Insights

Healthcare Industry Feeling the Pinch

Medical practices struggle financially as patients cancel regular appointments amid fears of COVID-19

By Megan Ryan | June 5, 2020

Empty waiting room

One unforeseen consequence of social distancing to slow the spread of the coronavirus is that people are reluctant to go back to the doctor for care unrelated to COVID-19.

It’s being called medical distancing.

“It might not be intuitive to think that medical practices and hospitals would be struggling in the midst of a pandemic,” said Jim Conley, Colorado medical and physician banking manager at BOK Financial. “But with the delay of elective surgeries, closure of medical offices and people being nervous about getting sick, the traffic into medical practices is down significantly over the past few months.”

As specialist offices, dental practices and physician groups begin reopening to see patients for annual appointments, elective procedures and issues unrelated to COVID-19, they’re experiencing many cancellations and postponements.

“Even though most practices are now fully re-opened for business, patients are hesitant to attend healthcare-related appointments because they’re perceived as dangerous,” said Teresa Lanham, Arizona medical and physician banking manager at BOK Financial. “Even though the medical facilities are open to the demand, they’re not experiencing the demand right now.”

“Medical distancing deprives patients of necessary care for continued health and well-being,” said Brenda Hulbert, longtime CEO of South Denver Cardiology Associates. “We are seeing sicker patients when they finally seek care. The result of this in some cases could be life threatening or life limiting.”

Like many other medical professionals, she stressed that the risk of not seeking timely, appropriate medical care is a far greater risk than exposure to COVID-19.

“All healthcare providers have the patient safety in mind and have implemented the highest measures to avoid transmission of the virus,” Hulbert added.

Healthcare takes a financial hit

The Washington Post reports that healthcare spending declined by 18% in the first three months of the year, just as COVID-19 was ramping up in the U.S. The national gross domestic product experienced the worst decline since the Great Recession in the first quarter, declining by 4.8%. The second quarter is expected to be significantly worse, with a projected drop of 37.9%.

The medical industry is not immune to the downturn. The Labor Department reports the economy lost almost 1.4 million healthcare jobs in April alone.

Hospitals and other medical practices have furloughed employees because they aren’t needed. The irony of not having enough patients to keep medical personnel busy in the midst of a global pandemic is not lost.

“We are currently experiencing the largest drop off in productivity in American history,” Conley said. “Many of our clients are at only 30% to 40% of their normal patient volume.”

Adaptations lead to mounting expenses

Medical practices are grappling with the financial challenges posed by a lack of patient visits and balancing the mounting costs with low patient revenue.

In addition to requirements for masks, securing enough personal protective equipment (PPE) for all employees and social distancing for treating patients, practices are faced with how to create enough space in small waiting rooms, limiting the number of people that can be in a treatment room and ramping up disinfecting processes.

“Healthcare, by nature, is based on people being close to one another,” Lanham said. “Adapting physical spaces and entire processes to increase space between people is a significant undertaking and expense for our clients.”

Hulbert ran down the list of new requirements her cardiology practice is adapting to. Spatially distancing patients is not always easy and while masks are a necessity, they are decreasing the “human” touch of healthcare, she said. Plus, there is the added expense of installing shields, purchasing high quantity PPE as well as “concierge” cleaning to continually sanitize between patients.

Telehealth filling the gap

One efficiency that has resulted from the abrupt onset of the pandemic is the shift to telemedicine.

“We have had to stop some programs for the time being and will be slow to return to others,” Hulbert added. “However, the rapid implementation of telehealth took a village, and now as we re-emerge, there are lots of changes to account for.”

Conley mentioned that telemedicine was part of the conversation when he worked in hospital administration 30 years ago. “It has been on the horizon for a long time, but this pandemic is going to push telehealth into the mainstream and I believe it will stick,” he said.

While telemedicine had been increasing in popularity prior to the pandemic, not all specialties had adopted the practice. Certain specialties are heavily dependent on diagnostics and a virtual interaction may not work, though certain processes can be adapted to an online system. Telehealth is more appropriate for certain specialties—and a more significant ramp-up for others.

“Like all industries, healthcare providers are facing the uphill battle of finding new ways of doing business,” Lanham said. “It will be more costly for medical practices to do business in the short run, and possibly the long run, with a focus on the safety of staff, patients and their caregivers.”

Adapting to telemedicine will require an investment in technology for many practices, Conley said.

“Telehealth will be part of the future of medicine,” he said. “In a world with less socialization, it is here to stay. There are some very entrepreneurial groups in this space and the pandemic will allow them to prosper as telemedicine becomes a more prominent component of healthcare.”