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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: One of the things you and I
have been tracking is the impact of
the expiration of the Affordable Care
Act enhanced premium tax credits and,
and what that means for hospitals.
So HCA has been talking about it, UHS,
Tenet, they've all talked about this
as a, a headwind for hospital finances.
At the same time, we've got Medicaid
dis-enrollments sort of coming in hot
'cause of the, the OBDA, and like Zeke
talked about, these, like, increasingly
higher and higher and higher deductibles.
Mm-hmm.
And so to talk about what that
means for, um, provider finances, we
have Seth Cohen, president at Cedar
Health, the financial experience
and healthcare payments platform.
Seth,
Seth: welcome.
Hello.
Thank you.
Hey, Seth.
Great to be here.
How
Martin: are you today?
Seth: I'm great.
Great.
Martin: Um, thanks so much for having me.
I'm a big fan of what you guys produce.
Oh, that's very nice of you.
So we really enjoyed your LinkedIn
post from a few weeks back on-
Mm-hmm ⦠ACA grace periods.
You have this very interesting, I
think, perspective, given the business
that Cedar's in, on provider finances.
There's a very evocative line, "Your
commercial accounts receivable just
became your self-pay AR without warning."
Yeah.
We're in June now.
Curious if you can give us a, the
little bit of a sense for what
the, the, the Cedar folks are
seeing from, uh, on the ACA front.
Seth: Yeah.
So on the ACA front, we are see- You
know, it's interesting, we started the
year not seeing as much softness in ACA
enrollment as we maybe had assumed, but
one of the things I think was hard to
recall is that, uh, when people don't pay
their premiums, it doesn't hit right away.
It takes a couple months
for folks to churn off.
And so in fact, we did see some
significant churn, I think in states like
Arizona, Minnesota, where you did see
after a couple months, people not paying
those premium bills, you know, suddenly
stopped getting coverage, and that was
a real pain point for providers, right?
Because they hadâ¦
many of them had given care or had
enrolled or scheduled care with
the expectation that they had that
insurance, and then they were sort of
surprised and caught off guard that,
wait, now, now they convert to self-pay,
and what happened to that insurance?
And, and so it's, it's just there's
so much administrative pain around
that, um, for the providers.
But of course now these, quote-unquote,
"commercially insured folks"
are, are now truly self-pay.
And so we've definitely seen some
volatility there, and I think it's
just, it continues to go up and
down, and you see folks kind of
churn on and off ACA, uh, much more.
But I think overall we're
seeing enrollment down.
Kevin: Seth, can you walk me
through the mechanics ofâ¦
I think it's non-intuitive
for folks who haven't been-
Yeah ⦠in ACA insurance coverage.
So- Yeah ⦠if I'm a patient, I go in
January to get, to get a treatment at
a health system- Yeah ⦠and then I
churn out of my ACA coverage in March.
Right.
It retroactively makes me s- I, I
don't have coverage as of January.
Like, what happens mechanically in,
in all of that for a health system?
Seth: Yeah, I mean, the, the way an
ACA plan, like most insurance plans,
is to work is that you, you have
coverage if you pay the premiums.
And so your underwriter, um, your insurer,
is going to, is com- is obligated to cover
the cost of your care as long as you are
an active enrollee, which means- Mm-hmm
defined as you're paying premiums.
And so these insurers, y- you know,
understandably, are tracking very
closely when premiums are paid
or not, and if you haven't paid
your premiums, you're no longer
obligated to be covered by the plan.
So to your point, Kevin, in January, if
you go in and you have scheduled your
care and you've presented a card saying
that I'm an enrollee in this ACA plan,
right, this marketplace plan, and yet
you haven't paid your premium, maybe even
for December or January, then yeah, there
is some delay, but you ultimately are a
churned member of that plan, and so y-
there's no obligation to cover your care.
Kevin: Yep.
