The Disruption Distortion

By now you may have read about the hand-to-hand combat in the hallowed hallways of Harvard.

In a scathing critique of Clay Christensen’s seminal work on disruptive innovation, Jill Lepore, a fellow Harvard professor, claims in a New Yorker essay“It’s a theory of history founded on a profound anxiety about financial collapse, an apocalyptic fear of global devastation, and shaky evidence.”

Christensen responded in an interview with Business Week saying:

“In fact, every one—every one—of those points that she attempted to make [about The Innovator’s Dilemma] has been addressed in a subsequent book or article. Every one! And if she was truly a scholar as she pretends, she would have read [those]. I hope you can understand why I am mad that a woman of her stature could perform such a criminal act of dishonesty—at Harvard, of all places.”

Whoa! Let the fireworks begin!

Walking the talk

In the interview, Christensen doesn’t dispute the almost random use of the word “disruption” or the need to bring discipline and understanding around a very useful theory. But he does set the record straight on many of Lepore’s drive-by claims, such as incumbents not disappearing in the retailing industry, integrated steel companies such as U.S. Steel still being dominant, disruption not happening overnight, about unionization as an explanatory factor, and the failed Disruptive Growth fund.

I did some quick research of my own research: Nucor (the disruptor) is the largest U.S. steelmaker in terms of market value with a market cap of $16 billion—four times that of U.S. Steel (the disrupted) with a market cap of only $4 billion. Nucor’s operating margin of 7.7% in 2013 was more than twice as high as U. S. Steel’s 3.4%. U.S. Steel has lost more than $900 million from 2010-2013 while being in the red every one of those years. Meanwhile, Nucor has been profitable every year with a net profit of $1.9 billion during the same timeframe.

And yet Lepore hangs her hat on U.S. Steel being “the largest U.S. producer of steel” (without saying on what basis) to accuse Christensen of ignoring factors that don’t support his theory.

Christensen is truthful in the interview. He openly admits to having missed the fact that iPhone was disrupting the laptop and was not a sustaining innovation against Nokia.

He says that he could list 10-15 problems that we still need to resolve, and if Lepore were “actually interested in the theory and cared enough about it to walk 15 minutes to talk,” he would have listed the problems with the theory for her.

“She [appears to have] only read one book at the beginning in the naive belief that the end comes out at the beginning,” fumes Christensen. “But because her purpose was to discredit me rather than look for the truth, she didn’t even look.”

The rest was unreadable

Lepore’s penchant for over-the-top theatrics is obvious very early on. She recalls finding a copy of “Steppenwolf” floating like a raft in a clogged sink. This was in the last years of the 1980s, mind you. Twenty Five or so years later, she still remembers reading the exact words on the cover: “In his heart he was not a man, but a wolf of the steppes.”

Then, dramatically, she adds: “The rest was unreadable.”

But amazingly enough, she could still read—on the cover of this unreadable, waterlogged book floating in the sink—that it was a Bantam Books edition, and still recall that fact 25 years later.

I was unable to retrieve the actual bloated book from the clogged sink at Polaroid (a “disrupted” company), but I was able to find two Bantam Books editions, one from 1979 and another from 1983, on website.

Assuming the book Lepore purportedly discovered in the bathroom was similar to one of these two covers, I am simply amazed that the words (“The world-famous novel of a man’s struggle toward liberation”) written just below the exact words she quotes were unreadable to her, but she was somehow able to decipher (and still remember) on a bloated cover the words “A Bantam Book” written in much smaller print just above the quoted words in the 1979 edition cover or running vertically and way off to the edge of the 1983 edition cover.

This whole unreadable theme is a setup, you see. Fast forward to the end and Lepore closes her diatribe with the “Steppenwolf” reference saying that “it is still available in print, five dollars cheaper as an e-book,” as if that in itself is convincing evidence of disruptive innovation theory’s failure.

Then she dramatically ends: “He’s a wolf, he’s a man. The rest is unreadable. So, as ever, is the future.”

As if implying that no bogus theory like disruptive innovation is going to make the future readable, Lepore moves on to pen the history of the national anthem in a column the following week, describing how the American flag “flew from the right-field pole, snapping in the wind like a whip” during the first game of the 1918 World Series, in Chicago.

It is remarkable what historians can find out.

Ulterior motive

After waxing on for the first two and a half pages about the wanton use of disruption, and not-so-casually dropping Michael Porter’s name, Lepore pulls out the dagger out of nowhere:

The strength of a prediction made from a model depends on the quality of the historical evidence and on the reliability of the methods used to gather and interpret it. Historical analysis proceeds from certain conditions regarding proof. None of these conditions have been met.

She conveniently forgets to mention Christensen’s scholarly article titled “The Ongoing Process of Building a Theory of Disruption” published in 2006 in the Journal of Product Innovation Management.

In this article, Christensen responds to the critiques head on while accepting some as useful additions or corrections and suggesting that others are ill-founded.

He recounts the development of the theory of disruption within the context of a model of what theory is and how it is built. He also addresses the concern about the model’s predictive ability and provides four publicly documented examples to show that the fear is unfounded.

On the contrary, Lepore takes random acts of other people under the name of “disruption” and blames them on Christensen. While it is true that “disruption” has become a buzzword, it is not Christensen’s fault that people have misused and even abused it.

So what could be Lepore’s motivation? Hard to say for sure, but I am going to hazard some guesses:

Attack Dog: Porter is on record, in a New York Times article on online education at Harvard, saying “Clay sees disruption everywhere.” Having worked for Porter (as an assistant to his assistant), Lepore may be in his camp. But I doubt that Porter would sic Lepore on Christensen. I hope Porter has better things to do than that.

Personal:  Her tirade, while very well-written, seems rather personal. (“History speaks loudly, apparently, only when you can make it say what you want it to say.”) Those are serious accusations to make. Christensen is right. If you are going to ambush his life’s work, you owe him some professional courtesy—especially if you work within walking distance of him on the same campus. But Christensen says that he has never met Lepore, so how could it be personal?

