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    June 24, 2021

    The Hard End of the Tail

    We are exploring the divide in healthcare between those who only live in a value-based care (VBC) world and those whose thinking about VBC is limited to whether the hyphen is required.  We are really trying to understand why that might be the case, other than the SOB doctors clinging to their fee-for-service (FFS) filthy lucre.

    It is worth noting that many equity investors are backing various VBC plays. VBC is their calling?  VBC is a ‘right’ and it is their mission to bring it to everyone? Can we dispense with that canard and try to have a real conversation about what is happening and why?

    Last week, we channeled our inner Vilfredo Pareto, the Italian economist who in 1895 noted that wealth was not evenly distributed and gave us the 80/20 rule that more formally carries his name, and noted what we (two uses of the royal ‘we’ already…just in case this blog gets sued, I want to spread the risk to myself as well) believe is, maybe, the single most important healthcare economics bumper sticker:

    5% of the population accounts for 50% of the total cost.

    Vilfredo, we are right on track…the top 20% of individuals account for 82% of all expenditures.

    Let’s spend a quick minute on this, the hard to solve, end of our skewed distribution curve.

    Some of these are one-off cases that just ‘actuarially are’ – the $2M neonate, my buddy who was nearly killed in a head-on crash by a driver high on meth (Happy ending – next month, to demonstrate that he really can walk again, he will escort his daughter down the aisle and give her away). These are the miracles of healthcare, but life does not come cheap.

    Most of the people on the expensive end of the tail are old or sick or both.

    Not a little old, like ‘old enough to look at the brochure for the seniors-only community without shame, but the frail elderly.  A newly minted Medicare beneficiary doesn’t suddenly start costing a boatload more.

    And not a little sick, but multiple chronic diseases and many comorbidities sick.  Really sick.

    Yes, the first tends to lead to the second, which is why the last year of life is frequently so much more expensive than those that precede it.

    Here is one specific example of just how skewed the skewness is…and a little more math for our English majors.

    There are about half a million Medicare beneficiaries with end-stage renal disease (ESRD).  Out of its $800 billion budget, Medicare spends almost $50 billion a year on ESRD.  That is over 6% of all Medicare spending.  And for those who like to quote stats at cocktail parties…that means that ERSD spending by CMS accounts for a little more than 1% of the entire federal budget. One condition, 1%.

    So yes, we need a different model for the people who are going to incur such disproportionate costs.  Thus, the birth of VBC.

    More 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.
    June 17, 2021

    Extreme Skewness

    One of the lasting positives that I take from US politics over the past decade is the steep reduction in my consumption of news reporting.  They just made it too compelling to instead listen to 1970’s rock instead. Not only is my peace of mind and mental health better, my intelligence and knowledge have improved.  Yes, yes, it was a low bar, but we’ll take the gains, regardless.

    Like the kid in ‘Talladega Nights’ who was ‘all jacked up on Mountain Dew,’ living on too many headlines and bite-sized stories – even if they are true – is dangerous.  You have as great a chance of being misled as being truly informed.

    An example is one of top line healthcare numbers that most frequently gets quoted in drive-by news stories – per capita spending is now about $12,000 annually.

    Simple math if you can manage those confusing zeros to know your trillions from your billions…about $3.8 trillion divided by 320 million people.

    The 12k headline is handy.  It is big, twice as big as whoever is next; a lot bigger than it used to be.

    And yes, it is true.

    But deceptive.  Averages like this can be.  Especially in the case of extreme skewness.  Your challenge is to use ‘extreme skewness’ in conversation today. Double points if you can work it in with your teenager.  Maybe something about Cardi B’s Instagram followers.  Statistics and Cardi B all in one post.  That is why you subscribed here, isn’t it?

    Here comes one of the most important starting insights about US healthcare, one that is necessary to begin to understand the issue we are exploring over a couple of weeks: why does one half of the industry think value-based care has taken over everything while the other half puts all this VBC chatter in the same category as the recent spike in UFO sightings that has the Pentagon abuzz.

    Yes, we spend about $12,000 per person per year on healthcare.  That comes to almost $4 trillion dollars.  But 5% of the population (about 16 million people…less than New York, more than Illinois) accounts for half of that spending.  The same simple math says this group rings in at almost $120,000 per person, 10x the average.

    More simple math (come on, English majors, don’t be scared…you can do this) shows that everyone else, 300 million+ people, incur about $625 each.  No need to worry about the confusing zeros here.  There are none.


    People spend more on coffee.

    More so, about one in five people in the US don’t even touch the healthcare system in a given year.  $0 per person.

