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March 9, 2016

March Madness Advice

Prepare for a massive decline in employee productivity.

It is time for everyone in the office to throw $10 in the office pool and complete their bracket. The NCAA basketball tournament is right around the corner. The madness is here, though much of it actually happens in April these days, but adding that detail to the tagline sort of ruins the poetry.

Welcome to ‘Late March and the First Half of April Madness.’

For those of you who don’t follow college basketball, but want to join the festivities, if for no other reason than the prospect of your bracket somehow beating the sports-obsessed guy in your office who wasted two days researching how well Yale can handle a full court press is worth ten bucks, here is a piece of advice:

Everyone loves the Cinderella upsets. That is what this whole narrative is about. But in the end, it is almost always the big boys with the big talent and big budgets who win. Pick not based on the mascots or school colors, but accordingly to the price of the coach’s suit.

Speaking of the big boys winning…

The Administration had floated the notion that in 2017 they were going to require some pretty stringent network adequacy measures for insurance plans sold on the government market places. Narrow networks that left patients unable to see their doctor or with only one hospital system in their plan were going to be limited. Consumer groups had demanded stringent quantitative measures of the provider network to make sure people were protected. The Administration promised to advance the cause.

The plans were in the works. Little Valparaiso University won a first round upset! The crowd went wild.

In the second round, the insurance industry pushed back hard against this idea. ‘No way,’ they said.

The Administration just released its final rules for 2017. There was a lot of stuff in there, but where did they come down on ‘network adequacy’ requirements? Dumped it, saying the states needed more time to explore the issue and that it could be revisited in the future.

Cinderella ran into [North Carolina/Michigan State/Kansas…pick one] and got annihilated.

So sports fans, the data say you should bet on the big guys. They win most of the time. And not just in college basketball.

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 7, 2016

Ahead of Schedule

Last week, 40,000 healthcare IT folks descended on Las Vegas for the industry’s biggest trade show.

That simple sentence immediately provokes a visceral response.

For some, it was ‘Cool, lots of new gadgets being pitched by sales reps with corporate credit cards who are ready to take me to an overpriced dinner and then on to the blackjack table.’

For others, it was more like, ‘Lord, I’d gladly appear on that TV show where they put you in a glass box and dump cockroaches on your head before I’d go to Vegas for a trade show with a stadium for of tech geeks and sales piranhas.’

If you are in the latter group and missed the big show, one of the highlights was the keynote speech by Sylvia Burwell, the Secretary of the Department of Health and Human Services.

Of course, there was a lot to cover, but her big news was that 30% of Medicare payments are now tied to some form of alternative payment method. This is a full year ahead of schedule in what was already a bold goal from CMS. After the many times where the Administration has had to move the goal posts up in order to reframe disappointing numbers, I am sure she was tickled make this announcement.

Medicare expects to pay out about $380 billion in traditional fee-for-service payments and now about $120 billion of that is tied to some alternative payment methodology.

Many of you are protesting, saying that can’t be right because none of your Medicare payments are value-based at all.

Both facts, yours and the Secretary’s, are likely true. Remember, most of the Medicare dollars go to hospitals, so the big dollars impacts the numerator. Of the value-based payments, fully 75% flow through ACOs, the largest of which are hospital-based. Many independent physicians do not yet participate in an ACO, so are not yet experiencing this parade. Here is an analogy: just because you know not a single person who would consider voting for Donald Trump does not mean that a lot of people aren’t voting for him. And just because you don’t have any cash coming through alternative methods does not mean it is not happening.

CMS expects to make even more progress toward alternative payment models this year. More ACOs will come on line and mandatory joint replacement bundled payment program is kicking in.

I should apologize for introducing a political analogy. I am sure you are as fatigued by the madness as am I. However, there are parallels worth considering. When a thing that at one point seemed implausible keeps gaining momentum, eventually we have to step back and wonder if the impossible might actually happen. Value-based payment models continue to rack up primary wins.

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 4, 2016

Fixing the Supply Chain

Back in the 80s and 90s, industry discovered, defined and then reengineered this thing called the ‘supply chain.’ Manufacturers did it and retailers did it. Everybody did it (except healthcare, of course).

The concept of the supply chain meant that a company did not just care about what happened inside its boundaries. If it was to deliver higher quality and lower cost to its customers, organizations had to think systematically about everything that came before it to create the inputs it used, and everything that came after it as its outputs were someone else’s inputs.

I was at a meeting back in the day and heard the newly created Senior Vice President of Supply Chain at Chrysler say that his scope of responsibility started where God left off (creation of the raw materials) and ended when parts rolled up to the Chrysler assembly line.

Without doubt, industry can point to 30 years of supply chain management as a major driver of economic improvement world-wide.

Now, a group of companies that have benefited from redesigning the supply chain for their core business are applying that same thinking to the healthcare they provide to their employees.

The Health Transformation Alliance is a group of 20 companies representing 4 million covered people and about $14 billion of annual healthcare spending. They have joined forces to improve their healthcare supply chain.

Let me translate: They are going to combine their data and their clout to start driving inefficiencies out of the healthcare they pay for on behalf of their employees. 2016 is a formation year and we can expect more companies to join. 2017 will bring a series of pilot projects focused on the first problem – the cost of prescription meds. By 2018, they plan to take on inefficiencies anywhere they find them.

Supply chain people have this notion, and they hold it with almost religious fervor, that if you are in the chain, you better be adding some value or your cost will get eliminated. And even if you are adding value, you better be adding it efficiently or you’ll get swapped out. They don’t really care about, or respect, organizational boundaries. They look at the flow of things from the beginning to the end. Every player and every step adds cost. It better be worth it or it gets shot. Data and technology and new economic relationships with suppliers are their key tools to wipe out ‘non-value added’ activity. They are highly disruptive to established industries because they are not looking to work on the margins, but do things that really move the needle.

