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Where we share our weekly news debriefs and discussions with industry experts. These are lo-fi recordings aimed at giving our readers more opportunities to engage with our analysis and a view into some of the conversations that shape it.
Martin: we'll be using certain financial
measures on today's Grand Roundup,
including adjusted ebitda, which are not
determined in accordance with accounting
principles generally accepted in the
United States, otherwise known as Gap.
Kevin, I think you were supposed to break
in with some breaking news at some point.
I was giving me,
Kevin: I wanted to let you get through it.
We have breaking news this morning.
Martin.
I am very excited to share that
Anthropic has partnered with Blackstone,
Helman Freeman, and Goldman Sachs
launch an enterprise AI services firm.
Also included in this partnership,
Martin, unless you, uh, be confused,
is General Atlantic Leonard Green,
Apollo Global Management, GIC and
Sequoia Capital a Laundry list of
the world's largest asset managers.
Martin, I find this one fascinating
because I think it is indicative of the
ultimate impact AI is having on us all,
which is ushering in the new golden
age of consulting models, which may
or may not be called forward deployed
engineers in these versions of the world.
I thought this quote from the
press release was fascinating.
We intend to build a scaled world-class
company to deploy Anthropics
incredible technology across a range of
businesses in our portfolio and beyond.
We believe it can help break down one
of the most significant bottlenecks,
enterprise AI adoption by expanding
the number of highly skilled
implementation partners, Martin, the
leading asset managers in the world
are essentially, as I view it, saying.
Help us, please.
Our portfolio companies don't
know how to implement ai.
We, we need help.
Can, can we build a consulting
firm so that we can go help our,
our, our portfolio companies
actually benefit from ai?
Which I actually think is an
interesting segue to some of our
conversation today about earnings
and whatnot, because a lot of public
companies are talking about this.
And Martin, I'd be curious what
your general reaction is to
those public company earnings.
Martin: Well, I mean, my, my sort of
perennial request is if you are reporting
earnings and you're talking about
the impact of ai, like tell me where
you're seeing efficiency improvements.
Tell me where you're seeing savings.
Tell me where you've been able to, you
know, move over human capital or lay off
human capital and, and get some savings.
And we haven't seen it yet.
It feels to me like what
they're positing here is.
Well, the problem is that we
can't implement the ai and so
we need some forward deployed.
3M BB analysts in a trench coat
stacked on top of each other.
Kevin: We need more people.
Burton,
Martin: I was talking to somebody
in consulting the other day and they
were sharing with me that they worried
that the bottom row of the pyramid
was going to collapse, that they
just wouldn't need analysts anymore.
And I said, you know, you know your
business a lot better than I do, but
from my very outside perspective, I think
you're going to need roughly the same
as it is today, plus or minus whatever
is going on with, you know, GDP growth.
Um, because yeah, I, it, it could be
that where those people sit change, it
might be that they go from, you don't
wanna work at McKinsey anymore, you wanna
work for this new Scaled world class
company, partnered with philanthropic.
But we're gonna, I think we're
gonna need the same number.
I think the same, the billable hours
and the people billing those hours are
gonna be approximately the same or more.
Kevin: Yes, Martin, instead of calling
them analysts, we may now call them
forward deployed engineers, but at the
end of the day, somebody has to go to
Bloomington, Indiana for four months next
week to figure out how a private equity
portfolio company that does, Lord knows
what is going to use these AI tools.
And I don't think that person is
going to be the managing director.
I think that person is going to
be the forward deployed engineer.
Martin: First of all,
no shade on Bloomington.
Lovely place.
Second of all, when I worked for a
summer intern for Best Buy, you know,
best Buy's headquarters has kind of,
in Bloomington, has kind of four, uh,
main camp and four things going up.
And one of those was just for consultants.
They just had like a whole thing.
It was just consultants there.
And I think it's like instead
of Accenture, it's gonna be.
Whatever, NewCo and Prop X, Goldman
Sachs alternatives X because I don't
think that they're gonna start at
private stop at privately held companies.
I think that then it's like, oh,
well this large retailer has this
problem and could use some of our
differentiated consulting services
Kevin: for sure.
Martin: Um,
Kevin: as much as we make light of
it, like I, I think this is a big
opportunity for these companies as
indicated by, um, the players that
are coming together in this model.
It's fun to see.
Martin: Yeah.
Well, we'll get to earnings and some more
on what's going on in private markets,
uh, or sorry, public markets in a moment.
But where I wanted to get started
was a funny quote from devoted CEO
Ed Park who said, please print this.
I want the government to
pay ma plans less money.
Kevin, what, what does he mean here?
Kevin: So there's a lot to
unpack inside this quote, right?
Ed Park was on stage at Medicares,
which is the annual conference for
the broker industry, um, selling
Medicare Advantage plans, right?
So they're getting their
update on the space.
We heard from some folks at Bailey
and Co last week on kind of general
narratives from, from that event.
So Ed Park went up there and he is
talking about what Devoted is up to.
He's telling the narrative of devoted
to the broker audience, which I think
is important context for what he is
saying here, because stepping back,
he is telling a narrative around
what devoted is trying to accomplish.
It is trying to change the
trajectory of American healthcare.
I'm gonna put a pin in that for a second.
If you just think about devoted as
a Medicare Advantage plan, I think
it is rather confusing that there
are CEOs out there saying this.
Because of any Medicare Advantage plan
on the market, they should be the most
worried about their profitability at
the moment, and least likely to be
telling CMS to be paying them less.
We put together this chart looking
at a couple pure play comps in
the Medicare Advantage market
or close to pure play comps.
Um, devoted health on the private markets,
according to its last publicly available
valuation data is trading at $16.3
billion of enterprise value at the
roughly 500,000 MA lives that it cited
having, um, at the conference, uh,
that implies $32,600 per MA member.
You compare that to Clover at
$8,300, a member alignment at $1,300.
A member Humana down at $5,000 a member.
It is wildly different in terms of
the valuation, and a lot of that
is driven by devoted narrative.
Right.
Um, but I think when we think about it
as a Medicare Advantage plan, it doesn't,
it doesn't make a ton of sense as a
standalone plan unless Ed Park is up
on stage picking up on the Zika manual
piece from last week, talking about
what he's willing to sacrifice with
what he is willing to sacrifice being
devoted as Medicare Advantage profits.
Martin, how likely do you think it
is that Ed Park is up there talking
about what he's willing to sacrifice?
Martin: Unlikely, Kevin.
I think that it, I think that the,
the interesting thing about this
is you, as you pointed out in the
newsletter, that it's probably wrong
to think about devoted strictly as
a, from a strategic perspective,
strictly as a Medicare advantage plan.
Kevin: Mm-hmm.
Yeah, exactly.
Uh, so that is the point that I try to
walk through in the newsletter is you
look at it in a Medicare Advantage plan
and you look at those 500,000 lives
and it's like, there, there are some
real signs for concern here, right?
I highlighted three data
points in the newsletter.
One, it grew by 120% plus in 2026.
From 2025, it's up at 500,000 lives.
It was closer to 200,000,
uh, in 2020, early 2025.
Two devoted board member who's been
involved since the earliest days of
launching devoted Bob Kocher and the
Venrock crew predicted that Humana
would crash in their 2026 Predict
predictions piece from earlier this
year, because of its excessive membership
growth in 2026, Humana grew by 20%.
Open enrollment for 2026.
Now, the theory that they were
talking about holds water, right?
The reason why they were predicting
Humana would crash is because new
membership and Medicare Advantage plans
traditionally is unprofitable membership.
It's a little confusing when you think
about that juxtaposed with the fact that
devoted is growing 120% because that
the theory would also then imply that
devoted is going to have some issues.
Endpoints also, third point noted
that devoted actually shrank in 2025.
So growing from it grew substantially.
23 to 24, shrank slightly from 24 to
25, and then grew a lot again going into
2026, which would seem to imply that
devoted has had these issues before and
had to adjust its pricing and strategy
to, um, to pivot towards profitability.
And so all of that in my mind,
highlights the underlying question
in the Medicare Advantage Plan.
But going back to, um, what Ed Park was
saying on stage, and I think the full
interview, uh, is worth watching here
to kind of listen how he talks about it.
He frames their start and Medicare
advantage as the ability to capture
the whole healthcare dollar so that
they can manage the whole healthcare
dollar via devoted medical group
and oroco their technology platform.
And I actually think that is the
underlying play here that devoted when
it's out talking to investors, when it is,
when Ed Park's talking about how he wants
to change the trajectory of healthcare.
It is through that medical
group better managing costs.
The MA plan is just a way, I
shouldn't say just, but it's a way
to capture that healthcare dollar
on the first market they're in.
I would be shocked if devoted in the
coming years is not expanding insurance
markets to capture the healthcare
dollar across other insurance markets.
If I think about it, ICRA seems
like a logical place to be.
Uh, for them in the near term,
you know, the employer markets,
uh, over the medium to long term.
All of that would make sense to me
for them to head, and I think that's
why they're valued the way they are.
They're not going for, Hey, we're
gonna be the next Humana that, you
know, the, the relative valuations
that are up on screen there, hint at
some of the issues with that, right?
They are trying to be the next United
Healthcare that is a more consumer
friendly version of that business
integrated payer provider model.
And it's, it's a big idea.
I think
Martin: something we talk about internally
a lot is that there is a bit of a
foot race right now for who is going
to scale the Kaiser model nationally.
It's hard to do.
And it's especially, I think,
hard to do for legacy players
for a variety of reasons.
I think that there's good
reason to think that it'll be
a upstart and not an incumbent.
Change management is hard.
If you're employing docs, you want
them kind of on the same page.
Like Kaiser has a model that works
very well rooted in a geography, and
if you wanna take that nationally, you
need some, some sort of special sauce.
And so I do see the fruit line.
I mean, the question I think if you're
an investor is like, are you underwriting
a 10% probability or a 1% probability?
Like what, what do you, when, when
you, uh, are investing at that price?
And then you know that Medicare
Advantage is in for some tough years
ahead in terms of, of reimbursement.
If, if you believe what Chris Klump
is saying, then that Kaiser for all.
Eclipsing United Health Group story is
the one that you're, you're believing in
Kevin: for sure.
I mean, this is, I, I actually think
it gets really interesting when you
juxtapose what Clump has said publicly
about wanting to get the growth rate.
Not necessarily wanting the growth
rate being in line and final notice
with GDP growth being a thing.
That makes sense.
And if you extrapolate that
statement to that, that, that
makes sense to me too, right?
Like medical cost growth should be
in line with GDP growth or ideally
less like if we're trying to reduce
healthcare spending in this country.
Okay, I buy that.
Um, if I then think about what Ed
Park is saying to CMS, which is please
pay us less because we can handle it.
I, I think he is essentially doing the
math in his head that, okay, if we enter
a deflationary period where payments
are coming down and we actually have the
ability to better control and manage costs
via our clinical model, I, they're gonna
take share from the industry to your point
and over time, they're gonna win an MA
and whatever other markets they enter now.
The, you also mentioned this already.
The likelihood of that happening
is the big question here, right?
Like I, I would imagine if you're a
devoted employee, you know that that's not
like a slam dunk likelihood that you're
gonna achieve that change in the world.
Um, it is your moonshot of what
you wanna achieve, and, uh, there's
gonna be some opinions that there's
0% chance of that happening.
And the question I think is, is it zero?
Is it 0.1?
Is it one, is it 10?
Personally, I don't think it's 10.
I don't think it's zero.
I'm probably more on the 0.1
camp because like there are laws of
gravity in healthcare, and we've seen
other organizations like Oscar try to
start on similar journeys where it's
like, Hey, we're going to reinvent
how healthcare works, starting from
managing the whole healthcare dollar
on the exchanges in Oscar's case.
And.
It's a really compelling narrative.
It gets a lot of folks
excited about going to those
organizations and working for 'em.
