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Affordable Care Act


A program DESIGNED with DoCtorS in mind! mind! Eligible Borrowers include the following:

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• Resident Doctors1 1 M4 will have to provide a valid, signed residency contract before closing of escrow. Must have adequate funds to cover the mortgage payments until receiving income from residency.

FIGHT cancer. It’s the only thing I do. As a radiation oncologist at Cancer Treatment Centers of America®, I wholeheartedly devote myself to fighting cancer. It’s not one thing I do, it’s the only thing I do. If you are diagnosed, and don’t know where to begin, start here. Start with a specialist who treats only cancer. Every stage. Every day.

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cancercenter.com/experts ©2016 Rising Tide




Round-up Staff Editor-in-Chief Adam M. Brodsky, MD, MM abrodsky@mcmsonline.com Editor Jay Conyers, PhD jconyers@mcmsonline.com Content Editor Dominique Perkins

Connect with your Society mcmsonline.com facebook.com/MedicalSociety twitter.com/MedicalSociety instagram.com/Medical_Society Letters and electronic correspondence will become the property of Round-up, which assumes permission to publish and edit as necessary. Please refer to our usage statement for more information.

Advertising To obtain information on advertising in Round-up, or to become a Preferred Partner, contact: Barb Spitzock 602-528-7704 bspitzock@mcmsonline.com

Cover photo and member profile photos by: Denny Collins Photography www.dennycollins.com 602-448-2437

MCMS 2016 Board of Directors Officers President Adam M. Brodsky, MD, MM

Send address changes to: Round-up, 326 E. Coronado Rd., Phoenix, AZ 85004

Secretary Ross F. Goldberg, MD

Periodicals postage paid at Phoenix, Arizona.

Treasurer May Mohty, MD President-Elect John L. Couvaras, MD Immediate Past President Ryan R. Stratford, MD, MBA Directors Jay M. Crutchfield, MD Shane M. Daley, MD Tanja L. Gunsberger, DO Kelly Hsu, MD Lee Ann Kelley, MD Marc M. Lato, MD Richard A. Manch, MD, MHA John Middaugh, MD Tabitha G. Moe, MD Constantine G. Moschonas, MD Anita C. Murcko, MD Steven B. Perlmutter, MD, JD Resident Representative Pamela McCloskey, DO Medical Student Representative Kimberly Weidenbach, MEd

MCMS offers: A FREE physician referral service A benefit of membership – we help drive new patients to your office To learn more contact Dixie Harris 602-251-2363 dharris@mcmsonline.com Visit us online at: www.mcmsonline.com



Round-up August 2016


August 2016 | Volume 62 | Number 8 Round-up (USPS 020-150) is published 12 times per year by the Maricopa County Medical Society, 326 E. Coronado Rd., Phoenix, AZ 85004. Round-up is a publication of the Maricopa County Medical Society (MCMS). Submissions, including advertisements, are welcome for review and approval by our editorial staff at roundup@mcmsonline.com. All solicited and unsolicited written materials and photos submitted to Round-up will be treated as unconditionally and irrevocably assigned to and the property of MCMS and may be used at MCMS’ sole discretion for publication and copyright purposes and use in any publication, website or brochure. MCMS accepts no responsibility for the loss of or damage to material submitted, including photographs or artwork. Submissions will not be returned. The opinions expressed in Round-up are those of the individual authors and not necessarily of MCMS. Round-up reserves the right to refuse certain submissions and advertising and is not liable for the authors’ or advertisers’ claims and/or errors. Round-up considers its sources reliable and verifies as much data as possible, but is not responsible for inaccuracies or content. Readers rely on this information at their own risk and are advised to seek independent legal, financial or other independent advice regarding the content of any submission. No part of this magazine may be reproduced or transmitted in any form or by any means without written permission by the publisher. All rights are reserved.



August 2016 | Volume 62 | Number 8

5 6 9 11 13 16

18 20

Letters To The Editor Doctors Making News What’s Inside President’s Page Federal Health Policy

Who’s Really Pulling The Strings In Medicine?

By Miriam Anand

The Cadillac Tax:

What You Need To Know By Dominique Perkins


5 Things to Know in the Arizona Marketplace By Ken Alltucker

What Insurers Leaving Obamacare Exchange Means For Physicians By Keith Loria

23 29

How Do You See It?

A Q&A with Stephen P. Herman, M.D. By Dominique Perkins

As Insurers Leave Obamacare Exchanges, Doctors Pay The Price

By Sally C. Pipes


The Illicit Perks of the M.D. Club By Vatsal G. Thakkar


How Not To Cut Health Care Costs

By Robert S. Kaplan and Derek A. Haas

38 41 43

A New Currency for Your Hospitals:

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Letters To The Editor To the Maricopa County Medical Society,

I am writing to express my thanks for being chosen as a recipient of the MCMS – MICA Medical Foundation Student Essay Scholarship. Your support to Arizona medical students by offering this scholarship is incredibly generous. This award will go towards paying the fall tuition of my second year of medical school and help me further advance my goal of becoming a physician. Already, my second year of medical school is underway. Just a few weeks ago, I completed my MBA with a concentration in Healthcare Management through the UA Eller College of Management. As I continue shadowing in clinical experiences and eventually begin to work in the clinical setting, I hope to use my newfound business knowledge to improve healthcare delivery and patient services. Right now, I am focusing on my pre-clerkship studies and engaging with the Phoenix Biomedical Campus through leading a variety of student interest groups and community activities. My passion lies in building diversity in the medical field. Since January, I have served as a co-leader of the Asian-Pacific American Student Association (ALAMSA), LGBTQ in Medicine, Medical Student Mentorship Program, and others. When I am not working on my studies or service to the community, I spend my time exploring art, literature, and the beautiful Arizona outdoors (but not in the summer months).

cuss emerging topics of health care facing our nation. I was very excited to enter the essay scholarship competition sponsored by Maricopa County Medical Society and the MICA Medical Foundation because it gave me a chance to vocalize my position on an important health care topic that I will be facing as a future physician. By publishing my work in the Round-Up, MCMS has encouraged our generation of future physicians to take a more active role in shaping the health care system in which we will serve our patients. Publishing a piece of medical literature for a large audience to view was very rewarding and I am thankful for the opportunity that MCMS has provided me and will provide future students to express their views and opinions in a professional setting. I would also like to thank the partnership between MCMS and MICA for making this opportunity to Arizona medical students possible. — Thomas Esposito AT Still University Student

Dear Dr. Brodksy,

Thank you for supporting the School of Osteopathic Medicine in Arizona (SOMA) at A. T. Still University and for recognizing the achievements of our student, Tommy Esposito.

This scholarship helps offset part of the financial burden of medical school tuition and therefor allows me to focus more on engaging with my school and local community. For that, I am grateful. Additionally, the essay topic challenged me to think about how the future of medicine is changing and how healthcare delivery can keep up with a growing population and technologically advancing society. Thank you again for this wonderful opportunity and selecting my piece as the winning essay.

We are grateful to Maricopa County Medical Society (MCMS) and Mutual Insurance Company of Arizona Medical Foundation (MICA) for offering an essay scholarship competition, allowing our students to demonstrate their critical thinking skills and commitment to whole-person healthcare. We also appreciate MCMS and MICA Medical Foundation for helping our students lessen their financial burden while pursuing their osteopathic medical degree.

Sincerely, Aishan Shi, MBA UA College of Medicine - Phoenix

Tommy, an OMS II, plans to pursue family medicine, pediatrics, or internal medicine; and there is no question he will bring value to any community he serves.

Dear Maricopa County Medical Society,

I would like to express my sincere gratitude and thanks for featuring my article in the Round-Up magazine. The State of Arizona is very fortunate to have a medical society that so strongly supports its medical students and encourages innovation by inviting students to dis-

Thank you again for supporting the bright minds we are honored to educate. Sincerely, Jeffrey W. Morgan, DO, MA, FACOI, CS Dean, School of Osteopathic Medicine in Arizona A. T. Still University mcmsonline.com/round-up



Doctors Making News Got something to Say? Share? Celebrate?

We want to hear from you! We are excited to reinstate the Letters to the Editor section of our publication. Did a survey topic make you think? An article make you chuckle? Or maybe you had a great time at one of our events! If something you read stood out to you, send us a note telling us what you think! Each month we will select a few letters to share.


he Maricopa County Medical Society is excited to report that MCMS Board Member Tabitha Moe, MD was selected as one of the Phoenix Business Journal’s 2016 class of “up-and-coming” business leaders, 40 Under 40! This list recognizes those impacting the Valley’s business community, as well as the community as a whole, and we are delighted to have one of our members counted amid that list! Congratulations, Dr. Moe! Moe is a cardiologist in Phoenix, Arizona and is affiliated with multiple hospitals in the area, including Banner Good Samaritan Medical Center and Mayo Clinic. She received her medical degree from the University of Missouri – Kansas City School of Medicine in 2007. She also completed her internal medicine residency at the University and served as chief resident. She completed her fellowship in cardiovascular diseases at Banner – Good Samaritan Medical Center in Phoenix, Arizona. Moe is a published author and is currently active in clinical research. She is a member of the Adult Congenital Heart Association (ACHA) and the International Society for Adult Congenital Heart Disease (ISACHD). She also speaks multiple languages, including Spanish. She has been a member of MCMS since 2011, and currently serves on our Board of Directors.



Round-up August 2016

In addition to what you think of our magazine, we’d also love to hear about you! Graduations, publications, big birthdays, promotions or new jobs, we want to hear about the moments in your life worth noting, so that we can celebrate life’s accomplishments alongside you. Share with us via mail, email, or on social media (you can find us on Facebook, Twitter, LinkedIn & Instagram). As ever, we are always on the lookout for members with a strong voice and unique perspective to contribute Round-up articles. If you are a Society member and would like to be considered for upcoming author opportunities, let us know! Here in the Maricopa County Medical Society, we think yours are the stories worth telling. Thank you for letting Round-up be a part of that. Contact us at roundup@mcmsonline.com Or mail letters to: Maricopa County Medical Society Attn: Round-up Editor 326 East Coronado Rd Suite 101 Phoenix, AZ 85004

The Strength of One. The Power of Many. Arizona Primary Care Physicians (APC) is a new primary care owned and operated medical group practice designed to meet the health care realities of today and tomorrow. APC protects what many Arizona primary care physicians value and hold in high regard – continued independence, autonomy and sustainability.





Join your peers and become a part of the the future of primary care. Call 623-215-9452 or visit our website at arizonaprimarycarephysicians.com for more information.| 7 mcmsonline.com/round-up

Doctors Making News has been a member of the Maricopa County Medical Society since 1982. We are so proud of his achievements, and delighted by this recognition. We would also like to extend our heartfelt congratulations to MCMS nominees Kathleen D. Graziano, MD, who works with the Phoenix Children’s Hospital, and Marc C. Lato, MD, who works with Dignity Health – St. Joseph’s Hospital & Medical Center. Physicians like you, who demonstrate such excellence and dedication, are an honor to our organization, and we are proud to count you among our membership.

