Rock Rockett: Yes, you can stay small and independent. But it’s a qualified yes (Interview)
Rock Rockett is the Founder and Principal of Rockett Healthcare Strategies. Rock has been in the GI space for almost two decades now. As a business person, he saw GI physicians evolve.
In this interview, we explore the big question on many people’s minds: is it still possible to stay small and independent if you choose to?
Do not miss this one (15+ mins).
◘ “Consolidation is going on. There’s also the downward pressure on their charges and reimbursement”
◘ “Consolidation will sweep up the large segments of the healthcare industry but not the whole thing”
◘ Keeping the external environment in mind – Is it possible to stay small and independent? – “Yes, but it’s a qualified yes”
◘ A positive trend – “Payors reimburse more if the procedure is done in the office”
◘ “Payors want to do something to counter the efforts of consolidation because they’re losing leverage”
◘ Since insurances are getting bigger and bigger will the smaller groups even make it to the negotiating table?
◘ “Maybe it’s the more affluent who will be able to preserve their independent physician practice. It’s unequal, but it’s a reality”
The Transcribed Interview:
Praveen Suthrum: Rock Rockett thank you so much for coming on The Scope Forward Show. It’s not every day that I get to talk to somebody who has founded a company on his own name. So, you are the principal of Rockett Healthcare Strategies and you have worked for a long time with gastroenterologists and in the GI space. So, I’m really looking forward to our conversation today.
Rock Rockett: Great! It’s a pleasure to be here Praveen. I’ve admired your company and the growth of your organization over the last few years and have listened to your talks from time to time but it’s been great getting acquainted with you.
Praveen Suthrum: Rock you’ve been in the GI space for a long time. How did you get involved with gastroenterology?
Rock Rockett: I’ve been involved with a gastroenterologist for about 15 or 20 years. I initially became involved through a small company that I was running that was doing accreditation consulting. We had a relationship with the accreditation agencies with the joint commission. So, I was approached by the joint commission and they said Blue Cross has some concerns about office-based procedures and they asked me – would you be able to talk to them? And so, I started talking with Blue Cross and out of that developed a negotiated arrangement so that the gastroenterologists could be reimbursed at a higher rate for doing procedures in their offices provided that they became accredited. So, I provided the accreditation consulting, Blue Cross provided the incentive. It was a nice little package deal, a win-win for the members, for Rockett Healthcare, and for the gastroenterologists. So, that was really what kicked things off for me.
Praveen Suthrum: How has GI changed over these last couple of decades from your lens?
Rock Rockett: What I’ve seen over the last 15 to 20 years is… you know number one is consolidation. I see that they’re also being able to look at different revenue sources because you know while the consolidation is going on there’s also the downward pressure on their charges and on their reimbursement. And so, with that downward pressure then they have to come up with more creative solutions. And so developing additional revenue strategies is something I’ve been very much involved with and I’ve helped the gastroenterologists in that regard.
Praveen Suthrum: What do you think of this wave of consolidation that has swept gastroenterology as a space?
Rock Rockett: You know, I guess ultimately I’m not a big fan of it. But the consolidation obviously leads to bigger and bigger organizations. And bigger organizations are tougher to deal with, more difficult for patients to navigate, and so you start losing some of that age-old you know physician-patient relationship. You know it’s a fact of life, it’s here to stay, it’s not going away, and it will sweep up large segments and large chunks of the entire healthcare industry but not the whole thing. So, that’s my view.
Praveen Suthrum: So, when you say not the whole thing… let’s talk about the segment that does not want to consolidate and wants to stay small and independent. So, I want to start by asking you – is that even possible? You know given this massive pressure coming in from the health system side because the health systems are consolidating and they’re locking in referral networks and then the other practices may be in a region they’ve taken PE or joining a PE platform or plan to… they might be consolidating or hospitals are acquiring physician practices… that trend is happening. And again like you said the insurance reimbursement is on the decline. So, given all these changes is it still possible? And I’m sure many in the audience are interested in this question – Is it possible to stay small and independent in this environment and if the answer is yes, I already have a follow-up of… how?
