Introduction and Episode Overview
[00:00:00] Stacey Richter: Episode 483 Part 2. "Reversing the Healthcare Flywheel to Contain Skyrocketing Healthcare Costs." This is the second part of my conversation with Jonathan Baran.
Recap of Part 1 and Introduction to the Flywheel Concept
[00:00:28] Stacey Richter: Okay, to review from Part 1 of this conversation, and if you didn't listen to it because you think you know how this whole skyrocketing healthcare costs thing works, let me tell you, I myself had a few revelations, so go back and listen.
To listen to this episode or read the show notes with the mentioned links, visit the episode page.
But to be fair, if you didn't already, sure, fine. Listen to Part 2 here first and then do it backwards. It probably won't make that much difference. Except, you'll need to contend with me totally ruining the Part 1 suspense because here's the negative flywheel starting with the axle.
Employers and other plan sponsors have been convinced to buy discounts, including discounts or discounts by their other aliases, rebates, and probably shared savings too I would throw in this category.
This is the grease that keeps the flywheel spinning. What's the why there? It's a genius idea if you think about it. And if you're not fully understanding what I'm about to say, go back for sure and listen to part one of this episode because this is a very fundamental concept that has come up over and over and over again on this podcast.
Cora Opsahl, talked about it. Claire Brockbank, Eric Bricker, Chris Crawford for just four shows off the top of my head in the past, you know, eight months or so.
The Problem with Buying Discounts
[00:01:39] Stacey Richter: Here's the concept. If you buy discounts, your costs will go up. Am I saying this theoretically? No, I'm not. Look at the last 20 years have costs gone up way higher than inflation. Yes, they have. What are we doing? We're buying discounts. So, it's hard to argue.
Renewals every single year will just keep going up the longer that we buy discounts. We talk about this Jonathan Baran and I in Part 1, how carriers have created a really very self-serving, buying framework where employers are trained to buy discounts.
Discounts are the axle and the buying of discounts becomes the top of our flywheel. And then some so inclined hospital system executives, there are certainly executives standing 10,000 feet from any bedside, so they really have zero idea how care or patients or even clinicians are impacted. But if plan sponsors buy discounts, those at health systems who are so inclined now have no real incentive to rein in prices or focus on appropriate care even.
And if you are so inclined, if you're very margin focused as a healthcare executive, you know, first things first, go gut primary care. That is step one in every playbook, and we definitely talk about that in Part 1 of this episode. And also, again, in about 10 episodes from earlier this year.
Another thing that you're gonna wanna do if your prime imperative is margin at a healthcare system is maximize the revenue off of every transaction. So, hey, hello, EHR systems. So now you have health system prices creeping up and up, unfettered, you know, just exacerbated by consolidation and a bunch of other different things.
But you've got healthcare prices creeping up, you have volume the same or higher because we're not preventing chronic disease like you would with advanced primary care, for example. And now we're back at the, oh wow, let me sell you another discount. And renewal is only 9% or whatever. Thus the flywheel spins.
Alright, so let's turn this wheel around, shall we? Flip it 180. What's the fix?
Reversing the Flywheel: A New Approach
[00:03:33] Stacey Richter: This is what Jonathan Baran talks about in the episode that follows, but he says, Hey, how about this? Instead of putting get bigger discounts in the middle of the flywheel, why don't we put buy better member health? That's a good start.
Buy a health plan that delivers better member health at an affordable price. Buy the care, not buy a discount off of a price we can't see for net price we can't see. Is it insurance? I don't know. Right. Like just buy the healthcare.
Jonathan Baran's Vision for Healthcare Reform
[00:03:58] Stacey Richter: Cutting to the chase, Jonathan Baran, advocates for a paradigm shift where employers invest in primary care, adopt better benefit designs, more aligned to cost and quality so that members are incented. Toward better cost and quality employee navigation services to guide employees to make more informed healthcare decisions.
So again, by changing the focus from buying discounts to buying actual healthcare, Jonathan says, we can reverse the negative cycle and improve overall health outcomes.
