122 - How Employers Are Taking Back Control of Healthcare Costs w/ Stu Clark | Premise Health

Show Notes

Vic sat down with Stu Clark, CEO of Premise Health, to discuss how employers and unions are tackling skyrocketing healthcare costs. They break down the direct contracting model, the financial burden of traditional healthcare, and how Premise Health’s advanced primary care approach is reshaping the industry. Stu explains the findings of a Milliman study showing cost savings, the critical role of primary care access, and why employers are bypassing traditional insurance models. They also explore the future of employer-sponsored healthcare, the challenges of provider shortages, and Premise Health’s expansion into alternative health plans.

Study: Premise Health saves employers and unions 30% on total healthcare costs

https://www.premisehealth.com/

Stu Clark, Chief Executive Officer, Premise Health Bio:

Stu Clark has served as CEO of Premise Health since its inception in 2014 and, prior to that, served in various leadership roles in predecessor companies to Premise. He has held executive roles in the direct healthcare industry for more than 20 years. 

Stu and his teams have helped lead the evolution of the direct healthcare industry, also known as employer-sponsored healthcare, from the early days of occupational health-only programs to today’s fully integrated, direct primary care models. This integrated approach connects members and their families to acute and urgent care, family medicine, pharmacy, fitness, and many other primary services, creating value by helping them be healthier. 

Under Stu’s leadership, Premise has focused on clinical quality, scale, infrastructure, and technology, while working to build a transparent culture anchored in accountability and merit-based career advancement. The company is consistently recognized as an employer of choice in communities where it operates employer-sponsored health centers and in the greater Nashville area where it is headquartered. 

Stu is a graduate of the University of Michigan in Ann Arbor, where he received a BA. He is currently a CEO council member and limited partner for Council Capital, a limited partner and advisor for Nashville Capital Network, and a former council board member and executive committee member for the Nashville Health Care Council, where he served for two terms. 

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Thank you.

Okay.

Welcome everyone to Health Further.

I'm excited today to have Stu Clark, who's the CEO of Premise Health.

One of the best stories that not everyone knows about.

And I'm excited to have Stu on and tell the story.

So Stu, thanks for doing this.

Really appreciate it.

Uh, Vic, thanks.

I've been looking forward to it.

Thank you for your interest.

So as we start, um, You know, we've known each other for a while, but not everyone knows Stu Clark or Premise House, but maybe let's start with your personal background.

Um, where, how did you get to Premise and where do you come from?

It's a pretty boring story, Vic.

I'm from West Virginia originally.

Uh, attended the University of Michigan probably because they hadn't admitted anybody from West Virginia in 200 years.

Um, and, and came out of school, uh, and joined a startup, an occupational health startup just south of Pittsburgh, and that was in 1991.

Uh, that company was, was sold to a Warburg Pincus fact company here in Nashville called, uh, Meridian.

And so I joined the Meridian team in, in 1996.

And, uh, today we're in our, we're currently in our eighth, uh, private capital investment cycle, uh, with this investment.

So this is all I've done for 34 years.

We love it.

Um, we love who we work with, we love who we work for, and we love the difference we're making in healthcare.

Excellent.

Well, and then let's talk about the premise, uh, origin story.

How did, how did Meridian evolve into premise?

There's been, as you said, there's been several investors that have done very well and then moved on and a new investor has come in.

Maybe pick up the story wherever you want.

Like, how did the brand and the current iteration come together to be premised today?

Well, it's, it's, it's actually quite simple that when we think about the healthcare spend in this country, and, and when I say spend, I'm talking about commercial, uh, the spend that is funded by employers and by.

The health and welfare funds of the taps partly unions and so spend right now is as we all know absolutely out of control It's that portion of the four and a half trillion annual spend call it two trillion Well that two trillion is growing at nine to twelve percent a year And so what's happened and it has been happening is that this is now an earnings per share concern For American companies.

Uh, but just as importantly, American families can no longer afford healthcare coverage.

The premiums are too high, the deductibles are too high, and now we've got a third rail here.

There there is a lack of access, at least to primary care.

