Like it or not (and debate certainly exists), mid-level providers are playing an increasing role in the primary care arena of the healthcare system.  In a recent study which examined data from greater than 300 retail clinics operated by such giants as Wal-Mart, Walgreens and CVS, utilization studies found that:

1. The vast majority of visits were for simple treatments such as ear infections, immunizations, and blood pressure checks.
2. Insurance was billed (and paid) for most of the visits.
3. Most of the patients that used the retail service didn’t have an established primary care provider.

This is relevant information for private practices because it helps us understand how people are using this more accessable (albeit, more fragmented) type of care environment.  By understanding this, we can begin to conceptualize ways that these mid-level provider practices should structure themselves and function in order to best care for their patients.

One suggestion that is evident is that mid-level provider practices should (1) address the “urgent care” needs of their market because that is how utilization currently happens, and (2) work on the development of comprehensive disease management tracts in order to properly prevent and maintain disease conditions for those that otherwise don’t (and likely won’t) have an established primary care relationship to keep them healthy.

Here’s a link to an article on the topic at the WSJ Blog.

Most of the patients said they didn’t have a primary care provider. One concern about the clinics is that they would lead to further fragmentation of care, by disrupting the patient-doctor relationship. “We found that three-fifths of patients did not report having a PCP, so for these patients there is no relationship to disrupt,” the authors write.

It’s not the best doctor that is guaranteed the best private practice.  It’s not the smartest physical therapist that sees the most patients.  It’s not the most compassionate dentist that stays in business the longest.

On the contrary, some of our best doctors, physical therapists and dentists don’t have the best practices, see the most patients, or stay in business the longest.  I see this in daily practice as I help private practice owners run their businesses, and last Friday I saw it happen to a physician from my birthtown of King City, CA.  The headline read, “Harrison to leave family practice,” and the article was a very transparent look into the reasons for his departure: business failure.

“I’ve gotten to do the best job imagined,” Harrison reflected, “I would continue if I could.” He went on to explain the closure is for business reasons, stemming from no one reason in particular, but a collection of bad decisions that hurt the overall business.

Dr. Harrison is a great doctor and a good man.  I know this because I know him personally - he delivered my son in the early 90’s and I have seen him off and on over the years.  I know that Dr. Harrison is a pillar of his community in the small town of King City, CA, and that his leaving will affect many by severing relationships that have kept a town healthy and brought comfort to those that called him doctor.

It is upsetting that the reasons for his departure are not because he is retiring or moving to a new home.  Dr. Harrison is leaving practice because his business failed. 

A career spanning multiple decades, providing quality care to a town that needs him - ended abruptly because the numbers didn’t pan out.  This can, in part, be chalked up to a healthcare climate that simply doesn’t support the general practitioner such as Dr. Harrison.  I’ve blogged about this many times (see posts here and here).  The other half of the equation though, is that physicians, dentists and physical therapists must acknowledge that private practice is a business - pure and simple.

I’ve debated this, and some disagree, citing ethical arguments for the separation between the two.  They view healthcare as a human need that supersedes business strategy and market forces - healthcare providers should just be able to focus on taking care of patients, not running a business (Heaven forbid a private practice desire to turn a profit…).

I believe the two actually go hand in hand - that the words “healthcare” and “business” can be used in the same sentence, and in a constructive, humanistic way.  My best argument for this comes in the examples of successful private practices that honor their responsibility as business owners to earn a profit - only so they can then use part of that profit to help others who are less fortunate.  This, if a practice owner so chooses, is powerful proof that business has a place in medicine, in dentistry, and in physical therapy.

And if you still don’t agree, you don’t have to look any further than Dr. Harrison to see proof that successful business is critical to one’s ability to serve others in the healthcare industry.

“There’s a lot of potential and real insolvency in medicine,” Harrison noted, adding that five physicians will soon leave their practices in the Monterey Bay area alone. The problem stems from a nationwide crisis of mixing the need for medical care with the practice of private business, he explained.

My best wishes and luck to Dr. Harrison in his new career, whatever road he takes.

