What AMGA’s Operations and Finance Report Says About Group Practice Now
On Nov. 11, leaders at the Alexandria, Va.-based AMGA (American Medical Group Association) released their “2021 Medical Group Operations and Finance Survey,” an important gauge of how large multispecialty medical groups are faring in the U.S. healthcare system.
As the press release posted to the association’s website on that date noted, “AMGA’s newly released 2021 Medical Group Operations and Finance Survey reveals both median net revenue and expenses declined for medical groups in 2020, but the revenue decline outpaced the expense decline due to the decrease in volume caused by the COVID-19 pandemic.”
“Although 2020 was in the height of the COVID-19 pandemic, many groups adapted during that year and made changes that will remain in place going forward,” said Rose Wagner, R.N., M.H.S., FACMPE, chief operating officer at AMGA Consulting, the association’s consulting arm. “Therefore, the pandemic resulted in many positive operational changes and learnings that medical groups can use to build upon. This survey is a critical tool to understand the financial and operational impact of the pandemic on medical groups.”
“The survey showed median provider salary and benefits expense as a percent of net revenue rose from 72.1 percent to 84.9 percent, which is a result of provider compensation being protected during COVID-19 coupled with decreased productivity during the same time,” the press release went on. “Median clinic staff salary and benefits expense as a percent of net revenue decreased from 24.2 percent to 22.8 percent. The latter demonstrates the impact of layoffs, furloughs, and care model/process changes due to the COVID-19 pandemic. Additionally, median total operating expense as a percent of net revenue (excluding salary and benefits) rose from 21.7 percent to 29 percent.”
"We have seen the median provider salary and benefits as a percent of net revenue trending upward in recent years, leaving a smaller percentage of the expense structure to cover staff salaries and benefits and operational expenses,” said Wagner. “This situation is not sustainable, and medical groups must focus on ensuring optimal efficiency in practice operations.”
Further, “When looking at trends, organizations often look at investment per physician/provider as a benchmark of performance,” said Fred Horton, M.H.A., AMGA Consulting president. “However, since expenses included and allocation methodologies in the P&L differ from organization to organization, we recommend utilizing a comparative analysis at the expense line item level, and the survey enables such a comparison. This approach points efforts to areas where the medical group is able to control and ultimately impact change.”
Among other key findings:
> The survey also showed median annual visits per provider declined in 2020. When medical groups employ both physicians and advanced practice providers (APPs), the “per provider” metric is typically utilized, with the metrics being divided by the total number of both physicians and APPs providers.
> While system-affiliated medical groups utilized more APPs than independent medical groups, the ratios between the two were near identical.
As the press release noted, “The 2021 edition of AMGA’s Medical Group Operations and Finance Survey is its most comprehensive survey yet, featuring data from 47 independent and affiliated medical groups, representing more than 23,000 providers across 6,712 clinic sites.” The report, the press release noted, also includes survey data on access (scheduling, telehealth utilization, etc.), revenue cycle management (accounts receivable, claims data, denials, etc.); staffing ratios related to operational support departments, clinic staffing by role, advanced practice provider-to-physician ratio by specialty, and financial information.
Shortly after the publication of the report, AMGA Consulting’s Fred Horton, Rose Wagner, and Elizabeth Siemsen, a director at AMGA Consulting, spoke with Healthcare Innovation Editor-in-Chief Mark Hagland to share their perspectives on the results shared in the report. Below are excerpts from that interview.
Let’s begin by looking at the big picture. Starting at 40,000 feet, what struck you in terms of the results uncovered in the report?
Fred Horton: I think what we found, by and large, is that there were volume reductions that everyone anticipated, per COVID-19; some expenses came out of the system, but definitely not enough to cover what the volume reductions were. And there’s a difference between the independents and the system-based practices. There were volume decreases that led to decreased profits among the independent medical group side. The picture is a bit more complex for integrated systems. In a normal state in integrated systems, the reality is that each unit loses a bit of money. When practices move from being independent to being part of an integrated system, the ancillary revenue typically rolls up to the system level, and there are system allocations. They lost volume, but there was also relatively less financial loss. The system-affiliated groups moved from investment per physician from $278,000 to $220,000. That’s monetary loss. In other words, the systems lost less, primarily because of lower volume. Per provider including APCs, it went from $164,000 to $135,000.
