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    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 4th.  It was actually July 2nd 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 2nd.  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 4th?

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

    Tim Coan

    CEO and founder

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

    Tim Coan

    CEO and founder

    Tim Coan, ALN’s CEO, writes an insightful and witty blog weekly about a variety of topics relevant to independent physician practices.
    June 16, 2022

    Unexpected Philanthropy

    Most of us 99%ers have at one time or another played the game, ‘If money were no object…’  Normally the question involves things like where you would live or what places in the world you would visit.  As a sign of – how do we say this? – ‘the evolving demographic of my friend group,’ it was recently posted as ‘what body part would you have repaired?

    For the 1%ers, it is not a way to jump start a dinner conversation, but a real question.  Some build funny shaped rocket ships, some buy sports teams or islands.

    John Arnold decided to use his fortunes to sue some hospitals.  He is probably not worried about the rising price of gas, but he is hacked off at the rising cost of healthcare.

    billionaire-john-arnold
    Billionaire John Arnold

    Arnold, who made his money as an energy trader at Enron and the got out before the collapse, and his wife Laura, through their philanthropic organization have awarded over $2.5 billion to address issues like gun control and criminal justice reform.  They may be a redeeming footnote to the Enron debacle.

    This time, they are backing a small law firm – Fairmark Partners – that has filed lawsuits against big health systems in Wisconsin, North Carolina, and Connecticut.  This is not their first healthcare play.  They’ve awarded over $350 million toward initiatives to influence healthcare policies and disrupt markets.  They are working to bust up pharma monopolies and get a $30 per month insulin solution to market.

    Beats another billionaire in space, doesn’t it?

    The Fairmark lawsuits – targeting HCA in NC; Hartford Healthcare in CT; and Advocate Aurora in WI – are going after the systems for consolidating, then price gouging.

    This may surprise you, but all three systems said the suits are baseless and they each have letters from their mothers saying what nice people they are.

    A twist on these suits may be something that the Justice Department and Federal Trade Commission are watching.  President Biden has targeted consolidations in general – and hospital systems specifically – for anticompetitive behavior.

    Historically, the trustbusters focused on a single market – did a hospital merger give too much power in this or that city?

    But these sprawling regional health systems bring unique leverage to the table to demand higher prices.  By offering insurance companies an ‘all or nothing’ deal – you get all the facilities in our system or none of them – they put them over a barrel.  For example, the payer might be able to live without a hospital in one area because there are alternatives, but in another market the system has the only hospital around and the payer has to have that facility for coverage.

    Little Fairmark – Ok, you can play a lot bigger when a billionaire is writing checks – is taking on some of the behemoths in the industry. Not as exciting as a rocket launch, but it will be fun to watch.

    Tim Coan

    CEO and founder

    Tim Coan, ALN’s CEO, writes an insightful and witty blog weekly about a variety of topics relevant to independent physician practices.
    June 9, 2022

    Selective Competing

    There are two ways to win without cheating.

    First, be better than the other guy.

    Second, set the rules to your advantage.

    Growing up, I loved sports, but let’s say I wasn’t very talented.

    We can say that because it was true.  As my high school basketball coach said of me, ‘Well, he’s short, but he’s slow.’

    When we were making up games in the backyard, I exceled because I was quick to be the one to make up the rules of the game.

    Want to race?  Ok, we run down to the phone pole, but you must calculate the average of the digits in your Social Security number before you run back.

    I could do a little math in my head.  My buddies were quicker than me, but only in one sense of the word.

    Similarly, the Medicare Shared Savings Program (MSSP) might be better at attracting kids (ACOs) well-suited to playing the game than driving actual cost savings.

    In short, ACOs get bonus payments from CMS if their actual costs are lower than their benchmark.  Ostensibly, which is an appropriately complex word for a very complex process, the benchmark is what CMS would have paid had the provider, based on their history, had the Medicare members been in traditional fee-for-service Medicare.

    A few years ago, CMS decided to modify how it set an ACO’s target benchmark.  In addition to the ACO’s own historical spending, CMS also threw the spending of other regional providers into the mix.  There was some initially appealing logic to the ‘regionalization’ tweak, but as is often the case with big, blunt government programs, the unintended consequences are not minor.

    It turns out that a lot of early adopter ACOs did not renew once the regional adjustment was added.

    Why?

    Well, their costs were higher than the region, which meant their benchmark was lowered, which meant they likely would not get a bonus and in fact now faced downside risk.

    So, they opted out.

    Guess what happened on the other side?

    Already low-cost providers, who historically would have been competing with themselves when the benchmark was set by just their own past performance, now got a higher benchmark – it was raised by the other higher cost regional players.

    ‘Hey, we can beat that,’ they said.  In fact, what they said was, ‘We are already beating it, so we don’t have to do diddly and we’ll get to pocket the bonus.’

    Higher-cost players exit the MSSP and stop trying to lower costs; lower cost players enter and take advantage of the higher benchmark and pocket the extra cash; CMS declares victory by showing the ‘participating ACOs’ having lower costs this year than in previous years; and the program marches on.

    Adding math at the phone pole did not make me any faster, but it allowed me to pretend I was.

    Maybe that is all that really matters to our reformers – not that we, you know, actually lower healthcare costs, but we feel really good about ourselves for trying hard.

