Friday, May 27, 2011

Gold Standard in Clinical Oncology Care Guidelines

Most stakeholders agree that clinical guidelines support effective and efficient treatment. Most also agree that the National Comprehensive Cancer Network (NCCN) publishes the most extensive guidelines.

Until now, no one has created a powerful-enough technological platform to allow physicians to utilize the full extent of NCCN's guidelines. 

The April 1st launch of Proventys CDS Oncology—a product of NCCN and Proventys, a health care technology company—dramatically alters the landscape. The new web-based system features extensive algorithms that enhance the decision-making process, and, once and for all, advance the industry beyond its bickering over guideline platforms.

Friday, May 20, 2011

Lyceum Roundtable Summit


On July 14th in Washington DC, Lyceum will host a roundtable summit analyzing opportunities and challenges facing the care delivery system, related corporate strategy, and new business models such as ACOs and other care coordination platforms.

The event features three roundtable tracks of eight to 14 participants. Each track breaks down into two separate three-hour sessions. (See below)

View details here. Indicate your interest in participating here. Official enrollment will commence shortly.

"The Provider Business Model" 
Track One: "Leadership"

New delivery models featuring care coordination and integration threaten to destabilize the marketplace. Whether large systems or small practices, health care providers now more than ever require capable, business-minded leaders.
  • What defines a capable leader? 
  • How important are value, accountability and customer satisfaction as business goals? 
  • Over the next two to five years, which providers will gain economic share, and which will lose? 
  • How should leaders expect the relationship between physicians and hospitals to evolve?
Track Two: "Data/ Performance Measurement"

Many industry people expect data and performance measurement tools—such as e-prescribing and electronic health records—to enable economic gains for physicians and health care providers.
  • Are these expectations too optimistic? 
  • Should provider groups strive for data control? If so, what type of data? 
  • To what extent are payers, by diversifying into IT businesses, recasting the health value chain?
Track Three: "Risk Management"

Efforts to diminish or discard the fee-for-service payment system are accelerating. Replacement models may incorporate varying degrees of provider risk taking. At the same time, health reform threatens to eliminate competition in insurance underwriting.
  • How much risk and what type of risk will providers likely assume? 
  • How does the demand for risk management expertise alter market positioning among and between payers and providers?

Tuesday, May 17, 2011

Imprison Criminals, Not the Street

Unless an appeals court overturns his conviction, Raj Rajaratnam faces considerable time behind bars. His actions could not have been more blatant.

More important than one man's crime is the alarm spreading across Wall Street. For the first time, a federal judge admitted wiretapping as evidence in an insider trading case. Will prosecutors take advantage of a big win and vigorously pursue other fund managers?

Also, there's the question of Wall Street's basic model and how it deals in information. Will the Galleon Case produce extreme legal burdens that overwhelm a system requiring, in the interest of price discovery, speed and efficiency?

"Imprison Criminals, Not the Street" tackles these issues and more in the current issue of Perspectives.

Thursday, May 12, 2011

Health Plans Transforming Themselves

As the chart below shows, the five largest health plans have thrived since President Obama signed the Patient Protection and Affordable Care Act into law, outperforming the S&P 500 by between ten and sixty percent. Beginning a few years ago, commercial plans began diversifying away from their core underwriting and ASO franchises. In recent months and to market cheer, they've accelerated these efforts, in order to combat eroding margins and the full impact of health reform.

The Wall Street Journal discusses this strategy in detail here.

Some questions to consider:
  • Are health plans more than making up for lost margins and creating more powerful businesses?
  • Do their diversification efforts materially disrupt the balance-of-power with providers? If so, is consolidation the only response providers have?
  • Could a different player—a smaller-sized insurer, for example—execute an alternative strategy and roll up out-of-favor underwriting and ASO operations?
  • What happens if the U.S. Supreme Court strikes down the individual mandate, or the health reform law fails to reach full impact? 
  • What's the likelihood of underwriting competition going the other direction and intensifying?
Click on chart to expand
Source: Google Finance

Monday, May 9, 2011

Winning the Impossible Game

Sometimes, in trying to impress a reader, a writer can create the wrong impression. Howard Marks, the veteran Chairman of Oaktree Capital Management and author of a widely-read client memo, tightly defines an investment philosophy that he's developed over four decades in his book, "The Most Important Thing".

While he strives to show the reader that long-term investment success requires psychological discipline (second-level thinking, as he terms it), in doing so, he re-affirms something the thoughtful investor knows already: it's nearly impossible to sustain outperformance in money management.

Investment managers, we learn, must overcome many common emotions that undermine consistent success: greed, fear, the willingness to suspend disbelief, the tendency to conform to the herd, envy, ego, and capitulation. They function in markets that are neither efficient nor inefficient, and must constantly mitigate risk exposures where they often have no clue what those exposures are.

