A Jobless Recovery Will Prolong Physician Financial Woes

HealthLeaders Media Staff, October 8, 2009

If your revenue increased or even stayed the same during the beginning of the recession, then you're doing better than many physicians. The median total revenue in medical practices declined—for the first time in years—by 1.9% in 2008, according to MGMA's latest cost survey.

And revenue wasn't all that dropped. The median number of patients visiting medical groups fell by nearly 10%, and the overall number of procedures declined 11.6% between 2006 and 2008. During that same period, bad debt from fee-for-service charges jumped roughly 13%.

This new information offers some statistical validation for trends that many in the healthcare field have already witnessed firsthand. Patients are cutting back on elective procedures in hard times. In some cases, they're forgoing necessary medical care because they are newly uninsured after a job loss. Or they're struggling to pay their bills after a visit, leading to that increase in bad debt.

The publicly-funded safety net is becoming increasingly strained, as well. In many states, Medicaid rolls are higher than they've ever been—Medicaid covered about 42.6 million people in 2008, up 7.6% from 39.6 million in 2007—and governments are starting to cut reimbursements to physicians in order to ease the pressure on budgets.

Physicians seem to be surviving the way most businesses keep going when revenues disappear—they're cutting operating costs. According to MGMA data, practices reduced overhead expenses in 2008 by about 1.5%, and much of that came from support staff, which dropped in the survey for the first time in a while.

Overall, staffing levels stayed about the same in aggregate, which may indicate that some groups hired while others laid off workers, and it has evened out in the wash. It's also likely that healthcare workers, like employees in almost every sector, are forgoing raises or even taking pay cuts for the time being.

Keep in mind, this data is from 2008. Fresher data from 2009 will likely show an even drearier financial situation for medical groups, as many of the indicators have gotten worse this year.

When the healthcare economy will turnaround is tough to predict. There are already a few green shoots that suggest the U.S. economy has at least bottomed out—the stock market has been on a tear since March and the latest GDP estimates have been better than initially predicted.

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