How COVID19 is affecting my practice and personal finances

Like most ophthalmology practices, I ceased seeing non emergent patients and performing non elective surgeries since mid March, for the last seven weeks. I saw a total of 54 patients over the first six weeks, and 21 last week.

Ophthalmology was one of the hardest hit fields, compared to others. The average practice had a 80% decline in patients seen, and many of these patients were for intravitreal injections. Many comprehensive ophthalmology practices such as mine had over a 90% decline.

This week, the governor in Arizona opened up surgery centers for elective surgeries. It was a good feeling to get back into the OR on Wednesday and do five cases, but the turnover was longer due to having to wait a half hour between cases. My patients were required to get COVID testing.

Even with two rooms, it took me two and a half hours to do five cases. It was the most relaxed I’ve felt in the OR in years because I didn’t have to rush back to the office. I even had time to go to Dunkin’ Donuts when I finished, something I used to do my first two years of solo practice when I was only doing two or three cases.

Yesterday the governor allowed hair salons and stores to open with social distancing. Restaurants will follow soon. So if it’s safe for them to open, I assume I can also, although I need to take more precautions because of my elderly clientele. In many ways, this feels like six years ago when I was opening my solo practice, except I already have a built in patient census that I know will continue to come and see me, so I expect to ramp up faster.

Even as a solo doc, I’ve been able to order and secure protective equipment to allow me to efficiently and safely see patients. I’m sure glad that I purchased a second exam lane in late 2018. With social distancing, it isn’t a good idea to move patients back and forth between the waiting room and exam lanes.

For the month of April 2020, my practice financials were bleak. I did have some accounts receivables from payers who delayed paying me for services rendered in March or earlier, but my revenue generated from patients seen was WAY under my overhead expenses. Like most other practice owners, I got the CMS COVID grant of 6% of 2019 medicare payments, although the amount I received was minuscule to the amounts that the large hospital chains received.

I was approved this week for the PPP (Paycheck protection program) and expect to be funded next week. I missed out on the first round so got scared and applied with six additional banks for the second round of funding. Mirroring larger vs smaller ophthalmology practices, I was much happier with the smaller banks which provided awesome service; I could actually speak on the phone with a live person after three rings. The big banks never updated me about anything, didn’t answer my emails or phone calls, acting like they didn’t even want me as a customer.

The purpose of the PPP is to pay two months’ salary and rent to my employee and myself, but I’ll put some of the salary I pay myself back into the practice as a capital contribution to cover overhead until I start generating enough revenue from patient care to cover my expenses.

This time the government bailed us out. For the practice owners out there, you may want to look into disability insurance and office overhead expense insurance. The government won’t bail you out if you break your arm or leg skiing and can’t generate income for you practice. Disability insurance usually has limits, so if you couldn’t cover your overhead then get office expense insurance. It’s expensive, and is usually limited to a few years where disability is for a lifetime, so try to accumulate savings so you won’t have to purchase this.

The extra time on my hands has been used to catch up on reading, deep clean my home and office, do my board recertification questions, chase after delinquent patient and insurance accounts to the bone, update my employee protocol handbook, do my S corp taxes (this was the first year I filed as S corp, to my surprise it isn’t much harder than Schedule C as taxed as sole proprietor) hike in Sedona, and get into top shape with Orange Theory and Peloton streaming videos.

A tip of the hat to any ophthalmologists who worked in the ER or the ICU to take care of COVID patients. For those of you who didn’t know, I was a resident at Mount Sinai in NYC and rotated at Elmhurst Hospiral in Queens, the epicenter of the pandemic. Here’s a nice report from my attending who taught me cataract surgery about the wonderful things that some of the residents have accomplished. I just hope that they get adequate ophthalmology training and experience before they graduate.

It will be easier for smaller practices to adapt to decreased patient volumes and social distancing

Ho Sun has already written about this in his excellent blog post. I couldn’t agree more with his comments. We’ve become experts at running small, efficient practices over the last six years and don’t need to do a whole lot to adapt. Financially, a low overhead micro practice with 35% overhead will pay off its expenses for the year at the end of April. The rest of the year will be profit, if any patients show up.

A high volume, high overhead practice with 60% overhead needs to see the same large number of patients until July to cover their overhead. They’re going to be in trouble and have to undergo lots of restructuring to survive.

The same is true for reimbursement cuts. If your overhead is 35% and reimbursement is cut by 10% as it was for cataract surgery in 2020, your profit drops by 15%. But if your overhead is 60%, your profit drops by 25%.

Before COVID hit I was seeing 13-16 patients per day because I wanted to keep my practice small. In 2018 I had an absolutely terrific front desk as my sole employee who took care of everything, so I could still get out of the office on time.

I decided to hire a tech right around the time COVID hit. Due to declining patient load I had her double as front desk and tech. Having saved time from patient workups certainly affirmed my decision to have two employees, which I really should’ve done about a year ago since my time is worth more than money. With this setup I can easily see the same 13-16 patients per day and get out nice and early. Once social distancing is over, I will expand to 18-20 per day over the next few years.

A bigger practice with crammed waiting rooms and lots of patient movement between rooms will find it harder to adapt. Additionally, these practices are frequently dependent on elective cash pay procedures such as premium lenses and lipiflow. Depending on how long the economic recovery takes, patients might be more reluctant to pay for elective or premium items.

