Monday, April 30, 2007

Physician Business Ideas - “Coding is the Business of Medicine”

Coding, EMRs, and the State of Denial Management

I recently spoke to James Weintrub, MD, a plastic surgeon in Providence, Rhode Island, With his partner, Greg Brownell, an Internet expert, James has spent nine years developing a coding system, DPNX (Digital Physicians Network, DPNX helps doctors code for themselves – without going to coding school, attending coding seminars, hiring coding clerks, or installing expensive EMR systems.

James’ rationale for devoting nine years to helping his fellow physicians is stunningly simple: “Coding,” James says,” is the business of medicine. No codes, no revenue.” As the nun CEO of a Catholic health system once told me, “No Profit, no Mission.” In other words, if you’re to carry out your healing mission as a doctor, you’d better be economically self-sufficient.

James maintains that coding, backed by appropriate documentation, is more practical and important to most doctors than EMRs. With EMRs, doctors may need a practice manager, may have to bear heavy expenses in training and implementation, and may experience losses as their practices grind to a halt during the installation process.

The operative word, you will note, is may. Some doctors, especially those in larger groups, swear by EMRs. Others swear at EMRs. I know of one physician consultant who devotes full time dismantling, rather than installing EMRs. For many doctors, especially those in small practices, see no return on investment, or ROI, for EMRs, to use the parlance of EMR vendors.

With the system of Weintrub and Brownell, on the other hand, James says all you need is Internet access. With information on their website, doctors can manually go through their charts, run chart information through their system, and see instantly if the practice’s documentation supports coding levels. By upgrading their documentation, doctors can quickly reduce the number of denied claims and raise their level of reimbursement.

In practice management circles, what James and Greg are advocating is known as “denial management.” Experts agree it’s better to code correctly, than overcode and risk a denial backlash, even litigation and fines, from insurers (Pamela Lewis Dolan, “Denial-Claims Systems Bring Cleaner Claims, Better Coding.” American Medical News, April 23-30, 2007). For a discussion of the James Weintrub and Greg Brownell approach, see pages 57 and 58 of Innovation-Driven Health Care: 34 Key Concepts for Transformation, Jones and Bartlett, 376 pages, indexed, $59.95,

Sunday, April 29, 2007

E-Medicine - Trouble In E-Paradise: Kaiser and Its EMR

Employee Fires Off EMail, Gets Himself Fired

George Halvorson, CEO and Chairman of Kaiser, is a friend and visionary. I often refer to his books; Strong Medicine(Random House, 1993, and Epidemic of Care (Jossey-Bass, 2003). In them, Halvorson says health care rests on a foundation of consumer engagement, doctor teamwork, collaboration, quality improvement, and accountability.

I feature Halvorson and Kaiser Permanente in a chapter, pages 103-111, in Innovation-Driven Health Care; 34 Key Concepts for Transformation (Jones and Bartlett, 2007). I lead off that chapter with this prelude:

Big health care organizations, such as Kaiser with its $30 billion in revenues, have bigger innovative levers to lift health care world, such as a comprehensive electronic system connecting all of its physicians.”

Kaiser’s EMR is widely considered the electronic medical records prototype of the future.

I’m not alone in admiring Halvorson. He is noted for plain talk. He is regularly featured as the keynote speaker at various national and international conclaves.

I was taken back when a Kaiser employee, 22 year old Justen Deal, dealt Kaiser a public relations blow with a Kaiser system-wide email lambasting HealthConnect – Kaiser’s ambitious $4 billion project to convert paper files into electronic records available at every doctor’s fingertips.

What upset me wasn’t so much Mr. Deal’s accusations (“We’re spending recklessly, to the tune of over $1.5 billion in waste every year, primarily on HealthConnect but also on other inefficient and ineffective information technology projects.”), but Deal’s lack of qualifications to judge Kaiser’s IT purported deficiencies.

Deal’s background, as outlined in a recent Wall Street Journal front-page piece (Rhonda Rundle, “Critical Case: How an Email Tirade Jolted a Big HMO,” April 24, 2007), were:

• dropped out of high school and college,
• served as a gay-rights activist in West Virginia,
• performed administrative chores for West Virginia Symphony and an Ottawa gay rights group,
• worked for a travel agency,
• developed patient-education booklets for Kaiser.

This is hardly a credible background for accusing Halvorson and other Kaiser executives of high level misconduct and for proclaiming HealthConnect as a “disastrous failure.”

Deal ignored the fact that since 2003 the Kaiser EMR has been developed and installed by the Epic Systems Corporation, a Madison, Wisconsin-based medical software systems corporation. Epic is widely considered as the premier EMR firm for large multispecialty organizations in the U.S.. Epic has won every award offered by the medical software industry raters – KLAS enterprises, College of Healthcare Information Managers, the HIMSS Davies, ASHP, and the Best in Texas.

Epic is, in short, considered in a class by itself, and has its systems installed and functioning in scores of large health care organizations across the country.

Mr. Deal didn’t try to hide what he was doing. He signed his email. It reached an estimated 120,000 employees of Kaiser. He didn’t think would be fired. But Kaiser dismissed him on January 11, two months after his November 2006 email blast. Now he’s helping friends with their computers, resting on his laurels as HIStalk’s (a popular IT website) Person of the Year, and looking for a new job.

Deal has become a Big Deal in the blogging world. He was asked to participate in a HealthCare Blogging Summit, and his accusations were featured in an interview by Matthew Holt, a well-known health care blogger with Dr. Andrew Wiesenthal, a physician overseeing the HealthConnect project.

Kaiser tale of electronic woe highlights three cyberspace dangers:

1) Hazards of off-the-cuff email remarks by employees of large organizations ( if you want confirmation of this danger, ask Alberto Gonzales, the current U.S. Attorney General)

2) Difficulties of controlling damage of electronic “whistle-blowers” of high-profile, high-target organizations (even if accusations don’t hold up under rational scrutiny)

3) Reputation injuries inflicted on individuals and organizations (The chief information officer of Kaiser resigned – said to be unrelated but the stigma remains - and the California watchdog agency overseeing managed care says it is monitoring HealthConnect’s performance, even though it finds no fault.)

George Halvorson and Kaiser don’t need me to defend them. George’s record and Kaiser’s performance speak for themselves. My father once told me, “Don’t start vast projects with half-vast ideas. Kaiser’s ideas – to connect all of its physician with one software system, to use software in its Archimedes Project for predictive modeling purposes, to run virtual clinical trials based on data from its 8.3 million members, to use a state-of-the art medical software company to make these ideas a reality – are truly vast and worthy of praise – not 0f off-handed half-vast condemnation by the ill-informed.

Saturday, April 28, 2007

Clinical Innovation - Hospital Innovations in The Pipeline

By Anne Zieger, Editor, Fierce Health Care

Prelude: What follows is an editorial by Anne Zieger, editor for Fierce Health Care, a widely read and admired electronic health care newsletter. The newsletter reports trends in health care and their impact. Fierce Health Care is sponsoring an awards contest for Innovative Hospitals, and I was asked by Anne my opinion of what lies ahead for innovative hospital CEOs.

Editor’s Corner - April 20, 2007

This is an interesting time to be a hospital executive--and a turning point in the business. New business models are popping up every six months, a fevered pace more akin to Silicon Valley than the staid halls of medicine. And practices which have standard for decades, such as expecting on-call physicians to work for free, are dissolving under pressure.

This week I spoke to Richard Reece, MD, a pathologist who practiced for 25 years and who is now a health care author, speaker, and consultant, to get his take on how some of these changes will shake out. Reece, author of the new book Innovation Driven Health Care (Jones and Bartlett, 2007), has taken a hard look at some of the industry's emerging trends, and he has some strong opinions on how it will all work out.
Some of his conclusions:

• With specialists "abandoning the mother ship" to form their own ventures, hospitals will have to take new approaches to partnership, Reece suggests. He believes that hospitals will have to do build more outpatient centers with specialists, or risk losing some of their highest-revenue admitters.
• He's skeptical that the retail clinic movement is going to keep expanding. "People expect more professionalism from clinicians than having to go behind a curtain at the back of their drug store," he says.
• He's expecting to see the rise of "big-box" medicine, 250,000 to 375,000 square foot facilities co-owned by hospitals and doctors. These retail-style facilities--which resemble suburban shopping malls--have joint reception areas, ample parking, imaging facilities, outpatient facilities, diagnostic centers, pharmacies. The idea, which is already taking root in the Midwest, is spreading across the country, according to Reece.
• Reece anticipates hospitals and doctors will increasingly build MAACs--multi-specialty ambulatory care centers--in partnership with real estate developers. These MAACs, which are being built in several locations already, will typically be found at the intersections of highways, often in areas which are medically underserved.
• He sees a movement toward Japanese-style lean models of production within hospitals. This will involve getting people together to plan how to do things more efficiently, such as reducing patient waiting times or times from biopsy to surgery, he says.

All of this boils down to a dramatic shift in the hospital paradigm, Reece suggests. In the future, hospitals will have to turn themselves "inside out," and find new ways to meet consumers where they live, work, and play.

So what do you think, readers? Is Reece on target, or do you disagree with his conclusions? Write to me and let me know where you stand. It's time to dust off that crystal ball!

Friday, April 27, 2007

Delivering the Male

From Himself and His Listlessness

The natural superiority of women is a biological fact, and a socially acknowledged reality.

Ashley Montagu (1905- 1999), The Natural Superiority of Women, 1998

Despite having had most of the social determinants of health in their favor, men have higher mortality rates for all 15 leading causes of death, and a life expectancy about seven years shorter than women's. Men's reluctance to embrace preventive strategies has also contributed to the spread of AIDS, particularly in Africa, and to an alarming rise in infections among young men, including other sexually transmitted diseases.

Furthermore, there is a sustained increase in psychosocial disorders in men, including alcohol and substance abuse, mid-life crisis, depression, and domestic violence.

Men's increasing aggression and auto-aggression remain an unsolved health and societal problem. As you read this, over 30 wars and conflicts rage around the world, mostly created, maintained, and aggravated by men.

Can something be done to improve men's life expectancy? Are there effective and morally acceptable strategies to modify men's negative behavior towards themselves and others?

We hope that these questions and the need to answer them trigger a strong movement in support of more focused and stronger research on men's health.

Although there is still a long way to go in most societies around the world, it is clear that women can perform (and on most occasions outperform) pretty much all the tasks traditionally reserved for men. In most of the developed world women are starting to outnumber men in medical schools and making rapid gains in terms of equality in compensation and opportunities in the workforce.

Will we see the gap in life expectancy between men and women widen as the gaps in social determinants of health become narrower? The answer is probably yes, unless women continue to adopt the same negative behaviors that characterize men today.

With the advent of sperm banks, in vitro fertilization, sex sorting techniques, sperm independent fertilization of eggs with somatic cells, human cloning, and same sex marriages, it is also reasonable to wonder about the future role of men in society.

