Financial boosts will run out soon
Many private practices are surviving only because they have managed to tap into new federal programs that can finance them for the short-term. Here are the main examples:
Receiving advance Medicare payments. Through the Medicare Accelerated and Advance Payment Program, physicians can be paid up to 3 months of their average Medicare reimbursement in advance. However, repayment starts 120 days after receiving the money and must be completed within 210 days.
Obtaining a federal loan. Under the Paycheck Protection Program (PPP), which is available to all kinds of small businesses, practices can apply for up to 2.5 times their average monthly payroll costs.
PPP money can be used for payroll, rent, mortgage interest, or utility payments for up to 8 weeks. The loan will be entirely forgiven as long as the rules are followed. For example, three quarters of the money must go to payroll, and laid-off employees must be rehired by June 30.
There was such a rush for the first round of PPP loans that many physicians failed to get the loan. “Many of my physician clients applied for the loan as soon as they could, but none of them got it,” said Mr. Inman, the San Diego financial adviser. “We are hoping that the next round of funding will provide them some relief.” The second round started on April 27.
Physicians who have already obtained the PPP loan are very relieved. “This loan made it possible for us to pay our employees,” said George W. Monks, MD, a dermatologist in Tulsa, Okla., and president of the Oklahoma Medical Association.
Staff benefiting from higher unemployment payments. Many practices and hospitals are laying off their staff so that they can collect unemployment benefits. This is a good time to do that because the federal government has boosted unemployment payments by $600 a week, creating a total benefit that is greater than many people earned at their regular jobs.
This extra boost ends in July, but practices with PPP loans will have to rehire their laid-off workers a month before that. Getting laid-off staffers to come back in is going to be critical, and some practices are already having a hard time convincing them to come back, said Michael La Penna, a physician practice manager in Grand Rapids, Mich.
“They are finding that those people don’t want to come back in yet,” he said. “In many cases they have to care for children at home or have been getting generous unemployment checks.”
The problem with all these temporary financial boosts is that they will disappear within weeks or months from now. Mr. La Penna is concerned that the sudden loss of this support could send some practices spinning into bankruptcy. “Unless volume gets better very soon, time is running out for a lot of practices,” he said.
Hospitals, which also have been depending on federal assistance, may run out of money, too. Daniel Wrenne, a financial planner for physicians in Lexington, Ky., said smaller hospitals are particularly vulnerable because they lack the capital. He said a friend who is an attorney for hospitals predicted that 25% of small regional hospitals “won’t make it through this.”
Such financial turmoil might prompt many physicians to retire or find a new job, said Gary Price, MD, a plastic surgeon in New Haven, Conn., and president of the Physicians Foundation, an advocacy group for the profession. In a survey of doctors by the Physicians Foundation and Merritt Hawkins, released on April 21, 18% planned to retire, temporarily close their practices, or opt out of patient care, and another 14%, presumably employed physicians, planned to change jobs.