Category Archives: Economics

Cut-rate concierge medicine? One Medical resorts to discounting

Good stuff, cheap

Good stuff, cheap

I have mixed views about concierge medicine. On the one hand I like the idea of higher service levels for patients and the ability for doctors to practice medicine the way they think is right without feeling like hamsters on a wheel. But overall I’m pretty skeptical.

  • I’m worried that concierge medicine may draw in physicians who are more concerned than average about their own lifestyles. My non-concierge doc works 80 hours per week and answers my electronic messages right away for no extra charge
  • It’s far from clear that the best primary care docs are concierge docs
  • Many concierge offices are just like regular primary care offices in that they make use of physician extenders: nurse practitioners and physician assistants. I have nothing against these professionals but it’s not what I’m looking for in a premium offering
  • The practices may make primary care more convenient and comfortable but I’m skeptical that they achieve anything special for patients who are really sick and end up in the hospital or under the care of a specialist

It is interesting to see just how inexpensive concierge care has become. One Medical Group in Boston charges only $199 per year for its concierge services. To put that in perspective it’s less than one percent of what my firm pays in premium for family coverage. And yet even at that rate the company seems to be having trouble attracting customers.

I had to chuckle when I received a brochure in the mail yesterday offering a $50 discount –actually a Whole Foods eGift Card– for new customers. Apparently even $199 is too expensive to draw patients in.

Maybe another way to look at it is that regular primary care in Boston is pretty darn good. You can get a same-day appointment if you need it, the doctors will spend the time with you when it’s called for and will go out of their way to help you get in to the proper specialist when required. Many will communicate by electronic message and return phone calls.

I’d actually be happy to pay an extra $199 or even more for a real improvement. And if my current doctor switched to a concierge practice model I’d go with her and pay more. But the concierge model as a whole has a lot to prove before it really catches on.
photo credit: Daquella manera via photopin cc

By David E. Williams of the Health Business Group.

When using a free health care website, consider the business model

Is a free lunch worth the price?

Is a free lunch worth the price?

When Google first came along I assumed that their business plan was to get users addicted to search and then start charging for searches. But it turns out they were a lot savvier than that. Instead of thinking of Google as a service to help users search out content, they thought of it as a service to help advertisers target customers. Users revealed their interests through their search habits, and Google delivered relevant customers to advertisers. Brilliant!

For a long time now Internet users have expected useful sites to be free. That’s true of consumer sites and it’s also true of professional sites. But before getting too involved with these sites it’s worth stopping for a moment to ponder their business models. That’s especially important for medical sites, where privacy is often a concern.

iMedicalApps  reveals the business model behind popular websites used by physicians:

Many free apps aren’t really free, though. We talked about the hidden price of free medical apps about two years ago, an issue that was later highlighted in the New York Times as well. In essence, the price of these apps is that we share enough personal information to enable targeted advertising, surveys, and so on.

What may come as a surprise to many healthcare professionals is that many apps they frequently use like Medscape and Epocrates share users’ names, NPI numbers, and other identifying information with pharmaceutical advertisers. As it turns out, Facebook and Twitter have stricter privacy policies than some of your favorite free medical apps.

The comments section is interesting. Most of those posting profess not to care if their information is shared. Maybe that’s reasonable, but at least it’s worth knowing that it’s occurring.

If you stop to think about it, it’s kind of obvious that “free” apps are leveraging user data to make money from other parties. Even so, many people are surprised when they learn about these business models. But even when the user pays there’s no guarantee that their data will be protected. Marketers are eager for information on doctors and others regardless of whether the user is getting a freebie. If anything, marketers are more interested in obtaining information about users with a demonstrated willingness to pay. And the purveyors of the information see no real reason not to double dip.

Edward Snowden’s revelations about NSA spying are having an interesting effect on the market. Snowden has raised awareness that information is often improperly used. Theoretically that might make people wary of signing up for sites that disclose their information. On the other hand, some may reasonably conclude that since the government is looking at their information anyway there’s no reason to try to protect it.

photo credit: webted via photopin cc
By David E. Williams of the Health Business Group.

A better business model for antibiotics

For the past couple of decades antibiotics have generally been a low margin, low revenue business that big pharma has stayed away from. Lack of new drug development activity combined with an increase in antibiotic resistance and the rise of “superbugs” are leading us rapidly to a frightening place where we lack effective drugs to stop many dangerous infections.

A Wall Street Journal article (Drug makers tiptoe back into antibiotic R&D) provides the welcome news that drug makers are starting to invest in this area again. One reason: they are hopeful that when the new products get to market there will be a greater willingness to pay than there has been historically. Antibiotics can have a big payoff in the form of improved quality and length of life and avoided medical costs. Curing an infection in one person can also prevent others from getting it.

The article speculates about reimbursement from health plans and whether big insurance companies will be willing to pay more for new antibiotics than they have for old ones. The answer may be yes, but I’m not sure it’s the relevant question. I’m reasonably optimistic that in the new world of global capitation, accountable care organizations, and other methods for placing risk on providers that the providers themselves will be willing to pay because it will be a net positive for them financially.

