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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: Kevin, you encountered an
ambient scribe out in the wild.
What was that like?
Kevin: I did.
It was an interesting experience.
I was not expecting it.
Went to a doctor's appointment,
which I do from time to time with a,
a family member, and doc walked in.
We've, we've met this doc dozens
of times over the years, longterm
doc for my family member.
Sits down, plops phone on table
and is like, "I'm gonna record this
visit if that's cool with you."
Of course, you, you,
what are you gonna say?
No.
What are you gonna say?
Yeah.
Uh, so we said yes, um,
which we would have anyways.
And it was a really
interesting experience.
For the most part, I, I don't
know that I would've thought the
visit was any different, right?
Like, if I didn't follow this space,
track along these sorts of tools.
But there were a couple moments
that, like, it was clearly different.
Most notably, when I, I ⦠She, she
asked if we could, if she could record.
We said yes, and I was like,
"Oh, what company is it?"
And I won't go into the company.
I don't think the, like, company is that
important here, 'cause it's not about the
technology, it's more about the, like, how
it's being implemented in these systems.
And so she pauses it, um, and she
starts giving me feedback on all
this, and the, the feedback was
essentially two points of feedback.
Um, one, she's like, "I, I,
I'm talking with patients.
We're having conversations just casually
about everyday life, how things are going,
how you're managing this condition."
And they'll mention things
like, "Oh, you know, I have dry
mouth every once in a while."
And the doctor was like, when the ambient
scribe hears a phrase like that, it,
it puts it into the, um, into the notes
as the medical term for dry mouth, as
opposed to just kind of like this coming
up in casual banter that you wouldn't
necessarily record as, like, patient
has clinical condition X, you know?
And so doc was
Martin: like- Does it also make
a, a dollar sign, like a ka-ching?
Like-
Kevin: Yeah.
Can you, can you extrapolate that
to- Laugh or upgrade it ⦠all
of the AI rev cycle conversations
we are having industry-wide?
I, I certainly can, right?
Um, you can see how this stuff happens
really fast like that, from like it's
translating an ambiguous conversation
into something very black or white,
and you've got a binary decision
to make of how you categorize that.
And it would make sense that you
categorize it as the clinical side
of the world, particularly when
you are capturing the stuff for rev
cycle And on the flip side, so that's
how it was capturing patient notes.
On provider notes, it was
essentially doing the same thing.
Provider was having conversation
with patient about kind of what
next phase of life looks like.
It starts noting that they had an advanced
care planning conversation, and provider's
like, "It wasn't really that serious.
Like, we didn't actually have an
advanced care planning conversation."
But that's what it noted in the, in
the documentation, which is also an
interesting thing for me, 'cause one
of the things I've heard anecdotally
from a few providers is when you're
using these tools and you don't have
to write down your notes after the
visit, you forget what you said.
So if you, if you meet, if you see a
patient again in 6 or 12 months, and
you go back and look through these
notes, and it has categorized it in
different ways than you expect, you
might not actually recall it as well.
And I think that's gonna be one of
the, the interesting dynamics to keep
an eye on in this space of, like,
what, o- of, of how that works for the
provider-patient relationship over time.
Anyways, they gave me that feedback.
They pressed play.
We went on with the visit.
It was kind of funny 'cause the
visit started with, "Hello, I'm
here this morning with patient
and their family member, Kevin."
And I was like, y- you're, y- this
is not how you start visits with us.
Like, it isâ¦
You are, you are talking to the AI scribe
in the room to start the visit, which
was a very, like, off-putting sentence.
It, it doesn't matter in
the grand scheme of things.
Like, the visit went on as, as it normally
does, and after 10 minutes you forget it's
there, but it was, it was funny to hear
that, that turn of phrase in the visit.
Later on in the visit, doc again
paused it at one point to talk through
a specific symptom, and then pressed
play on it again, which to the broader,
what I brought up in the newsletter, of
this being a conversation about trust.
Like, if, if conversations are
gonna become the core documentation
layer, it cannot be the case that
docs can turn on and turn off this
ability during a visit, right?
You can imagine if a payer executive
walked into that visit and saw
that, I, I, I think you'd have
some questions as to how you can
actually trust that as the system of
record in an environment like that.
Which then you fast-forward that
to think about these system-wide
deployments, and how you move past
early adopters into this, like, early
majority, late majority that might be
more skeptical of using these tools.
If you're just mandating, "Hey, you
need to have this thing always on in the
visit to record everything and capture
everything," and then you get these docs
who are sitting there looking at the
notes coming out of it being like, "This
isn't capturing it correctly," I- it'sâ¦
I, the industry's gonna
have to figure that out.
It's, it's, uh, you can either,
I think, write it off as learning
lessons as we build these tools and
get better over time, or you can take
that as a signal that you can see the
next wave of payer-provider tension
issues in this space, but it was, it
was fascinating to see it play out.
I, like, I, I think most folks in
a visit like that wouldn't notice
anything about it or think twice.
I'm sitting there going, "Oh,
this is fascinating," you know?
Martin: Yeah, it's a unique
perspective you have.
I also like that the doctor was like,
"I have some feedback for you if you
could just pass this along- ⦠to the
major, the, the health tech nerds."
One, one of the many community
benefits health tech nerds
offers is, uh, we're a universal
support line for all health tech.
Kevin: Yep.
Martin: Okay.
We- last week was a week.
There was a, a lot that happens.
I feel like I say that every
week now, but holy smokes.
Uh, so we'll be talking about
tiering, steering, and all or nothing
hospital contracts, the, uh, or, uh,
the DOJ settlement with OhioHealth
specifically, and a report from
the Council of Economic Advisors on
restrictive contracting with hospitals.
Matt Holt pivoting from The Paris
Review back to Thoreau, the Clover-Stars
recal- recalculation, and a ton more.
We've also got JD Friedland is joining us.
He's the executive director for
ventures at a little hospital system
in the Midwest you may have heard
of, Kevin, called Cleveland Clinic.
Kevin: I, I do know that name, yes.
Martin: Not, yeah.
It, it's a little, a l- a little
hospital system in the Midwest that's
not in Rochester, but in Cleveland.
Um, but first a, a quick
word from our sponsors.
So today's show is brought to
you by our sponsor, Ursa Health.
Ursa Health is the analytics company
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On Wednesday, this Wednesday in
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If you can't make it, register anyway.
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That's luma.com/htn-ursa-atlas.
Kevin.
Kevin: I've gotten, I've gotten
to preview some of those slides.
I'm excited for that conversation.
Yeah.
It's a cool look at how, like,
Atlas mo- Atlas implements the
VBC model with some of its payers
and, and how Ursa enables that.
I'm excited for it.
Martin: To me, one of the more
interesting questions in this moment,
oncology's obviously a huge amount
of medical spend happens in it.
There's also a sort of constant
wave of drug innovations.
Feels like a, maybe one of the harder
areas to sort of model and take risk, and
so it's interesting to see how that works.
Kevin: Mm-hmm.
Agreed.
Martin: So you made the argument last
week that the biggest piece of news, the,
the sort of biggest market-moving piece
of news was the settlement w- between
the OhioHealth Health System and the DOJ.
I am curious to, if you could give us
a little background on both that case,
and then what is tiering, steering, and
all or nothing in hospital contracting?
Kevin: Yep.
So for context, that conversation
happened, this news came out I think on
the same day that the Clover Stars news
came out, or the, the broader Stars news
came out based off the Clover, um, case,
and I was like, Martin, I actually think
that this, that the, the, despite the
fact that the, the Stars news was all
over social media and whatnot, like, to
me the OhioHealth news is potentially
bigger because these anti-tiering,
anti-steering clauses are a, um, a really
important version, uh, how, how these
systems, um, manage their contract.
So-
OhioHealth, um, system in Ohio, DOJ
filed a antitrust lawsuit against
them earlier this year, noting that
it didn't like the anti-tiering,
anti-steering, all-or-nothing clauses.
Um, theâ¦
If you go back and look at the original
DOJ complaint and the news that came out
around that, the complaint is all about
how these clauses restrict competition,
particularly for the commercial market,
and how in the commercial market, um, that
is limiting the ability for alternative
plan designs to come in to offer lower
costs for employees, uh, in the market
because of the negotiating position these,
these health systems that, that they have.
It was interesting to note that,
um, we'll come back to this, but
we just put up on screen that the
w- the, was it the White House, um-
Martin: Council of Economic Advisors
⦠Kevin: Council of Economic Advisors.
Thank you.
I was looking for, uh, that full phrase.
