Physician attitudes

Bain & Company, the global management consulting company best known for Mitt Romney r recently put out a publication called “The new cost-conscious doctor: Changing America’s healthcare landscape” in which they point to the shift in attitudes of physicians in regards to multiple issues such  ‘managing costs, drug and device usage, and standardized care are transforming healthcare business models.’

They surveyed 500 physicians and came away with the solid impression that physicians are ready to change and adjust their practice patterns due to economic conditions which prevail currently. Importantly, 80% believe that it is our responsibility to help in cost control, 50% state that their threshold of trying new products is higher and 75% of the cost conscious physicians think that care should be standardized. More of us now apply clinical guidelines.

Fewer physicians will have a major saying purchasing new products, devices or the pharmaceuticals in the formulary. The question is how will we adjust to speaking out for the patient when cost has to be balanced against the patient’s best interest, especially when the paycheck is coming from the hospital? Indeed, 40 % of surveyed physicians expressed concern about exactly that issue and felt that in two years, 50% of their patients might not get the best care due to cost cutting!

Ethical conundrums will crop up, consciences will be troubled and patients may wonder where Dr.Marcus Welby is! (Younger readers need to google Dr. Welby, the perfect TV family physician known for his kindness and home visits)

Rules of 401 K withdrawal & exceptions


Everyone is afraid of the penalties for early withdrawal from retirement accounts but most people do not know that there are other options even before full retirement age.

BASICS: For 401k accounts, 403(b) and 457 accounts, the 2015 contribution limit is $18,000 although people aged 50 and older can make an additional "catch-up" contribution of up to $6,000( $18,000 + $6000). In contrast, for an IRA the contribution limit for 2015 is $5,500 and an additional $1000 for people aged 50 and older.

WITHDRAWALS: For both regular and Roth 401k accounts, 59 ½ is the age when you can start withdrawing and then at age 70 ½ (or later if you have not retired) you are mandated to take distributions -- "required minimum distributions" (RMDs). The IRS has strict rules about how much you can withdraw. You can withdraw more but not less than a formula based upon life expectancy tables and the balance in your account at the end of the previous year. If you withdraw less, you may be liable to pay an excise tax of 50% of the amount you failed to withdraw.

There are other options for withdrawing before age 59 ½.  A ‘hardship’ withdrawal, significant and permanent disability and also If you leave your employment at or after age 55, you can  withdraw from the 401k setup with that employer.

Is there an exception to the tax for distributions in substantially equal periodic payments?

The IRS says “An additional 10% tax applies to early distributions (before the participant reaches age 59½) from a retirement plan or IRA under Code §72(t)(1). Section 72(t)(2) lists exceptions to this tax, including distributions received in substantially equal periodic payments.”

So, what most people do not realize is that there is another exception called the ’72 t’ exception which states: “if distributions are made as part of a series of substantially equal periodic payments over your life expectancy or the life expectancies of you and your designated beneficiary, the §72(t) tax does not apply.” One has to use life expectancy or mortality tables to calculate this and need a professional lest penalties are imposed!

Bundled payments are here; what do they mean?


CMS officials just announced a bunch of payment reforms in recent weeks—including the 'Comprehensive Care for Joint Replacement Model.' There has been talk for a while and remember the Bundled Payments for Care Improvement Initiative last year but what is different is : the proposal to make bundled payments mandatory for hospitals, doctors, and other providers in at least 75 locations.

Also remember the ACO participation for now is voluntary. See where this is headed? There is precedent of course like the Hospital Value-Based Purchasing Program, Medicare's readmissions penalties and with the new SGR law, which mandates value-based payment changes. There have also been ‘demonstration projects’ like CABG demonstration in the 1990s and the ACE program. But, there is a difference between the ACO payments and bundled payment model. The former entails providers waiting till later to see if cost savings can be achieved with ACOs wheras in bundled payments, CMS gets to discount the price at the very start. So, om $7 B spent by Medicare on THR and TKR replacements in 2013, the prices are adjusted prospectively and savings realized at the start.

