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November 15, 2019 Barometer Myopia

November 15, 2019

Barometer Myopia

It was a classic physics exam question:

‘Show how it is possible to determine the height of a tall building using the aid of a barometer.’

The obvious answer, for the examiner anyway, was to use the barometer to determine the differences in air pressure at the top and bottom of the building and thus calculate the height. That is what barometers are for, that is how physicists are supposed to think.

The student, who legend says might have been future Nobel Prize winner Niels Bohr, wrote, ‘Take the barometer to the top of the building. Attach a long rope to it, lower the barometer to the street, then bring it up, measuring the length of the rope. The length of the rope is the height of the building.’

When challenged by the professor to give the ‘right’ answer, the student promptly offered up several other alternatives.

Drop the barometer off the roof and measure the time it takes to hit the ground and calculate it that way.
Stand the barometer in the sun and measure the shadows of both barometer and building and calculate using the height of the triangles of each.
Tie it on a string and swing it like a pendulum, both on the ground and on the roof. Determine the radial altitude on both the ground and the roof and calculate it that way.
Mark off the number of barometer lengths as you go up the staircase and add those up.

And my personal favorite: Trade the barometer to the janitor in exchange for him telling you the height of the building.

Oh, the arrogance of falling in love with our presumed answer to the problem.

And that is exactly what we’ve done with value-based care. Giving the ‘right’ answers to the pricing mechanism question – ACOs, capitation, maybe bundled payments – has become more important than actually solving the problem – reduce the cost of healthcare, give us more value for our money.

Healthcare is complex beyond comprehension. There are so many places where the big collective ‘we’ are not getting good value for our money. Just off the top of my head…

Over-utilization due to financial self-interest (I led with that to please the ‘examiners’ who want me to say ‘fee for service is evil’)
Flawed work that does not come with a ‘make good’ guarantee
Ridiculously high unit prices that bear no resemble to value
Care that has no proven efficacy
Inflated prices that reflect waste and unnecessary friction in the entire process
Monopolistic prices that reflect an incumbent’s power more than value delivered

We could go on.

The point is we need more innovation in how we leverage pricing mechanisms as we drive for value, not less. Pricing models both reflect and drive innovation.

Sometimes, the fastest way to better value is to just lower the price.

That is a message independent physician practices should be trumpeting. ‘Hey, we just cost less than the other folks.’

Like talking to the janitor, sometimes the easy answer is the best answer.

November 8, 2019 Insensitive Chant

November 8, 2019

Insensitive Chant

In 2016, the Wisconsin Interscholastic Athletic Association sent a reminder to its member high schools that certain student chants were prohibited. Such as…

‘Overrated. Overrated.’

‘You can’t do that.’

‘Airball.’

These chants would hurt the feelings on the other team. If my son happens to be reading today, he is shaking his head right now as he led these very chants his senior year and frequently got shut down by the school administration. His disgusted ‘sissification of America’ speech would follow.

Another banned was the favorite comeback of the winning team if students from the other side tried any cute chant. They would simply point and drone, ‘Scoreboard, Scoreboard, Scoreboard.’

Which reminds us of the old truism: losers do more analysis and quote more statistics than do winners. Winners just point at the scoreboard.

Which brings your humble blogger back to a theme we explored in our whitepaper, The Case for Independent Physicians.

In short, we are now a decade into the industry’s infatuation with ‘value-based care,’ but no one is chanting ‘Scoreboard, Scoreboard’ because they can’t.

Average premiums for employer sponsored health plans will again go up 5-7% in 2020, three times more than inflation.
The CBO still projects that healthcare spending will grow 6% a year far into the future, just as it has in the past decade.

In case you are wondering, general inflation during the past ten year only topped 3% for about six months and was less than 2% more than half the time.

So, what do you chant when you can’t just point at the scoreboard?

You obfuscate, though I am guessing that is not how the students in the gym would describe it.

We get metrics from CMS and commercial insurers about what percent of their payments are now in a value-based contract (a lot, they say); we get numbers about how many ACOs we have and how many patients are covered by one (growing); we get reports on declining hospital admissions and improved measures of health outcomes and activities.

Is it time to summon the child from Hans Christian Andersen’s fable about the emperor’s new wardrobe?

Rather than throwing rocks from the cheap seats or shrugging with indifference because we are still predominantly fee-for-service (most independent specialists in particular), instead it is time to go on the offensive.

Here is the drum I am starting to beat, and encouraging our clients and friends to do the same:

‘Independent physicians are not behind on value-based care, we are leading the way. We are actually lowering cost and providing better care. An office visit from an independent doc is cheaper than one from a hospital employed provider. A case in our ASC is cheaper than one in the HOPD. Our imaging is way, way cheaper. Do you want better value for your dollar, or do you want new complicated reimbursement models?’