There’s also a brief mention of introducing a licensing model for drugs based on number of patients and indications rather than quantity of product. I think that’s a great idea and have written about it in the past.


By David E. Williams of the Health Business Group.

More from the nursing shortage myth annals

Good news or bad news?

Good news or bad news?

FierceHealthcare has a weird little article about nursing shortages or lack thereof (As market worsens for hospital jobs, nurses look elsewhere). As I’ve written before, the nursing shortage is a myth. If you’re thinking of going to nursing school or sending your son or daughter there based on the inaccurate notion that good nursing jobs are plentiful, you should think twice.

The Fierce article mixes together two articles that tell almost opposite stories. The first, from the Indianapolis Star describes the dearth of hospital nursing jobs –which generally pay well. Nurses who can’t get jobs there are moving down the food chain to lower paying outpatient and home care positions.

New nurse grads are sending out 60 to 100 resumes and getting no responses, we are told.

That article mirrors my sense of the market. If there were a real nursing shortage you’d expect employers to be talking about it, yet I almost never hear a hospital clamoring for more nurses to be trained. Contrast that with the situation in high technology where employers are constantly beating the drum for more STEM (Science Technology Engineering Math) graduates.

The second article from the Long Beach Press Telegram is about a faculty shortage in the California State University system. Something like 90 percent of qualified applicants are being turned away, which we are told “is exacerbating the state’s nursing shortage.”

Actually, with a national nursing glut, the applicants may be receiving a blessing in disguise.

A commenter captures my feelings about the article well. He has a niece who graduated with her RN but is still waitressing six months later. Meanwhile, “if California has such a shortage of nurses, why don’t some of the new grads sending out the 60 to 100 applications go west?”

photo credit: via photopin cc

By David E. Williams of the Health Business Group.

The big free-market impact of the Affordable Care Act

medium_4560586060The messed-up launch of the federal health insurance marketplace website is getting lots of attention these days, and rightly so. But ObamaCare is going into effect one way or the other, and we’re already seeing some significant changes in the economy as a result. The US health care system is a complex mix of public and private players with varying incentives and behaviors. Those who think the Affordable Care Act is a government takeover of health care may have difficulty accepting how it’s stimulating the free market.

And yet, the impact is significant. Here are a couple examples:

  • The availability of subsidized health insurance and the ban on medical underwriting (i.e., charging more or denying coverage based on pre-existing conditions) are increasing labor market flexibility, which should hold down unemployment and increase growth. We correctly fault Europe for restrictive labor practices that make it hard to fire workers –thereby discouraging hiring. But we have not looked critically enough at our own policies, which create “job lock” as employees hang on to their jobs and forego entrepreneurial ventures for fear of losing their health benefits. The New York Times covered this topic yesterday.
  • You would be forgiven for assuming that health insurers negotiate hard with doctors and hospitals in order to offer competitive premiums to their customers. As it turns out, they have really not competed on price in recent years. You have probably seen stories about how health plans are now competing hard for new members under ObamaCare. That means they are reacting to the reality (or even threat) of comparison shopping, which is enabled by the much-maligned federal exchange and the state exchanges. Health plans have sharpened their pencils and realized that to compete they need to negotiate harder with their providers. So now hospitals and doctors are complaining about being squeezed. But since we’ve been told that price of services –not utilization– is the main reason US health care costs are so much higher, shouldn’t we be pleased that the free market is finally acting? There are ways providers can maintain or even grow their incomes under ObamaCare –but they’ll have to move away from fee-for-service to do it. That doesn’t bother me.

photo credit: David Hilowitz via photopin cc

By David E. Williams of the Health Business Group

Healthcare Social Media Review is up at BrandEngagement

BrandEngagement hosts a thoughtful, thorough edition of the Healthcare Social Media Review, a roundup of blog posts about the use of social media in health care. My post about the value of patient reviews is featured in a section on Patients & Social Media. The other post in that section is by Forbes writer Dan Munro, who writes that ZocDoc is the only health care app to make the list of top mobile apps.

ZocDoc lets patients find doctors and make appointments. It’s kind of like OpenTable, which does the same for restaurants. But interestingly, neither Munro –who focuses on the service for consumers– nor the commenter –who talks about data sales– puts their finger on the key driver of ZocDoc’s business model, which is that physicians are the main customers.

Like OpenTable, ZocDoc is a lead generation tool that providers (whether restaurants or doctors or dentists) will pay for in order to get customers in the door. But ZocDoc’s value proposition goes a bit further, which is that it also enables providers to enrich their mix by picking up more desirable commercial patients and even those from specific high-reimbursing health plans.

So ZocDoc is more like an OpenTable that lets restaurant owners bring in more high-tipping, beautiful people and screening out those who are less desirable and less profitable.

ZocDoc does have some potential utility for consumers but I hope next year’s list of apps will include something where the consumer is the app’s true target customer.


By David E. Williams of the Health Business Group.

