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    February 25, 2021

    Dangerous Blowing

    This is an actual sentence from a Chicago area newspaper last April:

    “Normally a fun activity, bubble blowing during a deadly Coronavirus pandemic is a dangerous, risky behavior.”

    Blowing, like singing or shouting, can make those tiny aerosol droplets travel more than six feet.  That this ominous warning was directed at a passing car of teenagers blowing bubbles out the window and shouting, ‘Happy Bubbles Day!’ tells you that sometimes the COVID police can be a real buzzkill.

    OK, bubbles are dangerous, but not the fun, soapy kind.  Let’s talk asset bubbles and the associated stupidity risks.

    Bubble talk has been everywhere of late – the stock market, real estate prices, Bitcoin, Telsa, GameStop…lot of bubbles, lot of references to Dutch tulips in the 1600s (Google ‘tulip’ and the autofill will give you ‘tulip bubble’ and ‘tulip mania’).

    Bubble warners, like the dour Chicago journalist, worry about too much hot air, in the case of asset prices the air being too much cheap money being pumped into the economy.  There has been a lot of it, incomprehensibly large amounts. More is coming. That money has to go somewhere.

    No surprise, but a lot of capital is flowing into healthcare.  When you are talking about trillions, even that old non-sexy, non-tech, non-Elon one-sixth of the economy is going to get a share.

    Deals are getting made all over healthcare, but per our interest here, physician practices are hotter than ever.  Big operators have cash to acquire and financial investors have wheelbarrows full to deploy.  Your phone is probably ringing.

    I feel compelled to issue a tiny little warning.  But first, a disclosure.

    There is a lot I like about physicians getting together with outside equity.  Some of our clients have done this deal and we are right in the middle of helping them realize their vision.  The right partnership can simultaneously create a lot of economic value for physician owners and accelerate the delivery of more effective care.  In 2018 I wrote 22 blog posts explaining how the private equity option works and why it makes sense for many practices (Drop me an email if you want a copy of that).  We are generally fans.


    Here’s the warning – maybe it is for docs, maybe for the investors:

    I was talking to a friend earlier this week, he also a seasoned healthcare veteran (we are seasoned, not old) and, like me, working with many of his clients who are considering selling to private equity as opposed to the hospital or going it alone.

    We both quietly whispered that while many of these deals make sense for both sides, we are seeing some that are a train wreck in the making.  Knowing how the math for equity investors works and knowing the economics of some of these specialties…well, we just can’t see the path to happiness.

    We saw this in the physician practice management bubble of the late 1990s.  Too much money in the hands of investors who didn’t know this space, too many stupid deals, unsustainable valuation increases.

    The popping was inevitable.

    Be wise.

    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 18, 2021

    We Want a Lake, Too

    On behalf of the good citizens of Colorado, Wyoming, and Utah, allow me to say to our friends in Los Angeles, Phoenix and Las Vegas – you’re welcome.  I assume your thank you note got lost in the mail.

    Lake Mead is the largest reservoir in the United States, weighing in with a max capacity of a whopping 26 million acre-feet of water.  If you are not up on your water size measures, an acre-foot of water will cover a football field about a foot deep.

    The Hoover Dam, which created Lake Mead, gets all of the attention, but the real star of the show is the snow melt from the Rocky Mountains that feeds into the Colorado River, which provides most of the water to the reservoir.  Most of that is released to those big population centers down in the hot and dusty southwest corner of the country.

    I think I should be able to walk into someone’s house in Scottsdale and take a quick dip in their pool.  It was our water, after all.  Just coming for our share of the rent.

    Water, like data, is an interesting asset.  A cup or two by itself is no big deal but gather up all the snow that falls on the Rockies, and well, Bugsy Siegel can build The Strip, the Arizona desert can have more golf courses than people, and people in LA can wash their nice cars.

    That little pivot – water and data – gets us to our news of the day.  Late last year, we wrote about ‘data lakes.’  Now, a group of hospitals got together and said, ‘Hey, we don’t want our data just flowing downhill so someone else – we see you Jeff Bezos – can gather it up and make money on it.  We’ll build our own lake and then sell water.’

    That is more accurate than what they really said.

    14 big hospital systems, including Providence, CommonSpirit Health, Advocate Aurora Health, Trinity Health and Tenet Healthcare, came together to form Truveta, a company that will have a really big data lake.  The current owners alone account for about 13% of all clinical care provided in the US.  Others are invited to join.

    Here is the plan: de-identified data from all will be dumped into the lake and access to the data will require a paying a fee.  The mission of Truveta has all of the required words – improve health equity, enable ethical research – so it won’t surprise you that fees will vary based on the type of entity seeking to access the lake.  If you want to make money from our data, pay more.

