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October 28, 2021 Christmas Price Hikes

October 28, 2021

Christmas Price Hikes

On a recent trip to Los Angeles, my plane circled out over the water to land from the west. There below was the picture behind the headlines – about 65-70 container ships anchored off the port, waiting to get waved in to unload. Thousands of stuffed animals from China and techno-gizmos from Taiwan, doing nothing but accumulating cost day by day.

Kids, unless you are getting some Bitcoin for Christmas (no, son, mom and I are not giving you a bitcoin in your stocking), inflation is going to take a bite out of what is under the tree this year.

It is not just consumer goods that are affected. In recent Q3 earnings calls, multiple healthcare equipment and device manufacturers cited ‘supply chain issues’ impacting the quarter and their future outlook.

But there is another part of the healthcare supply chain that is a bigger worry, one that is not going to get fixed anytime soon, even if the President magically kept the Port of LA open 30 hours a day.

We are about to experience a real and significant provider shortage…doctors and nurses. This type of thing has been forecasted for years based on simple demographics. This population, aging at this rate, needs that many providers and we just are not producing enough. And those we are pushing out of the educational and training pipeline are not properly distributed across specialties and geographies.

We have known that we are facing a large wave of coming nurse retirements. A young nurse who graduated in 1982 is now over 60. Yes, yes, I am good at easy math. But after the past two years, even the 40-somethings are fried. Many physicians feel the same way, contemplating hanging it up early out of sheer exhaustion. Thank you COVID.

The short-term solution to the problem is making the long-term problem worse. Many healthcare organizations, desperate for help, are turning to locum tenens physicians and traveling nurses. They have no choice – there is not a crate full of these folks off the coast of California that will be unloaded in a week or so. But the premium being paid to those who step in to help means that many providers are now signing up for the gig approach permanently.

One surgeon, on his way to cover the ER in a small town for a four-day weekend shift, told me he could do this twice a month and make what he made in his regular practice. Technically, he has not retired, but we lost 60% of his capacity. Traveling nurses are making the same calculation. Multiply that by several thousand providers – no shame on them for making their own best decision – and it starts to show up.

An argument against single-payer healthcare has been to point to the wait times in places like Canada. We are about to get to experience that directly.

Christmas greetings from Scrooge, huh?

October 21, 2021 In Praise of Mixed Motives

October 21, 2021

In Praise of Mixed Motives

Brown Brothers Harriman (BBH) is one of the most influential firms in the world but flies under the radar. The carefully discreet investment bank, founded originally in 1818, is the epitome of the ‘establishment elite.’ BBH kids went to the same exclusive prep schools, attended Yale together, intermarried, joined the same country clubs, and, of course, did business together. One of the partners, Prescott Bush – well, you know he had both a son and then a grandson occupy the Oval Office, so you get the point.

The history of BBH is about as conflicted as you can imagine. It was publicly against slavery and worked for its elimination, all while profiting from it directly. The firm literally helped form and shape the United Nations, the CIA, and the Pentagon – and then made a lot of money selling to all of them. It directly underwrote the development of many railroads, stepping into a role that should have been done by the government – creating a public good, but also profiting from the ensuing trade that the transcontinental lines created. BBH prompted the government to send the military into certain countries to overthrow despot dictators – a move for democracy that just so happened to also protect commercial interests BBH had there. We could go on.

Without doubt, BBH embraces what some see as conflicted motives of doing social good while also making a lot of money for the partnership. Many reject the notion that these goals can coexist; the continued success of BBH at least challenges that premise.

Which gets me to last weekend.

I attended a clinical conference. Yeah, I did not understand about 75% of what was presented. Physician after physician rattled off polysyllabic words of Latin origin while pointing at statistical charts and showed close-ups of body parts exposed during a surgical procedure. I did a lot of nodding as I secretly Googled trying to figure out what some of the big words meant.

But I got the gist of the meeting.

Presentation after presentation talked about real advances in care that are improving outcomes for patients and lowering costs. Conflicting points of view about how to treat conditions were debated with data and research. This was the very best of US medicine, the innovation process lurching forward.

The presenters were mostly private practice physicians (there were a few academics and a couple of government docs thrown in), and yes, they benefit financially from this work – some hold patents, some are advisors to manufacturers, most get paid when they do these procedures. And yes, much of the research is funded in part by ‘industry,’ the code word for the device and pharma companies that make stuff that is used in these new treatments.

