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Dear Friend,
Why do hospital executives think that combining two weak facilities will create a strong one?
A decade or more ago, the financier Edward Lampert put together two weak businesses, Sears and Kmart. He thought that putting them together would create a strong business. Go figure.
That was at the time when those old businesses were declining. Internet sales, including via the likes of Amazon, were beginning to take off.
Yet, Lampert combined the two businesses only to find out that it did’t save the business. Lampert sold off their flagship line of Craftsman tools. Their stores remained in disrepair. There’s just no advantage to the business anymore, but yet it continued to hobble along into, and now out of, Chapter 11 Bankruptcy as a mere shadow of what the two businesses once were.
How different is that from hospital mergers in which CEOs and boards and others think that combining two weak hospitals will yield one that’s strong? Or even that one weak hospital can be saved by merging it into a strong facility?
How can most hospitals continue when procedures are being pushed out to ASCs and to other freestanding facilities? How can those hospitals continue to combine to form larger facilities with more beds? How can hospitals continue to acquire physician practices when all the evidence shows that hospitals lose money when they acquire physician practices.
I don’t know.
Maybe it’s the fact that people look at quarterly returns. Maybe it’s that CEOs think that mergers will make them momentary stars and that they themselves will be moving on to other ventures by the time that the deal fails.
It makes you wonder whether these larger-than-before entities in healthcare will survive at all when, eventually, as with Sears and Kmart, the shit hits the fan and returns are no longer possible.
But what does this mean for physicians?
On the one hand, as physicians became more tightly entrenched with hospitals and permitted themselves to become seen as “vendors” as opposed to partners, they increased the fragility of their hospital-linked future. Goodbye hospital equals goodbye practice.
On the other hand, telling the truth about your current situation allows you to prepare for a post-hospital future. What are your, yes, your, alternatives? What will you do if the hospital closes? Will you relocate? Will you re-group and remain in the community? Will you take advantage of the fire-sale of hospital property, perhaps ripe for re-purposing as a medical mall, an ASC, an so on?
There were both losers and winners in the Sears debacle. The number of combined Sears and Kmarts is shrinking to around 400, down from 1,672 just three years ago. That’s a lot of disappointed landlords and thousands upon thousands of out of work employees. But toolmaker Stanley Black & Decker walked away with the prize Craftsman brand and is already expanding its business.
Winner or loser? What sounds better to you?
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| | Tuesday - Success in Motion Video: Efficiency vs Efficacy – Rebroadcast
Watch Tuesday's video here, or just keep reading below for a slightly polished transcript: |
| | I’ve been thinking about the issue of efficiency vs. efficacy.
Efficiency is simply doing the task the right way. But efficacy has a qualitative difference. Efficacy is doing the right thing the right way.
I was recently in Charleston, SC. As I was leaving, I arrived at the airport a bit early. I heard the gate agent who was moving from gate to gate to assist with departing flights making a similar announcement each time. It went something like, “Flight So-and-so to Such-and-such place is about to depart. The doors will be closing in five minutes and will not be re-opening.”
Now, years ago, if you got to a gate a little bit late, they reopened the door. After all, the plane was still sitting there. Sometimes it’s still sitting there for twenty minutes before backing away from the gate.
So why don’t they reopen them?
The reason they don’t reopen them is that airlines are now graded for their on-time departures based upon when the gate closes. They then pull the jetway back and magically the plane has “departed,” even though it’s still sitting there.
It’s efficient for the airline to close the door and not let crying Mrs. Smith on, and I’ve seen lots of crying people who’ve now had the rest of their day of travel all screwed up.
It’s efficient because they got a wonderful score for having departed on time, when all they did was game the system.
Think about that next time, in the context of healthcare, you’re told that such-and-such is the measure by which you’ll be paid, the measure by which you’ll get the extra slice of money or some other higher form of reimbursement. Does it really make sense? Is that the right thing to be doing?
Consider whether it’s simply efficient but not very efficacious.
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| | | Wednesday - Medical Group Minute Video: Fraud on Physicians in the ASC Setting
Watch the video here, or just keep reading below for a slightly polished transcript:
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| As the shift of surgeries from the hospital setting to the ASC setting accelerates, we’re seeing more fraud at the ASC level.
No, I’m not talking about the significant amount of fraud that comes from the “usual suspects,” criminal operators who bill for medically unnecessary procedures, for procedures that never occurred, and so on.
Instead, as more physicians rush to invest in ASCs, unscrupulous facility promoters/managers scheme to separate physician investors from their money.
This fraud on physicians takes various forms, from securities fraud arising from misrepresentations, failures to disclose, and outright disregard for federal and state securities regulations and the exemptions therefrom, to sophisticated (and even Clouseau-like bungled) financial fraud on investors within the facility’s business operation.
“Compliance” in terms of investing in a surgery center is generally thought of as paying attention to the federal Anti-Kickback statute, state law referral prohibitions, and similar concerns. However, for physician investors it’s equally important to pay particular attention to vetting the overall structure of the deal and its promoters, the past history of the center’s operations, and the conflicts of interest and related-party dealings of those purporting to “manage” the facility.
Think of it this way: The last time I checked, a “physician-money-ectomy” isn’t on the Ambulatory Surgery Center Fee Schedule.
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| | Thursday - Podcast: Driverless Cars Might Not Crash But They Will Impact The Business Of Healthcare |
| Listen to the podcast here, or just keep reading for the transcript
I’m about to head off to meet with a futurist to brainstorm some ideas.
Speaking of the future, lots of people are talking about driverless cars.
Suppose those people who want to sell us driverless cars, or to force us into driverless cars, are right and that we’ll all be driving in them. What’s the impact on healthcare? What’s the impact on your practice?
Assuming, and yes, it is a very big assumption, that driverless (that is, people programmed) cars might actually be safer than people driven cars, will there be fewer accidents? According to Centers for Disease Control data, in 2006, 3.2 million people received non-fatal injuries from auto accidents. And, according to a 2013 report from the Agency for Healthcare Research and Quality, auto accidents resulted in approximately 2.8 million emergency department visits in 2010, which was around 15% of total emergency department visits for injury that year.
What happens if that business (no, I’m not coldhearted, but I’m writing this for healthcare providers) goes away? What’s the impact on the number of emergency department physicians needed? What’s the impact on the amount of nurses needed? What’s the impact on the number of hospital beds needed? What’s the impact on the number of specialist consults and surgeries and physical therapy and on and on? What’s the loss to the bottom line?
Yes, I’m warming up for the discussion with the futurist. This part of the warm up fits well with my own “futuristic” work, my book, The Impending Death of Hospitals.
But this self-driving car trend and many others and the way they intersect help lubricate the mind and lubricate the discussions among medical group and other healthcare leaders in exploring alternative futures, futures into which you must project your practice or business. That is, unless you want a driverless car to drive you to the poorhouse.
What are you doing to envision your future?
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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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