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| Dear Friend,
Echo chambers.
Dirigibles, lighter than air craft, and cakes.
I guaranty you that it’s about more than hot air.
It’s often bemoaned that industry leaders suffer from being in an echo chamber.
For example, most healthcare industry leaders know a lot about the way that other healthcare deals, or other ASCs, or other medical groups, and so on, are organized. But what do they know about deals, and ways of doing business, in other spheres?
That’s a shame, because there are many valuable lessons from other industries that can be borrowed for great benefit.
That sort of borrowing is one of the things that I’ve drawn on over a career that started with working in stores, restaurants, and factories, and in being an industrial salesman, doing real estate deals, and so on, plus the probably 100 industries that I’ve been involved in as a lawyer.
But, even if you haven’t done any of that, there are some tools you can use to imagine different ways of structuring your business, whether your business is an anesthesia group, a hospital, or a whatever.
Much of what I’m going to mention is inspired by a book by Mark Fox called Da Vinci and the 40 Answers. In the book, Fox interprets concepts developed in the former Soviet Union by Genrich Altshuller. At one point in his careet, Altshuller was an employee in the Soviet equivalent of the patent office. He realized over the course of assessing patent applications that ideas could be put into a number of categories. Fox identified 40. I’m not sure if Altshuller identified 40 or 36 or 62; it doesn’t make any difference.
The acronym for Altshuller’s thinking is known as TRIZ from the Russian Teoriya Resheniya Izobreatatelskikh Zadach, the “Theory of Inventive Problem Solving”. The notion is that there are models or basic formulae to follow to guide your thinking in inventing or in making improvements.
So, for example, the concept of the dirigible, a lighter than air craft, is something that floats above an existing structure and the notion of the cake is cutting something up into pieces, that is, into constituent parts.
Think about this in the context of healthcare. An ambulatory surgery center is simply the O.R. cut out of a hospital. A free-standing emergency room is a similar example: It’s the ER cut out of a hospital and then made into a free-standing entity.
The concept of a management entity, an “MSO”, could be conceived of multiple ways. It’s a dirigible floating above an existing structure. Or, it’s something (management) that’s been removed in “piece of the cake” fashion from the entire “cake”, say by the sponsoring medical group, that the group uses to uses it to manage itself, and then subsequently expands its function by bringing in other customers, that is, other medical groups to which the MSO provides services.
Think about how other structures, other concepts can be used as models for your current business or for a new business, whether they come from other industries or from thinking guided by tools such as TRIZ.
What’s in a franchise model that might be applied to medical groups? What referral structures are used in the travel business that might grow your facility? How can what a charity accomplishes with a zero budget be applied to acquiring a competitor?
Stuck? Let’s talk.
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| | Tuesday - The Consolidation Curve Meets Entropy - Success in Motion
Watch the video here, or just keep reading below for a slightly polished transcript:
Like many of you, I've been thinking about healthcare industry consolidation. You know, what’s often referred to as the role of private equity--but the reality is that private equity is only a part, a small part, of industry consolidation.
Some think that consolidation within healthcare is a great thing and some think it's worse than the bubonic plague. But the reality is that it’s just a thing. It's a part of any industry's life cycle just as much as birth and death are a part of ours.
The life cycle of industry consolidation has been graphically illustrated by something called the Consolidation Curve, a simple graphic that shows how industries start out as fractionalized, with many small players, the so-called "mom and pops". Some players grow larger--they begin acquiring other businesses like sharks eating sharks. Sooner or later, there are fewer providers who are much, much larger, and who end up dominating the industry.
But what the Consolidation Curve doesn’t show is what happens next, which I like to refer to as the Consolidation Curve Meets Entropy.
It's sort of like one of those monster movies, perhaps Godzilla meeting Mothra; things go downhill fast. It's an example of what Joseph Schumpeter, the economist, described as creative destruction.
In healthcare, we’re beginning to see the end game of many of the early consolidations. We can see this in, for example, the fact that the Justice Department is beginning to take a significant antitrust look at consolidation in many sectors of healthcare that began to be rolled up beginning 15-20 years ago, such as insurance and hospitals.
The same thing is happening in other silos of healthcare consolidation, hospital-based physicians services, for example, in which the large players have grown to such a significant size that they are beginning to exercise monopoly power within certain markets. Their market dominance is leading to much greater scrutiny and will eventually lead to their breakup.
On another front, the operational front, it's also leading to the fact that businesses, once they become too large, become so bureaucratic that they lose the ability to compete. The benefit that they got by consolidation, being able to achieve, they hope, synergies in operations such as one single accounting department, and a single chain-of-command/top-down control from the CEO’s office, begins to become a detriment because it ceases to be responsive to activities in the field. That, in turn, results in entropy--the fact there’s a natural tendency for things to decay over time: The large entity begins to fall apart.
For example, large anesthesia businesses rolled up many local groups, and some also went into other hospital-based areas, morphing into radiology contracting, morphing into emergency medicine contracting, and so on. Some morphed in the other direction.
The defect of that strategy from the hospital’s perspective is now obvious. Some of the very large players (Envision, TeamHealth) have basically been put on life support by the bond rating services. As a result, hospitals in certain areas of the country are quickly scurrying to see what they can do to begin negotiating for replacements from (what do you know!) local groups.
