The Executive Suite: The state of the healthcare industry post-COVID

Like almost all industries, the business of healthcare was rattled by the eruption of the COVID-19 pandemic and associated stay-at-home orders. Some 40% of Americans delayed medical care during the darkest days of the pandemic, reducing outpatient volume by ~60%. While hospitals struggled to stay afloat, many outpatient providers began fearing for their jobs.

Now, the business of healthcare seems to be well on the road to recovery. Recent research conducted by my firm, Redwood Advisors, and Evolve Healthcare Marketing indicates that practice volumes have been steadily returning. Roughly 25% of practices have already seen patient volume return to a pre-COVID level, and another nearly 25% expect it to return by the end of Q1 2021. In contrast, less than 10% believe practice volume will return after Q2 of next year, and only 18% remain “uncertain” as to when volume will return.

Another concern doctors faced was increased costs as practices needed to equip themselves with PPE and increased staff bonuses in response to the challenges of working during this pandemic. A quarter of practices report that COVID-19 increased costs by 5-10%, a third report a 10-20% cost increase, and about a sixth report a cost increase of over 20%.

Nonetheless, doctors and other healthcare professionals remain optimistic. An optometrist in Michigan reports that upon reopening after being closed for two months, the practice is now “very busy,” with appointments booked out two months in advance.

Others are leaning into the forced transitions to re-evaluate their entire operating plans. Barry Tanner, Chairman of Physicians Endoscopy, says that despite having additional costs and reduced volumes, their profit margins actually increased as they adjusted their staffing levels. “We’re now reviewing our whole operational plan so that we can continue to operate lean and mean moving forward,” Tanner says.

While patient volume may have returned to pre-pandemic levels, 2020 has accelerated long-term trends in the industry. Most significantly, telehealth has seen widespread adoption, and it is likely to continue to grow its presence among healthcare practices. According to Tanner, patients now feel “safer and more comfortable with telemedicine,” and it is now up to insurers to figure out how reimbursements will work for virtual visits. To date, about 70% of providers report that the pandemic has made them more reliant on telemedicine, and about 60% report that telemedicine will either “somewhat” or “significantly” improve healthcare in the long-term. Additionally, in some cases, accelerated technology adoption has improved the long-term financial outlook for many larger practices.

Despite all, the physician landscape can be expected to remain fairly constant. Most survey respondents believe that 2020 will not change the rate of physician retirements. Additionally, nearly all practice owners surveyed agree that the pandemic has not made them more likely to sell their practice, despite some early signs to the contrary.

Perhaps most importantly, physicians are split in their opinions on how COVID-19 has affected their job satisfaction. Half of physician respondents report that their job satisfaction has not changed since COVID-19 and a small number report that their job satisfaction has actually increased, but a sizable minority express a decrease in satisfaction. It remains unclear how job satisfaction relates to performance or physician retention in the era of COVID.

In light of the November surge in cases, it is possible that businesses, including physician practices, may be heading to another slow-down. However, with PPE, staff bonuses, and telemedicine structures now in place, practices will be well-equipped to weather COVID-19 and stay-at-home orders.