And it shows evidence of working in early
days based off of really happy customers
and some anecdotes that look great.
But then over time, as you scale,
it's, it's, you, you, you gotta
investors and you gotta make
margin margin and that gets hard.
Martin: Yeah.
I think that this, a version of this story
goes for clover and alignment as well.
If you look at their valuations
compared to Humana, they are rich.
And part of the reason for that
is that alignment and clover have
made a bet that the future's gonna
look different than it does today.
And I think that they have
some stuff going for them.
I think it's a less asymmetrical
bet than, than devoted Scott.
Um, and the sort of scope of
it is a little bit more narrow.
They're saying the.
Cram down from CMS is gonna benefit us.
We're gonna use that to grow.
It's gonna hurt Humana, it's gonna
help us, but it is this, I'm not
gonna say long shot bet, but it
is at that, that the future will
look different than it does today
Kevin: for sure.
Alignment and clover, I think would
be, uh, uh, KO on the earnings calls,
talks about like, there's a path to
a million members, I think is the
number he cites over the coming years.
And to me that is, it's more indicative
that if those companies reach the status
of Humana, I think that's, that is a
best case scenario outcome for those
companies in a, in a slightly better.
Slightly rethought way to your
point, devoted has to, has to
blow past Humana at this point.
For those, for the last investors who
came in at January at $16 billion to make
money, like assuming they've got a board
seat and they're like, Hey guys, how,
you know, how, how do we get this thing
to a hundred billion to 200 billion?
Because that's, that's their bull
case scenario, you know, and it's,
Martin: yeah,
Kevin: you gotta, you gotta
stretch to, I mean, you're, what?
You're united or you're
HCA at those valuations.
Martin: Our first guest is
here, so I'm gonna tee this up.
Joyful Health just raised a $17
million round raise, uh, led by CRV,
and we are welcoming on the CEO.
Hello?
Kevin: Hey Eliana.
Martin: Oh, you're
Kevin: muted.
Let's
Martin: get you off mute.
Eliana: That will do it.
Hello.
Thank you so much for having me.
How doing well, how are you?
Happy Monday.
Martin: Happy Monday.
We're doing great.
Um, so congratulations on the round.
Thank you.
Big milestone.
Joyful Health.
Like I said, $17 million,
$22 million in funding raise.
I thought the framing in the press
release was really interesting.
So you're talking about helping
practices manage finances.
Rev cycle is, it seems like all
anyone can talk about today.
And when we talked before, when we did
our pre-interview, you talked about a
sort of more expansive view and in the
press release you made a similar point.
You said, you know, we, we went
around two dozens of practices and
spent time as a fractional CFO.
Can you talk about the underlying
issues practices have here and
what you saw as a fractional CFO?
Eliana: Yeah, absolutely.
And I really don't have a background
in finance, so it must have been
a pretty dire situation to, to get
me into our CM in the first place.
So.
Uh, yeah.
I got into this space because my
family ran a behavioral health
practice as I was growing up.
So we had spent a lot of our nights
and weekends dealing with all the
administrative complexity that
comes with running a practice.
But because my background's
an early stage product, I was
at Charlie Health before this.
I really wanted to
experience it for myself.
So I actually went into about a dozen
practices actually in very open-minded
at first as like a fractional consultant
and kept getting pulled into finance
and I would say, Hey, I'm here to do
whatever you need me to do, whatever
the biggest hair on fire problem is.
And across the board, the challenge
was always, I have no idea
what I'm supposed to get paid.
I have no clue who's gonna pay
me on what timeline if I made
what I'm supposed to make.
So I got to work with a whole bunch of
spreadsheets trying to figure it out,
and I realized that I was spending
probably 80% of my time just trying to
track down all these payments across
seven systems that don't talk to each
other across the EHR and the billing
system, and the clearing house, and the
payer portals, and the bank account.
And that made it pretty clear to
me that the root cause issue of all
of this missing revenue is actually
that there's really no financial
source of truth in healthcare.
So providers have to play financial
detective to piece together all these
different systems, uh, before they
can even go track down what's missing.
They first had to figure out where
did it go in the first place.
So that's kind of what pulled me
into this problem space originally.
Kevin: One of the things I was, um,
particularly interested in, in the
Modern Healthcare article that was
talking about the funding round, was this
notion of AI services versus AI agents.
Martin and I were just talking
this morning about AI services with
anthropics, new consulting venture
that they just announced this morning.
I, I'd be curious, um, when you think
about that distinction of AI services
agents, how are you thinking about
that distinction organizationally
at joyful, and how are your.
Customers thinking about your
organization, like do they know you
are an AI first centric organization?
Is that part of the pitch?
Where does that come to play and, and
how you think about the narrative?
Eliana: Yeah, it's a great question and
one of my favorite things to talk about.
So I think in healthcare, oftentimes
people just want you to own the outcome.
And originally when I went to sell
our, uh, like the first version
of our solution, I actually was
selling it as a software to help
practices recover revenue internally.
And pretty quickly I started
to get the feedback of, I'm
actually really overwhelmed.
There's so much money that
I'm leaving on the table.
Why are you showing it to me and
you're not doing something about it?
So I realized pretty quickly that
actually what they were really
looking for was for us to go in and
own the outcome for them end to end.
And currently, uh, you know, denials and
AR is one of the most labor intensive
part of the revenue cycle that requires
a very significant amount of expertise.
It's, it's not rules based.
In fact, our head of RCM opt-in says
that there's actually more anti-patterns
than there are patterns when it
comes to working denials because
there are just so many permutations
of, of how they can show up.
And with thousands of payers all having
completely different payer rules, like
the rules are changing very frequently.
So.
AI agents do really well when there are
very clear if then statements, and some
of that exists actually more so on the
front end of revenue cycle where you
can build more of a rules-based engine.
But with denials and ar, it's just, it,
you know, you can't really get there yet.
I think it, there, there's a very clear
path to that, but there's a lot of
expertise that you still need in the loop.
So really the only way for us to do
that was to go and, uh, really own
the outcome and to automate the pieces
that we can automate, which we call
kind of like the, the science of RCM.
And then, uh, go and bring in
experts on kind of the art of RCM.
And the way that this really
shows up in the sales process,
actually, interestingly, Kevin, I
also thought, you know, maybe we
shouldn't really lead with the ai.
If you look at our website, it doesn't
really talk about AI much at all.
I think over time now that
providers have become a lot more
familiar with AI and uh, folks are
actually more open to adopting it.
What we've actually been doing is that
we've been very, very clear in our
demos, in our sales conversations around
where the AI fits in, and we'll actually
demo the AI that we're using behind the
scenes and we show very clearly like,
Hey, here's where the drop off is.
Here's where we pull in an expert.
And I think that level of transparency is
very helpful because otherwise it can feel
kind of opaque to know, you know, what
exactly is it that we're doing and how are
we using the technology on the backend.
Martin: One of the things I find
so fascinating about this space is
it feels like there's this tug of
war between payers and providers.
It's playing out in earnings calls in
sort of very subtle jabs at one another
where they'll say, oh, the, the payers
will say, okay, well the providers are
upcoding, and the providers will say,
we're getting increased claim denials.
You're kind of sitting in
between those two at the moment
working with these practices.
I'm curious.
If, if providers are seeing a revenue
uplift from, from working with you, how
durable is that given that payers are
now, I think, you know, it's a little bit
of the empire strikes back where they're
like starting to, to, to use AI tools
to try and, and, and tamp that down.
Eliana: Great question.
I think it's inevitable that everybody
will be using AI on both sides.
Uh, and we build joyful to work within the
way that the current structure is built.
You know, we didn't come in and say,
Hey, we're gonna redo the entire thing.
We're gonna rebuild the whole relationship
with Paris providers on the ground up.
Uh, we are working within the
existing pathways that providers
already use to get their claims paid.
My hope though is that we're actually
making it more efficient over time.
I mean, we're not, you know, we're called
joyful health written goals really to.
Create a better ecosystem
for all involved.
And I think payers are spending
an inordinate amount of money on,
uh, kind of this back and forth
between providers and our hope's
actually to make that more efficient.
So for example, we'll often actually
work with payer reps to go batch
reprocess claims without having to go
and overturn every claim one by one.
So the longer term hope is really to
help kind of build the relationship
between payers and providers and
maybe eliminate some of that, um,
administrative burden on both sides.
But regardless, I think we're kind of
built for an environment where we know
nothing will materially change between
this dynamic and, and the hope is just
to kind of make it easier on both sides.
But we're certainly seeing AI already.
I think we're seeing AI on the payer
side for sure, in terms of who's
picking up the phone and, and all
of that changes pretty frequently.
So, uh, I think longer term,
you know, there's gonna be a
lot of AI on, on both sides.
Kevin: Juliana, I wanted to pick up
on that topic of anti-patterns and,
and what you're seeing in practice and
see if we could talk about, like for
folks who aren't up to their eyeballs
in this every day, like how do you,
what actually happens from a claims
denial perspective and what's changing?
Like, is there a good example of what
changes for a practice and where they're
seeing that revenue lift when they see it?
Eliana: Yeah, I mean, I think the
biggest part of it is that it's
just super labor intensive today.
So I'd say probably like 70 to
80% of actually working a denial
ends up being detective work.
So currently a provider sends a
claim out the door and then they
receive a what's called like a ERA,
an electronic remittance advice,
uh, back, uh, from, from the payer.
It, it might actually be on paper if
they're not registered electronically.
That ERA covers dozens if not hundreds of
visits, and it doesn't cleanly map back to
the original claim that the provider sent.
And the way that the payer will
communicate a denial is through
a very vague denial code.
So it'll say something like CO 16, which
in practice actually means billing error.
There are thousands of reasons why there
might be a billing error, and every payer
will use it in a different manner, and
they can change that up at any given time.
So what the provider then has to do at
that point is essentially put on their
detective hat and look at pieces of
data across seven disparate systems.
So they'll look at their EHR
to see what was billed and
what the clinical notes said.
They'll look at the clearing house to
see what information went out the door.
They'll read the payer policy manuals,
they'll probably log into the payer
portal to check the claim status.
They might even make a call to understand.
Okay.
What billing error, like
what exactly did I do wrong?
And all these steps take hours and hours
per claim to the point where sometimes
it's actually not even profitable to go
and put all this effort in because the
amount of money that you spend trying
to fight that denial might actually
be more than the revenue that you're
gonna get back at the end of the day.
So oftentimes I think
what we're seeing is.
A significant amount of denials
are just never overturned in the
first place because nobody really
has the bandwidth to go after them.
And with large provider groups, that
really compounds over time to the point
where they're leaving somewhere between
10 to 20% of their revenue just on
the table and end up playing catch up.
So, uh, I think the biggest
revenue lift that folks see when
working with us is that we don't
leave a single stone unturned.
We are staffed to take on every single
claim, no matter the dollar amount,
and we're able to keep up with the
volume as, as the practice grows
because of the technology that we
have behind the scenes to actually
make this sustainable over time.
So a lot of it's just kind of trudging
through all of the manual work and then
also using the pattern recognition that
we have across all of our customers
and billions of dollars of, uh,
claims transaction data to be able
to say, Hey, we've actually seen this
denial before and here's how we've
solved it successfully in the past.
Martin: Like I mentioned in the top, it
feels like uh uh, there's a lot of startup
attention on the rev cycle process.
When we talked before, you mentioned
having a sort of more expansive view of
provider finances beyond just rev cycle.
I'm curious in terms of go to
market, how are things going?
Can you talk a little bit about what
it's like selling into to groups and
where you're finding some traction today?
Eliana: Yeah.
Yeah, I think that, um, I think that
there's, there's clearly a moment around
this right now because there's just so
much administrative waste happening.
So, and it's also one of the biggest
tear on fire problems for providers.
So I think it makes so much sense
that there's a lot of startup
activity concentrated in this space.
