Sermo Flexes its Muscles

MDNG Primary CareJanuary 2010
Volume 12
Issue 1

Daniel Palestrant, MD, CEO and founder of Sermo (, explains why Sermo cut ties with the AMA last year, reviews the current state of the largest online community for physicians, and reveals where he sees the site and healthcare social media headed in the near future.

Daniel Palestrant, MD, CEO and founder of Sermo (, explains why Sermo cut ties with the AMA last year, reviews the current state of the largest online community for physicians, and reveals where he sees the site and healthcare social media headed in the near future.

For our readers who don’t know about Sermo, what is it and how can doctors use it?

Sermo is now the largest physician online community in the country, with well over 100,000 US physicians. Doctors log in to Sermo and are able to share information with one another, and in doing so, improve patient care and their ability to unite and face the challenges confronting not only the medical profession, but really the whole country in terms of healthcare reform.

Back in July 2009, the AMA said it was breaking ties with Sermo because “the value was not there to justify the investment of AMA members’ dues dollars.” Why do you feel the relationship ended?

Sermo had actually, in May, given the AMA notice that we had decided to end the relationship because of positions the AMA was taking in the healthcare reform debate. We felt that there were fundamental confl icts that the AMA had in its business model, and they increasingly weren’t faithfully representing physicians. And as we saw the discrepancies grow between what the tens of thousands of physicians on Sermo were saying and what the AMA was saying, we felt that we could no longer in good conscience continue to have a public relationship with the AMA.

It’s been quite fascinating since then to see just how, frankly, fortuitous and depressing that decision [by the AMA] was; the AMA has been completely sidelined in this healthcare debate. It’s been clear that the AMA’s decisions were based more on the financial incentives that it gets from the US government as opposed to truly advocating for physicians or patients.

What is your take on physicians’ discontent with the way they are represented by professional or- ganizations like the AMA? Is the AMA not keeping up with the times?

I think that there’s been this general misconception about what the AMA really is. Today, the AMA has reached a point where it will not publicly talk about its membership base. The most optimistic estimates say that less than one in fi ve US physicians are AMA members, but most people on the inside will tell you that there are less than 60-80,000 physicians who are actually paying AMA members.

The AMA’s revenue in 2008 was nearly $300 million, with just about $40 million coming from membership dues ( A big chunk of the AMA’s revenue comes from its monopoly on billing codes, which is something that the government has granted them, meaning that the AMA gets a lot of money from insurance companies; and physicians as it turns out, are adamantly against those billing codes. So, to me it’s a fundamental confl ict that you could have an organization that is ostensibly advocating for physicians but is getting the majority of its money from the insurance industry.

Is there anything the AMA can do to maintain its role as a primary advocacy group for physicians?

The physician community has been very consistent on what it wanted to see in the healthcare reform process, and yet none of those things have been achieved. The reason why the AMA wasn’t able to achieve those things is because it has no leverage. The politicians know that the AMA doesn’t really represent the physicians, and all the politicians have to do is threaten the AMA with removing its CPT license. That would make the AMA’s revenue disappear, and there are thousands of people whose jobs depend on that special arrangement with the government. Because of that fundamental confl ict, there’s no possible way the AMA can truly advocate for physicians.

The AMA came out and endorsed the House version of the bill within, I think, 36 hours of the bill coming out ( In the 72 hours following that, more than 11,000 physicians logged in to Sermo and voted on whether they supported the House version of the bill, with more than 90% saying they did not. The AMA’s position was, “We’re doing these things because we think we need to have a seat at the table and we want to achieve our two primary goals,” which are malpractice tort reform and repeal of the Sustainable Growth Rate (SGR), neither of which the AMA has been able to achieve. In the current push for healthcare reform pretty much everyone got a deal—the insurance industry, the pharma industry—yet the AMA has managed to accomplish absolutely nothing for America’s physicians. We predicted this back in May when we made the decision to separate.

The AMA has decided to essentially give up on physicians, and you can see that it’s now making a pretty consistent effort to transform into a public health brand rather than a physician advocacy brand. There’s actually a growing movement among physicians to back a class-action lawsuit against the AMA for misrepresentation and for damages.