Singfried Meryn, MD, Professor of Medicine and Chairman of the First World Congress of Men’s Health, “The Future of Men and Their Health. Are Men in Danger of Extinction, British Medical Journal, November 2003.

As a male, I’m part of an endangered species. And like most men, I’ve been listless about my health. Here I correct the listlessness problem, for myself and all you other fellows out there.

The Bad News List


• see doctors 8 times less often than women;
• live five fewer years than women;
• drive more recklessly than women;
• are more stoic than women in face of pain;
• have no medical specialty devoted exclusively to their care (perhaps we could call it “manstetrics/anthropology);
• carry more abdominal fat than women;
• on average, have a 40% greater chance of dying than women at any age;
• have lower HDL levels than women (lower levels are “bad,” which is why they call HDL the “bad” cholesterol);’
• don’t know erectile dysfunction is a sign of hardening of the penile arteries, similar to hardening of the coronary arteries;
• have worse prognosis with depression (suicide 4 times more common than women);
• fare badly with diabetes, heart disease, and hypertension compared to women (we delay seeing the doctor, and we’re diagnosed too late to do any good).

The Good News List

If the foregoing depresses you, lighten up Here’s the good news. You can do something about it, by:

• measuring your waist – should be 40 inches or less;
• knowing you cholesterol – maintain it below 200;
• check your blood pressure – strive for levels below 120/80;
• don’t ignore and correct erectile dysfunction;
• keep your alcohol below two glasses;
• wear your seatbelt;
• when it comes to “fight” or “flight, ” flee.

The Male Resource List

• Prostatecancerfoundation

That’s it, Guys. You now have your bad-good-health lists. No more excuses.

Here’s to your health!

Please limit toasts to two glasses.


Tara Parker-Pope, “The Man Problem; Science Confronts Vexing Issue of Men’s Short Lifespans; The Case for the ‘Viagra Visit,’” Wall Street Journal, April 24, 2007.

Thursday, April 26, 2007

Innovative Hospital At Work: Cedars Sinai. Los Angeles

Preparing Physicians and Patients for Procedures for Safety’s Sake

Last week Anne Zieger, editor of Fierce Health Care ( called.. She had come across and wanted to know to learn what I knew about innovative hospitals. Her widely visited website has since announced it’s sponsoring an event called Health IT Innovators Awards. Fierce Health Care is calling for news from all innovative hospitals.

First on my list was Cedars-Sinai Medical Center in Los Angeles. Over the last ten years, the Cedars-Sinai medical center has built a Procedure Center and is now supporting a group of four “proceduralists” – internists wholly dedicated to performing procedures on hospital patients.

In 2005 each of these four proceduralists performed more than 2000 procedures. They received extra certification in fluoroscopy, conscious sedation, upper airway endoscopy, percutaneous tracheostomy, ventilator management, and ultrasonography. Their pooled complication rates, tracked through PDAs, was less than 1%, far below the norm for other hospitals.

Cedars-Sinai’s doctor leaders – Mark J. Ault, MD, and Bradley T. Rosen, MD, MBA -- say proceduralists greatly improve patient safety. In fact, Ault and Rosen envision procedularists as the next notch up in the patient safety movement, now being widely pursued among the nation’s 5000 hospitals. Proceduralists are an emerging specialty for general internists, and is closely allied to the evolution of the speciality of “hospitalist,” now about 10 years old.

Besides increasing patient safety and performing procedures, the Cedars Sinai proceduralists train incoming interns on nonhuman tissue models and wide sterile barriers. Other drivers behind the procedural movement are:

• helping residents comply with work-hour rules,
• enhancing resource use,
• reducing length of hospital stays.

The Cedar Sinai Procedure Center is designed to help interns, residents, and proceduralists themselves to prepare for and to improve in-house procedures – often performed in a critical care environment

One More Safety Step - Outpatient Preparation of Patients for Procedures

Now Cedars-Sinai has carried its patient safety campaign one step further. The medical center, in this case the Risk Management department, has extended preparation for surgical procedures to patients before they enter the hospital.

Patients forget up to 85% what they were told by their doctor about an upcoming procedure within 10 minutes of leaving the office. This may occur because patients are dealing with the stress of an upcoming surgery or medical procedure.
To enable patients to learn more about an upcoming procedure at their own pace and in the comfort of their home, an interactive web-based education program called Emmi (Expectation Management and Medical Information) is being rolled out across the medical center by Cedars-Sinai's Risk Management Department.

Patients access the Internet program from any computer, using an access code issued by their doctor. It’s worth noting the Emmi program requires no change in any hospital’s IT program. All that is needed is a patient’s computer access to the Internet, now approaching nearly universal access in many parts of the country.

Using easy-to-grasp language and drawings, Emmi walks patients through about 80 common operations (with more to come), from pre-op to post-op. The 20-30 minute teaching session explains benefits, risks, and options. It allows patients to pause the program and e-mail questions to their doctor. These may be followed up later during an office visit. There is a record of what patients viewed.

Emmi educates and prepares patients, and it helps them become more focused when talking with their doctor. This saves time for doctors, makes the informed consent process more consistent, and reduces length of office visits. Carolyn Bell, RN, director of Risk Management, says, "Other benefits include improved patient satisfaction, more efficient physician-patient interactions, reduced burden on front office staff and reduced malpractice risk."

Last summer The Center for Weight Loss Surgery was the first department at Cedars-Sinai to start the program. Since then, the Orthopaedic Center, Pediatric Services, Institute for Spinal Disorders, Minimally Invasive Urology Institute, Center for Digestive Diseases and the Heart Center have adopted it. To date, nearly 1,000 access codes have been issued to patients for procedures ranging from angioplasty, laparoscopic gastric banding (LAP-BAND) surgery, total hip, and knee replacement to colonoscopy.

"Our patients are arriving for consultation more fully informed than ever before," said Scott Cunneen, M.D., director of Bariatric Surgery. "Many potential questions have been answered prior to the patient's arrival, allowing us to focus on the most important issues. This is what technology is supposed to do -- make our job easier! I wish the Emmi program was available for every procedure."


1. Ault, M. J and Rosen, NBS, “Proceduralists – Leading Patient Safety Initiatives , New England Journal of Medicine, 356:1789-1790, 2007.

2. Rosen, BT, Ault, MJ, Ng, PK, ”The Proceduralist: An Emerging Specialty for General Internists, J Gen Int Med, 2005:20:Suppl 1:25, abstract.

3. Ault, MJ, Rosen, BT, Ault B, “The Use of Tissue Models for Vascular Access Training: Phase 1 of the Procedural Patient Safety Initiative, J Gen Intern Med, 21:514-517, 2006.

4. Cedars-Sinai Medical Staff Pulse
, “New Web-Based Program Helps Patients Understand Procedures, Risks, March 22, 2007.

Wednesday, April 25, 2007

Google Yourself

The Merit of Self-Googling

"I think everybody should periodically google themselves."

Joseph Scherger, MD, clinical professor of preventive and family medicine, University of California, San Diego, “Google: Searching for a Reputation,” AMA News, April 23-30, 2007

Google is the greatest innovation ever to hit the Internet. The stock market agrees. Google is far outpacing Microsoft, Yahoo, and WebMD, to name a precious few. And just today Google was rated the world’s top brand, its brand worth $66 billion, more than GE, Microsoft, or Apple.

Accordingly, all of you doctors out there. Google yourselves from time to time to assess where your space in cyberspace.


Simply go to Type your name in the search box. If you want to know the good news and the bad news about yourself, re-enter your name with modifiers like “kudos” or “sucks.”

If you’re really curious, you might even extend your googling to yahooing or altavistaing.

Google is simple. It’s easy. And information about yourself is just a click away.

I took the advice of Dr. Scherger and the AMA News. I googled myself.

Here’s what I found by typing the following terms into the google search box.

“Richard L. Reece, MD.” 70 entries going back to when I was editor-in-chief of Minnesota Medicine (1975-1990), covering interviews I conducted for The Physician Executive, profiles of my 4-month old blog, comments onf some the 29 articles I have written for, the fact that I had written 345 articles for Physician Practice Options, names and listings of some of my 9 books, contents of some of my recent blogs, and even my phone number.
“Richard L. Reece, MD, kudos and sucks.” One entry under kudos by Kevin, MD, a leading medical blogger. Nothing, thank God, under “sucks.”
“Richard L. Reece, MD, innovation”, 36 entries, including a compliment from a leading CME blogger about a “great essay.”
“Richard L. Reece, MD, innovation-driven health care,” 7 entries, mostly promotions of my book by Jones and Bartlett, Barnes and Noble, and
• “Richard L. Reece, MD,,” 8 entries of the 135 I have entered in last four months.

Based on my googling experience, I suggest you go right ahead and google yourself. You may find everything you ever want to know about yourself as recorded by Google - and maybe some things you don’t want to know.

I close with two couplets:

Google yourself,
See if you’re top-shelf.

Go ahead and self-Google.
It’s no ego boondoogle.

Tuesday, April 24, 2007

Democrats, Republicans, and Medicare Part D

Split-Potomac Soup, or Innovative Prescription?

“Medicare—originally a system in which the government paid people’s bills – is becoming a system in which the government pays the insurance agency to provide coverage..The political news over the last few days has been grim. First, the Senate tailed to end debate on the bill – in effect killing it – that would have allowed Medicare to negotiate over drug prices… Public opinion is strongly in favor of universal coverage, and for good reason: fear of losing health insurance has become a constant anxiety among the middle class. Yet even as we talk about guaranteeing insurance for all, privatization is undermining Medicare.”

Paul Krugman, “The Plot Against Medicare, “ New York Times, April 2-0, 2007

“Republicans won a big victory this week, shooting down a Democratic plan for more government-run health care. The GOP victors, and free-marketer, might send their thank-you notes to Dr. Mark McClellan. Dr. McClellan’s came online and wowed the oldr class. Private companies have flocked to offer a drug benefit, giving most seniors a choice of 50 innovative plans The competitive jockeying has slashed prices form an expect $37-a-month premium to an average of $22. The cost of Medicare Part D for taxpayers was 30% below expectations its first year –unheard of in government.

Kimberley A. Strassel, “Competence Man: The Dr. McClellan Medicare Cure, “ The Wall Street Journal, April 20, 2007

Democratic and Republican “dialogue” about containing health costs has become a non-dialouge. It is like two ships passing in the night, both in the dark and both plowing ahead in parallel courses without listening to another.

As I said In my book Innovation-Driven Care (Bartlett and Jones), “Innovations differ from “issues.” Issues tend to be political, divisive, insoluble, and despairing. Innovations, on the other hand may transcend politics, heal wounds, inspire hope, and even solve vexing problems in a practical and impersonal fashion. Where you stand depends on who benefits – and how much. It boils down to a win-win, win-loss, and loss-loss situations. A win-win is another word for innovation. This analogy may not apply to politics.