I think what's different about our
take is that rather than coming in
and saying, Hey, we're gonna go and
automate revenue cycle, we actually
started in a very different place.
We started at the root cause
of the problem, which is
really the data fragmentation.
So we spent two years not selling
anything, just kind of staying behind
the scenes, trying to figure out can we
build a platform that is system agnostic?
So can we go directly to the practice
and plug into their existing tech
stack without any migration needed
and recover missing revenue?
Since we figured out how to do that, the
sales cycles end up being actually pretty
quick because the pitch is like, Hey, we
plug into the systems you already have.
We work alongside your existing
team and we find you money
that's being left on the table.
You don't need to go and recomplete
all your EDI enrollments.
You don't need to move to
a whole new billing system.
And there's no training costs or
time associated with the transition.
So the switching costs
are actually pretty low.
So as a result, we're able to, uh,
get, go live with a clinic in like,
you know, a matter of like four to
eight weeks, really, depending on their
size and just plug in immediately.
So I think that's, that's, that's
what's different about our approach.
And we're not building a brand new
billing system that requires migration.
We just fit really nicely
alongside their existing stack.
And the longer term vision is because
we're so tightly integrated with all
their data, we can start to help out
on other areas where providers are
leaving revenue on the table, and then
longer term act more as their financial
insight layer to really make sure that
they are capturing all the dollars that.
Uh, they've builded and that they
have full end-to-end financial
visibility because we've integrated
across like their full tech stack.
Kevin: I'd be curious if, um, do
you think about going a step further
than that to the, the negotiation
layer between the payer and provider?
Like I, I would imagine there's,
there's solving the data
infrastructure inside the provider.
There's also one step back of that,
of solving it with it through that
contractual relationship with payers
and understanding what's going on.
Do you see that as part of
future state in these models too?
Eliana: It might be.
Yeah, I think that that provider contracts
are a, a very important data source
that for we already, uh, use today,
and I think there's a lot more that we
can be doing with it moving forward.
I think the goal really is to be fully
integrated from, uh, contract all
the way through to the bank account,
and that's where you can really
start to do more of this interesting
kind of, uh, financial analysis.
I'm, I'm a lot more interested in that
than, you know, going to like the front
end of revenue cycle where I think
that there's a lot of really wonderful
solutions today that are very specialty
specific and, and laser focused on that.
I think there's a lot of opportunity in
sitting across all of these disparate
data sources and then using that to
power various workflows downstream.
So absolutely, there's a lot of very
important information in the payer
contracts, both the rates and also how
the rates are applied, which currently
is like mostly in, uh, you know, dozens
of pages of free text and are not stored
in any sort of accessible manner today.
Kevin: Yep.
Makes sense.
Martin: It's been a pleasure chatting.
I know we have to let you go.
If folks have questions about Joyful Their
Practice and they wanna reach out, where's
the best place for them to either reach
out to you or find joyful on the internet?
Eliana: Yeah, joyful health.com.
Uh, email is eliana joyful health.io.
Would love to hear from you.
Um, thank you so much for having me.
Big fan of Health Tech nerd.
So, uh, always a pleasure.
Martin: Thanks so much.
You have a nice rest of your day.
Eliana: Thank you so much.
You too.
Bye.
Thank you.
Martin: Ai AI agents and AI services.
Kevin: Yeah, I, I mean, I, I think
we're gonna be talking about AI
services a a lot in the coming, in
the coming months and, and years.
I was like, oh, I, I, you could almost
think of CFOs as being forward deployed
engineers into, into medical practices
to help them find revenue opportunities.
Martin: It's, yeah.
I, I think I, uh, what I find so
fascinating about this having worked
for a medical group before, is how
little visibility frontline staff
and practice managers have on the
finances of, of what's going on.
They're shown the weeds on like patients
and patients out, and it's so far from
their area of expertise on what's going on
financially, which makes it, you know, if
you think about that as a box, it's very
different from a retail business where you
have, you know, a store general manager
who like knows the p and l inside out.
Kevin: Yeah.
Yep.
Martin: We have a couple minutes before
our next guest joined us, you flagged
a story from Mid-City News about one
of my favorite subjects, which is.
One of the coolest moves you can do
in healthcare, which is you take a
group of doctors and you put them
under a different NPI and you make
$40 million, which is beautiful.
It's like a beautiful
bit of, of arbitrage.
Kevin, what's going on in Massachusetts?
Kevin: So, uh, med City News had an
article out, um, was it yesterday?
Yesterday?
Yeah.
Uh, CVS, mass General Brigham,
they announced this deal,
I think it was last year.
I think they've been getting regulatory
approval for a year plus, um, regulator
came out with their analysis, uh, and it
suggested that it will drive up healthcare
spending by at least $40 million annually.
To your point, because part of what
is happening in this transition is CVS
MinuteClinics are giving their NPS to Mass
General Brigham giving is not the right,
but not the legal term here, not a lawyer.
Dig further in if you're interested in the
relationship, but nonetheless, what the,
what the, what the general pitch is, is.
Those nps are going to be
able to now manage patients
like primary care providers.
There is a well-known shortage of PCPs
in Boston, Massachusetts, and this
is going to help solve that shortage.
To me, it's, yeah, it's gonna increase
cost because Mass General is going to
charge what it charges, but it is classic
iron triangle of you wanna increase
access to providers in the Boston market.
This seems like it's doing more of that.
MinuteClinic services aren't
true primary care services.
This expands those.
I, I don't know, Martin, it's, it's,
it's a tough series of trade-offs,
and if you're the regulator, I, I, I
see why you might not like $40 million
of cost increase in the local market.
I also see the benefit of having
access to these nps as primary
care providers that people can see
for a broader suite of services.
How would you evaluate
Martin: those
Kevin: trainer?
Martin: Yeah, I mean, it, it feels a
little unrealistic to me that you would,
you would say, okay, we're gonna unlock
additional capacity and not pay for it.
Like, how, how would you do
that in, in a market economy?
And so, yeah, like, you gotta pay for
this stuff and the, the shenanigans to,
to, to use a, you know, to say it sort
of in a, in a derogatory way of like
hospital systems, bringing providers
in and billing them at a higher rate.
Like this is a known problem that
we, we need to solve at some point.
Mm-hmm.
And the sequencing question of do
we solve it before or after, do we
have the political juice to like.
Uh, to, to do it well, there's
acute provider shortages and
how do we manage those things?
Is, is a fair question.
Mm-hmm.
But you were just telling me about
an, an article in about a, a Boston
lady waiting like six months.
A year.
Yeah, a year.
I think it's a
Kevin: year
Martin: plus.
So,
Kevin: yeah.
Martin: I don't know.
Yeah, you're gonna have to for it.
I'll tell
Kevin: if I'm running a retail clinic,
I, I don't know what retail, I mean,
there's MinuteClinic and a few others.
Retail clinics are hard to
make a margin on to keep open.
They, they are not anybody's idea of like
the best business model in the world.
If I'm running a retail clinic,
I think this is a pretty logical
partnership to consider to
keep those retail clinics open.
Like, I, I, you know, I, I get that
it's, there are, there are, uh,
more systemic issues as a system,
but also like I, you know, I, I'd
be doing this move personally.
Martin: Yeah.
And if I'm a regulator, I think, you
know, I'm, I'm weighing the costs
with people being able to go see a
doctor, which is, is tricky calculus.
I'm gonna tee up our next guest.
Will you do the intro?
Kevin: Yes, of course.
Uh, very excited to welcome Brian
Roberts from Venrock to the show.
Brian, uh, welcome.
Hey guys to Health Tech Nerds.
How you doing?
Bryan: Thanks.
I was, I was getting, getting ready
to argue about site of service
and what Mass General Brigham's
Medicare rate reimbursement is.
Kevin: You wanna try it?
It,
Bryan: nah, it doesn't matter.
Like, like you, I look, the access
thing is totally true and, uh, there are
absolutely organizations, maybe fewer in
Massachusetts given the oligopoly, but,
uh, who get paid, uh, less as a multiple
of Medicare than Mass General Brigham.
Right.
Kevin: For sure.
Bryan: So, you know, yes, there
is that You want more access.
There, there, there is.
The, the, there.
What Warren didn't say was you, you put
'em, you put 'em under the high 10, right?
Kevin: Yes.
Bryan: Yeah.
Kevin: Anyway, um, uh, so
topic of the day for our
Bryan: conversation
Kevin: you posted on LinkedIn about the
acquisition of it, it is called Lon.
Is that, am I pronouncing it right?
Uh, by Eli Lil, it's, it's a
Bryan: sanctuary somewhere.
Kevin: Yeah.
That's how
Bryan: we
Kevin: came up with the
Bryan: name.
It was like a third name.
Kevin: I love it.
Uh, three 8.25
billion in cash up front with earn
out, get up to $7 billion, which
looks like it's one of Lily's.
Bigger acquisitions over time.
I was looking at at least the
last couple years and Yep.
Um, so really meaningful move
for Lilly Venrock seed investor
involved in um, building out the
business, going back to 2020.
Uh, really interesting in vivo CAR T
therapy platform, which sounds like
it's having some positive impact in
patients today and multiple myeloma.
Yep.
Would be curious to hear your
original investment thesis
in the business around CAR T.
We hear a lot in the community around
cell and gene therapies, CAR T this
coming wave of innovation in the space.
And so curious to hear how you
thought of original thesis, um,
how it played out over the years.
Bryan: Sure, sure.
So the original thesis, um, which
actually your people in the background
should be able to find, 'cause we
posted the investment memo, right?
Yep.
Um, we
Kevin: shared it in a link on Great.
It's on your LinkedIn post,
which we shared a link to here.
Bryan: Awesome.
Terrific.
Um, so the thesis was new
therapeutic modalities.
Get exciting for, 'cause they
do something really interesting.
Okay.
In cell therapy, in autologous
ex vivo cell therapy in multiple
myeloma, like they were basically
curing late stage people.
Like the efficacy was awesome, okay?
And just about everything else
about that therapy sucked, right?
It, it, you, you, you have to, you,
you gotta wait six or seven weeks
in order to get the therapy, right?
'cause they have to pull the blood
outta the patient, process it and then
stuff something back in the patient.
In j and J'S trial for the leading one, I
think 16, 17% of the patients died after
blood draw, pre getting treatment, right?
So when you think about actual real
costs to that sort of a processing
timeframe, like that was there.
Okay?
That's number one.
Number two.
Side effects.
They have to do these in
academic medical centers.
You can't do 'em out in
the community hospitals.
So it's, it's restrained, right?
Uh, as to where you can get it.
And then the third would be cogs, right?
Like the, I think when j and j
launched victi, which we will do
two or $3 billion this year, right?
I think they were maybe a
zero margin, maybe 20% margin.
Okay.
This is like, and everybody gets
on pharma or some rightfully some
wrongfully for like 80, 90% gross
margin business, et cetera, et cetera.
This is a place where a pharma company
went out there and was basically making
little to no money on the product, right?
So, uh, and you know, to put those
cogs in dollar terms, I think it was
something like $220,000 cost of goods.
Okay?
So the, the thesis for us was, wow,
there this stuff out of a combination
of MIT and France, CNRS in France.
That was showing enormous specificity of
gene therapy and could you take all that
stuff that j and j was doing super well,
and there's some other folks in, in the
space too, and remove the autologous and
the ex vivo part of it, see what happens.
Um, and what you, what you are and will
end up seeing is dramatically reduced
cost of goods, good efficacy, no six week
processing time, et cetera, et cetera.
And thus far, again, small number
of patients and you're gonna
have long tail safety risk always
right on these sorts of things.
When you have 20 patients, not
200,000 patients that have been
tested, you've got great efficacy.
So that was the thesis, was
this works in one format.
Can we basically go from whatever,
you know, uh, an LP record to A DVD.
Martin: One of the things that was
really caught our attention in your
LinkedIn post was describing the
journey of LON as a rollercoaster.