CMS recently announced  tying 85 percent of all traditional Medicare payments to quality or value by 2016 and 90 percent by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.

So, who gets to decide what physicians get paid as part of the ‘bundle?”

You really want an answer!

Trusted professions: Where do physicians stand?

So, there is the new Gallup survey of the most trusted professions out.

The telephone survey of 805 adults gauged respondents' attitudes and ranked the top five most trusted professions, which are:  Nurses, Medical doctors, Pharmacists, Police officers, and Clergy. 80% of respondents rated nurses as having very high "honesty and ethical standards" and about 65% saying the same for medical doctors and pharmacists. Nurses have topped the list each year since they were first included in 1999, with the exception of 2001 when firefighters were included after 9/11.

There are a few changes since 2013. All three medical professions rated lower than they had in 2013, with nurses down 2 %, doctors 4 percentage points, and pharmacists 5 percentage points. This compares with compared with a 7% rating for members of Congress and 8% for car salespeople. No profession gained in ratings.

The largest drops were among police officers, pharmacists and business executives. Who knows what happens next year after the recent police clashes. Honesty and ethics ratings of police officers dropped six percentage points since 2013, mainly due to many fewer nonwhite Americans saying the police have high honesty and ethical standards.

Interstate licensure

Not sure you have read about interstate medical licensure. The Federation of State Medical Boards (FSMB) now has seven states which have agreed to allow their physicians to become licensed in multiple states. The states are: Alabama, Minnesota, Idaho, Montana, South Dakota, Utah, West Virginia, and Wyoming.

A new agency called the Interstate Medical Licensure Compact Commission will consist of physicians, administrators, and members of the public who have been appointed to medical boards in each of the participating states.

Physicians who wish to practice in more than one state will then be licensed in additional states without having to fill out a new application or gather up an entire set of records to each state medical board. An applicant’s "principal state" will be able to attest to their qualifications, and other states can license them. Each state will require licensure fees though. This will make it easier for physicians practicing at state lines or in locum jobs and telemedicine efforts.

Best and worst states to practice

WalletHub recently compared all 50 states and DC using 12 metrics to judge best and worst states to practice medicine. Metrics included: competition, opportunity, wages, insured population, under-served populations and work environment including malpractice,

South Carolina, Minnesota, Texas, Mississippi and Kansas take the top five and  Rhode Island, New Jersey, Oregon, New York and  Maine bring up the bottom five.

Highest wages, adjusted for inflation:  NE, KS, IN, MS and  MI

Lowest wages: DC, NY, VT, CT and HI.

Greatest # of physicians per capita: DC, VT, RI, NY, MD.

Lowest # per capita: MS, ID, AS, HI, NV

Are stock prices too high?

 I have written about the Schiller Index previously but essentially it is  cyclically adjusted price earnings ratio (named after the Nobel prize winner) which is calculated by dividing stock prices by average earnings over the prior decade, with adjustment for inflation. This index in April was close to 27 with the long term average being 16.6 since the late 1800's. So, if this Index is high, like now, this portends that fund returns are going to much lower. Anway, there has been some resistance to this concept by people who think this concept is flawed because the market over a 100 years ago was nothing like it is today. In addition, the earnings yield (reverse of PE ratio or E/P) normally tracks the 10 year bond yield. So, Reynolds from the CATO Institute points out that the E/P from 1970 to 2014 was 6.62 which closely follows the ten year bond yield of 6.77. He is suggesting that the current gap between E/P and the ten year bond yield of  2.7 will be followed by bond yields rising.

Challenge to State Medical Boards

I have been warning physicians, particularly Primary Care of the coming escalation of licensure disputes for several years now.

Another brick has now crumbled. The SCOTUS decision  against the North Carolina Dental Board opens the door at least half open. The case revolved around non-dentists offering teeth whitening in malls and beauty salons, which was challenged by the Dental Board. The Federal Trade Commission (all powerful FTC) sued the State Dental Board using the Sherman Anti-trust Law.

