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February 20, 2020

While You Were Working

Back in the 90s, I had a client in the software development business.  Being smart guys, they decided the consulting game of trading hours for dollars to build something for someone else was not, well, smart.  They looked around and found an industry where the software solutions were pitiful.

‘We’ll build a better mousetrap,’ they said. ‘We’ll dominate and then sell for a wheelbarrow full of money.’

Their ideas on the better mousetrap were, indeed, much better than the junk being sold to the industry at the time. They locked themselves in the room and went to work, writing and testing and revising code.

Things being the way they are, the project was harder than they imagined.  They were, after all, taking on a rewrite of the software that ran an entire industry (think the equivalent of replacing your EMR as well as your systems for billing, accounting, payroll and inventory management).  What was to take 18 months took four years.

Finally, they emerged from the cave with their gleaming new software, ready to take over that little corner of the world.  Unfortunately, while they had their heads down working, the market moved.  What was innovative in their design four years ago was now a standard feature for the incumbent vendors.  Their ‘wow’ was now a baseline expectation.

Since it was the 90s, everyone wanted stock in the next big thing.  Instead of taking cash for my services, I, too, took stock options.  There was no wheelbarrow of money, but that is another story.

Here’s the point…

Last week I was with one of my favorite groups of physicians. Fourteen years ago, a group of small practices came together to form a larger entity.  Part of the conversation that night was a reflection on their journey.  What they did at the time was really bold and innovative; what they have built since is impressive and has them in a much better place.  In fact, without what they did they’d all be hospital employees right now.

But one of the people there at the beginning made an interesting observation.  If the practice had then been the size it is now, they would have been one of the largest provider organizations in that region.  But now, they are nowhere close to being large enough to matter as they would like to in the market.  Hospitals have consolidated; payers have as well; new entrants, many with a lot of financial backing, have entered the space.

While they were working, the market kept moving.

It can be discouraging when you have busted your tail to make progress and you just want to pause for a bit and catch your breath.  But the market does not pause.

An old quote from an entrepreneur best summarizes it for me…

‘Running my business seems a lot like one of my kid’s video games.  You fight like crazy to survive, just to find out the next level is even harder.’

Tim Coan
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.
February 7, 2020

Dusting off Dick Woodson

A winter storm is currently falling on Denver.  How do we keep warm?  Turn on the fire, grab some hot tea, and then enter the following into the search bar:

‘When do pitchers and catchers report?’

NEXT WEEK.

Baseball fan or not, this is one of the official early signs of spring.

Baseball is also in the healthcare news as the House Ways and Means Committee announced they are releasing the committee’s bill on surprise medical billing in anticipation of the targeted February 12 mark-up date.

What, you ask, does that have to do with baseball, and where, you ask, does this Dick Woodson fella come into play?

We are glad you asked.

The ‘benchmark payment mechanism’ provision favored by payers is not included and this is a win for most physician groups. This idea, though clouded in as much obfuscation as possible, would essentially have defaulted any surprise billing disputes to the contracted in-network rate.  Of course, payers liked this idea.  They would never really have to have a fair negotiation with any physician group as the resolution process would always land on the number they wanted.

Instead, the proposed solution, which appears to have both bi-partisan and bicameral support (shocking after this week), relies on negotiation and then arbitration.

In short, if there is a dispute over a surprise medical bill, patients get protected while the provider and payer enter a period of negotiation.  If they cannot agree, then they enter into binding, third-party, baseball-style arbitration (submitted your ‘best and final’ offer and arbiter picks one…no compromise). Loser also pays the administrative cost.

Here are the proposed guidelines for the arbitrator:

  • No required ceiling on the provider payments, but no floor, either.
  • Billed charges are irrelevant to your evaluation (those of you with a 10x Medicare charge master…whatever), but then again so is the payer’s ‘usual and customary’ rate.
  • You do have to consider the median in-network rate, but it is only an input to your evaluation, not part of a formula.

A good compromise…everyone loses a little. In fact, Kevin Brady (R-Texas), ranking member on the committee, said the goal is to develop an arbitration process that neither side wants to use.

‘You kids sit down and figure it out.’

So, who is Dick Woodson?

In 1968, Marvin Miller brokered baseball’s first collective bargaining agreement that had an arbitration provision for player salaries.  Woodson, a Minnesota Twins pitcher coming off a middling 10-8 season in 1973, was selected by Miller as the first player to enter the process.  He had made $15,000 that year.  The Twins offered him $23,000 for the next season.  Representing himself, he asked for $30,000 and won.