Photo by Jim Poulin | Phoenix Business Journal


he Maricopa County Medical Society is delighted to congratulate Dr. Michael Grossman for being Phoenix Business Journal’s 2016 Healthcare Heroes’ winner for Lifetime Achievement.

Grossman did not originally intend on pursuing a career in medicine, and his path to healthcare started in a highly unlikely place: geology. While studying geology at Temple University in 1953, Grossman happened to attend a lecture given by one of his professors about diseases such as gout – which involved crystals. That got Grossman’s attention. Grossman approached the professor after the lecture, and they agreed to work together for the next few years. By the end of his senior year, Grossman had discovered a love of medicine, and realized that what he truly wanted was to become a physician. He attended medical school at Hahnemann University – now owned by Drexel University College of Medicine – and Internal Medicine residencies at Mt. Zion Hospital Medical Center and the University of California San Francisco. He practiced in San Francisco for many years before moving to Phoenix in 1982. Grossman served as the Associate Dean for Graduate Medical Education at the University of Arizona College of Medicine – Phoenix, and as Vice President of Medical Affairs for Maricopa Integrated Health System. He 8


Round-up August 2016

Photo by Jim Poulin | Phoenix Business Journal

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What’s Inside T

he Affordable Care Act has taken on numerous monikers since its inception in 2009. Originally referred to as the Patient Portability of Care Act (PPACA), the ACA is now more widely known by its presidential nickname — Obamacare. While all don’t agree that this landmark piece of legislation has been good for our healthcare system, most have accepted the fact that it’s here to stay and, for better or worse, tried to make it work.

Very early on, experts predicted that insurance companies wouldn’t just eat their losses if the Obamacare marketplace plans weren’t flooded with healthy young adults. As expected, those needed to prop up the exchange plans bypassed coverage and just took the tax penalty, leaving the plans with more older and sicker patients than the insurance companies would prefer. The fallout? Much higher costs than anticipated, and not enough healthy people to even things out. As a result, payers are now reporting losses in the hundreds of millions of dollars, even approaching billion — that’s right, billion with a ‘B’ — for some of the larger insurers. It has become a mass exodus of exchange participants, and before long none of the largest payers will offer Obamacare plans (just my opinion). I’m sure this isn’t what the current Administration had in mind, but it’s what many knew would happen.

er, this isn’t likely to change. Numerous physicians, including many in rural areas such as Northern Arizona, have come up with creative ways to care for those even too poor to afford Obamacare. Banding together and offering patients a one-price-fits-all program, many physicians have priced affordable ‘concierge’ plans that people at or near the poverty line can fit into their budget. Not surprisingly, however, the insurance companies don’t like this and have fought diligently to restrict these efforts (through legislative lobbying). It’s happening here in Arizona, and likely everywhere else. As the saying goes, no good deed goes unpunished!


jconyers@msmsonline.com 602.251.2361

But what about physicians? By and large, the majority of physicians don’t view Obamacare in a favorable light. A common complaint is the deterioration of doctor-patient relationships impacted by narrow networks, a bright and shiny new product being offered by insurance companies. These narrow networks are exactly as they sound — narrow. They offer limited access to physicians, and many people end up joining an exchange plan without first checking to see if their doctors are included in what appears to be a great bargain. The result? Patients have to find a new doctor, and continuity of care is often interrupted.

On the bright side, the exchange plans have helped millions and millions of previously uninsured, or underinsured, individuals. Unable to afford insurance before, many are now able to find coverage that fits within their budget. Recent data, however, suggests that more than half of those originally expected to flock to Obamacare are still without insurance. But why?

With a presidential election on the horizon, Obamacare will continue to be a hot topic of conversation for patients, doctors, payers, and politicians alike. The Republicans have Obamacare in their crosshairs and will aim to dismantle the program if they take control of the White House. The Democrats have pledged to strengthen it even further. Who knows what will happen — I sure don’t! So, on to what’s in this issue of Round-up.

Some still can’t afford even the most reasonably priced plans on the exchange. Some still don’t view health insurance as a necessity and are content just paying the seemingly negligent penalty the IRS hits them with. Unless the penalty is high-

Our profile physician this month is a recent transplant from Manhattan, Stephen Herman, MD. We hope you enjoy his story, as well as the great articles on the impact of the Affordable Care Act on the healthcare landscape. Keith Loria specumcmsonline.com/round-up



What’s Inside lates on how physicians and patients alike will be negatively impacted as more and more third-party payers leave the Obamacare exchange. A wonderful piece by Sally Pipes looks at the fallout of the Obamacare exchanges, which many believe is driving the trend in payer mergers. For a local flavor, we include in this issue a recent article by Arizona Republic healthcare reporter, Ken Alltucker, who looks at five things to know about the Obamacare market place here in Arizona. Lastly, Rick Gibson describes a new financial tool being used by hospitals to fund infrastructure projects. Next month, our focus shifts to medical ethics, and who better to profile than a physician who heads the biomedical ethics department at the University of Arizona College of Medicine Phoenix? David Beyda, MD, is a leading ethicist who also happens to run his own non-governmental organization (NGO) assisting with healthcare training throughout Africa. His story is a truly compelling

one. We have a number of good articles in the queue for the issue, and hope you find it enjoyable to read. Mark your calendars for our annual event, scheduled for October 14th under the light of the stars at El Chorro Restaurant. Outgoing president Dr. Adam Brodsky will delivery his annual address, and incoming president Dr. John Couvaras will offer his thoughts on what direction the Society hopes to pursue next year. Our keynote lecture will be a thought-provoking presentation by two local physicians, Drs. Judith Engelman and Cynthia Stonnington, who examine various ways of how physicians can be more resilient to avoid burnout. All members are free to attend, so please RSVP by visiting our website at www.mcmsonline.com. Not a member and wish to attend? Simply email us at mcms@ mcmsonline.com and our excellent staff will get you signed up as a member and register you for the event. We’d love to see you there for this enjoyable event!

You’re Invited!

Join us for the Maricopa County Medical Society’s

Health Policy Forum

Thursday, September 22, 2016 6:00 - 8:30 pm MCMS Courtyard 326 E. Coronado Rd. Phoenix, AZ 85004

Come join your colleagues for an interactive Q&A with Arizona’s leading policy experts. Featured Panelists:

Rep. Heather Carter (LD-15) Arizona State House of Representatives Chairperson of House Health Committee

Sen. Katie Hobbs (LD-24)

Arizona State Senate Minority Leader Senate Health and Human Services Committee

Ms. Christina Corieri

Arizona Governor’s Office Health and Human services Policy Advisor


Pele Fischer, JD Space is limited! Reserve your spot and submit a question for the event. Sponsored by long-time Society partner

Arizona Medical Association Vice President of Policy and Political Affairs

RSVP TODAY! mcmsonline.com



Round-up August 2016

President’s Page T

his month’s issue deals with several federal health policy issues. The first is the Affordable Care Act of 2010 (ACA). This law has many provisions which were implemented in a stepwise fashion over many years. With six years of hindsight, we can begin to draw some conclusions. First, the overall cost of providing healthcare has not really changed. In fact, we have already seen several insurers pulling out of some federal insurance exchanges after realizing large financial losses. Second, through a combination of increased financial stress, as mentioned above, new and expensive EMR-based quality mandates, and new payment models, it has contributed to further consolidation in the healthcare market at all levels - among hospitals, among insurance companies, and among physician groups. Third, the number of uninsured Americans has indeed decreased. In theory access to care has therefore increased, but the high cost of caring for the previously uninsured, as well as the federally mandated increase in the minimum list of covered services, has caused extremely high deductibles in many of the new plans associated with the ACA. I have several patients in such plans who will see me in the office but consistently refuse to have any procedures or tests performed because they cannot afford the high deductible. Is this ideal? Clearly not. However, I would rather those patients at least have an established relationship with a health care provider who can at least give them advice, a physical exam, and prescribe medications. In this regard, the ACA is at least a start, if not the ideal system we would all want. More recently, the Medicare Access & CHIP Reauthorization Act of 2015 (MACRA) was passed when the flawed Sustainable Growth Formula (SGR) was repealed. Unless you are in a Medicare certified APM (Alternative Payment Model), your practice is likely preparing to participate in the Merit-Based Incentive Payment

System (MIPS). Under this system, what we do in 2017 (or at least how we code our visits) will determine our payments in 2019. Some doctors will be paid a bit more and some a bit less, up to an eventual maximum of nine percent of your total medicare payments. The checkboxes on my EMR are already multiplying. In addition to checkboxes for seatbelt use, sun exposure and risky sexual behaviors (i’m a cardiologist, remember), I now have to check a box for each problem in the problem list which stipulates “no change,” “improved,” “worsened,” “new,” or “resolved.” So for example, it is not enough for me to write under the “coronary artery disease” problem: “the patient is clinically stable without angina, his functional capacity has increased with daily exercise, and he is compliant with his medications without adverse effects and he is working on mediterranean diet type changes.” I have to also click a checkbox labelled either “improved” or perhaps “no change.” This adds nothing to the quality of the note either from my perspective or from the perspective of the referring doctor. However, it does make it easier for the medicare payment judges to adjudicate my claim, for which they will of course simply count the checkboxes I clicked and of course not actually read the note, thereby accurately deducing the relative “quality” of that particular patient encounter. I suppose somehow this is in the interest of society as a whole. Financially, it is purposely designed as a zero sum game. In other words, it must be revenue neutral for the federal government, so that for every dollar of reward given to physicians for meeting quality guidelines, there must be an equal dollar amount of penalties levied against physicians who are unable to meet the specified quality benchmarks. Consider yourself warned… Finally, ICD-10 has come and gone and while the doomsday scenario which had been predicted may have failed to materialize, the transition was not without its

Adam Brodsky, MD, MM

MCMS PRESIDENT 2016 abrodsky@msmsonline.com 602.307.0070

Dr. Brodsky specializes in Interventional Cardiology He joined MCMS in 2005. Contact Information: Heart & Vascular Center of Arizona 1331 N. 7th Street Suite 375 Phoenix, AZ 85006 http://heartcenteraz.com




