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April 4, 2019

The March to Managed

For many physicians, the phrase ‘managed care’ should never travel without the appropriate preceding epithet. That is fitting given the role that a dam, specifically the Grand Coulee Dam, played in the early history of managed care and HMOs.  It is fun to cuss a little and get away with it because you have woven in a historical double entendre.

While there were some early HMO-like experiments in the early 1930s, the first discernible representation of what we know today as managed care arrived in 1938 when industrialist Henry J. Kaiser partnered with Dr. Sidney Garfield to provide prepaid healthcare for the workers building the dam on the Columbia River in the state of Washington.

Early on, Kaiser and the eponymous Kaiser Permanente Medical Group were synonymous with this new idea. President Nixon signed the HMO Act of 1973 and most of us can pretty much sketch out the history since then… it was just California thing, then it was going to take over the country, then it got beat back, and now, maybe it will and maybe it won’t, depending on where you live and how you practice.

However, there is one segment where managed-care (and if you think PPOs are ‘managed-care’ then you also think a Twitter feed constitutes literature…we are talking about the HMO idea) is on the steady march forward.  In case you’ve not been paying attention, the government payers – both Medicare and Medicaid – are becoming more managed every year.

Here are some numbers for you.

First, let’s take Medicaid. Prior to the Affordable Care Act, there were 56 million people covered by Medicaid. That number is now up to 72 million. Of those, 49 million (68%) are in a managed Medicaid plan.

Of Medicare’s 60 million beneficiaries, 20 million are now covered by Medicare Advantage, also a managed plan.  UnitedHealthcare, the largest player in the MA space, sees a clear path in the coming years for MA penetration to reach 50% of the Medicare population.

Just a little math shows that one in five Americans are now covered by a government-sponsored HMO, That slice of the pie is going to continue to grow, and we haven’t even thrown in commercial HMOs yet.

There are a couple of takeaways from these headline numbers.

When CMS threw out their lofty goals for the transition to value based care, there was a lot of smoke and mirrors regarding the Obama care acronyms like ‘ACOs.’  Don’t get confused by the sideshow…the objective is being accomplished by moving government beneficiaries into managed-care plans.

Second, these are what you think they are – ‘managed’ plans with gatekeepers on the front end, narrow networks on the back end, and rigorous utilization management throughout the process.

Plan your strategy accordingly.

And if you get in trouble for using profanity, tell them you were just thinking about hydroelectric power system.

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.
March 27, 2019

Certificate of Greed

President Donald Trump seems to enjoy consistent support from a relatively steady portion of the population. My completely unscientific analysis, though I did ponder this statement deeply for a minute while wearing a cardigan sweater and stroking my professorial beard, breaks his persistent fans into two groups.

The first seems to be characterized best as the ‘poke ‘em in the eye’ crowd. When the president jabs the establishment, whoever that is, they love it because they get to enjoy the visceral reaction flowing from their personal frustrations.

The second group, however, tolerates the antics in exchange for getting tangible policies and executive actions consistent with what they believe is best for the country. Supreme Court justices and border security are two such examples.  Another thing frequently cited by this group, even though it gets far less media or Twitter attention, is Mr. Trump’s pro-market approach to deregulation.

Of particular note to independent physicians is the administration’s quiet campaign against Certificate of Need (CON) laws. You might’ve missed this because ‘quiet campaign’ is not what you typically expect from the president and it is a bit beyond his direct power since CON regulations are set at the state level.

But, in a broad, sweeping report to the president last December about how to fix the healthcare system, three of his cabinet secretaries took very specific aim at the anti-competitive effects of the increasingly anachronistic CON scheme.  Now, some state legislators are taking up the banner in trying to get these scaled back, if not repealed entirely.

Recall that CON laws came about in the late 1970s in response to an ill-fated cost containment measure from the Nixon administration (thanks Tricky Dick). Mr. Trump’s pro-market predecessor, Ronald Reagan, repealed that federal mandate in 1986 as evidence was already mounting that the idea was causing more harm than good. Here we are, over 30 years later, and only 15 states have eliminated the CON laws. As a westerner, I am happy to note that the vast majority of the states that actually welcome real competition are located out here on our side of the country.  Cowboy up.

The report to the president lays out the evidence that all this idea has accomplished is the protection of large regional health monopolies that increase cost with no demonstratable improvement in quality or the amount of charity care delivered.

