Listen to Tim Coan as he discusses the importance of a robust independent physician segment in the healthcare space. He also talks about the challenges of solo practice and how his company is helping independent physicians remain in control of their business. Don’t miss this insightful interview with Tim!
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tim.coan@alnmm.com
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Role of Fee for Service in a Value-Based World with Tim Coan, CEO at ALN Medical Management was automatically transcribed by Sonix with the latest audio-to-text algorithms. This transcript may contain errors. Sonix is the best audio automated transcription service in 2020. Our automated transcription algorithms works with many of the popular audio file formats.
Saul Marquez:
Welcome back to the podcast, Saul Marquez here. Today I have the privilege of hosting Tim Coan. He is the founder and CEO of ALN Medical Management. As a founder and CEO since its inception in 2000, he really has a long term history. Prior to that 30 years experience in strategy, business development and change management. He’s worked extensively in health care and with physicians in multiple contexts throughout his career. Prior to ALN, he was the founder of Alex it’s a Health Care Strategy Consulting Company. Before that, he was senior manager in Andersen Consultings, now Accenture Change Management Practice. He received his masters in industrial organizational psychology from University of Tulsa and his bachelors in psychology and sociology from Southwest Baptist University. Tim is a frequent speaker and writes ALN’s weekly blog on strategic issues facing independent physicians. And it’s going to be a great talk today with him focused around what we do in these changing times. And so with that, I want to welcome you Tim, so glad you could join us.
Tim Coan:
Saul, thanks. Thrilled to be here.
Saul Marquez:
So, Tim, talk to us a little bit about your inspiration for health care. What got you started. What keeps you in it?
Tim Coan:
Well, the truth of the answer is I ended up in health care accidentally taking a internship to get to my graduate program. But once I landed there, inspiration for me has been very personal. First at that internship, I ended up bumping into this amazing young new nurse that 32 years later, I still have the privilege of calling my wonderful wife and just watching her as a neonatal intensive care nurse on the frontlines taking care of literally the smallest and most vulnerable has given me a lot of inspiration through my life. My mother was a diabetic who died early from the complications of that disease. And so even though I’m not clinical, have been surrounded like a lot of people, you know, with a personal story that gives me the reason to say if we can do anything to help the helpers, that to me is meaningful and valuable work. And then even today, I’m compelled our nieces on the front lines in a hospital in New York City taking care of Corona virus patients every day. So it’s those types of personal things. That’s where it gets you up in the morning and say, what can I do to help?
Saul Marquez:
Yeah, that’s awesome, man. And the the opportunity to serve, whether it be directly or indirectly, is is a big one. And there’s a lot of inspiration in it. How would you say ALN is adding value to the health care ecosystem? Tell us a little bit more about the company and and your sweet spot where you’re delivering results.
Tim Coan:
As you mentioned in my bio, I began my career as a strategy consultant. And in that developed, you know, a real set of convictions about the need to, you know, not try to be all things to all people to understand a very specific segment of the market, their needs and in your yourself to serve them. And for a whole variety of reasons, I personally came to believe and we believe deeply as a company in the value of the independent physician practice segment inside the U.S. health care ecosystem. There is clearly a role for massive institutions and we have them. Capital formation and scale often require organizations the size of CMS or some large payers, large hospital systems, large farm and device companies. Those types of things just require that size and scale to work. But the outputs of those very, very large organizations eventually end up coming into play with an individual patient. In one of their most vulnerable moments, and oftentimes the the bridge between the very, very large and the very small, personal and intimate is an independent physician, eyeball to eyeball with the patient. In one of the most intimate settings. And so we have a deep conviction that our overall health care system is better when there is a robust independent physician segment in that ecosystem. And so ALN is a plumbing company, a joke. We are processing claims and standing up technology and providing data for our client practices that are all independent physician groups from one doctor all the way up to several hundred. And we are they’re building that part of their business to enable them to stay independent to stay in control of their own destiny, and thus again, for them to fill this very critical role in the US health care industry.
Saul Marquez:
Tim, I’m curious about that. The stats, I’m sure you’re well versed in this, at least maybe at a high level. What are the numbers now, you know, compared to 10 years ago? This independent physician group, I know it’s shrinking, but maybe it’s not as small as we think.