    This economic reality, these extremely skewed data, is a fundamental reason behind our split, parallel payment and care delivery universes.  With this reminder as our starting point, next week we’ll explore why it drives us to what we have.

    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 10, 2021

    Random Dots, Emerging Patterns

    The coolest news coming out of Washington DC this week was not political.

    That was a dumb statement…political news out of DC just causes indigestion, which is never cool.

    No, the Brood X Cicadas have returned.

    There was a story from 17 years ago, the regular cicada cycle, of a ruined outdoor wedding in which the deafening insects were so loud that you could not hear the band.  I guess that particular tip was not in the wedding planner’s guidebook.  It is now.

    Last week, the swarms showed up on the weather radar looking like a rainstorm west of the District.  A billion insects, flying in formation, starts to look like a single thing.

    OK, this is a stretch, even for me, but let’s connect the cicada swarm to some healthcare insights, if for no other reason than it gives us an excuse to make jokes about the bugs in DC.

    As I shared last week, I continue to be struck by the fact that the healthcare industry increasingly has two sub-worlds that may not even know the other exists.  On one hand, we have providers who are still firmly planted in a fee-for-service universe and think all of this ‘value-based care’ talk is from the same people that were all excited about UFO sightings by the Navy last month.  On the other hand, we have those who are all in on VBC and think FFS is a musty old wing down at the healthcare history museum.

    I’ve continued to think about that dichotomy. Like the millions of tidewater insects, there are a lot of individual dots in markets all over the country that come together to form both a value-based care swarm and a fee-for-service swarm.  Both show up on our radar.

    But like inflation, we then wonder of the two things are transitory and will eventually converge, or if two separate swarms are permanent.

    See how many DC references I am working in this week?  I should have a Sunday morning talk show.

    We’re more than a decade now into a full-fledged effort to reform and remake the healthcare industry.  We’ve had big policy changes; mega market moves; tons of investments; and a lot of innovation.  The cicadas were last here not long after President Clinton waved the white flag and told Hillary to cease and desist with her healthcare committee and start making her own campaign posters.  17 years is a long nap, but I think they would agree a lot has changed since they last crawled out of hibernation.

    Looking deeper at the current VBC v FFS divide will shed some light on how we got here and where we might be going.

    Until 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.
    June 3, 2021

    What Color is the Blue Dress?

    A long time ago, silly memes and images circulated around the Internet for entertainment purposes, not to manipulate the market value of some parody cryptocurrency.  One of the most famous, from 2015, was the lace dress that had people seeing two different colors – was it blue or gold – and arguing intensely with anyone who saw it differently.

    Gosh, that seems to be a good metaphor for many things these days, doesn’t it?  People looking at the same set of facts of drawing diametrically opposite conclusions.  Fox and MSNBC; the appropriateness of wearing pajamas to the grocery store…a long list.

    I was reminded of the dress debate because this week I was at my first in-person conference since the pandemic.  A couple hundred healthcare entrepreneurs and equity investors gathered, sans masks, to blow smoke at one another.  BS is an airborne pathogen, though not fatal.

    Side report from the scene – hearty handshakes were everywhere; people remembered how to tie their dress shoes and operate a belt; someone’s corporate credit card still worked at the bar, where the real work got done.  We extroverts were out and happy as a puppy finding bacon on the floor.

    I’ve said here before that I like the insights from these gatherings more than other types of conferences because real people on both sides of the conversation are making real bets with their time and money based on what they actually believe about the future.  It is easy to pontificate if all you are risking is your cool PowerPoint slides.  We more believe you believe what you are saying when your chips are pushed to the middle of the table.

    There are many observations that I could make from the conference, but the one that most stands out for me is the same one I made that last time I shared one of these reflections – when it comes to the debate between value-based care and fee-for-service economic models, healthcare is bifurcated as much as people were about the color of the dress.

    In this room, the companies that are all-in on value-based care, making progress, proving their point, throwing dirt on the FFS dinosaurs.

    In that other room, people with better mousetraps for some part of care delivery in every possible segment of the continuum.  Yes, they all believe that how they will get paid for their mousetrap is evolving, but at the core – yes, with a quality bonus; yes, some things are bundled – the more they do the more they get paid.

    One group is trying to figure out how to reward people for what does NOT happen to the patient; the other is trying to get MORE of their thing to happen for patients.

    And both are right.

    The payer of the bill is changing, moving downstream to care givers – health systems and primary care physicians – who are driving a lot of change.  But there is a still a big role for wrench-turners who will get paid for (better) wrench-turning.

