Lots of talk about direct contracting going on these days. Many of you will be familiar with the term, but in short, direct contracting means when a self-insured employer directly contracts with a provider organization with no payer in the middle of that arrangement. And when I say "employer," I mean the employer and all their peeps—their TPAs, repricers, other vendors, and consultants.

Most of this talk, though, seems to come from the point of view of the employer. It's super easy to quantify what's in it for employers. US healthcare costs get blamed for all kinds of things: companies who have lost big global contracts because all of those fringe benefits cost way too much around here.

If we're looking around for a why on that point, let me refer you to last week's episode (EP366) with Dr. Kevin Schulman entitled "An In-Depth Dissection of Our Dysfunctional Healthcare Benefits Market." Or the show with Dr. Wayne Jenkins (EP358) about how premium and deductible financial toxicity negatively impacts plan members. Never forget that financial toxicity is clinical toxicity.

So, like a knight riding in on a white horse, direct contracting with a provider organization has some interesting potential. Most obviously, when an employer contracts directly with a provider organization, they cut out the middleman. They put the direct in direct contracting. Considering the multi-billions of dollars that some of these middle people are raking in every quarter in profits and/or "margins," cutting out the middle people could have a financial upside as big as those billions in profit.

If those billions get passed on to patients in the form of lower co-pays/coinsurance or premiums, there could be some big benefits to direct contracting for pretty much all involved … except the middle people, of course.

My guest in this healthcare podcast, Doug Hetherington, says that it's not uncommon to see on the low end a 10% reduction in costs to maybe up to 50% reduction in costs. It's amazing what can be accomplished when everybody starts working together for the good of the local community and patient and is held accountable for more than just revenue maximization.

But there's also quality and patient outcomes upsides to these cost reductions. Here's a few we can speculate about: For example, if the middle people add layers of bureaucracy and administrative burden that make it really hard and/or upsettingly inefficient for anyone trying to serve their patients' needs to actually serve their patients' needs, then yeah, direct contracting can make getting the right care to patients faster and easier. That matters to burned-out clinicians.

Also, here's another potential point to ponder: benefit designs. Listen to the show with Dr. Mark Fendrick (EP308) on this, but most benefit designs offered by middle people are really, as they call them, blunt instruments. High-value care costs as much (or more) as low-value care. Deductibles don't care if you need your diabetic foot ulcers checked urgently or you might get your foot amputated. It's a known fact that health outcomes plummet in January when, all of a sudden, cancer meds or whatever essential lifesaving medical innovation cost as much as a patient's deductible. So, patients abandon care—and outcomes go down.

When an employer direct contracts with a provider, in its most sophisticated form—which my guest, Doug Hetherington, calls a "full-pay open contract"—the employer and the provider work together to construct a benefit design that helps patients get the best outcomes.

Or here's another benefit, for the whole community, not just the employer: The whole community keeps the money local. Many of these middle people are big national companies. As Dave Chase and others have said often, when these Fortune whatever companies arrive on the scene, lots of money exits stage left out of the community. If local employers contract with local providers, the money stays local.

So, all that I have said has been said before. What I wanted to dig into in this episode is the why and the how from the provider organization standpoint.

I got curious about this after my conversation with Katy Talento (EP350). She talks about a major barrier for self-insured employers who want to work with local hospitals is that the local hospitals couldn't, frankly, get out of their own way. Maybe they couldn't see the benefit for themselves that made the juice worth the squeeze? That's what I talk about in this episode with Doug Hetherington: what's in it for providers and what a provider organization interested in direct contracting needs to actually pull it off.

Doug Hetherington is CEO of Health2Business, and he has done and continues to do pioneering work with community hospitals in eastern Idaho and elsewhere. Health2Business helps facilitate direct contracting between hospitals and local employers.

You can learn more at health2business.com and connect with Doug on LinkedIn. You can also learn how to engage in direct contracts from Doug's presentation, "Beyond the Direct Contract."

Doug Hetherington is a health plan visionary, innovator, and program architect who believes providers are the key to sustainable and meaningful healthcare in our communities.

Midway through his 20-year tenure as a benefit advisor, Doug began innovating around self-funding, captives, reference-based pricing (RBP), and population management in search of viable solutions that gave his employer clients control over cost and plan design. His creativity and tenacity for change drove his development of several first-of-their-kind innovations, including RB EmCap, a national access captive program for RBP employers.

Doug founded Health2Business (H2B) in 2019 after successful proof of concept that better healthcare results when employers, providers, and health systems work together at the local level through direct contracts.

Tackling one aspect of our broken healthcare system, H2B solves for how we access and pay for care. While establishing scalable direct contracts with some of the largest flagship health systems in the country, Doug realized that in order to truly decapitalize healthcare, direct contracts need to be transparent, open, and free for employers of all sizes to access. By establishing H2B's independent, agnostic, and collaborative direct contract administrative platform infrastructure, Doug has created an entirely new vendor class known as direct contract administration.

An optimist by nature, Doug truly believes that the more we work together, the faster we can restore value to our healthcare system and create a sustainable mutual benefit for provider, employer, and employee/member stakeholders.

05:38 Why are health systems interested in direct contracting? 09:43 EP308 with Mark Fendrick, MD.10:06 What are the essentials for direct contracting between a health system and an employer or payer? 11:16 What are the three categories of open direct contracting agreements? 12:44 EP350 with Katy Talento.12:59 EP363 with David Scheinker, PhD.14:43 What direction do we need to be moving to solve the cost problems in healthcare? 18:10 "What does a value-based model begin to look like?" 20:31 What is one of the inherent benefits of a direct contracting environment? 21:01 What data should we actually be capturing? 25:01 "Sometimes you really begin to wonder, why is there such a high level of misalignment?" 25:16 How much can an employer save, on average, with a direct contract? 26:33 What are healthcare costs going up by per year? 26:50 "We pay for these insurance plans … and yet what you're paying for that and how they're assessing the risk is not … in line with the actual cost of care." 30:20 "I would say that … consolidation … is one of the reasons why we're … seeing more movement towards direct contracting."

You can learn more at health2business.com and connect with Doug on LinkedIn. You can also learn how to engage in direct contracts from Doug's presentation, "Beyond the Direct Contract."

Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

Why are health systems interested in direct contracting? Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

What are the essentials for direct contracting between a health system and an employer or payer? Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

What are the three categories of open direct contracting agreements? Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

What direction do we need to be moving to solve the cost problems in healthcare? Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"What does a value-based model begin to look like?" Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

What is one of the inherent benefits of a direct contracting environment? Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

What data should we actually be capturing? Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"Sometimes you really begin to wonder, why is there such a high level of misalignment?" Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

How much can an employer save, on average, with a direct contract? Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

What are healthcare costs going up by per year? Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"We pay for these insurance plans … and yet what you're paying for that and how they're assessing the risk is not … in line with the actual cost of care." Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"I would say that … consolidation … is one of the reasons why we're … seeing more movement towards direct contracting." Doug Hetherington of @MyH2B discusses #directcontracting on our #healthcarepodcast. #healthcare #podcast #digitalhealth

Recent past interviews:

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

Dr Kevin Schulman, Scott Haas, David Muhlestein, David Scheinker, Ali Ucar, Dr Carly Eckert, Jeb Dunkelberger (EP360), Dan O'Neill, Dr Wayne Jenkins, Liliana Petrova, Ge Bai, Nikhil Krishnan, Shawn Rhodes, Pramod John (EP353), Pramod John (EP352), Dr Eric Bricker, Katy Talento, Stacey Richter (INBW33), Stacey Richter (INBW32), Dr Steve Schutzer (Encore! EP294), Lisa Trumble, Jeb Dunkelberger, Dr Ian Tong, Mike Schneider, Peter Hayes, Paul Simms, Dr Steven Quimby, Dr David Carmouche (EP343)

First of all, this is a 400-level discussion. If you think you already know all about our dysfunctional healthcare benefits market, then this show is for you.

Before we begin, I just want to say something. I'm gonna refer back to David Muhlestein's episode (EP364), where he talks about the first step toward healthcare transformation. It is, let's just say, for incumbent health systems and payers, people who work there, to step back and in the harsh light of day really contemplate their business model—see it clearly. If you're listening to this show, then know that I love you; so this is not a condemnation of you or the great things that you are likely doing in your department. I see you as a changemaker. But contemplating your organization as a whole is like the first step of a 10-step program … to admit what friends and family were saying at the intervention.

If you're not yet at the—what's it called?—contemplative stage in your journey toward transformation, you could skip ahead to the 23:00 mark approximately for some advice on what people who work at incumbent payers and/or providers can do right now.

My one and only intent here is to see change happen. What I see currently are certainly efforts to improve quality at some level. But those responsible for finance, premiums, and the employer sales team are in a different part of the building. I mean, maybe a first step here is, Can you invite those guys and gals to your meetings?

OK … so, there was a paper that came out in JAMA entitled "The Dysfunctional Health Benefits Market and Implications for US Employers and Employees." It was by David Scheinker, PhD; Arnold Milstein, MD; and Kevin Schulman, MD, who is my guest in this healthcare podcast. David Scheinker, by the way, was on the show earlier (EP363), so certainly go back and listen to that.

This paper (the "Dysfunctional Health Benefits Market" paper) showed that commercial insurance costs have gone up 4x the rate of other benchmark goods or services in price. So, bottom line, "It is assumed that insurers compete intensely to improve the value received by employers and employees by negotiating to keep prices down and advocating for employers and employees." It turns out, though … not so much with that.

My guest in this healthcare podcast, as mentioned, is Kevin Schulman, MD, an author on that paper. And he says this much more eloquently than I will, but the skinny is this: Because insurer profits are capped at 15%, that means that the more healthcare costs go up, the more possible profit in absolute terms that a health insurance carrier can make. After all, 15% of a bigger number is … a bigger number.

If you look at how Wall Street responds to these bigger numbers all the way around—higher costs translating to higher profits, that whole thing—you will find that Wall Street likes this profit-generating formula … very much. Share prices go up when that 15% goes up.

What does Wall Street like less? It likes less restructuring and pushing providers to deliver better care for less cost and then passing those savings on to employers and employees. Even if you increase quality and decrease costs really well and/or profitably as an insurer, share prices do not rise nearly as much as they rise if you phone it in with the "negotiations" with providers.

Nonprofits, by the way, get no pass here either. Some of the most expensive hospitals in the country, which are nonprofit, are doing their thing in areas where nonprofit carriers are the big kahunas. Call it margins. Call it profits. Whatever … same thing. Listen to the show with David Muhlestein, PhD, JD (EP364) from two weeks ago. It's all about the business models. And that business model is revenue maximization. Period. End of the sentence.

So, who loses in this equation? Oh, right … patients. And employers. Read anything by Dave Chase for more on how crushing this loss is that patients and employers suffer: middle-class wage stagnation, bankruptcies, financial toxicity that is actually clinical toxicity, skyrocketing premiums way over the cost of inflation, that healthcare costs borne by employers are a driver for offshoring because they make American labor so expensive. A study the other day said that nonadherence due to a patient's inability to pay for treatment will be a leading cause of death in 2030. That's what this all is adding up to.