When it come to containing health costs, three schools of thought exist: 1) the all government nirvana school; 2) the “let the market decide” school no matter what the consequences ; and 3) the government-market partnership innovation school.

I belong to the third school. We have no other choice. Government now pays for 47% of health costs, but has a miserable record of containing costs. The private sector pays for 53% of costs but lets too many “uninsured” fall through the cracks.

Democrats argue that government-guaranteed universal coverage is the only compassionate, equitable, and egalitarian way to go. Republics assert the American people want a decentralized system offering choice, value, and access to the best and latest technologies, something only “free markets” can offer.

As usual in politics, both parties feel they’re totally in the right. Rarely do they seek some innovation that would split the difference, even if that is the only realistic solution.

In Republican eyes, the current innovative Medicare Part D qualifies as “innovative” because it has achieved 90% coverage and 80% senior approval rating - not a bad prescription for a capitalistic system.

But in Democratic eyes, with that damnable “donut hole, ” absence of “universality, “ and lack of drug price controls by government, it’s a bad, even a disastrous, way to treat the problem.

Irving Kristol’s book Two Cheers for Capitalism (Basic Books, 1978) comes to mind. Why not two cheers for the Medicare Part D plan that covers 90% of seniors and satisfied 80% of them? It works, it lowers costs, it gives access to most prescription drugs on the market. The answer is that we should always try for three cheers – equality and social justice for all. The problem is that a decentralized capitalistic society rarely reaches for utopia and rarely seeks more than two cheers for itself.

Monday, April 23, 2007

Overcoming Bureaucratic Costs at the Point of Care

What people mean by bureaucracy, and rightly condemn, is a management that has come to misconceive itself as an end and the institution as a means. This is the degenerative disease to which managements are prone. To prevent this disease, to arrest it, and, if possible, to cure it, must be a first purpose of any effective manager.

Peter F. Drucker, 1909-2005

How can physicians overcome that terribly exorbitant expense,
of complying with rules and regulations without recompense?

That’s a very large, complicated, and hard- to-answer question.
Administration makes up half the cost of each medical session.

But it’s plainly evident,
it’s how well you document.

It’s how accurately and comprehensively you code,
and how you charge for your own practice mode.

It’s how fast you can make your practice flow,
that determines how great your revenues grow.

It’s all about expense and time of data entry,
how patients’ roles can be made elementary.

When patients can electronically create their own histories,
they can document complexity and remove all mysteries.

When patients can swipe an HSA and personal smartcard,
they immediately become part of the consumer avant-garde.

Then the expense of all matters bureaucratic,
May go away in a manner that’s automatic.


What do Walmart, other retail outlets, banks, gas stations, airports, telephone companies, and the Internet share in common?

Four things:

1) They have the customer enter the data and minimize data entry expense.

2) They replace “processing personnel” – clerks, receptionists, tellers – with computerized data triage systems.

3) They conserve bureaucratic energy and time by delegating data collection to the rest of us.

4) They drive the rest of us crazy by replacing responsive personal human contact with unresponsive, often incomprehensible “systems.”

Innovators succeed by getting the “human-systems” mix right. Personally I prefer to deal with menu-less companies in which a human voice is one click away and with individuals who answer their own phone.

Sunday, April 22, 2007

The Second Oldest Profession

Why is it pundits and managers so often complain,
that organizing doctors is akin to herding cats?

You hear this cat tale often when experts try in vain,
to get doctors to declare and follow performance stats.

You hear it when they try to corral them into large groups.
Don’t doctors realize they’re just one of the many troops?

Why is organizing doctors like getting eagles to fly in formation?
Don’t doctors know they’re just another cog in a big organization?

Don’t doctors know birds of a feather,
By definition should stick together?

Don’t doctors know good care takes collaboration,
to solve sticky problems requiring quick resolution?

Don’t doctors know team-based medicine is where it’s at,
where most problems should be solved right off the bat?

Don’t doctors know the digital electronic medical record,
ought to be used routinely in practices across the board?

Don’t doctors know digitally tracking all clinical acts,
will allow standardized consistency based on real facts?

Don’t doctors know regional practice variation,
defies all managerial and logical rationalization?

Don’t doctors know their archaic one-on-one culture,
makes them sometimes look like a clinical vulture?

Don’t doctors know fee-for-service makes them look greedy,
especially when caring for the sick, the infirm, and the needy?

Don’t doctors know their practice will be labeled reprehensible
For all outcomes even if patients don’t behave commonsensical?

Maybe, just maybe, some doctors do know,
Which is why to culture changes they say No.

Doctors are, after all, the second oldest profession,
the latest in a distinguished long historical procession.

Many doctors feel, you see, everything under the medical sun,
can be most ideally and most personally dealt with one-on-one.


Doctors, medical group leaders have said for years, should practice in big groups In big groups, there’s simply more there there – more infrastructure, more efficiency, more teamwork, more economies of scale. Besides, as an added benefit, big groups are the way doctors can retain their independence – by working for themselves rather than hospitals and by being big enough so managed care plan can’t ignore or exclude you.

Now a downside looms to getting bigger. Large, independent, multi-specialty medical groups models are showing an inability to perform economically. The demands for capital, more specialists, more management expertise, and more infrastructure, e.g. IT systems, are becoming too much, The mounting overhead is making it impossible to reward group members sufficiently and to recruit new physicians. New health care markets are calling for consolidation of group practices model with not-for-profit community hospital and health system business model ( Zizmer, Daniel., and Person, Peter, “What Does the Future Hold for Larger, Independent, Multispecialty Group Model? Is a “Tipping Point on Model’s Horizon”, Group Practice Journal, April, 2007).

Maybe the lesson is: if your group practice is composed mostly of primary care physicians, you can never get big enough in today’s health care economic world to generate enough revenues to sustain yourself. Maybe the doctors who didn’t join these groups in the first place knew something. Maybe the fact that the percent of doctors in groups of 50 or more has never exceeded 12 percent of America’s physicians means something. Maybe more doctors are deploying information technologies and Internet access to enable themselves to practice solo signals a new trend :Maybe, by using information technologies, you can stay small, act big, be happy. and remain more personal with your patients too. Maybe solo practice will become the innovative thing to do. Maybe. But don’t count on it

Saturday, April 21, 2007

The Physician Culture and Resistance to Change. Part III

Physician Leaders Who Have Effected Change

The original version of the this article appeared in Healthleaders News</span> on June 4, 2003

Finding, developing and coaching physician leaders is a growth industry. Hospitals, HMOs, large clinics, and medical companies constantly hunt for physician leaders to help overcome physician resistance to change. Consultants who can spot and nurture these leaders are in demand.

Dr. Brian Campion, professor of Health Affairs and Medical Affairs at the University of St. Thomas in St. Paul, Minnesota., says:

"As a former CEO and practicing cardiologist I know the need for medical leadership in today's healthcare organizations. The practice of medicine has evolved from a cottage industry where physicians in small practices were their own bosses to large, complex healthcare organizations that employ physicians.

These new organizations require leadership if processes of care are to be developed to provide care at a lower cost.

First-generation physician leaders have failed at an alarming rate due in part to lack of traditional leadership experience and training. We believe that as doctors become more educated and experienced their contribution will enhance their organization's ability to succeed. We badly need to entice more physicians into leadership."

But how can one spot physicians destined to be effective leaders?

In The Effective Executive (Harpers, 1956), Peter F. Drucker saiYW leaders igniting fundamental change share these traits:

• They rely on courage rather than analysis to dictate their priorities.

• They pick the future rather than the past.

• They focus on opportunity rather than problems.

• They chose their own direction, rather than climbing on someone else's bandwagon.

• They aim high, for something that will make a difference, rather than something that is "safe" and easy to do.

• They seek fundamental contributions to improve society.
Over the last five years, I kept these traits in mind as I interviewed 100 physician leaders for my book, A Managed Care Memoir: A Physician's Whistle-Stop Journey and for two nationally distributed newsletters.

What follows are sketches of physician leaders who exhibited these traits.

Dr. Ed Fotsch, CEO of Medem Inc.

In the 1980s, Ed Fotsch, a San Francisco emergency room physician, watched uneasily as medical societies suffered an identity and clout crisis as managed care rose to dominance. The societies' impotence in dealing with HMOs, legislators, and big business contributed to Fotsch's unease. Then, while running a 250-person San Francisco IPA and later an Internet communications company, Fotsch became acutely aware that physicians possessed no communications infrastructure.

In 1999, he became CEO of Medem Inc., an Internet company funded by the American Medical Association and specialty medical societies. In leading Medem, Fotsch set about filling two gaping defects in American medicine:

1. Communication systems linking physicians and patients, and,

2. Computer networks connecting physicians and hospitals.

To fill the first hole, Medem developed two core products – free physician web sites and online consultation services. To plug the second hole, Medem recently agreed with Cerner, a major hospital data systems supplier, to build systems to allow physicians and hospitals to talk to one another. Fotsch's contribution? Uniting physicians around the country by encouraging them to employ information technologies to make leaps in clinical and business efficiencies; achieve revenue increases through these efficiencies, and facilitate communication between physicians, patients, and hospitals. The road to the future, he maintains, is paved with concrete uses of information technologies.

Dr. Harris Berman, former CEO of Tufts Health Plan

Harris Berman is an internist who retired in 2003 after 17 years as CEO and chairman of Tufts Health Plan in Boston, a 900,000-member nonprofit HMO. When he joined Tufts, it had 40,000 members. Tufts now regularly ranks among the nation's top 10 HMOs. Tufts works closely with physicians to help them practice high-quality, cost-effective medicine. He explains:

Our roots are very much in working with doctors and local hospitals. There is a real advantage to being a local organization instead of a national organization."

Tufts treads lightly on doctors by routinely asking them to evaluate new products. As an example, Berman notes:

"We are developing a state-of-the-art system for operating an HMO. The new system will enable us to collect information from doctors over the Internet and pay them electronically, thus eliminating the paperwork that delays payments. The system will auto-adjudicate claims, speeding payment to providers. Our aims are to increase revenue, reduce overhead and eliminate HMO hassles."

Berman's contribution? As a leader, Berman has always cultivated and asked for the consent of the governed – practicing physicians – before initiating change.

Dr. George Isham, medical director and chief health officer for HealthPartners

Dr. George Islam, internist, represents a new breed – a systems doctor. Systems doctors believe teams of health professionals applying systems to prevent and manage chronic disease can dramatically improve care.

Since 1995, Isham, as medical director and chief health director of HealthPartners, a 670,000-member HMO in Minneapolis, has developed systems approaches to care, resulting in significantly reduced complications and deaths from various diseases. Of diabetes, he says:

"There is a huge opportunity to improve the quality of care for diabetes. We now know what to do and how to do it. The American Diabetes Association has recognized HealthPartners Medical Group as a model for diabetes care. Our program in Partners for Better Health includes deployment of multidisciplinary care teams, a diabetes registry that provides clinicians with automated reminders for needed services, and several educational and counseling programs on self-management, diet, and exercise."

