The United States healthcare sector is witnessing a significant shift in the dynamics between hospital-owned and physician-owned practices. Recent data highlights that hospital-owned practices are increasingly demonstrating superior financial performance relative to their physician-owned counterparts. The 2023 MGMA DataDive Cost and Revenue report outlines these trends, shedding light on the challenges facing physician-owned practices, primarily due to staffing shortages that have intensified since the COVID-19 pandemic.
Hospital-owned practices saw a year-over-year increase of 1.79% in medical revenue from 2021 to 2022. This growth is notably at odds with the performance of physician-owned practices, particularly those in non-surgical specialties, which experienced a staggering 14.88% revenue decline during the same period. A broader examination reveals a troubling trend for physician-owned practices, whose medical revenue decreased by 17.8% from 2020 to 2022.
Critical to this decline is the staffing crisis that has afflicted the healthcare sector. The number of support staff per full-time equivalent (FTE) physician in physician-owned practices dropped dramatically, from 5.08 in 2019 to 3.0 in 2022. This shortfall is most pronounced in primary care practices, which lost over three support roles over four years. The ramifications of these shortages are severe, significantly impacting productivity, staff morale, and ultimately, the patient experience.
The ongoing staffing shortages have forced practices to manage operations with reduced personnel, leading to a cascade of adverse outcomes. As frontline staff are overwhelmed, patient care coordination suffers. This puts additional strain on clinicians who are already tasked with juggling high patient loads while navigating the complexities of patient management.
Practices have reported deteriorating staff morale, which can lead to burnout and additional attrition. Consequently, organizations are compelled to invest time and resources in recruitment—efforts that are now taking longer and proving more costly. Temporary or contract workers are often brought in to fill these gaps, resulting in increased operational costs, which do not necessarily translate to better patient care.
In terms of revenue cycle management, the effects of staffing shortages are acutely felt. Increased days in accounts receivable (A/R) and a rise in claim denials are direct consequences of the insufficient workforce able to manage coding errors and underpayments effectively. Practices are missing prompt payments that were once routine, jeopardizing their financial stability.
Ron Holder, MHA, underscores this reality by stating, “The lingering post-pandemic staffing shortages continue to challenge medical groups across the country.” His assertion serves as a sobering reminder of the uphill battle that physician-owned practices face as they attempt to regain their financial footing.
In the current milieu, hospital-owned practices appear to have a structural advantage. This could be attributed to more significant resource availability, better adaptability to rapidly changing market conditions, and an enhanced capacity to absorb staffing challenges. With more centralized operations and access to broader financial and human resources, hospital-owned models may be better equipped to navigate adverse conditions.
The increased trend among health systems to acquire independent practices further highlights this dynamic. Such acquisitions can stabilize revenue and improve overall operational efficiency, which may explain the upward trajectory in financial performances observed in hospital-owned practices.
One area where technology can significantly impact healthcare operations is through the automation of various front-office tasks. As data suggests, practices often struggle with high volumes of administrative work due to reduced staffing, making workflow automation a timely and relevant solution.
AI-driven technologies, such as those developed by Simbo AI, can enhance patient engagement and streamline front-office operations. Utilizing AI-powered phone automation can efficiently manage appointment scheduling, patient inquiries, and claims support workflows without the need for additional human resources. By effectively handling routine communications, these tools not only offset some pressures from existing staff but also ensure patients receive timely responses to their inquiries.
Conversational AI also enhances patient experience by providing 24/7 availability, which reduces patient wait times for responses. Further, AI can facilitate accurate data capture and management of patient information, leading to improved coding and billing processes. This technological embrace can contribute to reducing the A/R cycle days significantly, mitigating some financial woes linked to staffing shortages.
Moreover, as practices face increased competition and the need for efficiency, employing AI in revenue cycle management can automate processes that allow practices to focus on core competencies—delivering quality care to their patients.
The financial landscape of healthcare becomes increasingly complex in light of staffing challenges and technological integration. Practices are left to grapple with the balance between maintaining quality patient care and achieving financial viability in a tightening fiscal environment.
Physician-owned practices, particularly, must weigh the benefits of investing in technology against the backdrop of dwindling resources. While the upfront costs associated with automation solutions may evoke reluctance, the long-term savings achieved through reduced labor pressures and improved efficiencies can far outweigh these initial investments.
As healthcare administrators and IT managers evaluate their operational framework, the incorporation of advanced technologies, such as AI, can provide a lifeline. By automating routine responsibilities, they can redirect staff efforts toward patient-centered tasks, ultimately working to improve care delivery and operational outcomes.
In addition to harnessing technology for operational efficiencies, physician-owned practices need to reimagine their approaches to financial health. Innovative strategies may include restructuring their revenue cycles and focusing on value-based care models rather than volume-based care. This paradigm shift can help practices create more sustainable financial models while enhancing patient care quality.
Moreover, increased investment in workforce development initiatives can bridge some of the gaps left by staffing shortages. From ongoing training for existing staff to incentivizing new hires through mentorship programs, the healthcare workforce can become more cohesive and committed.
The contest between hospital-owned and physician-owned practices is intensifying amid a backdrop of staff shortages and evolving financial requirements. While hospital-owned practices are showcasing greater profitability, physician-owned counterparts face significant challenges that call for innovative solutions and strategic decision-making.
By investing in technology and embracing a proactive approach to workforce management, physician-owned practices can regain their footing in an increasingly competitive healthcare landscape. Whether through enhanced patient engagement via AI tools or a re-evaluation of their operational models, a path to sustainability and improved patient care is attainable.
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