I've heard a lot of talks on coding and so forth. That was one of the best ones in the shortest amount of time that I've heard. It was great. So my title change is a little bit different, and I think it's a good segue from what you just heard about headwinds relative to reimbursement. Just a show of hands, how many are in private practice or private academic practice, if you are? Good. That helps. So this talk, that's the lens that I come from, and I'll share that with you. I would just ask if you wouldn't mind not taking any pictures and slides, because I'm going to show some very specific data just to give you a sense. You can take notes and so forth, but I don't want this really for public consumption, but it's more to use by example, if that makes sense. So my disclosures, like all the others, are in the program. So I think the issue that we're facing right now is trying to achieve this balance between our clinical practice and then the business of medicine. Clearly, what you've just seen is that we're seeing declining reimbursement, but we're also seeing increasing costs, and I can't think of any other industry where that's a factor. There's always some ability to adjust, but when you take into consideration the cost of HR, inflation, and so forth, and never has there been a situation where we've seen increasing reimbursement, we're sort of in an upside down paradigm. There has been a tremendous amount of consolidation of groups, because I think the practice of medicine has become so extraordinarily difficult for small groups, given the lack of scale. As you'll hear from Lou, there is a profound outpatient shift, which is having a tremendous impact on the hospital system, but provides lots of opportunities for most of us in this room. I was at a leadership forum last night until about one in the morning that just the bags under my eyes, bowling with some of the young folks and talking to them about their hospital jobs, and it's just fascinating how many are signing on with hospital systems. This concept of value-based care is still, in my opinion, an enormous enigma. I can't share with you any specific examples other than episodes of care that we've played in, and maybe Medicare Advantage. Outcomes are critical, and outcomes are not just for research purposes. I'll talk about that a little bit, but outcomes are critical as we weigh ourselves against our peers. It's also required by the government to a limited extent, so that's something at this point I think you can't ignore in any practice setting you're in. What I'm mostly going to focus on in this talk is this last point, is creating verticals to replace professional compensation. So when you look at income, what Hussain pointed out, what income is, right? We have seen a profound reduction in professional compensation other than increasing the number of clicks or volume of services. It's become very, very difficult to sort of keep the lights on if you just rely on your professional revenues. And then I'm just going to make one slide on private equity. Lou, you're not going to talk about private equity, are you? You are? Good. So I'm not going to lose a very good position to address that. So this is the lens that I come from, and I think it's important to understand this going into this talk, because this won't, all this material may not be relevant to every individual, but it sounds like if you're in sort of a private environment where you control things, hopefully this will be. So we're in a practice of about 750 employees. We have 50 physician providers, 35 of which are orthopedic surgeons. We have 50 advanced practitioners. We have seven full-serve offices, seven independent physical therapy facilities, but 15 overall. So we now have independent physical therapy centers that we refer to that don't, that are not in our offices. And then we have seven ASCs, which are independently owned by groups of physicians, which I'll share with you a little bit of our experience there. What we have seen, and I think this is the, just to set the stage, is a overall decline in professional revenue. Now this is, this is a, an older slide, but this, this trend has absolutely continued, that we've seen a gradual decline. And then when you add in inflation, we've seen a significant decline on the professional revenue side. So that's something that we're being faced with. And, hmm, that was interesting. I never, yeah, I never, that's, I triggered something that I didn't even know existed, but now I just can't get out of it. Let me escape. Oh, escape. There's a command to increase the slide size. If anyone knows what that is, I don't know what I did, but that's, I've never known that. So in, in an effort to combat that headwind, this is what we're doing, okay? These are all the things that are in our, our, our portfolio that I would classify as verticals to help overcome the decrease that we're seeing on the professional revenue side. So if you're a private independent practice, which it sounds like a lot of the people in this room are, I think that's the optimal environment to be in. We're still, we still represent about 70%, I believe, of what's going on in the orthopedics page. It allows us to be nimble. We can right size. We can be growth minded, be responsible in those decision-making aspects. It gives us pretty much direct control over all the aspects of patient care, set and safe for compliance issues. It allows us to be very nimble and responsive to our patients. And I can say this because we're in a hospital, we're adjacent to a hospital in the academic environment. And I talked to my colleagues who run hospital service lines. There's, it's a, there's a profound difference in terms of what you and I can do in this setting versus what they