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August 11, 2022 The Devil, The Lord or Someone Else

August 11, 2022

The Devil, The Lord or Someone Else

In 1980, Bob Dylan won the first ever Grammy for Best Male Rock Vocal Performance. Fortunately, the ‘vocal’ part of the category has very low standards regarding clear articulation. From his ‘slow Train Coming’ album, Dylan told us that we’re going to have to serve somebody. You pick – the devil or the Lord.

John Lennon didn’t like those options and retorted in song he wrote in response that you gotta serve yourself.

Theological debates by philosophers with guitars.

We (yes, there was a crowd inside my head for this conversation) got to thinking about Dylan’s song related to the seismic shifts going on in primary care. While we’ve been talking about Amazon and One Medical, and before that Optum and DaVita Medical Group, and then all the PCPs who now work for hospitals, we could easily also throw in names like WalMart and CVS, or Oak Street and VillageMD and Iora and countless others.

Unless you live in one of those places where you can count more cows than people, odds are increasingly high that your primary care physician works for some very large company. Marcus Welby is now in the ancient history wing of the medical museum. In and of itself, this is not a morality issue, at least in my mind, for ‘big’ or even ‘for profit’ are not evil per se.

But as old Bob would say, those employed physicians are serving somebody and the question might be who.

Critics of the health system acquisition binge note if that if hospitals financially justify employing money-losing primary care providers because they order lucrative hospital-based services which cost more than the same services offered on a stand-alone basis then that can’t be good for society as a whole.

As the proposed Amazon-One Medical deal moves into the regulatory scrutiny phase, some people are asking just how separate protected medical data will be from all that stuff that Amazon knows about me that I don’t even know about myself.

And of course, anything that happens at Optum always causes skeptics to wonder what Orwellian strings UnitedHealthcare might be pulling behind the scenes, regardless of how wide the promised wall of separation between the two.

Surely the agenda of the big retailers is more than just driving pharmacy refills and selling toothpaste, though that is a start.

Most of the equity-backed plays are either focused on healthcare ‘consumers’ instead of ‘patients,’ or they are all about taking risk through Medicare Advantage or commercial capitation arrangements.

All to say there are more motives at play in the world of primary care than just the three options Bob and John gave us – God, Satan, or ourselves. Or maybe everything is just a twist on one of those three masters.

Patients now must be aware there might be someone else in the exam room besides just their primary care provider. Specialty physicians who have some level of a symbiotic relationship with PCPs should be mindful as well.

We all gotta serve somebody.

August 4, 2022 The Swiss Army Crowbar

August 4, 2022

The Swiss Army Crowbar

There is an easy and relatively reliable test of creativity that can be used in job interviews for roles that need this skill. Simply give someone a common, everyday object and ask them to list as many uses for that object as they can in 60 seconds. Creative people generate more ideas.

On that measure, I have some distant relatives that are virtual Leonardo da Vinci’s. That crowbar out in the garage? Makes a good TV antenna, door stop, beer bottle opener, grill spatula, and fingernail cleaner…all in one afternoon.

In that vein, let’s compare Amazon’s pending acquisition of One Medical with a similar mega deal a few years ago.

Remember Optum’s purchase of the DaVita Medical Group in 2019? You’d be forgiven if you forget the occasional multi-billion-dollar Optum purchase. There are a lot of them, it seems.

I am sure principals on both sides will point out the differences between One Medical and the former Health Care Partners, which Da Vita had acquired just a few years earlier, and might be rightly insulted by the crowbar comparison.

I say, ‘close enough.’

Amazon is paying $3.9 billion for 180 locations – mostly boutique primary care centers – and approximately 767,000 One Medical members (it is a subscription model). In the first quarter of this year, One Medical lost $91 million on $254 million of revenue.

Optum paid $4.3 billion for the 1.7 million annual patient visits across 300 clinics and 35 urgent care centers. Since the medical group was part of DaVita, the financials were not fully broken out, but it was clear the unit was losing money.

Remember when I wrote all those posts about your practice being worth some multiple of your profit (EBITDA)? Well, I stand corrected.

Though there are clear differences between the two, both are very large primary care groups targeted by very large companies – but with very different agendas. And this gets to our point last week of the fork in the road for primary care.

Optum, being part of UnitedHealth (BTW, they’ve been living at home with Mom and Dad for a long time now. Haven’t they saved up enough to move out of the basement and get their own place?) thinks about primary care through the lens of taking financial risk, capitation, complex care management, and how to reduce downstream spending. That is why paying that much moolah for a money-losing operation made sense.

Time will tell on the Amazon strategy, but One Medical is on the other end of primary care – a consumer-oriented play more aimed at the lower acuity end of the care spectrum. That is far more aligned with who we know Amazon to be.

