Encore! EP363: How to Cut Healthcare Admin Burden in Half, With David Scheinker, PhD

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[00:00:00] Stacey Richter: Encore episode. "How to Cut Healthcare Admin Burden in Half." Today, I speak with David Scheinker, PhD.

American Healthcare Entrepreneurs and Executives You Want To Know Talking. Relentlessly Seeking Value. 

The Impact of Administrative Burden in Healthcare

[00:00:27] Stacey Richter: I'm going to encore this episode with David Scheinker, PhD, for several reasons, but here's a big one. Why are we as an industry not doing what David Scheinker suggests in this episode? 

Why are we not doing, I don't know, kinds of logical things to reduce admin burden in this country when everyone agrees admin burden is a problem? 

But let me back up for a moment for context. Two things happened since this show originally aired. One is that I was invited to a fireside chat by the Advisory Board to talk with Abby Burns, one of the amazing hosts over at Radio Advisory.

And we talked about value in the healthcare industry. And if you define value as benefit divided by costs, and you can cut costs like cut admin burden costs in half, then you have created some really nice communal value, which we talked about at length during that aforementioned fireside chat. Here's the other thing that happened since this show originally aired.

I read the book by Mike Leavitt, mainly because Dr. Steve Schutzer kept talking about it, link in the show notes. The title of the book is "Finding Allies and Building Alliances". 

Exploring Solutions and Insights from Other Industries

[00:01:47] Stacey Richter: Maybe I will do a book report about this at some point, but let me share a couple of key quotes just to get the party started here.

Mike Leavitt wrote, "A diverse alliance, well led and well managed, can bring resources to bear on a problem that no organization can match, even the largest of organizations. The synergy of resources from financial to intellectual can deal effectively with a wide range of issues confounding organizations today."

I found that very interesting. Here's the second quote, which deals with what the top reason is that such diverse alliances may wish to hook up. "It's a common pain. A shared problem that motivates people and groups to work together in ways that could otherwise seem counterintuitive." Hmm, so back to administrative burden.

Let's review the facts that David Scheinker, PhD, shares in the interview that follows. He says any given transaction will cost provider organizations 14% of the total transaction costs to manage to get paid. Yes, it costs 14 percent of a transaction merely to get paid for the transaction. This is a big reason why both Peter Hayes, in the episode with him, and also Marshall Allen, links in the show notes. Talk about for why cash prices can be a whole lot less than going through insurance prices because you can skip a lot of insurance burden.

Now, on the payer side, add to that 14 percent an additional 5 to 15 percent to pay said transaction. That 30 percent of healthcare is waste stat that keeps getting tossed around. Listen to the show with Dr. Will Shrank for more on that. But yeah, here's 20 to 30 percent of every transaction that is waste.

And we haven't even gotten into redundant care or inappropriate back surgery yet. Our industry spends up to 30 percent of our money just trying to get paid and pay. Here's a case study for you. You know who has already solved for this whole, it's really hard to get paid and pay, dilemma? Derivative traders.

It used to cost derivative traders $100,000 to do a contract, any given contract. And they worked together and got this down to $5,000. By doing some of the stuff that David Scheinker talks about in the show. And I don't know, I feel like the healthcare industry could also do this too if they wanted to. But there are a whole bunch of reasons why our industry cannot seem to get together and be as ruthlessly practical as derivative traders.

Or, banks who have figured out how to work together to process credit cards to reduce their own common pain. Here are but a few of the reasons, potentially, why the healthcare industry doesn't get together to reduce administrative burden in some of the ways that Dr. Scheinker talks about. Reason 1. Some organizations, actually, make a lot of money off of that transactional waste.

As but one example, and not to just pick on one, but we don't have all day, how about some RCM, some revenue cycle management companies, who may or may not be owned by the same vertically integrated stacks as the payers themselves. As I have said any number of times, one person's, or potentially an entire country's, as the case may be, one party's waste, is somebody else's honeypot, and I am not sure if this is any exception.

Here's number two point why we haven't solved for this already. Legacy technology and data systems and all the sunk costs therein.