Back in May I wrote about how Cigna and United Healthcare lashed out at concierge physicians by terminating them from contract panels, citing “contract violation” as the reason.  I wasn’t privy to all of the details as relates to the contracts, and wrote about the story not to form strong opinions, but rather to bring the story to the attention of our readers, some of which employ concierge practices.  As a business consultant to private practices, this story also held personal relevance to me and my company as we frequently find ourselves amidst the 3-way power struggle that exists between our clients (physicians and healthcare providers), their payers, and their patients.

I colored the post as an insightful, albeit brief, two-sided look at the issue, both from the perspective of the healthcare provider as well as from the insurer.  No real right or wrong, just the facts as they were understood.  I did give cause, I believe, to acknowledge the creativity and innovation of the concierge model, as we truly support and encourage the free market response to a healthcare system that truly provides a disincentive to the provision of thoughtful, quality care, in lieu of high volume, low cost service.

Now, we believe both in free market innovation from those providing care, as well as in the protections afforded us as individuals through the availability of healthcare insurance.  Both need to be able to survive financially if we are to help our collective society receive the care it needs.  We get it.

We actually go so far as to preach to our clients that in the face of tough financial decisions it is far more noble to protect the interests of the business that serves many, than the interests of few, if those few may cause the ship to sink.  We understand that this applies both to healthcare providers as well as insurers, and as long as each are acting in the interests of their patients, debate over the “best” model or the “best” contract can make for healthy discussion. 

What we don’t preach however, is that profit motives and power should at any point override our responsibility to advocate for the best interests of those we serve - a responsibility that has been called into question in the move by insurers to squash concierge care of late, simply because they aren’t a part of the model.

Today, the Arizona Republic reported that once again an insurance company, this time Blue Cross Blue Shield (BCBS) of Arizona, recently informed Dr. Steven Knope, a concierge physician in Tucson, AZ, that his contract is in violation and may be terminated.  BCBS claims that this move is in defense of their members, and they are concerned that their members must pay rates that are not agreed upon in the contract. 

When well spun it kinda sounds legit - I mean, if a contract says it’s going to cost X to receive Y, then you can’t charge a yearly retainer to get it.  The issue is, Dr. Knope doesn’t submit claims to BCBS for his concierge patients, so it’s unclear as to how this can in any way affect contractual obligations he has to BCBS. 

In defense of the concierge model, my overwhelming inclination is to this time shake my finger at BCBS and chalk this move up to a power play that desires to control the money flowing through all of the care provided by this physician’s practice - when they don’t need to. 

The outcome is the really interesting part of this move by BCBS.  If this show of power by BCBS doesn’t relent, this will serve to: (1) Sever the relationship of BCBS members with their longstanding physician, interrupting the quality and continuity of care they receive, (2) BCBS will formally take the position that member loyalty plays a distant second to their control of the flow of cash through a small practice in Arizona, and (3) Dr. Knope, while undoubtedly disappointed at the termination of his relationship with his patients, will experience an uptick in his profitability because an insurance company cancelled a contract that he didn’t really need in the first place because he operates a business model that doesn’t depend on the 3rd party payer system.

I just blogged about the impact of increased patient financial responsibility earlier today but couldn’t resist getting this commentary up on The Healthcare Entrepreneur tonight as it relates to my earlier post and is very timely. 

A study released by Mercer indicates that patient responsible portions for payment of healthcare costs continues to rise as employers are pressured to shift financial responsibility for healthcare toward their employees during these tight economic times.

The impact on the private practice owner?  You can bet that some of those elective procedures will be staved off untill the 11th hour and time-to-cash on patient responsible portions will creep ever outward.  Now, I’m not saying the sky is falling, just be prepared to take care of that cash-on-hand.

Click here for the article from KansasCity.com.

A survey released Thursday by the Mercer consulting firm found that 59 percent of companies intend to keep down their rising health care costs in 2009 by raising workers’ deductibles, co-pays or out-of-pocket spending limits.

Between 2003 and 2007, the average deductible for an individual grew from $250 to $400. For a family, it rose from $1,000 to $1,500, according to Mercer.