And so the convergence of these factors have really driven, uh, premise over the last five to seven years, but especially in the last three years.

Yeah, and so that dynamic of, um, maybe the CEO and CFO being quite concerned that probably their largest line item for expenses is after payroll is probably healthcare expense.

And unfortunately, it's growing at that 9, 10, 12 percent per year in a way that the CFO has almost no control over.

Um, and yet, When you're trying to attract employees, health care benefits are a huge consideration and so premise steps in and tries to solve both of those, um, aspects of the challenge with this, uh, the on premise worksite care.

Um, but I'm going to call it the wrong thing.

So how do you solve that sort of conundrum for a leadership team that wants to give really strong benefits and keep their employees healthy, but also wants to get some handle over this cost?

Yeah,

I think if we back up for one moment, we have to level set with the fact that there are only three payers in this country, Vic.

Three.

The employer, the Taft Hartley Union Fund, and the taxpayer.

That's it.

If there is a health plan that is underwriting risk, or if there is a hospital or an ACO model, the bottom line is if they miss that bet, if they miss that risk bet, They're going to call it back in their next premium cycle.

So, at the end of the day, there are only three entities that fund health care in this country.

In the premise model, we focus only on the employer and the unions, as I mentioned.

And these employers have said, look, the health care ecosystem and the lack of alignment Is driving us into a cost structure that is unpredictable and is ultimately making us less competitive, both domestically and internationally.

So what we're hearing and we're seeing is that the large employer and the union trust.

are saying, okay, we're now going to directly contract for care.

So in your case premise, we need you to stand up eight primary care centers in Chicagoland.

And we need for you to do a data analysis on what hospitals have best outcomes, what specialists have best outcomes.

And we want you to navigate and own that patient to navigate them to the right secondary and tertiary.

Sites so that we get the best clinical outcome, which we know follows with the best financial outcome And so when we have patients attributed to our primary care teams And remember, we have almost 900 centers, 46 states, a considerable part of the Fortune 1000.

It's a multi time zone, cross section of American demographics.

So it's not like we have a South Florida demographic or a Bay Area demographic.

We have an American demographic, which means it's variable.

Uh, and so what we see is that our attributed families are thousands of dollars less per year compared to families at that same employer.

We're in that same location who are not attributed to premise.

Now that is a sample size of 209, 000 patients, 27 states, 26 employers, 19 different industries, validated by Milliman.

So the bottom line is the more primary care you deliver.

And if you compliment that with navigation and care management, you're actually going to bend the curve downward, not just flatten it.

And that's what our customers have seen.

Yeah, so I want to get to the study and the details of that, because I think a lot of the audience can be really interested in sort of unpacking that study for a minute.

But before we jump there.

There's sort of three ways that premise works with customers.

We have, um, sort of the employer who is, or, or the union that is your primary customer, but then you also have the, the employee or, you know, other, you know, other, uh, site and other.

Areas, they're called a patient that that's typically the same person could be a family member.

It is a family member often.

Yes.

And you also have the providers that you are.

I think you are hiring directly.

And so talk about those 3 different, um, customer stakeholders in premise and how they work together.

To drive communication and sort of the best care.

Yeah, and then let's get into the study in a second.

But I want to make sure I let set the ground table of how it works.

Well, the, the employer, uh, what we explained to the employer and is now generally accepted in our industry is that we need your, your healthcare claims and your pharmacy claims.

And of course, we have a big, big data shop here.

Very proud of the data organization and the infrastructure that we've built, by the way.

But we're able to take claims and we can very specifically recommend a staffing model, hours of operation and service offering or product offering for that particular employer in that location.

And so it is very much a quantitative ROI driven analysis.

It's not my primary care doctor is better than yours or we're going to work harder than the local community.

This is a data driven exercise.

And so we show the employer if we staff it this way, and if you allow us to engineer your benefit design to drive members, employees, and their families into our health centers, then you will get this financial outcome.

We also, I mean, we're a clinical organization, so we are monitoring clinical metrics every minute of every day.

So.

We know how compliant certain teams are with evidence based guidelines.

