Savvy Medicine's web log discusses timely topics for the healthcare professional, ranging from legislation to personal life balance. If there are particular topics that are of interest you, please share them with us.

   Posted On: December 29th, 2013

Reversion to the mean
Reversion to the mean? What does that mean in the investment context? Economists swear by it. Investors are generally oblivious of the concept specially once the stock market is on a tear like it has been for 2013. The concept is that over long periods of time various assets (now valued more) tend to return back to their average or mean. The WSJ reports that the S&P 500 Index gained an average of 11.2% between 1980 and 2012 but exceeded that in 2013 to 19.8%. That simply means that over the next year or more, assets overall will tend to swing back to the average. Will that be in 2014 or 2014 or later? No one can tell us that.
Comment: All we remember is the last good or bad experience we had in the market and react to that memory. If your asset allocation is solid, automatic investment plans with periodic re-balancing probably stands the best chance of success. Of course, a savvy investor could do well with extensive research and place wise bets and beat the market. But, like a lot of people I do not have time or the knowledge to make these bets so I am content not to follow the market every minute or hour content that I have made my bet in terms of my allocation for the long term. I may not get the 20% return some friends are getting but then I was not getting them prior to the market crash a few years ago when the tech bubble burst either!   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: December 29th, 2013

Future of tele health
I believe telemedicine (TM) will be big for several reasons. First, the shortage of physicians and other practitioners and influx of newly insureds will lead to increased wait times and dissatisfaction with the system. Telemedicine offers an ideal combination with new technology to rural and small towns as well as poorer urban areas with lack of transportation. All 50 states allow TM in some form or another. Google ‘helpouts’ is a new video-chat platform that may allow medical consultation especially for primary care practices. Consultations will be mostly related to non-emergencies, mental health counseling, dietary and wellness programs as well as routine low risk problems such as colds, allergies or small injuries or wounds. About 12% of patient care could be rendered remotely in a recent report in HealthAffairs journal.
Comment: A major issue remains and that is whether it will be cost-effective. A study by the London Scholl of Economics reviewed cost-effectiveness of telehealth compared with standard care over 12 months in 965 patients with three long-term conditions: heart failure, chronic obstructive pulmonary disease or diabetes and found that pay-off in terms was marginal in terms of quality of life. Another issue is whether TM reduces workload for PCP’s. A study in the UK showed no significant decrease in workload. However, more studies need to be done and as technology improves it should allow more cost-effective care to more people.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: June 30th 2013

Over utilization of diagnostic testing has been ascribed to either a profit motive on the part of physicians or fear of malpractice claims. While there is no discounting either, a new study shows that the VA has a similar problem. The VA physicians/nurses of course have no profit motive and liability is extremely rare because most claims are resolved through an administrative process. Authors in this JAMA paper reviewed 332 myocardial perfusion tests in 2010 and 2011 and using well published criteria for ordering the test , 13% were considered inappropriate and another 8% uncertain. The findings were no different than previous reports from non-VA institutions suggesting other factors rather than just profit motives or fear of lawsuits were in play.
Comment:Part of this behavior may be due to the training physicians received as well as an exaggerated perception of benefit for asymptomatic patients as the authors point out. News media are always quick to point out the profit motive as the answer to everything to do with physician behavior so I wonder how this will be reported. Maybe minimize the lawsuit risk and not mention the emotional toll on physicians?   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: June 30th 2013

Are all physicians going to sell?
Although healthcare systems are bingeing on buying physician practices, the predicted end of private practice may not be as close as everyone thinks. A recent survey by "Article". surveyed over 5000 physicians in April 2013. PCP’s represented 77% of those surveyed. 36% saw declining financial profitability, 50% did not have resources to handle the supposed 30M people entering the system and the majority spend one day a week in administrative matters rather than patient care. Some surprising findings were revealed. Only 11% were actively looking to sell joining the 10% who have sold already. 60% said they were NOT looking to sell. 65% of solo practitioners were not looking to sell. This varied by state with NY and Illinois physicians more likely to sell.
Comment: Certainly, this survey if of PCP's for the most part but this survey is against most others specially recruiting firms like Merritt Hawkins who contend that only 35% are currently not employed by hospitals or large groups. Resilience has been the hallmark of physicians who have seen new mandates and regulations come and go. It is likely that these physicians opting to stay in control of their practice see the current wave as a fad and disenchantment a given with employment by hospitals. Stay tuned.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: February 21st, 2013

Press Ganey retaliates
Boy, did Press Ganey react! Their missive was a tirade against physicians who struggle with satisfying ratings that hospitals are wielding to look good to rating agencies. Press Ganey makes millions off these surveys and any criticism hurts their bottom line. It all started with a Forbes article called “Why Rating Your Doctor Is Bad For Your Health.” They let out the secret that hospitals and their employees (physicians) may just over treat, over prescribe and over test to improve their ‘patient satisfaction’ scores (surprise!). The article mentioned a UC Davis study pointing out that the most satisfied patients spent the most on healthcare and prescription drugs and by the way were more likely to die. As incentive plans and bonuses become more tied to these ‘scores’ the question is: will they lead to worse outcomes and more costly medicine.
Comment: Patient satisfaction is very important in terms of quality of care and communication but the measures that are being used now are worthless. Keep an eye at the ball swinging back to the middle instead of way out.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: February 21st, 2013

CEO hires a hoodlum to frame physician
Talk about a strange hospital CEO and physician confrontation! An ID specialists just won a $5.7M award after the CEO was found guilty of framing the physician by planting a gun in his car. The CEO did not like the physician due to several conflicts at the leadership of the of Integrated Healthcare Holdings Incorporated (IHHI), which owned the Santa Ana hospital called Western Medical Center in California. So, the CEO apparently hired a hoodlum and paid him $10,000 (of hospital money) to set the physician up and frame him for a gun in his car. The hospital board was allegedly in cahoots with the CEO rewarded him by giving him a consultant contract!
Comment: Sounds like a Hollywood story? Maybe. Watch for it in your favorite movie theatre.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: December 29th, 2012

Top 5 Physician issues for 2013

1. Reimbursement: Even if Congress puts a temporary patch on the SGR fiasco, look for further nickel and dime reductions in reimbursement. The only exception is about a 75% increase in Medicaid reimbursement to PCP’s as part of ACA. How long that lasts is a tough one to predict.
2. Continued uncertainty over ACA (PPACA): Regardless of the SC decision, there will be continued challenges to the law. 2014 elections may see more efforts to defund some parts of it depending on who has control of the House.
3. More consolidations: More physicians including specialists have climbed aboard the train for hospital employment. In our town, there is hardly a cardiology group or Vascular Surgery group left in private practice. This will continue till physicians start to get disgruntled with efforts to curtail their decision making in order to cut expenses.
4. Autonomy: This will become a big issue as employed physicians settle in as ‘employed’ and forced to ‘align’ themselves with hospital systems. At some point there will be disagreements and with physician shortages, there will be a lot of shifting and cross over to competitors. Read the terms of your contract regarding restrictions on jumping ship very carefully.
5. Physician shortages & patient access: New graduates are being recruited heavily with great compensation packages. This will create some hard feelings for the already employed. With shortages and an estimated 30 million people about to get an insurance card over the next few years, who is going to care for them? Hospitals will have to retain physicians and keep them happy. Even then, don’t be surprised when the public revolts when they have an insurance card but no access or months of waiting time to get in.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: December 29th, 2012

Aetna pays up
A proposed $120M settlement with Aetna is near done. This is an old class action case which AMA, ten state medical societies and other plaintiffs filed against Aetna for low balling UCR fees using their Ingenix database. The database was developed and owned by United Healthcare and shared by the insurance industry to enable them to pay low fees for out of network services. The accusation was that Aetna purposely paid low fees for out of network services from 2003 to the present and therefore shifted the onus to collect from their patients instead of fair payment from the insurer.
Similar suits against Cigna and Wellpoint will probably also lead to a settlement. How do you get some of the settlement? The largest amount fund is the general settlement fund of $60M. Clinicians need to demonstrate that they were out-of-network providers for Aetna during any of the years from 2003 to the present. It is estimated that you may receive an average of $40 for each of those years. Cost of the settlement, attorney fees etc will take a big chunk of the money. To collect more, clinicians may be able to get from an additional $20 million provider "prove-up" fund. You must submit documentation that you billed Aetna for out-of-network claims and balance-billed the patient but the patient failed to pay. There is also a $40 million prove-up fund for Aetna beneficiaries   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: October 31, 2012

Payment for on call
One of the hot topics has been the per diem payment to physicians taking call to cover emergencies through the ER and whether some version may violate anti-kickback or Social Security Act. Well, some good news on that front.
Although one opinion by the OIG (Office of Inspector General) does not guarantee that all similar arrangements will be unlawful, this particular opinion involves a hospital asking for unrestricted call coverage of the ER by 130 physician specialists. Physicians agreed to serve on call by certain agreed upon time limits, admit them, see them in the hospital and provide follow-up care regardless of their ability to pay. The hospital offered this opportunity to all specialists and set aside an aggregate amount per specialty annually and paid per diem based on the number of physicians taking call. Importantly, the hospital hired an independent consultant to evaluate these payment rates to make sure they were fair market value and that there was no connection with number of referrals or admissions to the hospital. OIG agreed that this arrangement fit with the ‘personal services and management’ safe harbor and HHS will not impose any sanctions.
Commment: The point is that hospitals cannot use the threat of AKB statutes to deny on call compensation and can properly structure payment arrangements.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: October 31st, 2012

Patients like you!!
An interesting survey of 2,236 adults, of whom 95% had health insurance with 1,807 (78%) having a family physician or primary care doctor conducted by Harris Interactive.
“Among those who had visited a family physician or primary care doctor (at least once) in the past year, 79 percent said that they were very or extremely satisfied with their visit. 64 percent said that their doctor is always able to exercise independent judgment when providing care.” When asked about who might be to blame for rising healthcare costs, 75 percent of respondents who have a family doctor / PCP said percent said that insurance companies (75%), pharmaceutical/drug companies were very completely responsible (74%), cost of malpractice insurance (62%) and 59 percent said the government was responsible. Only 30 percent felt that physicians were responsible.
Regarding the health reform passed, 39% percent believe the impact of the law on healthcare will be negative, 26% who feel the impact will be positive and 35% have no opinion.
Comment: Just remember that no matter how much negativity is out there, our patients will be with us provided we take care of them without biases, judging them or letting commercial interests influence our decisions.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: July 7th, 2012

Sharpe Ratio
I talked about the Standard Deviation as a tool for measurement of risk in investments and will discuss very briefly another tool used by professionals: The Sharpe Ratio.
Most of us look at the returns and don’t focus on the risk we take in trying to achieve those returns. The Sharpe Ratio helps investors calculate out how much return they're getting in exchange for the degree of risk they're taking. Stanford Finance Professor and Nobel Laureate devised the ratio to figure out the investment return for each unit of risk assumed. So, SR = Investment (fund) return – presumed return on risk free investment/ volatility as measured by the standard deviation (we talked about in April, still posted on the blog) So, a high S ratio means you are getting rewarded well in proportion to the risk you took.
Example: Assume Treasury yields are 0.5% (if you are lucky!!) My fund earns 12% annually but I took a higher risk and my SD was 30%. So, my S ratio was 12-0.5/30 or 0.38 Your fund gave you only 10% annually but your risk was less and the SD was only 20%. Your Sharpe Ratio was based upon 10-0.5/20 equals 0.47. Your fund delivered a better return in relation to the risk.
You can find this ratio in most funds and if you use Morning Star it is under the ‘ratings & risk’ tab. Downsides are that this looks at past performance only and loses some relevance if returns are at Treasury Rates or below. This is just an additional tool for you to use in assessing risk versus reward. Next, I will talk about some other risk metrics such as Alpha and Beta.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: July 7th, 2012