Here's issue three. As Kaye Davis and Katrina Hubbard reminded me about the other day, there are some serious regulations in healthcare due to everybody being a vendor of CMS that adds a layer of regulatory complication to many collaborations. Also, state laws sometimes have an unintended side effect of making it tough to collaborate.

Now, are there any precedents for this type of collaboration in the healthcare industry? Yeah, actually Surescripts, which don't forget was created by an alliance of PBMs who worked together because they all wanted to enable e prescribing and needed a joint platform to do it. 

Look, I could say a lot about this one, but nonetheless, so much of what gets talked about in the show today with Dr. David Scheinker is very, very actionable. Just want to note that since David Scheinker was on the show, he and his team have done some major research over the past few years into ways that contracts can be standardized. If enough of you reach out and say that you're interested, we for sure can have David come back on the show and discuss. 

David Scheinker, PhD, is a clinical professor of pediatrics. He's the Executive Director of Systems Design and Collaborative Research at the Stanford Children's Health. He also founded and directs SURF Stanford Medicine. 

And with that, here is your original episode. 

Administrative costs in the United States have a bad rap. You don't have to look too far to find an article about how there's now like 10 administrators for every one physician in this country, or 3 to 4 billing people for every physician. 

Or Consider what Dan O'Neill was talking about in episode 359. He was talking about IPAs, Independent Physician Associations, and other managed care entities. As Dan mentions, contracting with some of these IPAs is like an I Love 1990 flashback. The contracting process, transpires via mail. Not email, mind you, mail. 

Like, stick a stamp on the envelope mail. So in sum, there's a lot of pretty well founded complaining about administrative costs in this country. A lot of this administrative stuff is truly inefficient and a fantastical waste of time. So here we are freaking out about staffing shortages, overlooking that doctors at the heights of their careers are spending some percentage of their time not counseling, treating, or diagnosing patients, but twiddling their thumbs on hold with one insurance company or another, slowly burning out by the inefficiency of it all.

We're doing pajama time, and we all know that too much pajama time means also burnout on a silver platter. So then let's get granular here. If we're trying to quantify admin costs, how you do that is to quantify how much each transaction costs. How much does it cost to send a bill and get paid for it?

How much does it cost to file an appeal on a denial of a prior auth? Add all those transactions together and you get the full cost of the administrative burden. 

The Case for Standardizing Healthcare Contracts

[00:08:41] Stacey Richter: Today, we're digging into a paper about admin costs written by David Scheinker, PhD, my guest today, Burak Richman, Arnold Milstein, and Kevin Schulman.

I have the pleasure of speaking with David Scheinker, PhD, as I mentioned, who is the lead author on this paper. Just to underline a major takeaway from this conversation with Dr. David Scheinker, He reiterates a recommendation to eliminate a big proportion of administrative costs. I guess I should say spoiler alert here, but the major takeaway slash recommendation is this.

Standardize healthcare contracts between payers and providers. Every payer and every provider finds one contract template and uses it. I don't mean one template per payer or per provider, although that probably would be a revelation in and of itself. But I mean that all payers use one basic provider contract.

A couple of specifics here. The template that I'm referring to, and that Dr. David Scheinker is referring to, consists of parameters. What do I mean when I say parameters? 

Consider what Airbnb does when you're looking for a place to stay, as an example. How many bedrooms? That's a parameter. How many bathrooms, that's a parameter. How many amenities, that's a parameter. After everybody picks their standard set of parameters, at that point all parties can negotiate and come up with whatever they want for what is the price of an extra bedroom or whatever value you're going to assign to that parameter. Go nuts there.

But from a data collection and analytic perspective and a getting paid perspective, it is way easier to do it that way, meaning it's way easier to execute and report when all of the contracts use the same parameters. Also, you can build tech to do a lot of that because you don't have to write algorithms with exponential variables.

My name is Stacey Richter. This podcast is sponsored by Aventria Health Group. David Scheinker, PhD. Welcome to Relentless Health Value. 