We know whether our provider teams are doing, um, the appropriate cadence with follow up and with, with care navigation and referral.

Um, and so, again, with the employer, it's if you spend this, you will get this back.

With the employee, it's if you are compliant with our, our care plan, You will get healthier, you will get off these drugs, or you will lose weight, or your hypertension will become under control.

Plus, it's less expensive for the family, so it's free to visit our centers, or it's a very marginal fee that is quite contrasted with what their deductible or copay would be in the community.

So they're financially incentivized to come to us.

So, the employee and family better care, less expensive.

For the provider, You know, last time I checked, doctors and nurses and pharmacists and physical therapists and everybody touch, uh, touching a patient went to school to change lives, not to optimize billing.

And so what we have is a healthcare ecosystem that is driven entirely by maximizing billable charges.

That's what the whole game is.

So the reason we don't have any primary care in this country is people who went into physicians, nurse practitioners who went into primary care.

Can't earn a living because the reimbursement levels are too low.

Why are they too low?

Because the misaligned healthcare system wants those bodies downstream in the expensive diagnostic centers, in the emergency departments, and definitely in the hospital beds.

Maximize reimbursement.

That's the game that our customers are fighting against.

Yeah.

And let's talk about the premise business model.

So you are charging large employer apps And how are you charging them?

And how do the incentives work like in order to get away from that incentivized to To get people into higher, you know more cases.

How does premise change that so that it is all aligned?

Yeah, well, uh, first of all again to my point around why people go to medical school and nursing school to help people get better We give them that environment So our mandate to the providers is spend as much time with the patient as you need Vic may be coming in for an earache But once you, uh, diagnose and prescribe a solution for Vic, what we need you to do is talk to Vic about his lifestyle and about his family history, if he knows it.

And let's begin to unpack what's really going on with Vic that ultimately is going to cost Vic's family and Vic's employer a lot of money downstream.

In the current model, there's, there's so much misalignment, there's no way for a doctor to

get there.

A ten minute clinic visit, you can't, you gotta just sort of quickly get them a script and move on.

You give them the time and space to have empathy for the patient and listen to what they're going through.

And that might mean not, uh, much but build a relationship.

It might uncover that both my parents died of heart attacks and I haven't been checked for cholesterol and I need to look at other things.

Exactly.

Or you could have something going on from a behavioral health standpoint.

You know, we have a behavioral health crisis in this country.

And we know that if you have a diagnosed chronic condition, and in addition to that you are diagnosed with a behavioral health condition, your claims are likely to be 50 percent higher.

So what we've done is we've incorporated behavioral health into our primary care model.

And so when we recognize in the exam room with Vic that he needs a referral We're actually going to walk you down the hallway or walk our psychologist up the hallway Make the introduction and try to get Vic engaged, uh with his emotional and his physical health We're just simply getting better outcomes because we're spending more time Yeah, and when you think about the work we do with healthcare blue book and with cedar gate We're able to navigate within that community to the highest quality most reasonably cost Uh secondary and tertiary sites and so we're owning the whole patient end to end Again, where's the motivation the employer or the union wants that person healthier and when you do that they get less expensive I asked a bunch of ceos in health care recently.

I said look got four and a half trillion dollar spend in this country Let's say everybody starts eating.

Well hospitals get super efficient technology and ai Take this four and a half trillion to three trillion dollars I looked around the room and I said, which one of you does well under that scenario?

Which one of you still has your job in three years under that scenario?

The system is set up to grow at nine to ten percent a year because again There are only three payers and the three payers are not in the ecosystem.

They're simply writing checks

That's right, and it is unsustainable which means I think By the definition of the world word that it has to change and what I really the reason I was excited to do this conversation is.

We don't have to try to figure out what to do.

Premise has already created a many year, maybe decade sort of experience track record of how this works and how it could be better.

Um, and what we need to do is just sort of have more people sort of coming in and adopting.

Yeah, align systems like this.

Yeah.

And so the way that's exactly right.

So the way a big customer of ours, any customer thinks of it is we go to them with an annual budget and we say it's going to cost you 10 million to run three primary care centers.

And here's what makes up that cost pay us every month on time.

