Subscribe
Share
Share
Embed
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: Good morning, Kevin.
Kevin: Good morning, Martin.
How we doing?
Pretty good.
I'm just, uh, quickly checking in on
a promising little business called
Healthsplash I've been following.
And, uh...
Oh, what's this?
It- I like this photo.
Yes.
This is the CEO of Healthsplash.
Kevin, can you let folks know
what happened in Florida?
The DOJ, uh, looked into his business
and, uh, convicted him of a $1 billion
Medicare cons- fraud conspiracy.
Came out last week that he was convicted
by a, uh, a federal jury of his peers,
um, of defrauding the Medicare program.
Always nice to see folks
getting their billions out of,
uh, taxpayer pockets, so...
You know, it's, it's not skin
substitutes, but it is, it
does seem like a big problem.
I am curious to...
So, like, digging into the business
a little bit, uh, Healthsplash is the
name, but he acquired a company called
DMERx, and basically connected pharmacies
and DME suppliers and marketers with
telemedicine companies who would
write scripts, uh, and doctor's orders
that, that people didn't really need.
They billed Medicare for about
a billion dollars and ended up
collecting about $450 million of that.
Uh, so that's pretty good for them.
I mean, bad for them, but
good, uh- Good and then bad-
Yeah ... I sup- right, right?
Yes.
Good for...
I mean, it resulted in photos
like this one, where he seems
pretty pleased with himself.
I don't know.
Yes.
I...
It seems like a pretty
sophisticated scheme, which, you
know, is, is how these things go.
I th- I'm mostly interested,
Martin, are, are you wearing
this for Halloween this year?
100%.
On that sophisticated scheme front, one
of the things I thought was interesting
is they, they had some sort of visibility
into the Medicare audit process, and
manipulated the doctor's orders to try
and sort of go under the radar of those.
And so, yeah, it seems
pretty sophisticated.
The press release from the DOJ also had
this tantalizing bit which they did not
expand on, which is a photo of the mansion
used in the defendant's music video.
Now, we have not been able
to find that music video.
Um, we did our best.
Claude tells me it's not online anywhere.
It was only used as evidence in the trial.
Okay.
Who knows if Claude's right,
but we s- we searched.
Audience, if you have a line on where we
can find this video- We wanna watch it
... we really, really would like to see it.
Couple other points.
It was in Florida.
No one shocked.
Uh, no one shocked Always
Florida Um, and yeah.
And, uh, the mansion looks pretty nice.
That's like a huge boathouse
It is a massive boathouse Okay.
Kevin, let's get into
the news of this week.
It is Monday, May 18th, and it's
been a busy couple of weeks.
I thought maybe where we could start
was primary care doctors at, uh, Man's
Greatest Hospital, MGB, seem unhappy.
Yeah.
So for the...
This is what?
The second time in two weeks now we're
talking about MGB primary care efforts.
Last week it was them getting critiqued
by the state over their partnership
with MinuteClinic, where they'd be
billing through their ACO for...
MinuteClinic would be billing
through MGB's ACO, right?
Um, this week there was a Boston
Globe article highlighting
MGB's partnership with K Health,
which is an interesting effort.
K Health is a startup that
provides, you know, AI-centric
virtual primary care services.
They partner with health systems
to provide access to, um,
virtual primary care services.
They partnered with a bunch of systems,
Mayo Clinic, Northwell, Cedar Sinai,
Hartford Healthcare, according to their
website, and Mass General Brigham.
Um, they launched this program, per the
Boston Globe article, back in September.
14,000 virtual appointments
have happened since then.
Worth noting here, uh, for the
conversation, it has expanded from virtual
primary care to virtual urgent care.
So as we think about kind of the,
the suite of services, it sounds
a little more urgent care-like
than it does primary care.
I would guess a lot of those 14,000
visits are access outside of normal office
hours for urgent care-type behaviors.
Um, it's worth keeping in mind,
this is a market where we've heard
a lot of public complaints recently.
This was a good article back from January
this year, talk- telling the story of
patient who, I think her provider had
passed away, um, was trying to find
access to another primary care doc,
and, um, reached out to a bunch of
practices, and I, I think she heard
back that she could get a visit maybe
in a year and a half or two years.
Really hard to find access to docs, right?
For somebody who needs access
to a medication, that seems
like a, a, a subpar outcome, I
suppose is, is how I will put it.
Um, so MGB rolling out the strategic
initiative to try to provide more
access for folks like this to be
able to get their medications,
uh, refilled in a timely way.
Seems pretty straightforward, right?
MGB, though, has faced some
pretty substantial blowback
from its provider group.
Its provider group has, um, uh- Been
talking about unionizing in the past,
and I thought this article, which is...
Or this quote from The Boston Globe
article highlights the pushback that
they're getting from their docs.
"Instead of focusing on Band-Aid
solutions, I think they should be
investing in primary care," said Dr.
Kristin Gunning, primary care physician
at Mass General Hospital since 2008.
An AI chatbot is not primary care, Martin.
It can help with the refill of a
prescription, but it is not a replacement.
I can appreciate the sen- sentiment
at a high level, but also I step back
and I think about what it means to
be an employee of an organization.
Martin, you and I have both worked, uh,
for large organizations in the past.
If you spoke to the public newspaper
about a strategic initiative that was
underway, and voiced that you think it's
a terrible idea and the organization
should be investing elsewhere,
what, what do you think would happen
to you working for that employer?
Kevin, please don't read the Minneapolis
Star Tribune article I wrote- ... or
I contributed to this morning.
Uh, in light of this, it seems
like that was, that was ill-timed.
Uh, no, I, I...
When, as an employee, like one
of the first things that they do,
especially as a mid-level, and I
think calling me a mid-level employee
at this would be pretty generous
at, at the places that I've worked.
They sit you down and they
say, "Do not talk to the press.
You do not do that.
That is not your job.
It is not why we hired you."
I would've gotten fired, uh, pretty
quick if I was, uh, out there talking
about how dumb I thought something was.
Yeah.
Also, it's like a real rock
and a hard place for, for MGB.
I mean, like I 100% see where
this guy is coming from, or
this doctor is coming from.
But
one to two year wait times for
a primary care appointment,
like what are we supposed to do?
Yeah.
I, I, I don't know.
I, like, it's...
E- everybody's in a rock and a hard place.
The state is, these primary
care docs are, MGB is also.
But like I, I try to put myself
in the shoes of, you know, I'm
somebody in leadership at MGB,
what am I doing here strategically?
Last week you're getting raked over the
coals because you are trying to bring
in MinuteClinic to provide its what, 80
APPs who are at MinuteClinics who you're
billing for primary care services through.
And the entire analysis is about
how that is increasing cost because
people who did not have a PCP before
now have a PCP, as we discussed last
week, and there's a little bit of
just like pure price increase from
MinuteClinic convenient care to MGB.
But the majority of the cost
increase is, hey, these 80 PP...
A- A- 80 APPs, say that quickly five
times, um, are now seeing primary
care patients and Giving them access
to these services, and okay, that's a
bad thing because it increases costs.
So then, the very next week you're
out publicly talking about how you are
providing access to primary care services
at a low cost via an AI centric video
visit platform, and you're getting raked
over the coals by your own primary care
docs because you're replacing them with
AI and these tools aren't a replacement
to what a primary care doc can be.
I, I, I don't know how you solve that if
you're, if you're an MGB leader because
either way you're taking hits, right?
Yeah.
I think it is worth noting that
there is not, there are not just
a good and obvious ways for us to
reduce the spending on healthcare.
Like, it is not obvious to us yet whether
K Health is actually bending the cost
curve down, but theoretically, right,
two things that are really promising in
American healthcare today are number one,
maybe AI will help bail us out of this
very hard problem that we have, which is
doctors cost more and more every year.
They see a fixed number of patients.
We aren't training a huge number
of new doctors, and so costs
are obviously going to go up.
That's just simple economics.
Um, and then the second thing,
APPs, bringing APPs into...
Uh, and, and both of these things
make employed physicians very upset.
I don't know what to do with that.
Like, I don't, I don't know what the
correct answer is, uh, that would
not make people angry with me if I
was in MGB's m- uh, MGB's shoes here.
Yep.
I...
I'm gonna pose a hypothetical that
I, I think has an obvious answer
to it, but I'm gonna walk through
the logic for a second here.
If, if MGB, if the analysis is right
from the state on MinuteClinic, which
I, I, I presume it is, that MGB has
the highest rates in the state for the
convenient and primary care services
that MinuteClinic is offering, and that
is why it's an issue that MinuteClinic
is, is partnering with MGB, right?
Because they're the highest
rates in the state, it costs the
most to provide those services.
Not good.
It seems incongruent that at the exact
same time MGB's primary care docs are
talking about unionizing because MGB is
not investing in them, not supporting
them, um, because they're getting paid
the most for these services in the state.
You would think that an organization
getting paid the most for those services
could afford to invest in a high
quality environment for their employees
to deliver that care, right Martin?
Yeah.
So if...
I, I, I think the way you explain
that is- MGB isn't focused on
primary care as an offering.
It is focused on being
academic medical center.
It is using primary care as a loss
leader, if you will, to drive profits
into its academic medical center campus
where it can reinvest there, right?
Like, that has to be
the theory of the case.
And so if that's the case, I, I, I...
Why is MGB in primary
care at all at this point?
Like, I, I think that's the hard
question that I struggle with here
of you've got these strategic efforts
that they are, they are trying to do.
They are getting a bunch of
blowback on both sides of it.
At what point do you sit there
and say, "It's just not worth it
for us to be doing primary care.
We're clearly not doing it well with our
employed po- population of providers.
Like, look at the quotes we're getting.
They're looking at unionizing.
They seem to hate working here.
Why, why are we doing this?"
It's interesting to think about that
hypothetical in the context of the
public markets and, you know, the public
h- publicly traded hospital operators,
they tend to not emphasize or talk
about primary care much on their calls.
And most of them say, you know, it's like
our footprint is pretty thin or slim.
Community Health Systems has, like,
an ACO, but, like, it's, it's just
not the thing that people talk about.
Mm-hmm.
And I think you could imagine a future
where the, uh, profit-minded non-profit
health systems, um, are like, "Well,
why, why are we in this business?
If we have all of these profitable
lines of business in surgery, in
ambulatory surgery centers, in high-cost
drugs, in oncology, why are we...
You know, like, yes, the,
the, historically the referral
patterns have been useful.
They've been a useful-
Yeah ... loss leader for us.
But now it just seems like a huge pain.
Yep.
This is why, I, I mean, going back f- you
know, w- uh, five, I guess 10 years now
to when One Medical was embarking on its
health system partnership strategy, it
always made the most sense to me that,
like, they're going to academic medical
centers with a theory that they wanna
focus on the, the high acuity type cases
being the academic medical center, and
they wanna partner out from a primary care
footprint perspective because you don't
wanna be doing both at the same time.
And so I...
You know, Cleveland Clinic, One
Medical, seemingly a good example
of that sort of partnership.
Cleveland Clinic is using that to go
into value-based care these days, which,
um, you know, the MinuteClinic, uh, MGB
partnership is around their ACO, right?
So there's, there's some play in
there that I, I can see the logic of.
But yeah, I, I mean, taking the partnered
approach and saying, "Hey," whether it's
One Medical or K Health that's gonna
come in and do these things and These
primary care docs who work for us today,
maybe there's another employer who can
give them a better employee experience
while figuring out how to, to provide
more access to primary care services in
the Massachusetts area, because clearly
it's, it's, it's not working as is, right?
And I wonder how much of those two
things sort of cut against each other.
Like, ticking off the list of things
that would make it a better employee
experience are probably, you know, smaller
panels and fewer appointments per day
and more time with those appointments,
uh, that, that you, that you have.
And it feels to me less
administrative work.
Um, you know, not getting bothered
by whatever's going on in the
most recent value-based care
initiative that you're doing.
And just, like, I think one thing we
hear when we talk to the doctors is
they just wanna practice medicine.
