The 401-Level Financial Motive Behind Prior Auths and Pharma Rebate Contracting

Imagine a cheaper, generic, or even clinically better drug that somehow ends up not on formulary at all, or stuck behind step edits and prior authorizations with a higher copay than the pricier brand sitting right next to it. In this solo episode, host Stacey Richter breaks down exactly how that happens, walking through a case study she calls Brand Number 2 versus the formulary's reigning Brand Darling to show how PBM and GPO rebate economics, not clinical need, often decide which drugs patients can access easily and which ones get thrown up against a wall of red tape.

This is Episode 517 (EP517) of Relentless Health Value.

WHAT YOU'LL LEARN

✅ How a high-volume Brand Darling generating billions in sales and huge aggregate rebates can keep a cheaper, generic, or more effective Brand Number 2 stuck on a nonpreferred tier, behind step edits and prior authorizations, regardless of price or efficacy

✅ Why a structural rebate cliff makes it nearly impossible for a new entrant to unseat an established Brand Darling on formulary, even if that new entrant offers a 99 percent rebate

✅ How rebate dollars a PBM or GPO wants to keep can be relabeled as a data fee, a service fee, or an admin fee, a dynamic also flagged by benefits consultant Robyn Tikia, letting a PBM still claim it passes along 100 percent of rebates

✅ Why a prior authorization is often used as a financial negotiating lever against a manufacturer's rebate offer rather than a clinical determination of whether a patient needs the drug

✅ How regulation such as the Inflation Reduction Act is compressing list prices and collapsing the rebate spread that the traditional contracting math depends on

✅ How GoodRx runs a reverse auction among PBMs to surface its advertised cash price, making coupon sites effectively a sales channel for the same PBMs that lock manufacturers into exclusive formulary contracts

WHY THIS MATTERS

As Stacey Richter lays it out, a PBM with a fiduciary duty to its shareholders has every financial incentive to double down on a high-volume Brand Darling and freeze out a cheaper or better Brand Number 2 with step edits and prior auths, whether or not that serves the patient stuck in the middle. As regulation compresses list prices and rebate spreads get less stable, more pharma manufacturers are deciding it is worth giving up access to large blocks of insured lives in order to control their own price directly through cash pay, patient assistance programs, or their own copay cards. It is not a clean alternative, since cash pay still runs through PBM-linked coupon platforms like GoodRx, but for some brands it is starting to look like the more controllable bet.

=== LINKS ===

🔗 Show Notes with all mentioned links:

https://cc-lnk.com/EP517

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00:00 Introduction to this episode.

00:35 EP516 with Ophelia Johnson.

01:48 A brief summary of the topics covered in this episode.

03:53 What needs to be true, no matter what your pharma brand is.

04:20 Why a PBM picks a brand "darling."

05:10 A message to PBM sales teams.

09:43 Clarifying a point about formulary decision making.

14:34 When might a cash-pay strategy start to look rational for a pharma brand?

16:25 Cash pay versus formulary from the patient perspective.

19:50 How PBMs feel about brands going cash pay.

20:56 Why GoodRx is allowed to sell non-formulary Rxs at cash prices on PBMs.

22:59 AEE13 with Ge Bai, PhD, CPA.

23:51 A clarification of points on GoodRx.

26:19 A point to ponder about discount coupons.

Only roughly 50% of new GLP-1 prescriptions were getting approved for coverage in 2023. From a plan sponsor's seat, that looks like pharmacy trend spiking 9%, 12%, even 20% year over year. From a pharma manufacturer's seat, it's half their prescriptions not getting filled. Same market, opposite problems — and that's exactly the lens this episode flips on.

In this episode, Stacey Richter speaks with Ophelia Johnson, who built new business channels for a pharmaceutical manufacturer that created the GLP-1 boom and has since launched a consulting practice at e-fi.works, about how cash pay models work from the inside — coupon platforms, telehealth channels, white label pharmacy models, and employer carve-outs — and where the new fees are hiding.

WHAT YOU'LL LEARN

✅ How the Inflation Reduction Act, PBM legal scrutiny, drug shortages, and the compounding bypass converged with ~50% GLP-1 prior auth denial rates in 2023 to push pharma into building cash pay channels that cut the PBM out entirely

✅ How the savings coupon model works: manufacturer buys the patient down to a flat transparent cash price via platforms like GoodRx, pays a fixed per-script fee instead of a PBM rebate, and the coupon platform makes the pharmacy whole — transparent math, no black box

✅ How the telehealth channel and white label pharmacy models extend the distribution chain beyond retail — and why shipping costs, credit card fees, dispensing fees, and new supply chain partners create gross-to-net and revenue leakage risk for manufacturers not built for it

✅ Why "direct to employer" is a misnomer: PBM contracts prohibit pharma from selling directly to self-insured employers, so third-party transparent administrators have emerged — but plan sponsors need to run the math first, given ERISA complications and PBM contract leverage

✅ How PBMs are now charging fees for hub-like patient support services to manage the exact prior auth complexity they created — a Whack-a-Mole shift of profitability that everyone needs to map before signing anything

✅ Ophelia's three-part practical advice: map the full patient journey and all ecosystem player incentives before building any new model (pharma); treat affordability as a clinical risk factor (clinicians); demand auditable medication abandonment data rather than settling for rebate yield metrics (plan sponsors)

WHY THIS MATTERS

If collaboration is the next innovation, everyone has to understand the incentives of every player in the ecosystem — not just their own. The same 50% of unfilled GLP-1 prescriptions that looks like runaway pharmacy trend from a plan sponsor's seat looks, from a manufacturer's seat, like half their market going dark — and both sides are making moves that affect each other. Understanding those moves, where fees are being layered on, and when fair profit tips into what Stacey calls profiteering is what this episode maps.

