Medical World News® (MWN) recently spoke with Christopher Fly, M.D.,who by day is assistant dean for curriculum and associate professor in the Department of Emergency Medicine at the Medical College of Georgia, in Augusta. And as if emergency medicine didn’t cause enough buzz in the space of a workday, after hours, Dr. Fly is an amateur beekeeper. The following transcript has been edited for length and clarity.

MWN: When you’re not in the School of Medicine or advising medical students, you might be found tending your back yard beehive. How did that interest start?

 Well, it’s interesting, I’ve always had hobbies and I’ve been kind of eclectic, but I always wanted to have things to do outside—it keeps me peaceful, keeps the batteries charged. I think I’ve always been a little bit fascinated with it. Interestingly, I don’t particularly like honey. My wife is an excellent baker, though, and she uses it quite a bit. So, six or seven years ago, my youngest, who’s now a senior in high school, came home from school one day, and said his teacher was taking a beekeeping class. I think maybe she even brought bees to school, but my son said, “I’d like to learn about bees.” And I said, “Well, that’s kind of cool. That’d be fun. Let’s try it.” And we started looking into it. It wasn’t something I wanted to do without any kind of training whatsoever. We missed the first season we could have started, so we kept reading about it and about one year later, my son and I went to a beekeeping class just across the river in South Carolina. In South Carolina you can actually get a Master Beekeeping certification although it’s not required. Most states, particularly agricultural states like Georgia where we live, have an interest in people being beekeepers—the more bees we have, the better pollination we have.He and I went through the class together. And then we got the bees. That’s how it started. And it was a project that he and I did together for some time. And as teenagers do, he got a little less enthused with it. But I was hooked as it were and I kept doing it.

MWN: Where does one get an original group of bees to start a hive?

 There are a couple of different ways but in our case one of the people involved in teaching the class who got really into it now sells his bees. So we bought ours from him. You can buy a box, or what they call a “package” that’s about 12 by 5 inches that is filled with bees and a queen. The queen is sequestered in the “queen cage” — a box about the size of a matchbox — with a few bees from her original hive. The rest of the bees are not from her hive, so they need to be kept separated for a while. Eventually she is freed from the queen cage and she will be begin laying eggs. You put that group of bees in an empty hive—it doesn’t have to have any comb in it to start. I started with a brand new one and they started building a comb almost immediately. The queen started laying eggs almost immediately. And there you have a hive.

 There’s no way for me to count them all—it’s well into the thousands. I started off with probably around 10,000 or 12,000 and they have built themselves up to probably 25,000 to 30,000 now. I don’t know that for sure, but they are an average size hive.

 I have been stung several times. As you may know, we have a little golf tournament here in the spring in Augusta. And I happened to be working there one year and the flowers are blooming and there are bees all over the place. I was standing on the course one day, watching them, and I’m not sure what I did because generally they won’t bother you when they’re on the flowers, etc. But one landed on me and stung me. I had to laugh because I wondered if maybe it was one of my bees. I live close to the Augusta National Golf Course and bees will fly three or four miles to collect pollen. So I thought, yeah, maybe was one of my bees.

I’ve been stung through my gloves. Some beekeepers work barehanded but I’m not going near that. Early on when I was feeding the bees, I had on my smock and my veil but I was wearing shorts. I didn’t think I had agitated them but one of them found my leg and boy, did I get stung. It’s probably like a lot of things in medicine. If you haven’t been stung by a bee yet you probably haven’t done it enough. Keepers who have 20 and 30 hives get stung pretty regularly. I have heard stories of older beekeepers who do it without any kind of protection. I don’t like it.

MWN: Where does beekeeping fit in to your schedule, and is it in any way like medicine?

 It’s not an everyday thing. It’s just fun some days to check on the hive outside or look out the window and watch the bees going in and out, make sure everything looks normal. Probably just because it’s fascinating. In the summertime, when they’re really active, it might as well be like O’Hare Airport or Hartsville Atlanta; they’re just going in and in and out in and out in and out. It is just fascinating to me to watch. These tiny creatures know how do to all these things and know they need to do them. They go out, find the pollen source, come back to the hive, and then communicate to the rest of the bees, “OK, go three miles to the northeast for this great bunch of flowers.” It’s all done with a “bee dance” that we can’t see, but it conveys exactly what the rest of the hive should do. And this is happening in my backyard. It’s fascinating.

That’s part of why I chose medicine, to learn more about the complexity of life in the world. And there’s always something new to learn. Same with beekeeping—and I’ve learned a lot over the last five years by making mistakes and messing stuff up and trying again. This is also a sustainable hobby. I can do this for as long as I want to.

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Physician dean and beekeeper 

Editor’s note: This article is based on the transcription of a video program, and was edited for length and clarity. To view the full video program, click 

® presentation titled “The Role of Continuous Glucose Monitoring in Diabetes Management.” We’re going to focus on the various factors that shape the use and impact of continuous glucose monitors (CGMs) in the treatment of diabetes.

There are many challenges to the self-monitoring of blood glucose. One day, it’s going to be archaic, like how people used to have to test their urine for glucose. We couldn’t imagine that people would be peeing in a cup now and using that to test their glucose. Self-monitoring of blood glucose requires blood, which isn’t always fun. You have to use a lancing device, which is sharp and can feel painful. You have to draw a drop of blood. You have to carry supplies: test strips, a glucose meter and a lancing device. It’s pretty inconvenient.

It provides only one number at one point in time, so you don’t know the direction that the glucose is going. You could get a reading of 110 mg/dL, and someone could feel confident that their glucose is in the target range, but what if it’s dropping quickly? Unfortunately, that’s something that a blood glucose monitor isn’t able to tell somebody. However, a CGM can provide information about what the number is at that time along with the direction that it’s going in and … predict impending high or low glucose values.

CGM has many benefits and can improve disease management in both Type 1 (diabetes) and Type 2 diabetes. One thing CGM does very well is provide instant feedback on lifestyle choices. Someone could eat a cup of oatmeal and immediately see how that impacts their glucose value. I frequently have patients who tell me: “I noticed that when I eat oatmeal, it spikes a lot. I thought oatmeal was healthy compared with eggs. Eggs don’t raise me up very much.” Things like that are very helpful along with the instant feedback about the benefits of exercise, such as walking after a meal.

There’s also the safety component. A lot of people are scared about going low — rightfully so. It’s very common that people might eat an extra bedtime snack because they’re worried about dipping low overnight. A CGM has a low glucose alert feature, so they can have the confidence that it’s OK for them to go to bed with their glucose in the target range. If it drops, they’ll get alerted and will be able to take action on that.

In terms of the health care team, the data are invaluable. If all you have is an A1C (glycated hemoglobin) reading and a few fingerstick readings, it’s like flying blind. You don’t know exactly what to do to the treatment regimen. If A1C is above target, you know you need to adjust something but you don’t know (whether) the person is having lows. With a CGM, you have all this information. You can determine exactly when someone isn’t in target range and then have a more targeted intervention to help them increase time in range and obtain their A1C target.

