Physician productivity, revenues fell steeply in 2020 due to COVID-19 volatility, Kaufman Hall says

Volatility driven by COVID-19 slammed physician practices in 2020, causing year-over-year declines in productivity, compensation and revenues, a new report finds.

At the same time, the average investment required to supplement physician revenues rose, according to Kaufman Hall's year-end analyses.

Kaufman Hall’s report draws on data on nearly 100,000 providers representing more than 100 specialties. 

Overall physician productivity, measured as physician work relative value units (wRVU) per full-time equivalent (FTE), fell 8.4% from 2019 to 2020 due to the impacts of the pandemic.

Physician wRVUs per FTE improved significantly in the second half of the year after plunging in the second quarter but held below prior-year performance for each quarter of 2020, the report said.

The effects of the pandemic on physician productivity varied across specialties. Primary care physicians saw the most robust recovery due to a patient-centric approach, including an increase in telemedicine offerings. But primary care doctors face stiff competition from an ever-growing array of companies offering virtual care services, according to the Kaufman Hall report.

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Specialty referrals remained down as patients delayed seeking care for new issues. Recent media reports indicate that initial diagnoses of diseases like cancer dropped in 2020 but could increase drastically as patients return in 2021.

Physician compensation declined just 1.6% from 2019 to $303,181 in 2020, as many health systems chose to freeze compensation levels during the pandemic, therefore reducing the overall decrease, Kaufman Hall reported.

Median physician compensation per FTE was $306,148 for the fourth quarter of 2020, up 1.4% from the third quarter and closer to the 2019 median of $307,961.

Lower productivity, however, led to a 6.3% year-over-year increase in physician compensation per wRVU from 2019 to 2020. From the third quarter to the fourth quarter, physician compensation was up 5.6% but remained below first-quarter and second-quarter levels.

Pandemic-fueled declines in patient volumes and lower productivity also drove net revenue per physician FTE down 6.3% from 2019 to a median of $566,773 in 2020. Total direct expense per physician FTE (including advanced practice providers or APPs) fell 4.9%—more than $40,200—from 2019 to $782,518 in 2020. 

RELATED: Physician compensation slides after COVID-19 slams practices, Kaufman Hall says

Contributing factors included volume declines that led to lower overall expenses as well as reductions in staff availability as many clinicians—particularly female physicians and APPs—had to stay home to care for children and others due to school closures and nationwide shutdowns, Kaufman Hall reported.

Even so, physician practices saw some signs of recovery in the second half of 2020, following significant disruption in the early months of the pandemic as nationwide shutdowns and concerns over potential COVID-19 exposure drove declines in physician visits. The median investment/subsidy per physician FTE fell 26% from a high of $289,268 in the second quarter to $213,118 in the fourth quarter, indicating the beginning of a return to pre-pandemic performance, according to the report. 

The median investment/subsidy per physician FTE for all of 2020 rose 6.8% from 2019 to $239,656, largely due to lower patient volumes earlier in the year.

Many hospitals and health systems continue to develop and grow their employed physician strategies as older physicians retire and recruitment for new physicians becomes increasingly competitive.

"Healthcare leaders should take a balanced approach with regard to meeting patient demand as they look to grow their physician strategies moving forward," said Cynthia Peters Arnold, a senior vice president at Kaufman Hall, in a statement. "This will require rethinking the investment needed to pay physicians, setting clear clinical quality and economic targets, and establishing a physician management system with accountability for both physicians and administrators."