    Fair enough.  If Google can monetize your information without sending you a teensy-weency little royalty check, then the hospital should be able to get a residual revenue stream from Grandpa’s gall bladder surgery records.

    Just interesting to see how this trend now arrives in healthcare.  And note, as Facebook users have learned, if the product is free, then you are the product.

    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 11, 2021

    Who Is in The Details?

    Well, the answer is ‘the Devil,’ right?  The Devil is in the details.  Everyone knows that.

    But maybe not.  Turns out there is an unsolvable debate as to who first took up residence in the details – God or the Devil.

    I started to tell those of you who twitch when God or the Devil come up in conversation to relax…that this is not a theology discussion, but then again, maybe it is, but of a different sort.   Hang with me just a second.  You still may twitch, but for more because of healthcare policy implications.

    First, the wormhole, then why I went down it.

    Turns out there are two competing versions of the common proverb about details.  One says it is God in the details, another credits the Devil.  This is no minor variation here.  We’re talking diametrically opposed ideas.  Yet, three cups of coffee and too many open Google tabs later, I am still not sure who was in the details first.  And of course, Nietzsche showed up.  He always shows up for these discussions.

    So, how’d I end up trying to chase down this history?

    Well, yesterday a big ‘ol coalition of associations, with enough acronyms to choke a horse, representing employers, physicians, hospitals and health plans issued a press release calling for – are you ready – better access to high quality care and affordable coverage for all! And a mere press release was not all…they even released a statement of principles as well!!!

    Well dang, problem solved in a two-page PDF.

    I am guessing with the dripping sarcasm you’ve figured out why my browser history now has page links to etymology and idioms.

    If you don’t have time to read the statement of principles, I’ll boil it down for you – throw more money at the problem.

    Hey, at least it is fashionable, in line with a lot of thinking these days.

    We’ve long said here that we must solve our industry – for the good of individuals, families, employers, governments, and our communities (did I get everyone?).  The problems are crushing, and we’ve made far too little progress.

    But, for good or for bad, the details do actually matter.  Even God and the Devil might both agree that just spending even more money might not be the answer.

    OK, now you can twitch.  For whatever reason you would like.  I am twitching because I had too much caffeine while in this etymology wormhole.

    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 4, 2021

    Discount Shoppers

    Last week, we used some twisted logic to tee up a discussion on the big trends in payer mix, but isn’t ‘twisted logic,’ by definition, an oxymoron?  The idea of twisting logic makes it illogical, right?

    You were expecting Socrates here?

    This unique thing that we know as ‘payer mix’ is not an issue in most industries.  Sure, most have differences in what customers pay, but that generally comes with some meaningful variation in the product or service.  Try explaining to your non-healthcare friends that you get paid one thing for Patient A and a materially different amount for doing the exact same thing for Patient B and they look at you like a Game Stop day trader trying to understand the margin call clearinghouse issue.

    Well, let’s check in on our unique little issue and see what the past decade has brought and what the future might hold.

    We’ve had national healthcare coverage for a long time, well before Obamacare.  We just knew it as those with employer-sponsored health insurance subsidizing those with government coverage.  We got paid a lot in our left pocket and a little in our right, but it was OK because it all worked out in the end.

    Hobby Lobby got paid a lot for overpriced craft items and took it in the shorts on that one 40% off item, but it was OK until it was not, and they decided to kill the coupon.  Quick update on that crisis…the crafters are up in arms, summarized by this two-word post on the company’s website: Hello Amazon.

    OK, here is the big picture math.  Keep this handy as there are some tidbits here you can drop in conversation.  It is like referencing viral memes, but for people who work for a living.

    Since 2010, we’ve added about 22 million people to the US population.  In the meantime, Medicare enrollment has grown by 15 million and, you ready for this, Medicaid enrollment by 24 million.  Throw in the 11 million people now who have insurance through the exchanges (high deductible plans for people who need financial assistance…do the math).

    So, we have more than double the growth in the lower paying plans than population growth overall.

    How much will it hurt?

    Since it is public and standardized, let’s use Medicare as a jumping off point.  Let’s say Medicare pays $1.00.  That is metaphorical, even if it seems literal at times.

    Well, if Medicare pays a $1.00, Medicaid pays $0.72.  And variations are dramatic, but commercial insurance pays about $1.43.  It used to be north of $2.00.

    If you can figure out the 40% savings on a $10 picture frame you can figure out the weighted average of what healthcare providers get paid has gone down.

    COVID has cost about 15 million people their employer-provided health insurance.  Guess where many of them are headed?

    Well that was not a very happy post, was it?

    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 29, 2021

    Coupon Crisis

    Those of you with kids away at college know the cell phone has changed communication back to mom and dad.  No more waiting until 9:00pm on Sunday night when the long-distance rates drop to make a quick 4-minute call home to check in. You can send a text anytime you need a little extra cash!