So you need to be aware of where a particular industry, or a particular specialty, is in the Consolidation Curve. And, you need to be aware of the fact that, just like the changing width of men’s ties, the consolidation trend repeats over and over again. So, too, does the Consolidation Curve, as it dumps into entropy and begins all over again.
What this means for you is that strategies such as a sale of the group as a sort of panacea may not hold true. It also means that instead of wanting to be acquired you might want to be an acquirer.
But, in a return to the top of the cycle of this post, whether you want to be acquired or an acquirer turns on where your industry and specialty lies on the Consolidation Curve or the drop into entropy.
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| | Wednesday - Direct Contracting by Physicians and Medical Groups - Medical Group Minute
Watch the video here, or just keep reading below for a slightly polished transcript:
Ebay and Craigslist have disintermediated the classified section in the newspaper, which used to be the largest moneymaker in that business. The newspaper as middleman has been put to bed for the last time.
But in healthcare, middlemen abound. Hospital systems are middlemen for their controlled/employed physicians. Insurance companies, and even more so on steroids, IPAs and risk bearing medical groups are the middlemen between, largely, employers and their employees’ medical care.
Why?
Some claim it’s because of the hassle, the administrative burden, the HIPAA this and the “coordination of care” that. So, they say, middlemen are needed. But that’s largely B.S.
Direct primary care contracting, that is, between patient and physician, is now a real thing. So real, in fact, that CMS recently sought, in their own words, “broad input on direct provider contracting (DPC) between payers and primary care or multi-specialty groups to inform potential testing of a DPC model within the Medicare fee-for-service (FFS) program (Medicare Parts A and B), Medicare Advantage program (Medicare Part C), and Medicaid.”
Over the next several months, we’ll be discussing elements of direct contracting, primarily from the angle of physician group to employer. We’ll discuss compliance, potential licensing issues, deal structure, and other elements.
For now, understand that “direct contracting” has many meanings and is certainly not “one size fits all.” It encompasses arrangements as diverse as concierge medicine, to subscription plus menu-like fixed fees for services, to sophisticated carve-out type deals directly between orthopedic surgery groups and large employers.
Thinking is constricted by the frame, the “allowed” parameters of the process. But many times, in fact, nearly all times, the concept of “allowed” is just a mental construct with no real teeth. Employers - insurers - other middlemen - providers is a frame that the large players, the CVSs of the healthcare world are breaking. You can break them, too.
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| | | Listen to the podcast here, or just keep reading for the transcript.
Here’s the executive summary for you: The goal of negotiation isn't to be liked by your negotiating opposite.
I know that that’s a shock to a lot of people, to those who don't like to ruffle feelings.
In fact, being liked isn’t even a good tool to help you in a negotiation because it can lead you astray. It can cause you to temper your negotiating posture through the filter of being liked — you hold back because you're concerned about being seen as disruptive, i.e., as "not liked."
Your goal in negotiation is to maximize your position. It’s not to kill the deal unless it should die. And, there is usually a pretty clear line between maximizing your position and blowing the whole deal up. But I’m telling you that in any and all events, that line is nowhere near you being liked.
Don’t be concerned with what or how the other side thinks about you. I can almost guarantee you that they don’t think about you.
Focus on the the deal points. Be concerned about whether you achieve them.
As to the other side? If, despite what I advise, you want to be concerned at all about what they think about you, then be concerned about whether they respect you, not about whether they like you.
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| | | Calibrate Your Compass
Read our exclusive RedPaper to guide you through this evolving situation.
The coronavirus crisis caused a short-term economic crisis for many medical groups. Our RedPaper shows you the way out. Plus, many of the concepts discussed are applicable during both good times and bad.
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| | | | We all hear, and most of us say, that the pace of change in healthcare is quickening. That means that the pace of required decision-making is increasing, too. Unless, that is, you want to take the “default” route. That’s the one is which you let someone else make the decisions that impact you; you’re just along for the ride. Of course, playing a bit part in scripting your own future isn’t the smart route to stardom. But despite your own best intentions, perhaps it’s your medical group’s governance structure that’s holding you back.
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| In fact, it’s very likely that the problem is systemic. The Medical Group Governance Matrix introduces a simple four-quadrant diagnostic tool to help you find out. It then shows you how to use that tool to build your better, more profitable future. Get your free copy Free.
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| | | | Whenever you're ready, here are 4 ways I can help you and your business:
1. Download a copy of The Success Prescription. My book, The Success Prescription provides you with a framework for thinking about your success. Download a copy of The Success Prescription here.
2. Be a guest on “Wisdom. Applied. Podcast.” Although most of my podcasts involve me addressing an important point for your success, I’m always looking for guests who’d like to be interviewed about their personal and professional achievements and the lessons learned. Email me if you’re interested in participating.
3. Book me to speak to your group or organization. I’ve spoken at dozens of medical group, healthcare organization, university-sponsored, and private events on many topics such as The Impending Death of Hospitals, the strategic use of OIG Advisory Opinions, medical group governance, and succeeding at negotiations. For more information about a custom presentation for you, drop us a line.
4. If You’re Not Yet a Client, Engage Me to Represent You. If you’re interested in increasing your profit and managing your risk of loss, email me to connect directly. |
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