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Transparency in Health Care

I have worked in health care for over 30 years.  I have worked on the payer side, in medical group operations, and as a consultant for physician groups.  I have interacted with literally thousands of physicians over the last 30 years.  The most amazing thing about my career is that every single doctor I have ever worked with is the best in their field.  All of them provide the highest quality of care for their patients, and they are also cost-effective.  How do I know this?  Well, they all told me they are.   I have yet to interact with a doctor that will tell me, “I’m actually a mediocre doctor.  I graduated at the bottom of my class and, I order more tests than my peers.  My quality is average, and I’m more expensive.”  Is that amazing how I have been able to only work with the very best doctors out there?

 

Ok, I will now take my tongue out of my check and get serious.

 

The reality is that most doctors are very good at what they do.  The vast majority of doctors are also doing what they think is right for the patient and trying to be cost-effective.  I can tell you countless stories where doctors do the right thing for their patients and control costs even when it is detrimental to their business or paycheck.  Like any profession, there are bad actors out there.  There are bad doctors just like there are bad lawyers and bad politicians…. wait, that may have been a lousy comparison.  Anyway, the point to all of this is not that all doctors are good or that all doctors are bad but that in the new world of transparency and consumerism, you will have to prove your quality and cost-effectiveness or someone else is going to prove it for you.

 

Recently I have had clients receive what can only be described as a “report card” from one of their payers.  The payer will grade them on “quality” measures as well as cost.  What makes this even more real for the provider is the fact that payers are now basing reimbursement on these grades.  In addition to that, payers are actively selling narrow-network products.  If you are on the wrong side of the quality/cost line, you are excluded from these networks, which means those patients can’t come, see you.  When this happens, “stuff gets real.”

 

At first, many physicians have a very visceral and adverse reaction to being graded by an insurance company.  Statements like, “Who are they to tell me my quality is bad!”  and “What does an insurance company know about quality?”  are often the first things out of their mouths.  These are valid concerns.  Insurance companies have access to limited amounts of data, and several studies have shown that insurance company physician profiling is not very accurate or predictive.   There are many reasons why it’s difficult for an insurance company to measure and predict individual physicians’ quality and cost-effectiveness accurately, but that’s not the point.

 

The point is they are going to do it anyway, and it’s the world we live in.  Combine that with the rise of consumerism and the digital native populations’ use of this kind of information in purchasing decisions, and we have a whole new world out there.  A world where it’s not good enough to say you are high quality, you have to be able to prove it and respond to anyone who says you are not.

 

So, what’s a doctor to do?  Well, there are three things that every practice should start doing to be prepared for this new world.

 

First, from the top of the organization, you have to accept this new environment and adopt a culture of quality, self-reflection, and continuous improvement. Merely shouting at the wind that this “isn’t fair” won’t help at all and won’t stop the changes that are happening and will continue to happen.  Like a smart man once said, “If you don’t like change, you will hate being irrelevant.”

 

Secondly, develop or secure the knowledge, talent, and resources to evaluate and, where necessary, challenge any data about your quality and cost profile.  When a payer sends you a report card, the first response should be; “Thank you.  Would it be possible for me to see the data behind this report so that we can use it to improve?”  Yelling at the payer and complaining about the injustice of it all won’t help.  You need to engage the payer, or whomever else is producing the report card, and get as much data as possible.  When you find an error in the data or a reasonable explanation for the discrepancy, then point it out.  When the data shows gaps in your quality, then address it internally, close the gap, and do better next time.  Groups that do this well and quickly are going to do well in this new world.  Think about it for a minute.  If these report cards are good, you have an external source, a payer, verifying your quality.  Now you can see, “We are the best group in our area.  That’s not just our opinion; BCBS thinks so too”.

 

Finally, get proactive.  Develop internal measures of quality.  Make them the kind of criteria a payer would look at.  Analyze and evaluate your doctor’s performance against these measures and work with any of your doctors that are outliers while also trying to move the needle for all of your doctors.  If you know that a payer is going to measure how many of your female patients over the age of 50 are getting a screening mammogram, then look at your EMR data and make a point of talking with those patients that have not followed through with getting this done.  A couple of years ago, one of my Radiology clients wanted to engage a major payer on a quality argument.  Their position was that their callback rate on screening mammograms was lower than their competitors, and because of that, they saved money.  The payer did engage and did an exhaustive analysis.  The analysis showed little to no difference between the two radiology groups in town on mammo callback rates.  When my client did a deep dive into their data, they found that one doctor was driving up the group’s call back rates significantly.

Simply put, most of their doctors were better, but one doctor in the group had such a high call back rate that it was driving up the group’s average.  This doctor was an older physician that in all honesty, probably either lost some skills or didn’t keep up with his peers and the technology.  He probably should have retired.  The point to this story is that this group should have been looking at this data proactively, and they should have addressed this issue before approaching their payer partner.  I know these are hard discussions and that it’s difficult for a group to tell a long time partner that it may be time to hang it up, but that’s the world we live in now, and that is what successful groups are going to have to do.