Pressed for time: Writing columns while teaching and conducting research can’t be easy. Maybe she was just pressed for time and got something out quickly by the deadline. Given the length of it (more than 6,000 words) and the various references (although superficial) to Christensen’s work, however, this essay seems like a well-planned attack.

Notoriety:  I have known of Christensen for at least 15 years. I have bought many of his books and have quoted him in my articles. I have heard him speak and even met him briefly at the World Innovation Forum event in 2007. Although she is a well-accomplished Professor of American History at Harvard and a contributor to The New Yorker since 2005, I had no idea who Jill Lepore was—until now. So, if notoriety was her motive, it is mission accomplished.

Charles Barkley is no stranger to drunken and overzealous fans accosting him. After he threw a man out of a window during a bar fight, a judge asked Barkley if he had any regrets. Barkley replied: “Yeah, I regret we weren’t on a higher floor.”

Two-Faced Facebook

The blogosphere is abuzz about Facebook’s antisocial experiment where almost 700,000 people had their feeds secretly altered to gauge effect on emotion.

Although this particular “experiment” lasted only a week back in 2012, Facebook can’t claim it was a small sample.

In a highfalutin-sounding study published by PNAS titled “Experimental evidence of massive-scale emotional contagion through social networks,” chief author and Facebook’s data scientist Adam Kramer called it a “massive (N = 689,003) experiment on Facebook.”

This study recently came to attention via a blog on which complained that “Facebook is using us as lab rats.” The story then caught fire after it was picked up by major publications such as WSJ.

More specifically, the study says the following:

“Which content is shown or omitted in the News Feed is determined via a ranking algorithm that Facebook continually develops and tests in the interest of showing viewers the content they will find most relevant and engaging. One such test is reported in this study: A test of whether posts with emotional content are more engaging”.

In other words, Facebook routinely and systematically manipulates the news feed to suit its own purpose (read “more relevant and engaging”) and so this was really no big deal!

According to The Atlantic, the study even creeped out Susan Fiske, who was the editor of the study and is a psychology professor at Princeton University. She wondered in the interview:

“Who knows what other research they’re doing.”

The study further explains what the researchers did in this instance:

“The experiment manipulated the extent to which people (N = 689,003) were exposed to emotional expressions in their News Feed. This tested whether exposure to emotions led people to change their own posting behaviors, in particular whether exposure to emotional content led people to post content that was consistent with the exposure—thereby testing whether exposure to verbal affective expressions leads to similar verbal expressions, a form of emotional contagion.”

With all the outrage, Adam Kramer published a public response on Facebook:

“I can understand why some people have concerns about it, and my coauthors and I are very sorry for the way the paper described the research and any anxiety it caused. In hindsight, the research benefits of the paper may not have justified all of this anxiety.”

In other words, we would have been better off had we kept this study secret rather than sharing it with the world!

I doubt that Facebook’s emotional manipulation actually scarred any of the unwitting participants, but Facebook’s stance and so-called “internal review practices” may seem two-faced, particularly in light of Mark Zuckerberg’s open letter to President Obama earlier this year about the sanctity of the internet.

“The US government should be the champion for the internet, not a threat. They need to be much more transparent about what they’re doing, or otherwise people will believe the worst.”

Well, touché, Mr. Zuckerberg, touché.

At least the NSA has a good reason to be secretive and a nobler goal of protecting Americans from the terrorists. What this little “research” has taught us is that we need to protect ourselves from the likes of Facebook.

Top hospitalists use questionable billing practices

Medicare physician-payment data shows that over one thousand primary care physicians providing hospital-based services billed Medicare more than five times the average, raising questions about their billing practices.

A common explanation that Medicare permits the use of a single National Provider Identifier (NPI) fails to account for specific requirements for the four common billing scenarios that allow such use.

The Medicare physician-payment data, made public for the first time in April, has revealed unusual patterns in doctor billings in recent stories by New York TimesWall Street Journal, and ProPublica.

Data Limitations

Many of AMA’s complaints about the Medicare provider payment data release have merit. For example, care quality cannot be assessed from the information reported. It is true that billed charges and payments are not the same. The data set also does not represent the physician’s whole patient population.

previous post provided demographic, utilization, and payment insights into the fastest-growing hospitalist specialty—primary care physicians who provide hospital-based services. This post will tackle the issue of billing outliers among hospitalists.

Human Limitations

With Medicare Advantage and all private payers excluded from the data, it is not unreasonable to expect that even the most hard-working individual physician would be able to provide about 5,000 hospital-based work RVUs (wRVU) per year for Medicare patients.

Medical billingThe work RVU (wRVU) element is associated with each CPT® code and represents the relative level of time, skill, training, and intensity to provide a given service. CPT is a registered trademark of the American Medical Association and an industry-standard way of measuring physician workload.

The average for more than 79,000 primary care physicians in the data was 1,230 wRVU in hospital-based services. Physicians who provided more than 50% of their total services using the 20 CPT codes commonly associated with hospital-based services were categorized as hospitalists. The average workload for the hospitalists was higher at 1,759 wRVU.

The data reveals that the top one thousand primary care physicians providing hospital-based services averaged more than 9,300 wRVUs or 7.5 times the average for all primary care physicians and 5.3 times the average hospitalist. The top 263 physicians each billed more than 10,000 wRVU, with one hospitalist topping out at more than 40,000 wRVU!

Plausible Explanation?

One plausible explanation that is often given for the top outliers is that the services can be billed under a supervising physician’s NPI. The AMA’s letter to CMS states the following:

There also are a number of situations where it will appear that one physician has performed services that were actually delivered by many practitioners because Medicare permits the use of a single NPI without identification of the individual who delivered the service in a number of situations. These include “incident to” services provided by residents and other health care professionals who bill for their services under a supervising physicians’ NPI.