Because of business models, insurers have become the piggy banks for health systems, as my guest Dr. Kevin Schulman says. This piggy bank is funded with the pennies, nickels, and dimes from you and me, the insured lives, our employers, and taxpayers. So, unless you're a shareholder in one of these carriers and their vertically integrated PBMs, of course, then, I guess, good for you. Or getting political donations from them might also be a net plus for you personally. Where are the activist investors in all of this?

Something that Dr. Schulman said in this episode I had never heard before, and—wow!—it explains so much. It's this whole idea of some, not all, but some health systems clamoring about how they have to charge commercial patients more because they are losing so much on their Medicare patients. They have to cost shift to commercial lives.

Here's what Dr. Kevin Schulman said about that in my own words: Cost is a construct. Cost is a dynamic fiction. I mean, say I buy a mansion. I put in a Jacuzzi and a tropical flower bed that needs to be misted with water on the half-hour. Then I tell you that my fixed costs are really high and, therefore, my tuna sandwiches are really expensive. I just made them expensive. I made the decision to increase my costs.

The interesting backdrop for that is that in competitive marketplaces, or in Maryland, hospitals do just fine (thank you very much) getting paid Medicare rates. They don't have to price shift. But in markets with no competition, where the hospitals decided to build, baby, build, they created these giant brick-and-mortar money pits that, yeah, cost a boatload. And then they complain that they have to price shift to employers and their own patients to pay for it all.

One thing that we don't talk about in this episode are non–fee-based brokers and the role that they play in all of this. One recent lawsuit is a pretty perfect example of what I'm saying here.

You can learn more by visiting Dr. Schulman's profile page and connect with him on LinkedIn.

Kevin Schulman, MD, is a professor of medicine for the Clinical Excellence Research Center (CERC) at the Stanford University School of Medicine and, by courtesy, professor of operations, information, and technology at Stanford's Graduate School of Business. He is the faculty director of Stanford's new applied master degree program, the master of science in clinical informatics management program. His research focuses on broad, system challenges in the healthcare market, looking for ways to better understand hidden costs throughout the system. He then works to develop innovative solutions to deliver great care at lower cost.

07:13 Why have commercial insurers become price-takers? 10:04 How does a health plan get bigger profits? 10:40 "At the core at this, Wall Street rewards predictable performance; and the predictable performance … is great if healthcare costs go up." 11:00 What does it mean to have a "dysfunctional equilibrium" in healthcare? 12:05 What's really changed in healthcare in the last 20 years that's caused this increase in healthcare pricing? 12:47 Commercial price versus Medicare: Do hospitals really need to cost shift? 15:51 How is value-based care really going to work? 17:43 "It's not A or B; it's a dysfunctional market." 17:57 "Little changes in volume or incentives is not going to change the underlying dynamics." 24:32 "I think it's an open question whether this model is really serving the American public." 29:25 "It's a really important time for us to think about, how do we create a different trajectory?"

You can learn more by visiting Dr. Schulman's profile page and connect with him on LinkedIn.

@kevin_schulman discusses #healthcarebenefits on our #healthcarepodcast. #healthcare #podcast #benefitsmarket

Why have commercial insurers become price-takers? @kevin_schulman discusses #healthcarebenefits on our #healthcarepodcast. #healthcare #podcast #benefitsmarket

How does a health plan get bigger profits? @kevin_schulman discusses #healthcarebenefits on our #healthcarepodcast. #healthcare #podcast #benefitsmarket

"At the core at this, Wall Street rewards predictable performance; and predictable performance … is great if healthcare costs go up." @kevin_schulman discusses #healthcarebenefits on our #healthcarepodcast. #healthcare #podcast #benefitsmarket

What does it mean to have a "dysfunctional equilibrium" in healthcare? @kevin_schulman discusses #healthcarebenefits on our #healthcarepodcast. #healthcare #podcast #benefitsmarket

What's really changed in healthcare in the last 20 years that's caused this increase in healthcare pricing? @kevin_schulman discusses #healthcarebenefits on our #healthcarepodcast. #healthcare #podcast #benefitsmarket

Commercial price versus Medicare: Do hospitals really need to cost shift? @kevin_schulman discusses #healthcarebenefits on our #healthcarepodcast. #healthcare #podcast #benefitsmarket

How is value-based care really going to work? @kevin_schulman discusses #healthcarebenefits on our #healthcarepodcast. #healthcare #podcast #benefitsmarket

"It's not A or B; it's a dysfunctional market." @kevin_schulman discusses #healthcarebenefits on our #healthcarepodcast. #healthcare #podcast #benefitsmarket

"Little changes in volume or incentives is not going to change the underlying dynamics." @kevin_schulman discusses #healthcarebenefits on our #healthcarepodcast. #healthcare #podcast #benefitsmarket

"I think it's an open question whether this model is really serving the American public." @kevin_schulman discusses #healthcarebenefits on our #healthcarepodcast. #healthcare #podcast #benefitsmarket

"It's a really important time for us to think about, how do we create a different trajectory?" @kevin_schulman discusses #healthcarebenefits on our #healthcarepodcast. #healthcare #podcast #benefitsmarket

Recent past interviews:

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

Scott Haas, David Muhlestein, David Scheinker, Ali Ucar, Dr Carly Eckert, Jeb Dunkelberger (EP360), Dan O'Neill, Dr Wayne Jenkins, Liliana Petrova, Ge Bai, Nikhil Krishnan, Shawn Rhodes, Pramod John (EP353), Pramod John (EP352), Dr Eric Bricker, Katy Talento, Stacey Richter (INBW33), Stacey Richter (INBW32), Dr Steve Schutzer (Encore! EP294), Lisa Trumble, Jeb Dunkelberger, Dr Ian Tong, Mike Schneider, Peter Hayes, Paul Simms, Dr Steven Quimby, Dr David Carmouche (EP343), Christin Deacon

One of my mentors often said price is irrelevant. He said he would sell anything for any price as long as he could define the terms of the deal. During this conversation today with Scott Haas about PBMs, that quote was playing in my head like an earworm.

I'm henceforth gonna struggle with the term rebate to define dollars that the PBM gets back from Pharma, because, according to my guest in this healthcare podcast Scott Haas, it turns out "rebates" comprise only about 40% of those back-end dollars that some PBMs manage to score from pharma manufacturers. I don't have any insight really into this, but Scott Haas certainly does—and this is the average that he has seen in his work and that we're going to dig into today. But in sum … wow! Let me just repeat that a mere 40 cents on the dollar of the gross amount that PBMs take in "rebates" from Pharma these days winds up going back to plan sponsors, even plan sponsors who are getting "100% of the rebates."

If you didn't understand what I just said, no worries. I'm gonna explain it right now. If you did and you know the why behind all of this also, you could probably skip ahead about five minutes.

Here's the backstory on this whole rebate fandango. Let's start with part one of what is a two-part transaction.

So, part one: the deal between pharma manufacturers and PBMs. In general, a pharma manufacturer signs a deal with a PBM to give back whatever percentage of their gross sales revenue to the PBM at the end of the year, say. It's along the same lines as a cash-back coupon for the PBM.

Why would a pharma company be up for giving cash back like this? Well, to get on a PBM's formulary, giving cash back is like the price of admission. PBMs have a lot of leverage, after all—at least the big ones. They control access to millions and millions of patient lives. So, if Pharma wants their drug to be accessible to those millions and millions of lives, they have to play the cash-back game, otherwise known as the rebate game. They have to agree to give back to the PBM a certain amount of cash on the back end.

So, PBM pays Pharma's list price up front—that's the gross amount paid, based on the list price of the drug—and then after all the cash back gets toted up at the end of the year, there'll be a net price. List price or gross price minus the cash back equals net price. It's this net price that's the true kind of final price which the pharma company gets paid per script by said PBM at the end of the day.

These days, most everybody pretty much knows that PBMs are getting these so-called rebates—this cash back from pharma companies that I just explained. And it's pretty common knowledge the so-called gross-to-net bubble (the gross-to-net dollar amount) is pretty huge, meaning the rebate or cash-back amount is pretty huge. And many have also noticed that the gross-to-net dollar amounts seem to be growing bigger and bigger every year. I mean, for one insulin manufacturer, consider this: Their list price, their gross price, is $350 per script. And their net price after cash back/rebates was $52 this past year. Wait ... what? After all the cash back to the PBM, the insulin manufacturer got paid 86% less than their list price—$350 went down to $52 per prescription. The PBM vacuumed up 86% of the dough for every script written for this particular brand of insulin.

OK … so, say Pharma gives $100 back to the PBM based on the terms of their deal. Call that part one of this example transaction.

Here's part two: the deal between PBMs and health plans or self-insured employers. Health plans and self-insured employers are customers of the PBM. They hire PBMs to manage the pharmacy benefits for their members or employees.

So, because everybody knows this whole rebate thing is going on, as part of the contracts that the PBMs put in place with their customers (meaning the health plans or employers), the PBMs tell their customers that they're going to give 100% of the rebates back to the plan/employer. So, you'd think that if the pharma manufacturer paid $100 to the PBM, that the customers of the PBM (the plan sponsors) would get the $100 back then, right? The PBM would pass on 100% of the savings, as it were, if they're saying that they're gonna give 100% of the rebates. I mean, if this is actually true, that $100 in and $100 out, then the PBM is potentially performing a useful service, right? They're lowering drug costs for their customer, the plan sponsors for their members and employees.

Except … turns out, not so much. Because what is a rebate, really? A rebate can be anything the PBM defines as a rebate. And it turns out that, on average, as I said before, according to those in the know, something like $60 of that $100 is not a rebate. It's an administration fee. Or a data fee. Or an education fee. A clinical program fee. Some other name that is not rebate.

As my guest Scott Haas says, the term rebate is meaningless because it can mean whatever the PBM wants it to mean. It's like inconceivable from The Princess Bride. I do not think that word rebate means what you think it means.

Now it is a tangled web we weave here, and for more on why I say that, listen to the episode with Chris Sloan (Encore! EP216) entitled "How Medicare Part D Plans Became Addicted to Drug Rebates." There's also a show with Pramod John (EP353) where we dig into, specifically, specialty drugs and rebating and so-called rebate walls.

But net net, all of this probably myopic focus on rebates means that you have to keep an eagle eye out for so-called exclusions in contracts if you are a plan sponsor. So, what are exclusions?

This is that whole thing where some cheap generic is excluded from a PBM formulary while some expensive brand for the same condition is on formulary. Why would a cheap generic be excluded from a PBM formulary? Simple. Cheap generics don't have rebates. PBMs lose a lot of money when some high-priced specialty drug, for example, goes generic. They might have made thousands of dollars per script on that high-priced brand by collecting its rebate. Think about that insulin example. The rebate is 86% of the cost of the drug. And everybody wonders why some cheap generic insulin or biosimilar or whatever isn't on formulary. It is not a mystery when you're dealing with for-profit enterprises built around a model of revenue maximization.

So, given all this, what's my guest Scott Haas's bottom-line advice in this whole thing? If you're a health plan or employer and you're trying to negotiate a PBM contract where your spend is predictable and your contracted price promises have any meaning whatsoever, Scott Haas's advice is, you have to ensure that the contract defines the actual prices for the drugs in the contract. With absolute numbers. Not percentages off or weird formulas or the empty promise of getting an AWP or a WAC (which means average wholesale price or wholesale acquisition cost) or any of the other various acronyms for some drug pricing schema. All of these are basically shorthand for "this price could change at any moment."

