Physician extenders, such as Nurse Practitioners (NPs) and Physician Assistants (PAs), have played a rapidly increasing role in the delivery of healthcare – they constitute an estimated 229,000 of the care providers in the U.S. compared to 661,000 MDs. (1) (2) (3)  As healthcare trends toward leaner reimbursement rates, increased regulation, and a greater focus on consumer experience, NPs & PAs may be better positioned to meet the changing demands than MDs.  Will physician extenders supplant MDs as the primary care provider (PCP)?

In prior posts, Jaymie Youngquist discussed the emergence of 2 disruptive innovations: retail clinics and concierge medicine.  Each article referenced healthcare’s shift in focus to the customer’s perception of convenience and quality – a concept he calls the “Starbucks Economy.”  Mr. Youngquist’s comparison of Starbucks’ consumer-driven experience to the recent changes in healthcare is prescient, but it runs deeper than he notes.

In the Starbucks Economy, healthcare has not only seen an evolution in the payment model and care setting (i.e., concierge and retail clinics), but also in medical care providers – the “baristas.”  Instead of MDs, physician extenders, especially NPs (who outnumber PAs ~2:1) have become the face of primary care.  The CDC reports that 15% of primary care visits in 2009 were handled by an NP/PA alone – an increase of 50% since 2001.

NP and PA training programs first arose in the 1960s in hopes of addressing a physician shortfall created by inadequate MD graduation rates and a booming population.  Shrinking reimbursement rates, hefty educational debts, onerous paperwork, and overwhelming patient volumes eventually left primary care physicians feeling pinched, which further fueled a shift in providers.  The forces acting on the primary care market incentivized MDs to choose other specialties or find solutions to adapt to diminished pay.  One solution manifested in the form of physician extenders, whose salary requirements and training matched the demands of the market.

NPs and PAs currently require fewer years of post-baccalaureate training than physicians (2-3 vs. 7-8 years, respectively*) and, accordingly, demand a smaller salary ($95-98k vs.  $189k).  Despite unfounded criticism that fewer years of education may equate with lower quality care, studies have shown quite the opposite – patient outcomes when treated by NP/PAs are as good if not better than physicians.

The addition of physician extenders to the mix of providers offers benefits to all parties involved – patient, provider, and payer.  By shifting a portion of the physician’s case load to NP/PAs, the physician can spend more time with patients requiring her specific skill set, while billing those who interacted with the NP/PA at a lower rate.  Myriad studies have shown that this model is not only cost effective, but interactions with NP/PAs results in greater patient satisfaction.  NP/PAs seem happy with the shift in roles, too  – both PA and NP outranked General Practitioner (MD) in CNN Money’s “Best Jobs in America – 2009” (2^nd and 4^th vs. 22^nd).

If the assumptions of the Starbucks Economy hold true, then the consumer’s perception of the quality and convenience of a healthcare model at a given price will strongly impact its success.   In the case of primary care providers, NP/PAs seem to check all the right boxes of proven outcomes, superior availability (i.e., retail clinics), and affordability, to boot.  Indeed, it appears that the free market has already spoken – NP/PA primary care visits jumped 50% over 8 years and NP/PA job growth is predicted to outpace physicians through 2018 (39% vs. 22%).

What do you think of the growing role of NPs and PAs?  Leave a comment below.

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In an article published by the Chicago Tribune, journalist Peter Frost commented on the recent issues involving health insurance rate increases for small insurance companies.  With the onset of a new year, and with the economy still experiencing stagnant growth, many small business insurance companies have been losing money.  In order to remain in the game, they have had to increase their rates between 12.9 and 23.2 percent. Due to the implications in the Affordable Care Act, passed in 2010, when an insurance company raises their premium rates above 10%, the Department of Health and Human Services has a right to step in to determine if these increases are justified.  While Health and Human Services cannot restrict these increases, they can make the public aware of them, potentially hurting the appeal of these companies to consumers. This type of intervention can be related to an attempt to fix what is known as a market failure.  The government is attempting to give the consumer more information to make more informed decisions.  However, this strategy also has the risk of promoting potential monopolies or oligopolies.  If the small insurance companies have no choice but to raise rates in order to stay alive, but the government insists on “public shaming” when this occurs, consumers are likely to switch their insurance plans to a larger company that has the ability to reduce their rates because the risk pool is much larger. Smaller companies can be sunk with just one large claim, especially if their customer pools continue to decrease.