President’s Page costs, lost productivity, and continuing sense of wonder as to why physicians have to spend their time coding down to such a microscopic level of detail. It clearly isn’t simply for accurate billing and payment because if you code everything correctly, you will most likely end up revenue neutral compared with ICD9. Although it will have taken more time and cost more money to get there). Could it be so that the government may more easily track the “quality” of our care? While this may one day improve the actual quality of the quality data, or at least the claims data, it will only be as accurate as the data entered. The newly enhanced claims data may one day be useful for research purposes as well. Both the case of better quality data and the case of better research data are cases in which the more specific billing data is not being used at the point of entry, as it is for direct billing purposes, but rather, being stored away for potential future use; the idea being to build a vast database of claims which can then be mined at a later date in either a research setting or to calculate as yet undesigned new quality measures. Is it a bad idea to have specific, uniform, and computer searchable data on each and every patient-specific problem? Perhaps not. Currently all of that data exists, and we physicians know exactly where and how to find it if and when we need to make patient management decisions. It may be in our last office note, or it may be in a radiology report, or it may be in a lab report, but we know how to find it. It has been and continues to be a monumental task to enter all of that data on every single patient problem on every single patient visit, at the same time. This is not something we would ever need to do clinically, since it is exceedingly rare to require all of that specific information at our fingertips at the same time. While this may be a noble idea, is it the best use of physician time to spend our days entering all of this data? To take a very specific example, the codes for mitral regurgitation are numerous. I can code mitral regurgitation from the anterior leaflet, from the posterior leaflet, from rheumatic causes, from prior infection, from a cleft mitral valve, from inadequate mitral leaflet coaptation, etc, etc. While that exact information may be important sometimes, for example when contemplating a surgical repair, when I am seeing a stable patient in the office with mild mitral regurgitation, it simply is irrelevant. Part of the art of being a doctor lies not in knowing all information at all times, but rather in knowing where to find the information you need to arrive at the correct decision which lies be12


Round-up August 2016

fore you. In other words, knowing the right information at the right time. When I need to know the exact type of mitral regurgitation that my patient has, I can either look at the most recent echo report, or more likely, I can actually look directly at the echocardiographic images of the valve itself and determine the exact nature of the regurgitation. Even the echocardiographer who officially reads the echocardiogram and describes the mitral valve in the report may fail to adequately describe the nature of the valve in the way that I need in order to make my decision. This is obvious and is because the echocardiography reader does not know the patient and does not know the specific medical decision being made at that time. This is not an indictment of the echo reader, it is simply a matter of being able to abstract the right information at the right time. i suspect most orthopedic surgeons look at their own X-rays before making certain treatment decisions, and I assume many neurologists look at their own MRIs before making treatment decisions. Its not that they don’t trust the radiologist, but rather they have their specific decision in mind as they review the images and therefore know exactly what they are looking for - the right information at the right time. Unfortunately, the ICD-10 system is an attempt to have all physicians have all the information all of the time, which is both medically irrelevant, and inordinately time consuming. Because this is common knowledge, the accuracy of the ICD 10 data being entered is highly suspect. Many physicians have realized that for their billing to be correct (i.e. revenue neutral compared to ICD 9), they simply have to code somewhere in the right ballpark to get the claim paid. Maybe one day there will be an automated way to capture actual primary medical data, however until we reach that day, having physicians spend their time coding minute details of each visit may simply not be worth it. In the meantime, I look forward to the utopian future when this vast database is actually used for the betterment of humanity.

Who’s Really Pulling The Strings In Medicine? BY MIRIAM ANAND

Why does it seem that my physician spends more time with the computer than with me?

Initially, it was thought that electronic health records would have a lot of advantages. They would allow physicians and other medical personnel faster access to patient records, without having to track down a paper chart. It was also thought that it would be easier to exchange information to the patient’s other physicians. This may be true in large medical facilities or hospital groups that all have access to the same records, but this has not turned out to be the case for most physicians and practices outside of these facilities. It also takes longer for most physicians to entire the records into the computer than it did for them to keep paper notes. To add to the problem, the government requires physicians to

keep electronic records in order to avoid decreased payments from Medicare, in order to meet the requirements, however, the government mandates that certain benchmarks be met and documented. This is called “Meaningful Use.” Some of these benchmarks may be important for improving care, but many are time-consuming and distracting for the physician and don’t significantly increase the quality of care. Concern for meeting these benchmarks forces the physician to focus on the computer and takes attention away from the patient.

Why does my physician spend less time with me and seem so rushed? Many of the changes that have resulted in today’s rushed visits started in the 1980s and 1990s. Medicare changed mcmsonline.com/round-up



how payments to physicians were determined and managed care took a much stronger foothold. Medicare and insurances determined what would be paid for physician visits and those payments decreased. Costs to pay staff, buy supplies, rent space, and for utilities, however, have not decreased. Furthermore, insurances have continued to make it more and more difficult for physicians to be paid for their services. They also require more prior authorizations for care, which means that the physician has to spend extra time justifying why he or she wants to perform a certain test or use a certain treatment. More employees need to be hired in order to keep up with all the bureaucracy. In the meantime, payment is lower for “cognitive service” than for procedures. “Cognitive services” refer to the mental processing of information about the patient’s systems, physical exam findings, test results, and other medical conditions to form a diagnosis and plan for treatment. Physicians in specialties that do not perform many procedures, such as primary care physicians, therefore get paid less. This is despite the fact that they often treat patients with complicated illnesses or conditions that should require more of their time to allow them to ensure that all the conditions are being adequately treated. Physicians are rarely paid for handling issues over the phone, reviewing test results, or filling out paperwork, all of which can be time-consuming. Thus, the only way for them to keep up with decreased payments and increased costs is to see more patients. Since there are only so many hours in a day, they must spend less time with each patient.

Why are physicians complaining about cuts in payments? Don’t doctors make enough money? Many people do not realize the expense required to become a physician. To become a physician, one must normally complete a 4-year degree or Bachelor’s degree. The specific classes required are more rigorous than those required for most other degrees and the students must perform at the top of their class to even have a chance of being considered for medical school. The average debt for those who go to medical school is $67,000. Once graduating from medical school, however, most physicians must complete a minimum of 3 years residency training before they complete the education required to practice unsupervised medicine, but many specialties require more. The current median salary for a resident is $50,000, but many work up to 80 hours a week. Most physicians, therefore, are at least 29 years old when they start earning higher salaries, but many are in their early 30s. Compare this to 22-26 year olds for most other careers. Even after training, most physicians still work more than 40 hours per week due to weekend shifts and night call. As your copayment and deductibles increase, you may be under the impression that those increased payments go directly into the physician’s pocket. First, if your physician owns all or part of his/her practice, money brought in must be divided for employee salaries, supplies, rent, utilities, and all of the other expenses that a business incurs. Physicians who are employed usually make a salary, although some may



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Round-up August 2016

Medicare changed how payments to physicians were determined and managed care took a much stronger foothold. Medicare and insurances determined what would be paid for physician visits and those payments decreased. Costs to pay staff, buy supplies, rent space, and for utilities, however, have not decreased. receive a bonus for meeting certain targets. The business or hospital that employs them also has expenses. In some cases, they perform a much higher number of procedures, which brings in more total revenue for the hospitals. Some hospitals are “for-profit” facilities, and most private “non-profit” facilities perform quite well financially. The "non-profit" facilities have the added advantage of not being required to pay local property and federal income taxes. Many hospital CEOs make over a million dollars per year. For examples of payments to hospital CEOs, visit: http:// khn.org/news/hospital-ceo-compensation-chart/. CEOs of health insurance companies make even more than that. To learn more, visit: https://www.publicintegrity.org/ 2014/06/09/14912/skyrocketing-salaries-health-insurance-ceos. These CEOs make at least 10 times what the physician treating you makes.

Why aren’t physicians protesting the changes that negatively impact their ability to provide care? Most physicians chose their profession because they wanted to make a positive difference in people’s lives. They often speak to colleagues, friends and family members about their struggles. One area where physicians have admittedly failed is in coming together as a collective force to successfully fight the changes made by the government, legislatures, insurance companies, the impact of the malpractice lawsuits, and all of the other entities that have led medicine to where it is today.

Some may recall that insurances attempted to “gag” physicians from discussing the negative effects of insurance decisions on the healthcare to their patients in the 1990’s. Many of those controlling the business of healthcare have money and influence to lobby legislatures and influence information released by the media. Physicians are spending the bulk of their time trying to care for patients and, as discussed above, this is becoming more difficult and time consuming. Many physicians feel overworked and burnout is not uncommon. They have resigned themselves to working in this current system or are looking at career options outside of patient care. Older physicians are opting to retire earlier than they might have otherwise. For many physicians, it can feel like David versus Goliath trying to fight all of these political entities and their PR machines. Unfortunately, all of the above mentioned factors are having an impact on your healthcare, but further changes with potential negative impacts continue to be proposed. The concern is that, as things continue to decline, fewer of the best and brightest will continue to choose a career in medicine. Newer physicians are being trained under the current system and, as a result, may have a different view towards patient care. Some may say that physicians don’t have it any harder than those who pursue other careers, but it is important to remember that these are the people who will be taking care of you and your loved ones when you get sick.

So what can I do? One reason that so many changes have occurred to lead us to where we are today is that the American public is unaware of the forces behind these changes. It is not entirely their fault. A lot of money is spent by those who are the true profiteers in healthcare to create PR campaigns to mislead the public. Until the public becomes aware and informed and speaks out, this will only continue. It is concerning to think about how much worse things could be before the majority of the public is aware. Will it be too late by then? What you can do is inform yourself about the issues raised here and encourage your friends and family to do the same. Then, speak out. Contact your legislators. Spread the word. Do whatever needs to be done so that our healthcare system can change for the better.

MIRIAM ANAND, MD Dr. Miriam Anand, MD, is an allergy specialist practicing in Tempe. She was the Society’s 120th president, and has been a MCMS member since 1998.




The Cadillac Tax: What You Need To know BY DOMINIQUE PERKINS


ntroduced in 2009, the Patient Protection and Affordable Care Act has certainly stirred the waters of healthcare, and members of all parties are still taking sides as the plan (and its various pieces) moves forward. At its core, the ACA has a few basic and noble goals:


Improve healthcare and overall patient safety.

Improve overall health of vulnerable populations by ensuring access to quality, culturally competent care, including necessary log-term services and supports.

Improve overall public health through emphasis on preventative care

Improve both general healthcare quality and overall population health through “meaningful use” of health information technology.


Round-up August 2016

Dramatically increase the percentage of the population with health coverage by ensuring affordable, competitive coverage options.

Reduce the continuing growth of healthcare costs, while still maintaining effective, high-quality care.

A big part of the 2010 health laws that aims to achieve a few of these goals is commonly known as the Cadillac Tax. This tax aims to reduce healthcare costs and increase access, but economists and the rest of the population are at odds over the plan’s ability to deliver. With the debate moving into a new presidential field, we’ve gathered the answers to a few top questions about the tax, and encourage you to follow the discussion and make your voice heard.

First, what is it? The Cadillac Tax is the plan to tax all high-cost health

benefit plans provided by employers for their employees. Originally set to begin in 2018, a 40% tax will be imposed on health plans whose value is more than $10,200 coverage for an individual, and more than $27,500 for family coverage. For example, this would mean that an employer in 2018 paying $10,200 in individual coverage fees would pay those fees directly to the insurer. However, if the plan were set to $11,000 per individual, the employer would pay a 40% levy on any spending that exceeds the set threshold. So, in the case of this example, if they were paying $11,000, that is $800 more than the threshold, and they would pay an additional $320 in taxes. The program’s affect will no doubt discourage companies from offering these high-cost plans to their employers, as they strive to stay below that taxable threshold.

