My original COVID Impact Worksheets allowed users to model various volume loss and recovery scenarios based on certain assumptions. As we move forward, the volume losses should be coming into focus. Unfortunately, they appear to be toward the higher end in many places, e.g., upwards of 60% or so.
If you're not tracking volume losses closely, you should be. I recommend tracking them on a weekly basis with an eye toward determining what the maximum percentage loss is for your practice.
Now that we have a sense of our losses (or will soon) we need to turn our attention to how to deal with the magnitude of the revenue loss. In a straight, professional component only practice, radiologists wages represent the large majority of the expenses. Other expenses are often fixed or non-discretionary, e.g., malpractice and general business insurance, etc. The reality is that radiologists' salaries and wages are about the only expense in a typical radiologist professional practice that are both
- Large enough to make a difference; and
- Discretionary enough to be modified (albeit with reluctance).
The fact is that if earnings go down so must wages. While a normal business may reduce wage expense by laying off staff, most community-based groups will be disinclined to layoff radiologists. However, this means they need to look to other solutions to save money - one of which almost certainly must be to adjust monthly wages so they are commensurate to monthly generated revenues. The question for most would be "What percent decrease do we need to consider?"
I modified my previous COVID Impact spreadsheet so that it is now possible to get an idea of how much radiologist wages would need to decrease to avoid a negative cash balance.
While we should be getting a pretty firm idea on our volume losses, we still know little about the recovery scenarios. To that end, my updated spreadsheet is designed to calculate the percentage decrease of radiologists' wages required to keep cash flows above zero across 5 different recovery scenarios. (Hey, it's better than working in the dark.)
In addition to the original data requirements, the new version also requires users to enter Total Paid Radiologists Wage and Pension Benefits and then adds a variable cell where the user can enter various salary reduction percentages to manually view their impact.
However, I also created a Macro that when run will create a Results Matrix that shows the results if wages are reduced between 10% and 55% in 5% increments for each of the 5 Recovery Scenarios. This is an easy way to get a quick sense of what wage savings (or deferrals) you may need to consider, depending on each recovery scenario.
Because this spreadsheet now contains a Macro my website won't allow me to upload it for distribution. However, I am making available for download via a shared folder on Box. You can access and download the new file by clicking here. There will be an option to download the file.
Detailed instructions for using the Macro to create a Results Matrix are included on the Instruction worksheet in the file.
Simply put, if you are experiencing a 60% loss of revenue, something will need to be done with wages. We might as well face the music and deal with this with as much information as possible, which is why I wanted to share this next version with you.
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Michael Bohl FRBMA
Strategic Advisor
Radiology Group, PC, SC
Bettendorf IA
(563) 484-0488
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