Seth: And so I would say it's interesting,
when I talk to some of our provider
friends in non-expansion states, so
when I say non-expansion, I mean states
that didn't expand Medicaid coverage
over the last few years, who have
been generally less worried about the
impact of the Medicaid redeterminations
that are coming this fall.
What they're more concerned about,
especially in states like Texas, is
this ACA impact because they have
relied so much on ACA enrollment
over the last few years, right?
That's where that
Medicaid-eligible population
from other states would've gone.
And so there, they're seeing real impact
from some of this ACA, um, volatility.
Martin: That's a perfect transition
because I think what we're hearing from
provider groups is a lot of anxiety
about the upcoming OBVA implementation.
Yeah.
Work requirement interim final rule
just dropped earlier or last week.
Are, are, are folks sort of, you
know, the, the folks that are using
Cedar and that you're talking to,
are they sort of feeling similar
distress around the last round of
redeterminations, like post-pandemic?
Like what does it, what does it look
like and, and what are folks doing
to get ready for, for- Yes ⦠this,
this next round January 1st?
Seth: So like any good
answer, it depends, right?
And so it depends on the state.
Depends, again, those non-expansion
Medicaid states, so a lot of the states
in the South, you know, are less sensitive
to these Medicaid redeterminations.
They're more sensitive to the
ACA enrollment fluctuations,
but less sensitive to Medicaid.
And then so you take, that's
one kind of lens to it.
Now, in the states where there
has been meaningful Medicaid
enrollment and redeterminations,
even there, it depends a little bit.
So you've got some folks, again,
I'm gonna talk about our friends in
Minnesota or Oregon, where you've seen
state p- uh, state bills pass in recent
years, I should say, where there's
been presumptive eligibility checks.
Like in other words, states have passed
laws saying, "You must screen everyone
who's showing up who is self-pay for
financial assistance before giving care."
So in states like that, providers
are already sort of bracing for um,
the work impact of needing to manage
self-pay populations because now
if Medicaid people churn off and
become self-pay, these are just more
people that now need to be screened,
and there's laws now around this.
It's like if you don'tâ¦
If Martin, if you show up and you're
self-pay and you aren't screened for
charity care before that care, there
are penalties attached to this, right?
Hmm.
So, so, so you have some, some folks
who are sort of primed, uh, and pr-
and providers that are primed for
this or are thinking about it a lot,
and then there are others, and I'll
be honest, who are a little bit more
of a head-in-the-sand mentality here,
um, where it might be, oh, I expectâ¦
I'm not saying I believe
this, I'm saying I hear this.
I expect that something's gonna change.
Congress is gonna come together and
they're gonna pass some last-minute bill
that's going to delay the impact of this.
I think that train has left the station.
We didn't see that happen with
the ACA subsidy expiration.
A lot of people were hoping that Congress
was gonna act, and it never happened.
Uh, or they tried, but it didn't happen.
And then I think there's
still some of that.
Or, or, or my state's gonna come
through with some additional funding or
subsidy that's gonna soften the impact.
I'm a critical access provider.
I can't affordâ¦
So, so it's a little bit of this,
like, deer in headlights situation
that, you know, we're trying to
encourage people to get over.
But then, yeah, a lot of, a
lot of providers are saying,
"We have to do something."
And, and i- in a world where you're
gonna now have an increase of patients
who have not just $100 bills, $1,000
bills, but, like, 15 to $20,000 bills,
you need a different way of sending,
of supporting those patients, right?
It's not just about sending
them a billing communication.
Like, you need to support those
affil- affordability challenges.
And I'm not saying that the provider
was, needed to take that responsibility
or that it's, it's their duty.
It's just now this is where it's
landed, and, and we're certainly
trying our best to help them.
But that's, that's, I
think, where things are at.
Kevin: We hear a lot in the, in the
community, in the news cycle, higher
deductibles, more out-of-pocket
payments required for patients.