He argues that, because cycles are unpredictable and the future is unknowable, the best an investor can do is determine where he is at present, in terms of market conditions. But even that realization is often impossible to achieve, especially if, as is usually the case, one or more negative emotions overwhelms an investor's psyche. (By implication, the clear-sighted folks might as well be needles in haystacks.)

What's more, Mr. Marks advocates Nassim Taleb's concept of alternative histories—where events that already transpired are, in fact, just small subsets of events that could have happened. In supporting this view, he dismisses, for example, an investor's great performance if that investor has assumed unnecessary risk, and luckily skirted harmful events.

Taken together, it's a miracle anyone can outperform the market for any length of time at all.

Why, after reading his book, would anyone trust his or her hard-won earnings with any individual or investment group?

To be sure, examples exist of folks who, over decades (the total time a person might buy and sell investment funds), have beaten the market, but you can probably count the number on one—maybe two—hands. Plenty more individuals have excelled over shorter time periods, but their performance showcases a small sample size (a few years) or may feature substantial losses, or both.

In either case (the long- or short-term period of outperformance), the shareholder entering and exiting a fund makes a critical timing decision that can dramatically affect his wealth's appreciation—or depreciation. Take Mr. Marks himself. He won't retain his position at Oaktree indefinitely, and his eventual departure presents considerable uncertainty to whomever purchases his funds today. (The same holds true for folks investing in Berkshire Hathaway and Warren Buffett.)

Past performance, Mr. Marks reminds us, does not guarantee future success. The shareholder, it would seem, could just as well visit the nearest casino, and claim the same chance for wealth improvement.

If investing in a money manager constitutes mostly luck—or a skill for timing (something Mr. Marks dismisses outright)—then why not create a money management operation instead? That career choice has produced vast riches for many, many different people—often far greater wealth than any of their shareholders.

Mr. Marks does not provide a model for building a money management operation. Instead, he delivers something more valuable—a complete investment framework, the operation's core competency and competitive advantage.

While investment groups can experience massive gains over short time periods, enough for its founders to enjoy a long retirement, most should plan for a long haul. Fat fees (management and, for some funds, performance) may not last forever, nor the ease of amassing assets under management—now especially challenging in the aftermath of the 2008 financial crisis.

The Graham-and-Dodd school of value investing, of which Mr. Marks is a disciple, perfectly fits a long-term approach. It produces a manager who applies patience, extreme diligence and a mental commitment to decades of work. The school—its espousal of frugality—doesn't demand that its students invest in costly trading infrastructure, super computers and complex algorithms, or ramp up risk exposure and deploy leverage and concentrated positions. Rather, it endorses in-depth, pound-the-pavement analysis, downside protection and margin of safety.

Farewell the retire-before-forty era. Pity the fool who expects to catch the next massive momentum wave, and trade his way to riches. Fads appear and disappear, back and forth Mr. Marks' pendulum swings, but steady goes the skeptical, value investor.

The long-term manager traverses the slow road of careful, defensive investing. Sexy, no. Successful business-building, yes.

Mr. Marks does not lack confidence. The book's title might well read "Everything I Have to Say is Important"; he manages, with eye-opening assertiveness, to identify each of his key statements as "the most important thing".

Of course, when it comes to money, we tend to use superlatives. And what could be more important than generating wealth-creating returns? We hope lots of things.

The first nineteen chapters explain different lessons he's learned—pearls of wisdom. Throughout the book, he interweaves excerpts from his client memo which he has published since the early 1990s. The twentieth, and final, chapter presents short outtakes from different issues of his memo, and summarizes his philosophy.

Early on, Mr. Marks distinguishes value investing from other investment styles, and cites the infamous Nifty Fifty of the late 60s and early 70s as a stark example of the perils of growth investing and misplaced risk taking. While certainly some of the companies bellied up, not only did many survive, they thrived: Eli Lilly, Coca-Cola, Philip Morris, Hewlett-Packard, Texas Instruments, and Motorola among the names he mentions. Had someone purchased and held on to equal positions in each company, that person today, forty years later, would have done quite well.

Even if Mr. Marks disparages the Nifty Fifty phenomenon, his repeated argument that patience pays is essential wisdom. An investor's career inevitably spans multiple market cycles—often extreme conditions. Confidence in long-term results contradicts our age of escalating portfolio turnover rates. For Mr. Marks and other contrary-minded investors, it's an obvious opportunity.

Finding and investing in a hot-handed fund manager may well be impossible for most people. Many more could opt to play the game themselves. Now, a manual—replete with enough catchy aphorisms to post as quotes-of-the-day for years to come—exists from which to make a business of it.