TUNE IN NEXT WEEK

Next week is the 401-level companion to this one — Stacey goes solo on the PBM and GPO contracting mechanics behind why cash pay became a thing, and why cheaper or better drugs can inexplicably end up off formulary or buried under prior auth.

=== LINKS ===

🔗 Show Notes with all mentioned links:

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00:00 Introduction to this episode.

02:02 LinkedIn post by David Alderman.

06:13 LinkedIn post by Ann Lewandowski.

07:05 Backgrounder LinkedIn post by Madelaine Feldman, MD.

08:07 The conversation with Ophelia Johnson.

08:14 What is cash pay?

08:59 Why is this a thing, and how did we get here?

10:47 LinkedIn post by Bryce Platt, PharmD, on prior authorization reform.

12:28 The different ways that a patient could go about receiving and paying for their drug.

13:22 What's going on behind the scenes between GoodRx and the pharma manufacturer.

17:02 What dispense fees are and how they work.

17:41 A sidenote about next week's episode.

18:00 AEE13 with Ge Bai, PhD, CPA.

19:03 EP439 with Luke Slindee, PharmD.

20:03 A sidenote about the pharma manufacturer POV.

21:44 The pharma supply chain in telehealth.

25:27 Why claims validation has never been more important.

28:19 Where do employers fit in all of this?

32:45 Where does it make sense to consider these alternative business models in lieu of the risks?

35:04 Why mapping the incentives is important.

38:42 Ophelia's advice to pharma manufacturers.

40:41 Ophelia's advice to plan sponsors.

41:32 EP426 with Nina Lathia, RPh, MSc, PhD.

42:46 More of Ophelia's advice to payers.

Is it fraud — or is it just a perverse incentive? That question sits at the center of Hunterbrook Media's latest investigation into skilled nursing facilities (SNFs), and the answer, as Stacey Richter puts it, matters to self-insured employers and anyone else paying for healthcare. In this episode, Stacey speaks with Michelle Cera, PhD, investigative reporter at Hunterbrook Media, whose investigation — triggered by a tip from an overwhelmed elder abuse attorney — uncovered a pattern of systematic understaffing, self-reported CMS STAR rating manipulation, executive bonuses tied to expense-cutting, and related-party financial engineering that funnels Medicare and Medicaid dollars straight back to corporate, while the most vulnerable patients pay with their health and their lives.

WHAT YOU'LL LEARN

✅ How for-profit SNF chains systematically recruit the sickest patients to maximize Medicare and Medicaid reimbursement, then staff below what those patients actually need — keeping the difference as profit and, in some cases, doubling executive bonuses in a single year

✅ How Hunterbrook analyzed millions of publicly available CMS data points across roughly 14,000 skilled nursing facilities, applying a UCSF-developed expected-hours formula tied to patient acuity, to quantify the gap between staffing hours billed and care hours actually provided

✅ Why CMS STAR ratings — the primary tool consumers use to choose nursing homes for loved ones — are largely informed by self-reported, unaudited facility data, and how former employees described manipulation of those ratings as rampant

✅ How related-party transactions allow SNF chains to route Medicare and Medicaid dollars through owned subsidiaries for goods and services like pharmacy, equipment, and insurance — with CMS flagging the overcharges as disallowed costs but lacking any mechanism to recoup them

✅ How a 2024 CMS final rule establishing a federal minimum of 3.48 HPRD (hours per resident day) and a 24/7 on-site registered nurse requirement was ultimately rescinded after industry lobbying — and what that rescission reveals about regulatory capture in the SNF sector

✅ Four concrete policy fixes: codify federal minimum staffing hours adjusted for patient acuity, strengthen reporting standards and auditing so no quality metric is entirely self-reported, create a recoupment mechanism for flagged related-party overcharges, and reform STAR ratings so consumers can distinguish independently verified data from self-reported data

WHY THIS MATTERS

Right now, Stacey argues, we are endlessly trying to keep up with thousands of profit-extracting geniuses and creating mazes of complexity to regulate actors who have no societal construct keeping them in check. The SNF sector is a case study in what happens when there is no agreed-upon definition of harm — when perverse incentives are just incentives. These are taxpayer, employer, and patient co-insurance dollars potentially going into someone's pocket while a patient is simultaneously being hurt. The 65-plus population is growing, the market is expanding, and — as Hunterbrook's research shows — the model that works from a profit perspective is to take sicker patients, cut the highest-paid staff first, and grade your own homework so no one notices. That playbook, once proven, spreads fast.

=== LINKS ===

🔗 Show Notes with all mentioned links and link to the Hunterbrook article: https://cc-lnk.com/EP515

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00:00 Introduction to this episode.

