COVID-19 has reminded us that there’s no such thing as absolute security. Not in our jobs. Not in our finances. Not in our health.
As a physician, you had little to worry about from a career perspective before the pandemic. Your skills were always going to be in demand, right? And who would have thought a health care crisis would actually reduce the demand for certain medical professionals?
But that’s what happened.
An American Medical Association survey of physicians conducted in July and August showed that 81 percent of respondents were experiencing reduced revenue as a result of the pandemic. The average revenue decline among respondents was 32 percent. Nearly a third of respondents reported drops in revenue between 25 percent and 49 percent. Another 15 percent experienced revenue shortfalls between 50 percent and 74 percent. Four percent said their revenue decline was 75 percent or higher.
An October report in Health Affairs noted that there was a loss of between 30 percent and 55 percent of elective patient volume during the first wave of the virus in March and April. This was largely due to guidelines from the Centers for Medicare and Medicaid Services (CMS) recommending postponing or cancelling elective, non-essential medical, surgical, and dental procedures to preserve resources for treating COVID-19 patients.
During the survey period, doctors reported that average weekly in-person visits from patients plummeted from 95 to 57. Even with the increase in teleheath use, 70 percent of physicians said they provided fewer combined visits (in-person and telehealth) than what they did before the pandemic. Overall, average total weekly visits fell from 101 to 72.
Less demand and declining revenue results in job losses — even in health care.
According to BLS, “a record number of nurses and healthcare workers have lost their jobs during the COVID-19 pandemic as hospitals halted revenue-generating elective surgeries and routine procedures. In April alone, 1.4 million healthcare jobs were lost.”
The American Medical Association (AMA) noted that physician offices alone shed 286,000 jobs in the first full month (April) of the pandemic, according to Bureau of Labor Statistics. “Although many of those jobs have been gained back, as of September, employment still remained below its January level,” wrote the AMA.
Furthermore, The Physicians Foundation found in a recent survey that 8 percent of physicians closed their practices due to COVID-19.
Many physicians employed at hospitals and physician group practices had their salary cut, some by as much as 20 percent.
COVID-19 also increased expenses for physician practices, according to the AMA survey. About 64 percent of physician owners reported increased spending on personal protective equipment (PPE). The average PPE spending increase because of the pandemic was 57 percent.
The majority of respondents said that federal assistance programs such as the CARES Act and the Paycheck Protection Program (PPP) were considerably helpful in dealing with the financial impact of COVID-19. A survey by The Physicians Foundation showed that 75 percent of physicians who applied for PPP received enough financial support to remain open.
“The economic impact of COVID-19 on health care continues to reveal itself through reductions in patient volume and revenue and in higher practice costs. As the pandemic stretches on, physician practice viability remains under threat,” the AMA said in its survey summary.
“While initial federal financial relief programs were helpful to practices that applied, it appears the road to recovery, particularly for smaller physician-owned practices, remains difficult and more economic relief is needed.”
The impact is likely to last even if there is a reduction in COVID-19 cases in the near future.
“Assuming that aggregate demand for elective services remains weak even after a COVID-19 vaccine becomes available some time in 2021, independent practitioners will have limited options to recoup lost revenue,” according to Health Affairs. “Small practices have little market power to set prices or generate new demand…Short of major structural reforms, it appears likely the pandemic will accelerate a long-standing trend toward contraction and consolidation among independent physician practices.”
The economic impact of COVID-19 on physicians contradicts the assumption that medical professionals have guaranteed job and financial security.
“What physicians often fail to remember is that we are paid for seeing patients. Even if we're employed, our employer makes money by billing patients. When patients lose insurance, don't have money to come to the hospital or are urged (or forced by quarantine policies) to stay away, then the money in the system dries up and physicians are not paid. Healthcare and the economy are, after all, inseparable,” wrote Edwin Leap, MD, who described having no locum tenens work in March or April of this year.
Even if your practice is relatively healthy during the pandemic, you should consider inoculating your finances against future afflictions. This includes:
- Having an emergency fund that you can tap into to cover unexpected expenses or to stay afloat if you’re unemployed or seeing fewer patients for three to six months.
- Investing in physician disability insurance to ensure you have income in the event that your own illness or injury limits your ability to practice medicine and make a living.
- Adjusting your budget to minimize debt and lower expenses so that you can live on less income if business starts to dry up. Prior to the pandemic, physicians typically were not receiving large pay increases. The Medscape Physician Compensation Report for 2020 showed that the average income for primary care physicians increased 2.5 percent from the previous survey. The average specialist income only grew 1.5 percent between surveys.
- Refinancing debt, such as student loans or your mortgage, to lower your monthly payments.
If little has changed for you financially in 2020, take the opportunity to prepare for the uncertainty of tomorrow because one thing is certain: Bad things will continue to happen.
After all, the last 20 years has brought the collapse of technology stocks, a terrorist attack, two wars, and a major financial crisis, in addition to this year’s pandemic.
Joel Palmer is a writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.