The Institute of Medicine recently appointed Isham to serve as chairman of its Committee on Identifying Priority Areas for Quality Improvement. The committee issued their report, Priority Areas for National Action: Transforming Health Care Quality, in March 2003.

Among areas the committee examined were: asthma, diabetes, evidence-base cancer screening, frailty associated with old age, high blood pressure, depression, end-of-life with organ system failure, children with special health needs, ischemic heart disease and immunization of children and adults. Isham's contribution? Showing that physician-led teams improve outcomes.

Dr. Allen Wenner, Founder, Primetime Software, and Dr. John Bachman, Saunders Professor of Primary Care, The Mayo Clinic

Werner, a family physician in a four man group in Columbia, S.C., and Bachman, a professor of family medicine at Mayo in Rochester, Minn., have worked together for eight years – in their own practices, at physician conferences, and at TEPR (Towards the Electronic Medical Record) meetings in the U.S. and abroad – to perfect and test a patient-generated medical history based on a computer interview. Their work has fundamental importance for four reasons:

1. Taking a patient history is the single most time-consuming aspect of physicians' workdays.

2. Engaging patients to relate their histories to a computer makes them feel like partners in their care. \

3. A patient-generated record produces an accurate, documented and structured record that helps facilitate coding, referral letters, billing, and protection against malpractice.

4. Patient-generated histories enhance productivity, patient satisfaction, and physician revenues.

The typical physician now spends an average of 18 minutes with a patient. To make ends meet under lower Medicare and managed care reimbursements, computer interviews can shorten that time by four to eight minutes.

For 15 years, Wenner has been developing software that makes patient-generated computer history a relevant reality. For eight years, Bachman has tested the computer-aided patient interview in his daily practice at Mayo.

Wenner's and Bachman's contribution? They have shown a computer-aided medical history improves care and documentation, and patients will embrace the idea of having a computer conduct the initial interview before seeing the doctor.

Dr. James Nuckolls, Medical Director of Carilion HealthCare Corp.

Expanding and consolidating medical groups into large practices has become common in recent years. Physicians seek to affiliate with large organizations to provide wide geographic coverage and to leverage their ability to negotiate with managed care organizations. Yet many groups have experienced significant growing pains associated with expansion, mostly due to difficulties in communicating and in maintaining common procedures.

Under the leadership of James Nuckolls, Carilion HealthCare Corp., in Roanoke, Va., has kept its physicians linked by using a multifaceted information system. The group includes 165 primary care physicians and 50 nurse practitioners and physician assistants in 54 locations. Through a common billing system, an Intranet, and electronic patient records, the group has enhanced practice efficiency, facilitated communication among physicians, provided continuing education, improved patient care, and demonstrated value to its constituencies.

Nuckolls has demonstrated that you don't need to be a big-city practice, or to be centered on some large central group, or to have a squadron of big-time specialists offering tertiary care, to make a difference in healthcare. The 165 physicians who make up his practice are largely primary care physicians in the rural Southeast, spread over 250 square miles in southern Virginia and eastern Tennessee.

Nuckolls makes sure his approach works by staying in daily contract by e-mail with his dispersed physician troops.

Nuckolls’ contribution? He has demonstrated an information system can lend coherence to what is often believed to be a "fragmented system," defying rational organization.
New physician leaders are surfacing who share common traits:

1. they have rich clinical backgrounds

2. they have the courage to say frankly that medical care can be vastly improved

3. they endorse physicians working as members of professional teams

4. they believe information technologies offer major opportunities

5. they are willing to spend years of hard work and resources to make their dreams of a better system become reality.

Friday, April 20, 2007

Culture, effect of - The Physician Culture and Resistance to Change, Part II

Hospital Culture vs. Physician Culture

This article originally appeared in the May 7, 2003 issue of Healthleaders News

Recently I heard Dick Davidson, head of the American Hospital Association, speak on "Fixing Our Broken Health System." He spoke of money pressures on hospitals. He asked for political support to bolster Medicare funding. Community health care, he said, converges at America's 5,000 hospitals. Hospitals are obligated to take all comers, their doors are open 24 hours a day, and meeting expenses of federal regulations is overwhelming many of them.

Davidson sees hospitals as the center of health care in most communities.

All care roads converge there – preventive care, health promotion services, high-tech care, oncology care, outpatient care, and increasingly, low-tech primary care delivered by hospital-employed physicians. The hospital culture sees itself as being everything to everybody – as a place of convergence and integration for hospitals and physicians.

Unfortunately, the hospital’s role as an indispensable community asset has become difficult. Medicare and Medicaid cuts, costs of the uninsured, and computer infrastructure demands are cracking hospital financial foundations and shredding the safety net for needy patients.

Meanwhile the physician culture – more fragmented, more introverted, and less hierarchical than the hospital culture – is experiencing its own angst, stemming from downward pressure on incomes, reduced reimbursements, sicker patients requiring more time, rising costs of doing business, unaffordable malpractice rates, HIPPA, and increased competition from physicians employed by hospitals.

Will hospital and physician cultures, both experiencing difficulties, converge into strategic partnerships?

Will they diverge into competing entities?

Will they integrate or disintegrate?

Hospitals hope for convergence and integration. Some health observers and stakeholders, including powerful specialty groups, foresee divergence and disintegration.

• Regina Herzlinger, Ph.D., professor at Harvard Business School, says "focused factories," specialized centers of excellence dealing one disease, will eventually replace hospitals that provide comprehensive care to all comers.

"I don't think we can develop one vertically integrated, relatively convenient system that provides care for every conceivable disease for every patient,” she says. “It's just not realistic."

• Jeff Goldsmith, futurist, has written:

"As health systems integrated structurally, they disintegrated culturally. The gap between professional and managerial cultures that existed during most of the 1980s and early 1990s widened into a chasm by the late 1990s. Professionals of all stripes – not merely physicians, but nurses, technicians, social workers and others – saw their practices increasingly commoditized and marginalized by the growing corporate ethos in their systems; professionals lost contact, physically and spiritually, with the 'adminisphere' – the tiny handful of people running their systems."

• Daniel K. Zismer, Ph.D., principal of a healthcare consulting firm in Minneapolis, says:

"More hospital CEOs will lose their jobs over physician relations than for any other single reason over the next several years. Organized groups of physicians in certain specialties that also happen to be critical to the success of hospitals have business strategy alternatives, which, if pursued, can have devastating consequences for hospitals, which in turn, threaten the jobs of health system CEOs."

• In Columbus, Ohio, Michael Curtin, Mount Carmel Health Systems board chairman, reacted to news that Columbus orthopedic surgeons were building a specialty hospital by saying,

"You cannot stand by and watch people rip out whatever profitable veins there are for a community facility." Mount Carmel and OhioHealth, another Columbus hospital system, plan to deny privileges to doctors investing in New Albany Surgical, an orthopedic hospital. Carl Bears, M.D, investor in the physician hospital, explains physician investors' rationale: "To gain control over how a hospital is run, you have to be an investor." And Robert E. Tabbies, M.D., an Oklahoma City neurosurgeon, part owner of the Oklahoma Spine Hospital, says: "For physicians, control and decision-making power translate into a more satisfying and rewarding professional life and increased revenues in the time of declining medical reimbursement, and many patients demand personalized treatment especially when it involves specialty care and surgery."

What can a hospital CEO do to influence physicians to become strategic partners, rather than competitors of hospitals?

Well, first, the CEO should understand the essence of the physician culture.

1. Physicians in a single specialty, though considered conservative and slow moving, speak from the same page. They know each other well, have similar practices, have a common language, and unite behind common business purposes. When uneasy or suspicious of hospital motives, they can move with astonishing speed to form competing entities.

2. Certain specialists, including heart surgeons, cardiologists, orthopedic surgeons, general surgeons, neurosurgeons, and oncologists – the economic lifeblood of most hospitals – are accustomed to acting decisively in clinical matters. This decisiveness carries over into business affairs.

3. Physicians are threatened by a hostile business climate and will move quickly to gain control of their economic and clinical destinies.

4. Physicians pride themselves on being independent professionals and are accustomed to acting with dispatch and with inadequate and uncertain information.

5. Physicians aren't impressed by business acumen. In their group opinion, physicians know hospitals, HMOs, management companies and large group practices have had their runs at owning, organizing and employing physicians, and for the most part, have failed to make a go of it.

6. Physicians understand the the physician culture, and its underlying cohesion, even as critics dismiss it as 600,000 fragmented doctors with 2,000 charts each.

7. Physicians are skeptical that hospital executives understand the physician business. After all, few hospital CEOs have yet to spend a day in the trenches with real doctors and real patients.

8. Physicians know their market power. They have yet to hear a sick patient say, "I feel ill. I must go to my Integrated Delivery System." Patients still go to their responsible neighborhood physician or appropriate specialist.

9. Physicians are a self-organizing swarm. They move in unison to a professional beat bred into them by self-selection and training. Physicians are self-learning Darwinians who know how to act, react, adapt and survive as individuals and as members of groups.

10. Physicians do not like to be told how they should be compensated. They prefer not to be paid salaries. They wish to be rewarded on a basis of individual productivity. Physicians make bad employees. Ask HMOs, hospitals, IDSs, PPMCs or other healthcare corporations. They have tried and failed to rein in that individualism or to put physicians on salary.

11. Physicians are a brotherhood and sisterhood. They come out of a common professional incubator, and know how each other thinks and acts without asking.

12. Physicians ask to be trusted to do the right thing, to be considered professionals, to be paid for productivity, and seek information systems that provide relevant information and speed patient flow.

13. Physicians prefer to run their businesses from the bottom-up, rather than having it imposed on them from the top-down by outsiders.
So, given the nature of the physician culture, what are hospital CEOs, whose job may be at risk, to do?

Here is Zismer's advice:

1. Don't delegate physician relations to lower management. Approach leaders of key physician groups yourself and say something to the effect of: "The hospital and I are interested in ensuring that we understand your needs and are innovative in our methods to the success of our collective futures over the long term."

2. Remember, your hospital's future depends on specialists in multispecialty or single specialty groups, not with "medical staff." Explain to your board the fundamental difference between specialty groups and the "medical staff." The medical staff is not a business entity. A specialty group is.

3. Give an honest report to the board about the state of the physician business climate – the good and the bad. Board members don't like surprises.

4. Understand market risks and financial consequences of a specialty group pulling out of the hospital and building its own facility. Report these risks and consequences to the board.

5. Engage in organized and deliberate business planning with key groups.

6. Be willing to execute on business models that make sense for both the hospital and physician groups, even if these models aren't an exact fit for the hospital culture, even if it entails business partnerships with physicians, even if they dilute the hospital bottom line in the short term. In the longer term, the new arrangement will most likely extend market share.

