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Physician Practices Pursue Four Financial Strategies to Survive Pandemic

Analysis  |  By Christopher Cheney  
   June 10, 2020

The COVID-19 crisis has been a financial fiasco for physician practices, including decreased patient volume and canceled elective surgeries.

There are strategies physician practices can pursue to weather the financial storm associated with the coronavirus pandemic.

Ninety-seven percent of physician practices experienced a negative financial impact from the coronavirus disease 2019 (COVID-19) pandemic, according to a Medical Group Management Association survey published in April. The financial hits have included decreased patient volume and loss of income associated with the canceling of elective surgery.

The COVID-19 pandemic poses an existential threat to the primary care sector, says Ann Greiner, president and CEO of the Primary Care Collaborative in Washington, D.C. "If we do not respond to the financial challenges that primary care is facing, we are going to see an already damaged foundation of our healthcare system crumble."

Physician practices can pursue four primary strategies to keep their business finances afloat, says Al Crawford, chairman, CEO, and co-founder of Davie, Florida­–based Bankers Healthcare Group.

1. Hold on to cash

"Do not spend if you do not have to spend. You should just hoard cash. The more access you have to cash, the better," Crawford says.

During the COVID-19 pandemic, physician practices should limit new spending to practice enhancements related to the pandemic such as air purification systems, he says. "There are expenses required during the COVID-19 pandemic, but I recommend that you do not go beyond those required expenses in an environment like this. We are in the middle of a pandemic, and what you do not need you should not buy."

2. Don't pay off debt, yet

"I would not be looking to pay down debt right now because of the No. 1 principle—cash is king," Crawford says.

Medical professionals should be careful about taking cash and paying down debt, he says. "For the next 90 to 180 days, I would try to stay cash-rich. If we're all back to work, there is a vaccine in the fall, your practice business is good, and you have saved a lot of money by being ultraconservative, then I would look at paying my debt down."

Although the Federal Reserve System has been taking actions to promote lending, physician practices cannot count on finding a lender if they experience a cash crunch, Crawford says. "You do not want to pay debt off, then something does not go right, and you go back to the banks and the banks are not lending. Then you do not have access to capital and that can kill your business."

3. Use government assistance

Crawford is bullish on the U.S. Small Business Administration's Paycheck Protection Program (PPP).

"You have an interest-free period for 24 weeks, which is fantastic. It is probably one of the best gifts that the U.S. government has ever given. If you follow the rules, such as spending 60% of your funds on payroll, and you get the loan forgiven at the end of 24 weeks, it is a home run," he says.

Even if a physician practice cannot get a PPP loan forgiven, the debt terms are a bargain, Crawford says. "If you can't get the loan forgiven or you can't pay your rent, it is an inexpensive loan. It is a 1% interest rate loan. So, it may make sense to do the 30-month payback and carry the loan if you can't financially afford to bring your staff back."

For physician practices that have gotten PPP assistance, the funds should be kept in a dedicated account to pay for program-approved expenses such as payroll and rent, he says. "When a practice pays for insurance or pays for payroll, they should reimburse out of the separate PPP account for the exact, specific payments. If they are making specific payments for rent, insurance, or payroll, they will have the proof for the bank and for SBA that the PPP funds were used for the purposes outlined."

PPP has been a lifeline for the Brownsville, Texas–based general surgery practice of Carlos Barba, MD. The cancellation of elective surgery in Texas hit the practice hard, Barba says.

The general surgery practice has a 10-member staff, including another surgeon and a physician assistant. "Fortunately, the federal government created the small business assistance program. We applied to that program, and I was able to get a loan. I did not have to reduce hours or cut my staff," he says.

4. Apply for private loans

Lending from banks and brokers also can stabilize a physician practice's finances, Crawford says.

Bankers Healthcare Group has established an "assistance loan" that ranges as high as $500,000. Borrowers do not have to make a payment on the loan for the first 89 days.

The terms of the assistance loan can be crafted to limit the size of monthly payments, Crawford says.

"We are giving the medical professional a term that goes out as long as 10 years. For the borrower, the additional years lower the monthly payment. In my opinion, right now everything is about the monthly payment. If you can lower the monthly payment, increase your savings, and decrease your spend, you have a much better shot of getting the business back to running well," he says.

Primary care payment reform

Reimbursement for primary care services must be reformed, Greiner says.

"This pandemic has laid bare that fee-for-service has been an epic failure. It is a system that is based on face-to-face visits, which obviously does not work in a pandemic when you are trying to keep both patients and clinicians safe. So, the pandemic has prompted a lot of conversation both at the national level and the state level about moving to a prospective payment system," she says.

During the pandemic, the Centers for Medicare & Medicaid Services (CMS) as well as private health plans have moved in the right direction on advance payments, Greiner says. "What both CMS and private health plans have done by putting advance payments in place is help primary care practices keep their doors open. That could be a step on a path toward prospective payments, but this is a conversation that has been going on for a long time."

In addition to establishing a prospective payment system for primary care, government and private payers need to provide significant and appropriate reimbursement for innovative care delivery models such as telemedicine, she says. "We have to get to a payment system that is agnostic about the way care is delivered."

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.


Nearly all physician practices have experienced a negative financial impact from the coronavirus pandemic, a recent survey says.

Primary care services should be reimbursed through a prospective payment system, a primary care advocate says.

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