can do. They're also not incentivized to do the things that we do. It allows us to, to, to achieve the lowest possible overhead without cost shifting. That's the big problem with the hospital system. The insurance companies are very soft on hospitals just because they tend to cost shift for, from tertiary care towards the things that you and I do in the ambulatory setting. And what's become very apparent to me, and I think if you had to walk away, one thing that I've learned over the last six years of being a managing partner at Midwest Orthopedics of Rush, Chicago, is that as we grow, when we, it's much like having a surgery center. You can open up a bunch of ASCs, but if you don't fill the rooms, you get crushed by facility overhead and so forth. It's the same thing with your physical plant when it comes to all the other things that you do. So we look at utilization of clinic space and so forth now, much like we do our ASC space. So I do believe that private practice will always be able to provide higher quality, higher levels of customer satisfaction at a lower cost. That doesn't mean you have tremendous net income, but I think if anyone can do it, we're in a situation to do that. So the concept that I think is important to understand is owning the patient journey. And recently I had our CFO tell me, what does each patient bring to the practice? In other words, if you had the value of the patient separate from your professional revenue, and you own the verticals, you understand what I mean by that, all of these things that you see on the left, as ancillary has become, we'll call that ancillary bucket, as they become a more important part of your compensation, each patient is worth about $2,500 to $3,000 So similarly, hospitals know what you're worth. If you are in a hospital setting and you do an average number of surgical procedures each year, your value to the hospital and the facility fee side, just so you know, is on average about $2.5 to $3 million, just to give you a sense. If you pull that into the amateur environment where you are the beneficiary of it, everything becomes very, very different. So this is a conservative estimate in my mind in terms of what every patient brings, and that's assuming they end up in an ASC setting where you share in the facility side. We're not having a talk on regulatory, is that right, So just a couple of slides on this. If you're in a CON state, you have a larger barrier to entry when you're trying to drive some of these verticals, especially the ASC side, and Lou, I'm sure we'll talk about that. There are significant headwinds to create CONs, but it's interesting, I've been hearing that that's something that might start to go away, which will be very, very good for all of us as we try to be sort of entrepreneurial here. So you've got to know your state. It's a very non-intuitive regulatory system. The goal is to prevent self-referral, but they allow us to do it if there's an in-office exception. So it doesn't make any sense to me whatsoever, but the point is that we can refer to ourselves when we are in control, overseeing it, and it's an in-office situation, okay? And what's also legal is physician oversight, certifying all your therapists, but having a physical therapy center and a retail center where you have no physicians, and that's something we stumbled upon late, and we're a CON state in Illinois. But there are penalties for non-compliance, you need to be mindful. I think the area that is most important, as you see here, how you stay out of trouble, one is disclosure, and we do it on our website, we refer people to the academy website, but that doesn't embody all the things I'm talking about. The answers have to be controlled, but not directly supervised. So our x-ray MRI happened to be in office, that's the way it works, we have no off-site facilities, but PT is a great example where it's off-site, but we're controlling it. The most important one is this middle one, that you can't directly distribute profits based upon your referral volume. I think it's intuitive. This is the crux of the legislation, but what you can do is you can reverse engineer it in some way that's prospective. So you could say, well, I'm going to create some formula, because I've looked at what the contribution answer is across the board is for our folks, and it's crazy. Our compensation system is it's pretty much equal distribution of ancillaries, but I have partners that, just to give you an example, there are partners who contribute up to $800,000 a year to our ancillaries, separate from ASCs, and I have partners that contribute $40,000 a year, yet they all take out the same. And it gets frustrating when you're in a larger group, and there's no way to really correct for that dollar for dollar, but there are, we're working, and I know others have done it, on some, you can take all your research skills and some multivariate analysis that says, what is it? Is it subspecialty? Is it a number of new patients? Is it a number of surgeries? So we're looking at all the variables and try to reverse engineer to figure out why there's such a broad distribution. Unfortunately, I believe in our practice, it's physician behavior. Some people just don't give a you know what, and some people do, and they don't go through the extra effort, and that's the biggest problem is controlling physician behavior. So then you need to have the care to stick if you're in that position. So it's a tough situation. MRI and CT has been mostly about service, allowing same day scans, patients we see, we call the facility, can you get them in? Patients love it, you're not screwing around with a disc, it doesn't go into your system, they get immediate information. Let me just see one thing. So, let's