Health Care Solutions: Lawyers

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.

Health Care Solutions: Pharmaceuticals

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.

Health Care Solutions: Physicians

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.


Lately, my friends have been subject to my long and rambling diatribes about the health care situation in our country.  I felt that it was time that my readers also got to sample some of my ideas on this critical topic. Other posts I have written on this topic are here and  here.

Today’s ramble is on FUD.  In sales, if you don’t have the superior product or service, you might likely resort to spreading FUD – it stands for Fear, Uncertainty and Doubt.  It is a highly effective, although morally bankrupt way to try to sell your product or idea.  The idea is to make the status quo something that is so unpalatable that your customer must buy your product, no matter its qualities.  The Right has been making hay with the concept for a while and has now driven the volume of the rhetoric on the health care debate to new levels.

If you have not been personally affected by the health care issues then it is only natural that you will pay attention to the loudest voices.  But, if you have tried to get personal insurance only to be denied for no good reason or for a pre-existing condition or have been denied coverage for a needed procedure or your COBRA ran out or you were otherwise affected, you have a stake in knowing the truth.

This is a critical time for us as a nation and it behooves us to take a little time to really understand what our elected officials are trying to do. I found this article compelling to help separate the wheat from the Rush Limbaugh (and others) chaff and FUD.

Paying your dues

A couple of conversations I had lately came together for me.

I had a discussion this week with a friend about baseball.  Actually, I was doing a lot of carping about how the best paid players for the Chicago Cubs, were having awful years.  From Alfanso Soriano to Carlos Zambrano to Milton Bradley, those big contracts haven’t been working out as incentives.  This week we heard about Carlos Zambrano admit to being too lazy to do the abdominal exercises to strengthen his back. Alfanso Soriano is having problems catching balls in the outfield, is hitting below .245 and can’t seem to run out a ground ball to first, yet is still collecting on his 8 year $136 million dollar contract.

Now I am not the fastest runner in the world, but if you were to pay me almost $105,ooo per game, I would happily run my hardest to the first base bag.  Yet on the same team, we have Ryan Theriot, a shortstop who makes $500,000 for the year, leading the team in hitting right around .300 and doing whatever the team needs him to do; sacrifice, steal a base or hit and run.

The second conversation with another friend had to do with a mutual friend who was offered a job that included base pay plus an incentive bonus program based upon the work done by his team.  Executive level job, tough job market, sexy company. But our friend was upset that his base pay was the same as the base pay of those that reported to him.

It seems that some of the folks caught up in these conflicts are laboring under the idea that they have paid their dues and are now somehow above performance evaluation.  Baseball in general has long paid for past performance with no review.  Remember Mike Hampton, hailed as the second coming of Cy Young, who was awarded an 8 year $121,000,000 contract in 2001 and has had a record of 56 wins and 52 losses over the 8 years. Not a real good investment, if you ask me.

If you get a chance, go see a minor league baseball game. Sure the skillsets of the players are not at major league levels, but watch them hustle.  Watch them listen to the coaches.  Strangely, you don’t see as many baserunning mistakes as you do in the majors.  The key fact is that the players are looking for any way to get noticed and perhaps find themselves playing with a major league club. The best way to do that is to perform, listen to the coaches and improve.

My friend needs to not worry about base salary.  If his team does well and the incentives are created with care, he will be remunerated well.

My advice to everyone is not to rest on their laurels.  Play every day as if it counted in the standings and worry less about having paid your dues.  You will do a better job every time by concentrating on the job ahead of you rather than the dues behind you.

Fun, Video and Management x2

I haven’t done a good listing of links lately, so here you go…

Fun: Gotta love this picture

Video: Regular readers know that I love Seth Godin.  If you have never heard him speak, take an opportunity to view this video of a speech he gave last year to a software developer’s conference.

Management: Netflix, a company that I admire for a lot of really great things, has posted a slide deck of how their corporate culture works.  It is long (128 slides), but it reads quickly.  It is a must read for any entrepreneur trying to establish a coherent and successful culture.

Time: I read this article a couple of weeks back and it keeps coming back to me with a simplicity of the content and yet the relevance.  Paul Graham writes about Maker’s Schedule and Manager’s Schedule.

Perfection – The Reason Why

A couple of weeks ago, I wrote about a Perfect Experience. While the memory still remains and my wife and I are still telling the story (talk about word of mouth marketing), I got to thinking how was that perfection made possible.  Really, wouldn’t every business want to deliver a perfect experience?  And the reality of it was that this is the first time that I can remember ever having a perfect experience.

In the comments to the story post, Cindy remarked that she believed that trust was a key component.  I think that Cindy hit the nail on the head.  Charlie trusted his team to attempt perfection each and every time.  If the team felt that they needed olive oil from the farm in Australia or wanted to try to make a new sorbet out of onions, it was no problem. There was no expense spared to ensure that the team had the right tools to allow for perfection.

Even the team that prepared the food was trusted. Contrary to what you might expect, the kitchen was not filled with culinary experts.  Sure there were some unbelievably talented chefs, but there were also a significant number of students and less experienced chefs.  They trusted in one another to do a great job.  The experienced chefs were always available to show a student how to use a new tool or perform a specific step in a recipe.  Each plate that was served was inspected by a pro to ensure that the guest’s experience was spectacular.

