Monday, October 14, 2024

The rose, the thorn, and the bud: Implications for health care

I was having dinner with my grandchildren, and one of the children* led the family through rose, thorn, and bud exercises. My granddaughter asked each of us to share a “rose” (e.g., a positive in their lives), a “bud” (e.g., something they are looking forward to), and a “thorn” (e.g., something they feel stuck with or need support). This was an excellent opportunity to share what excites us, makes us anxious, and what we might look forward to.

After reflecting on the metaphor, I thought it could be applied to the healthcare profession. This blog looks at what gives us joy, what causes pain and anxiety, and what our future holds.


The rose


I often go to a surgeon’s lounge or lunchroom and hear my colleagues complain about the status of American healthcare. Many say they would not choose the medical profession in the future or wouldn’t recommend healthcare to their children or grandchildren. However, suppose we stop and think about the joy we receive from our profession. In that case, it may alleviate some of the angst and heartache many of us experience.

We receive gratification when caring for a patient who achieves a favorable outcome. Fortunately, this happens with most of our patients. We feel delighted that we are physicians when we receive a call or a lovely letter from a patient’s family after the patient dies when they express the kindness and empathy we showed to their family members. (BTW, with patient and family permission, I place these glowing letters in a scrapbook that is in my reception area for other patients to see and read.)

We receive a vicarious pleasure when we receive feedback from our patients in our office surveys. This also includes patient satisfaction scores from online reviews. We feel a sense of pride when our online reviews are four and five stars.

We feel valued when we receive calls from TV and radio stations asking us to give our opinion on a new treatment or medication. We also feel accomplished when our publications are referenced by colleagues in peer-reviewed journals.

There are many examples of the psychological rewards and joy we receive nearly every day from our patients, colleagues, and others in the community.


The thorn


The thorn is something that causes irritation and annoyance. There are situations when something or someone is a source of unhappiness. There are pain points in our practice that we must contend with.

The most common complaint among physicians is declining reimbursements and rising overhead costs. We can seldom control reimbursements, but we can control overhead costs. If reimbursements are declining and accounts receivables are increasing, then it is time to look at coding and denials. If our services are correctly coded, the reimbursements will be protected, and denials or returned claims will occur. This pain point is a red flag that must be fixed.

Another issue that is inflicting pain on nearly every practice is the electronic medical record (EMR). Doctors spend more time looking at the computer than the patients. This is a common complaint that patients have voiced and must be resolved. Today, doctors find that they can’t complete their medical records during office hours and must use 1-2 hours each evening of uncompensated time to complete their medical records. This has even been given a name, pajama time. This is a most unfortunate situation and a source of great pain for physicians, and this must be resolved. One solution is using a scribe who inputs data into the computer while the doctor can focus on the patient. Now, computer programs can digitalize the doctor and the patient’s voice and create a record without requiring the doctor to input data into the medical record.

The need for prior authorization is a source of great pain for doctors and administrative staff. Insurance companies demand prior authorization for appointments to see specialists, lab tests, imaging studies, and medications the physician prescribes. Artificial intelligence has created effective PA letters to insurance companies that can reduce the time to develop communication from 30-60 minutes for each PA to just a few minutes.

A common complaint from patients is difficulty gaining access to care. It is common for patients to wait weeks or months for their appointments. Even acute care patients cannot be accommodated in busy practices and their patients are sent to urgent care centers, emergency rooms or seek another doctor. This, too, can be addressed with technology that offers patients online scheduling. Practices can see patients early in the morning, evening, and weekend.

Another option is to leave 1-2 time slots daily for emergencies, urgencies, or new patients. These time slots are nearly always filled and help to reduce the long waits to see a physician.

The greatest pain point is being involved in a malpractice lawsuit. Practicing defensive medicine is not the answer to avoid a lawsuit. Doctors are now mandated by their employers to see more patients daily, which shortens the time they can spend with each patient. This alone increases the risk of litigation.