Also came out this past week and, and
noted, um, some of the cost savings
that might result from banning these
anti-tiering, anti-steering, um,
all-or-nothing clauses in hospital
contracts, which suggested that
hospital prices might fall by 18%,
and premiums for employers might
fall by 6% as a result of them.
That's a really meaningful number and
kinda gets at why I was saying, like, this
could be a really big deal if it plays
out that it is the beginning of the end
of these clauses in hospital contracts.
What are these clauses?
How do I make sense of them?
So I, for me, I go back to 2015 era.
I was building a alternative plan
design, if you will, inside of United.
It was called Harken Health, right?
We were trying to go onto the
exchanges, which fall under the
umbrella of commercial contracts.
Because we were part of United,
United has a PPO contract with
basically every provider it
can find in the country, right?
That PPO contract has
been around for decades.
It defines the, the rules of engagement
for commercial contracts with big systems.
So any major metro market you go
to, the big health system in that
market has a contract with United
and this PPO, um, offering, and in
that contract, it has anti-tiering,
anti-steering, all-or-nothing type
language in it, more likely than not.
The practical implication of that
is for a model like us at Harken, we
were trying to build a new primary
care model that could drive better
cost outcomes by steering our members
to lower-cost imaging sites, right?
Trying to drive to better clinical
outcomes is one example of that
With these contr-- with these clauses in
the contracts, it limits your ability,
like for us inside of Harken, to actually
do any of that, 'cause the health system
can say, "You can't steer patients away
from us to lower cost facilities because
that is in our contractual clause.
So you cannot do that legally.
And you can also not tier away from us."
So in the plan design, you can't
create tiers that say, if you go to
this lower cost facility, you have,
um, preferential cost basis to go to
that facility where a patient will
pay more to come to our facility.
So it's a way for these systems to
use their leverage in the market
to say, "You can't drive commercial
business away from us because we
want that commercial business."
So they're really important,
um, in that regard.
They are slightly different than the
all or nothing contract, which, um,
I, I think it was Sutter in California
2022, there was a big lawsuit around
these all or nothing contracts, which
is it stems from a similar place of
contractual leverage for these systems.
But the concept is that if, if Sutter
knows it ha- or any system knows it has
a hospital that's kind of a, a must-have
in a network from network adequacy design
reasons for other reasons, um, it isâ¦
The all or nothing contract says,
"If you want any of our hospital's
facilities in network, you need to have
all of them in network at our rates."
So if you're a health system executive,
you're like, "Oh, I can acquire this
critical access hospital, this key node
in the network, bring it in, lift rates
up to system-wide rates," and the health
system benefits, and a payer can't
really do anything about that, right?
Because you need to have that,
that hospital in network.
And so if you need all of the hospitals,
then you're, you're stuck if you're
gonna offer coverage in that market.
So the OhioHealth settlement came out,
and OhioHealth said, "We're gonna agree
that anti-tiering, anti-steering clauses
in our contracts are unenforceable."
The settlement included a few
sample clauses, if you wanna
go check, check them out.
They're in the exhibit of the settlement.
It's potentially a really big deal
in these markets, particularly
for employers who are looking
at alternative plan designs.
So if you're an upstart insurance company
trying to crack an, a narrow network model
or trying to reduce costs for employers
by steering employees to low-cost sites of
care, to, like, take a lantern model as an
example of zero cost surgeries in certain
parts of the market with a specific
provider, you can now start to do that
more effectively because the health system
can no longer sit there and say, "No,
if you want us in, you cannot do that."
This opens up the door for all of that.
So to me, it's a reallyâ¦
It's not a slam dunk that this is a big
change, but it's a really interesting
opportunity, particularly for these
new-ish models in and around the employer
innovation market to come in and offer
employers a, a, uh, new types of models.
So I'm excited for it.
That's my, that's my TED Talk
Martin: It's one of those things
where you're like, "Well, why did the
insurance companies agree to that?"
And it, it is I think an example
of a, a clause that you can put
in your contracts if you have an
incredible amount of market power.
Yep.
You talked a little bit about network
adequacy requirements, like insurance
companies have to have adequate
networks, and if you're functionally or
virtually a monopoly in, in a region,
then, like, you are network adequacy.
I think there's, like, interesting sort
of read-throughs on what this means for
rural areas, especially looking down
the pipeline of a lot of consolidation.
You can imagine, um, this not having
a big effect on, on rural areas in a
post-OBBA environment, because there's
just not gonna be anyone, anyone else.
Like, there's just gonna
be one, one emergency room.
Um, and they'll be able to charge
you basically whatever they want.
I think a, a, a sort of interestingâ¦
So you, you talked a little bit about
this idea of alternative plan designs.
Lantern, in fact, last week announced a
partnership with Marathon Health- Mm-hmm
which is a sort of advanced primary
care DPC model, and it reminded me of
exactly what you were talking about w-
what you were trying to do at Harken.
It's like- For sure ⦠something that
would not be possible to do in a, uh,
in a tiering and steering world, and
this is pretty laser-focused on it.
I'll also note that Garner announced
that huge round recently, um, $100
million, and then Peterson Health
Analytics launched recently as well.
It seems like it's gonna be, uhâ¦
We're gonna go from a sort of tiering,
steering, all or nothing world if
this, if this stuff gets implemented,
if this becomes sort of like the
national path of travel, that we're
gonna go into a very thinly sliced
network, and even to the provider level.
Um- Mm-hmm ⦠this is the provider
that we want, and this is what we'll
pay for them, and, um, we're gonna,
I think, see the pendulum swing
very far in the other direction.
It's like the ultimate narrow network is
like you see this doctor who's the best
at this, and the, you know, the best
versus cheapest versus less likely to,
to, to get you readmitted to the hospital.
And Garner and Peterson Health Analytics
and some of these other companies are
in a really interesting position there.
Kevin: For sure.
And I, I mean, you go one
step further and whoâ¦
Is it Sidecar that's, that's
going into the ACA with the
no network style plan design?
I mean, there's-
Martin: Thinking about it, yeah
Kevin: There's all sorts of interesting
implications of this if y- as you
said, this does become kind of the,
the flavor of the day of, of path of
travel for health system contracts and
contracting, and I think that's gonna be
the fascinating part of this to watch.
So the OhioHealth was
the first case filed.
The DOJ also filed a case against
NewYork-Presbyterian, which, um,
had a lot of similar dynamics.
And Martin, to your point on
network adequacy and whatnot and the
negotiating leverage, like in the
cases it describes, it's like you
need these systems in, um, in network.
And it's interesting that Ohio
is a different market than New
York City, obviously, right?
And so going through the different
markets in this country and thinking
how that plays out, but it'll be, it'll
be worth keeping an eye on for sure.
Martin: I think that's a
good place to leave it.
Should we talk a little
bit about Walden Pond?
And by that I mean Thoreau.
Um, Matt Holt-
Let's do it ⦠president at The
Paris Review according to LinkedIn.
Kevin: Iâ¦
So after Thoreau fell through, I, I
checked in on Matt Holt on LinkedIn, and
I was like, "What is The Paris Review?"
I was like, "This guy'sâ¦
He, he's, you know,
Thoreau didn't work out.
He's on from healthcare.
Paris Review is what?
Like, a literary society
magazine type thing?"
You know what it is, right?
Yeah.
Martin: Yeah.
Kevin: Yeah.
Um, so I was like, okay, maybe, you
know, I- it fits the Thoreau on Walden
Pond, um, uh, theme certainly, but maybe
Thoreau is, is a thing of the past.
And so I, I, I remember having
that thought a few, you know,
after the Thoreau thing happened.
Clearly not.
They moved pretty
quickly on Ensemble here.
Martin: Yeah.
This was big news last week,
Ensemble, uh, being, you know, so the
investment's at a $12 billion valuation.
Current owners are Warburg Pincus,
Berkshire and Bon Secours Mercy Health.
Um, they're staying on as minority
health, or the minority investors.
It is, I think Warburg and
Berkshire bought in at 5 billion.
Yeah.
So this is a pretty healthy step up.
The history of Ensemble is, I
think, a little bit interesting.
They had had sort of a, a winding path.
They had looked at an IPO.
I think you dug into the S-1 from
that IPO, um, before ultimately
selling to private equity.
They had kicked the tires on, um,
another IPO or strategic alternatives.
Seemed like kinda nothing
doing, and then this pulled up.
Kevin: Yeah, for sure.
I-- There was an article out, it was
last September, talking about how they
were going through the dual track,
either IPO or M&A process, looking
for an exit at a 13 billion valuation.
Um, so it's, it's notable that,
you know, we're sitting here in
spring and this $12 billion M&A deal
emerges with everybody rolling over
their equity into the new entity.