While Medicare does permit the use of a single NPI, it is not a free-for-all. There are four common scenarios that permit billing under another physician’s NPI. It is worth discussing specific requirements for each to see if the single-NPI justification can sufficiently explain the high outliers.

 1.       Billing Under a Single NPI:

The mechanism for billing a physician under another physician’s NPI, known as the Q6 modifier, is very clear. Medicare Claims Processing Manual (Chapter 1, Section 30.2.11) unequivocally states:

“The regular physician identifies the services as substitute physician services meeting the requirements of this section by entering HCPCS code modifier Q6 (service furnished by a locum tenens physician) after the procedure code.”

In short, the Q6 modifier is reserved for locum tenens physicians and its use must meet several requirements, including:

  • The regular physician is unavailable to provide the visit services.
  • Locum tenens physician is not an employee of the regular physician.
  • The regular physician pays the locum tenens for his/her services on a per diem or similar fee-for-time basis.
  • The substitute physician does not provide the visit services to Medicare patients over a continuous period of longer than 60 days.

None of these “substitute physician” requirements could be met by other physicians in the same group, thereby making the use of Q6 modifier to bill under a single physician NPI on an ongoing basis a highly questionable billing practice.

2.       Billing for Locums Tenens Physicians

As the Q6 discussion has indicated, a regular physician may submit a claim under the locum tenens arrangement using his/her own NPI and, if assignment is taken, receive payment for covered visit services assuming the specified conditions are met.

However, the substitute physician may not provide the visit/services to Medicare patients over a continuous period of longer than 60 days.

Because many locum tenens assignments in the hospitalist environment last longer than 60 days, continuing to bill locums using the Q6 modifier could result in a highly questionable billing practice.

3.       Billing for Non-Physician Providers

“A high-earner may be billing for several mid-levels” is a common refrain offered to explain high billings. There is an equally common misperception that a hospitalist can routinely bill for a non-physician practitioner (NPP) being “supervised” under the physician NPI so as to get reimbursed at 100% of the physician’s rate rather than the 85% rate if billed under the NPP’s provider number.

According to Texas Medical Association, services and supplies that would normally be covered “incident to” in an office setting, such as NPPs that the physician hires and supervises, are not billable by the physician in hospital settings.

If the physician uses the services of his/her own employees in a hospital setting and the physician merely “supervises” his/her services, the physician is not eligible for a payment from Medicare because supervision alone does not constitute a reimbursable practitioner service.

WPS, a Medicare contractor, confirms the position that “incident to” guidelines do not apply to services in an inpatient setting. Rather than “incident to” billing, the encounter must be billed as a shared/split visit.

Finally, Medicare Claims Processing Manual (Chapter 12, Section 30.6.1.B) documents specific requirements for shared/split visits with a nonphysician practitioner (NPP):

When a hospital inpatient/hospital outpatient or emergency department E/M is shared between a physician and an NPP  from the same group practice and the physician provides any face-to-face portion of the E/M encounter with the patient, the service may be billed under either the physician’s or the NPP’s UPIN/PIN number. However, if there was no face-to-face encounter between the patient and the physician (e.g., even if the physician participated in the service by only reviewing the patient’s medical record) then the service may only be billed under the NPP’s UPIN/PIN.

In other words, to bill for NPPs under the hospitalist’s NPI as a shared/split visit, there must be: 1) documentation of the face-to-face portion of the E/M encounter between the patient and the physician and 2) the medical record should also clearly identify the part(s) of the E/M service which were personally provided by the physician and which were provided by the NPP.

In the absence of such documentation, the service may only be billed under the NPP’s provider number.

This applies to the initial history and physical examination, the discharge summary, and subsequent hospital visits. A notation of “seen and agreed” or “agree with above” does not qualify the situation as a shared/split visit.

If the face-to-face encounter and documentation requirements for a shared/split visit are not met, simultaneously billing for “several mid-levels” under the same physician’s NPI would become a highly questionable billing practice.

4.       Billing in Teaching Setting

Medicare Benefit Policy Manual’s Chapter 15 explains Part B services in a teaching setting:

Part B covers services that attending physicians (other than interns and residents) render in the teaching setting to individual patients. These include such services as reviewing the patient’s history and physical exams, personally examining the patient within a reasonable time after admission, confirming or revising diagnoses, determining the course of treatment to be followed, assuring that any supervision needed by interns or residents is furnished, and making frequent review of the patient’s progress.

Medicare Claims Processing Manual (Chapter 12, Section 100.1.1) documents specific requirements for services billed by teaching physicians as follows:

For purposes of payment, E/M services billed by teaching physicians require that they personally document at least the following:

  • That they performed the service or were physically present during the key or critical portions of the service when performed by the resident; and
  • The participation of the teaching physician in the management of the patient.

Documentation by the resident of the presence and participation of the teaching physician is not sufficient to establish the presence and participation of the teaching physician.

On medical review, the combined entries into the medical record by the teaching physician and the resident constitute the documentation for the service and together must support the medical necessity of the service.

The manual further states that if the resident performs some or all of the required elements of the service in the absence of the teaching physician, the teaching physician must independently perform the critical or key portion(s) of the service with or without the resident present. The teaching physician must also document that he/she personally saw the patient, personally performed critical or key portions of the service, and participated in the management of the patient.

If these key teaching environment requirements are not met, billing for residents under the same attending physician’s NPI would become a questionable billing practice.

Million Dollar Doc

In an interview, one of the highest earners explained that his hospitalist group had about seven providers in 2012 and their outside biller was “Q6ing most of the doctors” under his name. The group had no idea why and didn’t understand the process well enough at the time.

The unusually high number of services under a single NPI triggered a Medicare audit. The group had to provide extensive documentation to explain the issue and also had to make sure that individual physicians were credentialed appropriately.

Based on the data analysis and requirements review, his situation hardly seems like an isolated anomaly.

Questionable Billing Practices

With online access to individual physician’s Medicare billing and payment details, the front-page ethics test has now become a reality. But it amounts to more than just salacious, break-room gossip.