There's a reason in-the-know people say AWP stands for "Ain't what's paid," meaning ain't what's ultimately going to be paid by plan sponsors. What is necessary in PBM contracts is the final price—that number. Some digits with a dollar sign in front of them and a "per unit" after them. No acronyms and no percentage signs.

Whoever gets to define the terms ultimately controls the price. So, get the price up front.

As mentioned several times already, I am talking to Scott Haas, who is a senior VP over at USI Insurance Services. He's speaking today from the perspective of a plan sponsor, meaning from the point of view of a health plan, including those health plans managed by and paid for by a self-insured employer and their employees.

For more information on PBMs and how drugs get adjudicated, listen to the show with AJ Loiacono (Encore! EP231), which was one of the most popular episodes over here at Relentless Health Value. Somebody on a LinkedIn post the other day commented on how much she appreciated AJ Loiacono's frank assessment of things and how she would love to go to a meeting with more people similarly telling it like it is. That's pretty much what we aim to do at every episode over here at Relentless Health Value, and AJ nails it on that objective for sure in this episode.

One last thing, also on the show: Scott Haas brings up GPOs that the Big Three PBMs have been spinning up to aggregate and maximize all of those rebates that we just talked about. I discuss this exact topic at some length in another incredibly popular episode with Mike Schneider (Encore! EP288).

You can learn more at usi.com or by emailing Scott at [email protected].

Scott Haas has over 38 years of employee benefits experience. His background includes the development and validation of care management programs; prescription benefit management solutions; provider network evaluation, valuation, and negotiation; and underwriting.

Scott started and operationalized a third-party administrator (TPA) and a pharmacy benefit manager platform from scratch. He has worked in the arena of alternative funding for most of his career. Scott's primary focus is in the area of alternative delivery and financing of healthcare other than fee for service, along with prescription benefit and healthcare risk management consulting.

Scott has held officer-level positions within Blues plans and TPAs as vice president of sales and marketing, vice president of underwriting, and president. Scott has also served as a trustee for both union and non-union health and welfare and pension plans.

Scott frequently shares his consulting expertise speaking at national events hosted by organizations such as Health Rosetta, the International Foundation of Employee Benefits, the Health and Welfare Plan Management Conference, the Western Pension and Benefits Conference, and the Self-Insurance Institute of America (SIIA). Scott has authored and coauthored articles on various topics over his career.

Scott earned his bachelor's degree in business administration and economics from the University of Nebraska at Kearney. Scott also holds Chartered Life Underwriter (CLU) and Registered Health Underwriter (RHU) designations.

10:29 What's the major flaw with the buyer-seller relationship between plan sponsors and PBMs? 12:04 What are the five things that need to be considered in order to get a fair price from a PBM? 13:16 Why does using average wholesale price cause problems for plan sponsors? 15:05 What does it mean to put the network risk on the PBM? 17:10 What's happening with drugs moving from specialty brand to specialty generic? 19:14 "A generic is a generic; in our world, it's binary." 23:31 "The term 100% of rebates is really irrelevant." 23:54 What does it mean to have a minimum guarantee in drug rebates? 26:39 "When you do a line-item assessment … is it producing an optimal result in comparison to competitively achieved … pricing for generics … and for specialty?" 27:52 "Plan sponsors need to grow a backbone." 28:36 EP342 with Christin Deacon.29:05 Why do you need to understand your consultant's process as a plan sponsor? 29:30 Why do you need to understand formulary exclusions as a plan sponsor? 29:41 Why is it important to create a more equal PBM contract? 30:52 "Rebates inure to the benefit of the plan sponsor; they don't necessarily benefit the consumer." 31:45 What does Scott do at USI?

You can learn more at usi.com or by emailing Scott at [email protected].

Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

What's the major flaw with the buyer-seller relationship between plan sponsors and PBMs? Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

What are the five things that need to be considered in order to get a fair price from a PBM? Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

Why does using average wholesale price cause problems for plan sponsors? Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

What does it mean to put the network risk on the PBM? Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

What's happening with drugs moving from specialty brand to specialty generic? Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

"A generic is a generic; in our world, it's binary." Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

"The term 100% of rebates is really irrelevant." Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

What does it mean to have a minimum guarantee in drug rebates? Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

"When you do a line-item assessment … is it producing an optimal result in comparison to competitively achieved … pricing for generics … and for specialty?" Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

"Plan sponsors need to grow a backbone." Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

Why do you need to understand your consultant's process as a plan sponsor? Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

Why do you need to understand formulary exclusions as a plan sponsor? Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

Why is it important to create a more equal PBM contract? Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

"Rebates inure to the benefit of the plan sponsor; they don't necessarily benefit the consumer." Scott Haas of @USIIns discusses #PBMs and #drugrebates on our #healthcarepodcast. #healthcare #podcast

Recent past interviews:

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

David Muhlestein, David Scheinker, Ali Ucar, Dr Carly Eckert, Jeb Dunkelberger (EP360), Dan O'Neill, Dr Wayne Jenkins, Liliana Petrova, Ge Bai, Nikhil Krishnan, Shawn Rhodes, Pramod John (EP353), Pramod John (EP352), Dr Eric Bricker, Katy Talento, Stacey Richter (INBW33), Stacey Richter (INBW32), Dr Steve Schutzer (Encore! EP294), Lisa Trumble, Jeb Dunkelberger, Dr Ian Tong, Mike Schneider, Peter Hayes, Paul Simms, Dr Steven Quimby, Dr David Carmouche (EP343), Christin Deacon, Gary Campbell

In this healthcare podcast, we're gonna zoom out and look at the entire healthcare industry. I am very confident that you know a lot about the healthcare industry and its basic stats. It's huge. The healthcare industry is approaching the $4 trillion mark, and it employs more people than any other industry in 47 states. Think about that momentarily. More people work in healthcare than in any other industry in every state except for Wisconsin, Indiana, and Nevada.

We could get into (but we won't) how many of the gigantic, consolidated incumbents in the healthcare industry are either for-profits sporting very happy shareholders or investors. Then, of course, we have our "nonprofits"—especially mega-nonprofit health systems—who enjoy some pretty healthy margins while, at the same time, these health systems in general offer up some fairly embarrassing levels of charity care considering the amount of taxes they deprive their communities of.

You also are probably eminently familiar with various ways that have been cited to transform the industry. So, the usual suspects here are, of course, changing incentives—offering true value-based care contracts, for example—and then the whole creative destruction angle, wherein upstarts come in with far superior products and services, à la the whole Kodak case study or what happened to Sears and Kmart. Maybe this will happen in healthcare. Other ideas to transform the healthcare industry include employers harnessing the latent power that they have in some markets and then, of course, getting rid of middle people, for sure. Or we could go single payer, of course. That's another suggestion/solution.

Today's conversation is a rather holistic look at all of this. I dig into this with David Muhlestein, who is chief research and innovation officer at Health Management Association (HMA). And when I say dig in, I mean dig in. David made some very intriguing points that I had not heard before, actually—and I've heard a lot in my time, so that's saying something. I'm gonna tick off a couple of them, but I don't do them justice. So, you'll need to listen to David explain them and give context.

First off, what's the problem with healthcare being a $4 trillion industry in this country—I mean, almost 20% of GDP—and employing more people than any other industry in 47 of our 50 states? There are other big sectors in our economy, after all, that get lots of love. Why is big healthcare "bad" and these other sectors "good" in economic terms when we talk about employment?

That's one thing I wanted to know. And David made a point that may be self-evident for some but is worth reiterating in all cases. The government pays for roughly half of healthcare, and from a consumer or just American standpoint, it kind of sucks. I mean, I don't see many Insta selfies of someone rocking their brand-new insurance premium. Dollars going to healthcare or health insurance are not going to consumer goods. And that matters economically as well as retail therapy. For all you econ geeks out there, this industry offers no marginal utility.

Here's a second interesting point: Just changing incentives might not be enough. Organizations downstream and upstream need to be on board with the spirit and objective of the incentive change. If they are not, then it's game on for every CFO and their revenue cycle managers to finagle how to find the loophole that enables revenue maximization. Revenue maximization. Period. Revenue. The end.

Which brings me to another interesting point: Boards of directors, CEOs, people with fiduciary responsibility … they need to know thyself and consider their actual customer.

Spoiler alert: 99% of the time, that actual customer is not patients, no matter what is printed in big letters on the front door.

No change can really happen unless those who serve in the upper echelons of these businesses get really real about where their bread is buttered. Organizations are built to serve their customer, after all. So, if a patient isn't identified as a customer, the organization at its very core is gonna have a lot of difficulty serving the patient.

So, now what? If I want my organization to move forward in a way that is more patient-centric and less financially toxic, say, what to do? Here's thoughts after chatting with David Muhlestein. Four main steps:

1. As I just said, you gotta get your current state unemotionally understood. For reals, who is the organization built to serve? So, first step is being introspective in the harsh light of day.
2. Consider the timeline of your existential demise. Ha ha, this show is so uplifting. But unless organizations really think out 5 years, 10 years, 25 years and really internalize the existential threat, it's going to be hard to motivate change. I see this all the time. So do you. Inertia is real. Nobody does anything until they absolutely have to.
   • Sidebar: But if you need an eventual demise to bring up at your next strategy meeting, I just saw a paper come out saying that by 2030, cost-related nonadherence could become a leading cause of death in the United States, surpassing diabetes, influenza, pneumonia, and kidney disease. This is as per a study by the nonprofit West Health Policy Center and Xcenda. Nonadherence … what does that mean? It means the patient is not doing their treatment. They are not going to the doctor or getting medical care or not taking their drugs. Meaning no one is making money off of all of those patients, especially when they're dead. This is where the rubber meets all of those excess profits everybody is reaping in the short term. I hope that was helpful for anybody trying to motivate change today.
3. Consider what legacy we want to leave behind. Do we all want to wait until we're forced to change to do so? Is this the healthcare system we want to leave behind to children and grandchildren? I mean, anybody who's got a loved one in the hospital with anything complex, fighting for their own patient records, on the phone for hours a day with insurance carriers while care is delayed with possibly devastating consequences, the family having to coordinate care and cross their fingers and pray they don't get a ridiculous bill for services that may or may not have been rendered and then use retirement savings to pay for them … if anyone is not looking to be a party to all of this, then let's think about our strategy moving forward and how it will change to meet the future we want to see.
4. On to the evolve and change approaches: How exactly do you think about doing that? According to David Muhlestein, you can repair your current organization or remodel or rebuild.

It sounds daunting, but as Dr. Eric Bricker said on our recent interview together (EP351) and as others have said as well, this is already happening in some regions across the country. There are pockets with real transformation. These changes are on the edges right now, but they're showing that this can and is possible.

You can learn more at healthmanagement.com.

David Muhlestein, PhD, JD, is chief research and innovation officer for Health Management Associates (HMA). He is responsible for the firm's self-directed research and supports strategic planning and innovation.

David's research and expertise center on healthcare payment and delivery transformation, understanding healthcare markets, and evaluating how the broader healthcare system is changing. He is a self-identified data nerd and regularly speaks and writes about healthcare system evolution.

David joined HMA via its acquisition of Leavitt Partners in 2021, where he was the chief strategy and chief research officer.

