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| | Dear Friend,
You might hold all of the equity interest in your medical group, but do you really own it?
Walmart is famous for its slogan “Save Money. Live Better.”
It’s no surprise that the slogan is aimed at the customer.
But what about the supplier?
There is a tremendous analogy here for medical groups, especially for hospital-based medical groups.
From the start, Walmart employed a low-price strategy. The way they sell at low prices is to buy at lower prices.
Many manufacturers, as they began selling to Walmart, craved the large distribution the stores offered. They’d assess how much Walmart would buy, and look at how many stores Walmart would put their product in. 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, Walmart began putting the pressure on. They knew that the manufacturer was so dependent upon Walmart for their huge volume and reach, that they could push even harder for really low prices, for low, lower, and lowest prices.
So, what does that have to do with you?
If you’re the leader of a hospital-based medical group, an anesthesiology, radiology, emergency medicine, pathology, or hospitalist group, it’s the same story. And, for those office-based physicians working for a hospital, it’s definitely the 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 “we’re reducing salaries,” or “we want you to expand coverage”) then what choice do you have other than to say “yes”? The alternative, of course, whether spoken or understood, is that you’ll soon be an “ex-vendor” or “ex- employee.” [I didn’t say “ex-partner” because you never were treated as a “partner.”]
The real question is, have you, in essence, given away the ownership of your practice entity?
And, should you go to sell your group, if you’ve become that dependent on one large source of business, what sort of a discount will the buyer demand due to your huge, “baked in” fragility?
Think about it: Do you and your fellow physician “owners” really own what you think you own?
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| | Tuesday - Success in Motion Video: Latest on Company Model of Anesthesia Services
Watch Tuesday's video here, or just keep reading below for a slightly polished transcript: |
| It’s November 14, 2019 today. In Tenet Healthcare Corporation’s most recently released 10-Q, their quarterly report filed with the SEC. They disclosed that they are in the process of settling for, they believe, $66 million with another couple million reserved for attorney’s fees.
They’re resolving a case in which they were alleged to, among other things, have violated the federal Anti-Kickback Statute by forming, in concert with surgeons and a co-owned surgical hospital in Oklahoma, an anesthesia company. In other words, a model in which the surgeons and a Tenet subsidiary went out and formed their own anesthesia group, which then obtained the exclusive contract at the surgical hospital.
The result was that whenever the surgeons were referring cases to their co-owned surgical hospital, they were profiting also from the anesthesia. That profit varied in proportion to the number of cases, the types of cases, the value of those cases that they were referring.
Now, Tenet undoubtedly is not going to be entering into any sort of an admission that they violated the law, and there was no trial on this, so these are allegations only. But this settlement raises more red flags about the propriety of surgeons and facilities entering into or sponsoring company model of anesthesia vehicles.
If you haven't read it yet, I explored this same topic from a different viewpoint on the blog at the weisspc.com website. It’s something we’ll cover further when additional about the settlement is released.
Frequently, hospitals will tell surgeons and even the anesthesia providers involved that they have vetted these structures. In fact, in the case now settling, the relator, the individual who brought the False Claims Act, alleged that Tenet and its subsidiaries had a cookie-cutter sort of “kit” of documents that they were using to deploy the company model of anesthesia services at many facilities.
But just because the attorneys for some big hospital company have vetted something, doesn’t mean that it’s legal. In fact, in my experience, there's often an inverse relationship.
Get your own counsel. Vet these things carefully. Don’t just jump into a deal that the hospital says is fine.
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| | Wednesday - Medical Group Minute Video: Yes, You Can Build A Health System Without A Hospital
Watch the video here, or just keep reading below for a slightly polished transcript:
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| 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.
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| | Thursday - Podcast: Why You Need To Understand The Concept of Lifetime Value |
| Listen to the podcast here, or just keep reading for the transcript
What’s a relationship worth to your business, whether your business is a medical practice or a healthcare facility such as an ASC or an imaging center?
Originally limited to marketing (where it remains a very powerful idea), the concept of lifetime value involves looking at the worth of a customer not as the one-off value of a transaction, but as the worth of the stream of transactions over the lifespan of the relationship.
So instead of looking at a transaction, say the value of some medical procedure performed on Sally Smith, as $1,200 in profit to the group, look at it in terms of the relationship with the average “Sally Smith.” If that’s 2 procedures and 3 referrals, returning, for example $4,700 in profit, then that’s the lifetime value.
But that’s not where the original use of the tool ends. Rather, the next step is to ask yourself how much you can spend (in money, time, etc.) to bring in a $4,700-in-profit customer and to ask yourself how you should treat a $4,700-in-profit customer.
But wait, there’s more.
As it’s often said, there are many “customers” in healthcare: the patient, the referral source, and, depending on one’s medical specialty, the facility.
I suggest that it’s vital to apply the same “lifetime value” concept to each of those relationships. For example, apply the tool to the relationship between an ASC and a referring surgeon. Or to the value of an exclusive arrangement at some facility.
For those hypersensitized to kickback concerns, note that I’m not talking about offering any remuneration for that lifetime value. Instead, I’m telling you to use the concept as a thinking tool in nurturing relationships in order to reap their long term value to you.
But wait, there’s more.
The concept also plays out in connection with relationships within your medical group or other healthcare business. What’s the lifetime value of a great employee? And, even beyond that, what turnover costs are avoided by not losing that great employee?
We all know what it’s like to be placed on hold by some call center. We all know what it’s like to be greeted at the reception desk with an unsmiling glance and a cold “yes?” or, even worse, a “next.”
The people who run those operations have no clue of the concept I’m sharing with you. The bigger the organization, the more clueless they generally are. Why should they care if you walk, they ask themselves, when your business or mine is “worth” just a few cents to the bottom line.
They can’t see the dollars for the cents.
Have more sense.
Customers of all sorts aren’t transactions. They’re long term relationships with a lifetime value.
Competing for business that depends on relationships gives smaller businesses, those without layers and layers of bureaucracy, the advantage. And, all business depends on relationships. Develop deep and lasting relationships with your customers.
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 just for how many billing units they generate.
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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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