Managed care's attempts to capture aesthetic surgery.

Managed care organizations recently have attempted to add aesthetic surgery to their line of available services. To better understand the challenges posed by these actions, all members of the American Society for Aesthetic Plastic Surgery were surveyed about managed care overtures to aesthetic plastic surgeons, their responses, and the likely responses of their patients. The goal was to examine both the supplier and consumer ends of the aesthetic surgery market to determine the likely effects of managed care's attempts to capture aesthetic surgery. A total of 632 plastic surgeons returned the surveys (response rate, 54.5 percent). Twenty-two percent reported being approached by managed care organizations about joining a panel of aesthetic surgeons. Approximately one-quarter of the plastic surgeons said they would participate in aesthetic surgery panels developed by managed care organizations. Characteristics significantly associated with willingness to participate were solo practice structure, a low percentage of practice revenues from aesthetic surgery, and a very competitive practice environment. Plastic surgeons believed that their colleagues would be even more willing to acquiesce to managed care aesthetic surgery; more than one-third said that 25 to 50 percent of their colleagues would join, and nearly one-third thought that more than half would participate. Plastic surgeons believed that many of their patients would also participate in managed care aesthetic surgery. Twenty-four percent thought that more than half of their patients would choose an aesthetic surgeon through their managed care organization if that organization developed a network for aesthetic surgery. This figure increased to almost 40 percent if the organization would deny coverage for complications resulting from nonpanel surgeons, and to 41 percent if the organization would offer price discounts. This survey shows that most plastic surgeons are against managed care aesthetic surgery. But it also shows that some plastic surgeons will participate, and that most plastic surgeons think many of their colleagues and patients will do likewise. This means that managed care organizations have the potential to make inroads in aesthetic surgery on both the supplier and consumer ends of the market. To prevent managed care from capturing aesthetic surgery, plastic surgeons must anticipate the likely business strategy of managed care. To this end, they must understand the steps involved in the creation of a new service business and offer organized countermeasures against each of them.

Wall Street's growing influence on plastic surgery.

The advent of managed care has unleashed market forces on the health care system. One result of these new pressures is a shift from nonprofit to Wall Street-based financing. This report quantifies these trends by comparing health organizations' financial structures in the 1980s and now. The reasons behind this shift and the function of the stock market are examined. A review of Wall Street's key financial measures confirms that health care has shifted to the stock market as its principal means of financing. The stock market works by assigning a current price to a company's stock based on estimates for future earnings. Thus, companies desire predictability in their costs, revenues, and profits. Plastic surgeons can master this system by meeting the challenges imposed by Wall Street financing. Important steps include continuously measuring costs and outcomes of procedures, demanding cost data from hospitals and payers, using these data to improve costs and outcomes, and taking advantage of the system's openness to innovation and easier access to capital. As they seek to protect their role as medical decision makers under the new free-market system, plastic surgeons can benefit from understanding the mechanisms of the stock market.

The intercostal to phrenic nerve transfer: an effective means of reanimating the diaphragm in patients with high cervical spine injury.

Nerve transfers have been well described for the treatment of congenital and traumatic injuries in the brachial plexus and extremities. This series is the first to describe nerve transfers to reanimate the diaphragm in patients confined to long-term positive pressure ventilation because of high cervical spine injury. Patients who have sustained injury to the spinal cord at the C3 to C5 level suffer axonal loss in the phrenic nerve. They can neither propagate a nerve stimulus nor respond to implanted diaphragmatic pacing devices (electrophrenic respiration). Ten nerve transfers were performed in six patients who met these conditions. The procedures used end-to-end anastomoses from the fourth intercostal to the phrenic nerve approximately 5 cm above the diaphragm. A phrenic nerve pacemaker was implanted as part of the procedure and was placed distal to the anastomosis. Each week, the pacemaker was activated to test for diaphragmatic response. Once diaphragm movement was documented, diaphragmatic pacing was instituted. Eight of the 10 transfers have had more than 3 months to allow for axonal regeneration. Of these, all eight achieved successful diaphragmatic pacing (100 percent). The average interval from surgery to diaphragm response to electrical stimulation was 9 months. All patients were able to tolerate diaphragmatic pacing as an alternative to positive pressure ventilation, as judged by end tidal CO2 values, tidal volumes, and patient comfort. Intercostal to phrenic nerve transfer with diaphragmatic pacing is a viable means of liberating patients with high cervical spine injury from long-term mechanical ventilation.

Aesthetic surgery economics: lessons from corporate boardrooms to plastic surgery practices.

Healthcare traditionally has been described as not conforming to the laws of economics. Consumers pay for aesthetic surgery directly, thus freeing it from the usual confounding factors and making it more likely to comply with the market forces explained by economics. Recent studies have demonstrated the ability of classic economics to analyze, predict, and optimize the financial environment of aesthetic surgery. This article describes economic principles and how they can be applied to aesthetic surgery. Some of the basic instruments of economics include the study of supply and demand, prices, and price elasticity; capital investments; communication and cooperation; and consumer cognitive limitations. Each of these tools offers plastic surgeons the opportunity to gain improved control of their financial environment.