There are a lot of data that show the benefits of a CGM in terms of improving glycemic management. We have (several) randomized controlled trials with a real-time CGM, thinking back to the old DIAMOND trials in Type 1 (diabetes) and Type 2 diabetes. We also have (several) randomized control trials with intermittently scanned CGM. I’m not going to go through all the data but the bottom line is that these trials showed that there were decreases in A1C as well as increases in that time in target range.

Time in range is becoming an important metric. That’s the time spent between 70 and 180 mg/dL. The reason this is becoming so important is because we know we can bring down A1C. A1C is an average, so we can bring it down by causing tons of hypoglycemia. Obviously, that isn’t good clinical management and won’t lead to good clinical outcomes. By increasing time in range we can still achieve the A1C target, but in general we’re going to have safer outcomes and people are going to feel better because they’re not going to be on this roller coaster of high and low or having tons of lows.

Other important things we’ve seen from the clinical trial data are improvements in quality of life and less diabetes distress, which is so important. There have been (several) cost-benefit analyses showing that through the use of CGMs and improvements in quality of life — as well as other important end points like reducing hospital admissions for severe hyperglycemia and reducing emergency department admissions for hypoglycemia or hyperglycemia — there’s a huge cost benefit to using these devices.

When we think about the burden on health care professionals, we know that (physicians) are being asked to see more patients. It can be challenging to take care of people with diabetes, especially if you have a 20-minute slot with their visit. CGMs have helped people reach their A1C targets and other metrics. The reduction in hospital and emergency department admissions is important and reduces the burden for health care professionals.

A CGM could increase the burden if it isn’t implemented in a systematic way. That’s not a great thing to say. I’m a big advocate of the use of CGMs, but the reality is that you’re going to get more data, so your team has to have a process of who will look at the data, how you’re going to download the data and what you’re going to do with it. Sometimes that involves a bit of training up front for the team, or at least figuring out who on your team is going to be the technology champion. Fortunately, there are a lot of people who want to be technology champions. When you think about the diabetes care and education specialist or the pharmacist, dietitian, nurses or your MAs (medical assistants), who on your team can you utilize who’s interested in this space and wants to develop more expertise that can help you? That way you can implement good practices so that it doesn’t feel like an extra burden and is helping your practice provide the best care for your patients.

When we think about patient factors to consider for CGM use, the patients’ preferences are always my top concern. I want patients to have choices and realize what their options are. We have four options on the market and I want them to understand some of the differences, like alarm capabilities. Some have predictive alerts, so you can predict hypoglycemia in the next 20 minutes. Others don’t and have simpler alerts for highs and lows. Some have the option to turn all alerts off. Others don’t have that option. Some are implantable; some aren’t. The point is that people need to understand the differences so they can make an informed choice about what’s going to be the best option for them. Another example is calibration. Some require fingersticks and some don’t. You want people to know and understand those things and see what will work best for them.

Is there a subset of patients for whom we wouldn’t recommend CGM? It’s an interesting question. I come back to choice. I had a patient earlier this week who has Type 1 diabetes and has been checking with fingersticks four times a day and is doing great. He’s reaching his A1C targets. He’s doing well. He said he doesn’t want to wear a CGM. He’s concerned that he might feel overwhelmed by the data. He feels that what he’s doing is working very well for him. I respect that choice. In the future, if he’s not meeting his treatment targets, I may try to … encourage him to try it, but he’s doing well now. It’s not something we have to force everyone to do.

I find that with most people, even if they’re reluctant to start it — maybe they don’t want to wear something on their body or they don’t like this idea of all the data — once they try it out, they usually realize, “This was a lot smaller than I thought and I don’t have to look at the data all the time. I can look only when I want to.” Many people do very well with it.

In terms of providing education when recommending CGM, there are a lot of websites I utilize. I like to provide initial education about the different options in a very objective way and then I refer to websites like https://diabeteswise.org, which is a great site. It’s a nonindustry-funded site that objectively goes through the options and asks people questions about what’s important to them so that they can figure out what might be the best technology for them. I also recommend websites like https://diatribe.org, which is up to date with cutting-edge technology. If there’s a … CGM innovation, we know it will be the first to report on that. I like to send patients to those sites to do a little additional reading for follow-up before they (decide).

Utilizing CGMs for diabetes management in COVID-19

CGMs have been instrumental during the COVID-19 pandemic. We’ve all had to pivot to virtual care. We were fortunate. At Cleveland Clinic, we were doing virtual visits long before the pandemic but we do (them) much more frequently now than we ever did before. What’s nice about a CGM is that the data with most of these devices are Bluetooth connected, so it’s going into a portal that can be viewed … instantly to see how someone is doing. Even the data that aren’t automatically going into a portal have the capability to be plugged in and downloaded. In terms of virtual care, we’re able to view those data. It’s a lot more informative than if we only had an A1C value.

One of the unique things about a CGM is that we have all these different … key metrics. In addition to time in range, we have the glucose management indicator (GMI). That’s essentially an estimated A1C. I’m able to use that to track how someone is doing and see (whether) they’re meeting their treatment targets. During COVID-19, that’s been very helpful because a lot of people don’t want to come in. They don’t want to go to the laboratory. I have people who haven’t been to the laboratory in a long time, but I still have a very good objective assessment of how they’re doing. In fact, there’s a lot of movement to see (whether) GMI and time in range could overtake A1C or at least be supplemented with A1C so we’re not relying on this one metric every three months for evaluating diabetes care.

When we think about CGM accuracy, they’ve all shown that they’re pretty accurate. We have a term we use to describe the accuracy: mean absolute relative difference (MARD). The lower, the better. According to the Food and Drug Administration, when MARD is below 10%, the device is accurate enough to base treatment decisions on. That would include treating hypoglycemia or determining insulin doses based on the numbers. We feel pretty comfortable with their accuracy. It continues to improve.

One thing we have to be aware of is that there’s a slight lag time with CGM. The gap is closing, so the lag time isn’t what it was like 10 years ago. But because fingersticks are measuring the capillary and CGM is measuring interstitial fluid, there’s a slight delay. That means that if somebody recently ate something, the glucose on the fingerstick might be a little higher than it would be on the CGM. Similarly, if someone recently exercised or … gave an insulin injection, that number may be a little different. Educating people on those differences is very important.

Beyond that, calibration is sometimes a factor that goes into device selection. When you calibrate, you’re essentially doing a fingerstick and entering (the result) into the device to calibrate it. Any time you do that, you could be entering in some error, because we know fingersticks aren’t perfect. If you have anything sticky or sweet on your fingers or if you didn’t get a good enough sample, that can skew the reading. If you put a bad reading into the device, you’re probably going to skew the accuracy. That can be a determination. Devices that are factory calibrated are often preferred because you have less interference and it’s easier for the person because they don’t have to do additional fingersticks.

CGMs have evolved so much over the (past) several years. It has been amazing. Some big advancements are regarding calibrations. It used to be standard that all CGMs required fingersticks, and now we have factory-calibrated options that don’t require any fingersticks or have them as optional. There have also been impressive advancements with wear time. One of our devices goes up to 14 days. Another is implantable and goes up to 180 days. Wear time has evolved. It used to be about three days to start.