I-- It, it seems to hint at, one, the
reaction of-- the potential reaction
of the IPO, um, and public market
investors into an asset like this, right?
If that could have gone public at a
13 billion valuation, you think that
would've been a preferable, uh, exit
path for the backers of Ensemble
versus a $12 billion M&A deal.
So that window does not strike
me as, as open for Ensemble, or
at least that was the perception
at that 13 billion valuation.
Um, seemingly indicating at kind of
these questions of what happens to an
RCM asset in the future, like Ensemble,
where their narrative, going back to I
listened to their CEO talk at JP Morgan,
it was very much a, "We're gonna put
boots on the ground in these systems
and help them think holistically about
what their RCM structure looks like."
He had this example of, you know, a
lot of systems are implementing point
solutions in the RCM market right
now, thinking they're saving 2%, um,
from that point solution, but they're
not l-they're not seeing that they're
losing 98 cents, um, 98%, uh, by not
looking holistically at the RCM journey
because the point solution is, is saving
a little, but losing on the entire,
entire journey of the RCM life cycle.
And that example stuck with me.
I think there's a, there's
a certain logic to that.
Uh, Ensemble, if you go back to their
S-1 that they filed to today, they
seem to have grown pretty meaningfully
in terms of their clients and,
um, the net patient revenue that
their health system customers have.
I think it's doubled, uh, which
makes sense from a valuation
perspective then, too, that it's
gone from five billion to 12 billion.
I think it's a really interesting
narrative in today's environment, right?
We hear so much about AI automating
rev cycle, taking away all the
waste that exists in healthcare and
Ensemble brought up some of the issues
that happen in this environment, right?
You know, if there's moving
goalposts between payers and
providers in their negotiations.
I think he brought up the example of
sepsis at, at one point in time during
the JP Morgan of, like, if a payer comes
along and says all of a sudden, "Hey, you
now need to have a culture for a sepsis
diagnosis," and that wasn't part of what
is clinically required previously, AI
can't predict payers changing how they're
going to require, um, certain things for
documentation of a clinical condition.
And that's where the human element
comes in, in interpreting the
ambi- ambiguity of these things.
So I, I, I thought it was a
interesting narrative to see.
I'm curious to see how Ensemble fits into
the broader Thoreau agenda, because as
we've seen, Matt Holt's playbook at New
Mountain Capital is acquire some assets,
bring them together, build a broader
platform, and that's what we saw with
the initial attempt at Thoreau, right?
Like, it was a 30 billion attempt
at bringing together what?
Six different things, was it?
Martin: Yeah.
I think a, the, you surfaced an article
from an MSK provider last week about Evil
Corp, EviCore, and a doctor lamenting the
loss of EviCore to a sort of internalized
AI-driven prior auth, um, tool from a,
from a payer, I think it was Highmark.
Highmark, yep.
And this strikes me as an
interesting, uh, a- an interesting
acquisition given that context.
Like, first of all, no one likes EviCore,
or no one liked EviCore, but it's like
wait till you meet the new guy, which
is a, a vibe coded AI point solution
from your, your regional payer.
Second of all, it's like, yeah, what
we're trying to manage here is a
intentionally frictionful process
where payers and providers are arguing
about, like, okay, to get, to count
this as sepsis, we need a culture.
You can't just use, um, you can't
just use, like, physician judgment.
Now you need to go implement the
workflow and the process to make sure
your, all of your sepsis diagnoses
have a culture and there's like a
bunch of things downstream from that.
And we've used that as a jumping off
point to talk about what is a, you
know, AI job versus a, a human job, and
where AI, going back to the beginning
of this conversation, is really
good at saying like, "Well, I'veâ¦"
You know, a- as I'm talking and
describing my symptoms, I have X,
Y, and Z, and the, the AI is going
boom, boom, boom and saying like,
adding those to the diagnoses codes.
But then on the payer side, they're
saying like, "Okay, well, we need,
like, evidence for those things."
And you see why people conceptualize this
as, you know, rock 'em, sock 'em robots,
payers versus providers, and- For sure
what the use of a human,
uh, in the loop might be.
Kevin: Yep.
I, Iâ¦
That article was so fascinating to me.
It's probably gonna be one of these
things that I'm referencing like 6 to
12 months from now as I think about
the space, 'cause it, it highlightsâ¦
As I read that article, yes,
EviCore has long track record.
There's been ProPublica articles
about how people don't like what it's
doing from a prior auth perspective.
It's got the nickname Evil Corp-
The provider article skips
over all of that, right?
It is basically like, I liked
EviCore because it approved
the care that I was doing.
I do not like the AI tooling that
Highmark has because it is denying
the care that I am trying to provide.
And the, the, the conversation is
about the ambiguity that exists in
the particular procedures he's doing
and some of the materials that, uh,
this provider was doing, and how a
human in EviCore would understand that
ambiguity and still approve the care.
The AI, again, going back to the AI
scribing conversation at the beginning,
it forces a black and white determination,
and in this case, it's deciding
against what the provider is doing.
And the provider doesn't like that,
and I wouldn't like that either.
Like, I understand where y- they're
coming from in, in making this case.
But it's a really good example to me
of, of the issues that start to arise,
particularly in a fast-moving field
where there's always new materials that
can be used, new types of procedures
that can be going on, et cetera.
And ultimately, it's a negotiation
between two counterparties in
that negotiation who aren't always
going to agree on those things.
And so if you force an AI tool in real
time to adjudicate those disagreements,
it's not gonna feel good for whichever
party loses, and it's going to be a
natural inclination to say, "Well, I want
the human back who can actually understand
the nuance of some of this," because it
is so fast-moving at all times, right?
Iâ¦
Like, to me, it is such a logical place
that this is going to end up, that
it's not for the, for the institutions
like Highmark that are just AI
everything, heading that direction.
I, I don't think that's
the path of travel here.
I actually think there's a pretty good
case that, like, you should be looking
at assets like EviCore that have-
And enable them with AI, change
the brand reputation around from
evil core to, to something slightly
more productive and positive.
But I- to me that's, I don't know,
that's the path of travel here
Martin: Cigna's bankers, if
you're listening, 'cause EviCore
is up for sale, uh, throughout-
Kevin: They're evaluating strategic
alternatives, I, I believe is the-
Martin: Yes ⦠is the phrase, right?
They're evaluating strategic alternatives,
including a sale, because they don't- Yes
feel like the asset is core anymore.
And let me introduce you to Matt Holt,
who has, I don't know, $18 billion,
uh, potentially from Apollo, and is
looking to buy assets in this space.
Yeah.
Should we talk about Clover?
The Clover of it all.
Kevin: Let's do it.
Martin: Man, so this news hit, uh, after
close of business on last week, and
then it was k- uh, basically everyone
was like, "We don't know what it
means, but it seems like a big deal."
So CMSâ¦
Rewind.
CMS, uh, Clover sued CMS.
Everyone I've talked to said no
one was really watching this.
It wasâ¦
Like, Clover doesn't have a
big government affairs team.
It was not in the venues that
these cases are usually litigated
in, which are Tennessee andâ¦
Or sorry, excuse me, DC and Texas.
And so people weren't reallyâ¦
This was not on anyone's radar that
this was a, a sort of live possibility.
And the judge sided with Clover and
said that basically two things, they
agreed with Clover on two things.
One of them, which was that CMS used
data sources that were not authorized
in their measurement of stars.
Those were mostly Part D, uh, medication
adherence scores and stuff like that.
That's not authorized because Stars was
passed in 2003, Part D was in 2006, so
it's just not possible for the statute
to authorize Part D, uh, Star scores.
And then some administrative
scores for, for Part C.
The other theory was, like, and also much
of the Star scores are just not allowed
to be, uh, done via the rule-making
process, because Congress doesn't haveâ¦
Or sorry, like, the, like,
Congress should be doing it.
This lawsuit ended up netting
Clover an expected, like, $120
million, um, in Star bonus.
It's a great tailwind for them.
The stock was up.
So we covered all that, I
think, a week or two ago.
Then CMS just dropped this letter
saying, "We're recalculating everyone's
Star scores based on that first
theory that the judge sided with."
So setting aside the, like, w-
administrative procedures, act stuff.
Like, we're just gonna toss the
Part D scores, pars- toss the
administrative Part C scores,
and recalculate everyone's score.
And- It didn't end up like, it didn't
end up moving the needle too much.
The markets were pretty
quiet in the reaction.
If you kind of go through at a
contract level, we did some estimates.
We think Humana was the big winner,
um, but it was 80 million bucks.
Uh, like, look, I'm sure they'll
take it, but it's one contract in
Georgia, so it's not like, you know,
moving the needle in a, in a huge way.
