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| Dear Friend,
There’s lots of advice out there suggesting single track “cures” to the cash crunch that many medical groups and facilities are experiencing as a result of the coronavirus economic crisis.
Unfortunately for the victims, many cures are being touted by those with knowledge, even extreme knowledge, about one solution, one recipe. Or, in some cases, simply part of the recipe.
Take for example advice concerning valuation, offered up as the solution to the decline in income in the context of an existing coverage stipend arrangement.
Yes, it’s entirely true that modeling valuation, that is fair market value, is an important element of renegotiating stipend support. But the bigger set of issues includes, but is no means limited to, questions such as should you renegotiate, which of many renegotiation strategies should you adopt, what other alternatives are available, and will the solution to that short term problem ruin your long-term future, among many others.
As i’ve said before (if you haven’t already watched them, watch Business in the Time of Coronavirus Part 1, Part 2, and Part 3), there are many tools, many solutions, to the financial crisis impacting groups and facilities.
However, they must be considered extremely carefully and put into context, into your particular context, that is.
And, consider that many solutions are simply short term solutions to long term problems, band aids on the entity equivalent of birth defects. They offer only short term relief so don’t confuse them for anything else and don’t ignore the need for further analysis and corrective action.
Beware those with a single recipe. After all, knowing the recipe, even the world’s best recipe, for a tagine doesn’t makes you Moroccan.
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| | Newsflash: Business Life In the Time of Coronavirus - Part 4
Whether you're the leader of a group in crisis or of a group that is using the crisis to advance your position, the current times have very much in common with your own past.
As discussed in this video, not only is opportunity inherent in a crisis, you yourself have already used the equivalent of a crisis in your own past. You can harness that once again.
You can harness that once again.
[If you haven't already seen them, follow these links to watch the first three installments in the series, Business Life In the Time of Coronavirus - Part 1, Part 2, and Part 3 now!] |
| | Tuesday - Sutter Health and Surgeons Settle Whistleblower's Kickback Allegations for $31M
Watch Tuesday's video here, or just keep reading below for a revised, more polished transcript: |
| Hope you’re having a great day! We’re filming in a guest studio here today, a loaner studio. Sorry for the noise, car is a blast to drive but it’s sort of not designed to be a video studio.
There was a story in the paper I saw today, Healthcare News, about another settlement by Sutter Health, the large Northern California system and a group of physicians, as I recall cardiac surgeons, they settled a False Claims Act lawsuit –$30 million from the hospital and around $5 million from the docs, that involved allegations of kickbacks in a very interesting setting.
Here, the cardiac surgeons, who are apparently the star referral group to whichever Sutter hospital they practice at (multiple – I’m not sure), well the facility was accused of having entered into a kick-back relationship with those doctors whereby that group got some exclusive contracts, and that group, to the exclusion of other cardiac surgeons, got very valuable on-call coverage agreements. The allegations are that in total close to $2 million was shifting hands. All designed to reward those surgeons for their referrals. Now, of course in these settlements, nobody admits liability, no one was proven to actually have violated the law here, it was a settlement. But the story here is a common one. It’s the one of the overvaluations or the indefensible valuation in connection with stipends from hospitals whether they’re stipends pursuant to exclusive contracts, on-call agreements, and actually in this case there were also medical director agreements.
So again, just because a hospital tells you a deal has been vetted by its counsel, and Sutter has many many lawyers, that doesn’t mean the deal is legal, doesn’t mean that even if there’s a lawsuit, a whistleblower lawsuit or criminal action that settlement isn’t going to be what occurs. A plea bargain is going to be what occurs because of fear of the risk of what happens at trial. So, look out for yourself if you’re a physician. The fact that somebody is dangling a couple million bucks in front of you sounds wonderful until you realize what the real price you pay might just be.
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| | Wednesday - A Not So Love Triangle: When PE Met AKS Who Met Stark
Watch the video here, or just keep reading below for a slightly polished transcript:
It’s not quite when Harry Met Sally.
As you certainly know, there’s been a flood of investor money, notably private equity money, it into many medical specialties over the last decade.