At the risk of hurting someone’s feelings, it is time to start pointing and chanting, ‘Scoreboard, Scoreboard.’

More to come next week.

October 31, 2019 The Pile of Discarded Name Badges

October 31, 2019

The Pile of Discarded Name Badges

Today officially ends my long fall conference season and leaves me with a big question: For Christmas, should my kids each get a couple of lanyards with plastic nametag holders, logo-emblazoned cell phone charges, a water bottle, or a basket full of those tiny hotel shampoos? Sometimes they read along, so I hope this does not ruin the surprise.

My conferences covered diverse perspectives, so I got to peer at healthcare from several angles. Stepping back and squinting at the past several weeks as the big blur it has become (what city is this again?), a couple of big things emerge.

Four observations, in no particular order…

First, the industry is ever more bifurcated on the subject of ‘value-based care.’ For many, this is the new reality and the game is over. For another swath, particularly surgical and procedural-oriented physicians, this all seems like a bunch of self-important wonky hype because it has not come to their world at all.

The first group has no idea the second group exists, or if they do, they presume they are Neanderthals that will either get it soon or go extinct.

The second group – many of our readers – need a new script for talking to the first group and here it is, free of charge: ‘We ARE fully into value-based care, and in fact, we are leading the way and are ahead of you all. When you move FFS business out of the hospital, HOPD, and health system-employed physician settings and to our lower cost ambulatory model, you save a ton of money and isn’t that the essence of value?’

Second, no one talks about changing their EMR anymore. It just seems too hard and too expensive. But there are about a gazillion new tech companies that have some bolt-on solution to make all the pain go away.

Unfortunately, most of those companies won’t make it and will also go away, but right now you can’t pick the survivors.

Third, if there are any real issues that matter in the election (that is not a rhetorical comment…it seems everyone has picked sides and are only talking to their own team), healthcare will be at the top of the list and the philosophical differences between the Shirts vs. Skins are wider than ever.

Here’s a free piece of advice for President Trump…if you ever get asked a question about healthcare, just point to CMS Director Seema Verma, sit down and give her the floor. She is beyond impressive and delivers the most articulate and compelling defense of market-based healthcare ever. That advice implied ‘sit down and shut up,’ so it’s not going anywhere, is it?

Finally, the big outsiders who are coming into healthcare…holy cow, are they going to blow things up. Understanding what Walmart is doing with their clinic in Dallas, Georgia; seeing some things Google is doing that only Google can do; hearing healthcare plans from companies as diverse as Mastercard to Lyft to Bose (yes, the speaker people)…well, Dorothy, this ain’t Kansas, is it?

October 25, 2019 The Vizzini Debate

October 25, 2019

The Vizzini Debate

You can determine the age of a tree by cutting it down and counting the rings, though that seems to be a bit of a harsh method for answering an irrelevant question.

You can determine the age of a woman…no, you can’t. That is a state secret.

You can determine the age of a man by the set of movie quotes he uses out of context way too often as substitutes for original dialogue. His cited movies were playing when he was in his 20s because he was waiting for the final stages of his cerebral cortex to firm up and these movie lines got cemented in at a critical juncture.

Recently, I was with a group of guys about my age and the subject of ‘most quoted movies’ came up. We all quickly agreed…’The Princess Bride’ was on our Mt. Rushmore.

There are few scenes more central to the history of humanity than the battle of wits between Vizzini and the Man in Black. Here is the transcript of the scene if you are depraved of all cultural education.

I recently found myself having a Vizzini-like circular argument with myself, not over iocane poison, but Certificate of Need (CON) laws. I blame my friend Doug for starting this, but in reality, it was due to an internal struggle between two conflicting personal beliefs.

Philosophically, I generally like vesting autonomy with the states as much as possible, one reason being that it gives us 50 laboratories in order to figure out what works. Currently, 35 states and the District of Columbia have CON laws that impose government control on several aspects of healthcare service expansion, most notably the construction of new facilities.

Surely, I must choose the state’s rights option in front of me.

Not remotely because I am equally strong, if not stronger, in my conviction that hospital monopoly power is being used to drive up the cost of healthcare. There is no clearer evidence than their use of the archaic CON laws to restrict facilities competition, particularly from physician practices.

Should CON laws continue to be state level decision or should there be a federal action to sweep them all away in the name of increased competition that will help lower costs?

Well, Doug prompted this internal argument, but then he resolved it for me as well.

Since CMS, through both Medicare and Medicaid, pays the bills everywhere why would it allow the 35 states and the district to retain CON laws that have the effect of increasing the price tag CMS pays? More specifically, why would taxpayers in non-CON states agree to subsidize higher costs in CON states just to appease the entrenched hospital power brokers?