The other area where we’ve seen a lot of advancement is with integration. We have CGMs that integrate with insulin pumps to have automated insulin delivery, which is incredible. We also have CGM integration with connected insulin pens, which can also use those data and be able to view it in one report, which is remarkable. Several mobile apps can link in with these CGM data. Accuracy has improved a lot over the years, and we’re seeing that the sensor is getting smaller.

Despite all of the amazing advancements that we have had in the CGM space, there are still some unmet needs in research and clinical treatment. I do a lot of management in pregnancy, and we lack clinical studies in pregnant women with preexisting Type 2 diabetes or true gestational diabetes, where women develop diabetes during their pregnancy.

It would also be valuable to collect more information on the use of CGM and the outcomes in people with Type 2 diabetes who aren’t taking insulin. Last year, we had the MOBILE study, which studied Type 2 diabetes on only basal insulin and showed an impressive A1C reduction in that population. I’d like to see more on the complete noninsulin users. The other area where we need more research or best practices is the implementation of CGM. Many of us are sold on CGM being a great tool. However, how does a busy practice suddenly implement this tool? How do they get their team up to speed on reviewing these reports that look different from typical glucose meter readings? We need more of that so we can efficiently get this into practices across the country and world.

Diana Isaacs, PharmD, BCPS, BCACP, BC-ADM, CDCES, is a Clinical Pharmacy Specialist and Remote Monitoring Program Coordinator at the Cleveland Clinic Diabetes Center.

CGM has many benefits and can improve disease management in both Type 1 (diabetes) and Type 2 diabetes. One thing CGM does very well is provide instant feedback on lifestyle choices.

The role of continuous  glucose monitoring in diabetes management

The COVID-19 pandemic has stressed the entire health care workforce. Particular attention in press accounts has been focused on burnout among nurses and doctors along with other clinical personnel resulting from long work hours, inadequate staff, shortage of supplies and the emotional toll of caring for dying patients. We simply must provide better preparation and support for those who care for others.

Not to detract from this important group, but I would also call attention to another group of caregivers who, like doctors and nurses, have experienced increased stress and burnout during the pandemic but also go almost totally unrecognized during nonemergency times. That group consists of family caregivers for patients who are elderly, disabled or facing a critical or terminal illness.

I can speak from personal experience, having been the primary caregiver for my parents, both in their 90s, during the last years of their lives. It is a difficult task under any circumstances but made worse by inconsistent resources, lack of coordination of needed help, and the disconnect between the medical system and other providers of care and services.

I can hardly imagine the increased stress involved for those who have had less exposure to the health care system than have I, a physician of 40 years. The effect of the pandemic found its way to homebound patients, making doctor visits more difficult and resources harder to find while bringing significant social isolation due to limitation of visitors.

I have been left to wonder: How does being a caregiver affect the health of the caregiver, and how does our system dysfunction play into that effect? It turns out there are multiple studies looking at the issue, dating back to the 1980s. While not all caregivers experience significant long-term negative health effects, there are reports of increased depression, higher morbidity rates due to ignored or delayed health care for the caregiver, financial and emotional stress, and family and work disruption.

How big a problem is it? A study of employees of a large insurance company more than 10 years ago found that 25% of their employees reported being a caregiver to a family member or loved one. A follow-up study at one of the nation’s largest financial institutions found that rate to be 32%, which has only risen during the COVID-19 pandemic.

I imagine the stress of caring for a loved one with COVID-19 and the worry about family exposure have taken a huge toll. There have been notable reductions in productivity and attendance among caregivers, although the option for working from home and the recognition of the issue and employer flexibility significantly mitigate the workplace effects.

In my own small study of the senior management of my organization done three years ago, a surprising 80% were caregivers. But the shocking part to me was that not one of us knew of the burden our colleagues were coping with.

As we begin to address social determinants and how to mitigate their negative health effects, should we not also begin to ask whether the patient in front of us is also a caregiver? Or should we not ask more about who is caring for that older, critically ill patient we are treating and make sure they have all the resources they need to do the job?

Caregiving is hard and often consuming. It goes beyond the doctor visits and making sure medications are filled and given properly to include coordinating other family and paid caregivers, grocery shopping and food prep, keeping up the household, paying bills, handling financial affairs, and often preparing for the death of a loved one. 

It was helpful for me to have a caring family physician whom I could call or text when needed, along with the resource book, “The Caregivers Toolbox” by Carolyn Hartley and Peter Wong. There are other great resources available, but I became aware of this one after working with Peter, who was a Fortune 500 business consultant, and who wrote this book after a personal experience with caregiving. There needs to be a national discussion on how to provide better long-term care for our seniors, but we should also start by coordinating, funding and providing support services for patients and their caregivers.

L. Allen Dobson Jr., M.D., FAAFP, is a family physician and editor-in-chief of 

We simply must provide better preparation and support for those who care for others.

How do we care for the caregivers?

The number of severe COVID-19 cases may be on the decline, but physicians still face plenty of headwinds, including some that existed before the pandemic and others that the pandemic created. Many physicians — confronted with staffing shortages and clinician burnout, rising patient demand for telehealth, increased supply and labor costs and a lack of interoperability between different information systems — are struggling to maintain prepandemic profitability levels.

That is why it is essential that physicians obtain the payments they are owed as quickly as possible, completely capture accurate payments and minimize collection costs. For many physicians, solving these problems starts with adopting digital engagement tools that make it easier for patients to schedule appointments and obtain cost estimates before visits and for staff to capture payment details and establish payment plan options after visits.

Better patient engagement through better tools

At various steps throughout the patient journey, physicians can implement digital tools that promote patient engagement while increasing convenience and efficiency for patients and staff. Here are a few.

Online self-scheduling options enable patients to schedule appointments at any time of the day by choosing from a preselected list of available dates and times specified by the provider. Self-scheduling reduces barriers to care for patients while enabling staff to spend more time on higher-value activities.

Physicians can implement information systems that deliver automated reminders to patients at prespecified intervals prior to appointments. Appointment reminders help physicians maintain revenues by reducing the rate of patients who miss or skip visits.

Prearrival and in-clinic digital check-in: 

With digital check-ins, patients enter or confirm key personal and insurance data plus the reason for their visit, which enables physicians to deliver a previsit cost estimate based on visit type and copay. When patients validate, confirm and update information, it increases the likelihood of clean claims that result in prompt payment to physicians.

According to new research, 32% of patients will pay their medical bill within five minutes of receiving a text reminding them to pay their bill; 25% will pay when presented a bill via email. Patients expect the security and convenience of text and email notices to receive and pay bills.

Physicians that offer patients flexible postservice payment plans can improve collections, reduce the need for costly follow-up activity, and reduce bad debt sent to collection agencies. Ultimately, patients want to pay their bills, but because most health care costs are unplanned, it is important to offer flexibility to create a win-win for patient and physician.

To thrive financially in a postpandemic world, physicians must do everything they reasonably can to secure the payments they are owed while minimizing investment in resources to collect those payments. Digital patient engagement tools that boost convenience for patients and productivity for staff represent the path to get there.

Rajesh Voddiraju is president of Health iPASS, a Sphere Company. Send your tech questions to medec@mjhlifesciences.com.