It just feels like the, the sort of star
score infrastructure is in this moment
where it's, it's, it's kind of brittle and
it feels like it's on un- uneven ground
Kevin: For sure.
I mean, we've seen some commentary, I
think it was Andrew Schwab on LinkedIn
talking about the broader implications
this has for stars in this post-Chevron,
um, world where these, these questions
about how federal agencies can interpret,
uh, ambiguous, um, uh, regulations.
I, I, I don't know what this
implies for stars moving forward.
It's, it certainly seems like the
questions keep getting bigger and bigger
and more stuff like this is happening.
And to me, I think if you and I wereâ¦
Imagine we were running CMS and
thinking about, okay, uh, the, the
agenda as we have heard it, and the
goal is we like Medicare Advantage,
we wanna support Medicare Advantage.
We also wanna make sure that it is a,
a good deal for taxpayers, and we are
bringing in costs in the program, going
back to V28, um, going back to advance
notice, advance notice to final notice.
We wanna make sure that we are, we
are keeping an eye on cost, but also
ensuring program stability, not just
for the plans, but for members, um,
for all constituents in the program
If we're trying to play that out and think
about the program moving forward, I, I
gotta imagine this feels a little bit
like you have one hand tied behind your
back while you're trying to, um, figure
out what you do with this program and
how you structure it, because all of a
sudden, like you've gotten through final
notice, you, you, you think you're in a
relatively good place with the plans, then
all of a sudden Clover has this lawsuit
that's not filed in traditional places,
and a court decides in Clover's favor,
and you've gotta all of a sudden rethink
the, the entire Stars program as a whole.
And I would imagine, again, you're not,
you're not particularly well-resourced as
a federal, uh, institution at the moment,
and so you have to think about, how do I
allocate these limited resources to drive
this program forward most effectively?
And I think you sit there and say,
"Let's get in front of these potential
lawsuits that follow along with Clover.
Let's just make this decision now,
and let's start getting ahead of,
of future decisions to come," right?
Start thinking about advance notice
for 2028, for final notice for
2028, what that starts to look like,
all coming from this place ofâ¦
And I heard, I was, Oz was at the
Johns Hopkins Carey Business School
giving a talk about like future of
MA and his vision for it, and the
vision was basically, uh, MA is
preferable to traditional Medicare,
but we gotta make sure it costs
the same as traditional Medicare.
If it costs the same and is preferable,
there's no reason why it shouldn't win.
That feels like the, the path of
travel here, but if you're trying
to make sure it is equal from a cost
perspective and then all of these
things are happening, it's, it's more
uncertainty in the program, right?
Which is just, it's a hard place to be.
I don't know.
I don't know how you resolve that.
Like, if you're running CMS,
what are you doing, Martin?
Martin: And f- so Stars are
a hugely meaningful component
on the payer side, right?
There are whole teams that
are- Yep ⦠dedicated to this.
It is also a, in, you know, capitated
arrangements or any kind of value-based
arrangements, when I worked for a
medical group, it would be like, okay,
like, you know, uh, there's a Stars
score related to diabetic retinopathy
screenings and, you know, it was like,
okay, what are we doing this month?
It's like, we're making sure everyone's
got their diabetic retinopathy screenings.
And there's also a, uh, ecosystem of
vendors who support sometimes very niche,
like they're like an analytics vendor
who will help you nail your Star scores
in, for instance, medication adherence.
And so-
The uncertainty that it's un- injecting
into the market right now is, I
think, across basically everyone
who is adjacent to star scores.
Um, and that includes, you know,
there's comp models and contracts
that are based on this stuff
for the, on the provider side.
Yeah.
There's whole teams that just do Part
D medication adherence stuff, 'cause
those scores are triple-weighted.
They all just got tossed, um, at, at the
major payers, and so it's, it's a lot
to digest, and it's some certainty going
into 2027 for, you know, where, what your
contracts are gonna be, what your star
ratings are gonna be for those contracts.
Um, and but the question of, like,
what you need to be focused on as an
organization, what vendors you should
be bringing in, how you should be
structuring your, your comp and your
bonuses with those provider orgs,
that's all a huge TBD, and we won't know
more until we hear more from the next,
you know, advanced notice from CMS.
Kevin: Yeah.
It's an interesting dynamic that I hadn't
fully appreciated until you talked that
through, of the implication this has on
some earlier stage companies in the market
who are, who are selling these solutions
into, um, the managed care entities,
helping them manage their star scores.
Like, if stars isâ¦
the entire future of it is uncertain,
I can see how it, it makes for
an unfu- a, an uncertain future
for startups in that market too.
Martin: Yeah.
So we'll see.
Kevin: Hmm.
Martin: Um, we'll see, and what, you
know, it'll be interesting to watch theâ¦
There was a CareFirst had a lawsuit
going that was paused pending the,
the resolution of the Clover one.
They ended up with roughly, by my
math, roughly what they were suing for.
Um, and so it, it seems like this might
be enough to put the litigation behind CMS
for now, but these are some big questions
for what it'll look like going forward.
Kevin: Yep.
Martin: I was talking about,
uh, medication adherence, like
I mentioned, the, the Part D
measures are, are triple-weighted.
Speaking of pharma, I wanna talk
about one of my favorite subjects,
which is the 340B program.
Ourâ¦
Well, your home state, my, my, myâ¦
I wish it was my home state.
Minnesota is, I think, the
only state that publishes this
comprehensive 340B report every year.
Super fascinating stuff if
you're a huge, gigantic nerd.
Um, but th- this is, like, the
340B program, basically, right?
Like, in, in miniature, like, theâ¦
It costsâ¦
The hospitals get the, uh, get to buy
the drugs for the amount on the left,
and then they get reimbursed the amount
on the right, and that is just pure,
pure profit or, if you're a non-profit,
pure net income for the hospitals.
The 340B program was in the news this
week because Eli Lilly has frozen the
340B discounts for a handful of hospitals
who are refusing to submit data requests,
basically claims-level data on these 340B
transactions, um, to Eli Lilly for review.
And this is, like, I think, you
know, I referred to it in The Daily
as the latest salvo in the 340B war.
But there is, like, a bunch of stuff
going on at the federal level to try
and reform 30B, and Eli Lilly is saying,
"Yes, that all sounds good, but also,
like, in the meantime, we're gonna run
forward with our own program, and if
you're not complying with it, we're just
gonna stop letting you have the discount."
Sure to be litigated, but, uh, I, I
think it, we're, we're seeing the 340B
salience ratchet up again, um, going
into this midterm election cycle, and
also I think, you know, just generally
in the, in the healthcare market.
Kevin: Martin, a- as someone who doesn't
fully understand the, the workings of 340B
and, and how specifically it, it happens,
do you, do you under- Like, how can Eli
Lilly just say, "Hey, we're, we're no
longer doing this because we're annoyed
that hospitals aren't submitting claims in
a, in a federal program like this," right?
Like, it, it j- it doesn't quite track
to me how all of a sudden Eli Lilly one
day is just being like, "No, we're not
cool with this anymore, therefore it's
⦠We're, we're not doing it," you know?
Martin: I should, I should emphasize
that this wasn't just a, like, Eli Lilly
woke up one day and said, "No more."
Uh, so Eli has won some lawsuits against
hospitals basically saying that underâ¦
So there's, there's the 340B
authorizing legislation says
basically, like, here's this program.
These are the types of people
that, uh, hospitals or entities
that are eligible for the program.
Um, Eli Lilly would like that universe
to be as small and narrow as possible.
The hospitals would like it to be
as wide and expansive as possible.
Eli's won some court cases.
On the back of some of those court
cases, they, uh, have felt a degree
of confidence that they could pull
something like this off and have
the support of the administration.
This is administered by the, um, HRSA,
Health Resource Services Administration.
Um, it's like a small department
in, in HHS, and they warned of
this basically back in January.
So they said, "We're gonna do this."
Most, according to them, most
entities, 340B systems are complying.
It's just a handful of larger, uh,
systems that are not complying.
And basically, Eli's sort of theory
that they're not, is that they're
not complying because this data
would be very embarrassing for- Mm
their 340B case.
Like, that they are basically buying
drugs at a markdown, selling them,
or sell- uh, they're buying drugs
at a discount, selling them with a
markup, and making a lot of money.
And, and I think that that is absolute-
I mean, the Minnesota report says
yes, that is exactly what's going on.
Yeah.
I'm gonna read from the Minnesota report.
It says, "The state's largest 340B
hospitals continued to generate the
largest revenue from the 340B program.
The hospitals reported generating over
1 billion in net 340B revenue, over
80% of statewide net 340B revenue."
So that net revenue's obviously profit.
