Dental offices hit hardest in health care industry layoffs

The drop in health care services contributed more than 2.2 percentage points of the 4.8 percent drop in GDP in the first quarter

The health care industry lost 1.4 million jobs in April, according to the Bureau of Labor Statistics. The damage was driven by job losses in dentists’ offices, which saw more than half a million job losses over the month, and nearly another quarter million jobs from physician offices. (Monasse Th/Andia/Universal Images Group via Getty Images)
The health care industry lost 1.4 million jobs in April, according to the Bureau of Labor Statistics. The damage was driven by job losses in dentists’ offices, which saw more than half a million job losses over the month, and nearly another quarter million jobs from physician offices. (Monasse Th/Andia/Universal Images Group via Getty Images)
Posted May 11, 2020 at 6:42pm

After social distancing restrictions to slow the spread of COVID-19 took effect in March, Noelle Dunn had to lay off all nine employees at her downtown Washington, D.C., dental office, including herself.

While the practice has been essentially closed for weeks, seeing patients only in emergencies, Dunn said her overhead costs climbed as she spent more on protective equipment and updating her office to make it safer for patients and her employees. When the practice reopens, she expects to be able to treat fewer patients — which means less revenue — because of social distancing.

Dunn received a loan from the Paycheck Protection Program that Congress set up in a law to help small businesses weather the shutdown, although if she does not use it within eight weeks, she must repay it. But the typical 30- to 60-day delay on insurance plan reimbursements could make it hard to pay her employees when the practice later reopens.

“It’s very challenging from the business side of things,” Dunn told CQ Roll Call. “It’s going to change the way dentistry is run in the future for quite a while.”

While health care providers are being hailed as heroes throughout the pandemic, the industry was not immune to job losses as patients canceled elective surgeries and postponed appointments to lower their risks of infecting the coronavirus that causes COVID-19. The health care industry, which grew steadily throughout the Great Recession more than a decade ago, lost 1.4 million jobs in April, according to the Bureau of Labor Statistics. 

The damage was driven by job losses in dentists’ offices, which saw more than half a million job losses over the month, and nearly another quarter million jobs from physician offices. The BLS reported an additional 205,000 job losses in the offices of other health care practitioners such as other outpatient care providers.

Over the last two months, 53 percent of jobs in dentists’ offices were lost, according to the Altarum Institute, a health care research and consulting firm. Dental offices could have a harder time rebounding because of the high-contact nature of teeth cleanings and other oral procedures, said Ani Turner, Altarum’s co-director of sustainable health spending strategies.

Turner said she expects dental offices to try to bring back patients when they can safely do so and modify their operations to increase safety, but demand could be low. 

“It’s such a high-contact encounter. It’s not even like your haircut. People are going into your mouth,” she said. “Both from the perspective of the safety of the hygienist and dental staff and again the patient, it seems like it’s got to be one of the last sort of activities to ramp up again.”

The next pandemic response package, in which some lawmakers want to include additional aid for health systems, may be weeks off. Larry Kudlow, director of the National Economic Council, said Sunday that “many people would like to just pause for a moment and take a look at the economic impact of this massive assistance” while informal talks on the next round occur.

The American Dental Association last month sent a letter to lawmakers asking that the next response package provide small businesses more flexibility to repay federal loans that would allow them to make better decisions about staffing based on when they plan to reopen. The trade group also requested that dentists be included in the distribution of protective gear to providers, such as N95 masks and face shields, and sought tax credits to buy protective gear and make office safety improvements.

Richard Gundling, senior vice president for the Healthcare Financial Management Association, said the drop-off in revenue for a variety of providers of non-COVID procedures only shows part of the picture. As more elective procedures that bring in higher revenue — including cancer treatments, transplants and other critical issues — resume, medical providers’ finances may not improve significantly, Gundling said.

“Even though they may have the surgeries back, their patients might not have jobs to pay for it,” Gundling said.

Payment problems

Lawmakers funneled $175 billion to hospitals and health care systems in aid packages over the last two months, but that hasn’t stemmed the hits to many practices that closed at least temporarily as the pandemic spread.

Federal officials recommended that providers cut back on voluntary procedures, which resulted in a substantial revenue losses, although the Centers for Medicare and Medicaid Services encouraged telemedicine and released guidance last month for providers to begin resuming those elective procedures.

Some lawmakers, such as Sen. Joe Manchin III, D-W.Va., are seeking more. He said health care providers “invested heavily to prepare for the pandemic” by canceling non-emergency procedures at the government’s request. 

“This major shift has put our front line healthcare providers on the brink of financial disaster,” Manchin said in a letter to congressional leaders Thursday.

Manchin urged the administration to tilt the next aid package more heavily toward rural and Medicaid-reliant providers. In his letter, he called for the package to earmark 20 percent of the funding for rural providers and forgive interest payments on federal loans, which allow providers to receive cash advances based on historical Medicare payments, through the Accelerated and Advance Payment Program. 

CMS took some steps to alleviate the losses felt by Medicare providers by expanding the availability of the AAP loans. However, the agency paused that program last month over the protest of groups like the American Medical Association, noting providers instead could receive funds under two of the coronavirus relief laws.

The legislative aid provided to the health care sector so far represents only part of the costs the sector may face. A paper published in Health Affairs last month argued the direct cost of treating victims of the pandemic would run between $163 billion and $654 billion. Another analysis by the Brookings Institute published last week estimated the cost of treating coronavirus patients at between $15 billion and $313 billion for hospitals nationwide.

Separately, the lost revenue from cutting back voluntary procedures in the health care industry may outstrip the federal relief funds by the end of April, according to a JP Morgan analysis in March. Health care revenue dropped 40 percent or more nationwide, the analysis found, in a sector with typical revenues of $100 billion a month.

The sudden drop in elective procedures and the health care services in general contributed more than 2.2 percentage points of the 4.8 percent drop in gross domestic product in the first quarter, according to a Commerce Department report. 

Gundling said many of those procedures will return, but hospitals may not necessarily be better off. He said medical providers may feel more long-term stress in the months following the crisis due to a change in the revenue mix — with more Medicaid patients at a lower reimbursement rate and more patients with no insurance at all.

“Some of the stronger health systems are going to be able to weather this storm,” Gundling said. “The ones going through tough times, the ones in rural areas, they didn’t have lots of cash or financial wherewithal to weather this in the first place. For the ones that are frail and weaker, this could be existential.”