Why Doctors Must Give in and Use EMRs

Admit it; you have a real interest in health care. Oh, you may be like most of the rest of Americans and not really care about the field or science of health care, but you probably do have a real interest in caring for your own health. Most of us do. Most of us, even if we don't show it by our actions and behaviors would like to be really healthy.

When we choose our physicians, most of us make that selection because of several factors. Among them might be these:

• Whether the physician is "in network"
• Whether we have a level of comfort with the physician
• Whether we think the quality of care will be excellent

How do we know if the quality of care will be excellent? We generally don't, but we have our ways of thinking that we might know. We ask our friends and relatives. We might go to a site like Angie's List or healthgrades.com to see what they say. 

Do you know what else is really important? According to a survey done jointly by Aeffect and 88 Brand Partners, 82% of patients believe that physicians who use electronic medical records (EMRs) provide better quality of care. (While I cannot find the actual complete survey results, you can see snippets here.)

To me, that is astounding. Many physicians that I know like EMRs, but perhaps just as many dislike them. They say that the EMRs cause physicians like them to have to spend extra time inputting a bunch of data. They say that they have to hire additional staff that increases their cost of providing care, but that insurers often provide them with nothing to compensate for this cost. But, according to the same survey, 44% of patients have a more positive impression of physicians that use EMRs (while I don't have the data, I am guessing that the number who say they have negative impressions is very small). 

While we are moving more to a value-based system, physicians still receive most of their compensation from seeing more patients. Other than scheduling on a much tighter basis and hoping that their schedules fill up, physicians can increase demand for their services. When they do that, their schedules will fill up and that will probably allow them to earn more income which most of them will view as a positive. 

So, the connection (perhaps pun intended) is that even for physicians who don't like them, EMRs are becoming a necessary part of a practice. Physicians must give in and use EMRs. Soon, they will really have no practical choice.

If We Only Knew What 401(k) Participants Really Want

I read an article this morning called "What Participants Really Want From Their Bond Fund." It was written by a gentleman named Chip Castille. Mr. Castille is the head of the BlackRock US Retirement Group. As such, Mr. Castille is likely a participant in a 401(k) plan, although to be truthful, I don't even know if BlackRock offers a 401(k) plan to its employees.

More to the point, the article tells us what participants really want in a 401(k) plan and specifically in a bond fund in such a plan. While I could not find where the author cited any survey data, either he has some on which he is basing his conclusions or he is divining the answers because he seems to really know better from my read of the article (more on that later).

The author implies that participants are looking for safety, return or retirement income. That is a pretty broad spectrum. But, he doesn't dig into it enough for us to know how a plan sponsor or an investment professional would decide. What he does do is point out that an investment manager in a bond fund looks at how closely his fund is tracking a benchmark while participants look at whether the fund has gained or lost money or it will produce sufficient income.

I don't mean to demean what any professional says. But, here I beg to differ with the author. Participants get a lot of junk in the mail these days (not that these days are really any different from any other days in that regard). If the participants to whom he is referring are anything like the ones that I know, they don't look at individual fund performance very often. In fact, in the case of most that I know, "not very often" is spelled N-E-V-E-R. That's right; they don't look at individual fund performance. They look to see how their total account is doing. They judge (that's spelled G-U-E-S-S) whether it's a good day to be in equities or a good day to be in fixed income and periodically move their money around because they think they know.

Typically, participants don't like losses in their accounts. In fact, I would say that if you were to rank account balance events in order of importance, my guess would be that far more participants would say that they would like to avoid meaningful losses perhaps at the expense of a few big gains than the number who would say they would like to go for big gains at the potential expense of taking some very large losses.

But, I'm just guessing. I don't really know. And, frankly, the author of the article doesn't know any of this either. Face it, he hangs around with investment professionals. Investment professionals are not representative of your average garden variety 401(k) participants.

I happen to be an equal opportunity dumper, however. While I cannot find data that the author is using to draw his conclusions from, I will also take this opportunity to dump on many authors who do use data, usually from surveys.

Let me show you why with an example. Suppose a survey question is worded like this:

What do you want from your 401(k) bond fund?

1. Safety
2. Return
3. Retirement income
4. Guacamole
5. Health care

I've never posed this question this way, so I get to guess at hypothetical results. Some number of people will answer with 4 or 5. Among those who don't, that is, they answer with 1, 2, or 3, or they just skip the question entirely, do they know what I mean by each of 1, 2, and 3? My guess is that they don't. Safety has lots of meanings in life. To an investment professional, it means one thing. To a plan participant, it might mean NEVER losing money. You and I know that is essentially impossible in a bond fund, but the average participant may not.

Some firm out there that wants to prove their own point will have a survey question like this one. They will ask about 1,000 random selected people to answer the questions and some smart people in the proverbial back room will analyze the answers so that the author of the next great white paper will have the definitive solution. 

Suppose the potential answers were flip-flopped (that is, health care was at the top followed by guacamole with safety last), would that change the results? What does a participant do if they wanted to answer none of the above? Or, suppose they don't understand one of the answers. Or, perhaps, in their mind, it's a tie between two answers. Or, maybe last week they would have answered return, but after they got their most recent statement and saw a 10% decline in their account balance, they suddenly place significant value on safety.

Let's face it, none of us know what the average participant wants in a 401(k) bond fund. We don't even know what an average participant is. 

Remember the two words that I capitalized -- NEVER and GUESS. That should tell you something.