Additionally, David is a visiting policy fellow at the Margolis Center for Health Policy at Duke University, adjunct assistant professor at The Ohio State University College of Public Health, and a visiting fellow at the Accountable Care Learning Collaborative. He previously served as adjunct assistant professor of The Dartmouth Institute (TDI) at the Geisel School of Medicine at Dartmouth College.

David earned his PhD in health services management and policy, JD, MHA, and MS from The Ohio State University and a BA from Brigham Young University.

07:38 Is it an issue for the healthcare industry that it is one of the largest employers in the country? 08:42 "I think that we need to figure out what is an appropriate amount to spend on healthcare and get to that level." 09:01 How do we not decrease the amount of healthcare we're receiving while paying less for that healthcare? 10:11 What are the two ways we can look at decreasing healthcare spend? 15:39 "I think that a regional approach may happen." 16:56 "When somebody takes less, others are going to follow them." 17:33 Who is really paying in our current healthcare system? 19:47 "Any sort of a model that you start with influences everything else that you do." 20:09 What's the common challenge David Muhlestein sees in value-based care systems? 23:21 "There are countless things that you can do to improve the current system today." 27:25 What are the three options for building up better healthcare? 28:19 David's advice for healthcare executives. 33:22 "To really lower the total cost of … healthcare, it's a 30-year process."

You can learn more at healthmanagement.com.

@DavidMuhlestein discusses #healthcaretransformation on our #healthcarepodcast. #healthcare #podcast #digitalhealth

Is it an issue for the healthcare industry that it is one of the largest employers in the country? @DavidMuhlestein discusses #healthcaretransformation on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"I think that we need to figure out what is an appropriate amount to spend on healthcare and get to that level." @DavidMuhlestein discusses #healthcaretransformation on our #healthcarepodcast. #healthcare #podcast #digitalhealth

How do we not decrease the amount of healthcare we're receiving while paying less for that healthcare? @DavidMuhlestein discusses #healthcaretransformation on our #healthcarepodcast. #healthcare #podcast #digitalhealth

What are the two ways we can look at decreasing healthcare spend? @DavidMuhlestein discusses #healthcaretransformation on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"I think that a regional approach may happen." @DavidMuhlestein discusses #healthcaretransformation on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"When somebody takes less, others are going to follow them." @DavidMuhlestein discusses #healthcaretransformation on our #healthcarepodcast. #healthcare #podcast #digitalhealth

Who is really paying in our current healthcare system? @DavidMuhlestein discusses #healthcaretransformation on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"Any sort of a model that you start with influences everything else that you do." @DavidMuhlestein discusses #healthcaretransformation on our #healthcarepodcast. #healthcare #podcast #digitalhealth

What's the common challenge David Muhlestein sees in value-based care systems? @DavidMuhlestein discusses #healthcaretransformation on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"There are countless things that you can do to improve the current system today." @DavidMuhlestein discusses #healthcaretransformation on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"To really lower the total cost of … healthcare, it's a 30-year process." @DavidMuhlestein discusses #healthcaretransformation on our #healthcarepodcast. #healthcare #podcast #digitalhealth

Recent past interviews:

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

David Scheinker, Ali Ucar, Dr Carly Eckert, Jeb Dunkelberger (EP360), Dan O'Neill, Dr Wayne Jenkins, Liliana Petrova, Ge Bai, Nikhil Krishnan, Shawn Rhodes, Pramod John (EP353), Pramod John (EP352), Dr Eric Bricker, Katy Talento, Stacey Richter (INBW33), Stacey Richter (INBW32), Dr Steve Schutzer (Encore! EP294), Lisa Trumble, Jeb Dunkelberger, Dr Ian Tong, Mike Schneider, Peter Hayes, Paul Simms, Dr Steven Quimby, Dr David Carmouche (EP343), Christin Deacon, Gary Campbell, Kristin Begley

Administrative costs in the United States have a bad rap. You don't have to look too far to find an article about how there's now, like, 10 administrators for every 1 physician in this country. Or 3 to 4 billing people for every physician. Or find someone complaining about arduous prior auth processes and how long specialists sit on phones trying to get a prior auth approved while having a frustrating "peer consult" with a "peer" whose career has nothing to do with that specialty and, in fact, knows very little about it.

Also consider the time that specialists' admin teams have to spend—or really any doctor's admin teams have to spend—when they are required to send documentation validating some prior auth request or appeal. They, in many cases, have to send this documentation via old-school, drop-it-in-a-mailbox mail … literally. This documentation can and often does amount to a sizable box full of paper patient records. They have to drag a box into their office and fill it up with paper to send to the insurance company to validate whatever appeal. Think about who prints out all that paper. Who does all this stuff? And who on the insurance side is unboxing it all and, I don't know, are they highlighting the good parts? Are they rekeying anything? What goes on there?

Or here's another administrative cost: collecting and tabulating all the data needed to participate in some quality incentive program. Considering that each carrier has their own flavor of metrics … yeah again. Administrative burden, administrative costs.

Or consider what Dan O'Neill was talking about in EP359 the other day. He was talking about IPAs (independent physician associations) and other managed care entities. These entities hold the contracts with payers on behalf of smaller provider organizations or solo practitioners. So, these smaller (usually) individual practices contract with the IPAs—you know, for leverage and all that. And then it's the IPA who then holds the contract with the payer. As Dan mentions, contracting with some of these IPAs is like an "I love 1990" flashback. The contracting process, again, transpires via mail. Not email, mind you. Mail. Like, stick-a-stamp-on-the-envelope mail.

So, in sum, there's a lot of pretty well-founded complaining about administrative costs in this country. A lot of this administrative stuff is truly inefficient and a fantastical waste of time—valuable clinician time. So, here we are freaking out about staffing shortages, overlooking that doctors at the heights of their careers are spending some percentage of their time not counseling, treating, or diagnosing patients but twiddling their thumbs on hold with one insurance company or another slowly burning out by the inefficiency of it all. Or doing pajama time, and we all know that too much pajama time means also burnout on a silver platter.

Now consider this: Reducing admin costs are frequently cited as a fine way to reduce overall healthcare spending in this country. So then, let's get granular here. If we're trying to quantify admin costs, how you'd do that is to quantify how much each transaction costs. How much does it cost to send a bill and get paid for it? How much does it cost to file an appeal and a denial of a prior auth? Add all those transactions together and you get the full cost of the administrative burden.

In this healthcare podcast, we're digging into a paper about admin costs written by David Scheinker, PhD (my guest today); Barak Richman, JD, PhD; Arnold Milstein, MD, MPH; and Kevin Schulman, MD, MBA.

I have the pleasure of speaking with David Scheinker, PhD (as I mentioned), who is the lead author on this paper. Dr. Scheinker is an associate professor of pediatrics and executive director of systems design and collaborative research at the Stanford Lucile Packard Children's Hospital. He is the founder and director of SURF Stanford Medicine at Stanford. David Scheinker's work centers around bringing together engineering PhD students and faculty with hospital administrators, leaders, doctors, nurses. The goal here is to design improvements to operations from an industrial engineering point of view. So, you can see how investigating administrative burden and costs and trying to reduce them fits in here.

Before we begin, I just want to point out one thing: I alluded to this earlier when I mentioned staffing shortages. As reported by Gist a few weeks ago, health systems saw an 8% increase in labor costs per patient day; and many are budgeting for a negative operating margin. In the past, most administrative challenges were solved by throwing bodies at the problem. That is now untenable. This is one promise of technology. Tech can automate, replicate, and scale much of what has required human labor in the past. Tech is used to automate administrative functions in many other industries also, so there's a number of precedents for this.

Now, just to underline a major takeaway from this conversation with Dr. David Scheinker, he reiterates a recommendation to eliminate a big proportion of administrative costs.

I guess I should say spoiler alert here, but the major takeaway/recommendation is this: Standardize healthcare contracts between payers and providers. Every payer and every provider finds one contract template and uses it. I don't mean one template per payer or per provider, although that probably would be a revelation in and of itself. But I mean that all payers use one basic provider contract.

A couple of specifics here: The template that I'm referring to (and that Dr. David Scheinker is referring to) consists of parameters. What do I mean when I say parameters? Consider what Airbnb does when you're looking for a place to stay, as an example. How many bedrooms (that's a parameter)? How many bathrooms (that's a parameter)? How many amenities (that's a parameter)?

After everybody picks their standard set of parameters, at that point, all parties can negotiate and come up with whatever they want for what is the price of an extra bedroom or whatever value you're gonna assign to that parameter. Go nuts there, but from a data collection and analytic perspective and a getting paid perspective, it is way easier to do it that way—meaning it's way easier to execute and report when all of the contracts use the same parameters. Also, you can build tech to do a lot of that because you don't have to write algorithms with exponential variables. And anybody who has tried to write algorithms with exponential variables—and I am talking from firsthand experience here—it's a hot mess right out of the gate.

You can learn more by connecting with David on LinkedIn and following him on Twitter.

David Scheinker, PhD, started his career as a research mathematician and switched to healthcare operations to work on an interdisciplinary team and have a more immediate impact. He is a clinical associate professor of pediatrics, the executive director of systems design and collaborative research at the Stanford Lucile Packard Children's Hospital, and a member of the Clinical Excellence Research Center (CERC) at Stanford University. He founded and directs SURF Stanford Medicine, which brings together students and faculty from the university with physicians, nurses, and administrators from the hospitals. He studies clinical care delivery, hospital operations, sensor-based and algorithm-enabled telemedicine, the socioeconomic factors that shape healthcare, and policy.

07:23 What's the quantitative administrative cost in an average transaction? 07:49 What's the quantitative administrative cost in a healthcare transaction? 08:43 What does the healthcare billing and administration cost add to the US's overall healthcare spend? 09:38 Is it possible to cut billing and administrative costs in healthcare? 11:01 "In some ways, the problem for healthcare should be simpler." 12:14 What does the complexity of the current system look like in a doctor's office? 15:26 How did David go about studying healthcare administrative costs? 18:17 "It doesn't have to be simple; it should be standardized." 21:41 What would be the pushback on standardizing contracts in healthcare? 22:35 Why is it possible to gain more value by losing customization in contracts? 24:11 "Never let a good crisis go to waste." 24:33 "It's much easier in healthcare to build something new than to change something that exists." 27:39 What benefits does telemedicine have to cutting administrative costs? 29:09 What is another significant benefit of using standardized contracts? 30:17 Why haven't standardized contracts become a common thing in the current healthcare system?

You can learn more by connecting with David on LinkedIn and following him on Twitter.

