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

Focus on two key areas to add value

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

Overcoming Low or No Marketing Budget

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

"You can't start with the technology and try to figure out where you are going to try to sell it."

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

Analysis of data separates fact from fiction

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.

How to Avoid LinkedIn Email Spam Attack

Revoking access can be easier said than done!

Who doesn’t want to grow their professional network? But do you find yourself in the clutches of LinkedIn email spam grab and don’t know how to extricate yourself?

Bloomberg has reported that some LinkedIn customers have filed a lawsuit alleging that LinkedIn hacked e-mail addresses. The existing users have no way to stop the process, the plaintiffs said according to the story. One user said that LinkedIn contacted more than 3,000 people including those copied in on e-mail messages. Another estimated that LinkedIn used as many as 200 names and e-mail addresses of his contacts—including those of several old girlfriends he had forgotten to delete—inviting them to connect with him on the site. Oops!

LinkedIn InviteIt gets worse. LA Times story recounts a retired FBI agent and private investigator’s clients including those the Agent/PI had investigated—basically everyone in the address book—received an email.

How is that possible? The NY Times piece said: “Instead of asking you to opt in by checking off which specific contacts you want to invite, LinkedIn requires you to opt out by unchecking the “select all” button. If you are not careful, hundreds of invitations can go out — no second thoughts or cooling-off period provided.”

Sound confusing? It is probably meant to be.

However, in response to the lawsuit, Blake Lawit, Senior Director, Litigation at LinkedIn, issued a denial: “We do not access your email account without your permission. Claims that we “hack” or “break into” members’ accounts are false.” He further stated, “We never send messages or invitations to join LinkedIn on your behalf to anyone unless you have given us permission to do so.”

All the legalese and how, what, and when LinkedIn does what it does aside, the question as to how to revoke the permission granted to LinkedIn remained essentially unanswered for me. As the NY Times piece confirmed, “Regardless of the claims in the lawsuit, there is no doubt that LinkedIn makes it awfully easy for you to send an invitation to connect to everyone you have ever e-mailed and much harder to revoke that permission.”

As a matter of fact, I have not been able to find out how to revoke permission in LinkedIn. However, here is what I found out if you have a Gmail account. Google allows you to share information from your Google Account with third-party websites without revealing your username and password. You can revoke this access as follows:

    1. To manage your connected apps on your desktop, sign in to the Google Accounts homepage
    2. Click on Security at the top of the page
    3. Click on View all in the Account permissions box.
    4. You’ll see a list of the third-party sites you selected to always approve for Google authentication. If you see something on there that you don’t use anymore, you should click to Revoke Access.

When I followed these steps, I did find that LinkedIn was permitted! After clicking the “Revoke Access” button, I am hoping that it cuts off any third-party access to my address book.

If nothing is listed, you will see a message saying: “You haven’t granted any apps or websites access to your Google Account.”

More information about sharing your data with other sites can be found at:

Happy professional networking without accidental spam!


Wrong-Headed Cure for Reducing Healthcare Costs

$17,000 of Phony Savings

As the debate about how to reduce healthcare costs rages on, Jeffrey Singer, a general surgeon in Phoenix and Cato Institute adjunct scholar, has published an opinion piece in the Wall Street Journal. “The Man Who Was Treated for $17,000 Less” chronicles how the surgeon “saved” the patient, with a low-cost indemnity type of health insurance policy, $17,000 by pretending that he was uninsured, self-pay. It is a wrong-headed cure for reducing healthcare costs.

healthcare - head in the sandDr. Singer concludes among other things that it is the third-party payment system that interferes with true price competition, so market clearing prices can’t develop. He goes on to chastise Obamacare for expanding the role of the third party and practically eliminating the role of the patient in the delivery of health care.

On the face of it, Dr. Singer’s arguments to diminish the role of third-party payers seem compelling. After all, by bypassing the insurance company the patient paid only $3,000 when he was asked to pay $20,000 upfront. But that’s like saying, “I saved $17,000 by not buying a Rolex I didn’t need.” Based on the examination of assumptions and facts, I contend that Dr. Singer’s arguments are hollow and his conclusions are erroneous.

By Dr. Singer’s own admission, the true price for the procedure was $3,000, and at that price “none of the providers was losing money on my patient.” Why on earth then the providers and the hospital felt compelled to mark up the price to $23,000 for this unsuspecting patient? Could it have something to do with the fact that the insurance policy had no provider-network requirements or preferred-hospital requirements?

These absurd markups saw the light of day, when Medicare released hospital billing data and outpatient services data this summer. As reported in The Arizona Republic, for every $4 charged to Medicare, Arizona hospitals collected $1 from the federal health program for those 65 and older. My own analysis showed that New Jersey had a markup of 6.2 times and the prices were marked up by 5.4 times on average in California relative to what Medicare actually paid.