I wrote about the Sherman Act a few years ago (

The Board argued it was a 'State' board but SCOTUS pointed out that it was run by Dentists with almost no State intervention and in addition the Act does not allow the State to abandon markets to protectionist action and therefore upheld the FTC.

Naturally, the case was supported by pretty much ALL nursing organizations for obvious reasons and opposed by AMA and medical professionals. 

Comment: I think you will now see NP's, PA's and others ramp up their ability to challenge physicians claims that some NP actions are the 'practice of medicine' and in some case they have a point. The PCP's I think are in for a State by State battle and will lose most fights I am afraid.

Physician Leadership Program at Ohio State

The Faculty Leadership Institute, a signature program within the Center for FAME (Faculty Advancement, Mentoring and Engagement) at Ohio State University College of Medicine admitted its first class of 30 physicians and basic scientists in the spring of 2013. (  The second cohort is finishing in March of 2015 and the next class is set to begin in the summer of 2015. Every cohort gives us a chance to learn from participating faculty about how better we can serve their needs and assist them in leading their teams, divisions and departments into the future.


The core curriculum consists of providing education in areas of leadership principles, business acumen (vision, strategy, business planning, financial accounting and human resources, interpersonal skills (communication, team building and negotiations), healthcare leadership (healthcare law, patient safety and quality) and change management (dealing with change, problem solving, decision making and project management). The final session is devoted to the presentations of capstone projects.  These projects are selected by teams and worked on over a three month period. The teams are expected to utilize the knowledge they gained from the program to develop their final case study.


Measuring the impact of this program on individual or institutional success is harder than planning or delivering the content to participants. Self-evaluation of participant scope of knowledge before and after the program is one metric we use. Monitoring promotions and leadership positions following completion of FLI is another one. We are now collecting evaluation by managers of participants in FLI before and after the completion of the program. Institutional return on investment is harder to measure over the short period of time that FLI has existed. However, over time the improvement of faculty satisfaction scores, measurement of faculty engagement and lower attrition will demonstrate the value of FLI.


Leaving aside the value of the delivery of vital knowledge to future leaders at the medical center, an important but often overlooked benefit is the camaraderie and team work that participants experience throughout the year. Friendships made across department and institutions will last for decades and facilitate working across silos and artificial boundaries to solve every day problems experienced by those who expect their leaders to solve problem and not preserve the status quo.


We hope to build a community of FLI Alumnus to provide opportunities and enable them to remain true to their original desire to lead people and do the “right” things.

Rules for investors

 Morgan Housel a columnist at Motley Fool had a good column in the recent issue of the (WSJ talking about rules for investors and how to avoid common mistakes. Here he lists the rules:

"1. All past market crashes are viewed as opportunities, but all future market crashes are viewed as risks.

2. Most bubbles begin with a rational idea that gets taken to an irrational extreme.

3. “I don’t know” are three of the most underused words in investing.

4. Short-term thinking is at the root of most investing problems.

5. Investing is overwhelmingly a game of psychology.

6. Things change quickly—and more drastically than many think.

7. Three of the most important variables to consider are the valuations of stocks when you buy them, the length of time you can stay invested, and the fees you pay to brokers and money managers.

8. There are no points awarded for difficulty.

9. A couple of times per decade, investors forget that recessions happen a couple of times per decade.

10. Don’t check your brokerage account once a day and your blood pressure only once a year.11. You should pay the most attention to the investor who talks about his or her mistakes.

12. Change your mind when the facts change.

13. Read past stock-market predictions, and you will take current predictions less seriously.

14. There is no such thing as a normal economy, or a normal stock market.

15. It can be difficult to tell the difference between luck and skill in investing.

16. You are only diversified if some of your investments are performing worse than others."


Best investment books to read

A recent WSJ column had a list of the best books on business/investing to read.

I have only read a few of these but here is the list they had.