00:40 Fixing the root cause problems with the American healthcare system.

01:40 EP511 with Dr. Siva and Monica Lypson, MD, MHPE.

01:50 Today's root problem topic.

05:12 Introducing today's guest and her latest investigation.

07:43 The conversation with Michelle Cera, PhD.

08:35 How Hunterbrook Media's latest investigation into skilled nursing facilities got started.

11:07 EP509 with Patrick Nelli.

12:58 Article where you can learn more about Hunterbrook Media's investigation and the stories of neglect.

13:20 How inadequate staffing creates neglect in SNFs.

14:03 Connecting the dots between staffing and resident needs.

15:33 Why skilled nursing facility chains are extremely profitable to the detriment of patients.

17:15 How star ratings on CMS can be skewed in the favor of these SNF chains.

21:56 The perverse incentives playbook.

23:20 An example of how executive bonuses are tied to perverse incentives.

27:53 How lobbying walked back the CMS minimum staffing regulation for SNFs.

29:05 Another note in the perverse incentives playbook.

30:08 University of Pennsylvania study on minimum staffing levels.

30:59 How much of these chain SNFs' funding is from taxpayer dollars.

33:16 Another perverse incentive: overpaying sister companies.

34:17 EP482 with Preston Alexander.

35:07 Why CMS can flag overcharging, but they don't have a cost recoup structure.

38:10 The case to be made about how current business dealings within SNFs is fraudulent.

39:30 How to fix the perverse incentives happening in skilled nursing facilities.

How the Sutter Health Antitrust Case Opened the Door for Employers and Members to Recover Hospital Overcharge Damages

What happens when a self-insured employer or health plan member finally says enough is enough and takes a consolidated hospital system to court over anticompetitive contracting practices? That's exactly what antitrust attorney Matthew Cantor did — and after 13 years of litigation, three trips to the Ninth Circuit Court of Appeals, and a first trial, he and his team secured a landmark $228.5 million settlement in Sidibe v. Sutter Health.

In this episode, Stacey Richter speaks with Matthew Cantor, founding partner of Shinder Cantor Lerner LLP, about one of the most significant antitrust victories in healthcare history — and what it means for self-insured employers, plan sponsors, and everyday members who have been paying inflated premiums because of hospital market power.

WHAT YOU'LL LEARN

✅ How all-or-nothing clauses and anti-steering/anti-tiering provisions allow dominant hospital systems to lock up local geographies and block members from accessing lower-cost, higher-quality care

✅ Why holding large, consolidated health systems legally accountable is so difficult — including the halo effect, the FTC's lack of jurisdiction over nonprofits, and the challenges of unsympathetic witnesses

✅ How Sidibe v. Sutter Health established a groundbreaking precedent allowing indirect purchasers — employers and plan members paying inflated premiums — to recover damages from hospital overcharges

✅ Why the DOJ is already pursuing similar anti-steering litigation against health systems like OhioHealth and NewYork-Presbyterian

✅ Four concrete options for employers ready to stop being passive price takers: federal legislation, state legislation, engaging the DOJ and state attorneys general, and direct litigation

WHY THIS MATTERS

Hospital charges make up roughly 50% of underlying medical costs, which in turn represent 80–85% of health insurance premiums. When consolidated systems operate in local markets with little competition, everyone — employers and members alike — pays more. Sidibe v. Sutter Health shows that accountability is possible.

=== LINKS ===

🔗 Show Notes with all mentioned links: https://cc-lnk.com/EP514

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00:00 Episode Setup 03:06 Why Hospitals Drive Premiums 05:47 Sutter Case Overview 09:36 Matt Cantor Background 12:57 Local Market Power 17:50 Why Litigation Matters 22:03 Indirect Purchaser Breakthrough 28:11 Why Sutter And Winning Evidence 35:53 What Employers Can Do Now 41:46 Closing And Resources

Stacey Richter introduces Episode 513 of Relentless Health Value as a primer on anti-competitive hospital contracting with Brennan Bilberry of Fairmark Partners, setting up next week's interview with Matt Cantor, lead litigator in the Sutter Health antitrust class action that led to a $575 million settlement over alleged price inflation using market power.

Bilberry explains how hospital consolidation enables higher commercial rates and outlines a four-part contracting playbook: all-or-nothing contracting requiring inclusion of all system facilities at high prices; anti-steering and anti-tiering clauses blocking lower-cost benefit designs; price gag clauses limiting disclosure of negotiated rates despite transparency rules; and pressure on ostensibly independent providers to sell or align pricing with the dominant system.

The episode links these patterns to DOJ actions against OhioHealth and New York Presbyterian and emphasizes collective action, regulation, and litigation to address them.

=== LINKS ===

🔗 Show Notes with all mentioned links: https://cc-lnk.com/EP513

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00:00 Episode Setup

00:38 Why This Matters

04:41 Hospital Playbook

06:59 Consolidation Effects

11:41 All Or Nothing

15:24 Anti Steering Tiers

22:12 Price Gag Clauses

26:22 Squeezing Independents

31:15 Fixing The System

35:15 Wrap Up Sponsors

What does it look like when a broker or employee benefit consultant is circling your plan like it's a gold mine? Doug Aldeen, a well-known attorney who has spent many years in the self-insured space, has seen exactly what falls all the way down to the level of legal action — and in this episode he breaks down the top categories of broker and EBC compensation arrangements that wind up costing plans millions. In one documented example, a balance-billing vendor collected $2.2 million in fees over three plan years to cover a risk of just $94,320 — for a service the plan didn't even need.