The bottom line is that each of the four scenarios above has very specific billing requirements, and proper compliance with them would severely constrain the maximum workload that can be physically provided under a single NPI.

The detailed data analysis points to the presence of questionable billing practices among high-earning hospitalists because the single-NPI explanation fails to justify hospital-based workload that would be several times more than the average.

To avoid any unwanted attention and to steer clear of expensive and time-consuming audits, all hospitalists should reexamine their current billing practices for billing under another provider’s NPI.

PS: You can also see the press release on this topic at:

What we know about Hospitalists

Although highly-paid doctors were played up in major newspapers after the Medicare data release, a lot of useful information about hospitalists has been ignored.

After Medicare released a treasure trove of provider payment data, media outlets such as The Wall Street Journal and New York Times, published pieces focusing on the tiny sliver of doctors accounting for an outsize portion of Medicare’s 2012 payments.

CMS has already listed several data limitations on its website. Further, AMA has made its feelings known even before and soon after the data release in a letter to CMS according to the CNBC story.

While the AMA’s objections clearly have merit, in my opinion the alleged data limitations do not render the information so worthless so as to prevent drawing any meaningful conclusions.

There is a wealth of demographic, utilization, and payment related information available for the very first time in the data release, particularly as it relates to hospitalists.

Deconstructing a Hospitalist

Information related to hospitalists has always been somewhat suspect.

Until now, many things we thought we knew about hospitalists (primary care physicians who provide care to patients in the hospital) have been based on anecdotal information, statistically questionable surveys, or incomplete membership information.

HospitalistUnfortunately, there is no “hospitalist” designation in the enormous data release because physicians are listed under Internal Medicine or Family Practice or General Practice.

However, there is enough information in the Medicare data release to reliably isolate hospital-based services based on the entity code, place of service, and provider specialty along with 20 specific CPT codes (registered trademark of the American Medical Association) predominantly used by hospitalists in a hospital setting for observation, inpatient, and critical care.

Using this methodology, I compared the number of hospital-based services provided by each independent physician belonging to Internal Medicine, Family Practice, or General Practice in a facility setting to the total number of services provided by the same physician.

Physicians who provided more than 50% of their total services under the 20 CPTs commonly associated with hospitalists were categorized as “hospitalists” and the rest were classified as “traditionalists.”

Further, by overlaying physician work RVU (wRVU)—representing the relative level of time, skill, training and intensity to provide a given service—associated with each CPT code, the services were converted to a more standardized and consistent wRVU metric, which is a predominant factor in physician compensation.

Key Findings

A detailed analysis of the 2012 Medicare data using the methodology outlined above revealed the following key findings:

  • Numbers: Hospitalists were outnumbered by traditionalists. There were 37,983hospitalists and there were 41,622 traditionalists.
  • % of Services: Of the 51.6 million hospital-based services, 67% were provided by hospitalists—twice as many services as provided by traditionalists.
  • % of Work: Hospitalists often exclusively provide hospital-based services so it should come as no surprise that the 20 hospital services comprised 87% of all the services for hospitalists and only 12% for traditionalists. This bolsters the hospitalists’ claim that greater experience in a hospital setting makes them more efficient providers.
  • % of Females: The percent of hospitalists that are female stands at 35% compared to only 24% among traditionalists. The difference may exist because of the location where hospitalists may be more common or because of women’s desire not to be spread themselves too thin as a traditionalist working in both inpatient and outpatient environments.
  • Uptake by State: States with a minimum of half a million hospitalist services and 75% or greater hospitalist uptake are: Nevada, Washington, Arizona, Massachusetts, North Carolina, and Virginia. States lagging with 60% or less in hospitalist uptake are: Alabama, West Virginia, New Jersey, Mississippi, Illinois, Arkansas, Kentucky, Louisiana, and Indiana.
  • Specialty: Internal Medicine specialty dominates the hospitalists with 84% belonging to it compared to 58% of the traditionalists.
  • Workload: The average Medicare workload for a hospitalist was 910 services or1,759 wRVUs compared to 409 services and 748 wRVUS for a traditionalist. It is important to remember that this workload only represents Medicare patients and does not include Medicare Advantage or private-pay patients.
  • Coding Levels: The highest level admission code (99223) was used 66% of the time as opposed to 99221/99222. For subsequent care middle level code (99232) was used 62% of the time compared to 99231/99233. Generally, hospitalists were more prone to using higher levels codes compared to traditionalists, possibly reflecting sicker patients under their care. .
  • Charge Mark-Up: Hospitalists marked up submitted charges at 204% (more than twice) of the Medicare allowed amount compared to traditionalists who submitted charged at 171% of the Medicare allowed.
  • Paid vs. Allowed: Both hospitalists and traditionalists were reimbursed 79% of the allowed amount. In other words, the an additional payment of 21% for deductible and coinsurance amounts would have been due from other sources, including patients.
  • Paid Amount: Medicare paid $3.93 billion for hospital services provided by hospitalists and traditionalists with 68% of it going to the hospitalists. It is important to remember that Medicare payments represent only a portion of the full revenues (notprofits) because physicians also bill private insurers and other payers.
  • Payment Rate: The payment rate per service was $76. Because services can range from 99231 (at $30) to 99291 (at $174), a better way to look at the payment rate is per wRVU, which was $40. The allowed rate per wRVU was $51.
  • Gender Gap?: Despite the headlines regarding Gender Pay Gap, the amount paid per wRVU was virtually identical for female and male physicians at $40 indicating that the difference in total amount paid to men vs. women is explained by the volume or number of wRVUs submitted rather than the reimbursement rate.


The demographic, utilization, and payment data provides unprecedented insights into the heretofore loosely-defined “hospitalist” profession.

Contrary to WSJ story, Hispanics at the bottom in UC admissions

In a WSJ story called “Hispanics Gain at California Colleges,” Miriam Jordan reports that The University of California (UC) has admitted more Hispanics than whites for the first time.