Physician survey themes
A recent survey by Athena Health/Sermo of over 500 physicians (76% specialists) and 50% in dependent reveals some common themes:
70% have a favorable view of EMRs are deemed valuable though labor intensive and 22% believe it significantly improves patient care. Dealing with payers/billing is still a major headache; Billing: 27% use an outside service Lots of skepticism that government can lower costs or improve outcome
43% have either never heard of an ACO or know little about them. 63% think it would affect their practice negatively. But, 41% are confident in their ability to be part of an ACO
58% want the entire ACA reform law either completely repealed or majority repealed
Comment: Pessimism about the future of medicine and that quality of medicine will decline over the next 5 years is the biggest concern out there.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: May 20th, 2012

What we are doing right!
What are most physicians missing amongst all the bad news we continually hear in the physician lounges and the hallways?
It is the fact that despite all the negative stories about physician’s being a shill for pharmaceutical companies and out for profit at the patient’s expense, the patient is still on our side.
A Gallup poll during the raging health reform debate in 2009 had the public express trust that physicians were the group they trusted most to fix the healthcare system. In a 2011 Gallup poll, 70% of the public rated doctors as ‘high’ or ‘very high’ in terms of their honesty and ethical standards. Clearly, our patients realize that we have bad apples but they are a small minority to be found in every profession. I would argue that the 70% is low and we should aim, all together, to have that inch up into the 90’s despite the strong headwinds and the universal cynicism all around us.
There are a number of reasons why physicians have managed to ride the storm out better than some other professions. We have welcomed the advent of the patient as a consumer. The more discerning and involved the patient the better we feel about the patient’s participation and the outcome. The one-on-one relationship has survived the insurance companies and the government efforts to erect barriers between us. The trust between physician and patient has largely been preserved. All the better since there is a correlation between patient compliance and outcomes and trust in the relationship. The trend towards disclosing any medical errors and making a truthful apology will further cement this trust.
Comment:It is wise to draw a curtain in our exam rooms between the patient-physician team and the noise and clutter outside.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: May 20th, 2012

The real issue being ignored in healthcare costs
The single most repeated fact during the national debate about healthcare is how expensive healthcare is in the U.S. Plus outcomes that fall below OECD benchmarks. The per capita spending in 2008 was $7538, 51% higher than the nearest high spender Norway. As a share of national expenses, our health bill is over 16% of GDP. Few get into the weeds and start to question why? The entire focus is on the share of hospital and physician part in the overall expenditures.
Of the 2.6T$ spent on healthcare in 2010 over 50% is spent on lifestyle diseases! "Article".
Behavior. Even moderate behavioral changes would drastically cut health care costs for type 2 Diabetes, Coronary Artery disease, stroke and colon cancer just to name a few. Addictions. Obesity. Childbirth in teens. The list goes on. It would make sense to compare outcomes for instance for infant mortality with other countries after accounting for childbirth in addicted single mothers with no prenatal care.
The healthcare system cannot fix all of society’s ills. We should find innovative ways to reduce cost and improve outcomes in high risk populations. However, the problem is much bigger than that. It will take total buy-in from the public and some extreme measures to bring down the cost as well as the human suffering.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: April 8th, 2012

How do assess risk versus reward in stocks/funds before investing? One measure of risk.
The long-term data show that although the stock market has generated fairly steady returns over the years, there have been periods of considerable variability, and therefore, risk for the investor. To quantify this risk, several measures are commonly utilized. One of them is the Standard Deviation (SD). I will briefly examine the rest over the next few postings.
Standard deviation is a measure of the range of an investment’s return or the scatter of a set of numbers over a period of time. For instance, Bernstein estimates the SD for Cash: 2-3 percent; for Bonds: 3-5 percent; for conservative domestic stocks: 10-14 percent; for Foreign stocks: 15-25 percent; and for emerging market stocks: 25-35 percent. The standard deviation as used in mutual funds signifies the deviation of the returns from the expected normal returns. Most mutual-fund rating companies, including Morningstar, list the standard deviation of annual returns for the past five years or 10 years for rated mutual funds. A portfolio of 100-percent foreign stocks had a much greater risk (standard deviation of 22) with a better return than domestic stocks with a standard deviation of 16. A mix of 50-percent domestic and 50-percent foreign stocks was expected to have a return of 15 percent, but with reduced risk (standard deviation of 14).
So, the next time you look at your portfolio look at the SD for mutual funds or even your entire portfolio to give you some idea where you stand in terms of risk versus reward.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: April 8th, 2012

Burnout, depression and alcohol in physicians
Recent studies have analyzed burnout, depression, quality of life, suicidal rates and medical errors and their consequences in physicians and especially in surgeons. About 9.4% of adult Americans meet the definition of substance abuse or dependence with men being twice as likely to be in this group. (Oreskovich: Arch Surg. 2012; 147(2):168-174) The authors surveyed >25,000 members of the American College of Surgeons as part of a comprehensive study of lifestyles and burnout. Of the almost 28% completing the survey, 15.4% fit the definition of substance abuse or dependence. Prevalence was almost twice as high in women (25% versus 14%). Surgeons were more likely to be dependent if they were depressed or burned out. Working for the VA (!), male sex and having children were associated with a lower risk.
Comment: I knew there was a good reason to have children! Of course we do not know whether the substance abuse caused the depression or vice versa. Also the study primarily concentrates on alcohol abuse and not opioids or other drugs available to some physicians. The message however remains strong. Every hospital or medical center must have strong programs to detect and counsel physicians in order to protect patients.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: February 27th, 2012

Napping at work?
Napping at work? What? All of us have experienced having to take short naps whenever possible during our residencies when sleep was so precious. Once in practice, few of us have a place available or the time, during a packed day, to take a short ‘power nap.’ An oncologist friend of mine has always gone home for a quick lunch and a short 30 minute nap for years since his office is 10 minutes away. I have never asked him what actually goes on at home when he goes home for a 'nap'! For most of us, that is not possible.
The Libby Zion case, which resulted in duty hour restrictions for residents, was the impetus. Starting in 2003, nearly 20 years after the Zion case the work hour restrictions exist for the entire country. Although the work hour restriction is too much of a ‘blunt instrument’ sleep scientists have shown that naps as short as one hour can prevent performance errors. It is not a sign of weakness anymore. "Article".
Comment: My problem was, and I suspect that is true for a lot of you, that I was too wound up and had too many things on my mind to nap at work. Maybe if I came home, I might have been able to nap. But, it is not practical for most of us. Will there be a time when we get ‘rent a cot’ type of cabins like they do at some airports??   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: February 27th, 2012

How mant stocks does it take?
That great investment guru Benjamin Graham advised adequate diversification but warned about too much diversification. The debate about how many stocks in your portfolio you need to own to maximize returns but minimize risk is still out there. The modern portfolio theory (MPT) was proposed by Markowitz in the early 1950’s and Nobel Prizes have been awarded in this area of economics.
Jason Zweig had a good review in a recent WSJ column. He recounted an interesting study led by Professor Chance where he instructed over 200 students to invest one stock followed by others until they had invested in 30 stocks. For the entire group, the risk went down 40% by going from 1 to 20 stocks. But, when they increased their holdings to 30 stocks, their risk increased. Mr. Zweig pointed to a study by the Federal Reserve, which showed that 84% of households that owned direct shares owned no more than 9 stocks and a surprising 36% only owned a single stock. Most ‘experts’ including Graham and Malkiel advise that owning between 10-30 stocks assures you about 90% of the benefit of diversification. If you own this magic number of stocks you eliminate what is called ‘unsystemic’ risk.
Comment: I guess the question is: If you do not know how many stocks and what kind to own, aren’t you better off owning a mutual fund? Then, most of us want to diversify further by buying funds of various kinds, not realizing that a lot of funds own the same stocks! I know of no one that checks and compares each fund to see if they own duplicate stocks. That is called 'asset correlation'; see the chapter in "The Smarter Physician Volume 3". Even, if you decide to buy ‘value’ versus ‘growth’ or ‘small’ versus ‘large’ caps or even ‘financials’ versus ‘healthcare’ sectors , do not be surprised to see some overlap in this day of mega conglomerates. You could own something like the U.S Total Stock Portfolio, an index fund that captures tons of companies   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: January 28th, 2012

Referrals increase. Why?
Barnett and colleagues report that the number of referrals from ambulatory visits have grown 94% from 1999 to 2009. (Arch Intern Med. 2012;172(2):163-170) Surprised? I am not.
They analyzed 845,243 ambulatory visits and estimated that a visit to a physician generated an increase in referral to another physician from 4.8% to 9.3% in the ten years. A somewhat slower referral pattern was found in physicians groups that had an ownership stake in the practice or those with the majority of income from managed care contracts. In the same time period, the “total number of ambulatory visits in the United States increased from 841 million to 1130 million per year or 3040 to 3720 visits per 1000 persons annually.” Both PCP’s and Specialists showed an increase in referral rates. Specialists referrals increased primarily in ENT, GI and Orthopedics same as for PCP’s. It is clear that further specialization has left some PCP’s uncomfortable with the rapid increase in new knowledge. But, an important factor is that they are burdened with more complicated patients and less time to deal with them.
Comment: No one knows what the proper referral rate is and so we cannot judge whether these findings have any meaning with regard to appropriateness. PCP’s in managed care contracts tend to refer less is nothing new. We found that out in the managed care era. How will the reform and ACO’s deal with referrals?   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: January 28th, 2012

'Cloud Care' What is it
Technology is moving faster than Moore’s Law about computing would suggest.
Billing software, administrative and financial aspects of a practice are the biggest headache for any practice other than human resources. So, what is new? Here comes ‘CareCloud’ offering ‘cloud ‘online services that does patient appointments, process insurance claims, billings, collections, financial analyses, medical records and links patients with physicians and other healthcare organizations. Too good to be true? You decide. " Cloud Care" . The privately held company charges $499/month per physician. This is in addition to a more comprehensive revenue cycle management program, which is billed as a percentage of collections.
All data is kept in the ‘cloud’ meaning off-site and the practice downloads some software. No special hardware is needed. Also available are benchmarks for the practice to compare itself to with regard to the usual goalposts. The company is also now introducing a medical record system.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: December 12th, 2011

2012 COLA is here
“COLA” for 2012 is coming up quickly, so it may be worth a few minutes to catch up.
Standard income tax deduction to $11,900 (up $300) for married couples filing jointly, to $8,700 for heads of household and to $5,950 for singles. Tax bracket: for a move from the 15% to the 25% bracket income will be $70,700. Estate tax exclusion increases to $5.12 million from $5M
$17,000 (up from $16,500) limit for 401k, 403b and 457b plans; another $5,000 for those >50 Tax deductibility for traditional IRA phased out at $58,000-$68,000 for single filers and $92,000-$112,000 for married couples where spouse contributing is covered by workplace. SS payroll taxes increase for about 10M workers and maximum earnings subject to the tax will now be $110,100   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: December 12th, 2011

Are you holding on to losers??
Jason Zweig, a very savvy commentator on financial matters, recently wrote in a WSJ column about what prompts people to hold on to their losers in investments. He cites research in a new field called ‘neuroeconomics’ which offer some clues. One such study involved people deciding whether to hold or sell investments while being monitored inside a brain scanner. While monitoring the ventral striatum (part of the brain associated with associated with emotional and motivational aspects of behavior), it was noted that when an asset was a loser and the price was made to go up, activity in this part of the brain was ‘blunted’ meaning that people were always hoping for a rise and therefore theyw were not surprised. They concluded that most investors who have losers are always hoping for a rise in the value of their holdings. Another study showed that people are much worse at estimating losses from a bad investment than gains from a good investment.
Comment: My take is that a lot of us hate to admit we made a mistake and think we are really smart at spotting good investments. When we do, it is the equivalent of ‘out of sight, out of mind’ and we ignore the problem hoping it will correct itself. This is normal human behavior!   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: November 5th, 2011

Are ancillary services now a loser?
It is no surprise that total medical revenue from 2009-2010 declined for many practices according to MGMA data. While the thinking has been that those with ancillary services would continue to outperform those without, this was not necessarily the case. Turns out that for PC practices the revenue per FTE physician declined regardless of ancillary revenue. Surprisingly, surgical practices without ancillaries did better than practices with ancillaries with some increase in revenue and profit. In contrast, those with ancillary services had decreases in both metrics. For multi-specialty groups there was a slight increase in total revenue and minimal increase in profits.
Comment: I guess you have to wonder (without breaking down the numbers) whether this is due to decreased reimbursement (ultrasound for example) or continued rise in fixed expenses such as salary, benefits and bricks and mortar costs. Medicare is trying to fix leaks as they spring up and when the leak is a flood then they run to stop the leak. Soon, there is another leak. We will observe where the next one is. Unless, the entire reimbursement system is turned on its head.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: November 5th, 2011