skip that. The problem with imaging now is it's becoming commoditized, and the average, if you look around your community, there are low cost options, not necessarily the best magnets, but low cost options for patients, and that becomes a problem when the insurance carriers start to get a sense of what things really cost, and we've seen declining reimbursement in a dramatic way. So the cost per scan, our most recent one was about 384 bucks, and we have all of these sort of forces going each direction, and we're not crushing it. So we're very data driven when we look at each of our verticals, and every other Monday we share this with our physicians, and we look at the number of appointments that have been scheduled, and we look at the number of appointments by referring physicians, and it usually correlates with subspecialty. Sports medicine does very, very well, because we do a lot of primary care, early initial care, when you look across the board, as opposed to spine, where patients come in frequently with their scans and so forth. So it does, the impact on the ability to grow and deliver this vertical is very dependent upon the specialty, I will tell you that. We look, there's some great data, how many of you are part of the ortho forum? Yeah, so the ortho forum is a great place for, being in some organization where you can be benchmarked is critical, and I'll just tell you the median on a per physician is somewhere around $35,000. So if you want to look at what the contribution to your net income is in compensation, the median's about $35,000, just to give you a sense. PTOT, this, yeah, go ahead, buddy. So Medicare's been paying less and less for MRI. Yes, yeah. And I'll conclude, I'm just, that reimbursement was kind of starting to cross how much it costs us. Yeah, we're, so great question, and sort of what you see in this room stays in this room. So we're upside down for Medicare, and it's a problem because you're going to be upside down with other payers at some point, too. So it's awful because Blue Cross Blue Shield is about 67% of the payer mix in Illinois, and they closely track with, very closely track with Medicare, so it's approaching other payers. So we limit our slots. So we do it for convenience, and we limit our slots, and we send them to the hospital. So, and I think they actually get, because they're a facility, they may actually get a higher reimbursement. Maybe someone in this room knows. They get the facility, so maybe it's not the worst thing in the world for them, but the service sucks, they don't get the desk, we have trouble getting access between Epic. So really, you should think of MRI, look, I showed you the average incomes, it was 35. It goes through a whole lot of time and effort. It's an amazing service for your patients. You don't lose patients. You can get them diagnosed the same day, if you need it, right? And so the patients really appreciate it. So I would say it's that MRI and CT is really a hybrid of service, and not necessarily huge levels of compensation. So PT, OT. These are all the things that are related to PT, OT, and I'll try to share some pearls there. The headwinds in PT and OT for us are profound. We spend a tremendous amount of time and effort opening PT clinics. We're getting crushed with HR forces. These therapists are extremely mobile. They will go for huge signing bonuses. And the paradigm for PT, if you just look at the management, this is probably one of the more important variables. You can either take direct responsibility for management yourselves, which we do now, take on all your therapists and so forth, or if you're a little bit early on the curve, you can outsource this in a management service agreement with existing physical therapy companies, right? They offer the service, and they do a reasonable job, but they're incredibly conflicted. So anyone that has trouble getting into your clinic that they're managing, they say, you know, you can't get into this one, but I'm going to send you to an ATI or other nearby that you can get into. So we just found that we were not getting the value from that relationship, but we were very nervous up front about bringing physical therapies under our payroll. So, because it's an enormous responsibility to staff physical therapy clinics. So we're still learning in this. What we've also found is that the facility side, the expense side, is enormous, and we're trying to find low-cost options. So when you look at the build-out required in the square footage requirements, so now we're looking more at a kiosk situation where we have two physical therapy treatments for one therapist in a health club or something equivalent to reduce our facility expense, which has really been the biggest challenge to our net income. But, you know, these are all the things you can do in PT. We've done a lot of specialty things. Still workers' compensation in Illinois reimburses well, so we do FCs, we do work conditioning. We have some cash-paying business and performance recovery, injury prevention, things like that. That's actually done reasonably well. Again, very data-driven. We report back to our physicians the number of physical therapy appointments. You know, we were for a while reporting capture rate, which I think is not a very useful number other than for following a trend. The thing about capture rates is that I have joint replacement surgeons who capture a PT visit on the first visit, and that's it. Then the patient goes somewhere else because they do it in the recovery room because they're doing outpatient joints. And it doesn't reflect what really delivers to the bottom line of the practice. So it's really physical therapy appointments. That's what drives it. We look at where we are in terms of