The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It
Blue Ocean Strategy: How To Create Uncontested Market Space And Make The Competition Irrelevant
The Know-It-All: One Man’s Humble Quest to Become the Smartest Person in the World
Hospitals are in the toughest position of all in the health care debate. Anyone showing up in their emergency rooms are required to get health care, whether they have insurance or not. Many people without insurance coverage use the emergency room for all of their health care needs, which strains the ability of the hospitals to provide a high level of service to their paying customers.
In addition, hospitals are at sharp end of the stick when it comes to dealing with insurance companies. Even if a patient has insurance, if the insurance company denies authorization for a treatment or procedure, the hospital must jump through hoops to try to reverse the denial. A friend of mine manages a group of 6 people who work for a company that is contracted by a single hospital chain just to reverse these denials. They make a very good living just adjudicating the differences of opinion between the insurance companies and the hospitals.
Hospitals do not do themselves any favors, however, when it comes to managing their own businesses. Because most of their funding comes from insurance companies and Medicare/Medicaid, they negotiate with these companies for standard reimbursment rates, which in many cases have no basis in the actual costs to provide the service or procedure. They do not post the prices of their services, so that the average consumer can make informed decisions. And of course, if you are uninsured, you will pay the highest price.
Hospitals are always looking to grow, to take market share away from the other guy. There is a strong sense that they need to buy the flashiest newest technology, the multi-slice MRI or the gamma knife. And I think that we need to have access to these technologies as they can significantly improve the quality of diagnosis and treatment provided. But I don’t think that every hospital in the county or state needs to have the same technology. Heck, run the MRI 24/7. If my doctor requires that I need to get an MRI to diagnose a serious condition, I would go in at 2am to get it done.
The technology that will make the hospital work better and provide significant patient care overall is EMR – Electronic Medical Records. It is not flashy, but it provides the framework to allow doctors to work together and have a unified view of the patient’s status from anywhere. This is not being implemented at anywhere near the pace that it needs to be. President Obama is wise to have included significant incentives to its implementation.
Hospitals are in the crosshairs. They need to maintain good relationships with physicians, insurance companies and big pharma. They are mandated to serve the public, whether they can pay or not. They have significant unfunded mandates from the government, accreditation organizations and insurance companies. Now is the time for hospitals to take the initiative to step out from the “Woe is me” persona and propose needed reforms to the entire health care debate.
There is an interesting article in BusinessWeek this week talking about the differences between entrepreneurs. The question is whether every small business owner is an entrepreneur. Some say yes, other definitions require significant innovation. I think that the conclusion of two classes of entrepreneurs, replicative entrepreneurs and innovative entrepreneurs provides the most clarity and understanding.
Lately, I have been thinking along another path related to the practice of entrepreneurship. There are a lot of entrepreneurs who are totally invested (monetarily and in all other ways) in their great idea. They nurture it and grow it and get others to get excited by the idea. It is all about the idea. Now, over time, the idea might grow and become something more, but the key is the idea. We think of Henry Ford, Jeff Bezos, Steve Jobs and Sam Walton. All successes, but focused on the grand innovative idea. These entrepreneurs typically are thought of as evangelists for the idea.
Another group of entrepreneurs are excited by the chase. Sure the idea has to be reasonable, but the fun is to grow a business, in whatever field currently is interesting. More times than not, the big thing here is the team. The team is why the entrepreneur gets up in the morning and makes that extra effort to sell the customer on the deal. People who are excited by this typically have a strong skill set in a particular area and need to rely on others to work on areas that they are not particularly well suited to. It surely matters less to these entrepreneurs what the specific “idea” is, as long as it is interesting and they have a strong, committed team to work with.
Either way, we have entrepreneurs who are building businesses. The key thing for the entrepreneur to figure out is whether they are the “idea guy” or the team builder. Both can be successful given the right environment. However, if you try to work in an environment that is not suited for you, you are asking for trouble; trouble for the business and trouble for your professional growth.
Find out where your strengths lie and focus on finding the right opportunities on which to concentrate.
We need to take a break from all that Health Care stuff and I thought some fun links might be “just the ticket” as Jon Lovitz might say.
I can’t believe how Al Franken
created this hand drawn map
Fun: For trivia buffs, here is a tough quiz, using circular logic.
Politics: Another Sanctity of Marriage act for California? Maybe.
