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Dear Friend,
Ah, the "service" mindset. Sounds nice, but it can get you into a lot of trouble.
In fact, it's the subject of this past Monday's blog post, To Serve Man? Follow that link to the blog or just keep reading for the rest of the story:
Yes, the title of this post is a tip of the hat to the Twilight Zone episode of the same name. It raises a somewhat similar question: Do you, that is your medical group, really exist to serve others, in this case “the hospital,” or are you simply serving yourself up as a tasty meal to be taken and devoured?
Many medical groups, certainly many hospital-based groups but, increasingly, even office-based groups, view themselves as simply providing a “service” for the hospital, functioning as a sort of clearinghouse for income and expenses. This mindset severely limits your group’s future.
It limits the willingness, and the ability, of your group to pursue outside opportunities. That’s chiefly because there is tremendous pressure to pass through to the owner, and often to the non-owner, physicians all available income, instead of immediately investing in, or creating the capital reserves necessary to pursue, other opportunities.
Additionally, “service” groups often suffer from the mindset that the group was formed to provide services at only that hospital, thus taking off the table completely the consideration of other opportunities, even if the group were able to deal with the notion of holding back what would otherwise be income available for distribution.
Of course, “service status” results in a severely weakened position vis-a-vis the hospital, which knows that your group’s very existence depends on renewal of its exclusive contract. That’s a horrible position for your group to be in, both in terms of the concessions that the hospital may demand, and that your group may be forced to give – not to advance its position in some other respect, but merely to save its own life.
In the Twilight Zone episode, aliens, the Kanamits, come to earth on professed humanitarian grounds. The first Kanamit visitor leaves behind a book, the title of which cryptographers translate as “To Serve Man.”
The Kanamits bring about the end of hunger, world peace, etc., etc. and invite humans to visit their beautiful planet, which they begin to do in droves.
Then, just as one of the cryptographers, Chambers, starts to board a Kanamit spaceship for the voyage, one of his colleagues, Patty, who’s been working to translate the text of the Karamit book, rushes to the departure site and frantically yells, “Mr. Chambers, don’t get on that ship! The rest of the book To Serve Man, it’s… it’s a cookbook!”
The warning came a bit too late for Mr. Chambers. Don’t let it come a bit too late for you.
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| | Tuesday - Success in Motion Video: Trigger Warning! Mark Waxes Political On The Government Shutdown And Healthcare Industry-Killing Regulations
Watch Tuesday's video here, or just keep reading below for a slightly polished transcript: |
| | I’ve been thinking about the government shutdown, which is now over. And, yes, this is one of my political/philosophical posts, so if you don't want to read it, skip it.
A few weeks ago I attended a very large national healthcare conference.
One of the lectures I sat in on involved a guy speaking who was, in essence, the chief lobbyist for a certain medical specialty's national organization. He talked about all the “tremendous wins” from their lobbying efforts.
He was talking about seeing a MACRA-this and MACRA-that, which led me (in the back of the room) to wonder why so much money needed to be spent on lobbying efforts, and on whether things like MACRA are just giant wastes of time that we get a result of representatives of far less than average intelligence who have nothing better to do than pass moronic legislation, they themselves having never really engaged in anything of much productivity.
What makes this worse is that half-baked laws are implemented by unelected bureaucrats who have to justify their jobs by making up other laws, oops, regulations that have the force of law - when those who are making these things up can’t even be tossed out of office because, absent a government shutdown, they’re busy at work every day and very hard to fire.
Do we need all these non-essential folks? Looking at the regulatory side, what would things be like if we didn’t have them? Might they have to find productive jobs? Might they stop gumming up the works that cost practice groups countless thousands, or maybe even tens of thousands of dollars a year in lost productivity as well as the cost of the actual dollars paid out in order to comply and to prove up compliance?
Many bemoaned the government shutdown. Why? Maybe a permanent government shutdown for these "non-essential" people is what we should all be hoping for.