The story reports that Latinos accounted for 28.8% of the 61,120 Californians admitted for this fall’s freshman class at the UC system’s nine undergraduate campuses, up from 27.6% last year and topping the 26.8% share of whites.

While that is definitely a noteworthy development, the story left something to be desired: As always, looking at the numerator without attention to the denominator can lead to erroneous conclusions.

Although the WSJ story recognizes that Hispanics represent California’s largest ethnic group and reports the ethnic composition of 15-19-year-olds in California, it doesn’t quite finish the thought or the calculation.

College AdmissionsSo, I decided to finish it myself! I created a table based on the info in the WSJ story, CA Dept of Finance data, and filled in some blanks for “other” ethnicities because the percentages didn’t add up to 100% otherwise.

All of a sudden, these numbers show in a very different light! Hispanics are at the bottom when you consider their percent representation compared to the other ethnicities.


UC Freshman

Ethnic Composition 15-19 year

% Representation























That left me wondering about a few questions, such as:

  1.  How has the % Representation changed over time?
  2.  What effect has California’s prohibition of consideration for race or ethnicity (Proposition 209, the 1996 ballot initiative that amended the state constitution) has had on % Representation?
  3.  How do these percentages look over time at the state’s most competitive schools, UC-Berkeley and UCLA?

Answers to these questions are important because things may be changing. A Washington Post blog said that California voters could decide this fall whether to allow state universities to consider the race, gender, color, ethnicity or national origin of applicants when deciding admissions.

According to the blog, State Sen. Ed Hernandez, a Los Angeles Democrat and lead sponsor of the bill, said the percentage of minority students in the University of California and California State University systems has declined precipitously since Proposition 209 had passed.

Stay tuned!

Doctor-Pay: Top 10 Arizona doctors received $2.5+ million each

For the first time, Centers for Medicare & Medicaid Services (CMS) has released a public data set with information on services and procedures provided to Medicare beneficiaries by physicians (aka Doctor-Pay) and other healthcare professionals.

In 2012, Medicare paid $77.4 billion to more than 880,000 doctors and other health care providers. Eight states (CA, FL, TX, NY, NJ, IL, PA, and NC) accounted for 51% of the total payments.

doctor-payIn Arizona, Medicare paid $1.3 billion to more than 15,000 individual doctors, with the rest paid to companies, including clinical laboratories, ambulance service suppliers, and ambulatory surgical centers.

Medicare payments represent only a portion of the full revenues of a physician’s practice because physicians also bill private insurers and other payers.  For certain specialists, the cost of expensive equipment and/or drugs may be included into the payments doctors receive. In other specialties such as hospital-based internists, physicians may work as locums and actually get paid under another physician they are substituting.

Notwithstanding these and other data limitations, which doctors are getting paid how much from Medicare in Arizona?

Consistent with national trends, top 2% of the doctors accounted for 24% of the Medicare payments in Arizona. Because vastly different numbers of doctors can work in different specialties, merely looking at the total payments can be misleading. In terms of number of doctors in the top 2%, five specialties dominated this select list of 313 doctors as follows:

ARIZONA – Top 2% Docs Only


# of Doctors

Total Medicare Payments

Avg. Medicare Payment Per Doctor

1. Ophthalmology




2. Radiation Oncology




3. Hematology/Oncology




4. Cardiology




5. Dermatology









Top 10 Doctors in Arizona

The 10 highest-paid doctors in Arizona each received Medicare payments in excess of $2.5 million in 2012.

    1. SAAVEDRA, EGBERT – TUCSON – Ophthalmology               $4,364,977
    2. WALSH, MARK – TUCSON – Ophthalmology                        $3,964,410
    3. JAVID, CAMERON – TUCSON – Ophthalmology                  $3,348,891
    4. HARRIS,  APRIL – TUCSON – Ophthalmology                        $3,343,206
    5. RAKKAR, AMOL – GLENDALE – Hematology/Onc                $3,087,798
    6. VRANIC, MITAR – MESA – Vascular Surgery                         $2,991,155
    7. ISAACS, JEFFREY – PHOENIX – Medical Oncology             $2,808,139
    8. BHALLA, RAVI – PEORIA- Rheumatology                                $2,800,399
    9. GERSTNER, GREGORY – TUCSON – Hematology/Onc      $2,629,974
    10. CANTY, THOMAS – PHOENIX – Radiation Oncology           $2,597,257


“Outlier” Doctors

Payments vary greatly depending on the physician specialty. More than 1,559 doctors in Family Practice in Arizona received $50,032 in average payments and provided 1,224 services, whereas 1,776 doctors practicing Internal Medicine received $91,407 in average payments for 1,687 services in 2012. At the other extreme, 274 Ophthalmologists received $363,748 in average payments and provided 3,483 services, whereas 87 doctors practicing Radiation Oncology received $626,465 in average payments for 4,662 services.

To determine “outliers,” we calculated average payment received and average number of services provided for each specialty. And then we compared physicians to peers in their own specialty for an apples-to-apples comparison. We identified top 258 doctors, across various specialties, who received payments that were 5 to 42 times more than the average payment for their specialty in the state. On average, the number of services these doctors provided were nine times that of their same-specialty peers. Of course the service mix could vary from doctor to doctor in the same specialty.

Click on the following table to see the 25 doctors who were at the top of the “outlier” list for having the highest Payment Factor—defined as Medicare payment received by an individual doctor divided by the average payment among same-specialty peers in Arizona:

Top 25 Docs







Clearly, there are many factors including practice setup, location, place of service (facility vs. outpatient), patient population, and severity of disease that can skew the payment data. But an individual doctor receiving payments 10+ times more than his or her peers working in the same specialty is akin to a major league batter hitting .750 when the MLB average in 2012 was .255 over more than 165,000 at-bats.  (Nobody has ever come close to accomplishing that—even during the steroid era!)