 

The bottom line is this.  Change is happening.  Payers and consumers are going to grade and rate your performance.  You can be angry about this or accept it and develop the necessary tools and expertise to deal with it.

 

The choice is yours, and so will be the results.

 

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Clinical Quality in the US Health Care System

Anyone who has worked in health care or has even a moderate interest health care has heard that the US health care system is the most expensive in the world and we don’t get much for our money.  Usually, when people make that statement, they use the World Health Organization’s ranking of the US as proof that our quality is not very good. WHO ranks the US 37th in the world for health care. This is a false argument as the WHO doesn’t really measure quality.  However, the WHO rankings do bring up the question of quality, which a good question to put to bed once and for all.  I would suggest that the US health care delivery system produces the best quality of care in the world and I have the data to prove it.

 

First of all, its ridiculous to think that the quality of care in the US is behind countries like Chili, Morocco, Cyprus, Columbia and Greece, all of whom are ranked higher than we are by the WHO.  I mean has anyone ever been diagnosed with Cancer in this country and said; “If only I lived in Greece.  Then I could get some really quality care.”

 

Rather than point out all of the problems with the WHO rankings, let me point to some data that explains and supports my position that we have the best health care quality in the world in the United States.  That may seem counter to what many people believe, because on the surface it doesn’t appear that way when you look at mortality, life expectancy or infant mortality statistics.  The Peterson Kaiser Family foundation produced a wonderful report in 2019 comparing the quality of the US healthcare system to other countries.  For this study they used the Netherlands, Australia, Sweden, Japan, Austria, Germany, France, Canada and the UK as the group of comparable countries for comparison.

 

The report produced some interesting and telling results.  When looking at age adjusted mortality rates, we see steadily falling rates for all of the countries studied with the US still above the comparable country average.  The Healthcare Quality and Access (HAQ) rating has the US with the lowest rating of all the comparable countries.

 

Another way to measure mortality rates and life expectancy is the Years of Life Lost measure.  The United States again trails all other comparable countries.

At this point you are probably wondering how I can make the argument that the clinical quality in the US is very good when we seem to fall behind all other comparable countries in these three measures?  Well, that gets us to the rest of the story.  The United States being the richest country in the world has produced a lifestyle that is extremely unhealthy.  Consider the following.

 

The United States leads the world in average daily caloric intake.  Of the comparable countries in the Peterson-KFF study the US had the highest obesity rate at 36.2%.  That’s right, over a third of our population is clinically obese.  None of the other comparable countries are even close to us with the average of the comparable countries at 21.7%.  That means that our rate of obesity in this country is 40% higher than the average of the other comparable countries.  We know that obesity leads to many significant health issues like diabetes and cardiac disease.

 

Another area where our lifestyle impacts overall health is in the area of substance abuse.  The rate of substance abuse in the US is twice that of the average from those comparable countries.  Just think about these two factors and the impact they have on our overall health as a country.  People in the US are 40% more likely to be obese and twice as likely to have a substance abuse problem than the average citizen in comparable countries.

 

The Peterson-KFF study looked at disease burden in their study.  They did so by measuring the Disability adjusted life years.  This is a measure of disease burden and the rate per 100,000 shows the total number of years lost to disability and premature death.  In 2017, the DALYs rate for the US was 31% higher than the comparable country average.

 

So, with that the data starts to become clear and paint a different picture.  We can see that the US lags behind comparable countries in mortality rates.  However, we also see that it’s not a level playing field.  As a population we are doing everything we can to die at a young age.  We suffer from obesity and substance abuse issues among other things that significantly impact our health.  My question to you is this; should we blame our health care delivery system for this or is it time to look in a mirror? I mean, blaming our health care system for individual and societal issues around things like obesity and substance abuse is a little bit like me blaming my fork for my weight problem.

 

I would argue that a better measure of clinical quality comes from our delivery systems results combating serious conditions and diseases.  Even here we have made life hard for our doctors and hospitals because things like obesity and diabetes are comorbidities for most other serious health issues.  Be that as it may, when looking at specific diseases and conditions we start to see a true picture of the clinical quality of our health care delivery system.

 

Again, from the Peterson-KFF study we see the US has a lower 30-day mortality rate for heart attack and stroke than the average of the comparable countries.  That is amazing considering that those individuals who have a heart attack or stroke in this country are much more likely to have a significant comorbidity condition than other countries.  Simply put, with a less healthy patient our doctors and hospitals still produce better results for heart attacks and strokes than the other countries.  In addition to that our mortality rate for breast, colorectal and cervical cancers are also below the average of the comparable countries.  This is again with a much less health patient population to work with.  The same holds true for the age adjusted mortality rate for all cancers.  Again, the US has lower mortality rates for all cancers than the comparable country average.

 

To me the picture is pretty clear.  Our wealth and lifestyle have produced some very unhealthy habits.  The fact that our statistics are not worse than they are is a credit the quality of care available in this country.  Our doctors and hospitals are keeping us alive while we are doing everything we can to die at a young age.

 

Again, I reiterate my statement; I don’t think anyone with cancer or other serious diseases is sorry they are in this country and would rather be treated in Greece or Columbia.

 

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Remember 2019?