And guess what they do.

We have no bad debt.

We don't care what the reimbursement rates are coming out of Washington or help, but we don't care.

We're paid directly by fortune 1000 every 30 days for operating that center.

We have an incentive by showing compliance with HEDIS, evidence based guidelines, pharmaceutical adherence and compliance, and ultimately total cost of care.

We can earn higher incentive fees as we save them money.

So it's a shared savings type of arrangement.

And the way a Fortune 1000 employer thinks about this is, okay, well, if I was spending 5 million last year in the community on primary care in a network, and Premise wants me to spend 10 million for these two centers, But that 10 million is going to save me 5 percent off of my 700 million dollar American total spend.

No brainer.

So when a CFO sees the quantitative results of what we do, we start launching sites.

You know, we launched, we had our biggest year last year.

We launched over 130 new sites, you know, organically.

We, we grew it, um, uh, gosh, 16 percent on the top line and nearly 18 percent on the bottom line.

And that's on over a billion dollar base.

So the demand for what Premise does is unlike anything I've seen in 34 years.

Yeah, and what, I understand it because it, um, it is turning health care into a more manageable kind of department expense line item for the CFO.

So like, yes, you're going to maybe reduce the cost of care, but you're also giving them more, uh, certainty.

It's going to cost 10 million dollars to run these clinics.

And you're going to give them monthly reports of how it's going and in return, they're going to pay you on time.

And then you together are sort of working on this bigger overall health budget and trying to make savings and get better care delivered through that process.

That's right.

We are after total cost of care.

We can often replace a number of the point solutions that these employers have brought on that nobody's using.

There is point solution fatigue to a degree.

I've never seen it.

Uh, you hear CHROs talking about 20 and 30 point solutions.

Well, we can immediately replace half of those just as part of our embedded primary care behavioral health, what we call advanced primary care model.

So they can eliminate the cost of the point solutions and they get more engagement, uh, and and it's just a better outcome.

Yeah,

I'm

a

VC, right?

So if there is something that is a new approach, you could test it in 1 center of your 1000 centers.

And then it either really improves care at lower costs, or it doesn't, and now you have a much more clinically validated decision tree to work on, as opposed to just the bright, shiny object.

Let's add that to the benefit plan.

Next thing you know, you have 500 different point solutions.

Yeah, I mean, point to a point solution for a chronic disease that's actually worked.

There may be a couple, Vic, I don't know, but I haven't read a single hard quantitative ROI actuarially validated study that says for diabetics, if you use this point solution, your A1C stabilizes at eight or less for the next three years.

I haven't seen it.

And so the large employer and union organizations are calling monkey business on all this and we're just getting back to basics.

If you spend 10 on primary care, you're going to spend a lot less on your 700 of total cost of care.

And no one else is doing that in the ecosystem right now.

It's all about how do I maximize reimbursement?

Which is, which is directly counter to what the employers and the patients and even the individual providers really want.

Exactly.

Well, first of all, who, you know, as I think Warren Buffett said, show me where the incentives are and I'll show you where the behavior goes.

Well, if you don't have risk and you're making fees off of total spend, then you want total spend to go up.

I don't care what your carnival barking says on stage, the bottom line is You're incentivized for your customer to spend more money.

Yeah, that's, that's the thing that no one talks about that is abundantly clear to me that you've been saying is no one takes risk more than 12 months in the future, period, in the system.

There's no one that does that except for the employers and, and the government, I guess.

And so what you're doing is giving is sort of aligning with those actual, um, groups that are responsible for the multi year cost of care.

And then helping them navigate that starting with primary care where you can have the most influence.

That's right.

So if you take, uh, an MSA like DFW or Orlando, and we have big customers in both of those those areas, when we tell a certain hospital that we're going to move 90 percent market share of the largest employer in that area to their hospital.

But here are the rules of the game.

Guess how much they push back?

Not at all.

Because they only have 10 percent of that customer's market share at the moment.

So, I mean, our physician's ability to navigate is the heaviest hammer, biggest lever that there is in cost control in that local community.

We simply will shut down referral to any institution or specialist that is not going to adhere to our quality requirements.