We have been discussing the importance for independent physician practices to become a care delivery platform. While not always the case, when you can expand to include facilities, you open new opportunities that make your platform is stronger and more sustainable. CON laws generally function to protect established hospital systems and limit options for physicians. That is just reality and it is wrong.  If you care about your independence, this issue likely matters to you.

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.
March 20, 2019

It Is Not About the Price

As a young consultant, I figured out quickly that I had a knack for selling and embraced my inner ‘BS-er.’ More importantly, I found myself working for an old partner who was the proverbial peddler of frozen water to native tribes in the far north. This guy could really sell.

Invariably, the first time you make a pitch to the prospect, you get to that moment of truth where you put the price on the table. And just as invariably, the prospect objects to the price. That is when you learn that new deodorants should be tested on rookie sales people.

The first time I went back to my mentor to discuss the client’s objection to our quoted price, I was sure the answer was a discount. The old guy leaned back in his chair, looked at me and said, ‘The price is not too high; your solution is too small.’

His point was that if you solve a big enough problem for the client, pricing becomes less of an issue. There is a lesson here for physician practices looking to become focused care platform as a way to sustain long-term independence.

Historically, it was fine for a physician to simply play her role in the broader process. Patients flowed in from somewhere, you did your part, and passed them on to whoever was next. Collegiality, cooperation, and the fact that everyone made enough money along the way were all it took to make healthcare work. 

Obviously, things have changed.

Now, the customer cares about the price. And by customer, I mean everyone who participates in paying the bill – employers, payers and individuals; the government and the tax payers.

They have collectively said, ‘That price is too high.’

So, you have two choices: you can discount the price, or you can come back with a bigger solution that solves a bigger problem that makes paying your price a good deal.

This is the opportunity for physician practices who want to become a platform…broaden the scope of your services so that you were not just a bit player in the overall scheme of things. Solve a bigger problem; take responsibility for integrating and delivering the services that are logically next to yours so that you provide a more complete answer to what the patient needs.

Value-based care is a big principle, not just a form of reimbursement like capitation or something that only applies to big health systems. You can deliver and get paid for value in a lot of ways, and when you do, you change the discussion around price.

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.
March 13, 2019

Purse in the Road

Growing up in a small town – the ‘no stoplight, one doctor, Sonic Drive-In was the only national brand around’ kind of small – meant you had to make your own fun.  I am not sure of the statute of limitations on these things, so I have no comment on any questions related to Mrs. McConnell’s cat.

One of the best games involved some fishing line and a women’s purse.  You know how this goes…tie the line to the purse, leave the handbag in the middle of the road, and when someone tries to pick it up, give the purse a good yank.

Earl, the school janitor famous for mangling the English language, got out of his car and bent over in the sharp glare of his head lights.  As he reached to pick up the purse, it scooted about three feet. Earl about wet his pants shouted something you couldn’t say in church.  He threatened to beat us, whoever the ‘us’ was hiding in the bushes.  Then he burst out laughing.

We’re all tempted by the purse in the road, which gets us to a couple of general warnings about potential ancillary revenue streams as you move from being just a practice to the broader idea of a platform.

First, many of these are just sleezy.  Beware of hucksters pitching you easy money because the compliance cops eventually catch up.  I continue to be shocked by the number of physicians looking to make a quick buck who end up in the news because they had to write a really large check to payback Uncle Sam.

Second, some are too cheesy for a legit medical practice.  If the rack of creams and incense candles in the waiting room reminds someone from a late night HGTV infomercial, that might not be the image you want as you discuss a life-threatening disease with your patients.

Finally, remember, we’re trying to lower the cost of care.  If your new line of business has no value other than to increase your personal income, it will be short-lived, I promise. 

It should go without saying that you want to build service lines and revenue streams that help the patient, improve care and lower overall costs (there, the healthcare pledge of allegiance) while improving the top line for your practice. 

The good news is that opportunities abound because in the overall value chain of healthcare, physicians sit adjacent to the very expensive hospital segment.  And the technology to allow care to be moved to lower acuity settings is working in your favor.  There is plenty of opportunity to capture revenue that currently belongs to someone else and move it into your boundaries in a way that benefits everyone (except who you took it from, obviously). Don’t feel bad…they are actively trying to steal yours. It is called ‘competition’ and it makes the system better.

Build your revenue streams, but don’t get caught looking for the ‘too-good-to-be-true’ purse just lying in the middle of the road. Do the work.