@David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

What's the quantitative administrative cost in an average transaction? @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

What's the quantitative administrative cost in a healthcare transaction? @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

What does the healthcare billing and administration cost add to the US's overall healthcare spend? @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

Is it possible to cut billing and administrative costs in healthcare? @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

"In some ways, the problem for healthcare should be simpler." @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

What does the complexity of the current system look like in a doctor's office? @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

How did David go about studying healthcare administrative costs? @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

"It doesn't have to be simple; it should be standardized." @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

What would be the pushback on standardizing contracts in healthcare? @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

Why is it possible to gain more value by losing customization in contracts? @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

"Never let a good crisis go to waste." @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

"It's much easier in healthcare to build something new than to change something that exists." @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

What benefits does telemedicine have to cutting administrative cost? @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

What is another significant benefit of using standardized contracts? @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

Why haven't standardized contracts become a common thing in the current healthcare system? @David_Scheinker of @SURFStanfordMed discusses administrative burden on our #healthcarepodcast. #healthcare #podcast #healthcarecosts

Recent past interviews:

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

Ali Ucar, Dr Carly Eckert, Jeb Dunkelberger (EP360), Dan O'Neill, Dr Wayne Jenkins, Liliana Petrova, Ge Bai, Nikhil Krishnan, Shawn Rhodes, Pramod John (EP353), Pramod John (EP352), Dr Eric Bricker, Katy Talento, Stacey Richter (INBW33), Stacey Richter (INBW32), Dr Steve Schutzer (Encore! EP294), Lisa Trumble, Jeb Dunkelberger, Dr Ian Tong, Mike Schneider, Peter Hayes, Paul Simms, Dr Steven Quimby, Dr David Carmouche (EP343), Christin Deacon, Gary Campbell, Kristin Begley, David Contorno (AEE17)

Let's talk about provider organizations and telehealth. It's just too common a refrain amongst provider organizations who say some combination of:

• Our patients and/or clinicians don't like telehealth.
• Telehealth is too expensive for us to do ... unless maybe we should charge facility fees for telehealth visits.
• Telehealth is risky to invest in because as soon as payers start paying less than 65% of in-person visits, we're gonna drop it anyway.

These things are said despite the overwhelming popularity of telehealth in almost any large-scale survey that you'll find. It seems like largely the only entities reporting that patients and clinicians don't like telehealth are provider organizations who haven't adequately invested in telehealth at the systematic/strategic level. Therefore, the only thing their anecdotal evidence about telehealth really seems to show is the negative impact of phoning it in—which is no one wanting to phone in (pun unintentional but, you have to admit, kind of great).

All of this is going on with an interesting backdrop, as reported by Chartis Group (and shared by Olivia Webb in her Substack the other day): Health systems see telehealth as a major competitor—82% of health systems surveyed reported that telehealth companies like Teladoc or Amwell are competitors. This is second only to the percentage of surveyed health systems that named other health systems as competitors.

John Singer wrote on Twitter the other day, "Any leader who thinks their business is immune to the wild dynamism of our time is unlikely to last long."

So apropos. Love it.

I said this on a podcast last December (and you can go back and check the tape if you want to), and I'm even more convinced of it right now: Telehealth is inexorable, and it's already showing its disruptive potential. But let me point out something here. Who is leaning in hard to telehealth? I'm gonna make a broad-stroke statement here—so take it for what it's worth—but let me hypothesize that who is leaning in hard to telehealth and virtual healthcare are telehealth and virtual healthcare companies. Many of them are adding in-person care because billing codes, but their DNA is digital. So, most of the so-called "hybrid" companies out there are digital companies with in-person clinics that they've added—not ye old in-person clinic that added a digital service line.

So, I say all this to say I wanted to talk to a traditional sort of provider organization. I wanted to talk to an in-person provider organization who is conceiving of telehealth not as a threat but as a new opportunity to provide ancillary services. One who is going "hybrid" but from the other direction—traditional in-person to digital instead of digital to in-person.

Further, I wanted to talk to the CFO of one of these places. I thought the CFO would be the one to get the real scoop from because it's all about the business model, baby.

Let me underline the business model point with a quote from a Substack entitled "I wasted $40k on a fantastic startup idea." And here's the quote: "It had been … a working assumption of mine ... that if you could improve the health of … patients then, you know, [someone] would pay for that."

Yeah. No, they won't. Unless … business model.

My guest in this healthcare podcast, Ali Ucar, is the CFO of Care Solutions Group. They provide mobile physician services to seniors. As they expanded their mobile physician service, they also looked at additional ancillary opportunities. Those ancillary opportunities all involve telehealth.

Right now, Ali Ucar's company is running two telehealth programs. One of them is basically tele-urgent care. The second one is using telehealth for care transitions including some care coordination. They transition patients back to the home care setting as safely as possible. Let me say that again in business model speak: Discharged patients don't wind up in the ER and/or readmitted within 30 days.

So, let's hear about telehealth from the vantage point of a CFO. How do organizations who realize that telehealth is essential for future viability, how do they make it financially viable today?

Ali Ucar listed out a stepwise approach to creating a sustainable business model that takes advantage of telehealth. Here's the first thing: Figure out what you're trying to do on behalf of patients … please. For example, what opportunities are you trying to give your team or customers to improve patient care or equity in care? That's where it really should start.

The next step, then, is figuring out how you're gonna get paid sustainably. There are two pieces to that.

1. Maybe you can get paid directly, if at all possible. The most common way to do this, which is also the one I like the least because it echoes with the ghosts of paying for volume, is the whole "get yourself a code and bill FFS" for your activities.
2. Maybe there's a value-based or risk-based contract that you can get where you're taking care of a patient population at a certain stage in their care journey. Good luck with that, and I say this as a finger wag to plan sponsors/employers/carriers who, only in a slim majority of cases, offer a way for providers to get paid for the value they create. Please do better.

OK … moving along in our ways to get paid list besides trying to figure out how to get paid directly vis-à-vis FFS or in some kind of risk-based way, another thing that you can do is to ascertain how another stakeholder in the care continuum is going to directly benefit from what you're doing. Make them your customer and then bill them.

1. You can figure out the quality programs that they're a part of and how much revenue is at stake, then take a piece of that.
2. Maybe you can charge them to do something because they could get direct reimbursement for what you're doing, and then you take a piece of that.

There's a second part to the business model here besides the revenue generation part, and oddly, despite its apparent, I don't know, seeming straightforwardness, it's so often relegated to the world of the afterthought.

After constructing the revenue side of the business model, you gotta get operational and figure out how you're going to switch up your workflows and your processes and your roles and responsibilities, your strategy or infrastructure ... ascertain how you're doing business has to change to accommodate the new service offerings.

Listen to the shows with Liliana Petrova (EP357) and Christian Milaster (EP320) for many examples of healthcare businesses kind of weirdly disregarding this last part here. If I had to pick one predominant reason why, first of all, telehealth at some provider organizations is getting a bad rap but also why doctors are suffering under the weight of their administrative burden (and other clinicians as well, of course), it's this, right here. If leadership in an organization doesn't stop and pick apart their operational model when their revenue model changes, you get a suboptimal and misaligned operational model. I feel like there's three shelves of books on this topic in most public libraries, so I won't belabor it here.

You can learn more at caresolutionsusa.com or by emailing Ali at [email protected].

Ali Ucar is CFO of Care Solutions Group with a diverse background in finance, operations, and strategic planning. Ali has been instrumental in designing and implementing programs targeted at reducing costs to insurance companies, hospitals, and nursing homes.

Ali played the lead role in the acquisition and integration of a distressed, near-bankrupt mobile physician practice in 2015. The integration included implementation of operating and restructuring initiatives to improve competitive positioning and financial performance.

As part of the mobile clinician service and to improve access to care while minimizing the financial impact of the pandemic, Ali launched the statewide telehealth program in 2020.

Additionally, to address the needs of a chronically ill and high-risk patient population, Ali has assisted in the launch of the Transitional and Chronic Care Management Programs to assist families and patients with the required coordination of care in the home. Providing this connectivity to a dedicated, single-contact point provided through a registered nurse has been a major factor in reducing hospitalizations, readmissions, and emergency room visits.

Ali also has secured contracts with commercial insurance companies for implementation of Chronic Care Management programs as well as program outreach initiatives targeted at engaging and communicating with moderate- to high-risk members.

His work also includes project management expertise gained while leading projects with a chain of skilled nursing facilities targeted at managing the needs of discharged patients and for projects initiated by Blue Cross Blue Shield, Ford Motor Company, and multiple start-ups.

The development and expansion of Care Solutions Group's comprehensive medical management programs traverse across multiple healthcare systems and settings that include private homes, group homes, independent living communities, assisted living, and skilled nursing facilities.

07:45 How do Care Solutions' telehealth programs do payments? 08:57 EP320 with Christian Milaster and EP357 with Liliana Petrova.09:33 "As you go deeper into it, you're coupling that telehealth with transitional care, chronic care; you can also address … health equity issues in … areas which may be difficult to reach." 10:02 As a CFO, how is Ali Ucar involved in the telehealth strategy development? 11:26 How have Care Solutions' telehealth programs become sustainable? 13:02 Why would it make financial sense for Care Solutions to continue their telehealth programs? 15:13 EP354 with Shawn Rhodes.18:55 How does the work that Care Solutions' telehealth programs do benefit customers? 21:50 Does Care Solutions have a proactive strategy to building out their telehealth programs? 24:34 How do Care Solutions' telehealth programs add value to provider organizations? 26:33 "It's basically refining your practice. That's the way I look at it." 27:58 How does Ali Ucar, as a CFO, evaluate the success of his telehealth programs? 30:09 "I think the most frustrating thing from a patient standpoint may be if they don't have those needs addressed quickly."

You can learn more at caresolutionsusa.com or by emailing Ali at [email protected].

Ali Ucar of Care Solutions discusses #hybridbusinessmodels on our #healthcarepodcast. #healthcare #podcast #digitalhealth

How do Care Solutions' #telehealth programs do payments? Ali Ucar of Care Solutions discusses #hybridbusinessmodels on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"As you go deeper into it, you're coupling that telehealth with transitional care, chronic care; you can also address … health equity issues in … areas which may be difficult to reach." Ali Ucar of Care Solutions discusses #hybridbusinessmodels on our #healthcarepodcast. #healthcare #podcast #digitalhealth

As a CFO, how is Ali Ucar involved in the telehealth strategy development? Ali Ucar of Care Solutions discusses #hybridbusinessmodels on our #healthcarepodcast. #healthcare #podcast #digitalhealth

How have Care Solutions' telehealth programs become sustainable? Ali Ucar of Care Solutions discusses #hybridbusinessmodels on our #healthcarepodcast. #healthcare #podcast #digitalhealth

Why would it make financial sense for Care Solutions to continue their telehealth programs? Ali Ucar of Care Solutions discusses #hybridbusinessmodels on our #healthcarepodcast. #healthcare #podcast #digitalhealth

How does the work that Care Solutions' telehealth programs do benefit customers? Ali Ucar of Care Solutions discusses #hybridbusinessmodels on our #healthcarepodcast. #healthcare #podcast #digitalhealth

Does Care Solutions have a proactive strategy to building out their telehealth programs? Ali Ucar of Care Solutions discusses #hybridbusinessmodels on our #healthcarepodcast. #healthcare #podcast #digitalhealth

How do Care Solutions' telehealth programs add value to provider organizations? Ali Ucar of Care Solutions discusses #hybridbusinessmodels on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"It's basically refining your practice. That's the way I look at it." Ali Ucar of Care Solutions discusses #hybridbusinessmodels on our #healthcarepodcast. #healthcare #podcast #digitalhealth

How does Ali Ucar, as a CFO, evaluate the success of his telehealth programs? Ali Ucar of Care Solutions discusses #hybridbusinessmodels on our #healthcarepodcast. #healthcare #podcast #digitalhealth

"I think the most frustrating thing from a patient standpoint may be if they don't have those needs addressed quickly." Ali Ucar of Care Solutions discusses #hybridbusinessmodels on our #healthcarepodcast. #healthcare #podcast #digitalhealth

David Contorno the other day posted the life expectancy chart comparing the US to comparable countries. Spoiler alert: It's horrifying.