Can you talk a little bit about the
challenges that hit along the way
and what it was like riding Yeah.
Riding shotgun for that.
Bryan: Um, yeah, and look, I gotta, I, I
gotta give huge props to the team, right?
Um, 'cause you don't, like in
the, in the healthcare IT space,
you see it a little bit less.
But, um, but in biotech, there
is definitely, like lots of
these people are scientists.
They're, you know, more scientists
than entrepreneurs, right?
They, lots of them come out of big
pharma jobs, et cetera, et cetera, like.
Taking real risk and living on the
edge is not something biotech does a
lot, which is why for, you know, the
last 15 years people have been like, we
raised the $150 million series A, right?
Like I've, I've gone looking for CEOs for
companies and they're like, well, do you
have $300 million on your balance sheet?
I'm like, no.
Why would I do that?
That's like, you're killing me, right?
So I gotta give the team huge
props for being stressfully
focused, right in the face of
nearly running outta money a bunch.
But what happened was we put in a
little seed round in 2020, um, and
then as you guys might have seen in
2022, like the world changed a little
bit from a financing perspective, um,
and even more so in biotech, right?
And so biotech went into a deep freeze
from a financing perspective and cell
and gene therapy, preclinical companies.
We're like, you know, liquid, nitrogen,
temperature, uh, and uh, and so like,
it's not that, I mean, we did fail to
fundraise for a bunch of time, couple
years, but like, I think we failed
to even get people interested really.
Right.
They were just like, like,
you, like, what are you doing?
Oh, well, we're a preclinical
cell therapy biotech company.
Like, I, I got like, I gotta
go have my nails done, right?
Like, I got something else to,
something else to do with my time today.
Um, and the, and happily it turned out to
be true, like the teams North Star was,
let's get clinical data, however we can
get there and that will unlock it, or our
clinical data will suck and we'll be done.
Right.
Um.
They did a great job at that.
The things that carried us through were,
we had some pharma companies who saw
the benefit, the potential benefit of,
of the platform that we just described.
Um, and while we were doing it in
Multiple Myeloma, which was the lead
program that Lily bought us for, um,
there, there was some other stuff.
And so we got money from Astellas
first and then j and j to help
fund the operations of the
business without giving up the lead
program, which was super important.
Um, yeah.
And then summer of 25, we started
to get clinical data and then
they presented a late breaker
abstract at Ash November of 25.
And then people were like,
oh, wow, this might work.
And then of course, lots of
investors called, but we didn't
actually need the money anymore.
Kevin: Brian, in Healthcare IT services
world, where we typically play.
You know, we got a lot of payer
provider leaders who don't think
a ton about pharma listening.
Um, uh, to HTN, one of the things that
I hear in this world is, you know, what
VBC was to the last decade, specialty
pharma cell and gene therapy innovation
is going to be to the next decade.
Huge wave of innovation
coming, prepare for it.
I, I'd be curious from where you sit in
the landscape, if you would agree with
that thesis, disagree with it, and if you
were leader at payer provider listening
to this, like, what would you be, what
would you be thinking about when you see
news like this of, you know, new CAR T
therapy getting bought for substantial
amount of money coming to market?
Bryan: So I think that.
On the one hand you have had lots of,
uh, fear, maybe it's, you know, the,
the payer version of Doom scrolling
about the potential costs of all these
cell and gene therapies coming through.
Right?
Um, and you've got the various sickle
cell ones that were priced at two to
two and a half million dollars a crack.
Um, and basically have sold what,
like, you know, a half a dozen of them.
Like, so like the commercial
launches have been terrible.
Okay.
On this, um, you did have, uh,
a couple of, uh, pediatric ones.
Novartis bought, uh, bought AveXis, um,
and stuff like that, that were a little
lower priced and in peds were fine.
But then those were one-offs.
Now, like the, I'll give, I guess
I'll give you a couple thoughts.
One, I was always very surprised that.
The various chronic biologics
that were priced at five, six,
700,000 bucks a year, right?
Alexion, um, flew under the
radar at pharma companies, right?
Because, you know, in the US part
of the reason the people worry about
these couple million dollar price tags
is the member is resonant at any one,
at any one payer for like two and a
half years or something like that.
And so, so everyone's like, it's like,
why, why preventive care is dad, right?
Like, oh my gosh, I don't wanna,
as a payer, I don't wanna pay
for somebody else's benefit.
Okay?
Um, but even at two and a half years,
those five, six, $700,000 a year,
things were, were adding up to things.
But they were rare diseases.
Like they never, they never pushed
on them for a bunch of years.
I do not understand why
that is true, number one.
Um, number two, um, I think that.
One of the big things that needs to go on
over the course of the next five years,
and I think it will, and I think Colonial
is an example of this is I think you're
gonna have, uh, cell and gene therapies
that cost three, four, 500,000 bucks
a year, not 2 million bucks a year.
Right?
At which point, I think all those
companies that are being formed to finance
cell and gene therapies and super with,
like, they're, there's no, there's no
reason for them to exist and thanks.
Now, the tricky ones, I think will be
when you have the intersection of cell
and gene therapies with big markets pain.
Let's do chronic pain is one, right?
Um, like there's a lot
of people with that.
And even if you dotted 2 million
bucks a year, if you're at 300,000
bucks a year or 4,000 bucks a year,
that gets to be big price tags.
Now, maybe the healthcare economics
compared to what current costs
are, work for that one or not.
Like, we'll see how that works out.
But certainly everything that we are
looking at in the cell and gene therapy
space is, can you see your way towards
a more stable price notion, not the
ones that have been priced super high.
Uh, and again, like let's debate
like why people have fixated on
that given no one's buying them.
Like, yeah, I wanna sell my house
for a hundred million dollars too.
Like it doesn't actually
mean anyone's gonna buy it.
Kevin: You just gotta
find one person, Brian.
Bryan: Yeah.
Right.
And unfortunately sickle cell,
you gotta find a lot of people.
Right.
So it's even harder.
Kevin: Yeah.
Martin: One of the things we've been
thinking about lot lately is with this,
you know, sort of golden age of, of
cell and gene therapy, it feels like
there's, the infrastructure demands are
just like a quite different from the
pharmacy infrastructure that exists today.
I'm curious what you're thinking
about, you know, aside from the
financing and aside from the
discovery, like how getting.
What do we need to get these
drugs in the hands of, of
people that doesn't exist today?
Bryan: Yeah.
I think that's, I think that's gonna be
a decade long journey on really, right.
Um, again, in the, in the current,
uh, cell and gene therapy,
you've got such monitoring that
needs to go on for side effects.
Um, icans, uh, you know, CRS
stuff, they, they're only getting,
they're, they're only getting
done in academic medical centers.
Right.
Then you're gonna have some, like,
you're gonna have some CNS gene therapies
where it's intrathecal delivery.
Right.
So like, it, it, the, the distance
between these things and either
just normal injectables and pills,
that is, you got, you got at
least a decade on that for sure.
Kevin: Martin, should we wrap?
I don't know.
Martin: Yeah, I think we
are at the end of your time.
Brian, thank you so much for coming on.
This was problem.
Super helpful.
We'd love to have you back to
talk about, uh, mass general
CMS and Medicare rates sometime.
Bryan: I thought I thought you were,
I thought you were gonna ask me about,
uh, from your newsletter about Eddie's
comment about decreasing Medicare rates.
Kevin: We can, if you want to.
We were chatting on it earlier.
I figured we we're, we're
Bryan: outta we're outta time.
Kevin: I, um, I, we, we worked
our way through that in a way
that we think makes sense to us.
We'll, we'll see how I would, I
would, I would, I would, I would
Bryan: SI would support your thesis.
Kevin: Yep.
Yeah.
It's, it's a logical one.
It's a big one.
You know, it'd be great if it
comes, if it comes to fruition.
It's, uh, yep.
There's a lot of work between
here and there, which is why
you get good teams doing it.
So fun to see.
Yep.
Bryan: You got
Kevin: it.
Brian.
Appreciate.
Martin: Cell and gene
therapy is one of those.
Yeah, it's cell and gene
therapy is one of those.
I just get so excited.
Yeah.
I get so excited.
Kevin: It is going to be the, the
point on, you know, they're, they're
the, the two and a half million
dollars drugs aren't getting that
much adoption today, and there
aren't that many people using them.
I, it's a, it's a really interesting,
like, I, I have that 60 minutes
episode just like burned into my
brain when I think about the topic and
Yeah.
If costs come down over time and
it becomes more accessible from an
affordability perspective, and that
infrastructure question, I think
is gonna be a fascinating one too.
It's gonna be an interesting journey
to watch over the next decade for sure.
Like I, to his, to, to Brian's point,
if we have a cell and gene therapy
that all of a sudden cures chronic
pain, like what I, I don't know.
Martin: The way that some people
get got really excited about the
recent na NASA mission is how
I feel about these therapies.
It's just like science and
amazing what we can do.
Um, yeah.
And yeah, and like I feel so
optimistic about the future
that we can do this stuff.
I wanna like spend more money, my money
and other people's money on doing it.
Kevin: For sure.
I'm, I'm all in on that.
Stories like lon, it, it's,
it's a cool one to hear.
It's very different than the traditional
healthcare services story, but, uh,
six years growing to a $7 billion exit
from creating a, a new class of, of
not class, but new drug, um, is cool.
Martin: I'd also love to see the
Apple TV miniseries on Colonial.
This, the colonial story.
I feel like it'd be good.
I hope they, I hope they've
optioned it to someone.
Kevin: It, it, I, I feel
like it could be good.
I, I don't know if it, if I, I
would say would, it could be good.
It'd be fun to, it'd be
fun to check out for sure.
Martin: Maybe just for
me, let's talk earnings.
It's been a busy earnings week.
You, uh, are taking the brave
non-consensus position that
Teladoc has its mojo back.
Kevin: I think it's getting there.
Uh, you listen to the earnings call, it
really feels like it's starting to turn.
The business is turning a corner
in my mind, the integrated care
segment, which is kind of the
traditional think Livongo business.
They've had a rough go of it the
past few years as they have shifted
from this, um, subscription based
model to a, a fee for service model.
And they've gone from, you know, what
was 70% subscription to now 70% fee
for fee for service paying on visits.
And I actually think it sounds
like they're starting to find,
find their mojo in that business.
Um, so that sounds like it's doing okay.
And then you've got this better help
business that seems like it's successfully
pivoting to the insurance model.
They talked about how it reported, I think
13 million of insurance revenue in Q1.
They're currently on a
$75 million a RR run rate.
They expect to be 125 million
of a RR by the end of 2026.
It seems like it's growing like a weed.
That is exactly, there was that blog post
the other week that we talked about a
little bit from, um, Saki Geordi talking
Through Better Help's Valuation Math
and what applied for Teladoc Better
Help seems to be wildly undervalued
if it continues on this trajectory.
And as a result, Teladoc seems
to be wildly undervalued.
So it'll be, it'll be worth watching
what happens on that narrative over the
coming, um, over the coming quarters.
Because, you know, you've got
activist investors who are
basically like, guys, we're worried.
We're worried about the fact that
a private investor might come in
and take away all of our upside
because it is so undervalued.
Which is an interesting version
of being worried about being
an activist investor, right.
It's like, just like the value is
inside this business, do a better job
telling the narrative to unlock it.
You know, it's not change it anyways.
Martin: Yeah.
Any good recent comps for a
insurance taking behavioral health?
Platform that got acquired by a large
hospital system at a generous premium.
Kevin: Yeah.
I mean this, the blog post
talks about that, right?
Yes.
It's like, Hey, here's all credit
Martin: sake.
Kevin: Yeah.
Uh, you know, it provides a
really good comp for better help.