We know CMS is working to be disruptive as well. They have set bold goals and are moving that direction. But being a government entity, there is a certain slowness inherent in how CMS must work (Winner: obvious statement of the week).

No such constraints, bureaucratic or political, will limit this group. Keep an eye on it and be sure that you are not one of those non-value added cost items about to get bushwhacked.

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 2, 2016

Truth Revealed by the Fraud

Twenty five years ago, I heard a speaker say that in this world of exploding information, one of our most important tools was the screen we used to decide what to pay attention to and what to ignore. That was pre-Internet, pre-mobile, and pre-most everything that we take for granted these days. He could not have even imagined then the amount of information coming at us now.

This blog exercise starts with my scanning tons of news sources and, following his advice, I have my screens for what gets read and what gets skipped. One of those screens is for news related to fraud and compliance.

So, of course, the headline about hospital operator Tenet paying $238 million to settle a False Claim lawsuit caught my eye. The settlement swung Tenet’s 2014 earnings from a small profit to a big loss. Look out, executive bonuses and stock options.

On the surface, it looked like another garden variety False Claim deal. Four Tenet hospitals in the Atlanta area contracted with clinics operated by Hispanic Medical Management (HMM) to provide prenatal care to a cohort of predominantly uninsured patients. The agreement called for HMM to provide language translation services, marketing to the Hispanic community, and help getting patients enrolled in Medicaid.

The Justice Department said it was all a thinly disguised ruse to pay HMM for directing referrals to the four hospitals. And they asked for almost a quarter of a billion dollars as punishment for the dirty deeds.

This reminds us the Feds take this fraud and abuse stuff seriously. If stories like this seem to be coming at a more frequent pace, you are not dreaming. Accordingly to one of my spies who sat in on a DOJ meeting, Justice has chasing down healthcare fraud high on its list of priorities.

But there was another insight hiding in this story. Though physicians are often lumped in with hospitals in the amorphous category called ‘providers,’ this case reveals the degree of the economic difference between hospitals and physician practices. Look at the most basic fact of this case: someone effectively paid a bribe to get MEDICAID referrals. Yep, hospital economics are such that someone thought it was a good idea to pay a bribe to get more MEDICAID patients.

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 29, 2016

Follow the Comp Plan

Some things in life are complicated. I have daughters, I know complicated.

Some things are not. I have a teenage boy. Bribe him with a burrito and you can get him to do most anything.

Sales folks fall into the latter category. They are not real complex. Sort of point and shoot.

But what they can do is run about any scenario through their comp plan in about four minutes. Like my Pavlovian son, wave the burrito and they salivate. Commission this and they’ll sell it. Don’t pay for that and they won’t.

Recently Anthem, Aetna and Cigna all announced that they would no longer pay commissions to insurance brokers when they enroll people through the exchange market places when those people qualify to enroll outside the normal enrollment period. People who qualify to do this are generally much sicker than normal, which means they incur a lot of cost, which means they lose the insurer a lot of money.

It doesn’t take Warren Buffet to determine that you don’t want to reward sales people for selling money losing products.

Speaking of which, Cigna and Humana have stopped paying commissions to brokers for enrolling people in ‘gold’ plans. Again, sick people pick gold plans, even with the high premium, because they know their bills will be high and they want the better coverage. United pays almost no commissions for sales on the exchanges, regardless of product.

Critics claim this discriminates against the sickest people. Insurers label it ‘adjusting’ to market realities.

Many businesses have some customers that lose them money. Rational actors work to avoid such customers. They definitely don’t want any more of them. Whether it is adjustment or discrimination, it is clear how they insurers feel about their profit on these sub-sets of their customers.

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 26, 2016

Robert Trent Jones Trail

Back in the 1980s, two seemingly unrelated facts came together in the state of Alabama.

Fact one was that the pension fund for state employees was sitting on a lot of cash and looking for a place to deploy it with a good return.

Fact two was that many people passed through Alabama on their way to Florida to play golf. But all they bought in Alabama was coffee and gas.

The result of these two coming together is a thing called the Robert Trent Jones Golf Trail. The state used the pension money to engage the famous golf course architect of the same name to build a series of high end golf courses all over the state.

Today, the Trail has 468 championship holes on 26 courses scattered across 11 sites. Hard core golfers everywhere have, or aspire to, build a vacation around the Trail where you can easily play 36 holes a day as you traverse the from the border with Tennessee to the Gulf of Mexico.

A creative solution to two different problems.

Alabama is about to launch another creative venture, having just been granted a waiver from CMS to move two-thirds of the state’s 1 million Medicaid beneficiaries out of the traditional fee-for-service model into a capitated managed-care model.

The state is broken into five regions and each region must have at least two Regional Care Organizations (Alabama’s version of an ACO). The RCOs are provider organizations that include hospitals, physicians and behavioral care providers. So far, 11 RCOs have signed up and been approved by the state.

By state law, each RCO has a 20 member board, 12 of whom are part of the RCO and at financial risk, and 8 members from the community who have no risk in the RCO. Five of the eight must be providers who deliver services to Medicaid patients and three of those must be primary care physicians. A business executive in the region, nominated by the Chamber of Commerce, must also be on the board.

Remember, it is not just the state’s football team that wears crimson red – the politics of Alabama are the same color. Well of course Alabama is one of the states that did NOT expand Medicaid as part of the Affordable Care Act.

This goes into effect this fall. Like the Robert Trent Jones Trail, this is a grand experiment and we’ll see how it plays out. Golfers say The Trail it is one of the best values anywhere in the country. Maybe their Medicaid approach will earn the same kuddos.

Roll Tide.

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.