Tim Coan:
Well, it’s interesting because when we decided several years ago to really home this particular part of our strategy around independent physicians, there was a time I thought we I was gonna be the mayor of a very small and shrinking island in the Caribbean, because if you go back four or five years ago, you know, most industry experts were projecting the complete and total death, the independent practice. And there was a time as physicians were rapidly joining employment status with health systems mostly. But even players on the payer side of things that looked to be the case. Today, we’re probably at a depending on how you count. The data is very sketchy, but it’s for some people anywhere from a 50 50 split between employee and independent physicians, maybe as high as 60 65 percent employed. But we’ve definitely seen that trend slow. What we’ve learned is what’s really, really hard is to be Marcus Welby, you know, the independent one doc practice that many people in, say, our parents generation grew up with.
Saul Marquez:
Right.
Tim Coan:
The cost, the regulatory compliance, the role of technology, consumerism, marketing, just make it really, really hard for solo positions to survive. So we’ve seen a dramatic reduction in that particular model, positions that are independent. Those practices as a rule are tending to get larger. And interestingly enough, one of the emerging trends in a whole variety of ways, but particularly with private equity, is many of them to retain their clinical independence and not be part of a larger system, are bringing in equity partners a new model, but it still leaves the physicians in control clinically. So we’ve seen that trend begin to flatten. And it does vary by specialty. There are far more primary care physicians, for example, that have taken the employment model. More specialists, particularly surgical procedural specialists, tend to be independent. And there’s also a geographic variance that I can’t always figure out the fly behind. But we we do see different trends in different markets.
Saul Marquez:
The geographical one is interesting. Right.. I mean, what markets do you find tends to to be more toward one or the other?
Tim Coan:
You know, it’s funny. The first thought off the top of your head would be this has something to do with managed care penetration. You know, the more managed care, the more you need larger groups. And so you look, for example, in places like Southern California where we’ve got, you know, lots of good old fashioned capitated HMO. And and then market tends to really, really bifurcates. You either have very large groups oftentimes through the IPA model or you’ll end up with more solo physicians out there than you find in other places. So they it is a driver, but it doesn’t explain all the variance. I think sometimes the power of the hospital systems in a particular market are in effect. And what their strategy is around employing physicians and are they employing just primaries or primaries and specialists. And we see hospitals taking very different strategies which will affect the independent practice market. The other thing that’s now coming into play because of the presence of the equity players in the physician spaces know are their consolidators in a given specialty that are showing up in a market. Know, we’ve clearly seen more of this, beginning with the hospital based specialties of radiology and anesthesia, where we’ve now got large staffing companies with lots of physicians that are part of their model. And that can drive some things as well. And those equity sponsors are now moving beyond the hospital based specialties to some of the office based specialties. We’re seeing a lot of activity right now in pain management, orthopedics, obstetrics, general surgery. So so that factors there. And then we’d be remiss if we didn’t mention the biggest player of all in the employed physician space. This is generally a way to win a bet at a health care conference, because when you ask who employs, you know, most doctors at the bar and happy hour at the conference, you’re probably going to get an answer. A Kaiser or may be one of the big health systems like Ascension. But the trick right now is by large measure it’s Optum and Optum. Currently, employees, I think the last number I saw is over about forty five thousand physicians. As much as four times the amount of Kaiser. So they’re a big player for lots of strategic reasons. So when you throw all that in the blender, I’ve just figured out that when you walk into a market, you you just gotta start from scratch. Yeah. What’s going on here? What are the factors driving, whether or not there is a strong, robust, independent physician segment or not? And it’s just a big Rubik’s Cube that varies market to market.
Saul Marquez:
Fascinating. I appreciate that, Tim. And I know listeners do, too, because a lot of anecdotal information gets pushed out there. And this is a really great deep dive into the physician, the models, the players, equity partners. You know, just the providers side appreciate that. The download, they’re with you as as a L. And what are you guys doing that’s different to help the individual independent physicians?