For many, that conflict of interest is unacceptable. But I am guessing that the patients who now have a better life don’t care that those who took the risks necessary to drive the innovations also benefited financially.

ALN has long been an unabashed advocate for the role independent physician practices play in the US healthcare system. This is just one more reason we hold that position.

October 14, 2021 Rolling with Willie

October 14, 2021

Rolling with Willie

Willie Nelson starred in his first leading role in the 1980 film Honeysuckle Rose, a story about musician getting long in the tooth and still chasing fame. During a flight shortly after signing, Nelson was asked by the executive producer to write a theme song for the movie. Nelson pulled the barf bag out of the seat pocket and quickly penned the words to ‘On the Road Again,’ which hit number one and became one of his most popular songs of all time.

Ain’t that story quintessential Willie?

I did not write poetry on airline paper goods, but I did hit the road last week. This cooped up extrovert was out and about, getting to meet with multiple people across many segments of the physician services landscape. Both my wife and our dog encouraged me to use up a lot of my excessive supply of words in those meetings and dinners. I am not exactly sure how I was to take that, but yes, I did heed that counsel.

Multiple of the conversations turned, one way or another, to the subject of physician practice consolidation – either groups getting together on their own to achieve some scale or outside equity sponsors facilitating the process by throwing cash around. The big question was, ‘Will it work?’

The dialogues dove into the pro’s and con’s of various models, the unique challenges of consolidating physician practices, the hard reality that operational scale requires standardization (and, by definition, some loss of autonomy) that independent-minded physicians find hard to accept at times.

Let’s see the dessert menu…we still have problems to solve.

One particular topic was the physician ‘income scrape’ that often comes with a sale of the practice to a financial backer, the reduction in physician income in order to ‘create’ the profitability that buyers require before they invest. The joke started with, ‘How long does it take before the physicians forget the big check they got at closing and start complaining about their now below-market wages?’ The debate seemed to be between the first subsequent partner meeting a month later or maybe the second. ‘Not long’ was the easy consensus.

There are two take-aways for anyone – physician, investor, practice executive – contemplating this option.

First, physicians may not be rational here (some finance nerd was trying to make the case for getting multiple years of advanced payment, taxed at capital gains rates instead of ordinary income; the time value of money…the rest of us threw our dinner rolls at his theoretical ivory tower), but they are normal humans. ‘That big check’ is parked over there somewhere in their minds (or docked at the shore), but the monthly income is more real.

Second, if that is all, or even most, of the upside to the future financial model, that is going to be tough sledding for everyone involved. If that is all you’ve got, you don’t have the answer yet.

Like a band of gypsies, keep rolling down the highway until you find something more real and sustainable.

October 7, 2021 Tim Coan on the Breakfast Leadership Podcast with Michael Levitt

October 7, 2021

Tim Coan on the Breakfast Leadership Podcast with Michael Levitt

While there is no blog this week we encourage you to listen to Tim’s recent appearance on the Breakfast Leadership Podcast! On this podcast, Tim speaks with host Michael Levitt about why he is bullish on the future of independently owned medical practices, and how they can make the case for offering the best actual value in the market to patients and payers alike. Tim also touches on major strategic shifts underway in healthcare – what, why, implications, and how to go forward. At just over 22 minutes, this is a quick listen that tackles these big ideas efficiently.

Listen below!

iTunes: https://podcasts.apple.com/ca/podcast/interview-with-tim-coan/id1207338410?i=1000536698723

Spotify: https://open.spotify.com/episode/3A8klew0ShHAeIfLshmCBR?si=DbJVzWVzRJavjWuafqIvdQ&dl_branch=1

Amazon (Audible): https://www.audible.com/pd/Interview-with-TIm-Coan-Podcast/B09GQTPKTH?ref=a_pd_Breakf_c3_lAsin_0_1&pf_rd_p=625c212d-b95a-47db-8d56-d35a359de6e9&pf_rd_r=HYMSW5VM2VX6K36ARSG0

September 30, 2021 One Is Not Like the Others

September 30, 2021

One Is Not Like the Others

You have to work pretty hard to stay under your rock these days to not hear the word ‘trillions’ tossed around bags of peanuts at a baseball game.