Better patient engagement

For a physician, a partner buy-in agreement is an admission to the ownership and management of the practice as well as a landmark in a medical career. The agreement determines many of the most important aspects of a physician’s career, including compensation, ownership stake, management responsibilities and the terms under which he or she can leave the practice through retirement or resignation.

However, the agreements do not always get the scrutiny they deserve, according to health care attorneys who have represented practices and physicians in negotiations over the contracts. “A partnership agreement is a crucially important agreement that could be in place for 30 years or more and it should be approached that way,” says health care attorney Jeffrey Sansweet of Wayne, Pennsylvania.

Buy-in agreements are different from the employment contracts physicians sign when joining a practice as an associate. However, employment contracts often stipulate the time of service and other conditions necessary for an associate to be considered for or automatically offered a partnership.

Usually, terms of the buy-in agreement are negotiated separately, after a physician has been with the practice for two to five years. That period allows the associate and partners to evaluate one another and the partners to learn the revenue-generating capacity of the associate. Of course, not all doctors want to become partners, with some preferring to remain employees.

Negotiations usually are not contentious, says Patrick Formato, a health care attorney in Lake Success, New York. “By the time they get to the buy-in, the associates know what the situation is and what the buy-in is,” he says. “And if the practice really values the physician and they want to make it happen, they’re going to make it happen.”

There are exceptions, however. Sansweet says he has seen negotiations drag on for years: “It can get heated when you deal with ego, money and power.”

The amount of negotiating can depend on the practice and how frequently it adds partners. A larger practice that regularly executes agreements probably will work from a template that it is unlikely to alter significantly, Sansweet says. However, a practice that has not added a partner in a long time or that has seen its circumstances change is usually more willing to start from scratch, he says.

Not surprisingly, the attorneys interviewed recommended that physicians hoping to become partners should hire a health care attorney to negotiate on their behalf. “Don’t let the practice’s attorney tell you what to do,” Sansweet says, adding that having lawyers do the negotiating can avoid tension between associate physicians and the partners they hope to join.

Because aspiring partners are buying a share of the practice, determining the value of the practice is key to a fair agreement. There are three common ways to calculate it.

The first is the market method, basing a practice value on recent sales of comparable practices nearby, like the way real estate agents price houses. Healthcare business consultants typically collect practice transactions through annual surveys, broken down by specialty, location and other practice characteristics.

The second is the revenue method bases the value on practice profitability. It is favored by accountants and often used in conjunction with the market method.

The third method is based on practice assets, such as equipment, real estate, valuable inventory and any affiliated businesses, and calculates what it would cost to build the practice from the ground up. Any debt owed by the practice is subtracted from the value.

The practice should open its books to an associate physician during negotiations, including any existing valuations, additional companies owned by the practice, leases, revenue, tax returns, balance sheets, debt and buyout agreements for current partners, Sansweet says, adding, “It’s a red flag if they’re not willing to share everything.”

Practice valuations often include goodwill, the value of a practice over and above the value of its net tangible assets. Such items as patient lists, an ideal location, community reputation and other factors can be included in this.

Buy-ins generally are less expensive than they used to be, Formato says, explaining that as more practices are acquired by hospitals and health care systems, the remaining ones have fallen in value. Typically, when a practice is acquired, the employment and buy-in agreements are voided and replaced by employment agreements with the new owners, he says.

The buy-in payment can be structured in several ways. A lump sum payment is relatively uncommon. More typical is payment through years of deductions from the new partner’s salary or a mix of the two.

Buyouts — the terms under which a partner leaves the practice through retirement, resignation, death, disability or other means — are part of most buy-in agreements and just as important, says Formato. Although these usually are negotiated as part of the buy-ins, many agreements include opportunities to renegotiate when a partner decides to leave or retire.

They usually include the amount of notice a partner must give the practice before leaving, which might be up to 180 days, Sansweet says. And the new partner’s buyout is not the only one that matters.

To truly determine the value of the practice, aspiring partners should also examine the buyout agreements of current partners, particularly if they are nearing retirement age. These agreements detail the terms of how the practice will buy back the ownership shares of departing partners. Depending on the cost, the financial impact can be severe.

Buyouts can sometimes be renegotiated to reduce the cost to the practice, Formato says, adding that in some cases a practice will try to break the agreement to preserve its viability. Buyouts guaranteed by the partners themselves can be harder to change, whereas those guaranteed by the practice can be easier to break, he says.

Although the buy-in and buyout terms are most important, buy-in agreements cover other key subjects as well. One of these is power in the management of the practice. A new partner buying a share equal to three current partners should get an equal vote with the other three, Sansweet says. However, it is not unusual for larger practices to have tiered partnerships with senior members retaining more clout.

Buy-in agreements can spell out the new partner’s administrative responsibilities, work and on-call hours, vacation time and more. They also can provide job security by barring partners from expelling someone from their ranks without just cause.

Buyouts also can include noncompete clauses that restrict a departing partner’s freedom to join another practice or establish a new one. However, Sansweet says, these are unenforceable in a growing number of states.

For a physician, a partner buy-in agreement is an admission to the ownership and management of the practice as well as a landmark in a medical career. 

Physician buy-in agreements

Running a physician practice means wearing different hats — sometimes a challenge when patient care takes most of a doctor’s time. For a practice to thrive, it is important to track, measure and address specific benchmarks. Here we look at some key areas, from converting leads to claim denials, navigating a value-based care model and tracking reimbursement.

Denise Brown, M.D., an internal medicine physician and the chief growth and strategy officer at Vituity, a nationwide multispecialty physician partnership based in Emeryville, California, breaks down key benchmarks into essential “buckets” for doctors to prioritize as follows: clinical, operational, financial and equity.

Measuring clinical metrics can be challenging, Brown says, particularly when trying to measure patient outcomes. “The real outcome that matters is quality of life,” she says “and everyone’s got a slightly different perception of what that is.” She recommends physicians utilize quality-of-life surveys or track how often patients avoid emergency room admission or readmission.

In the value-based care model “we’re going to get paid on the value we create,” according to David McNeil, president of PatientPop, a growth and patient engagement platform for independent practices based in Santa Monica, California. The challenge for the primary care physician is to work to eliminate hospitalization or referrals to specialists when possible, and both metrics can be tracked.

“It’s the operational benchmarks that can really make or break your small group or private practice,” Brown says. These include such metrics as tracking how long patients wait in your office before being seen, how well your practice communicates with patients and whether it provides options such as text, email and phone.

What physicians must realize about improving their operations is that “we are in a new era of consumer-driven health care,” McNeil says. “Patients want the Uber experience … easy, accessible and convenient.”

This necessitates looking at the patient experience from the moment a practice first collects patient information, which he says should be a digital, simple process. “And when they show up, they’re brought right into the appointment room and it’s just as elegant as it can be,” he says.

Physicians should also follow up appointments with reviews through an automatic process such as a text or email survey. “That’s what we’re experiencing in every other industry, and health care has just been historically behind,” McNeil says.

Important financial benchmarks begin before a practice even sees a patient, McNeil says. “What are your incoming patient leads and are those leads converting?” he asks.