And an academic medical center like
MGB, especially the sort of crown jewel
of the local system is, is doing a lot
more than just practicing medicine.
It's its own entity in and of itself.
So I would be curious, like, is, is, is
it possible to create more access and
a better employee experience for PCPs?
What's your take on it?
Uh, I, I, I th-
I think if you apply the iron triangle
to that logic, it is really challenging
to figure out how to make that work
without visiting a conversation that the
Wall Street Journal picked up again this
weekend, which is, hey, maybe NPs or PAs
can do that work, because that is the only
way I can think that you figure out how to
increase access at, at lower costs, right?
You, you bring in a different
workforce to do that work.
Or you bring in K Health.
Like I, I, I just, I, I mean, I
actually think it's an entirely logical
partnership for MGB to be, be doing
in a scenario like this because, um,
it, it fits that narrative, right?
The, the only challenging thing
is this quote on the screen.
You invest more in the existing
infrastructure when clearly
that, that, for better and worse,
that's not working, you know?
I would be curious, you know, I...
It seems like one of the areas of pushback
that we get, so it, you see it on the
screen with this doctor, you hear it in
the conversations about NPs and PAs, is
that, like, it is not going to be safe for
us to roll out these alternatives or to
do these things that are potentially labor
saving, cost saving, increasing access.
Like the solution- Sure ... always
comes back to, like, we need more
doctors, but we can't get more doctors.
And- I'm curious how, uh,
from a policymaker's...
Like, I, I think that if you're a
doctor, that makes a ton of sense.
But as a policymaker, I think the
trade-off that you're doing is
saying, at what point is lack of
access more dangerous than someone
who's had less training than a
MD, like an internal medicine MD?
And- Yeah ... is an AI doctor or an
AI-enabled doctor or a PA or an NP
a good substitute for a physician?
Like, I think the...
Just if you look at the, the total hours
of training and the, the rigor of that
training, I think you would say no.
And then you say, but, like, is that
the ac- actually the right comp set?
Because right now, people are on
waitlists for one to two years.
For sure.
Yeah, I...
There's an interesting
undercurrent in all of this to me.
I, I mean, hearing you talk about
that, one, it very much reminds
me of what we are seeing go on
actively in the state of Utah, right?
Where you've got policymakers
saying, "Hey, we wanna ease access
for a relatively basic task.
We think AI can come in and do that."
State Medical Board obviously
disagrees, with the crux of their
argument being safety concerns, right?
It's gonna screw up and put
the health of, um, our state at
risk, and that's a bad thing.
That, I think, is the argument
we see in spades in a variety
of different ways, right?
We'll get into this in
access in a little bit here.
But, like, it, it's always the
looming threat of safety is at
risk when you do these things.
And that is, I think, why it's so
hard to do politically, because
no politician ever wants to be the
person who puts safety at risk.
That is a great way, uh, to
lose your, your seat, right?
And so inevitably, when that
criticism gets raised, you back
off real, real fast because nobody
wants to put safety at risk.
Yeah.
I, um, I think there's a fascinating
undercurrent in all of this,
too, which is, um, the employment
status of providers writ large.
Obviously, it has been a macro trend
over the last several years that
providers, physicians are, are no
longer practicing independently.
They now work for an employer, whether
that employer is health system, vertically
integrated player, um, financial backer.
And it strikes me that a lot of this
is unhappiness with the relationship
between an employee and their employer.
Like, uh, employees across the country,
across the world are grappling with this
issue of their employers potentially
bringing in AI that replaces them
because it does it more efficiently.
And it's just kind of a fact
of life these days, you know?
Like we are all dealing with this
transformation, uh, regardless of where we
work or what type of job we're working in.
And part of me is, um I am
empathetic to the issues providers
face on the, on the whole and
the challenges in that workforce.
I, I'm not that empathetic to
this argument in particular.
Like, we're all dealing with AI
transformation and what the, the
downstream implications of it are.
I, I don't know.
Yeah.
It, it, it's hard and
I, I think that the...
You know, I've been calling the top of
physician employment for, like, eight
years now, and so you shouldn't listen
to me on this particular, uh, prediction.
But it does seem to me like we are
at a, at a high point for physician
dissatisfaction with being employed.
Right.
And for a lot of reasons, you could
imagine that just, that number just
stop trending in the direction of
employment and start trending towards
being independent physicians again.
Like, I for one am not personally
worried about primary care doctors
getting replaced by AI, and I think
that that, that fear is misguided.
Um, but I do think that a hospital
and a physician have this arrangement.
You know, you- if we think about, like,
why the, the firm exists to reduce
transaction costs, it doesn't seem like
it's doing that with, uh, with doctors
and, uh, and hospitals at the moment.
And it might be time to reevaluate where
those physicians are sitting and what
their employment status looks like,
and figure out the right logical home
for them, as we were saying earlier.
100% agree.
I think it, it's a good way
of framing the conversation.
If you, if you unpack this provider's
quote, it is, I think, fundamentally
about the transaction costs
increasing working inside of an MGB.
Because from her perspective, they're
investing in the wrong things.
And again, go back to
the beginning of this.
In an environment where MGB is already
the highest cost primary care provider
if you look at their rates, it shouldn't
be the case that they need to invest even
more in their primary care providers.
There should already be more than enough
investment in primary care when you
are the high-cost group in a market.
If you need to invest more, it's
like, it's not working, you know?
I, I just, I don't get it conceptually.
I don't think we can afford it.
Yeah.
Yeah, it's, it's a hard problem and,
you know, I think if, if you do have
questions about how your employer is
making investments, maybe don't go to
The Boston Globe, or in my case, the
Star Tribune questioning that publicly.
Sorry, Kevin.
Um, before we go on to our next
segment, want to take a quick pause.
Um, so w- this, today's show is
being brought to you by Ursa Health.
Over the last decade, Ursa has
quietly powered some of the most
recognizable names in value-based care.
When they built, uh, what they
built in partnership with Agilon
Health is worth a closer look.
A financial data pipeline spanning
30-plus full risk payer contracts
that achieve forecasting accuracy
within a fraction of a percent.
If you're thinking about VBC data
infrastructure at scale, you should
check out Ursa Health at ursahealth.com.
That's U-R-S-A health.com.
So
thank you to them for
sponsoring this episode.
Um, wanted to, you know, the
chatter on access this week has
been kind of making me laugh.
Broadly, digital health companies
are kind of pushing back on, on
access, especially a lot of the
companies that attended the kickoff.
You were at the kickoff, uh,
rubbing elbows, rubbing shoulders?
I don't know what the idiom is,
with, with a lot of these folks.
Curious for your read of the
situation, um, and specifically
of, of Daniel's quote here.
I, uh, y- I, I think the journey has
been, has been, uh, well hashed at
this poi- You know, I, the kickoff
was a lot of energy, enthusiasm in the
room, a lot of excitement around this
concept that we are going to be able to
have this outcomes-based payment that
is going to drive change in the way
Medicare beneficiaries are, are treated.
That conceptually everybody is aligned
with, "Hey, pay us based on outcomes."
Fast-forward over time, rates
don't come out for a bit.
There's questions of where rates
are coming in and why they're
taking so long to come out.
And then they do come out, and they
are lower than anybody expected.
And it starts this, this, uh,
teeth gnashing in the industry of
how are we gonna make this work
from a profitability perspective?
When all along CMMI was signaling
that, you know, the rates are gonna
be low enough that you're not gonna
be able to, to take an existing
model and figure out how to operate
profitably in this new model.
You're gonna have to build
from the ground up and rethink
the underlying infrastructure.
Those rates are now out.
We've now had, um, uh, the first
round of applications be announced.
I think it's, what?
150-plus companies that are
participating in the program.
And now that that's out, last week
we saw it was both Endpoints and Stat
came out with articles chatting with
the digital health industry about the
issues that they see with this program.
Um- It, it, it seems like it's
been a topic of discussion behind
closed doors in the industry for a
while, that digital health as, as an
industry, if we wanna call it that,
is unhappy with CMMI's rates, that
they wanted higher, and they're not
gonna be able to make this work.
We saw that in the attrition from
that slide that was up at that
first session to who actually
participated in the program, right?
A lot of digital health opted out.
And this quote from Daniel Perez, who's
CEO of Hinge Health, which is obviously
one of the big, um, uh, digital health
players, public company, uh, was
the most pointed I have seen anybody
in their critique of CMMI to date.
"Access Program will not improve outcomes.
It will not improve the experience.
It will certainly not reduce costs, and
the way it's been structured, digital
health companies have to basically remove
any sort of clinician human oversight."
It's a pretty direct rebuke of the
program, and definitive in its not
improving outcomes, not improving
experience, not reducing costs.
What do you make of that quote, Martin?
I thought it was a, a sort of
incredible thing to, to say out loud.
And the reason for it is that there's,
like, a, a sort of very strong ethos
in Silicon Valley where we say we're
gonna take, we're gonna take these
sort of low-probability, um, you
know, long-shot bets on things and,
and see if they work, 'cause if
they do, it could change the world.
And it has been almost sort of unanimous
in, i- in, in the criticism, and it's
been coming from these, like, Silicon
Valley companies that, that, you
know, it feels like they should be, be
rooting for something like this, even
if it doesn't work for their business.
If you look at Hinge's, you know, like,
last, um, last financial statement,
like, they're having a great...
They had a great quarter.
They're growing like crazy, and this
would not be a good move for them.
The, you know, if you...
Like, the NPV does not pencil out for
them to, to do access at these rates.
And that to me is the beginning and
the end of the, the statement, right?
Like, it's like, "Yeah, this doesn't
make any sense to us, but good luck."
Um, so that's, that's, I think, my...
was my sort of personal reaction.
I am pretty sympathetic Because I
do think it is a very long shot bet.
I think, you know, if I had to, to sort
of place the odds, I'd be somewhere in
the one to 100 or one, one out of 1,000
that we are actually going to improve
experience, reduce costs, change, uh,
change the trajectory of these patients.
There's a...
You know, whenever we mention access,
people come out of the woodwork
and they say, "There's going to be,
um, like, this is going to select
for already healthy patients.
This is going to ignore patients who
are the, you know, sort of actual
drivers of spending in healthcare."
And like- Mm-hmm ... that all,
that all makes sense to me.
Um, I'm- Do you- Go ahead, yeah.
No, no, no.
What were you gonna say?
You think it's one to 100 that we're
gonna do any one of those three,
or all three of them together?
Well, I think that doing all three of them
together is basically impo- impossible.
I mean, we talk about the iron
triangle- Yep ... and the sort of
physics of healthcare spending here.
And when Access first got announced and
you and I did our little debrief on that,
I said something along the lines of,
"I'd be willing to spend a lot more for
basically any of these outcomes," right?
These are all very good things on the
merits, and they're also very expensive.
And so our willingness to pay as a
society, just on the basic societal
level, should be very high for, you know,
reversing cardiometabolic disease and
depression and musculoskeletal diseases.
And so, yeah, I mean,
I am, I am skeptical.
I am, I am quite skeptical, and
also I think that it is a good
thing for CMMI to be trying.
I'm curious how you're
processing all of this.
I, uh, overarching, I am in 100%
agreement that I think this is exactly
what CMMI should be trying to do, right?
And I, I, I think most
of the industry has...
Like, as I read the endpoints and
stat articles, I, I think there is
a general acknowledgement of like,
yes, this is the right direction to
head, this concept of outcomes-based
payments, generally supportive of it.
To your point, yes, the financials are
a challenge, and, uh, as we'll get into
later in the show, we're seeing what
happens when companies adopt AI, see
margin degradation as a result of that.
And, um, turns out investors don't,
don't, don't love that when that happens.
Um, okay, so that's a
self-evident statement.
Of course digital health is
not gonna participate if it
results in margin degradation.
Um, and they're indicating kind
of what's behind that, right?
Uh, they have humans in the loop in
their process and- Access is testing this
theory that maybe we don't need that.
