Rapid changes in the health insurance and financing areas have created an opportunity for physicians and life sciences companies to work together in the measurement of quality and success.

 

Life science companies need accurate analysis of utilization of pharmacy use but also benchmark information on overall outcomes and comparisons of successful versus non-successful outcomes. This data may be used for scientific reports, research findings support or authentication, or as a feasibility test to determine best variables for analysis.

 

Pendulum Health offers these capabilities to sort through not just procedure level utilization but also case mix adjusted findings and the ability to see complexity trends that may help or compromise the actual scientific findings of a research project. Pendulum Health is often represented at the Academy Health Services Research meetings in Washington, DC and at pharmacy research meetings.

 

When The National Institutes of Health announced its road map for medical research in 2006 it described what would be happening over the next ten years. Our point here is that as research goals have changed so has the entire health system  but the focus areas that Dr. Elians Zerhouni, then director of NIH and author of the study, made are just as relevant in 2015 and beyond.

 

The three focus areas include:

 

  1. New pathways to discovery: tools and techniques for understanding how disease works at the molecular level.
  2. Research teams of the future: includes a new funding program to encourage high risk but high return research in unexplored areas.
  3. Re-engineering clinical research: creates a better network of academic medical centers and community based physicians that work jointly on clinical trials. The road map received $500 million as of 2009, the NIH road map report on health reform was also funded by the Center for Health Care Innovation as was the funding for outcomes research through Comparative Effectiveness Research (CER).

Pendulum Health's interest is in the area of working with primary and specialty care physicians, networks and coalitions as interdisciplinary teams to construct alternative delivery systems, and monitoring trials for new applications and innovations in medicine. In so doing Pendulum Health will further benchmark information for payers and consumers regarding what works successfully in medical practice improvement.

 

Physicians

 

Pendulum Health assists physicians with ventures that help improve practice effectiveness as well as offer opportunities for practice growth and revenue. Pendulum Health is building Advance Practice Models (APMs) in primary care as part of its foundation for the next wave of Accountable Care Organizations.

 

A variety of strategies have surfaced and have been successfully implemented by large, for profit driven companies that can be replicated by smaller determined groups and networks of physicians at a local level. Areas such as consolidated managed care contracting and billing through locally owned physician MSOs, design and development of physician owned data banks, opportunities for malpractice coverage at reduced rates, creation of physician owned imaging centers, and development of specialty institutes for cardiology, orthopedics and oncology, collaborative health plan ownership models and shared staffing services are but a few of the capabilities Pendulum Health brings to the table.

 

Pendulum Health has earned a special relationship with the American Academy of Family Practice and the American Osteopathic Association both of whom have referred family practice and primary care physicians to form groups and networks to support collective action on practice improvement.

 

What is Pendulum Health's role?

 

First of all, Pendulum Health is not a broker and does not buy practices but rather believes in the independence of physician practices. Pendulum Health believes that small groups of 6 to 12 physicians are more efficient than operating solo and partnerships. Why? Because as expenses eat away at practice revenue and as reimbursement gets more complicated, the thin margin of a small practice makes it vulnerable to acquisition by hospitals or other buyers.

 

This means that as physicians consolidate under a contractual organization they own, they have a bigger margin, stronger staying power in the face of future changes, and simply a better lifestyle. In addition, shared coverage for calls, overhead expenses, and potential equity and annuity of a larger group become more attractive.

 

Physicians voice concerns such as: I want to make sure I am part of a quality group. How can you tell if this group has good outcomes without comparing them to other physician’s performance in the market? How do I know I can retain my insurance agreements if I join a different group? What is the competition charging? Is this group good at collections? If I am thinking of starting a smaller group, what additional revenue streams are available?

 

How does Pendulum Health answer these questions?

 

The first step

 

There are several organizational structures we recommend for startup physician owned enterprises that are driven by physicians but professionally managed by experienced staff.

 

NETWORK

 

Many physicians joined all the IPAs and networks set up by insurers in the early 1970s and found that despite all the promises, the ability to trade compensation discounts for increased market share did not work. Some networks got very large with only a handful of new patients seen every month while others mismanaged the funds and any withhold after expenses was a dream. In short, many folded because they could not operate and manage risk as a network. The network we speak of is a highly focused network of single or multispecialty owners that have input into the governance of the network but also have access to professional management of the network in everything from billing and coding to unifying managed care contracts and leveraging the size and superior outcomes of the group. This high performance panel is eligible to attract bonuses and package pricing as well as create a shared savings with health plans and even with large employers on a direct basis.

 

JOINT VENTURE

 

As is the case for most physicians, cash flow does not allow for a large down payment on an expensive Joint Venture. Many physicians are squeamish about being purchased by hospitals or venture capital executives who, on a moment’s notice, could terminate contracts with physicians leaving them out in the cold, meanwhile manipulating the remaining physician owners of a network into doing things their way. Again, the income guarantee and bonuses may be only a dream as these organizations calculate their return on investment (ROI) and suddenly realize the need to fire doctors and administrative staff to break even.