Another thorn is the potential for cybercriminals to hijack or hack our patient data. The healthcare profession is a target for cybercrime. Retrieving patient data is time-consuming and very costly. Efforts must be made to protect our patients’ data and avoid this ever-looming pain point.

Finally, burnout is the thorn impacting nearly 50% of all physicians. Burnout is reaching epidemic proportions, causing dissatisfaction and disappointment that many physicians are retiring early and leaving the healthcare profession. This thorn must be dealt with quickly, or we will see a greater shortage of physicians needed to care for the American population.

We will usually find that the gratification from practicing medicine (the rose) far outweighs the discomfort and pain points we must endure from our practices.


The bud


The bud represents the future and the opportunities ahead for us all. This is where new ideas have blossomed into projects and events, looking forward to how they may impact healthcare and the services that we provide our patients.

I want to share a story that leads me to discuss a bud in healthcare. I referred a patient to a large academic medical center. The patient was seen by an oncologist, and the patient spent thirty minutes completing seven pages of demographics, health insurance information, and a health questionnaire. He was sent to the radiology lab from the oncology department for an imaging study and lab testing. At each department, he filled out the same seven pages of information that was the same as at the oncology department. This patient was anxious about his diagnosis and his impending chemotherapy, and now added to this was nearly ninety minutes to fill out the same information that was indeed available on the computer in the oncology department. Suppose the patient had to participate in a survey of his experience and go online to rate the experience. In that case, you can guess what his responses would have been.

My bud is that this process can be streamlined and doesn’t have to be onerous. Let’s learn from the airline, the hotel industry, and Amazon. At Amazon, you can buy a product with just two clicks: one to check out and, finally, a second click to order the item, which will be delivered in twenty-four hours. When you order from Amazon, you receive four email messages from Amazon: 1) the moment you place an order, 2) you receive an email confirmation of your order, 3) another email shows up in your inbox to let you know your order has shipped, and 4) and finally an email is sent once the order arrives which includes a picture of the box\envelope that is at your doorstep. This is one of the many reasons that customers love Amazon. That’s an example of a bud where we can do better.

Another bud with multiple opportunities is harnessing artificial intelligence (AI). AI can reduce administrative tasks like prior authorization, writing patient education materials, writing referral letters to referring physicians and writing job descriptions to post on internet job sites.

The bud will bloom when we can check patients in with just a few clicks, like Amazon, when we can use artificial intelligence to perform mundane administrative tasks, and when we use technology to look at our patients rather than at computers.

Bottom Line: The goal of using this metaphor of the rose, the thorn, and the bud is to reflect on the practice’s accomplishments, pain points, and potential for improvement. Sometimes, we need to reflect on the joys and benefits of a medical practice. Then, we need to identify the thorns and find solutions to those pain points. And last, let’s look forward, not backward, and see all the potential in front of us and put the joy and pleasure back into our medical practices. Perhaps we can focus on patients and not on data entry into computers.

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Friday, October 11, 2024

Navigating the pros and cons of selling your medical practice to private equity

As the health care landscape continues to evolve, medical practitioners are increasingly contemplating selling their practices to private equity (PE) firms. As Medical Economics reported recently, the number of private equity deals in the health care sector rising rose six-fold to nearly 500 deals in 2021 from 75 deals in 2012, with continued growth expected in 2024.​ For specialties like dermatology and gastroenterology, these PE acquisitions have become particularly common, reflecting broader trends in the health care industry.


The appeal of private equity for doctors


As with many businesses, the potential for financial security is one of the most important reasons why professional practices sell to private equity. For many physicians, selling their practice to PE offers a lucrative exit strategy. Doing so allows them to monetize their life’s work, providing a comfortable cushion for retirement or other ventures. Selling to private equity acquisition often yields a higher price for the seller, than they’d get from an internal sale or by selling to another medical practice or to non-PE buyers. That’s attributed to the substantial capital and talent resources that PE firms have at their disposal. Again, the potential for a financial windfall can be particularly appealing for physicians nearing retirement or for those looking to reduce their involvement in the day-to-day management of their practices.