And I think as we're finding, it's, the
behavioral market is a really interesting
place at the moment, given the amount of
demand Teladoc in their earnings call, I,
I think they, they cited a data point that
it was something like in the insurance
business, in better help, they're
seeing 20% higher, um, visit completion,
I'll call it, uh, versus the cash pay
business because it's breaking through.
The affordability barrier
is covered by insurance.
It's doing better and the
profit margin is skyrocketing.
For markets that have, um, been
in insurance for a bit, it's like.
Yeah, yeah.
Uh, you know, I, there's demand there.
It's providing access for
folks to these visits.
It's, um, uh, it's entirely logical to
me that they're gonna do really well.
And this behavioral segment is
something to keep an eye on.
Martin: Should we talk about alignment?
Kevin: Let's do it.
So, uh, maybe I'll tee up
the high level on alignment.
Please Do.
Alignment actually dropped,
I think it was 20% at like
right after earnings on Friday.
It was backup to being down
around 12% during the day.
This, despite it raising guidance for
revenue and membership and raising the
low end of its gross profit and EBITDA
guidance, it was a good Q1 for alignment.
The reason why as best we can figure
it out, and this was in some of
the slack conversation that we had
Martin, um, alignment stock fell
is because it was valued so highly.
As we were showing earlier in the
call, people are baking in growth
and they are asking questions about
alignment's, growth trajectory and
it's ability to get to that kind of
1 million members, how quickly it's
gonna get there and questions going on.
Alignment's earnings call was one of
the more strategically interesting q
and a sessions I found in part 'cause
John CAO just does a really good job
of explaining what's going on in the
business and providing some color
and there's benefit to being a, um,
a business focused on one area of
healthcare like Medicare Advantage.
The most interesting comment,
Martin, I thought was this one.
What was your takeaway from his
talk track about the negotiation
between health systems and MA plans?
Martin: It is funny 'cause when you log
in to a health system earnings call or
you hear commentary from a nonprofit,
they speak somewhat disparagingly
about Medicare advantage rates.
And Koko, I thought had the
perfect rejoinder, which is we
are paying them a hundred percent
of what they deserve to be paid.
I think that that is true and incredibly
brave to say in the midst of contract
renegotiations wouldn't expect anything
else from Kyo who is a straight shooter.
But yeah, I, it it, one of the things
we talk about is that hospitals are
the, you know, sort of single largest
source of money, like single, like
they're very expensive and we spent
a lot of money on them and insurance
companies are the only people who can
really effectively negotiate with them.
And.
Is saying look like we're, we're
paying you what you deserve to be paid.
We're not letting you get
away with shenanigans.
And again, I I love that
someone is saying it.
If you are out negotiating
with the health system, how do
you think that makes you feel?
Kevin, put on your, your, your health
system hat for a second and you're
like going into negotiations and
Kao is, is is explaining that you're
getting paid exactly what you deserve.
How does that make you feel?
Kevin: Not great.
I think we heard this narrative in DC last
week from health system CEOs who are in
front of the ways and means committee.
I mean, it's.
It's a fairly standard talk track, right?
There is additional ad
administrative burdens.
Payers are denying claims,
they're delaying payments, they
are instituting prior auths.
There is an additional cost of doing
business inside of Medicare Advantage.
Leaving aside what Koko is saying
about, about how much, um, they
deserve to be paid in terms of Medicare
Advantage versus traditional Medicare.
It's tough, Martin.
I, I mean, it is touching on like the,
the core argument between health systems
and payers, and I don't know that they're
necessarily ever going to see eye to
eye on topics like this, but stepping
back, if I'm Chris Klump and I'm at
Medicare thinking about, you know, I
see KO saying something like this, I
would be really interested in having a
conversation with KO and with HO Hospital
leaders saying, come, bring your data and
show me what's actually going on here.
John's saying this.
Health systems are
saying a different thing.
Like how do we get to the underlying
ground truth behind this so that
we can figure out a path forward.
I will say from everything that we are
hearing from CMS about bringing cost trend
down, clump talking more about getting
health systems involved in managing costs.
I, I, I'd agree with you that it
strikes me that this is more true than
not that, um, their, that ma plans are
paying, uh, a hundred percent from their
perspective of what health plans or
what health systems deserve to be paid.
But man, that is such a, a charged
statement in today's environment, right?
Like no hospital leader is going to
like hearing that they are going to
firmly disagree and many, if that's
true, I think would just presumably
exit the MA market rather than
continue getting paid that right.
Martin: Yeah.
Yeah.
And as we sort of gear up for
conversations about Medicare Advantage
and original Medicare and what costs
more, one of the things that you, you
see with Alignment Healthcare is like
the way that you save money is by
keeping the health systems in check.
And that's an unpopular thing to do.
And you know, the reason why we find this
statement so compelling is that it is
something that I think most people would
agree with off the record, but you'd
be hard pressed to find anyone in the
healthcare system saying on the record.
And so props to Kao for, for
coming out and saying it.
Should we talk about Humana quick?
I love this earnings call.
Kevin: Take us on to Humana.
I,
Martin: man,
Kevin: so
Martin: yeah, you go,
Kevin: I was gonna say, the beginning
of it to me just teed it up so perfectly
in which Humana's, CEO, Jim wrecked
in his first, um, sentences of the
earnings call, essentially said, we
are right where we expected to be.
And then he goes, let me repeat that.
We are right where we expect it to be.
Which is not a normal start to an earnings
call, like a CEO repeating himself like
that, I think is very indicative of
him essentially being like, hi haters.
Like I, I am sure they've gotten so
many questions that's like humanity.
Like, do you really know what
you're doing here in 2026?
And I, you, you feel a sense of
vindication coming through on Q1
earnings where it's like, we do know
what we're doing and this is exactly
what we expected as a business.
Martin: Yeah, it was salty
and I, I respected it.
Like, it, it seems to me like it is
too early for us to tell whether they
actually have their arms around risk.
Q1 is never super indicative.
It's usually a pretty low MLR spend.
Um, quarter on top of that, we had
the flu season and the snowstorms.
There was a funny moment on the call
where they said, Celeste, their CFO said,
well, as you know, we're concentrated,
given our market concentration,
parentheses, Florida, the winter
storms were less of a problem for us.
Um, and so yeah, they, they, they said
they're right where they need to be.
I thought another interesting
part of this call was.
We're already talking about PPOs on MA
earnings calls, again, after the big
shakeout and retrenchment and a bunch
of people exiting their, their PPOs.
And, and Jim Recton said, look like
there's no such thing as a bad product.
It just has to be priced right.
And if everyone in the market is
pricing their PPOs responsibly,
you can make money on it.
And if they're not, then
you're gonna lose money.
And I, I think that that is a, a perfect
description for the challenge of the PPO.
But also the MA market more broadly is
you go in and you say, like, our actuaries
think this is where we should price.
And then you've got the business
people saying, well, if we want,
you know, we think this is where
other bids are gonna come in.
And there's this game theory and
that's how you, you end up with people
getting totally run over because
sometimes the actuaries get overruled
by the business folks and you end up
not having your arms around the risk.
Kevin: Yep.
The other big takeaway
from Humana for me was.
They more clearly said that they're gonna
need to pull back on benefits for 2027.
Yes, which it is.
It's helpful clarity.
I think it's what the market expected
needed to happen and hearing them more
explicitly say the the gap between
trend and funding is there and we've
gotta get back to 3% margin in 2028
and we are going to prioritize margin
improvement in 2027 to get there.
It seems like that gave the
market some comfort now.
It's gonna be fascinating to
watch again, they're setting
up for this like back to that.
Do you really know what you're doing here?
Question.
They have been talking a lot about
retention and the importance of
retention to reduce costs of acquisition.
Can they retain the membership through?
That is gonna be fascinating to watch.
Martin: We'll see about LTV.
Should we keep running through
the earnings calls of the week?
Kevin: Let's go.
We left it off
Martin: with Savannah,
Kevin: right?
Cigna.
Cigna,
Martin: yes.
Yep.
Cigna made some news this week.
So number one, they're
exiting the A CA markets.
Makes sense.
It's a pretty small part of their
business, turbulent market at the moment.
I don't know that you can blame them.
Kevin: Remember when Aetna exited and
everybody was like, oh, is this the
right strategic move for Aetna to make?
Like, they're not gonna be able
to enter for a couple more years
if they wanna come back in.
I, I think Aetna is so happy they
pulled out when they did at the moment.
Martin: A hundred percent vindicated.
Kevin: Yeah.
Martin: They're also,
Kevin: yep.
Martin: Oh yeah.
I was gonna say they're also doing,
it's one of my favorite euphemisms,
which is reviewing strategic
options for the Evercore, ev ev
the core, not the investment bank.
Evercore.
Kevin: Correct.
Martin: But Corp.
Um, which is, uh, I believe a, uh, a
sort of medical prior auth solution.
Kevin: Yes.
They, it was interesting to
hear them, how they frame this.
It was almost like.
We collectively are making so much
progress on prior auth as an industry
and automating it, that the business
model for Evercore has eroded so
much that there's not a ton of value
in owning that business anymore.
So we might find a partnership of an
industry, uh, coalition to take it over.
And it's like tough sales pitch.
It's being, it's being, it sounds like
it's being set to pasture, which given the
general momentum around this narrative of
specialty pharma employer that they seem
to be, um, uh, running with at the moment.
I, I get it.
You know, get rid of the
stuff that's not a core asset.
That's not a focus, that's potential
distraction of your management team.
Focus on the specialty pharmacy, play
the employer markets, they called out.
So they launched a new copay only plan
design for employers to help them with
managing costs and whatnot called Clear.
They noted that that's seen a ton of
interest in the employer segment there.
There's gonna be a lot of opportunity,
uh, in, in the coming years ahead,
I think, to help employers navigate
rising healthcare costs in this country.
If you are a business like
Cigna and Clarity makes a lot of
conceptual sense to me, right?
Like we talk a lot about IRAs and
other plan designs and copay only, and
the clarity that you get with them.
We saw Surest and United, uh,
take off in that general market.
That model makes a lot of sense to me.
I'm curious to have Brian Miller's
school me on that a little bit,
but that's my general take.
Yeah.
Martin: Centene is up 26% beat
and raise guidance for the year.
Businesses are performing as expected a CA
spend a little hot, but they're expecting
to get some vestment on the backend.
And so no sort of red flags there.
Kevin: Yeah, it was interesting to hear
why it was a little hot too, like they
were talking through how they, um, it
was part of their silver strategy, right?
It was running hot because of the
silver membership they brought in.
Um, uh, and that population incurring
higher than expected medical costs.
So it really sounded like it was
related to the acuity of that
population, not any utilization dynamic.
They also noted that, so they went from a.
3% pretax margin X estimate on the
a CA book as a whole, it's a four
or 4%, two, 3% down a percent.
Um, but they're expecting that
they will see a larger risk
adjustment receivable as a result.
They'll get more because they
have a sicker population relative
to other plans and, but they're
not accounting for that yet.
So it sounds like it's all
gonna net out in the wash.
I think they said in one of the q
and a answers that, like, assuming
that risk adjustment receivable comes
through, it'll net out around where they
expected it to net out for the year.
But on the whole, it sounds
like business is going well.
Like the sense I get across all the
payers is this, it's, it sounds like
they, after a couple years of trend
being outta control and not knowing
what's going on first couple months
of 2026, it feels like, okay, we've,
we've got our arms around this now.
It's still high.
We need to like figure that out.
But it's manageable.
Martin: Yeah.
Kevin: Tell me about tenant.
Martin: Well, I love Tenet.
Not only is it the name of one of
my favorite movies, uh, it is also
a hospital system that is just doing
brisk work, uh, raise guidance for Q2,
deploying a ton of capital into ASCs.
Um, there was, I think a, you know,
like a, all hospital systems right
now is reporting some headwinds from a
CA exchanges, some uncompensated care
increases, which they expected, and
it sounds like they have their, their
arms around, but analysts are just very
curious and trying to get a read on
what this is actually gonna look like.
