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05/10/17

Roy D. Mercer

Back in the 90’s, two morning radio hosts in Tulsa, Oklahoma created a fictional character named Roy D. Mercer famous for making hilarious prank calls.  When I say ‘hilarious,’ I mean that terribly unsophisticated humor that comes from the juvenile mind of rock-n-roll DJs who happen to be bona fide rednecks. 

If you voluntarily listen to the symphony or think Chicago is ‘out in the country,’ you might not find it funny.  But in fly-over country, the bits had you spewing your coffee on the way to work.  Twelve albums sold over a quarter of a million copies, so maybe it is an acquired taste.

Roy D’s typical call ended up with him getting in a ginned up argument with the poor sap who answered the phone, eventually leading to him threatening to come over there and exchange blows.  Roy, wanting to make sure he could win this fight, would ask his inevitable question:

‘How Big ‘a Boy Are Ya?’

For many Mercer fans, that question is not only just a comedy line, but an important part of their life philosophy.  As one such redneck who grew up in that part of the world and, yes, might have owned a Mercer CD or two, it is a question I often ask physicians.

In the quest for independence, size matters because as Roy D. knew, there was going to be a fight and it was better to be the bigger guy.  As we talk with physician practice leaders around the country, we constantly stress that scale is important for a growing number of reasons.  Here is one more data point to make the case.

A study in Health Affairs (OK, how’s that for range?  Roy D. Mercer and a Health Affairs study in the same post.) found that, to no surprise, when payers have substantial market share, they negotiate lower rates with physicians.

The study examined about 15 million PPO claims and compared the prices paid to physicians for level three, four and five office visits based on whether the payer’s market share was ‘a little’ (less than 5%) or ‘a lot’ (more than 15%, though the average for this group in the study was 24.5%). 

For most practices, payers will little market share paid an average of $88 a visit (across all three levels, across all markets studied), but that dropped to $70 for the bigger payers. Same work, same care, but a big haircut.

But there was another angle from the study.  Bigger practices, those with 15% or more of provider market share, got paid more than smaller practices.  They got $97 per visit from small payers and $76 from the plans with more concentration.

So yes, even big practices get squeezed as payer concentration increases, but they start from a better place and give up less than do their small practice counterparts.

There is going to be a fight, so how big ‘a boy are ya?

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ALN

Tim Coan, ALN’s CEO, writes an insightful and witty blog three times a week about a variety of topics relevant to independent physician practices.

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