He suggests that in this digital age there are many opportunities to track conversion rates of patient leads into appointments, but it does require having a website, app or patient portal and staying on top of online reviews. It also requires paying attention to patients’ show rate and looking at the technology and software that could be introduced to make the process easier for practice manager and patient. “This could be providing text confirmations, digital intake forms, etc.”

The financial metrics a practice needs to track will vary depending on the financial model of the business, according to David Berg, president of Redirect Health, a care navigation company with headquarters in Scottsdale, Arizona.

“In an entirely fee-for-service model, the more I do, the more I’m going to make — so if I’m spending too much time with somebody and not getting that corresponding billing, I’m going to get in trouble financially.” In this model, physicians will likely be tracking ways to offer patient care that do not always require an in-office visit, he says.

In the fee-for-service model, physicians must pay close attention to their collection percentage. “It’s easy to leave a lot of money on the table if the doctor is not measuring collection percentages based on the work they do,” Berg says. Improving this ratio may require collecting more from patients up front or increasing the number or the seamlessness of available payment options.

In the value-based care model, where physicians are paid in a capitated way, the financial benchmarks become more connected to the quality of patient care, McNeil says. This means physicians must work more efficiently to reduce frequency of patient visits. “With value-based care, getting the trust of the patient is more important, and the customer experience depends a lot on communication,” McNeil says.

Berg discovered after years of running a practice that physicians need to take a very close look at how they are being reimbursed by Medicare/Medicaid. “I would encourage physicians to pick the top 10 codes they use and measure the pricing for just those, because I see a lot of doctors getting fooled in their contracts.”

For example, he says, “If I’m a primary care doctor, I don’t really care what I get paid on a heart surgery. Or if I never do skin biopsies, it doesn’t matter what I’d get paid. What matters is what I get paid on the services I typically do.”

An obvious, but often fraught, metric to track is accounts receivable (AR). “You don’t want your AR to get huge,” says Beth Cable, director of revenue cycle operation for AKASA, an artificial intelligence (AI)-powered automation for health care businesses.

Common problems with AR include denied claims and the work of correcting errors and resubmitting claims. “You want to make sure you’re collecting as much as you can and tying that in with a clean claim rate, which means getting that claim out the door right the first time,” Cable says.

This is where AI-based programs can help automate processes that would otherwise consume the resources of a billing person or practice manager. “Some AR denials and requests for additional documentation requests can be handled by AI,” Cable says.

Berg recommends an in-house billing person over outsourcing. “The first 80% of claims are fairly easy to get. The next 10% gets dramatically harder to collect, and you’ve got to know when to stop trying so you don’t waste money.” The amount of money most outsourcing companies want may not be worth it to obtain that last 5% to 10% for a smaller practice.

Lastly, Brown emphasizes the importance of measuring equity in a practice, although it is not as easy a metric to track as some others. “Who are you treating and why, and how did you decide?” she asks. “If you don’t take insurance, why are you not, or which insurances are you not taking?” She feels these are important questions for a practice to ask to ensure it is reaching as wide a patient population as possible.

Berg adds that this extends to guiding patients, who are often confused by their health care journey, in understanding everything from how to make an appointment to the costs of their care. “The more that a doctor can hold a patient’s hand and guide them through the things where they have the most fear and doubt, the more value that doctor is going to create.”

Benchmarking your practice

Editor’s Note: The following is adapted from “Searching for the Family Doctor: Primary Care on the Brink” by Timothy J. Hoff. Copyright 2022. Published with permission of Johns Hopkins University Press.

When I worked in primary care as an administrator back in the late 1980s, I heard the same complaint from the family doctors with whom I worked as I do now from those that I interview for my research—primary care medicine is not paid for in the United States anywhere commensurate with its value to patients. When I helped to run an insurance billing department for a primary care office thirty years ago, I saw firsthand how much lower the payments were for services meant to keep people from getting sick compared to payment for services that relied on waiting for people to get sick. Not much has changed in 2021. There is the rhetoric that primary care and prevention matter much more now to insurance companies, hospitals, and doctors’ offices. Sure, maybe in a few areas like chronic disease management where primary care medicine and family doctors have been asked to do more for patients. But that has not created a financial windfall for primary care, and what it asks of family doctors is very much responsible for how joyless some of their patient care work has become. For the most part, high-cost specialty medicine still dominates the health care system and still receives the bulk of the insurance payments. It is responsible for keeping hospitals profitable and specialist doctors well paid and in control.

The specialty of family medicine has always existed within the context of an unsupportive American health care system that underemphasizes primary care, where service is fragmented and procedural medicine is favored, and that waits until people get sick to interact with them and is ever more corporatized. It is a care delivery system long built on capitalist ideals. One defined by a supply side which pushes the prevailing narrative that health care is not a fundamental individual right, but rather a market in which buyers and sellers come together to transact business that benefits both sides. Despite the advent of Medicare and Medicaid in the 1960s, and the Affordable Care Act in 2010, health care in America since the 1970s has been mostly about providing big ticket items to an unhealthy, largely uninformed group of patients. That is where the money has always been for hospitals and specialists. This profit motive has produced a care delivery system in which monopolistic behavior and service fragmentation abound, politicians serve powerful industry stakeholders in biased ways, growth is valued above all else, and patients are left mostly out of the equation.

To create such a cold-blooded system takes time. It has not happened overnight. Neither will it be fixed overnight. Such a system is no friend to either family medicine or primary care. In fact, such a system views primary care as an attractive nuisance, useful for capturing patients in more expensive systems of care and getting them efficiently to higher-cost services. A loss leader to get patients to the expensive stuff. The American health care system has for decades been less enthusiastic to the idea of a generalist doctor managing patients’ care holistically and with a high level of relational excellence. It has financially undervalued primary care in all its forms. It has allowed the job of a family doctor to become saddled with administrative chores and bureaucratic requirements. It has made family doctors buy into one new initiative after another, overpromising how these initiatives would help primary care while under delivering. In many ways, it has treated family doctors like the generalists of old they replaced — as lower-valued and lower-paid parts of American medicine.

The financial undervaluing of primary care

All things hostile to family medicine in the American health care system start with reimbursement. And reimbursement has not been kind to family medicine and primary care delivery over the years. In terms of receiving adequate payment for its services, primary care medicine has always been the ugly stepchild of American health care. In other countries like Canada and the United Kingdom, primary care medicine and its doctors remain the centerpiece of care delivery and receive a significant bulk of the resources, but in the United States it has not been that way since World War II. Continued advances in medical technology, the rise of hospitals and specialists, and an ambivalent public have been steady negative influences on primary care’s viability.

Aiding these developments beginning in post-World War II America was the increased availability of private insurance for many Americans, usually paid by employers. Before insurance, generalist doctors dealt in a cash-only business, charging patients fixed fees for different types of services. Their system of billing was perhaps less egalitarian in giving everyone the chance to obtain their services, but it was within physicians’ control and fully transparent. Patients knew how much a service would cost, and they could assess whether it was worth the cost to have it performed, at least from their personal perspective. Doctors, almost all of whom owned their practices, could in theory better manage their revenue and expenses, altering their prices in relation to how much time and other resources were put into the service provided. Such a payment system helped to keep generalist medicine an economically viable endeavor in which a single doctor could be involved as an owner. One might not get wealthy, but you could earn a good living, control the economics of your practice, and do the kind of medicine that you wanted with your patients.

