Anticipating, mitigating coronavirus impacts on private practice: A thought experiment
Physicians and practices need to prepare now for the short- and long-term business consequences of COVID-19.
“Luck is a very thin wire between survival and disaster, and not many people can keep their balance on it.”
– Hunter S. Thompson
“Anyone who was alive during the outbreak of the bubonic plague in the 14th century experienced something terrifyingly close to the widespread death and chaos of an apocalyptic event.”
– Alan Huffman
Two advance apologies are in order: First, what follows may be old news. This column is written a few weeks before you get to read it, and the ideas below could be overly sunny or cloudy. Second, this month’s column discusses the cold-blooded theoretical business and financial impacts of the emerging coronavirus pandemic and overlooks entirely the much more important human drama now playing out in the world’s headlines.
The latest facts
Research scientists, doctors, politicians, executives and citizens are all waking up simultaneously — in the space of just a few weeks — to the reality that this coronavirus (COVID-19) issue could go on for awhile and have a potentially significant impact on global economic growth and geopolitics, as well as day-to-day living and practice operations.
Ophthalmology is a wonderful profession, but it is uniquely exposed to the possible impacts of COVID-19. We certainly have it better off in our ophthalmology practices than Princess Cruises and Delta Air Lines. But my Singapore client is now reporting that business is sharply off. Our mostly geriatric patients are the most susceptible to dying from the virus. And the typical ophthalmologist works nose-to-nose with 150 patients a week. Before long, some of those noses will be loaded viral “guns” for you and your staff.
On March 11, COVID-19 was labeled a pandemic. The NBA halted the playing season. Actor Tom Hanks announced his infection from Australia. And the White House banned travel from parts of Europe for 30 days. For epidemiologists, the familiar, pandemic case-case-case, cluster-cluster, “BANG!”
New red dots are popping up daily on the excellent (if spooky) Johns Hopkins map showing worldwide cases: gisanddata.maps.arcgis.com.
First, the apparent facts as of this writing:
- Coronaviruses are nothing new; they were first discovered 60 years ago.
- Catching COVID-19 results in everything from mild flu symptoms to brisk respiratory decline and failure.
- Like the common flu, death rates are much higher for seniors, around 8% in some reporting.
- Treatment thus far ranges from relieving symptoms to ventilator life support; no vaccine protection or cure is available at present.
- In the last month, the number of reported new daily cases in China has fallen by a factor of 100 (with mass quarantines), while reported daily cases in rest of the world are up by a factor of 100.
- In cold mortality terms, dozens of Americans have died along with more than 7,000 more in the rest of the world.
- That said, as of the end of February, in those younger than age 50 years, the risk for death was less than 0.5%, while in those older than the age of 70 years, it was more than 8%. No deaths had occurred in children younger than 10 years as of Feb. 26.
- Thus far, the personal and economic disruptions of COVID-19 are perhaps more impressive than the raw infection stats:
- The U.S. stock market fell nearly 14% in a single week.
- Nonessential business travel is being canceled by major corporations.
- Holiday plans are on hold (Venice, anyone? Tokyo?).
- Nationwide bans on large public gatherings are spreading.
- Amazon’s most popular hand sanitizers are on indefinite backorder.
Here is one more fact: Ophthalmologists are terrible hand washers. In our consulting observations of thousands of patient encounters through the years, we have noted that male eye doctors wash or sanitize only 50% of the time between patients, and female eye surgeons are only slightly better at about 65%. These disappointing rates are seen even when otherwise thoughtful doctors manipulate the ocular adnexa of patient A and moments later the adnexa of patient B. (And are being observed by a visitor!)
A thought experiment
As the old man used to say, “Expect the worst, hope for the best and settle for anything in between.” With that, here is a thought experiment concerning an adverse COVID-19 scenario over the next 12 to 24 months.
1. It does not take much imagination to assume that the U.S. economy, now in its 11th year of expansion and overdue for a recession, will be shoved into recession faster and deeper because of COVID-19. That in itself is not too worrisome, especially to health care providers who are generally resistant to the business cycle.