Wall Street's assessment of plastic surgery--related technology: a clinical and financial analysis.

Many plastic surgeons develop technologies that are manufactured by Wall Street-financed companies. Others participate in the stock market as investors. This study examines the bioengineered skin industry to determine whether it integrates clinical and financial information as Wall Street tenets would predict, and to see whether the financial performance of these companies provides any lessons for practicing plastic surgeons. In efficient markets, the assumptions on which independent financial analysts base their company sales and earnings projections are clinically reasonable, the volatility of a company's stock price does not irrationally differ from that of its industry sector, and the buy/sell recommendations of analysts are roughly congruent. For the companies in this study, these key financial parameters were compared with a benchmark index of 69 biotech companies of similar age and annual revenues (Student's t test). Five bioengineered skin companies were included in the study. Analysts estimated that each company would sell its product to between 24 and 45 percent of its target clinical population. The average stock price volatility was significantly higher for study companies than for those in the benchmark index (p < 0.05). Similarly, buy/sell recommendations of analysts for the study companies were significantly less congruent than those for the benchmark companies (p < 0.05). These results indicate clinically unrealistic projections for market penetration, significantly high price volatility, and significantly high discordance among professional analysts. In all cases, the market is inefficient-an unusual finding on Wall Street. A likely explanation for this market failure is a cycle of poor clinical correlation when assigning sales projections, which in turn leads to price volatility and discordance of buy/sell recommendations. This study's findings have implications for plastic surgeons who develop new technology or who participate in the equities markets as investors. Plastic surgeons who develop new medical devices or technology cannot universally depend on the market to drive clinically reasonable financial performance. Although inflated sales estimates have benefits in the short term, failure to meet projections exacts severe financial penalties. Plastic surgeons who invest in the stock market, because of their unique clinical experience, may sometimes be in the position to evaluate new technologies and companies better than Wall Street experts. Well-timed trades that use this expertise can result in opportunities for profit.

Data collection and utilization: bringing physicians on board.

Healthcare financial managers can encourage the physicians in their organizations to help collect and utilize clinical and performance data in four ways. The data should be used to develop individual physicians' practice preferences by emphasizing patient outcomes. Modified treatment recommendations or protocols that rely on the performance data should be introduced as improvements to be adopted just as the physicians would alter practice behavior based on data published in medical journals. Physician advice and direction should be solicited about how to collect data and how best to use those data within the organization. Finally, physicians should be included in any financial benefits that result from successful data utilization.

Pricing strategy for aesthetic surgery: economic analysis of a resident clinic's change in fees.

The laws of microeconomics explain how prices affect consumer purchasing decisions and thus overall revenues and profits. These principles can easily be applied to the behavior aesthetic plastic surgery patients. The UCLA Division of Plastic Surgery resident aesthetics clinic recently offered a radical price change for its services. The effects of this change on demand for services and revenue were tracked. Economic analysis was applied to see if this price change resulted in the maximization of total revenues, or if additional price changes could further optimize them. Economic analysis of pricing involves several steps. The first step is to assess demand. The number of procedures performed by a given practice at different price levels can be plotted to create a demand curve. From this curve, price sensitivities of consumers can be calculated (price elasticity of demand). This information can then be used to determine the pricing level that creates demand for the exact number of procedures that yield optimal revenues. In economic parlance, revenues are maximized by pricing services such that elasticity is equal to 1 (the point of unit elasticity). At the UCLA resident clinic, average total fees per procedure were reduced by 40 percent. This resulted in a 250-percent increase in procedures performed for representative 4-month periods before and after the price change. Net revenues increased by 52 percent. Economic analysis showed that the price elasticity of demand before the price change was 6.2. After the price change it was 1. We conclude that the magnitude of the price change resulted in a fee schedule that yielded the highest possible revenues from the resident clinic. These results show that changes in price do affect total revenue and that the nature of these effects can be understood, predicted, and maximized using the tools of microeconomics.

The financial environment of aesthetic surgery: results of a survey of plastic surgeons.

To gather information about aesthetic surgery's current practice structures, competitive environment, patient price sensitivity, and marketing and practice development requirements, a two-page survey was developed and mailed to all 1180 members of the American Society for Aesthetic Plastic Surgery. A total of 632 surveys were returned (response rate of 54.5 percent). Most aesthetic plastic surgeons said they were in solo practice (63.3 percent). More than two-thirds described the marketplace as "very competitive," with 59 percent reporting 25 or more surgeons offering aesthetic surgery in their area. They estimated their patients' average income at $62,800. Nearly all plastic surgeons labeled their patients as "moderately price sensitive" (62.3 percent) or "very price sensitive" (30.6 percent). Similarly, 23.2 percent estimated that they had lost 20 or more patients within the last year for reasons of price. Practice development and marketing efforts represented an average of 7.3 percent of plastic surgeons' working time. Parameters associated with a high percentage of time devoted to these activities were solo practice, percentage of revenue from aesthetic surgery greater than 50 percent, a practice environment designation of moderately or very competitive, and ten or more area surgeons offering aesthetic surgery (p < 0.05). High patient income led to only slight decreases in price sensitivity and did not significantly reduce the amount of time spent on marketing and practice development. Although the rest of the healthcare industry has undergone a period of consolidation, aesthetic surgeons have been able to resist these changes. The results of this survey suggest that the fragmented nature of the aesthetic surgery industry is associated with additional burdens on plastic surgeons. As the aesthetic surgery market becomes more competitive, plastic surgeons may benefit from consolidation to reduce costs and maximize efficiency.