The data limitations have been well-documented and even explained by CMS in its methodology document. The exceptions cited in the WSJ story for medical homes and more expensive procedures to avoid more invasive tests later are valid, but I don’t agree on the following points:

1) Exceptions: Are we to assume that all family practice doctors, even those being paid 5-10 times than their average peer, are running medical homes or that all cardiologists are doing PET imaging? That must not be the rule.

2) Overhead or Facility: How do we explain “overhead” when the place of service for many of the specialists is the facility. In those situations, I doubt if they are incurring the stated practice overhead as reported in the WSJ story. For example, I looked up a Nephrologist ($347K Medicare payment) who has an office, and either office visits or initial/subsequent hospital care  accounted for a majority of his payments. In such cases, which I believe are very common, I don’t buy that 46% of his actual reimbursement went toward expenses and overhead, especially if he does not buy and administer expensive drugs or own his own expensive dialysis or other equipment.

3) Partial Payments: The amounts Medicare reported as paid are after deductible and coinsurance amounts have been deducted. This means that doctors received payments for deductible and coinsurance in excess of the reported Medicare payments. My estimate is Medicare pays about 80%. If true, these payments are understated by as much as 25%. I have not seen this fact reported by any of the major media outlets.

4) Quantity vs. Quality: Although the quality of services is not reported the sheer volume of services in some cases is astounding. For example, Dr. Burhan Chinikhanwala (interviewed in the Arizona Republic story) in Bullhead City gave 30,000 Tocilizumab injections to 11 patients at $2.80, Abatacept injections to 20 patients 10,075 times at $16.13, and 17,090 Infliximab injections to 75 patients at $50 (according to NYT and WSJ interactive graphics). I am no Rheumatologist, but how is that even possible? Also, we don’t know the cost of these medicines to him, but it raises three questions: 1) Were these injections really needed or does everyone get it? 2) How can so many injections be justified, especially to so few patients? 3) Assuming the patient number is somehow inaccurate, how can one doctor see so many Medicare patients in addition to all the other Medicare Advantage and private-pay patients without burning out?

5) Complexity/Self-Referral: As far as the “complexity” argument of Dr. Fernyhough in the WSJ story, I am not so sure either. Having run a medical practice for hospitalists, I know that Medicare rules allow a doctor to bill for others’ services in case of locum physicians (for 60 days or so) and nurse practitioners directly supervised by the doctor. Same goes for attending doctors billing for residents and fellows. Physical Therapist, however, is a legitimate provider type. I don’t understand why Dr. Fernyhough would bill six of his office physical therapy staff under his own NPI rather than the NPIs for the staff if they provided the PT service. More importantly, it also raises an interesting question about self-referral related to physical therapy. Is it a Medicare requirement for orthopedic surgeons to also provide physical therapy in-house?

All in all, this data release is a great first step (kudos to WSJ for fighting for it) because it is forcing all of us to dig deeper and ask some very important questions.

Imperative for HR: Don’t put lipstick on a pig

Last year, a Gallup survey on the “State of the American Workplace” found that only 30% of the U.S. workforce is engaged. What role must HR play in this crisis of workforce disengagement?

Back to the basics

As described in a previous post, the basic facts on employee motivation have been fairly well known since 1968 as revealed in on one of the all-time classic Harvard Business Review articles titled “One More Time: How Do You Motivate Employees?” by Frederick Herzberg.

His research showed that the set of factors that dissatisfy employees are separate and distinct from the factors that create satisfaction. The growth or motivation factors that are intrinsic to the job are: achievement, recognition, the work itself, responsibility, and advancement. These factors are tied to the job content.

The dissatisfaction-avoidance factors are extrinsic to the job and are found in the job environment. They include: company policy, supervision, interpersonal relationships, working conditions, salary, status, and security. As the Gallup survey observed, “indulging employees is no substitute for engaging them.”

Imperative for HRUnfortunately, environmental factors that titillate are far easier to address than the intrinsic factors that motivate. But that is akin to putting lipstick on a pig. Little wonder then that a majority of the workforce is either uninspired or actively disengaged?

Failing grade for HR

Corporate Leadership Council’s 2006 research report titled “Defining Critical Skills of Human Resources Staff,” based on a survey of chief human resources officers at nearly 200 organizations, had found that few CEOs saw the function as strategically important, or as meeting performance expectations.

It is debatable whether that perspective has changed much in the last few years, and that is what presents HR an opportunity to shine in two key areas:

Strategy Formulation: Strategy is the company’s modus operandi for dealing with future challenges. If HR doesn’t fully understand the strategy, how can it help shape it? How can it guide the company in that direction? It is incumbent on HR to understand the strategy, and more importantly, its implications as they relate to determining how employees will align with the changing business priorities.

  • What organizational structure will be best suited to accomplish the objectives?
  • How can the work itself be designed and organized to maximize intrinsic motivation?
  • What HR policies will be more effective than others?

In short, as Herzberg puts it: “How do you install a generator in an employee?”

Strategy Implementation: In many organizations having a feel-good mid-winter meeting in Arizona creates a false sense of security that strategic planning can be accomplished in a two-day powwow.

Again, HR has an important function to perform in advising business executives on the practicalities of implementation. HR is in a great position to inject reality by communicating employees’ existing capabilities and what it will take to bridge the gap to the future capabilities. HR can be the litmus test to see what kind of change management effort the company will need.

To accomplish these objectives, however, HR will need to take off the blinders and broaden its horizons about strategy formulation, data-driven recommendations, being consultative, change management, and communication. Instead of being seen in a tactical compliance role, HR must view itself in a strategic position of generating and sustaining commitment. HR should focus on being the bridge between the company and the employees’ intrinsic connection to their work.

Then, and only then, will HR be seen as a strategic partner rather than order-takers and invited to be at the head table.

PS: This blog is based on my article published in HR Strategy and Planning Excellence and also posted on

Marketing Effectively As An Underdog

As a marketer, it is easy to feel overwhelmed when going up against much bigger rivals. The big dogs can have an impressive legacy, unique branding, and deep pockets. So, if you are an underdog, how do you market effectively with low or no marketing budget?