2. But with recession comes a drop in investment values, by as much as 30% or more, depending on which analysts you read. (Surprise! The Dow’s 10% drop on March 12 brought the total decline to 27% in the last few weeks.) Now, that is not too much of a bother for 40-year-old eye surgeons who have years and years to save for retirement. But a significant percentage of America’s surgeons are older than 60 years. If the stock downturn is sustained, some will have to delay or downsize retirement.
3. We all remember what happened to elective/cosmetic care volumes in 2008-2009 with the Great Recession. A reversal of consumer confidence will hit elective care providers the hardest.
4. You are not off the hook if your practice focuses on cataracts rather than LASIK. Cataract surgery is very much an elective procedure in most cases. We can expect nervous seniors to push surgery off until promising pandemic news arrives.
5. If COVID-19 has the same transmission rate as influenza, the common flu, we might find about 45 million Americans infected if a pandemic sweeps the planet (and keep in mind, this coronavirus is now present in a majority of countries as of this writing).
6. Fatality statistics for influenza are about 0.1%. Epidemiologists are venturing guesses of anything from 0.5% to 5% for COVID-19. Let’s assume that 1% is the right answer. That would be about 450,000 extra fatalities, or a 15% increase, in the annual U.S. death toll.
7. A significant part of the patient care performed by ophthalmologists is referred by optometrists. In the midst of a pandemic, it is easy to imagine a significant percentage of optometric patients pushing their appointments out until the “all clear” signal emerges.
8. It seems likely that the youngest, healthiest patients might well delay their eye doctor appointments, which does not sound great. But they will eventually come back. What about older patients?
9. Seniors represent about 60% of the cash flow of the average general ophthalmology practice. On the present trajectory, COVID-19 appears to have as much as an 8% fatality rate among seniors. If 8% of 60% of your business goes away permanently, that is a nearly 5% drop in cash flow. And since most costs are fixed, that translates to a 10% or greater drop in profits.
10. Keep in mind that all of these statistics are averages. But you do not practice in an average community; you practice in your community, which may be more or less affected by COVID-19.
11. And all of this is before considering the knock-on effects of this virus. Elevated staff absences. ASC and clinic supply disruptions. Restrictions in movement and quarantines for the hardest-hit communities.
12. COVID-19 is certainly on the radar screens of all thoughtful health care market participants:
- Hospitals with generally thin operating margins, which have to front-load needed resources for a coming pandemic, while developing critical plans to protect their workers.
- Government payers, whose finances could be so stretched by COVID-19 as to oblige (and provide political cover for) further reimbursement cuts.
- Government policymakers, some of whom are seeing COVID-19 as another good reason to shift to universal health coverage.
- Insurance companies, which are now realizing their potentially significant exposure to unforeseen claims.
- The pharmaceutical and device industry, which has to interpolate between supply line snags, a pullback in non-critical capital investments and a sensitive customer base that tends to say, “When in doubt, don’t.”
- Private equity firms, which would reasonably see COVID-19, at the least, as a business development headwind, if not a tornado wiping out this delicate enterprise model.
Practical things to do
Stay informed. Click on www.aao.org for updates and useful portals. Scan your local public health department’s website for physician-aimed advisories.
Follow the evolving CDC recommendations for infection protection and control practices at www.cdc.gov/COVID-19/2019-ncov/infection-control/control-recommendations.html.
For the time being, shift your business planning horizon from the typical 3 to 5 years to the next 6 to 12 months.
Be the best leader you can. Staff and patients already look up to you. Step up. Use your medical education to help others have a balanced understanding of what is to come. Remember that the most effective leaders put the interest of others first.
Increase the number of sanitizing stations in your office. Urge sick staff to stay home. Ask patients to report any flu symptoms at the front desk before they move throughout your office and potentially infect a wider cross-section of staff and patients. Subject to official public health recommendations and your own sensibilities, if COVID-19 takes hold in your community, consider front door temperature and symptom screening.