visits per PT. You can use your orthoform or some other benchmark for that. That's important, obviously doing it ethically. We look at the – this is where we get crushed. We're in Chicago in the peripheral area, and we look at our average facility expenses. So we do just okay per physician. What we've learned in PT is that a well-running clinic will – somewhere between $250,000 and $300,000, and that's about $65,000 to $75,000 per therapist. That's what they will net. So if you want to get a rough estimate of what you can do, a very well-run physical therapy clinic should net somewhere between $65,000 and $75,000, and that's about as good as you're going to do. So it is a lot of work. It's a lot of effort, and it's not a huge return. But again, it's service. It's keeping the patients, and there is real value from the patient's eye. DME is another one. I think it's very necessary. We're all across the board in terms of the financial – what it delivers. The biggest problem we had with DME was inventory management. Way back when we looked at it in 2011, when we looked at our peers, we were just getting crushed. We tried to figure out what the problems were. The biggest issue, as I mentioned, was having inventory management. But we've gotten much better at this. We have on-site DME in all of our offices. It's an amazing service for our patients. We're finding other sort of, quote, retail opportunities with our patients. Yet as hard as we work in ours, we're still feeling like we're not doing it right. We're still getting crushed on the DME. And I think part of it is when we do our accounting, we fold in Castroom, and Castroom is not a very profitable thing for us. Castroom is a service, but you don't make much – you actually lose on a Castroom setting. So a lot of this is in terms of how you report. But again, DME, it's just on the margin. What you're seeing is you get little clicks along the way. It's not like these are huge life-changing differences, but if you have the whole portfolio of verticals, you can do something with it. This is another thing that we started doing is nutrition. There's some data that shows that you reduce post-operative infection, reduce post-op muscle atrophy with perioperative nutrition. So we use EMN, which is a company out of Canada, but basically it's two weeks before, two weeks after. Probably 60, 70 percent of our surgeons capture their patients for this. And this is an out-of-pocket expense for patients, but there is some medical value to it. Orthobiologics is another cash-paying business. It poses a significant ethical dilemma. We have stayed away from any of the terms such as stem cells and regeneration. It is fee for service. This is a whole lecture in and of itself, but to be compliant in this area, we ask patients to sign an advanced beneficiary notice. We bill the patient directly, and if we do things in the outpatient surgery center, we pay the surgery center. So do not let your centers, if you can avoid it, bill the patient, because if they've already paid you for the service, then they bill the patient, it gets very, very ugly. So if you can just control that, so we have the ASCs invoice us out of the payment that we get from the patient, and that's been very clean and very compliant. Reputation management, you're going to hear a good talk on that. You're going to cover that, right? I will. Yeah, so bottom line is there's lots of tricks that you can do in your office. We do a card in the office, and we have a link on the website. This is insanely important. Ask your patients. Virtually every one of them will tell you that they've looked you up online. So it's very important. Just one slide on outcomes. We used to think of outcomes as a research tool. I will tell you that it's mandated by the government. Your peers are doing this. It's a way to benchmark you and your outcomes to your peers. It provides a tremendous number of analytics, and it also has patient engagement on the front end. When a patient comes in to me, they come in, they have a code. Well, we knew they dislocated their shoulder based on what they told the scheduling. They put the problem and the condition in. Before they get to me, they're pushed a video that I've made on this condition and how to prepare for their visit, and also their pre-op score, their pre-op scores. Then they come in, they're seeing something happens, they get pushed more information through SMS or email. So it's tremendous for patient engagement, but it also deals on the reimbursement and pre-op side. So just something to think about. So overall, we've been modestly successful in all these efforts. Our income has stayed the same. What I'll tell you is the following. The expense side needs to be watched. As I said, maximize your space utilization. I'll just tell you that we, despite all these efforts with a very mature practice, which I think has run well, not because I'm managed by our because I have amazingly smart partners, our growth has been about 5% to 8% per year. So this is a whole lot of time and effort, okay? And the yield still is very, very challenging. You're going to hear about the outpatient shift. You're going to hear about ambulatory surgery centers. I would say that all the things I've shown you, all the things that I've shown you, the most important contribution to income is the ASC side. You can spend all your time in investing in these verticals, which you should do, and that can maintain your income as professional revenue pressures continue. But the thing that will be the most important for your practice is going to be the ASC, and you're going to hear a great talk on that from Lou. So thank you very much.

private practice

reimbursement

outpatient care

value-based care

verticals

income