In this episode, Stacey Richter speaks with Doug Aldeen, JD, a self-insured space attorney, about how rent-seeking broker and EBC payment models work, how they hide in plain sight, and what plan sponsors can do right now to find out if they're the ones holding the bag.

WHAT YOU'LL LEARN

✅ How reference-based pricing vendors using a "cost of savings" fee model — where broker and vendor fees both increase as hospital charges rise — can result in the vendor and broker combined getting paid more than the hospital itself

✅ Why a plan paid $2.2 million to a balance-billing vendor over three plan years to address only $94,320 in actual risk — and why the Texas District Hospital statute made that service completely unnecessary in the first place

✅ How voluntary benefits with first-year commission structures running 70 to 90% function as a near-direct pass-through to the broker, not a benefit to plan members

✅ How undisclosed vendor-to-broker payments — structured as "marketing services" or "discounts" at the book-of-business level, including per-script PBM payments — can legally avoid Consolidated Appropriations Act disclosure requirements while still biasing plan recommendations

✅ Why complexity in a compensation agreement is itself a red flag — and what the CAA actually requires in terms of a plan sponsor being able to "reasonably conclude" what a broker fee is

✅ A six-step roadmap for plan sponsors: ask why five times, calculate ROI, assess downstream risk, demystify the commission structure, run an independent broker RFP, and audit your plan documents and stop-loss agreements for gaps

WHY THIS MATTERS

Where there's mystery, there is margin — and broker and EBC compensation arrangements can be layered in ways that make the math nearly impossible to follow without a NASA scientist, as Doug puts it. The Consolidated Appropriations Act was supposed to bring transparency to these arrangements, but enforcement is spotty and the gray areas are real. Plans that have had the same broker for years may trust them precisely because of the long relationship — but as this episode makes clear, long tenure is not the same as trustworthy, and the dollars at stake are in the millions. The honest brokers and EBCs are out there, and they're adding real value. Telling the difference just takes some diligence.

=== LINKS ===

🔗 Show Notes with all mentioned links: https://cc-lnk.com/EP512

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00:00 Introduction to this episode.

00:59 A caveat for the record on this episode.

02:11 The first problematic payment model discussed in this week's episode.

03:27 The second problematic payment model discussed in this week's episode.

06:16 The conversation with Doug Aldeen.

06:27 Why is reviewing broker/EBC compensation so important?

08:05 The Ohio Potato Company anecdote.

10:28 The first way brokers/EBCs might get paid.

11:45 What "cost of savings" means.

12:31 EP457 with Cynthia Fisher.

14:07 A rent-seeking solution that requires a cost-benefit analysis.

19:16 Why the broker/EBC is sometimes in the dark about vendor kickbacks.

21:46 Where the CAA is unclear.

22:23 EP508 with Lee Lewis.

22:58 EP379 with AJ Loiacono.

24:04 Actionable advice for plan sponsors.

24:57 The second piece of actionable advice for plan sponsors.

25:22 The third piece of actionable advice for plan sponsors.

26:08 Demystifying the commission structure.

27:35 Using a broker RFP from an open source.

27:54 EP484 with Dave Chase.

28:31 Why you should be auditing data and claims.

29:29 EP478 (Part 1) and EP479 (Part 2) with Andreas Mang and Jon Camire.

31:29 The importance of having an "out."

33:11 Why the broker community may be at substantial risk.

35:30 EP419 with Andreas Mang.

If we want clinical teams to take on risk, we have to reckon with what that risk-taking actually incentivizes. In this episode, Stacey Richter weaves together conversations with two physicians to surface a tension she argues hasn't been said directly enough: the very mechanism we're counting on to fix healthcare — providers going at risk — has cherry picking and lemon dropping baked right into it. And the same organizations we're asking to take risk are the ones we already know are upcoding every ER visit to level four complexity.

In this episode, Stacey Richter speaks with Dr. Ahilan Sivaganesan, MD (Dr. Siva), a spine surgeon and researcher whose work on time-driven activity-based costing and the Operative Value Index appeared in EP505, and Dr. Monica Lypson, MD, MHPE, a physician and medical educator whose prior conversation with Stacey on this topic from EP322 has become, unfortunately, more relevant than ever.

