Practices cannot survive the COVID-19 cash flow crisis
By JEFF LIVINGSTON, MD
Will doctors be able to keep their practices open during the worst pandemic in our lifetime? Our country needs every available doctor in the country to fight the challenges of Covid-19. Doctors working in independent practices face an immediate cash flow crisis threatening their ability to continue services.
The CARES Act was signed into law on Friday, March 27, 2020. The law offers much-needed help to the acute needs of hospitals and the medical supply chain. This aid will facilitate the production of critical supplies such as ventilators and PPE. The law failed to consider the needs of the doctors who will run the ventilators and wear the masks.
Cash flow crisis
Private-practice physician groups experienced an unprecedented reduction in in-office visits as they moved to provide a safe and secure environment for patients and staff. In compliance with CDC guidelines, practices suspended preventative care, nonurgent visits, nonemergent surgery, and office procedures.
These necessary practice changes help keep patients safe and slow the spread of Covid-19. The unintended consequence is an unreported and unrecognized cash flow crisis threatening the viability of physician practices.
The only way to
fully eliminate medical debt would be a comprehensive single payer plan, which
allowed no fees at the point of service.
However, such a
plan would require setting all prices for all doctors, hospitals, labs, and
drug companies. All providers would have to be satisfied – in advance — with
what the government is going to pay them on each procedure.
Germany accomplish this through collective bargaining. Japan, France, Taiwan,
Israel and Scandinavia also have national fee schedules. However, I do not
think you could get all the providers in Toledo to agree on one schedule, much
less every provider group in America.
would also require new income and payroll taxes of at least ten per cent more
than we pay now, if we want first-dollar coverage.
The first section of this article stated that many forms of medical debt can be reduced or cancelled by stronger enforcement of consumer protection laws. These debts are not inevitable and are not due to poverty. It would not require trillions of federal dollars to cancel them, either – just the willingness to go against lobbyists.
I advocate the following attacks on medical debt:
cancel balance bills and surprise bills if there was no prior disclosure.
In most cases,
providers will not have the right to collect anything more than what the insurers pay them.
We must cancel the older, inactive “zombie debts” that are being purchased by collection agencies.
This line of
business must terminate. Providers throughout the country are selling
uncollected medical debt for pennies on the dollar to collection agencies, who aggressively attempt to force
patients to pay the full amount due. These debt collectors harass patients at
work and at home, deploying unscrupulous tactics even after the statute of limitations
on the debt has expired.
proposal by Sen. Bernie Sanders to cancel $81 billion of medical debt is a very
good start—but it is only a start.
The RIP Medical
Debt group—which buys old medical debts, and then forgives them—is absolutely
in the right spirit. Its founders Craig Antico and Jerry Ashton deserve great
credit for keeping the issue of forgiveness alive.
over $88 billion in new medical debt is created each year; most of it still
held by providers, or sold to collectors, or embedded in credit card balances.
Tragically, none of this has to happen! In France, a visit to the doctor typically costs the equivalent of $1.12. A night in a German hospital costs a patient roughly $11. German co-pays for the year in total cannot exceed 2% of income. Even in Switzerland, the average deductible is $300.
U.S. patients face cost-sharing that would never be tolerated in Germany, says Dr. Markus Frick, a senior official. “If any German politician proposed high deductibles, he or she would be run out of town.”
By THOMAS WILSON PhD, DrPH and VINCE KURAITIS JD, MBA
A recent study in the New England Journal of Medicine reported on the results of a “hotspotting” program created by the Camden Coalition of Healthcare Providers (Camden Coalition). Hotspotting targets interventions at all or a subset of healthcare superutilizers – the 5% of patients that account for 50% of annual healthcare spending.
of the study were disappointing. While utilization (hospital readmissions)
declined for the hotspotting group, the declines were almost identical in the
control group. At least three headlines
implied that the conclusion of the study was that hotspotting care management
approaches have been proven not to work:
explain, we believe that much of what’s going on here can be explained by one
or both of what we call “RTM Traps” (regression to the mean traps).
essay, we will:
Define RTM (regression to the mean)
Explain the RTM Traps and how many
have fallen into the traps
Suggest how to avoid the RTM Traps
our POV is relevant to clinical, technical, and executive staff in the many
organizations focusing on the superutilizer population – hospitals, physicians,
ACOs, health plans, community groups, etc.
Sometimes you wonder where the line is in health care. And perhaps more importantly, whether anyone in the system cares.
The last few months have been dominated by the issue of costs in health care, particularly the costs paid by consumers who thought they had coverage. It turns out that “surprise billing” isn’t that much of a surprise. Over the past few years several large medical groups, notably Team Health owned by Blackstone, have been aggressively opting out of insurers networks. They’ve figured out, probably by reading Elizabeth Rosenthal’s great story about the 2013 $117,000 assistant surgery bill that Aetna actually paid, that if they stay out of network and bill away, the chances are they’ll make more money.
On the surface this doesn’t make a lot of sense. Wouldn’t it be in the interests of the insurers to clamp down on this stuff and never pay up? Well not really. Veteran health insurance observer Robert Laszewski recently wrote that profits in health insurance and hospitals have never been better. Instead, the insurer, which is usually just handling the claims on behalf of the actual buyer, makes more money over time as the cost goes up.
The data is clear. Health care costs overall are going up because the speed at which providers, pharma et al. are increasing prices exceeds the reduction in volume that’s being seen in the use of most health services. Lots more on that is available from HCCI or any random tweet you read about the price of insulin. But the overall message is that as 90% of American health care is still a fee-for-service game, as the CEO of BCBS Arizona said at last year’s HLTH conference, the point of the game is generating as much revenue as possible. My old boss Ian Morrison used to joke about every hospital being in the race for the $1m hysterectomy, but in a world of falling volumes, it isn’t such a joke any more.