Remember 2019?  What was that about 10 years ago?  I remember it like it was just last year.  Back then before all this Covid mess we were worried about health care and how we needed to do something to reform our health care system.  We had polls showing that health care would be the number one issue for voters in the upcoming election.  Well, it’s still going to be the number one issue but now for a different reason.

 

Sometime next year we are going to wake up from this Covid nightmare.  We are going to have an effective vaccine and much better treatments for the virus.  We are going to wake up and the elections will be over with some poor schmuck having taken the oath of office.  I’m serious, if both Trump and Biden knew what they were in for, they would both try to endorse the other guy.

 

When we wake up from this nightmare and try to get back to normal, we are going to realize that healthcare is still a problem and the reality is that the problem just got much worse.  Think about it for a minute.  If healthcare and healthcare costs were a problem in a strong growing economy with record low unemployment, then what on earth is it going to be like in a damaged economy with the highest unemployment since the great depression.  What’s it going to be like after that government has racked up debt like a drunken college student on spring break with Daddy’s gold card?  Whom ever occupies 1500 Pennsylvania avenue in January is going to find a huge crap sandwich on the resolute desk and it’s called healthcare.

 

So, since I am pretty sure that guy won’t be me…. please don’t write my name in on your ballot…. seriously, don’t…. like I said, since it won’t be me, I have no problem providing my diagnosis and prescription for the President.  In the next several episodes I will attempt to tackle this problem and provide a list of things the President and Congress can do to try and fix the mess we are in.  I’ll warn you now.  It’s going to be a bit like watching sausage being made.  It won’t be pretty, and I might change your choice of breakfast food.

 

So where to start?

 

Let’s start with a foundation of how bad things are and how we got here.

 

The US healthcare system has a significant cost problem.  That cost problem is creating a coverage problem.  What we don’t have is a quality problem.  Let me explain.

 

In 2018 the US spent $10,586 per capita on healthcare.  That is more than any other country in the world.  A lot more!  If we look at nine comparable countries, we see that the second highest country is Germany at $5,987 per capita, which is almost half of what we spend.  If the US could get its healthcare spending down to the same per capita rate as Germany it would save our country over $1.5 trillion dollars per year.

 

This problem has been brewing over several decades but really took off from 1990 to 2010.  During those two decades healthcare spending jumped from an already inflated 12% of GDP to 17% of GDP.  That was before Covid and before the economic downturn we will experience this year and next.

 

Forecasting GDP and unemployment in 2021 right now is harder than forecasting the weather three months from now.  The Fed has projected GDP growth rates for next year at anywhere from -1% to 7%.  They are projecting the unemployment rate for 2021 to be anywhere from 4.5% to 12%.  That’s like saying the temperature tomorrow will be somewhere between zero and 120 degrees.

 

I think it’s safe to say that 2021 GDP will be well below where it would have been without Covid and that we will have an unemployment rate that is much higher than it would have been.  That seems like a safe bet to me.

 

Both of those things will put pressure on the Federal budget and deficits and will likely drive the healthcare spending as a percentage of GDP to rates approaching 20%.  Add to that the trillions, yes trillions, as in much more than one trillion, trillions of dollars added to the national debt in 2020 and you have a recipe for budgetary disaster.  That’s what the guy sitting behind the resolute desk will have to deal with.

 

So, with that foundation, let’s start our journey on how to fix this mess.  Tune in next week for a discussion on quality and why in spite of what some people believe, that is not our problem.

 

Check out our latest podcast! Streaming on Apple Podcasts and Soundcloud now!

 

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Capitation – The “C” Word

For years, if not decades, we have been hearing about healthcare reimbursement transitioning from a fee for service system to a value-based system.  Until recently these predictions were much like the song “tomorrow” from the movie Annie, where tomorrow is “always a day away.”  Oddly enough, it may be the Covid-19 pandemic that creates the catalyst to make tomorrow, today.

 

Recently BlueCross BlueShield of North Carolina announced a new program called “Accelerate to Value.” This program will provide independent primary care practices with additional funding to replace the revenue they lost during the Covid-19 crisis. To receive this money, the group must stay independent, join one of four approved ACOs, and consider a capitation contract next year.

 

For many physicians, the use of the “C” word causes a great deal of trepidation.  They get worried that capitation is just a slick way for payers to trick providers into accepting less money for the services they provide.

 

Let me begin by saying that being skeptical of anything coming from a payer is always a good thing. That being said, not everything they do is bad, and in this case it isn’t.

 

Capitation is a tool.  Nothing more, nothing less.  Like any tool its value and effectiveness lie with the skill of the person using the tool rather than the tool itself.  A scalpel in the hands of a gifted surgeon can save lives.  That same scalpel given to a child will result in someone getting hurt.

 

Capitation, as well as other forms of value-based reimbursement, is designed to help fix one of the fundamental economic flaws of our health care system; a flaw that contributes to our problem of health care hyperinflation in this country.  You see, our current fee for service system pays doctors to treat illness, injury and disease.  It does not pay doctors very well to keep people healthy or help them avoid illness and disease.  Capitation reverses this and pays doctors to keep people healthy.  For example, things like imaging go from being revenue sources to expense centers.  Under capitation, the most profitable patient is the patient that is healthy and stays healthy.  From a philosophical standpoint, most doctors would love to be paid for keeping people healthy rather than only being paid when treating an illness or disease.

