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.

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.

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.