Our NPS requirements for our patients and ultimately our cost requirements.

Yeah, and We're going to build an alternative health plan and you know, it reminds me Of saying I think gandhi said it, you know first they ignore you Uh, then they laugh at you Uh, then they fight you and then you win and so when I say premise is going to get into the health plan business They were ignoring us.

Now they're laughing at us.

What I mean by this, we have two pilots right now.

Two major Fortune 1000 customers.

You can have your typical buka plan, and your 300 out of pocket every paycheck, and your 7, 500 deductible.

7, 500 deductible.

Or you can have the premise health plan.

It's much cheaper against your, uh, uh, paychecks.

So call it 100 instead of 300 or 350.

No copay, no coinsurance, no deductible, none, zero.

And so what happens is you have to get your primary care at premise on site, near site, or virtually.

And then when we refer you to that orthopedist or that neurologist, That's where you go as long as you stay in that network Which is a subset of the larger health plans network, by the way So that we're not messing up the economics And so the premise doesn't have to directly contract in every community if you stay in that network I mean instead of paying nine thousand dollars a year per family toward your 25 000 that it costs to underwrite It's it's some small fraction of that.

So We're getting into the health plan business and, you know, it explains why we don't get holiday cards from Health Plan, Inc. and PBM, Inc. and Hospital, Inc. That's why you don't see me much.

I'm actually afraid someone's going to take me down and back out.

Well, and you're actually working, delivering the value to your customers as opposed to talking about it.

So, um, yeah.

And then is there an opportunity to, um, have premise be my home or the employee's home for health care?

And then I might switch jobs.

But I could, I could stay with Premise if you're with that new employer too.

Is that on the roadmap or is that a possibility?

If both employers in that scenario, Vic, are participants in our health center, then absolutely.

What we will never do, ever, ever, ever, is bill fee for service or take some crappy primary care cap rate.

That puts us into the same category as every other primary care provider, which is do as little as possible.

See as many people as possible.

Uh, and volume, volume, volume, up, code, up, code, up, code.

We're never going to play that game.

We're going to get paid directly by the entity at risk for the cost of our operations.

And we want the ability to earn upside when we make people healthier.

Well, so let's talk about the Millman study that you did with Millman now, because I think that's a good place to go.

And then my belief is that as people start realizing the savings per member per year that we'll talk about right now, and then also the, just the satisfaction levels of the patient, of the customer employee, of the doctor, that you're going to get more and more of the S& P 500 as customers, where I could then move back and forth because premises come everywhere.

But before we get there, you did this study and you've done a couple of different years, but the last one got published in October and just discuss the study because it was very detailed.

And I want to, you know, I have a lot of, uh, healthcare insiders that are listening.

So I want to spend like 10 minutes, like talking, how did you design the study?

How'd you make sure you had apples to apples?

And then let's talk about the results.

Yeah.

So we, we embarked on this particular study that, as you pointed out, was updated last October, um, I don't know, four or five years ago.

And it was a result of our exhaustion with the claims out there by entities that they were saving the employer or the union's money when we knew that they weren't.

Just because you reduce your episodic cost does not mean you're saving them money.

Just because they're avoiding cost doesn't mean you're saving money.

The only way to save money in healthcare is to make the patient healthier so that they spend less money on stuff in the ecosystem.

Yeah,

you need to move them to, uh, healthier living, maybe maintaining their, managing their chronic disease better, not having these, uh, adverse events because they're healthier.

And then that results in less cost.

Exactly.

So with the Milliman study, we, we approached Milliman and said, look, we've got a significant sample size here.

We've got a great cross section of the U. S. We've got a great cross section of American industry.

We've got the data.

Um, here's our approach.

And of course, we have data scientists on staff here.

And, you know, so we've, we've always been a quantitative shop.

I mean, if you can't, you

could do it without Milliman, but, but having Milliman overlook it gives you so much more credibility.

Yeah, and it separates us from the carnival barkers out there.

So again, we went to Milliman and said, here's our approach.

They had some suggestions around risk adjusting exactly, you know, the actuarial processes.