[00:10:35] David Scheinker: Thank you for having me. 

[00:10:36] Stacey Richter: Administrative costs in the US. If we're talking about an average transaction in the United States, what's our cost here? Quantitatively, what's the cost?

[00:10:46] David Scheinker: So I'd like to first draw a contrast to the way we make payments in our everyday lives with a credit card. With my credit card, I can pay for even more different services and goods than there are types of healthcare you receive in the hospital. And that all in cost is about two percent. 

[00:11:02] Stacey Richter: 2 percent of the total transaction.

[00:11:04] David Scheinker: Yeah. For healthcare, just on the provider side, it's about 14.5 percent to bill insurance companies for physician service. 

[00:11:15] Stacey Richter: So while the rest of the world can manage to get paid 2 percent of the total transaction costs, in healthcare, just speaking from the provider side, it costs an average provider 14.5 percent of the total transaction to manage to get paid for that transaction.

[00:11:31] David Scheinker: That's exactly right. The estimates of how much it costs on the insurer side, just to pay for the transaction, vary, but the two together are almost, by every estimate, over 20 percent, and by many, closer to 30 percent. 

[00:11:45] Stacey Richter: So, one fifth. Effectively. 

[00:11:47] David Scheinker: At the very least. Yes. 

[00:11:48] Stacey Richter: Okay. And everybody wonders why healthcare costs are so high. Here we have just to get paid, adding no value at all to the patient, add a fifth to the bill. 

[00:11:58] David Scheinker: Exactly. 

[00:11:59] Stacey Richter: And in the aggregate, what does this contribute to our gigantic healthcare spend in this country? 

[00:12:04] David Scheinker: Just the waste associated with healthcare billing and administration costs is $360 billion. 

[00:12:12] Stacey Richter: Wow. $360 billion.

[00:12:14] David Scheinker: With a B. 

[00:12:14] Stacey Richter: That would seem to pay for a lot of patient care, even if it was a zero sum game, if we could repurpose that to a more positive use case. 

[00:12:22] David Scheinker: Or even keep the same amount of patient care and reduce that from the premiums that are cutting into people's take home pay or the deductibles that are making people reluctant to seek care.

[00:12:33] Stacey Richter: Yes, or that. 

So, you know, considering the huge dollars that are at stake here, what's the why here? Like, why isn't anybody frantically working to save these dollars so that they can either be saved or deployed with some greater impact here? 

[00:12:47] David Scheinker: Before I go to the why, I just want to answer the why would we think it's possible?

[00:12:53] Stacey Richter: Okay. 

[00:12:54] David Scheinker: I want to point out that there's at least two really strong pieces of evidence that a better way is possible. One is that every other OECD country practically has far, far lower billing and administrative costs than we do. The other is the motivating example that Barack Richman told us about, and it's from swaps, or code of swaps, which are derivatives contracts.

I mean, this is a $200 trillion market, over 600 firms in 50 countries, and they used to negotiate contracts much more like we do in healthcare. They used to pay about $100,000 in legal and other fees per contract in the swaps industry. And then they made an effort to standardize all of it, and they brought that cost down by a factor of $20,000 to about $5,000.

[00:13:42] Stacey Richter: Wow. 

[00:13:43] David Scheinker: That's one of the few markets in the world that's as complex as healthcare and as large as healthcare and it made clear that it's possible to have significant standardization while keeping the level of customization and flexibility. 

[00:13:59] Stacey Richter: You're the mathematician, but it would seem very much like you could take that 20 percent healthcare, you know, the cost of administrative being 20 percent and put it down to 2 percent if the same ratio applies.

[00:14:12] David Scheinker: Yeah, if it was the same ratio, it would be down to 1%. But yeah, absolutely. In fact, in some ways, the problem for healthcare should be simpler. 

[00:14:20] Stacey Richter: So it sounds like you're almost setting up two paths forward. One way is to do what all the other OCD rich countries do, which is provide some level of single payer healthcare.