As I've said multiple times already, my guest today is Jonathan Baran. He has been, for a long time, a healthcare entrepreneur today. He is co-founder and CEO of Self Fund Health in Wisconsin, committed to challenging the expensive healthcare system in Wisconsin. Self Fund Health, I am always so pleased to tell you did make a really, really kind offer to help out RHV, Relentless Health Value financially.
You and the tribe here are really great folks who I truly, truly appreciate. So please do support Self Fund Health if you are in Wisconsin.
My name is Stacey Richter. This podcast is sponsored by Self Fund Health today. And with that, here is the episode.
Jonathan Baran, welcome to Relentless Health Value.
[00:05:09] Jonathan Baran: Stacey, thank you for having me today.
[00:05:11] Stacey Richter: Okay, Jonathan Baran so last week we talked about the version of the healthcare flywheel with discounts in the center. That flywheel spins and it results in higher and higher and higher healthcare costs. If we're thinking about, for the conversation right now, how we're gonna reverse that flywheel, where do you wanna start?
[00:05:29] Jonathan Baran: You might say that, when I'm gonna talk here, you might call me idealistic, you might say that this change is not possible. And that very well could be the answer to this, but I also do have the belief that in the same way that the incentives are created and they drive the behavior, we can also begin to reverse those incentives.
And then a number of really good things can follow up from that. This is where it has to begin with the buyer or the purchaser of the healthcare.
The Role of Employers in Healthcare
[00:05:59] Jonathan Baran: Let's begin to think about through the employer's perspective, because this is where all dollars originate, how we could actually set the incentive structure in a way that actually begins to reverse this.
[00:06:10] Stacey Richter: So now it's renewal season. What needs to happen?
[00:06:14] Jonathan Baran: When we think about reversing this flywheel, let's begin where we started, which is with the discounts, right? So alternative world, what happens if an employer rejected the concept of a discount? Every time that it got brought up, they would say, Nope, this is not how we buy healthcare. We actually just want to begin to understand the unit cost of these services.
I don't want a report that shows me a discount. I wanna actually see how much did my MRIs cost the actual unit price, right? I wanna see my surgeries, I wanna see my drugs. If employers began to think like that, and again, I would argue they're now buying healthcare, they're not buying insurance.
What are the types of things that would then fall from that?
Investing in Primary Care
[00:07:12] Jonathan Baran: The first thing that we have to do is we have to invest in primary care because if we are still reliant on the old referral streams of the hospital systems, we are gonna be back in the same spot that we are. We believe that there is a beautiful movement that is happening right now, which is around direct primary care.
So we are big believers in this movement of doctors who are leaving the big hospital systems and are starting their own practice where they go back to what real primary care is. And they, as a result of changing their business model from fee for service to subscription, I would argue if employers start to invest in primary care, we would have a primary care renaissance.
Primary care docs would come out of the woodwork. They would stop going into early retirement. They would go into the profession again. We would eliminate this primary care shortage because we would make primary care a profession that docs wanna actually get into. So that's number one.
[00:07:52] Stacey Richter: Okay, so to reverse the flywheel, huge main concept is do not buy discounts.
That in and of itself will have a profound impact. Beyond that I'm hearing invest in primary care. There's been six shows on the many reasons this is the case just this year so far. There are clinical reasons. There are plenty of financial reasons, which matter if you happen to be the plan sponsor actually paying for healthcare, or if you are the patient or member.
What else?
Benefit Design and Employee Navigation
[00:08:19] Jonathan Baran: If we're gonna buy more, $500 MRIs, we have to create an incentive structure for the member to actually make that choice to get the $500 MRI and not the $5,000 MRI. This comes back to concept of plan design, where we have to align the cost of the healthcare to the cost that the member pays.
Right now, those two concepts are divorced and the healthcare costs the same as long as it's quote in-network. That does not help us. So we have to create some sort of financial incentive for our employees to help them make the right decisions, or at least make the decisions that align to the cost of the healthcare.