Interesting and instructive footnote: Comparable pitchers, in terms of stats, were already making $25,000 – $30,000 a year more than his $30,000 request.  The arbiter’s final question to him at the end of the hearing – ‘Why did you ask for so little?’

Tim Coan
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.
January 30, 2020

Lost in the Alternatives

On a recent road trip, my wife and I stopped to fill up, both the gas tank and my belly.  Walking into the convenience store was like turning a dog loose in butcher shop.  This place was huge and bright and upscale.  If the developer who just opened the 3,000,000 square foot American Dream Meadowland mall in New Jersey built roadside convenience stores, this is what they would build.

I wandered around aimlessly for too long trying to decide on a drink and a snack.  Too many alternatives gave me a serious case of decidiphobia.  My wife told me to get some almonds (regular, smoky, bold, sriracha, habanero or wasabi?) and iced tea (sweet, unsweet, a little sweet, with cranberry, with motor oil?) and get to the car.

I have written before about product proliferation being one of the large mega-trends of the past 30-50 years, a clear marker of the march toward consumerism.  We’ve flipped from Henry Ford’s ‘sure you can pick your color…and hey, you want black!) to the customer being in charge.  Just walk the beverage aisle of your supermarket if you need evidence.

Yes, that is coming to healthcare, big time.  We’ve discussed that frequently as well, so today is not about rehashing that, though we absolutely reserve the right to recycle old ideas when we don’t have a new thought to share.  Blogger laziness.

What has me intrigued today is how this trend is backing upstream into the nature and structure of physician practices.  It makes sense.  If you have a lot of different types of beverages, you must have a lot of different types of production facilities to produce those different products.

If we are going to deliver a lot of different types of healthcare, we’re going to have a lot of different types of physician practices that can produce that variety.

We have practices closely tied to a hospital and other practices that never darken the door of the place.

We have practices that live and die on value-based reimbursement and some that can’t even spell that.

We have practices that exist to feed their downstream ancillary services and those that are just about the exam room.

We have practices geared to ride the Medicaid growth wave and practices whose payer mix is Visa, Mastercard and American Express.

We have practices getting small and focused and practices that are trying to gobble up everything in sight.

Never before has the idea of ‘the physician practice’ as a generic thing had less meaning.  It will mean even less tomorrow.

You are now fighting for shelf space in the big convenience store.  You better be a really good version of who you are trying to be because there are a million other options.

Just ‘being a good doctor’ is as anachronistic as just being a good potato chip.

Tim Coan
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.
January 9, 2020

Bell Curves, Bifurcation and Long Tails

We generally don’t travel a lot over the holidays, and we don’t have large extended families on either side to keep us hopping, so the business slowdown gives me a little room to allow for some random reading that goes ‘who knows where.’

So now comes my first blog due date of the year and the first opportunity for all of that to come out in some ‘almost cogent’ 500-word output.   My family is happy that you are reading this, and they are off the hook from having to listen to the latest ‘interesting’ thing that Dad wants to share.

You’d think I might try to frame up the coming year with some outline of coming healthcare trends or challenges, and that is your first mistake of the year, assuming I would start with something logical.

Instead, let’s talk about distribution curves, both normal and busted.

You think I was kidding about the family’s relief, but yes, we had a long dinner conversation over the holidays about distribution curves.  At least they are all old enough now to have a glass of wine when Dad goes down one of his wormholes.

The bell curve is one of the key underlying truths of life, a reality that shows up all over the place.  On many dimensions, it is right to assume that the world is normally distributed and then act accordingly.  There are people and organizations on either end of the curve, and they think, feel and behave like the outliers they are.  But most are bunched in the fat middle, hanging close to the median, and think the fringe crazies are, well, a little crazy.

But then there are many things that are not normally distributed at all and assuming they are will get you in trouble.

There are 1,000 songs an hour uploaded to music streaming services (will save you the math…that is 9 million a year), but only a handful make money, much less Beyoncé money.  That is a very long tail.

Some things are this extreme or that with little in the middle.  Bifurcation is one of my favorite smart-sounding words and there is no more interesting example than global population distribution. Take a quick look at this picture. That blows my mind.

OK, Tim, you wandered around the Internet the past couple of weeks.  Besides making me more interesting at parties (you needed this for December, not January, didn’t you?), is there a point here about my business?

Well yes, yes there is.

As you plan your strategy, be clear about your assumption on how your market is distributed and then check to make sure you are right.

If it is normally distributed, you can chase the tails or chase the middle, but know they are not same.

