Illustration: Eniola Odetunde/Axios
The coronavirus is shriveling the businesses of doctors' practices, which serve as the home base for most patients.
The big picture: Small and independent groups that are facing the most severe cash crunches eventually may be forced into two less-than-ideal options: sell the practice, which would further consolidate the industry and expose patients to higher costs, or close their doors for good.
Where it stands: Loans and bailout money are helping some doctors stay afloat for now. And the federal government and health insurers are paying doctors for telehealth visits, but that isn't making up for lost revenue.
- Some doctors are reporting that revenue is falling anywhere from 50% to 90%, according to doctors and others who work closely with practices. Hospital care for COVID-19 and social distancing are taking priority over primary care checkups, endoscopies and other non-urgent services.
What we're hearing: Doctors have started receiving the federal government's loans and grants designated for medical providers. But the small business funding program is out of money and was an administrative nightmare for many doctors who applied.
- 20% of primary care practices now believe they will temporarily close within the next month, according to a new survey of doctors.
- "The economic pressures on physicians, especially small practices, are so severe right now that their survivability is in question," said Bob Doherty, an executive at the American College of Physicians. "Unless the financial situation improves, within the next several months, many are going to have to shutter or sell out."
What's next: Hospitals, insurance companies and private equity firms — which have been rapidly buying physician practices well before the pandemic and with almost no antitrust review — will view financially distressed practices as a golden opportunity, especially if the doctors are valuable sources of referrals.
- Hospitals have an advantage if they have built existing "relationships and goodwill" with physicians in their markets, said Torrey McClary, a lawyer at King & Spalding who works with hospitals on acquisitions.
Yes, but: Study after study after study has shown that prices soar when physician practices are acquired — often through more aggressive billing or through hospital "facility fees" getting tacked on.
- "That's always the fear: The fewer players that you have, the more costs go up because now you're making choices that are void of concerns for competition," said Amber Walsh, a health care lawyer at McGuireWoods.