What does Sermo offer to physicians that the AMA does not?

Sermo isn’t trying to be an advocacy organization. We are a for-profi t company, but one of our unique attributes is our physician community, and because we authenticate credentials and make sure every member is in fact a licensed US physician, we can very effectively create a medium for doctors to come and share and vocalize their opinions. And that can create some very powerful indicators about where healthcare is going in this country and how physicians perceive these trends. That forum for physicians predicted some very interesting things 6-9 months ago, at the beginning of the healthcare debate, and now, as the debate is moving to its next step, we’re seeing some very interesting patterns start to appear out of the physician community.

Can you harness the energy of this community and channel it toward something productive that effects change rather than just comments on it?

Over the summer, the Sermo community drafted a statement of key healthcare reform principles called the Physician Appeal (, which was signed by about 11,500 physicians and delivered to members of Congress. A number of congressional teams quoted Sermo physician positions during the congressional debate.

That being said, the first step here is communica- tion. There’s been such a stranglehold on the public voice of the physician, and physicians have had such a difficult time connecting with one another. I think it would be a mistake to underestimate just how important it is for physicians to have a place online where they can interact. And we’re seeing a real groundswell of that phenomenon on Sermo.

Have you seen any backlash against Sermo and the positions you advocate?

The funny thing about backlash is you typically don’t see it. But if I want to measure a backlash based on the growth of the community or the activity level of the physicians, those have all increased quite dramatically, so it would seem that our primary constituency, the physician community, has been very supportive of these positions.

How do you respond to criticisms that Sermo is just data mining for its pharmaceutical sponsors?

Data mining and market research are certainly an important part of our business model. We have an infrastructure, we have people, and we need to pay the bills. When we do the data mining, it’s always transparent; if you go to our website, we describe in great detail how our business model works. What we’ve found is that so long as it’s understood that we don’t violate the physician’s confi dentiality or privacy in any way, the physicians are quite comfortable with our business model. Sermo has had this same business model for nearly three years, and now we’re seeing variations of this being adopted by Twitter, Google, and a number of other social media companies.

What is your vision for taking Sermo to the next level? I think, as a start-up company, our first goal—and one we’re very excited about—is profitability. We’ve made some great progress in becoming a profi table and self-sustaining company, and that’s been a huge accomplishment and something we’re very proud of. I think people can expect to see Sermo continuing to refi ne our products; this year, we’ll be launching an entirely new platform. As that platform goes live, we’ll be exploring some new features for physicians. We know there’s a huge demand for connecting doctors and patients, so we’ll be looking to explore some of those areas.

If you go to the Sermo blog (, a lot of the things talked about there have been exported from the Sermo physician community to the general public, with everything anonymous, so you can see survey results and physician comments. Perhaps the most interesting trend we’re seeing is that more physicians are taking steps to opt out of the third-party payer system altogether and migrate to cash practices. This is something we started detecting about a year ago, and now we’re seeing it really explode, and the healthcare reform effort seems to have been the catalyst. In December, the Mayo Clinic—which I’ll point out is an institution that the current administration has held up as a paragon of cost-effective healthcare delivery—made an announcement that it was going to stop accepting Medicare payments. That was a very interesting development that had been predicted in the Sermo community almost a year ago.

About a year and a half ago, Sermo was approached by Sanofi-aventis and we started working on something called the Practice Management Exchange ( Sanofi will go live with its iPractice ( in the next few months, and that will include CME courses that teach physicians how to switch over to a cash practice. We have found that the demand among physicians looking at alternative business models has been nothing short of explosive. Cornell did a survey that showed US doctors offi ces spend $31 billion a year (or 7% of their income) just trying to get paid by the insurance companies ( It’s no wonder physicians are saying that this current business model just isn’t sustainable anymore. That $31 billion overhead is largely due to the CPT codes, and that gets us right back to the AMA. The more complex those CPT codes are, the more money the AMA makes, the better off the insurance companies are, and the worse off the physicians are.

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