Pocket phone ultrasounds! A pocket smartphone ultrasound device, you say? The FDA approved Mobisante’s new ultrasound device and this is hitting this market this month or next. (Businessweek October 3-9 2011)It scans vascular and other structures quickly, allows post processing and measurements as well. The cost of the hairbrush like attachment is $7495. Certainly looking at the demo the resolution is not great but if you wanted to do a fastscan or see if there was a pseudoaneurysm you don’t need a high resolution scan. The company is also looking at battlefield use. With smartphone’s everywhere, the next generation of portable ultrasound’s will improve and reliance on large centers for quick, low resolution imaging use will diminish.
Comment: Venture capital money is now flowing in to this technology. GE is already in it, AT&T is stepping in and Philips is eyeing things carefully.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: October 15th, 2011

The 'nurse doctors' are here
The NYT recently profiled a nurse practitioner with a doctorate who wanted to be called a Doctor. ( "NYT article" Reg required.)The article stated that nurses who obtained their doctorates were not doing it to gain more autonomy, money or prescriptive power. The AAFP Board President commented that patients would be confused about who the doctor really is. Let us look at some current workforce numbers: 276,000 PCP’s, 125,000 NP’s, 225,000 Pharmacists and 81,000 PA’s. Mid-level practitioners are getting larger in numbers and with the shortage advertised by physicians (myself included) the ANP’s and PA’s and Pharmacists have an opportunity to gain market share as the first healer to see patients. All they have to do is convince payers to reimburse them at the same rates as the physicians. The same physicians who were tutoring PA’s and ANP’s and promoting the teamwork concept are now crying foul. The numbers are important, too. “In 2008, there were 375,794 nurses with master’s degrees and 28,369 with doctorates.” Now, no one has proved that a nurse with a doctorate can deliver better care. But, there it is.
Comment: Where the rubber will meet the road is when Congress will look at the budget deficits and ask: Can we replace one PCP with two of either an ANP or PA? (The compensation, on average, for an ANP /PA is half that of a PCP) As I have said before on this page, the PCP’s who are locked into their own battle with specialists over being under compensated, will need support from their specialist colleagues. Will it materialize? This battle is surely before us sooner rather than later.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: October 15th, 2011

If all else fails blame the docs!
Sally Pipes comes to the defense! "USA Today article".
“The Kaiser Family Foundation released recently its latest estimate of what health insurance will cost in the future. By 2021, average family premiums are set to double, to more than $32,000. This year alone the premium is $15,073, up 9% from 2010.” She is talking about the Health Affairs article penned by two authors from Columbia, one of whom happens to be one of President Obama’s chief healthcare advisors. These authors state "We conclude that the higher fees … were the main drivers of higher U.S. spending," and "Physicians are making five times the median income. Is that what we really want?" They compared doctors' pay in six developed countries and found that U.S. earnings surpassed the rest. Basically, the authors unload and lay the entire blame on physician fees as the culprit for our health care ills. "HA article". Sally Pipes argues that education costs here are higher and almost 4-10 times the cost of medical school in the US. The average work week is longer, about ˝ the income goes to overhead and liability insurance higher. It is interesting that physician compensation in the US runs about 20% of the health care bill and take home pay about 10% of the nation’s health bill.
Comment: I expect nothing less from academics who are far removed from patient care. There is no question that US physicians in general are better paid than their counterparts in other countries. However, to blame all the ills on 1/5 of the spending is disingenuous and betrays a preexisting agenda. They ignore the old saying ‘go where the money is’ and where big dollars are spent : hospitals and nursing homes. That is not to shift blame because physicians have to get their act together and stop the waste and abuse that they see. But, any well intentioned practicing physician put in charge of the system can point to a 100 places where the waste is if they will let us do it!   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: September 22nd, 2011

Are your retirement plans disrupted?
A recent Jackson & Coker survey shows that 52% of 522 physicians surveyed had changed plans for retirement and 70% had decided to work longer due to the market. Of those who had decided to leave full-time medicine, 26% blamed it on health reform uncertainties and22% due to the rising cost of doing business. The price of EMR may have a lot to do with this regardless of the incentives. Some had gone part time or locum tenens. (See my recent article ) A full 19% stated they were leaving the healthcare industry for something else. As we point out in the article, the locum tenens industry has grown significantly Jackson & Coker point out that 10% of those working part time are older than 65 and an additional 22% of those between 55-64 are also working part-time.
Comment: I think our study ( "abstract" .) has caught the wave of physicians working part-time. The women in their child rearing years and males >60 happen to be the largest groups who can work part-time and fill in to make up the shortage. For the full abstract see the news page.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: September 22nd, 2011

Is the AMA still the voice of medicine?
Another Jackson & Coker survey touches on a sore topic for many physicians. What do they think of the AMA? Only 11% agree with the statement that the AMA represents their views! Those agreeing vary: males 10% versus females 13%, practicing 10% versus non-practicing 19%, members 40% versus non-members 4% (no surprise). Only 13% agree with the AMA position on health reform, 15% think the AMA successfully advocates for their positions, 11% that it is effective at lobbying for tort reform, 13% that the AMA is effective in supporting physician autonomy and a whopping 9% agree that the AMA is effective in insulating physicians from intrusive government regulations! Of the 976 physicians surveyed, 72% dropped their AMA membership because the AMA did not speak for them, 53% because the CPT business was a conflict of interest, 47% because of the MAA support of PPACA and 43% for too far left an ideology.
Comment: Certainly those of us who have watched the membership decline over the years and particularly after the PPACA fiasco, still recognize the power of the only united physician lobby in Congress. However, the AMA has shot itself in the foot many times and its deal with the administration regarding PPACA in exchange for changes in the SGR formula was the coup de grâce.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: August 20th, 2011

Did your pay go up 4.3% to 1.05M/year?
In its annual Executive Compensation Survey of about 1,200 U.S. health care providers, Modern Healthcare notes that average health care system CEO pay in 2011 climbed by 4.3% to $1.05 million, making health system CEOs the only executive group to average more than $1 million per year in overall cash compensation. If the health system revenue was <1 B$ the CEO median pay went up 14.4% mostly due to incentive pay. The average hospital executive gained 3.1% in 2010. However, the smaller system CEO ‘stagnated’ at a median of $600,000!
Comment: For those physicians becoming fully employed, are there incentives tied to your compensation? How are they structured? Are the goal posts realistic and are they being moved? My experience is that systems try to make the goal posts so high that most physicians are setting themselves up for failure. The time to set these goals is at the initial meeting. Once the goals have been set, you will be hard pressed to change them. Also, bring evidence to argue against unrealistic goals. There are legitimate places to get this information.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: August 20th, 2011

A behemoth goes retail!
Mayo just opened a retail facility at the Mall of America in Twin Cities mega mall called "Create Your Mayo Clinic Health Experience." The store sells Mayo Clinic cookbooks, wellness programs, and provides telemedicine services. Customers play with 3-D computer monitors, kiosks, and "navigator specialists" to map their health and develop wellness programs.
Comment: The trend to opening urgent care centers in grocery stores and CVS pharmacy and moving closer to the consumer is clear. I have previously featured this trend. I do not think every system is going to be successful at this. Previous branding helps. Mayo is one of the top most brands thanks due to the rich and famous getting their care at Mayo. Kent Seltman co-authored “Management Lessons from Mayo Clinic,” published by McGraw-Hill in June 2008. I am having him come to facilitate a session on customer satisfaction at Ohio State as part of an 18 month Talent Management and Leader Development Academy to educate junior surgical faculty. He details in his book what it takes to provide totally patient centered care. Worth listening to.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: August 7th , 2011

The five percent problem
What do you about the 5% of the population that accounts for close to half (47.5%) of the healthcare spending in the U.S? And 10 percent of the population for 63.6 percent of spending? In 2008, the ‘average’ person spent $233 versus the top half spending was $7,313 on themselves. Not surprisingly, it is the chronic conditions that are at the crux of the problem. Nearly 50% of people in the top 5 percent of health care spending had high blood pressure; a third had high cholesterol; and a quarter had diabetes. (Fung A. National Journal June 27, 2011)
Comment: Any solution to healthcare spending will have to focus on chronic conditions. Hence the current flavor of the month: medical homes. There has to be a multi-pronged solution to keeping chronic conditions from increasingly bankrupting the bank. Incentives for people taking care of themselves and disincentives for abusing themselves have to be part of the solution. Personal responsibility is entirely absent in the current reform legislation. All the risk is transferred to hospitals and physicians. Unless there is a financial penalty, a lot of people will not control their weight, lipids, blood pressure etc.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: August 7th , 2011

Value or growth?
It may not be an ideal time to be talking about value versus growth when all you are thinking about is a defensive position in the market. But, if you are a long term investor, you are not looking at the daily swings and striking a balance between value and growth. Value investing is investing in cheap stocks while growth investing is the opposite or investing in companies poised for growth. Established growth companies like Apple are expensive with a PE >2-4 times the market average. Bernstein points out that Professor Haugen studied the value effect in the mid-1990’s and noted that 20% of stocks with the highest PE’s (growth stocks with an average PE of 42) had an earnings yield of 2.36% versus the 8.3% for value stocks (PE 11.9%). Earnings yield is the inverse of the PE or earnings/price.Bernstein, a physician turned money manager, also comments that the risk of value stocks is lower than growth stocks partly because they stand up better during bear markets.
Comment: Read ‘The intelligent asset allocator' by Bernstein.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: July 24th , 2011

Physician CEO's are best. Are you surprised?
That physicians make better CEO’s of health systems is not conjecture any more. A cross-sectional study of 300 chief executive officers of the top-100 U.S. hospitals in 2009, looked at quality measures in three specialties: Cancer, Digestive Disorders, and Heart and Heart Surgery. A strong positive association between the ranked quality of a hospital and whether the CEO is a physician (p<0.001) was apparent. (Goodall. Physician-leaders and hospital performance: Is there an association?) Only 235/6500 hospitals in the US had Physician CEO’s in 2009. Goodall used the US News and World Report criteria and noted that 16/21 CEO’s of the highest performing systems (honor rolls) were physicians. These high performing hospitals like the Mayo & Cleveland Clinics choose physicians for a reason.
Comment: We have argued previously that credibility is a big issue. "abstract" . Physician CEO’s who have practiced not only know how the quality and expense factors can be dealt with but can deal with physicians one on one and directly impact the care at hospitals.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: July 24th , 2011

Wrist monitors: the latest tech watch!
Going with my technology theme, let me introduce you to wearable health monitors with a wrist sensor product. Jawbone’s "website" . came out with it’s first non-audio product, which is a wristband that acts as a portable health monitor. It is equipped with an application that combines tracking and analysis of user movements, nutrition and sleep patterns. Can you imagine a device that monitors EKG, pulse rate, temperature, motion, sleep, stress, pacer activity etc and report data back to the physician or a central monitoring site?
Comment: I think this has the potential to take off provided the cost is affordable and privacy issues are addressed. The programs may be able to be synched with smartphones also.,   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: July 9th , 2011

Concierge care growing
I have written about concierge care before. I am bringing it up again specially for PCP’s out there who are struggling with heavy handed insurer’s and declining reimbursement. BusinessWeek this week had a column about QLIANCE, a company that is widening its appeal among patients. Our research in the workforce area shows that access to physicians will be a huge issue with ‘reform’ as is currently enacted. QLIANCE founder Internist Garrison Bliss estimates that $16 of a $60 office payment is taken by the insurer. He has investors like Michael Dell and Jeff Bezos of Amazon. Bliss estimates that his concierge patients incur 22% less cost and save money with reduced hospitalizations since they can visit their Physician and obtain quick appointments, communicate by email and spend more time during the visits. He points out that because the coverage is not comprehensive, patients still need regular insurance coverage for catastrophic illnesses.
"qliance" .   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: June 23rd , 2011