We understand that many ophthalmologists prefer or enjoy bigger practices and higher volumes. You can get there eventually, but my advice to anyone opening is to not get in over your head too quickly. The lesson from COVID is to make sure your practice runs like a well oiled machine, there is a plan to pay debts for equipment or purchase of the office, and to have some savings before you expand. Bigger is not always better.

Right now is a terrific time to start a solo practice

Practice owners’ true colors come out in the time of crisis. I heard of someone in my town telling their junior associate that they wouldn’t be doing any more surgery, because the owner wanted to keep the cases for themselves. I’ve heard of private equity groups laying off doctors, or paying them zero if on an eat what you kill compensation structure.

Some of my employed friends are taking pay cuts between 50-80%. While I myself wouldn’t give my junior associate full pay for the entirety of the seven weeks of the shutdown, if I had an associate I would still want to treat them fairly. It’s unfair to ask them to make the same sacrifices as a partner when they don’t get the advantages of a partner in good times. I would’ve probably paid them in full for two weeks and then re-evaluated the situation.

On the other hand, the junior hasn’t bought in either with cash or sweat equity like I have. Perhaps I’d lower their base but make performance bonuses easier to reach, and offer a earlier partner buy in for making some sacrifices.

But let’s not forget the PPP is supposed to help cover salaries, including junior associates, for eight weeks. I don’t feel it’s asking too much to have a junior associate’s practice pay them the PPP amount which is annualized at $100,000 per year for the next eight weeks.

Some of my friends who started their practice recently didn’t get much out of the Medicare COVID grant and the PPP because they were dependent on 2019 practice income.

They were still happy that they left their old practice, because guess what? In bad times it isn’t gonna be the senior partner to go first when volumes are low. It will be the junior associate that’s asked to leave.

Now is a good time to start up because interest rates are low and equipment vendors and landlords are probably willing to make deals, and there will be pent up demand for patients to be seen once this is all over.

Don’t get me wrong, the first six months of a startup right now is harder than when I started up. But it’s still a very good time to start a solo practice.

Personal investments: stay the course and don’t time the market

I’m quite shocked that the stock market recovered so quickly from its low on March 23, although I wouldn’t be surprised if it went down again. It’s now at the same levels as August 2019 and 10% off its all time high. Many people I know sold when the market dropped. This is the exact opposite of what you should do, because you want to buy when it’s low and sell when it’s high.

I spent a lot of emails trying to convince people to not bail out on the market and shift their stocks to cash. If you felt you were overexposed to the stock market and didn’t have enough cash on hand, and your risk tolerance was too high, then right now in May 2020, after the stock market has recovered is a real good time to do sell stocks. There may be some people that get lucky and sell everything and buy back at a lower price, but personally, on March 23, I thought stocks would continue to go down. They haven’t.

If you sold all your stocks on February 20 and bought them back on March 23, of course you made a killing. But how did you know to do so those specific dates? Please post in the comments section (or at least keep a personal journal) on what the stock market will be a week, a month, six months and a year from now and continue to update us based on how economic conditions change. You will quickly see how wrong you are.

Any fool can get lucky once or twice or perhaps several times, but there’s regression to the mean. It’s difficult to be consistently right about timing the market. Same goes for VIXY (betting against the market) and individual stocks. If you bet against the market, how do you know when to start and when to stop? I remember reading one week orange juice was the highest performer in the market, but I don’t even remember which week. I’m sticking with broad, diverse, low cost investments that mirror the US economy, like the total stock market index and the SP500 index.

I continued my weekly dollar cost averaging, and as the market dropped I put in more and more and purchased extra shares while it was on sale. It’s already served me well. It is common sense to buy more shares when the price is lower and sell when it’s higher, but people get caught up in their emotions and do the very opposite. I recommend you rebalance your portfolio if the market drops 10-15%, and have a written plan to stick to.

Even right now, the SP500 is about the same level it was in September 2019. Did everyone think the world was coming to an end then? At its lowest point at the end of March, it was the same level as early 2017. If you are close to retirement and had been invested for years, you’d still have gains for everything you invested before 2017. If you just finished training within the last 5-7 years, your horizon for the stock market should be long term at 20-30 years, and this was a golden opportunity to purchase stocks at sale prices.

And remember, recessions usually last for a few years at the most. So if you have more than five years towards retirement you should be just fine. I’d be saying that even if the stock market right now was at March 23 levels. If you have less than five years toward retirement, you should’ve had more cash to begin with.

I performed tax loss harvesting, which is a strategy of selling your losers (post tax funds I purchased in the last two years) and rebuy them with similar but not identical funds to reset your cost basis lower. So I have five figure losses on paper for which I can apply $3000 per year against ordinary income, which is taxed at a higher rate than capital gains. If I don’t use it all up, perhaps when I sell my practice I will get a tax discount on the portion taxed as capital gains.

A strategy of consistently dollar cost averaging, rebalancing/ buying more when the market dips, sticking to predetermined written asset allocations, and having six months’ savings (more if you’re a practice owner as you might need owner capital contributions in times like this) sounds easy, until you don’t do it.

If you want to sell your stocks and buy a bunker, right now is a real good time to do so now that stocks have went up and the prices of bunkers have probably dropped. If the world came to an end because of the coronavirus or any other event, your money wouldn’t be worth anything anyway.

Remember, throughout history the stock market has survived multiple world wars, the cold war, the savings and loan crisis, the tech crisis of 2002, the real estate crisis of 2008. The stock market could (and will) drop again, but eventually will make a comeback. Because it always does.

I hope everyone stays safe and healthy, and regardless of whether you’re solo or not, that your practice is doing well.