And I, I'm not ready to give up
on this idea that, that we can't
im-improve experience, reduce
costs, um, uh, and improve outcomes.
I think it'll be really
interesting to see.
I am particularly excited for companies
like Whoop and Withings to see what that
looks like as they c- enter the market,
and how they think about structuring this.
Because e- they are consumer-grade
experiences, so I would imagine at
least a subset of companies show
that we've got a better experience.
Maybe it increases cost, maybe it doesn't.
Everything increases cost, so I think
it's a safe bet to suggest that costs
are gonna go up, um, despite what
this program is trying to achieve.
But I'm excited to see how it plays out.
It's easy for us to say that as
commentators on the space without,
like, our P&L being reliant on
making this model work, right?
I, I...
If I'm sitting in Daniel's shoes
or Sean Duffy's shoes at Omada, he
was quoted I think in both of those
articles as well, I, y- you've gotta
take a look at your profitability, and
you've gotta communicate to investors.
And I can understand why they're
communicating what they are, and they
are starting to push back more on
CMMI in this process of saying, "Hey,
listen, like, we support the concept,
but the rates just don't add up."
Um, so it's an interesting game of who's
gonna blink first, in my mind, between
CMMI and the digital health stalwarts.
I, I think back to what we've heard
a couple of times from CMMI that, uh,
this is intended to push incumbents, and
you're not going to be able to, to rethink
from kind of that seat of incumbency.
And I continue to think it, it, it p-
pokes at the digital health industry
as acting like an incumbent model,
which I don't think historically,
like, any of us think of digital
health startups as the incumbent.
But CMMI is implying that here, right?
Which I find fascinating.
And I think once you're a public
company, you, for better or for worse,
are an incumbent at this point, right?
If you have quarterly earnings
reports, and you have to go and
tell your shareholders what's going
on, and your valuation isn't just
based on, like, a dream about what
is possible, then yeah, I think you,
you at this point are an incumbent.
And that's just part of growing up,
is you sort of letting go of- Yeah.
Yeah.
You have to act like an incumbent
because your investors expect it of you.
Like, it, it's, we, we talk
about incumbents in this,
like, derogatory-type phrase.
But what it actually means a lot of
times, I think, is that you actually
have to pay attention to your profit
margin and grow your profit pool over
time, which is the ex- expectation of
every business in a capitalist mindset.
It's just they have to show cashflow
versus the inc- the, um, the insurgent
category, which can generally
subsidize losses with the expectation
that an incumbent is going to buy
them one day, and they'll have to
figure out how to generate cashflow.
It's not the insurgent's issue.
So you can get capital out before anybody
has to figure out that, that side of
the world, and nobody wants to do that.
Anyways.
I will also say that, like, it is,
I think, a moment where people are
feeling pretty down on capitalism,
but the nice thing about, you know,
having gap profitability is then,
then you pay taxes on those profits.
And, like, those are things that
fund stuff we all like, and i- it
is a, it is a system of trade-offs
where we have to say, "Okay, you...
We want you to optimize for X,
Y, and Z," and then, uh, we let
them go and optimize for it.
And yeah, there's, there's
some, some trade-offs there.
But we, we want, we want Hinge and,
and Omada, and the other publicly
traded companies to generate profits,
which is how people retire, and
to pay taxes, which is how we fund
things like schools and bridges.
I don't...
Like, it doesn't feel
that controversial to me.
I am gonna make an argument at some point
here in the near future, controversially,
that more capitalism in healthcare
might actually be a good thing.
Like, trying to get it to be more
of a market, trying to solve some of
the efficiencies so that it can act
like a market, would actually be the
best version of American healthcare.
I'm gonna duck and walk
away after saying that.
But I, I don't know.
There's, I, I think,
uh, something to that.
My sort of duck and walk away yes and to
that is- ... uh, large metropolitan-based
nonprofit hospitals should probably
get taken over by HCA or Tenet or UHS,
because I think that they would run
them with better sort of discipline.
But- I, I, I don't disagree.
I don't disagree.
Yes.
Um, well, up next we have Loren Adler.
He's a fellow and associate director,
uh, for the Center on Health
Policy at the Brookings Institute.
I'm gonna bring him forward.
Today we're talking about
the no surprise act.
Loren, it's nice to meet you.
Nice to meet you.
Hey, Loren.
Hi.
How are you doing today?
Loren: I'm doing great.
Uh, how are y'all doing?
Kevin: Doing great.
So I think with our audience, the health
tech nerds, you can assume a pretty basic
level of understanding on the No Surprises
Act and IDR, balance billing, baseball
style arbitration, bankruptcy of Envision.
These are all things that we've
been talking about for a while.
But for people who are just kind of tuning
back in to the, this after the coverage,
um, in The New York Times, what's
working well and what isn't working well
roughly f- four years into the process?
Loren: Sure.
I think it's a great question and
good to level set, uh, in all of
these discussions here, but right.
So basically, we had this issue
of surprise billing, right?
The canonical case, it's
an emergency situation.
You go to the ER.
Actually, most of the time,
the hospital itself is in your
insurance company's network, right?
We're talking about folks with
commercial insurance, uh, here.
This isn't sort of Medicare or Medicaid.
And it turns...
You know, the hospital's in-network,
but it turns out the emergency
physician group, uh, is not in your
insurer's network, and basically,
you know, uh, there's no contract
there, so the insurer pays something.
The, the provider group bills you, bills
the patient for the difference between
what the insurer pays and, and what
they, what their sort of like dream
list price, uh, is for this issue, and
patients kind of get stuck in the middle.
I think the, right, the good parts
are, right, the No Surprises Act
pretty clearly protected the patient
from those one-off large bills, right?
It pretty cleanly took
them out of the middle.
And it's, right, it's not just emergency.
The other, the other sort of big case
here is, I think elective surgeries,
where again, you pick your surgeon,
you probably pick your hospital,
but you're do- not picking the
anesthesiologist who, uh, you know,
is putting you under for the surgery,
or the radiologist or the pathologist
where your labs are going, right?
Those are the pieces where you kind
of get stuck in this same situation.
So basically, the law came in
and really did this sort of
three-prong, okay, fine, you can't...
The pa- the provider can't balance
bill the patient anymore in these
out-of-network situations, and the insurer
has to treat this as an in-network service
for purposes of patient cost-sharing.
And then the last piece, which is
sort of where all the, the fighting
and implementation challenges is,
uh, have been, are, okay, we need
to require the insurance company to
pay the provider, the out-of-network
provider something here, right?
There's no contract.
So what do you do there?
And, uh, sort of in prototypical Congress,
they kind of effectively punted and
created this, uh, bureaucratic, uh,
pretty opaque process called independent
dispute resolution or, or think of it
like an arbitration process and then
the insurers and providers have to hash
out, you know, sort of what the, the...
They have to each make their best offer
of what they think the right price
should be, uh, and then this arbitrator
is with some guidance in the statute,
but not super clean guidance on exactly
how they're supposed to consider that.
They have to decide, you know,
whose price- Should hold the
day, um, for these services.
So again, right, the, the key
is the patient has been removed.
They're not getting, you know, this
large bill, you know, in emergency room.
You know, they were often patients
getting hit with $1,000 balance bill.
That part is not happening.
However, we've sort of moved a little bit
downstream, and now we have this question
of, uh, this arbitration process to date,
at least, has been awarding prices that
are far higher than what price prevailing
rates used to be for these services.
So I think that's what the some of
the work that myself and colleagues at
Brookings and other folks as well have
done is trying to compare the prices
emerging from this arbitration process
to sort of the prices that used to be.
And then, uh, Congressional, uh,
Research Service has also sort of
compared them to current contemporary,
contemporary rates as well.
A- and the sort of core finding is,
right, the prices here are just far
higher, uh, than they used to be.
In radiology, for instance, the average
outcome in IDR is a- almost four times
higher than what average prices used
to be, uh, what average and network
prices used to be for these services.
And that leads to the question
of, okay, those costs don't just,
like, disappear into the ether.
Those don't just come
out of insurer margins.
Those are fundamentally costs that
are going to get passed on to patients
and consumers through higher premiums
and higher cost-sharing, right?
I think, yes, they're protected from
that balance bill itself, but if you
are gonna raise the price of something
by, you know, 100%, then eventually the
insurers are gonna start charging more
cost-sharing, uh, you know, along with
that service, even if they can't...
You know, they can't change the cost
sharing on the individual service
that was in the process, but, you
know, if we're talk- taking a five,
10-year lens here, uh, that they will.
Kevin: Lauren, so if I, if I think
through the logic, um, that cost, uh, uh,
largely in the employer market, is going
from being balance billed to employees,
so them having to pay for it directly.
Now it's being paid for by the employers.
I would think that would be
showing up in employer rates, what
they're paying for medical care.
And then you made this point, I think,
on Twitter, what was formerly known as
Twitter, now X, about a week ago, that
if that's showing up in employer, uh,
premiums, um, or what, what employers
are play- paying, that will eventually
come back to hospitals and rate
negotiations and those conversations.
Are you seeing evidence of that
kind of sequence of events playing
out in the market right now?
Loren: I'd say so far it is
mostly still anecdotes, and
I, I think that is difficult.
I don't think we have good
systematic data on the question.
I will say part of that, in my view, is it
took a while for market actors to figure
out how this process was going to go.
I, I think if you polled stake--
industry stakeholders back in 2022 when
this law was first being implemented,
or in 2021 right before it was being
implemented, a lot of folks thought
this process was going to lead to
prices coming out of arbitration that
looked actually pretty close to, uh, to
average and network prices beforehand.
And there was this thought that they'd
actually look like median prices.
And right in, in these specialties
in particular, there was kind of
this dynamic where there's, you know,
twenty, thirty percent of the market
in something like emergency medicine is
these large private equity backed firms.
And the thought was that
they were getting paid...
You know, they were earning sort of
substantially higher rates than the
average, um, which sort of meant like
the mean, you know, the actual sort of,
uh, weighted average was higher than
the median because there's, you know,
they're only thirty percent of the market.
Uh, and so there was this
thought that there might actually
be some rate compression.
Uh, and, and I think you saw some of that.
Again, it's anecdotally in sort of the
initial way this law was being framed.
In 2022, you saw lots of complaints
from provider groups about, "Oh, this
insurer is taking an aggressive tactic
to try to negotiate down my, my prices."
So a-a-and then, you
know, it wasn't really...
We had a lot of court cases over the
implementation of the arbitration
process, and it really wasn't until
2024 or so that it became clear, I
think, how high the prices actually
have been coming out of this process.
And then, so we're, we're sort of
finally starting to see that now
factor into future negotiations.
I think in 2025 is probably the first
time you plausibly would have seen that,
but I really think it's 2026 is kind of,
right no-right now is the first year,
and certainly you're hearing anecdotes.
That New York Times story that you
referenced, you know, had a couple
anecdotes of payers talking about it
adding one or two percent to premiums.
But it is-- I think we still don't
have a great answer, and I'm...
This is my, uh, I don't know that we will
have a clean answer for another couple of
years, in part because there still are...
I should note, one big issue right now is
that a lot of providers are complaining,
yes, they're winning all the time, but
the insurers are not necessarily always
actually paying at the end of the day.
And, uh, and now there's-- a lot
of courts have weighed on in, in on
this, and it is unclear at, at best
whether there is any pri-private right
of action to enforce these awards.
I think most courts have said
you can't enforce these awards
in courts, but it's been split.
Um, the government can fine the
insurers actually quite a lot of
money if they aren't paying up,
but they have not done so to date.
But all, all, all to say, this is
just sort of one of these, another
hindrance towards getting toward
equilibrium, is that right until the
provider can only use it in negotiations
if they're actually getting paid
by the insurer in this situation.
So, uh, it's just another sort of hiccup
on the road to, to, to figuring out kind
of how this, uh, this all plays out.
But certainly eventually, and you
certainly hear it in- The way some
of the provider groups discuss
this, that it is, okay, I'm getting
paid eight times Medicare or four
times what I used to get paid.