Philip Kotler, the father of modern marketing, said: “Marketing is not the art of finding clever ways to dispose of what you make.” Unfortunately, putting the cart before the horse has become far too easy in today’s social-media frenzy.

Marketing Underdog

The good news is that there are many examples of upstarts outflanking much bigger rivals. But it requires a fundamental rethinking of a company’s place in the customer marketplace.

Achilles’ Heel

History has shown that market leaders can be their own worst enemies. Their soft underbelly can present opportunities in three areas for those who dare to be creative and passionate:

Scope: Larger companies, with my-way-or-highway attitude, often ignore certain customer segments because they may be unprofitable or difficult to serve. Smart marketers need to develop product or service offerings to help these underserved or neglected non-consumers. For example, Southwest Airlines started with three planes and targeted those passengers who couldn’t afford to fly and were either driving or taking the bus instead.

Service: Big companies can install customer-relationship software, but instilling a customer-first culture is often difficult for them because of unwieldy operations, multiple locations, internal politics, inward focus, and misplaced incentives. For example, Chick-fil-A, which started as Dwarf Grill in Hapeville, Georgia, has managed to keep customer loyalty and employee engagement front and center in an industry where fast food is synonymous with unfriendly service and high attrition.

Scale: Larger rivals can make huge investments, but they can also have blinders on about bigger and better customers. For example, Paychex saw an opportunity to make payroll outsourcing easy and affordable for small businesses after realizing that heavyweight ADP’s product offerings, internal processes, information technology, resource allocation, and incentive structure were all geared toward serving larger employers with 50+ employees.

Ignorant Antagonists

If these examples of upstarts outwitting the incumbents appear one-off or outdated, think again. Clayton Christensen, one of the world’s top experts on innovation and growth, has done in-depth research on how industry leaders get blindsided—precisely because they focus too closely on their most profitable customers and businesses.

According to Christensen, successful companies relentlessly move up-market by pursuing “sustaining” innovations aimed at demanding, high-end customers and by making better products that can be sold for more money to them. When they do so, however, they unwittingly open the door to “disruptive” innovations at the bottom of the market.

Mark Twain knew this more than a century ago. He said: “The best swordsman in the world doesn’t need to fear the second best swordsman in the world; no, the person for him to be afraid of is some ignorant antagonist who has never had a sword in his hand before; he doesn’t do the thing he ought to, and so the expert isn’t prepared for him; he does the thing he ought not to do; and often it catches the expert out and ends him on the spot.”

The caveat for low-budget marketers is to avoid taking the Goliaths head-on by going into battle with a sword. Instead, the trick is to develop an unconventional, five-smooth-stones strategy that would make the established rivals laugh and say, “Yeah, right!”

So, put on your ignorant antagonist hat and think carefully about what you want to market, to whom, and why before worrying about how to market it.

Remember the time when established mainframe computer makers labeled the personal computer a toy, when digital cameras were mocked by professional photographers, or when online education was pooh-poohed by major universities?

PS: A version of this post was previously published at Marketing Profs and CommPRO.Biz, both leading websites for marketing and communications professionals worldwide.


Ad Battles: Apple’s Non-Response to Disparaging Ads

A recent article in Variety titled “Apple, Once A Maker Of Ads With Bite, Gets Bitten By Rivals” ponders why Apple hasn’t responded in kind to the ads poking fun at it by Samsung, Microsoft, and Google’s Motorola unit. The article rightfully points out that as the world’s most valuable brand, Apple doesn’t have to stoop to the level of its competition—no matter how annoying they may be.

But there is more to it than that.

As Mom always said, “If you have nothing good to say about others, don’t say anything.” That is a good rule of thumb to remember in advertising too. Just like in presidential elections where the challenger always wants more debates and the incumbent wants as few debates as possible, Apple is now the incumbent as far as mind share is concerned. Apple no longer sees any need to give free airtime to its competitors.

Also, Steve Jobs had the chutzpah and in-your-face attitude to mock Microsoft. Comparative advertising, in which competitors are named, is always a gamble: It has to be hard-hitting but done tastefully enough so as not to be seen as belligerent and off-putting. You must be able to walk that fine line or things can blow up in your face. Tim Cook’s personality appears to be quite different and he may have decided not to go there.

According to Wikipedia, in the UK, most of the use of competitor’s registered trademark in a comparative advertisement was an infringement of the registration up till the end of 1994 and the current rules on comparative advertising are still regulated by a series of EU Directives. It is not an open field in the U.S. either. An article titled The Law of Comparative Advertising in the United States by John E. Villafranco states that the FTC permits disparaging advertisements “so long as they are truthful and non-deceptive.”

Although FTC doesn’t care about it, from a marketing perspective what the ads mock must be something the consumers care about. Steve Jobs in a refreshingly honest, thoughtful, and profound answer in a 1997 video to a rather blunt, in-your-face question, says, “You have got to start with the customer experience and work backwards to the technology. You can’t start with the technology and try to figure out where you are going to try to sell it. And I have made this mistake probably more than anybody else in this room and I got the scar tissues to prove it and I know it’s the case. And as we have tried to come up with a strategy and vision for Apple, it started with what incredible benefits can we give to customers. Where can we take the customer?”

Now, a lot of CEOs chant the same “customer-first” mantra. But not very many in recent memory have believed in it so wholeheartedly and executed it with such a ferocity as Steve Jobs and Apple have. That alone explains why Apple is the world’s most valuable brand today, not to mention a nearly half a trillion dollars in market cap. What was Apple’s market cap when Steve Jobs uttered these famous words in 1997? $2.3 Billion! Apple’s market cap has gone up more than 200 times since then and is still at a very reasonable P/E ratio of 12.84. (Compare that to the P/E ratio of 111 for Facebook or 1,227 for Amazon!)

