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Break The Cycle dives deep into the issues that keep renewals bad, costs rising and employees frustrated. Each episode breaks down what’s really happening and how employers can change the trajectory.
Sarah Michaels (00:00):
Claims are not just the claims, just because you have a bad claim here does not mean there's not something we can do about it. Yes, I cannot prevent a NICU claim from happening or a cancer from starting, although I really wish I could. I unfortunately work with people on typically their worst days of their lives. People aren't calling me for a feel good story all the time. Usually it's, I have this horrible news and how can you help me? And I absolutely love that. I get to walk alongside them in those moments, but claims are not just claims because the reality is if you dig into the claims, there's a story behind that.
Josh Schumacher (00:32):
The employee benefits industry has been stuck in a cycle that keeps costs rising and plan members underserved. But there's a better way forward and it starts here. Welcome to Break the Cycle. Welcome back to Break the Cycle. I'm here with Sarah Michaels, Chief Clinical Officer at Kinetic Health. And today we're going to be talking about what's really driving your healthcare spend and what you can do about it. Tara, thanks for being here.
Sarah Michaels (00:57):
Thanks for having me.
Josh Schumacher (00:58):
So the first thing I wanted to jump to right away is love the stethoscope, love the RN tag. Obviously you have a clinical background, which is something our listeners might not know about. Can you tell me a little bit about how you ended up in the field of benefits and kind of your journey to this point? Yeah.
Sarah Michaels (01:13):
You're jealous. This is like the comfy style. Yeah.
Josh Schumacher (01:15):
It's
Sarah Michaels (01:15):
Fun to be a nurse sometimes. Yeah. So nursing is my passion. It's something that I've done for the past 10 plus years of my life. It's kind of unusual for me to be on this side of things, but I was working my dream job shortly after college down at Riley Hospital for Children where I had the opportunity to open our very first inpatient psych unit. It's a place that I'm proud to say I still get to work today on the weekends for fun. But really why I left that side of things was to figure out how do you keep people healthy and out of a hospital system? You work in a hospital and you see the brokenness. You can speak to any nurse. It's a lot of charting. It's a lot of documentation. It's not as much patient care as any of us would like.
(01:55):
And I think that results in this broken cycle of you fix the problem when they're in the hospital and there's not enough education to keep people out of the hospital setting. So coming to the broker side of things 10 years ago has really been a fun challenge for me to figure out, okay, how do we tackle that problem and actually improve people's lives?
Josh Schumacher (02:14):
Yeah. So you mentioned a little bit about the brokenness of that system. Can you talk to me a little bit more about what you mean by that when you say the system's broken, what you've learned since being on the broker side and kind of frame for us the challenge that you're actually trying to solve?
Sarah Michaels (02:28):
Yeah. Kind of a long question. There's a lot of different ways you can go with that. Brokenness in my mind probably starts at the primary care level. It starts with preventative care. If you think about, regardless of where you guys are listening in from today, who has bought out all of the primary care practices. It is these huge hospital systems. And I promise you, they're not making money from primary care. A lot of them in fact lose money on the primary care side. But where they're making money is due to the referral system. So if you need something beyond primary care, these providers are essentially incentivized to refer them right back into this larger hospital system. How many times have you gone to the doctor and they say, "Hey, yeah, maybe you need a scan done. Why don't you go down that hospital hall and get it done right now?" Convenience, it sounds great.
(03:15):
You're not even thinking in that moment, "What is this actually going to cost me? " And I don't think unless you're in our space, you realize that in that setting, you might be paying five, 10 times the cost of what would have been done in a standalone facility. So that's where I think it really starts is as humans, we're told to trust our doctors
(03:34):
From a young age. And so where do you break that cycle of, okay, I trust my doctor, but just like if I need a new car, I'm going to shop around, am I really advocating for my own health in the time of need?