Tell your patients what you are doing to reduce infection risks during the pandemic; use your website and post signage. And do not just say it, but show it: Let patients see you sanitizing your hands as well as wiping down patient contact surfaces.
Liberalize staff policies. If a staffer is approaching their PTO limit, allow them to borrow from the next year. Yes, some staff will take advantage of the situation and call out sick when they are perfectly healthy. If you do not provide paid sick time off, change your policy. The last thing you need is an ill staff member coming to work and infecting their co-workers, much less your patients.
On the economic front, develop a plan for what you would do if 25% or more of your practice revenue was interrupted for a few months. The average practice has ready capital access equivalent to less than 3 months’ operating expenses and would be hard-pressed to thrive in this scenario. Build on your reserves, if possible: Apply for a larger line of credit (and confirm your current line is active). Inventory your personal savings levels and access through personal credit lines and home equity instruments. Make sure the billing department is as efficient as possible and collecting all allowable fees.
If your pinched cash flow obliges you to slow vendor and bank payments, communicate with your creditors early and often about your situation. We are all in this together.
Scan your staff and providers for any “key man” vulnerabilities. In some small practices, this could be a single billing staffer or administrator. In other settings, even the temporary loss of a single high-producing surgeon could be problematic.
Anticipate a higher no-show and cancellation rate. These patients will eventually return, but not if your business systems and staff protocols allow them to be lost to follow-up. Many practices have relatively weak continuity of care and recall systems. These need to be airtight so your practice can spring back to life as quickly as possible.
Take advantage of any emerging tax or regulatory holidays now being discussed at federal, state and local levels to give small businesses needed relief.
Keep yourself and your family healthy, so you can concentrate on the needs of your practice. If you do not have a stock of food and other household necessities on hand, gather these without hoarding. The oath you took as a physician may oblige you to exert heroic efforts on behalf of others.
The unfortunate truth is that the majority of American families live from paycheck to paycheck and cannot raise the cash to cover an unexpected $1,000 emergency. You, on the other hand, are probably in the top 1%. If your personal resources and sentiments move you to do so, offer to be the hedge your neediest staff may need to get through this and return — with much gratitude — to your employment.
If you travel, be a good scout. Be prepared. Anticipate the possibility that you may be quarantined away from home. Bring personal medications and a good book. A really long, good book.
Reassess your retirement trajectory and financial position. February’s severe correction in the stock market was long overdue and should have been already built into your personal financial plan and asset allocations, particularly if you are approaching retirement. But if you (like many) have more hopes than plans, now is a time to harness the shock of a drop in your net worth to reset your expectations.
See the big picture and harness your intellectual curiosity. As a physician — and most likely a biologist before that — you are in a good position to understand what is going on. This would all be a lot of mental candy and loads of brainy fun, at least before you stopped to realize these virus particles have you in their crosshairs. All the same, be present and mindful during the wild ride that looms ahead.
Steady your nerves and be prepared to make difficult decisions if the deepest or most prolonged impacts above come to pass. As much empathy as you may have for all of your staff, it would be better to modestly cut costs (including payroll costs) to allow the practice to sail through the disruptions that are coming than to threaten everyone’s job by retaining a full staff census as patient counts drop.
- For more information:
- John B. Pinto is president of J. Pinto & Associates Inc., an ophthalmic practice management consulting firm established in 1979. John is the country’s most-published author on ophthalmology management topics. He is the author of John Pinto’s Little Green Book of Ophthalmology, Turnaround: 21 Weeks to Ophthalmic Practice Survival and Permanent Improvement, Cashflow: The Practical Art of Earning More From Your Ophthalmology Practice, The Efficient Ophthalmologist, The Women of Ophthalmology, Legal Issues in Ophthalmology, Ophthalmic Leadership: A Practical Guide for Physicians, Administrators and Teams, Simple: The Inner Game of Ophthalmic Practice Success and a new book, UP: Taking Ophthalmic Administrators and Management Teams to the Next Level of Skill, Performance and Career Satisfaction. He can be reached at 619-223-2233; email: pintoinc@aol.com; website: www.pintoinc.com.