In the book Antifragile, author Nassim Taleb points out that there’s no word that describes the opposite of fragile.
Category: Strategy
Walmart is famous for its slogan "Save Money. Live Better.”
Call them mental models, call them viewpoints, the point is the same: the box in which we conceive of what’s possible serves as an artificial barrier that confines our thinking.
An article in the Wall Street Journal (Saturday/Sunday edition, September 28 – 29, 2019) revealed that the corporate debt of large physician services companies, TeamHealth and Envision Healthcare, was now trading below the distress ratio.
We’re living in a time of fast-paced change. Sure. But, I think people have been saying that since the Enlightenment. Maybe it’s the one thing that’s remained constant. But maybe it’s not. Some things have certainly remained the same.
Have you considered the impact of contingency fee thinking on your business?
Many physicians bemoan the fact that we have retail, corporate run walk in clinics, such as the Minute Clinics run by CVS, staffed with nurse practitioners and PAs.
But, like it or not, the Minute Clinic and other variants of a consumer-friendly model are going to become an increasing part of the way healthcare is delivered in the U.S. And, they’re going to become an increasing force as the gateway to physicians (especially to specialists), to facilities, and to ancillary service providers.
The reality is that that’s the future. The question is whether you’re going to attempt to stop it or whether you’re going to do something to align your practice and the way it operates with that type of future.
Note that I don’t mean that you have to align with CVS (or any other drug store chain) in particular. I’m simply using CVS as an example, but with its coming combination with Aetna, expect that they’ll be pushing hard to assemble their own, integrated provider network in an attempt to crush competition from hospital-centric healthcare.
Instead, I’m urging that you pause to consider how the increasingly consumer friendly model will impact your practice. And, better yet, that you consider how you can participate, whether as a direct operator, a co-venturer, or simply as a referral-receiving provider, in the future of the retail healthcare market.
When you’re doing this thinking, consider that there’s no one, single model. The concept isn’t limited to the in-retail-store model. It’s as varied as app-based portals, to walk-in clinics, to “surgery center centers of excellence,” to wellness centers, and on and on.
I’m sure that carriage manufacturers took one look at the Model T and thought “we should pass laws to keep these things off the road.” But saying that, or even screaming that, didn’t stop cars from running over their business.
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss
The Sioux City Journal reported last week (on 12/29/17) that a hospital-physician joint venture ASC, Pierce Street Same Day Surgery, filed suit to enforce covenants not to compete against a number of current and former physician investors.
Pierce Street is also suing the medical group, Tri-State Specialists, owned by some of the individual physician defendants.
The flashpoint is the defendants’ development of a competing ASC, Riverview Surgical Center.
That’s the straightforward news. But, what’s really going on? And why should you, probably not a surgeon in Sioux City, care? Keep reading. It will become clear, really clear.
Pierce Street, a joint venture between physicians and UnityPoint Health – St. Luke’s hospital, is located in Sioux City, Iowa, a Certificate of Need (“CON”) state. Pierce Street alleges that the defendant doctors signed agreements that bar them from being involved in a competing ASC located within 30 miles of Pierce Street, both while they are owners and for a year after.
Tri-State Specialists and the defendant physicians are developing their competing facility in Nebraska, just across the Missouri River, the state boundary, from Sioux City. That site is 4 miles away from the Pierce Street ASC.
Here’s what’s interesting for any physician, for any ASC, and for any hospital administrator, whether you’re in Sioux City, Scranton, or San Francisco, or anyplace else.
1. I haven’t seen the underlying agreements and so I can’t tell you if I think the specific covenants not to compete are enforceable or not, but either way, physicians that sign them and facilities that demand them must understand their limitations and their obligations. They may be BS (I’ve worked with a number of physicians on their escape from unenforceable provisions). They may be enforceable, in which case the damages could be severe. But either way, those that demand them are often serious about attempting to enforce them . . . whether they are ultimately enforceable or not . . . and the transaction costs of that battle can be staggering.
2. Nebraska is a non-CON state. Facilities located in a CON state, like Iowa, may think that they’ve blocked competition, but if they’re located anywhere near a border with a free state, the protection is illusory.
3. More telling of the future, and while I can’t get into the heads of the competing physicians or of the Tri-State Specialists’ medical group CEO, but I’d guess that they realized that they didn’t need a hospital partner to run an ASC. Pierce Street alleges that it will lose 60% of its volume to Riverview, and that’s sure to put a pile of profit into the Riverview physician-owners’ pockets. As a regular reader of the blog, you know that that’s one of my main points: hospitals are dying and, so, too, are hospital-affiliated ASCs. Hospitals are becoming anchors around the feet of entrepreneurial physicians.
4. Riverdale is being built next to an existing Marriott hotel, with the intention that patients and their families can stay right next door. That’s a low-cost twist on my concept of the Massive Outpatient Clinic™ (watch the related Success in Motion video), in essence, a “non-hospital hospital” campus. Just as physicians no longer need a hospital to partner in an ASC, you no longer need a hospital to partner in what is nearly equivalent to a hospital.
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss
I recently attended a continuing legal education seminar concerning some very complex organizational structures for healthcare venture development.
Slide after slide flashed on the screen, each looking even more like a dish of spaghetti topped with Froot Loops and Cheez-Its than the one before it.
This entity and that. Physicians here. Investors there. Money flowing this way. Control over here and ownership over there.
From a purely legal standpoint, the models made sense.
However, from the practical standpoint, one apparently lost on the presenter, the structures were unfinanceable.
And, even assuming that the owners could finance the deals completely out of pocket, the structures would likely cause payors either to balk at paying you in the first place, or worse, to pay you now but later wake up to what’s really going on. Then, they’d demand their money back and claim that you defrauded them, or worse.
This is an example of the necessity of second order thinking.
The first order in our example is simply to ask whether the structure works from a legal standpoint. (“Yes, it does, so let’s proceed to document it.”)
The second order is consideration of the impact of your decision made at the initial level. (“Can we finance that type of deal?” “Is the legal structure ‘too cute by half?'”)
The dive goes deeper from there, to the third level (e.g., “What’s the impact of an unfinanceable structure on our relationship with . . . “”) and beyond, bounded only by the time and money you’re willing to invest in the process and the question of whether it makes sense to do so.
How deeply are you thinking?
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss
The next thing you know she was fired.