The battle of wits solved by a ‘truly a dizzying intellect.’

Read the scene…the obtuse references will make sense and this whole post will be funnier.

October 17, 2019 Chinese Trade

October 17, 2019

Chinese Trade

Given the NBA’s recent imbroglio regarding all things China you would think a smart person would stay far away from this subject, but then again, this blog does not have a few billion dollars of revenue from the Chinese market at stake.

And since when have we stayed away from topics because it would be ‘smart’ to do so? Plus, we are pretty sure our humble post is not on the radar of Chinese state-run media or Twitter trolls, so here we go.

Actually, our thought for the day is not about US companies accessing the vast Chinese market, but just the opposite – might China be coming after yours?

Telemedicine is widely considered to be one of the key pillars of the industry restructuring that is required. It is an avenue to lower costs and improve access, particularly in rural areas. The US telemedicine market is currently estimated at $12.5 billion and projected to triple in size by 2025. Globally, the 2025 forecast is a whopping $130 billion.

We summon our inner Captain Obvious to point out that a central tenant of telemedicine is that it renders geography meaningless. Throw in the speed of the coming 5G infrastructure and more circumstances are less constrained by the patient being over here and the provider being over there.

You can guess where this is going, can’t you?

China has a severely stretched national healthcare system. Hospitals are overcrowded and getting in to see a physician can seem impossible. Enter telemedicine to address the problem.

Good Doctor, a company owned by a large Chinese insurance company, has quickly ramped to over 100 physicians in its call center. Signs hanging above the rows of cubicles housing headset-wearing providers read: ‘Internal Medicine,’ ‘Pediatrics,’ ‘Gynecology,’ and ‘Obstetric.’ Sounds like a typical multi-specialty practice.

As in the US, tech companies also want in on the game. Both Alibaba (the Amazon of China) and Tencent Holdings (social media, gaming, venture capital, general technology) have launched their own telemedicine companies – Alibaba Health and WeDoctor, respectively.

If you think the US telemedicine market is growing fast, it pales in comparison to China where the 2026 market is expected to be 20 times larger than it was 2016. That is some serious scale.

Yes, yes, yes. There are about a thousand barriers between a Chinese call center and US patients. And of course, when you have 1.4 billion people at home, why bother with the hassles of reaching into the United States?

But Good Doctor recently set up joint ventures that allow it to expand to South Korea and Japan. That is, we believe, a small step closer to California.

October 10, 2019 Anecdotes are Data, Too

October 10, 2019

Anecdotes are Data, Too

As president and CEO of the Federal Reserve Bank of San Francisco and a member of the central bank’s Federal Open Market Committee, Mary Daly is a quant among quants. Like most economists, particularly those who work at the Fed, Daly lives with and loves the numbers.

Her job is an ongoing group debate about the interpretation of endless charts and graphs. Unemployment, consumer sentiment, shipping containers from China, soybean production from the Midwest, the price of gas…Daly and her colleagues digest the data in attempt to sense the direction, speed and future of the economy.

But she has a special advantage, a unique data source that gives her insight most classic economists do not have. She leaves her office and goes around the nine western states covered by the San Francisco district and actually talks to people. She tells stories from her road trips in her podcast, ‘Zip Code Economies.’ A Fed economist telling stories from the ground? What a concept.

My week put me in multiple interesting conversations with independent physician groups fighting this ‘healthcare transformation’ battle in real time. Stringing the anecdotes together is not a chart, but is insightful…

Several surgical practices have come together, 100 providers in all, to become a strong player in a market dominated by three powerful health systems. Now they are in a partnership with a payer to move cases from the hospital outpatient departments to ambulatory surgical centers. The physicians will get a financial kicker for doing so and the payer will save boatloads. Other payers are also interested.
A primary care-centric IPA that was formed years ago to take capitation risk has now merged several practices from within the IPA into a 30-provider group to create an alternative for physicians who want to be part of larger practice, but want that practice to be owned and run by physicians instead of the hospital. Payers are supportive because, in that market, most primaries are employed by a hospital, immediately raising the cost of care due to the site of service differential.
An investor-backed venture is delivering mobile homecare visits as an alternative to expensive trips to the emergency room. They are growing like crazy and have contracts with almost all the major carriers in their markets.

You know that I love numbers, loves charts and thinks a good graph of data is just further evidence of a Divine Creator. I consume most of the healthcare data I can find, especially things that relate to independent physician practices.

But anecdotes are data as well, and these three seemingly random conversations this week point to a truth as valid as a trend line: There are many spunky, thriving independent physician practices who are engaging with the market, often those responsible for paying the bills, to find better answers. They may not be coveted speakers at the big, big conference or policy wonks testifying before Congress. They are just out, on the ground, actually helping solve the problem.