We are talking about 10 doctors who have a similar vision of practicing as if they were a group without walls but need capital to truly improve their practices and get the incentives leveraged so physicians can control some of the outcome of care as well as the profitability of the group. Joint ventures normally require two organizations to stand back to back with the idea that they have a mutual interest. An interested party here could be a minority investment by a hospital (Many hospitals we have spoken to are looking for a way to get out from under their purchase of physicians and would invest in an MSO and release physicians from bondage with some provision for keeping admissions stable), or it could be a surgery center, or an established owner of a medical equipment company. There needs to be something in it for both parties and by keeping the majority of the ownership with the founders, the physician enterprise has some confidence that they will not be abused or sold out. We emphasize the word minority here to indicate that if the JVCO does not work out, a scramble to find a new partner is possible without losing the entire venture down the road. There are also insurance companies who are looking for organized networks of physicians in which they can have some ownership. The insurance company has a means to distribute a new product through a dedicated group and the physicians have a partner that gives them some guarantee of payment and market share.

Pendulum Health has been asked to seek out joint venture partners or represent interested physicians in being able to sell back their salaried contracts in exchange for an income guarantee and bonus to the group while returning sole ownership to the physicians instead of the hospitals. The ownership of an MSO like structure by a health plan and physicians is workable but requires some analysis and strategic advice that Pendulum Health is capable of offering.

 

PARTNERSHIP

 

There are traditional and nontraditional partnerships. In some cases there may be a single specialty group formed to partner with a hospital for a gainsharing program. For example the Bone and Joint Mandate from CMS offers an opportunity for both partners to gain in any savings accrued below a set baseline. We have seen the creation of these partnerships in forming other bundled products linked to severity of patient illness.

 

Again, Pendulum Health takes the role as the independent data gatherer and reporter to make sure the savings are documented and it tracks all CMS or private pay contractors to assure all of the work done to improve care and lower costs is verified by Pendulum Health as an independent third party.

 

All of these ventures can be successful as long as there is a mutual understanding that the “practice as usual” method of daily existence must change and they must become much more patient friendly, practice a formal patient engagement process to build loyalty, and, finally, there needs to be some assurance that the physician has some improvement in satisfaction over the solo or two man group in joining this collaborative approach to the practice of medicine. These are the elements of what we call the Advance Practice Model. Different from medical homes and much more performance oriented than a traditional group, the APM introduces the differentiator in the market that makes the physician organization sustainable long term as an attractive and competitive form of delivering care.

 

Step 1 Build the vision and a model

 

Begin reading the literature on network formation to get a vision of what you want this enterprise to look like at the beginning and five years down the road, and gather a group of physicians you respect and trust to discuss your vision.  This may be several informal meetings in your living room or a restaurant but make a schedule, take notes on areas of agreement, and once you have a model and agreement on 5 or 6 principles, it’s time to move to step 2.

 

Step 2 Research the vision and gain momentum

 

Produce a set of written principles about the new corporation. Each physician in the core group should invite an additional physician to become part of the founders group. Explain the concept, vision and principles to the newcomers. Be ready for questions; many of which you will have already asked one another, but some will be new questions. More questions will require more research, but understand how a group without walls may operate and don’t call in lawyers and create a budget that will have everyone worried about money right away, instead focus on the principles of the new venture. You now have a core group and a model in mind; now it’s time to determine if it’s feasible.

 

A short warning here. Not everyone will agree on everything in the beginning because it’s new. Try not to get hung up on budgets and operation;, that will come later. Physicians like unanimous decisions, but in business it’s rarely unanimous. That means the leaders of your group will emerge and press forward but if you wait for everyone to agree on everything you will be lost and never get to step 3.

 

Step 3 Feasibility

 

Feasibility takes into consideration four separate but critical questions:

 

  • Is there a market?
  • Is there a market with a need?
  • Can we fill that need with current or proposed services?
  • Can this venture sustain itself long term?

One of the first questions to ask is how big is the service area you want to cover? How many people live there? How many are employed and in what industries? How many seniors and how many children?  Are you able to cover more than one county? Who are your biggest companies (not insurers but employers that are paying the bills)? How will it change in 5 years? The broader the population you cover the more likely this venture will meet everyone’s needs in terms of practice market share, gain and sustainability.

 

Is there a need is a bit tougher question to answer. You need to find out: Are there other groups without walls, networks, IPAs, PHOs, medical staff organizations, ACOs and the like? How many of them are strong? Do they have the capacity and capability that you have? Many are probably hollow networks with no real distinction other than location and discounts. Can you do the same thing in coverage and would your group like the opportunity to gather bonuses versus discounted patients?

 

Next, can we, as a network of independent physicians, pharmacies, home health agencies, mental health specialists and/or nursing service specialists offer something in our product that is not now in the market? Who would be a partner to offer this service? This requires a competitive analysis in which you survey employers or insurers to discover the true needs of the community and determine how one would be paid for this new service before jumping into the creation of a formal organizational structure. 

 

While mail out surveys are popular, we have found face-to-face meetings with select employers or other payers along with secondary demographic analyses to look at current and future market trends to be of great use in formalizing the feasibility study.

 

Finally comes the sustainability question—can we build and maintain a strong organization to support new services or expansion of current services?  How long would it take to launch, what expense is needed in terms of people to run this enterprise and what medical expenses need to be matched to revenue to make sure services are able to produce a positive versus negative outcome? This requires a formal budget with a sensitivity analysis (best case/worse case) projection into the future.

 

This framework has served many Pendulum Health clients well over the past 40 years. While aspects of this are found in white papers and books published by the Pendulum Health team, Pendulum Health is sure that success is not found in a template but in a customized version of actionable research, facilitation and documentation of the new organization’s current and future aspirations. Pendulum Health’s team serves a variety of clients in the health care environment and would be happy to discuss ideas or meet in person or by phone to walk through the potential benefits and risks of your proposed venture.