Josh Schumacher (03:48):
Yeah. And obviously I know you're not saying don't trust your doctors. You're still a medical professional. Can you talk to me about kind of like the flip side of that challenge, which is the employer and kind of how they're looking at this, like, I'm sending my people to get healthcare, they're getting these procedures, they're getting these referrals. What's showing up on the employer side of the equation?
Sarah Michaels (04:09):
Yeah. So I mean, inherently we work with a lot of HR folks
Josh Schumacher (04:13):
And
Sarah Michaels (04:14):
Most people in HR are in HR because they love their people, they care about their people. And so naturally they want what's best for their people. And especially when we talk about health, that's very personal. If you're let into that personal journey, it's usually the HR person that knows about what's going on. And so at the end of the day, I always say our leaders care about their people and they want them to get the best healthcare possible. But when you talk to the patient, because I have that great privilege of, as the nurse, people coming to us, the first thing you hear is not even, "Let me sit and talk to you about my diagnosis I just got." Nine out of 10 times, they're worried about what it's going to cost me, the financial impact. It's not even what's the premium and what's my co-insurance, my out- of-pocket maximum.
(04:56):
It's, I have to miss work. Yeah. Can
Josh Schumacher (04:58):
I afford this?
Sarah Michaels (04:59):
Can I afford it? I have to pay bills still. I don't even know if I have disability leave. I mean, they need to be reassured immediately. Can I financially afford this diagnosis before they even want to talk about their diagnosis? So when you talk to HR leaders and you talk about the employer's responsibility in healthcare, it's creating really a full strategy, not just what's my health insurance plan look like, but what supplemental policies do I have in place like hospital indemnity, like accident, like critical illness to help offset some of these really hard hits that these people are going to have if you're facing a health journey. And a lot of it's just education too, is people don't know what they don't know. If I do not have a condition today, I don't maybe care about open enrollment when they come and talk about all these wonderful services my HR team can provide, but the moment I get a diagnosis, that's when we're in panic and is almost too late to be able to educate them.
(05:53):
So it's just walking that fine line of throughout the year consistently, how do you make sure that proactively we have an approach in place that our employees know about, their family members know about, so we can get people to the right place at the right time to get that proper diagnosis.
Josh Schumacher (06:10):
So to kind of summarize what you just said, I think employers are struggling, they're wrestling with the fact that they want to provide great care for their employees. They want to educate them on how to take advantage of that care, how to be healthy throughout the year and how to get, whether it's the procedures or the testing they need to identify things early, but they're also employers worried about a bottom line, worried about costs. Talk to me a little bit about kind of how that pressure to keep costs on, because we obviously know that we exist in an industry where costs just keep going up and up. Can you talk to me a little bit about that pressure and how kinetic health ... I mean, we'll get into what kind of options are on the market, but can you talk to me a little bit about why you've built the team you've built and why we've kind of stepped into the situation in this way?
Sarah Michaels (06:58):
Yeah. And this sounds funny, but it was almost accidental. When I was hired as the very first clinician at this broker, it was in order to create a wellness program for employer groups. Wellness used to be this huge buzzword. HR somehow wore that hat, I think because it's a culture play, absolutely. And so it was build out a wellness program, bring lunch and learns to us, bring yoga programs, bring whatever we could. And it's funny because there was one of me at the time and you would put in all this time and it was very well intended. However, it was the healthy people that always showed up and it was the people that you're truly targeting that were absolutely nowhere to be found. And a light bulb kind of went off year one when I was in this space to say, "Wellness alone is not going to be our solution to the cost savings that you're talking about.
(07:42):
" And quite frankly, I tell groups, you're almost wasting money if our only approach is going to be wellness and it's not focused on health. Health is who actually has a condition today that if I actually impact that condition, I improve their lives, which is all we care about as clinicians. But when you're reporting back to a CFO, because I've improved their health condition, you're going to start to see the cost decrease and they're not going to need as much care. And so it's been a really fun shift building out the team. We had to get really strategic in hiring other nurses, pharmacists, social workers, dieticians, health coaches, like literally a full functioning clinical team within the walls of a broker firm, which is so unique. But it comes down to why are others not thinking about that? Because if you're talking about how are we going to prevent the rising cost of claims, the only way to do that is to put on that clinical lens and say, "Okay, I know my costs are rising in this specific area.