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| | | Wednesday - Medical Group Minute Video: Do You Know What Costco Pharmacy Doesn’t About The Lifetime Value Of A Customer? – Rebroadcast
Watch the video here, or just keep reading below for a slightly polished transcript:
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| | I’m writing this as I’m waiting for a flu shot at a Costco pharmacy. And waiting. And waiting.
Like a dry cleaner, healthcare providers have to screw up to lose a customer’s loyalty. Dry cleaners know that once they attract a customer, it’s extremely likely that he or she will continue to patronize the store for years unless the dry cleaner does something to wreck the relationship. Like break the buttons on your shirts two weeks in a row.
It’s all about customer satisfaction.
But the larger the organization is, the lower the overall buy in-to customer satisfaction. The more removed someone is from the bottom line, the less the loss of any single customer is perceived to cost him or her. The employee, or so he thinks, will continue to collect a paycheck and, maybe, just maybe, get measured by his “efficiency,” such as, in the case of a chain store pharmacy, the number of pills the employee pushes out the door each month.
Compare a big box pharmacy with one owned by an independent pharmacist. The independent pharmacist knows that she profits from filling more prescriptions but she also knows that without a customer there are no prescriptions to fill. And, very importantly, even at a $13 profit on the average prescription transaction, if the customer has a family of 4 whose scripts she also fills, the customer is worth at least several thousand dollars in profit over a four or five year period.
So what's this mean for you?
Done right, a customer isn’t a discrete transaction. Instead it's a long term relationship with a lifetime value. And, it’s the same if your “customer" is a patient, a referral source, or a hospital . . . or anyone or anything else. Appreciate the value of that lifetime relationship. It highlights the essential fact that you can invest far more than you thought in money and in interaction to create and nurture it.
It's easier for smaller competitors to compete for business that depends on a relationship than it is for larger ones. And, all business depends on relationships. So if your practice or business is small, take advantage of it. Develop deep and lasting relationships.
If you’re the leader of a larger organization, be afraid of what you don't consider to be your competition. There might be economies of scale in terms of purchasing and administration, but customer service is one at a time. Make sure that your hiring focuses on the skills required for customer satisfaction, train for it, fire for lack of it, and reward those who deliver it, not only for how many pills they push out the door or how many billing units they generate.
I’m still waiting for that flu shot. And I’m about to Google for another pharmacy.
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| | Thursday - Podcast: Anesthesia Company Model Arrangement Fuels $1.718 Million Dollar FCA Settlement by a Surgeon and a Separate Guilty Plea By Another Doctor Defendant |
| Listen to the podcast here, or just keep reading for the transcript
In a recent set of go-rounds with the Department of Justice, the so-called company model of anesthesia services took a major hit: One alleged co-conspirator, Jonathan Daitch, M.D., just agreed to a $1.718 million civil settlement and another, Michael Frey, M.D., plead guilty in a criminal prosecution. Frey appears to be a cooperating witness against other alleged co-conspirators.
A quick refresher: In its most direct form, the company model involves the formation, by surgeon-owners of an ASC, of an anesthesia services company to provide all of the anesthesia services for the center. But there’s nothing inherently “anesthesia” about the set-up; the same issues apply in other referrer-controlled structures, such as in the relationship between a dermatologist and controlled pathologists.
The model has long been regarded either as a blatant violation of the Federal Anti-Kickback Statute . . . or, by others (surgeons), as a perfectly proper way of doing business. That latter viewpoint appears to be crumbling under a million dollar plus settlement and the prospect of years in federal prison.
The combined facts of the settled civil case against Daitch and the guilty plea in the criminal case against Frey included allegations that the two surgeons received kickbacks via Anesthesia Partners of SWFL, LLC. (“Anesthesia Partners”), an anesthesia “company” owned by the two physicians.