Additionally, private equity firms can offer sellers structured payment options, such as an upfront lump sum combined with earn-outs or equity in the acquiring entity. These options provide flexibility and can align with the seller’s long-term financial planning needs. This financial security is not only a reward for years of hard work but a way to ensure the continuity and growth of the practice under new ownership.


Enhancing practice operations via PE


Beyond financial security for the seller, private equity ownership can significantly enhance the operational aspects of a medical practice. These improvements can lead to increased efficiency, better patient care, and enhanced growth opportunities which can lead to increased profits and valuations. Key operational benefits of selling to PE include:Capital infusion: 
  • Private equity firms provide substantial capital, which can be pivotal for practices looking to modernize their facilities, invest in cutting-edge technology, invest in new types of software, and expand their services.
  • Operational efficiency: PE firms bring a wealth of experience in streamlining operations, reducing costs, and improving profitability. They employ new practices in administration and patient management, often leading to better financial performance. This operational expertise can relieve physicians from the burdens of managing the business side of their practices, allowing them to focus more on patient care.
  • Broader network and resources: Joining a PE-backed group provides access to a broader network of professionals and resources. This network can open doors to new opportunities, enhance the practice’s reputation, and increase patient referrals. The backing of a reputable PE firm can also bolster the practice’s market position, providing better negotiating leverage with insurers and suppliers.

Potential drawbacks and risks of selling to PE


However, the decision to sell to private equity is not without its downsides. One of the primary concerns is the potential loss of autonomy. Private equity firms, driven by the need to generate returns to investors, may implement changes that conflict with the practice’s culture or patient care philosophy. Physicians might find themselves at odds with new management styles and policies, leading to friction and dissatisfaction.

The pressure to improve profitability can also impact the quality of patient care. PE firms might push for cost-cutting measures that, if not carefully managed, could compromise the standard of care provided to patients. This focus on profitability over patient care can lead to ethical dilemmas and dissatisfaction among staff and patients.

Cultural shifts within the practice are another concern post-sale. The transition to PE ownership can bring significant changes to the workplace environment, affecting staff morale and patient relationships. Physicians and staff may struggle to adapt to new policies and management styles, leading to potential disruptions in service delivery.

A short-term focus on profits is another risk associated with PE ownership. Private equity firms typically aim to maximize the value of an acquisition within a five to seven-year window. This timeframe may not align with the long-term vision of the practice and its stakeholders. This short-term approach can lead to decisions that prioritize immediate gains over sustainable growth and development.

Moreover, while PE firms provide initial capital, they often finance the acquisition through debt. This financial burden can strain a medical practice’s resources and affect its long-term profitability. The added debt obligations can also limit the practice’s financial flexibility and resilience in facing future challenges.


Risky business


Even though PE firms regularly engage in acquisitions, it doesn’t mean that every deal goes well. Let’s say Dr. Smith's (fictional) Dermatology Clinic, a well-respected practice, was acquired by a private equity firm with the promise of financial security and growth. In reality, however, the PE firm implemented stringent cost-cutting measures, reducing consultation times and limiting the use of essential medical supplies. This led to a noticeable decline in the quality of patient care and clashed with the clinic's long-standing patient-centered philosophy, causing frustration among the physicians.

The new management's aggressive policies created a stressful work environment, significantly lowering staff morale. Key personnel, unable to adapt to the new culture, chose to leave, further disrupting service delivery. Additionally, the PE firm's focus on short-term profits over long-term sustainability resulted in deferred investments in technology and equipment maintenance, leading to operational inefficiencies.