You'd also realize things like healthcare is really complicated and it's hard to do it by yourself. Particularly as a patient. And so you would have to invest in things like nurse navigation. You would have a nurse sit alongside a patient and help them through this process because you realize that employees are more than happy to change the direction or will change the course of their healthcare, if you make it simple for them.
And right now it's too complicated. It's way too complicated for the average patient to navigate on their own. And so these are just some examples of like the things that you would do, understanding what I started with, but you're now an employer and you're thinking about what are the changes that I would drive practically to then reverse this incentive structure.
[00:09:42] Stacey Richter: So just starting with the first thing that you mentioned about stopping buying discounts. And I just want to underscore, that's not some kind of off the wall, wow. That's some kind of revelation sort of theory. We have had, let, let me just count the number of people who have said this unequivocably, right?
We had Claire Brockbank, we had Cora Opsahl off from the 32BJ Union who are just like, stop by and discounts. We have had Cynthia Fisher also say, stop buying discounts. Scott Haas. We have Chris Crawford, we had Peter Hayes. They all unequivocably, example after example. So if anyone's just like, I don't know about, go back and listen to those shows because you will not get more evidence-based rationale for quit it with the discounts right there.
So what you're saying instead though is okay, if we're not buying on discounts, then what we need to be focusing on is manage the actual, we want our employees to actually get good healthcare. So what does that look like?
Let's manage the purchase of healthcare to ensure that if our employees are gonna go into this quagmire we call the healthcare industrial complex. If I wanna use the really cynical name for it, that we're really helping them, and what you're suggesting is there's three really big constructs there to be thinking about. One is primary care. Because you got to get them out of a system right at the very beginning. Otherwise you're trying to stop a train that's already left the station.
And we just had Matt McQuide, we had Dr. Eric Bricker say basically, you can't just be dipping in and saying like: “Hey, patient who's just signed up for a really expensive, unnecessary surgery, or it was going to a known doctor who's operating on inappropriate.” You know, you, you can't just pop in subsequently and then say: “No, you shouldn't do that.” They're like: “I got my operation scheduled. Right.”
So like timing is really important and if you wanna be there from the very beginning, you have to it is really important that primary care is an independent unconflicted entity.
There's a virtuous cycle also that could start here just across the country if we invested in primary care and wrestled control away from some of these conflicted entities over to the employers. And you can really see the rationale there.
Then you talked about benefit design. We're buying healthcare here. How are we making smart choices? How are we helping members make smart choices? And then the navigation is also part of that.
[00:12:12] Jonathan Baran: Yes, because at the end of the day too, the most expensive thing in healthcare is the pen of the primary care doctor. And so where and how that dollar gets managed is ultimately dependent on them.
That's why, as you said, it needs to be independent, needs to be unconflicted, have the time to do real primary care things.
[00:12:42] Stacey Richter: Okay, so now the top of our flywheel is employer is managing benefit design under the framework of we are managing spend most of the time. I mean, there are certainly issues with high cost claimants and stop-loss insurance.
So we are changing up benefit design more in line with what the actual underlying costs are, and we are doing some navigation. Then what happens?
The Changing Role of Brokers
[00:13:04] Jonathan Baran: So then this is gonna fundamentally change the role of the EBC or the broker. This is an important one. I would argue today most brokers think that their role is to present the options.
So Mr. And Mrs. Employer, I've got three different potential plans for you. Which would you like to choose? And I would argue if employers start to drive this behavior of buying healthcare, they will fundamentally see their role as helping employers on that journey. Anyone that's done this will know that the single hardest thing here is education.
It's helping your members to understand all these things that we are talking about today. So if I'm a patient and at the end of the day I have a healthcare need, how do I know? How do I know what to go? How do I know what to do? Right? And, that then becomes the role of the broker, in my view. They become much more responsible, not just for presenting options, but for driving real outcomes. Driving down healthcare spend.
Because very practical things like brokers would then run regular meetings with employers where they would sit down and they would discuss the value of DPC. And how to access imaging and what to do about prescription drugs. They would literally sit down with high cost members and help guide them and answer questions very specific to their conditions. Not in generalities, but very specifically.