I mean, these are mostly nonprofits,
and so they don't call it that.
And yeah, it's, it's, like, embarrassing
for those hospitals to say, like,
"Oh yeah, we have this, this little
sideline that is immensely profitable,"
even though it's really historically
meant for small safety net hospitals.
Kevin: Mm-hmm.
Martin: Now, you might think
like, "Okay, these hospitals
are abusing the 340B program.
We should just stop that."
And, you know, y- you might be
saying, "I'm on Team Eli Lilly here."
Um, I would say it is, uh, Eli Lilly's,
like, glad to hear that you're on
Team Pharma versus Team Hospital.
Uh, but one of the things that the
Minnesota report also notes, which is, you
know, safety net federal grantee clinics,
tribal health centers, they generated
the least net 340B revenue, right?
Like, they're the people who
are using- Mm-hmm ⦠the
program as, as it should be.
Um, they're, and, and they're generating
the least, but they're also really
small, in many cases individual.
Like, it, it couldn't
be any other way, right?
They are, they are generating the least
'cause they are much smaller than the
largest hospitals in, in Minnesota.
And I was at, uh, the National Association
of Federally Qualified Healthcare Health
Centers, uh, annual conference recently.
They were talking about how existential
this is to them, that any changes to the
program disproportionately impact them.
So even though it's just, like, a
very thin wedge of net income that
they're generating, that is the
difference between them being mostly
still in the red, but less so than
they would be without the programs.
And so- Mm ⦠in an ideal world,
you'd figure out a way to target it
so that you were saying, "Okay, only
these hospitals, health systems,
clinics that really need it can do it."
But that's hard to do, and-
Yep ⦠there doesn't seem to be a
ton of political will to do that.
The other thing I'm tracking here is
a new model for 340B that is focused
on rebates instead of discounts.
So right now, a hospital says like,
"Hey, Eli Lilly, I need 100,000
of these drugs at this discount.
Send me an invoice The proposed model
from HHS moves that to a rebate model,
and that actually I think does aâ¦
That allows, uh, some more of that
granularity on the, the claims.
Like, it, it gives you a
sort of richer data set.
Unfortunately, it also has a huge
impact on small cashflow constrained.
Like, if you think, "Okay, I'm gonna
put up the, the, the total amount
and then get a rebate later," and
you're a health center, like an FQHC
who's, like, doesn't have any money
and is barely making payroll, that
is a less attractive alternative
to you than the current status quo.
Kevin: Yeah.
It all reminds me, Martin, of the
conversation we were wading into in
Slack late last week about the role of
the regulator in, in healthcare in this
country, and how effective a regulator can
be in this current political environment.
We've got these programs, the No Surprises
Act, Wiser, this 340B program, where
the, the unintended consequences of
legislation that was designed to do
something, something good in, in the
examples of 340B and the No Surprises Act.
Wiser wasn't really a unintended
consequence, it was just, um,
uh, a prior auth model in an era
where politicians find it easy
to go after prior auth models.
But it'sâ¦
It reminds me of that conversation we're
having and, like, how do we, how do we
actually move these topics forward in
productive ways in the current political
climate where it's, it's just, it, it's,
it's hard to figure out what the path is.
Like, Iâ¦
Going to what you just said, it seems
fairly logical to me that we should,
we should wanna help support the
federally qualified health centers
that are benefiting from this program,
and that, in my understanding, is
where 340B originated from, right?
It seems less important to me that
the large health systems and markets,
you know, get what's going on here.
H-how do we, how do we fix this
without throwing out the baby with
the bathwater, uh, if you will?
Martin: Yeah.
I think one thing I will say on this,
'cause we had this discussion in Slack.
It's an interesting, I think, discussion
where we kind of go back and, and
forth on the merits and demerits of
government intervention in the market.
One thing I'll say is that the
340B program is just bad policy.
So I- ideally what you wanna do is,
uh, in good policy, is you wanna
just subsidize, use tax dollars
to subsidize the FQHCs and theâ¦
But the people who designed 340B
is like, "Here's a clever idea.
What if instead of using tax dollars
to subsidize those things, we just,
like, take it out of pharma's P&L?"
And that has lots of appeal, right?
Because you're not having to raise
taxes to, to do these things.
But it, it, it, it also inc- like
the, the bank shot, like trying
to policy make through bank shots
is like, it, it leaves you exposed
to, um, to gamesmanship like this.
Like, that's how you kind of end up here.
Like, if it is a pure tax and subsidy
situation where you are taxing the pharma
company or taxing everybody and just
giving that money to the FQHCs, like that
is a much cleaner way to go about it.
It's much harder, harder to game them.
On the, um, No Surprises Act thing,
it's like the No Surprises Act thing is
I think better policy even though the
outcome is bad in that it solved an acute
problem for an acute population of people.
Like, most people, most years do
not need to go to the emergency room
and they do not need anesthesia,
and so most people most of the
time will not get balance billed.
Kevin: Mm-hmm.
Martin: And the thing that you wanna
fix with the No Surprises Act or you're
trying to fix is to stop individual
people who are definitionally not most
people most of the time from getting
balance billed, and the way that you
do that is you're gonna have to spread
that cost- Like that cost exists.
You're gonna have to spread
that cost out over more people.
The No Surprises Act is doing it in a bad
way, which is spreading it out by mostly
putting Buddy and Halo MD's pockets.
But like, it was always going to
be the case that we were going to
pay more at, at a societal level
by stopping the balance billing.
Mm-hmm.
Uh, and like that's just like the,
the sort of the redistribution there.
It is, it is, I think, you know,
two examples of public policy.
One of them I think is like
archetypal bad, 340B is just dumb.
And No Surprises Act, you're like, I don't
know, I, I feel like I'm a lonely defender
of it in that like it is good that people
aren't getting balance billed anymore,
and I think that the status quo ante was
worse than the problem we have today.
But it does suck that the, the, the,
the beneficiaries are buying Ferraris,
uh, and increasing my premiums
Kevin: Yeah.
It's a, it's a, it's a tough
look in, in this environment.
Martin: Okay.
We have about 10 minutes before we
welcome JD from Cleveland Clinic, and
I wanna talk about the Kevin O'Leary
Wolverine stack that is launching.
No, I'm just kidding.
Open, OpenLoop is a telehealth business.
They are basicallyâ¦
I, I think it's fair to describe them
as sort of like Shopify for telehealth.
They basically allow you to, uh, have
a brand and then bring doctors, either,
uh, telehealth doctors to that brand.
And so in the old days, it was like I'm
a, you know, I have a telehealth brand,
but I'm, I'm located all in Minnesota, for
instance, and I wanna expand nationally.
And OpenLoop would say like, "Yeah, we got
doctors licensed in all of the states."
Mm-hmm.
"We can kindaâ¦
You can just rent our doctors
and they'll, they'll help."
But they made an announcement last
week that was, uh, a little f- a
little fabulous, like, a littleâ¦
I think they, they were, uh, they
were, they were stretching what,
what they c- are actually able to do.
But they said basically, like, now anyone
can launch a telehealth brand, and you
went through and you filled out the form.
And you said-
Kevin: Yeah.
Martin: Yeah.
I mean, why don't you, why don't
you kinda kick off the story
there and tell us about your-
Kevin: Yeah
⦠Martin: your experience.
Kevin: But the, the one
mental mo- it, umâ¦
My mental model of OpenLoop today
is historically it has been a white
label telehealth platform, right?
It, it, uh, got some recognition in the
Medvi story in The New York Times, because
it was powering Medvi as an example.
Um, it powers lots of
other organizations too.
Not all of them are like Medvi, but
that is the, it is the white label
brand behind organizations like that.
It enables that.
My interpretation of this launch is that
it, this was moving it to the Shopify
type model, with the difference being,
like, as I think about a Shopify, as a, a
person creating an online business, I can
just go click some buttons and all of a
sudden, poof, I have an online business.
And that was the, the narrative I read
in the press release of all of a sudden
you can, within hours, as a creator,
have your own D2C telehealth brand
online selling, um, GLP-1s, you know,
oth- other things of, of that ilk.
And that, to me, like,
that is fascinating.
If all of a sudden you can just
go click through a website builder
and, poof, like, you're, you have an
audience, and in a few hours you're,
you're selling, um- uh, GLP-1s, uh,
there's a lot of implications from a
consumer health perspective if that's
the world in which we are heading into.
And, um, I was listening to OpenLoop
CEO describe the launch, I think it was
on a New York, um, stock exchange show,
and, you know, it was talking about
dating apps, and gyms, and anyone with an
audience, and, um, clinicians, clinics.
Uh, but you can, you can see where the
target is, is going in, in, in that.
