You can't make this stuff up!!!

A Duke luminary highlighted in Reason magazine...

Reason link

Private equity in health care

Money chases returns. It is a fact of life. As opportunities for returns get squeezed in industries which have been the hunting grounds for private equity, opportunities within health care start to look more attractive. The latest waves have identified physician practices where value can be unlocked by using PE magic. The targets for PE are multiple including anesthesia, ophthalmology, orthopedics, dermatology, dentistry, radiology, pain medicine, behavioral medicine, urology, and even primary care.
Those pushing PE hold it out as a potential savior for physicians, with acquisition meaning they get a pot of money and relief from tasks other than caring for patients. It sounds too good to be true. However, I can't really say for sure how the proponents of PE investment are wrong. I have some hunches. There are apparently certain advantages that PE firms have over other health care entities such as hospitals or health systems. Unlike hospitals and health systems, whose acquisition prices are subject to fair market value (FMV) in order to comply with Stark and Anti-Kickback statutes, private equity firms have no such restrictions. They can form partnerships based on the strategic value of the practice as opposed to FMV. The strategic value may calculated by applying a multiple to a practice’s EBITDA (earnings before interest, taxes, depreciation and amortization). In addition, PE generally has equity and generally much more equity available than health systems or other suitors already involved directly in health care delivery.

What makes specific specialties attractive are common elements. These include currently fragmented delivery systems, favorable payment environments with strong procedural focus, inclusion of Texas IG)(DDS the menace).

pathology specimen generation, and at least some portion of the business being cash.  Leading this movement was dentistry with a history of corporate dentistry going back more than a decade. There have been what appear to be financial successes but there have also been some spectacular failures including abusive Medicaid clinics investigated by Congress and state authorities(

Of all of the acquisition activities, the one that has captured the most news recently is in the dermatology realm. A recent highlighted article in the NYT (Link) peeled back some of the sausage making involved in making PE investment work, at least in this specialty.

 It has raised a firestorm within the field (Resneck) with the current Chair Elect of the AMA Board of Trustees, Dr. Jack Resneck weighing in. PE firms tend to leverage non-physician clinicians, who are less expensive than physicians, to deliver care, often under limited supervision. This is an especially attractive specialty for PE since there are fewer regulatory burdens involved. Clinics are generally free standing and not burdened with hospital or health system credentialing requirements. A number of dermatologists are cashing out. A number are also raising dire warnings regarding the immediate effects on patient care and the long term effects on the specialty.

This appears to be the start of the wave of consolidation. There are still mountains of cash looking for returns and interest rates are still at historic lows. In the cross hairs are specialties that have bucked the trend toward acquisition by health systems. PE is likely to compete successfully for practices because of the inherent advantages noted above. There are inherent issues which will need to be grappled with, primarily focusing on where capturing efficiencies driven by financial concerns and non-clinicians begins to drive care decisions. In addition, expanded use of non-MD clinicians practicing at "the top of their licenses" will create additional tensions, especially if these changes are deployed in environments where few if any relevant clinical outcomes are measured.

One additional factor which may loom large is how PE influences will play out in an industry where the prices are fixed by administrative mechanisms. The niches within healthcare targeted by PE are specifically the services with the largest profit margins, likely so because they have been mis-priced. In other industries, PE driven expansion in supply will generally drive down prices, creating a feed back loop to discourage additional entry into the field. However, in healthcare, increased supply often drives increased demand, with the pricing controlled by the RUC and Medicare, and private payers simply following their lead.

For those who think that PE entry driving inefficiencies out of the industry will drive down health care costs, guess again. Heavily utilized services which deliver high margins develop interest groups which maintain mispricing by political means. Prices are not set by any sort of market. They are set by the RUC. Be prepared for an explosion of costs as PE driven expansion drives more and more utilization. PE may be good for extracting value from industries but there is reason for skepticism that they will add value to consumers. I believe this pathway may be good for investors in the short term but bad for everyone else.

Informed consents, documentation of encounters, and Larry Nasser

I hate to perseverate about this particular scandal, but the more I think about this situation, the stranger it appears. Dr. Nassar is a doctor and by any standard, his interactions with the gymnasts represent patient encounters. Furthermore, many of these patient encounters were with under aged minors.

I see patients in this age group as well. My encounters happen almost invariably in the presence of some adult guardian. If I do anything to these patients, it is done after informed consent is done. Not always written consent but with explicit permission granted after explaining what I am planning to do and what specifically I hope to accomplish. This is followed by a note in the medical record which documents the events that transpired.