(08:33):
Now what am I going to do about it? What action can I take to start to improve lives and decrease the cost of
Josh Schumacher (08:38):
Claims?" Yeah. So cost of claims are the claims is a way that I've heard you kind of phrase this before. Yeah. So talk to me a little bit about what employers are experiencing with claims. Talk to me about what's really driving the cost of some of these claims because I'm sure many employers, many people listening in the room know that like when someone has a NICU baby or when unfortunately cancer hits their plan, it's going to be really expensive. But can you talk to me a little bit about what's going on there, what employers are seeing and why we've gotten to kind of the statement, the claims are just the claims. Well,
Sarah Michaels (09:12):
And you've heard me speak about that because I hate when people say that. That is such an old way to look at it. Claims are not just the claims. Just because you have a bad claim here does not mean there's not something we can do about it.
(09:23):
Yes, I cannot prevent a NICU claim from happening or a cancer from starting, although I really wish I could. I unfortunately work with people on typically their worst days of their lives. People aren't calling me for a feel good story all the time. Usually it's, I have this horrible news and how can you help me? And I absolutely love that. I get to walk alongside them in those moments, but claims are not just claims because the reality is if you dig into the claims, there's a story behind that. I don't think any employer group these days has a data problem. And in fact, we have quite the opposite.
(09:56):
Data is everywhere. People probably have it sitting on their desk today, a huge stack of papers of this is what has already happened, but we have a decision problem because how are we strategically thinking? Right now, we're looking in the rear view mirror to say, "Here's what's happened." And a lot of people stop there. They say, "Well, I know I had a $1.4 million NICU hit. Absolutely nothing I could have done to prevent that. I'm going to get a double digit increase at my renewal and there's nothing I can do about it. " But I try to get people to think differently. I try to get people to say, "Okay, but how is that baby doing today? How are they going to be doing 12 months from now?" Because when we talk about renewals, we're actually predicting the future. We're trying to project what the spend's going to be in the next renewal year.
(10:38):
And so it's really important we dive into the data to say, "What story is this actually telling me? " A lot of those situations are one and done claims. It doesn't matter the size of your group. It's probably about three to five individuals that are costing your plan 40% or greater of overall spend. So it's so important that we know who those members are and we have a plan in place in order to impact those specific individuals.
Josh Schumacher (11:05):
So it sounds like a very complex situation where you almost need an understanding of the clinical side of what's going on to tell that story, to tell the story of what's going on in the claims. For those people sitting there wondering like, "Okay, well, so is it standard practice to have a nurse and a pharmacist have these people on staff to look at that? " Because frankly, kind of sounds like without that insight, you don't really understand the story of what's going on. So why have brokers, why have advisors in this space, why do they not all have a clinical team just as a rule to kind of try to tell that, try to dig into that story, try to understand it better?
Sarah Michaels (11:43):
That is a really good question. And I wish I had the answer to it because we've seen over the past six years of doing this, the impact clinicians can have when they're in the claims data. We've been able to keep claims averaging a nearly flat increase, and that is against all of these major hospital systems and drug systems that keep increasing all of their rates. So that's a true testament to what you can do. And yes, you're right, it is a challenge, but at the same time, it's not as hard as people think. All we focus on is I have to improve these specific individual's lives. I'm not talking about a thousand plus lives. Sometimes I'm talking about one person. And from an HR side, that's the feel good story. I can share a story. One of my favorite stories last year was we had a member come to us that was diagnosed with a late stage of cancer and unfortunately told by the health center that they're going to have to enter hospice care and palliative care.