Rock Rockett: For sure! Well, definitely the answer is yes. But it’s a qualified yes, okay? So, it’s a qualified yes. You can stay small, you can stay independent, you can be in control of not only your own destiny but be in control of your own practice patterns, and your own approach to patients and patient care, and so forth. And in some situations with these consolidated and larger groups, they get very focused on production and productivity and so forth. They kind of get obsessed with that.
I’ve had clients of mine who just rebelled against that and say, ‘I want to practice the way I want to practice’, ‘I want to do as many procedures as I want to do’, ‘I want to have that control that a physician should have.’ And it depends upon your market, depends upon where your group is, and it depends upon your relationships within that market, your referral network, and so forth. Some others have come to me and said, ‘well, if I go off and do this and set up office endoscopy suite the hospital is going to crush me!’ and I say, ‘well, that’s certainly possible and maybe this is not for you!’ So, it’s not for everybody but it definitely is a strong and viable solution.
Praveen Suthrum: So, who is it for? In what kind of environments is such a model possible? And when you say that… again, I’m saying this in my own words but helping physicians or gastroenterologists diversify and add revenue streams, how can they do that? What are those strategies that they can deploy?
Rock Rockett: Well, so the strategies are the strategies that the consolidated groups employ as well. So, there are arrangements where the gastroenterologists can share in the pathology revenue that are you know totally legal totally within the constraints of the regulations. And there’s one model is called the TCPC model there are other kinds of arrangements where a group can work with a local path lab or a path lab anywhere in the country for that matter. And they can you know participate in the pathology revenue likewise on the anesthesia piece. The anesthesia piece can be part of the revenue solution because you know you hire your own MD anesthesiologist, hire your own CRNAs, bill and collect for them. There are other models where the mobile anesthesia group will come into your office and you will do the work with them and then they will provide the nursing services, they’ll provide the recovery room nurse or say if a recovery room nurse charges 80,000 a year for instance that’s a pretty significant chunk. So, I would say to anybody interested in being on their own or going out on their own or having a small group and on an independent basis – you look at the professional fees that’s coming to you for your practice, you look at other revenue sources and principally those are anesthesia and pathology. There are some other smaller items like colon prep and so forth. But yeah, kind of in a nutshell that’s how it can work.
Praveen Suthrum: Doesn’t some of this require investments or money? And some doctors may ask where would that come from?
Rock Rockett: Exactly! You’ve got to have money to make money, right? So, it does require an investment. So, what I would do with a gastroenterology group, they can come to me or they can go to an accountant or someone to say, ‘hey how much is this going to cost and how much am I going to get from it?’ So you kind of develop a Performa much like the surgery center management companies would develop. And so, you look at those costs of the build-out, the design of the build-out, the equipment, the staff, the cost of getting it accredited and put all of that together and that’s the cost and over how many years can we amortize those costs? Can we lease equipment to do certain things? The first component is the expense side the second side is – what is the reimbursement going to be? Are the payors going to reimburse me more for doing the procedure in the office?
And there is a certain trend in that regard that’s a very positive trend. I had a conversation just yesterday afternoon with the Vice President of a leading Blue Cross organization just as of this past January, two months ago, increased the reimbursement for office-based procedures by 15%. Well, if you’re a gastroenterologist and you’re already getting seven or eight hundred dollars for an office-based procedure then that’s another 15% on top of that… you could be a podiatrist, you can be a urologist, there are several different specialties that it applies to. The payor organizations and principally Blue Cross are seeing that they have to do something to counter the consolidation efforts because they’re losing leverage. When the payor is still the same size the payor is but the providers get larger and larger then the payors are losing leverage. So, they have to do something to strengthen their position. There are regulations, right? The certificate of need regulations which dampen or prohibit the development of surgery centers in roughly half of the states of the US – Illinois is one, Massachusetts, North Carolina, lots of east coast states, and a couple of west coast states. So, the payors are looking at different strategies. In some cases, the payor will pay the gastroenterologist equivalent to a facility fee. They will say, ‘We’ll pay you as if you’re a licensed surgery center. We know you can’t be because of the regulations in our state.’
Praveen Suthrum: What I keep learning is that the insurances are getting so big that even some of the largest physician groups are finding it difficult to negotiate with them and improve contracts. So, if that is the case for these large groups then if somebody decides to stay small could they ever expect to get better reimbursements or negotiate with these insurances? Will they even come to the negotiating table?
