‘Direct Practice’ Medicine Gaining Increased National Visibility

A recent clip featuring Garrison Bliss, MD, founder of Qliance was profiled on NBC Nightly News under the title of ‘Flat-Rate Health Care A Viable Option?’

As this form of innovation is a niche, and largely unknown part of the Patient Protection and Affordable Care Act (PPACA), I include it, here.

Kudos to Dr. Bliss and the Qliance crew!

The ‘Medical Aggregators’: Are We Entering Round Deux?

First a little historical context:

For those with a healthcare ‘event horizon’ slightly more seasoned than the current health reform and related social media data frames, you might remember the initial round of aggregation in medicine lead by disruptive nameplates such as MedPartners (now operating the PBM CareMark), PhyCor, FPA Medical Management, and their second or third tier physician practice management ‘me too’ copycats.

They all emerged from a robust round of venture capital backed industry determination tagged as ‘PPMC’s’, i.e., physician practice management companies. These ‘aggregators’ were the darlings of Wall Street for a while, though with some exceptions, i.e., US Oncology (formerly Physician Reliance Network), most witnessed relatively short life spans, from IPO to unwinding in perhaps a 10 year run (see: MedPartners collapse and Aftermath).

Yet, despite the promise outlined in the offering prospectus’, why did these entities fail so miserably as the ‘white knight’ consolidators or aggregators of a multi-trillion dollar ‘cottage medical industry’? Their business model proferred essentially three core benefits:

1. Centralized, standardized and more efficient back office medical administrative management
2. Scale of market asset concentration and therefore increased sophistication and leverage (improved pricing) with third party payor negotiation, and downstream contract management; and
3. Serve as an ‘anchor play’ with respect to the broader design and implementation of rational though market based local delivery organization and financing, i.e., PPMC’s would harness and more effectively articulate a business culture among physicians that valued clinical integration, medical risk management, and ultimately the allocation of limited health care resources

At least this was the longer term expectation from a ‘win/win’, i.e., payor and provider perspective, of the more established players. Most however, in an effort to demonstrate value (i.e., earn their management fee) to their physician boards, focused on short term margin improvement (better rates, focus on more profitable services via improved payor mix, maximizing the contract revenue/recovery cycle, and reduced overhead, etc.), vs. the strategic focus of managing the risk (both quality and cost) of their local population (i.e., enrolled members).

So rather quickly the strategic basis of the PPMC appeal was subordinated to a short term focus (i.e., increasing net revenues) due to a rising chorus of claims that at its core the business model was merely a third party ponzi scheme which introduced another mouth to feed from an increasingly constrained health care supply chain.

Net/net, the PPMC industry flamed out big time and did not fulfill its ‘roll-up’ promise of the practice of medicine. Now many years later, we are at another tipping point. Witness the current round of promising vehicles with a similar vision of organizing physicians. These candidates include: hospital systems, health plans, integrated delivery systems, emerging ACOs, medical homes,  and even niche play organizers in the concierge, or direct practice space including SignatureMD, MDVIP, HealthAccess Rhode Island, CarePractice, Qliance, and HelloHealth, as well as the rapidly emerging series of retail pharmacy sponsored primary care clinics, e.g., CVS/CareMark Minute Clinic, etc.

Too many docs are unwilling to risk the capital of private practice, and instead are looking to hook-up with one or more of these institutional or VC backed entrepreneurial sponsors. Will they succeed where their predecessors failed? If so, why?

From my perspective, it will clearly depend on the business model chosen to enable competition of the right variety, and the degree to which the venture embraces, nurtures and expresses physician culture that values collaborative group practice. Top down, corporate strategies dependent upon an over worked and out gunned medical director or VP of medical affairs will miss the mark. The more likely way for these ventures to succeed is by ‘baking’ the culture from the ground up. In other words, ‘seed it and they will come’. One of my mentors (Ernest Holmes) once wrote long ago: ‘the soil can’t argue with the seed’. Lets nourish the soil first, then make sure we plant the seeds with the right constitution and vision.

Towards a ‘Preferred Hospitals’ Manifesto

So what’s a ‘preferred hospital’ anyway?  A fair question, since ‘beauty’ is for the most part in the mind of the beholder!

Preferred Hospitals remains a conceptual ‘on the come’ value proposition at this point; but when I first thought of the idea, I had in mind structuring a network of participating hospitals and physicians directed primarily to the 47 million Americans without health insurance. The network’s ‘secret sauce’ consisted of providers who contractually committed to a substantially discounted (equivalent to the best or “most favored nation’s”) rates, otherwise extended to ‘wholesale buyers’, i.e., health plans, with the greatest group purchasing leverage.

In the economics of managed care, the more members a health plan trafficked in a specific market, the greater provider discounts they could expect. Most favored nations rates often equated to 50 cents on the dollar (or less!) , i.e., a 50% discount. Thus, the value proposition (to the uninsured) was twofold: (1) the contract rates would be actually honored, and therefore the member would receive a benefit in exchange for the modest dues paid vs. told ‘we don’t participate with that plan’; and (2) the provider’s rates would be adjusted to ‘fair value’ at least as determined by the entities with the greatest purchasing power in that market.

The great irony is hospitals and physicians too often (whether by design or not) reserve their ‘retail book’, i.e., billed charges, for the least able to bear the burden of charge based ‘sticker shock’. Many offer cash discounts as a courtesy in the +/- 25% range, but too often fail to present that option upfront before the downstream litany of collection calls.