And so for HCA kind of came in at the
bottom end of their range, but HCA was
being, being very cautious on that.
And yeah, there's just
a lot of uncertainty on.
That corner of the market, since it's
a pretty small corner of the market for
these hospitals, it feels pretty telling
that that's where the, the anxiety is.
Um, that the, yeah,
Kevin: yeah.
The unstated theme that I got from
the call was Tenet could have raised
guidance after Q1, but they don't.
And so, you know, maybe after Q2
we'll see them raise guidance.
'cause things underlying are going well.
The thing that I didn't, the, the, there
was one question in the q and a about
this kind of payer mix shift that's
been happening where, um, one of the
analysts said, okay, I get that a CA went
down, but your managed care mix, which
includes managed Medicare or Medicare
and uh, Medicaid is roughly the same.
That didn't change much year over year.
So like what gives, if your a CA
business is down 14%, which just
from a math equation perspective
in my mind, must mean that that.
Medicare or Medicaid went up by an
offsetting amount to the a CA business.
And I, I I, the answer wasn't
exactly clear to me on like
what actually happened.
The answer was kind of a, hey,
yeah, that you, you're right, like
we, we did okay and we offset it.
So I'm curious, like logically I would
think that a CA population would be
going to Medicaid and so Medicaid would
be increasing and offsetting that.
That is the best I can wrap my
head around it, but I thought that
interaction was, was interesting.
Martin: Raised more
questions than answers.
The last public company I wanna
talk about is option care health.
They beat, so this is the home and
alternative site infusion company there.
I think an interesting
business for a lot of reasons.
Some of which, you know, we talked about
a little bit with Brian before on these,
you know, the, the sort of infrastructure
for some of these cell and gene therapies.
It feels like option care health is
maybe in a position to navigate that.
But first they have to survive.
They
fair survive is, I think maybe
putting, uh, being a touch dramatic.
But they beat, uh, analyst
expectations for EPS missed on revenue.
Stock drop was pretty dramatic.
And what's going on here is, I think
fascinating, which is their less
profitable acute business is growing
really well, high single digits, and the
chronic therapy business is declining.
Part of what's going on here is
there's some biosimilar headwinds.
They, some of their money is made on the
spread, uh, uh, for, for biosimilars.
The, the spread is lower for biosimilars
than it is for name brands and, and that
shows up in their chronic care business.
So they're trying to get
their arms around that.
I, I think in the long run, I'm, I'm very
interested in these alternative care and
home infusion businesses, but in the short
run, I think it's some tough skating.
I'm excited to welcome our
next guest, Natalie Davis.
She's CEO of United States of Care, and
United States of Care is a prominent
research and advocacy organization
focused on healthcare affordability.
Natalie, welcome to the show.
How are you today?
Natalie: I'm doing well, thank you.
Thanks for having me.
Martin: We're so excited to have you.
So it has been already, I know it
feels hard to believe that it's
already almost election season.
Again, healthcare affordability
is on everyone's mind.
You just released, your organization
just released a poll mm-hmm.
Of morning consult.
I was wonder if you,
um, walk us through the
headlines on that poll.
Natalie: Sure.
So lemme just give you the five
seconds on United States of Care.
We are a policy and advocacy
organization, like you said, um, working
to make healthcare more affordable
and accessible for all people.
What makes us unique though, is that
we actually go out and talk to people
across the country to understand
what they want out of the healthcare
system, what they hate, what they
love, um, solutions they want, uh, what
they want policymakers to focus on.
And that drives our
advocacy, um, policy agenda.
So we've talked to over 30,000
people across this country.
We have a data warehouse that houses
quantitative and qualitative data
to trust, to understand things
like primary care, to trust, to
value-based care, um, et cetera.
And every time we talk to people,
the number one issue that they bring
up, like you said, is affordability.
Um, it is the buzzword of the
moment, but it is something we've
been hearing since we launched the
organization just eight years ago.
Um.
And it isn't, affordability isn't
just about affording the healthcare.
Of course, that is one
of the main concerns.
Of course, it is one of the number one
drivers of medical debt, but it's also
the emotional, um, uh, weight that
the worry about affording something,
um, really, really puts onto people.
They're, they're worried, they
can't afford their healthcare.
They're up in the middle of the
night, they're foregoing care, um,
or choosing the health plan that may
not be best for them because they're
worried about, um, what they can afford.
Um, and so we wanted to really make sure
that this, um, while it is the work that
we do across the country, really make
sure that this is top of mind for policy
makers as they, as we move into midterms.
And it was gonna start planning for 2028.
And like you said, um, we
just released this poll where.
Not surprising, but great
to put numbers behind.
71% of people agree that healthcare
costs are unaffordable for people.
Um, you know, we've talked
to people across the country.
A man in North Carolina told me about,
um, an infected injury he had on
his hand that he didn't go get, um,
treatment for because he was worried
about costs and it went septic.
We hear about these all the time when
we talk to people, and it is something
very much that they want leaders
to, to focus on and make sure that
they themselves, their health is put
forward, um, before we think about, you
know, profits or other aspects of what
makes healthcare so, um, expensive.
Kevin: Natalie, as we listen to healthcare
conversation in DC across states, there's
a whole host of policy topics that
get bantered about for payer provider
leaders, uh, price transparency, uh,
site neutral payments, things like that.
I saw a chart at the end of the,
um, the document, looking at public
sentiments across some of those kind
of commonly discussed topic areas.
I, I'd be curious how you're,
how are you framing up what those
concerns look like for midterms?
How do you think they will
impact the discussion?
Come, come this fall?
Natalie: Yeah, I think
it's a great question.
So it's very clear from the
polling that people want Congress
to focus on this, that they want
their leaders to focus on it.
69% of people agree that
Congress should ensure affordable
healthcare for everybody.
76 believe that a candidate's position
on healthcare costs is gonna help them
know who to vote for in the midterm.
So these are serious numbers.
These are things that people are gonna
want politicians to, to take serious
and talk about on the campaign trail.
Um, as you said, they're also very
clear on the solutions that they
think, um, could, could help make
healthcare more affordable for them.
Um, these are targeted changes
that we see strong political
support for across demographics.
So, you know, anywhere from.
Liberty prescription drug costs at
64% of people, um, 63% of people
requiring hospitals to post prices.
Um, as you said, facility fees
for non-hospital, um, settings.
And those fees that people are getting
more and more now in the mail at 62%
banning debt collection for hospital
price, um, violations, um, you know,
blocking anti-competitive mergers at 53%.
So we we're over half of people that are,
that have been surveyed believe that these
sort of solutions are what they want.
And I think our message to
policymakers is this is a real issue.
Um, it is, it is quat to call it a
pocketbook issue or a kitchen table
issue, but it really is what is on
people's minds and they're gonna vote
for, for who they think will take
on these issues, um, and, and really
make progress for the individuals.
Martin: It is always hard to
get anything done at the federal
level during a midterm year.
I saw that United States of Care,
Bryan: mm-hmm.
Martin: Recently announced the
Red State Affordability cohort.
I'm curious to get your kind of view
of what's going on in the states
and how that's breaking down red
versus blue and a little bit more
about the, the affordability cohort.
Natalie: Yeah, so, um, this is our Red
State, um, cohort, like you mentioned.
So United States of Care has been working
at the state level on affordability,
policy and advocacy since we started,
like I said, eight years ago.
Um, and we see states across.
The political spectrum and legislators
across the political spectrum,
taking on these affordability issues.
Our organization working in
partnership with, with local, um,
advocates and legislators, et cetera.
We've passed affordability laws,
um, 22 bills in nine states,
impacting 26 million people.
So there is a lot of experience that
we have had out in states that Congress
can look towards and others can look
towards of where we can make change.
We very specifically, like you just
mentioned, recently launched a Red
State cohort, which, um, we were able
to work with local partners to really.
Build infrastructure in states
that haven't yet tackled
these affordability issues.
Um, working in conservative political
environments where some of, um,
where individuals are facing some
of the most urgent challenges.
Um, these solutions are broadly
bipartisan, supported by voters.
We're able to show that through our
polling that we do in each state.
Um, and, you know, red states are, um,
uniquely positioned to work on this.
They have a history of pma
pragmatic, fiscally conservative
policymaking that, you know, brings
a strong foundation to action.
And we're here to make sure that they
can continue or take on new issues.
Um, and, and you'll see, we will show that
action is, is possible in these states
and that policy makers at the national
level can also take on these hard issues.
Just like you guys were just talking
about Chris Klo and others who we,
we know well, there's, there's a
lot of work that, that across the
political spectrum people can take on.
Kevin: Natalie, one of our favorite blog
posts recently that we've discussed a
lot, uh, in the community is Z Emanuel's
conversation around what we need to
sacrifice to reduce healthcare costs with,
Hmm, as I interpret it, general, general
thesis being, you know, all the various
constituents in the industry tend to think
about like, what, what I need more of to
do more of the good that I'm providing.
I need more rates, I need more
patent protection around my drugs.
I, I need these things.
But his takeaway is then to get
healthcare costs from 18% of GDP
down to a more reasonable number.
We're all gonna have to stack our
hands and collectively agree on
something that we are willing to
sacrifice, not what we need more
of.
Mm-hmm.
Um, that, that seems both directionally
like the right path to head to me, but
also a particularly challenging one from a
political perspective because it requires
everybody giving up something, which I
don't think folks tend to like to do.
Natalie: Yeah, I,
Kevin: I would be curious how you think
about that particular, particularly
when juxtaposed with the seeming
desire for incremental change.
Mm-hmm.
Um, as I, as I think about it from,
from reading the results of your poll,
how do you think those two concepts
get layered together in terms of.
What various constituencies are willing
to, to sacrifice potentially or give up in
order to reign in affordability, spending
access to care, quality, et cetera.
Natalie: Yeah, it's a great question
and I have like so many thoughts,
um, running into my head because,
um, one of the things that people are
starting to talk about more, but we've
done a lot of research on is trust.
Mm-hmm.
And why people have or do not
have trust and where trust
is actually being moved to.
Um, and when we talk to people about
the healthcare experience, there is a
boiling anger about how much they believe
profits are made off of their backs.
Um, that they do not think the
healthcare system is there for them,
that they know when somebody is,
when they, when something is billed.
It is not necessarily for better care.
It is because we have a for-profit
system and I'm putting No, no, um.
No judgment on the concept that we
do because it is the, the, you know,
healthcare system that we have created.
And yet people are feeling like
more and more they are not that
this, this healthcare system is not
there for them and it's making them
really mad, um, and really demanding
the change we just talked about.
It is also becoming extremely
dangerous in some ways.
We saw, of course, the horrible mor
murder of the United Healthcare, CEO.
I don't know if you guys saw the stats.
I think it's something like 40%
of people polled under the age
of 18 said that was acceptable.
23% of adults said it was acceptable.
And, um, a plurality of those
were Democrats who my guess is
likely believe in gun control.
So there is a undercurrent of real
anger that if something is not changed,
when it becomes, when affordability
and trust all come together, that
there is, um, there, there are really.
Um, you know, bad, bad outcomes
for individuals and can be very
deadly or unhealthy, um, outcomes
for our country or for individuals.
And so when you ask that question, I
think we need to be taking, the healthcare
system needs to be taking a look much
more closely at what they can do and wanna
do and not hold onto entrenched grounds.
And with the same talking points
that have been used by, in
different parts of industry forever.
I think one of the hard parts is that
my theory is that like we have had
this pie, um, and that we talk about a.
You know, nobody wants to have smaller
pieces of pie, but I think the pie slices
are so thin now that nobody actually has
the levers that they need in order to,
in Im impact the change that they want.
I talked to a Blue Cross Blue
Shield, um, insurance company, and
they wanted to take on prior auth.
They, as an organization,
they wanted to take it on.