7. Be always mindful of the legal considerations in designing hospital/physician collaborations, including, but not limited to, Stark self-referral statutes, anti-statutes, tax-exemption standards, and reimbursement issues.
Always keep in mind that physicians resist change that subjugates them to hospitals. Remember, physicians will accept change if it gives them more influence and control over clinical affairs, and if it helps them retain their autonomy.

In Part III, we will look at physician leader success stories.

Thursday, April 19, 2007

Culture, Effect of - The Physician Culture and Resistance to Change Part I

Why Physicians Stick to the Status Quo

This originally appeared in HealthLeaders News, Apr. 7, 2003

In 1993, George Halvorsan, now Chairman and CEO of Kaiser Permanente, wrote in his book Strong Medicine:

"Rather than taking an overall leadership role in the continuous improvement of the health care delivery system, too many medical professionals either ignore the problems of the system in order to concentrate in their own specific practices or focus their energies and talents on protecting the status quo.

Today, 10 years later, health leaders still say physicians shun leadership and resist change. The following story illustrates one aspect of the problem.

Dr. Allen Wenner, a leader in persuading fellow physicians to employ electronic medical records, has introduced software to allow patients to record complete medical histories before seeing their doctor. The computer interview produces a structured history. This permits physicians to zero in on a patient's problem, freeing up large chunks of time to see other patients and increase revenues.

Yet most clinicians resist this breakthrough productivity tool. The thought of a computer interviewing patients simply runs against physicians' cultural grain. Physicians learn in medical school that personally interviewing patients defines a doctor. This ideal of what a doctor ought to be leaves a deep cultural imprint. Of this love affair with the past, Wenner says, "When we hurt enough, we will change. We're just not there yet."

I've told this story and others in my book, Managed Care Memoir: A Physician's Whistle-Stop Journey: 1983-2003.The book contains interviews with 12 healthcare experts. They discuss why physicians rebel against HMOs and why they cling to the status quo in face of Medicare, managed care, and malpractice squeezes.

Most doctors stick to the past by remaining in small practices: 80 percent are in groups of 10 or less, 60 percent in groups of 6 or less and 40 percent in groups of three or less. In addition, some physicians are bucking seemingly inevitable trends by withdrawing from hospital-sponsored organizations and canceling contracts with HMOs.

On the information technology front, less than 5 percent of doctors have converted to electronic medical records, barely 15 percent communicate routinely by e-mail with patients, and the percentage of small groups ready for full HIPAA compliance remains less than 10 percent.

What's the problem? Part of it is the conservative physician culture. This culture reluctantly shares decision-making and managerial power with outsiders. Also doctors avoid risks because they see nothing better on the horizon. For independent physicians, there are simply too few incentives, too little personal satisfactions, and not enough spare time and extra money to induce change.

Healthcare cultural problems exist at three levels:

1. The Culture of American Society

As J.D. Kleinke has written:

"Such is the culture of medicine in America. We demand the best, accept nothing less and reward lawyers handsomely for making sure we get it. Even the imminence of certain death does not attenuate this cultural fact, as the clinical behaviors, costs and outcomes of typical intensive care illustrate. Our national consciousness is steeped in optimism, hostile to all processes and manifestations of aging and enraptured by a limitless faith in technology; as a people we have come to revile death as much a personal defeat as a personal loss.”

In other words, given America's medical culture, physicians, patients, and lawyers are likely to keep on doing what they're doing.

2. The Culture of Large Health Organizations.

Remaking Health Care in America: Building Organized Delivery Systems
is an excellent book on the culture of large health systems. The authors – Stephen M. Shortell and four other consultants – describe the cultures of 10 large multi-hospital systems, which had 1994 total revenues of $500 million to $1.5 billion. These hospital systems have worked hard, with mixed success, to create physician group cultures stressing teamwork, cooperation, sharing of information, pride in the organization, and attentiveness to physicians.

Salaried physician stakeholders drive certain tightly integrated organizations – nonprofit HMOs such Kaiser and clinics such as Mayo. These successful models, led by physicians selected for their dedication to the organization's mission, have not been replicated on a broad scale.

Academic medical centers have special cultural problems. These centers, burdened with educational expenses, are fragmented, overspecialized, notoriously difficult to organize, and not very enthusiastic or good at training primary care doctors in outpatient settings. Too often the culture of academic health centers consists of sharply departmentalized and overspecialized independent fiefdoms, connected only by a common plumbing systems and grievances over parking.

3. The Culture of Physicians
Health industry leaders have repeatedly told doctors they must consolidate into larger groups or integrate with hospitals to survive; achieve greater size, critical mass, and scale; cultivate managerial care expertise; work in multidisciplinary teams; seek capital offered by large companies; follow evidence-based or standardized guidelines to practice good medicine; practice preventive medicine; develop systems approaches to managing chronic disease; enter into primary care specialties to assure a less costly health system; install information technologies in their offices; establish practice web sites; offload business functions to the Internet; communicate with patients through the Internet and by e-mail; convert to paperless offices, prescribe electronically; standardize codes and transactions for diagnostic procedures and develop leadership skills.

These admonitions from health leaders have left many clinicians unmoved. Physicians have not bought into the argument that bigger is better or that managed care and corporate models for achieving quality are in their best interests or their patients’.

To understand why physicians have resisted, you have get inside their minds and skins. The way many physicians think can be illustrated in the following list of ideas:

1. You became a physician to serve patients, not hospitals or business corporations.
2. Your customers are “patients,” sick individuals who need your help, even when that help is expensive and experimental.
3. You're "the patient’s advocate," a protector and a guide through a world fraught with obstacles to care.
4. You see patients one at a time, and you don't feel responsible for "population health."
5. You don't really care about the financial health of investor-owned HMOs who profit from minimizing care.
6. You realize patients spent 99 percent of their time outside your office, and you know ill health often stems from flawed life styles and rarely rests on your advice, which you are not paid for offering.
7. You distrust group activities. Your success has always been by dint of your individual effort, whether that effort has been getting good grades in college, doing well in medical school to qualify for the residency of your choice, or caring for sick patients in academic medical centers or inner-city hospitals.
8. Your rewards have come through working hard, mastering your specialty and impressing colleagues, not through participating in hospital, HMO, or corporate bureaucracies.
9. You dislike organizational politics. You detest meetings. You turn a wary eye toward any activity that takes you out of the operating room, off the wards and away from your office, for those locations are where the patients, your joy in doing well and your income are.
10. What has any managed care organization, hospital or business corporation done for you? HMOs, in your mind, manage cost not care. Has any HMO medical director or health executive ever helped you care for a patient better? Has any HMO policy improved quality of care for your patients? Has adherence to clinical guidelines really helped you find the right answers to your patient’s problems? Has any managed care organization placed at your fingertips in the waiting room, at the “point-of-service,” an easy-to-use information system that saves you time by telling you what drug to use, what diagnosis to consider and or whether the patient can pay?
11. Everything that relates to the new competitive environment has discounted your fees, driven down your revenues, compelled you to hire more personnel to deal with HMO clerks or “Doctor Denial” HMO medical directors and forced you into organizations where autonomy is less, rules are stricter, income is lower, work is harder, and a production-line mentality is at work.
12. You’re a professional, not a "provider" to be ordered about. What do these health care executives and those on the other end of an 800 line know about practicing medicine anyway?

Given these states of mind, it's no surprise physicians resent being subjugated to HMOs, hospitals or PPMCs. It's no surprise physicians undermine organizations that try to manage them. It's no surprise that business executives are having such a hard time “herding cats,” as executives so quaintly and demeaningly put it.

It's no surprise that loose "integrated" systems, cobbled together to win managed care contracts, fail. It's no surprise physicians resist “retaining earnings” to pump into business organizations they innately distrust. It's no surprise that lawyers, accountants and executives are having such a hard time imposing business principles or systems thinking on physicians.

These cultural characteristics may reflect a self-centered, narrow-minded, and shortsighted worldview. But these traits dominate many physicians' minds and can’t be dismissed.

In Part II, we will look at strategies for redirecting this cultural mindset to better the health system

Wednesday, April 18, 2007

Clinical Innovations - Announcing: Innovation Outlet and Health Care Innovation Association

In my travels around the health care innovation circuit, in the process of writing Innovation Driven Heath Care (Jones and Bartlett, 2007), and in composing these daily blogs over the last four months, I can’t help but notice many of you innovators and entrepreneurs out there teem with ideas on how to transform and better the health system.

But most of you have no timely and convenient outlet to express your heart-felt passions, the state of your businesses, the hard work you have put in, and the results you have achieved.

Therefore, I'm creating this blog outlet to make your innovations known. If you would like to announce your innovations to the blogging world and to those outside that world, I invite you to submit your thoughts on your enterprise to me at I will then provide you with further details. Your submission will be subject to editorial approval. Once approved, I will publish your thoughts on your innovative business on If you are approved, you will become a charter member of the Health Care Innovators Association.

President, Health Care Innovators Association

Richard L. Reece, MD

The co-founder of the Health Care Innovators Association is James Hawkins, MBA, President, Professional Consulting Services and co-author of Sailing the Seven "Cs" of Hospital-Physician Relationships: Competence, Convenience, Clarity, Continuity, Competition, Control, Cash (Practice Support Resources, Inc, 2006, 800-967-7790,

Limits of Innovation - Innovation Limits

Dangers of Anti-Aging Nostrums

To some, “innovation” and “entrepreneurialism” smack of commercialism and hucksterism, not professionalism. Not to me. I regard innovation and entrepreneurialism as the salvation and distinguishing features of the American health system, if carried out legitimately. Innovators and entrepreneurs create products, jobs, and health care improvements, not government. Government can only monitor. approve, or disapprove.

But innovation and entrepreneurialism have limits. Drs. Ronald Klatz and Robert Goldman, Chicago-based osteopathic physicians, who hold M.D. degrees from the Central Amrican Health Science University in Berlize, which they admit never attended, may have reached these limits.

The State of Illinois doesn’t accept their M.D. degrees as legitimate. The State has ruled they should stop using their M.D. titles in their promotions, presentations, and publications. Meanwhile, Klatz and Goldman, under auspices of the Academy of Anti-Aging Medicine, which they founded, continue to hold conventions promoting anti-aging products.

In a New York Times story, reporter Duff Wilson describes a four day December 2006 Las Vegas convention sponsored by the Academy of Anti-Aging Medicine at the Venetian dedicated to the proposition that growing old is a “treatable condition.” (“Aging: Disease or Business,” New York Times, April 15, 2007.) The convention floor was festooned with booths advertising vitamins, hormones, and pharmaceutical drugs promising to help people either to look or feel young or to stave off aging.

At the Las Vegas convention, many “wellness” workshops were held. The workshops promoted, among other things, human growth hormone (HCG) as an agent for wellness, energy, strength, and a sense of well-being in aging individuals – claims the medical establishment and scientific literature have been unable to confirm.