I last blogged about healthcare stocks back in January.  Well, a lot has happened since January, so let’s see how we are faring.

While the healthcare sector is down 7.29% year-to-date, this is actually outperformed only by consumer staples which is down 2.73%, all other S&P 500 sectors show larger losses than healthcare (financials are down 31.53% on the year - ouch!).

Looking at the last 3 months, healthcare and consumer staples are the only winners in the S&P, with healthcare the clear market leader at 4.39% growth compared with 0.27% for consumer staples.  All other sectors have shown a single or double digit negative performance.

So, yes the economy is misbehaving, but overall healthcare is still hanging in there and providing a bit of hope in this sea of pessimism.  Click here to read more about healthcare stocks in the San Francisco Chronicle.

Health care and consumer staples traditionally outperform other sectors when the economy slows, under the assumption that no matter how bad things get, people will always need food, drink and medical care.

While that is undoubtedly a factor this time around, some analysts say the sector’s recovery could be more than temporary.

“I’m bullish now for the short, medium and long term,” says Jonathan MacQuitty, a partner in Abingworth Management Inc. in Menlo Park, which specializes in health care investing. “I’m not always short-term bullish, but I think health care will be the best performing sector for the next 12 months.”

Healthcare has long been referred to as resistant to economic fluctuations that readily affect sectors such as retail, manufacturing, and entertainment.  In fact, we have blogged about this very point on The Healthcare Entrepreneur a number of times (see posts here, here and here).

Exposure exists though, and usually trickles down to healthcare through the bond markets (read about how bond markets affect healthcare here), and insurance companies who are affected by the capital and job markets.  A somewhat new, and significant exposure is gaining attention though, and holds the potential to affect both small private practices as well as large hospital organizations: The patient’s pocketbook. 

Co-pays have risen over the years as have the use of high deductible insurance plans which require more out of pocket payment by the users of the healthcare system.  Well, with more responsibility placed on the patient to pay for their own care, patients have used more discretion in their decisions about the services they receive. 

This makes perfect sense, as this type of discretionary use of services is the essence of the free market - people will buy goods and services at a price that they feel is reasonable (that is, they are both willing and able to pay for desired or needed goods and services).  If a price is out of reach and/or the goods and services do not possess a perceived value that exceeds the amount required to purchase them, the goods and services will go unpurchased, and pressure will exist to offer them at a lower price (read more about supply and demand in healthcare here).

So, imagine the decision making process that occured for Jack Atwell, a 58 year old mortgage broker who was referred by his physician in South Florida to have a cardiac catheterization test because of stress testing that indicated he had an increased risk for a heart attack.  Sounds like a simple decision…have the test, right?

Well, when Broward General Medical Center informed Atwell just two days before the procedure that he needed to pay his responsible portion upfront, to the tune of $2,500, he simply couldn’t afford it.  Fortunately for Atwell, he was able to get the procedure done at Holy Cross, also in South Florida, without an upfront fee.

So, as you can see, this is what’s happening both in our hospitals and in our private practices in America.  I’m not personally here to judge what is right or wrong, only to illustrate that there is a chapter unfolding in American healthcare that tells the story of an ethical dilemma imposed upon our healthcare businesses because of the pressure to survive financially, as well as an economic soft spot in the industry that is a direct result of patients’ inability and/or unwillingness to pay for certain services.

Click here to read the full article in the Sun Sentinel about Jack Atwell and the growing trend toward increasing patient responsibility in the healthcare transaction.

The Internal Revenue Service looked into the issue for the first time in 2006 through a voluntary survey and found 14 percent of 481 nonprofit hospitals nationwide required patients pay or work out a payment plan before being admitted.

Patient advocates said asking for payment before care is delivered, and with short-term notice, places stress on vulnerable individuals who might face life-threatening illnesses. “Somebody facing a catastrophic illness and having to be burdened with the extra stress of paying a co-pay or premium is just unconscionable,” said Laura Goodhue, executive director of Florida CHAIN, a consumer-health advocacy organization based in Palm Beach Gardens.

