On Competition and Circumvention

This weekend on the way home from one of our distant offices I was visiting, I listened to an interesting segment on NPR about competition in healthcare. Two economists were quoting Milton Friedman. That’s a quick way to get my attention. If you haven’t read Friedman, you’re doing yourself a disservice.

One of the economists has made it his life mission to take down the California Medical Association and their anti-competitive stance on nurse practitioners. With nearly 20% of our GDP going to healthcare, you can expect more of these debates and you can expect them to get louder.

Friedman wasn’t and isn’t the only economist who favored elimination of medical licensure. The problem with assuming competition in healthcare will drive down costs and increase quality, as nearly every industry has witnessed through increased competition, is that consumers have no worldly idea what they are going to pay for specific procedures when they go to a hospital or doctor’s office.

Think I’m wrong? Try it. Call your local hospital and ask how much they will charge to take out your appendix. You won’t find a single person who can give you a straight answer.

Here and in other media, I’ve reported the details of the CATO Institute’s recommendation and position paper on medical licensure. The most feasible path forward to help stimulation competition and decrease costs is to eliminate licensure.

I know this sounds crazy, but economists and legislators believe patients in poor counties should have the right to see a nurse practitioner and not a doctor if they so choose and, especially, if that’s the only option available to them.

Recently, many governors, including Kansas’ Governor, signed into law a new telemedicine bill. Dr. Marc Ackerman and his impressive group of directors have launched the American Teledentistry Association, and our own audiology device manufacturers are themselves working on teleaudiology options. The pace of all of this is increasing rapidly.

It is no longer a far-fetched dream that doctors and audiologists will be delivering care at a distance. I’ve said here and elsewhere that this is a great way to increase taxes to cover the burden of paying the coroner in Minnesota after a doctor in Texas prescribes the wrong medication that kills someone. Listen, this stuff happens in doctor’s offices face-to-face, so it’s not the telemedicine that I’m concerned with, it’s the increased burden of compliance and growing federal taxation that will swallow small providers.

The federal government says they are for small businesses and love to see more competition in the marketplace, but that’s just because it helps get them elected. What sane person would campaign on “we’re anti-small-business and pro-monopoly?”

But that’s exactly what has happened. Trump’s Administration has given us a 4, hopefully 8 year pause from the relentless battering small businesses have taken over the decades, but even Trump’s Tax Plan did nothing to help the small professional-services business in America. I will pay more in taxes this year than ever before. They know where their golden goose lives and they aren’t about to kill it by lowering the taxes of the top 1%.

Look at every industry and you’ll actually see less competition, built under the guise of more competition. The US previously had over 100 car manufacturers. Today we have three. We used to have hundreds of airlines in this country. Today we have ten. Telecommunications providers, internet service providers, retail and even hospitals have undergone massive consolidation.

They won’t admit it, but the bureaucrats and regulators in Washington D.C. would much rather police and regulate a handful of players in one industry than they would hundreds. I can’t blame them. I would too and so we’re on a steady march towards a single-payer system in this country. You can ignore it or position yourself for a wise exit and then re-entry in a much smaller footprint, serving a very small sliver of your population with a very niched, customized, specialized service.

There’s nothing wrong with this strategy, by the way. Rolls Royce sells only 3,500-4,000 cars per year but does so at a 26% net profit margin. Ford’s net profit margin last year was negative 2.9%. The previous year, Ford enjoyed a whopping 6% net profit margin, their best ever. The average for the auto industry last year was 1.34%.

Rolls Royce clawed $4.21 billion in profit and a 26% net margin out of only 4,000 cars sold last year. Amazon would have to ship over $250 billion of crap to their 100 million Prime members in order to get the same amount of profit.

Through continued expansion and consolidation, hospitals will produce the same money math as Amazon – razor-thin margins. Physicians who join hospital employment see their net productivity drop by 35% compared to their peers in private practice (Source: JAMA). These conglomerates will operate on razor thin margins, which is fine as long as they can produce earnings for Wall Street and private equity.

You can try to play in this new world. I’m not discouraging it at all. Some of our colleagues are attempting as we speak. Some know their history and are trying to defy it. Some do not know our industry’s history and are doomed to repeat it. Both miss the fundamental truth in all of this: you can be aware of what’s going on and circumvent it.

Make yourself Rolls Royce and compete in a category of one. Surpass everyone else in your town by taking better care of your customers than they can. The only problem you’ll have, like Rolls, is that your profits will be embarrassingly high.


Perception and Reality

Geraint Thomas won the 2018 Tour de France, becoming the first Welshman to take the top prize. I stopped watching the Tour several years ago, for the most part, because of the doping scandals that continue to reappear and the wide disparity in the funding of the top one or two teams and everyone else. Chris Froome, last year’s winner and Sky teammate of this year’s winner, tested positive for excessively high amounts of the asthma drug salbutamol last December. Not shocking.

Outside my usual observation of competitive strategy and tactic, I took away one huge gleaming pearl on how the world works and it came in the most unusual and least expected ways while watching the Tour. In the middle of the week, Froome, the same knucklehead who has admitted to doping, was “wearing a dark gray rain jacket over his racing jersey and was yanked off his bike by a police officer who mistook him for a fan riding the course.” Brilliant.

The leader wears a yellow jersey for a reason. Riders don’t wear dark hoodies over their racing gear for a reason. This police officer is tasked with keeping the riders safe. When he saw what he suspected was a common citizen riding along in the race, he immediately yanked that person off his bike.