If it has a long tail with only a few big winners, make sure your math works.

If it is really bifurcated, don’t get caught in the empty middle.

Tim Coan
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.
December 19, 2019

That’s A Wrap

We come the final blog post of the year…wait, of the decade – wow, that adds some pressure for me to step this up a bit, doesn’t it?

If I had been thinking a little more, I would have done some really witty and creative retrospective look-back on these past ten years and come up with a misty-eyed piece that could be set to some Neil Diamond song.  But if I had been thinking more, I would have come up with some better than Neil Diamond.

If you just pause for a minute and think about what has happened in healthcare over the past ten years, it will blow your hair back a bit.  Maybe Neil in black sequins is right after all.  Consider that at the end of 2009, we did not even have the Affordable Care Act yet.  ACOs, value-based care and MACRA were not yet common in our lexicon. Retail clinics and telemedicine were nascent glimmers of new ideas.  Precision medicine meant a sharper dart to throw at the Physician’s Desk Reference.  Google’s only interest in healthcare was the random searches of people diagnosing themselves before going to see their doctor.

It would be easy to go on breathlessly about this being a decade of such great change and transformation, but I think that would be overdoing it.  In truth, most aspects of how we – patients, providers, payers, employers – experience healthcare in 2019 still feels a lot like how it did at the beginning of the decade.

But (orchestra begins to swell) we laid down a lot of things in these teenage years of the new millennium that now set the stage for real and seismic change in the decade to come.  All the prep work, the things under the surface that must happen, is necessary but not yet really disruptive.

So, as you head off to find the eggnog and a parking space at the mall, we’ll leave you with this thought:  While it would be easy enough to skeptically conclude that all the prognostications about the transformation of healthcare this past decade were little more than marketing spin, let me suggest that we are getting close to having enough of these individual parts now in place.  They are starting to coalesce and achieve critical mass of the ‘new.’ Then suddenly (apparently sudden but not really) big change happens.  That is what the next decade holds.

And one other parting thought: Thank you. As I bring the blog to a close each year, I am reminded that it is a real privilege to have each of you reading along.  That you give a few minutes of your day to consider my rambling is not something I take for granted.

Have a wonderful holiday and we’ll see you again in the new decade.

Tim Coan
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.
December 13, 2019

Some Things Persist

I recently attended a healthcare investor conference, you know those gatherings where people with money – mostly private equity funds and banks – mingle with company executives who might be looking for money now or in the future.  There are a lot of navy blazers.  It is a little more advanced than the junior high dance because the boys are not just standing in the corner, wanting to talk to the girls but afraid to do so.  That the punch bowl has been replaced by an open bar, sponsored of course by the big law firm who wants to get these folks together so they can get paid to paper the deal, might have helped.

Lots of interesting conversations take place which is what makes attending these valuable to me.  Investors and executives are in it together, thinking about the industry but they come from different perspectives and ask different questions. Yet, everyone is trying to serve a real market need while also making money.

Which was ironic – serve customers AND make money – given that one of the biggest market stories of 2019 was the splashy IPOS of companies like Uber and Lyft and WeWork (IPO? Oops) that don’t make money and likely never will.  It feels a lot like 1999 when we forgot that fundamentals matter, that some things might change but some laws are persistent.

Time for ‘Coan hard right turn non-sequitur.’  We haven’t had one of those in a while, have we?

At the same conference, we heard from the CEO of an organization helping primary care physicians form physician-owned ACOs.  Across their organizations, they have about 5,000 physicians, manage thousands of patients, and now control about $7 billion of spending.  Pretty impressive.

As he spoke, I thought about the fact that the vast majority of ALN’s clients are still predominately, if not exclusively, in a fee-for-service world and would find his view of things as foreign and strange as Eliot found ET to be.  [Side note – this is a theme we are going to be exploring next year because this change is going to affect your practice in ways that you may not see coming.]

During the Q&A, I took the opportunity to ask a question on behalf of all of you FFS Neanderthal specialists: ‘As your physicians are now under value-based payments, but you rely extensively on fee-for-service physicians to deliver much of their care, what do you want and expect from them as your partner?’  Translated: What do we need to do to get your referrals?

You might have expected some new, managed care-infused answer, but he responded without hesitation: ‘Two things.  Access – get our patients in quickly.  Communication – tell us what you found and what you did.’

He said the same thing that primary care physicians have been saying to their specialists for decades.

How do FFS physicians play in the value-based world?  Start with the fundamentals.

Some rules persist.

Tim Coan
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.