You see Japan; you see Switzerland, Israel, Spain, Italy … basically everybody else in a cluster of pretty darn vertical lines: increasing life expectancies year over year without much cost increase at all. And then—wow!—off to the right, all by itself, you see the USA, costing nearly double the worst of the other countries with a life expectancy that is years lower. We pay a whole lot, and despite all of the advances in medicine and how much we pay, we don't seem to be getting the value for our dollar.

We could dig into those poor outcomes that we pay for. If we were going to, I might mention our truly beyond-upsetting maternal mortality rates and also infant mortality rates, which are way above other comparable countries. We could talk about all of our issues with diabetes and obesity. But let's save all that for another day and just take one example that is really the quintessential example of what's going on. Let's chat about heart failure for just a sec. Here's some stats for you. They come from Dr. William Bestermann's Substack newsletter, and if you don't subscribe to it, you might want to. It's free.

Dr. Bestermann wrote: "Twenty-two percent of heart failure patients who are admitted to the hospital are dead within a year. Patients with [heart failure] generate a third of Medicare spending and 40% of Medicare fee-for-service deaths. Overall, heart failure patients have a mortality of 22%, compared [to] 4% for Medicare patients without heart failure. They are responsible for 55% of Medicare readmissions."

But here's some good news: In Denmark, investigators proved that using optimal medical therapy reduced heart failure admissions by 70% compared with usual care.

Here's some more good news: There was a small, impoverished town near the coast of the Carolinas that had very few heart failure admissions. How did they accomplish that, you might wonder? Well, there was a nurse—one nurse—who was working under a grant. She was very dedicated. She had a list of all the heart failure patients in the area, and this was her job: making certain that every patient was on the best treatment for heart failure. She called the patients. She spent time with them. She had a trusting, caring, long-term relationship with them. That's it! That was the secret sauce.

As Dr. Bestermann says, "Every poor community in our country could do that, but they don't."

So, this leads us to care gaps—dare I say, this country's seeming care gap fetish dealing with care gaps retroactively.

In this healthcare podcast, I'm speaking with Carly Eckert, MD. It's kinda funny, actually. I originally wanted to get Dr. Eckert on the show to talk about care gaps and how to close them, but this show did not wind up going how I thought it was going to go because Carly Eckert is a physician by training who got really interested in the upstream causes of what she was seeing in clinical practice. Despite my best efforts, she refused to be lured into my closing care gaps conversation. So, instead, this conversation is about the construct of care gaps and thinking about them in context. Closing care gaps is a model of care and maybe not a particularly great one, relatively speaking. In fact, here's another name for the model of care called closing care gaps: care gap whack-a-mole. Care gap pops up … we whack it. Care gap pops up … we try to close it. Another care gap pops up … we try to close it. Another care gap … you get the idea.

Carly Eckert has worked in epidemiology and public health and also clinical informatics for health systems and payers. She is currently leading a team at Olive AI working on network data analytics and machine learning algorithms.

I recorded this show with Dr. Eckert prior to EP359 with Dan O'Neill. In that interview, which you should go back and listen to when you have a sec, Dan O'Neill cleared up a couple of things that I struggled with during this interview.

Here's the big one that I could not figure out: Why with the whack-a-mole? Why do we still insist as a nation on waiting for someone to show up in clinic to retroactively and reactively address a missed preventative care opportunity?

Why don't so many more provider organizations create pop health programs that consider the whole person proactively? Why don't they take the time to operationalize whole-person care in a meaningful way? Why don't they do what that nurse was doing in the Carolinas?

Ah, yes … to the surprise of exactly no one, it's all about the Benjamins.

As Dan O'Neill put it, if all a provider organization is doing is slapping a sheet on a doc's desk every morning with a list of care gaps for all the patients that he/she will see that day, it's highly likely that incentives, or penalties to do anything else, are very weak. It's a sign that, from a paying for value perspective, we're not paying enough for value that it's worth it or maybe even feasible for any provider organization to take the time and capital expense to switch up their business model in any meaningful way. So, the provider gets a little bump or a little knock if they don't meet some quality standard. OK, great … so then they'll minimally tweak their workflow and have doctors within their 7- to 15-minute visit suss out and try to close care gaps.

I don't want to say this is entirely negative. It's known that when provider organizations do close care gaps, patient outcomes do tend to get better—so, not arguing that. But there's opportunities that get left on the table with all this reactiveness. Bottom line: You insurers, you purchasers of healthcare, get to it. Pay for value, for real. If you're still just kinda paying mostly FFS with an icing of quality measures, maybe think a little bit harder about what's next that's really gonna end the whack-a-mole and bring about a more proactive and in-context mindset.

But you provider organizations, if you don't fix this stuff yourself, you're gonna get doctors and other clinicians (as we're seeing) burning out and quitting because there's only so much you can jam into a 7- or 15-minute visit, number one. But number two, doing population health reactively like this is suboptimal—and everybody knows it. So, what winds up happening is dedicated doctors and nurses desperately want to do the right thing but simply do not have the time. And they watch patient after patient suffer for it. That sucks. So, fix it. Maybe find a nurse like they did in North Carolina. At the end of the day, it's probably cheaper to stand up a program like that than having to recruit all new doctors and hire traveling nurses when all of the current staff quits due to burnout and/or moral injury.

You can learn more at oliveai.com. You can also connect with Dr. Eckert on LinkedIn and follow her on Twitter.

Carly Eckert, MD, MPH, is a product leader at Olive AI, the automation company creating the internet of healthcare. As a trained physician, epidemiologist, and informatician, Dr. Eckert brings a tremendous amount of clinical experience and relevant healthcare industry knowledge to her work. In her role, Dr. Eckert combines her expertise, data understanding, and deep passion to impact healthcare for all patients. Prior to her role at Olive, Dr. Eckert led product for multiple AI start-ups with a particular interest in socially responsible technology and community impact.

06:59 What is the true goal in making population health successful? 07:26 How does the clinical pathway need to manifest in population health? 08:00 How do we get a nonfragmented state of care? 08:25 What is the best model of care? 10:08 "Identifying and addressing care gaps is an important element of population health." 13:01 Closing care gaps vs creating a nonfragmented system of care. 17:11 "I think you have to take small steps with people." 18:18 "There's a lot of power in peer support." 18:52 Why should provider organizations connect with peer groups? 20:39 "The key is that it's not going to be the same for everybody." 24:43 Why is diversity of the workforce key to closing care gaps? 25:07 EP322 with Monica Lypson, MD, MHPE.25:11 EP347 with Ian Tong, MD.30:09 Where can providers improve transparency to help close care gaps?

You can learn more at oliveai.com. You can also connect with Dr. Eckert on LinkedIn and follow her on Twitter.

@md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

What is the true goal in making #populationhealth successful? @md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

How does the clinical pathway need to manifest in #populationhealth? @md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

How do we get a nonfragmented state of care? @md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

What is the best model of care? @md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

"Identifying and addressing care gaps is an important element of #populationhealth." @md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

Closing care gaps vs creating a nonfragmented system of care. @md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

"I think you have to take small steps with people." @md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

"There's a lot of power in peer support." @md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

Why should provider organizations connect with peer groups? @md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

"The key is that it's not going to be the same for everybody." @md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

Why is diversity of the workforce key to closing care gaps? @md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

Where can providers improve transparency to help close care gaps? @md_carly discusses #caregaps in #healthcare on our #healthcarepodcast. #podcast #digitalhealth #valuebasedcare #vbc

Recent past interviews:

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

Jeb Dunkelberger (EP360), Dan O'Neill, Dr Wayne Jenkins, Liliana Petrova, Ge Bai, Nikhil Krishnan, Shawn Rhodes, Pramod John (EP353), Pramod John (EP352), Dr Eric Bricker, Katy Talento, Stacey Richter (INBW33), Stacey Richter (INBW32), Dr Steve Schutzer (Encore! EP294), Lisa Trumble, Jeb Dunkelberger, Dr Ian Tong, Mike Schneider, Peter Hayes, Paul Simms, Dr Steven Quimby, Dr David Carmouche (EP343), Christin Deacon, Gary Campbell, Kristin Begley, David Contorno (AEE17), David Contorno (EP339), Nikki King

Before I get into the show today, let me just remind everybody about our mailing list, which you can sign up for on our Web site, relentlesshealthvalue.com. You might follow Relentless Health Value on LinkedIn or Twitter, which is a great option, for sure; but I wanted to point out that what you see there is abridged at some level. Meanwhile, if you subscribe to our mailing list directly (again, by going to our Web site, relentlesshealthvalue.com—it's over on the right sidebar where you can sign up for the mailing list), if you subscribe that way, each week you'll get an email with a full transcription of the whole introduction of the show with timed show notes. Also, we don't send out literally anything else beyond what I just described on a weekly basis. Also, you can unsubscribe easily and anytime you want. You just hit the unsubscribe in the email. Also, we don't share our list with anybody. We barely have time to look at it ourselves, so if you have any concerns there in that regard, please don't.

Last week's show (EP359) was with Dan O'Neill, and he talked about the four gradations of value-based payments, from paying purely for volume on one end of the continuum to paying purely for value on the other. When you have a moment (not now, but when you can), go back and listen to that show, as it adds some color to what we talk about in this healthcare podcast.

But in the meantime, one of the points that Dan O'Neill makes is that patients in this country won't gain the benefits of value-based care unless commercial insurers pay for value, for reals. After all, value-based payments are payments that incentivize value-based care. Without value-based payments, how does anyone expect to get value-based care?

To belabor this point momentarily, a provider is not gonna switch up their FFS business model when insurers, especially commercial insurers, pay whatever for whatever with no reward going to providers who spend time and effort to create value and/or better outcomes for patients. I'm being super cynical here, I will grant you. But in this day and age of private equity and record profits by a consolidated healthcare industry, if I'm in charge of a provider organization just realistically here, Pramod John, PhD, says this really well in EP352. He's talking about drug development in that episode, but same thing here is true for medical care. If you indiscriminately pay Ferrari prices for Hyundais, you're gonna get a Hyundai for the price of a Ferrari.

To add insult to injury—and this is just one important reason why providers aren't really willing to invest in lifting outcomes—any value that they would manage to create is gonna be realized by the insurers. It's gonna go right back into insurers' pockets. Steve Schutzer, MD, talks about this in his episode (Encore! EP294) about the why and how to create a center of excellence. If, as a provider in a pure volume contract which is FFS, I work really hard to save downstream costs and complications for patients, some carrier is gonna bank the difference.

It's go time, all you self-insured employers out there. Pay for high quality. Make the carrot an orange-colored stick, as they say. Patients will benefit. Probably doctors and other clinicians, too, honestly: less moral injury and crappy workflows.

In this healthcare podcast, I am talking with Jeb Dunkelberger. Jeb Dunkelberger is the CEO of Sutter Health | Aetna, which is a payvider. Payviders, by Jeb's definition, take on full risk. They have a full-risk insurance product, meaning they must switch up their business model and how they deliver care so that it works in a total capitation payment situation.