This poses the dilemma of how an insurance company should act in the current and future markets.  On one hand these companies need to remain competitive in order to turn a profit and to be able to afford the risk they currently bear among their consumers.  On the other, government intervention make the insurance company feel pressure to act in a social insurance type of manner.  It is likely that within the next few years, a majority of these smaller insurance companies will need to align themselves with the protocols of health insurance exchanges and continue to appeal to small business owners within their area.  Ultimately the current climate in healthcare is treacherous for small insurers and undoubtedly will require new strategy on their end in order to remain in the market at all.

Works Cited

Frost, P. (2012, January 22). Health Reform Law Has Small Insurers on Edge. Retrieved January 24, 2012, from Chicago Tribune: http://www.chicagotribune.com/business/ct-biz-0122-insurance-reform-20120122,0,204779,print.story

Kaiser Commission on Medicaid and the Uninsured . (2012, January 18). Establishing Health Insurance Exchanges: An Update on State Efforts. Retrieved February 10, 2012, from Kaiser Family Foundation: http://www.kff.org/healthreform/8213.cfm

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In April 2011, a rare combination of senators – a Republican and a Democrat – introduced legislation to effectively overturn the 1979 court decision. Senator Chuck Grassley (R-Iowa), the bill’s co-sponsor, said that Medicare claims data regarding payments made to any provider of services or supplies should be available to the public. In addition to making government more transparent, the bill also includes other provisions to fight Medicare fraud. He and Senator Ron Wyden (D-Oregon) both maintain that the bill will keep patient-related data private to protect patient privacy. Senator Wyden stated that “hiding information on how taxpayer dollars are being spent is not something we do in this country”[1]. The AMA has released a statement opposing the proposed legislation which it says will harm a physician’s right to privacy. The bill is currently under review in the Senate Finance Committee[2] (see Schoolhouse Rock: I’m Just  Bill for a refresher is you need one)[3].

Health care expenditures are under increased scrutiny particularly due to rampant cost escalation that has now made them a large portion of the gross domestic product. Barring national security implications, in general, taxpayers and watchdog groups have a legitimate interest in knowing how tax revenue is spent, particularly where there is potential for fraud and abuse. Information about physician Medicare reimbursement dollars is held only by a few, namely the Centers for Medicare and Medicaid Services (“CMS”) and physicians. Taxpayers, due the involvement of tax dollars, are a part of this transaction but remain in the dark.

This is a classic example of the health economics theory of market failure. One reason why a market failure can arise is if access to information is restricted or prohibitively expensive.[4] If private enterprise is unable to resolve this issue, one way to mitigate such a failure is for the government to step in and take corrective action. In this case, the judiciary blocked access to CMS data and it will likely take an act of Congress to overturn the decision (of course, the Supreme Court could change its mind but that is unlikely in this situation). While the controversy is far from over – after all, it did legislators a mere 32 years to finally act on this issue – this bill will make the government more transparent and will allow taxpayers to see how some of their tax dollars are spent.

We’re in an era of partisan politics, incessant bickering and gridlock in Washington, and for Republicans and Democrats to finally agree on something these days is no small feat. Now the only question is – will this bill survive the AMA’s wrath?

In this lecture, Dr. Doucette shared his vision for how concierge medicine can fit into the current health care system and revolutionize how primary care is delivered for both patients, doctors, and businesses. Dr. Doucette brings a unique perspective to the issue. After graduating medical school, he decided to take an uncommon route and forgo residency for investment banking. In 2006, Dr. Doucette raised capital and started ModernMed.

Dr. Doucette went on to discuss the current state of health care in the US and problems with its delivery and incentives. He also outlined the four tenets of concierge medicine: The Land Rover Experience, Green Bay Packers, An Apple a Day, and the Blind Skier at Vail (See the video for an explanation of each of the 4 tenets).

Video:

Slides:

Of course, not everyone believes that concierge medicine is the answer to our health care problems and there is a good deal of controversy surrounding it.  What do you think?  Let us know in the comments!

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Dr. Doucette’s lecture will take place at noon on February 1st. The video will be posted shortly afterwards, so be sure to check back, or better yet follow us on Twitter!

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In light of a market that is slowly being driven more by price conscious consumers; we see a national demand for low-cost, convenient healthcare services.  Retail clinics seek to meet this demand face on and are capable of challenging traditional methods of care.

A report by Deloitte, a nationally recognized consultancy agency, Retail Clinics: Update and Implications, concluded that retail medical clinics would become a staple of the U.S. health care delivery system. Deloitte claims that retail clinics are not a fad and; they are a ‘disruptive innovation’ with a sustainable value proposition (price, quality, service) that is welcomed by consumers (Deloitte, 2009). For people with no health insurance, retail clinics offer substantial cost savings over other alternatives.