And
If that's the case, then all of a sudden,
you know, a dating app can spin up, um,
one of these sites in a, in a few hours.
I, I, again, the, the
implications are interesting.
So anyways, I went through,
I filled out my own version
of the form on their website.
It is not quite to me the like Shopify
experience that I think through of I
can just go click some buttons and all
of a sudden, poof, I've got a landing
page up that's selling these things.
Like you submit the form, um,
sales rep reach out, reaches
out to you for a conversation.
I have not had that conversation yet,
um, 'cause I don't wanna take up their
time, just for my internal research
purposes because I do not plan on selling
the HTN Wolverine stack anytime soon.
But nonetheless, it's, to me it's really
interesting to see this sort of, um,
play emerge in the healthcare space.
Like I think Open up, uh, or
sorry, OpenLoop is doing really
well in terms of being this white
label platform for telehealth.
I am curious to keep an eye on if this
play is more marketing stunt where, you
know, the Medvi news scared some folks
off from launching these types of brands
and so there are fewer folks coming into
the market to create these things and so
saying, "Hey, it's, it's Shopify-like,"
actually opens up the door for more brands
to come in and it's a nice marketing
play from that perspective, or if this is
really a next gen product under the hood.
But either way, it's to me seemingly
very indicative of the D2C healthcare
interests in these moments and, and
where things are seemingly heading.
Martin: Iâ¦
Number, okay, two comments.
Number one, I'm imagining the, a, a
sort of call center of just physicians
and they are just like , they have like
a little prompt on their screen and
it's like, "Hi, I'm calling in from Mr.
Beast clinic," or, you
know, whatever it is.
HTN's Wolverine Peptide clinic.
Like they're just like kinda cycling
through all of the, the sort of
influencer, um, or- Mm-hmm ⦠you know,
Hinge or Tinder or Grindr dating app.
Mm-hmm.
The second thing that I'm fascinated
here, so the Medvi article had many
fascinating components to it, but one is
like you would assume that the clinical
infrastructure layer, what OpenLoop
is doing, is the more valuable part.
Like if you think about the sort
of the value being created- For
sure ⦠for every dollar that
comes in, you would expect that
they would demand A lot of that.
And so I am very curious to hear,
like I know you're not gonna waste
the poor salesperson's time, but
I'm like very curious to hear how
that dollar of revenue is split up
between OpenLoop and the, the brand.
'Cause you could imagine-
Mm-hmm ⦠like if you're Mr.
Beast, you could demand a lot
of that dollar, uh, 'cause
you have a lot of followers.
And if you are sort of a more niche,
say a, a sort of healthcare industry
focused, like Health Tech Nerds, like you
can, you can demand very little of that.
I'm just curious about the economics
of, of how they're, they're sort
of, they're navigating that.
Kevin: Yeah, I, I, for whatever reason,
I just, I really struggle to see a
future state of healthcare in this
country where it's like, you know, Mr.
Beast is launching his own GLP-1
platform or, you know, pick
your influencer on social media.
I, I don't know.
Maybe I, I, I could be entirely
w- wrong about that, but I, I
just, I, I struggle to see it.
Yeah, I think the question
is the right one, Martin.
I, Iâ¦
The, the economics, um,
it seems like influenceâ¦
Like, over time, you, you would have
other platforms come in and compete
on cost, and influencers would go
back and forth between platforms.
But, um, I just, I, I don't know
that I see the thousand flowers bloom
type model emerging here over time.
Maybe I'm completely wrong in it.
Either way, it's, it's interesting to me.
I am, if you can't tell,
naturally skeptical here.
I- it's interesting to hear the CEO
make the case of access to healthcare in
this country is really hard right now.
This is a good thing because we
are helping support more access
to, to healthcare services in this
country and getting people the
medicines that they, that they want.
We just talked about, the other
day, the article about GLP-1s
and how employers are titrating
access via digital health startups.
I, I, I at least canâ¦
I give that narrative some credit.
I, I understand that narrative.
They are providing more access
theoretically through these models
and, um, that seems like a path of
travel for where things are headed.
So it's gonna be interesting
to keep an eye on.
Martin: Yeah.
I- the first thing I did after this
announcement was I went and checked on
Hims stock because this, to me, like
if, if you were trying to imagine who
this might threaten, if you're taking it
seriously, and I sort of tend to agree
with you that maybe we, we, we shouldn't.
Uh, but if you were taking it seriously,
it feels like Hims would be the, like in
the, the universe for direct-to-consumer
things, like they have the most to lose.
I don't know much about Hims' marketing
strategy beyond the Super Bowl ad, but I,
I, I do imagine that they probably have
some, some influencer deals and if you're
an influencer you're like, "Okay, should I
work for Hims or should I launch my own?"
Um, Hims stock was- Mm-hmm ⦠was
relatively unaffected, um, on the news.
And so- Yeah ⦠it's like, yeah, I
think that a- as of right now, I'm
saying, mm, I'm not really seeing it.
But-
It is something to watch.
Yep.
And like I said, I'm just
fascinated about the economics.
Like, w- what is, what is a brand
worth on s- that sits on top of
the, the clinical infrastructure?
Kevin: For sure.
I almost wrote this weekend in the
newsletter, there's a really interesting
dichotomy that, that exists today in
the healthcare narratives of like what
I'll call the Bryan Johnson Live Forever
movement, these longevity style plays.
We saw Midjourney announce their
ultrasound in a spa in California
that'll launch in 2027, versus the
Zeke Emanuel public health oriented
eat your ice cream type model.
And there's a lot of momentum in
this Live Forever Bryan Johnson-esque
longevity space at the moment.
And, you know, it's, I think, natural for
healthcare folks to be skeptical of it,
but it's, it's gonna be something to keep
an eye on, 'cause clearly a lot of folks
are interested in it, moving in that path.
And I, I, I don't think
we can underestimate it.
Martin: Yeah.
I mean, w- we've joked, but it's
like this is the thing that people
wanna spend their money on, and
maybe demand- Right ⦠will expand.
Maybe demand is limitless, right?
I mean- Yes ⦠uh, Hims was
up a little bit on Friday.
It's given back the gain, or Thursday,
excuse me, given back the gains a little
bit because of the forthcoming peptide,
uh, uh, guidance from, from the FDA.
It's like, I don't know.
And supplement businesses-
Sure ⦠I don't know.
They've beenâ¦
They haven't been, they've been
good businesses in the past.
So people wanna spend their
money- Yeah ⦠on healthcare,
and, and I don't know, maybe Mr.
Beast is the, the person you
want to to take your cues from.
Um, this is gonna be a hard pivot,
and so I'm not even gonna try.
Not even gonna try.
I'm just gonna say we're really
excited today to welcome JD Friedland.
He's the executive director for
ventures at Cleveland Clinic.
You may have heard of it.
Uh, here he is.
JD, welcome to the show.
How are you doing today?
JD: Good morning.
I'm doing great, and I'm really thrilled
to be, uh, part of this discussion.
We could spend the next 20 minutes talking
about what you guys were just talking
about, 'cause Cleveland Clinic has a
very- ⦠specific perspective on healthy
longevity, and are the Brian Johnsons
of the world and social media going to
sort of win the day with respect to how
people are going to biohack themselves,
or is something sort of grounded
in, you know, science and research
and medicine going to win the day?
We would prefer it to be one
way, but I worry that it might
end up going the other way.
So that's, that's maybe
for a different day.
Martin: Yeah.
W- w- we'll stick a, uh, stick a,
a point in that and maybe come back
to it at the end if we have time.
JD: Sure.
Martin: You have an
interesting perspective.
I'm sure you're seeing a lot of pitch
decks right now as the sort of head
of the in-house venture capital arm
for Cleveland Clinic, and I'm sure
it's, like, all AI all the time.
And so I wanna start- Mm-hmm ⦠outside
of AI and ask you, what is interesting
to Cleveland Clinic and to you
at the moment that is, is a- at
least not a pure play AI solution?
JD: Yeah, I mean, I think we have
an interesting perspective because
I think we start from the position,
like a lot of our peers, that as a
large health system, we always have
challenges, problems, and priorities
that are re- that remain unaddressed.
We are, um, we're privileged, frankly,
to be part of a system where we're
generating a lot of proprietary
knowledge, inventions, discoveries,
know-how, data, you name it.
And so we have an opport- we have
opportunities to start our own companies,
but we also have opportunities to
contribute non-cash value as a partner
to emerging companies across healthcare.
And so we start, if we're doing it right,
we're starting really with the problem.
You know, what are the biggest burning
needs that we're seeing across our
institutes, across the enterprise?
