Interview with Physicians Practice on M.D. Bankruptcy Trends

Physicians Practice, a leading medical practice management journal, contacted me for observations about trends in physician bankruptcies and financial distress. My comments will be published in an upcoming issue, but I have a preview for faithful readers on my thoughts:

1. There’s little doubt that physicians are going to be adversely affected by the economy-wide decline in healthcare consumption. The notion that demand for healthcare services was inelastic because care is a necessity was a fantasy. There’s been a rash of news reports of patients foregoing healthcare, everything from patients skipping appointments and diagnostic tests and cutting prescription dosages to stretch drugs out to parents who delay their daughter’s sweet 16 nose job and take care of her post-operatively at home, rather than foot the bill for an overnight stay. Anecdotally, many clients are confirming that patients who can put off care are doing so, and that even affluent patients are slower to pay and harder than ever to collect from.

2. This recent downturn, which was already brewing in 2008 prior to the crash, is a very recent trend, but the long-term downward trend in physician reimbursements and revenues has been one of growing disparity between the “haves” and “have nots” among physician practices, including divides:

• between low tech primary care physicians, who bear the brunt of a payment structure that fails to reward the diagnosing of patients with multiple problems through longer physical exams and detailed histories, and subspecialists, who, in general, fare better in a procedure-oriented structure;
• between subspecialties that perform more remunerative procedure-oriented care involving capital-intensive technology (orthopedics, cardiology, urology) and those that don’t (pediatric subspecialties, pulmonology, endocrinology);
• between physicians, particularly in elective medicine and concierge-type practices, whose patients are cash and PPO patients pay more for their services and physicians who are forced to accept the flat (and therefore declining in real terms) and often actually declining reimbursements from Medicare, Medicaid, and HMO’s;
• between physicians in saturated markets (particularly large urban centers) and physicians in small and medium sized markets, who often earn more for the same work based on supply/demand, but and save significantly on overhead expenses (e.g. office space, support staff) and regional variances (e.g. lower rates of malpractice litigation).

The “have not” ranks are growing and the “have” ranks are shrinking for variety of reasons.

3.  Ultimately, the payment structure of medical practice drives physician supply towards more remunerative areas, while Medicare fee schedules and private payors steadily erode  the more remunerative sectors.  Over time, more and more physicians are experiencing the downgrading of medicine into a middle-class profession, albeit one that requires more training than any other in our society.  Physician services are being/have been commoditized.   (Physicians who are cash-only are bucking this trend by successfully differentiating themselves so that they can opt out of the third party payment system that drives these trends.) Younger physicians are opting in ever greater numbers for larger organization practice, such as in systems like Kaiser or in hospital-based medicine, where being part of a large organization looks better than ever.  Physicians remaining in small or solo private practice turn to alternative revenue sources (e.g. ancillary services, such as imaging and physical therapy), but the payors and regulators ratchet down on these over time as well.  It’s a losing battle.

4.  Many physicians already in practice ignore these trends until they can’t any more.  There is a generation of physicians in solo and small, private practice that have watched their incomes erode dramatically under capitation and managed care.  The physicians most at risk in the current downturn include this significant population of physicians who are already suffering, treating patient populations that are heavily HMO and Medicaid, and don’t need much more to push them over the edge.

More to follow…

Will the Election Bring Federal Healthcare Reform?

With the election a week away, the issue of healthcare reform has been getting a relatively high degree of media coverage. It will be interesting to see whether the political will for reform will be present in 2009. If so, given the certainties of Democratic majorities in both the House and Senate, the outline of federal reform is likely to follow the proposals of Barack Obama:

• Universal health insurance by 2012. Via a new government insurance program, employers (except for the smallest companies) will be required either to provide private health insurance coverage or to pay a payroll tax toward a federal fund.
• Insurance companies will be more tightly regulated (prevented, among other things, from rejecting applicants based on their health conditions).
• New controls will be used to bring costs down.

