A Return to Normal Patient Volumes?

There’s no doubt the COVID-19 pandemic will have a lasting impact on healthcare.  As shelter-in-place orders took hold earlier this year the impact to hospitals, physician groups, specialty clinics, dentists, and other care providers was profound:

• The volume of inpatient procedures fell 50%+ compared to prior years
• Some specialties experienced 90%+ declines
• Collectively, hospitals lost $60B a month

With many healthcare providers operating at single-digit margins in the best of times, this dramatic decline in demand drove many providers to implement significant cost reduction measures, reduce services and hours, or temporarily close.  In dental practices, employment declined by 500,000 jobs – the largest employment loss in any healthcare sector.

However, in recent weeks as COVID-19 restrictions have started to ease, providers have been seeing upticks in procedure volumes across specialties. According to data compiled by Strata Decision Technology, daily outpatient visits increased 40% over the 30 days ending May 30, 2020. This compares to a nearly 50% decline for the 30 days ending April 26th. Similarly, home health and primary care visit volumes are beginning to increase as well. Home health visit volumes reported by LHC (LHCG) and Amedisys (AMED) increased week over week beginning in late April, countering a ~25% decline in home health visits as providers were kept out of many homes. Further, the cumulative visit deficit, the percent decline versus early March baseline visit volume, within primary care is now just (5%) as of mid-June, according to data from the Commonwealth Fund. This is a trend we expect to continue as states continue to re-open under enhanced safety protocols.

For the dental sector, all states were open for elective procedures as of June 1^st. In the last week of May, 90% of dental practices had re-opened and dental employment had risen by 250,000 compared to the prior month. In fact, according to data compiled by P&R Dental Strategies, a dental data and analytics vendor that aggregates claims data from over 65 national and regional dental payers, visit volumes for the week ending June 14th have returned to 99% of baseline, or pre-COVID-19, volumes.

This is a significant increase from prior weeks, when volumes were less than 50% of baseline as well as marked improvement from the month of April when volumes were less than 10% of baseline.

On a state by state basis, there still exists a wide disparity in volume recovery, with some states operating well in excess of 100% of baseline volumes and others still below 50% of baseline volumes, as of the week ending June 14^th. Northeastern states such as MA, PA and NY are on the lower end of the spectrum, while western states such as UT, SD and ID are all operating at 120%+. As we think about the relative performance and attractiveness of both standalone and sponsor-backed dental services organizations on a go-forward basis, geographic footprint will certainly be a factor worth taking into account.

Another factor for industry participants and investors to consider will be how different providers leverage business practices learned and implemented in the past few months, in particular the utilization of virtual care (e.g. telemedicine). Virtual health increases the number of patients a provider can see in a day, enhances patient convenience, and reduces face-to-face contact. While virtual visit volumes will certainly fall from all-time COVID-19 related highs, we expect to see sustained increases in virtual visits compared to pre-COVID-19 levels. Further, we would expect that those dental services providers who were nimble enough to adopt and implement effective virtual care strategies during the pandemic were also able to diversify their revenue base and partially offset some of the inherent crisis related performance declines. As we ultimately return to more normal levels of activity, we would expect these forward-looking providers to lead the pack over the next 12 to 24 months.

We’ll continue to monitor visit volumes across the healthcare landscape as federal, state and local governments evaluate the proper path toward re-opening and healthcare providers resume more regular business practices. As we have seen across multiple states recently, re-opening has been accompanied by a worrying resurgence in case volume. While we look forward to a return to baseline levels of visit volume across the country, we believe providers and patients need to be extremely diligent at taking appropriate precautions wherever possible. With the right protective measures in place and with patient safety and well-being at the forefront, we hope to continue to see a sustained and safe rebound in activity levels in the coming weeks and months.