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February 24, 2014

Sasquatch Spotted

Yes, there seems to be some level of agreement between Republicans and Democrats on one very important issue.

We all know the SGR formula for physician Medicare payments is broken. We are all tired of the twisted Kabuki theater that takes place at the end of every year, the net result of which is the cuts are postponed, dollars are wasted fidgeting with claims processing only to get about what we thought we were going to get anyway, and the elephant just gets kicked further down the road.

We also all know that now, after years of elephant kicking, the problem is so huge that it is easier to kick it again than to actually solve the problem.

But, both parties have their teams of high ranking people, healthcare policy wonks, and nerds with spreadsheets working on a real fix to the SGR problem. The fact that the ‘S’ stands for ‘sustainable’ is wickedly ironic.

We might be sneaking up on real action, but is Washington. However, we are getting little glimpses behind the curtain on the thinking of the two groups and, while there are differences, there is enough commonality on some big things that we could be relatively safe in assuming something like these ideas might be part of the actual solution.

First, you can assume that Medicare will be essentially flat for another ten to twelve years. And yes, I am discounting any increase that starts with 0.x%. Yep, after about that many years of basically flat already, we are likely to see that repeated. So, you have 20-25 years of cost increases (we call that inflation) with virtually no increase in revenue. That means…well, you know what it means because what it means because it has shown up in your wallet.

And you know that increasingly your commercial contracts are tied to Medicare, so this basically means the best case scenario is that your ‘per unit’ reimbursement is flat for the next ten years.

I hope you are not reading this over breakfast as I don’t want to ruin your cornflakes.

We’ve been saying to our clients for a long time that they better gear their operations and personal lifestyle to work at Medicare levels of reimbursement. Kudos to those of you who find a way to beat that benchmark, but that is still generally sound advice.

The second idea that both sides seem to like, though with variations in the execution, is some form of pay for quality. This is likely to be something like a 5%+/- swing, based on your results.

So, if you are below average (and since physicians are like children in Garrison Kellior’s Lake Wobegon, that means almost no one is below average), you could lose up to 5% of that already flat reimbursement. And if you are above average, you could get up to 5% more.

We’ll be watching to see how this plays out. Logic says we have to tackle this beast at some point and with healthcare the only thing that seems to matter in Washington these days, why not now? I remain a little skeptical and continue to keep my eyes open for pachyderm’s tumbling down the trail. But, if there really is agreement that reality is reality and flat is all we can afford, then it wouldn’t be a total surprise to see some action here in this general direction.

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 24, 2014

The Fine Print

I think you might be able to get a no-cost breakfast and maybe even an occasional free dinner, but as the saying goes, lunch is going to cost you, one way or another.

Patients, or voters, depending on your lens, were promised lots of things that looked like a free buffet, but it turns out there is a little price (or two or three) to pay.

Astute minds, or those who are faithful in their use of Quicken, know there is a lot more to a family’s healthcare cost than just their portion of the monthly premium. But after a lot of marketing noise focused almost exclusively on that single monthly premium number, ever more people are waking up to the true cost of rising deductibles, limited pharmacy benefits, and excluded services. And these are just the financial costs.

It turns out that some stuff does roll downhill, and the bottom of the slope slides right into the family budget.

When the portion of the premium paid by the individual goes up faster than wages, as has happened since 2003, and that premium is for a plan with a higher deductible, as is happening regularly now, there will be an impact on how patients think about their consumption of healthcare.

And remember, their consumption is someone’s revenue. Maybe yours.

There are many, many changes that are moving healthcare toward a more traditional consumer industry, but none is more powerful than this one. The more conscious people are about what they pay for something, the more active they are in seeking their own self-interest (and not necessarily yours) in their decisions.

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 17, 2014

Tinkering Begets Tinkering

Some reading about the challenges that surface when exchange plans eliminate specialty hospitals (e.g. the local Children’s hospital) and thus disrupt care for chronically ill patients reminded me of a recent project at our house.

My wife bought an old, beat up armoire for $1 (really) that she was going to restore for our youngest daughter’s room. It obviously needed a coat of paint and there was one drawer rail that I had to reattach. It turns out that the board to which the drawer rail was to attach was missing. No worries. I would simply add another board as this was in the back and not visible. In the process of attaching that, the front board came loose as well, the old staples simply gave way. That meant that I would have to somehow rig a hidden block to hold up the front board without interfering with the opening and closing of the drawer. Lo and behold, the other side had the same issue, so that little fix would have to be duplicated. The paint job and a couple of nails turned into the entire piece of furniture disassembled in our entry way for several days. You know the story.