Incentives: Do hospitals walk the walk?
For all the talk about having incentives for ‘quality’ hospital leaders do not walk the walk. Their recruitment patterns show they’re still incentivizing doctors for driving up procedure volumes rather than providing ‘value’ to patients. Merritt Hawkins recent study of 2700 physician searches shows that 3/4 of all physician searches include a performance bonus for the doctor and that <10 % of those bonuses are tied to something other than volume of procedures. 56% of the searches were conducted for hospitals probably because few private groups can afford their services.
Like past years Family practice and general internal medicine were the most common specialty searched for. In 2008, about 50% of physician practices were hospital-owned but a survey last fall by another industry group found that 74 percent of hospital leaders planned to hire more doctors in the next 12 to 36 months. Most want primary-care doctors. However, in my own community, 3 large Vascular Surgery groups are all hospital employed now.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: June 23rd , 2011

Insurers claim accuracy
The annual National Health Insurer Report Card released by the American Medical Association (AMA) says almost 20% of claims are processed inaccurately, which contributes to about $17 billion annually in unnecessary administrative costs. The AMA analyzed a random sample of 2.4 million electronic claims for about four million medical services submitted between February and March of this year to generate the report card. The card shows that the seven commercial insurers had an average claims processing error rate of 19.3% this year, a 2% increase from last year. The report card also ranked health insurers on their claims processing accuracy rate:
• UnitedHealth Group had the highest rating, with a 90.23% claims processing accuracy rate;
• Regence Group Blue Cross Blue Shield had an 88.41% accuracy rate; and
• Anthem Blue Cross Blue Shield had the lowest rating, with a 61.05% accuracy rate.
To rebut the data America's Health Insurance Plans claim that nearly one in five claims to health insurance companies are not submitted to health plans electronically and that "more than one in five claims are submitted by providers at least 30 days after the delivery of care." " click here to see the report card" .   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: May 15th , 2011

CME funding by Pharma
Pharmaceutical and medical device company funding supports up to 60% of accredited continuing medical education (CME) costs in the United States. 770 of 1547 (55% physicians) at 5 CME conferences responded to a survey and 88%) believed that commercial support introduces bias, with greater amounts of support introducing greater risk of bias. A single commercial supporter was perceived to have a greater risk of bias.
Almost 85% (653 of 770 respondents) underestimated the cost of lunch, and 88% (678 of 770) underestimated the cost of coffee at their respective site. In 2006, participants (physician and non- physician health care practitioners) attended 12.8 million hours of accredited CME activities, representing a total income of $2.38 billion. The IOM report estimated that physicians, on average, spent slightly more than $1400 per year for CME in 2007, and elimination of commercial funding with continued attendance at the same types of CME activities would increase these costs to about $3500 annually Only 15%, however, supported elimination of commercial support from CME activities, and less than half (42%) were willing to pay increased registration fees to decrease or eliminate commercial support.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: May 15th , 2011

How does the new ICD 10 impact you?
What does ICD 10 mean for you? The mandated transition from ICD-9 to ICD-10 occurs as of October 1, 2013. ICD-10 will be critically important to the success of Accountable Care.
Changes relate to: Code Structure , Coding Rules , Number of codes, ICD-9-CM (diagnosis) = 14,432 compared to ICD-10-CM (diagnosis) = 69,368 etc. ICD-10 offers substantial improvements over ICD-9 in defining the patient’s condition in better detail. As an example, In ICD-10-PCS there 32 codes defining which finger, which level and which approach compared to a single code in the current ICD9. About 36% of all ICD-10-CM codes are different only in that they distinguish “right” vs. “left.”
Over 50% of the ICD-10 codes are related to musculoskeletal conditions and over 17,000 ICD-10 codes (~25%) are related to fractures.
It is estimated that 16 hours of training and an additional 10 hours of practice should be anticipated for ICD-10-CM Revenue cycle management systems for both hospitals and clinics will need to be updated to support coding in ICD-10, as well as ‘typing’ of ICD codes to differentiate ICD-9 from ICD-10.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: May 6th , 2011

Why the compensation gender gap?
Sasso And colleagues reported an interesting study in Health Affairs on a topic of great interest: gender gap in physician compensation. It has been contended that because women enter primary care more often and work fewer hours, their compensation tended to be lower. They studied starting salaries of residents in NY state leaving residency programs between 1999-2008. They found a diverging gap with male physicians earning $16,819 on average (up from $3600 in 1999)more than female physician after accounting for specialty choice, work hours, practice setting etc. The compensation was self-reported and some of the information was based on ‘anticipated’ income in addition to estimating averages since some compensation was reported in a range rather than an absolute number. The study confirmed the greater proportion of women who planned to devote fewer than forty hours per week to patient care (38.1 percent versus 24.5 percent of men).
Comment:The authors admit that it seems unlikely that discrimination has actually increased recently and postulate that women tend to gravitate towards jobs offering more flexibility and family friendly atmosphere and are willing to trade salary for non-monetary benefits.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: May 6th , 2011

Patient perception regarding healthcare
The Deloitte Center for Health Solutions surveyed 1008 consumers in 2010 regarding their knowledge of health care reform and other aspects of healthcare. Here are some answers.
A full 38% said they are “not at all knowledgeable” about the new health reform law.
Grade the overall performance of the current U.S. health care system: 32% of U.S. adults grade the U.S. health care system A/B compared to 27% who give it a D/F; Those who gave it a D/F had employer-sponsored coverage((25%), Medicare (22%), Medicaid (13%), and Military coverage (8%). 48% of the uninsured gave it a D/F. However, the A/B rating improved from 20% in 2008 to 32% in 2010.
To what extend do you feel your household is financially prepared to handle future health care costs: 36% said they are financially prepared to handle future health care costs; 17% said they are not prepared; in households with income above $100K, over 50% were prepared.
Finally, when asked: Does each of the following have a major influence, minor influence or no influence on the overall health care system cost? Insurance cost 70%, hospital costs 69%, system fraud 67%,lifestyles 65% and defensive medicine 52%   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: March 10th , 2011

Ipad2 for physician offices?
Apple launches its iPad 2 this week, and the device could significantly advance mobile health at hospitals and physician offices. Physicians have widely adopted the original iPad in conjunction with electronic health record (EHR) use. Hospitals also are using iPads to support facility operations and infrastructure. There have been some issues with it including screen resolution and the battery life of 4 hours. The new Ipad 2 has a 10-hour battery life, weighs less than the original iPad (1.3 lbs versus 1.5 lbs), thinner (8.8 versus 13.4 mm) and processes graphics at a faster rate with the A5 dual-core processor , which should accelerate access to medical images and about 350,000 apps. The camera should help rural physicians with transmitting images for second opinions etc A recent survey by Aptilon of 341 U.S. health care professionals' tablet computer preferences showed that 79% preferred the iPad; 12% preferred Windows PC-based devices; and 9% preferred Android-based devices. 59% of ipad owner respondents used it for medical tasks, such as receiving and reviewing updated medical information and completing paperwork. The survey found that 38% of respondents expect to have an iPad within the year and the new Ipad 2 may accelerate that move.
The FDA just cleared (510k clearance) software, called Mobile MIM, which allows physicians to view medical images on Apple's iPhone and iPad mobile devices, and marked the first time that the FDA had given clearance to a mobile health application that will help clinicians view images and make medical diagnoses based on computed tomography CT, MRI), and PET.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: February 13th , 2011

Should you involve yourself in real estate?
Texas Health Resources, which owns or is affiliated with 24 hospitals, is working with Cambridge Healthcare Properties to form a real estate partnership and offer tenants and non-tenants (physicians) to own shares of the 24 buildings in the partnership. Legal concerns are of course many. A question for physicians is (as we discuss in our article” Is Medical Office Real Estate Investment for you? “In General Surgery News. "here" . (Log in required) Is: Investing in Medical Office Buildings Physicians who are interested in investing in medical buildings need to answer several questions in order to determine if ownership is right for them.
1. Should the practice own the building alone or should a joint venture with other practices be considered?
2. Should partnering with a hospital be considered?
3. Should a third-party developer partner be considered to help guide the practice through the development process?
4. What are the front-end cash requirements?
5. What is the physician’s tolerance for debt guarantees?
6. How does ownership align with long-term practice strategies and goals?
7. What is a viable exit strategy?   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: December 20th, 2010

Do you have basic understanding of the Medicare Physician Payment system?
Uwe Reinhardt, another economics professor at Princeton is an authority in healthcare issues and has an easy to understand contribution to NYT healthcare blog on payment issues.
He goes through the history of the fee schedule, how Medicare fees are determined, the conversion factor and most importantly the problems with the SGR and the physician fee schedule. It will only take you a few minutes but the summary is easily understood. He explains that the SGR replaced the volume performance standards prior to the BBA of 1997. It was intended to keep physician spending in Medicare ( included laboratory tests/imaging/and drugs) in line with growth of gross domestic product per capita after adjusting for growth in the Medicare population, changes in the law and importantly the cost of running a practice tracked by a Medicare Economic Index (MEI). He notes that the increases in Medicare physician fee reimbursement have been in recent years, usually ˝ that of the MEI. In effect, the fee increases have not been keeping up with inflation. However, he points out that physician services per Medicare beneficiary have increased at a compounded 5.4% indicating that volume of services have made up for the lack of fee updates.
Read his column "here" .   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: October 26th, 2010

Physician burnout analyzed
Burnout is more common than depressions or substance abuse among physicians. Common features are “emotional exhaustion, depersonalization and a decreased sense of personal accomplishment.” Symptoms include: physical exhaustion, sleep disturbances, headaches, anxiety, depressions, cynicism, guilt, ineffectiveness, poor judgment, treating patients and co-workers as objects and feeling emotionally depleted. The causes are well known to most physicians and include: lack of autonomy, problems balancing work and home, high patient volume pressures and too many administrative tasks. Almost 40% of U.S Surgeons suffer from burnout and 32% exhibit high emotional exhaustion and a quarter show depersonalization. It is interesting that ľ Surgeons would opt to become Surgeons again but only ˝ would recommend medicine to their children. 9% of Surgeons reported that they had made a major medical error in the last 3 months!
Comment: We all recognize that we have had some of these symptoms at one time or another during our careers. If you don’t you are in denial. Fortunately, we pull out of the cycle with the help of our spouses and family. Burnout has consequences for our patients. So, it’s not just a personal issue but a safety issue for the public. Note: This material is taken from Balch CM & Shanafelt T. Combating stress and burnout in surgical practice: A review in Advances in surgery. 44 (2010) 29-47.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: September 17th, 2010

Professional Liability: New information
The health policy journal ‘Health Affairs’ featured a recent series of articles on malpractice and liability. Warning: The journal is generally viewed as unfriendly to physician concerns. A study estimated total annual cost of medical liability as $55.6B or 2.4% of healthcare costs. This includes defensive medicine costs. This is lower than previous estimates but even if true 2.4% of $2.3 T annually is still a lot of dollars. Another article by Mello et al calculated the cost of defensive medicine at $45.6B in2008 or 82% of the total system cost for malpractice liability. In other words, 18% of the cost is related to actually from all the lawyering that goes on every single day related to claims against physicians. A third study evaluated physician perceptions about MP claims and concluded that concerns about MP were high in both specialists and generalists and ‘modest’ differences between states with and without tort reform. In another study by J. William Thomas, Ph.D., Cutler Institute for Health and Social Policy, University of Southern Maine of 35 medical specialties, tort reform changes to cap pain and suffering would reduce medical malpractice premiums by 10 percent and reduce the nation’s total medical costs enough to result in savings of $20 billion between 2010 and 2019.
Comment: Whichever way you slice it, the cost of frivolous suits is significant. There is NO chance of federal reform with this Congress. Maybe when all the stars are aligned with the legislative, executive and judicial branches in synch we may see the promised land.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: September 17th, 2010