Then insurance came along. Private insurance separated patients from the costs of various forms of care, making specialty medicine an attractive option with fewer financial risks associated with it. While other countries like Canada and the United Kingdom insured most of their populations through government-run programs that had spending caps and placed primary care medicine at the center of care delivery, the United States pursued its insurance expansion in a different way, focused for decades on fee-for-service reimbursement and providing “usual and customary” payments to doctors based largely on what the latter wanted to charge for their services.

Insurance in American health care undercut the economic rewards of primary care medicine for family doctors because it biased payments toward procedures and specialists. It prevented patients from understanding “value” when it came to diagnosis or treatment and many no longer needed to worry about how much a health service cost. The fee-for-service payment system over time paid out more bills at a higher rate for specialists than for primary care doctors, because the usual and customary fees were set by specialists themselves, with little questioning of how they came up with their fees.

Good primary care medicine is slower to do than most procedural work. It does not align well with procedural medicine that can be done in an assembly-line fashion, generating a higher volume of overall fees in the process. Family medicine or primary care involves something called “evaluation and management services,” which in essence is time the family doctor spends on interviewing the patient, asking questions, getting to know patients, and managing a wide swath of clinical complaints and treatments for some. Attempting to be someone’s “comprehensive doctor” and “care manager” means a lot of these types of tasks and activities.

Whereas specialists are niche providers focused on treating single diagnoses and body parts, family doctors in theory are practicing medicine focused on prevention, disease management, behavioral health, and family care. They rely on getting to know their patients’ preferences, needs, and wants to deliver this type of medicine effectively. They must get patients to trust and listen to them. Primary care medicine takes more time as a result. It also has a longer trajectory to seeing the end results because it is more uncertain and complicated for many patients, involves a lot of cognitive work on the part of the doctor, and often has delayed time frames for seeing good outcomes. Many tasks and activities of primary care medicine simply have not been as highly valued dollar-wise by insurers. But they are critical to a close-knit doctor-patient relationship.

Timothy Hoff, Ph.D., is professor of management, health care systems, and health policy at Northeastern University in Boston; a visiting associate fellow at the University of Oxford, and author of “Next in Line: Lowered Care Expectations in the Age of Retail- and Value-Based Health.”

Primary care medicine is not paid for in the United States anywhere commensurate with its value to patients

Family physicians and the fight against the health system

After more than two years of COVID-19, the United States must transform its primary care system to deliver better care at lower cost and to provide greater satisfaction for doctors, medical staff and patients.

The pandemic was seen by many as an opportunity to fix primary care. Two years later, the problems that existed before COVID-19 — and that were in some ways exacerbated by it — will continue to worsen without intervention, according to physicians and health policy experts interviewed by 

The problems are as familiar as they are intractable. Primary care remains underfunded in proportion to its importance to the health care system. Continued reliance on fee-for-service payments means doctors remain strapped for time because they need high patient volumes to earn revenue. Consequently, patient visits are too short, schedules are too full and physicians are burned out. Workforce shortages are robbing doctors of time needed to focus on patient health. More spending is needed to recruit new doctors to primary care specialties.

All of this has contributed to widescale burnout among primary care physicians — 94% said they have experienced symptoms of burnout, according to the 2021 

® Physician Burnout survey. Many are questioning their career choices. One-third of internists said they would choose a new specialty if they could, according to the 2022 

But there also remains an opportunity to fix what ails the system. “Things are open as much as they have been in a century for primary care to improve its funding, its training, its sense of professionalism in the U.S. health care system,” says Rebecca Etz, Ph.D., a professor of family medicine and population health at Virginia Commonwealth University in Richmond.

“But it could also fail,” Etz adds. “And I don’t think people understand that this is a platform that is too critical to collapse.”

The root cause of primary care’s problems is “a misalignment of payment” between funding on a fee-for-service basis and the ability to provide proactive, population-based care in communities, says Asaf Bitton, M.D., M.P.H., executive director of Ariadne Labs, a collaborative health systems innovation center at Brigham and Women’s Hospital and the Harvard T.H. Chan School of Public Health in Boston.

Bitton was a member of the National Academies of Sciences, Engineering, and Medicine (NASEM) committee that in May 2021 published “Implementing High-Quality Primary Care: Rebuilding the Foundation of Health Care,” a 428-page study outlining the recent history of primary care in the United States and ways to bolster it.

One of its recommendations is plain: Primary care accounts for 35% of health care visits and gets 5% of health care expenditures. In other words, pay primary care doctors adequately for the services they provide and on par with specialists, says Timothy Hoff, Ph.D., professor of management, health care systems and health policy at Northeastern University in Boston.

In theory, investing money in primary care to keep people healthier will lower the cost of specialty care, so the savings pay for better primary care. “But you can’t do that initially until you invest more in primary care up front,” Hoff says.

There should be plenty of money to make that investment. In 2020, the national health expenditure was $4.1 trillion, or $12,530 per person, accounting for 19.7% of the U.S. gross domestic product, according to the Centers for Medicare & Medicaid Services (CMS). National health spending is projected to grow at an average annual rate of 5.4% from 2019 to 2028 and to reach $6.2 trillion by 2028.

Nobody, particularly specialists or hospitals, wants to lose their piece of the pie, so there is counterpressure to maintain the current system, Hoff says. “The only way you make the slice of the pie bigger for primary care is you have to take it from somewhere else. We haven’t tried with much success to do that.”

How do we go about fixing this system? Some physician groups call for single-payer models, such as Medicare for All, that if enacted would blow up the U.S. health payment system as we know it. There is very little institutional support for such a change.

The NASEM report recommends creating a societal goal to direct a greater proportion of health care spending to primary care. It also examines options for dealing with primary care payments and recommends a shift away from fee-for-service to a hybrid model with capitation to pay doctors regular, fixed amounts per patient — in other words, value-based payments.

Value-based payment initiatives are not new — the latest major overhaul came in 2015 when Congress passed the Medicare Access and CHIP Reauthorization Act (MACRA), which created several new models including the Merit-based Incentive Payment System (MIPS) and the Alternative Payment Model system.

The goal of MACRA was to incentivize providers to move away from MIPS, a combination of fee-for-service with some value-based incentives/penalties, toward alternative payment models, according to an analysis in a July 2021 

 blog. But for many reasons, the MACRA programs have not effectively moved providers toward accountable care organizations and participation is declining. The authors of the 

 analysis call for Congress to take up legislation to fix MACRA. “Congress has an opportunity to harness the significant energy behind payment reform and channel it into clear and strong payment incentives for providers to improve the quality of care they deliver and manage total costs of care,” they write.

Instead, there is little that individual physicians and practices can do to impact the conversation around reimbursement rates and value-based care. Some are taking matters into their own hands by opting for insuranceless practices, using models sometimes described as direct care or concierge or membership medicine.

Erika Bliss, M.D., a primary care physician in Seattle, uses a direct care business model with patients paying monthly fees and no billing of insurance at the primary care level, she says. Apart from a revenue stream, direct care allowed Bliss to be flexible, using telehealth for quick responses to patients during the pandemic lockdowns. With a constant stream of referrals, her practice grew so much that she closed to new patients during the pandemic.