President Seeks to Change Rules For Paying Overtime

It greeted me in my inbox this morning: "Obama Will Seek Broad Expansion of Overtime Pay." In a nutshell, the President says that corporations are making too much money, often at the expense of salaried workers who should be classified as non-exempt under the Fair Labor Standards Act (FLSA).

What do you think?

For background, as I am certain that most readers know, non-exempt workers generally must receive overtime pay (usually time and a half) for hours worked in a week beyond 40. The law gives the President/Administration fairly broad powers in classifying as non-exempt versus exempt. Currently, the regulations provide that workers typically earning $455 per week or more generally may be classified as exempt. The threshold was increased to that level by President Bush (43) in 2004 and has not been increased since.

Also classified currently as exempt under the label of professional or executive workers are groups including fast-food managers, computer technicians, loan officers, and other similar jobs that the President views should be paid overtime when they work beyond 40 hours in a week. The US Chamber of Commerce, of course, disagrees.

While I am usually pretty fiscally conservative, if I think about this, $455 per week isn't much. It's barely above the proposal from the Administration for an increase in the minimum wage ($404 for a 40-hour work week). On the other side of my brain, I consider that since I entered the professional workplace during the Reagan Administration, it has seemed fairly normal that people who want to get ahead in business will work at least 50 hours per week or more and in many cases, far more than that. It just became a way of life.

I recall that fairly late in the Clinton Administration when his Labor Department revised guidance on this issue that the firm that I was working for at the time reclassified who was exempt. That firm then turned around and said that non-exempt employees could only work overtime with approval from pretty high up managers. So, who won? Nobody, really. The company passed that work on to exempt employees and the newly non-exempt group who had seen pay raises cut in response to this regulation were stuck at 40 hours per week.

Lose lose.

Part of me wants to say that giving aspiring professional non-exempt workers the right to forgo overtime when they work more than 40 hours per week would enable those that want to get ahead to do so, but that would just take us back to the mentality in which I grew up in the workplace where we all worked insane hours to be the one person who stood out (of course we didn't because we were all that way) from the crowd and got ahead.

Ultimately, it feels like it is just part of macroeconomics. You can't just look at one individual and one company in a vacuum and see how they will react. There is a larger dynamic. If companies have to pay an individual overtime, they will seek to find ways around the rules to ensure that they can find exempt workers to do that job and still not have to pay. The newly non-exempt worker will lose and ultimately the company will lose as well. On the other hand, the Bush Administration limits probably exempt far too many workers from the rules. Nobody wins there either.

It's part of a broader give and take. In an ideal world, companies would allow workers to do their jobs and would pay overtime to those who should be non-exempt under the spirit of the FLSA. Also, in an ideal world, workers would not be working overtime unless it was truly necessary.

I wonder when we will be in an ideal world? Anyone? Buehler?

Can Anybody Win the ACO Game?

Suppose you invented a game that ultimately, nobody could win. Do you think it would be popular? I don't. Game players get frustrated at losing. Either they give up or they try to get better, but eventually, if their improvement doesn't lead to some more wins, they stop playing the game.

I know that accountable care organizations (ACOs) are not a game. For the uninitiated, they are healthcare organizations that choose to operate under a model in which they are rewarded for meeting metrics related to quality of care and total cost of care (TCC). Under the Affordable Care Act (ACA), those reimbursements are tied significantly to an ACO's trend in TCC being meaningfully less than the norm.

That sounds like a really good idea, in theory. The system is providing an incentive (no, I will not say it is incentivizing) to ACOs to reduce medical inflation. For an ACO to do that, however, costs money. The ACO will likely have to add to its infrastructure both from the standpoints of technology and people. Each has a cost.

Simply put then, the game is won when reimbursements (incentive payments) exceed the essentially required investment in the business. The game is lost when the converse is true.

I think we can establish that each of these points is almost necessarily true:

1. Each ACO will try to reduce its own contribution to medical inflation.
2. There are practical limits to how much that medical inflation can be reduced.
3. When many organizations are simultaneously working to control TCC, the average increase in TCC will come down.
4. If 2. and 3. above are true, then it will become virtually impossible to achieve the financial goals necessary to have reimbursements large enough that an ACO gets a positive return on their investment (ROI).

You don't agree with the fourth point:? Think about it. If the target TCC increase gets low enough (because the average does) and a particular ACO has already gotten to the asymptotic point of its efficiency, then they have likely reached the point where they cannot win anymore. Because the competition had enough room to improve and that one ACO had reached the point where it didn't have enough room for improvement, it will have lost its chance to win (at least for a while).

There are presumably good things that will happen out of this model. Notice that the game breaks down because each organization is striving to reduce TCC. That's a good thing. But, at some point, ACOs that can no longer win may just stop playing the game. When they do that, what will happen to their TCC?

Can anybody win the game?

Treasury Modifies Section 83 Regulations

The Treasury Department recently issued revised final regulations under Code Section 83. While Section 83 regulations are longer and more complex, this was a short document that focuses specifically on "substantial risk of forfeiture."

So, what do these new regulations do? They add a paragraph that explains that you cannot create substantial risk by putting something in a plan document that is not going to happen and say that it creates substantial risk. In fact, they specifically say that a forfeiture provision that is not likely to be enforced (based on all the underlying facts and circumstances) does not create substantial risk.

Generally, the litmus test that is being applied is whether receipt of the property is conditioned upon performance of future services. So, for example, if nonstatutory stock options vest only if the executive works for the company for 5 years after the grant date, then there would (my read, but not a legal opinion by any means) be substantial risk of forfeiture until the options vest.

Interestingly, this regulation has retroactive applicability relating to property transferred after January 1, 2013.