Alright, and why is it named after a car? Far from having anything to do with cars, the Cadillac Tax pulls its name from the very insurance plans it is aiming to curtail. Dating back into the 70s, the Cadillac automobile as a luxury symbol snuck into healthcare vernacular, and by the 90s, unusually expensive health insurance plans (especially those provided and paid for by employers) were referred to as “Cadillac Plans.”

Why would this tax be a good idea? The Cadillac Tax flies in the face of existing and long-standing tax procedures. Previously, accepted tax law dictates that employer-sponsored health insurance doesn’t count as taxable income. This encourages companies to do their spending in tax-free benefits, instead of wages which are taxable. Economists argue that the Cadillac Tax will encourage companies to spend more efficiently, and increase take-home pay over time, while also constraining healthcare costs. The tax also aims to encourage both employers and plan sponsors to offer lower cost plans, while also cutting down on overutilization of medical care. Thereby forwarding the overall ACA goal of increased coverage access and lower general costs. In further support of that goal, revenue from the collected tax fees are intended to help fund the uninsured medical expense.

Now can we talk about the flip side? While the goal of lowering healthcare costs is certainly one most patients can get behind, one inevitable result is the likelihood that employees will simply be on the hook for more of those costs. Employers are saying the tax will force them to scale back offering benefits to their employees, or drop them entirely. When it comes time for benefit enrollment, many employees could be looking at fewer plans to choose from, and higher costs in the form of deductibles and co-pays.

So who will this tax effect?

that it will affect primarily CEOs, top executives, and unions with top-spot benefits, this is not necessarily the case. The tax is set to affect just about everyone in the long run. Because companies naturally want to avoid the tax they are beginning to scale back on their benefit plans. It is predicted that the number of companies impacted by the tax will grow over time, due to the way the tax is indexed to inflation. According to a survey released by The International Foundation of Employee Benefit Plans, 60% of employers in 2018 would trigger the Cadillac Tax unless changes are made, and it is predicted that that number will rise over the next 10 years. There are also a myriad of factors that could place companies’ spending near the threshold, including high-cost geographical areas or an older employee population.

I hear members of Congress are wanting to repeal or delay the tax. You heard right. Push back from companies and unions have led congress members of both parties to seek a repeal or curb of the tax. While the tax is set to be a large revenue-generator for the government, they’re not buying the argument that companies will chose to instead spend their money on higher wages, and they even doubt the amount of revenue that will be generated, since it seems logical that most, if not all, employers will cut back on benefits to avoid paying the tax.

How likely is it that the tax will ever really take effect? At this point? Less and less. Lawmakers have voted to delay the tax by two years, so that it will not take effect until 2020. However, on top of that, both the House and the Senate have shown a significant majority in support of eliminating the tax entirely. The delay puts the tax squarely in a new administration’s court, but it is less than likely that opinions will swing around to its favor.

DOMINIQUE PERKINS Dominique joined Maricopa County Medical Society’s staff in 2014, and is currently serving as the Communications Coordinator. She has a bachelor’s degree in Communications and Journalism, and over 6 years’ experience as a writer, editor, and social media strategist. Dominique also enjoys helping with Society events. Be sure to look for her the next time you attend! Dominique can be reached at dperkins@mcmsonline.com.

While the name of the tax has led to the impression mcmsonline.com/round-up




5 Things to Know in the Arizona Marketplace BY KEN ALLTUCKER


etna this week became the latest insurer to pull out of the Affordable Care Act marketplace in Arizona.

Aetna joins UnitedHealthcare, Health Choice Insurance Co. and Humana as insurers that will not offer Obamacare health-insurance plans next year in Arizona. Health Net, meanwhile, will scale back to offer an Obamacare health-insurance plan only in Pima County. These insurer exits will limit options for consumers enrolled in an ACA marketplace plan.

What happens in Pinal County? A total of 9,667 Pinal County residents had selected a marketplace plan as of Feb. 1, and those customers who wish to continue subsidized coverage beyond Jan. 1 have no current options. That would change if another insurer commits to Pinal. Right now, there are no health-insurance companies com18


Round-up August 2016

mitted to selling marketplace plans in Pinal County. Aetna had planned to sell plans in Maricopa County and Pinal County, but the insurer reversed course and pulled out of Arizona’s marketplace. Obama Administration officials say they are confident a marketplace option will emerge by the time the three-month enrollment period begins Nov. 1. Blue Cross Blue Shield of Arizona, which earlier announced plans to drop out of Maricopa and Pinal counties, said it would reconsider in the wake of Aetna’s decision.

What options will Maricopa County residents have?

Maricopa County residents enrolling in coverage through ACA had eight insurance companies to choose from this year. There will be far fewer options in 2017. Only two insurance companies — Cigna and Phoenix Health Plans — are now poised to offer a marketplace plan. That means customers now insured by other companies through ACA will have to change carriers.

Customers might also pay more because Cigna and Phoenix Health Plans are seeking significant rate increases. Phoenix Health Plans wants to raise average rates by 122.8 percent. Cigna has requested an average increase of 19.2 percent. The Arizona Department of Insurance is still reviewing those rates request, so it does not mean those full rate requests will be approved. The vast majority of marketplace customers qualify for tax-credit and cost-sharing subsidies, so those consumers might not see much of an increase. Other “off-exchange” plans that do not offer financial subsidies should be available to consumers. Although Aetna will exit the marketplace, it intends to sell an off-exchange plan in Maricopa County.

I’m enrolled in an Aetna marketplace plan. How does that affect me? If you continue to pay your monthly premium, you can keep your coverage through the end of this year. However, you will need to find a new plan for 2017. The three-month enrollment period begins Nov. 1.

I don’t have an Obamacare plan. Do I need to worry? The marketplace exits do not affect most Arizonans who get insurance through an employer or a government insurer such as Medicare, Medicaid or the U.S. Department of Veterans Affairs. Employers have their own enrollment periods that allow workers to select an

insurance plan. Also, consumers who have a Medicare plan can review their coverage through Medicare’s open enrollment, which runs from Oct. 15 through Dec. 7.

How many people are covered by the ACA? As of March 31, nearly 180,000 Arizonans were enrolled in an ACA marketplace plan. The vast majority of those consumers receive subsidies to offset the cost of monthly premiums. But consumers who want to keep their subsidized coverage in 2017 will have far fewer options. The health-care law also provided funding to allow states to expand Medicaid coverage for those who earn up to 138 percent of the federal poverty level — or about $33,500 for a family of four. More than 390,000 Arizona residents secured Medicaid coverage as of this month, according to Arizona Health Care Cost Containment System figures.

KEN ALLTUCKER Ken Alltucker is a Watchdog News reporter who covers everything about health care from a consumer’s perspective — doctors, hospitals, insurance, policy, prescription drugs and those seemingly ever-increasing bills. He helps consumers navigate the complex world of health care and serves as a watchdog of government-funded health care. © 2016 Distributed with permission from The Arizona Republic | www.azcentral.com.

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What Insurers Leaving Obamacare Exchange Means For Physicians BY KEITH LORIA


According to the Congressional Budget Office only about 10 million of the expected 21 million people have enrolled.

That decision, as well as other insurers leaving some markets has sounded some alarm bells, particularly among opponents of the ACA.

What does this mean for physicians?

ecent analysis by the consulting firm McKinsey & Co. reveals that many insurers are losing money in ACA individual markets, with aggregate year over year losses more than doubling, and with posttax margins between –9% and –12%. Losses like these resulted in UnitedHealth Group leaving the California ACA market after only one year.

Health policy expert Joel White, president of the Council for Affordable Health Coverage, notes this is a phenomenon happening all over the country because not enough people are signing up and insurers are losing money. 20


Round-up August 2016

“The risk pools are older and less healthy. And automatic stabilization programs are ending in 2017. The combination means rates must go higher, which discourages more enrollment, which makes the market worse,” says White.

Adam C. Powell, Ph.D., president of Payer+Provider Syndicate, a management advisory and operational consulting firm focused on the managed care and healthcare delivery industries, notes that physicians who had contracts with insurers that departed the ex-

multiple insurer networks, they have more bargaining power and can negotiate more favorable rates. But with fewer insurers in the market, remaining insurers have more leverage (through less competition) and can try to force a doctor to lower their prices — requiring doctors to replace that revenue by taking on more patients to compensate for the lower rates of reimbursement.

changes but not with other insurers may lose patients. Conversely, physicians with contracts with the remaining health plans may gain from the exodus. According to the Kaiser Family Foundation, residents of 650 counties will be limited to just one health insurance company in the healthcare marketplaces next year. This significantly and negatively impacts consumers because lack of choice means no competition and thus no incentive to hold down prices.

Physicians want to focus on providing care, but as long as they’re dealing with looming legislative complexities, that focus may remain hazy.

Therefore, in order to control costs, carriers that remain on the exchanges will have to limit their network access and try to reduce payments to providers—both of which will clearly put a strain on physicians and prompt more to drop out of these networks.

Susan Nedza, MD, senior vice president of clinical outcomes at MPA Healthcare Solutions in Chicago, notes physicians and their patients are affected by all of this in three significant ways.

White says that Congress needs to stabilize the market by reforming the Affordable Care Act and having the first generation of exchanges create a simple and easy enrollment process. There’s also a need for more flexibility in what plans offer and expanded employer coverage via new options like health reimbursement accounts and expanded HSAs.

“It affects patients who will find themselves switching insurance once again. The administrative burden associated with switching is challenging for patients or their doctors,” she says. “There is a high probability that insurers will continue to offer plans with high deductibles and a narrow network of providers. Patients may forgo needed treatment due to co-insurance costs.”

Rick Bates, CEO & co-founder of SingleCare, an online retail marketplace for healthcare services, notes physicians can continue to focus on providing optimal care to their patients, but might find they are spending more time dealing with administrative issues.

Doctors need to prepare for increasing pressure to sign in-network contracts that impact their fees this year and in 2017, Nedza adds. “Health insurers drive profitability through aggressive provider contracts and utilization management,” she says. “Thus they may find additional pre-authorization burdens for specialty pharmacy, imaging and oncology services put in place.”

Any more problems physicians should know about? In general, many lower-tier ACA plans have high deductibles, meaning patients pay more out of pocket and it creates additional paperwork and administrative headaches for physicians, taking their attention away from providing quality care.

KEITH LORIA Keith Loria is a contributing writer for Medical Economics.

One big concern is how this will affect a provider’s ability to get the best reimbursement rates for his or her practice. Bates explains that when providers can work with

© 2016. Distributed with permission from Medical Economics. medicaleconomics.modernmedicine.com

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Round-up August 2016


How Do You See It? A Q&A with

Stephen P. Herman, M.D.



he Affordable Care Act (or, as it has become known, Obamacare) has seeped into every corner of the medical community. Opinions and experiences differ widely with each physician, and even among patients. However, it seems all have experienced at least a level of frustration as insurance payers back out of the program, and narrow networks derail many established doctor patient relationships. Now more than ever we seem to see the creation of an “us vs them” scenario, where the “them” are insurance payers, and the rest of “us” are running around to a new set of rules. Or multiple sets! Despite frustrations, it is certainly true that there have been some benefits,

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and that the program may be a step in the right direction, even if it is not a final destination. Perhaps one of the areas to benefit the most is the field of mental health. Building on the Mental Health Parity and Addiction Equity Act of 2008, the ACA has expanded coverage of behavioral health care. This wide-scale recognition that mental health and addiction treatment are essential health benefits is a significant turning point for our communities. This month Round-up took the opportunity to sit down with someone with a unique perspective on how our society has progressed in recognizing and treating behavioral health. Stephen Herman, MD, a recent (and welcome) addition to our desert state, has served for many years as both a clinical and forensic psychiatrist. We’ll let you tell his story in his own words.