I feel like the healthcare world just skipped over the $17.3 billion mega-merger between Centene and Wellcare, which just received final regulatory approval last Wednesday. With their powers combined, this new company will create the Thanos of government-focused health plans, hopefully without any of the deranged plans to take over the world. I do get it, 181 million lives are covered by employer-sponsored insurance, between full-risk and self-insured plans. These employer populations have the most disposable income and their HR departments are willing to provide supplemental benefits. However, in my opinion, the future growth of health insurance will be governmental programs like Medicare Advantage (MA), Medicaid managed care, and ACA exchanges. But instead of me telling you this, here is exactly what Centene and WellCare said in a press release to defend the merger:
“The combined company would be the leader in government-sponsored healthcare with increased scale and diversification both geographically and in its managed care service offerings, and enhance access to high-quality services for members. It will offer affordable and high-quality products to its more than 12 million Medicaid and approximately 5 million Medicare members (including Medicare Prescription Drug Plan), as well as individuals served in the Health Insurance Marketplace and the TRICARE program. The combined company will operate 31 NCQA accredited health plans across the country and will have increased exposure to government-sponsored healthcare solutions through WellCare’s Medicare Advantage and Medicare Prescription Drug Plans. It will also benefit from leveraging Centene’s growing position in the Health Insurance Marketplace to new markets. The transaction creates a company with the size and scale to better serve members through enhanced healthcare programs, expanded capabilities and increased investment in technology.”
In this post, I write down all my strategy and business development knowledge in healthcare and organize it into the top 9 commandments for selling as a healthcare startup. I think everyone from the founder to the most junior person on the team should know these pillars because all startups must grow. I should also note these tenets are most applicable for selling into large enterprise healthcare incumbents (e.g., payers, providers, medical device, drug companies). Although I appreciate the direct-to-consumer game, these slices are less applicable for that domain. If your startup needs help developing or implementing your business development strategy, shoot me an email and we can discuss a potential partnership. Enjoy!
1. Understand Everything About the Product and Market
You must also understand the competitive landscape, who else is in the marketplace and how they appear differentiated? What has been their preferred go-to-market approach and is your startup capable of replicating a similar strategy with your current team members? Also, do you understand the federal and state policy that most affects your vertical, whether that be pharmaceutical or medical device (e.g., FDA), health plans (e.g., state insurance commissioners), or providers (e.g., CMS)? For example, if your company is focused on “value-based care” and shifting payment structures of physicians to downside risk, do you intimately understand The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the requisite CMS Demonstration Models from the Innovation Center (e.g., MSSP, BPCI-A, etc.)? Make sure you do or at least hire someone to explain what is important now and in the future.
Rob Coppedge and Bryony Winn wrote an interesting article in Xconomy yesterday. I told Rob (& the world) on Twitter yesterday that it was good but wrong. Why was it wrong? Well it encompasses something I’m going to call the Lynne Chou O’Keefe Fallacy. And yes, I’ll get to that in a minute. But first. What did Rob and Bryony say?
Having walked the halls and corridors and been deafened by the DJs at HLTH, Rob & Bryony determined why many digital health companies have failed (or will fail) and a few have succeeded. They’ve dubbed the winners “Digital Health Survivors.” And they go on to say that many of the failures have been backed by VCs who don’t know health care while the companies they’ve invested in have “product-market fit problems, sales traction hiccups, or lack of credible proof points.”
What did the ” Survivors” do? They have:
“hired health care experts, partnered effectively, and have even co-developed their models alongside legacy players. Many raised venture capital from strategic corporate investors who have helped them refine their product, accelerate channel access, and get past the risk of “death by pilot.”
Now it won’t totally shock you to discover that Rob heads Echo Health Ventures, the joint VC fund from Cambia Heath Solutions (Blues of Oregon) & BCBS of N. Carolina, and Bryony runs innovation at BCBS of N. Carolina. So they may be a tad biased towards the strategic venture = success model. But they do have a point. Many but not all of their portfolio are selling tools and services to the incumbents in health care, which mostly includes health plans, hospitals and pharma.
And now we get to the Lynne Chou O’Keefe fallacy. (You might argue that fallacy is the wrong term, but bear with me).
No one likes getting bills. But there is something that stinks particularly spectacularly about bills for healthcare that arrive despite carrying health insurance. Patients pay frequently expensive monthly premiums with the expectation that their insurance company will be there for them when illness befalls them.
But the problem being experienced by an
increasing number of patients is going to a covered (in-network) facility for
medical care, and being seen by an out-of-network physician. This happens because
not all physicians working in hospitals serve the same master, and thus may not
all have agreed to the in-network rate offered by an insurance company.
This is a common occurrence in medicine. At any given time, your local tax-exempt non-profit hospital is out of network of some low paying Medicaid plan or the other.
In this complex dance involving patients, insurers and doctors, Patients want their medical bills paid through premiums that they hope to be as low as possible, Insurers seek to pay out as little of the premium dollars collected as possible, and Doctors want to be paid a wage they feel is commensurate to their training and accumulated debt.
Insurers act as proxies for patients when
negotiating with the people that actually deliver healthcare – doctors.
Largely, the system works to funnel patients to ‘covered’ doctors and
hospitals. Patients that walk into an uncovered facility are quickly
redirected. But breakdowns happen during emergencies.
There are no choices to make for patients arriving unconscious or in distress to an emergency room. It suddenly becomes very possible to be seen by an out of network physician, and depending on the fine print of the insurance plans selected, some or none of these charges may be covered.