“Wellness” in a Physician’s Practice — What does it look like?

I’ve become convinced that an ever growing % of the population is ready to pay for “wellness” as part of their medical care. Why? Over the past few years, deductibles & co-pays have skyrocketed. People are paying more out of pocket and getting the same or less healthcare. What if people could pay what they are now paying and get better healthcare? The baby boomers are healthier & more interested in integrative medicine than ever before. If a quality alternative existed, I believe they would be attracted.

So this is the question …

What do you think would need to be part of a Wellness Practice. Some docs are promoting Wellness, but don’t act as the patients PC physician. I’m inclined to combine the two so a single physician directs my care.

What’s included? Testing? Infusion? Vitamins? Hormone treatments? Nutrition?

I’d like to hear from you — if you were starting with a blank sheet of paper to design an integrative wellness program, what specifically would be included? How would you charge for services in such a way that insurance would pay as much as possible? What would the real world model look like?

Accountable Care Organizations

Today I’m going to focus on Accountable Care Organizations (ACO’s).  This past week, CMS announced their initial rules and regs for ACOs.

Start with the basic:  what is an ACO?  It is an organization to be formed by hospitals, doctors and ancillary service providers to better manage the care of Medicare patients.  Think of the Mayo Clinic among a set of providers without common ownership.  The goal is to actually manage the care of a patient (boy does that sound familiar!!) in order to get the optimal outcome at the lowest cost.  The ACO then shares in a portion of that cost savings.

This is yet another experiment in trying to find out how to insure that patients get the care they need in a system that pays providers for every time they provide care.   The system we have gives every healthcare provider the incentive to provide services, whether needed or not.  The system also gives incentives to get MRIs, use drugs and do a large variety of things that adds profits to someone’s bottom line, but doesn’t necessarily improve and may in fact reduce the quality of health care.

CMS has been trying to figure out why healthcare might cost $10,000 in Minnesota and $25,000 in S.

Tenet & Community Health

I don’t mind going out on a limb – so some projections regarding Community Health & Tenet.

#1 – Tenet is history as a stand alone company.  Trading volume Friday was more than half the capitalization of the company.  The arbs and hedge funds are loading up in a big way and they will get to vote.  Company is gone.

#2 – The price is probably in the $7.50-8.00 per share range, but could be higher.  The synergies and margin upside is so great in this company that CYH can use more stock and others can use cash to buy Tenet.  Tenet has a bloated infrastructure and bloated bureaucracy that can be rationalized.

#3 – Other bidders could emerge.  Let’s run through the possibilities:

HCA – unlikely.  They want to go public.  If they wanted the company, they could pay as much as CYH, or more since they are private.

HMA, UHA & LifePoint – no way.  Bill Schoen doesn’t like big transactions at HMA.  LifePoint too small.  Alan Miller just bought Psyc Solutions and he really prefers the psyc business to the acute care business.

Vanguard.  I’m certain that Charlie Martin would love to own Tenet. 

New Bull Market in Hospitals?

The bull market for hospitals was restarted on Friday.  As you probably will recall, I talk a fair amount about the seasonality of the hospital stocks and we are going into the seasonally strong period which lasts through some time in May.

The reaction to the Community Health offer to buy Tenet was astounding .. not on the Tenet side but on the CYH side.  CYH traded down $1.40/share after the announcement and opened down.  Then the stock roared up 13% on the day, trading up $4.25 on the close, over 5 ½ points higher than the low.

HMA was up over 4%, Lifepoint over 5%.  Some of these gains were probably due to an expectation that a new consolidation phase may have begun, but I think more likely is that the hospital stocks are well under valued relative to historical levels.

The 5 major public companies are trading at 7.1x LTM EBITDA and 0.90x revenue.  While that’s higher than it has been in the past year, these stocks have historically traded 25% higher.

The other positive for 2011 is that this sudden increase in hospital focus should allow HCA to complete its IPO which I think would be very good for the entire sector,

New Trends in Healthcare #2

The next major trend I see is the beginning of using telemedicine or video conferencing.  I recently completed a private equity placement for a company coming out of the Medical College of Georgia.  They have developed a system to remotely diagnose and treat stroke victims.  Amazing technology which uses computer algorithms in addition to standard blood work and imaging for diagnosis.  A doctor in Augusta, GA who is an expert in his field is now diagnosing stroke victims throughout rural Georgia.  Results are fantastic.

I’m seeing more news stories about physicians using email (currently about 7-8%) and remote diagnostic.  In working in the Caribbean, I’m talking with a group that provides second opinions with a U.S. doctor.  Where are the patients coming from?  Central & South America.  In Honduras, for example, there is no regulatory problem with paying for a video conference with a U.S. specialist.  It is only in the United States that this would cause a problem.  A doctor in Georgia can’t treat a patient in any other state without significant regulatory issues.

Five years from now this should become a big business.  Use a centralized diagnosis center for the inbound consultations.  This is very similar to what Night Hawk does with reading x-ray,