Like, I would love to be in network
if you can pay me more than you
used to be paying me, and...
Right?
This is sort of replacing.
I, I think there was a great-
Kevin: Yeah
... Loren: Team Health, who's one of the large
PE-backed emergency physician staffing
companies, had this great quote about how,
you know, uh, basically to the effect of
we don't want to do balance billing, but
balance billing is a contract leveraging
tool, uh, for them, which is now I think
the IDR process has sort of replaced
that as their contract leveraging tool.
But a- again, I think we're starting
to kind of see that now in this cycle
and, uh, more probably into 2027
and beyond how that, when this sort
of starts flowing through, uh, more
to, to, uh, to the sort of premiums.
Kevin: So it feels to me like
neither provider groups nor
insurers were particularly
pleased with the status quo ante.
Now they're, neither group seem
particularly pleased with this
compromise and the implementation of it.
There's a bit of, like,
sort of Washington, D.C.
consensus, which is that if everyone's
unhappy, it was, like, the right solution.
I don't know that that is true for, for
this particular case, but I'm curious
to get your perspective on whether
this was the best that we could do.
Um, and if we had another bite at
the apple, what would you recommend?
Loren: That's a great question.
Uh, the short answer is certainly far from
the best we could have done, uh, here.
But right, I think if you poll market
participants now, I think the provider
groups are quite happy with how...
They want the law, right?
They want the payments enforced that
insurers have to actually pay them, but
I think, I think in their wildest dreams,
they couldn't have hoped to be getting,
you know, uh, the CRS report is three
times the median in-network price today
they're getting through arbitration.
I, that, I, I think very few people
would have even dreamed they were gonna
do that well, uh, in this process.
I think from the get-go and from the
congressional re- back when this debate
was happening before 2020, there was a
lot of, I mean, these sort of economist
types like myself and some folks at
AEI who I had, had worked with, were
sort of advi- uh, explaining that
arbitration had a lot of risk to it,
in part because it is very opaque.
You, you don't really know what's
going to happen in the process.
It risks being captured by providers.
I think at the end of the day, these are
human beings making these decisions in
arbitration, and human beings tend to be
more sympathetic to, uh, to physicians
than they do to insurance companies.
And I think very few kind of think
through, okay, if we raise prices, if we
double prices on everything, around 10%
of claims spend, that's gonna affect,
uh, you know, that's gonna affect how
much, uh, people are paying in premiums.
Um, obviously, employers are pretty
unhappy a- at the way things have gone.
You know, I'll say I, I think given
the political realities of Congress,
I, I think most of It would have been
much cleaner to just pick some sort of
benchmark and say insurers have to pay.
The out-of-network rate is now gonna be...
It's fine.
If you wanted to base it on average
in-network prices beforehand, you
would have said, okay, or even convert
that to a percentage of Medicare.
So you'd say, okay, the insurer
has to pay 250% of Medicare for
this service, and then it's done.
But like, that, that's,
that's how it exists.
I think another piece that myself and
some colleagues had, particularly for the
non, for the non-emergency services in
particular, the cleanest solution here
always seemed to me to sort of deal with
this by regulating the contract design.
'Cause at its core, the issue is that
the anesthesiologist group, the surgery
group, and the hospital are allowed to
negotiate discordant contract statuses
with the same insurance company, whereas
to a patient, that seems insane, right?
It, it just, it makes no sense to me as a
patient that the hospital I'm going to and
the anesthesia group, who I have no choice
over, who I see can have a different
network status with my insurance company.
You could simply make that illegal, right?
That, that is one of the solutions
that came up in the Senate.
The, the, the Health Committee in
the Senate had raised this as one
possibility earlier in the debate.
They called it the in-network guarantee.
Um, it sometimes got
called network matching.
But that's the basic idea, is you
just say, you can't have discordant
network status here, and then you
just sort of force there to be a
tri-party market negotiation between
the insurance company, the hospital, and
the anesthesia group here, and then...
But now the patient's out of the
middle, and you have this actual...
And then the market gets to
decide what the price is.
We can talk all day about problems
with markets and healthcare.
Uh, I don't pretend that that
is sort of leading you to
necessarily the perfect price.
Uh, but it is a...
I, I always found that the cleanest
solution, um, but it never...
I, I mean, it had some appeal,
but did not get terribly far
in the congressional debate.
Kevin: I'd be curious about your sense
of where all this lands in the near term.
It sounds like last week there was
some provider group advocacy, uh,
reporting, uh, that, you know, insurers
aren't following the NSA process.
Um, CMS sounds like it's
considering new IDR entities.
There's an IDR operations rule at OMB.
Martin knows more about that than I.
But I, I'd be curious.
Seems like there's a lot of
activity, increasing coverage.
We're seeing the New York
Times articles, et cetera.
Um, we're seeing both payers
and providers making their cases
on social media and elsewhere.
Where does this land in the near
term over the coming months?
Loren: I honestly, I think there's
probably not a ton of movement that
happens on the big picture changes
on, you know, sort of what are the
prices that are coming out of IDR.
I think it's honestly hard to see Congress
coming back to that question in the
near term, next year or two at least,
uh, in that sort of timeline, in part
because this is sort of the standard
difficult political economy question,
where you have a very concentrated
ga- uh, group of winners here, right?
You have just sort of emergency medicine
and anesthesia groups, particularly the...
Right?
This process has been dominated
by a handful of firms.
You know, it's TeamHealth, SCP
Health, and, uh, Radiology Partners
are just a huge chunk of what's
happening in this process, right?
They would lose from a law that does,
that, that sort of tried to bring
this back down to market prices, but
the gainers are very diffuse, right?
So you have this concentrated losers
in that situation and a very diffuse
group of benefits, beneficiaries
who are, you know, all premium
payers, all employers in the country.
That, that sort of makes the politics of
this, uh, quite challenging, honestly.
So I think you'll get these
things at the margins, right?
There is this rule right now, but that's
more about making the process itself move
a little smoother, so it's more technical.
It's trying to say, "Okay, let's
try to help, to improve the flow of
communication between the two parties."
That's useful.
Uh, it's just not gonna change the
sort of overall cost impact of the law.
One good thing that they are trying to
do is there's been a lot of ineligible
submissions going through the process.
So there's been a lot of services that
were not eligible f- like they were
either covered under a different state
law, there have been reports of Medicaid
claims or a Medicare Advantage claim
running through this process that never
belonged there in the first place.
So part of what this rule is trying to
do is trying to weed those out and sort
of penalize you for doing ineligible
submissions, and also forcing insurers
to give sufficient information to
providers so they know how to do that.
I think some of that, some of the
problem wasn't just on providers doing
this on purpose, it was partially
just not getting correct information.
So I think there's some smoothing of
the process, but again, nothing, uh,
nothing near term seems like it is
going to change the fact that we're
getting, you know, prices at, you know,
radiology prices four times higher
than, than prior in-network rates.
That certainly doesn't seem
like a near-term, uh, fix.
I think the only other, uh, near-term
one which maybe has some play, the
providers have been pushing a bill to
up the penalties on insurers who don't
pay in a timely fashion the awards.
That has had some legs on the
Hill, but it's unclear how much.
And again, the, the government
already has the authority to fine
insurers a pretty substantial amount,
uh, i- if they are not paying.
So I, I think there's a little
bit of everyone trying to figure
out exactly what's going on before
they start levying those fines.
But, uh, I don't have a great
answer for exactly why that, uh,
why that hasn't happened yet.
Kevin: Lauren, we've kept you
a little bit after your time.
This has been hugely helpful.
Where can folks follow for your writing
and thoughts on healthcare policy?
Loren: Sure.
So you can look me up.
All my, uh, all my writing tends to be on
the Brookings Institution, uh, website.
Uh, you can look up my name.
I think I'm the only, uh,
Loren Adler in the US at least.
And, uh, and I...
Find me on Twitter at, @lorenadler, or
on X I should say, uh, as well- Loren
... where I usually am pushing out my work.
Kevin: Thank you so much
for your time today.
Loren: Yeah, thanks for having
Kevin: me.
I appreciate you, Loren.
You know, I've been balance built.
Oh, yeah?
Yeah.
How was that experience?
Well, it was pretty funny.
I was like, you balance built the wrong
guy, 'cause I know all about the NSA
IDR, and you are not allowed to do this.
All right.
You had a great musing in the
newsletter yesterday on pharma.
Can you walk me through what's
going on with this chart?
So pharma, advocacy group for the
pharmaceutical industry, uh, was making
this point, um, in a white paper,
I think they put it out last week,
arguing, generally speaking, against
the most favored nation drug pricing
model, suggesting that, uh, the US,
while, you know, it arguably does
pay more for, for drugs, uh, benefits
because it has the most access to, uh,
new medicines of anywhere in the world.
And I found this, this
chart to be pretty striking.
Like I, I'm, I'm predisposed to take
what I hear from advocacy groups with
a grain of salt across the board,
whether it's the pharma groups, provider
groups, insurance groups, you know
you're gonna get the slanted case.
And you know you're getting that here too.
Nonetheless, it's really compelling.
United States, 88% of new medicines,
I think it was within, yeah, within 10
years you can see in the subheaders,
um, are all approved indications are
being reimbursed by public insurance.
You compare that to the other
major economies across the globe.
You've got Germany that's
next, 30, uh, percentage points
less than the United States.
And to me, I think it highlights the
state of, of access to new medicines
funding innovation in this country.
And pharma is kind of in a fight for
their lives over, "Hey, like we need to
continue funding this sort of access to
new treatments because this is what pays
for the development of these drugs."
And I don't know about you, Martin, but
I look at this chart and I'm like, I, I
wanna live in the country that is at 88%.
Like, that seems like a unambiguously
good thing before we get into the rest
of the conversation about what that
implies of the trade-offs in healthcare.
Yeah.
Would you agree?
I, 100%.
It's like the question is like,
are you willing to pay for it?
Right.
And like- Yeah ... personally,
I feel like, yeah, no-brainer.
Like, we should definitely, we
should definitely get first.
Yeah, I- Yes ... I lived in, in one
of these countries that didn't have...
I mean, let's go to the
next, the next slide.
So this I thought was funny.
Uh, not funny But, um, news from
around the world, this is also part
of the pharma- Is not the right word.
Uh, it's definitely not
the right world, uh, word.
Yeah, I mean, so they're just talking
about long waits, denied access.
Yeah.
Uh, terrible news.
The H- HA- H- HAS is unfavorable to the
reimbursement of the drug that slows
down Amélie Charcot disease in France,
and it's like, this is what you get.
This is...
You know, I lived in France for three
years, and the thing that was always
happening is, number one, uh, the
French government was always playing
extreme hardball with the pharmaceutical
industry, some of which were located
in their country, and saying like,
"Sorry, we're not gonna cover that."
And that is upsetting to people with,
you know, a particular disease state,
but they're like, "We also don't have
any money, 'cause every time we try to
raise taxes, people put on these yellow
vests and shut down the whole country."
Uh, and so that's the trade-off, right?
I mean, that's like the
trade-off that you get.
And- And in this country...
You go.
No, no, no, no, no.
I was gonna say, in
this country, you can...
I, I can almost see pharma and the
representatives going around DC with
this white paper and showing politicians
this graphic and being like, "Do you
wanna be the politician responsible
for this headline in this country?"
And the answer, I would
think, again, is no.
For any politician, you do not
wanna be the person in this country
responsible for taking down access
of new drugs from 88% to 45%.
That is a great way to get
run out of office, right?
The political incentives are very bad.
People don't wanna pay more taxes.
They like the current level
of access that they have.
And it is, I think, very easy as we're
sort of taking a step back and having
an academic discussion about what we
might do to lower costs in healthcare.
Mm-hmm.
And it is very hard, I think, to have
that discussion without thinking about
what it would be like if your student,
or if your child had a rare lung disease
that wasn't getting approved or, you
know, this life-changing treatment in
the UK, or, you know, the progression
of this, this incurable disease.