Lately, the $50 billion “anti-aging” industry has come under legal scrutiny. Authorities in 3 states have indicted 20 people, including 4 doctors, for Internet trafficking in human growth hormone, used for anti-aging, and anabolic steroids, employed to enhance athletic performance.

Because of these agents’ rare complications – separation of the femoral head from the shaft, joint pains, carpal tunnel syndrome, headaches from increased intracranial pressure, osteoporosis, and diabetes – federal law prohibits their use except in certain conditions. HCG may be prescribed, for example, in childhood growth disorders, AIDS, and a rare condition, adult hormone deficiency disorder.

Physicians prescribing HCG has stretched the latter to mean almost anything associated with aging side effects – weakness, reduced strength, forgetfulness, loss of muscle mass – or with diseases or accidents that might remotely effect pituitary function. Drs. Klatz and Goldman say aging is a disease causing the pituitary to produce less growth hormone. Therefore, their books, articles and speeches say hormone replacement therapy at low doses is legal and beneficial in “properly diagnosed deficient adults.” The criteria for “proper diagnosis” remain elusive.

Fifteen years ago, Drs. Klatz and Goldman founded the Academy of Anti-Aging Medicine, now claiming 20,000 members. They recently sold 80% of their convention business for $49 million to the Tarsus Group, a London media company. Klatz and Goldman know what the public craves, viz, a modern Fountain of Youth gained through drugs or other products. The market to correct for aging diseases and appearance related products will grow to $71 billion by 2009, according to BBC Research, a marketing research firm in Wellesley, Massachusetts.

In pursuing wealth, however, Klatz and Goldman may have violated a tenet of medical innovation, primum non nocere, “First, do no harm.” In so doing, they may have breached the limits of medical innovation.

Tuesday, April 17, 2007

Clinical Innovations - Innovation Knows No National Boundaries

Quote of the Week

The quotation that follows is appropriate in light of an article in the April 11 JAMA on the work of a Brazilian-US team of researchers who report from the University of St. Paulo that they succeeded in making 14 Type 1 Juvenile Diabetics insulin-free for varying time periods (”Autologous Nonmyeloblative Hemopoetic Stem Cell Transplantation in Newly Diagnosed Type I Diabetics,” volume 207, pages 1568-1576). In an accompanying editorial, Jay Skyler, MD, of the Diabetic Research Institute of the University of Miami Miller School of Medicine, supported partly by an NIH grant, said the study showed great promise, “Cellular Therapy for Type I Diabetes, Has the Time Come?” The study shows that innovation knows no national boundaries and cooperation between researchers from different nations bears fruit.

“Stereotypes about national origin are the dirty secret of technology communities, like this: The Chinese do not invent anything; they only copy. Italians design beautiful shoes, but who ever heard of a Tuscan computer programmer? Russians dominate chess, yet cannot seem to engineer a children’s toy. Germans excel when they control all variables — of a high-performance automobile. The French routinely lead in technologies that require large government subsidies. The Japanese so yearn for acceptance that individuals won’t promote a new idea without the approval of their peers.

If I have offended anyone, I will not apologize. I am recycling crass stereotypes about national traits in the service of a better understanding of how innovation works.

Talk of national identity rarely comes up in public, but privately many people — from academia to venture capital firms — take for granted that the contours of a career in technology are often shaped by the national origin of the technologist.

Comprehending innovation through the prism of national identity has its risks. In the 1970s, many people dismissed the Japanese as mere imitators and failed to see how the knowledge gained from copying would lead to path-breaking technologies. The success of Toyota, Sony and Japan’s vibrant animation industry provide cautionary tales for those who might dismiss entire nationalities as copycats or only as consumers of advanced innovations.

Nations can and do change, sometimes by smart planning, sometimes by serendipity. Finland, home to the mobile phone powerhouse Nokia, was an agricultural country 50 years ago. So was Ireland, now home to thriving clusters in electronics and pharmaceuticals. Ireland’s investment recruitment agency is now crowing about the virtues of “the Irish mind” in a series of print ads. The most popular ad, using a drawing of the Irish rock star Bono, declares: “The Irish. Creative. Imaginative. And flexible. Agile minds with a unique capacity to innovate, without being directed.”
Friends of Israel’s top engineering school, Technion, are paying for a similar series of ads, which appear periodically on the Op-Ed page of this newspaper. “The brainpower of its people” is “Israel’s only natural resource,” one ad declares.
There is little debate, however, that small countries are freer these days than large ones to boast about the supposed talents of their people. That is partly because larger countries can inspire fear or may have a history of invading others. Irish chauvinism seems benign, yet some people may regard praising the genius of “the German mind,” for instance, as objectionable, given the history of German aggression in World War II.

While migration and the flow of knowledge across borders have led to a flattening of the world, different technological strengths remain associated with different nations. So nations bent on becoming more innovative in other fields must confront their own collective strengths — and weaknesses. Just as technologists invent great products, countries invent, and reinvent, people.”

G. Pascal Zachary, “Creativity, Innovation and the Cultural Parade,” New York Times, April 15, 2007, G. Pascal Zachary teaches journalism at Stanford and writes about technology and economic development.

Monday, April 16, 2007

Keeping Score of Health Care Realities

What is the reality? What is the score of the game?

John Naisbitt, Mind Set! Collins, 2006

In Mind Set!, John Naisbitt has a chapter “Focus on the Score of the Game.” He says he trusts sports results because, despite the rhetoric, you always know the final score of the game. He points to the European Union. In 2000, the Union proclaimed it would overtake the United States as an economic power.

But Naisbitt asks:

What is the reality? What is the score of the game? In every single year since the announcement in 2000, Europe has lost economic ground against the United States. If you want to know the European Union and its member countries are doing and where they are heading, you have to constantly check the score of the game. Is employment rising or falling? How much growth is being achieved? Are economic reforms being carried out? Few jobs can be created by government. It is entrepreneurs who create new jobs. How nourishing is the environment for starting a new company? Is the productivity increasing or not?”

Keeping Score Using Health Care Data

Using Naisbitt’s logic, we ought to be able to use “the score,” i.e. data, to track and even reform health care in the United States. Indeed, there is a reform school (pun not intended), that says you can effectively use data to control costs.

This school says, among other things, that only if the U.S. government, with the help of employers, would use data to:

• measure health and eligibility status of those entering public programs;
• give each provider a unique identifier to track their activities using data;
• organize a national management infrastructure for keep score of health care economic activities;
• standardize and make transparent pricing data;
• set up a national data repository;
• promulgate national clinical data guidelines and use data to see who complies;
• establish a federal rotating loan fund to encourage doctors to install EMRs;
• reward doctors and hospitals on the basis of data outcomes;
• pay only those submit claims electronically so data could more easily tracked;
• establish a national office of technology assessment to determine what judge
procedures or drugs based on data before procedures or technologies are released for public use;
• give consumers all the data they need to know to judge cost and quality.

all would be well, unnecessary care would end, care would be rational, and costs would come down.

Logical, Realities Keep Getting in the Way

This data reform school approach is logically compelling, and compellingly logical. But let’s look at the score so far:

• The Oregon plan to pay for care based on data-based health priorities failed;
• managerial infrastructures for tracking data still vary enormously;
• EMR use among most doctors hovers around 10%;
• John Wennberg’s studies more than 2 decades ago that care and outcomes vary by region has not changed practice patterns one iota;
• standardized pricing and transparency are still buzzwords;
• pay for performance may die in its infancy;
• the number of regional organizations sharing data remain small and rudimentary;
• a national technology assessment proposed 30 years ago to control CT and MRIs never developed legs and imaging use exploded;
• consumers tend to look only at the data that pleases them and to disregard what displeases them.

Besides, America culture looks suspiciously at “national” or even “managed care” efforts to keep score, maintain discipline, and restrain individualism.

Novelli’s Column

All of this came to mind as I was reading a column “Overhauling Health Care,” by Bill Novelli, CEO of AARP, in the April 2007 AARP Bulletin.

Here’s the table on who pays national health expenses.

1993 2006 % Change

Total Private Funds $512.5 1,129.6 %120.4
Out of pocket $145.2 $250.6 %65.7
Private insurance $295.5 $727.4 %146.2
Other private funds $71.8 $151,5 %111.0
Total Public Funds $400.1 $992.9 %148.2
Medicare $150.0 $417.6 %178.4
Medicaid (federal share) $76.8 $178.1 %131.9
Medicaid (state share) $45.6 $135.4 %196.9
Other $75.2 $132.1 %75.7
State & Local $120.9 $267.6 %121.3
Total Cost (in billions) $912.6 $2122,5 %132.6

The table shows:

• Health costs have more than doubled (2.3 times) in the last 13 years.
• Public share of paying for health costs has risen from 37% to 47%.
• At a 65.7% increase, out of pocket costs have climbed the least among all forms of health payment.
• Medicare costs have gone up most (2.8 times, 178.4%).
• Combined federal and state costs of Medicaid (now $313.5 billion) rank only second to Medicare in terms of percent of cost gain (2.6 times, 156%).
• The greatest percent gain in cost escalation (196.9%, 2.9 times 1993 costs) comes from state Medicaid spending.

Beyond data and inability to contain or sustain this health inflation rate, either on the public or private side, one can argue the meaning of the numbers.

Novelli‘s Take

Novelli’s take, supported by polls, is that the public wants affordable access to health care above all else. He says the greatest promise in delivering this resides in the current California universal initiative,

“because it could serve as a model for national health reform. It broadly tackles the problem (in a state where approximately 20 percent of the population is uninsured) by requiring all individuals to secure coverage for themselves and their families. It creates market improvements, sets wellness and quality goals and cost limits, expands coverage for lower income adults and kids and shows how to finance it all.”

Novelli’s view reflects classic Inside-the-Beltway thinking, namely, that government, state or local, will be the final solution for health care. This attitude makes sense. AARP, after all, is an inside-the-Beltway Powerhouse. The AARP constituency of over 40 million members represents an unmatched power voting bloc.

Furthermore, AARP is switching political horses. In 2003 AARP supported the Republican-backed Medicare bill prohibiting Medicare with bargaining with drug companies to lower drug rates. Now AARP backs the Democratic position that Medicare ought to be able to negotiate drug prices.

My Take

I have a different take. I believe political realities of a near equal sharing of public (47%) and private economic interests (53%), make universal health care unlikely in the near term, especially if a government-run system is superimposed on the current system. The costs of universal case may be prohibitive, especially in light of the government’s poor performance in containing costs. In the April 10 Hartford Courant, an article reports universal care in Connecticut would cost $18 billion, more than Connecticut’s entire state budget of $17.5 billion.

Connecticut is probably overstating the cost. Massachusetts reports it is on the verge of implementing universal health insurance for all but 65,000 of its 328,000 uninsured residents (Pelluck, Pam, Massachusetts Offers Details on Health Care, New York Times, April 12, 2007.) State officials estimate a mere cost at $213 million to taxpayers, a pittance compared to Connecticut estimates, and much less than the $12 billion estimate for universal coverage in California.

