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Bouncing Back from COVID-19 Part 2: Finding a Solution

This is the second blog in a three-part series about helping private practices bounce back from COVID-19. To read the first blog, “Challenges Facing Private Practices,” click here.

There are so many different moving parts to relaunching a practice that it can be hard to know where to start. The sheer number of problems to be solved can make the endeavor seem overwhelming. Here at Bancroft, we have defined the challenges using five broad questions:

  • What are our people plans?

  • How are we helping our patients navigate COVID-19?

  • What should our survival mode operations and cost structure look like?

  • How can we take advantage of reduced executive demands to strengthen our organization?

  • What do we need to do now on capital and governance?

Each of these questions has several components to it:

What are our people plans?

  • Cash flow/capital during social distancing

  • Furloughs/downsizing/layoffs necessary—and approach to each

  • On-going communications execution to all internal stakeholders (executives, employees, physicians, staff)

  • Administrative support (e.g., unemployment filing for employees, benefits management, physician filing for CARES Act or other support)

  • Safety for staff in on-going operations

How are we helping our patients navigate COVID-19?

  • Telehealth

  • Emergency services

  • Cleanliness and safety

  • Active engagement with chronic or recuperative needs

What should our survival mode operations and cost structure look like?

  • How long do we expect social distancing measures to continue in our area?

  • How much capital cushion do we have to make investments (if any)?

  • What resulting operating model can we afford?

How can we take advantage of reduced executive demands to strengthen our organization?

  • Technology upgrades

  • Facility/Office improvements

  • Talent acquisition and development processes

  • No-regrets closures and terminations

  • What facility and operational changes are required in response to COVID-19? (e.g, cleaning, training, physical layout, and flow)

What do we need to do now with capital and governance?

  • Define and implement on-going communications with lenders, investors, and board of directors

  • What capital cushion is needed to ensure survival?

  • What must be addressed with investors/lenders to ensure stability during social distancing and prep for relaunch (e.g., covenants, capital cushion, reporting, and communication)?

  • How much capital will be required for restart?

Answering all these questions can be time-consuming, but once you know this information you are in a better position to make decisions. You will have the basic pieces in place to project how much revenue your practice is likely to have in the first month of opening, the third month, sixth month, etc. In addition, you can determine whether your company will need to dip into capital or when you will be breaking even on costs.

Bancroft has performed extensive modeling around these issues. Taking the information generated by these questions and combining it with our market knowledge, we can create models for clients that project future revenue. Such models allow practices to consider what will happen if they make changes in different factors. For example, if you bring all the staff back immediately, will you achieve profitability faster? Or, if you reduce physician compensation by X, when will you reach the break-even point? The chart below shows a model for the relaunch of a hypothetical 20-doctor practice.

Bancroft’s model shows that this particular practice would reach the break-even point between months four and six. The payback range is months seven to ten, and it would be seven to ten months before the practice could afford to have all the physicians back at work.

Information provided by the Bancroft model allows the practice to make informed decisions about key questions. Where is capital best spent? How should we compensate physicians? What are our personnel needs? As you can see, this business would be better off if they make significant physician compensation adjustments during the relaunch and its capital requirement per physician would range from $50k to $200k.

Bancroft’s models allow your practice to develop a relaunch plan based on information—not guesswork. When helping clients devise such plans, Bancroft also believes it’s important to keep in mind the needs of each stakeholder in the business. This is a way to double-check that every group’s interests are addressed and that the plan is financially sound. Each practice has five main groups of stakeholders. Below are some of the key questions that you should ask yourself about each group of stakeholders to ensure that your plans address their concerns—as well as market conditions.

Patients/Customers

  • What is our historical mix of patients? What are their clinical needs?

  • What are our payment sources? (e.g, commercial, Medicare, exchange, patient responsibility)

  • What are our traditional business lines? (e.g., routine, chronic, acute, elective)

  • How will clinical needs affect restart sequencing? Are there pent up clinical needs?

  • How will local job losses impact patients’ ability to pay/reimbursement?

Clinicians

  • How will our current compensation model need to change for relaunch?

  • What is our physician rehiring/return-from-furlough plan?

  • How are our clinical leaders reacting to COVID-19?

  • How does the rest of our clinical staff appear to be reacting to COVID-19 – economically, professionally, emotionally?

Team

  • How is our leadership responding to the crisis?

  • What key gaps on the team or direct reports need to be filled now?

  • What is our plan for rehiring staff? Is there a topgrading opportunity?

Capital/Governance

  • How are lenders reacting?

  • How are equity investors reacting? How is the board reacting?

  • Do we have sufficient capital for survival and for relaunch?

Market Dynamics

  • What are we hearing from referral sources? How will that impact our volumes or mix?

  • How is our competition positioned? Are mom and pop operations going to come back?

  • What are we hearing from payors? How have they responded to AR collection efforts?

Leveraging this information, Bancroft can help you start developing a plan to reopen. In part three of this blog series, we discuss how Bancroft’s team and their expertise can allow you to refine your relaunch plan and begin to execute it.

Part three of this series discusses how Bancroft can help your company survive and even thrive during a pandemic economy. Reach out to Bancroft today. We’re happy to discuss how we can help you achieve your business goals.