Why good execution trumps kickbacks
The Trump Administration is considering relaxing the federal fraud and abuse regulations for kickbacks and bribes. Even though I still believe people are generally good, the thought of it is cause for concern.
Simply speaking – when there is a big pot of money and no clear rules on how it can be used or earned, bad things happen. There are plenty of examples in healthcare as well as in other industries that serve a broader public interest. Just think back to 2008 for a minute.
The question that remains is whether or not there is a valid business reason to relax the federal bribery and kickback regs. The Ambulatory Surgery Center [ASC] industry is probably the most relevant example for this discussion.
Ambulatory Surgery Centers [ASCs]
In case you’re not familiar with these entities, ASCs are free standing surgical facilities that perform routine surgical cases requiring less than a 23 hour stay.
ASCs are thought to be an extension of a surgeon’s practice and therefore, frequently owned at least in part by the physicians who work there. Current federal regulations require disclosure so that patients understand the financial relationship.
In short, ASCs give surgeons a legal way to participate in the full profits [and losses] of providing surgical services to their patients. There is no need for bribery or kickbacks.
Bribery and Kickbacks
Even though technically there is no need, bribery and kickbacks have been used to incentivize physicians to use one or more facilities.
Patients have been bifurcated by payer and treated at the facility that pays the physician the most money. Federal anti-kickback regulations have helped protect the Medicare population from these practices. However, the commercial population is a whole different story because the impact of economic credentialing is less severe than federal debarment.
Economic Credentialing vs. Federal Debarment
Economic credentialing and federal debarment are similar in that they exclude a provider from participation in a specific network. Federal Debarment is more punitive for providers because few providers can afford to operate without servicing patients funded by government programs, and more specifically Medicare.
Commercial payers have had a harder time excluding providers from their networks because they have to remain competitive with other health plans in the market to get the more lucrative contracts with employers.
So relaxing the federal kickback and bribery regulations reduces the risk of federal debarment and increases the potential for schemes that maximize provider reimbursement.
Value Based Care
The argument for relaxing the federal fraud and abuse guidelines is to better facilitate value based care arrangements. The desired outcome of value based arrangements is to increase the quality and reduce the cost of care.
If we think about the Strategic Execution Framework, how would relaxing federal regulations translate into the structure of the organization?
I’ve put together a sample outline of the structure needed to support a value based care transformation to help you answer the question.
Purpose: We provide patients needing routine surgical services a high quality, cost effective alternative to inpatient services.
Long Term Intention: We will continuously expand the scope of services provided and improve the quality of our care by investing in our people, facility and processes. We will also strive to deliver the outstanding service patients expect and deserve.
Identity: Our employees are service oriented, committed to continuous learning so that they are prepared for what’s next and have the courage needed to help the organization step into the future.
Key Values: Service, Learning, Growth and Courage
Long vs. Short Term Intention
During the height of the Out-of-Network strategy [and kickbacks] in the ASC industry, I asked several physicians how long they thought the scheme would last. Most thought only a few years.
Some had a short term intention because they were close to retirement. Others lost site of the bigger picture and consequently, paid a big price in the end.
Relaxing the federal fraud and abuse regulations seems like another short term intention that could run amuck. Kickbacks are not a substitute for good strategic execution.
Strategists often leave the Operators in charge of execution. It rarely works. In fact, it only works 10% of the time.
Strategic Execution requires specialized knowledge and skill to develop the structure and culture needed for long term success.
I’ve been reading the Nordstrom Way lately. Nordstrom success has everything to do with their strategic execution.
I’ll share some more insights from the book in a future Rush Weekly.