Already, large numbers of primary care physicians are employed by hospital systems. And large numbers are employed by Optum, down on that end of the continuum. Maybe soon, on the other end, a bunch with have a 401k from Amazon.

All three come with a significant potential conflict. We’ll crack those open with a crowbar next week.

July 28, 2022 Selling Off the Parts

July 28, 2022

Selling Off the Parts

Some of us can remember when this new term – hospitalist – was just breaking into our lexicon. No longer would primary care physicians scurry back and forth between the office and the hospital. They could pick one or the other and reduce their windshield time.

The thorny age-old question of where to put the physician parking lot eased, just a bit.

That was the beginning of the deconstruction of primary care, historically comprised roughly of three parts – deliver care in the clinic; manage and coordinate patients with chronic diseases with all the other players; and round in the hospital before the sun came up or while dinner was getting cold on the stove.

One part was now carved off.

The disassembly continues.

Last week’s announcement that Amazon is buying One Medical (will there be due diligence, or does it just show up in a brown box?) is just one more very large piece of evidence that primary care is further being broken up and sold for parts.

No one will say this, of course.

But when we step back at look at the players like CVS and Walmart and the seemingly endless number of telemedicine and app-centric care delivery companies that pop up faster than the dandelions in my yard, and now Amazon, we see the continuing trend that is reshaping healthcare for everyone, not just primary care providers.

The low-acuity end of healthcare delivery – wellness and prevention; simple episodes like the flu; occasional bumps and lumps; you know, the things that are real but don’t yet redefine how the patient experiences most of life – is being flooded by astonishing amounts of capital and new entrants from everywhere.

Why is Grease Monkey not yet offering an oil change and annual physical why you wait? This is a great opportunity to leverage their retail locations to get a piece of the pie.

Likewise, a ton of money and consolidation is flooding into the other end of primary care – the active management and financial risk-bearing of high-acuity patients, those who do drive a lot of cost and do, every day, live their life through the lens of their health condition.

It seems like there are more players jumping into both ends of the pool than we will ultimately need, but this is what happens. $4 trillion is big market and lots of people would like a piece. Eventually it will shake out, losers will go home, and the winners will be really big.

Interestingly, however, most of the actual spend in care delivery resides somewhere between these two disaggregating parts of primary care – hospitals, most specialty physicians, almost the entire outpatient services sectors.

Unless something interesting grabs our attention (squirrel!), we’re going to spend a few weeks exploring the implications of this trend. It is not a new topic…we’ve been on this theme a while. But is really, really happening and headlines like this one bring us back to it.

BTW, if you work for Grease Monkey and steal my idea…you are welcome.

July 14, 2022 Finally, Good News on Inflation

July 14, 2022

Finally, Good News on Inflation

I know he is out of the country right now and has a busy schedule, so he may not get to read this today, but I have some good news for the president on the inflation front. That topic has been rugged of late, and I am sure Mr. Biden longs for the good old days of 2021 when he could still say ‘transitory.’

But I have a stat for his spin masters, those tasked with finding a cable news camera and explaining to us why the pain at the pump or checkout counter is not as bad as it feels. This stat will point to a place where there is no inflation – zilch.

This one even comes with a handy graphic the TV folks can pop up on the screen during the interview. The graphic is easy – just draw a straight line, flatter than western Kansas, with a couple of insignificant wiggles as you move left to right, then a little dip at the end. Then just add ‘Last 30 years’ at the bottom and you’re done.

See! No inflation!

What is this line?

Oh, that is the Medicare conversion schedule for physician reimbursement since 1992.

For those you not steeped in the machinations of Medicare’s Relative Value Units, this is the magic variable in the formula that determines how much physicians get paid. And not just for Medicare…most commercial payers set their rates tied to Medicare as well. So, this really is a big deal.

The conversion factor was $34.73 in 1992.

Currently it is $34.61.

CMS just proposed a 4.4% cut for 2023 to take it to $33.08.

Because, well, physician practice operating costs have not changed in 30 years, and especially not while Uncle Joe has been president. No staff asked for salary increases; supply and medication costs are exactly the same; rents have never gone up; and of course, malpractice insurance rates got locked in forever back when George Bush, the elder, was in office.

And as an added bonus that comes from wearing those long white coats, physicians get to buy gas at a private pump that charges only $1.09 a gallon. College tuition comes with an 80% discount coupon.

See! No inflation!

Victory! And don’t forget to vote!

Yes, I know, I know…

This is all driven by a law that puts this math on autopilot.

And yes, I know that there will be fierce lobbying and Congress will probably step in. But the ‘win’ physicians seek is just to keep this flat. And by now, even those who get their news from TikTok know that with inflation ‘flat is really down.’ This flat/down has been going on now longer than most physicians have been in practice.

The system is broken, but we’ll kick the can down the road – AGAIN. And in the meantime, the cumulative pressure on the financial viability of physician practices grows.