Think about the profundity of this incident. A garment is all it took. One minute you’re the defending champion of the Tour de France. The next minute, you’re confused as someone breaking the law, riding in a race where you shouldn’t be riding and a police officer tackles you to the ground.

Your mind should instantly leap to how you and your practice are relentlessly judged by new patients, referring doctors, colleagues and community leaders. In how you dress, speak, market and decorate your office, are you wearing a gray rain jacket over your racing gear?

It’s not fair, but it’s how the world operates.

You’re being judged and assumptions are being made about your clinical skills based not on the patient’s final occlusion but on the cleanliness of your restrooms. Your team is being judged about their sincerity, friendliness, education and apathy based not on reality but on the mere appearance of their uniforms.

I once overhead a James Beard Award-Winning Chef explained to a group of young aspiring chefs, “You’ll never be really great in this profession until you’re obsessed with clean restrooms.” The students looked at her in confusion. They wanted to hear about the latest sous-vide cooking techniques, not some boring advice about janitorial services.

No one got the point, but I chuckled out loud. She was exactly right. Of course her meals are faultless. Of course she knows how to prepare insanely-tasty food. But that’s just the start. Her tables and floors are also spotless and the restrooms are always impeccably clean. She was trying to teach these young chefs if they want to be great, they have to find all the “gray rain jackets” and get rid of them. You can be an amazing chef, but to be a James Beard Award Winner, you had to really love and embrace all aspects of delighting the customer, including how clean the restrooms are.

Listen. I’ve boosted the conversion of young doctors simply by putting them in a neatly-pressed shirt and tie with a custom-tailored white lab coat. Before working with me, they looked like teenage tech repair reps, roaming the office, looking for broken computers. After working with me, they look and sound like a doctor. You might think you have this issue covered. Secret shopper data reveal otherwise.

I’ve made millions for my clients and my own practices by fixing what we say on the phone and how we say it. You might think you have the phones covered. Secret shopper recordings reveal otherwise.

The uncomfortable truth about nearly every business on the planet is that delivering exceptional quality results is just the beginning. This earns you nothing in the eye of the public. Consumers expect small businesses to change the oil without breaking the filter, deliver the food without salmonella, file the taxes on time and without gross errors, complete the surgery without killing the patient, etc. If you can’t operate at the highest level of efficiency and quality, get out of the business. That’s the starting point. Everything else is up to the perception that people can trust you and that you are worthy of their referrals. And, perception is reality.

Don’t sleep another night until you find every gray rain jacket with even the slightest possibility that it might be covering over your racing gear. Make a list. Where is perception putting you at risk of being yanked off your racing bike and tackled to the ground? Eradicate these from your practice like the unwelcome viruses that they are. Then, put the yellow jersey on your practice. Never take it off and never look back.

The Way Forward

On a recent monthly coaching call, an exceptionally bright client and successful audiologist in California asked me what are the key characteristics of my top students. It’s a smart question. One I imagine Munger or Buffett might ask of a leader in any worthwhile organization.

At the top of my list, resting on four or five other characteristics, was the fact that the most successful members of AuDExperts are curious and often stand alone in their desire to grow.

Where friends and colleagues often shun or refute basic marketing, management and employee engagement strategies, my top clients turn over every stone, looking for clues, testing, measuring and adapting. In other words, they behave exactly the opposite as the average doctor and small business owner. And, more importantly, they really don’t care what their peers think or have to say about it.

These doctors are clearly the minority.

Kierkegaard said, “Truth always rests with the minority … because the minority is generally formed by those who really have an opinion, while the strength of a majority is illusory, formed by the gangs who have no opinion.

It’s why my top clients ignore the “gangs” online and in other media. Inside the average Facebook user group, online message board or CE meeting room, you’ll find a bunch of doctors sitting around, looking at what their peers are doing and attempting to do it incrementally better or blindly following the crowd.

My best strategies are deeply rooted in principle, not fad, and they’ve all come from outside our industry. The Disney Institute, MIT Sloan School of Management, my own MBA training, obscure marketing, psychology and behavioral journals and research – this is where I start. Through relentless testing and slow release to my top students, then through my monthly marketing programs and here, only after the strategies and tactics have been tested and proven in several markets, you will find ideas, examples and templates that will only grace the pages of a Facebook user group if they’ve been stolen from or licensed through yours truly.

I admit, I live a charmed life. It wasn’t always that way, but my top students benefit from it greatly. One of the best ways to avoid me-too group think is to set aside time each day in quiet reflection to focus on your goals and objectives.

Where are you headed in the next 3-5 years? Look for the long runway. Someone much smarter than I said we tend to overestimate what we can accomplish in 30 days but underestimate what we can accomplish in a year.

Kierkegaard observed, “Incapacity for quiet contemplation cuts us off from our true self and instead causes us to adopt by passive absorption the ideals of others.”

If you feel the tug in your personal life or in your practice to listen to and adopt the ideals of others, might I suggest an alternative. Set aside at least 30 minutes each day to ask yourself what you now know that you didn’t know when you woke up this morning. Write down the 3-5 big things you’re going to accomplish tomorrow. Never start your day with email or by checking your phone.

While others float aimlessly without opinion, you will remain grounded, focused and effective. While others are driven by impulse, you will act with intention. Don’t stop with quiet reflection. Share your goals with your team leaders. Align your organization with your true sense of purpose. Measure relentlessly. Celebrate even the tiniest of wins. This is the way forward.