The front of the house staff was no less focused on the perfection of service than the chefs.  They made sure that every guest was able to enjoy their meals, from wine suggestions (a difficult chore when there are over 20,000 bottles of wine on hand) to explanations of the menu choices and ingredients used.  They were able to take guests on a tour of the kitchen and really bring the experience to life.  They made sure that all aspects of the dining experience that guests see were perfect.

The trust extended to allowing us to sit in the kitchen while the meal service was being performed around us.  How many businesses would be able to feel comfortable allowing their customers to watch every step in the creation process?  I have posted about living your life in public (like baseball players), but this is even a step beyond that.

Charlie makes no bones about the mission for his restaurant.  He wants to deliver excellence in everything he does. And he does it in an entirely unconventional way — by trusting in his team to do the right thing. Yes, you have to have the right experts.  Yes, you have to have the right tools.  But the key is to make sure that you have a clear vision of what perfection is for you and then communicate that to your team.  If you have the team, the tools and the vision, then trust is what will allow it all to come together.

Banking Etiquette

Banks have gotten a bad rap over the past year or so.  But in truth, they are the linchpin of our financial livelihood as entrepreneurs.  If you accept credit cards, you need a bank.  If you pay payroll taxes, you need a bank.  If you want to pay your employees using direct deposit (or even the quaint paycheck), you need a bank.  Most vendors still require that you pay them using a check.

Banks also can provide loans for businesses.  These can be asset based loans, lines of credit, mortgages, long and short term.  And this is where businesses can get into trouble.

While most business owners think of their checking accounts and loan accounts as separate entities, the banks do not.  So if you have missed a couple of payments or have just exceeded your loan covenants, the bank can, without warning, clear out your accounts to fulfill the terms of your loan agreements.  And if you have a personal guarantee, they can tap into any personal accounts you might have at the same institution.  Talk about a kick to the head…

I have a few suggestions to try to make this less of a potential issue for you:

  1. Build a good relationship with your banker.  Meet quarterly with him or her.  Take them into your business and explain what goes on.  For sure, tell them the good news when you sign a big deal, but just as critically, let them know when things aren’t going so well.  The more you communicate with them the better you will be.
  2. Don’t put all your eggs in one basket.  Keep your personal accounts at a separate bank.  Keep transactional money at the primary bank, but keep other long term cash somewhere else.
  3. Understand your loan covenants.
  4. If you don’t hear from your banker, or they don’t return your calls, don’t consider this a good thing.  The last time I heard about the money transferring process was 2 weeks after hearing “Oh yeah, I haven’t heard from my banker at BigBank in 6 months.  I’m guessing that they have forgotten about us.  They must have bigger fish to fry.”

When this happens, everyone gets upset at the bank.  How could they do this?  In reality, the bank is just trying to forestall the worst outcome for the bank, a complete loss of the capital that they have provided to the customer. They figure something is better than nothing.  And the entrepreneur needs to understand that that is a potential outcome of the deal that they made when they accepted the cash.

Idea Risk

Sorry for the time between posts, but summer intruded and must take precedence.  I will try to get back on a better schedule, but can make no promises since I still have another month or so of summer.  But on to more meaty topics…

So many entrepreneurs (me included sometimes) have said that they would love to start up a new venture if only they had a great idea.  But is that really the case?

While I was researching a new venture idea, I came upon the thought that there were really two kinds of risk in the entrepreneurial world.  The first is Idea Risk.  That is, is the idea good enough to base a viable business upon?  The second is Management Risk, or can the team that the entrepreneur has assembled pull it off?  Of these, Management Risk seemed to be the most likely to be able to be ameliorated through judicious use of mentors, incubators and trusted service providers.  The Idea Risk seemed to be a binary decision – either it was a good idea or not.  But the more that I have thought about it, the more that I find that Idea Risk has more facets.

I have a friend who, over the past year, has met with various people and has generated at least 7 or 8 actionable ideas.  Not just “Oh you should start up a new-age car dealership” kind of wacky ideas.  But full blown creative ideas, ideally suited to the person that he was talking with, with some sense of market potential, revenue sources… the real deal. In only one of those cases, has the person taken the idea and run with it.  And she didn’t do it until she was goaded into it and provided some incentives that reduced her risk.

And therein lies the real rub.  It is not the lack of ideas.  There are tons of ideas out there. If you are looking for a great idea, check out this list of 999. It may not even be the quality of the idea, although the new age car dealership doesn’t rock my boat. The real reason that people don’t start ventures is the risk factor.  They are worried that they will not make enough money.  They are worried that their mother-in-law will not like them.  They are worried that they will lose the house.  They are worried that their friends will think them crazy for leaving a perfectly good job as a manager at IBM.

My advice to you is that if you want to be an entrepreneur, you have to get over the fear of what everyone else has to say.  If you find an idea that you are passionate about, think Bill Gates “A computer on every desktop running Windows” or Anita Roddick‘s “To dedicate our business to the pursuit of social and environmental change.” at the Body Shop, go for it with all your heart and all your soul.

I truly believe that the key word in Idea Risk is Risk, not Idea.

Illuminating the Path to Enlightenment