Tim Coan:
Well, we do care about the individual practices and we have some of them as clients. But the truth matter is our primary strategic focus in terms of what drives our day to day decision making is the segment that we refer to is bigger than small and smaller than big, and that that’s as deeply profound as it sounds. We believe the 1 to 5 provider space is going to continue to be difficult, as we discussed earlier, just for, you know, all of the things that get laid on a practice. So when we strategically sit down and say, what do our clients need, what are we going to build, create value we have is our real sweet spot, kind of the five to 30 providers. We have a couple of clients that are much larger and their equity back, they’re growing fast and they’ve got kind of a unique set of needs on top of that that we add. But I think that the thing that we have done is just get really, really focused on what does that segment five 230 independent Oppa’s Bay surgical or procedural. What do they need when it comes to Rev’s cycle, I.T., business intelligence, the compliance related things around that. And we are just fortunate enough to be like our market. We are big enough that we can invest because that part of the solution set when we get into it 20 years ago was fundamentally labor driven. For example, you know, we’re in the business of outsource billing and that question used to be just one of the I want the payroll to set on my numbers or your numbers because it was a labor driven deal. Over the course of 20 years, this is when we saw an opportunity there It has increasingly become technology enabled services, which means capital, which means size and scale. So we are now big enough. We process about 200000 physician claims a month, which kind of puts us bigger than most mom and pop outsource billing companies. But we’re small enough that we are intimately involved with our practices and we can configure what is needed. For example, we’ve got a vascular surgery group, really complex coding. They’re tied to their office space lab. They’ve got some unique specialty specific clinical technology that we need to flow data into. Our I.T. team is able to customize with them. So the data flows from their system into the claims processing part of things. And then on the other side, we’ve got a hospitals based group that is an independent group providing care in the hospital. But they’ve also got a fairly robust telemedicine practice, which ironically predates all the telemedicine we’ve been standing up in the last 30 days. And that had a different set of data technology and our CRM requirements. So we’re in this little sweet spot where we’ve been able to build a robust engine. It’s got a lot of technology, it’s got a lot of automation. We’re deploying bots. Now we’re in severe early stages on artificial intelligence for predictive analytics on denial’s. And at the same time, we’re small enough that we can get in with each of our clients and do the configuration that they need based on their specialty. And I think that’s what puts us kind of in a unique place to create value for this five to 30 and in some cases 200 provider groups.
Saul Marquez:
That’s fascinating, Tim. And so what would you say is the one or two differentiating value adds that’s give to your customers.
Tim Coan:
I think, you know, everything in our business begins with cash. Our clients do work and we’re turning it into cash for them. And we have best of class performance in terms of what’s called the net collection ratio, and that is getting them every available dollar that their contract requires. And that’s really a combination of the things that we discuss, but how we get into tying that into their operation. I think the second one is really around business intelligence because those practices that we serve have a level of complexity that’s bigger than their size. They’ve often got a surgery center or imaging or something like the telemedicine thing that we’re discussing. So they need us to help them manage a business that maybe 10 million dollars of top line revenue. It’s got a lot of complexity and being a bunch of recovering consultants. We’re data junkies ourself and we provide a lot of business intelligence, not just about how the Reb. cycle is working, but what’s going on about their business that we can see through the claims that flow through our shop. Those would be the two things. And then maybe if if I cheated and took a third our ability to handle their complex technology platform with them.
Saul Marquez:
Very cool. Very cool. Doesn’t get clearer than that. Tim, I appreciate you highlighting those things. If you if you had to highlight maybe how you’ve improved outcomes or made business better, what would you say a good story there is?
Tim Coan:
You know, I think it’s helping our clients who are physicians, they’re clinicians. They own their business, but their primary jobs take care of their patients. How do we help them take this incredibly complex thing of health care revenue cycle? And if you’ve ever tried to explain it to somebody, that’s not in it. And they look at you like you you’ve got four heads. It’s like, would anybody have designed a more complicated thing? It’s like now probably not. But to translate that in a way that our physicians who come into a board meeting, you know, for an hour a month, that they can understand it enough to make the necessary decisions as owners of the business without getting lost in the weeds. I think that’s one of our biggest challenges. But when we can do that and enable them to be a clinician ninety nine percent of the time and owner 1 percent of the time and bring those together, that’s that’s when we know we’re doing good stuff.
Saul Marquez:
Love it. That’s definitely a sweet spot if you have to think about the last 20 years. Do you have something that happened there, a setback that you feel produced, a key learning that’s made you guys better today?