Billing benchmarks
Key indicators of value to any medical practice include the net collection rate, days in accounts receivable, charge lag days, denial rates, collection per RVU, bad debt etc. A standard report generated by most software billing programs should consist of total charges, dollar amount submitted for payment, amounts paid/adjusted/written off with a breakdown by physician, facility, CPT code, and payer. An aging report with accounts receivables at 30, 60, and 120 days and beyond is essential. Overhead costs should be reviewed on at least a quarterly basis keeping in mind that overzealously trying to reduce overhead could produce negative results. Investing a little extra to obtain better information or that extra call to an third party payer may be worth a great deal more than saving a few staffing dollars. If your practice lags behind standard benchmarks, the billing manager must be able to come up with a performance improvement plan. Some warnings signs for you to look for include: claims payment first pass rate <85%, paper remittances are >30% of all posted charges, charge master has not been updated in more than 2 years, a compliance plan that has not been reviewed or updated in 2 years, insurance contracts have not been reviewed in 12 months, cash collections are lower than the previous year, 40% or more of the A/R is >90 days old and >80% of that is either self-pay or patient co pay
Comment: Most of you are familiar with the intricacies of billing but few understand the benchmarks that you should compare your office performance with. I have laid these out here "Revenue Cycle" . and here "The Smarter Physician Volume 2" .   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: August 20th, 2010

Rawls theory? What is it?
Who is or rather what is Rawl’s theory? John Rawl wrote his book ‘A theory of justice’ in which he explains his ‘justice of fairness’ as an alternative to the well know utilitarian philosophy. The latter states that social welfare is simply the aggregate of all individual’s welfare or in other words the possession of goods is what brings utility to individuals and does not concern its elf with whether its fair or unfair for the individual or society. Rawl on the other hand is at the opposite end of the spectrum by saying that inequality is equal to injustice. The relevance of this topic is to the healthcare debate. Although, Rawl did not mention health care as being included in his discussion some see it as a ‘social justice’ issue calling for ‘re-distribution’ and others calling this ‘socialism.’ Undoubtedly, the debate will continue between those wanting a national tax payer supported system versus those calling for the federal government to stay out of their lives.
Comment: What do you think? Tell me.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: August 8th, 2010

Medical Liability claims all too common
The AMA just released information from their Physician Practice Information survey of 5,825 physicians who had worked at least 20 hours/week related to medical liability.
Some interesting data: Only 5% of physicians in a given year are sued.
Over their entire career 42.2% had a claim filed against them. 61% of physicians over age 55 had been sued with an average of 1.6 claims/physician. 22% of psychiatrists and 69% of Surgeons and OBGYNs. 90% of Surgeons over age 55 had been sued! Solo and single specialties were sued more often, men were sued twice as commonly as women. AMA also reported PIAA data which showed: 65% claims were dropped/dismissed or withdrawn, 25.7% settled, 4.5% decided by arbitration and 5% by trial and 90% resolved in favor defendant physicians.
Comment: It is well know that the system ‘gets it wrong’ on both sides meaning <15% of patients who actually suffer an injury file a claim and negligence occurs in 15% of filed claims. Clearly, the system does not work. Will it ever get fixed? Not until all the stars are aligned meaning the trial lawyers are asleep, the public awakens and Congress is actually working!   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: August 8th, 2010

Quality of care by IMGs: Is it up to par?
Over a quarter of all physicians or about 180,000 working in the U.S are international medical graduates. U.S citizens born here and graduate from a foreign medical school represent 12.5% of all IMG’s. The quality of care rendered by IMG’s has always been a sensitive issue with claims and counter claims. The issue is being discussed because of the anticipated shortage of physicians.
Norcini et al just reported their findings comparing the care rendered by non-U.S.-citizen international graduates, U.S.-citizen international graduates, and U.S. medical school. graduates by reviewing inpatient death rates and lengths-of-stay for patients with congestive heart failure or acute myocardial infarction—or heart attack in 184 Pennsylvania hospitals from January 1, 2003, to December 31, 2006. Physician specialties included FP (33%), IM (48%) and Cardiology (19%). Non-U.S.-citizen international graduates had significantly lower mortality. No difference in mortality were found when comparing all international medical graduates with U.S. graduates meaning that the difference between non-U.S.-citizen and U.S.-citizen international graduates was the difference and was striking. The patients cared for by U.S.-citizen international graduates and non-U.S.-citizen international graduates had significantly longer stays than patients of U.S. graduates. The authors speculated that “variability in the quality of the medical schools that U.S.-citizen international graduates attend, but to some degree, it may also reflect their ability” implying that U.S citizen IMG’s may not be receiving the same quality education or that possibly the pool was not as strong.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: July 27th, 2010

Bernstein: Do you know who he is?
William Bernstein. If you have not heard of him, you have been hibernating (at least from a learned investor point of view). He was a physician in his past life and is a “financial theorist” and a smart money manager. His ‘efficient frontier’ website and research in portfolio theory makes him a savvy market reader. His books include: The Intelligent Asset Allocator, The Investor's Manifesto, The Birth of Plenty and The Four Pillars of Investing. Read the first chapter of ‘A hypothesis of wealth’ "Read here" .
I happen to think the guy is brilliant. His handle on economic history and theory is amazing. Read his recent column in Business Week on retirement where he gives pretty common sense advice to those of us in our sixties. He states, “ If you are a 60 year old withdrawing 2% of your retirement savings annually, you will be as safe as you can be; at 3% you are probably safe; at 4% you are taking real risks; at 5% you have a good chance of an Alpo diet.” Think about that. The figure generally thrown around is with drawing 4% of your savings annually which will last you a life time. He advises adding 1% to 1.5% to the number if you are in your 70’s. That is pretty conservative and worth considering. How do you do that? Either working later in your 60’s than you planned or having a big savings stash where 3% really adds up to an annual sum you can truly live on.
He also recommends delaying taking Social Security till you are 70 and looks at SS as an annuity. Most people will not follow that line of logic because if you die before age 82, you have left money on the table and most of us do not want the government to have a dime of our money.
   Posted On: July 16th, 2010

Generation skipping transfer
Beginning on January 1st, 2010 the Federal Estate and generation skipping transfer (GST) was repealed with reinstatement to pre-2001 Tax Act law. What does that mean? The $1M exemption and maximum tax rate of 55% will return compared to a 3.5$M exemption and 45% maximum rate in 2009. What has not been repealed? The Federal gift tax which in 2010 is 35% compared to 45% in 2009. The cumulative life time exemption is still $1M and annual gift tax exclusion remains at $13,000 per donee. In 2011 a 55% maximum gift tax returns. If you die in 2010, a new carry over tax basis applies meaning that a capital gains income tax instead of the estate tax.
Comment: Many people have divide assets using the 3.5$M exemption using revocable trusts ( A-B trusts). Just make sure the beneficiaries of various trusts match because you could have un intended consequences and ‘disinherit’ children in GST’s in favor of grandkids. Ask your trust attorney because I am not an attorney!   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: June 23rd, 2010

Planning to retire at 65?
The % of people expecting to retire at age 65 has changed over the past 15 years according to a Gallup poll. In 1995, 47% expected to retire ate age 65 compared to 2007 when 57% said they would retire ate 65. Change in retirement plans apparently was due to health reasons (55%), change in the economy (32%) and to care for family (25%). Of course , life expectancy once you reach 65 has also increased. In 2008, you can on average expect to live another 18.7 years ate age 65 (men 17 versus women 20 years).
As you know the usual age of retirement for example to receive Medicare is 65 but thee retirement age varies around the world. For instance in Greece it is 58 and in France it’s 60. Does that coincide with economic issues that have arisen recently in those countries? Consequently, the expected years in retirement for French workers (24) are much greater than the U.S (17.6). The actual average retirement age varies from 58.7 in France to 64.6 in the U.S and 68.9 in Japan. The Japanese have their minimum age at 67 and 14 years on average in retirement. Apparently, in France the retirement age was dropped from 65 to 60 to please the union workers in 1983 to go along with the 5 week holiday and 35 hour work week. Now, some of these countries are trying to reverse that but labor unions are making this difficult. So when you retire where does your income come from? A large % (40%) comes from Social Security, 24% from earnings, another 19% from pensions and annuities and the rest from income assets etc. I suspect the % from pensions is larger in Physicians. At least I hope so! What is striking is how many people think their spending in retirement will be a lot or a little lower (58%) when in fcat a full 33% said they spend as much in retirement as they did before that period. The average out of pocket health care expenditures for age 65+ citizens is $4631 annually, a 62% increase since 2006. Sixty % of this goes for insurance premiums.
Comment: You will likely live longer than your parents, retire earlier and therefore need more savings than earlier generations. Social Security will be there for the baby boomers. For Generation X, the SS benefits will likely be reduced or available at a later age and for the Millenials, who knows?   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: June 5th, 2010

Stimulus $$ for physicians!!
We all watched while everyone around us scrambled to get a piece of the ‘stimulus’ money. But, did you know that Physicians also stood in line and some were successful (other than research)? About 5000 Physicians and Dentists and others received > 2.5B$ in loans! Kaiser Health News reported a radiologist in Florida who borrowed 1.5M$ for expanding MRI services, Orthopedic group in Kansas were loaned $3.4M for expansion of office and surgery space, Dermatologist group in Texas were granted $3.9M for a larger cosmetic facility. The loans were through the SBA and 13% were to health related businesses. 90% of the loans were guaranteed by the Feds under the bill and much of the associated expense of the loans were waived. The applicants did NOT have to prove a need for new or expanded services. The Dartmouth Policy researchers contend that this will raise prices while the Physicians argue the loans allow them to expand services and hire more help.
Comment: I guess this explains how the mortgage disaster worked because borrowers did not have to prove that they could afford the loans either! What happens when the loans are due and borrowers default? I suppose there is still the taxpayer!   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: June 5th, 2010

Will costs go up or down with 'reform'?
The 2010 total medical cost per American family of four is $18,074, an increase of 7.8% according to Milliman Medical Index. The employer’s share of this is about $10,744 (59%), the employee portion is 24% and 17% is out of pocket expense. Generally, the employee portion averages about 28.7%. So, what makes up this cost? In and Out patient costs are almost ˝ or 48%, Physician cost is 33%, prescription cost is 15% and 4% are miscellaneous. The fastest growth is in hospital costs which increased 9.8% in 2010 compared to 7.7% in 2009 whereas the physician component decreased from 6% in 2009 to 5.2%. The ‘reform’ will apparently shift costs from the employee to the employer at least in the short term. This is because the life term and annual limits are going to be phased out. Some more preventive services will have cost sharing removed and also prohibition of pre-existing illnesses for children will also contribute to this.
Comment: It will be interesting to see if the reform addresses the cost problem. Given that there are some early benefits that come with extra cost to employers, we are sure to see the cost curve go up   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: May 27th, 2010

The 'collateral rule' nixed by the Supremes in Ohio
The collateral rule is a source of aggravation to defendant physicians in liability cases and serves as a windfall for plaintiffs/attorneys. Prior to the current Ohio Supreme Court ruling, defendants were not allowed to present actual plaintiff medical bills which may have been paid by their insurance. That meant that plaintiffs could ‘double dip’ by collecting damages (if they won) for medical bills (even if the costs were lower than the original billed amount) that were already paid by their insurer. Ohio Justices ruled that nobody actually paid the difference between charges and collected amounts (write offs) and that defendants could submit evidence about reasonable value of damages that could be rightfully collected by plaintiffs.
Comment: This is one of several rulings by the Ohio Supreme’s that have gone the way Physician groups have pushed for. The Ohio Assn for Justice (re-named from Ohio Trial Lawyers Assn) of course protested that the plaintiffs deserved the full ‘fair market’ value of medical services (translate to charges). Of course this means the defendants collect lesser amounts and therefore their lawyers collect less also. Ohio Physicians have come together over the past ten years with our State medical association to make this happen.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: May 27th, 2010

