Welcome back to Sunday Bites Bites from an Interview.

We did our first interview! It’s with healthcare finance director guy (known as AB). He was dropping so much knowledge on us with the last issue that we decided to have a full fledged conversation to get his take on the current state of the healthcare industry.

Thank you to other healthcare finance guy (known as AS) to help out with some context.

We cover:

1. The shortage of doctors in the U.S.

2. Value Based Care

3. Why a company like Walmart could fail in their healthcare strategy.

We condensed our notes and gave direct quotes where we could.

Interview with AB

AB is a higher-up in the finance arm of a healthcare system. He’s a very clear thinker when it comes to the broader systemic issues that plague healthcare in America.

1. On the shortage of doctors in the U.S.

The issue of a shortage of MD’s in the U.S. contributes to a number of problems within the healthcare system, namely cost.

We suffer a shortage of medical doctors by design.

How? Well, It all boils down to the American Medical Association (AMA).

Here’s what AB had to say about it.

“American Medical association is effectively a lobby. Their reason for existence is to increase the compensation of the members of this organization. How do you increase the compensation of medical doctors? By reducing supply as much as possible. So the market value of their labor goes up.”

So how does the AMA do this?

It has its ways. One way it does that is graduating doctors from medical schools. Now, while the AMA doesn’t have a direct influence on things like how many doctors a school can graduate, it exercises its power in a different way…

”….[You can’t] can open a university that graduates licensed medical doctors without the blessing of the American Medical Association. A new university that has a licensed medical doctor program has not been opened in decades.”

The issue of cost is essentially a supply problem. “If we can somehow alleviate the crunch of providers, then we solve the cost problem.” AB also mentions that up to 60% of a hospital’s P&L is labor.

How would we fix this problem?

We increase the supply of doctors, obviously. The quickest way to do that? International Medical Graduates (IMG’s). These are doctors who’ve graduated from overseas medical schools and have a license to practice in their respective countries.

AS informed us of this notion becoming policy:

“…Tennessee was having a shortage of doctors, so they passed a law that would allow international medical grads (IMG’s) to go through a series of steps to earn provisional medical licenses in the state.”

An influx of doctors into a state’s population would, in theory, drive the supply up and labor costs down. This would eventually drive down the cost to the patient.

2. On Value Based Care

Here’s a refresher on Value Based Care:

1. It’s more about prevention and better patient outcomes

2. It’s the opposite of the fee-for-service model, which incentivizes that a doctor run tests, do procedures etc.

3. Small but fast growing facet of healthcare (10ish% right now)

Here’s AB with his thoughts on VBC in the context of transitioning from a Fee-for-Service based model:

“The premise of Value Based Care is that the provider is already getting paid regardless [of services performed]. And now the provider wants to minimize unnecessary healthcare utilization… and minimize costs…But I still contend that we do not know how to keep people healthy.”

What a system would have to look like for this to be self sustaining when it comes to VBC:

“I’m really….really speculating here...but it would basically have to resemble a nanny state…We provide housing, transportation, nutrition, fitness classes, lifestyle coaching. We take you and envelop you in services...”

“Right now effectively all of our healthcare is very hospital centric. What it looks now is a doctor goes to outpatient, has some appointments, 3x a week clinic, 1x a week procedural room. Procedure is done, the patient is out of sight out of mind.”

“In case of VBC, it would be multiple people asking you all these questions about nutrition, sleep, etc. and maybe provide you advice on your diet….”

AB ends it with discipline to do the healthy thing is a key factor for this to work:

”I know that eating healthy is good but I also know that ice cream makes me really happy.”

3. Why a company like Walmart could lose with its current healthcare strategy

“Because they will not be able to overcome the [doctor] labor shortage…“where money really gets made in  the healthcare industry is the high acuity high complexity patient care. So hospitalizations. Surgeries, difficult cancer cases... In those outpatient clinics, you cannot do high acuity high complexity cases…MP’s and Nurse Practitioners are not permitted to engage in high acuity high complexity cases.”

So you mentioned earlier that high complexity cases are where the money is made in healthcare, going back to something like Walmart, would they be able to do a ‘fee for referral’ type thing?

“No because federal legislation called Stark laws. Stark laws effectively stipulate that there cannot be anything of value exchanged for referrals.”

“The step around that would be to create a completely holistic organization where you see a Walmart health center, and then they refer you to a physician at Walmart hospital…etc..”

So even if they run those health centers in a lean manner, couldn’t they get something out of it?

The only way to play that game is not to play.

What AI Made This Week

Sick Fits by Ahmed

I know we featured him already. But Donald Glover’s Mr. And Mrs. Smith outfits are nothing short of perfect.

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Have a great week!

Ahmed and Peter