That Devilish Data Again

As always, the devil is in the data. Here are the estimated details in Massachusetts uninsured residents will be asked to pay.

Proposed Massachusetts Health Insurance Premiums

Singles, Income Monthly Premiums Yearly Cost

$0 - $15,315 $ 0 $0
$15,316- $20,420 $35 $420
$20,421-$25,525 $70 $840
$25,526-$30,630 $105 $1260
$30,631-$35,000 $150 $1800
$35,501-$40,000 $200 $2400
$40,001 -$50,000 $300 $3600

Couples, Income Monthly Premiums Yearly Cost

$0- $20,535 $0 $0
$20,436 -$27,380 $70 $840
$27,381 - $34,225 $140 $1680
$34.226-$41,070 $210 $2520
$41,071-$50,000 $270 $3240
$50,001-$60,000 $360 $4120
$60,001-$80,000 $500 $6000

Families,Children Monthly Children Yearly Cost

$0 -$25,755 $0 $0
$25,756 -$34,340 $70 $840
$34,341 -$49,925 $140 $1680
$49,926-$51,510 $210 $2520
$51,511-$70,000 $320 $3840
$70,001-$90,000 $500 $6000
$90,001-$110,000 $720 $8620

These premiums appearmodest, unless, of course, you are among the uninsured who are not currently paying premiums because you’re living week to week, month to month check-to-check, and state-imposed mandates for premiums are unaffordable. The Massachusetts government would, of course, subsidize those who could not afford to pay, in the process creating another welfare class.

In the last 13 years, government has shown scant ability to make health care more affordable to all Americans. It is always possible government could do more by expanding Medicare and Medicaid to cover all, but that would be unsustainable for long, if past performance is any guide, and rationing, strict guidelines, and waiting lines might follow.

Current State of Health Care

In the April 12 Wall Street Journal, David Wessel, a columnist operating Inside-the-Beltway, says the debate over health care debate is:

Employer-based health insurance is slowly dying
– He quotes Joseph Antos, health economist at the conservative American Enterprise Institute, who says employers are grown weary of paying the lion’s share of health care coverage. Now, Antos says, they want out.

We don’t know as much about medical science as we need to know -- After several recent large scale clinical trials, it’s become apparent that we’v e been paying more for certain things – stents for coronary artery disease , hormones for alleviating menopausal symptoms, erythopoetin for treating anemia in cancer and kidney failure, Vioxx and Cerebrex for pain – than we need to based on evidence. Few agree on what works and doesn’t work, and practices still vary greatly from one region to another.

Americans want a lot of health care, are willing to pay for it, and don’t like their choices limited. Because of this feature of American culture, it is likely that the enthusiasm and excitement of Democrats over prospects of the final arrival of universal coverage on a national scale will be dashed again on the rocks of reality and politics.

Credit-driven Care - Prospects for a Credit-Driven Health System

There is no greater resource in an economy than “purchasing power.”But purchasing power is the creation of an innovating entrepreneur. Installment buying literally transforms economies from supply-driven to demand-driven.

Peter F. Drucker, Innovation and Entrepreneurship, Harper & Row, 1986

An Interview with Kenneth Bloem, M.S., Executive Chairman, MedDirect, LLC, Grand Rapids, Michigan

Preface: During his career, dating back to the late sixties, Kenneth Bloem has worked with the Peace Corps, the World Health Organization, and the Lahey Clinic. He has been COO of the University of Chicago Hospitals, CEO of Stanford University Hospital, CEO of Georgetown University Medical Center, CEO of the Advisory Board Company -- a for-profit strategy and research company which later spawned two highly successful IPOs (The Corporate Executive Board CEB and The Advisory Board Company ABCO), and Board member of a number of health related companies both private and public.

Since 2006, he has been executive chairman of MedDirect. LLC. MedDirect brings credit solutions to various healthcare constituents. MedDirect was founded in 2000 to provide financing for elective procedures to physicians, dentists, orthodontists, and other health care providers.

MedDirect’s founders sense a significant and growing need for credit and financing solutions for patients, health care providers, and traditional health plan subscribers as well as health plan holders with HSA, HRA, and FSAs

Personal Background

Q: What’s your background? How did you come to be executive chairman of MedDirect?

A: I graduated from college in 1968. In the ensuing 39 years, I have spent 10 of those years in public health in national and international settings. About 15 of those years have been in group practice and hospital management, mostly in leadership positions in academic medical centers. I devoted four years in a policy position in an academic administrative setting at Boston. And I’ve spent about 10 years altogether in business and entrepreneurial activities.

After college, I did volunteer health work, two years of Peace Corps work in Malawi and another two years in the Congo as part of the smallpox eradication campaign. I did another three years working for the Peace Corps as staff. Then the World Health Organizations recruited me back to work again in the final stages of the smallpox eradication program.

Q: What year was that?

A: That was in 1975. WHO thought smallpox existed only in Bangladesh and in a few isolated places in India and in the horn of Africa (Ethiopia & Somalia). My wife and I went off to Bangladesh for another six months. We hoped we would see the last smallpox case in the world in Bangladesh, but we missed that case by about four months. As it turned out, the very last case occurred in Somalia, about six months later.

I went from Bangladesh to Boston where I did graduate studies at the Harvard School of Public Health, and then, through an internship experience found myself in a position at the Lahey Clinic. I was with Lahey for four years.

Q: That was before Lahey moved to Burlington?

A: I helped Lahey move to Burlington. Lahey relocated from Kenmore Square Boston to Burlington in 1980. They knew they wanted to own and manage their own hospital. They were strategic enough to purchase a 60 bed hospital in Brookline, Massachusetts. When I graduated, I accepted the position of CEO of little Brooks Hospital. I helped train the staff and make the transition to Burlington. We made the move over a Thanksgiving weekend in 1980.

I worked at Lahey for four years. Then I went to Boston University for four years. I was the assistant, and then an associate vice-president reporting to Dr. Richard Egdahl. Dick was vice-president for health affairs. BU had six graduate and undergraduate programs in medicine, public health, nursing, allied health, and social work.

I was responsible to help Dr.Egdahl “managing” those programs. “Managing’ is an oxymoron in a university setting. Dick created the Health Policy Institute, which focused on corporate health. We addressed cost issues of corporate health benefits.

Dick developed another program focusing on “utilization management,” a term I believe Dick coined. Dick was intensely interested in practice efficiency and variability. He served as a mentor to a number of health entrepreneurs, some of whose enterprises became highly successful.

Q: What then?

A: I was recruited to become chief operating officer and executive vice president of the University of Chicago hospitals. It was a great institution, consisting of three hospitals losing lots of money. My job was to help turn it around financially and to bring it up to quality level the University of Chicago demands of all of its programs. I did that working for Ralph Muller (CEO) with a team of highly talented colleagues for 3/12 years. Then went to Stanford for another turnaround effort.

Q: What did you find at Stanford?

A: Well, Stanford was in trouble from fulminating managed care. It was losing money and market share. Stanford had built a new hospital. It had focusedits energy on the physical facility and the technology rather than on the changing market. All the profitability and utilization numbers were going in the wrong direction. Stanford was a strategic as well as a financial turnaround.

Q: And then?

A: Then after 4/12 years at Stanford, I was recruited by David Bradley, founder of the Advisory Board Company in Washington, D.C. a for-profit research think tank, to be its CEO.

Q; What was the health environment in 1993-1994?

A: It was the era of health reform surrounding the Clinton presidency. I thought the Advisory Board might influence health policy on a larger scale and on a higher plane, than one could do while at a single university setting.

Q: What exactly did the Advisory Board do?

A: I was recruited to help put infrastructure in the company David Bradley had created. He wanted it to grow big and do an IPO. We needed systems, infrastructure, staff, procedures, how we wrote the studies, how we addressed legal questions – all of this needed to be done.

My task was to recruit people and put systems into place so the Advisory Board could operate as a business, not just as an “Ivy League sweatshop” for ambitious and smart young lawyers, doctors, and aspiring executives.

We became very good at recruiting from the finest undergraduate colleges. The typical recruits spent only 18 to 20 months with us. They were preparing themselves to go onto graduate schools in medicine, business, economics, and finance. We gave them access to our members, one side of which were the 1000 or so of the world’s largest banks and finance institutions, the other side was 1200 to 1300 of the country’s largest hospitals and health systems.

At the top of the organization, we recruited the brightest people we could find from leading consulting organizations and law firms. Many were bored with transactional duties of their jobs. They were thinkers and wanted to be part of the larger scheme of things. We had a small cadre of very bright people, focusing on changes and trends.

Highly successful in any case, the company grew substantially during that time. Unfortunately I left prior to two IPO’s. The first company to IPO was called Corporate Executive Board. And then a year or so later, the health care side did an IPO. They are called the Advisory Board Company. Both organizations today are Fortune 1000 companies.

During that time, I joined the Georgetown University board. I commented to the University President that the medical side was losing more money than the board recognized. In a couple of months, he talked me into becoming the CEO of the medical center.

The hospital and clinical enterprise were losing $40 to $45 million year. I took on the assignment from 1997 to 1999 to turn these losses around. It soon became obvious to me the Georgetown board didn’t want to invest the money that it would take to make Georgetown a major academic medical player.

Q: You were going head-to-head with Hopkins and other players, weren’t you?

A: With Hopkins and also Washington Hospital Center and with the Inova Healthcare System in Virginia. The medical center had been making lots of money, but the university used it to bankroll non-medical parts of the university. When the medical side started losing money, support of the medical enterprise proved too thin.

I sought someone to buy the clinical part of the enterprise, and the Washington Hospital Center was interested so we consummated a deal. From late 1998, the MedStar System, led by the Washington Hospital Center, absorbed the Georgetown clinical system and hospital, and they’ve had it ever since. It took them about six years to completely break even.

Lessons Learned

Q: So what have you learned through this tortuous passage through academia, devoted to bringing rationality to health institutions caught in market storms?

A: I’ve learned a lot of things. It’s been a fascinating time to be involved in American, and to a lesser extent, in world medicine. Among other things I’ve learned that truth and discovery isn’t limited exclusively to academic institutions. At the Advisory Board I found an intense thirst for elucidating what was going on in the health care field, much more so than what I had seen in the academic centers. I came to recognize the power of market forces across the globe, not just in our country.

I learned how difficult it was for some organizations, not just universities, to orient themselves to market forces. Universities are organized to protect themselves against societal changes market forces bring. In academia I was at the crossroad between the principles of academic freedom and requirements of social accountability demanded of a university and its faculty when they run a large (commercial) clinical enterprise.

I also learned that universities can change in response to market forces. It’s possible to “get the elephant to dance” -- with good governance, a responsible university president, credible medical center management – and consistent communication with the faculty.

