PPE Supply and Demand May Delay Reopening
Healthcare providers still struggling to gain equipment
As the novel coronavirus (COVID-19) peaks and many parts of the country begin the process of reopening, medical groups and health systems are confronting the challenge of resuming elective surgery and delayed primary care appointments. Recent pulse surveys of members of AMGA’s Leadership Councils tell the story of the ongoing struggles for medical groups to acquire PPE and the direct tie to their capability to resume elective services and regain financial stability. When asked, “What is your biggest concern with the resumption of elective services, PPE use rate/supply levels was just second to testing requirements/expectations.
A second question around the anticipated volumes with the resumption of services highlighted where groups plan to be, even with the lingering concern about PPE resources: 43% anticipate volume recovery less than 50% of pre-COVID-19 levels. One survey participant opined, “This will be a slow ramp-up. Initially 10-25% of volumes. … Consideration of ability to do without burning through important PPE like N-95, as well as gowns. … We will schedule in two-week increments and adjust if PPE supply drops or cases go up and we get a surge in hospital.”
PPE resource availability has faded into the background in recent weeks, giving the impression that the supply scarcity has been resolved. When surveyed specifically on PPE, many groups shared that some needs were being addressed, but almost a third of participants indicated that circumstances had not changed or were getting worse. Even those that have seen improvement in the levels of PPE for their groups and facilities worry about the reliability of the supply chain. One respondent remarked, “PPE availability is the most significant 'unknown' in our resumption process.”
While sourcing/availability remains the biggest mountain to climb, there are other related PPE challenges. One is utilization. The practice changes related to the use of PPE have created confusion with both internally and externally driven policy adjustments. These changes can impact utilization, potentially creating unintended consequences. As one survey participant described, “The multiple changes in external PPE guidance have made credible communication of current practice and consistent compliance by staff/providers a challenge. It has fueled fears. Accurate daily inventory is also a challenge and critically important as we decide what services we can provide.”
The new practice and utilization levels have increased supply costs substantially, at a time when revenues have been severely constricted. In addition to higher utilization, the scarcity of supplies have increased the cost of the items. Even groups that are able to acquire needed PPE may be paying substantially more for the materials. One stated, “The cost of PPE has skyrocketed. We are now paying 12 times the amount for surgical masks. We recently ordered 100,000 surgical masks and the cost was $80,000, when in February it would have been $7,000.” According to the AMGA 2019 Medical Group Operations and Finance Survey, medical/surgical supplies make up 1.03% of net operating revenue (median). An increase in these expenses, outside the normal inflationary increase, coupled with the decrease in volumes and related revenue will place additional pressure on medical group financial performance.
As some groups resume elective services and/or prepare for reopening, they shared the importance of PPE to regaining some of what has been lost for medical groups since the COVID-19 crisis began. The survey responses and comments indicate a lack of trust overall relating to PPE –the availability in the market, the expertise on safe utilization, and the ability to secure resources. Any new “normal” for groups will have to reflect the cost – both price and utilization – and restore their confidence in their ability to maintain the needed levels of these critical supplies.
This analysis is provided by AMGA Consulting, your long-term partner on key business issues. To find out more about AMGA Consulting can assist you with unprecedented access to market data and best practices derived from America’s leading health systems and more than 170,000 physicians nationwide, visit amgaconsulting.com.