Tim Coan:
Yeah, you know, it’s interesting. I could come up with a long list of setbacks, but one that comes to mind, Saul. We had a client several years ago. Ironically, they were equity backed. They were in a specialty in a market that we thought, man. There is no way this thing is not a home run. But they were really struggling and they began to get behind on their invoice to us and we would talk to them and they like, hey, we’re turning the corner. And we looked at the big picture and we’d like there’s no way this can’t work. And they kept going and kept going. And you could probably guess where this story’s going to land. They told us at one point and they said they were closing the practice and we’d had a major write off that we had to take that rippled through our financials. And so when we step back from that and say, you know what, can we really learn what you come to realize? And this is true in business everywhere, it was just, you know, I could put a price tag on on the cost of my tuition on this one is we all no matter where we are, if we’re not taking stuff out of the dirt that God made or we’re not the final consumer, we’re somewhere in the middle of a value creation chain. And we are very connected to what happens to us both upstream and downstream. And so it pushed us to be more engaged and more transparent and demand the same from our vendors, suppliers and partners that were upstream of us. And likewise, to be more connected downstream with our client practices. And so one way that that is showing up, for example, right now in the middle of the Corona virus stuff, we’re all trying to project some scenario in the future that that might be believable that we can plan on. And we are simply asking our largest clients to give us their projection for the rest of the year and incorporating that into our model rather than us. Just try. And by the way, we’re sharing from them what we see about their business and they’re sharing their projections back with us. And so to just be more connected up and down the supply chain, both upstream and downstream, is kind of that very expensive lesson taught me.
Saul Marquez:
Yeah. Yeah. And so when you when you when you think think about this practice, I mean, it’s a great practice. You get to sign it strategically to an account manager, you know, you haven’t even taken on but thinking through it. How could this have prevented or mitigated what happened?
Tim Coan:
Well, this was easy for me to say ’cause I’m going to blame the dead here and they’re not around to defend themselves because the practice did go out of business. But looking back at it, in this particular case, this was in early private equity entree into this particular specialty. And you know, as we got into sorting through the debris and we got more into it because we were a significant creditor trying to figure out how to get paid, I don’t think the equity guys actually understood the business model of this specialty because we found it’s like we were only seeing the top line right here claims in years volume. And here’s how your specialty, the demographics of your market. I mean, they were a diabetes group in the south. Right.. I’m from the south. You want to do just fine. There’s a high, you know, high number of people with diabetes and some of those markets. But the way they had put their business model together, once we understood the cost side of the equation was like, you guys will never make money. It’s not that there’s not a need here. And so, again, that sort of led us to say in the long run, one of the things that independent practices are really going to need, this is another reason that the, you know, 1 to 5 doc group is going to struggle is you really need to be able to afford high quality management. This is a complex world right now and having really, really good business people who can partner with physicians and let them be owners at the top, get them out of the management layer in the middle and clinicians day to day. It is when we look at our clients that are really successful, that’s their formula. They’ve got great civilian executive business leadership that has partnered with great physician owner and clinician leadership, and that’s what makes it work.
Saul Marquez:
And that’s fascinating. And I appreciate you sharing that very valuable lesson and think about where you guys are at. You guys and gals are at in the value chain. And I would think think about this very thoughtful question that Tim has posed to us. And be sure to connect both upstream and downstream to to those service providers, customers that you’re working with. What would you say you’re most excited about today, Tim?