Uh- Yeah ⦠Mark Cuban has this memorable
phrase about making hospitals subprime
lenders in the market- Yeah ⦠uh, as
we, um, pass more and more onto patients.
Can youâ¦
Like, how is this impacting
hospital financials?
What's the financial impact
you're seeing- Yeah ⦠seeing?
How does that change over time
as we're seeing more and more
of these higher deductible type
plans- Yeah ⦠hit the market?
Okay.
So
Seth: don't let me go too
far on my soapbox here.
So you can always rein me
in- No, get right up on it.
Get right up on it, Seth.
You can always- 'Cause I, I
do have a soapbox on this.
Let's hear it.
So here's the thing.
All right.
Certainly you two don't need to be
educated on medical inflation in
this country and how out of whack it
is vis-a-vis the rest of the world.
We all know that.
What is sometimes less well understood is
that over the past 15 years, out-of-pocket
costs have been disproportionately
higher than medical inflation.
So if there's US inflation, and
medical inflation's above that, the
US out-of-pocket growth, like, from
consumers, is higher than that.
So in other words, patients
have been disproportionately
absorbing our medical trend in this
country- Mm ⦠the past 15 years.
And you see that things like high
deductibles were an experiment.
Back in 2005, I think 2 to 3% of
Americans were on a high deductible plan.
2023, the first time ever, the majority
of Americans are on a high deductible.
So I'm starting here because, to answer
your question, because- Out-of-pocket
costs have not always been how they
are today, and I think a lot of
health systems in particular are, have
been struggling to keep up with what
has been a relatively silent trend.
Like, we talk about medical trend and
claim denials and payer reimbursement
dynamics a lot more than the steady uptick
of patient out-of-pocket year after year.
And so I think a lot of hospitals in
particular are sort of still remembering
the days when everyone showed up with a
co-pay, and now almost no one does, right?
And, and you, you made the point around
my comment on commercial versus self-pay.
I mean, most providers still classify
patients into three insurance classes,
which is commercial, government, self-pay,
and that's a total anachronism, right?
Because, you know, again, you
can have someone on a commercial
ACA plan, good luck tracking
that as a commercial patient.
So my point is, number one is,
things have changed a lot, and
it's been hard for providers to
keep up with this new reality.
And then I think then second, the
numbers are significant, right?
So if you take a typical $5 billion,
you know, what they call NPR, net
patient revenue system, right?
Um, it used to be the
patient out-of-pocket would
be 1 to 2% of that NPR.
Now it's 5 to 12%.
Wow.
So let's just assume, yeah, right.
So if you take 10% of 5 billion, that's
$500 million that your patients owe you,
and if you're only collecting around
40% of that, which is more or less the
average we see across hospitals, right?
Like, let's pause on that for a second.
The majority of patient
bills are not paid.
Yeah, I mean, Martin, you're notâ¦
I, I love to remind people of this.
Like, if you've paid your bill
as a patient in this country,
you likely are in the minority,
uh, when it comes to healthcare.
So if you're writing off 60% of
$500 million, you know, remember,
that's income, not revenue.
So what could $250 million of
net income provide to a hospital?
Again, these are, these
are massive numbers,
Kevin: right?
Yeah.
Seth: Um, and the last thing I'll say on
that, and I will then step off soapbox,
but is even within that out-of-pocket
growth, the fastest sub-segment of patient
out-of-pocket cost has been self-pay.
So even before we get to the full
impact of Medicaid and some of this
ACA churn, m- the uninsured patient
doll- dollars have grown the fastest.
In fact, for most of our clients,
40% of patient AR, 40% of patient
account receivables, is from
patients with no insurance coverage.
Martin: You know, it's funny
that you bring up that stat.
No, it's not funny.
It'sâ¦
This is a very serious topic.
But it is, uh, because my next question
is I was listening to a investor call
with UnitedHealthcare executives,
like management, and the guy who,
one of the m- the, the executives
said something like, "Oh, like,
only 40% of co-pays are collected."