Did you start out knowing you wanted to pursue medicine? I received a BA cum laude from Brandeis University in 1968. It was the year of assassinations and Vietnam – a frightening year for all male graduates. During college, after three different majors, I settled on psychology. However, towards the end of my junior year, I decided to be pre-med (with no pre-med courses!) to become a psychiatrist.



Round-up August 2016

During that summer, I took inorganic chemistry at Harvard Summer School. In my senior year, I took calculus, physics, and biology, and the summer after graduation, I suffered through organic chemistry (every pre-med’s horror course) at Boston University Summer School. Because I was applying to medical school a year behind my class, I became a VISTA (Volunteer In Service To America) in West Virginia, bringing diversity to sports and educational programs in Wheeling and setting up a medical clinical at Wheeling Hospital for people who did not qualify for state and federal funds for their medical care, but could not afford it on their income. The next year I was accepted at Penn State’s new medical school, The Milton S. Hershey School of Medicine, in Hershey. Once there, influenced by a superb pediatrics faculty and the exciting new field of neonatology, I decided to become a pediatrician. My pediatric internship was at the West Virginia School of Medicine in Morgantown, and for the rest of my residency, I spent two years at the Mayo Clinic, in Rochester, Minnesota.

How did you discover forensic psychiatry? After residency, I then went back to Pennsylvania to practice pediatrics. I was frustrated being so busy and hardly had time to talk to parents and children. Back in my hometown of New York City, I worked at Pfizer in New Drug Development, but after a year realized this


work was not for me. I missed clinical medicine. That old longing for psychiatry – specifically child and adolescent psychiatry - led me back into a second residency. I studied adult psychiatry at the Montefiore Medical Center in the Bronx, New York and then served a two-year fellowship in child and adolescent psychiatry at the Yale Child Study Center, in New Haven. During my time at Yale, I was introduced to forensic psychiatry by Albert Solnit, M.D. the Director of the Center and Diane Schetky, M.D. my psychotherapy supervisor and a pioneer in forensic child psychiatry. She became my mentor throughout my career and I am indebted to her forever. I have practiced clinical and forensic psychiatry in Manhattan since 1982 to date (including being on the teaching faculty at New York-Presbyterian Medical Center). I have always loved teaching and have had many opportunities at medical centers throughout New York City. I have also practiced in Connecticut, where I have lived for over 25 years. In 1999, I became Board-Certified in forensic psychiatry, a sub-specialty of the American Board of Psychiatry and Neurology. I was re-certified in 2002.

With such strong East Coast roots, what led you to Arizona? I’m a native New Yorker but not so myopic that I’ve failed to appreciate other parts of this country. As part of my medical school experience, for example, I had externships in Topeka, Kansas (the Menninger Clinic), and Rochester, Minnesota (the Mayo Clinic). I also served an externship in neonatology at Hebrew University School of Medicine, in Jerusalem. But if you asked me a decade ago whether I had ever considered living and practicing in Arizona, I would have said . . . uh . . . no . . . Then I met Carol, and suddenly my world tilted southwest. I was called to Tucson to consult with two attorneys in a very complicated case involving an adolescent. The attorneys were Gregg Woodnick, of Phoenix and Carol Soderquist, who practices guardian/conservatorship law and some family law throughout Maricopa County. After three days of intensive work, I was finished with my part. But it was hard to say good-bye. When I hugged them both, I had already become smitten with Carol. Back home, I applied for an Arizona medical license and did not tell Carol at first. Soon began what turned out to be a nineyear long-distance relationship. From the moment I met this beautiful and bril-

Some see it as a threat to their traditional independence, their finances, and relationships with patients. Other doctors see the ACA as an imperfect but much needed answer to providing health care for the millions of Americans who were not insured. liant woman and lawyer, with a heart as big as the Canyon, and her warm, welcoming and loving family, I knew they would be my future. Love didn’t just call me to Arizona, it bellowed. Carol and I married on Feb. 27, 2016 and guess who officiated: Gregg Woodnick, Esq. We had all come full circle in the most perfect way. So now I am a newbie Arizonian, building my practice in forensic child and adult psychiatry. Oh, Carol and I will visit New York City often, but I have become a member and supporter of the Scottsdale Center for the Performing Arts, and we have been to the Musical Instrument Museum countless times. I have often visited the Arboretum and visited many parts of the state. In fact, my national forensic organization, the American Academy of Psychiatry and the Law, had its annual meeting in Tucson last year. My home now, is Chandler, Arizona. While most of my dear high school friends have retired, I’m revving up. I am limiting my psychiatric practice to forensics in all of its iterations, complexities and challenges. I hope to teach in the child psychiatry division at Banner, the main hospital of the University of Arizona School of Medicine – Phoenix.

Let’s talk about the Affordable Care Act. How do you see it? MDs are mixed in their reaction to the Affordable Care Act. Some see it as a threat to their traditional independence, their finances, and relationships with patients. Other doctors see mcmsonline.com/round-up



There is a misconception by many in this country that the mentally ill are prone to commit violent acts, when, in fact, most are suffering, frightened, and harmless to others. the ACA as an imperfect but much needed answer to providing health care for the millions of Americans who were not insured. ALL are frustrated and angry that so many state exchanges and private insurers are now raising their rates. As a forensic psychiatrist, I have not been impacted by the ACA. However, the children and adults I see in my work surely feel its breadth - both the positives and negatives. I frequently offer my fees on a sliding scale for people of limited means.

Coming from your particular specialty, what do you see as the advantages of the ACA? The ACA provides much in the way of mental health care, requiring most individual and small employer health insurance plans, as well as the marketplace exchanges, to provide mental health and substance abuse coverage, preventative assessments for adults and children, and rehabilitative services. There are many more services and requirements regarding mental health care. The ACA also expanded the scope of the 2008 Mental Health Parity and Addiction Equity Act. I know there is a scarcity of psychiatrists – especially in rural areas, where there is one psychiatrist for every 30,000 people. Arizona has been applauded for having a comprehensive Medicaid program covering a wide variety of mental illnesses and drug abuse. Not so with those who don’t qualify. Although the State increased services to this population in 2014, many people with lesser symptoms receive no comprehensive care. However, I have met many dedicated professionals who give their heart and soul to treating and caring for the mentally ill. Still, this state – and so many others – has a long way to go.

In the past few years the topic of mental illness has moved more to the forefront of our communities. What trends have you noticed? There is a misconception by many in this country that the mentally ill are prone to commit violent acts, when, in fact, most are suffering, frightened, and harmless to others. Certainly, from Columbine to San Bernardino, 26


Round-up August 2016

from Sandy Hook to Tucson, from military bases, to Orlando, mentally ill killers have been the perpetrators. The position of many of our leaders and the NRA, however, is that it’s not more gun control that is needed; instead, they say, it’s the mentally ill who need better treatment. This is an attempt to sound humanitarian when, in fact, they are dead wrong. It is the lack of intelligent and comprehensive gun control that accounts for the mass murders we endure every few months. Every year, over 30,000 women, men and children die from guns. Gun control advocacy groups and professional organizations include: the American Hunters and Shooters Association, American State legislators for Gun Violence Protection, the Brady Campaign, the Coalition to Stop Gun Violence, Everytown for Gun Safety, the American Psychiatric Association, the American Academy of Child and Adolescent Psychiatry, the American Psychological Association, the American Nurses Assocation, the American Medical Association and many others. Drug abuse is rampant in our country, fostered by infamous cartels, unscrupulous doctors running opiate mills, teens and adults seeking a thrill and wanting to make some quick cash, and well-meaning physicians who prescribe opiates appropriately and in limited amounts, but some of whose patients become addicted. Even a few pharmaceutical companies must take the blame. For example, when OxyContin was approved by the FDA in 1995, its time-release properties were thought to prevent euphoric effects and abuse. The original doses were 20, 20 and 40 mg. In 1996 an 80 mg tablet was approved and in 2000, a 160 mg dose was approved. After the realization that this drug was highly addictive, the FDA made some changes in labeling. In 2010 it approved a new formula for the drug to prevent crushing it into a powder and dissolving it, chewing or breaking it. Nevertheless, the use and abuse of this drug, and its relatives, have created a national crisis.

DOMINIQUE PERKINS Dominique joined Maricopa County Medical Society’s staff in 2014, and is currently serving as the Communications Coordinator. She has a bachelor’s degree in Communications and Journalism, and over 6 years’ experience as a writer, editor, and social media strategist. Dominique also enjoys helping with Society events. Be sure to look for her the next time you attend! Dominique can be reached at dperkins@mcmsonline.com.


Dr. Herman | On the Personal Side Describe yourself in one word.

Best movie seen in ten years?

What is your favorite food, and favorite restaurant in the Valley?

Favorite activity outside of medicine?


Favorite food: Italian; Favorite restaurant: Café Monarch

What career would you be doing if you weren’t a physician? Folk music radio personality

What is a hidden talent you have that most would not know about?

The Departed

Playing and hanging out with grandsons


Wife: Carol Soderquist; daughters: Katie Loughlin and Kai Strogen; Son-in-law: Kevin Strogen; pride-and-joy grandsons: Owen and Ayden Strogen — and a large, loving and warm extended family.

Playing guitar and folk-singing




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Round-up August 2016

As Insurers Leave Obamacare Exchanges, Doctors Pay The Price BY SALLY C. PIPES

ajor insurers are no longer sure if they can afford to participate in the Affordable Care Act’s (Obamacare) insurance exchanges. That’s making the White House nervous.


The administration’s charm offensive is likely the result of announcements by UnitedHealth, Aetna, Cigna, several Blue Cross Blue Shield affiliates and Humana that they’d consider quitting the exchanges next year.

In late March, the Obama administration met with insurance industry representatives in what was officially billed as an effort to fix Obamacare’s “risk adjustment” program, which is supposed to compensate insurers who take heavy losses by covering higher-risk patients.