Traditionally, the retail clinic marketplace has been saturated and dominated by retail chains such as CVS, Walgreens and even Target.  In addition, competition amongst U.S. healthcare providers has increased dramatically in the midst of a shrinking, more saturated healthcare market.

While large hospital systems compete vigorously to retain and attract new patients, I see retail clinics as an important strategic ‘push’ to retain existing patients; control the burden and stress put on their emergency departments and; a way to develop a new “access point” for new and existing patients.

In some cases, large hospital systems have found that their patients prefer to receive care in the retail care setting, especially for low acuity care visits.  More importantly, physicians and allied health professionals have begun to embrace the model because it allows them to direct their patients to retail clinics after hours.

Aligning themselves with a retail clinic concept represents an unparalleled opportunity to differentiate their business model from their competitors, such as CVS.  Large hospital systems, such as the Cleveland Clinic and Mayos of the world, bring a strong recognizable ‘brand’ name to market, as being top-notch healthcare providers, who have direct access to world-class specialists.

Even though entry into the retail clinic marketplace maybe no easy feat to overcome for a large hospital system, it represents a ‘disruptive innovation’ in an industry ripe for change.  The retail clinic model meets an increasing demand, from informed consumers, for convenient, low-cost, and quality healthcare; and it doesn’t look to be fading anytime soon. I believe it will be integral for large hospital systems to begin exploring and implementing the retail clinic model or strategically aligning themselves with established retail clinic providers.

For more information check out:

http://www.deloitte.com/view/en_US/us/Industries/US-federal-government/center-for-health-solutions/index.htm

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 In recent years, especially in the face of health reform, healthcare innovations have begun to materialize from a more consumer driven market.  As consumers, or patients in the case of health care, become more knowledgeable and price sensitive to the way they pay for their healthcare, we see a new emerging market demand for convenience and high quality of care.  This emerging market and culture, which I will call the “Starbucks economy,” has driven the way wealthy and mainstream Americans demand their healthcare services.  In my assessment of this emerging fad in the U.S. economy, I will address the question, “How has the culture of consumerism and demand for convenience in a “Starbucks economy” affected the way healthcare services are provided in the marketplace?  In consequence, this question brings new innovative healthcare services to scope.  Therefore, I explore how the appearance of concierge medicine, through the lense of ‘disruptive innovation,’ will impact the way healthcare is delivered and demanded in the U.S.

‘Disruptive innovation,’ an economic concept made popular by renowned economic theorist and Harvard Business school professor, Clayton Christensen, is described as a “technology that brings a much more affordable product or service to use in an existing market.”  Historically, in the U.S., primary care providers and insurers have evolved to make access to healthcare inconvenient (i.e. HMO plans), costly (i.e. increased copayments and deductibles) and fragmented from the wants and needs of the consumer.  Under these market conditions, insurers and providers unwittingly open the door to entrants that can offer simpler, more convenient and lower-cost services to customers (Appendix 1).   Moreover, because of the emergence of a “Starbucks economy,” an underserved area of consumer expectation evolved as a demand for convenience and high quality services.  In consequence, current market conditions allow for ‘disruptive innovations’, such as concierge medicine to emerge.  In turn, concierge medicine provides more efficient solutions through convenience and cost minimization measures, which have a potential to drastically change market dynamics.

In the days before concierge medical providers, more people were thinking twice before running off to the doctor for every headache.  This is due in part to the  inconvenience and time wasted to be seen and in some cases, not even by their own physician.  For the wealthy and mainstream Americans, the marginal cost or extra time spent receiving traditional primary care far surpasses the marginal benefit of receiving this care.  In general, for most Americans, time is money and thus very valuable to the consumer.  In response, concierge medical providers present a more efficient solution and seek to challenge the traditional mindset of such consumers by meeting the growing needs of a “Starbucks economy.”

Concierge medicine enables people to see their doctors at any hour, on any day or as the popular phrase 24/7/365.   As this retail innovation has evolved, mostly because of the direct consumer-provider compensation model, many patients have their doctors’ cell phone numbers, pager number, email and can schedule same-day appointments.  In some cases, a patient can communicate via video Internet with their physician with devices such as an iPad or laptop from any location, particularly in the comfort of their home or private office.  The patient dictates the convenience and time of their appointments, which increases patient satisfaction and overall demand for this service.  Therefore, the most interesting impact of concierge medicine is its’ ability to put the power of economic decision-making squarely in the hands of the healthcare consumer.  The concierge medicine model eliminates the need for third-party insurers and seeks to meet an unmet demand for convenient, high quality care and in some cases at lower costs to the consumer.

