The healthcare landscape in the United States is undergoing a notable transformation in the rivalry between hospital-owned and physician-owned practices. Recent findings indicate that hospital-owned practices are outshining their physician-owned peers in terms of financial performance. According to the 2023 MGMA DataDive Cost and Revenue report, this trend highlights the difficulties facing physician-owned practices, mainly stemming from staffing shortages that have worsened since the COVID-19 pandemic.
Between 2021 and 2022, hospital-owned practices reported a year-over-year medical revenue increase of 1.79%. This upswing sharply contrasts with the performance of physician-owned practices, especially in non-surgical specialties, which experienced a shocking revenue decline of 14.88% during the same time frame. A broader analysis reveals an alarming trend for physician-owned practices, whose medical revenue plummeted by 17.8% from 2020 to 2022.
This decline can largely be attributed to the staffing crisis affecting the healthcare sector. The ratio of support staff per full-time equivalent (FTE) physician in physician-owned practices saw a significant drop, plummeting from 5.08 in 2019 to just 3.0 in 2022. The impact was most severe in primary care settings, where practices lost over three support roles within four years. These shortages have serious implications, negatively affecting productivity, staff morale, and ultimately, the patient experience.
Ongoing staffing shortages have compelled practices to operate with fewer personnel, resulting in a series of negative outcomes. As frontline staff become overwhelmed, the coordination of patient care deteriorates, further stressing clinicians who already face high patient loads and the complexities of managing care.
Practices are witnessing a decline in staff morale, which can lead to employee burnout and increased turnover. As a result, organizations are forced to invest significant time and resources into recruitment—efforts that are now proving to be lengthier and more expensive. To close these gaps, temporary or contract workers are often brought in, which leads to heightened operational costs, without necessarily improving patient care.
In the realm of revenue cycle management, the impacts of staffing shortages are particularly pronounced. Increased days in accounts receivable (A/R) and a rise in claim denials are clear consequences of an inadequate workforce struggling to manage coding errors and underpayment issues effectively. Practices find themselves missing out on prompt payments that were once routine, threatening their financial stability.
Ron Holder, MHA, emphasizes this situation by stating, “The lingering post-pandemic staffing shortages continue to challenge medical groups across the country.” His comments highlight the significant hurdles physician-owned practices face as they endeavor to regain financial stability.
In the current environment, hospital-owned practices hold a structural advantage. This may be due to better resource availability, greater adaptability to rapid market changes, and an enhanced ability to manage staffing challenges. With centralized operations and broader access to financial and human resources, hospital-owned models seem better prepared to handle adversity.
The growing trend among health systems to acquire independent practices further underscores this dynamic. Such acquisitions can stabilize revenue streams and improve overall operational efficiency, which may account for the upward trajectory in financial performance seen in hospital-owned practices.
Technology presents a significant opportunity to enhance healthcare operations, particularly through the automation of various front-office tasks. Many practices today face high volumes of administrative work due to reduced staffing, making workflow automation a timely and effective solution.
AI-driven technologies, like those from Simbo AI, can improve patient engagement and streamline front-office operations. Utilizing AI-powered phone automation can effectively handle appointment scheduling, patient inquiries, and claims processing workflows—reducing the need for additional personnel. By managing routine communications, these tools alleviate some of the pressures on existing staff while ensuring patients receive timely feedback on their questions.
Conversational AI also enhances the patient experience by offering 24/7 availability, thereby reducing wait times for responses. Moreover, AI facilitates accurate data capture and management of patient information, leading to better coding and billing processes. Embracing this technology can reduce accounts receivable (A/R) cycle times significantly, helping to alleviate some financial burdens caused by staffing shortages.
As competition rises and the need for efficiency grows, incorporating AI in revenue cycle management can automate processes, allowing practices to concentrate on their core mission: delivering high-quality patient care.
The financial landscape of healthcare is increasingly intricate, especially in light of staffing challenges and technology integration. Practices must navigate the delicate balance between maintaining quality patient care and ensuring financial viability in an increasingly constrained fiscal environment.
For physician-owned practices, weighing the advantages of investing in technology against dwindling resources is crucial. Although the initial investment in automation solutions may seem daunting, the long-term savings gained from alleviated labor pressures and enhanced efficiencies can outweigh these upfront costs.
Healthcare administrators and IT managers assessing their operational frameworks should consider that integrating advanced technologies like AI can serve as a crucial lifeline. Automating routine tasks allows staff to focus more on patient-centered responsibilities, ultimately enhancing care delivery and operational outcomes.
In addition to utilizing technology for greater operational efficiency, physician-owned practices need to rethink their strategies towards financial health. Creative approaches may include restructuring revenue cycles and emphasizing value-based care models over volume-based care. Such a shift can help practices build more sustainable financial models while improving the quality of patient care.
Furthermore, investing more in workforce development initiatives can help fill some gaps left by staffing shortages. From ongoing training programs for existing staff to mentoring initiatives for new hires, a more cohesive and committed healthcare workforce can emerge.
The competition between hospital-owned and physician-owned practices is intensifying in the face of staffing shortages and evolving financial needs. While hospital-owned practices are demonstrating greater profitability, physician-owned practices are confronting considerable challenges that require innovative solutions and strategic decision-making.
By embracing technology and taking a proactive approach to workforce management, physician-owned practices can work toward regaining their footing in an increasingly competitive healthcare environment. Whether through improved patient engagement via AI tools or reevaluating operational models, a path to sustainability and enhanced patient care is well within reach.
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