The exit of those carriers would be bad for consumers and doctors. But even if the administration manages to keep them in the fold, Obamacare is reshaping the healthcare landscape in other ways that undermine the interests of America’s physicians. mcmsonline.com/round-up



This year, just a third of those Silver PPO plans remained available. The rest were either discontinued, or the insurer who previously offered them otherwise reduced the number of plans it offered or sold plans in fewer areas. In 22 states, none of the PPO plans that were available in 2015 stayed the same in 2016. Insurers have lost a lot of money on the exchanges. UnitedHealth pegged its loss at more than $720 million last year. It’s going to exit the markets in Michigan, Georgia and Arkansas, effective next year. Anthem said that losses on Obamacare plans caused its profits to fall 64% in the last quarter of 2015. Blue Cross Blue Shield plans haven’t fared much better. Fitch Ratings found that 23 of 35 BCBS companies reported $1.9 billion in lost earnings. Sixteen had a net loss. Health Care Service Corp., which owns Blue Cross affiliates in Illinois and four other states, lost $1.5 billion on its individual insurance business in 2015—nearly twice as much as the $767 million it lost in 2014. Meanwhile, 12 of the 23 non-profit insurance Consumer Operated and Oriented Plans (Co-Ops) started by Obamacare have failed. That’s forced hundreds of thousands of people to secure coverage elsewhere. Eight of the 11 remaining are under “enhanced oversight” or undergoing federally-mandated “corrective action plans.” Should they fail also, consumers will have even fewer insurance choices. The acting administrator of the Centers for Medicare & Medicaid Services, Andy Slavitt, said in late February that he supported loosening capital rules to allow private insurers to become part owners of Co-Ops that have survived. But who would want to invest in a venture that appears doomed to fail? 30


Round-up August 2016

Payer landscape changing Even if insurers weren’t failing or quitting the market, Obamacare’s exchanges would still have the effect of reducing competition. That’s because the industry is rapidly consolidating in order to cope with Obamacare’s heavy regulatory burden. Aetna and Humana agreed on a $37 billion merger last July. Within a month of that announcement, Anthem and Cigna announced a $54 billion deal. If both mergers go through, the nation’s big five insurance companies will be whittled down to three. Meanwhile, in California, the state’s Department of Insurance recently approved Centene’s purchase of HealthNet. Merger mania will further concentrate what is already a highly concentrated market. Between 2006 and 2014, the market share of the four largest insurers increased from 74% to 83%. An analysis by the American Enterprise Institute found that there’s been zero growth in the number of health plans in the commercial market since 2008. In testimony before Congress, the report’s author, Scott Gottlieb, MD, a practicing physician, said that Obamacare “has made it more difficult for new health plans to get started.” Further limiting choice is the shift among exchange plans toward HMOs. In the 1990s, the American people rejected HMOs, which generally restricted them to a limited provider network. As a result, many disappeared. And PPOs became the norm. But last year, 43% of mid-level Silver plans available on the ACA exchanges were HMOs, according to an analysis by the Robert Wood Johnson Foundation. Thirty-nine percent were PPOs. This year, just a third of those Silver PPO plans remained available. The rest were either discontinued, or the insurer who previously offered them otherwise reduced the number of plans it offered or sold plans in fewer areas. In 22 states, none of the PPO plans that were available in 2015 stayed the same in 2016. Gottlieb says that this movement toward greater concentration in the industry and greater reliance on HMOs is by design. Obamacare, he told the House Judiciary Committee last fall, is “nothing short of a wholesale embrace of the capitated arrangements and the concept of shifting financial risk onto providers.”

Cutting competition hurts physicians Less competition in the insurance market harms not just consumers but doctors, too. Mammoth insurers, for instance, could dictate lower reimbursement rates for doctors. Those that refuse could lose out on the chance to treat a substantial population of patients. As the American College of Physicians noted in a letter to the U.S. Department of Justice (DOJ), “Insurance consolidation would harm the process of negotiation as

through,” she said.

Merger mania will further concentrate what is already a highly concentrated market. Between 2006 and 2014, the market share of the four largest insurers increased from 74% to 83%.

In other words, insurers tend to dictate lower payment rates to doctors—and keep all the savings for themselves. The DOJ has blocked previous health plan mergers because of the harm they’d cause physician practices. In the case of a proposed merger in Michigan, the DOJ said that it “would have given Blue Cross Michigan the ability to control physician payment rates in a manner that could harm the quality of healthcare delivered to consumers.” Likewise, the Pennsylvania Insurance Department found that a proposed merger in the Quaker State would’ve “reduced provider reimbursements below competitive levels.”

physicians could be forced to accept anti-competitive reimbursement.” A 2012 study published in the American Economic Review looked at the Aetna-Prudential merger and found reductions in healthcare employment and wages in areas where the 1999 merger had the most impact on competition. Northwestern University professor Leemore Dafny, PhD, told Congress last fall, “insurance consolidation will tend to lead to lower payments to healthcare providers.” That’s obviously bad for doctors and hospitals. But shouldn’t lower prices at the hospital be good for consumers? Only if those lower prices “are ultimately passed through to consumers in the form of lower insurance premiums (and/or out-of- pocket charges),” Dafny testified. And there’s a “lack of evidence for this pass-

The net effect for doctors of all these changes driven largely by Obamacare is that insurers and hospitals will continue to exert greater control over the practice of medicine. Doctors will have less autonomy and face the prospect of lower reimbursement rates. This trend won’t change unless Obamacare is dismantled and replaced with a reform package that increases competition in the healthcare marketplace.

SALLY C. PIPES Sally C. Pipes is president, chief executive officer and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is The Way Out of Obamacare (Encounter 2016).

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The Illicit Perks of the MD Club BY VATSAL G. THAKKAR


ne of my patients recently had her request for a relatively common medication for attention-deficit hyperactivity disorder, Vyvanse, denied by her insurance provider. I tried to appeal the decision, but her father — the chief executive of a health care company who purchased insurance for hundreds of employees — had better luck. He called up the head of the insurance company and got the drug approved. Last year, my 5-year-old fractured her ankle. The bill for the 12-minute orthopedist’s appointment was $1,125, and about half of it was covered by insurance. I wrote the doctor a letter — please revise this bill, as it is clearly erroneous — and included my “M.D.” Instead, the doctor left me a message saying he was waiving the bill entirely as a professional courtesy. Stories like these reveal an uncomfortable truth. Our health insurance system is so broken that pulling strings — or rank — is sometimes the only way to get



Round-up August 2016

the coverage you think you’ve paid for. Since 2010, when the Affordable Care Act was passed, the major insurance companies have seen their stock prices soar. Though the act expanded coverage to millions, a report last year by the Robert Wood Johnson Foundation revealed that 41 percent of health plans sold on the government exchanges had physician networks described as “small” or “extra-small,” covering less than 25 percent and 10 percent of local doctors, respectively. Individuals may have to change doctors or choose out-of-network services, incurring extra costs. Wendell Potter, a former Cigna executive turned whistle-blower and a co-author of the recent book “Nation on the Take,” says that “insurance companies profit by introducing hurdles in the coverage and claims process.” These hurdles lead some patients to simply give up and pay or forgo treatment altogether. He calls this the companies’ business model.

Nepotism occurs in many fields; friends and family of New York City police officers often carry Patrolmen’s Benevolent Association cards, which may confer special treatment in a traffic stop. It’s human nature for a group to look out for its own (especially groups like physicians that originally consisted only of white men). Bonds forged in sleep-deprived situations involving life and death create a special kinship. This strategy has given rise to a new business. After his son was born with cerebral palsy, Scott Leshin, then an associate at Goldman Sachs, made it his business to read the fine print of his health insurance policy so he could fight for the services his son needed. His son started walking only this year, at age 10. And yet, “I still have to prove to UnitedHealthcare that he has CP every six months,” Leshin told me. His success in getting services covered led him to found his business, SJ Health Insurance Advocates, which has a staff of 19. He works on a contingency basis — his customers pay only when his team succeeds. But the best way to advocate for yourself is simply to be a doctor. When my son was born eight years ago, a series of errors left my wife unmedicated for 18 hours after a C-section. Furious, I fastened my medical school faculty badge to my collar, hoping to send the message: I’m watching you. We got an apology and a private room.

pensive than smaller ones because they can demand higher payments from insurance companies, which are then passed down to patients. In most realms, those with the least ability to pay should receive the biggest discounts. In health care, it is often the uninsured and indigent who receive bills with the full “chargemaster” fee — the wildly inflated prices that nobody really pays — while large insurance companies get the biggest breaks. And why is it that I can shop for a mechanic in minutes from my phone but doctors’ fees are a mystery? In a battle of dueling bureaucracies, the Supreme Court recently dealt a blow to price transparency in Vermont, where the state wished to publish a database of fees and other information. An insurance company, Liberty Mutual, objected to turning over the data on what it paid doctors and hospitals, and the Supreme Court agreed. The justices argued that, according to the ACA, only the Labor Department, and not individual states, had the right to collect this data. The ruling affects almost a dozen states that are pursuing similar initiatives. Finally, our insurance system drives up costs for everyone. Between 1998 and 2015, the cost of cosmetic surgery for top procedures, which is paid by the consumer and not covered by insurance, rose at about half the rate of inflation, while overall health care rose at around double the rate of inflation — more than a threefold difference. It’s no surprise that people with connections, like the chief executive, resort to any means they can to navigate this system. It’s more worrisome when doctors do the same. As a medical student I would never have dreamed of accepting special favors just because I was part of the exclusive M.D. club. When I was living in New York City, friends encouraged me to obtain the prestigious “M.D.” license plates, which came with special parking privileges — quite a perk in Manhattan. But I was never on call at a hospital that required expedient parking, so I didn’t get the plates. This didn’t stop many others, however. Nepotism occurs in many fields; friends and family of New York City police officers often carry Patrolmen’s Benevolent Association cards, which may confer special treatment in a traffic stop. It’s human nature for a group to look out for its own (especially groups like physicians that originally consisted only of white men). Bonds forged in sleep-deprived situations involving life and death create a special kinship. Physicians originally provided free care to their own to keep doctors from trying to treat themselves, but the tradition is also an acknowledgment of mutual respect.

These workarounds are necessary because the health care system doesn’t follow any rational rules of economics, where the customer should be king.

But when everyone is feeling the pain of decreased access and increased costs, physicians currying favors will only foster resentment. Shouldn’t we be advocating for reform, rather than finding our own shortcuts?

Economies of scale are supposed to bring costs down. But in health care, large hospitals are often more ex-

Talk is cheap. Last year, another instance of M.D. favoritism was presented to me in a time of need, and I mcmsonline.com/round-up



grabbed it without flinching. I had a herniated lumbar disk, and was in pain for weeks on end. Finally, my orthopedist suggested an MRI. The day before the study, the radiology office said that my insurer, Aetna, had denied the test and I would have to pay $1,000. In pain, I told them that I would keep my appointment. The next morning, I called Aetna.

The call was scheduled with a radiologist, whose number came up with a Nashville, Tennessee, area code. The icebreaker was easy: I trained at Vanderbilt, I told him. “How’s Nashville these days? Isn’t real estate booming?” Then he got down to business: “OK, tell me about this patient. I mean, about you ...” I went through my clinical history. Less than three minutes later, he approved my MRI.

I was patched through to a third party, Evicore, which evaluates requests for imaging. (This company is basically one of the hurdles described by Potter, intended to reduce costs for the insurer.) I was told the test had been denied because I had not yet had six weeks of unrelenting symptoms. This was not true — I had been counting the days, and it had been 6 1/2 long weeks.

