| View this email online if it doesn't display correctly |
|
|
|
| |
Dear Friend,
The box in which we conceive of what’s possible serves as an artificial barrier that confines our thinking.
Call them mental models, call them viewpoints, the point is the same: the box in which we conceive of what’s possible serves as an artificial barrier that confines our thinking.
I’ve written previously about physician owned ventures that are near replacements for hospitals. Take for example, the post Hospital Becomes Hole In Ground. ASC Takes Up The Slack in which I discuss my concept of the Massive Outpatient Center™: A combination of an ASC, a medical office building, and one or more of a menu of complementary patient care offerings.
If you haven’t read that post, read it now.
I realize though that for some, that description of the very accessible alternative to hospital servitude, and equally accessible route to increased profit, didn’t resonate because its viewpoint focused primarily on the facility as opposed to the function.
So let’s look at the solution from another viewpoint. One that’s equally valuable to those previously stymied as well as to those who already clearly see the implications for their own involvement and investment.
In common healthcare industry parlance, a healthcare system centers around the notion of hospitals, generally, but not always, many hospitals under common ownership, together with their affiliated physicians and other providers.
But with hospitals dying at an increased rate, with healthcare systems, even large systems, merging in an attempt to extend their remaining shelf life, and with technology, pricing advantage, and payer preference all pushing procedures to freestanding (e.g., outpatient) facilities, physicians can replicate the system model . . . without the hospital.
Let’s take a large orthopedic group as an example. [Note that the choice of that specialty is simply an example – the same prescription can potently play out in many practice areas.] Traditionally, the physicians in the group were closely aligned with a hospital. Perhaps the physicians had ownership interests in some ASC, maybe in more than one. Their office practice remained completely separate, certainly in a legal sense, but in a conceptual sense as well.
That model can now be flipped into what is essentially a “hospitalless” healthcare system: the group, whether alone or with investor partners [note that there is so much money available that it is not necessarily the case that outside investors are needed if they are not wanted] reorganizes the structure of their practice relationship and co-locates their office, their ASC, their physical therapy, their imaging facility, and so on.
The goal is to create what is essentially a self-contained center of excellence providing a continuum of orthopedic care for patients. The physicians manage that care from patient intake, through surgery, and through rehabilitation. All through a system of entities, facilities, functions, and processes they own and control.
This fits exactly into the concept of value-based care and this fits exactly into what many large employers seek (just look at what Walmart is doing) in terms of directing their self-insured plan beneficiaries, that is, their employees, to physicians and facilities that provide the most effective care even if it is not the cheapest care.
Just remember the notion of the box that limits your thinking, if you think that this doesn’t apply to you.
Let’s talk. |
| | Tuesday - Success in Motion Video: Who Really Owns Your Medical Group?
Watch Tuesday's video here, or just keep reading below for a slightly polished transcript: |
| | I was reading something earlier today about Walmart and their method of doing business, and I realized there was a tremendous analogy there for medical groups, especially for hospital-based medical groups.
It’s this:
From the start, Walmart had a low-price strategy. They way they sold at low prices was to buy at low prices. Many manufacturers, as they began selling to Walmart, craved the large distribution the stores offered. The manufacturers would look at how much Walmart's buying, and look at how many stores Walmart has, and then, in order to get the Walmart business and that tremendous distribution, they'd sell to Walmart at very reduced prices.
But as Walmart became a bigger and bigger part of a manufacturer's business, 50%, 60%, 70%, then Walmart began putting the pressure on. They knew that the manufacturer was so dependent upon Walmart that they could push them for really low prices.
So, what does that have to do with you?
It’s the same thing if you're the leader of a hospital-based medical group, an anesthesia group, a radiology group, it doesn’t matter what sort. Emergency medicine, pathology, hospitalists? Same story.
If the huge bulk of your business is dependent upon a single hospital or a system of hospitals, say, six hospitals in XYZ, Kentucky, then who really owns your group? Do you own your group? Or, in essence, does the system, or the hospital, own your group?
After all, if they make a demand on you–we’re cutting your stipend, or there’s no longer a stipend, or we want you to expand coverage, or we want you to provide in-house call when you’ve never been providing it–then what choice do you have other than to say “Yes”?
Have you, in essence, given away the ownership of your entity?
And, should you go to sell your entity, if you’ve become that dependent on one large source of business, what sort of a discount will the buyer demand due to its huge, "baked in" fragility?