Leaving aside the merits of these proposals, a few questions come to mind: (1) In light of the recent hemmorhaging of federal money in various bailouts, will there be political will for the astronomical costs of the envisioned system?

(2) Is there any reason to think the health plans will be any less effective in undermining the Obama proposals than they were at scuttling the Hillary Clinton reform of 1993?

(3) If there is no movement at the federal level, what are the prospects for Governor Schwarzenegger’s statewide healthcare reform plans?

California Enacts Certification for Massage Therapists

Governor Schwarzenegger has signed into law the first California statewide certification system for massage therapists. S.B. 731 establishes a voluntary certification for the roughly 40,000 people who currently practice massage therapy in California as “massage practitioners” and “massage therapists.”The certification will be managed by a new Massage Therapist organization (MTO). Over the next six years, this organization is charged by the new law with creating a board, developing policies, processing applications, and, ultimately, issuing certifications.

Recommended Action: The establishment of statewide certification–and the attendant professionalization of massage therapy in California–is a positive development for healthcare providers whose current services incorporate massage therapy or who are considering expansion into massage therapy in the future. The current licensing of massage therapy–at the city and county level–is confusing and forces providers who employ massage therapists (for physical therapy or other purposes) to focus excessive attention on compliance requirements that vary from locale to locale. It is hoped that the MTO will work towards establishing uniform regulatory requirements across the state.

Harry Nelson is a partner in Fenton & Nelson, LLP. Fenton & Nelson advises healthcare providers on risk management and compliance issues, including scope of practice and training requirements. For additional information, please contact him at harry@fentonnelson.com

©Harry Nelson 2008

Physician Consolation and Apologies: How Much Should Providers Say?

Among the things that physicians and other healthcare providers generally don’t learn in medical school is how to speak with patients and their families after bad outcomes, particularly when a medical error or possible error is involved. Confusion about what kind of statements are legally protected, coupled with feelings of fear, guilt, shame, or the overwhelming emotional state of upset patients (or grieving family members) only add to the pressure. At the same time, the growing belief is that more forthright and empathetic communication from physicians reduces the incidence of malpractice lawsuits and licensing complaints dramatically. (E.g. William Sage, Rogan Kersh, MEDICAL MALPRACTICE AND THE U.S. HEALTH CARE SYSTEM, p. 151 (Cambridge University Press, 2006).) So what can and should physicians say?

1. What does the law protect?

California, like many states, has an “apology law” that provides that statement, writings, or benevolent gestures “expressing sympathy or benevolence relating to the pain [and] suffering” are inadmissible to prove liability. California protects statements of sympathy, no matter who makes them, as long as they are made to a patient or family member. However, the law does not protect statements that fault or substantiate plaintiffs’ allegations, which can be used against physicians.

• In other words, physicians can – and should freely make – compassionate statements, i.e. “I’m so sorry that you are in so much pain” without fear that the statements can be used against them.

• On the other hand, physicians cannot make acceptance-of-responsibility-statements without legal consequences, such as “I’m so sorry that I hurt you.”

2. So how much should the physician say?

What to express depends upon whether the circumstances call for expression of empathy or an acknowledgment of fault. It is beyond the scope of this article when fault should be acknowledged. (Consult your malpractice carrier, employer, or a lawyer.) Expressions of empathy are very different from apologies. If fault is being admitted, then Randy Pausch’s definition of a “good” apology works: a “good” apology expresses that (1) what I did was wrong; (2) I’m sorry I hurt you; and (3) how do I make it better? (Randy Pausch and Jeffrey Zaslow, THE LAST LECTURE, p. 162 (Hyperion 2008).) This model, however, only works for a case of unmistakable error. In the more common ambiguous circumstance where fault is not being conceded, physician are often not “apologizing” but instead are express empathy in a manner that must be more circumscribed and nuanced.