Was this wrong? I told myself I was using my status to fight a small injustice, not to get special treatment — though in our faulty system the two are often inseparable.

“I’m sorry, sir, but the only way to reverse the denial is for your doctor to call our doctor.” Indignant, I declared myself a physician and said that my pain was interfering with my ability to see patients.

Welcome to American health care, I thought. I’d succeeded in persuading my insurance company to cover the procedure — but I still had to pay for it.

The representative asked what type of physician I was. “A psychiatrist,” I replied.

Aetna, however, got the last laugh. The $1,000 MRI was discounted to $525, which was within my “imaging” deductible, making my Gold plan feel more like a Bronze.

VATSAL G. THAKKAR Vatsal G. Thakkar is a clinical assistant professor of psychiatry at the NYU School of Medicine.

Was I licensed?

© 2016 New York Times. Distributed by the New York Time Syndicate.

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Round-up August 2016

How Not To Cut Health Care Costs BY ROBERT S. KAPLAN AND DEREK A. HAAS


ealth care providers in the United States and much of the rest of the world are trying to respond to the tremendous pressure to reduce costs. Many of their attempts, however, are counterproductive, ultimately leading to higher costs and sometimes lower-quality care. Our findings show that to identify cost-cutting opportunities, hospital administrators typically work from the information that is most readily available to and trusted by them — namely, the line-item expense categories on their profit and loss (P&L) statements. Those categories, such as personnel, space, equipment and supplies, are attractive targets: Reducing spending on them appears to generate immediate results. But the reductions are usually made without considering the best mix of resources needed to deliver excellent patient outcomes in an efficient manner. Field research we are conducting with more than 50 health care provider organizations, most U.S.-based, suggests much better ways to reduce costs without jeopardizing care and often while improving outcomes. Let’s examine five common cost-cutting mistakes in detail.

Mistake no. 1: cutting back on support staff The first port of call in a cost-cutting exercise is often the payroll, which accounts for about two-thirds of a typical provider organization’s costs. But disproportionately cutting support staff can be shortsighted when it lowers clinicians’ productivity and raises the cost of treating patients. Our research shows that specialists’ time is often 10 times more costly than their assistants’ time. It makes no sense to have physicians and senior nurses perform tasks that could be done just as well by far less expensive personnel. Indeed, we found that effectively integrating more nurses and physician assistants into patients’ care frees up senior clinicians to work “at the top of their license,” performing tasks that only they can perform, leading to higher-quality care at a much lower cost per patient. Top-down spending mandates are effective mainly in aggravating the margin-versus-mission tension between financial and clinical professionals. Arbitrary constraints or cuts in personnel spending can lead to mcmsonline.com/round-up



long treatment delays, worse care and outcomes and overstressed, frustrated caregivers.

Mistake no. 2: underinvesting in space and equipment Idle space and equipment are much less expensive than idle clinicians and technicians. Yet hospital systems often make poor trade-offs, underinvesting in space and equipment and thereby lowering the productivity of their most expensive resources. A case in point: We’ve learned that some orthopedic surgeons perform seven to 10 joint replacements a day while others do just two or three — even though the duration of the actual procedure does not vary greatly between the two groups. The difference in productivity results from the number of operating rooms available: High-volume surgeons generally have two, while low-volume surgeons have only one and must wait between surgeries for the room to be cleaned and the next patient prepared. Our analysis shows that the cost of a second operating room is far less than the cost of a skilled surgeon and clinical team’s idle time.

Mistake no. 3: focusing narrowly on procurement prices Recognizing the hazards of cuts in personnel, some executives aim their reductions at materials and services from outside suppliers. These items often account for 25% to 30% of total costs, and reducing them lets administrators avoid the potentially demoralizing impact and perhaps difficult union negotiations associated with eliminating personnel. Yet we found enormous variation in organizations’ spending on supplies, owing to variations in the quantity and mix of items clinicians use. For example, in our multisite study of knee replacements, the cost of bone cement varied by more than a factor of 10 (for similar patient populations and outcomes) across institutions. Many hospitals focus too narrowly on negotiating price and fail to examine how individual clinicians actually consume supplies. As a result, they miss potentially large opportunities to lower spending.

Mistake no. 4: maximizing patient throughput It would be absurd to try to increase the productivity of musicians by having them play faster. Yet health care executives force an increase in the number of patients seen by physicians each day by establishing productivity targets that limit office visits to fixed time periods, such as 15 minutes or a half hour. This apparent increase in productivity, however, is not sensitive to the impact of these seemingly arbitrary standards on patient outcomes.

IDEA IN BRIEF + The Problem Field research with more than 50 health care provider organizations, most based in the United States, suggests that many cost-cutting initiatives actually lead to higher costs and lower-quality care. + Why It Happens Administrators typically look to reduce line-item expenses and increase the volume of patients seen. This may generate immediate financial gains, but if the cuts are made without considering what’s needed to deliver excellent patient outcomes, they lead to larger bills in the long term. + The Solution Administrators, in collaboration with clinicians, should examine all the costs incurred over the care cycle for a medical condition. This will uncover multiple opportunities to benchmark, improve and standardize processes in ways that lower total costs and deliver better care.

especially those treating patients with chronic conditions, tell us that if they could spend more time and money educating and monitoring their patients, the total spending on the patients’ conditions would decline dramatically. High-level administrators, however, focused solely on line-item expense categories on their P&Ls, often overlook these opportunities to reduce the total costs of treating their patients while improving outcomes. Such opportunities should be highly relevant for the new accountable care organizations, which have incentives to reduce the total costs of treating covered patients, including costs incurred at other facilities.

Mistake no. 5: failing to benchmark and standardize We have also found great variations in the costs and clinical and administrative processes involved in treating specific medical conditions among the multiple facilities within a provider organization and even among physicians within the same facility. Physicians, nurses and other caregivers often do not know the costs associated with their treatment protocols. And administrators rarely collaborate with them to develop outcome and cost measurements that would facilitate benchmarking and best-practice-sharing opportunities. Actively engaging clinicians in the cost-measurement-and-management process also enables them to learn the true cost drivers of a full cycle of care.

In fact, if you measure a physician’s productivity not by inputs (number of patients seen) but by the quality of outcomes achieved, you’ll find that physicians can often achieve greater overall productivity by spending more time with fewer patients.

High health care costs are the result of mismatched capacity, fragmented delivery, suboptimal outcomes and inefficient use of highly skilled clinical and technical staff. The current practice of managing and cutting costs from a P&L statement does nothing to address those problems.

Clinicians in several of our ongoing research projects,

The only sustainable way to reduce costs is to start



Round-up August 2016

WHERE IS THE PRESSURE COMING FROM? Cost-effectiveness has not historically been a competitive imperative in health care; virtually no provider offers a low-cost/low-price strategy, because patients who are usually insured - do not see any benefits from seeking out low-priced providers. Instead, they search for providers with a reputation for high-quality care. Consequently, providers compete by claiming to offer better care (though few supply data to support their claims). Those perceived as doing so attract more patients, enabling them to negotiate higher payment rates from insurers. This industry dynamic has contributed to the price index for hospital and related services’ having grown more than twice as fast as the consumer price index over the past 30 years. Several new factors, however, are encouraging providers to become much more cost-conscious:

+ New Health Insurance Plan Designs

Many plans now require consumers to contribute higher co-pays to access upper-tier providers (those the insurer rates as the most expensive). Some, including plans offered under the Affordable Care Act (ACA) exchanges, exclude high-priced providers. In addition, insurers have introduced higher-deductible plans, with deductibles as high as several thousand dollars, to make consumers much more price-sensitive. As these plans gain market share, high-priced providers can anticipate lower patient volumes.

+ New Reimbursement Mechanisms

Some providers now receive global payments that make them accountable for the total cost of caring for a patient, including care delivered by other providers. The ACA authorized Medicare to expand global payment models in accountable care organizations, and many private payers are pushing in this direction as well. Insurers are also introducing bundled, or episode-based, payments, under which they pay a single fixed amount to cover all the costs associated with the full cycle of care for a patient’s condition.

+ Tougher Insurers

In response to increased price resistance from consumers, employers and the government, insurers are taking a harder line in negotiations with providers. Some no longer allow price increases above inflation and are reducing or eliminating payments used to support research and education. Further, because of the aging of the population and the ACA’s increased coverage of patients under Medicaid, a greater percentage of patients are now covered by much less generously reimbursed public insurance programs.

+ The Emergence Of Low-Cost, Low-Priced Alternatives

Walk-in clinics, such as MinuteClinic and others in pharmacies and retail stores, are starting to provide much lower-priced outpatient care. They could become the Southwest Airlines and Walmart of health care, disrupting the expensive supply of community care by existing providers.

with an in-depth analysis of the current processes used to treat each medical condition. Clinicians and administrators need to fully understand all the costs incurred over a full cycle of care, and the outcomes, for each treatment their facility provides. With that understanding they can work together to deliver the same or better outcomes with an overall lower-cost mix of personnel, purchased materials and equipment. This path can dramatically improve efficiency and lower costs while continuing to deliver exceptional care.

ROBERT S. KAPLAN Robert S. Kaplan is a senior fellow and the Marvin Bower professor of leadership development, emeritus, at Harvard Business School. Derek A. Haas is a project director and fellow at HBS and a founder of Avant-garde Health. © 2016 New York Times. Distributed by the New York Time Syndicate.


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A New Currency for Your Hospitals: Get Energy and Water Projects Done Without Using Your Own Capital BY RICK GIBSON


hoa! Recent news reports tell us there are trillions of dollars of pent-up infrastructure projects in the U.S. That’s trillions with a capital “T.” It’s not only roads and bridges but in cities, schools, hospitals, churches, shopping centers, prisons, and other buildings in both public and private sectors. In the Healthcare sector, there are



Round-up August 2016

5,600 hospitals in the U.S. with 110 hospitals in Arizona alone. If you figure the average hospital might have $5-10 million of its own pent-up lighting, energy, HVAC, water and waste projects it would like to do, that would add up to a whopping half billion to one billion dollars in ready projects, just in Arizona hospitals.

Evolution of hospital management — new budget challenges of this decade Says Art Doloresco, healthcare executive: “Leading a hospital today is more challenging than ever. With rising healthcare costs and regulatory issues, most facilities have had to make fundamental compromises, not only in how they manage their business in administration, operations and facilities. While patients are always the priority, recent changes to reimbursement and cost increases put important facility upgrades on the back burner, which puts even more pressure on aging equipment that’s the backbone of our infrastructure. Thankfully we’re finding newer and smarter ways to help our hospital clients get these projects funded and done sooner.” Since my partners and I have had meetings with dozens of hospitals, we can now imagine being a flyon-the-wall in a typical budget planning session at a hospital. Each of the hospital departments is at the table and as with most hospitals, dealing with money issues is forever challenging. Capital budgets are even more limited as resources come primarily now from operations and philanthropic sources. Budget discussions are hard fought and can be territorial. To be expected, the strongest influence comes from doctors in high-earning specialty areas or involve healthcare “headline” areas. Thus, new MRI machines and other such equipment can claim a lot of the capital budget. When it comes to spending money on HVAC, lighting, water and waste systems and other energy savers, it’s simply not sexy enough. Does the patient care about where the A/C or heat comes from, as long as they’re comfortable? Does hospital management think of infrastructure as key to their business? Uh, no.