We go deep on payviders the last time Jeb was on the show (EP348). But in this relatively short conversation, I wanted to talk to Jeb about the operational imperatives of moving to value-based care, moving to a care model that is aligned with value-based payments—what needs to switch up in the day-to-day to ensure that patients don't have care gaps that cause expensive trouble downstream, or patients at rising risk get taken care of promptly before something avoidable and/or acute (ie, expensive) happens.

There are three main things that Jeb talks about:

1. Fixing up the clinical workflow
2. Having care navigators
3. Aligning physician comp to organizational goals

Let me dig into each one of them briefly.

1. Fixing up the clinical workflow. There's basically five aspects to that:

• Ensuring that the right data is in the clinical workflow. Let's talk about this data for just one sec and we'll find actually one more reason that payers and purchasers need to get kinda engaged in this making sure members get care thing. Because data—data that payers have that is needed at the point of care. Like claims data. Please provide it to providers and actually insist that it gets used by clinicians making clinical decisions at the point of care.
• Ensuring that there are pick lists of drugs, with generic drugs first
• Making sure it's easy to get to pended orders that close care gaps right within the clinical workflow
• Empowering medical assistants and holding them responsible to create value for members
• Building referral management into the clinical workflow in pursuit of a nonfragmented patient journey

2. Having care navigators. I just want to remind everyone: This is even more important if the EHR doesn't support referral navigation. Also, Liliana Petrova talks about this extensively, the need for care navigators, in EP357. She's talking about it relative to telehealth, and she makes a really important point: If you want to ensure that the right patients are getting telehealth and also taking advantage of it to streamline their longitudinal care and make it less fragmented, you have to have navigators involved in scheduling. Otherwise, how's a patient supposed to know whether to go in person or telehealth or even that telehealth is available?

3. Aligning physician comp to organizational goals. We definitely get into this in some detail.

We cover these three top-line operational must-haves in this episode, and you'll hear about them right from a CEO who is doing them right now. Besides this conversation, another resource I would highly recommend checking out is a recent article in Nature entitled "Deploying Digital Health Tools Within Large, Complex Health Systems." While this article is about digital health tools (obviously by its title), 80% of the article is pertinent to deploying pretty much anything in a big provider organization, including an upgrade to value-based care delivery—and/or probably digital health tools are pretty requisite in any attempt to effectively remodel the clinical workflow in this way in 2022, so there's that, too.

For additional Relentless Health Value episodes on this topic of how to build an operational model that fulfills value-based care objectives, I'd listen to the show with Shawn Rhodes on the essentials for clinical integration (EP354)—also the show with Lisa Trumble (EP349) on what that clinical integration looks like from a care perspective. I am also going to refer you to the episode next week (EP361) with Carly Eckert, MD, MPH. So, check that out for sure. We talk about care gaps.

You can learn more at sutterhealthaetna.com. You can also connect with Jeb on LinkedIn and follow him on Twitter.

Jeb Dunkelberger, MSc, MHCI, currently serves as CEO of Sutter Health | Aetna (SH|A), a commercial insurance plan serving Northern California. The health plan aims to combine the value of retail, provider, and payer via its partnerships with CVS, Sutter Health, and Aetna. Prior to SH|A, Jeb led growth for two bay-area healthcare start-ups: Cricket Health and Notable Health. Jeb has also held executive roles at Highmark, McKesson, and EY. Jeb holds healthcare-related degrees from Virginia Tech, The London School of Economics, Cornell University, and University of Pennsylvania.

08:36 What must a provider organization consider operationally when incorporating value-based care and value-based payments? 09:44 How can you use perverse incentives to encourage people to do the right thing? 12:25 How should clinical workflows operate to incorporate value-based care? 14:10 "How do you align patients?" 15:52 How should the EHR operate to maximize value-based workflow? 16:52 Why is taking action on claims data and clinical data together important? 20:26 "Have they actually solved the last mile of integrations?" 21:15 "Changing the behavior of a provider is an absolute art and science." 22:57 "We have to do more." 27:09 "That administrative headache … doesn't just end with the insurer."

You can learn more at sutterhealthaetna.com. You can also connect with Jeb on LinkedIn and follow him on Twitter.

@Jeb_Dunk discusses #valuebased #clinicalworkflows in this week's #healthcarepodcast. #healthcare #podcast #vbc #valuebasedcare #ffs

What must a provider organization consider operationally when incorporating value-based care and value-based payments? @Jeb_Dunk discusses #valuebased #clinicalworkflows in this week's #healthcarepodcast. #healthcare #podcast #vbc #valuebasedcare #ffs

How can you use perverse incentives to encourage people to do the right thing? @Jeb_Dunk discusses #valuebased #clinicalworkflows in this week's #healthcarepodcast. #healthcare #podcast #vbc #valuebasedcare #ffs

How should clinical workflows operate to incorporate value-based care? @Jeb_Dunk discusses #valuebased #clinicalworkflows in this week's #healthcarepodcast. #healthcare #podcast #vbc #valuebasedcare #ffs

"How do you align patients?" @Jeb_Dunk discusses #valuebased #clinicalworkflows in this week's #healthcarepodcast. #healthcare #podcast #vbc #valuebasedcare #ffs

How should the EHR operate to maximize value-based workflow? @Jeb_Dunk discusses #valuebased #clinicalworkflows in this week's #healthcarepodcast. #healthcare #podcast #vbc #valuebasedcare #ffs

Why is taking action on claims data and clinical data together important? @Jeb_Dunk discusses #valuebased #clinicalworkflows in this week's #healthcarepodcast. #healthcare #podcast #vbc #valuebasedcare #ffs

"Have they actually solved the last mile of integrations?" @Jeb_Dunk discusses #valuebased #clinicalworkflows in this week's #healthcarepodcast. #healthcare #podcast #vbc #valuebasedcare #ffs

"Changing the behavior of a provider is an absolute art and science." @Jeb_Dunk discusses #valuebased #clinicalworkflows in this week's #healthcarepodcast. #healthcare #podcast #vbc #valuebasedcare #ffs

"We have to do more." @Jeb_Dunk discusses #valuebased #clinicalworkflows in this week's #healthcarepodcast. #healthcare #podcast #vbc #valuebasedcare #ffs

"That administrative headache … doesn't just end with the insurer." @Jeb_Dunk discusses #valuebased #clinicalworkflows in this week's #healthcarepodcast. #healthcare #podcast #vbc #valuebasedcare #ffs

Recent past interviews:

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

Dan O'Neill, Dr Wayne Jenkins, Liliana Petrova, Ge Bai, Nikhil Krishnan, Shawn Rhodes, Pramod John (EP353), Pramod John (EP352), Dr Eric Bricker, Katy Talento, Stacey Richter (INBW33), Stacey Richter (INBW32), Dr Steve Schutzer (Encore! EP294), Lisa Trumble, Jeb Dunkelberger, Dr Ian Tong, Mike Schneider, Peter Hayes, Paul Simms, Dr Steven Quimby, Dr David Carmouche (EP343), Christin Deacon, Gary Campbell, Kristin Begley, David Contorno (AEE17), David Contorno (EP339), Nikki King, Olivia Webb

Last week's show was with Wayne Jenkins, MD, from Centivo; and we talked about how insurance design, when not done well, can lead, in a nutshell, to mental and physical health problems for employees. This is a great lead-in to the conversation in this healthcare podcast with Dan O'Neill. And before I get into why it's a great lead-in, let me just start here—and don't roll your eyes.

What is value-based care? Consider this delineation: There's value-based payments, and then there's the type of care that these payments incentivize. You would hope that a value-based payment would result in care that was of value (ie, great patient outcomes and patient satisfaction at a fair total cost of care). But those are two distinct things—the payment and the care.

If we change the payment model but the provider behavior doesn't change in a way that actually improves patient outcomes and care, then what are we doing here?

Or the converse: If we do not change the payment model, then how does anyone expect the care paid for is going to change? Employers or carriers who just meander along with the broad PPO network happily paying as much for low-value care as for high-value care and happily paying centers of excellence as much as non–centers of excellence … how is a provider who wants to spend time and money building out a practice to deliver better patient outcomes, how can they do that without overcoming some pretty fundamental business model challenges?

This whole concept is one that my guest today, Dan O'Neill, has talked about and will talk about in this episode. Dan says the first step is for insurers, IPAs, managed care organizations to take an absolute chainsaw to their network management bureaucracy. There must be a clear door to a value-based payment model. It must be that if you're a provider or you're a physician practice (primary care practice, in particular), and you want to go down a value-based care path, there has to be a clear door and a pathway for you.

I think I have a non-perfect litmus test for anybody with a value-based payment program who wants a heuristic to check if their value-based payment program is actually meaningfully impacting models of care in the marketplace: If most of the provider organizations who are part of that value-based program still incentivize and pay their doctors using FFS incentives like RVUs (relative value units), I'd step back and think about that for a piece. Contemplate that doctors, who are responsible for care decisions, still have every incentive to do everything that they would have done had the provider organization just been paid FFS. What's the point of value-based payments that extract exactly zero behavior change? And that is not a rhetorical question.

So, back to the conversation from last week with Dr. Wayne Jenkins citing all of the things that can go horribly wrong when an employer's benefit designs are misaligned with the financial realities of their workforce. You get what you pay for, and I don't just mean that in terms of the dollars outlaid, since we all know in healthcare prices and quality have nothing to do with each other—I mean, in terms of what you choose to pay for and how you choose to pay for it.

That's the macro of this whole thing, but indulge me as I get into the micro for just one sec. Let me just remind everybody about Goodhart's Law: "When a measure becomes a target, it ceases to be a good measure." More on the why of this in the interview with Rishi Wadhera, MD, MPP, on the hospital readmission reduction program (EP326) and also what happens when we don't adhere to Goodhart's Law as we evaluate PCPs, which Rebecca Etz, PhD, talks about in EP295.

In this episode with Dan O'Neill, we go through where we're at on the continuum of value-based payments and how those payments are impacting the care, value-based or otherwise, that is incentivized by those payments. We tick through four gradations of value-based payments:

1. A pure volume contract (otherwise known as FFS [fee for service])
2. A clinician bonus for achieving quality measures
3. A piece of the savings (ie, MSSP [Medicare Shared Savings Program])
4. Global risk

My guest, Dan O'Neill, is chief commercial officer over at Pine Park Health. Besides over a decade in healthcare tech and services, he was a policy fellow at the National Academy of Medicine and worked in the Senate on the Senate Health Committee.

You can learn more at dponeill.com or connect with Dan on LinkedIn.

Daniel O'Neill, MA, MS, currently serves as chief commercial officer for Pine Park Health, a value-based primary care group that delivers on-site care in senior living communities. Prior to that, Dan was a health policy fellow at the National Academy of Medicine, working primarily in the US Senate on legislation focused on surprise billing, anti-competitive contracting practices in the commercial market, and price transparency. Dan has also worked as a senior vice president with Change Healthcare and as an advisor to venture-stage healthcare services and technology firms. At Pine Park, Dan is responsible for risk-based contracting with IPAs and insurers and for the group's participation in CMS value-based care models, including direct contracting. Dan's research is available in NEJM Catalyst and on the Health Affairs blog, and he holds graduate degrees from Johns Hopkins University and Stanford University.

