More independent physician practices likely to seek partners in the coming months due to financial issues caused by COVID-19

• The demand shock from COVID-19 is unprecedented, and many physician respondents believe that the resulting loss of revenue will put their practices at financial risk, according to a McKinsey & Company survey.
• Six weeks into COVID-19, 53% of all independent physicians reported that they were worried about their practices surviving the COVID-19 challenge, according to the same McKinsey & Company survey.
• The survey also showed: Almost half of all independent physician practices said they had less than four weeks of cash on hand, and 68% of those respondents looking for partners ranked financial support as their number-one reason.

The McKinsey & Company survey, which I focused on in my blog last week, also finds, “The demand shock from COVID-19 is unprecedented, and many physician respondents believe that the resulting loss of revenue will put their practices at financial risk. Six weeks into COVID-19, 53 percent of all independent physicians reported that they were worried about their practices surviving the COVID-19 challenge. Almost half of all independent physician practices said they had less than four weeks of cash on hand, and 68 percent of those respondents looking for partners ranked financial support as their number-one reason. A third of small independent physicians reported that they believe working for a larger practice may provide greater benefits. Many independent physicians said that, due to COVID-19, they were considering partnering with a larger entity, selling their practice, or becoming employed.”

Takeaway

The McKinsey & Company survey provides additional evidence that COVID-19 will create opportunities for hospitals and health plans to more closely align with the remaining independent practices in their market.

This will likely accelerate the movement to value-based payment as health plans extend a financial lifeline in struggling practices in exchange for participation in APMs and/or physicians seek global payment arrangements (partial or full capitation) to minimize the risk of cash flow disruption due to sudden volume decreases and support virtual care models. 

Given the limited days cash on hand independent practices report having, we’re likely to see practices start seeking partners, if they haven’t already, in the coming months. Unless Congress intervenes, Medicare will start withholding 100% of fee-for-service payments for those practices that elected to receive accelerated payments by the end of August at the latest.