The acquisition was largely financed through debt, placing a financial strain on the clinic. The added debt burden limited the clinic’s financial flexibility, making it difficult to invest in necessary improvements or to weather economic downturns. This case underscores the risks of selling to private equity without ensuring the buyer’s and seller’s goals and values are aligned.


6 critical considerations


When considering a sale to private equity, it is essential to weigh the potential benefits against the risks carefully. Due diligence is crucial to ensure the decision to sell aligns with your practice's goals and values. Below are six key considerations to guide you through this process:

Research the PE Firm: Investigate the firm's track record, management style, and long-term strategy. Ensure that the PE firm’s vision for your practice aligns with your goals and values.

Engage Legal and Financial Advisors: Experienced advisors can help navigate the complexities of the transaction, ensuring that your interests are protected and that the deal is structured favorably. They can also assist in understanding the tax implications and financial impacts of the sale.

Impact on Patient Care and Reputation: Consider how the sale will affect patient care and the practice’s reputation. Ensure that the PE firm's goals align with maintaining high standards of care and ethical practice.

Communication with Staff and Patients: Transparent communication about the potential sale and its implications is essential for maintaining trust and stability among staff and patients.

Understand the PE Firm’s Exit Strategy: Know how the PE firm plans to grow the practice, the expected timeline for their investment, and what will happen when it decides to exit.

Explore Alternative Transition Strategies: Consider other transition options that might better suit your long-term goals. An internal transition to younger doctors in your practice may align more closely with your goals than a sale to PE.

Selling your medical practice to PE can offer significant financial and operational benefits, but it is not without its challenges. A successful transaction is based on thoroughly understanding how the goals and culture of the prospective PE firm align with those of your practice. By engaging experienced legal and financial advisors, understanding the implications for patient care and practice reputation, and by maintaining transparent communication with staff and patients, you can better position yourself to make an informed choice that supports both your immediate and long-term objectives.


Conclusion


Ultimately, the decision to sell to private equity should be guided by a clear understanding of your practice’s needs and goals, as well as a commitment to maintaining the high standards of care and service that have defined your professional journey. By weighing the pros and cons carefully, you can ensure that your practice continues to thrive under new ownership, providing lasting value to both you and your patients. If you decide to sell, make sure you have an experienced guide by your side.

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Thursday, October 10, 2024

In retirement, what’s more important – health or wealth?

A report from the Employee Benefit Research Institute found a strong correlation between health, wealth, and overall retirement satisfaction. The report, “Is simply having money enough to ensure a satisfying retirement? The relationship between health and wealth in determining retirement satisfaction,” delves into how physical well-being and financial stability jointly influence retirees' happiness.

The report analyzed data from the 2020 Health and Retirement Study, focusing on retirees aged 55 to 80. It shows that while wealth is a significant driver of satisfaction, health plays an equally—if not more—important role in shaping how content individuals feel in retirement.



Key findings:


Wealth impact: 73% of individuals with assets of $500,000 or more reported high retirement satisfaction, compared to only 33% of those with assets under $25,000.

Health impact: 70% of retirees in "excellent-very good" health reported being highly satisfied with their retirement, while just 28% of those in "fair-poor" health felt the same.

Interplay of health and wealth: Even among wealthier retirees, health was a defining factor. For instance, 78% of individuals with $500,000 or more in assets and excellent health were highly satisfied, compared to 55% of those in poor health with similar assets.

The report also emphasizes the importance of guaranteed income, such as pensions or annuities, and preretirement planning as additional contributors to retirement satisfaction. Retirees with a steady income stream were more likely to feel secure and content.

The study noted demographic variations, with White retirees reporting better health and greater retirement satisfaction compared to their Black and minority counterparts. This highlights potential racial disparities in retirement outcomes.

Samita Thephasit, research associate at EBRI, underscored the importance of a holistic approach to retirement planning, stating: “Health and wealth are interconnected in how satisfied people are with their retirement. Employers should design benefits that encourage regular health checkups and financial planning.”

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