You want to know why over 70% of physicians now work for a health system or big corporation? This one thing explains a lot.

June 30, 2022 Independence Day Cul de Sac

June 30, 2022

Independence Day Cul de Sac

So, I had a good thought on today’s post, a hypothesis on a topic that should have been somewhat interesting. Not ‘worthy of discussing at your coming BBQ’ level of interesting, but ‘consistent with my low expectations of Coan, especially before a holiday weekend when everyone is mailing it in’ kind of interesting. I just needed to go get, what I believed to be relatively straightforward, data to confirm or deny the hypothesis. Either way, there would be a path to 500 words of blather about the subject.

Can I just say that we, as an industry, have horrible data? Is the Supreme Court about to issue an opinion on THAT topic? We, and by that I mean me at the moment, need some action here.

Since it is a good topic worth exploring, I’ll table it and come back later, at a time when I am willing to do more work to get the information. But I already have stuff ready to go on the grill tonight (we are starting early), so ‘more work’ and ‘today’ don’t go together.

But leaving you with nothing – well that would not be nice. So, speaking of getting an early jump on Independence Day, here’s a little nugget for you, one you can share with the family and friends this weekend. That is, if you are OK being ‘that guy.’ Obviously, I am not just OK being ‘that guy,’ I am aiding and abetting other ‘that guy’ types.

Turns out our declaration of independence in 1776 ‘sort of’ happened on July 4^th. It was actually July 2^nd when 12 of the 13 colonies at the Continental Congress voted to approve the declaration. So, you can absolutely start early and pronounce yourself as both patriotic and historically accurate in the process. A couple extra days of beer and BBQ is not a bad idea.

If you are real overachiever – or glutton – you can stretch this out another month because most of the signers of the Declaration did not get around to putting pen to paper until August 2^nd. There was a delay getting the language written neatly onto the parchment. Several did not get around to signing for even longer. Sounds like your physicians being a little slow closing their charts, huh?

So why the 4^th?

After reaching agreement on the 2^nd to declare independence, it took a couple of days to finalize the language (the documentation was going through coding review). On the 4^th, Congress then voted again to make it official.

There you go. Use this trivia this weekend at your own risk.

We’ll be off next week, so no blog post. I might just re-read the Declaration while sitting by a mountain stream. Maybe you want to, as well. It is a pretty good document, after all.

June 23, 2022 Playground Pecking Order

June 23, 2022

Playground Pecking Order

When it comes to lobbying power, the American Hospital Association (AHA) bullies the American Medical Association (AMA) every time, taking the docs lunch money at recess and then making them eat dirt. One more reason more and more physicians find the AMA irrelevant.

But these two are the undercard fighters, a little entertainment to amuse the audience until the big boys get going. Not even the AHA can hold a candle to PhRMA, the very powerful drug industry lobbying arm. Plus, their acronym is way cooler than ‘AHA’ or ‘AMA.’

We could cite lots of examples to make the case that PhRMA could give both the hospitals and docs a noogie and a wedgie simultaneously (We apologize if this extended analogy to playground behavior by young boys is too crude for your tastes, but beside fitting my point, as a bonus it also explains the bad behavior of some men in your life.), but here’s one that continues our recent theme of billionaires spending their discretionary income to challenge the healthcare industry instead of going to Mars.

A recent study in the Annals of Internal Medicine suggests that, for 2020, had the Medicare Part D program purchased just 77 generic drugs from MCCPDC instead of how it now buys them the program would have saved $3.6 billion.

Speaking of acronyms…MCCPDC? Really? After four letters aren’t you required by law to make it make a word? Like PhRMA?

Well, when you are a billionaire, and you have already bought your sports team, and your PR headshots are of you wearing hoodies, I guess you can name your new healthcare venture anything you want.

So, the ‘Mark Cuban Cost Plus Drug Company’ it is. In a ‘cost plus’ world, paying for a naming consultant is an unnecessary expense.

The MCCPDC model is straightforward. They price generic meds at the cost of manufacturing plus a 15% margin, a $3 dispensing fee, and a $5 shipping fee. Bam…much lower price for the meds.

I am cheering these types of outsiders looking to upset the powerful monoliths of our industry. Cuban is a serious student of the healthcare industry, which is interesting as his name is always bandied about as the next business tycoon who knows how to leverage social media to connect with the average person who might consider a change of address to 1600 Pennsylvania Avenue.

But that is not my point today. Instead, this story is a pointed reminder that Medicare is prohibited from negotiating drug prices.

Pause for a PhRMA flex pose for the camera.

Oh wait, Medicare doesn’t negotiate with hospitals or physicians either.

It just dictates the price.

Like PhRMA dictates to CMS.

Well physicians, you know where you are in the recess hierarchy.