That's one way to standardize a contract. You have one. Or the other way is to actually use the skills that we've developed in other areas in the financial world. As you said, like, in order to adjudicate, or whatever they call it, these other contracts, obviously it's a developed skillset that somebody has, apply that, those skills and those learnings into the healthcare sector.

[00:14:56] David Scheinker: I'd say it's a continuum between the two. Many of these other rich nations, they have a combination of a government payer and private payers. So we're thinking about how do you revise the system if you have just the government doing it, or how do you revise the system if you're going to take that innovation and technical advancement that the competition in the free market is supposed to facilitate.

[00:15:20] Stacey Richter: So it sounds like if we're going to do the free market thing, we need to do the free market thing and use the learnings that the free market has devised elsewhere and apply them here. 

[00:15:30] David Scheinker: Absolutely. 

[00:15:31] Stacey Richter: What does this actually look like in a doctor's office? 

[00:15:33] David Scheinker: The complexity of the current system looks like physicians spending lots of time while they're providing care for a patient, trying to figure out first, okay, which set of rules guide the documentation required for this patient because it depends on who's paying for this patient's care.

So it's two types of complexity. One that arises from the number of different contracts a provider has to deal with and the second arises from how complex each of those contracts is. 

[00:16:04] Stacey Richter: And I could see that this also could lead to, you know, doctors often get dinged or there's the implication that there's this, in quotes, gaming the system.

Like, I know I'm going to get through the PA criteria if I code it this way instead of that way. I could see that the impetus to do that, and I'm not talking about someone committing fraud, right? I'm talking about that messy middle where you've got some poor doctors who can't remember because of all this complexity, which contract is governing whatever it is.

So they're just trying to figure out how to code this properly so that under the specifics of that particular contract, it turns out to be what that contract is looking for, right? Like, I know there's a bunch of nuances here, but I could see that that puts the doctor in a very potentially awkward spot.

[00:16:55] David Scheinker: Exactly. Doctors at large academic medical centers probably aren't explicitly doing this, but the hospital has all sorts of guidance and decision support that makes sure the doctors do it. Or if the doctors end up not documenting something they need to, then they may have somebody reach out to them from the billing office and ask them to do retrospectively.

So in effect, it does filter through to doctors. 

[00:17:19] Stacey Richter: So again, this isn't necessarily about providing better patient care for the most part. This is trying to figure out how to characterize or classify the care that somebody either has given or wants to give in an effort to describe it using the proper terminology so that it's one can get paid. 

[00:17:39] David Scheinker: Exactly right. We explicitly want to avoid thinking about the value generated by the guidance insurers provide to avoid low value care or to prevent inappropriate care. There are lots of positive, valuable additions to hospitals, insurers, medical associations and others identifying what's appropriate, what's ideal under which conditions and we do not look at that value as part of this equation.

We really just want to study as close as we can the direct analogy of, you know, you've decided the latte you want to buy, you've decided what kind of milk and toppings you want. They've made it however they've made it, and now you just swipe your credit card. That credit card swiping. 

[00:18:24] Stacey Richter: Yeah, so that's a really important distinction.

That what we're not talking about here is an insurer trying to incentivize a high value care and disincentivize low value care, which is what you're talking about. What we're talking about here is how do you manage to get paid for the care that you should get paid for? 

[00:18:41] David Scheinker: That's exactly right. 

[00:18:42] Stacey Richter: And obviously, you did a study looking into these administrative costs, what they are, and then potentially what we can do to help minimize them since they are the quintessential, you know, if you're going to identify anything that's low value, it's, it's certainly this.

Practical Steps Towards Reducing Administrative Costs

[00:18:59] Stacey Richter: Do you want to maybe just give the really top level of the methodology that you use just in case someone is interested in how you went about this and then let's talk about your conclusions. 

[00:19:08] David Scheinker: The reason this is so relatively understudied is that few people understand how this works or see how it works or have the data about how it works.

So that first paper that I keep referencing is the foundation of the work because they spent an immense amount of time actually following physicians and administrators around with a stopwatch to track exactly what they were doing, how long it took, why it was necessary. And that articulation of exactly what goes into swiping the credit card in healthcare is what we base our work on.