05:06 What is the spectrum of value-based contracts? 07:24 Why don't value-based contracts at the organizational level always trickle down to the provider level? 11:25 What are the two things that need to happen to drive outcomes in value-based healthcare? 15:24 How do insurers play into improving value-based contracts? 19:46 "There's a strong case to actually clamp down on prices." 23:47 "Right now, we're still in a place where if you want to do something other than fee for service … you have to fight like hell." 24:03 What's the first step to making value-based contracts more accessible? 24:27 What's the second step to making value-based contracts accessible? 25:23 Why are the incentives to change American healthcare pretty weak? 27:10 "Organizational change is just exceedingly difficult." 28:45 What should you do if you want to start pushing organizations toward value-based contracts? 32:42 EP351 with Eric Bricker, MD.

You can learn more at dponeill.com or connect with Dan on LinkedIn.

@dp_oneill discusses #vbc on our #healthcarepodcast. #healthcare #podcast #valuebasedpayments #digitalhealth

What is the spectrum of value-based contracts? @dp_oneill discusses #vbc on our #healthcarepodcast. #healthcare #podcast #valuebasedpayments #digitalhealth

Why don't value-based contracts at the organizational level always trickle down to the provider level? @dp_oneill discusses #vbc on our #healthcarepodcast. #healthcare #podcast #valuebasedpayments #digitalhealth

What are the two things that need to happen to drive outcomes in value-based healthcare? @dp_oneill discusses #vbc on our #healthcarepodcast. #healthcare #podcast #valuebasedpayments #digitalhealth

How do insurers play into improving value-based contracts? @dp_oneill discusses #vbc on our #healthcarepodcast. #healthcare #podcast #valuebasedpayments #digitalhealth

"There's a strong case to actually clamp down on prices." @dp_oneill discusses #vbc on our #healthcarepodcast. #healthcare #podcast #valuebasedpayments #digitalhealth

"Right now, we're still in a place where if you want to do something other than fee for service … you have to fight like hell." @dp_oneill discusses #vbc on our #healthcarepodcast. #healthcare #podcast #valuebasedpayments #digitalhealth

What's the first step to making value-based contracts more accessible? @dp_oneill discusses #vbc on our #healthcarepodcast. #healthcare #podcast #valuebasedpayments #digitalhealth

What's the second step to making value-based contracts accessible? @dp_oneill discusses #vbc on our #healthcarepodcast. #healthcare #podcast #valuebasedpayments #digitalhealth

Why are the incentives to change American healthcare pretty weak? @dp_oneill discusses #vbc on our #healthcarepodcast. #healthcare #podcast #valuebasedpayments #digitalhealth

"Organizational change is just exceedingly difficult." @dp_oneill discusses #vbc on our #healthcarepodcast. #healthcare #podcast #valuebasedpayments #digitalhealth

What should you do if you want to start pushing organizations toward value-based contracts? @dp_oneill discusses #vbc on our #healthcarepodcast. #healthcare #podcast #valuebasedpayments #digitalhealth

Recent past interviews:

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

Dr Wayne Jenkins, Liliana Petrova, Ge Bai, Nikhil Krishnan, Shawn Rhodes, Pramod John (EP353), Pramod John (EP352), Dr Eric Bricker, Katy Talento, Stacey Richter (INBW33), Stacey Richter (INBW32), Dr Steve Schutzer (Encore! EP294), Lisa Trumble, Jeb Dunkelberger, Dr Ian Tong, Mike Schneider, Peter Hayes, Paul Simms, Dr Steven Quimby, Dr David Carmouche (EP343), Christin Deacon, Gary Campbell, Kristin Begley, David Contorno (AEE17), David Contorno (EP339), Nikki King, Olivia Webb, Brandon Weber

First of all, anybody who thinks that your average citizen in the United States today is unaware of the financial double jeopardy of going to a doctor, going to an emergency room, getting a procedure is sorely mistaken. Americans today are well aware of the financial risk that they are taking by seeking healthcare in this country.

To illustrate this point, let me read the first couple of sentences from a New York Times best-selling book review: "The illness narrative, ending in financial ruin and decreased quality of life, has become one of the classic 21st-century American stories. In her debut essay collection, Emily Maloney documents the … intersections of money, illness and medicine. For Maloney, the primary experience of receiving health care is not merely a bodily or spiritual event but always … a financial one. She understands … the relationship of money to being ill, … to managing an unfathomable amount of debt." This is a New York Times best-selling book in the beginning of 2022.

Add to this something I saw Pete Scruggs write on LinkedIn a while back, which I found actionable. He said:

"Patients selling personal items or taking on credit card debt after medical procedures is a failure of creativity in providing healthcare. It is possible to build creative health plans that reduce costs for patients with expensive procedures by giving wise guidance at the time patients need it the most.

"It is not enough for insurance to provide access to a wide range of health providers but effectively leave the patient in debt … after the procedures are done. It is possible to buy healthcare so well in the local community that employers can reduce cost dramatically at the time most needed by those using health services."

And lastly, let me quote from a recent article in JAMA by David Scheinker, PhD; Arnold Milstein, MD; and Kevin Schulman, MD, which says, "The financial consequences of an underperforming health insurance market (one that is not holding down … cost … ) diminishes the quality of life affordable to US employees and their families and the financial viability of employers not in the health care industry."

So, in this healthcare podcast, I am speaking with Wayne Jenkins, MD, who is chief medical officer over at Centivo. Before his move into value-based healthcare about 10 years ago, Dr. Jenkins started his career as a radiation oncologist. He has also served as the chief clinician at a bunch of large health systems.

I wanted to have Dr. Jenkins on the show to discuss a recent report which was published by Centivo that methodically dissects how financial toxicity is affecting patients. This includes how it affects choices that employees/patients/members are making both in terms of the care they decide they are willing to pay for or, more likely, the financial risks they're willing to take.

In short, the three key findings of the report are as follows:

1. Workers face mounting healthcare affordability issues, and health plan cost sharing features such as high deductibles are an underlying cause.

Just a quick spoiler here: Do you know the percentage of employees who are forgoing buying groceries in order to afford medical expenses left on their shoulders by their high-deductible health plan or by their health plan with excessive premiums? Going hungry isn't just for minimum wage workers.

1. Medical expenses are a significant cause of mental health and well-being issues for both individuals and also families.
2. The conventional wisdom that health plan members will never "trade off" certain offerings for greater savings is simply false.

The big takeaway here, though, is that the situation that we have in this country today is not a secret among your average regular American civilian. They do fully understand that by entering a healthcare setting, they are very well trading off, in their attempt to be healthy and going to the doctor in pursuit of that aim, they are trading off their financial well-being. And that financial toxicity actually has health implications. If you can't afford groceries, for example, or your mental health suffers, we get ourselves rather rapidly into a downward spiral, as you may be able to see.

Other episodes dedicated to the impact of financial toxicity and possible solutions are in the show notes. I'm just gonna mention here quickly, we talked to Marty Makary, MD, about his book called The Price We Pay (EP242). There's an interview with Marshall Allen (EP328) and then also a very interesting conversation with Mark Fendrick, MD (EP308).

You can learn more at centivo.com.

Wayne Jenkins, MD, is the chief medical officer at Centivo. He is an accomplished physician and executive with a proven track record of patient-centered, revenue-driven results. Over the course of his career, he has consistently transformed large, complex healthcare systems into market leaders that deliver quality and value in a dynamically changing environment.

Prior to Centivo, he was the chief clinical officer for population health at Vanderbilt University Medical Center, where he provided clinical oversight of value-based care delivery and completed the formation of Medicare accountable care organizations (ACOs). Before his time at Vanderbilt University Medical Center, he served as the senior vice president and chief strategy officer of Orlando Health, as well as president of Orlando Health Physician Partners. Previously, Wayne was the chief of radiation oncology and then subsequently the medical director for the Florida affiliate of M.D. Anderson Cancer Center, a subsidiary of Orlando Health, Inc.

Wayne holds a bachelor's degree from the University of Tennessee, an MD from Vanderbilt University School of Medicine, and a master's of health policy and administration from Johns Hopkins University. He is board certified in radiation oncology and was recognized in Best Doctors in America annually from 1994 to 2015. He has published 18 scientific articles and is often sought out to speak at state and national conferences.

05:23 How is financial toxicity in healthcare affecting patients? 07:02 How do we define a "normal" deductible in today's healthcare? 08:14 What's the point of having a deductible? What does a plan gain from a high deductible? 10:43 How does the cost of a patient's deductible correlate with their use of their health insurance? 12:51 EP308 with Mark Fendrick, MD.15:18 How is health insurance actually sometimes reducing patients' health? 16:24 What is the defining characteristic of those who are more adversely affected by high deductibles? 17:04 Why should CFOs consider plans with lower deductibles for their employees? 18:26 "Are there other ways to approach this in a marketplace, to get more value for what you're paying for so this problem can be addressed?" 21:56 How should employers contemplate health plans moving forward? 22:24 "Having the health plan choice gives more financial viability in addition to that open access." 22:58 "In some sense, [that] can be a zero-sum game. Do you get it in the premium, or is it paid in the higher deductible?" 23:45 "I think there are value choices in the market that may help negate some of the problems that we were just discussing." 25:33 "I think conventional wisdom may be left over from the '90s." 26:49 Why does building these narrow networks have to be a science? 28:38 Does a narrow network adversely affect mental health? 32:20 "Narrow and excellent is not a bad choice for people."

You can learn more at centivo.com.

Wayne Jenkins, MD, of @Centivo_Health discusses health insurance plan design on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

How is financial toxicity in healthcare affecting patients? Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

How do we define a "normal" deductible in today's healthcare? Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

What's the point of having a deductible? What does a plan gain from a high deductible? Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

How does the cost of a patient's deductible correlate with their use of their health insurance? Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

How is health insurance actually sometimes reducing patients' health? Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

What is the defining characteristic of those who are more adversely affected by high deductibles? Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

Why should CFOs consider plans with lower deductibles for their employees? Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

"Are there other ways to approach this in a marketplace, to get more value for what you're paying for so this problem can be addressed?" Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

How should employers contemplate health plans moving forward? Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

"Having the health plan choice gives more financial viability in addition to that open access." Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

"In some sense, [that] can be a zero-sum game. Do you get it in the premium, or is it paid in the higher deductible?" Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

"I think there are value choices in the market that may help negate some of the problems that we were just discussing." Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

"I think conventional wisdom may be left over from the '90s." Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

Why does building these narrow networks have to be a science? Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

Does a narrow network adversely affect mental health? Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

"Narrow and excellent is not a bad choice for people." Wayne Jenkins, MD, of @Centivo_Health discusses on our #healthcarepodcast. #healthcare #podcast #digitalhealth #healthcarecosts

Recent past interviews:

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

Liliana Petrova, Ge Bai, Nikhil Krishnan, Shawn Rhodes, Pramod John (EP353), Pramod John (EP352), Dr Eric Bricker, Katy Talento, Stacey Richter (INBW33), Stacey Richter (INBW32), Dr Steve Schutzer (Encore! EP294), Lisa Trumble, Jeb Dunkelberger, Dr Ian Tong, Mike Schneider, Peter Hayes, Paul Simms, Dr Steven Quimby, Dr David Carmouche (EP343), Christin Deacon, Gary Campbell, Kristin Begley, David Contorno (AEE17), David Contorno (EP339), Nikki King, Olivia Webb, Brandon Weber, Stacey Richter (INBW30)