WHAT YOU'LL LEARN

✅ Why physicians cannot responsibly go at risk for outcomes and costs without first knowing their own costs — and why time-driven activity-based costing (TDABC) is, as Dr. Siva puts it, existential for surgeons navigating procedural bundles

✅ How sliding scale bundled payments, where payment adjusts to the complexity of the patient and the surgery, could address cherry picking and lemon dropping — but only if the cost data underlying that scale is transparent and independently validated

✅ Why handing health systems a sliding scale risk adjustment framework is, in practice, handing them their own version of a Medicare Advantage RAF — and how we know exactly what happens next, because we've watched Medicare Advantage upcoding and commercial down coding play out simultaneously

✅ How the whole person health model — as practiced in independent advanced primary care, the VA, FQHCs, and some community health plans — reframes the economics: when care is genuinely comprehensive, many of the current upcoded profit centers become cost centers

✅ Why the solution to gaming risk adjustment frameworks may be the same as the solution to gaming credit scores: a neutral, detached third party scoring patient complexity using ground truths that cannot be manipulated by the parties with a financial stake in the outcome

✅ How structural barriers — misaligned funding streams, office hours that exclude working patients, the absence of robust quality measurement in most network contracts — can produce cherry picking and lemon dropping even without any overt intent to discriminate

WHY THIS MATTERS

We are deep into the value-based care era and the perverse incentive problem has not been solved — it has been relocated. Fee-for-service incents volume. Risk-based models incent patient selection. As Stacey frames it, the holy grail we are promoting has the very same conflicts of interest baked into it that we say we can't trust doctors to handle. What this episode surfaces is a conundrum worth naming plainly: you can't ask biased parties to grade their own homework, and right now that's exactly what we're doing every time we hand a large, corporatized health system a risk adjustment framework and expect them not to put a finger on the scale.

=== LINKS === 🔗 Show Notes with all mentioned links: https://cc-lnk.com/EP511

✉️ Enjoy this podcast? Subscribe to the free weekly newsletter: https://relentlesshealthvalue.com/join-the-relentless-tribe

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00:00 Introduction to this episode.

01:53 Upcoding problems: a previously unpublished clip from EP505 with Dr. Siva.

05:22 What is the minimum requirement for physicians to go at risk?

07:22 How sliding scale bundle payments can reduce risk for physicians.

10:43 The question covered in the upcoming episode.

13:19 Is value-based care good for underserved communities?

15:01 "If you create perverse incentives, you actually might make known healthcare disparities worse … to meet the demand's value." —Dr. Lypson

16:18 "There actually might be systematic and structural ways that the healthcare system might say … we're not interested in taking care of you." —Dr. Lypson

16:51 "The incentive to have a good outcome is not there; the incentive to have another visit is there." —Dr. Lypson

17:15 EP485 with Cristin Dickerson, MD.

17:49 "The only indictment I have on the fee-for-service system is that it's gotten us to where we are right now." —Dr. Lypson

18:41 "If you don't have any connection in that system, even the provider trying to … provide a good outcome might be disconnected because the system is not in place to … connect the dots." —Dr. Lypson

19:15 EP436, EP491, and SUMS9 with Elizabeth Mitchell.

19:28 What are the must-haves for a value-based system that create the patient outcomes we need?

19:51 What is a whole health model?

22:00 EP462 (Scott Conard, MD), EP319 (Grace Terrell, MD), EP431 (Kenny Cole, MD), EP409 (Larry Bauer, MSW, MEd), and EP495 (Mick Connors, MD).

22:23 LinkedIn post by Mark Weber.

25:05 EP484 with Dave Chase.

25:31 Why we need to fix the structural issues if we want to fix health.

26:00 Why a patient's bias is the one we want in the room.

27:36 Stacey's conclusion on this week's episode.

If someone makes more money when the patients or members they serve are worse off, call that profiteering. That's Stacey Richter's working definition heading into this conversation — and it's exactly the lens she applies to Medicare Advantage in 2026, a program she argues touches everyone, not just seniors. When big vertically integrated carriers negotiate their own Medicare Advantage rates and shift the difference to commercial employers through ASO contracts, research has put that markup at 4.7% above what employers would otherwise pay.

In this episode, Stacey Richter speaks with Betsy Seals, co-founder of Rebellis Group and former CEO of its parent company Alerion Advisors, and now a board member and startup advisor in the Medicare Advantage space, about where the program stands heading into 2027 — and what a back-to-basics, non-profiteering playbook actually looks like on the ground.

WHAT YOU'LL LEARN

✅ Why Medicare Advantage is currently in a stabilization and retraction phase — including market exits, benefit pullbacks, and an underwriting loss in the first three quarters of 2025 — and what that means for beneficiaries depending on whether plans cut flashy enrollment perks or outcomes-focused care

✅ How vertically integrated carriers use their full book of business to negotiate lower Medicare Advantage rates for themselves while cost-shifting to self-insured commercial employers through ASO contracts — and why health systems account for roughly 50% of most employers' total health spend

✅ Why a newly published prior authorization data report showed denial overturn rates of 95% or more upon appeal — with only 11% of denials ever appealed — and what the downstream incentives of AI-driven prior authorization actually look like when a clinician's eyes are removed from the file

✅ How Goodhart's Law applies to STARS quality measures: once a measure becomes a target, it ceases to be a good measure — and what distinguishes plans that lift STARS scores through genuine health outcome improvement versus box-checking for bonus payments

✅ Why chronic Special Needs Plans (chronic SNPs) saw nearly 50% growth in beneficiary enrollment and how they represent a legitimate back-to-basics strategy for plans that can identify and serve specific chronic condition populations well

✅ What independent primary care practices need to understand about how their own coding and prior authorization practices flow upstream into MA plan finances — including the perverse incentive that drives some PCPs to route patients to the ER rather than navigate an arduous prior auth process

WHY THIS MATTERS

Medicare Advantage is not just a seniors' issue. It shapes tax dollar stewardship, it shapes what happens to our family members and grandparents, and as Stacey spells out directly, it shapes what commercial employers pay for hospital care. Betsy Seals has spent decades watching executives make short-term decisions — upcoding, AI-driven prior auth denials, STARS box-checking — knowing they won't be around for the long-term consequences. Her message, and Stacey's, is that there are ample ways to make a fair profit in Medicare Advantage without any of that. Go back to basics. Do it right. Because sooner or later, you're gonna get caught with your hand in the cookie jar.