Speaking of trillions, want to guess how many trees there are on the planet?

About three trillion.

Yep, that might be funny if it were not painful.

In the reconciliation bill, every tree gets its own dollar.

While the two sides (it seems like there are a lot of sides just on the Democrat side, but I am a little confused) would use different nouns and adjectives to describe the Biden plan – one set are far warmer and fuzzier than the words used by the other side. Call them entitlements or call them infrastructure; label them safety nets or income redistribution or incentives to not work; frame them as moral or evil; declare it won’t work or insist that it will.

Every tribe and team get to pick their own nouns and adjectives as they tell their own version of the story. But every version of the story involves moving a lot of cash from over here to over there.

Of course, I pay particular to the healthcare parts of the discussion, and we’ll have no idea what ends up in the agreement until it is done because the haggling is frenetic as the deadlines approach. Seniors may get coverage for eyes, ears, and teeth. People on the exchange may get better coupons to help with the monthly bill. But one of the foundational points seems to be dragging those 12 pesky Republican states that have not yet expanded Medicaid finally into a key element of Obamacare.

This gets to my ‘well, duh’ realization this week…

Almost every other of the entitlement programs – Social Security, child, and electric vehicle tax credits to name a couple – are essentially financial transactions. Someone pushes a button and money from the government shows up in a bunch of bank accounts.

But the healthcare coverage provided through CMS requires a third party – a whole bunch of them, actually – to deliver the government benefit to the 140 million people covered by Medicare or Medicaid. We call them ‘healthcare providers,’ doctors and hospitals, and the like.

‘Conscription’ is too strong of a word because you can opt-out. But that is neither practical nor palatable for most providers. So, they are participants in the jig. Uncle Sam decided to outsource the work.

Government healthcare programs are, in fact, unique compared to some of the other things with which they get lumped when legislation of this magnitude is summarized by those trying to inform us about what is happening.

You get to both pay the taxes and accept the lower reimbursement for an ever-growing portion of the population. Well, aren’t you special?

September 16, 2021 CMS’ Anti-Gravity Pen

September 16, 2021

CMS’ Anti-Gravity Pen

It stinks when facts get in the way of a good story. As I prepared to write today’s post, I knew the lead-in that I would use, a perfect set-up for my point today. Except that the story is not true at all; just an old apocryphal tale that lives in the fertile soil of the internet.

NASA did not spend millions, much less billions, developing an ink pen that would write in space even as the oh-so-smart Russian cosmonauts laughed at us while using a cheap pencil.

Real truth: Pencils are problems (flammable…not good in an environment that is at times 100% oxygen; floating broken lead pieces not a good idea). A private pen company did spend about $1M of its own money to develop an anti-gravity pen that both countries used – at a price of about $2.39 per pen.

But, dang it, were this story true it would be perfect here. And since I have no better idea, let’s just pretend it is. My kids will tell you I make up crap all the time, so nothing new here.

Last week, we noted the 2020 results of the Medicare Shared Savings Program, the largest of the government’s value-based care initiatives. After years of sputtering outcomes, MSSP saved $4.1B, a net of $1.9 billion to CMS after the bonuses were paid out to the participating ACOs. A couple billion is nothing to sneeze at, but it has taken a lot of work to make that happen.

In the meantime, UnitedHealth Group released a study about how much could be saved if we moved simple, common surgical procedures from hospital outpatient departments (HOPD) to ambulatory surgery centers (ASC).

Disclosure: Yes, UHG has not one, but two dogs in this hunt. They are not only a payer, but also the owner of a lot of ASCs. But you can be biased and still be right.

Common procedures done in the HOPD setting in 2019 cost, on average, $7,716 each. The same procedures in an ASC averaged $3,157, a savings of over $4,500 for each case.

There are over 6 million outpatient procedures done in HOPDs each year and only about 10% of them are for complex patients (e.g., morbid obesity, multiple comorbidities, etc.) that should be kept close to a hospital, just in case.

Do any math you want –how many of those are Medicare patients, how many move to the ASC – and you quickly get a number that blows way past $2 billion. Just by moving routine same day surgeries from the HOPD to an ASC.

See? The NASA pen story would have been perfect…millions spent developing a pen vs. just using a school child’s #2 pencil.

Though the NASA story is not true, unfortunately the ACO/MSSP story is.

How about we do the easy thing first?