• Regardless of fault or the lack thereof, we recommend that physicians always convey three protected elements of what Dr. Michael Woods, author of Healing Words: The Power of Apology in Medicine (Doctors in Touch 2007), calls the 5 “R’s”:

• Regret: (“I am so sorry you are going through this”);

• Recognition: (“This has been so hard on you”); and

• Remaining engaged: (“I am here for you.”)

• On the other hand, Woods’ other two “R’s” – (taking) responsibility and (helping) remedy – should be reserved for cases where there is clear, conceded physician error. Based on the law above, physicians should expect that expressions of responsibility (i.e. Pausch’s expressions that “what I did was wrong” or that “I hurt you” or expressions of remedy (“how I will help you through this” or why “it will never happen again”) will be legally admissible.

3. How should the physician say it?

• Prepared: If consolation is a new skill, physicians should write out the points they want to convey to be prepared and ensure the right message is conveyed with the right tone. Nervousness can lead to saying too much (i.e. expressing fault) or to inappropriate defensiveness or, worse, lightheartedness. The consolation or apology should not be read, just thought out carefully in advance.
• Informative: It is critical to be clear, honest, and direct about what happened. At the same time, too much information can be overwhelming. The worst approach is evasion.
• In person: Communication should take place face to face. At a minimum, the conversation should be over the phone. Email, which omits emotional tone, is the wrong way to offer consolation or apology.
• In private: It is easier to speak in a place where the conversation will not be overheard (except by physician staff or colleagues who will be supportive witnesses in cases where litigation or complaints ensure).
• Informally: It is better to speak in closer proximity, on the same level (i.e. both sitting or both standing, without a desk or bed in between doctor and patient).
• Without delay: Physicians should not put off these talks. Patients (and families) need soothing and good communication most when their feelings are raw.
• Active listening: As important as what is said, is how it is said. Before speaking, it is essential to defuse emotional or grieving patients or family members with active listening, i.e. focusing attention on the speaker, paraphrasing back what you hear, clarifying what is being said in nonjudgmental, without agreeing, disagreeing, or being defensive, conveying that you hear and understand the speaker. Active listening creates a collaborative, emotionally supportive environment. Patients or family members are often as desperate for emotional support as they are for information about what happened and why. Before discussing anything about the medical issues, the physician must ask the patient (or family member) how he or she is feeling and, if appropriate, ask questions.
• Taking notes: It is important to document the communication and the patient (or families’) reaction and to note any witnesses in the patient medical records. Writing down what is said goes hand in hand with active listening. It also is a helpful record if there is any malpractice suit or complaint.
• Sincere: The most important thing is to speak from the heart. It can be a challenge to convey the right tone while staying on message (i.e. expressing that you are sorry for what happened, not for having done anything wrong), but the expression must be genuine.

Harry Nelson is a partner in Fenton & Nelson, LLP. Fenton & Nelson counsels healthcare providers on risk management and legal complaince matters. For additional information, please contact him at harry@fentonnelson.com

©Harry Nelson 2008

Physician Compensation, Pay-for-Performance, and Outcomes Reporting

In an essay in the New York Times, cardiologist Saundeep Jauhar, M.D. describes the challenges inherent in linking physician compensation to performance. The problem, Dr. Jauhar writes, is that pay-for-performance programs (“P4P”) create incentives for particular therapies that result in their overuse: pay physicians for prescribing antibiotics, and patients will receive them even if they have no evidence of infection. In addition, P4P encourages “cherry-picking” and discourages physicians from treating the sickest patients for fear of negative statistics.

The same danger lies in many of the physician outcome reporting programs that are gaining in popularity: in the field of cardiothoracic surgery, for example, the California Coronary Artery Bypass Graft (CABG) Outcomes Reporting Program, CCORP, has given rise to a fear on the part of many surgeons of the implications of negative reporting on outcomes if they perform CABG on sick patients.