They would've had to cancel like 20
different contracts and eat the, you know,
eat the cost of, um, canceling those, et
cetera because of all of the ways that all
of the middlemen and all of the different
processes and companies that are involved.
And so I think one of the biggest
problems, one big problem to add to what
you said and Zika is talking about is that
the pie slices are so thin that it's hard
to give up anything, but nobody really has
the control to have the impact that even
if they wanted to, that they could do.
Martin: Yeah.
This has been super helpful.
The poll is great.
We link to it in the comments.
If folks wanna learn more about
United States of Care, the advocacy
work that you're doing, the research
that you have, where's the best
place for them to, to find that?
Natalie: Yeah.
Come on over to United States of care.org.
You can, um, sign up for, I call
our award-winning newsletter,
even though it's one no awards.
It, it will one day 'cause it's a great,
um, very useful into your email box
every, every couple weeks with some
great information on what's happening
in policy and talking to people.
Um, you can find me on
LinkedIn at Natalie Davis.
Um, otherwise we'd love to hear from
folks and, and thanks for having me on.
Kevin: Natalie, can I sneak in?
Can I, can I sneak in one more
Martin before we let you go?
Yes.
Natalie: I,
Kevin: um, on the topic of trust, you got
me thinking about the conversation that
I hear all the time about AI these days.
Mm-hmm.
And in our circles we're tracking
along with various policy, uh,
decisions on how AI is being used
from a care delivery perspective.
Yeah.
There's a lot of conversations
around how payers are, are using ai.
There's the why wiser program
and prior auths and, and whatnot.
Um, how do you see that showing
up in these results at all?
Yeah.
In the conversations you're having
qualitatively or quantitatively
and potential impacts this fall.
Natalie: I'm so glad you asked.
And it is a place that we are
doing research on, um, and should
have something later this year.
We did a poll about a year and
a half ago on it, but we know
things change so rapidly and we're
hopeful that we can have an AI and
trust poll annually going forward.
Um, and you know, it's really interesting.
People are very torn, like 50% of
people are optimistic about AI in
healthcare, and 50% are very concerned.
And um, and when we talk to 'em about
what would make them more interested, the
concept of like, I need to trust it, which
means it needs to be transparent to me.
I need to know when it's, when
it's coming, how it's being
used, where my data is going.
We'll see if that changes over time
because we know people also are
going to chat GBT and otherwise and
using it on their own and putting
very personal information in there.
Um, we put five use
cases in front of people.
Um.
To see where their comfort level
was with AI and, and healthcare.
Um, and most people are like,
yeah, right on for back office,
you know, um, back office work.
Um, more interested, I think if I were
to tell anybody, if you wanna talk to
patients about AI and why your provider's
using ambient listening or otherwise,
like more time with their doctor.
We hear this all the time in our, any
lots of different polls or conversations,
is if you are bringing back a trusted
relationship that they had with somebody
where they are then having face-to-face
conversations 'cause there's ambient
listening or an email is better written
with more clear information for somebody
coming out of appointment through ai.
I think right now where the public is,
is they want the transparency into it.
Um.
And how people are using it are
really showing the places where
healthcare is breaking down, right?
Navigating bills, understanding,
um, lab results, uh, helping
pick the right health plan.
So I think there's a way if done
well, where patients are being asked,
what problem can we solve for you?
Um, that AI could have a benefit.
And my last is if, if you know of
anybody who's making an AI company where
it's actually bringing affordability,
making healthcare more affordable for
people, I'd love to hear about it.
'cause I haven't yet.
I ask this all the time.
And, and so far those savings,
if there are any, seem to accrue
to the system and not people.
So that would be a huge proof point.
If we can show that this
benefits people in that way,
Martin: we will keep our ears open.
Okay.
I do not have one for you off the top of
my head, but we'll keep our ears open.
Natalie, thank you so much.
Let us know when you got the AI poll
and we'll back to chat your time today.
Natalie: Thank you.
Have a day.
Bye.
Martin: Very quickly before we,
we welcome our Alaska guests,
I want to talk about Nebraska.
So we are in day four of Nebraska
launching the nations first with a couple
asterisks, um, community engagement
requirements for Medicaid expansion.
So this is what everyone will
be launching in January 20, 27.
From the one big beautiful bill,
they are doing it a bit early and
the thing that everyone is paying
attention to is medical frailty.
So CNS has not announced what medical,
how they're gonna define medical frailty,
but Nebraska, since they implemented
it four days ago, had to come out and
say what constituted medical frailty.
It was a very long list, and some back
of the envelope math that I did suggested
that as many as 50% of people would
qualify as medically frail, um, just based
on prevalence in the Medicaid population.
The other thing is they, they committed
to not adding any new state employees.
And so the way that you interesting
to, to, to handle this, this new
administration, and so the way they're
going about this, at least for now,
is a bunch of self at attestations.
And so if you have a.
You qualify as medically frail.
You can self attest to this, and
they're gonna, they're gonna auto
adjudicate some of that with claims data.
Kevin: 50% seems like a, a higher number
than I would expect of medically frail.
Would that align with your general theory
Martin: of the case?
Yes, and I will, I will share some
notes, but it is a fascinating
document to, to dig into.
But we have our final guest for the day.
Excited to welcome Brian
Miller, who's a practicing Dr.
Hoover Institution visiting fellow
vice chair of the NC State Health Plan.
I've been a fan of his writing on
healthcare policy for quite some time
now, and really excited to chat with him.
Brian, welcome to the show.
Brian: Thank you for having me.
Happy Monday.
And also I, I do wanna point out that
Tenet has a Rotten Tomatoes rating of 70%.
And as someone who has terrible taste
in pop culture, I'm most interested
in movies per my wife that have
Rotten Tomatoes rating of 40% or less.
So I have seen Tenet, but that's
because my wife made me watch it.
Martin: I've seen it about 12 times and
my wife has seen it once begrudgingly.
Um,
Brian: yeah.
Martin: Okay.
So I reached out to you after the
announcement that you, uh, you
were elevated to Vice Chairman
for the NC State Health Plan.
We are big fans of the NC
State Health Plan story.
Kevin is a Duke alum and,
uh, a fan of all things.
Uh, well, yeah.
Brian: I'm wearing Carolina Blue.
Bryan: I kind
Brian: of, and also a little
bit of Duke colors too.
So maybe I have an identity crisis.
Right.
'cause we're supposed to be impartial.
Right.
And we are,
Martin: our team is, our team
is divided between, uh, North
Carolina and, and Duke as well.
Um, so anyways, you have, you've sort
of helped oversee the transformation
for the NC State Health Plan.
Can you give us a little bit of
background on the financial trouble
and the causes of that and what
the, the turnaround has looked like?
Brian: Absolutely.
So the state health plan has 750,000
members just over and just, and about 4.5
billion in annual spend.
So for comparison, that is the
largest purchaser in the entire state.
Outside of Medicare and Medicaid, we
have round numbers, a billion dollars in
purchasing power in the Raleigh area, and
I think about 900 million in Charlotte.
And so the treasurer
took over as board chair.
I joined the board, Tom Friedman,
who you've talked with and know,
joined as executive director,
which is our version of A CEO.
And we took a look at the books
and took a look at premiums and
benefit design and networks.
And like many state health plans, and
frankly a large portion of the employer
sponsored market, there had been sort of
an increase in premiums, but we hadn't
yet implemented a lot of the basic managed
care and insurance benefit design tools.
And so I, I joke that what we are
doing is sort of like Coke Zero.
It's not, you know, the, it's not even
Diet Coke, it's not even the sugar cane.
Uh, Coca-Cola, right?
This is like managed care.
Super light.
So very gentle.
Uh, we have 550,000 members
on our active employee plan.
You know, that's employees
and their spouses and, uh,
children and other dependents.
And so we did a couple things.
One is we implemented and, and
stole shamelessly from the Medicare
program, income adjusted premiums,
because no idea in health policy
is new, it's just recycled from
somebody else or another marketplace.
So we just shamelessly stole.
And the idea of being sort of, if you're
the dermatologist at UNC making $400,000
a year, we salute you and your role, but
that the custodian cleaning up the local
park or the teacher teaching second grade
doesn't have that same income performance.
And so we need to adjust premiums
for income, which is exactly
what the Medicare program does.
It's the fair thing to do.
So we implemented that, recognizing that.
53% of our members make under $65,000
a year, which is not a lot of money.
Other thing we did is we updated our
benefit design and kept the moop or
the maximum out of pocket, relatively
similar to prior years, noting that
if you have a chronic disease, right,
if you have rheumatoid arthritis,
or you have Crohn's, you're gonna
hit that moop every year, right?
You're gonna get procedures, you're
gonna see the specialist, primary
care doc refills, imaging, et cetera.
And so we said, we don't want to
adjust the moop up too much because
that's gonna, you know, penalize
folks for having a chronic disease.
And that's, again, not fair.
And you're seeing this idea of fairness
and, and sort of there are, there are two
rules of health policy, I would say, and
they apply in Medicare, Medicaid, employer
sponsored insurance, wherever it is.
One is, don't break the old
folks and the sick folks, right?
So like help them get on a
path to where they feel better
or can be more functional.
And the other is, uh, I call it
don't be a jerk to the poor, right?
So, um, obviously in the employer
sponsored insurance place, those
rules are applied differently, but
the idea is, is that policy needs
to be fair and equitable and we need
to support the entire workforce.
The other thing that we're doing, which
as you can see from the various news
that has rolled out, is that we're
implementing preferred providers.
And the idea being that
we're like Costco, right?
We can purchase, we, we
have lots of members.
And so if I'm gonna be a good fiduciary
to the members, whether it's the third
grade teacher, the custodian, the
physical assistant, or the nurse at,
you know, the state hospital, I gotta
get a good, we gotta get a good deal.
And part of getting that good
deal is being a volume purchaser.
So preferred providers is a
way to gently tier, right?
It's gonna be mild tiering with.
Massive semi truck level
positive steering for the member.
'cause our principle is
the member's gonna win.
The member's not gonna lose.
Members are never going to lose.
Right.
We're here for the members.
Right.
You know, we are, it's
a uncompensated board.
We get a sandwich for lunch.
Right.
And if you travel, you know, they, they
help support your travel, but it's unpaid.
We are here for the, the members.
And so we're essentially going to the
health systems and saying we would
like a two pound jar of mayonnaise.
Not the six fluid, hence little
thing that you're charged, you
know, $15 for at Whole Foods.
We want the two pound jar of mayonnaise.
Same quality, same nutrition facts label.
And we're doing that for ortho.
ENT general surgery and
the, the steering is huge.
And you saw that the treasurer, uh,
unveiled a zero cost surgical bundle.
So if you get that in or hernia repair,
the idea is if you go to the preferred
provider and it's $0 and maybe with
your regular benefit, it's a thousand.
Like that's huge positive sewage.
So we're putting our foot on the
accelerator to making sure that
the members win financially and
with that financial win and that
volume obviously will eventually get
and should get increased quality.
Because a lot of medicine, you
know, there's an art and there's
a science, and then there's the
sort of technical aspect, right?
So.
My orthopedic surgery friends like
to joke that they're carpenters
and they love doing, you know, I
have a knee friend, I have an ankle
friend, and I have a hip friend.
So that way when I'm in my sixties
and I need those, I can just call them
and you know, I'll get high quality.
So it's, I'd say our principles are income
adjusted premiums, making sure that folks
with chronic disease aren't penalized.
And then of course, steering and
purchasing for volume because we gotta
purchase like Costco, high volume,
lower cost, and better quality.
And it sounds corny when I say it,
you know, the sort of triple aim,
it makes me feel like, oh my God,
it's just another talking point, but
it's not right because we actually
want to do it and are doing it.
Kevin: Brian, one of the things that
intrigues me most about North Carolina
healthcare is this pipeline seemingly
between federal and state, all these
federal thinkers coming to the state of
North Carolina to try to implement change.
