Physician practices suffered at the start of the pandemic

Physician spending fell 57% below pre-pandemic levels in April 2020, according to a new report from the American Medical Association that reveals changes in the Medicare program during the first six months of 2020.

The report underscores the extent of the financial fallout among healthcare providers who had to grapple with reductions in patient volume and revenue during the start of the Covid-19 pandemic. AMA looked at Medicare claims to analyze physician spending and conducted a survey in July and August 2020.

While Medicare Physician Fee Spending (MPFS) recovered from the lows of April 2020, spending was still 12% lower than expected by June 2020, according to the report. Overall, during the first six months of 2020, MPFS was down $9.4 billion, or 19%.

“The economic impact of the COVID-19 pandemic has placed significant financial stress on medical practices as expenses have spiked and revenues have dropped,” AMA President Susan R. Bailey, MD, said in a statement. “For practices that have struggled to remain viable as the pandemic stretches on, many will face a difficult and precarious road to recovery.”

The drop in spending ranged across service type, setting and specialty, with physical therapists reporting a 34% drop in spending, compared to just a 6% drop in nephrology spending. Reduction in spending also varied across states. New York reported a 27% reduction, compared to a 13% reduction in Oklahoma.

While the claims data showed spending fell drastically, physicians agreed in the survey, with 81% agreeing that revenue was still lower than pre-pandemic levels. The same number said they were providing fewer in-person visits during 2020, with the average number of in-person visits falling to 57 from 95.

At the same time revenue declined, costs increased as physicians had to invest in more personal protective equipment (PPE). Smaller practices also struggled, the report found, as they lacked vendor relationships and purchasing power to acquire necessary PPE amid a surge of demand. The average increase in PPE spending was 57%, and 36% of physicians said acquiring PPE was very or extremely difficult.
 

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