Most importantly, and I believe the Variety article misses this point, Apple’s comparative ads in the past were geared toward boosting its fledgling Mac brand against the then-dominant yet clumsy and buggy PC or against IBM in the earlier days while positioning itself as elegant, hip, and cool. To the best of my knowledge, Apple has not taken the same approach with mobile entertainment or in mobile computing—fields in which Apple virtually reinvented and reinvigorated the customer experience with iPods, iTunes, iPhones, and iPads.

Besides, right now there isn’t much for Apple to mock as the technology and interface gaps have narrowed quite significantly. When Apple introduces visionary products again that take on established market paradigms and shoddy customer experiences , it may revisit taking potshots at its pitiful rivals again.

Let’s just hope those ads are half as entertaining as the Mac vs. PC ads!

Analysis: Obamacare Provides Competitive and Affordable Choices

Obamacare is providing competitive and affordable choices of health plans that consistently meet minimum requirements, according to a detailed analysis of county-level data available at the healthcare exchange website, combined with demographic data provided by Synergos Technologies. premiums

The federally run health exchange offers plans in 2,512 counties located in 34 states with a total population of nearly 200 million people. The analysis revealed that the national average for a 50-plus adult for the second-lowest Silver premium is $386. The national average for the lowest-premium Bronze plan for an under-50 adult is $174.

What choices in insurers and plans are available on

On average, there are 2.5 insurers and 9 Bronze plans covering 60% of the cost of care. For Silver plans, which cover 70% of the cost of care, there are 2.6 insurers and 10 Silver plans available per county. But the availability of insurers and plans is not distributed evenly. As expected, more populous counties have more insurers and health plans. Counties with a population of more than 500,000 have twice as many choices of insurers (average more than 4 insurers) compared to counties with a population of less than 50,000 (average more than 2 insurers).

Is competition restricted in smaller counties?

There are 454 counties in which only a single insurer is offering a Silver plan and 517 counties in which only a single insurer is offering a Bronze plan. Typically, these are smaller counties concentrated in southern states such as Mississippi, Texas, and Alabama. But it is worth noting that all the counties with a single insurer accounted for less than 10% of the total population in the 34 states. In other words, more than 90% of the population in the 34 states has access to two or more insurers and 10 or more Bronze and Silver plans apiece.

Does restricted competition drive premiums higher?

Although competition among insurers generally drives premiums lower, number of insurers may be only one of the contributing factors. Lack of competition among insurers does not always drive the premiums higher.

For example, the average for the second-lowest premium Silver plan for a 50-plus single adult in 74 counties in Texas with a single insurer is $335; the comparable average among 54 counties in Georgia is $585. The average among 77 counties in Mississippi is $502, but it is only $353 among 64 counties with a single insurer in Alabama. The least-expensive Bronze premium in Texas varies in a fairly tight range around the $135 average for an under-50 adult—regardless of the number of insurers or county population.

This disparity in premiums among different states indicates that some states may have been more diligent than others in challenging higher premiums through rate reviews.

What effect does income level have on premiums?

In many states, premiums are higher in counties where the median income is lower, which is also associated with smaller populations and fewer insurers. Are higher premiums a result of lack of competition, smaller population, underlying healthcare costs, or lower median incomes? It is arguable that lower median income—and therefore higher likelihood of federal subsidies—may be one of the motivating factors for insurers to charge higher premiums.

Do subsidies make plans more affordable?

An important aspect of affordability is that federal subsidies could significantly reduce monthly premiums for people with low incomes. Because Obamacare caps the amount consumers will pay as a percentage of their annual income, it is possible that low-income consumers may not even have to pay monthly premium if they qualify for subsidies.

Kaiser Family Foundation’s subsidy calculator ( shows that the premium for one adult earning $25,000 would be capped at $144 per month (or 6.92% of income) based on a Silver plan and the associated subsidy (depending on age, location, etc.) could be applied to a less expensive Bronze plan. For example, for a 49-year old adult located in zip code 39870 in Georgia, the Bronze premium could be $0 because the subsidy would cover the entire amount of the Bronze premium!

How do healthcare exchange premiums compare to the current premiums?

Because all plans available through the exchange must offer the same essential health benefits related to doctor visits, prescription drugs, hospitalization, maternity and newborn care, and preventive care, premiums available through the exchange cannot be compared to what consumers—many of whom are grossly underinsured—may be paying now, especially for a substandard insurance plan.

While canceled policies will provide fodder for political theater, it is an unfortunate but inevitable outcome of a major policy change for the better of this scope and complexity. The government routinely fails vehicles that do not meet emission testing standards. Why shouldn’t the same hold true for substandard healthcare plans that endanger people by underinsuring them?

It’s nothing new, but there is a lot of irresponsible journalism going on. Journalists with an axe to grind are interviewing uninformed people to push their foregone conclusions and to generate misinformation. Here is a classic example as reported in LA Times as reported by Michael Hiltzik: Another Obamacare horror story debunked

What is the bottom line?

The analysis confirms that Obamacare’s federal exchange offers competitive and affordable choices while providing essential health benefits and meeting minimum actuarial value thresholds. Expanding access to healthcare for millions of Americans in the individual market is an excellent first step in reducing overall healthcare costs.

On average, however, hospitals charge 370% of Medicare payments nationally. It is not uncommon for hospitals to report a charge-to-cost ratio of 700-800%. The high cost of the healthcare system as a whole is driven primarily by opaque and exorbitant provider prices—tempered only by illusory discounts hidden inside insurance products. To truly bend the healthcare cost curve down, these excessive cost markups will need to be challenged.

Employers of all sizes, as fiduciaries of self-funded plans, will need to implement a Cost Plus Model so that they can procure healthcare services in a transparent manner. Their focus should be on reducing the actual healthcare spend without reducing health benefits or increasing employees’ premiums.

PS: I sent out a formal press release on this topic on November 1 and it was picked up by Yahoo! Finance, MSN Money, and The Business Journal among many others.