Why Smart People Make Big Money Mistakes and How to Correct Them, by Gary Belsky and Thomas Gilovich

Against the Gods: The Remarkable Story of Risk, by Peter L. Bernstein

Common Sense on Mutual Funds, by John C. Bogle (**** in my opinion)

Triumph of the Optimists, by Elroy Dimson, Paul Marsh and Mike Staunton

Surely You’re Joking, Mr. Feynman! or What Do You Care What Other People Think?, by Richard Feynman

The Intelligent Investor, by Benjamin Graham (**** in my opinion)

How to Lie With Statistics, by Darrell Huff

Thinking, Fast and Slow, by Daniel Kahneman

Manias, Panics, and Crashes, by Charles P. Kindleberger

Buffett: The Making of an American Capitalist, by Roger Lowenstein

A Random Walk Down Wall Street, by Burton G. Malkiel (**** in my opinion)

Sceptical Essays or The Scientific Outlook, by Bertrand Russell

The Snowball: Warren Buffett and the Business of Life, by Alice Schroeder

Where Are the Customers’ Yachts?, by Fred Schwed Jr.

The Money Game, by ‘Adam Smith’

Has the 'MOC" become onerous?

DANIELLE OFRI in the NYT on December 15, 2014 argues that  MOC's or Maintenance of certification has indeed become onerous and unnecessary.

A lot of physicians would agree. Most boards like mine (Surgery) went to re-certification every 10 years. Now, the MOCs requires more paperwork and record keeping, in the view of the ABMS, to demonstrate to the public that physicians are on the ball.

Internists signed a large petition to protest the ABIM decision to indicate that those not meeting MOC requirements were going to be tagged as such.

Two studies in JAMA addressed quality and costs each. Turns out that quality was no different and costs were only marginally lower (2.5) in the MOC group versus the non-MOC group. Dr.Ofri suggests doing away with the ritualistic, memory testing ten year exams and instead having an open book test to better allow physicians to actually learn material while they are reading to answer questions.

What do you think? You want BOTH the ten year re-certification and MOC, neither or just the re-certification?

Winners & Losers in the new fee schedule

Cheryl Clark at Healthleaders Media outlines some winners & losers in the new fee schedule update. The information is apparently located in Table 93 of the release by Medicare.

So, first the winners. Chiropractors (up 12% starting January 1st 2015).

Losers: Diagnostic testing in Family Practices ( cut 23%), independent labs ( down 20%),  radiation therapy center providers (down 17%).

Over the past 4 years, chiropractors are up 14%,  psychiatrists and geriatricians up 8%. Over the same time period, pathologists are down 13%,  radiation oncologists down 11% and neurologists have been cut 7%.


Remember, budget neutrality (other than a specific inflation rate) is the law set by Congress many years ago so if some specialty is up another specialty has to be cut.


Does the Affordable Care Act hurt independent physicians?

AS everyone knows, the # of independent physicians is decreasing and # of employed physicians (hospital/academic or large groups) is increasing. The latest Physicians Foundation survey showed 44.8% employed by hospital/health system,  40.4% owner/partner of a practice and  14.8% employed with an 'independent' practice. In the same survey, 47% of physicians stated their practice had experienced no change since passage of the ACA (Obamacare). Almost 40% had experienced a problem ranging from payment issues to  being dropped by an insurance carrier.

A recent column in the WSJ by Dr.Gottlieb outlined what he saw as a threat to independent practices. See if you agree with his opinion. Here are his conclusions as seen by Shannon Barnet at Beckers:

"1. PPACA supporters endorse consolidating independent physicians because it enables payment provisions that shift the financial risk of delivering care onto providers as opposed to government programs like Medicare. Furthermore, he suggests the creators of the law assumed physicians could better bear financial risk if they're a part of a larger, well-capitalized institution.

2. Consolidated health systems eliminate competition between local providers for contracts with health plans, according to Dr. Gottlieb.

"Since all healthcare is local, the lack of competition will soon make it much harder to implement a market-based alternative to ObamaCare," he wrote. "The resulting medical monopolies will make more regulation the most obvious solution to the inevitable cost and quality problems."