“Really, a lot of what we were doing was just monitoring the situation and giving people information,” Bliss says. Other patients and physicians struggled to connect, “and a lot of practices closed or had to fire a bunch of people because they couldn’t pay their bills.”

Greater investment in primary care would allow primary care physicians to hire more staff, which would allow doctors to spend more time with patients, says Emily Godfrey, M.D., M.P.H., a family physician and OB-GYN specialist in Seattle.

Because primary care is reimbursed at a lower rate than specialists, primary care clinics are forced to have a greater number of shorter visits to meet overhead costs, Godfrey says. This leads to primary care physicians having a greater administrative burden than specialists, which perpetuates burnout among primary care physicians and proportionally fewer medical school graduates going into primary care.

She describes the difference between a 40-minute specialty examination of one patient issue and trying to address four or five patient issues in a 15-minute appointment. “Because 15 minutes of our time is worth less than
15 minutes of a specialist’s time, we have to see more patients to earn the same amount of revenue as a specialty clinic,” Godfrey says.

As a result, it’s not possible to address the range of issues patients have and in a manner that addresses their issue in the context of their families and communities. Often these patients have to come back for multiple visits to get their issues addressed, she says. And more patient appointments mean a greater need for staff.

Some financial help for staff could be coming. In November 2021, CMS announced the 2022 Medicare Physician Fee Schedule will update its clinical labor pricing rates for the first time since 2002. Essentially, Medicare payments have not kept up with the true cost of clinical staffing, says Sterling N. Ransone Jr., M.D., FAAFP, the president of the American Academy of Family Physicians (AAFP) and a family physician in Deltaville, Virginia.

“We’re using 20-year-old data to pay me in order to pay my staff, and prices have gone up quite a bit since then,” Ransone says. More money for physicians to pay for nurses and medical assistants can improve patient care while easing the financial strain on primary care practices, he says.

The health care workforce was strained even before the worst times of COVID-19. For some, the pandemic became the tipping point.

In March 2020, the Larry A. Green Center — a Richmond, Virginia-based institute that studies primary care — began a regular national survey that became a running tally of pandemic stress on physicians and their staff and how it has affected patient care. Two years later, 62% of responding clinicians say they know of other doctors who retired early or quit during the pandemic, 29% say they have personal knowledge of practices that closed and 25% reported they expect to leave primary care within the next three years.

“It’s a bad situation,” says Etz, a co-author of the NASEM report. “These people are really struggling. We really need to figure out both how to increase the workforce that we have in primary care and how to support the current workforce that is suffering historic highs of mental exhaustion and burnout and historic lows of resilience.”

When physicians close their practices, other doctors take on more patients but resources are stretched even thinner. The United States has about one-third of its medical workforce in primary care but that number needs to be about 40% of its medical workforce to create a basic, well-functioning health care system, Etz says.

Primary care cannot necessarily rely on a steady stream of new physicians. Medical schools are only sending about 12% to 15% of graduates to primary care — not enough people to replenish the health care system, Etz says. The situation likely will get worse. Last year the Association of American Medical Colleges projected a national shortage of between 17,800 and 48,000 primary care physicians by 2034.

There are policy solutions that could help. Physician groups applauded in December 2021 when CMS announced 1,000 new Medicare-funded physician residency slots in qualifying hospitals. They will be phased in with 200 a year over the next five years, targeted for hospitals with training programs and the greatest need for physicians. It was the largest increase in Medicare-funded residency slots in more than 25 years, according to CMS.

Those slots need to focus on primary care, “the bread and butter, which is foundational in medicine,” not subspecialties, says George M. Abraham, M.D., M.P.H., MACP, immediate past president of the American College of Physicians and an internal medicine physician in Worcester, Massachusetts.

The AAFP has called for more federal spending on programs that target primary care, such as the National Health Service Corps, which started in 1972. It offers scholarships and student loan repayment for doctors and other health care staff who work in underserved areas around the nation.

The academy endorses the federal Teaching Health Center Graduate Medical Education program, which started in 2011 and has trained more than 1,148 primary physicians and dentists in underserved areas, with 65% working as family physicians.

As a field, primary care needs a fresh approach to recruitment, Abraham says. “Unfortunately, we don’t have the equivalent of an NBA or an NFL or an NHL draft, so there aren’t these people queuing up to be a member of the team,” Abraham says. “We’re sort of coaxing people to come play with us.”

Medical students learn that treating patients with multiple medical problems is time consuming, energy draining and sometimes demoralizing, and they will make more money and likely have less workload as specialists, Abraham says. Physicians need to talk to medical students about the joy they find in getting to know patients, sometimes generations of families, and the mutual caring relationships that can develop. Getting students out to see how primary care affects a community “would be incredibly beneficial,” especially during the third and fourth years that are specialty oriented, Ransone says.

As pandemic conditions subside, doing more of the same is an option — and probably the worst one if physicians hope to see meaningful change in payment methods and finding new doctors, experts say. Physicians and analysts already know primary care is the only part of the health system in which regular investments produce more equity and lower mortality, Bitton says. Physicians need to be part of the solution set, and that starts by articulating their needs to patients, payers and policy makers.

“That’s going to require advocacy, political organizing (and) articulation of a clear use case just like other physician and nursing specialties do,” Bitton said. “I mean, cardiologists and neurologists are really good at advocating for the things they need. I would argue primary care should be just as good or better. We offer a huge value proposition for the rest of the health care system for our communities (and) for our country. Now we need to state it and then get to practicalities and then implement it.”

Why physicians deserve a better system — and how to get there

Fixing primary care

Something very interesting is happening right now: People are pulling back their spending. Retail sales are generally based on dollar figures for spending, whereas consumers tend to frame decisions more in terms of experiences like “should I go out to eat tonight or eat in?” And if you look — at least here in Dallas-Fort Worth — people are pulling back on these decisions. The price of gasoline is way up, median wages are lagging price increases, the stimulus has run its course and the one-way train of profiting from stocks and cryptocurrency has reversed. Restaurants that were packed last year are much less busy on weeknights and road traffic is slowing.

I was 13 when the crash happened in 2008 and I noticed many of the same things. It was almost eerie, but not quite as much as driving around in March 2020.

Looking around is an underrated way of gaining insight into the world. This strategy is much more effective outside of Manhattan, where so much of the financial industry is concentrated. Even going to a couple of Apple (AAPL) stores at different times and talking to people can provide great insight. Apple stores were extremely busy for years when the PE multiple was low, an obvious contradiction that resolved in favor of shareholders in the long run (by the way, I would not say the local Apple stores are very busy right now; if they are getting growth, it will have to be from digital services). Apple reports after the bell for those looking to place their bets. Amazon (AMZN) reports as well, giving a real-time window into the health of the consumer.

So we get the gross domestic product (GDP) report, and it shows a -1.4% annualized decrease in real GDP for the first quarter of 2022. GDP estimates are notorious for revisions, so we get a revised estimate in about a month. But this is kind of a big deal. Two quarters of negative GDP growth is the definition of a recession, so one more figure that comes in negative officially puts us in a recession. Given that we had
$1.9 trillion in stimulus last year and nothing this year, I think our year-over-year comparisons will be hard to beat going forward as well.

