October 17, 2016
2 min read

BLOG: When scheduling encounters, consider against payers that deliver low value

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In my last Business-Minded Surgeon blog, I argued that surgeon time is a scarce resource that should be prospectively allocated or appointed based on predicted revenue generated by individual encounters, rather than on a “first come, first served” basis. In other words, much like payers now measure the value that individual surgeons produce, we should measure and apply the value of our invested time based on the predicted payer reimbursement for each encounter as well.

Although many surgeons aspire to achieve the productivity resulting from appointing encounters predicted to generate the highest charges, some are hesitant to apply this method to predicted collections. Of course, the only difference between collections and charges is the payer relationship. It mystifies me that surgeons would hesitate to rigorously consider the moral justness of favoring one payer over another.

Why do we avoid this analysis? Doesn’t every other party to the health care ecosystem — for example, employers, patients, hospitals, commercial payers and government payers — measure the value generated by each of the other parties? Shouldn’t that blade cut both ways for all participants? Why should payers get a free pass and why does giving payers a free pass erode the sustainability of the entire system?

As any medical economist will acknowledge, the performance of any participant in a complex system depends on the existence of feedback loops that rewards good behavior and punishes bad behavior. Each party to the system justly seeks to maximize its position in the system because that is its obligation to its shareholders. Failure to rigorously reward and punish any party to the system will result in eroded performance of that party and the entire system with time. Therefore, holding each participant in the health care ecosystem to the highest standards and providing continual feedback on good or bad performance is good for every party in the system. Failing to do that predictably produces erosion of performance.

Step back as a surgeon/businessperson and consider the following thought-experiment: Rather than viewing your practice as the vendor and the payer as the customer, view the payer as the vendor and your practice as the customer. The payer has a massive inventory of medical problems it wishes to sell to practices in local markets. If your practice appoints patients non-cognitively (first come, first served), then your practice is failing to provide the feedback loop that holds the payer responsible for its performance.

If your practice uses an appointment optimization solution, it could seek to invest its capital (surgeon time) in the encounters that deliver the best product (revenue). A practice that shops poorly deserves to perform badly in the market.

How does the practice become a smart shopper? Unfortunately for most practices, the shopping begins and ends with annual contract negotiations with commercial payers and the decision to participate or not participate with government payers like Medicare. Once that decision is made, no further data or feedback is measured, analyzed or acted upon while thousands of individual encounters occur that could provide valuable insight into the value of the overall relationship.

As I will show in my next blog entry, this is an example of securitization, an ingenious business tactic payers have used to exploit surgeons’ naively good intentions for a long time.

John “Jay” Crawford, MD, is a partner at Knoxville Orthopaedic Clinic and founder of nextDoc Solutions, a software company that builds custom apps for orthopedic surgery practices. His primary interest is helping private-practice orthopedic surgeons discover and implement strategies to ensure robust and sustainable business performance in a consumer-driven health care environment.