OK, folks. Let’s tackle an easy one with only one topic.
In this country, the saying goes, anyone can sue anyone else for any reason (and sometimes for no reason at all). But medical malpractice is a specific type of tort, a civil lawsuit that has had intended consequences and unintended consequences for all of us. So let us look at tort reform.
First, the intended consequences. Attorneys who specialize in medical malpractice present their cases to a jury made up of regular citizens who are tasked with the job of determining the dollar value of the particular injury (and pain, suffering, loss of consortium, future salary, etc.). Because these lay juries do not have any particular medical training (and they are dealing with OPM – Other People’s Money, i.e. the insurance company’s), they tend to deliver awards that are lottery like. Their thinking is that if I were in that position (and it didn’t cost me extra), I would want to be as generous as possible. The lawyers, as in most personal injury cases, collect a third of the award. It can be pretty lucrative.
Now the unintended. Because of the increase in medical malpractice lawsuits, doctors have been practicing defensive medicine. According to this Massachusetts Medical Society report, 12% of all health care expenditures are for defensive medicine and costs involved are well over $100 billion annually. The costs for those x-rays, ekgs, stress tests, MRIs and blood work add up quickly. But the doctors think, “I sure don’t want to be that guy who gets asked ‘Why didn’t you order an MRI to determine for sure the extent of the problem?’ on the witness stand.”.
So, how do we change the system? First, we must look to tort reform, specifically for the medical malpractice arena. Instead of using a regular civil trial with judge and jury, change all medical claims to an arbitration model with medical experts as the arbitrators. Under this type of a program, there would be limits on non-medical claim reimbursement.
Second, we change the method of reimbursement from a medical malpractice insurance model to a model that has worked well for the banking industry, the FDIC. In this case, each health care provider pays a fee into a pool that the arbitration panel can use to pay claims.
Doctors and hospitals don’t get off scott free here, though. I would expect that as a part of this program, reporting on the number of successful claims will be made available for quality checking by interested patients. This will be another area where transparency will allow health care consumers to have more information on which to make provider decisions. In addition, if physicians were incompetent, the arbitrators could (and should) take away medical licenses.
Lately, I have been hearing this awful commercial on the radio: “Have you been prescribed Lipitor for your high cholesterol? Know that there is no alternative and that your doctor prescribed it for a reason.” More FUD on the Health Care front. Really, if there was no alternative, why would Pfizer spend money scaring you about changing? What Pfizer is really worried about is that they maintain the high profit levels of Lipitor based on the high price of this drug (over $100 per month per patient in the US). The fact is that people are looking for other statins (yes, there are generics out there that do much the same as Lipitor for significantly lower prices). My bigger point is that Lipitor provides an astonishing amount of profit to Pfizer — by this account $2.86 billion dollars in 2008 that would not be generated if Lipitor lost patent protection. Good news for the Pfizer investors, but bad news for all of the patients who are taking the drug and the health care system as a whole.
My vision is that we reduce the amount of time a drug can remain proprietary, in order to allow cheaper alternatives to come into the marketplace. Drug companies can develop “plus” products if they want (and get proprietary timing on those), but each version of the drug should move into the generic phase faster to allow more patients to be served in a cost effective manner. Certainly some patients will benefit from the newest iteration of the drug, but a considerable number of patients would have some value from the older stuff. I liken it to the PC marketplace. There are some of us who need to the get the latest, greatest, hottest new products the day they come out. Others are well served by utilizing the previous version.
Pfizer’s contention is that they work on a number of research projects that don’t work out and the profits from the big win cover some of these, but we can do better to hold down the cost of drugs.
According to this filing, Pfizer (as an example) spent 15.4% of revenue on R&D and 30.5% on selling, informational and administrative expenses. Doesn’t sound like an R&D company as much as a marketing company to me. Lest you think I am out to get Pfizer, we can look at their competitor, Novartis. According to this filing Novartis spent 16.9% of revenue on R&D and 35.1% on selling, general and administrative. Again, about a 2 to 1 ratio.
So, I have another problem with the consumer advertising that Big Pharma utilizes. These drugs are all prescription drugs that cannot be utilized without a physician’s authorization. Why should Big Pharma advertise to consumers? All it does is provides a way for consumers to demand that their physicians prescribe the name brand, whether or not it is the best solution for their condition. In order to provide more profit to the pharmaceuticals, they should stop all consumer marketing and use those profits to devote to more R&D. Think of it, no more goofy commercials with folks in bathtubs talking about ED or the advantages of Advair or birth control via patch, ring, pill or injection. The result would be something like $10 million a day back to Big Pharma for R&D. Sounds like a winner to me.