Based on that first analysis, we characterize the drivers of cost and complexity and how long it takes. And then we think about ways that other industries have standardized and automated to reduce those costs. So, one way would be to reduce the number of contracts. For example, the extreme that people talk about is single payer.

So there's just one monstrous contract that covers any type of care anybody could ever want or deliver and how the government is going to pay for it and ask that it be documented. This would correspond to a provider that previously had $5,000 contracts having only one contract. The second feature is contractual complexity.

And in the single payer model, to continue with the example, the average contractual complexity may go up because if a provider is administering care for every possible patient under one large contract, that's going to be a very complex contract. Alternatively, there's a world where you can keep the current number of contracts or reduce it, but each contract would be based on a more standardized digital format.

That would reduce the contractual complexity so that it becomes a mostly automated interaction or at least one that you're very familiar with because it's not different for a thousand different contracts. 

[00:21:07] Stacey Richter: Okay. So either we can have one or a very small number of really, really complicated contracts because that's what winds up happening when you try to consolidate under one contract is that the contractual complexity goes way up.

Or we can have a bunch of contracts. But as long as each contract type is simple, then you know, the sum of each of those two formulas winds up being roughly the same. Did I understand that right? 

[00:21:32] David Scheinker: The only distinction I really want to emphasize is it doesn't have to be simple. It should be standardized.

So, in the credit card analogy, the negotiations of the prices and the bills that credit cards, you know, are used to pay for, they can be incredibly rich and complex and on these online marketplaces, but they're very standardized. So all of that complexity can be done by a computer rather than a person.

[00:21:58] Stacey Richter: And do you mean standardized across contracts? So, in other words, there's a larger number of them, but they're very similar or the same in their nature. 

[00:22:07] David Scheinker: Exactly. One way you can think about this is if you have a contract where for hip replacement, a certain amount is negotiated. So one way to do that is if you're an institution, every insurer that comes to you, you hammer out and negotiate the price of a hip replacement.

That negotiation is going to take different factors into account and it's going to have some customized payment and criteria for hip replacement. Now that leads to many, many contracts, each with its own somewhat idiosyncratic rules. The alternative is you create some parameters to describe a hip replacement, a clinical complexity parameter, the price it should be covered for, some quality conditions, and then each of those is just a parameter. 

Now, any contract can then just be specified by setting these parameters. That can still lead to millions of potential contracts, but they're all standardized in the sense that they're all fully described by just a few parameter values. 

[00:23:06] Stacey Richter: It almost sounds like what you're suggesting is that we turn these contracts into structured data in some way that you then can parse and have a computer look through and search and sort.

[00:23:17] David Scheinker: You can have a template contract, a provider and insurer say, okay, here's our template contract and here are the seven ways in which you're allowed to modify. Maybe you think your population is a little healthier, or maybe you think you are a little more efficient in these clinical procedures, or maybe you're more competitive in this area of your service.

And so, each new contract should be generated from a standardized contract based on a relatively small list of parameters having to do with quality, cost, and risk. And the resulting modified contract should be something that can be administered by both sides with the exact same documentation as the original contract.

[00:24:03] Stacey Richter: Okay, so everybody agrees that like for a hip replacement, and I'm making stuff up here because I have entirely no idea what I'm talking about. You're saying, hypothetically, for every hip replacement, for every insurer, every provider, everybody agrees on like three parameters, as you call them. One parameter, let's say, is the risk level of the patient.

And then the second parameter is the quality of the hip replacement delivered based on something or other. And then lastly, I don't know, you have patient satisfaction with the service. Now the insurers and providers can brawl over how much the payment will be for each hip replacement, but they're fighting within the framework of those three parameters and the provider performance is based on those parameters. 

I could see the pushback there is going to be that you lose the ability to finesse. Like, if every contract is its own unique snowflake of a contract, then we can get incredibly specific relative to whatever I want to get incredibly specific about. Like the second that I move to a template, I'm going to lose the ability to drill down at the most finely tuned level of detail.