Trends in less pay leads to less work hours
The number of hours U.S. physicians work each week has markedly and steadily decreased during the past decade. There was a striking correlation between physicians' decreasing hours and decreasing fees for their services. No surprise is there! You get paid less and less and you get discouraged and ask your self why you are putting in extra hours. "By 2006, physician fees were 25% lower than their inflation-adjusted 1995 levels," according to Douglas O. Staiger, Ph.D., of Dartmouth College, Hanover, N.H.. Interestingly, this cut across all specialties. Physicians from all demographic areas have shortened their typical workweeks from the approximately 55 hours that prevailed since 1977 to 51 hours by 2006. In contrast, mean weekly hours worked by other professionals such as lawyers, engineers, and registered nurses stayed stable.
Comment: As I have said here before, there is a shortage ahead and this makes our projections look good compared to what reality may be like. "Read here" .   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: May 17th, 2010

Re-balancing: Right way
How often does one‘re-balance’? Re-balancing refers to the fact that stock and bond markets go up and down and change the % of the allocations you started with. The idea is for example that if small caps do well one year, the % of small caps in your portfolio will exceed the target you set as a goal. Everyone knows by now that rather than the performance of individual stocks/bonds it is the asset allocation you set that is responsible for 90% of the results. Vanguard looked at monthly, quarterly and annual re-balancing from 1926 to 2009 and noted similar returns. So, the idea of re-balancing quarterly or semi-annually may be too often a lot of experts opine. The problem is if you never re-balance, you will probably come out with the highest returns but you take much more risk in terms of huge swings. Also, if you re-balance too often you of course pay trading fees and taxes (the latter if the account is a taxable one). Other options are: direct dividends and capital gains from over weighted accounts to under-weighted accounts; transferring or exchanging cash between asset accounts; or simply adding new money to the under weighted accounts. Some people use their birthday each year to re-balance.
For detailed information see "The Smarter Physician Volume 2" .   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: May 17th, 2010

Understand opportunity cost
I am going to take a stab at explaining, in terms I understand, the phrase ‘opportunity cost’ since you will hear it from administrators and business managers like it was some mysterious term known only to the elite. Take an example. You win the lottery. You have to decide what to do with $1 million. Let’s say you invest in a fast food restaurant your brother-in-law is starting. He promises you a return of 3 % annually. But, your advisor tells you have the ‘opportunity’ to make 7% annually in the market. Since you have just the $1M, if you invest in the restaurant, you lose the opportunity to make possibly 7%. In most cases, if you do not have an alternative and you want to compare the restaurant investment to something else, you would take for example the Treasury rate as the alternative. The OC is the basis for ‘discounted cash flow analysis.’ DCF analysis is when you assign appropriate values to cash flows that occur at different points in time in the future and then summarize it to a single present value. This allows you to take a promised future return and ‘discount’ it to present dollars or present value. The opposite of discounting is compounding, where you take a present sum and calculate, based on a given interest rate, the future value. The OC (or also known as the discount rate) applicable to investment cash flows is the rate that could be earned on an alternative investment with similar risk. The last phrase is important. You cannot compare investment opportunities fairly unless you factor in the risk. Got it?   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: May 9th, 2010

MLR: A fight for dsiclosure
Commercial insurance companies track the ‘medical loss ratio’ (MLR) as a measure of their profits and try to keep it low. This number refers to the % of the premium $ spent on direct patient care. A MLR of 80% means 80c of every $ earned in premiums is spent on direct patient care and 20c is then spent on administrative costs and profit, some of which is returned to shareholders. For regulators MLR is a measure of efficiency and financial strength. The health insurance legislation passed requires a minimum MLR of 80% for the individual and small group market and 85% for large groups. Large insurers report a lower MLR compared to smaller carriers. United Health reported a 82% MLR whereas the NAIC, the regulatory body overseeing insurers, reported it as 71% for the individual market, 79% for small groups and 84% for large groups.
Comment: You guessed it! Large insurers have already shifted some expenses such as nurse hotlines expenses, clinical health policy and wellness program costs to the ‘medical expense’ side to game the system. Wellpoint, the big gorilla, projects that they will increase the MLR (or in their words the ‘benefit expense ratio’) by 1.7%, which translates to over $500 million of $30B in premiums it collects.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: May 9th, 2010

Physician attitude pessimistic with reform
A recent survey by Athenahealth/Sermo conveys a pessimistic outlook by 2000 physicians. 79% are less optimistic since the reform bill passed, 53% indicate they may opt out of insurance plans and 66% indicate they will consider opting out of ALL government programs! If you consider that the ‘reform’ did not address tort issues, fix the SGR formula, address physician shortage in a meaningful way or give physicians assistance in dealing with health insurance companies the perception makes sense. In addition, the bill shut down physician entrepreneurs who wanted to compete with their own hospitals/ specialty units. Almost 2/3 think the quality of medical care will decline in the next five years and that solo practices or small groups will be hard put to survive. The survey shows that 92%, 81% and 83% believe getting paid by private insurers, Medicare & Medicaid, respectively has become more burdensome. The survey also tested their basic business knowledge. Only 25% correctly defined ‘cash flow’, only 33% knew their AR length of time and 43% did not know their insurance rejection rate.
Comment: That confirms my long held view that we must do a better job in teaching residents about business issues before they enter practice.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: April 25th, 2010

Unionization ahead for physicians?
Is it possible? Will the employment of physicians lead to unionization of the physician workforce? The AMA in 2004 spent over $3 million to sign up 40 physicians for Physicians for Responsible negotiation, which never took off. Although unions have tried to increase their penetration into the physicians they have hit a stonewall. The only physicians who have joined unions have been those employed by the state, county or city or groups of interns and residents. With full employment will come dissatisfaction with the heavy handedness that some physicians expect from hospitals. When physicians are forced to bargain every year or two about salaries, retirements, incentives and benefits, they may be forced to join together and seek the protection of unions. Previously anti-trust laws have restricted them from sharing information and negotiating as a group. However, with full employment a union can negotiate with hospital systems without much fear of the Feds at least with respect to anti-trust laws. The AMA says approximately 16% of physicians were employed by hospitals in 2008. But, a lot has changed since then. Merritt Hawkins 7 Associates claims that search assignments by hospitals for employed physicians have grown to 50% compared to 23% five years ago. The SIEU affiliated Doctors Council represents 4000 physicians employed in public facilities mostly in NY and NJ. Other unions are the American Physicians & dentists associated with AFLCIO and AFFSCME.
Comment: With increasing full time employment unions will be aggressively looking to recruit unhappy physicians into their fold. Just imagine. If healthcare systems are unhappy about spending time on physician issues now, what will it be like in five years when they have to deal with a physician union in addition to nurses and other employees?
Based on G Blesch “labor pains? Modern Healthcare, April 19,2010   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: April 25th, 2010

Risk adjusted mortality not accurate??
Risk adjusted mortality rates have become the ‘holy grail’ for policy wonks, media and government agencies to report on the ‘best’ hospitals and doctors. Alas! Peter Pronovost a Hopkins Professor and a researcher from the University of Birmingham in England report in the British Medical Journal that risk-adjusted mortality rates are a “poor diagnostic test” to measure hospital quality and the statistic should be only one of many factors considered when comparing hospital performance. Their study makes two main points: 1. Risk-adjusted mortality rates do a poor job of separating preventable deaths from deaths due to other causes because risk adjustment accounts only for factors that can be “identified and measured accurately.” 2. Risk adjustment fluctuates between regions and causes, exaggerating discrepancies across hospitals. They also point out that about 5% of in-hospital deaths have been deemed ‘preventable.’ The authors suggest instead non-mortality stats such as hospital acquired infection rates, outcomes of high risk procedures and clinical processes such as anti-coagulants prior to hip surgery as better markers of quality.
Comment: This makes sense that even the best risk adjusted numbers are sometimes flawed and real co-morbidities are not measured accurately.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: April 12th, 2010

SGR fix: What if it does not happen?
While the entire basis for the SGR (sustainable growth rate) methodology is too complicated to explain, it is clearly detailed on page 60 of "The Smarter Physician Volume 2" . Essentially the formula is used to determine payments to physicians under Medicare Part B and strives to control spending. Congress has been putting band aids on this flawed formula but at some point the formula will have to be trashed because if the 21% cut were to take place, the CF (conversion factor) would be worth only $28.40 which means the payment will be $10/RVU less than in 2001!! Costs have risen by about 22% during 2001-2010.
Comment: If cuts actually happen (which I doubt), 2/3 physicians according to a recent survey will reduce the # of Medicare patients, Ľ will stop accepting new patients and 1/10 will stop seeing Medicare patients altogether. Whether physicians will actually do what they say remains an open question if a significant % of their practice is Medicare. The cuts may also incentivize physicians to switch to NON-PAR status. A PAR (participating) physician is paid 80% of the Medicare fee schedule (patient’s pay 20%) in comparison to NON-PAR physicians who get paid 95% of the fee. But, NON-PAR physicians can only charge 115% of the Medicare approved amount and the patient pays the difference between the NON-PAR amount and the limiting charge.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: April 3rd, 2010

A list of new taxes
Wonder what will happen to your taxes with the new health insurance reform? If you are making over $250,000 as a couple you will pay over 1Trillion $ over the next ten years. Total tax hikes are estimated at 1.3T$ in the 2011 budget and $750B in the health reform bill.

Here is what happens to your tax rates:
1. An additional 0.9% tax on wages and earnings from self-employment plus a 3.8% ‘Medicare’ tax on interest, dividends and capital gains and ‘other unearned income’. It is estimated that this amount will be close to $2,250 for couples making 250-500,000. This is to fund Part A or Hospital Insurance part of Medicare and is the first time this tax is applied to investments.
2. Raising tax brackets (36% bracket to 39.6% and 33% to 35%)
3. Raise tax on dividends/capital gains from 15% to 20% or even 23.8%. This will force people to dump dividend paying stocks and look for muni’s. You would also shy away from any capital gains unless you had off setting losses.
4. Phasing out or capping exemptions and deductions
5. Starting 2018, there will be a 40% excise tax on “Cadillac” health insurance plans that cost over $10,200 a year for individuals and $27,500 for families.
Taxes on those making less than $250,000 for couples will come because of excise tax on medical device manufacturers; Fee on brand name pharmaceuticals; 10 percent tax on tanning services; reducing the amount families can place in Flexible Spending Accounts (FSA) and increase the penalties for non-medical deductions from Health Savings Accounts (HSA); and higher taxes on health insurance companies and producers of medicine.
Comment: Some are predicting a VAT similar to Europe because even these additional taxes will not pay for the cost of the new programs.
   Posted On: March 28th, 2010

Read a very brief summary of the entire legislation here.