Q: In the last 1980s, I was in Minneapolis, and I saw first hand how managed care devastated the University of Minnesota medical center which was trying to support a newly built hospital. The academic center was slow to recognize potency of market forces. Indeed, they thought of HMOs and the market as vulgar, commercial, and too much below them even to think of HMOs as rivals.

A: The universities, particularly the great universities, put up walls to protect faculty. That’s fine, even wonderful, in sequestered fields of inquiry. But not in medicine. Medicine requires a social contract with society, professionals, the public, and government. There has to be accountability. Dealing with market forces requires management, professional responsibility, accountability dynamics that are quite foreign to usual faculty responses.

Q: In the book, Two Cheers for Capitalism, Irving Kristol makes the point those academics considering themselves high-minded -- a cut above mankind. They feel they ought to be untouched by marketplace pressures.

A; For universities, hospitals and the faculty clinical practice organization are often regarded as an economic nuisance. The universities prefer humanities, sciences and departments of the arts. The business of organizing and delivering care, and being held accountable for the business results of the medical center are unclaimed, unexplored, and unwanted territories.

Some great universities, Hopkins and the Harvard hospitals, recognized the market threat early enough to deal with market pressures. But a lot of universities were well behind the curve. Great faculties and great science are not enough in dealing with the marketplace. At Stanford, Chicago, and Georgetown I was involved in turnarounds.

Q; I’m interested in the Stanford case. After all, Alain Enthoven and Victor Fuchs, at the business school and on the economic faculty, had international followings as health care gurus. Couldn’t they have given the signal to the Stanford medical center that all wasn’t well?

A; Enthoven, of course, was a giant in shaping the managed care world and in the consulting he did with Kaiser as well as his activities as a business professor. But his influence over the Stanford medical center was unfortunately small. As far as concerns Victor Fuchs, he was a beloved faculty member. But neither Alain nor Victor (to the best of my knowledge) was ever on the board of the medical center. Both had international followings as business and economic leaders, but their influence in their own university medical center was minimal.

Q: You left Georgetown about the year 2000. Where did you go from there?

A: I was tired of working for large organizations. I decided to develop my own consulting enterprise focusing on board-related work and health enterprises. I did consulting with largely medium sized health related businesses, in some cases universities or academic centers.

One of the consulting assignments that came out of the blue was from a law firm representing the royal family of Qatar and its foundation, the Qatar Foundation. The wife of the Emir of Qatar was interested in exploring whether that country could establish an internationally recognized academic medical center and a biomedical research institution.

I consulted with them starting in 2002. I did that off and on for about four years. Then they asked me to serve for a year as the interim CEO putting together the initial management team, the clinical plans, select the architect etc, so that’s what I did for the year 2005 in residence in Doha. My wife joined me for most of that time. Qatar had already developed a relationship with Cornell University Medical Center, which resulted in the building of a fabulous new medical school in Doha. The nation’s rulers wanted to also develop a teaching hospital and biomedical research center to be staffed by Cornell, but to be managed and governed independently by the Qatar Foundation

Q: When your Qatar relationship ended, you returned to the U.S. in 2006?

A: Yes, I had been an advisor since 1998 to Greg VandenBosch. Greg is CEO and founder of MedDirect, the company I’m now chairman of in. We are from the same town, Grand Rapids, Michigan. Greg had been President of the parent company of MedDirect, ES Financial, a financial service company in the resort and hospitality industry. That sector was experiencing great consolidation, and he was looking for business opportunities outside of ESF’s hospitality sector.

In the late 1990s, he asked me if I thought there was an opportunity to establish a health related finance business. In 2000, he co-founded the company MedDirect along with Scott Addison MD, a family physician, to provide financing for patients or orthodontists and dentists.

I have long believed in the inevitability of increasing consumer financial involvement in health care and in the need for increased individual consumer financing and consumer decision-making. From the beginning, I strongly supported Greg moving into that particular arena.

At the time there was evidence that the consumer health movement would evolve. If you looked at all the parties who had tried to address the perennial problem of cost escalation in healthcare, all of them had failed.

Government regulation failed. Corporation regulation (in the form of managed care) failed. Industry self-regulation failed. It seemed to me the only two sources left to try to help rationalize the cost problem were either to have patients do it or to have a nationalized health system.

I didn’t think a nationalized approach would be advisable in our culture after looking at the State-driven European systems who were trying to superimpose a market approach to rein in their costs.

Q: Your response surprises me. You come out of academia, stereotyped as being liberal and favoring a single-payer system. Yet you’re very cautious about nationalized systems.

A: I have come to believe health care is more a reflection of a country’s culture than it is a matter of economics. (In other words, I don’t believe the old adage “It’s the economy, stupid!” applies to healthcare.) And I don’t believe American culture would accept a nationalized, or even a single-payer system. Our culture places too high a premium on individual choice, on instantaneous service, on personalized care. Simultaneously, our society has deep respect, in the main, for entrepreneurism and a distrust of government.

There are a host of more practical reasons why I’m dubious about government run health systems: rationing queues/waiting lists/”brain drain” loss of innovation,--for starters. Look at any state-run health system and you will find a “shadow” parallel market system – which exists because of the defects of the official health system.

The Consumer Movement and MedDirect

Q: So you believed theconsumer-driven movement might be upon us?

A: I wouldn’t say it was “upon us.” But I knew it would grow, and in short order, be upon us. So I joined MedDirect in early 2006 upon returning from Qatar, and have been working full-time every since. MedDirect is a confluence of multiple factors.

First is this notion individuals have a major responsibility in financing and managing their behavior in health care, not just in this country but internationally. Price Waterhouse did a recent survey of 400 health officials, many from single-payer countries, and there was a strong consensus financing of health is a shared responsibility- employers, individuals, and government.

Second, Medicare and Medicaid data show that $250 billion was spent out of pocket in the U.S. (2005) Analysts are now predicting a trillion dollar market in personal health accounts. Market forces here are powerful. Better to bet with market forces than against market forces.

And in this market, credit is very, very important. Credit is a market facilitator. Sixty five percent of the U.S. economy is facilitated by the use of credit. But in the health care sector, now over $2 trillion, that number is dramatically smaller. Greg and I have believed for a long time individual financing of healthcare was and is a growth opportunity.

Third, I believed in MedDirect’s proven ability to service those engaged in small financial transactions. The parent company, ES Financial, has serviced over 100,000 small mortgages and homeowner association accounts, and brought the systems and expertise to service those accounts efficiently. MedDirect has picked up those talents, and we have a call center staff that can service accounts and originate loans very efficiently.

So in sum three factors – individuals paying for health care, need for credit, and core competencies in servicing and loan origination make MedDirect a formidable company.

Q: What about another factor – the passage in December 2003 by Congress making health savings accounts widely available?

A: HSAs play a strong catalytic role. But MedDirect doesn’t to succeed. The HSA movement will grow, but not all the HSA bugs have been worked out. Future HSA models -- for the poor, the chronically ill, and the general population – will contribute enormously to market rationalization in the U.S.

But as a company, MedDirect as a company is betting on a larger proposition – that individuals desiring or needing healthcare will need a facilitator of credit to get at that care when it is desired. The HSAs, the HRAs, and the FSAs are all devices, but they aren’t the whole game. With the politicalization of health care, none of these devices are a sure bet.

Doctors and Their Culture

Q; What about doctors? How do they benefit?

A; That bring us to another factor – our understanding of health professionals and their culture.

Q: Explain that culture.

A: Well, it’s one thing to be a credit card company or a mortgage company or a collection agency. But there are precious few finance organizations who know how doctors want their patients to be treated and who see how their patients are treated financially is as an extension of their personal and professional reputation. Or, how companies think about offering health benefits to their employees.

And so our proposition is that there is an enormous market for personal health financing. And we believe that as a business that understands the medical world will have advantages that will result in better and more sensitive products. Greg’s wife is a physician, the co-founder of MedDirect, Scott Addison, is a physician, And I understand what drives physicians.

Q: MedDirect started by giving credit lines for patients of orthodontists and dentists. I gather you client-base has expanded.

A: That was our first of three products – providing credit for care to be delivered sometime in the future. We now have about 700 physicians who are offering our financing, and we have just added 1000 dentists who will be adding our financing to their practices. When we started, there were not many physicians who had credit-card terminals in their office. Now it’s far more common.

Our second product was a line of credit associated initially with health savings accounts, now expanded substantially so that health plans and health insurers can offer this to their employer customers to all employees We call this the Health Bridge program. We now have two traditional health plans that are offering this guaranteed line of credit to those with deductibles of $500 or more.

Q; So this Health Bridge is most applicable to those with high deductible plans?

A; To a certain extent, yes. But if you look at the trends, more and more patients – no matter what their deductible – will be paying out of pocket for procedures that aren’t covered. It could be a reverse vasectomy or a cosmetic dermatologic procedure. Much of the need for credit will come from our perverse reimbursement system, with changing insurance products and with new devices and new technologies coming on stream that are not covered. Gaps in coverage occur all that time, and at awkward moments when a patient needs a procedure or care.

Q: And your third product?

A: We call it the “self-pay solution”. It is designed to help physicians’ offices handle their proliferating volume of patient-pay accounts. The typical physician’s office has a billing apparatus to help them send bills to Medicare and health plans. But then they have all of these little individual patient’s bills – co-pays, deductibles, or patients who have lost their insurance or bills associated with processed problems that the insurance company has rejected.

A recent McKenzie study indicated about 15% of a physician’s total revenue is represented by these small bills. This amount will grow by 35% a year over the next three years. This total of individual out-of-pocket collections may soon grow to 35% of all revenues.

We help physicians service these accounts, in some cases provide loans, and we do it sensitively without offending the patients. Fundamentally handling these out-of-pocket expenses is a servicing business.

It’s not just sending out bills. It’s coordinating the billing process. We’re not in the collection business, and we’re not in this to chase patients. We take those little bills, averaging $210, off the physician’s hands. We have systems to arrange payment plans and offer loans to credit-worthy patients. We have 40 years of experience in managing small accounts --- an expertise banks and other financial institutions do not have and do not want to bother with.

The Future

Q: How do you see the future of the health system? What is your crystal ball telling you?

A: Regardless of what health policy changes are, like the ones you saw addressed in Bush’s State of the Union address, namely changing the tax code, or the universal coverage movement in Massachusetts and California, the need for credit will increase.

Under any scenario, states cannot afford first dollar coverage, and insurance companies cannot either. So, regardless of the shapes of policy changes and coverage experiments going on, it will become apparent individuals must play an increasing role in shouldering financial responsibility and it will take credit to meet that responsibility. Individuals will also have to be more responsible for the health behavior that contributes to health outcomes.

At a higher level, I anticipate increasing volatility in the health policy arena, leading to intense debates in 2009 over full-scale health financing reform. Regardless of what policy prescription emerges from this process I believe a consensus will evolve that future responsibility for the funding of healthcare costs must be shared between individuals, employers and government.