Contrary to the statements made by the hospitals and providers claiming that charges don’t matter because Medicare doesn’t actually pay them, Dr. Singer’s example clearly shows that anyone without the enormous purchasing power of Medicare or a third party behind them is highly susceptible to these astronomical charges. In other words, Dr. Singer justifies the role of third parties with his own example.

I agree with Dr. Singer that when patients are directly involved in their own healthcare decisions, they are more accountable. However, another major flaw in his argument is the utopian assumption that all patients have the medical and financial knowledge, cost and utilization data, the necessary time, wherewithal, and ability to analyze and negotiate every healthcare expense on literally thousands of diagnoses codes on the basis of quality, outcomes, and price. If Dr. Singer hadn’t gone to bat for this patient, could this patient have accomplished all of what Dr. Singer did on his behalf by himself in today’s system?

If we are truly going to bend the healthcare cost curve down, among other things we must first shine the light on incomprehensible, nationwide markups that have become the norm. As a start, maybe Dr. Singer can start by quoting to all patients regardless of their insurance status the price he actually accepted instead of the “more than enough” $2,500 list price.

If the hospitals and providers accepted and published what Medicare pays as the “standard” price, instead of marking it up 5-7 times, it would automatically diminish the role of third-party payers.  The payers will no longer have to play the game of chicken with the hospitals. And the unsuspecting patients—insured, underinsured, or uninsured—will no longer be caught in the crossfire.

NSA Leaks: Is Snowden a Hero or a Goat?

Trade Snowden for Pussy Riot anyone?

There is a lot of debate going on about the NSA leaks and whether Snowden is a patriot or a traitor. Is he a whistleblower or a self-righteous leaker?

Snowden’s coming-out party, while in Honk Kong, was chronicled by Laura Poitras and Glenn Greenwald in a couple of interviews published by The Guardian. Recently, The New York Times published a thrilling backstory about how that meeting came about in “How Laura Poitras Helped Snowden Spill His Secrets.

In his news conference on August 9, President Obama proposed restructuring the Foreign Intelligence Surveillance Court to provide a privacy advocate. The Wall Street Journal characterized it as a “significant about-face” because just a few months ago he had defended the program saying, “I think on balance, we have established a process and a procedure that the American people should feel comfortable about.”

And today The Washington Post reported that the NSA broke privacy rules thousands of times per year according to an internal audit and based on documents provided earlier this summer to The Post by Snowden.

It is worth noting that the Fourth Amendment related to unreasonable searches and probable cause was introduced in Congress by James Madison in 1789, nearly a century before telephones and a couple of centuries before emails were invented.

“The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

The NSA was established by President Truman to continue U.S. efforts that had led to breaking German and Japanese codes in World War II. According to NSA, Executive Order 12333, originally issued 4 December 1981 (by President Reagan) charges NSA to “collect (including through clandestine means), process, analyze, produce, and disseminate signals intelligence information and data for foreign intelligence and counterintelligence purposes to support national and departmental missions,” according to its website.

I am all for transparency and restraints on vast government powers. However, here are my thoughts on the delicate balancing act:

  1. President Obama’s statement to make NSA’s surveillance program more transparent is used by many talking heads as an after-the-fact justification for Snowden’s actions. That is hardly an argument. By that twisted, self-fulfilling “logic,” one could easily justify the 9/11 attack because it generated a new normal through an incredible breadth and depth of introspection, arguments, reviews, reports, calls for reform, changes, new laws, and, of course, finger-pointing!
  2. There are millions of citizens with some level of security clearance. They probably come across some level of classified information every day. Imagine, even if a small percentage of them went Snowden on us and started leaking sensitive information because they objected to something or the other—especially after signing their life away to keep this information confidential in order to get the security clearance in the first place. It would make a mockery of the entire national security apparatus.
  3. The Washington Post acknowledged that when it came to the NSA incidents, “Most were unintended. Many involved failures of due diligence or violations of standard operating procedure.” I was actually impressed by the thoroughness of the internal audit. The NSA official is right in saying, “You look at a number in absolute terms that looks big, and when you look at it in relative terms, it looks a little different.” If we are going to look for perfection in any entity, government or otherwise, or in any person, we will continue to be disappointed. Feel free to raise your hand if you have never exceeded the speed limit.
  4. People often talk from both sides of their mouths. They want the government out of their lives until something happens in their own backyard and now they need help from the government. And then the government can’t act fast enough for them. They would be the first to do Monday-morning quarterbacking and harshly criticize the government if a terrorist plot were to be carried out. As President Reagan said, “Recession is when your neighbor loses his job. Depression is when you lose yours.”
  5. Edward Snowden: “I don’t want to live in a society that does these sort of things.” How is that working out?

Trade Snowden for Pussy Riot anyone?

Old News: The News Business is in Trouble!