(12:39):
There's absolutely nothing that they can do. And they came to us thankfully and said, "We just want a second opinion." It was somebody who still had a lot of life to live and they just wanted to give their family full news. And so we were able to use referrals, get them to the leading cancer center here in the Midwest within 48 hours of that call, which is just incredible. And not only did they have that appointment, but they left with a treatment plan and they left with news that this diagnosis is not fatal, that they will survive this cancer and they have been actively in treatment ever since living their life. And so those are the stories that you will never be able to put a price tag on, but that person will always be loyal to their employer group for creating this relationship
Josh Schumacher (13:24):
That
Sarah Michaels (13:24):
Literally saved their life.
Josh Schumacher (13:26):
Yeah. So I love the stories that you get to share and you've impacted so many people. I think as a clinician, you're always jumping to, "Hey, here's how we solve this problem. Here's how we solve this problem." And I love that. I want to jump back first though and kind of summarize kind of where a lot of people are probably at right now in the industry where they are still in this mindset of the claims are just the claims, the claims hit and there's nothing, they might not have a clinical team, they might not have access to these solutions. They're sitting there going, "The claims are just the claims. I can't really do anything about this million dollar plus claim that comes in. This is just a part of my experience." What I'm hearing you say is that's not the case and there are things that we can do about it, right?
Sarah Michaels (14:09):
There absolutely are things. Again, you can't always prevent what has already happened, but you absolutely can influence what's going to happen. And so it's about creating those intervenable moments and figuring out where can I actually take action to be proactive in managing your financial risk, which oftentimes benefits are the second highest line item on any company. And so if we don't have a strategy in place to manage that risk, I think we're doing it wrong.
Josh Schumacher (14:37):
Yeah. So you said companies have a data problem or don't have a data problem, sorry. Companies don't have a data problem, they have a decision problem. Yeah. So can you talk to me about maybe the top two or three decisions, the main things that an employer should be looking either to do or for a partner that can do to really start to make a change in the cycle now?
Sarah Michaels (15:00):
Yeah. Just like any, when you have a huge budget, and again, this is your second highest, there should be strategy in place to keep things stable, to make sure that it's consistent. And so if you're saying claims are just claims, what you're saying is I might have $2 million deficit next year, I might have a $1 million surplus, and you're just throwing things out and hoping that it works, but what is the strategy that you have in place? So a lot of times when we talk about changing benefit plan design, for example, that's just cost shifting. I'm either going to take on more responsibility as an employer in the cost standpoint or I'm shifting that cost back to my employees. That's all benefit plan designs actually do. I want to create actual cost savings. I want to work with groups to identify where are there opportunities to put something in place today that saves people money because the biggest thing that you could do for your employees is, what happens in December if I could create a premium holiday where my employees now get no contributions taken out of their paychecks?
(16:03):
That is significant for a lot of people here in December. And so those are the stories you're trying to create is let's not just keep doing a lot of cost shifting, let's actually talk about cost savings.
Josh Schumacher (16:13):
Yeah. So a strategy needs to be in place. Another thing as we talked ahead of this that you mentioned is just the fact that it's not always just having the data, it's who you have looking at the data. So talk to me about kind of that approach and just talk to me about what else employers can be doing to actually ... So when it comes to actually impacting the claims, let's say they now have a strategy in place, what does that strategy look like? What are kind of the three core components of actually addressing this problem head on?
Sarah Michaels (16:43):
Yeah. So when I was first hired and we started the shift of, hey, maybe wellness alone doesn't work,
(16:48):
I was actually tasked with helping lead our data team. And that was really exciting because all of a sudden I had data and I could create very targeted interventions. I could figure out not just at the individual level who needed some intervention, but you're looking at a group level. GLP-1s continue to be this huge conversation. I don't think they're going away anytime soon. Super Bowl even had them out there with oral medications. Every other commercial. Every other commercial. That will be a problem, but now I shift people's mindset to say, is it really like, do we have to offer these or not, or is the bigger conversation around obesity? And if we actually understand obesity, do we realize what obesity is actually doing long term to our health? What people don't realize is top three conditions we see today, without a doubt, are oncology, cardiac, muscular skeletal.