Like, 'cause it costs a lot of money,
and a government- Sure ... panel is
saying, "Well, we just can't afford it."
Um, and that might be the right answer
for a particular government thinking about
their trade-offs, but it is, uh, if you
can afford it, it feels like it would
be a nice thing to be able to, to do so.
Yes.
It is the hard situation that we
are- In, in American healthcare,
I think, of trying to balance that
and digesting the costs of these new
miracle drugs that we are all seeing.
So holding that, that thought there
for a second, I find it fascinating to
juxtapose that with a thought that I
am hearing more and more these days.
It was interesting to see it come up
in TBPN, uh, last week in an interview,
and then I think was summarized nicely
here in this, um, this post on X.
But basically the thought goes,
Martin, you know, K- Keytruda, which
I think is number four on that list.
I think it's that pembro...
I, I think it's that one.
Um, is at 26 billion of revenue, going
to 32 billion of revenue in 2026.
That's more than OpenAI's generating
in 2026 at only 25 billion.
The TBPN clip is basically the, the TAM,
total addressable market, for pharma
is way bigger than anybody realizes as
this, um, as generative AI comes to the
forefront and we reach this, this point
of AI being able to do everything for us.
Everybody in the AI industry is gonna
start looking at pharma as, "Oh, I'm gonna
go develop the next miracle cure," and the
addressable market is, is huge for that.
Which is just like the quintessential
problem to me in American healthcare of
we look at the TAM and the entrepreneurial
opportunity of doing good, which
by the way I think is a good thing.
Like, we want entrepreneurs
to go develop Keytruda.
That, that is where we should
be spending time, I think.
But at the same time, like, the
addressable market that is being talked
about on TBPN is also the issue that
we have with healthcare costs as a
percent of GDP at the exact same time.
And the fact that we have those
conversations entirely separately
from each other to me is the issue.
Like, if you're an entrepreneur
building the next generation of
cancer drug and turning cancer into
a chronic condition, that is great.
We should have more people doing that.
We also can't have an abundance of
drugs making 30 billion of revenue
a year from a cost perspective.
Like, the math does not math, Martin.
It sure does not.
Ah.
I'm out of breath.
It sure does not.
Yeah.
And I think it's just very hard
to, to have, given the political
constraints of the system that Lauren
was just talking about, it's very
hard to have an honest conversation
about those trade-offs, right?
And say- Yes ... we're, i- if we want
to spend less on X, we need to also...
That, like, means ticking off these
treatments and reducing the TAM and
making it harder for us to bring on...
You know, part of the, the hard thing
about scientific innovation is that
it's also, like, we can't just point
to a thing and say we wanna fix this.
It, it, it, it comes up,
uh, sort of randomly.
So I want you to, uh...
Kevin, we have a, our
next guest is ready to go.
Can you tee us up while
I bring him forward?
Yes.
Ex- very excited to have Will
Johnson joining us from Guide.
Uh, Will, welcome to the show on a day
where, uh, you have some fun and exciting
news that you announced this morning,
um, the acquisition of We Know Medicare.
Uh, excited to chat with you about
that brokerage space more broadly.
I thought I might start, um,
with this question about...
So read the press release this morning.
Looks like We Know Medicare itself was on
an acquisition spree recently, growing 4X,
I think, over the last eight months, which
sounds like wild growth, so, um, awesome
for them, awesome for you guys, primarily
via the acquisitions of other agencies.
And you noted in the press release
that you expect Guide and We
Know Medicare to, to, for that
pace to continue of that growth.
You've also acquired two other
practices in the last two months.
Sounds like a ton of growth going on.
I, I'd be curious to hear kind
of how are you thinking about
that growth structurally?
What's going on that's leading to, to
growing so quickly behind the scenes?
Will: Yeah.
So first off, thanks for having me, guys.
Uh, longtime fan of HealthTech Nerds.
Kevin, I think I was telling you when
we, we connected previously, I might
have been a reader since newsletter one.
Uh, I, I don't know how many guests can
claim that, but, uh, long- longtime fan.
Nice to be on the, uh, on the show.
Uh, so a couple things.
I mean, one, as you mentioned,
uh, Mike and the team at We Know
Medicare are now a part of Guide.
They have grown rapidly through
acquisition, and I think one of the
things that gets us most excited is
both being able to help fuel that
model but also really drive organic
growth on a post-acquisition basis
of the partners that they acquire
into their own kind of ecosystem.
And so, you know, We Know
Medicare itself is a relatively
sizable agency to begin with.
We think there's a lot of opportunity
through the Guide platform, uh, and AI
enablement to help them drive organic
growth, superior customer experience,
and ultimately, you know, help those
Medicare beneficiaries that they serve
today get into the right product, uh,
a- and ultimately help their teams
service more of those consumers at a
scale that right now, you know, they
might argue is, is kind of limited
from a capacity perspective, um, and
also deliver white glove customer
service against a backdrop of, of
even more capacity on a service basis.
So we're excited about those dynamics,
uh, and the ability to partner with
Mike and his team, who, you know, have
gone through an acquisition before,
and I think we're humbled to kind of
be the partner of choice for somebody
that's a relatively informed seller.
Kevin: We know Medicare mentioned
in, like, being ex-- in the press
release being really excited
about the AI transformation.
They talked about adding
rocket fuel to the growth.
We were talking earlier offline a little
bit about some of the challenges the
industry seems to be having broadly
in digesting and metabolizing AI
into actual sort of, uh, returns.
Um- Yeah ... we have seen the big AI
frontier labs launch consulting arms,
excuse me, for deployed engineers.
Doximity and Health Catalyst are
shutting down significantly today.
Uh, can you describe like what
the, the rocket fuel is that is
a, a, a sort of, um, in, in, in...
for the, the brokerage, uh, rocket?
For sure.
Will: And, and maybe I'll kind of connect
it to something, Kevin, you just asked
me about, which was like, "Oh, wow,
like you guys have done, you know, three
deals in relatively quick succession.
How do you guys handle that from
a, you know, scale perspective?"
And I think, you know, one of the things
that we decided early on was we really
needed to build a platform or almost an
automation suite, if you will, for the
agency owners that we're partnering with.
And so what we will do is both a
combination of leverage our platform
to drive renewal automation, you
know, cross-sell opportunities,
client service scalability that's
truly horizontally delivered
across every business we work with.
And so, Kevin, that helps to get us
some scale, and then we'll actually
send team members on the ground, which,
you know, come from backgrounds like
Scale AI or, you know, a bane from a
consulting perspective, and either build
automations on site, of course, which
is something that, you know, you've
probably seen lots or read lots about
with respect to kind of our other peer
groups and other industries or verticals.
But we'll also just help the teams, right?
Day-to-day operationally say,
"Hey, look, guys, here's a huge
opportunity that we might be missing."
And so you're just another set of kind of,
you know, eyes and ears on the ground, uh,
in partnership with those organizations.
I, I think there's lots of fair
criticism out there right now around,
you know, look, what are we actually
seeing from a returns perspective with
the AI deployments that, uh, that have
actually gone on outside of CodeGen?
We're already seeing the results
of some of our AI deployments
in these environments.
Uh, you know, won't get into too many
details on the show, but they are real,
and they are quite pronounced, uh,
particularly on the revenue side of the
equation, and even those that are kind
of actively trying to get access in
some way, shape, or form to the guide
platform, either through a partner like a
We Know Medicare or a Benevest or using it
day-to-day in their operating environment
on a more retail basis similar to Avid.
Uh, so for us, I think uniquely, I
think in, in the insurance brokerage
sector, which has been increasingly
well reported on, we are seeing some
of those returns come through already,
even in some cases, thirty to forty-five
days of working with a partner.
And I think the ability for us to take
both a platform and a forward-deployed
approach gives us the opportunity
to perhaps have a little bit more
scalability in the model, uh,
you know, almost out of the gate.
So we're, we're really excited
about that, to say the least.
And I think I would be remiss if I
didn't point out the team that we've
been able to bring on to kind of- Build
the business and go on this journey.
There's a lot of folks with healthcare
insurance and fintech in their DNA, and
also admittedly private equity, right?
So you have a nice combination of those
that come from the Oscars, the Stripes,
uh, of the world, et cetera, and those
that come from the Alpines, the Vistas,
uh, you know, Francisco-backed, uh,
platforms that are ultimately delivering
some of the domain and almost functional
and operating rigor that you would need
in order to run these businesses well.
And so I think we kind of have
a nice, unique combination of,
you know, industry expertise.
My co-founder, of course, was formerly
EVP at Spark, now, of, of course,
our COO, and those that have also
understood the M&A motion and the
domain expertise and nuances that,
that are required to execute that well.
Kevin: Well, you and I have talked
before about the, the journey the
broker market has been on over the
last several years from a reputation
perspective as MA has kind of shifted
writ large, and there's been questions
of, of the role brokers are playing
in acquiring members and the lifetime
value and churn and yada, yada, yada.
Totally.
It seems like we're at an interesting
point in time where we are now starting
to hear more on the, on the opposite
side of that pendulum of the strategic
value that a, a well-positioned broker
can play in the market with the trust
that they can build with a member and
how they can drive that lifetime value.
I, I'd be curious what you're, you're
hearing on the ground talking to these
brokerages about that strategic value,
about what the winning value prop is.
And I'd be curious how, how Guide plays in
that conversation with payers potentially.
Like, we're seeing Scan out doing some
interesting stuff with brokerages.
Totally.
How are you thinking about
conversations with payers, those
strategic relationships, and how
that evolves over time in the space?
Will: Yeah.
I think first, you know, you've got to
give Sachin and folks like Michael Blay
a lot of credit for, for what they're
trying to do with respect to industry
and kind of sector transformation.
Um, so a real shout-out to really
that entire leadership team and
organization for, I think, pushing that.
I think for us, the thing that's
been most exciting is actually how
many of the partners we're working
with are already doing some of
these things naturally already.
So as a good example, you know, and
I think you have to give a lot of
credit to Garrick and his team in Avid.
One of the things that we saw even
early on that was a huge light bulb
moment for us is even how they,
they position themselves as a real
advisor, uh, or a guide, hence the
name of our business, to the members.
Like, they are even calling
themselves that oftentimes, right?
When they're answering the phone,
"Look, we're, we're really a more
comprehensive advisor for you.
And yes, we're gonna help you pick the
right product for your needs, but when
you have a pharmaceutical issue, if you
can't h- you know, find a physician,
like, call us and we'll help you do that."
So in many respects, we're partnering
with those that I think already have
what we would call both mission and
deep commercial alignment with respect
to what we're trying to accomplish.
And so, you know, I think the thing
where we've been fairly fortunate on
is not only our own team construction,
but if you look at our partners as an
extension of that team, and we really
feel that way about them, many of these
folks already feel and are kind of
conducting business in that vein already.
You know, when I, when I was
first starting the business,
you know, I was working with
our, uh, now head of marketing.
She was working with us fractionally,
and I, I used to joke that if I was
gonna write an article to, you know,
start the company, I'd call it In
Defense of the Broker, because I think
one of the unfortunate things about
the industry today is we tend to only
read the stories about the bad actors.
We never really read or see published
the stories of the good ones.
And so a big part of what I think Guide
is trying to achieve is both, you know,
deep and highly integrated partnerships
with those good actors in the business,
and then ultimately give them the tools
technologically, operationally, and from
a partnership perspective, you know,
Kevin, as you mentioned, to help to
fuel their model that again is already
aligned from a mission and kind of
commercial vision perspective with ours.
Uh, you know, I think with
respect to where carriers are,
it's a unique point in time.
You know, I think the last kind
of quarterly vintage from all the
carriers was pretty favorable,
so I think that was great to see.
But I think, you know, broadly between
what you're seeing from the rate increases
on a rate reimbursement perspective, uh,
for Medicare and just what's going on, you
know, for the last, let's look at twel-
like on a trailing 12 months basis with
our own P&Ls, it's a unique point in time
where I think everyone is asking, "How can
we work together to solve these issues?"