At the time I originally entertained the idea, the discounted medical plan marketplace (DMPO) was populated with flimsy players, many of whom where exposed by the Georgetown University Study ‘Discount Medical Cards: Innovation or Illusion?‘ So it appeared this idea would have traction in the marketplace. While I enthusiastically jumped in, I found myself banging my head on the wall, over and over again. The value proposition seemed so apparent to me; especially linking the emerging growth of retainer, concierge or micropractices to a targeted and under-served market that contrary to popular wisdom was not a indigent demographic per se. Further, I reasoned (incorrectly I might add) that many of the forward thinking, and compassionate hospital systems (especially the one I worked for in DFW), forged under benefit of tax exemptions would proactively embrace a solution designed to reach an underserved market, and thus make a material deposit into the ‘community benefit’ bank. With IRS and the Congress on the non-profit hospital trail (i.e., Chuck Grassley, et al) looking into the veracity of 990 filiings, certainly these hospitals would see the light and embrace the greater good this model so obviously afforded; not!

None-the-less, I began to negotiate ‘upstream’ with several national PPO network managers, who in search of incremental revenues, and fighting ‘silent PPO allegations’, were electing to ‘rent’ and private label their networks in exchange for a per member, per month (PMPM) fee that ranged at that time between $3.50 – $4.00. Yet, as a start up with no membership, it became solely a cat and mouse affair. The PMPM basis was a function of the membership base which at that time was zero. From their perspective, it was a pure play ‘on the come’ business model, and good intentions not withstanding, we could not come to terms.

I also approached several colleagues, and friends in the personalized, retainer model, or concierge medicine market, and attempted to interest them in the business model. Most notably the Society for Innovative Medical Practice Design (SIMPD) was a logical partner or sponsor (I reasoned) to which I ‘pitched’ the idea, though to no avail. They were just not interested in ‘marketing” their nascent member panel at the time, nor reaching out to this underserved market per se.

Thus, no traction developed, and after much time soliticing support, and partner participation, I elected to back off of the business model.

So fast forward a few years and witness the ‘health reform 2.0 moment’ we’re all having. Revived thoughts have surfaced as to what and how a preferred hospitals network might be structured?

Here are a few ‘indicia’ of an emerging preferred hospitals manifesto:

• Commit to pricing, cost and quality transparency
• Adopt social media guidelines to engage and empower patient utilization of the hospital’s services (pre-admission, during and post discharge; especially follow-up concerns)
• Offer ‘members’ most favored nations’ rates via a credible discount medical plan(s)
• Waive where possible, or otherwise, defer collection of all upfront fees, copays, estimated co-insurance, and/or deductibles
• Participate in budget driven and consumer specific time payment programs (as determined by independent financial counselors) via auto-debit direct from the patient’s bank (interest free)

This is only a start. I welcome your thoughts.

HelloHealth’s Jay Parkinson on ‘New Age’ Medical Models

Program Note: Due to ‘technical difficulties’ the interview with Jay was disrupted and will be rescheduled shortly! This live web is a continuing experiment and the tech gremlins do tend to appear now and then. My continued apologies to Jay.

Jay Parkinson, MD, MPH, of Hello Health, joins me for a conversation on emerging alternative medical practices from Concierge, Boutique to retainer based models, including the HelloHealth strain. Jay is a pioneer in the adoption, and integration of social media tools into medical practice; and will share his insights, and vision for the promise and pitfalls of social media innovation in medicine.

Amidst the current ‘fever pitch’ buzz of health reform, there is considerable conversation about lowering health care costs, while improving both quality and access. The US health care system is at risk of implosion. Whether we look at it from the underfunded programs of Medicare or Medicaid, or the cost prohibitive employer sponsored health insurance system – which has priced iteslf out of reach absent the planned cost shifting of so called ‘high deductible health plans’ – few are happy campers; and approximately 46 million Americans are without health insurance.

We will connect the dots of emerging medical practice models to the broader health reform agenda by considering the vision and value system of one of medicine’s clear innovator’s.

Join us on June 19th, at 11 AM EDT/ 8AM PDT for a live broadcast that will also archive for later broadcast or RSS subscription to Google Reader, iTunes or other feed aggregator.

“Concierge, Boutique or Retainer” Based Medicine; Is This Good For American Healthcare?

It seems not a day goes by without another announcement of this or that primary care medical practice electing to leave entirely, or in part, the traditional model of medical care. Yet, this is a trend most worthy of considerable exploration.

Absent effective health reform (minimally: primary care payment equity, and administrative simplification), the current drip, drip, drip outmigration of physicians from a traditional billing and collections medical practice into these ‘new age’ models has the potential to grow into an outright tsunami in the near term.

Movement by primary care physicians into the boutique, concierge or retainer based medical models is not without a downside. Some say that it is clear evidence of the emergence of an impending ‘perfect storm’ in medicine that will collapse the primary care safety net at the precise time when it anticipates its greatest demand (i.e., retirement of the baby boomer generation).

When one takes into consideration the overwhelming preference for medical students to opt for higher paying specialties vs. the primary care specialties of Family Medicine, Internal Medicine, and Pediatrics, the trend is quite disturbing – health reform incentives (to grow capacity) notwithstanding.

At one level, it is a rational response by physicians to a failed healthcare finance and delivery paradigm; while at the same time, extracting essential primary care infrastructure from a delivery system that completely relies on it’s availability.

There are many models in the retainer or concierge medicine market. Once you’ve seen one, you’ve seen only one; there is no standardization. From MDVIP, to Jay Parkinson, MD, at Hello Health, this is a dynamic and rapidly evolving industry.

We will feature this medical phenomenon from the inside out at one of our next programs. There is much to discuss.