The effect of increased consumer demand on fees for aesthetic surgery: an economic analysis.

Economic theory dictates that changes in consumer demand have predictable effects on prices. Demographics represents an important component of demand for aesthetic surgery. Between the years of 1997 and 2010, the U.S. population is projected to increase by 12 percent. The population increase will be skewed such that those groups undergoing the most aesthetic surgery will see the largest increase. Accounting for the age-specific frequencies of aesthetic surgery and the population increase yields an estimate that the overall market for aesthetic surgery will increase by 19 percent. Barring unforeseen changes in general economic conditions or consumer tastes, demand should increase by an analogous amount. An economic demonstration shows the effects of increasing demand for aesthetic surgery on its fees. Between the years of 1992 and 1997, there was an increase in demand for breast augmentation as fears of associated autoimmune disorders subsided. Similarly, there was increased male acceptance of aesthetic surgery. The number of breast augmentations and procedures to treat male pattern baldness, plastic surgeons, and fees for the procedures were tracked. During the study period, the supply of surgeons and consumer demand increased for both of these procedures. Volume of breast augmentation increased by 275 percent, whereas real fees remained stable. Volume of treatment for male pattern baldness increased by 107 percent, and the fees increased by 29 percent. Ordinarily, an increase in supply leads to a decrease in prices. This did not occur during the study period. Economic analysis demonstrates that the increased supply of surgeons performing breast augmentation was offset by increased consumer demand for the procedure. For this reason, fees were not lowered. Similarly, increased demand for treatment of male pattern baldness more than offset the increased supply of surgeons performing it. The result was higher fees. Emphasis should be placed on using these economic relationships to expand the demand for aesthetic surgery.

The effect of increased plastic surgeon supply on fees for aesthetic surgery: an economic analysis.

The size of the plastic surgery workforce has important effects on the financial environment of the specialty. Economic theory predicts that increasing the area supply of surgeons performing aesthetic surgery will result in lower fees for their services. This study tested that theory in the actual aesthetic surgery marketplace. The study examined the ratio of plastic surgeons to the general population of several states. It then traced the aesthetic surgery fees resulting from different densities of area plastic surgeons. This information was economically analyzed to project the fee effects of possible future changes in the number of practicing plastic surgeons. For the states of New York, California, and Texas, there is a proportional decrease in fees as the density of plastic surgeons increases. For example, New York has 34 percent more plastic surgeons proportionally than Texas, and its fees are 30 percent lower in real dollars. Economic analysis can project the fee effects of changing the supply of surgeons performing aesthetic surgery. The analysis reveals that a 30 percent national increase in the supply of plastic surgeons would lower fees by approximately 32 percent. Similarly, if the number of plastic surgeons increases by 50 percent, fees will decrease by approximately 53 percent. However, these fee effects can be mitigated by expanding the demand for aesthetic surgery. In conclusion, the size of the plastic surgery workforce has profound effects on the fees paid for aesthetic surgery, and the magnitude of these effects can be understood, predicted, and optimized using the tools of economics.

The changing health care marketplace: current industry trends, new provider organizational structures, and effects on plastic surgeons.

Current market forces are driving the health care industry in new directions. The managed care industry is currently undergoing a market shakeout, as manifested by consolidation, increased competition, and lower profits. Medicare is fighting to remain solvent by lowering fees paid to providers, driving patients into managed care plans, and cracking down on billing irregularities. For providers, the combined effect of these trends is lower fees, increased risk-sharing, and increased overhead. Plastic surgeons face new demands in this environment. They must increase their efficiency and form new alliances with other providers. These alliances allow plastic surgeons to maintain a steady stream of patients, to manage risk, to negotiate more lucrative contracts with managed care organizations, and to increase efficiency. To achieve these alliances, plastic surgeons must alter the organizational structure of their practices. Several corporate practice models are becoming more prevalent; these include large group practices, physician practice management companies, and integrated delivery systems. Each structure has advantages for plastic surgeons, but each also requires plastic surgeons to trade varying degrees of financial and professional autonomy for market strength.

Managing mergers without alienating physicians.

Mergers and acquisitions have become perhaps the most pervasive and important business activity in the healthcare industry. Physicians, however, frequently dread becoming involved in mergers because they fear loss of autonomy, income, and even their jobs. In merged organizations, the best managers look for ways to extend the benefits of mergers to physicians to prevent them from perceiving themselves as victims and becoming alienated from the organization.

Improving physician participation in billing compliance programs.

Billing compliance programs represent a challenge for all members of healthcare organizations. Despite the importance of such programs, many physicians often seem reluctant to embrace them. The solution to gaining physician buy-in to such programs lies in educating physicians, involving them in the programs' development and implementation, and making compliance as easy as possible.