And, you know, we are simply a party
that is raising their hand and being
very vocal about the opportunity to
wanting to lean in and support them.
How that manifests, I think, is
gonna be different with every
partner, as you can appreciate.
I think Scan has been the most kind of
front-footed about what that looks like
and, you know, kind of how to play.
Um, but nonetheless, I think you've
gotta give a lot of credit to, you know,
the carriers that are trying to look
for ways to both support these members
but kind of beyond just enrollment.
That's obviously happening.
We'll be a part of that a- as will others.
Kevin: I'm curious to hear, you
know, we had the folks from, uh,
Bailey & Company on a couple weeks ago.
They had just gotten back- Big
fan ... yeah, Medicarians, and they
talked about this as an emerging area
of interest in the, among the, the sort
of middle market private equity world.
You are, you know, sort of going out,
knocking on doors, meeting brokers.
I'm curious what the conversation
looks like when you're approaching a
partner and what, uh, what that, the
dynamics of that conversation look like.
Will: Yeah, I mean, I think one of the
things that was interesting about our,
you know, our space is, one, this was
not like a fly-by-night idea for me.
I'd been trying to do some variation of
Guide for about six years, and, you know,
I think what's been most interesting is
one of the biggest headwinds we thought
we would face is this notion that the
industry is fairly transacted, right?
I think it's like RIAs are, you
know, the only industry that is more
transacted than brokerage right now,
and so there's a lot of competition.
I think what has been interesting and
probably humbling for us is we try
to come in with a different model.
You know, I think historically, and even
when I was doing research on this, you
know, in the six years leading up to,
to going this direction, many of these
owners typically when they sold had kind
of run into three distinct challenges.
One is they never really got much in the
form of resources post, uh, transaction.
Two, to varying degrees, the team
was, uh, reorganized, you know, into
a different structure not so long
after the business was acquired.
And then three, they had like
even more administrative, uh,
challenges because they just
have more reporting requirements.
And so they were kind of like after
the two-week period of elation subsided
after the check hit, I realized I just
had these three kind of really gnarly
and thorny issues that I was dealing
with for the rest of my commercial life,
unless I just chose to exit the business.
And so what we kinda did is said,
"Hey, look, what if we could kind of
be door number three for the owner?"
All right, door number one being
sell to kind of what you know exists.
Door number two being kinda
bootstrap your own purchase of
software solutions, et cetera.
Or door number three, which is
what if you could present an
opportunity for the partner to kind
of buy in to a different model?
One that not only provides a platform,
but provides a team of operators who
came from the domain, have a lot of
empathy for the challenges these agency
owners go through, and really understand
that they are the entry point to the
system for many of these consumers and
even small to medium employers and say,
"Look, let's go in arm in arm together.
Let's find a, you know, M&A structure
that's highly aligned with respect to our
own economic incentives, and then just
be relentlessly focused on deep kind of
member experience, uh, solutioning for
any of the challenges that the members
ultimately experience, the client in the
case of our partner, and also be a deeper
strategic partnership to the carrier."
And I think if we can look at this
system as something that is more,
you know, interconnected from a value
chain perspective versus, you know,
disparate, you start to see much more
productive conversations, uh, emerge,
and ultimately, I think it's gonna
manifest in returns across the ecosystem.
So for us, we, we come very much
front-footed on this notion that,
hey, we're kind of a different model.
You know, I, I believe quite firmly that
we've got the best team in the market.
Uh, and if nothing else, you know, my
number one job is making sure that I put
the best team on the field I possibly
can, not just for our investors and our
other employees, right, I think it's a
duty to them as well, but for the partner.
You know, in many ways, access to talent
is a big part of the value proposition
for these agency owners, and so, you
know, I think for us to come with kind of
that team, an AI platform that actually
solves their day-to-day problems,
which we were very much focused on,
and then three of those that are like,
"Look, we're all in this with you.
We're not doing a thousand transactions.
We're gonna do some fraction of that,
so you're gonna get a lot of our time."
Uh, and we're looking for owner partners
that are, you know, kind of long-term
in orientation as a part of that.
So, you know, if we take Mike as
an example, right, uh, from We Know
Medicare, he's in his early thirties.
You know, Garrick, not so
different on an age bracket basis.
Joe and Regina, very much ten years of,
of, of, of work ambition in them for sure.
And then if you look at the other
deals that will be announced later
this year, the owner profiles
are not so dissimilar in nature.
So I think you've got this interesting
combination of what I believe is a truly
world-class team, an AI platform that's
already showing demonstrable changes
In the economic, operational, and kind
of NPS of these businesses and for
the clients, and then an owner profile
and even deal structure that is really
orienting these folks around long-term
partnership with us, we believe is a
recipe for comparative and differentiated
advantage in the space and ultimately
long-term returns for all parties,
including the carriers, which we're
very intentional about trying to foster.
Kevin: Well, one of the interesting
sentences in the press release to
me was that, um, uh, you're, you're
helping provide guidance across
insurance, health, and wealth
decisions, which I, I traditionally
have thought of guide as, you know,
Medicare Advantage brokerage type play.
Uh, can you, can you expand on
the groups that you're acquiring?
What do they...
Go a click deeper in what they look like.
How many employees do they have?
Who, who are they serving?
And what- Yeah ... decisions...
When you say insurance, health,
and wealth, like, what does that...
What does their book
of business look like?
And are you doing all of it?
Are you doing just a slice of it?
How does that play out?
Will: Yeah.
So, I mean, maybe we'll just start
with, you know, what do I think is
a is a different way to think about
how to serve these populations rather
than talking about even our partners.
But if you think about some of
their challenges, it is not just
unique to insurance product access.
Right.
This notion of picking the right insurance
product, you know, going down the
appropriate and correct kind of healthcare
journey and having an experience that
is, you know, truly optimized for their
unique needs, and then ultimately making
sure that from a wealth and kind of
financial health perspective, they are
able to access these services, which
oftentimes is, is sometimes a financial
issue more so than anything else,
are all kind of connected in nature.
And so for us, we kind of put
ourselves in the shoes of the consumer.
Wow, it would be really great to have
a partner to help me pick my plan, help
me navigate this ridiculous healthcare
maze that we have in the United States.
God love it.
And then ult- ultimately manage kind
of the financial health of, of my own
personal P&L to make sure that I am
not only protecting my downside, right,
which is largely what insurance is for,
but also managing some of the upside.
And so, you know, when I, when I
started thinking about what the
right business kind of vision was, it
was much more about kind of dealing
with these highly c- interconnected
issues for the consumer, right?
So just putting yourself in a
kind of customer-centric lens,
that's kinda what we landed on.
Most of the agencies today are
just doing one product line, right?
I mean, they're just selling
Medicare Advantage, et cetera.
So a big part of, of the offering
and ambition is to say, "Hey,
could we help you do something
just beyond Medicare Advantage?"
I think there's a unique point in
time opportunity to do this because
I firmly believe that we're going
through really a broader what I call
unbundling of insurance products.
If you think about Medicare Advantage
as the tip of the spear for this issue.
You know, over the years, I think the
carriers Very fairly so, had quite rich
benefits, uh, within the base major
medical product and Medicare Advantage
product they offered, largely because
they were able to do so economically.
I think now what we're kinda seeing is
a, you know, rationalization of what
is an appropriate spend on Medicare.
I think Chris Clump and the
broader organization are
doing a great job with this.
You've really gotta give them credit for
trying to create stability in the market.
And what I think that does is
bring everybody back to a place
where the major medical product
is for major medical expenses.
And then beyond that are things on top
of that, you then get to a place where
consumerism and more individualization
of choice of product ultimately rounds
out the rest of that coverage portfolio.
And so I think in particular in Medicare,
it's a nice entry point for, I think,
that vision because of what is going on
in the market, and very bluntly, we just
have a lot of experience in that space.
Uh, you know, shout out to Sam
in particular, who has a lot
of domain expertise here and
a large network, et cetera.
Um, but if you think about, you know,
what could happen with that unbundling,
I think you're gonna see consumers need
more comprehensive and broader portfolio
guidance within insurance, but then that
ultimately cascades into other elements of
their life that we will ultimately touch
as well in the not-so-distant future.
Kevin: This was a hugely helpful overview.
I'm looking at my notes.
It is also, uh, coming up to me.
You mentioned six years, but the official
one-year anniversary of, of Guide-
Yeah ... is tomorrow, so happy- Tomorrow
... happy almost birthday to Guide.
Um- Thank you ... where, where
can folks get in touch if
they, they wanna learn more?
Will: Yeah, I mean, look, I would always
say just reach out to me directly.
I mean, you can always of course
visit the website at guidehealth.ai.
But look, I think we, we love to hear
from anybody that's passionate about the
space or, you know, believes we could
help them in some capacity, so feel free
to reach out to me, will@guidehealth.ai,
or use any of our social channels across,
you know, X, LinkedIn, or otherwise
to, uh, send us a DM and, you know,
we'll get back to them immediately.
Kevin: Thanks so much for
your time today, Will.
Good seeing you.
Thanks, guys.
Will: Love being on the show.
Yeah.
Kevin: See ya.
It has been interesting to hear
the large Medicare Advantage payers
talk about the strategic angle of
broker engagement recently, and you
had- ... an interview with the CEO
of Included Health a few months ago.
Um, and he had a, a sort of, a, a take
on the future role of brokers, which
I thought was really interesting.
I think it's an exciting time.
Yeah.
I...
it's, it is.
I, I agree.
I think it's an exciting time.
It's interesting to juxtapose.
I...
in the back of my head, I have that, uh,
you know, as plans are changing benefits,
thinking about what that looks like.
I've got that image seared in my brain of
the Minnesota seniors picketing Blue Cross
Blue Sh- of Minnesota over their access
to the Lifetime gyms in town, and I'm
like, you know- There, there is so clearly
a role for a, a broker who can build
trust, who can help navigate, who can help
seniors understand what they're getting
access to, what's covered, what isn't.
And, uh, if Will's theory of the case
plays out of, of insurance gets more
focused on major medical and it gets
unbundled from there, you can, uh, you
can see a world where it becomes harder
and harder to navigate and on your own,
and you need help from a trusted guide.
And I think that the brokers that are
thoughtful about how they're doing
that and doing it the right way seem
d- seem well positioned, uh, for this
kind of next wave over the coming years.
I'm gonna be interested to see
how the market itself plays out.
You can imagine...
You know, it reminds me a little
bit of when we were talking about
independent primary care a few
years ago, and everybody was getting
all excited about the role of the
primary care group, and there were
acquisition models on top of that.
Like, I think that will be one of the,
the really interesting things to keep
an eye on in the space of what does this
acquisition market look like over time?
I remember at, like, the peak, we had
Carbon Health acquiring urgent care
practices and being like, "Hey, we're
gonna acquire them for top dollar
and flip them into primary care model
somehow, and that's gonna be magic."
And that turns out magic, I don't think
actually exists, but I think there
is a really logical thesis in what
Will is talking about of you do this
thoughtfully, you bring some practices
in, you roll them out, and I buy that.
Well, before we get into our last
segment, I think we have another ad read
from, uh, Nashville Healthcare Sessions.
Yes.
You wanna queue that up?
Nashville Healthcare Sessions, if you
are thinking about your fall conference
schedule like we are, Nashville
Healthcare Sessions is certainly
worth attending, taking a look at.
It's back for the fourth year this
September 13th through 15th, bringing
together execs from across the ecosystem
for conversations on strategy, capital
allocations, and growth, things
very germane to this community.
Intentionally capped at 1,400 attendees
to keep it intimate and substantive.
Past attendees include leaders from
HCA, JPM, General Catalyst, CVS,
DaVita, Turquoise Health, and more.
We'd love to see you there.
Uh, grab a ticket at
nashvillehealthcaresessions.com/register.