Tim Coan:
You know, it’s interesting as a strategy guy who is currently grounded Right.. So I can’t go get on airplanes. I can’t go see people, which is my normal job. Yep. So we’re all setting here. Looking forward to. Have we found the bottom? When does it begin to uptick? When do we return toward normal? But there’s a there’s a bigger question in my mind that has been occupying me of late. And it creates some fear, but it creates a lot of excitement. And that is there will be things that, you know, and we’re all hearing these conversations, but we’ve got to drive this in our own business. There will be things that never return to normal that the change of 20/20 will for ever result in a restructuring. And some things will go away entirely. They will just be obliterated and there will be great loss. Other things will be they will continue, but they will be so fundamentally different. You know, telehealth, for example, might be one of those things. And then there will be new opportunities that emerge that six months ago that none of us had on our radar screen. And when I look at that, I believe that what the next two or three years in health care is going to represent is a time of great pain and loss for those that are not well equipped. And it will be disruptive and dislocating. On the other hand, there will be some bold players who are willing to take some chances who have got themselves to enough size and scale, for example, in the independent physician space, where they have the leadership, they have the resources to bet on some of these emerging opportunities. And we’re going to see, I think, a period of business model innovation that will parallel what we are hoping for on the scientific side with vaccinations and treatments and the like. But I think we’re going to see a level of business model innovation in the position space unlike anything we’ve seen in a long, long time. And so I’m really excited. You know, my job, I’ve got the best job in the world because I get to just join up with my clients and be a strategy consultant for free to help them figure out where they’re going. And we’ve already begun some conversations with some of them as they started thinking about the new opportunities that will be emerging after this all passes to deliver more value to their patients, to the health care system overall, to not just bend the cost curve, but break it and change it in some places. That’s gonna be a fun time for at least some some subset of the market in the coming years.
Saul Marquez:
Man, that’s cool. And that’s definitely exciting. You got me excited about it, and I’m not even in the in the in that vertical. Your passion is contagious. As you know, podcast host I’m always curious what my my guests are reading. And now listeners are always curious to what book would you recommend to us or for some good reading during these quarantine days?
Tim Coan:
I could recommend a lot, but I’ve been thinking about my audience specifically where I hang out, particularly as some independent physician practices are coming together and trying to get a little larger. There’s a book that I have recommended repeatedly that I think it sneaks in the side door but is so educational. It’s called The Quartet. It’s a book written by Pulitzer Prize winner Joseph Ellis. And it is actually a history book. So the health care books manage the book. And it’s definitely not a book written specifically about the psychological, social and cultural nuances of trying to bring several physicians together into a larger group. It’s the story of our founding fathers, specifically Alexander Hamilton, George Washington, John Jay and James Madison. Thus, the quartet who personally engineered our migration from the Articles of Confederation to the Constitution and it is a is a fascinating historical story, one that without these four men, the United States doesn’t exist. But when you read the story, if you have ever been part of two or more groups of physicians trying to come together and figure out how to be bigger together, it’s like he has been listening in on your meetings. And so whether you’re in the position space or not, the quartet. It’s just a fascinating read, obviously. Ellis, having won a Pulitzer for another of his books, is a great writer. But if you spend any time hanging around doctors, it’s a very informative read.
Saul Marquez:
Some great summary there. Quartet by Joseph Ellis, folks. And you know where to go. Outcomesrocket.health in the search bar for the full show. Notes, transcript, links, everything we’ve discussed. You can find it there just to type in A L N and or type in Tim Coan and you’ll be able to. Tim Coan and you’ll be able to find it there. It’s Coan, its Coan. And so, Tim, just a privilege to have you on before we conclude. I’d love if you could just leave us with the closing thought. And then the best place for the listeners could continue the conversation with you.
Tim Coan:
Saul as a person who my role is to help the helpers. I just want to. Especially in this time, say thanks to every doctor and nurse, clinician, lab tech, whoever you are that’s directly caring for patients. Health care is a massive industry, but it all kind of comes to an apex at that place that care gets delivered to a patient. We are exceedingly grateful for you all and know that there’s a whole army of us standing behind you trying to do our best to help you out, not just during this time, but every day as we provide health care, our friends and family.
Saul Marquez:
That’s great to Tim. And I second that a big thanks to all of the health care providers. And so, Tim, what what would you say the best place for folks to reach out and continue the conversation is.
Tim Coan:
Would love to hear from people. I love chatting with folks in this industry who are up at the plate with the bat, their hand and taking a swing. You know, even if they strike out, they’re giving it a shot. And e-mails the best. tim.coan@alnmm.com.
Saul Marquez:
Outstanding.Tim, thank you. It’s been a really insightful discussion around physician models and practices and management of them. We’re leaving better because of you. And so I just want to say a big thanks to you for helping share your insights with us.
Tim Coan:
Saul, thank you. I appreciate what you guys are doing. Facilitate the conversation. Thank you.
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