How would you address that pushback? 

[00:25:24] David Scheinker: That's absolutely valid. And to take our example from the financial world, if you want to continue paying $100,000 per contract and bearing all of the massive overhead costs of physicians and patients of administering them, then yeah, that's worth it to you. Then you get to keep the beautiful individual snowflakes.

If you want to give up some of that finesse and individuality and move to a $5,000 per contract world where you have algorithms doing a lot of the work instead of physicians, then hopefully what you lose in that finesse, you gain in cost savings and standardization and transparency. 

[00:26:04] Stacey Richter: So in a way, you might actually gain more, like whatever you think you're going to gain by having, you know, finesse to the nth level, you're probably losing in the inability to actually operationalize those details anyway, right? So it's almost not even a kind of a fair statement because of the impossibility of the administrative, like we're not living in the real world here. 

[00:26:29] David Scheinker: Exactly. If we take the absolute minimum estimate of 20 percent wasted spending around contracting, Then, you're saying, okay, if we could standardize contracts and get down to a few percentage points of cost, then the reason to not do that was because you think that finessing the contracts is adding these 18 percentage points of value.

And I would be hard pressed to believe these individualized contracts are really adding value of that magnitude or anywhere near it.

[00:27:00] Stacey Richter: So if I'm an insurer, and I'm picking up what you're putting down, you know, like I'm a decision maker and I work for a pay organization, I work for a large employer, for example, what's your advice for me?

Because if I'm thinking things through in my head, you know, I've got all these different care settings and whatnot. I mean, there's just some inherent complexity here. What do I do? What's my first step? 

The Future of Telemedicine and Contract Standardization

[00:27:20] David Scheinker: Never let a good crisis go to waste. Take advantage of the fact that there's this huge transition to telemedicine.

If you're an insurer, you're aware of the incredible headache and cost associated with updating legacy systems and trying to move away from the infrastructure you have in place. I think, and I desperately hope that at some point this will get done, but I realize that it's much easier in healthcare to build something new than to change something that exists.

So I would take all of this new demand for telemedicine and all of this new demand for appropriate telemedicine payment models As an opportunity to build something totally new, something efficient and standardized and scalable and algorithmically administrable. 

[00:28:05] Stacey Richter: You know, you're referring to inertia in the healthcare industry, number one, but then also the whole innovator's dilemma.

But if we're thinking about building something new, such as the infrastructure around telehealth, that might be a perfect opportunity for everybody to just start afresh. So going back to the standardizing contracts. Reducing administrative burden. If I'm a provider and I am seeing exactly what you're saying, right, or I know my front desk is seeing exactly what you're saying, what do I do?

Is there anything that I can do either, you know, proactively or reactively relative to either the contracts that I am negotiating myself or the contracts that I'm getting? 

[00:28:43] David Scheinker: I think the ideal would be if, as a provider, you identify. Look, this is the contract that is the most efficient for me to administer.

It'll probably still be pretty inefficient. And this is again a gamble, but what I'd imagine is if every payer that comes to me and wants to negotiate their own contract, I say, look, how about we just take this contract and as a bonus to you for accepting a contract that's not yours. I'll just give you a 3 percent discount across the board.

The idea being that if a hospital can save 14 percent discount on the cost of getting paid by turning all of their many contracts into one, then they could afford to give a discount that it would still be more than cost effective. I can see why there's all sorts of practical reasons that would prevent that, but that is the kind of approach that in theory should be possible because of the magnitude of the wasted effort and money.

[00:29:43] Stacey Richter: Yeah, you definitely think that at a minimum, that's a great starting point to contemplate just recognizing the fact that there's huge dollars that are on the table there that could be saved. So like if you've got a 14 percent categorical bucket to be playing with there, there's probably a lot of negotiation leeway that you have.

[00:30:02] David Scheinker: The more practical advice I'd give the provider is you're launching all sorts of telemedicine programs or you're scaling up telemedicine and areas where it was a fraction of your volumes before. So, you could start there by going out to insurers and saying let's build a new standardized algorithmically administrable approach to our telemedicine programs rather than trying to jam telemedicine into our existing contracts in a way that's just going to increase its complexity.