And I think a good example of that
two years ago was, hey, this ambient
listening thing feels like it's something
that might be real, and we have a big
problem with clinician burnout and
pajama time and patients getting annoyed
because doctors never look them in the
eye anymore 'cause they're spending
all their time looking at a screen.
Maybe we should look at
solutions to that problem.
And I think we really try to
start from that perspective of
what's the pr- biggest problem?
What does the ideal solution look like?
And who is out there that matches most
closely to that ideal solution that is
willing to work with us, not just as a
customer and not just as they want our
money because they want us to invest,
but as a partner where we can take an
active role in advancing that solution.
And again, that's exactly what we did
with the ambients, and that's really
become a blueprint for us on how
we can work with, um, emerging and
established players in the digital
health spectrum to, um, be additive
as a, as a customer, as a partner,
and hopefully as an investor as well.
Kevin: JD, it's good to see you.
One of the, um, one of the things
we're listening for when we listen to
largely publicly traded companies in
the space as they're talking about AI
agenda initiatives they have underway,
is for the impact of AI on either
revenue or cost for an organization
to, to think about financial impact.
I know that is one lens on, on
impact for organizations, and
there's a whole host of other lens.
Mm-hmm.
I'd be curious to, to hear how are
you thinking about measuring impact?
Do you have examples of where you feel
like AI is, is actually driving tangible
impact- Yeah ⦠organizationally
that you're excited about internally?
JD: Yeah, absolutely.
So I can give you a few examples,
and ambients is one of them
because there's a, there's
You, you guys have probably heard
this phrase many, many times before.
You have hard ROI and soft O- ROI.
You have direct ROI, and then there's
other things that we're supposed to
be delivering as a not-for-profit
mission-driven organization.
So how are we improving outcomes
which have both a direct financial
and non-financial impact on
Cleveland Clinic, on our patients?
How are we creating an environment
that's the best place to work in
healthcare, which is one of our sort
of, you know, core, uh, principles of
ourselves as an, as an institution.
And, um, how are we m- how are
we optimizing the experience
for our patients as well?
And one of the things that's always
in the back of my mind, and I've been
talking with our peers about this as
well, is, um, what does the hospital
system of the future look like?
What is ⦠Is it gonna look
like what we have today in 10
years, in 20 years, in 30 years?
How are people receiving their care?
Um, this is already, like, morphing.
And then how can Cleveland Clinic and
our peers, who deliver great care when
the patient's in the hospital, stay
connected with those patients when
they are discharged, or hopefully they
don't have to come into the hospital
because they're able to receive a level
of care based on their level of acuity
regardless of where they are, whether
they're in their house, whether they're
traveling, whether they're, you know,
come to a clinic, or they're, you know,
in some other ambulatory facility.
Um, and we want to reserve our acute
care for those cases and those patients
that need it, but make sure to conserve
those resources in such a way that allows
us to optimize care for our patients.
Martin: I am a hypothesis that Kevin and
I sort of kick around sometimes is that,
you know, there, there's sort of lots
of concerns about massive job loss and,
and sort of replacement in healthcare.
Yeah.
A sort of hypothesis that
Kevin and I kick around is that
we're, we're not going to seeâ¦
We're gonna see similar or actually
higher employment for, for health
systems, but stuff is gonna move from
largely off-stage roles, so billing
and coding and stuff like that,
to more on-stage roles, care- Yeah
care coordination, patient
experience type stuff.
I'm curious what your view on this
is- Yeah ⦠um, seeing a lot of
the, the innovation, uh, firsthand.
JD: So, A, that's already happening.
So there's a few things that I'm
trying to sort of process in my
brain, uh, you know, really in 2026.
One is, and I just came from a conference
and, you know, shameless plug, K Ventures
sponsored something called The Line Forum
last week up in Cape Cod and had, you
know, uh, Anthropic and, and, uh, OpenAI
and Walmart and many of our peer ins-
uh, uh, groups and the like, and one
of the things that emerged from that is
something that we've read in the papers.
However bad you think that, um,
general population sentiment is
on AI, it's actually a lot worse.
And so when we think about, like, ways to
help solve some of our biggest problems
in healthcare by using AI, and I'm really
happy that, by the way, we're now six
minutes into our discussion, and this
is the first time I'm using those two
letters together, uh, that was purposeful.
Um, but the consumer patient, uh,
perception of AI, not just in healthcare,
but in general, is decidedly negative.
And I saw some data at that, uh, at that
summit, which really, really shocked me.
I mean, I knew it was bad.
I had no idea how negative the general
sentiment is about AI, and AI's coming
for our jobs, and AI is going to produce
profits for tech companies, uh, at the
expense of the average person, and where
are our elected officials in trying to,
you know, put a, put a framework around
this, uh, rather than letting, you
know, the big tech companies just make
even more money and fire more people.
And that's kind of where the
general consumer mindset is.
So with, with that as a backdrop, I
do think that healthcare is uniquely
situated because it's one of a handful of
industries where there is a significant
shortage in labor, and patients feel
that because there's waiting times to see
a doctor, and I get seven minutes with
my doctor, even with Ambula listening.
Um, and so how, how can we
potentially use technology?
I won't say the two dreaded letters,
but how can we use technology in general
to, um, empower our caregivers to
deliver better care more efficiently
and create time and space for patients
to receive the care that they need?
And sometimes that's in the doctor's
office, and sometimes there may be an
ability to deliver technology to wherever
the patient is to allow them to get the
care that they need and then upscale those
patients to, uh, a caregiver when needed.
And so that's the way we're work-
really kind of framing that.
Um- I can talk about a few.
You know, I talked about
ambients a little bit.
We have partnerships with, uh,
uh, we have a partnership with a
co- with Bayesian, which I'm sure
you guys are very familiar with.
Um, we're, we're really using them
for timely detection of sepsis in
the hospital, which is a huge, huge
issue for us and everybody else.
Um, we established a partnership
last year with a company called
Dyania, which we've also invested in.
Um, and they basically are using an
AI engine to, uh, mine our patient
EMR data to identify patients first.
Uh, the first use case is to identify
patients that match the inclusion
criteria of one of more than 200
clinical studies that Cleveland
Clinic is ru- is, uh, running.
And so it accelerates our ability to
recruit patients into a study, but it
also enables one of the millions of
patients who have been to Cleveland
Clinic in the past to identify there
may be an opportunity for them to enroll
in a study for, let's say, difficult to
treat, or they may be, they may be out
of treatment options at this point, but
here's a study that they can enroll in it.
So we're enrolling patients
a lot faster in our studies.
We're now looking at ways to incorporate
that into our clinical practice as
well, and potentially identify patients
that are flying under the radar but
may have an underlying condition
that would suggest that they come
in and talk to their cardiologist or
neurologist or other specialists as well.
So I can go on and on, and we have
a partnership with Palantir with
respect to creating efficiencies.
But we really are aggressively looking
at ways to address both, I call it, you
know, back of the house and front of the
house deployment of technology to enable
us to further our mission, uh, without
building 10 new hospitals or hiring,
you know, 10,000 or 20,000 employees.
Kevin: JD, one of the topics I'm keeping
my eye on, curious about, is this
conversation around general frontier
models versus healthcare-specific models.
We saw a nature paper come out
talking about how two of the
healthcare-specific models were
outperformed by general models.
We've seen a peer institution of yours
partner on a healthcare-specific model.
Yes.
I, I'd be curious, what's, what's
Cleveland Clinic's take on, I
assume you sit on a wealth of data.
I assume that's perceived as a core asset.
How do you, how do you think about
that conversation of, of general
healthcare-specific advantages of each?
JD: So I don't know if how many of my
peer, uh, members are on the, uh, on
this, uh, event right now, but we are
in direct dialogue with investors,
with our peer institutions, as well
as with companies about best ways
to contribute, you know, our-- those
assets that you talked about and more.
So it's not just data, it's
our knowledge and expertise.
I think there's probably, uh,
uh, this might be controversial.
I believe there is one time value
to the contribution of data, and
the data that we have is never
more valuable than it is today.
Um, because that data, I believe
once, once one institution contributes
data to an LLM or a foundation
model, um, then the next set of
data becomes incrementally valuable.
But if we're the 30th institution
to contribute our data-
It's a lot less valuable than
if we're the first or second.
So we're talking with a lot of our
peer institutions about how can we
form a tight consortium of a handful
of leading institutions to contribute
really robust and deep data sets that
are complementary to one another.
Um, so that's kind of option one.
We have not announced a formal
data partnership with anybody.
We have selectively licensed some of
our data on a non-exclusive bas-basis to
inform, uh, uh, uh, foundation models,
but we're also exploring broader areas
where we can really contribute our data
in such a way that, um, is incredibly
valuable and also is a fair exchange
of value, not just for our data, but
we also want to think about once those
models are, are, um, educated, how can
they then be better informed in concert
with our expertise and our workflows?