And I was gonna ask you about
that stat, but I had reversed it-
Mm-hmm ⦠because I didn't believe him.
I, like, I, in my head, I was
like, "Oh, it must be 60%."
But you're saying 40% is the
collectability rate for, for
patient responsibility-ish.
Y- y- yes.
Like order of magnitude.
Yeah.
And it, and it varies, right?
It varies a
Seth: lot, right?
And a lot of it is demographics, right?
Like I, you know, we have our
friends at Hoag Hospital in
Newport Beach, California.
I think they're closer to 80 to
90% because, like, look at the
patient communities they serve.
And then you've got, like, safety
net hospitals in, you know, inner
city Chicago or New York where, where
it's even lower than that, right?
We've, we've met many hospital
health systems that are 15,
20 cents on the dollar, right?
And by the way, we're
talking about hospitals.
You look at physician groups, so
ambulance companies like air and, you
know, ground ambulance companies or
emergency medicine staffing groups that
work inside hospitals but aren't known
to the consumer, they have no br- you
know, they're sending bills and people
are like, "Who is this bill from?
I, I, I went to Allegheny Health.
I don't know who Envision
is or Team Health."
They're collecting sometimes
five to 10 cents on the dollar.
So yes, so I think on average is
around 40 in our book, but massive
distribution around those medians.
Kevin: Seth, I'd be curious your take
We hear a lot about AI technology,
how it's changing the industry.
I would imagine that this space is
ripe for, you know, thinking about
how you reach out to patients, how you
engage with them, interact with them to
increase that collect- collectability,
um, while also providing good experience
around that, uh, for the individual.
H- how are you guys thinking
about AI technology as part of the
conversation inside of Cedar in
terms of driving, driving performance
moving forward and thinking about that
conversation across the enterprise?
Seth: Yeah.
Um, yeah, we can't get through a, we
can't through a con- conversation these
days without talking about AI, so we
should- For sure ⦠let's go there.
I, I think, but before I just dive
into all the wonderfulness of AI or
opportunity, like first, like anchoring
on what's the problem to solve, right?
Yeah.
And I don't mean that
in a, in a cheeky way.
I think that that's important
because I think sometimes
there's not clarity on that.
So the problem to solve used to
be, how do I just create a modern
and easy billing experience?
Like remember when we all used
to like have to write checks, and
like you'd have to call in and like
you know your statement number.
I think generally we've done a good
job of moving beyond that world, right?
Where we're now in a bit moreâ¦
I mean, there's some exceptions of
course, but it used to be any way
that we needed to create just a more
consumer friendly billing experience.
Now though, when we see 40% of our
book of business owed from patients
who have no coverage, right?
And that's just gonna go up.
That's a very different problem to solve.
This is now how do we help people
manage af- an affordability challenge
that they never intended, right?
Nowhere, no one budgets for healthcare.
Like I've never met anyone who
says like, "Next year I'm gonna
plan for breaking my leg, and so
I'm gonna put aside this money."
That never happens, right?
So with that in mind, the problem to
solve is this one around affordability.
And I think where technology and
particularly AI can help is affordability
is a very personal question.
Affordability means things
to different people.
Like you, Kevin, might say that this
bill is not affordable, not because
you can't actually pay it, but you
sort of, you don't believe it, right?
Mm-hmm.
It's like my Blue Cross insurance does
not say that I owe the same amount,
or I already paid the facility bill.
I don't know what this bill is, and it's
really the physician bill that you justâ¦
So when people say, "I can't,"
or, "I don't want to pay this,"
that could mean different things.
Whereas Martin, you might look
at this and be like, "I stumbled
into the ED, I have no coverage.
I literally cannot pay this $35,000 bill.
This is bananas," right?
So I do think given how personal
some of these situations are and
the resolution paths, I think this
is where technology is a front.