Rock Rockett: Yeah a very good point Praveen. A small group negotiating with a Blue Cross? Yeah! Forget it! That’s not really going to be too effective. I think what you have to be aware of is – what are the reimbursement trends being invoked by the payors and it’s literally on a state-by-state basis. The Blue Cross of Illinois pays for roughly 200,000 endoscopy procedures per year and then you know if they’re paying a surgery center or a hospital outpatient department an average of 1500 to 2,000 dollars then it’s hundreds of millions… it’s like 300 million dollars a year. And so it’s not heart surgery, and it’s not knee replacement. It’s not big-ticket items but it’s the high volume of a relatively low-cost procedure and so Blue Cross is incentivized now.
They are motivated to address that issue and how they can impact it. And I think the pandemic is probably inspiring that as well or contributing to that. So, you know nobody wants to go to a hospital now unless they absolutely have to. So, to have a colonoscopy done in a hospital this doesn’t make much sense it needs to be done in a surgery center… ‘Oh our state is a certificate of need state. We don’t have many surgery centers!’ Okay… you got to come up with another solution… And that’s where this office-based solution is effective. So, there are favorable market conditions for office-based procedures and for independent practices to maintain and grow and sustain themselves, and then there are certainly unfavorable market conditions that people have to be aware of. And that’s something that I try to keep my finger on the pulse of so that’s part of the value that I bring to the table.
Praveen Suthrum: You know the gastroenterologists who are deciding to stay small and independent, how are they working out their relationships with the regional or local hospital or health system? Do they have any control at all? If so how?
Rock Rockett: You know let’s take Chicago for an example. Let’s take the Advocate Health system for example. So, you know within a very large organization like Advocate, 14 or more hospitals, thousands of physicians, many of those physicians are employees, right? They’re employees of that organization, kind of an equal number… a couple of thousand physicians are what they call Advocate physician partners. So, they are contracted through their arrangements with the carriers. They are contracted through the Advocate system and the Advocate umbrella but they’re not constrained by that. They’re not employees of that so they still have this independence and that can work.
And there are age-old examples from I don’t know 20 or more years ago in Virginia with Dr. Irving Pike negotiating an arrangement with the system there to say, look this is what we’re going to do – our group is going to do office-based procedures that doesn’t mean we’re going to cut out the hospital entirely because we’re still going to you know do make referrals to the hospital there are still the higher-level cases the cancer cases that are going to get referred to the hospital so you know it’s not a total sum game. There are arrangements where everybody can share in a piece of the pie. Maybe it’s not as big a piece of the pie as they used to have but they still get a piece of the pie.
Praveen Suthrum: What’s your view on gastroenterology for the next five years, 10 years maybe even longer? How do you see the space from a business standpoint evolve?
Rock Rockett: So, I think technology is going to erode the position of gastroenterologists. I said something to a prominent gastroenterologist in Chicago a couple of years ago about doing a colonoscopy and he looked at me and he said, “A monkey can do a colonoscopy. So, just don’t get worried about the difficulty involved in doing a colonoscopy.” So, that may be somewhat of an exaggeration but nevertheless that there are those issues. So, technology is a big driver, and then there is consolidation. It’s interesting to me because I see the pros and cons of consolidation and once consolidated, do the doctors stay in those groups? And there are some indications that there definitely is a segment of people who once they’ve gone through that whole consolidation process, say, ‘you know what? This is not what I thought it was going to be and I’m out, I’m going to exit!’ And maybe it’s the more affluent who will be able to preserve their independent physician practice. You know, they’ll still have that relationship with their independent, small physician practices and you know it’s unequal but it’s a reality.
Praveen Suthrum: Rock, thank you so much for this conversation. Any final words before we close?
Rock Rockett: I very much appreciate your time today and spending this time with you Praveen. It has been a good experience and I hope I can contribute something to help the gastroenterology specialty and the individual physicians who are looking for what’s the right career fit for them within their specialty.
Praveen Suthrum: Thank you.
By Praveen Suthrum, President & Co-Founder, NextServices.