Hospitals argue that rising health care costs and hard economic times have caused an explosion in care for which they are not paid.

Here is a recent post from Dr. Wes’ blog:

Patients are increasingly moved through a healthcare system unaware of the powerful market currents shaping the direction and costs of their healthcare. A moonscape of larger and larger behemoths of healthcare are slowly taking shape across America as more and more doctors succumb to the inevitable market forces intent on squashing the former entrepreneurial healthcare climate, resulting in fewer patient options for affordable healthcare.

Are you positioning your practice to fight against these “inevitable market forces”?  Are you looking outside “business as usual” for your practice to find ways to expand your revenue sources, decrease costs, and strategically plan for the future?  Are you preparing that inner entrepreneur that exists inside of you to allow your independent practice to flourish?  If not, your practice may just be gobbled up by hospitals or large groups.

I’m beginning to feel as though this next decade will see the end of medicine as we know it. The market forces have become too powerful to fight anymore.

We frequently consult with practitioners on exit strategies from their businesses.  The most common theme that we see is that the practitioner-owner has pulled out every last dollar from the business and when it comes time to exit they are left with a business that isn’t worth very much.  At that point, it makes more sense to unwind the business rather than try and sell it.

When consulting these individuals on building value into their business prior to exiting, we often discuss moving some income into investments for the business (i.e. savings, money market, portfolios, joint ventures, ownership in subsidiary companies, etc.)  We try to instill that these are strategies that need to be implemented well before that moment of exit so that when it does come time to sell the net worth of the business is substantial enough for someone to take a second look at.

On the list of investments provided above, I left out Real Estate.  Here is a recent post on the idea that Real Estate may be the most valuable item on the books.

In any small business, including running a physician’s office, the most valuable piece of your business is the real estate. Most people have heard the McDonald’s story of founder Ray Kroc, who believed that the most valuable aspect of McDonald’s was the real estate underneath each restaurant. For small business owners including physicians, getting a piece of the dirt underneath their business is essential.

Here is an interesting take from an economist looking at the “business model” of small health care practices.

For most small business owners, the productivity of each employee increases revenue. Whether the product is a widget or a hot-dog or computer software, the general concept of employee productivity is that employees increase revenue and the more revenue per employee the better. Thus as sales escalate to the point of needing another employee, the revenue from that person’s productivity more than covers his cost. Thus scaleable businesses typically have desirable business models.

In private practice medicine, revenue is dependent on the productivity of one person - the doctor. Hiring more employees does not increase his productivity. The only thing that can increase revenue is for the doctor to work harder and faster to see more patients or do more procedures. He is the rate-limiting step in the business model. This is the reason why your trips to the doctor’s office get shorter and shorter.

Check out the rest of this article here.

We’ve blogged a lot about the primary care shortage in America (read a few posts about it here and here and here…and here) and the resulting impact this is having on patients who are looking for a primary care physician and can’t find one.  But this is only one impact the shortage is having on the healthcare economy.

There are many primary care doctors who have made the choice to stick it out and remain “cognitive specialists” in a failing system, and while it is a struggle, many find a way to survive.  There is strength in numbers though, and the ability for primary care physicians to stick together, recruit, and partner together to tackle the challenges that are thrown their way is reaching a tipping point whereby the numbers aren’t there to support a group approach to primary care practice - there simply aren’t enough doctors, especially in rural and underinsured areas.

Read more in the Baltimore Sun about a report released by the National Association of Community Health Centers on the topic.

When his colleague departed in December, family doctor Charles Bennettthought he would soon find a new partner for his private practice in Lusby. But he has had no luck for the past eight months.

“I’m still trying to find someone, but I don’t think it will get any better in the foreseeable future,” said Bennett, whose Calvert County practice employs four staff members. “The process is very time-consuming, and I am already very busy as it is.”

Bennett’s troubles stem from the fact that the United States faces a serious shortage of family physicians, especially in rural and poorer communities. There are too few primary care doctors and nurses to meet growing health care needs, according to a report released yesterday by the National Association of Community Health Centers. The study found availability depends on location.