   Posted On: January 25th, 2010

Wait times: Servitude?
According to a Merritt Hawkins survey of 1162 offices of 5 large specialties including FP in 15 metropolitan areas, the average wait time to see a physician was 15.5 days (2.4 to 48.6). The high end of the range in some cities such as Miami was 200 days, San Diego 90 days and Minneapolis 110 days for some specialties. So, here come the regulators! California HMO regulators are demanding that HMO patient’s be seen by a FP within 10 business days of requesting an appointment and within 14 days by a specialist. Oh Yes, there is more. Physicians must return patient calls for treatment within 30 minutes and be available 24 hours a day. Patients with urgent problems must be seen within 48 hours. These rules were on the books since 2002 but are now being phased in over a year. The NYT reports that the average wait in San Diego is 24 days and in LA 59 days, referring to the same MH survey. The state bureaucrats seem to think that this should not be a problem. They will just audit physicians and rely on patient complaints.
Comment: The State authorities did warn that they may not be able to chase down every complaint! Sure. That helps. California physicians better wakeup and take some action before they legislate servitude.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: January 18th, 2010

Quality of care & Hospital Boards
Quality of care is among the ‘triple threats’ (other being cost and service) labeled by Berwick facing by the healthcare system. Who is ultimately responsible for quality? You may not guess the real answer. It is: Hospital Boards! Board of Directors or Trustees have the ultimate responsibility. 85% of Boards are not-for-profit. A study by Ashish Jha in Health Affairs this month looks at the Board engagement by Boards in the quality of care at U.S hospitals. Their responses were from722 chairs who had served an average of over 12 years on the Board. Sadly, only 8% of Board members were physicians. Only 44% of Board members identified quality performance as one of the two most important criteria for evaluating the CEO. AS you know evaluation of the CEO is THE most important of the Board’s responsibility. The study detected large differences in governance between the highest and lowest performing hospitals.
Comment: Why am I not surprised? I have repeatedly said that if you want change and put emphasis on the quality of care and focus back on the patient, physicians need to be a larger part of any Board. Although all Boards have a QA sub-committee and its on the agenda, having been on hospital Boards, it does not get the priority it deserves.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: January 18th, 2010

Health care spending: Good and bad news
The papers were full of headlines about how the spending on healthcare in 2008 was a historic low. Compared to what?? It reached $2.3T or 16.2% of GDP or $7,681 per person in the U.S. Spending rose 4.4% in 2008. The headline was because it dropped from6% in 2007. Personal healthcare spending ($ spent on purchase of health care goods and services) grew 4.6% in 2008, 2/3 being due to a rise in price and 1/3 due to other factors such as population growth etc. Still, Federal spending increased 10.4% to go with the huge splurge in federal spending. Medicare spending increased 8.6% up from 7.1% in 2007. Because employers dropped or reduced employee coverage, spending by private businesses increase only 1.2%. How about spending on hospital and physician? Hospital spending went up 4.5% and physician spending increased 5% for 2008.
Comment: That is the good news. The bad news: the CPI and inflation was flat. So, even a 4.4% increase adds to the problem. As I have said before, the ‘reform’ bill does not address the cost problem we have.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: January 11th, 2010

McCarran Ferguson, the big insurers and YOU
Why are the insurance companies up in arms with revoking the unusual protection they operate under the McCarran Ferguson Act? I have been saying Congress needs to repeal this totally outdated and harmful piece of legislation for almost 10 years. All I get are blank looks from physicians who don’t understand what the fuss is all about. To read my artice on Anti-Trust issues click: here.
Please understand this important issue. I know our eyes tend to glaze over on legal topics but hang on! The courts have created exemptions by implied repeal, state action, and the Noerr-Pennington doctrine. Implied repeal is invoked when antitrust legislation is in direct conflict with existing federal statutes. Occasionally the state itself promulgates a policy or regulation that may not be in compliance with federal antitrust legislation. In this instance, the courts have ruled that the state action, under clearly enunciated rules, takes precedence. The Noerr-Pennington doctrine exempts activities related to influencing legislation by invoking the First Amendment of the Constitution, which guarantees freedom of speech and the right to petition the government. Congress created a fourth exemption when it passed the McCarran-Ferguson Act, which excuses the insurance industry under certain circumstances from antitrust legislation. The fifth exemption is for union and business– negotiated collective bargaining agreements.
The McCarran–Ferguson Act (15 U.S.C. §§ 1011-1015) was passed by Congress in 1945 and exempts insurance companies from federal anti-trust legislation that applies to most businesses and allows state law to regulate the business of insurance without federal government interference. So, The Act MAY permit price fixing if state law allows ! It does not mean that insurers can use boycott, coercion, and intimidation but in effect by sharing data etc they are a monolith.
Physicians and hospitals are fighting with one arm tied behind their backs. So, we are not allowed to do collective bargaining because of anti-trust laws but insurers can share information and essentially price fix services like in the now infamous Ingenix case I have covered here. Now, to be fair some insurance companies think federal regulations will be looser than state regulations.
Comment: This revocation of the "MF" (!!) Act is probably one of the few GOOD things in the health reform bill.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: December 1st, 2009

How many stocks does it take?
That great investment guru Benjamin Graham in his book “The intelligent investor” advised adequate diversification but warned about too much diversification. The debate about how many stocks in your portfolio you need to own to maximize returns but minimize risk is still out there. The modern portfolio theory (MPT) was proposed by Markowitz in the early 1950’s and Nobel Prizes have been awarded in this area of economics. Jason Zweig had a good review in a recent WSJ column. He recounted an interesting study led by Professor Chance where he instructed over 200 students to invest one stock followed by others until they had invested in 30 stocks. For the entire group, the risk went down 40% by going from 1 to 20 stocks. But, when they increased their holdings to 30 stocks, their risk increased. Mr. Zweig pointed to a study by the Federal Reserve, which showed that 84% of households that owned direct shares owned no more than 9 stocks and a surprising 36% only owned a single stock. Most ‘experts’ including Graham and Malkiel advise that owning between 10-30 stocks assures you about 90% of the benefit of diversification. If you own this magic number of stocks you eliminate what is called ‘unsystemic’ risk. (See Chapter 2 of Volume 3 of The Smarter Physician)
I guess the question is: If you do not know how many stocks and what kind to own, aren’t you better off owning a mutual fund? Of course, most mutual funds include many (often hundreds) stocks. Then, most of us want to diversify further by buying funds of various kinds, not realizing that a lot of funds own the same stocks! This ‘asset correlation’ if zero reduces portfolio risk because the funds move independently of each other. I know of no one that actually checks and compares each fund to see if they own duplicate stocks. Even, if you decide to buy ‘value’ versus ‘growth’ or ‘small’ versus ‘large’ caps or even ‘financials’ versus ‘healthcare’ sectors , do not be surprised to see some overlap in this day of mega conglomerates. You could own something like the U.S Total Stock Portfolio, an index fund that captures tons of companies.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: December 1st, 2009

News/tidbits of interest
Senate Bill: Requirements for "reasonable" time off at work for nursing mothers. Employers with more than 500 employees would be required to provide a separate room for this activity. $400 million for sex education and "adult preparation" to help teens transition to adulthood. Medicare would boost payments for bone density scans under the legislation, and would require some limits on what uninsured people have to pay for emergency room care. 5 percent tax on cosmetic surgeries proposed in the legislation. The tax would not apply to cosmetic surgeries that are already tax deductible, including those to correct deformities.
The 2010 rule for receiving the 2% Medicare electronic prescribing bonus requires eligible physicians to report an e-prescribing code 25 times during the 2010 reporting period (calendar year) when a patient visit generates an e-prescription. After 2012, there will be penalties for physicians who are eligible but who do not e-prescribe.
The 2010 CF (conversion factor) is now $28.3895 not $28.4061.
CMS has added a requirement that suppliers of technical component (hospital labs and others) of advanced imaging (PET, MRI etc) to be accredited by January1 st, 2012.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: November 22nd, 2009

Retail clinics take off
Retail clinics have proliferated and their selling point to offering low cost, non emergent care, in convenient locations, with little e waiting time and often at odd hours. There are over 1100 retail clinics, which is a 40% increase in the past year. The two main operators are Minuteclinic and Take Care with a 72% market share most of whom are located in retail pharmacies. About 150 clinics, most owned by small outfits closed last year. The average charge is about $60-80 and break even is between 12-18 months. . Future projections vary from a peak of 4000-6000 by 2012. Deloitte suggests about 13% of consumers had utilized RC’s in the past year. Coverage for RC’s varies from 40-80% of visits depending on the survey. Health Affairs report suggests that a visit to a RC for a ‘comprehensive visit’ costs in the range of $50 less than a trip to a PCP or the ER> A major issue with consumers seems to be the possibility of missed diagnoses or staff qualifications. Local hospitals have started to partner with RC owners in an attempt to get downstream revenue and referrals for more complicated illnesses. The RC can use these affiliations to advertise a credible backup for complicated medical problems.
Comment: the AAFP (family doc’s organization) had an agreement with Take Care clinics to limit its services. This has now been torn up. It is obvious that RC’s are going to kick it up several notches, particularly with a shortage of PCP’s. They will start to market into chronic disease management problems. They see the 130 million chronic care visits to PCP’s and their eyes light up. They will tap into the 6000NP’s and 4600 newly graduated and PA’s as well as those currently practicing out there. If health insurers cover these visits as a solution to high costs, PCP’s may be forced to deal with RC’s in partnerships. Supervisory requirements for PA’s and NP’s will be reduced as time goes on. (Note: Information for this post is based on a report from Deloitte)   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: November 15th, 2009

Health Insurers controversy
Congress recently accused six large insurers (Cigna, UH, Wellpoint etc) of spending less than the 87c of every premium dollar that they claim to spend on healthcare. Apparently, the insurers reported ‘medical loss ratios’ from 81.5-84.8% in 2008, which is less than the 87% quoted by AHIP the insurance industry spokespersons and lobbying arm. The portion of the premium dollar actually spent on paying for healthcare costs is euphemistically called the ‘medical loss ratio.’ The insurance companies have lately changed the term to ‘medical benefit ratio’ to sound more patient friendly! After paying for care, the rest of the premium is used to cover sales, marketing, underwriting and other administrative expenses and, of course, the huge salaries of executives and finally profits to shareholders. Congress also reported that these top insurers apparently spent 74% of individual policy holder’s premiums on health care costs compared to 80% on small business policies. So, much more of the premium dollar is apparently spent on big business patients. The House bill, it is reported, requires insurers to spend at least 85% of the premium dollar on healthcare costs versus the Senate bill, which simply requires them to report the data. AHIP says that ‘medical loss ratios’ are not an accurate measure of the efficiency or effectiveness of a health plan because some expenses under the administrative column may help lower the cost of health care they argued.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: September 1st, 2009

Medicare A Primer

   Posted On: September 1st, 2009

Marketing strategies

   Posted On: September 1st, 2009

After tax and before tax calculation simplified
You are often trying to figure out the return on after tax investments and based on your tax bracket calculate how it compares to say a tax exempt bond or vice versa. Well, its simple. Basic Formula: AT = BT X (1-T) where T is the tax rate
Taxable versus tax-free bonds To manually compare the equivalent yield on a tax-exempt bond to a taxable investment or vice versa, two pieces of information are needed to calculate the third as follows:
Assume the Yield on the tax free is = 3 percent; Your marginal tax rate = 0.39 percent; and therefore, equivalent taxable investment to be comparable to tax-free yield = 3 / 1-0.39 = 2.61 percent.
Similarly, to calculate the tax-free yield necessary to match a known taxable investment return: Taxable investment return = 3.7 percent; Marginal tax rate = 0.39 percent; and therefore, equivalent tax-free yield to be comparable = (3.7) x (1-0.39) = 2.257 percent.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: August 3rd, 2009

Breakeven analysis: A real example. Common on, you can do this, it's easy!
You are considering purchasing a new testing machine that has a fixed cost of $100,000, generates revenue of $500 per test, and variable costs associated with testing of $50.
You want to know: How many tests does your office need to do for you to cover your initial $100,000 investment. If you had $0 costs associated with each test, you would divide your initial investment by $500, the revenue you receive from each test. However, your cost for performing the test is $50 not 0. So, $500 minus 0 = $450 per test.
The equation is simple: Total revenues – total variable costs- fixed costs= profit
So, here it is: (100x volume) – (50 x volume) – 100,000 = Profit
OR since you are calculating breakeven the profit = 0
OR (100 – 50) x volume = 100,000
OR 450 x volume = 100,000
OR volume = 100,000/450 = 223 tests
After performing 223 tests, each test (which generates $450 or the contribution margin) becomes pure profit because you have already paid off your equipment. (See previous explanation of CM) GOT IT!   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: July 28th, 2009

Direct & Indirect costs explained
While the object is not to teach ‘managerial accounting’ it is relevant to understand ‘indirect’ costs in addition to contribution margin as explained last week As I said costs are classified by volume (fixed/variable), management (operating or non-operating) or traceability (meaning traced to a unit or department).
For example, your office has a laboratory and you want to know the cost structure as compared to other sub-units within your practice. Direct costs are ‘directly’ tied to the lab since they would not be incurred if you closed the unit. So, salaries/benefits of the techs, costs of supplies/materials for performing tests are all direct costs. Indirect costs in this context are costs not directly related but those that are shared by other units in the practice. So, the lease payments, utilities, computer systems and administration etc. These costs may be less but would stay even if the lab was closed tomorrow. Remember that this direct/indirect separation applies to units or sub-units within your practice (micro level) but as far as your corporation is concerned, all of these are ‘direct’ at a high or macro level. It’s confusing but you must also deal with the fact that costs by volume (fixed/variable) and traceability over lap significantly. So, fixed costs (costs irrelevant of volume of services) include both direct and indirect costs whereas variable costs generally include direct costs for the most part. Think about it. Your lab (fixed costs) includes personnel (direct) and expenses for the facility itself (indirect). However, the supplies etc (variable) are all direct costs. I know. This gets my head turned around, too!
I illustrate this in Chapter 8 of the 2nd volume of "The Smarter Physician Volume 2" .in detail and will illustrate the concept with a real example of 'breakeven' next week.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: July 20th, 2009