3. PPACA payment reforms like accountable care organizations and bundled payment are biased in favor of engagements with hospital-owned entities and against less centralized engagements with independent physicians.

"These ObamaCare payment reforms are fashioned after 1990s-style health maintenance organizations, or HMOs, in which entities like hospitals would get a lump sum of money from Medicare (or now, ObamaCare) for taking on the risk of caring for a large pool of patients." wrote Dr. Gottlieb. "But right now all of these payment schemes are tilted far in favor of having hospitals pool that risk, and not looser networks of doctors."

4. PPACA biases against independent, private-practice physicians include requiring providers to control their own IT infrastructure, waiving anti-kickback provisions that many private practices are unable to qualify for and reimbursing hospital outpatient clinics for higher amounts than independently owned medical offices for the same procedures.

5. Many physicians, Republicans and Democrats alike, have expressed to Dr. Gottlieb that their professional strain would not be impacted by the PPACA.

"They are wrong," wrote Dr. Gottlieb. "ObamaCare has accelerated many of the detrimental trends doctors see in their profession, and introduced new ones."

Q Ratio: What is it?

 I have previously discussed the Sharpe ratio and other measures for evaluating individual investments as well as the broader market.

A recent Wall Street Column mentioned the Q ratio.

So, here is a brief explanation of the Tobin Q Ratio. The 1981 Nobel Laureate James Tobin came up with the Q Ratio, which measures a firm’s assets in relation to the overall market’s value. In other words, a ratio of the net worth of a company and replacement cost of the firm to indicate if the company is undervalued or overvalued. For instance, if Xerox has 80M $ of assets and has 10 million outstanding shares at $ 6 each, then the net worth of the company is: 10M x $6 = $60M divided by the total asset or replacement value or $ 80 = 0.75 (Q Ratio) . This means that Xerox is currently worth more than its assets and it is UNDER valued (Q Ratio between 0-1). If the Ratio is over 1.0, the company would have been overvalued. The overall market today is higher than 31 of the 35 previous market tops and the ratio is 69% above its arithmetic mean. This is because the combined market value of all the companies on the stock market is lower than their replacement costs and the Q Ratio exceeds 1. An all-time Q Ratio high at the peak of the Tech Bubble was 1.63.Unfortunately, the ratio is not very timely and 2-3 months behind but apparently is the best predictor of market corrections of > 20%.
 Comment: 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!   --------------------------

What do new physicians look for when picking a job?

For physicians considering new jobs, proximity to family and relative is the prime consideration. In a recent survey of 215 physicians by Quantia, here are the top ten considerations for physicians looking for a new job:

  •   Proximity to family, friends or loved ones — 26.1%
  • Location of organization (i.e., in a certain part of the country, or a certain city) — 24.6% of respondents selected this as their top consideration
  • Compensations relative to cost of living — 16.7%
  • Total compensation — 13.0%
  •  Reputation of the hospital, practice or program — 5.12%
  • Type/Size of community (i.e., urban, rural, suburban, etc.) — 4.7%
  • Part-time potential — 4.7%
  • Number of hours on-call — 2.8%
  • Paid time off — 1.4%
  • Loan repayment — 0.9%

For over 50: 'catch up' contributions

Retirement Once you turn 50, you are allowed to make "catch-up contributions" to retirement-savings accounts like 401(k)s and individual retirement accounts which means you can put in more cash annually than younger investors.

In 2014,  people age 50 and above can put as much as $23,000 of their pretax pay in a 401(k) or 403(b) plan, $5,500 more than younger investors. They also can contribute a total of $6,500 to traditional or Roth IRAs, $1,000 more than their younger counterparts.


At age 59 1/2, you can now take distributions without a penalty from most retirement accounts. Also at this age, you also become exempt from the usual rule that requires money converted from a traditional IRA to a Roth IRA to stay in place for five tax years and not incur a penalty.

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.

Update:  11/30/2014; With the ACA, everything is on it's head!

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!