    We are fortunate.  The unlimited calling plan means we get to hear from our youngest frequently.  Mostly she calls when she is doing laundry (hey, we’ll take it) or wants to see ‘her’ dog (I accept my third-place status with her).

    But last night, there was an emergency.  She and my wife had to Face Time – it was an ALL CAPS immediacy kind of crisis.

    ‘Mom.  Did you hear?  This is HORRIBLE.’

    Now, we’re in the car, I am driving and resisting the urge to look at the phone to make sure Maggie was still alive.  What happened? Did we just need to head straight to Oklahoma to meet her in the ER?

    ‘Hobby Lobby is dropping their 40% off coupon!’

    Oh, it was worse than something that merely sends someone to the hospital.

    A long, semi-cathartic counseling session between the two of them ensued.  The dog and I pretended to be distraught because being distraught seemed to be the only acceptable response to this news.

    You must know that for my wife and daughter, cruising the aisles of Hobby Lobby is therapy, a life-giving experience comparable to a religious pilgrimage. Hard days are washed away with half an hour of wandering in that Disneyland of Imagination.

    Of course, the best part of all is to walk to the register with one item, just one, and then whip out that 40% off Hobby Lobby coupon that is available every day, all the time.

    Joy, but with a discount!

    That is, until February 28 when the party comes to an end and the saintly folks of Hobby Lobby become a little less saintly.

    As I listened in to the wailing and of gnashing of teeth (the dog just went back to sleep), it got me thinking about a topic that I want to dive into a bit next week.

    Hobby Lobby was not intentionally trying to hack two of its most devoted customers (the data are still coming in, but early returns suggest that meltdown occurred millions of times across the country).  It is just that customers like my wife and daughter use the discount strategically and, as such, aren’t nearly as profitable as the store would like.

    Unfortunately, you have this dynamic coming at you from the opposite direction.  More and more of your customers (excuse me, patients) are going to be walking in with a discount coupon.  It is called a Medicaid card.

    We’re overdue to step back and look at some big health insurance trends and will pick that up next week.

    That is, if I am not being sent to Hobby Lobby for an endless stream of one-item purchases.

    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 21, 2021

    Serve Yourself, Save Five Cents

    You know, it was a big day in Washington yesterday, one with a lot of firsts – and hopefully some lasts as well.  There are a lot of directions we could go reflecting on what a day like that means, so…let’s talk about the evolution of the gas station.

    I have no explanation for that level of randomness.  I am like the guy who lives next to the airport and painted ‘Welcome to Cleveland’ on the roof of his house to greet landing passengers.  Thing is, he lives in Milwaukee.

    You’ve probably heard and read enough regarding DC for one week, but meanwhile back at the day job ranch, the way we deliver care is changing rapidly and doesn’t pause every four years just because there is a new guy called POTUS.  So, let’s look at the history of the ‘filling station’ to get our thinking rolling.

    Fittingly, Mrs. Bertha Benz (yes, that Benz) got the first car from her husband and business partner Karl, which she filled up the first time at the pharmacy in Wiesloch, Germany in 1888.  The early filling stations were run by the pharmacies, an interesting foreshadowing of something, I am sure.

    (Mr. Biden, if your speech writing team needs some historical research, you know where to find me.)

    The first one in the US was a Gulf station in Pittsburgh.  Growth was explosive over the next three decades as the automobile took over the country.  There were over 230,000 US gas stations by 1940, with attendants who would pump the gas, wash the windshield, check the air and oil, and give you a little local gossip as you waited.

    Pumps improved over time, but the first big innovation was just a business model change.  In 1947, Los Angeles station owner Frank Ulrich hung a sign that said, ‘Serve yourself, save five cents. Why pay more?’  With that, the self-service movement began.

    We pause here because our readers in New Jersey and parts of Oregon have no idea what we are talking about.  ‘Self-serve gas?  What? That is a thing?’

    Two other key technology advances then took us to where we are today – the system that allowed the pump to be controlled from inside the store, and then the pay-at-the-pump credit card – no human contact required.  Filling stations were leading the way on social distancing for years.  Who says fossil fuels are archaic?

    In a short 35 years, the job of gas station attendant was invented, exploded, then was virtually eliminated.

    Now, those squatty little charging stations are starting to spring up at places like the airport and the mall.

    The process is predictable, relentless, repetitive…

    • Big, underlying demographic and societal trends drive demand.
    • Technology of all sorts gradually improves, then accumulates to make a big jump to enable something completely new.
    • Then someone has a new idea and asks, ‘Do we have to do it that way? Why not this way?’
    • Customers get new value and the game forever changes.

    This is us now.

    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.