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.

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Click here or call (888) 827-5613 for information on a free program dedicated to helping private practices throughout the U.S. strategically adjust to the slowing economy.  Free program runs through March 31st, 2009 and is open to practice owners and administrators of any healthcare discipline.

Tannus Quatre PT, MBA is a practice consultant and principal with Vantage Clinical Solutions, Inc., a national healthcare consulting and management firm located on the west coast.  Tannus can be reached through the Vantage Clinical Solutions website by clicking here.

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.

There’s a reason that the California Healthcare Foundation has raised $10 million to create a low interest loan pool for California clinics serving low-income and uninsured persons - and it’s not because they have cash on hand.

We regulary recommend that private practice owners prepare their practices for unforseen circumstances by building up several months cash on hand.  This isn’t easy to do, and the temptation to bleed cash out of a business for personal income is difficult to resist when building up a stockpile of cash - but, boy can it be worth it.

Having several months of operating cash on hand both prepares a practice for opportunity that may present itself (expansion, new hires) as well as protection against downturns in the economy or other undesirable scenarios.

Have a strategy of infusing cash back into your practice over several months or years in order to meet a reasonable objective for cash on hand.  Whatever you do, avoid having to dip into credit lines that require a bail out such as this.

The state as of August is deferring to providers Medi-Cal payments, which account for up to 50 percent of health center revenue, to address the state’s crisis. According to the California Primary Care Association, the action is costing its 700 member clinics and health centers $1,500 each minute that the state budget impasse continues.

Some 41 percent of clinics report being able to cover operating expenses without Medi-Cal reimbursement for 30 days or less, according to the association. Interest on traditional lines of credit available for these clinics can range as high as 14.5 percent.

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Click here or call (888) 827-5613 for information on a free program dedicated to helping private practices throughout the U.S. strategically adjust to the slowing economy.  Free program runs through March 31st, 2009 and is open to practice owners and administrators of any healthcare discipline.

Tannus Quatre PT, MBA is a practice consultant and principal with Vantage Clinical Solutions, Inc., a national healthcare consulting and management firm located on the west coast.  Tannus can be reached through the Vantage Clinical Solutions website by clicking here.

How’s this for a healthcare policy trifecta? - Gift bans for pharma reps, $25 million in EMR incentives for private practices, and university requirements to boost primary care graduates.  Three big issues in healthcare today…one clean law to deal with them.

Tackling major issues in healthcare policy isn’t easy, and tackling three large ones with one fell swoop is quite ambitious.  Pushed forward by Senate President Therese Murray, the new Massachusetts law was signed into law yesterday by Governor Deval Patrick.

The law is just the beginning however, and much more planning will be required to achieve what the law intends over the coming years.  Read more about the law at the Boston Globe.

Patrick’s Human Services Secretary JudyAnn Bigby said that while universal health insurance is an important goal, the current system is lacking if everyone cannot get access to quality care, or premiums and out-of-pocket costs become too costly for patients.

“We have to make sure that people have access to high quality care and that we are being efficient in the way we pay for that care and that we are paying for the right things,” Bigby said in an interview. The law Patrick signed yesterday “puts the challenge to those of us who have to implement it to do more planning.”

This article in USA Today reports on a trend reported by the CDC regarding the frequency of visits to the physician’s office.  The CDC reports that visits increased 26% between 1996 and 2006, the same time period that experienced an 11% growth in population.

The reason?  An aging population.

Juxtaposed against this information from the University of Missouri which predicts a shortage of 44,000 primary care physicians by 2025 (I blogged about this recently in a post about supply in demand in healthcare here) and we’ve got a problem on our hands.

Time to get crafty with our access points into the healthcare system…

The aging of the U.S. population is translating into many more visits to doctors’ offices and hospitals, a reality that is taxing weak spots in the health-care system, according to a government report released Wednesday.