That would be more practical. 

[00:30:32] Stacey Richter: An algorithmically administered telehealth program would be something, as we were discussing before, that you could categorize like, you know, something about the visit itself. It's something numeric as opposed to longhand. 

[00:30:47] David Scheinker: Exactly. Telemedicine has two huge benefits from this point of view.

One is that it's a digital interaction whose duration and cadence can be tracked so that if the care model doesn't punish providers for providing care quickly and efficiently in short episodes, then it should be possible to generate both value for the provider, patient and the payer. And then second is that a lot of telemedicine is associated with data collected from remote devices. For example we do a lot of work in continuous glucose monitoring of our Type 1 diabetes patients and remote care for them. So the extent to which those digital data are available makes it more straightforward to measure the efficacy of the program and implement quality controls.

Type 1 diabetes is a relatively small population but think about hypertension management. If you have blood pressure measurements from the patient's home automatically sent to the care team and you have a cadence with which the care team reaches out to these patients, then you can track the progress in managing blood pressure from the digital sensor and you can figure out a reimbursement that makes the program sustainable and rewards institutions that manage to do a better job managing hypertension remotely and efficiently. 

[00:32:09] Stacey Richter: So it sounds like you're using the term telemedicine as a shorthand for like, this is how you can actually get paid for value for reals. 

[00:32:17] David Scheinker: Exactly. 

[00:32:18] Stacey Richter: Are there any other benefits of contract standardization that you might want to add here beyond the inarguably big kahuna of saving 20 percent what we're spending on inefficient administrative activities currently?

[00:32:32] David Scheinker: Another potentially significant benefit of standardization would be that apparent conflicts between payers and providers would just disappear. There are all sorts of apparent conflicts that are really just an artifact of the complexity of the system and the current pathways that have grown organically to navigate that complexity.

And if you think about the fundamental role of providers, provide care, the fundamental role of a payer as estimate risk, collect capital and generate guidance on care value or evaluate the value of care. Then if you have a seamless contractual environment between the two, it is very easy to align incentives or relatively easier to align incentives. Then it would be in this current model. 

[00:33:26] Stacey Richter: So why hasn't this happened yet? It must be fairly obvious to participants in this billing fandango. Like, what is the reason why it is taking so long to address it? 

[00:33:39] David Scheinker: The reason I think this hasn't happened is that there's been a lack of competitive pressure to do it.

It's incredibly expensive to update legacy systems. It's difficult to renegotiate partnerships and contracts. And these are barriers. But in other industries, these are barriers that companies either overcome or companies end up going out of business because of competitors who do overcome them. In healthcare, health insurers have the expertise to build systems that can facilitate this more standardized approach.

If there was more competition and more pressure on insurers to become efficient, I think they would be the party with the resources, both in terms of capital and data, that could make a serious pass at this kind of standardization. I think that health insurance state commissioners are a great authority to potentially push for some of this kind of work.

[00:34:36] Stacey Richter: So all of the consolidation in the marketplace actually moves us away from this goal as opposed to closer to it. 

[00:34:42] David Scheinker: Exactly. The consolidation moves us, technically it's more feasible because it's a more centralized consolidated system, but from the incentives point of view, it's less desirable. That's a little bit of a paradox.

Concluding Thoughts and Next Steps

[00:34:52] Stacey Richter: Dr. David Scheinker, thank you so much for being on Relentless Health Value today. 

[00:34:55] David Scheinker: Thank you for having me. 

[00:34:57] Stacey Richter: Links to everything discussed on the program today can be found at relentlesshealthvalue.com. If you visit the website, relentlesshealthalue.com, you will also find a complete listing of all of the shows that we have published thus far with leading entrepreneurs and executives in the healthcare space today. Another cool feature is, you know, you can subscribe to the show so that every week the episode is automatically sent to you so you don't have to remember to go to the website to download it. Thanks so much for listening.