Additionally, concierge providers have reduced costs by being thoughtful and systematic about their treatment protocols, and reduced billing costs by not taking health insurance for non-catastrophic expenses.  By eliminating the interaction between physicians’ and health insurance companies, one study found that it will save up to $31 billion dollars annually (Casalino et al., 2009).  As a result, concierge medicine is innovatively simpler by avoiding high administrative insurance costs (an avg. of 40 cents per dollar spent on healthcare), which is an inevitable consequence of archaic cost containment polices.  In effect, the ‘disruptive force’ of concierge providers has allowed them to navigate around insurers, while still meeting the demands of wealthy and mainstream consumers.  Therefore, under a concierge medicine model, providers attract more patients, consumers and/or beneficiaries, in turn decreasing the overall market share and revenue of traditional insurers and primary care providers.

Someone might ask, “How successful is concierge medicine as a ‘disruptive innovation’ in the current market?  One concierge medical chain, MDVIP, expects to add more than 80 doctors to its network of 300 this year and claims 93% annual renewal rates among its 100,000 patients (Herzlinger, 2009).  In most cases these beneficiaries pay directly for this service out-of-pocket and supplement catastrophic care with health insurance or a Health Savings Account (HSA).  This interaction drives the business of healthcare delivery back into a direct compensation model, characterized by high reimbursement and large profit margins.  Each MDVIP doctor is limited to 600 patients, who pay them $1500 to $1800 a year, as a capitated yearly or monthly cost (Sack, 2009).  In addition, average physician time spent with patients has gone from 8 minutes to over a half hour, where they give physicals and answer questions that their patients might have about their current health status.   In general, concierge medical providers show an increase in patient satisfaction and retention/conversion rates, representing a growth in demand and overall market share.

In the same segment, Qliance, a start-up created by an MD and his MBA business partner, charges only $600 to $800 a year, similar to a gym membership.  This represents how concierge medical providers are evolving further to meet the growing demand of more mainstream Americans who can’t afford the high prices of most boutique concierge medical firms.  Additionally, Qliance reports that it has aligned itself with over 50 small businesses, which reported savings of up to 50% from traditional insurance plans.  In response, Qliance has gotten the attention of many venture capitalists, raising nearly $13.4 million, because it represents a business model that is truly a ‘disruptive force’ in a market ripe for reform.

In most cases, the products of concierge medicine have met and surpassed consumer demand for unparalleled convenience and high quality care.   Traditional primary care providers and insurers lag behind because of their inability to respond quickly as a result of administrative and institutional barriers.   Thus, concierge medical providers are directly challenging how healthcare is delivered and paid for in America through convenience and cost minimization.

In conclusion, as medical concierge providers evolve, they will eventually find ways to meet the needs of all mainstream consumers, wealthy and poor alike. As more physicians and medical professionals open their business up to the concept, I expect a cost structure more suitable for the mainstream patient.  This structure will be driven by the forces of competition to provide services at an affordable price with high quality of care and most important, consumer convenience.  Moreover, I believe concierge medicine is consistent with the trend toward consumerism and consumer driven healthcare.  This business model represents an “innovative disruption” that will transform patient access and satisfaction while fundamentally improving the economics of healthcare.   Therefore, concierge medical providers will continue to thrive in a “Starbucks economy” dominated by a demand for convenience and quality of care. 

References

Casalino, L. P., Nicholson, S., Gans, D. N., Hammons, T., Morra, D., Karrison, T., et al. (2009). What Does It Cost Physician Practices To Interact With Health Insurance Plans? Health Affairs, 28(4), 533-543.

Chirstensen, Clayton. (2009). Key Concepts: Disruptive Innovation.  http://claytonchristensen.com/disruptive_innovation.html

Herzlinger, R.E. (2009). Healthcare Reform and Its Implication for the U.S. Economy. Business Horizons, 53, 105-117.

Sack, K. (2009, May 11). Despite Recession, Personalized Health Care Remains in Demand. The New York Times, p. 12.

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In this lecture, Dr. Goodman shared insights that he gained while rising through the ranks of health care administration and provided advice for students that wished to follow in his path.

The Three main topics that he covered included:
Career Advice – Dr. Goodman shared his advice for students seeking a dual role as a clinician/administrator.
Business of Medicine – How and when can the financial interests of health care organizations conflict with the clinical goals.
Looking Forward – Why it’s important for future health care professionals to be conversant in the language of business and medicine.

Video:

Slides:

We hope you enjoy the lecture and please share your thoughts in the comments section!

The video will be posted shortly after the event. We hope to see you there, but if you can’t make it, please check out the video!