Think about it: Do you and your fellow owners really own what you think you own?
|
| | | Wednesday - Medical Group Minute Video: For Sale – Slightly Used ASC
Watch the video here, or just keep reading below for a slightly polished transcript:
|
| Sure, you can buy a new 2019 Bentley Continental GTC for around $300,000. But you can pick up a gently used 2016 model for around half the price.
But did you know that the same bargain can be had on a slightly used ambulatory surgery center?
Last month, two facilities owned 51% by Surgical Care Affiliates (SCA) the ASC behemoth owned by the even bigger healthcare behemoth UnitedHealth Group, Inc., became the equivalent of not simply a slightly used exotic car, but of a slightly used GMC Yukon.
Set up as a venture between majority-owner SCA and various physicians, Belleville Surgical Center, LTD, operated two ASCs, one the eponymously named Belleville Surgical Center and the other Physicians’ Surgical Center, both located in Belleville, Illinois.
From an Illinois state filing, many of the physicians who had previously referred their cases to the ASCs joined hospital affiliated medical groups. Their referrals to the ASCs dried up.
SCA, as the ASCs’ manager, sought a buyer for the facilities as ongoing operations, in other words, as operating businesses.
But operating businesses sell for more money than, well, the skeletons of closed businesses. No buyer stepped up and the facilities closed.
But just like the smart shopper for a slightly used Bentley, up stepped a smart shopper, Shakeel Ahmed, M.D., a gastroenterologist. Dr. Ahmed purchased Physicians’ Surgical Center’s operations, as well as Belleville Surgical Center’s land and building, for $50,000. Yes, just $50,000 – all of the zeros are accounted for.
Of course, there’s no way of knowing what equipment was included in the deal – much of it under SCA’s management may have been leased. But under almost any guess as to what’s going to be involved in bringing the facility back into operation, the deal was a tremendous bargain, perhaps up to 99% off.
I’m not saying that it’s every day that a bargain like this comes around. But there are more distressed sales and other creative opportunities around that one might think.
There are other lessons here, too.
Belleville’s state fling reveals that the physician investors didn’t, as individuals, have a significant amount of skin in the game, with none of them owning more than 5% of the deal. What exactly they lost when they gave up their independent practices and signed up with hospital employers is unknown. More skin in the game might have led to a different outcome.
Having a giant corporate partner in the deal didn’t help either. In fact, it might have made it more likely that the individual physicians would stop using ASC.
Just like each of the pennies on the dollar that Dr. Ahmed used to pick up the ASC, there are two sides to the ASC coin. Some facilities fail. But even when they do, they may be a tremendous opportunity for you.
|
| | Thursday - Podcast: Rainbows, Unicorns, and Fraudulent ASC Deals |
| Listen to the podcast here, or just keep reading for the transcript
ASCs can be great investments for physicians. Oh, as long as they are real.
But if all they are are rainbows, unicorns, and clear blue sky, then you’d better stay away.
The problem, of course, is telling the difference.
Some seem to have a hard time doing so.
Late last month, three members of a family, the promoters of a fake surgery center scheme, pleaded guilty for their roles in defrauding investors.
But wait, the story gets better. The three initially settled a civil suit brought by the New Jersey Bureau of Securities that they defrauded 26 investors in an ASC scam. How much money they took is unclear, but the facility itself was never built. The trio agreed to pay $5.5 million to settle, $4 million of which was in investor restitution.
No sooner than the ink dried on the settlement, the family then conned 15 of the same investors out of $3 million in a second scam!
This time, the scamsters were charged criminally and, eventually, pleaded guilty. Two are facing years behind bars and one is to receive probation.
One thing’s for sure, their ASC has a 0% infection rate. Or, maybe it’s 100%. I guess it all depends on what exactly we’re measuring.
Simply warning you to do due diligence in connection with any ASC investment seems trite, but this case, which is humorous only because neither you nor I was one of the conned investors, illustrates why it’s not.
You might say it’s anecdotal, but in my practice I’ve seen multiple forms of ASC scams, from fake surgeries and fake patients, to patients who had surgery but didn’t require it, to surgery center promoters who, as did the defendants in the above scam, used surgery center proceeds to pay for items for their personal use.
The bottom line for you, as an ASC investor, is to carefully investigate the deal, and its promoters, on the way in, and on a periodic basis after the investment is made.
If you don’t, then don’t be surprised that some of the investment is sitting in the promoter’s garage. It’s that red Ferrari F430 Spider parked next to the blue Bentley Continental GTC Speed.
|
| | | | 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
|
|
|
| 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.
|
| | | | | | 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. |
| | |
|