I think that is whereâ¦
The data is a one-time value, and
there's probably incremental value of
the additional data that we generate.
But to me, the ongoing expertise and
insight that we can contribute as a center
of excellence is continuing value, and
that's more of an anu- an annuity as
opposed to, let's say, a large one-time
value that our data sets can contribute.
So that's the way I think about it today.
Um, but it also speaks to our core
function as a, um, mission-driven
organization, and this has really been
a sea change in the last three years.
Three years ago, we couldn't
license data to anyone that wasn't
a wholly owned or majority-owned
subsidiary of Cleveland Clinic.
Um, and so that was kind of
frustrating when we had companies
that we were a minority investor in
that we couldn't license data to.
We're in a very different place today.
I think we recognize the value of what
we can contribute and also the shelf
life of the value that we can contribute
Martin: We had a interesting conversation
with Zeke Emanuel a couple weeks back
about the role of clinical AI, and so
it feels like a lot of the conversation
today is focused on administrative stuff.
Makes sense.
I'm curious where you're seeing
opportunities for more, like,
AI practice of medicine or AI-
Mm-hmm ⦠clinical, like stuff
that, that falls into the clinical
bucket rather than the admin bucket.
JD: Yeah.
So, um, so I talked about the ambients.
That, to me, kind of, um, straddles
the line between administrative and
clinical, but there's definitely
a large clinical component.
Uh, again, another conference I was at
a couple weeks ago, the Peterson Health
Technology Institute summit, uh, back
in the beginning of June, they talked
a lot about this idea that, hey, I
thought AI was gonna, like, produce
efficiencies and bend the cost curve.
And if you look at the numbers, like,
expenses are up, like, 17% from,
you know, when ChatGPT kind of hit
the ground running in, in late 2023.
And I can tell you part of that reason,
I was really glad they didn't mention it
at the, at the conference, but I'llâ¦
I mean, I'll state the obvious now.
Our re- our, you know, our, um, our,
our, um, reimbursements that we're
submitting for are more robust because
we're capturing all the value that
we're delivering through ambient
listening, through other techniques.
And so, um, I think ultimately we
ought to be receiving fair value for
services rendered, and shame on us
for not being able to present a more
robust reimbursement request based on,
uh, the actual care being delivered.
But those days are gone, and now that
we have ambient listening, uh, we also
deployed, have deployed and invested in
a company called Theater that's using
ambient video to capture, um, data
coming off, visual data coming off of a
laparoscope or an endoscope, and then the
AI is able to generate a surgical note.
So now a surgeon can do the same
thing that our clinicians are doing
with ambient listening to review
and quickly confirm everything that
happened in a surgery, and then submit
that, uh, as part of a reimbursement.
And they're also losing their pajama time
too, which they're not crying over at all.
So we're looking at ways
to really deliverâ¦
Uh, again, I'm gonna stay away from
the, the two word, two-letter word,
uh, but deploying technologies on the
front of the house side to really help
create a better experience with better
outcomes, um, and reduce the burden and
the burnout factor on our clinicians.
And that's really kind of critical
to what we do and sustaining
ourselves as an organization.
Kevin: OpenEvidence has taken a,
a interesting growth strategy from
a product-led growth perspective,
getting it into the hands of clinicians
to start using its tooling, um,
organically without going through the
traditional healthcare apparatus, long
sales cycles of systems and whatnot.
And they're starting to go there,
but that's not kind of where
they started from originally.
It's, it's started to seemingly bubble
up this conversation about the shadow
use of AI inside of organizations,
and how organizations are thinking
about when, when clinicians are using
non-approved tooling, what does that,
that mean for the broader system?
I, I'd be interested to hear,
are you all thinking about that?
Is that coming up in conversations
with peer institutions?
Yeah.
How are you addressing that,
if at all, organizationally?
Yeah,
JD: it's a big issue.
I, I can neither confirm nor
deny that people may be using
OpenEvidence at Cleveland Clinic on
an unauthorized basis, but there's
certainly no authorized basis today.
Um, I did have some concerns about
the business model of OpenEvidence and
the level of, I'll just call it trust,
that clinicians and researchers can
have in OpenEvidence, given that it's
basically an advertising-driven model.
And, you know, if I was a clinician, I
might have concerns about, "Hey, look,
pharma's paying for this, so why should I
trust the information that I'm getting, or
at least the prioritization of how I'mâ¦
how the information is presented to me?"
I haven't seen to date any hard evidence
that that's in fact the case, but
that's in the back of my mind with
respect to the long-term viability
of a solution like OpenEvidence.
And, uh, again, I know we're only a
little bit into it, but I would certainly
wanna- Uh, continue to monitor that.
I think some sort of a solution, um,
and we are very focused on how do
we deliver the best information to a
caregiver at, when they need it so that
they can make an informed decision.
It really gets back to, I think, Martin,
a, a comment you made earlier, and
we use a slightly different phrase.
We call it clinical intelligence, and
I stole that from one of my colleagues
at Colorado, Colorado University.
Um, but um, that's really the,
I think the way we think about.
It's kind of a co-pilot for clinicians
and researchers to be able to
present the latest information,
evidence, and information.
I think I used information there twice.
Information, evidence, and studies,
uh, at the point of care or at
the point of research where it's
going to have the greatest impact.
I think that's gonna be critical.
I actually posed a question last week.
Uh, you know, today there are certainly
issues around, um, liability and how,
you know, like, uh, there's a lot of
companies out there providing like
virtual behavioral care and chatbots
and even agents that can interact
with patients for behavioral care.
One of the limiting factors there,
as far as I'm concerned, is Cleveland
Clinic won't just, won't, um, deploy
something like that today get, in a
current iteration because what you're
effectively doing is subcontracting to a
digital health solution, and yet Cleveland
Clinic is retaining all of the liability
associated with an adverse outcome.
So between the companies and the
health systems, we need to figure
out a fair distribution of value
and liability associated with that.
I think that's probably the pathway
forward there, and that might be
the pathway forward for any forward
deployed, clinically oriented
digital health solution that's
gonna involve either referral to
or referral from a health system.
Um, so that's, that's definitely
one, uh, major issue that we're
trying to grapple with right now.
Um, I, I probably went a little bit
sideways on your question, but I think
those are all relevant issues that
we're, we're struggling with right now.
Martin: That was a very helpful overview.
I think that liability and value question
is a, is a excellent one to end on
'cause it is, I think, going to define
a lot of the conversations that you
have and that we'll all be having, um,
over the course of the next few years.
JD, thank you so much for your time today.
We're already excited to have you
back to hear more about some of
these investments you're making and
what you're seeing in the market.
Thanks for your time.
JD: Thank you as well.
Have a great day.
Martin: Bye
Kevin: Bye.
Good seeing you, JD.
Appreciate it.
Martin: I find that to be so
fascinating, like the, the question
of what do we do with liability?
And I think that's like malpractice
liability, but there's also the, uh, the
sort of classic thing with a startup and
an institution like Cleveland Clinic, in
that like Cleveland Clinic has a ton of
brand equity and reputation, and a startup
comes in- Mm-hmm ⦠and says like, "We'll
come in and we'll do this thing, and if
it doesn't work out, like we'll declare
bankruptcy, wash our hands of it, and go
raise another around in, in, in Silicon
Valley," 'cause that's like what, whatâ¦
You get pats on the head for, for
failing fast in, in the Valley.
And for Cleveland Clinic, they're
like, "Well, we gotta be around with
our n- you know, this is our name.
It's the only name we'll ever have."
And so I find that, I find those
conversations to be fascinating.
Kevin: I do too.
It all reminds me, Iâ¦
Every conversation I have on this topic,
I become more and more convinced that this
space is gonna move at the speed of trust.
It is all about can you trust these
tools, how they're implemented, what's
gonna happen when things go poorly,
are you gonna work through it together?
And you can hear it in
that conversation, right?
It's, it's a bigâ¦
If you're one of these institutions,
it's a big organizational redesign
question in, in many ways.
And to your point, like you've got
the brand to think about, you've got
the entity to think about, and you
wanna move it forward, and you've
gotta trust that you're working
with the right set of partners.
Um, it's gonna be a fun multi-year
journey to, to watch evolve over time.
Martin: The speed of trust.
Uh, I, I think that's a great,
a great place to leave it.
So if you love these sorta conversations,
you should definitely subscribe,
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And if you wanna chat with us live about
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Kevin, have a great rest of your Monday.
Kevin: Happy Monday.
Bye.
See you Martin.
You