So where
I wanna leave it for today's episode is
on AI, something we have already talked
about a little bit today, um, but it's
something I expect we'll be talking
about a lot more over the next few weeks.
So, um, this is from Open Evidence's...
an article about Open Evidence.
And yeah, I, I am a- always kinda
curious to check in and, and hear
after earning season is coming to an
end, what's the current state of play?
I think this chart in particular
always, you know, it, like, stands
out to me Because OpenEvidence is
the household name when it comes to,
um, AI in healthcare, and it's nice
when your user graph looks like this.
That's a nice looking user graph.
Yeah.
Uh, I mean, they have had a
heck of a run over the last...
I mean, that's a year, Martin,
that they've gone from 2.6
million queries, visits, searches,
queries, is that what they're
calling it, to 27 million queries.
Like, that is a wild journey
for what we traditionally think
of as healthcare growth models.
Like, we're, we're not used to
seeing stuff like this, right?
Yeah.
It's pretty incredible,
and it's good for them.
Um, good for them.
I, I think it's interesting.
One of the things that I, I was listening
to Doximity's earnings call last week.
Doximity reported, it
was their Q4 results.
They're not on a, on a calendar
year, um, reporting cycle.
But they, they reported a solid
quarter of earnings, but the, the
headline takeaways were, one, um,
the pharmaceutical ad industry was
generally soft because of some of the
questions from a regulatory perspective
that we were talking about a little
bit earlier with pharma and whatnot.
And so, so ad purchasing decisions
are shifting, yada, yada, yada.
Two, Doximity is going headfirst into
AI itself, and while it seems very
bullish on AI on the whole, the near term
financial implication is, I know this
won't be a shock to you, they are seeing
a decrease in margins as a result of
investing in AI compute and other stuff.
So I think their gross margin went
down 2% on the quarter year over year.
Their EBITDA margin, adjusted
EBITDA margin, I think, was down 5%.
Um, and the market does
not like that, Martin.
Their stock's down 30% as a result.
And I, I find it really, really
head-scratching to, to see the
reaction to Doximity's quarter and them
saying, "Hey, we're investing in AI.
We think this is a huge future TAM for
us and are super excited about it."
And, um, while at the same time you've
got Doximity over here in the private
markets, or, or OpenEvidence in the
private markets, going gangbusters growing
in, um, in their utilization of AI.
Yeah.
I, uh, I liked this quote, which
you called out in the newsletter.
So OpenEvidence is funded
by pharma ad dollars.
One of the things Doximity was
talking about is some softness in the
pharma ad dollar market, which maybe
OpenEvidence is not seeing, or maybe
some of that softness is coming from
people allocating to OpenEvidence.
But if I was Choosing to allocate my
marketing dollars, this is not something
that I would wanna hear, uh, in a
report on the, the, that advertising.
On its app and website, uh, the
many clinicians interviewed for this
article remarked that the ads were
either unobtrusive or non-existent.
Yeah.
I...
That is a fascinating quote to me.
If I take that at face value, I think
there are two logical explanations
for that potentially, right?
I think there is one which is, the ads
are so effective as they're being served
up, that providers don't know that
they are seeing ads, but their behavior
is being influenced by them, right?
Like, that is the point of pharma
putting ads on here, is you're
prescribing the drug that is showing
up or the device that is showing
up, I think, as I understand it.
So either it is working so well that
docs don't notice it, or it's not there.
And either way, I don't know that despite
the momentum that Open Evidence clearly
has from a, um, use case perspective
at the moment, I, I'd, I'd, I'd be a
little concerned about that, right?
I, I, I don't know that this is
a quote that makes me confident
in the trajectory moving forward.
I think it's hard to sort of square
the, the valuation story as well,
which is, I think, what you were sort
of teeing us up for, which is Doximity
is also in the pharma ads business.
Yep.
They are also investing in AI.
They recently...
Our friend Photon, uh, Otto from
Photon, they recently added prescribing
directly in, in the Doximity app.
That seems like if you were looking to
drive actions as a result of your pharma
a- spending, like that would be...
Uh, pharma ad spend, that
would be a great way to do it.
Just go over it and click
on the prescribe button.
And it, it is a, you know, the
private markets and the public
markets value different things.
And that, uh, reminds me of, you wrote
up a little bit about Health Catalyst
and yeah, that was a, a sort of
similar story on the public and private
markets valuing different things.
Yeah.
Before we go to Health Catalyst, I
wanna finish this point on Doximity.
Yeah.
Doximity, I just pulled
up its stock price.
Its market cap is now 3.6
billion at the moment.
It's up a couple of percent
today after it got hit last week.
Uh, Open Evidence is, I think that's 30%
of what Open Evidence is at, roughly.
Like, I think Open Evidence
is 12 or 13 billion.
Doximity brought in, in the quarter, 100
plus million of free cash flow, Martin.
Open Evidence hit, I think,
100 million of revenue in 2025.
Like- I-- to your point on the
valuation difference between
public and private markets, I
just, I, I do not understand it.
Like I-- if you buy Open Evidence's
valuation at 13 billion, which
we could argue about, certainly
it would seem like somebody would
come in and say, "Hey, Doximity
is a substantially larger company.
Maybe it doesn't have quite as much
momentum on its side in terms of the
growth in physicians, but it does
already have the installed base.
How's that thing worth $3.5
billion when it's kicking off $100
million of cash flow a quarter?"
I just, I, I, I, I don't get it.
On your other hand, to, to your point,
Health Catalyst is, I think, at roughly
$80 million in market cap right now.
It's had a really tough time, and
this was one of the notable companies
in the industry a decade ago, right?
Like I recall working for a health
system that Allina was one of
the big transactions with Health
Catalyst, where Health Catalyst
took on, um, a lot of our staff
supporting Allina with data analytics.
It was, it was really forward-thinking
at that time in terms of helping
health systems understand how to
use data, how to think about data,
um, and how to, um, drive that
forward across the organization.
And to see it struggling this much
with this transition into this
kind of n-new world is, is really
fascinating to me, 'cause they
have the installed base, right?
They, they're just struggling with--
They, they included this chart in
their, um, quarterly earnings release.
They're transitioning from an old school
platform, I think called Docs, to a
new school platform, and a lot of their
customer base is, uh, is shifting revenue
away from Health Catalyst, and they're
basically insourcing their infrastructure
layer or using another partner, and
they're only gonna use Health Catalyst
for application layer moving forward,
which seems like a logical spot for
Health Catalyst to be and to play in.
But it, it's, it, it's, it's fascinating
to me that here you've got a company
that has contracts with a lot of the
leading health systems across the
country and deploying AI into those
contracts via an application layer, and
it's sitting there trading at an $80
million market cap, while the industry
is going gaga in the private markets
over the ability to use forward-deployed
engineers to sell into health systems.
Like if I'm Health Catalyst, I'm just
writing, like I have forward-deployed
engineers sitting in every major
health system in the country, and
I'm hoping that somebody takes me
private at this point because it,
it just doesn't make sense to me.
I don't know.
It's a very interesting question,
but we have our last guest of today
joining us, and I'm gonna bring her up.
Hi, Jennifer.
How are you today?
Jenny: I'm great.
How are you?
Kevin: I'm great.
We're really excited to welcome
you, excited to talk a little bit
about rural health and Homeward.
I think most people in the audience
are pretty, like, understand
pretty well that at a surface
level rural healthcare is hard, the
populations have unique challenges.
But can you help sharpen
that a little for us?
Like, what are those challenges?
Yeah.
What makes it so hard?
Jenny: Yeah.
So maybe, maybe I'll start by, um, where
I, where Amar, my- Amar Kendal and I
started when we launched the company four
years ago was, um, rural's not niche.
You know, one in five of us live
in a zip code that's designated
as rural by the US RUC code.
There- there's nine different
zip di- zip code digits, and
the bottom three are rural.
And when you look at mortality outcomes,
it's about a 20% higher mortality
if you live in a zip code that's
rural, designated as rural, period,
independent of socioeconomic status.
And when you look at the mismatch
about, you know, most of the
primary care shortage areas, about
63% of those are in rural areas.
Um, we know that there's a big
mismatch between demand and supply.
We know that transportation
infrastructure is very difficult
for people living in rural markets.
And so there's been, um, a real
mismatch around the types of services
that are needed and the types of
services that are available, um,
and provided into those ecosystems.
So our intent of coming to the market
was to help bring and scale services
that can actually drive differentiated
outcomes in a very different manner.
Kevin: Jenny, we have been following
along as a community with the Rural
Health Transformation Program, a
lot of the energy activity around,
uh, that model in particular.
Uh, I- I'm curious how, how you're
seeing that program being rolled out.
Martin and I like to joke about this
being a golden age for consulting models,
because it seems like a lot of entities
in the space are trying to figure out,
how do they respond to this program?
What's the opportunity?
How are you seeing it being rolled
out, where the opportunities lie within
it, where a model like Homeward is,
is finding the opportunity to support
the implementation of the program?
Jenny: Yeah, maybe, maybe I'll start kind
of high level and then we can dig in.
So the Rural Health Transformation
Program, RHTP as it's affectionately
referred to, is a true once in a
lifetime investment from the federal
government into rural healthcare.
So it's $50 billion.
It's intended to reshape how care is
delivered in these parts of the country.
Um, we know that there's a
need, we talked about this.
More than 400 rural hospitals
are currently at risk of closure,
and nearly two in five still
lack full interoperability.
So at this
That the projected rural cuts exceed
the size $50 billion investment.
So for context, 137 billion is
projected to come out of rural
hospitals over 10 years from the
one big beautiful bill versus the 50
billion that's being injected through
the RHTP over the next five years.
So there's a real
opportunity and a real risk.
Um, and it has been a flurry.
There's been lots of excitement, lots
of people, um, racing toward this.
And I think the biggest takeaway, um,
when we can, uh, break this down as to
what the path forward might look like,
is that when we speak with states, the
one theme that comes up repeatedly is
that many people wish there had been
a year zero, which is time to align
stakeholders, assess infrastructure
gaps, sequence the investments
before moving into implementation.
But instead, states are kind of pushed
directly into year one under a lot of
pressure to deploy the funds quickly and
demonstrate, demonstrate the progress.
So that pressure has been
compounded by structural bottlenecks
at the federal site, site.
CMS planned for 16 project officers within
the newly established Office of Rural
Health Transformation, but only about
eight to 10 have even been hired to date.
So each state work plans requires
a project officer to sign off
before the funds can move, and
the shortage has created a real
queue and a real bottleneck.
So urgency is understandable.
Um, early signals suggest we may be moving
quickly without actually first solving
the problems that actually determine
whether or not the investments will work.
So I think a lot about this
is really around a sequencing
problem as to where we are for the
states to get to what they need.
Kevin: I'm curious if you were, you
know, I'm sure you're actually having
conversations with, with governors and
state Medicaid agencies, but when you're
having those conversations at a very
high level, what do you think, you know,
if, if, if we had that year zero, what
would be the best way for states to be
allocating these dollars in your view?
Jenny: Yeah, I, so I think that the,
you know, again, what we're seeing
is, um, the current setup right now
is favoring doing over building.
There's RHTP spending caps, so you
can only have, for example, um,
20% that goes to infrastructure
and capital improvements.
Technology catalyst at capped
at 10%, EHR replacement's at 5%.
So because of that, people
are thinking very differently.
There's very little time being spent
on what is the data infrastructure,
what is the health information
exchange s- exchange look like?
What does interoperability look like?
Instead, they're jumping to, wow, wouldn't
it be great to do an AI investment
in name a chronic condition, which is
really great and really innovative, and
that's part of the application process.
However, it won't s- be successful
unless the underlying data
infrastructure can actually...
is set so that you can deploy
those, those actions off of that.
Similarly, like in rural, you know,
they, there's 63% of people don't,
do not have a identified primary care
provider, and so that's a problem.
So who's gonna navigate
care for an individual?
That's an infrastructure problem.