Depending on what specialty you’re in, private equity investment is just beginning to ramp up.
For example, I’m seeing, both here at the law firm and at our M&A advisory firm affiliate, an uptick in deals in dermatology, ophthalmology, and orthopedic surgery. To use a sports analogy, in some medical specialties, the game is just getting started.
There are many factors that make your practice an attractive candidate for private equity investment, but that’s not what this post focuses on.
Instead, it’s essential, whether or not you ever plan on doing a private equity deal, to know what makes a practice completely unattractive to any buyer: potential compliance problems, in particular, potential violations of the federal Anti-Kickback Statute or of Stark.
Too many physicians approach compliance problems from the “who’s going to know” perspective. As I’ve written many times in the past, you’d be surprised (as in one of your partners or even an employee in the billing office).
But here, in the mergers and acquisitions context, the “how” has an actual name. It’s called “due diligence,” the investigation of the quality of the to-be-acquired entity that includes a proctological look into potential compliance issues.
The presence of unresolved compliance issues can easily result in a dead deal. And, even if it doesn’t, the representations and warranties – the risk allocation provisions – of the acquisition deal will shift responsibility for undisclosed, pre-closing compliance issues back onto you, the seller. In other words, that planned trip to a faraway tourist district might be swapped for an unplanned trip to District Court.
Whether you’re interested in a potential sale of your practice now, in the future, or never, the first step is always the same and should be taken now: Commission a “red team,” a self-sponsored, deep dive into your group’s compliance risks today. |
| | Thursday - Business in the Time of Coronavirus - Part 2 |
| Listen to the podcast here, or just keep reading for the transcript.
Almost 7 years ago I wrote a short blog post that's particularly applicable during today's times of economic crisis caused by the coronavirus crisis. It was called “Are You Just Taping Up Problems?”
Let me read it to you and then we'll build on it from there:
I was finally on the plane. The flight was already 3 hours late to take off. And then the flight attendant announced that one of the overhead luggage bins had a broken latch. The plane could not take off until it was fixed. A mechanic was called.
About 15 minutes later, the mechanic boarded the plane. The overhead bin was emptied. He played around with the latch. Then he pulled out a form and began filling it in. And filling it in. And filling it in. For approximately 20 minutes.
He then pulled out a roll of tape and taped the bin closed — that took about 10 seconds. He left.
Are you simply taping up your medical group’s problems? Quick and easy (that’s fine) but destined not to last.
If so, the tape is sure to come loose, causing the problem to bang right down again on your head, with far greater consequences.
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The point, of course, is that there are no effective short-term solutions to long-term problems. Looking at this another way, a short term solution might solve the immediate problem, but don’t fool yourself into thinking that you’ve managed the issue for the long term or even for next time. It’s like pulling weeds. The garden looks great for a few weeks until, what do you know, it’s full of weeds again. For example, you may be having an immediate cash flow problem . . . and I'm not saying that doesn't need to be fixed. But what I am saying is that that fix is, in many instances, not a fix of the underlying issue: That the business wasn't designed to bank money for weathering the storm. That the compensation plan or compensation structure wasn’t designed to deal with any situation other than a complete pass through. That the staffing model wasn’t designed to permit changes in “guaranteed” work.
Many groups suffer from other, related, long-term problems. Issues in connection with governance – in which there is neither any effective government system, or the “everyone is a partner” problem, or the problem that results from the existence of a strong governance system on paper, but one which is depleted by a culture that requires consensus.
Many groups, too, suffer from the defect that their existence is completely dependent upon one facility. As many of you have noticed, facilities have used the crisis to terminate agreements. How strong were those bonds, those life lines to the future of the group? Not very strong at all. Work to create and then preserve optionality, not just at the service site level but at other levels as well.
Crisis is also opportunity. Those that use the crisis, and especially the downtime it’s imposed, to strategize for the future will find new solutions and will position themselves to burst ahead at the other end of the tunnel, when others are afraid that the light is just another train headed toward them to flatten them.
There’s no short-term solution to a long-term problem. It’s the tape on the overhead bin.
Stay well. Stay strong. Stay strategic.
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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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