Do you really understand what 'contribution margin' is??
Since most physicians have not taken cost accounting (at least recently), we need to understand basic terminology when communicating with hospital types. One of the most common terms coming up with administrators is ‘contribution margin’ within the context of how much revenue you bring to the hospital, new services your specialty may bring or when doing a breakeven analysis for a procedure or device. So, I will try to explain what I understand. All or most businesses have fixed, variable and sometimes a mix of ‘costs’ to cover before they can show a profit. Fixed/variable costs are based on volume whereas direct/indirect costs are based on traceability and operating/non-operating costs are based on management. All are different ways at looking at the same thing.The variable costs like staffing (hospitals) for instance has to be covered before one can apply any revenue to covering fixed costs such as property taxes. So, essentially the CM is the amount of per unit revenue available after covering variable costs to help cover fixed costs. Another misconception is that CM is profit. Not. CM is what’s left after covering variable expenses. Once fixed costs are covered, what is left is then profit.
This concept is also used in office practices to perform a ‘cost-volume-profit’ analysis for services or procedures you do to help you figure out if the service is profitable and if so how the profit would respond to raising or lowering prices for a certain volume of services.
I illustrate this in Chapter 8 of the 2nd volume of "The Smarter Physician Volume 2" .in detail and will illustrate the concept with a real example of 'breakeven' next week.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: April 28th, 2009

Physician shortage is for real
You may have seen tons of coverage lately, including President Obama’s comment about it in the context of the ‘universal’ coverage that some people want. Universal coverage how? With a looming shortage of BOTH primary care and surgical specialists, it seems hard to imagine how coverage will be provided. Extenders can close the gap in some areas of primary care but not enough. Certainly, they will not be able to provide surgical specialty care. The NYT and many other papers have highlighted the problem. The Boston Herald stated “ Doc shortage looms in Mass." "is here" . Only 13% are under 35.” % of physicians over age 55 is currently around 44%, according to the AMA. About a third are contemplating changing careers and others retiring early (assuming the market recovers!)
Our book titled “The coming shortage of Surgeons: Why they are disappearing and what that means for our health” will be published by Praeger Publishing in the fall of this year.
Our presentation at the American Surgical Association April 23rd. "The Estimated Cost of Training the Future Surgical Workforce". "is here" .
Comment: My advice to young residents is to take heart despite falling reimbursements. The supply/demand equation should work in their favor, provided the market is allowed to work. The last part of the statement is a huge qualifier, meaning IF the federal government keeps its hands off healthcare. Will it? Unlikely.   ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
   Posted On: August 4th, 2008

Disability premiums: Pay after tax or through corporation
Should you purchase pre-tax disability insurance designed to save you hard earned dollars now versus after tax dollars paid for a policy that will save you a lot more later? Obviously, if you do not collect on the policy by not getting disabled you are better off purchasing the pre-tax policy! But, what if you do get disabled and qualify for benefits. Mr. Tiffany in a recent example in “MGMA Connexion” laid out the alternatives.
He assumes a $10,000 a month in benefits policy on which the corporation has paid $250/month for 10 years before getting disabled.
Option of paying premiums pre-tax by corporation Total premiums paid: 120 months x $250/month = $30,000 paid out pre-tax Corporate tax rate of 33% tax savings $10,000. Net payments = $20,000 Benefits received: $10,000/month taxed at the corporate rate of 33% (paid to the corporation since premiums were paid by the corporation) = $6700 Assume ten years of disability or 120 months = $804,000
Option of paying premiums paid after tax by physician He assumes a $10,000 a month in benefits policy on which the physician has paid $250/month for 10 years before getting disabled. Total premiums paid: 120 months x $250/month = $30,000 paid out after-tax Assume ten years of disability or 120 months = $1,200,000
How about if you decide to switch and pay with after tax dollars rather then pre-tax which you have been paying with? If you get disabled within 3 years of making the switch, the IRS will use a complicated formula with a ratio of pre and after tax premium payments to figure out how much of the benefits are taxable? But, IRS ruling 2004-55 in 2004 allows you to bypass this ‘3 year look-back rule.’ The corporation creates a bonus fund from which to pay the premiums (162 Executive Bonus Plan). The bonus is not taxable to the corporation but is taxable to the physician.
Comments: For details regarding group plans versus individual policies read Chapter 8 in my book " The Smarter Physician Volume 3.
   Posted On: July 13th, 2008

Whole brain: Are you using it all?
Let me take a break from CMS and Congress to visit a more interesting topic: Using your ‘whole’ brain.
While going through my MBA in healthcare management I was surprised and initially unfulfilled to study a lot of the ‘softer’ side of business. I must have taken at least 6 personality tests of various kinds including the MBTI (Myers Briggs Type Indicator). The MB separates people into sensing (S) and intuitive (I) types and each group is then sub-divided into thinking (T) or feeling (F). As an example, not surprisingly I found myself as the first born to be an ISTJ! (Serious, quiet. Practical, orderly, logical, dependable etc). The most interesting was the Hermann Brain Dominance (HBDI). I learnt amount about my strengths and weaknesses. "HBDI" . It was developed by William Herrmann while leading management education at General Electric in order to measure and describe thinking preferences in people. The HBDI test of 120 questions involves: analytical, sequential, and imaginative thinking. It is controversial to say the least as far as accepting the assumption that the left brain is logical and the right brain is intuitive, insightful, and creative. I was given several exercises and projects to improve two quadrants on my right brain!!
As physicians, we see the variety of approaches and differences between our leadership’s approach to problems. These cognitive differences are separate from their skills or abilities and indicate ‘preferences.’ (Leonard & Straus. Putting your company’s whole brain to work. HBR # 97407) I have been struck by the equally successful (or unsuccessful) approaches by right and left brained dominance individuals. Getting your message out to a variety of people that report to you means understanding how your message will be perceived. It may not be heard the way you meant for it to be heard. We all know that. Some people comprehend numbers/figures/stats. Others learn through graphs and others by hearing a talk rather than a written piece of paper. And if you are stuck with a problem, Leonard asks: Who do you go to for assistance? The someone who thinks like you or to a person who is just ‘different’? You should know the right anwer by now.
My point in raising this issue is to make you appreciate different view points and appreciate them as not ‘out in left field’ or ‘weird’ but ‘different’ and contributing to problem solving. Whether it’s your partners in the group or employees learn to look and hire people with different strengths and not necessarily in the same left brain mold you are.
   Posted On: July 8th, 2008

The Swiss healthcare Model: Worth looking into?
Regina Herzlinger is a Professor at Harvard that has written extensively on healthcare and recently on consumer driven healthcare (CDHC). This information is taken from her article “ Consumer driven health care: Lessons from Switzerland” in JAMA 292: 1213, 2004.” The country provides universal health care at a lower cost albeit with some drawbacks. CDHC is supposed to combine free demand and supply, transparency and include oversight from the government. In Switzerland consumers purchase insurance not the e government or employers. The money to buy the insurance may come from the government or employer but consumers know the full cost before buying the insurance themselves. Insurers provide information to consumers about the product including design and cost. Compulsory benefits include hospital acre and other benefits are optional which require additional payment such as private rooms or child care for sick parents. They also have high deductible plans like the U.S has. No plan offers complete coverage and out of pocket payments are common. Physician fees are negotiated between the physician association and the Swiss insurance association. No supplemental billing is allowed. Hospitals also have limited pricing freedom. If they run deficits they are guaranteed subsides from public funds within reason. Private hospitals charge higher rates which may be covered by supplementary policies or out of pocket payments by patients. Insurance companies are also rightly regulated and must accept all compulsory insurance applicants although they may reject supplemental applicants. Almost no information on pricing is available on physicians and hospitals although premium rate changes are publicized in the media. Individual municipalities do provide means testing based taxpayer supported low income compulsory insurance. The central government supervises insurer financial solvency and fees. High deductible plans have the largest market share and managed care a small market share.
Comments: The consumer has significant control over their choice. There appears to be some bias against the very sick. There is universal coverage ultimately guaranteed by the government. Risk adjustment is centrally applied to insurers. The Swiss model does consume a larger fraction of the GDP than most countries but has 30% lower per capita cost compared to the U.S.
   Posted On: May 3rd, 2008

Moral Hazard & Health Insurance: What does it mean
You will hear the words ‘moral hazard’ more frequently as the showdown over health insurance becomes increasingly heated. Economists have borrowed the phrase from casualty insurance and applied it to health insurance. The term implies an ethical or moral defect. Actually, no unethical or fraudulent behavior is assumed. Moral hazard within the health insurance context implies that a person who is partly or totally insulated from directly paying for their insurance is more apt to use the insurance or less concerned about the cost of the service. Take the current mortgage industry disaster as an example. If the tax payer bails out institutions that freely gave out risky loans, would they exercise the same care next time as when investors and consumers were responsible for their bad decisions? This is the reason why for example disability insurers do not compensate claimants for 100% of income loss due to disability. They understand that if they did that, more people would apply for disability status. A lot of economists that are pushing for ‘universal’ care disagree that this concept is entirely valid for the health insurance market.
Michael Morrissey in his book has a very good chapter on ‘Moral hazard and prices’ in Health Insurance. where he explains the concept of price elasticity and discusses moral hazard in relation to prices. In economic terms he points out that the problem with moral hazard and cost of health care is that consumers may use extra units of care because the care is ‘free’ (included in their premium) and worth less to them than the actual cost borne by a third party such as the insurance company. This explains the use of increasing co-payments for office visits and procedures.
   Posted On: December 15th, 2007

CMS Update, RVU's & Stark

A summary of the RVU methodology and CMS updates is posted as a pdf file here.

   Posted On: December 4th, 2007

Article posted here.

   Posted On: November 9th, 2007


Physicians have a great opportunity to create additional personal wealth and it lies within their medical office lease. Historically, physicians have been satisfied with finding office space and executing a lease for such space. This represented a “cost of doing business”. In the past, physicians may not have realized that their lease had value in the real estate marketplace. This is why today, more than ever before, physicians are investing in medical office buildings, especially in the building where they lease space. A good medical office project can generate annual cash returns of between 12% and 17%. In addition to these annual returns, the appreciated value of medical office real estate can create significant appreciation value upon sale. The demand by purchasers for medical office buildings that are fully leased (90% or higher) has grown significantly creating a real opportunity for a physician to “cash in” on their need to lease space. How can a physician pursue this opportunity? In today’s market, any physician looking for medical office space should always inquire with the developer or owner if investment opportunities exist. There is an excellent chance that if the medical office building is a new development, the opportunity for a tenant to invest is very good. Developers today have several different investment programs and levels to encourage such investment. The reason the developer is willing to offer this investment is simple…a physician who invests in the building where they practice is more likely to stay in the building for a long period of time. Hospitals have also been very receptive to opening up on-campus medical office ownership to physician tenants for similar reasons. These hospital on-campus investments even became more valuable because of the relationship with the hospital. What to watch for … Since there is so much demand by investors, and healthcare real estate investment trusts (REIT) are so aggressive in pursuing medical office investments, physicians need to be certain that the cost of investment does not become inflated. Physicians, when exploring new facility investment with third party developers, should pay attention to the legal structure, the financial exposure, control and management as well as a solid understanding of the ultimate exit strategy. Also in reviewing financial pro-forma (projected) information, they should be certain that reasonable rental rates exist, the vacancy rate used is reflective of the local market and assure the reasonableness of any projected sale price. More important than the projected sale price at some future date is the projected annual cash flow which supports a solid investment return. If properly structured, the ownership of medical office real estate in today’s market offers an excellent opportunity to increase wealth. This is done by leveraging the same tenant lease that is an operational expense to a physician practice. Contributed by Denny Freudman, President Healthplex Solutions


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