=== LINKS === 🔗 Show Notes with all mentioned links: https://cc-lnk.com/EP510

✉️ Enjoy this podcast? Subscribe to the free weekly newsletter: https://relentlesshealthvalue.com/join-the-relentless-tribe

🫙 Support the podcast with a small donation to the Tip Jar: https://relentlesshealthvalue.com/join-the-relentless-tribe

🎤 Listen on Apple Podcasts https://podcasts.apple.com/us/podcast/feed/id892082003?ls=1

🎤 Listen on Spotify https://open.spotify.com/show/6UjgzI7bScDrWvZEk2f46b

📺 Subscribe to our YouTube channel https://www.youtube.com/@RelentlessHealthValue

=== CONNECT WITH THE RHV TEAM === ✭ LinkedIn https://www.linkedin.com/company/relentless-health-value/ ✭ Threads https://www.threads.net/@relentlesshealthvalue/ ✭ Bluesky https://bsky.app/profile/relentleshealth.bsky.social ✭ X https://twitter.com/relentleshealth/

00:00 Introduction to this episode.

00:43 Past episodes on profiteering: EP481 with Benjamin Schwartz, MD, MBA, and EP495 with Mick Connors, MD.

01:25 How Medicare Advantage is relevant to everyone.

06:15 A preview of today's conversation.

07:49 The "state of the state" of Medicare Advantage plans.

08:49 Video by Eric Bricker, MD, on the financial performance of the U.S. healthcare system.

09:32 Does Medicare Advantage's losses matter to the patients?

10:29 A recap of Betsy's insights so far.

11:19 The underlying strategic through line that needs to be considered.

13:04 The impact of Goodhart's Law.

14:12 What the players that are succeeding right now are doing.

14:22 The first pillar of a back-to-basics strategy: Don't get caught with your hand in the cookie jar.

16:07 EP463 with Betsy Seals.

16:50 Why short-term strategies don't work.

18:26 Stats report on prior authorizations serving the beneficiary.

19:32 EP482 with Preston Alexander.

19:38 Why prior authorization needs change.

21:28 The better strategy to use.

21:43 EP462 with Scott Conard, MD.

23:17 The second pillar of a back-to-basics strategy: Focus on the beneficiaries you actually serve well.

24:37 What it looks like to implement this focus on the beneficiaries you serve well.

25:29 How special needs plans play into this.

27:43 The third pillar of a back-to-basics strategy: Think about how STARS in clinical programs improve health.

30:04 The ethical component to implementing a Medicare Advantage program.

31:04 Betsy's advice for independent practices dealing with prior authorizations.

33:37 STAT article by Bob Herman about the effectiveness of Medicare Advantage lobbying on policy.

34:08 Betsy's final notes for all players impacted by what's currently happening.

Employer medical inflation has averaged 7.7% annually over the last 20 years — and that was in a historically low inflation environment, so the near-term number is likely closer to 8.5%. If your finance team is forecasting health benefits at CPI, you are already behind. That single number, put into an out-year model and left to compound, makes the case for bold action faster than any benefits presentation ever could.

In this episode, Stacey Richter speaks with Patrick Nelli, CEO of Aligned Marketplace and a former CFO, about a seven-step roadmap for how benefits teams can align with CFOs and finance teams to move away from passive price-taking — and toward a health plan that actually bends the cost curve.

WHAT YOU'LL LEARN

✅ Why employer medical inflation is structurally set up to outpace CPI by two to three percentage points — driven by Baumol's Cost Disease, the absence of a functioning market to constrain prices, and Medicare cost-shifting to the commercial population — and why 7.7% annually should be the status-quo baseline in any out-year forecast

✅ How the physician employment shift of the last 20 years — from 80% independently employed to 80% hospital or corporate-employed — created a fundamental conflict of interest, because hospitals primarily make their gross profit on inpatient commercial surgeries and cannot simultaneously optimize for keeping people healthy and out of the hospital

✅ The three specific mechanisms by which independent advanced primary care drives savings for self-insured employers: unit price reductions from steering to lower-cost independent labs and imaging, reduced downstream utilization including ER visits and specialist referrals, and prevention of future high-cost claimants — backed by a Milbank study showing access to primary care increases timely cancer screenings by 20 to 50%

✅ Why a skeptical CFO should require counterparties to put their fees at risk in an aligned payment model — and why that alignment test is more persuasive than any published study

✅ How to structure a steering and tiering strategy by risk-stratifying members and disproportionately engaging those with high and rising risk, since less than 10% of low-cost members with identifiable risk today will drive over 40% of total plan spend next year