In system-affiliated practices, median visits decreased a bit more, as evidence of the volume reduction. And then we also saw that telemedicine spiked early in the pandemic, and decreased over time, and ultimately, it will stabilize.
Elizabeth Siemsen: The figures were thus: 30 percent of care delivery occurred through telehealth in the second quarter of 2020 for primary care, then dropped to just under 15 percent. Different specialty types have a different mix. 3 and 4 were consistent in that 10-15-percent range.
Horton: The care model will be redefined as more patients come into the office.
What are the most important findings that leaders should understand, from these results?
Horton: They are around the broad observations that I shared above, in terms of the volume impact and the telehealth levels. We survey a couple of times a year, and one of the things that strikes me is that while organizations worked very rapidly to implement telehealth, as time went on, organizations refined their care model, and as patients came back into their offices, the physician groups refined how efficacious telehealth was. It was difficult to get the costs out. We did see some cases where costs were taken out, but that gets into the details.
I think the independent medical groups did a fairly fantastic job recovering from the pandemic. The volume reductions were less. Independents are responsible for getting volume back themselves, not as part of an integrated system. So I think some of this involved culture, and also a little bit in terms of how quickly they can rework their strategies, because they tend to be smaller.
Rose Wagner: What we saw here was the difference in how groups had to staff to see patients. We did see staffing models change; we know that organizations got creative in how they staffed; they had people working from home, for example. The lessons will go forward, because now we’ve got staffing crises in clinics; people can acquire front-office staff and medical assistants. So they’re working to take the inefficiencies out of practice. Organizations will really refine their strategies. And when we say medical assistants, we’re not referring to physician assistants, but to back-office staff who help room patients and take vital signs; and also front-office staff. So, back-office staff and front-office staff that do the check-in and insurance eligibility.
What are your thoughts related to the broader economy and to worker shortages in the general economy? Are some of the shortages of back-office staff in medical groups connected to those broader trends?
Wagner: Yes. We’ve had organizations say you can get paid better at Amazon; and the fact that people are leaving the workforce.
Horton: And remote work; you can’t work remotely in those environments, obviously.
Siemsen: I was struck, as I looked at the data, and went back a year. At that time, 44 percent of groups were providing telehealth services; now, it’s 100 percent. And that’s a big, fast change. And not all will stay at a high level; but it is a big change and shakeup. As Rose said, there’s a new normal. Groups had to punt and figure out how to function well. I think there’s still more to come; there will be a lot of things they like to do.
What will the landscape of multispecialty group practice operations look like three years from now?
Wagner: I think medical groups are going to be forced to operate more efficiently; there’s less and less revenue available to go to operations. So, to survive, organizations will have to operate more and more efficiently; they’ll just have to get better at it. There might have been some space in the past, but now there’s very little room for error now.
Siemsen: There will be more technology-enabled work required as well. Groups will look to make their teams more efficient, whether through evisits, telehealth; they’ll leverage technology more efficiently.
Will information technology and data analytics will be part of the solution?
Horton: Yes, I think that technology, in a number of areas, will play a big role. If you look at remote testing… and analytics, and changes in workflow in the EHR [electronic health record]. If you look at the investments in technology in HC, it’s off the charts compared to the past. And it all comes down to dragging down that per-unit cost. There will be continued investment in that area.
Siemsen: I concur. I think we’ll see more and more use of analytics, especially in the EHR. There’s a lot that can be tracked and analyzed. I think…
Is there anything you’d like to add, per everything we’ve been discussing?
Horton: EHRs weren’t necessarily bult to do the types of things you’re suggesting; but through evolution, we’re getting at that, and there’s greater integration. And how do we capture data not just to make sure we can bill better, but so that we can improve the care model? And there’s investment in data companies that will really help with predictive analytics, and looking at disease states, and intervening earlier; and the ambulatory environment.
And that will involve analytics for clinical decision support at the point of clinical decision-making, correct?
Horton: Yes, and risk-based contracting provides promise for the right care at the right time by the right provider in the right setting, to ultimately improve both outcomes and cost-effectiveness.
