From Tom's Desk


Hard Lessons From Medi-Cal

Total-risk insurers and their contractors have yet another worry.




Corporations who contracted with the state to delivered care as risk-bearing entities under “Medi-Cal," California's version of Medicaid, are under fire for generating strong profits.


In order to attract potential insurers, the state over-funded their initial contracts---resulting in significant profits that are generating a public outcry. Now those same insurers are being told the those "excessive" profits from their hard work are going to be clawed back through future contracting adjustments.


Much of this is a matter of political influence, but one point is not.


The select few insurers who generated lower profits, who used their revenues to fund robust networks and aligned compensation formulae are in a great position for massive long term revenue growth.  


They're going to be picking up after the insurers who go leave the program after their "excessive profits" are clawed back.


With the true "golden age" of data-based payment before us, remember that the quick buck is vulnerable to clawbacks.


It's true value that generates sustainable returns.

You Should Know...

What the Rapid Growth of APMs Presages for Compensation.

The share of compensation delivered through "alternative payment models” (APMs) is growing faster than expected.


According to a recently released report from an insurance industry group, these APMs, running the gamut from metric-based bonuses and penalties to total-risk sharing, account for 29% of 2016 CMS payments—-greater than the trend line would predict and well on its way to the industry goal of 50% by 2018. 


Unfortunately, clinicians are catching on that, while insurers and systems reap the huge benefits of these increases, their personal financial “return on effort” required to capture the at-risk revenue in these APMs is poor and trending worse. Clinicians are increasingly retiring, seeking non-clinical employment or simply disengaging in place.


The successful healthcare leader will create compensation systems that give clinicians enough of an upside to make their “return on effort” worthwhile—-up to and exceeding a performance-based doubling of baseline, market-level income.  


The competition for labor arising from the medical “gig” economy as well as the innovation in healthcare delivery outside the third-party payer system is simply too great to do otherwise.


So far, compensation systems have concentrated on an inadequate combination of minimal “bonuses” and/or significant financial penalties. 


Organizations who rely on these systems will experience continued and increasing workforce disengagement and decreasing productivity.  Since both are essential to successfully executing care delivery under APMs and the share of payments coming through APMs is growing faster than expected, the revenue losses for these organizations will be astonishing—and unsustainable.

Without getting ahead of the compensation curve, many will not survive.

High-Value Insight


When Your Patient Leaves Your Panel.

If your Medicare Advantage patient changes from you as a prime---call them.


That's a "weapons-grade" insight.  A "secret sauce" that has saved me seven figures in revenue over the years.


The very worst thing that can happen to your panel is for you to have a patient leave your care.


You've invested time and money to get them healthy, to get all their chronic diseases addressed and to establish a relationship with them.


You make these investments in time and treasure, waiting for your capitations payments to catch-up so you can book some net profit---and then your patient changes PCPs.  Frustrating.


it's pretty frustrating to watch as the new prime reaps all the benefits of your labor.


If your patient makes a change, you simply MUST call them---personally.  It's painful and challenging, but it must be done. There may be a pattern of factors you can identify and address to prevent patient losses in the future.

But there is an even better reason.


If you call personally, you can actually demonstrate to your patient that you give a damn.


You don't have to be adversarial, you don't have to beg them to stay, you just have to ask "why?".


"I noted that you changed your PCP to another doctor. Was there anything that happened that caused you to make that change that I might help with?"  

You just might find out some valuable information about your staff or the system you practice within.


Most folks that are angry with you personally won't tell you outright, but you can tell over the phone that you offended them in some way.  


A few will curse you then and there. Congratulations, you now know what patients never to take back.  A small price to pay for the rare episode of verbal abuse.


Finish the call with a guarantee that you will do anything necessary to smooth the transition to their new clinician. And if there are any problems, give them the direct number to your office fixer---or even better, to your own direct line.


In my personal experience, after a call like this, and after sampling some of the other local primes, patients often came right back.


Patients leave for many reasons. If the reason is personal, you can discover information that may help you make some necessary changes.


And if the reason is not personal, if they're moving or need to change coverage---you will generate some phenomenal word of mouth.


Just by demonstrating you give a damn.

Q&A with Dr. Tom

How many patients in a clinician's risk-based payment system panel are too many?


Depends on the clinician, but there is a number.


Every clinician works at their own level. I've seen clinicians with 750 risk patients and making multiple of seven figures on 70 hours of work every week.  I've seen others with only 100, making far less money but happily working far fewer hours as well.


For me, the number was 500. For you, it will be different.


The point is, there's a number that will give you a maximum return on your time and effort. Beyond that, you may take care of more patients and your gross may go up, but because the work required to maintain your "profit margin" with that larger number of patients will exceed your natural level, your attention to detail will suffer and net performance will end up staying about the same.

It's an immutable law of nature. Every clinician has a number for optimum performance.


Your administrator, medical director and insurer, however, have trouble accepting this.


They think if they can just "manage" you better, give you "better tools" (i.e. an EHR), your financial performance will be better as well.


Don't give into the temptation that more is better with a shared-risk contract.


There's a number of patients for your personal optimum performance.


Find it.


And realize it's far less than what your employers or insurers wish it was.

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