    Tim Coan

    CEO and founder

    Tim Coan, ALN’s CEO, writes an insightful and witty blog weekly about a variety of topics relevant to independent physician practices.
    June 2, 2022

    Spinning or Winning?

    Years ago, our family was watching the Olympics.  Though not a one of us can do a cartwheel without having a team of medics standing at the ready, we were outraged at the low score the judges gave a gymnast that we thought had nailed her routine.  My son uttered, ‘I could never play a sport that is judged.  Give me the clarity of a scoreboard.’

    But what if even the scoreboard is subject to interpretation?  Many are these days.

    We continue to explore how well we are doing – or not – bending the healthcare cost curve over the past 10-15 years. It is time to look hard at one of the centerpieces of reform – the Accountable Care Organization (ACO).

    Warning…like assigning points to a double back flip on the balance beam, it depends on how you look at it.

    For the government side of reform, ACOs are the funding and delivery vehicles for the Medicare Shared Savings Plan (MSSP).  2020 – yes, the year that will forever come with an asterisk – was the eighth performance year for MSSP and the scorecard from the Centers for Medicare and Medicaid Services (CMS…acronyms are breeding like rabbits today) says the 513 ACOs saved CMS $1.86 billion, net after the incentive payments were made back to the ACOs.

    CMS called it a win.

    ‘Accountable Care Organizations are an Affordable Care Act success story. The 2020 Shared Savings Program results continue to demonstrate the impact ACOs have in improving quality and lowering health care costs,’ said CMS Administrator Chiquita Brooks-LaSure.

    Even in Washington, where we now let ‘trillion’ roll off our lips as easy as a mom in the drive thru can say ‘double, nonfat, oat milk, extra steam vanilla latte,’ a couple billion dollars is real money.

    But first, let’s put these big numbers in context.  The Medicare spend for 2020 was about $830 billion, so we’re talking about a ‘savings’ (more on that to come) of about 0.22%.

    Said another way, currently we spend about $13,000 per year per Medicare beneficiary.  There were about 10.6 million Medicare folks (of the 64 million total) covered by an ACO, so the ‘savings’ (have to use the quotes until we get around to unpacking just how that number is calculated) comes to about $190 per person.

    We have a saying in our house that dates back to the days of homework – ‘Barely counts, almost doesn’t’ – as in, ‘Are you done with your homework yet?’

    So, a barely win is a win.

    Fair enough.  Thanks for not spending $2 billion more of the taxpayer dollars.

    But, but, but…

    We must ask two questions.

    Given the vast amount of energy that goes into ACOs and MSSPs, is that a really good return on the investment?

    And does that reflect real savings or various statistical oddities and accounting trickeration?

    Sorry son, but this is more about subjective judging than a clear scoreboard.

    We’ll explore deeper next time.

    Tim Coan

    CEO and founder

    Tim Coan, ALN’s CEO, writes an insightful and witty blog weekly about a variety of topics relevant to independent physician practices.
    May 12, 2022

    Mark’s Cool Chart

    One of my professional mentors told me that if I was going to be any good at sales, I needed to be able to sell big deals on a single, simple picture.  His were on cocktail napkins, a la the famous Southwest Airlines kind of picture.  He was very good.

    That set me on my near clinical obsession with charts and graphs.  There is a story in the data and the data want to tell that story.  One good picture can change how we think about something.

    Mark Perry at the American Enterprise Institute has one such game chart, one that he updates regularly as the data change.  Multiple commentators have called it the ‘Chart of the Century.’

    Now even the accountants, who find it a slight abomination when their little rows and columns are converted to a trend line, are even a bit intrigued.

    Perry’s graph  is getting even more traction these days because it shows price changes of selected US good and services since 2000.  With all the inflation news, the site is currently getting more hits than Shohei Ohtani.

    The chart simply plots over time data for 15 items used by the Bureau of Labor Statistics (BLS) in the calculation of the Consumer Price Index (CPI), that now ubiquitous inflation number that is still a puzzling new idea to anyone under 40.

    The overall price change – aggregate of all items the BLS tracks – has gone up 65.5% since 2000.  Since recent months have spiked a lot of things, I went back to a version of the chart I found from the summer of 2018 and that number was 57.4%.  Let’s use that to be fair.

    But I want to examine at just one line on the chart.  It is easy to find.  Right that at the very top.  It shows the price changes for Hospital Services.  Before you look, you wanna guess that number, given 57-65% is the overall rate of price increases?

    How about 211-216%.

    Perry notes that, as a general rule, the items that are above the average are subject to more government intervention and those below average have more market competition.  That Hospital Services wins the title, and is now pulling away from second place College Tuition and Fees, seems to validate that observation.

    Another question to ponder…how can overall healthcare spending as a percentage of GDP stay relatively flat while the largest sector of the industry (hospitals are about 31% of total) is going up 4x faster than general inflation?

    3rd grade math and a little logic says everything else in the healthcare spend bucket has come down.

    Here is our big point on the reform status report: The changes – value-based care, MSSP, ACOs, expansion of Medicaid enrollment – were all very ‘pro’ hospital/health system because all this integrated care was how we were going to bend the cost curve.

    So, how do you explain being at the top of Mark’s Chart of the Century?

    Tim Coan

    CEO and founder

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