Please start the discussion in the comments if you agree or disagree. I’m sure there are other approaches that I have yet to think about.
Note that I am not a physician and certainly don’t take any medical advice from me.
It’s good to be back. Too many distractions in the summer that just make it difficult to generate great ideas.
Today, I want to start to think about some ways that we can view the health care crisis in this country. One problem that I have mentioned before is that the consumer is the only constituency in this fight without a lobbyist. The hospitals, insurers, doctors, pharmaceuticals, lawyers and software companies all are paying huge sums to the legislators to push a bill one way or another. The only way to get to a solution on health care will be to compromise. What I thought might be helpful (and sometimes controversial) would be to look at each of these constituencies and see what changes might be beneficial to the health care consumer. I would love to hear your opinions on these rantings in the comments.
Today’s topic is doctors.
We all know that they are the personal face of the health care crisis. As the main deliverers of our health care, they are there to see the failures in our current system as we see them. But there are lots of issues relative to this last link in our health care delivery system that can be fixed.
Today’s doctor is overworked and underpaid, at least according to her. They spend a lot of time working to convince insurance companies to pay them for services. They are forced to rush patients in and out in order to see as many patients as possible. In many cases, there is not the time to get to know the patient other than as a combination of diagnoses and test results. Is this what we really want? It obviously is not what the doctors want.
On the other hand, doctors in all specialties spend at least 4 years in post graduate study and 3 years in residency, racking up hundreds of thousands of dollars in loans. Is this a bit of overkill for the majority of the health related needs we have? Yes, we will still need neurosurgeons, but do we really need this level of medical experience to diagnose ear infections and perform sports physicals? We have started to see a retail physician service, brought to us by Walgreen’s and CVS, who can perform these types of low impact evaluations on a much lower cost per procedure. I would vote to see more of these as part of our continuing care. Even better would be if they were coordinated by the same family physician we are comfortable seeing to insure continuity of care. I understand that people are loathe to change their vision of health care provided by physicians, but this is one compromise that we as consumers need to make.
The primary care physicians are hit the hardest. They are the ones who have to fight with the insurance companies over every decision. In many cases, they are fighting for the authorization for procedures that they get no financial benefit from, e.g. colonoscopies, stress tests, MRIs, specific drug regimens. Instead of being the doctor with all of the responsibility for coordinating our care and little of the revenue potential, I would vote to change the role of primary care physician to that of a project manager for each patient. They would call in the troops necessary to fulfill the patient’s requirements, whether that was a Physician’s Assistant for that ear infection or a Cardiac Surgeon to insert stents. The primary care physicians would get paid for the coordination and project management of each patient and the doctors that were called in for ancillary services would get paid by the procedure.
Rather than a residency program where the new doctor works in a hospital for little money and no sleep, I would propose that the residency program actually become more like an apprentice role. Newly minted doctors could work with established physicians in their specialty and learn the business from the ground up. One initial benefit would be that the new folks would be given the opportunity to see how a practice works, the ins and outs of insurance, billing, scheduling and all of the other myriad details of a modern physician’s world. Sure, the aspiring cardiac surgeon would scrub in on surgeries, like they do now, but they will do it under the tutelage of a teaching physician with whom they will have the opportunity to grow. The doctor, rather than the hospital, takes on the role of teaching the physician.
Lastly, we tend to venerate doctors in our culture, from Marcus Welby to Dr. Kildare to Dr. McDreamy. And doctors have done a ton of good, no question. But, the doctors have read their press clippings. Especially the specialists. My friend Sandra reminds me that one of the big issues with physicians is that they are simply greedy. Fast Company had an article that claimed new primary care physicians make an average of $186,000 per year and orthopedic surgeons make triple that. Yes, they have college loans, but these are not minimum wage jobs. This is not practice income; this is salary, after insurance and office help and tongue depressors are paid for. Unfortunately, this problem will take time to fix, if we are strong enough to try, as a whole new generation of physicians will need to be introduced to these changes. But it is critical that we as consumers understand the economics behind our health care and this is an area of concern.