Many technicalities and offsetting
factors make the official GDP report hard to parse. For example, the dollar is strong and supply is constrained at home, so Americans are importing more things. This affects GDP negatively but is not a big deal. What might be a big deal is whether companies were induced to overinvest and overorder inventory by looking at the huge demand from stimulus last year and assuming it would last.

Restoration Hardware (RH) makes cool furniture, but its recent earnings report was a shock to the downside as consumers cut their discretionary purchases after the stimulus ran out. 

, a popular transportation industry publication, came out with a forecast for a freight recession a few days after.

The current state of housing also is an enigma to rational observers. The housing market at least felt balanced in 2019 and luxury homes were frankly hard to sell in many markets. Obviously, the pandemic set off a huge housing boom, but the underlying demographics create an interesting contradiction. By year-end, we will have built about 5 million homes since the start of the pandemic, but the U.S. population is only expected to have increased by 1.5 million or so since then. Maybe the net number of new homes is lower because of the roughly 200,000 to 300,000 teardowns of homes that happen in the U.S. per year — but with 2.5 people per household, the implication is that long-term fundamentals only justify about a million homes being built, whereas we are building five times as many.

These numbers are ballpark estimates, but by this lens the housing boom looks like more of a speculative frenzy exacerbated by pandemic-era policies and less of a demographic megatrend. If letting millions of people live rent free for 12 to 18 months and using the Fed to fix mortgage rates below 3% for the same period created an epic short-term housing squeeze, the implication from the true demographic demand is that we might be in for a bust going forward. When the government fixes the price of something too low, a shortage will inevitably result. But when the government stops fixing the prices as a return to normal, this will put people out of business who created business models around the fixed prices, as we saw in the savings and loan crisis in the 1980s and in the 2000s housing bust. Look at homebuilder stocks for what I mean — they are crashing while the housing market booms.

I seem to always pick on housing, but it is one of the sectors where the government has the most influence on economics — unlike the used car market where a boom-and-bust is just an annoyance, or the oil market where such things are common, expected and planned for.

One wonders whether companies of all kinds obtained too much inventory based on what people were spending in 2021 and will be stuck with surplus now that consumers are tapped out. One also wonders whether some of these companies hired too many workers based on the same assumptions and will need to let some go to balance the new supply-and-demand picture.

We are almost to the payroll peak hit in 2019, and I think we can count on at least a couple more months of good numbers. We are still getting over the shock from the pandemic — the friction in the labor markets means it takes time for workers to come back and be placed in jobs for which they are a good fit.

A question to ask is whether we have too few people working, about the right amount or too many. The mainstream answer is that we have a labor shortage, but companies have been remarkably flexible in dealing with this. (Have you used self-checkout lately?) Although I agree that there are still some shortages in the service industry, I think we might have too many people working in certain sectors of the economy — construction might be a prime candidate for a bust in 12 months.

The labor market is continuing to normalize, but as part of the process my guess is that rapid gains in nonfarm payrolls will turn to mild losses in the back half of this year. The Fed is in a tricky spot here if inflation stays high and the jobless rate starts to inch higher, but my guess is that as long as unemployment is below 5.5% to 6%, then getting inflation down will be more important.

The worst thing the government could do here is to print lots more money and start the cycle over, but I think they learned their lesson from the mistakes of the 1970s. Populism and the desire to attempt to print to prosperity seem to be on their way out — France and Slovenia just chose centrist candidates rather than populist ones, and inflation is arguably the No. 1 political issue in the upcoming U.S. midterms. The government did not rush to bail people out in 2008 the way it did in 2020, reminding traders that the “Fed put” is not universal.

The market is forward looking, whereas economic data is backward looking. Looking around into the world can help bridge the gap. What I am writing about here is a big part of the reason the S&P 500 is down about 12% for the year. My guess is that we have 10% to 20% more downside from here, making this market worse than in the early 1990s but better than in 2008. Valuations now never got quite as crazy as they did in the late 1990s, but we could see a market with some of the same mechanics of the tech bust of the early 2000s.

The future is uncertain and long-term investors do not necessarily need to sell to sidestep this, but I think you will be able to get stocks cheaper in six months than you can now. At the very least, I would try to make sure you own as much as possible of quality companies with real earnings and not speculative companies or companies with junk-rated credit. Consumer discretionary stocks and high-valuation companies are the riskiest right now, so avoid those if possible. Good luck to all.

We might already be in a recession

Fear that a market-punishing recession is right around the corner seems ubiquitous. Headlines, cable news chyrons, social media, talking heads, investment analysts and politicians solemnly convey the following composite message:

Monetary actions by the Federal Reserve Board will plunge the nation into recession this year or early next. This fate is confirmed in blinking neon by the trends in yields of Treasury bonds of different maturities, known as the yield curve. The recession will push the already declining stock market much lower, savaging returns of millions of Americans investing for retirement. Inflation, at a 40-year high, is wrecking our economy and will continue indefinitely. The war in Ukraine will grind the market down even further.

This picture of financial conditions is the bleakest since the financial crisis of 2008 (an actual crisis). Astonishingly, these prognosticators seem quite certain about something that is impossible to predict with certainty. At the very least, some of their predictions lack nuance and qualification. At the worst, they misguidedly rely on analysis that is flat-out wrong, hyped or distorted.

Sure, economists cover themselves with a lot of if-then statements. But the general tone of the media and some renowned investors these days is that a recession is coming soon — no question about it — and it will push the market far below current levels. The message is clear: Financial apocalypse is at our doorstep.

Sure, a recession is coming. Recessions are like rain: One is always coming. The question is: When? Doomsayers seem impervious to various data indicating that a recession before 2024 (if even then) is unlikely. They dismiss various indications that regardless of what happens with the economy, the market will not necessarily tank. But not all bear markets occur with recessions and not all bull markets occur with great economies.

Here are some points that challenge the basis for the current hysteria.

The obsession with the direction of Treasury-yield curves is based partly on error, partly on assumption. National media, always looking for simplicity, obsessively monitor the slope of the curve of yields of the two-year and 10-year Treasury bills, as if this is a sure-fire recession indicator. They cover the flattening of this curve as though it were the horrifying descent of the suspended swinging blade in Edgar Allan Poe’s “The Pit and the Pendulum,” threatening to disembowel the economy.

Unfortunately, they are looking at the wrong curve. The more predictive curve is the three-month/10-year, which is currently steepening, suggesting no approaching recession. The inferiority of the two-year/10-year curve as a recession indicator is a matter of historical record. This was clearly demonstrated again in 2018: After an angst-filled summer that year with this curve flattening, no recession ensued. Regardless, recession forecasting should rely on myriad data, not just Treasury-yield curves in isolation.

On the occasions when recessions do follow the flattening of Treasury-yield curves, on average they have historically occurred about 17 months later — and after a 14% gain in the S&P 500. People who are liquidating stocks now to sit out a recession may end up ruing that decision even before a recession begins.

Fear that a market-punishing recession is right around the corner seems ubiquitous. 

Medical Economics June 2022 edition