What alternatives are there… how can we get our building upgrades paid for? You have air handlers, heaters and coolers, some from the early 1980’s (or even the 1960’s?). You have old florescent fixtures that flicker and give us headaches. There are sinks and toilets that groan, leak and waste tons of water. And old dusty electro-hydro-pump-mechanical machine thingamabobs that crank away in a dark room somewhere. It’s easy to ignore them, then see if there’s any leftover budget to patch them up. For this, we use our credit lines, bonds and lease agreements, but alas, these are still just other forms of debt.

What about ‘ESCOs’ and their performance guarantees? Energy-Service-Companies or Energy-Savings-Companies are businesses that do the general contracting and help you FINANCE the purchase. They do this by packaging the vendors performance warranties into something they call a Performance Guarantee which is to help shave some basis points of the lease, loan

Each of the hospital departments is at the table and as with most hospitals, dealing with money issues is forever challenging. Capital budgets are even more limited as resources come primarily now from operations and philanthropic sources. Budget discussions are hard fought and can be territorial. or bond. For their putting the whole package together, they generally add 25-35% margin to the vendor and installers invoices. ESCOs are generally very competent with getting infrastructure projects done. But just keep in mind, their goal is to sell you the biggest project possible, using YOUR MONEY. So, your financial statements will be further burdened by these projects, large or small. The more projects you do, the greater your negative obligations become. So even while the economics of saving water and or energy makes sense, the debt-load obligations would have negative impact on your company.

What about ‘sharing agreements’? They’re creative ways to package a lease. How do you know it’s a lease? Check for multi-year terms, minimum payments, and penalties if you cancel early. That is what the auditors will do. If even one of these is found, they will add the liability to your financials and it will affect your bank covenants and bond capacities. Just like the ESCO, they act as general contractors and add a similar margin to vendor & installer invoices, besides a financing cost of money charge. The contractor implements a project to deliver energy efficiency, or a renewable energy project, and uses the stream of income from the cost savings, or the renewable energy produced, to repay the costs of the project, including the costs of the investment. Cash-poor, yet creditworthy customers are therefore good potential clients for this until the auditors do their magic under the new FASB and GASB lease rules. Other variations like shared-savings agreements or energy-services agreements, involve a finance company, energy consultant, and/or a contractor to do projects (like boiler upgrades, chiller upgrades, HVAC systems optimization, mcmsonline.com/round-up



lighting upgrades and other energy-using equipment improvements) with the lender getting repaid through the subsequent energy savings. The lender receives a percentage of financing over the term. In some cases, a finance company will pay the contractor to do the project and the co-op repays the finance company. In other cases, the contractor secures its own funding and then the customer pays the contractor. Yes, there could be some advantage in using a sharing agreement instead of a loan. However, it’s important to keep in mind that these sharing programs are still some form of debt. That is, each new project comes from your budget and will add to your pile of debt obligations.

Finally... here’s a new form of currency for your hospital. Sustainability Partners (SP) does energy, lighting and water retrofit projects for cities, schools and hospitals based solely on usage and/or savings! There are no minimums, cancellation fees, or multi-year terms. So your hospital can get infrastructure projects done with zero of your own capital budget and have them be completely off-balance-sheet. Until now, all you had was cash or credit (debt instruments like leases, loans, bonds, etc.). SP enables you to recover the huge waste in your Utility Lines and use it to fund projects. SP pays 100% of these projects, covers all of maintenance and provides free upgrades, all on SP’s dollar. SP can start

with one project and once you see how it ‘gets derisked’, you’ll wonder why you couldn’t use it for your next ten projects. If you had used a lease or a bond, those same ten projects would heap a bunch of debt on your balance sheet. Finally, here’s a way to get the projects done, save energy and water, AND get some fresh new cash flow (from your share of the savings) that you could use for something else (like those new hires you’ve been anguishing about).

In summary: 1. There are likely several projects in your facility that could save a lot of energy and/or water. 2. We suggest you get started on them now, since they’re wasting energy and water, and your money each month. 3. If it takes years to fix these problems, it’s like you’re paying double the energy cost every year. 4. We suggest you take the initiative to fully upgrade your facility over the next year or two. 5. Look for ways like Sustainability Partners to use the energy savings itself to pay for the cost of projects. 6. Thus, you can dramatically improve your budget while you save energy and water. Don’t let budget, credit or organizational limitations get in your way. References:

h t t p s : // w w w . m o r a n c o m p a n y . c o m / h o s p i t a l - f u n d r a i s ing-best-practices/


https://www.philanthropy.com/article/St-Jude-Builds-a-Fundraising/157049 http://www.beckershospitalreview.com/pdfs/conference/13_Hafner_Using_Metrics_to_Analyze_Hospital_Perf.pdf

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Round-up August 2016

Rick Gibson has had a 40-year career building businesses, founded and co-founded several successful technology companies. Since 1999, Rick has served as Managing Director of HOTventures, a “mentor capital fund” for the Southwest U.S., which invests in and advises fast-growth companies, in domains as diverse as Ballistic Armor to Agriculture. In 2014, Rick joined Sustainability Partners (SP), as a Venture Partner. SP funds large commercial infrastructure projects, in which they share the energy and water savings with the customer. Sustainability Partners works with cities, schools, hospitals, churches and other kinds of perpetual entities to retrofit HVAC, lighting, energy and water projects in which the companies don’t use their capital and the project is off-balance-sheet for the customer. Contact Rick Gibson at rgibson@gsvsp.com or 520.661.6797

In Memoriam Hartley, Thomas Franklin M.D

of Scottsdale, Arizona, passed away on August 10, 2016, at the age of 91. Tom was born in 1925 to Jimmie Clay Franklin Hartley and Thomas Jay Hartley of Little Rock, Arkansas. He is survived by two sons: Tom Jr., and wife, Sally, of Scottsdale, AZ, and John Hartley, and wife, Cindy, of Prescott, AZ; three granddaughters and four great-grandchildren. “Popa” was adored and will be greatly missed by all in his family. He was predeceased by his wife, Martha, his parents, and one sister. Tom spent his happy youth in Little Rock and Hot Springs, Arkansas. He graduated from Hot Springs High School in 1943 and was a member of Delta Sigma Fraternity, Alpha Kappa Chapter. From 1943-1945, during WWII, he served in the U.S. Naval Air Corp. After the war, he graduated from Little Rock Junior College in 1947 and then received his B.S.M. at Oklahoma A&M (Oklahoma State) in 1948. Dr. Hartley met and married, Martha, while at the University of Arkansas Medical School where he received his M.D. in 1951. He then served in the U.S. Army Medical Corp as a Battalion Surgeon and completed his medical internship at Madigan Army Hospital, Tacoma, WA, and at Fort Hood, Killeen, TX, in the years that followed. The family moved to the west Texas town of Snyder, in 1953, where Dr. Hartley joined friends and fellow physicians, Drs. Carl Dillaha, John O’Bannon, and Wilton Jones, in General Practice. He also served as Chief of Staff of Cogdell Memorial Hospital from 1960-1963. This was followed by a residency in Internal Medicine at Scott & White Memorial Hospital in Temple, Texas. Dr. Hartley went on to complete a residency in Allergy & Immunology at the University of Colorado Medical School from 1965-1966. After returning to Temple, Texas, in 1966, he was on staff of the Allergy Department at Scott & White Memorial Hospital and also served as a consultant in Allergy & Immunology for the Veteran’s Administration Center and the Santa Fe Hospital. He received his certification as a Diplomat of the American Board of Internal Medicine in 1967 and certification by the American Board of Allergy & Immunology in March 1968. Dr. Hartley joined friend, doctor, and colleague, R.C. (Rosie) Romero, M.D., in Arizona, July 1968, to form Allergy & Immunology Associates, Ltd. of Scottsdale and Phoenix,

where he practiced for the remainder of his career. He was certified by the American Board of Allergy, Asthma & Immunology for 42 continuous years and was part of the active medical staff and teaching staff at Scottsdale Memorial Hospital in Scottsdale, AZ, and Good Samaritan Hospital, Phoenix, AZ. In addition to his successful practice, he served for several years as an allergy consultant to the Phoenix Zoo elephant population. His most famous pacaderm patient was Ruby, the renowned Asian elephant, whose colorful paintings were sold all over the U.S. Tom also was as a Federal Aeronautics Administration Examiner, an associate clinical professor at LSU Medical School, served on the Board of the Maricopa County Medical Society, and was President of the Arizona Society of Allergy. Tom was named a Fellow of The American College of Physicians in 1971 and the American Academy of Allergy, Asthma, & Immunology in both 1971 and 1983. He served on the Board of Directors for The Foundation for Medical Care and was a Scientific Assembly Committee Member for the Arizona State Medical Association. Other associations and memberships included: The American and Arizona Medical Associations, American Academy of Allergy & Immunology, American College of Physicians, and the American College of Allergy & Immunology. Dr. Hartley was involved in over 34 clinical research projects during his medical career and was published 9 times as a result of his expertise in his field. He lectured on Allergy, Asthma & Immunology, and related diseases, across Arizona during the years he practiced and was often called as an expert witness in medically-related trials. It was obvious to all who knew him that Tom dearly loved the practice of medicine and greatly missed the profession, his patients, and his colleagues after retirement. He was very proud that Allergy, Asthma & Immunology Associates continues as a successful medical practice led by clinicians he mentored. Tom, and Martha, whom he affectionately called “Sam”, enjoyed 60 years of marriage before her passing. They had fun times with family, and a myriad of good friends, pursuing many adventures and hobbies which included being licensed pilots, ranch and race horse ownership, a love of water and snow skiing, world travel, and the sailing of their beloved boat, “The Sam”, in San Diego. They shared good and active lives.




In Memoriam Pallares, Carlos MD


82, of Chandler passed away peacefully on August 8, 2016. He is survived by son Jose Carlos Pallares Jr., daughter Lilly Pallares-Norman, son in law William Norman, sister Maria Luisa Pallares and grandchildren Dominic and Vivian Pallares. He was profoundly loved and will be missed deeply.

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Round-up August 2016



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2003 -


WHY CHOOSE MICA FOR YOUR MEDICAL PROFESSIONAL LIABILITY INSURANCE? MICA has been a leader in the industry for 40 years, providing coverage in Arizona, Colorado, Nevada and Utah. We specialize in medical professional liability insurance-that's all we do. As a mutual insurance company, MICA is owned by its members, who are eligible for dividends when they are declared.* Since our founding, we have distributed more than half a billion dollars in dividends to our qualifying members. Contact us today for a quote and find out how MICA can help protect you and your practice.



(602) 956-5276

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