 

The benefit or harm that a capitation contract can have on a practice is determined by the details of the agreement.  These details can be complicated and are the key to determining how these agreements function.  How do I know this?  Well, I negotiated my first capitation contract almost 30 years ago.  I have negotiated single specialty, PCP, hospital and full delivery system cap agreements.  Most of these I negotiated while working for insurance companies.  Some of these agreements worked very well for both parties, including the providers on the other side of the agreement.  Some of them were financially devastating.  I negotiated and managed one such agreement that went so poorly that the hospital system actually paid the insurance company for the pleasure of treating its members.  I’m not kidding.  The cap contract was so bad that after paying for leakage to other hospitals, the cap pool had a negative balance, so the hospital had to send a check to the insurance company to cover the deficit.  That’s how bad these things can get.  On the other side of the spectrum was a single specialty cap contract that performed so well for the physician group that their revenue was actually higher than the full billed charges for the services they provided.  While these are the extremes, it does point out the variability of these agreements.

 

So how does a medical group ensure that the contract they enter into is beneficial?  The key lies in three areas.

 

  1. Understand the data.  You have to be able to compare the revenue from capitation to the revenue that the old fee for service agreement would have produced.  This will allow the group to figure out if they are starting out even, ahead, or behind.
  2. Understand the way the cap works. If you have seen one cap agreement, then you have seen one cap agreement.  They are all different and they all have different provisions.  Understanding how they work is key to being successful under these new payment models.
  3. Manage your group’s performance. Working under a cap environment is in many ways similar to managing under a fee for service agreement.  Groups have developed very good systems and reporting to measure physician production under fee for service agreements.  This is because production is king in a fee for service world.  In a capitation environment, you need to develop new tools and reporting to manage individual performance under these agreements.  If excessive imaging is a cost center under a capitation agreement, you need to be able to measure and manage any over utilization of imaging by the physicians in your group.

 

Groups that are able to effectively handle these three things, can and are very successful in a cap environment.  Those that can’t or don’t, are likely to fare very poorly.

 

New payment models, like capitation, have been predicted for years.  For many physicians, this was always a future problem that didn’t need to be addressed right away.  Well, the future is now.  It’s time to get started.  Your ability to transition to these new payment models will either secure your future or eliminate it.

 

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Value Based Reimbursement. The time is now.

Throughout history major events have produced lasting impacts on this country often times bringing about quick, dramatic changes in many aspects of our lives.  9/11 forever changed how we travel in this country.  World War II made this country into a world superpower and gave birth to our current system of employer-based health insurance.  It remains to be seen what lasting impact will come from Covid-19 but its highly likely that this pandemic will drive significant changes in our health care system, how we deliver care and how we finance the care we deliver.

 

For decades now we have known that our health care cost trends are unsustainable.  The cost of our health care system and the portion of the US economy that it consumes have been steadily increasing for the last 50 plus years.  The only thing that has made this situation possible for so long is the strong and growing US economy.  Since the great depression our economy has been in a steady growth mode with the exception of some relatively short-lived recessions like the financial crisis of 2008/09.  Sergio Ermotti hit the nail on the head when he said; “Growth is what solves most big economic and social problems: poverty, government deficits, quality of life, rising healthcare and retirement costs.”

 

So, what happens if that growth cycle is broken?  What happens if our economy experiences a major economic downturn, one that lasts more than a year or so?  Well, ladies and gentlemen we are about to find out.  By all accounts and predictions, we are about to enter into a prolonged period of economic challenges the likes of which we have not seen since the great depression.  This will put significant pressure on our health care system, and how we finance the incredible amount of health care we consume as a country.  Let’s just look at some of the early numbers.

 

Current projections suggest that they US government will run budget deficits for 2020 and 2021 of well over $5 trillion dollars.  That’s more than the cumulative budget deficit for the last 9 years.  To put that number in perspective, our budget deficit for the next two years is more than the entire GDP for every other country in the world except China.  That’s right, we are going to put more money on our countries credit card over the next two years than the entire economic output of almost every other country in the world.

 

The CBO is projecting a reduction in US GDP for 2020 and 2021.  They are also predicting unemployment rates that are three times higher than the rate in 2019.  All of this spells trouble for the US economy and the federal budget.  Health care remains the largest single category in the federal budget and a significant part of every employer’s expense structure.  This will put pressure on our health care system like we have never seen before.

 

This perfect storm of economic factors could be the catalyst for major changes in how we deliver and finance health care in this country.  For years there has been talk about transitioning our health care system from a fee for service system to one that is value-based.  Proponents talk about the perverse incentives of a fee for service system and how inflationary it is.  They are correct.  The proponents of value-based systems of reimbursement suggest that paying doctors to keep people healthy rather than only paying them to treat people once they get sick will have a significant impact on health care costs and is the only way out of the mess we are in now.  While I agree that making the shift to value based reimbursement is necessary and will definitely help, it’s not a magic pill and other changes will also be necessary.  That being said, it is definitely a step in the right direction.