Can we figure out who the care navigator
is so that when you look at somebody
and you deploy all these resources,
that that single person going through
is going to have improved health?
That's how we're gonna get to
population improved health.
So it's thinking through these
different underlying infrastructure
issues that I think is what year
zero could have allowed people to
do across a bunch of stakeholders.
Instead, it's, "Hey, hey, hey,
gotta have an application.
You have to put it in.
It has to be reviewed.
You have to start spending the money."
So the default is, okay, well, let's
take the money and p- uh, patchwork
what's already in existence, 'cause
we know there's a bunch of cuts.
We talked about that earlier.
We know a bunch of
people are gonna be hurt.
And how do we make the, make the
pain less, less aggressive and less
real versus thinking through what's
the infrastructure, what are the
pieces of technology we layer on?
How do we make it a r- um, sustainable
revenue model when the funding goes away?
Right?
Really key important questions.
And there just hasn't, quite frankly,
a lot of great intent, but there hasn't
been the time to do that across...
You know, healthcare is complex, I
don't need to tell you that, but across
multiple stakeholders in this ecosystem.
Kevin: Jenny, I, I'm curious to, to, uh,
shift to the, the topic of the day, which
is always AI these days, a- as it relates
to this rural health, um, uh, program.
We've had a couple folks on the
show talking about the opportunity
to use AI, particularly for
disadvantaged populations.
Toyin and Andy Slavitt, um, in particular
wrote a really interesting piece
on how they're thinking about that.
We're also seeing, um, this
conversation play out in different
ways in different states.
Obviously, the state of Utah has been
rolling out, um, its AI first program.
There's been a lot of concern
from the state medical board
over safety implications, uh, of
that, rolling out that program.
Uh, I, I'd be curious, are you seeing
any pockets, states, interesting models
where folks are thoughtfully deploying
AI as part of this program to solve
some of the access type challenges
that we're seeing in rural healthcare?
Or- Um, is it, is it mostly
still conceptual at this point?
Jenny: Um, there is...
There has been some, uh, pickup.
So what I would say in g- in
general, very high picture,
is rural follows urban, right?
So innovation calls on dense markets,
dense markets, um, and hospitals that
have more margin, and that is not
the case in many rural hospitals.
So they're not as dense from a
market standpoint, and their margins
are, are typically very slim.
Um, but we do see that when, when things
are deployed, things are, you know,
the i- the, um, outcomes are great.
So for example, we know that when you
start to do some scribing, we see that
burnout from individual clinicians
drops from about 52% to roughly 39%.
Um, a- and when you do some predictive
AI components, you start to see
outcomes driven in the population.
However, rural hospitals report a
56% adoption of predictive AI versus
an 81% among, among urban hospitals.
And, uh, in our conversations
we've learned a lot, um,
we've really learned a lot.
And even as we, we think about
our value-based care models that
we bring into rural hospitals, we
partner with providers because it's
important that we keep them afloat.
So we share some of the savings with,
uh, the providers in the rural ecosystem.
And mostly what they're concerned
about is how do they stay
afloat for the next 30 days.
So how do they collect 30% of the, the,
their bills that are being rejected
from, from payers, for example.
And so it's, it's really coming
back to, um, spending the time, and
how can you implement and leverage
these technology assets in a world
where rural hospitals don't have
a chief technology officer, right?
How can you do the heavy
li- lifting for them?
How can you do a shared savings?
They don't have, you know, a
million dollars for a return
of investment of five million.
They don't have a million dollars
to invest to get a 5X ROI.
How do you, how do you solve that model?
And so how do you bring
things to market differently?
How do you help build the deployment
to help keep these systems in place?
And those are all, those are all doable.
They're, they're typically
different business models that
innovation takes to market.
But we've found constructive and
innovative ways to be able to
do that with our rural health
pa- uh, hospital partners.
Kevin: I'd be curious what life looks
like as a rural independent primary
care doctor these days, and what- Um,
you know, when you're with Homeward
going and talking to them, what
do those conversations look like?
Like, what, what are you helping
them out with that is hard
for them to do independently?
Jenny: Yeah.
So maybe I'll just start with
the, the really great thing about
getting to work in this ecosystem.
Um, and this is like, this
is not just through work.
I grew up in a rural part of
Minnesota, so this is my family.
People in rural parts of America build
incredible relationships in the community.
They invest in the ecosystem.
The, the highest number of physicians
and healthcare providers working in rural
markets grew up in the rural market.
So they're coming back.
There's a strong sense of family.
There's a strong sense of
commitment to the country.
It's a beautiful culture.
And as an independent primary care
doc in rural parts of, of America,
you are literally just trying
to keep the lights on, right?
Trying to every day do the right
thing by your, by your patients.
Trying, you know, aggressively not to burn
out, that you almost don't even have the
time to lift your head above sand to take
a break and look at what that looks like.
So the things that are most
resonate for us are two things.
One is, how can you help my, my business
stay afloat such that I can continue
to service the individual people?
What are the tools and the
assets, and how much can you
do for me to make that happen?
Not can you sell me?
Can I take the burden?
How much of the burden can you take?
And what does that free up for me
to continue to deliver the care?
And then the second is always
help coordination across those
individual people, right?
What does that look
like for their patients?
The commitment to patients by
rural physicians is astounding.
I mean, truly astounding.
They are doing the yeoman's work of,
you know, like kind of taking these,
on these burdens, and they're in a
system where the system doesn't offer
them a lot of flexibility to do that.
They want to continue to do their jobs.
And so it's a lot of just,
you know, table stakes when it
comes to what can you automate.
You know, the, like the,
the scribing is huge.
Like, can you get on, you know, an
electronic health record, which seems
crazy 'cause we've already, we've
kind of gone through that transition.
Rural's not there.
A lot of our rural, independent
rural health providers
are still on paper charts.
So how can we help them in the automation?
How can we help them in their
revenue cycle management?
Kevin: Jenny, I, I thought it'd be
interesting to touch on the, the
entrepreneurial journey for a minute.
You obviously saw a, a rocket
ship at Livongo, um, uh, in
that journey going into Teladoc.
Uh, you're now operating in rural
healthcare environment, which for
communities like ours, you know, rural
Medicaid, underserved populations-
Yeah ... very hard model to scale up.
Um, we saw on social media it looks
like there was a layoff recently.
I, I'd be curious- ... for other
entrepreneurs attempting to build in
this market, recognizing the challenges
that are all around and the uncertainty
and, and headwinds that are at times
facing these models, reflections on
the, on the journey at hand, things that
you would share to other entrepreneurs
who are thinking about building in a
space, um, as you are, you know, in
the thick of the journey at the moment
Jenny: Yeah, I think
about two big components.
The first one is how do you
leverage what's transforming
in the technology world?
How do you leverage the AI assets so
that you can, um, stealing from a, a
fellow, a former colleague, stealing
a world where there's scarcity can...
How can you create abundance?
How can you lower the cost of
care and improve the quality?
I think we're finally at that time point
where we can strip away bare bone basics
around back office administration, but
even start to do some of the care delivery
automation relative to technology.
That's a good thing as
you're building a company.
There's also a transition from the
number of humans you need in your
company to do that, to the ability to
scale that and do that autonomously.
That's a successful transition, right?
So needing fewer people to
deliver the same or better care
is successful in the marketplace.
So that's number one.
I think the second one is how do you,
how do you best align those outcomes?
And we've seen, uh, Homeward launched
as a value-based care company with
the idea that you should really
get paid for the care you deliver.
At the end of the day, if you
align economic incentives with care
outcomes, you end up in a better spot.
We've seen examples of that working in
the broader ecosystem and not working,
and a lot of that is driven by two things.
Number one is the only way
that works is if you're able to
predict historically what is the
baseline need for a population.
So we've seen that.
We've seen, you know, um, uh, code
captures with the advent of V28
from V24, the transition around
what should be included as we think
about the risk for a population.
There's been government federal
changes, there's been payer
changes around how to process that.
But ultimately at the, at the end of
the day, you really have to establish
what is the fair baseline so that
you can understand for all parties
involved, not have a game, a game around
the base, a gamesmanship around the
baseline, but what is right and how
do you, how do you move on from there?
Coming off of that, the only way these,
these organizations or these relationships
work is through transparent information.
So if it becomes just a game of
s- information asymmetry, that's
just again, gamesmanship and not
improvement upon the population.
So can we get the, can we get the
information across the population?
Can we share it?
Can we share it transparently?
And we've seen value-based care companies
on both sides, the company and the payer
side, be caught up in the gamesmanship
of contracting to get to outcomes.
Those two have to be true in order to
do the third part, which I think is
the most fascinating and probably the
most impactful part, which is like
what is the innovation that you can
drive through technology and services
to actually improve outcomes, assuming
that the baseline is understandable
and measured correctly, and that
there's not a game of information
asymmetry, and then things are aligned.
And so like, so that is the goal and
the work and how value-based care is and
can be radically successful, and that I
think is the direction that we're moving.
Kevin: Jenny, I think we have
time for one more question.
I'm curious how you think about the
provider shortages in, in rural areas.
It feels to me like one thing I've
seen states do is take a bunch of
their, or talk about allocating a
bunch of their money to incentives
to try to bring more providers out.
Strikes me as int- an interesting
angle that you're working on, which
is making the job better and more
remunerative for, for doctors.
That seems like it would help.
But how do we, how do we get more
doctors into, to rural areas,
and i- is that what we should be
aiming at, in your perspective?
Jenny: Well, I think that there's a lot
of, um, incentives, and we're seeing this
in the RHTP applications around incenting
people to r- re- recruit physicians
and come in and work in these markets.
What we're not seeing is a
lot of emphasis on retention.
So for example, we have over 200,
um, plus programs on recruitment
of doctors into rural markets
with only about 24 on retention.
Um, and then only five focus on incentives
to improve both recruitment and retention.
We know that most providers that go into
rural markets come from rural markets.
We know that the number one
reason providers don't go to rural
markets is the lack of educational
opportunities for their children, right?
So to become a healthcare
provider, it's inordinate amounts
of schools, lots of dollars.
You have to love school, and you've
grown up in a, in a, in a highly
concentrated emphasis on education.
And to enter into a one-room
schoolhouse is typically not the
choice that people make for their kids.
So we see a lot of people being
recruited for dollars, and then
we see them leaving when their
kids get to elementary school age.
So that's what I...
When you think about what is the
investment around retention, I
think it's broader than just dollars
of getting people to move there.
Kevin: Yeah.
It's, uh, when you start thinking
about the magnitude of the problem,
it ripples out so quickly into all
of these other things that are so far
outside of, of healthcare, like rural
education and rural infrastructure and
broadband and, and all of these things.
And Jenny, this has been hugely helpful.
We really appreciate your insights on
RHTP, the Homeward, the, the rural market.
Can you let folks know if they're
interested in learning more
about Homeward, the, the best
way to, to, to get in touch is?
Jenny: Sure.
Homewardhealth.com.
Go ahead, go ahead and check it out,
or v- feel free to shoot me an email
at jschnider@homewardhealth.com.
Kevin: Thanks so much for
your time today, Jenny.
Thank you, Martin,
Jenny: Evan.
Big fans of your show.
Thank you.
Okay,
Kevin: bye.
Bye.
Thanks, Jenny.
Yeah.
It's, it's, it, it, you very quickly get
to this place where you're like, "Well,
there are just so many other things we
need to solve besides just-" My mind is,
I, the educational thing, I had never...
I, I mean, it, it makes complete sense.
I had never worked my way through
all of that myself, but I'm
like, yeah, I, I, I, I, yeah.
Yes.
Well, if you wanna help us brainstorm
how to solve this and other problems,
you can subscribe to the newsletter
at healthtechnerds.com\subscribe
or join us in the community where we're
always talking about this stuff and where
I will be starting a thread later on
about what to do about education for, for
doctors' children, uh, in rural areas.
Thanks so much for your time today, Kevin.
Look forward to continuing
the conversation.
See you, Martin