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 …

Home Healthcare — CMS Target #1

I’ve begged my friends who own home healthcare assets to get out. Sell. And all but one (way to go George) told me that they had too much upside in the business to consider selling now. Lesson #1 when running a healthcare company. Sell before major regulatory change. Sell when margins are too high to be sustainable — no one is good enough to make up for it in volume without MANY years of additional work. Sell when someone wants to buy your business — for when the day comes that CMS targets the industry, then NO ONE will be a buyer. Amedisys is the poster child for the most recent CMS and Congressional action. They have been accused of creating care plans with one eye on the reimbursement rules. Get to a certain threshold of visits, and reimbursement rises substantially. One visit less than the threshold and no bonus. Guess what? CMS thinks the industry is making sure the patient gets the one last, and arguably unnecessary, visit so the home health agency gets the higher payment. OF COURSE THEY DO. Wouldn’t you? One more treatment will help, not hurt the patient. Yet when the payment system is set …

Thank You Freedom Fest 2010

Last night was the conclusion of Freedom Fest 2010 at the Bally’s Casino in Las Vegas. The quality of this program was astounding and I congratulate all who were involved. You haven’t lived until you see Steve Forbes dressed up as George Washington in one of the skits at the closing banquet. We live in unique and dangerous times. As I’ve written to my clients on all too many occasions, the investment decisions that we make in the next couple of years will be the most decisions that we will ever make in our lifetimes. Get it wrong and we may be financially ruined, regardless of how many financial resources we have today. Get it right and even modest investors can make millions, securing the financial future for their families today and for generations to come. If you have never heard of Freedom Fest, click on this link and see what you missed. Something like 160 presenters over three days. I’ve been to lots of conferences and heard lots of speakers. The quality of the speakers at this conference was impressive. And the conclusion is unmistakable: the United States and most of the major countries around the world are on …

CMS goes after Oxygen

After quite a long time of silence, CMS weighed in with a massive 30% cut in oxygen reimbursement in 9 competitive bid markets. CMS has been trying for a couple of years to have providers compete for business based on price. After a court setback, CMS is back. The plan expands to cover 91 more MSAs in 2013 and the rest of the country in 2016. The cut was far worse than expected and again shows that oxygen services are over priced. The largest public company in oxygen, Lincare has argued, and probably correctly, that a big cut like this will allow it to gain significant market share. No argument there. Yet earnings are going to be under pressure and after a double in the stock it is quite vulnerable. Time to be very cautious in the markets. The world’s debt problems are being recognized and the result will be a no growth world economy. The expectations of a 3%+ recovery will be an illusion. World governments are cutting spending and China has a real problem in a real estate bubble that dwarfs the U.S. bubble. Time will tell, but it could get really nasty and July is historically a …

A Major Week in the History of the U.S.

This coming week may be a major milestone in the history of the United States. The Administration will pull out ALL stops and will do ANYTHING to get their version of the healthcare bill passed. First let’s review the procedures for passage. A couple of months ago the House and Senate passed different versions of the reform bill. Given that the Senate could not pass (by 60 votes) the same bill today, the House needs to pick up the Senate bill and pass it without amendments. The House does not have the votes to pass the original Senate bill, unless they cut a side deal with the Senate. With a side deal in place, the House intends to get the votes to pass the original Senate bill and that will be signed by the President. The deal with the House is that the Senate will introduce another bill to make some budget changes to the original bill, and will move to pass this new bill with the 50 vote reconciliation process of the Senate. The purpose of this new bill is to adjust the final version of the original act, which is necessary to get the House votes necessary for …