 

As we look to a very difficult future, physicians and other parts of our delivery system should start getting ready for this kind of tectonic shift from fee for service to value based methodologies.  Reimbursement models like capitation, shared savings and bundled payments are likely to move from experiments and the exception in most parts of the country to becoming the mainstream for everyone over the next couple of years.  This transition will not be easy or without its challenges.  The groups that get it right will do very well and those that don’t will have a hard time surviving.  The time to start working on this is now.

 

There is a story about Napoleon that illustrates the need for urgency here.  During his reign, Napoleon asked his engineers to plant trees on both sides of the roads that entered Paris.  He explained that he wanted his troops to march to and from battle in shade.  When an engineer asked him if he knew how long it took a sapling to grow tall enough to cast that kind of shade, Napoleon replied; “Of course I do.  That’s why you need to plant them today!”

 

In future blogs and pod casts I will explore in more detail the kinds of reimbursement methods that may be used in a new value-based world.  It is my hope that this information will help physicians and delivery systems prepare for the future.  Hope is not a strategy and it has been said that success is where preparation and opportunity meet.

 

Check out our latest podcast!

https://podcasts.apple.com/us/podcast/fulcrum-strategies-analyzing-changes-in-health-care/id1281557675#episodeGuid=tag%3Asoundcloud%2C2010%3Atracks%2F862697569

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COVID – The Second Wave

Covid-19.  Get ready for the Second Wave.

 

 

I wrote a blog post on March 23rd about Covid-19 and the concern for what could happen.  That was just over 3 months ago.  On March 23rd we had 34,000 cases in this country and our case count was increasing by 9,000 case per day.  The country was starting to shut down in an effort to flatten the curve.  Predictions of over a million people being infected were being widely debated as some people predicted the worst while others felt things were being overstated.  In fairness and with a keen understanding that hindsight is 20/20 we really didn’t know much back then.  In the last three months we have learned a great deal about this Virus and have done some great things as well as some not so great things.

 

Let’s take a look at where we are today and how we got here.

 

From March 23rd to April 23rd we saw increases in daily cases as the country struggled to get control of the virus spread.  By the end of April, we seemed to get things under control and the new daily cases started to come down from a peak of about 34,000 cases per day.  We all started feeling good about our success at “flattening the curve”.  By early June we had reduced the daily new case number to less than 20,000.

 

With all this good news states started re-opening and reducing restrictions.  Unfortunately, it appears that some of them jumped the gun a little and removed too many restrictions.  That combined with some Covid fatigue by the general public seems to have given the Virus new life like a blast of air can give a fire. Yesterday we set a record with over 50,000 new cases in one day.  Earlier this week Dr. Fauci testified before a Senate Committee that he is worried about the new case count exceeding 100,000 per day in the near future if we don’t do something.

 

There is some good news in all of this.  Our health care delivery system once again rose to the challenge and has done a great job of protecting Americans from their biggest threat, themselves.  With this spike in new cases we have not seen a corresponding spike in the fatality count.  Our average daily fatality count peaked on May 7th at over 2,300 per day.  On July 1st that number was down to just over 500 per day.  Some of that is a result of the spike in younger people contracting the virus but much of it is a reflection of how our health care professionals have continued to improve their understanding of the virus and how to treat it once someone gets sick.  They are truly the hero’s in all of this.

 

So here we are looking at a second wave of the virus that could be worse than the first.  Yes, our health system has made great strides in treating this virus, but they are also on the brink of being overloaded in states like Florida and Texas.

 

So, what should we do?

 

To begin, let’s start focusing on what is productive and give up some of the unproductive discussions that seem to be politically motivated.  The Virus is neither Republican or Democrat and our discussions about it shouldn’t be politically biased.  Can we all agree on some simple facts here?  Yes, this virus is worse than the flu.  No, its not some kind of conspiracy.  No, the numbers being reported are not overstated.  If anything, they are understated.  Yes, wearing masks in public does help control the spread of the virus.  On that last one can we also all agree that failing to wear a mask in public is not only irresponsible but it’s also disrespectful of others and disrespectful to those health care workers on the front line.  This is not an issue of personal rights, it’s an issue of public safety and concern for your friends, family and the rest of your community.  I for one am tired of people debating this.

 

The main thing we can all do is be part of the solution and not the problem.  Let’s not worry about what a given politician or elected official does or says.  “We” can be the solution to this problem.  “We” need to take an active role in fighting this virus.  That means paying attention to the very intelligent experts available to us.  That means following the advice of some gifted physicians and really practicing intelligent social distancing and precautions.  Just because something is allowed in your state or area doesn’t mean it’s safe or intelligent.  Practice some common sense and help get this virus back under control.

 

If “we” take control of this and bend that curve back down, it will be better for all of us.  If we aren’t willing to do these simple things and do them without turning it into a political discussion or a discourse on Constitutional Law then we have no one to blame but ourselves when hospitals get over loaded, people die and the politicians are left with no other choice but to shut things down again.