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.
March 6, 2019

Evolving Etymology

I’ve always found the history of words to be fascinating, particularly the evolution of meaning over time.  Since our son is a junior in college, we get to witness the emergence of new words into the language in real time.  I have come to learn that ‘dope’ is a good thing, as in ‘that is dope.’  He does go to school in Boulder, so it is comforting that dope is just an adjective.

No one does more to advance new words entering the lexicon than business consultants.  Often, these are just exercises in self-aggrandizement, 25-cent words that add no value.  I’m sorry, but if you have mop up vomit, calling you a ‘custodial engineer’ doesn’t make your job less smelly.

However, sometimes new words are required because the thing that was is now different enough, even though it looks familiar, for there to be a real distinction.  When we talk about the need for independent physician practices to become a ‘platform’ is that just some faddish marketing spin, or is it really something different? 

Fair enough. We’ll explore it in the coming weeks and you be the judge.

A central tenet of the platform concept is the ability to leverage the flow of patients capture new and multiple sources of revenue.  Think about the big health system…they want to make money off patients in every conceivable way possible.  

For a long time now, we’ve talked about the importance of ancillary revenue streams to a physician practice.  Those who can and do develop revenue sources that compliment the traditional professional service fees of the practice tend to perform better financially.  Increasingly, the presence or absence of these other services also predict whether there is a path to continuing independence.

It is no surprise that primary care physicians are employed by hospitals and health systems more often than are specialists.  Besides generally getting paid less for their services, ancillary services that provide material revenue are not as easy to come by for internists, pediatricians and family medicine physicians.  Though, as we’ll discuss in a coming post, the move to value-based care has opened a new source of revenue for which primary care providers are well suited.

So yes, physician practices that wish to remain independent must become a care delivery platform. Generating various sources of revenue from the same universe of patients is one feature of the platform idea.  As reimbursement continues to compress and labor costs do what labor costs do year over year, the margin left over from pro fees alone is ‘not dope.’  You now must think about this part – what you used to consider the essence of your practice – as merely the headwaters of your river.  Monetizing more and more of what flows from your core service is how you will remain independent.

Revenue streams are just one aspect of the platform idea.  We’ll discuss others as we work through this this series on this concept.  Next up…a couple of warnings.

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.
March 1, 2019

Pronunciation Options

Niche.

Do you scratch it or give it an upper-class nod to the French origin of the word?? Do you say ‘nitch’ or ‘neesh?’ Do you judge me if I use the more plebeian pronunciation? 

I only ask because it seems the path forward for independent physicians is increasingly bifurcating into one of two fundamental strategies.  You can build your practice into a ‘platform,’ something we’ll explore more in coming posts, or you can pursue one of several niche alternatives, however you wish to pronounce it.

Now, the niche road may, at first glance, just seem like a fancier way to describe a solo or small practice, especially if you say ‘neesh,’ but I want to press into that a little more to get at some emerging differences.

Small practices, as we’ve known them in the past, are getting harder and harder to sustain.  If you are a garden-variety solo physician, making a living off your pro fee claims submitted to third party government and commercial payers, it has been getting tougher for years now, so this is not news.

There are obstacles at every turn.  Managed care contracts are ‘take it or leave it’ deals as reimbursement rates continue to slide.  MIPS and MACRA either increase costs or further nibble at payment rates.  Technology is complex and expensive. New compliance issue sprout like dandelions in the spring.  And employees…well, humans are messy, aren’t they?

On the positive side, there are more options than ever before for physicians who want to pursue the niche strategy.  Concierge medicine and a seemingly endless stream of cash-based physician services are just one type of this alternative.  Others carve a distinctive clinical focus that sets them apart, again often with a cash-pay service line that supplements the traditional fee-for-service model.

Also, a plethora of contractor gigs are now available, from time covering a telemedicine shift to time in the urgent care.  Some physicians now make their nut by getting on a plane to somewhere in rural America twice a month for a long weekend, not for a camping trip, but instead to cover the ER on a locum’s assignment.

The point is for many physicians, the path to independence is increasingly personal.  They find a niche that works for their skills and life objectives.  They customize and configure their professional career more as a solitary professional than a medical practice.

This model works and comes with many advantages.  But if you go this route, save aggressively and invest smartly for there is likely nothing to sell at the end of the run.  When you’re done, you’re done. 

Alternatively, if you want to build and be part of a medical group the stakes also keep getting higher.  Even that may not be enough.  Now, instead of ‘practice’ you want to think ‘platform.’  There are many versions of this model as well and we’ll start exploring those. 

At least how to pronounce ‘platform’ is clear.

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.