Some big health plans must think exchanges will succeed

More aggressive drafts of the Affordable Care Act (ACA) included a public option that would have set up a government run health plan to compete with private insurers. That got shot down in an effort to broaden the base of support for the law. Although I’m not a fan of government-run businesses, I do think it would have been an interesting experiment to see whether private plans would have sharpened their game in the face of new competition, especially since many areas of the country current lack robust competition among commercial health plans.

While the public option never made it, the ACA’s insurance marketplaces are on their way in just a few days. Exchanges promote competition by giving buyers the chance to compare health plans on an apples-to-apples basis. Price becomes a more important decision factor in efficient marketplaces. Even if the exchanges get off to a rocky start they are already sending shudders through the ranks of the established brand name health plans. You can tell from the Wall Street Journal article (Health Insurers Scramble to Keep Healthy Customers), which depicts at least some plans resorting to aggressive or even deceptive practices to keep customers from defecting to exchanges.

The plans are scared that current members will go to exchanges for lower premiums and possible government subsidies. Humana sent a letter that the Kentucky Department of Insurance considered misleading. The company was trying to get its members to renew early for 2014 by threatening to switch them to a pricier policy if they didn’t. Aetna has also run into trouble.

This behavior reminds me of what I see with consumer products in other markets that have become more competitive, and that pleases me. It reminds me of AT&T getting aggressive on renewals and upgrades when Verizon was about to get the iPhone. Or like what happened when the long distance business was deregulated and MCI offered an innovative Friends & Family plan. Or when various fast food chains offered value menus. In these cases consumers won out once they learned to navigate the new environment, and established companies had to sharpen their game to continue to compete.

Health insurance has a long, long way to go to approach the competitiveness and consumer focus of other industries. Due to various constraints it may never get there. And yet the introduction of exchanges looks like it may turn out to be a bigger step in that direction than I had expected.


Eagerly awaiting the death of defensive medicine

I’ve always been annoyed by proponents and defenders of defensive medicine, i.e., doctors ordering unnecessary tests to stave off lawsuits. Not always, but often enough, it is a case of physicians shirking responsibility, blaming others, and acting in a self-serving manner. Attitudes haven’t changed that much, if Defensive medicine: A solvable problem in Healthcare Finance News is to be believed.

A Medscape survey cited in the article asked physicians who’s been sued to give advice to others:

Among the remarks: “Document more often, more thoroughly… get rid of rude, demanding, noncompliant patients… practice more defensive medicine.” One advisor went so far as saying: “Don’t assume ANYTHING!! If it hurts, CAT scan it. If it hurts between the nose and the toes, consider it a heart attack and stress-test everyone from 9 to 90!”

A 2010 survey of physicians found that doctors thought 26 percent of health care costs were due to defensive medicine.

Although there may be a knee-jerk reaction to test more rather than less, there’s no evidence that the amount of testing has anything to do with the likelihood of a lawsuit. In a fee-for-service environment, more testing puts more money in the doctor’s pocket, so I’ve always been skeptical of the “defensive medicine” explanation for over-testing.

Now that capitation in various guises is coming into vogue, physicians and hospitals are going to look at things a little differently. I’ll bet the same doctor who recommends indiscriminate scans and stress tests today will find some other approach to risk management once financial incentives are re-aligned. With a bit of luck, that will sound the death knell of defensive medicine.

Thankfully there are other approaches to protecting against lawsuits, including not making errors in the first place and apologizing when mistakes do occur. I’m sympathetic to physicians who get sued, but we shouldn’t make too much of their defensive medicine advice.


By David E. Williams of the Health Business Group.

ObamaCare and tax evasion

The Affordable Care Act (aka ObamaCare) may help reduce tax evasion, especially in states that don’t expand Medicaid eligibility. That’s because people whose projected income is between 1x and 4x the poverty level will be eligible for federal subsidies to purchase insurance on the new marketplaces (also called exchanges). There’s an incentive to report more income in order to be eligible for subsidies.

Kaiser Health News (In states that don’t expand Medicaid, some of the uninsured may still get help) doesn’t discuss the tax compliance issue directly, but does note that there’s a potential strategy for people to estimate their incomes optimistically in order to qualify for subsidies.

I’ve seen anecdotal evidence of this phenomenon in Massachusetts, since RomneyCare was instituted. Some babysitters and other informal workers started asking their employers for letters stating their hours and wages in order to qualify for subsidized insurance here. It may or may not have made economic sense for these workers to start declaring income, but it gave one more push toward getting on the books and going legit.

Cracking Health Costs: Interview with Al Lewis

Al Lewis, inventor of “disease management” and Tom Emerick, former head of global benefit design at Walmart, have teamed up to write Cracking Health Costs: How to Cut Your Company’s Health Costs and Provide Employees Better Care a guidebook for businesses looking to save on health care expenses right away.

In this podcast interview, Al discusses the “snake oil” wellness industry, explains why an ounce of prevention is not worth a pound of cure, touts domestic medical tourism and describes how the disease management field has reacted to his earlier indictment of them: Why Nobody Believes the Numbers: Distinguishing Fact from Fiction in Population Health Management.

As always, Al is informative and entertaining.