(17:35):
Muscular skeletal has risen over 300% over the past three years in cost. The reason being is high cost surgeries. We are immediately jumping to surgeries. It's because you have all this extra fat that is sitting on joints that's breaking it down quicker. So when we address any issue, we have to think holistically of what is the GLP-1s alone going to fix it or are there other issues we need to talk about? So in this situation for groups, what are we doing about muscular skeletal spend? So I say number one is just use your data to actually tell the story of what's actually happening. Where do I need to impact? I met with a prospect this week and something they told me was, forever, we have this budget set aside for tobacco cessation program that if you attest that you're going to stay nicotine free, then you don't have to pay as much in your premium.
(18:22):
They said, "But we don't have another budget and we really want to change it to a wellness, like getting people into a doctor, how do we create that budget?" My answer to them is like, "Start with what you're already doing and then identify is that actually working." So you basically said, "We know that the nicotine attestation is probably not working."
(18:41):
I would argue the most important thing you can do is drive people to primary care. Research has shown that over 75% of your most catastrophic claimants, people that are really going to wreck your plan, when you look at had they had spent 24 months leading up to that catastrophic event, they had no claims at all, which means our number one need in this space today is to drive people to establish a primary care physician, get them in sooner, make sure that we catch things earlier to prevent some of these catastrophic claims from happening. So these are just some of the approaches we really look at. You don't need to create a whole new budget. You don't need to even add point solutions, although we can. Of course, clinics make sense when they make sense. And of course, weight loss programs make sense, but not for every group.
(19:27):
And a lot of groups just need to start with the little things and look at the data and figure out what it's telling you. And if you don't have data, you have people survey your people. Ask your people, what do you guys need from us? What do you guys want? Start there.
Josh Schumacher (19:41):
So it all starts and ends kind of with understanding the story and then reacting to that, making sure that you have a partner that can help you react to that story. Because what I hear you saying is you have data, or if you don't, you should be getting data, go get your data, then take a look at that data, make sure that you actually understand what it's telling you instead of just saying, "Okay, this is the data that exists." And
Sarah Michaels (20:02):
Instead of waiting to your renewal. So if you're waiting to your renewal and then using that to justify your 40% increase, that is way too late. Every single month, you need to be in your data, you need to understand what's going on. You should then know come renewal time exactly what to expect. So
Josh Schumacher (20:17):
We've covered a lot of ground today. We've started with what's broken with the healthcare, the benefits system. We've talked about the fact that every employer, especially those HR people who are on the front lines, want to do something about it. They want to take care of their people. And we've also addressed that there's not a data problem. It's an understanding of what story is that data telling you. So as we walk away from this conversation, what would you advise someone who wants to start to understand the story their data is telling them?
Sarah Michaels (20:48):
Yeah. So if you already have the data, take the time to actually look for that story within your own group, ask the question, what is truly driving my claims, whether it be at a group level or at that individual level, and then take it one step further and say, "Now that I know what I know, what can I do about this? " And what people don't realize is by taking that extra step, you might be changing somebody's life because you're improving their lives and that's the best feel good story you could have.
Josh Schumacher (21:19):
Yeah, I love that because for anyone listening, they're probably watching their trend line year after year just keep climbing up and to the right and they feel like there's nothing they can do about it, but that's not true. They can actually get an understanding of their data, get an understanding of their story and start to bend that trend line in the right direction. Yeah. Well, Sarah, thanks so much for joining me today. I think this has been a really enlightening conversation for me, hopefully for the audience as well. Remember, you don't have to keep repeating the same outcome. You are built for better and we're here to help you see how you can break the cycle. Thanks for joining us for this episode. For more on how to break free from the cycle of rising costs and painful renewals, subscribe wherever you get your podcasts.