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| Dear Friend,
Cost, value, and the stupidity of government purchasing.
A diamond and a rock, sitting side by side. Both discovered near the bottom of the Udachny diamond mine in the Sakha Republic region of Russia, one of the world’s ten deepest open-pit diamond mines.
But are they of the same value?
The cost, in materials, labor and equipment of retrieving the two stones, the diamond and the rock, are identical.
Yet, the value of each stone is tremendously different. The diamond might be valued in the thousands to the millions, while the rock is just tossed aside as junk.
Value does not follow cost. Cost has nothing to do with value.
But in healthcare today, the trend is to base “value,” on cost. This is very curious. The technical term for this is “ass backwards.”
Take, for example, the findings of a new study published in January 2021 in the journal Health Services Research. It shows that, on average, Medicare pays $114,000 more per physician per year for the same bundle of services when that physician is hospital employed as opposed to physician practice employed.
The study reveals that primary care physician services are paid at a 78% increase and surgeon services at 224% of physician office levels.
So let's play this out. Andy Administrator, CEO of Arbitrage Hospital of Cashtown, pays Sally Surgeon, M.D. $500,000 for her practice and turns her office into a hospital outpatient clinic. Starting the very next day, Medicare pays more than 200% more for Sally Surgeon’s same services. If I were Andy, I'd be buying as many practices as I could and capturing all of the newly employed physicians’ referrals, because Medicare is financing the deal. It's almost too good to be true. Who says welfare is only for the poor! Sheesh, it's a better corporate welfare deal than selling Teslas!
To Medicare, the higher "cost" of providing services inside a hospital justifies a higher price for those services. Even if the day before, the exact same physical location was outside of
a hospital.
What the government calls healthcare economics, I call healthcare fraud.
Unfortunately, the government is not about to call the OIG, the FBI, the Postal Inspectors,
and 17 other agencies plus the U.S. Attorneys Office, indict themselves, and then call a
press conference.
[A stealthy shoutout to "Jay" for letting me know about the study.] |
| | | Business Life in the Time of Coronavirus Mini-Series
The coronavirus crisis caused a short term economic crisis for many medical groups. Our mini-series shows you the way out. Plus, many of the concepts discussed are applicable during both good times and bad.
[If you haven't already seen them, follow this link to watch our entire series.] |
| | Watch Tuesday's video here, or just keep reading below for a revised, more polished transcript:
A couple of weeks ago, I visited my dermatologist.
It took some time for the practice to submit the charges to my carrier, to make the required contractual adjustment, and to send me my bill.
When I received the bill, it showed the office's phone number, and even the extension to dial, so that I could pay over the phone. I dialed the phone number and, as soon as the system (not a real person) answered, I keyed in the extension number. Oops, that extension does not exist!
I called back again and listened to the entire auto attendant recording. There it was, “Press 3 for billing issues.” I guessed that payment is a billing issue, although “payment” would have been a bit more clear. I pushed 3.
Let's skip the entire story because you do not have enough time to read it today.
Suffice it to say that after calling seven times the first day, no one had answered extension 3. The call just made a loop. A voicemail loop, ringing and ringing and then back to the initial greeting. So, I set the bill aside.
A few days later, I tried again. The same thing happened.
Yesterday, finally, after four more tries, someone picked up the phone. I told her that I was calling to pay. I told her that I'd called multiple times over multiple days and could not get through or even leave a message. The response from the practice employee? “I've been busy!”
Who's collecting your money?
The majority of my readers are leaders of large hospital-based groups, extremely entrepreneurial physicians, and the owners of entrepreneurial facilities. Some have outsourced their billing and collection. Some have a person right there in the office.
But have you really thought about whether those people tasked with making collections actually make it easy for your patients to pay?
When you're complaining about collecting copays and deductibles, is it really the fact that patients aren't paying you? Or is it the fact that you've made it difficult for patients to
pay you?
Do a self-audit. Find out what's up. Hire a "secret shopper." Even try to pay your own bill.