✅ How regulatory changes in the One Big Beautiful Bill Act now give employers more flexibility to offer advanced direct primary care and virtual care options at no cost to members — and why that creates a positive feedback loop between engagement, savings, and further benefit design improvement

WHY THIS MATTERS

The status quo is not neutral. It is a choice to accept 7.7% annual medical inflation in perpetuity, and as Stacey puts it, financial toxicity is increasingly clinical toxicity — when members can't afford their medications or land in financial ruin after an illness, that is also disruption, just experienced on the back end. The question Patrick poses is whether employers want some upfront disruption or the guaranteed disruption of a compounding cost curve. The roadmap here is not theoretical — it is a step-by-step translation of the benefits case into the language that finance teams actually use, with the goal of turning the CFO from a skeptic into an ally.

=== LINKS === 🔗 Show Notes with all mentioned links: https://cc-lnk.com/EP509

✉️ Enjoy this podcast? Subscribe to the free weekly newsletter: https://relentlesshealthvalue.com/join-the-relentless-tribe

🫙 Support the podcast with a small donation to the Tip Jar: https://relentlesshealthvalue.com/join-the-relentless-tribe

🎤 Listen on Apple Podcasts https://podcasts.apple.com/us/podcast/feed/id892082003?ls=1

🎤 Listen on Spotify https://open.spotify.com/show/6UjgzI7bScDrWvZEk2f46b

📺 Subscribe to our YouTube channel https://www.youtube.com/@RelentlessHealthValue

=== CONNECT WITH THE RHV TEAM === ✭ LinkedIn https://www.linkedin.com/company/relentless-health-value/ ✭ Threads https://www.threads.net/@relentlesshealthvalue/ ✭ Bluesky https://bsky.app/profile/relentleshealth.bsky.social ✭ X https://twitter.com/relentleshealth/

00:00 Introduction to this episode.

02:48 Roadmap Step 1 highlights.

03:07 Roadmap Step 2 highlights.

03:49 Roadmap Step 3 highlights.

04:15 Roadmap Step 4 highlights.

04:27 Roadmap Step 5 highlights.

04:58 Roadmap Step 6 highlights.

05:19 EP504 with Ryan Jacobs.

05:37 Roadmap Step 7 highlights.

06:28 Introduction to the conversation with Patrick Nelli.

06:36 Step 1 to Patrick's roadmap: Open the conversation.

07:57 What Patrick thinks is sometimes missing in health benefits.

09:07 What finance teams need in order to change their behaviors.

09:53 What Baumol's cost disease is.

10:58 EP341 with Gary Campbell.

11:14 EP492 with Sam Flanders, MD, and Shane Cerone.

12:18 The second item stacked against employers: Being price "takers."

13:49 The percent inflation employers should expect if they follow the status quo.

15:39 INBW46 with Stacey.

16:54 Proven strategies to bend the health benefits finance curve.

18:42 EP391 with Scott Conard, MD.

19:37 SUMS11 with Stan Schwartz, MD.

20:18 How employers and plan sponsors can bend the cost curve.

21:47 The two distinct business models that finance teams need to consider when setting up their health benefits model.

24:11 Milbank study on the role of primary care.

24:53 A quick reminder of high-cost spending within health plans.

25:00 EP466 with Vivian Ho, PhD.

25:10 EP464 with Al Lewis.

25:59 What finance teams need to hear right now to understand why disrupting their health benefits plan is worth it.

27:45 The next step when an employer recognizes that they should seek out an advanced primary care option for their members.

28:41 EP503 with Ryan Wells; Leo Spector, MD, MBA; and Adam Stavisky.

30:27 Next steps after an employer enlists an advanced primary care system and aligns values and incentives in their benefits plan.

34:26 A last word to benefit teams working with finance teams.

34:55 EP430 with Barbara Wachsman.

35:08 How Aligned Marketplace fits into this entire conversation.

One company at the Health Transformation Alliance managed their health benefits well enough that when they were acquired, the acquiring company looked at the plans and found $2,300 less expense per employee — with better benefits. Moving 2,500 employees onto that plan, at a PE ratio north of 40, created over a quarter billion dollars of instant equity value that nobody had priced into the deal. Nobody had even thought to look. That story is where this conversation starts.

In this episode — the first-ever Ask Me Anything installment of Relentless Health Value — Stacey Richter takes a question from benefits procurement leader Sarah Monroe about why executives rarely take bold action on health benefits, and answers it with Lee Lewis, Chief Strategy Officer and GM Medical Solutions at the Health Transformation Alliance (HTA) and host of the Broken Benefits podcast.