Because what we are thinking a lot
about is how do we deliver an experience
that is really in segments of one,
and saying, "Okay, Kevin, for you,
we need to make sure that we can use
agentic AI to check your Blue Cross EOB.
See, oh, there's a line item denial.
Let's make a phone call,
figure out what that line item
denial is about, reconcile it.
This is why you owe something different.
The plan does not cover
this, but it checks out.
Here's your green check mark.
You go ahead."
With Martin, it might be you have
financial assistance, community resources.
Or by the way, you have
a health savings account.
Let's make sure to use the
banking balances that we have.
We connect to the major HSA banks in
this country, like HealthEquity, right?
Or Optum.
Let's make sure we are aware of that.
And that, I'll tell you, in and
of itself is an interesting thing.
Two-thirds of people with HSA
accounts in this country have
never opened their account.
Never activated.
They're just dormant.
I know.
Wow.
It's, it's, it's just like
this is the stuff, right?
It's like, you know, we created
consumer-driven health plans.
Remember when we called them that?
I do.
They were CDHPs.
And we did that and we said, "No,
don't worry, we're gonna give everyone
an HSA account because then they're
gonna be empowered consumers."
Well, like what happens, right?
Like, what always happens in
healthcare is like consumers don't
really engage, and so they get these
accounts from their employers, and
they're hard to get into, and they're
clunky, and I don't remember that it
was communicated in open enrollment
'cause I didn't care at that moment.
And so they just sit dormant,
not invested, justâ¦
So, so the point is, is technology
can help us connect people to
resources that they need and
not just bill them is the key.
Kevin: Right.
Makes total sense.
I recall reading, uh, going back, you
know, Definity when that was acquired
by United, when it was starting to take
off back in, you know, late '90s, early
2000s, and it was consumer-directed
healthcare and it was gonna revolutionize
the way people interacted with healthcare.
Yeah.
And you know, here we are 26 years
later talking about the, the,
the blight of, of high deductible
health plans in this country.
Yeah.
To your point, I, you know,
unintended consequences of this stuff.
But we think,
Seth: but, you know, some of
this stuff comes down to, like
just-in-time communications, right?
Mm-hmm.
Like there, there's a whole arc of
communications in healthcare that are
so indifferent to the consumer and then
we wonder why consumers don't engage.
It's like why, and not, not that we wanna
go too far in this direction, but you
know, we have this arbitrary period in the
middle of the year or the third quarter
of the year called open enrollment, and
that's, that's for whatever reason, the,
the correct time to then like just, you
know, throw up a bunch of information on a
bunch of employees who may or may not have
any interest in healthcare in that moment.
And so I, I think that part of this is
a function of we communicate to patients
in a way, and consumers in a way that's
totally indifferent to their needs.
I think what we're able to do
here at Cedar since we're in
the bill pay workflow is to say,
"Okay, we're sending you a bill.
Like this is a moment where you're
clearly gonna pay attention.
So how do we in that moment connect
you to the resources that you're
otherwise not gonna pay attention to?"
I think for instance, like connecting
to these health saving accounts and like
telling you, "You have these dollars in
this HSA," or, "You have this account
where you can put dollars in and giveâ¦"
Like that's the moment and, and I
think that's where we can help, you
know, reduce some of the blight.
Kevin: Yeah, for sure.
Martin: It's a great, it's a great
vision, and we're really appreciate
you spending some time with us-
Yeah ⦠uh, this, this, this day.
I, I, I think you're on the West
Coast, so I was gonna say this morning.
Yeah.
But yeah, uh, appreciate you
spending your morning with us.
Uh, where can folks find you if they,
they, they wanna chat, uh- Yeah.
Uh, seth@cedar.com.
Awesome.
So, yeah.
Thanks so much for your time today, Seth.
Yeah.
Thank you.
Appreciate you, Seth.
Nice meeting you.
Seth: See you.
Take care.