 

It’s up to you and me to get things back on track.  Let’s not blow this.

 

Take a listen to our podcast that coincides with this blog post! Streaming on SoundCloud and Apple Podcasts!:

https://podcasts.apple.com/us/podcast/fulcrum-strategies-analyzing-changes-in-health-care/id1281557675#episodeGuid=tag%3Asoundcloud%2C2010%3Atracks%2F853859728

 

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What does a Post Covid-19 world look like for doctors?

As states open up and restrictions lessen, physician offices are starting to return to somewhat normal schedules.  Most of my clients report steady increases in patient volumes.  Some approaching pre-Covid levels.  This begs the question, what are things going to look like 6 month or even a year from now.

 

While we can’t be completely sure what the future will bring it is safe to say that it’s not likely to look exactly like 2019.  If we assume no major fall outbreak of Covid-19 that would cause states to shut down again, we can paint a pretty good picture of what the future looks like for physicians.

 

Let me jump right to the heart of the matter.  It is extremely unlikely that things return completely back to normal.  It’s also unlikely that the average physician’s income in 2021 will be as much as it was in 2019.  For some doctors the income of 2019 may be a high-water mark.  Now, this isn’t a forgone conclusion and much of your future depends on what you do today and how you adjust to new market factors.  Here are the top three reasons why the future will look different than last year and how it may impact your practice.

 

  1. It’s the Economy Stupid!  In 1992, James Carville talking to campaign staff for the soon to be President, Bill Clinton, uttered the profound and prophetic statement, “It’s the economy stupid”.  He was right then and would be right today.  The biggest thing reason things will be different in the future is the economy. Covid-19 dealt a crushing blow to the US economy and one that will be felt for several years.  We are going to be dealing with high unemployment and a frightened workforce for some time.  You simply don’t recover from this kind of event overnight.  For doctors this means a shift in payer mix as some patients that were covered by insurance yesterday will have Medicaid or no insurance tomorrow.  With high unemployment more patients will have a hard time paying their portion of the health care bill.  These factors will reduce the average revenue per patient seen.  This means that even if you return to 2019 volumes your revenue is likely to be less than it was in 2019.
  2. The genie is out of the bottle and its unlikely we will be able to put him back in.  Consumers have had a taste of Telehealth visits and they are going to demand at least some access to this service going forward.  This brings about two challenges for physician practices.  The first is can you efficiently and effectively deliver this service.  If 20% of your visits convert to Telehealth you need to find a way to reduce your expenses accordingly.  That’s because your second challenge will happen when the payers decide how and how much they are going to reimburse for telehealth.  You can rest assured that when the Covid-19 crisis is over the payers are going to cut the reimbursement for this service.  So, if you convert 20% of your visits to telehealth at reduced reimbursement and don’t reduce your expenses your physician incomes will suffer for it.
  3. The last thing that could impact physicians in a post Covid world is the upcoming election. The combination of the pandemic, a suffering economy and a federal budget that will be bleeding red ink like a stuck pig might create the perfect storm for health care reform.  Don’t get me wrong, we need health care reform.  We need to fix our current system.  My point is that the Federal Government has a long track record of screwing things up and if done wrong health care reform could be done at the expense of physicians and physician incomes.  Every practice should be looking at plans and options of what they would do if health care reform significantly impacts your revenues.

 

While these are daunting challenges there are some bright spots among the clouds.  We will still need health care in 2021.  That’s not going away any time soon.  The challenge for doctors looking into the future is to make sure your practice is ready and in a better position than others to respond to the changes that 2021 will bring.  The doctors that do that will not only survive but will thrive.  Those that don’t will find a rough road ahead.

 

Many years ago, I was in New York City with a group of friends.  We got a little lost and found ourselves walking in an area at night that made us all a little nervous.  I started looking at my friends very closely.  One of them asked what I was doing.  “I’m trying to figure out if I can run faster than any of you guys.  You see, I only have to be faster than one of you.”  In some ways that is what medical groups face in the future.  You don’t have to be perfect, but you are going to have to be better than your competition.

 

Check out our podcast that coincides with this blog post!

https://podcasts.apple.com/us/podcast/fulcrum-strategies-analyzing-changes-in-health-care/id1281557675?i=1000478393988

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Health Care Provider Strategies – Post Covid-19

At some point in the future we will come out of this pandemic and things will try to return to some form of normal.  We will develop a vaccine and/or treatment which will eliminate or at least significantly alleviate the clinical risk of Covid-19.  When that happens, the world will try to pick up the pieces of a damaged global economy and move forward.  While no one knows exactly what a post Covid-19 world will look like we do know it won’t look like the world we knew in 2019.  It’s very likely that the US economy will take some time to bounce back.  Some economists are worried that it will be several years if ever for the US to return to something that looks like 2019.  Some industries and some companies may never fully recover.

 

For health care we can assume that, absent some major legislative change like Medicare for all, the number of uninsured and underinsured will go up.  The number of people on Medicaid will go up.  We can also assume continued and intensified cost pressures from both payers and the government.  All of this will happen during a time when consumerism and the demands of the consumer will be increasing.

