OK, I admit it. I forgot to bring the MedPac Report

There aren’t many classes that one takes in graduate school that is worthy of a book, especially at a marginally known program such as the M.B.A. program at the University of Kansas.  But that is exactly what came out of the best course I ever took: Applied Portfolio Management.  I was in the inaugural class taught by a young man fresh from the financial wars of the 1980s and early ‘90s who had given the University several hundred thousand dollars of his own money so that his portfolio management class could invest real money vs playing a riskless simulation.  It was Kent’s money and you darn better not lose it.  I didn’t and my group came in first in that inaugural class.  There were four of us in the group; two Americans, a Taiwanese, and a Russian.  After that first semester no one could imagine the success of the class.  The profits from the course went to fund a basketball scholarship.  Then Roy Williams left for the University of North Carolina.

During lectures Kent McCarthy spoke at length on what it took to be a successful fund manager.  Based on the west coast he would be up by 4am watching the markets as he readied for work then remaining in the office late in the evening until the Japanese markets opened.  When I first met Kent as you might imagine he didn’t yet have time for marriage.  One statement by a guest speaker stood out.  “If you’re not willing to go on vacation with a stack of prospectuses and read through ten or twenty a day while sunning on the beach, find another job.”  I didn’t go into the market.

However, now twenty years on, it is interesting how like Kent’s life is mine.  Those who know me understand they can call me any time after 5am any day of the week and I will probably be up working.  As I head out for a week in Mexico the first thing I thought to bring for reading material was the June 2010 MedPac report and the newest MedPac Databook.  Challenged with a 5am flight I forgot the darn thing.  Thank goodness for PDFs and the ease at which the Nook can read them.  So I will still be able to sit in the sand with a good book.  It will just be from MedPac.  Vacation just means I get to blog more often.

Which brings me to colleagues who might read this blog.  I am constantly amazed at the peripheral grasp of baseline knowledge of our industry held by many physicians and administrators.  Their approach to running a medical practice, hospital department, or product line is to “run it like a business” but never reaching far enough down into the guts of the business to understand the likely reaction from certain actions taken in the health care market place.  So we continue to shoot ourselves in the foot and remain often our worst enemy.

Part of the reason I started this blog was to try and separate the real issues of concern from the routine angry howling at the moon we hear each time a new Proposed Rule is published.  Reaction to Proposed Rules often remind me of one of my favorite cartoons.  It is a Far Side of two cowboys protecting their circled wagon train from attacking Native Americans.  As the arrows fly overhead one cowboy is heard to say, “FLAMING arrows?  Can they DO that?”  Just as we learn from Medicare every year, “ Yes they can, and they will.”

But the basis for Proposed Rules are often messaged months if not years before in MedPc reports.  That is why I read them.  They are free.  As my dad said many times, “Free is cheap.”

Posted in MedPac, Medicare | 2 Comments

The Efficiency Trap

There is a story about a man who, soon after China began to allow tourists, decided to run across mainland China.  The Chinese approved what they considered a rather odd request as most Chinese at the time wondered why any sane person would want to do such a thing.

Several weeks into the effort the young man became ill and almost died.  The body style that made the young man a virtual running machine lacked the body fat to sustain him through an extended illness.  So the young man that to many appeared the picture of good health came very close to death because he lacked the reserves his body needed in bad times.

There is a parallel in the ambulatory surgery center  market today.  As Medicare facility reimbursement continues to seek a bottom we find centers across the country reacting to falling reimbursement.  Poorly run and inefficient organizations now have their own survival at stake and begin to find time for the work it takes to measure themselves, to identify areas of inefficiency, and to apply staff and encourage physicians to become more efficient.  But what about those organizations with no fat to cut?

Like the young man running across China these organizations find it more difficult to find the “fat” needed to buffer decreased reimbursement so that incremental efficiency is harder and harder to discover.  Year-to-year performance measurements are wholly inadequate to provide an overall view of how well the organization is doing.  In such a construct efficiency gains in previous periods are perversely punished in all future periods.  What is needed is a way to place the organization in contrast to other organizations of a similar nature.

That is where benchmarking comes in.  Good benchmarking drops the organization on the continuum of inefficient to efficient operations and places year-to-year comparisons in proper perspective.   The problem is that is it hard to find benchmarking that is operationally focused.  Most benchmarking efforts are clinically or financially focused and provide only marginal information that can be used operationally to improve the efficiency of the organization.

What is needed is to have more operational individuals engage benchmarking efforts and explain what they need.   Organizations which provide benchmarking opportunities are eager to understand those measure that will encourage participation.  Find a benchmarking effort and stick with it.  Get involved.

If you don’t you will eventually find that driving out cost creates your own efficiency trap.

Posted in Benchmarking, Efficiency, Medicare | 2 Comments

Medicare Wants to Save Primary Care … but is this the way?

Of all the problems in medical economics the plight of Primary Care physicians is certainly a valid issue.  In any preventive construct it will largely be Primary Care physicians who will form the skeleton of the system. And there is a problem …

In any business there is a natural tension between owners, who must survive on the net proceeds of the business and employees who can demand ever increasing compensation.  We are seeing this with Primary Care as overall physician income continues to drop while Advance Practice Nurses and Physician Assistants continue to demand higher and higher income.

What Medicare has done is ignore a basic economic model and instead punished specialists by refusing to pay for consultative services.  Keep in mind the services continue to be provided, an opinion is rendered and the patient is returned to the referring physician.

Placing one’s hands over one’s eyes does not a problem make go away.

And yet this is Medicare’s solution.  Keep in mind the basic problem does not go away and as we see so often the solution provided by Medicare is no solution at all but only serves to move the problem further into the future for some other administration and some other Congress to solve.

The approach to physician compensation is archaic and hearkens back to the days when solo physicians provided the majority of patient care.  Today’s health care system is designed to deploy a stratified approach to patient care based on matching specific training with the perception of need based on the patient’s specific condition.  At times this involves the use of Mid-Level Providers such as Advance Practice Nurses and/or Physician Assistants, often requiring supervision by a physician.  In such a situation not only does Medicare reimburse the encounter at a reduced rate, but provides no compensation for the physician for the assumption of risk and time commitment required to provide adequate supervision.

In the current reimbursement construct for Primary Care physicians who deploy Mid-Level Providers they find themselves in a downward spiral of compensation with more and more of their time spent supervising without compensation.  Make no mistake the solution is NOT to replace Primary Care with more Mid-Level Providers.  While talented and well trained Mid-Level Providers did not attend medical school while their supervising physicians did.

The solution does not involve ignoring the problem.  The solution involves paying the providers for what they do.  For physicians who deploy Mid-Level Providers, they deserve to be paid for their supervision.  For specialists who continue to provide consultative services?  Pay them for the work they do.

Posted in Medicare | 6 Comments