Going back to, you know, Conway
Blue Cross and North Carolina,
um, five, six years ago now.
One of the observations I'd make
on federal policy right now in
conversations is a lot of emphasis
on value-based care, getting people
into accountable care relationships.
Um, when I look at the North Carolina
State Health plan, when I hear
you talk there, when I look at the
health Affairs article from a few
months back, I don't see an emphasis
on value-based care as part of the
thesis that y'all are building out.
And I, I'd be curious
your reflection on that.
How do you think about the role
value-based care has played in managing
healthcare costs, both for North
Carolina, but then also more broadly?
What's the opportunity in
value-based care ahead?
Brian: I guess I would say define what
value-based care and accountable care are.
And the problem is, is that they
don't really have necessarily
clear definitions to me.
So my, my answer is, if
I'm a plan member, right?
Like if I'm a second grade
teacher, value is a couple things.
Value is having stable and
predictable premiums, right?
So one of the things we're gonna try
and do is have premiums be tied to a
relatively stable share of income so
people don't experience price shocks.
So again, stability.
The other thing is, is what is
my out-of-pocket cost, right?
So that's value to a member.
If something causes $0 versus a thousand
dollars, that's value to the member.
Other value, I would say is a little
more atypical, but is important.
And I would say if I'm a teacher and
I'm pregnant and you offer me an OB
appointment at 11:00 AM on a Tuesday.
That's really not very
member centric, right?
Like that's not helpful because the
teacher is going to have to get, uh, a
substitute for frankly, the entire day.
'cause that's in the
middle of the class day.
It's not like you can skip out and
go to the doctor's office for 30 odd
minutes and you know, shuttle on back.
We all know that going to the
doctor's office is a half day event.
So I would say value to the member
is also access that works for them,
which could be late afternoon or
evening hours or weekend hours.
Again, we are a volume purchaser.
I would say quality is part of that and
quality in areas where you can measure it.
A lot of quality measurement frankly,
can be manipulated and doesn't really
hold up and, and doesn't perform.
But there is are some areas where we
know that quality matters and quality.
Matters in a way when you
purchase it with volume, right?
So like every procedural part
of medicine is starting to have
a, a volume requirement put into
even like board certification and
credentialing and privileging, right?
The interventional cardiology
boards, you have to do a
minimum number of cardiac cath.
So yes, we have, you know, quality
metrics and we have a, a vendor in
addition to our executive team negotiating
our preferred provider network.
And we have quality metrics
associated with that.
But I would say it's price, price driving
volume, volume, driving quality, and then
sort of access as part of that, right?
Because if I price purely based
on quality and I don't look at
the other components, right?
It is a triangle.
So if I get you an appointment at
the best O-B-G-Y-N in the world.
They're located in Brussels,
that doesn't help you.
Right?
So I, I would say it's the
trade-offs within the geography
that we have to make sure that
the member gets really good value.
So I'd put value and value-based care
as sort of built around the member, not
an abstract concept of a policy paper.
And I would say, I've been part of the
North Carolina community for a long time.
I went, as you probably looked
up, went to UNC for graduate
school, and it was the one place
where I felt I was truly accepted.
So I've always been very grateful to
the state and if there's something that
I can do to help the state and help the
state employees who made my education
possible, that's what I view my role
as, being vice chairman of the board.
Right.
They served me.
By creating a wonderful state
and educational environment and
business opportunities made my
future possible, and so maybe I have
a small chance to help them make a
healthier future possible for them.
Martin: You recently testified in front
of Congress on medication affordability
and we just earlier were talking Yes.
We were just earlier talking.
Yes.
And I'm excited to hear them.
We were just chatting with Brian
from, uh, Venrock on Colonial.
Mm-hmm.
The acquisition by Eli Lilly,
CAR T Therapy Cell and Gene
Therapies more broadly.
I'm curious to get your view on
what we should be doing on the
medication affordability from.
Brian: I, I have so many thoughts,
especially after looking at the specialty
of biologic drug spend at the North
Carolina State Health Plan and also
the Medicare program and part D and uh,
B as in boy and D as in drugs, right?
It took us four tries to get the NA naming
right for the parts of Medicare, right.
Finally got right on Part D for drugs.
So I, I would say that the challenge
is that old drugs are expensive and
I, I'm fine if you have new cool
drugs and new cool drugs with high
value, I'm fine with that being
expensive, and that's a separate
discussion about how we pay for that.
But the, the fundamental problem
that we have, and I, I don't think
we've done a good job parsing
this, is that all drugs should be
cheap and have lots of competition.
And frankly, we have a lot
of FDA barriers to that.
If you look at generics, super
successful, you show Bioequivalents
do some manufacturing oversight, and
granted, I'm oversimplifying that,
but you have a low barrier to entry.
In terms of dollars and and time
and we have lots of cheap generic
drugs, which work really well.
And then we have lots of new,
cool branded small molecule drugs.
We don't ever have that
for the biologics market.
The biosimilars market we now
have 15 years of experience with.
And so we really need to update that 3 51
K pathway and make it a true abbreviated
BLA pathway or alaw as we like to call
it, because, you know, anything in health
policy has gotta have a cool acronym.
And abla sounds like fun, right?
You, you think about Dilbert or
the office with Michael Scott.
Uh, and, and so you could imagine a world
where the FDA says, and Congress tells
the FDA as part of the next user piece.
They, they, they could say
pharmacokinetics is the sort of
minimum evidentiary requirement
to approve biosimilarity.
And that comes with interchangeability.
And then you could imagine that the FDA,
if they have some resolved un unresolved
uncertainty about biosimilarity,
they could require more evidence like
pharmacodynamics or immunogenicity.
You could also imagine a world
where the FDA says, actually, you
don't need to do a PK study or
PHARMACOS to show biosimilarity,
Hey, just show some structural
characterization in manufacturing.
And you are on the market as
an interchangeable biosimilar.
We do that.
A lot of biologic drugs for ra, Crohn's
insulin, which everyone's always talking
about, those drugs would be cheap.
And again, the idea of being,
if you have a chronic disease,
you shouldn't be penalized.
Like you should be able to get
sort of basic level access to
medical care, whether it's doctors,
hospitals, technology, or drugs like
you should be able to get access to
relatively affordable healthcare.
And yes, we still want innovation
and this doesn't exclude innovation.
All drugs should be cheap.
And, you know, I, uh, surprises people.
I agreed wholeheartedly
with Bernie Sanders, right?
He shook my hand before the hearing.
I was, uh, had a nice discussion with
him during the hearing and I said, you
know, improving FDA product regulation
is a better way to lower drug prices.
It's a more effective
tool to lower drug prices.
And that's what we should be doing
because that way you make old drugs,
cheap, have lots of price, competition,
new drugs, still, you have that incentive
for innovation and you don't break that.
And, uh, if you have diabetes,
insulin should be cheap.
And if you look at it, you have
the twice a day, NPH regular
insulin, which is the old stuff.
You can buy it, it's super cheap.
It's a Walmart.
Then you have the basal bolus, right?
The long acting, the short
acting with the fancy flex pens,
that's a little more expensive.
And a lot of manufacturers are
now working on a, uh, once a week
formulation of basal insulin.
They've been a couple studies in
the New England Journal, right?
That should be more expensive.
I'm okay with that being more expensive,
but the basal bolus stuff should be cheap.
Just like the NPH regular mix
is cheap, and that's a biologic
drug regulation problem.
It's actually not as much a payment
problem, but FDA stuff's hard, right?
Like it's a technocrats palace
turns your hair white, gives your
ankles, takes away sleep, right?
My hair is turning white.
You just can't see it on the camera.
Thank God.
Kevin: It's a good angle.
Brian.
Speaking of cost of things, one of
the topics Martin and I find ourselves
trying to wade through a lot is Medicare
Advantage versus original Medicare.
Brian: Oh,
Kevin: what actually costs
federal government more?
Brian: Oh, well, you know, I don't think
we've answered that question very well.
I think a lot of other people think
we have answered that question.
I really look at it as, you have to look
at three sort of lenses that I testified
on Waynes and means about this a year ago.
Three things you gotta do.
One is take a look at statutory
program spending, right?
Fee for service, AB spending, uh, versus
Medicare Advantage Program spending.
Recognize that MA
includes a, B, D, Medigap.
So you might not get an answer.
You, you know, that you, you'll probably
get an answer that the insurance
industry doesn't like and that's okay.
Right?
Then you need to look at per
component benefit spending.
Like what is the cost of buying a B, uh, D
and Medigap in ma versus fee for service?
And you know, someone's gonna
raise their hand and say, well, the
Part D computation is really hard.
And I'll be like, yes it is.
And you know, we can get good analysts
and economists to do that, and then
someone else is gonna raise their hand
and throw a tomato at me and say, well,
Medigap is paid for by the private market.
I'll be like, well, not exactly right.
12 million Americans on traditional
Medicare have Medigap and those
are traditionally wealthier.
And you know, a less diverse
group, shall we say, of Americans.
And you know, they matter.
But there's a lot of other Americans
who have, you know, employer
sponsored Medigap retiree plans.
There are also others who have
TRICARE for life, which is a Medigap
plan, which taxpayers pay for.
There's also others who have
Medicaid, right, the dual eligibles.
So again, that per component benefits
cost is the second thing you need to do.
And then I'd say the third comparison
that you should do is say, what does it
cost to construct the holistic health
benefits package when you retire?
'cause you need A, B, and B, you
need a drug benefit unless you're
magically healthy and dying.
Your sleep at a hundred, which is
not many people, but I've met them.
There are a few.
And then Meab, right?
So if you do that three stage three
sort of lens comparison, statutory
program spending per component
benefit spending, and then the cost to
construct a holistic health benefits
package, you get a range of answers.
And I think then we would have
probably a better policy making.
I know that's might not be a satisfying
answer, but it's the correct, I think
the correct, the correct answer is it
sort of depends upon which lens you
look at and you should use all three of
those lenses to get a complete picture.
And you know, if you're the insurance
industry or you're an academic
who doesn't like managed care,
like you can pick a side of that.
You know, you can pick one of
those lanes to swim in and get
the answer you're looking for.
And I'd say the answer you're looking
for is probably a lot more gray.
Martin: This has been a lot of fun.
Thank you so much for stopping by.
If folks wanna read some of your
writing, where's the best place
for them to, to access that?
Brian: Probably my
website, which is Brian J.
Miller md.com.
Uh, it's, I try and put
everything up there.
It's a little bit like the Berkshire
ha website website's a little dated,
but you know, I am very bullish
on technology, but, and not always
the best at executing it myself.
So I would say there,
Martin: we appreciate the overview.
You covered a ton of ground.
We'd love to have you back some time.
Um, of course.
Really appreciate it.
Brian: Thank you.
Kevin: Enjoy the
Martin: afternoon.
Kevin: Thanks, Brian.
See you, Brian.
Brian: Have a good afternoon.
That was
Martin: fun.
Kevin: That was an
awesome convo to wrap on.
Lots of, lots of policy considerations.
I don't think we're gonna get an answer
anytime soon to the Medicare Advantage
first original Medicare question, Martin.
Martin: Yeah, and I don't know the
Kevin: brain.
This is right to me.
I, you know.
Martin: Yeah, and I don't, I don't know
that it's super important that we, we
have, like, I, I understand the desire for
a definitive answer, but I think one of
the beautiful things about the program is
different stuff works well for different
people and it's okay if one costs a
little bit more and a little bit less.
And where those things land on the,
the accounting ledger is, um, is
just the cost of doing business.
So for sure covered a lot of ground today.
If you have enjoyed this discussion
and you wanna keep the discussion
going, I would recommend, uh,
going to healthtech nerds do com.
You can join the community.
We're talking about the
stuff in Slack 24 7, 365.
Kevin, anything you
wanna leave folks with?
Kevin: That's where people can find us.
Martin, we'll see you.