The two surgeons were also co-owners of their professional practice, Advanced Pain Management Specialists, P.A. (“Advanced Pain”), which is located in Fort Myers, Florida. Anesthesia Partners was the exclusive provider of anesthesia services for Advanced Pain.
Anesthesia Partners contracted with CRNAs to provide the anesthesia services. These CRNAs were paid a contracted rate. Anesthesia Partners then billed Medicare and TriCare directly for the anesthesia services they provided. Daitch and Frey shared the profits.
The U.S. Attorney alleged in the settled allegations against Daitch that his ownership interest in Anesthesia Partners, and the remuneration he received through this ownership interest, induced him to refer his patients for anesthesia services to Anesthesia Partners. Dr. Frey plead guilty in his criminal prosecution to the same allegations.
These results are entirely consistent with the OIG’s position in Advisory Opinion 12-06. In that opinion, the OIG stated that there was no safe harbor available in respect of distributions that the surgeons would receive from their anesthesia company. Even if the safe harbor for payment to employees applied, or if the safe harbor for personal services contracts applied, those safe harbors would protect payments to the anesthesia providers. But, they would not apply to the company model profits that would be distributed to the surgeons, and such remuneration would be prohibited under the AKS if one purpose of the remuneration is to generate or reward referrals for anesthesia services.
The failure to qualify for a safe harbor does not automatically render an arrangement a violation of the AKS. As a result, Advisory Opinion 12-06 then turned to an analysis pursuant to the 2003 Special Advisory Bulletin on suspect joint ventures and found that the physician-owners of the proposed company model entity would be in almost the exact same position as the suspect joint venture described in the bulletin: that is, in a position to receive indirectly what they cannot legally receive directly—a share of the anesthesia fees in return for referrals.
The results in the Daitch and Frey cases are also entirely consistent with the OIG’s position in Advisory Opinion 13-15 (disclosure: I was counsel to the requestor of that opinion) centering on a proposed arrangement in which a psychiatry group performing ECT procedures at a hospital would capture the difference between the amount it collected for anesthesia to ECT patients and the per diem rate it would pay to the anesthesia provider.
The OIG found that the proposed arrangement would not qualify for protection under the AKS's safe harbor for personal services and management contracts.
That safe harbor protects only payments made by a principal (here, the psychiatry group) to an agent (here, the anesthesia group); no safe harbor would protect the remuneration the anesthesia group would provide to the psychiatry group by way of the discount between the per diem rate their group would receive and the amount that the psychiatry group would actually collect.
Because, again, failure to comply with a safe harbor does not render an arrangement per se illegal, the OIG in 13-15 then analyzed whether, given the facts, the proposed arrangement would pose no more than a minimal risk under the anti-kickback statute.
The OIG flatly stated that "the proposed arrangement appears to be designed to permit the psychiatry group to do indirectly what it cannot do directly; that is, to receive compensation, in the form of a portion of the anesthesia group’s revenues, in return for the psychiatry group’s referrals of patients to the anesthesia group for anesthesia services."
The OIG concluded that the proposed arrangement could potentially generate prohibited remuneration under the AKS and that the OIG could impose administrative sanctions in connection with the proposed arrangement. In other words, the OIG declined to approve the arrangement.
Advisory Opinions 12-09 and 13-15, and, now, the civil settlement by Dr. Daitch and the guilty plea entered by Dr. Frey in his criminal prosecution, demonstrate a fact lost to many when discussing “company model” deals: they generally do not fit into an available safe harbor — either the personal services and management contract safe harbor or the employee safe harbor.
Not only is this because payment is not set in advance and will vary with the value or volume of referrals, but even more fundamentally because those safe harbors apply only to payments from the principal to the agent, not to payments (in the form of the discount), which is remuneration, from the agent to the principal.
Physicians and CRNAs currently engaged in company model deals would be well advised to immediately obtain counsel to evaluate their relationships in light of these new developments.
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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 here.
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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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