    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 27, 2021

    A Memorial Day Reminder

    Without doubt, the past 14 months have been predominantly, overwhelming about change.  Those strange eyes staring out from over all the masked faces have been filled with bewilderment about all the change.  Or the shock of having just sneezed a big, gooey mess into their mask.

    But mostly it is about the change.

    It seems my conversations these days are dominated by navigating the return-to-work minefield, questions about the permanence of telemedicine, or the latest entry into healthcare by one of the big tech giants that has already eviscerated retail and advertising and most everything else and now is turning with hungry eyes to gobble us up.

    Good grief, the pace has been dizzying and shows no sign of relenting.

    But, for a variety of seemingly unrelated reasons, I have been reminded these last few weeks about what has not, and will not, change in healthcare.  And that is worth pondering for a few minutes as we head into the long holiday weekend.

    170 years ago, French writer Jean-Baptiste Alponse Kerr wrote, because writers write stuff, ‘plus ça change, plus c’est la même chose.’

    Now, if you don’t know French you might think old Jean-Baptiste was ahead of his time and was telling the Reddit crowd to buy AMC stock and screw the hedge funds.   Meme…chose…take that, Wall Street!

    But, that was not what he was saying.

    From that phrase, we get our idiom, ‘the more things change, the more they stay the same.’  The literal translation is closer to, ‘the more it changes, the more it is the same thing.’

    Which gets me back to the personal reflection I want to leave you to ponder as you stand over the BBQ grill this weekend, beer in hand, waiting on your ribs…

    Yes, healthcare delivery is getting disrupted in ways we never imagined.  One new player summed up their strategy as ‘digital first,’ meaning patients will increasingly engage initially via a glass screen.  And for many parts of healthcare, that is probably going to be true.

    But, as events of the last few weeks reminded me, the most essential, most important, more valuable parts of healthcare involve a human – a doctor, nurse, someone else – looking another human in the eye, laying hands on them – having a face-to-face conversation with a patient, who has come, trusting their provider to help address a real and deeply personal issue.

    This coming weekend we remember the women and men who served us in war.  But I, for one, will also remember those who have, in this weird ‘war,’ donned their masks and shields (and not a video chat) to remind us that the more healthcare changes, the more it is still about the same thing – providers doing their thing to take care of their patients.

    We thank you and raise a toast in your honor.

    Have a great weekend.

    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 20, 2021

    Dr. Google Really Will ‘See’ You Now

    Go to Google and type ‘sci fi movies about the machine taking over the world’ and you will see that we’ve been fascinated by this idea for a long time.

    That I would ask Google a question about artificial intelligence machines taking over is more than a bit ironic, isn’t it?  That the machine had me a long list of decent answers in 1.08 seconds suggests the wild visions of sci fi filmmakers of 50 years ago don’t look so fantastic today.

    Well, this post is not going to be a classic like Blade Runner, but here’s another story about the march of the ‘algo’ (hip for ‘algorithm’ – just here to help), and this one starts to get a little close for some of our readers.

    Google – yes, Google has already taken over my blog – announced this week its new AI dermatological assistant.  The technology resides in Google Search and requires a person to upload three pictures of their ‘what is that icky rash’ skin condition and then answer a few questions.  Then, bingo presto, the AI will suggest the likely condition.

    [Insert your own selfie joke here.]

    Google clearly states this is not a medical diagnosis and it is only suggesting potential diagnoses. It also says it won’t target ads based on the results.  Yeah, right.  If I burp in front of an open browser, I get Pepto Bismol ads for a month.

    Here is a little more detail…

    Currently, dermatologists recognize and treat about 3,000 conditions.  Right now, Google’s AI is nearly as good as the dermatologists, but only on 26 conditions, so the docs don’t have to rush out and start driving for Uber today.  There are another 400+ conditions the deep learning system is working to identify.

    But – and here is where it gets interesting – the 26 conditions (e.g., eczema, psoriasis, acne) represent about 80% of the skin issues seen by primary care providers.  And the Google machine is more accurate than both primary care physicians and nurse practitioners.

    Much of the diagnostic work of dermatology involves visual pattern recognition, an area where AI is making great strides.  We’ve been hearing for some time now about this type of AI progress in radiology, which has a similar cognitive recognition process.

    For now, these tools are being positioned as assistants to clinicians and patients.  Helping primary care providers, whose scope of practice requires them to know not only the difference between a basal cell carcinoma and dermatitis, but also some orthopedics and some mental health and some oncology and some everything else, more accurately diagnosis could be a good thing.

    Just remember that there are a lot of people with a lot of money in companies like Google working to automate some of the things in your day job.

    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.