Back to our little narrow network problem.

So specialty hospitals, especially children’s hospitals but also certain other facilities focused on specific diseases, are often more expensive on a per unit basis. A $23,000 appendectomy at the specialty place can be done for $14,000 at the low cost community hospital. It seems logical in light of the objective of reformers to set up a system that moves patients over to get the $9,000 savings. Of course, the specialty hospital gets excluded from the network.

Which is great, except for those chronically ill patients, who happen to need coordinated care the most and are also big drivers of cost, who now have their long term care disrupted because their hospital and physicians are not in their new network.

That is not good, so the feds begin to tinker. Let’s offer a longer term transition period. Let’s say that if the network does not provide essential services, then the exchange product must pay for those out of network services. Yes, that will blow up the economics of the insurance, but we’ll figure that out later. And yes, then we’ll start arguing over whether or not the service is actually provided, but we’ll figure that out later, too. And yes, yes, that means the patient is now getting some of their care through the contracted network and some outside of it, and yes, yes, that is hardly the goal of accountable care, but we’ll go to the hardware store and get some tape and glue and baling wire and fix that, too.

Soon, the thing will be disassembled in our collective front hallway.

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 17, 2014

Get Your Mind Right

News flash…They cancelled the Marcus Welby TV show. No, really, it is off the air.

As healthcare gets blown up and reconstructed, that version of independent medicine is gone and it isn’t coming back. If you are reading here in hopes of finding some magic potion that can lead back to the good old days, you will be disappointed. Besides, if I had a magic potion, don’t you think I’d use it on my personal bank account and give up non-reimbursed blogging about healthcare?

If you want to stay independent, if you want to control your own destiny, it is going to take a lot of work. You are going to have to give up some things that you have cherished in the past. Your thoughts about independence are going to have to be reformed. The way you operate will end up looking very different than the past.

So as one of my clients says, and he says it with the most beautiful Southern drawl, 'You're going to have to get your mind right.'

This is a big deal and you have to approach it accordingly. We're not going to be futzing around the edges here. This will not be just applying a new coat of paint and calling it done. Heavy lifting will be required.

Remember, there is always the employment alternative.

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 17, 2014

Yes, I am Myopic

I am not anti-big health system. I am not universally opposed to physicians becoming employed by big health systems. Sometimes, that is the best alternative.

But I am a big believer in the value of the independent physician practice.

You might argue that is naïve, my advocating the value of independent physician practices even before the dust settles on what the new rules will be. And maybe that is right, and maybe my judgment is clouded because independent physician practices just happen to be our clients who pay our bills, including my salary. Maybe so.

Yet while the contours of the restructured healthcare industry are still being shaped, there are some things we know and I happen to believe, with conviction mind you, that independent physician practices are needed and will be valuable.

Granted, this won’t be your grandfather’s independent practice. Nor your dad’s. Not even the one you had a couple of years ago. Or might still have even now. But in spite of the challenges – and they are many and large – I do believe there will be a critical and important role for independent physicians if you are willing to embrace it.

All that to say that what we are going to talk about here will be pretty narrowly focused on independent physicians. We’re not out to solve every challenge in healthcare, but we will attempt to tackle some that reside in this little corner the world.

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 17, 2014

Winners and Losers

The rules of healthcare are changing and changing more dramatically than some people are ready to admit.

Industries go through change all the time, most of which is incremental. But sometimes the changes are so deep and so fundamental that what comes out the backside is very, very different. Or gone completely.

Ask Blockbuster. Or my friend who used to be in the printing business. Or my former travel agent. Or the folks selling fried pork rinds. OK, I have no knowledge of the fried pork rind industry, but I can just imagine that the trend in health consciousness has put a dent in their sales.

When this happens, there are winners and losers. It is more fun to win.

The focus of my musings here are intended for those who lead independent physician practices and want to keep them that way – independent.

Here, we are going to talk about how these changing rules are changing your game. My goal is to help you understand what you need to understand about where our industry is headed so you can make the decisions you need to make in order to control your own destiny.

Simple as that. I hope you find these posts thought provoking. I hope they stimulate discussion with the other folks in your practice as you try to figure out the path forward.

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.