 

So, the big question is what should a medical group or hospital do in light of these major industry and economic shifts?  Well, let’s begin with some wisdom from the great Sun Su.  In the book, The Art of War, Sun Su tells us that “Strategy without tactics is the slowest route to victory and tactics without strategy is the noise before defeat.”  This is something that every medical group and hospital should keep in mind.  Success in the future will depend on a well thought out strategy paired with the detailed execution of tactics that support that strategy.  Just doing one of the other will not get the results you are looking for.

 

With that said, let’s examine the strategies that will succeed in the future.  The future for physicians and hospitals will focus largely on three areas.  Market Position, Value and Service.  Your strategies should focus on and address each of these areas.  Let me explain.

 

Market Position is not just market share or size.  Market position means becoming or remaining indispensable.  This can be a result of size and market share.  It can also be a result of having a service or procedure that only you can provide.  Solid market position can come from patient loyalty and/or relationships with major employers.  Anything that would make it difficult for a payer to be successful without a relationship with your group or hospital creates a valuable market position.

 

Value is the second item to be addressed.  Notice I did not say cost.  Value is larger discussion that includes total cost of care not just price per unit.  For example, a surgical group that can perform more surgeries in a lower cost setting like an ASC or office setting can actually produce value even with a higher fee schedule than their competitors.  This is because of the savings they produce from reduced facility costs.  An OB group with a lower c-section rate produces value even with a higher fee schedule.  Value is about total cost and return on the investment more than just the price per unit.  Groups in the future will need to be able to calculate and prove their value.  They are going to need to constantly improve their value proposition to be able to stay ahead of the competition and be successful.

 

Service is the final strategy that should be addressed.  Service is going to become even more important to the success of medical practices in the future.  In the future groups are going to need to attract the right kind of patient.  More and more that patient is going to be a consumer that is going to demand higher levels of service, more flexibility in hours and appointment scheduling and increased online and electronic communication capabilities.

 

As we move through this crisis, successful practices are going to need to develop a strategic plan that addresses each of these three major areas.  Once their strategic plan is developed, they are going to need to execute on that plan with precision and speed.  Doing this will ensure your success.  Failure can lead to the long slow goodbye.

 

I will leave you with another quote from Sun Su.

 

“In the midst of chaos, there is also opportunity”

 

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The Perfect Storm (Part Four)

Consumerism.

 

The Role of The Consumer in Healthcare

 

 

Historically the role of the consumer in health care has been one of a passive participant.  This passive participation was caused by the fact that the doctor was rarely questioned or challenged by the patient, there was limited access to information outside of the doctor’s office and since someone else was paying the bill there was little financial consequence to the patient.

 

Look at it this way.  Assume you are going out to a nice restaurant for dinner.  The waiter comes to your table and asks you a few questions like when you last ate, what your food preferences are etc.  After spending just a few minutes listening to your answers the waiter tells you what you will be having for dinner.  He informs you that you will be having the crab soup as an appetizer, the filet mignon medium rare for your main dish accompanied by roasted brussels sprouts.  All of this will be paired with a very nice California Cabernet and at the end of the meal you will be having the baked Alaska and a cup of coffee.  There is no discussion about how much all of this is going to cost or if you would rather have something else.  Now we would never put up with this in a restaurant, but this is largely what has happened historically in a doctor’s exam room.  The doctor will ask you some questions and based on that and some test results he or she will prescribe a course of treatment.  In the past this interaction rarely involved the discussion of options or costs.  All of that is going to change in the future.  In the post Covid future the patient/consumer is going to drive much more of that conversation.  They are going to have access to more and more information about the doctor, treatment options and costs.  The future consumer is going to take a much more active role in this discussion and doctors are going to have to adjust what they do and how they do it in order to meet the demands of this new consumer.  Those that do will be successful and those that don’t will be in trouble.

 

In the future the patient will have access to incredible levels of information about doctors.  Patient satisfaction, cost profiles, training and quality data will all be available via their smart phones.  The new consumer will also have more access to information about treatment options, success rates and side effects. They will use this information to help them choose which doctor to see and what they want done.  They will be equipped to and will demand to discuss this information with their doctor.

 

In addition to being more involved in their treatment decisions the new consumer is going to demand a very different level of service.  They are going to be less willing to wait long periods of time because “the doctor is running behind”.  They are going to demand more electronic connectivity and functionality when dealing with their doctor.  Remember, many of these new consumers are used to doing almost everything they need in life from their smart phone.  For the digital native population their smart phone is more of a portable handheld tablet than it is an actual phone.

 

All of this spell a major shift in how health care is delivered and what a successful practice looks like.  I predict that we will start to see a bifurcation in how health care is delivered.  Some practices will continue with the old school status quo way of delivering care.  Other practices will embrace these new concepts and will evolve into a practice style that meets the needs of the new consumer.   The old school practices will start to lose the new consumer and will be attractive to older consumers (Medicare) and those without access to advanced technology (Medicaid).  The evolved practices will attract more of the digital native consumers (those with jobs and good health insurance).  Since Medicare and Medicaid are usually the lowest reimbursing payers that means the average revenue per patient for the old school practices will decline.  The practices that evolve over time will see their revenue per patient increase.  In addition, the practices that adopt this march forward in technology and service levels will actually lower their average cost per patient.