See what happens.
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| | How to Deploy the Secret Sauce of Opportunistic Strategy
Webinar On Demand
They say that COVID-19 has changed the world, creating the "new normal." Many of your colleagues and many hospital administrators are running scared.
Others, leaders like you, know that crisis means opportunity.
Let me provide you with the strategic tools and insights that you need in order to seize opportunities, whether they’re in the context of your current business relationships, the expansion of your business activities, or the creation of new ventures.
You will learn:
•Defense as a defective default: It’s necessary, but not sufficient.
•Exploiting weakness: Drop the guilt and identify opportunity.
•Flat line negotiation is fatal: Understand its myths and limitations.
•Negotiation reality: Learn to identify and deploy on multiple planes to affect the outcome.
•Maneuver: Harness the power of maneuver, both in overall strategy and in specific negotiation strategy.
Others see a crisis and freeze in fear. Learn how to see the opportunities and obtain the tools to increase your odds of obtaining them.
The price to attend is $479. The cost of not attending is astronomical. |
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Wednesday - Mitigating Against Risk to Physician Groups of Hospital Closure - Medical Group Minute
Watch the video here, or just keep reading below for a slightly polished transcript:
Another week, another hospital closes. Well, at least one.
Yes, this is a popular topic, because each additional hospital closure underscores the risk
for physicians and medical groups that do not spread risk. The lesson applies to both
hospital-based and office-based physicians, although not necessarily equally.
February 11, 2018, was the final, lights out, closing day for Quorum Health’s Affinity Medical Center in Massillon, Ohio.
According to pre-closure filings, 692 employees were to be laid off, along with 116 people employed by the affiliated Doctors Hospital Physician Services.
The physician clinics operated by the hospital remained open until early March 2018, in order to allow ownership to be transferred to the affected physicians or other local providers.
Not all is necessarily lost, because after the facility and related entities are completely shut down, the former Affinity’s physical plant will be turned over to the city of Massillon, which, it seems, will try to make another go of it.
Here are some of the bottom line lessons for you:
Office-based physicians located on, or even near, hospital campuses must take possible hospital closure into account when negotiating leases. Will closure trigger your right to terminate the lease? Sure, it is great to be able to walk from your office over to the hospital for rounds and for meetings, but I can tell you from the experience of representing physicians who had no such termination rights, that continuing to maintain an office next to a boarded-over facility with weeds sprouting up from cracks in the asphalt, in an office-building that is half abandoned, is not great for business.
Physicians must consider the risk, not just the supposed relief, of hospital employment or even of tight affiliation. No more hospital, no more employment. Sure, you might have the ability to "re-start" an independent practice, but without any of the support mechanism (office, staff, equipment, medical record system, accounting system, etc.) that you did not have to worry about when you (thought you were) letting someone else, the hospital, worry about it for you, so that you could "just practice medicine," that is, until they ran the business into the ground.
Unless the hospital-based groups practicing at Affinity have other practice locations, they are either out of business or on an extended vacation until, and if, the facility reopens and they regain their positions. If you are dependent upon one facility, then the absence of that facility moots the necessity for your existence.
The patients who would otherwise receive care at Affinity will go somewhere. Perhaps to competing hospitals in neighboring towns. Perhaps to ASCs and other outpatient facilities that you and other physicians can legally have ownership in. Affinity closed because it suffered huge financial losses. The hospital business model is broken. And, you can take advantage of that fact.
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| | | Listen to the podcast here, or just keep reading for the transcript.
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 is 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 is 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., 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 has 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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| | | Calibrate Your Compass
Read our exclusive RedPaper to guide you through this evolving situation.
The coronavirus crisis caused a short-term economic crisis for many medical groups. Our RedPaper shows you the way out. Plus, many of the concepts discussed are applicable during both good times and bad.
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| | Help Us Help You With Helpful Content
What tailored content would you most like to see during this
time? How can we focus on solutions to your most pressing strategic concerns?
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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 Free.
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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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