Recommended Action: Physicians are under increasing pressure – from both patients and payors – for more information about and incentivization linked to quality of care. Greater reliance on both pay-for-performance and outcome reporting metrics are inevitable, despite the manifest problems inherent in both. On an individual level, providers need to approach these trends and their challenges strategically. On a collective level, providers need to take part actively in establishing — and establishing limits on — meaningful quality guidelines before payors and government agencies impose them.

Harry Nelson is a partner in Fenton & Nelson, LLP, a law firm that counsels healthcare providers on business and compliance issues. For additional information, please contact Fenton & Nelson at harry@fentonnelson.com

©Harry Nelson 2008

Making Good Decisions About When to Settle Lawsuits

A recent New York Times article reports the results of an interesting study that every healthcare provider (and every person) eager to go to trial — and reluctant to consider negotiated resolution of litigation — should read. According to an article by Jonathan Glater, most parties to civil lawsuits make objectively wrong decisions when they decline to settle cases.

The study reviewed over 2,000 cases that went to trial between 2002 and 2005. Reviewing the quality of decisionmaking by plaintiffs, the study found that, in the vast majority of cases where plaintiffs decline settlement offers and proceed to trial (61% of the time), they end up with less money than they had been offered in settlement. While defendants erred in going to trial less frequently (24% of the time), the results in those cases were far worse: $1.1 million in additional costs for defendants, as opposed to $43,000 in lesser gains for plaintiffs. When the additional costs of attorneys’ fees are factored in, these numbers may understate the extent of erroneous decisions.

Recommended Action: Although the study raises questions about the quality of attorney advice and client decision making, it is frequently the case that considerations other than accurate forecasting of outcome play into decisions about whether to go to trial. Often, the emotional aspects of disputes lead clients to overvalue their own cases or to be reluctant to acknowledge the position of the other side. The study highlights the importance for attorneys to advise clients carefully about the risks of litigation and for clients to listen when their attorneys counsel conservatism. Any healthcare provider reluctant to settle a case, whether as plaintiff or defendant, ought to think twice in light of this study.

Harry Nelson is a partner in Fenton & Nelson, LLP. Fenton & Nelson represents healthcare providers in healthcare and business-related litigation. For additional information, please contact him at harry@fentonnelson.com

©Harry Nelson 2008

Compliance Planning & Cosmetic Medicine: A Tool for Minimizing Risk

Dr. Smith was looking for ways to boost revenues to make up for the steady erosion of insurance reimbursement in his medical practice. He had received an offer from a consultant that would offered to transform his practice into a “medi-spa,offering aesthetic medical services, such as Botox, along with spa services, such as facials. He agreed to pay the consultant a fee plus a share of revenues from the non-medical spa services in order to develop the new practice and market it to a new clientele, interested in both cosmetic medical treatment and spa services.

Read more…

L.A. Times reports on growth of patient reviews of doctors online

A recent L.A. Times article (“Doctor ratings: Is your healthcare hot or not?” Shari Roan 05/19/08) called attention to the issue of patients reviewing their physicians online via websites, such as www.rateMDs.com. This accelerating trend poses an emerging and serious challenge to physicians. As the article notes, this practice of online rating of physicians “shifts the balance of power.” It enables patients to do significant harm to physician’s reputations, without regard to the merits of the patient’s criticism. There is no system of verification of information.

In aftermath of Donda West case, California legislature considers legislation to raise cosmetic surgery requirements.

The highly publicized November 2007 death of Donda West, mother of rapper Kanye West, following a tummy tuck and breast reduction has prompted the introduction of legislation affecting cosmetic surgery in California. The coroner’s report found the death to be attributable to”coronary artery disease and multiple post-operative factors due to or as a consequence of liposuction and mammoplasty.” It was subsequently discovered that the physician who had performed the procedure had failed to require a pre-operative physical examination.

Understanding Stark Law in 2008

A physician may not refer Medicare or Medicaid patients for designated health services (”DHS”) to an entity with which the physician (or an immediate family member) has a financial relationship unless an exception applies.

The following article outlines those exceptions.

Read More…