 

It doesn’t take an Ivy League MBA to determine which practice is going to be more profitable and able to succeed in a sustainable way.

 

So, the choice is yours.  You can see the challenges and opportunities ahead of you and start adjusting now or you can continue with the same way you have provided care and service for the last several decades.  I understand that many practices will choose the status quo.  People don’t like change.  I get that.  I also know that as a wise man once said, “If you don’t like change you are going to hate being irrelevant.”

 

Take a listen to our podcast that coincides with this blog post!

https://podcasts.apple.com/us/podcast/fulcrum-strategies-analyzing-changes-in-health-care/id1281557675#episodeGuid=tag%3Asoundcloud%2C2010%3Atracks%2F828358354

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The Perfect Storm (Part Three)

Post Covid-19 – The Business Response.

 

In the months of March and April over 36 million American’s filed for unemployment.  That means in just two months our economy went from having very little unemployment to the highest unemployment rate since the great depression of the 1930s.  Most economists project that before this crisis is over the unemployment rate in this country will exceed the previous record of 24.9%.  That’s right, before this is all over one out of every 4 people in the US job market will be without employment.  Most American’s weren’t even alive 87 years ago the last time we had this much unemployment.  The fact that this all happened in just two months is beyond comprehension and something no one ever expected to see.

 

Many industries like airlines, hotels and manufacturing have been virtually destroyed by this economic crisis.  The big question right now for everyone is what will happen when this crisis subsides and what the world will look like when we all try to return to work.

 

I am going to spend the next few minutes talking about how businesses are going to respond to this crisis as the economy opens back up and how that will impact the financing and delivery of health care.

 

As we recover from this crisis it’s clear that almost every business will have been damaged by this economic downturn.  It’s also clear that it will be some time before out unemployment rates return to where they were just a few months ago.  Both of these facts will impact what health care looks like in our future.

 

With damaged bottom lines, pressure from investors to return to previous levels of profitability and high unemployment employers will have the opportunity and incentive to reduce the amount of money they spend on health insurance for their employees and family members.  One way to do this is to simply reduce benefits.  Increases in deductibles and co-insurance levels are likely to become the norm.  In addition to that, many companies may either reduce or eliminate the amount they pay to cover family members of employees.  These actions can dramatically reduce the expense for employers by shifting those expenses to individuals.   For physicians and hospitals, moves like this will increase patient responsibilities which often times delay and reduce total revenue received for services provided.

 

In addition to these simple moves we may see a tectonic shift in how insurance is provided and the way those benefits are determined.  Let’s remember that it was an incredible historic event, world war II, that gave birth to the concept of employer funded health insurance.  Our current crisis could cause a significant change in the way health insurance operates in the future.

 

One tectonic change that could come from this is the shift from insurance reimbursing physicians and hospitals at contractual negotiated rates to a structure of defined benefits.  Under this type of insurance, the employer decides how much benefit they want to cover for each type of service provided.  For example, the employer could decide that they will pay $500 for an MRI needed by one of their employees.  The employee would be responsible for all costs above $500.  If the insured can find a provider willing to do an MRI for $500, they would have no extra expense.  If, however the insured had the MRI done at a hospital and the charge was $2,000 the insured would have to pay the extra $1,500.

 

This kind of change in how insurance is provided would have a dramatic impact on physicians and hospitals and how they interact with their patients.  For most physicians and hospitals this would be the first time they had to either compete on price or at least explain to their patients why their quality or service warranted a premium price compared to a practice across town or in another area.  This new dynamic creates both challenges and opportunities.  Some practices will pursue the “Walmart” strategy and try to attract volume by being the lowest cost option.  Others will pursue the opposite strategy and compete on quality and service thus justifying higher costs.   Either strategy can work depending on execution.  As an illustration, consider this, a large cup of coffee at McDonalds costs $1.49 while a large, sorry Venti, cup of coffee at Starbucks is more than twice that price.  Several blind taste tests show that a majority of consumers can’t tell the difference between the two.  Why do so many people spend more money for a coffee at Starbucks?  Well, because Starbucks has done a great job of creating real and perceived value in the eyes of consumers.  The same opportunity will exist in medicine.

 

So, as we look to the future and how businesses are going to react to this crisis, we should all be prepared for significant changes.  At minimum we will see the uninsured rate climb and patient financial responsibilities increase.  In addition to that we may see a dramatic shift to things like defined benefits.  Physicians and hospitals should begin preparing for these changes now in order to be ready when they happen.

 

This country along with everyone else got caught sleeping at the wheel when this pandemic hit.  Let’s not duplicate that experience when changes to health care happen post Covid.

 

Take a listen to our podcast that coincides with this blog post!

https://podcasts.apple.com/us/podcast/fulcrum-strategies-analyzing-changes-in-health-care/id1281557675#episodeGuid=tag%3Asoundcloud%2C2010%3Atracks%2F823633978