There is a large void in the news reports when it comes down to descriptions of of specific contexts of the assaults perpetrated by Dr. Nassar. The implication is that he touched young girls inappropriately under the guise of treatment.  I don;t work in the sport medicine field and I don't know what their standard workflows and processes are. Do practitioners routinely ask for consent prior to doing manipulations? How do they handle this for minors, especially when the interventions may happen repeatedly and during times when parents are not around? What sort of documentation do they do? Does the documentation acknowledge consent was granted and for what?

I don't know for certain but I suspect that Dr. Nassar and much of the sports medicine world operates in a way which is very different from from the rest of medicine. The rest of medicine is adherent to protocols put in place to protect both practitioners and patients, which also allows for what otherwise represents violation of personal spaces. Are these protocols applied in the realm of sports medicine? It does not appear to be the case. Are there notes written by Dr. Nassar describing each therapeutic intervention, the justification for the intervention, the outcome desired, and subsequent measurement of whether the specific outcome was attained? I do not think so.

Is there evidence that either the gymnast or an adult guardian was fully informed regarding the specifics of the intervention proposed (I am going to do this manipulation requiring me to touch this part of your body), the purpose of the intervention, and the outcome desired. I do not think so.

In my opinion, there are minimum standards which should be required for all doctor (or non-MD clinician) - patient relationships and interventions. These include explicit recognition of patient autonomy, informed consent (not all of which is written informed consent), rigorous protocols for dealing with vulnerable populations (including minor children), and at least a minimum of documentation of intervention deployed which captures the above elements. Furthermore, patients and their adult guardian should have access to all of the medical documentation.  If Dr. Nassar had been required to adhere to these minimum standards, I doubt the events would have transpired.

Larry Nassar and the state of medicine

I read an article in the New York Times this morning about the role of Patrick Fitzgerald as an adviser to Michigan State University (NYT). He was hired by MSU to help them sort out the allegations against Dr. Nassar. It appears that his team did not speak to anyone who placed a complaint but instead focused on senior leadership and other sports medicine doctors.

While there has been lots of coverage in the news about this saga, there has been little written on exactly what Dr. Nassar did which qualified as assault. I believe this is where a problems lies. Physicians are granted some degree of latitude in terms of how we are allowed to interact with  others. We are allowed to ask very personal questions. We are allowed to touch others in ways which no one can do, except those who have very intimate relationships. Each specialty may engage is specific activities which are uniquely delicate and sensitive. Specialists dealing with anatomic areas that may be associated with sexual arousal must tread a fine line.

I don't know what Dr. Nassar did but I can speculate that he manipulated parts of female anatomy under the guise of "treatment". For the young girls who were placed in his hands, they likely started with the default state of trust. They had some musculo-skeletal problem that Dr. Nassar was charged with diagnosing and treating in order to enhance their gymnastic performance. When Patrick Fitzgerald did his review, he asked a number of Dr. Nassar's peers questions regarding the appropriateness of interventions done and the information he got back from them was the interventions represented standard of care. Yes, taken outside the context of treatment what he did might appear to be quite inappropriate but his colleagues assured investigators that the actions were "not sexual in nature".

The truth is health care providers can do almost anything plausible to a patient under the guise of diagnosis or treatment. In the absence of the ability to measure clinically meaningful outcomes, it is essentially impossible to tell if a given practice is appropriate or not. For the most part, outrageous behaviors can be identified. A dentist does not to fondle breasts in order to remove wisdom teeth. However, there are domains where context defines apparent necessity. Looking for breast cancer does involve manipulating the breast.  This opportunity could be abused by a clinician looking for a titillating experience but it generally provides few opportunities to manipulate the breasts of young girls.

Larry Nassar found himself with the opportunity to manipulate the groins of young girls, all under the guise of treatment of something. The current state of medicine did not readily afford an opportunity to weigh in and say, this is not right. He was afforded the status of an expert and despite the discomfort experienced by literally hundreds of young women, their discomfort could be dismissed by a proclamation that the interventions were "not sexual in nature".  From the perspective of one who is part of the "priesthood", this is a claim which is widely accepted. The public does not understand the complexities involved in medicine. We experts know best given our training and experience. Furthermore, we defer to our colleagues in other sub-specialties, in which we are not experts, and the default is to give them the benefit of the doubt.

One of many weaknesses that is evident is that he could get away with what he did for as long as he did because he was not required to show that the interventions he undertook actually accomplished anything. He was not called upon to measure outcomes. He was afforded expert status with no real data demonstrating that he was an expert in anything.