Amazon founder Bezos buys The Washington Post

News flash: The News business is in major trouble! (Okay, just kidding about this being a news flash.)

It was reported on Monday that Amazon founder Jeff Bezos is buying the money-losing Washington Post and other newspapers for $250 million.

The Washington Post is not alone in this predicament as can be clearly seen with the troubles of NY Times, Gannett, and Tribune Company. After all, NY times just dumped the Boston Globe at a 93% loss after purchasing it for $1.1 Billion and selling it for $70 million.

At first glance, this may seem like a knee-jerk, impulsive purchase by Jeff Bezos. Be assured that it’s neither a toy nor a trophy purchase for Bezos. He has been on an unmistakable path to transform Amazon from a passive, online retailer to become the content king. He has deftly made inroads into content production, publishing, distribution, storage/retention, and cloud services infrastructure.

With that trajectory in mind, the purchase of the Post seems like a logical extension to own highly reputable and brand-name content—especially at a throw-away price.

What exactly Bezos has in mind remains to be seen. An educated guess will be that he will imbed and find other channels to distribute the content while working some reverse synergies to help Amazon.

As the AP has reported, Bezos has always emphasized that “It’s all about the long term.” He doesn’t have a magic formula for turning the Post around. He does has deep enough pockets to wait until he can figure it out and do it semi-profitably. As with the Kindle, he may adopt the strategy that it is merely a means to an end and not something that has to generate a ton of profits.

All in all, it looks like a smart move, but we may have to wait a few years to see how it actually plays out. If Bezos is successful, however, it could transform the media landscape. It could trigger major journalistic purchases by other titans like Google and Microsoft.

Bezos’s would be a one-of-a-kind strategy that may or may not be replicated easily by others though.

Gangnam Style: Superstar Teachers and Suicidal Kids

Blind Copying of "Best Practices" can be Disastrous!

The field of education is abuzz about “The $4 Million Teacher” piece in The Wall Street Journal. Sort of.

Amanda Ripley, in a WSJ piece plugging her upcoming book, states that South Korea’s students rank among the best in the world and its top teachers can make a fortune. She wonders whether the U.S. can learn from this “academic superpower” with a 93% high-school graduation rate. She credits tutoring services offering after-hours classes (“hagwons”) in every subject for a fee, where private tutors now outnumber schoolteachers for the success.

To me, it’s like asking to reform high school drama departments using Brad Pitt as an exemplar. Mr. Kim, the featured four million dollar man, is hardly a teacher. He is a smart and accomplished businessman capitalizing on the intense desire for rote learning in a broken public education system driven by desperate parents. This is precisely the kind of misguided hero worship (e.g. Google) I have railed against in earlier posts.

There are major contradictions in the WSJ article too. On one hand it says, “To create such trust, Mr. Kim suggests paying public-school teachers significantly more money according to their performance—as hagwons do.” On the other, it admits to a ruthless meritocracy for hagwons teachers in which “their pay is based on their performance, and most of them work long hours and earn less than public school teachers.”

To put it in the right context, let’s consider this. According to the CIA’s World Factbook, South Korea is a country that is slightly larger than Indiana, but has a population of nearly 49 million. Mother’s mean age at first birth is 29.6—nearly 5 years older than in the U.S. South Korea spends 5.1% of GDP on education expenses compared to 5.4% for the U.S.

And there is a darker side to this rat race. In all likelihood the competition is incredibly intense and the peer pressure absolutely brutal. “Eight out of 10 South Korean parents say they feel financial pressure from hagwon tuition costs. Still, most keep paying the fees, convinced that the more they pay, the more their children will learn,” says Ms. Ripley.

A Yahoo! Finance article by Naomi Rovnick says, “The country has the highest suicide rate in the OECD and the fourth-lowest fertility rate.” Ms. Rovnick also cites a BBC article which quotes child psychologist Kang-ee Hong: “From the beginning of childhood, the importance of money and achievement are emphasised by their parents, so they feel that unless you are successful in school grades and a good job, good prestigious college, you’re not successful, and the parents behave as if ‘you’re not my child’.”

Now, you are scaring me if the parents’ obsession with money and status is driving young people to suicide. I guess you have to be careful what you wish for. Besides, is this hagwons system making South Korean kids smarter? “That is a surprisingly hard question to answer,” says Ms. Ripley. “The most affluent kids can afford one-on-one tutoring with the most popular instructors, while others attend inferior hagwons with huge class sizes and less reliable instruction—or after-hours sessions offered free by their public schools.”

Jeffrey Pfeffer and Robert Sutton, both of whom I had the pleasure of meeting in April, have written that “The logic behind what works at top performers, why it works, and what will work elsewhere is barely unraveled, resulting in mindless imitation.”

Bottom Line: Blind copying of so-called best practices in vacuum without properly understanding the logic, culture, context, or implications often leads to disastrous consequences.