WHAT YOU'LL LEARN

✅ The three false C-suite dogmas that Lee Lewis says lead to a "stay in the herd and keep it quiet" approach to benefits: that healthcare costs are a fixed expense you can't manage, that saving money necessarily hurts people through cost shifting, low quality, or narrow networks, and that fixing healthcare is never worth the effort or the disruption

✅ How those dogmas manifest in practice — including a company spending $700 million annually on benefits that turned down a roadmap to save $50 million because no one's bonus was tied to plan performance, and a culture that self-selects for complacent HR teams over mission-driven ones

✅ Four external forces that may keep C-suites locked in place: the social circles CEOs travel in that include health system leaders, balance-of-trade threats from large carriers and vendors who hold commercial business as leverage, personal incentives offered to key decision-makers by status quo vendors, and executives who don't feel the weight of a $5,000 deductible the way a $25-an-hour employee does

✅ Why the competitive stakes are rising — because healthcare is now nine to 14% of total employee compensation, transparency data lets anyone look up what rival employers are paying, and companies that mismanage this expense face both shareholder and fiduciary risk while falling behind competitors who don't

✅ De-risking tactics for benefits teams operating inside conservative cultures, including same-network TPA changes, carrier-enabled vendor additions, narrow pilots, and mid-year tests that move the plan forward without requiring C-suite sign-off on a full transformation

✅ Direct advice for any CEOs in the building: encourage bold action explicitly, tie bonuses to health plan performance, and staff benefits teams with the diverse financial and clinical skills the role actually requires

WHY THIS MATTERS

Health benefits are the second largest line item after payroll in most industries, and the companies that are minding this business carefully are accumulating real competitive advantage over those that aren't — quarter billion dollar M&A surprises notwithstanding. The three dogmas Lee describes are false, but they are sincerely held, and that makes them stubborn. As Stacey frames it, financial toxicity is clinical toxicity: when employees are functionally uninsured because their deductible exceeds what they can afford, the ER becomes the only option. That is disruption too — it just shows up on the back end. The question isn't whether to accept disruption. It's which kind you're choosing.

=== LINKS === 🔗 Show Notes with all mentioned links:

https://cc-lnk.com/EP508

📺 Visit Lee's YouTube Channel

https://www.youtube.com/@brokenbenefits

✉️ Enjoy this podcast? Subscribe to the free weekly newsletter: https://relentlesshealthvalue.com/join-the-relentless-tribe

🫙 Support the podcast with a small donation to the Tip Jar: https://relentlesshealthvalue.com/join-the-relentless-tribe

🎤 Listen on Apple Podcasts https://podcasts.apple.com/us/podcast/feed/id892082003?ls=

🎤 Listen on Spotify https://open.spotify.com/show/6UjgzI7bScDrWvZEk2f46b

📺 Subscribe to our YouTube channel https://www.youtube.com/@RelentlessHealthValue

=== CONNECT WITH THE RHV TEAM === ✭ LinkedIn https://www.linkedin.com/company/relentless-health-value/ ✭ Threads https://www.threads.net/@relentlesshealthvalue/ ✭ Bluesky https://bsky.app/profile/relentleshealth.bsky.social ✭ X https://twitter.com/relentleshealth/

00:00 Introduction to this episode.

00:43 Ask Me Anything Question 1: Why don't more self-insured executives take bold action toward their benefits strategy?

03:09 A summary of the three dogmas covered in the following conversation.

05:53 A look ahead at next week's episode.

06:36 An introduction to today's guest, Lee Lewis.

08:23 Why there is an aversion to digging into health benefits for some executives.

09:43 The first dogma: Healthcare costs are fixed expenses.

09:56 The second dogma: Saving money in healthcare hurts people.

12:01 The third dogma: Fixing healthcare is never worth the effort.

12:26 How these dogmas trickle down to HR teams.

13:47 Anecdote: One company that turned down saving $50 million and why.

16:28 A quick reminder about the context behind where CEOs' mindsets are.

17:10 The kinds of employers HTA seeks out.

19:20 EP500 with Stacey.

20:03 The power of C-suites in health systems.

21:33 EP466 with Vivian Ho, PhD.

21:36 EP404 with Suhas Gondi, MD, MBA.

21:42 Why a CEO may pull the plug on health plan/health benefit improvements.

22:37 An anecdote about Lilly cancelling their health plan.

23:21 Items that CEOs need to be thinking about.

24:33 EP506 with Jerry DiMaso.

26:07 EP501 with Ivana Krajcinovic, PhD.

26:32 A summary of why CEOs should care about their health benefits costs now.

29:02 How do personal incentives play into CEOs' decisions about health benefits?

30:44 Another quick reminder about C-suites.

31:53 Why perverse incentives make it difficult for C-suites to accept change.

33:11 LinkedIn post by Patrick Moore.

33:28 Why the salary gap plays into health benefit decisions in a perverse way.

34:58 EP488 with Mark Cuban and Cora Opsahl.

36:13 Lee Lewis's advice to people in benefits who are aligned to the mission.

40:06 Lee Lewis's advice for CEOs.

Lee Lewis of @HTACOOP discusses #benefitsstrategy for #selfinsuredemployers on our #healthcarepodcast. #healthcare #podcast #financialhealth #commercialpayermarketplace #digitalhealth #healthcareleadership #healthcaretransformation #healthcareinnovation

Recent past interviews:

Click a guest's name for their latest RHV episode!

Stacey Richter with 15 experts (EP507); Jerry DiMaso; Dr Ahilan Sivaganesan; Ryan Jacobs; Stacey Richter (INBW46); Ryan Wells, Dr Leo Spector, and Adam Stavisky; Brian Machut; Ivana Krajcinovic