And we would have full insight into what's going on in the plan, what's driving it, what are the real claims, what are the real opportunities? And that becomes then the primary role of the EBC is to help that employer and their population on this healthcare buying journey.
It's a fundamental shift in the role of the broker that's driven by this top level incentive structure change.
[00:14:49] Stacey Richter: Do you feel like then, I know there's a lot of EBCs who regard, especially the ones who are transparent, the ones who really, truly want to be, and it's part of their value prop to employers that they are, a number of those EBCs really regard their role as helping to construct a plan for the employer to put together a benefit design. So are you saying that that you feel like goes back to the employer or are you saying that's still part of the role of the broker?
[00:15:28] Jonathan Baran: So if you have this new changing behavior, this new changing paradigm amongst employers, what is going to begin to emerge is a new type of health plan.
Now, maybe this comes in the form of a TPA or an ASO, many types of potentials that could fall into this category. But ultimately, I'm gonna use the phrase health plan, which is an entity that helps the employer purchase healthcare in this way. So what that is now going to drive is that enter the broker back into the equation, the EBC.
Now they have an option for something else that is different that is how these employers actually want to buy. And now we can move fundamentally away from these games like discounts and networks and things like that. And what the brokers will begin to realize as well as the employers, is that the single biggest challenge in a model like this is educating the employees, educating the workforce, because healthcare is complicated.
And so as an employee, you have to know how should I consume healthcare rather than just blindly taking my ID card and walking in the big hospital system. What am I supposed to do now? How do I interact with this? And this is an ongoing change. It's an ongoing evolution.
But what this enables is that the employer, the EBC now is not playing the role of presenting options like health plan options, but now they ultimately are able to really own and control outcomes. The more that the EBC is able to educate the workforce, the more costs come down.
The more you could sit down, run education meetings with the employees, educate them on their options, what to do specifically for high cost members. All of these different things is to ultimately allow the employer to get the best value for their healthcare dollar.
[00:17:22] Stacey Richter: If I'm just tracking with the reverse of this flywheel here, we are going from buying discounts to buying healthcare. And if we think about buying healthcare and you've got enough employers who are like, I wanna buy healthcare. Like, stop it with the discounts, quit it. Talk to me about how I am going to get my employees the best healthcare I possibly can get them.
Then that incentivizes a health plan and you know, lots of names for health plans or 3rd party administrators, administrative services only, like whatever you wanna call it, right? But like a health plan, let's just throw 'em all into one term. Incentivize a health plan to offer a product to improve health, which might have primary care folded in. It might have navigation folded in. It might have benefit design aligned with costs to really think through.
Because if you wanna, as you just said, if you wanna improve the health of members, then this is how you do it. So put a health plan together that offers those things.
Now a broker can say, all right, here's a solution for you. Employer, instead of spending all of this time trying to math our way out of a very human issue we can focus on really getting better health for members.
It was interesting because many, many years ago I interviewed someone on this pod who said, you know, there's two dimensions of getting better healthcare. It used to be the haves and the have nots. And that sure is still a thing, but it's also the know and the know nots and you have to be a have and a know if you wanna really get better healthcare.
And that definitely sounds like also what you're suggesting here.
[00:19:02] Jonathan Baran: Yeah, 100%. So then that behavior then changes. Now we have employers that are learning to buy healthcare like they buy anything else. They think of healthcare spend as a key performance indicator of their company. They track it just like they track any other expense. They talk about it at company meetings.
They make it known that the amount of money we spend this year is going to determine the amount of money that's gonna come outta your paycheck next year. They don't take the standard like we see have a lot of employers when you talk about healthcare spend, they literally kinda like plug their ears and they say like, this is not my job to manage or understand.
We actually remove that and we talk about these things and we see it as an opportunity to lean in, better, educate our workforce. Better able to drive the change that we're talking about.
[00:19:49] Stacey Richter: And then if we're thinking about the rest of the flywheel, if you have enough patients who are walking into the door of a hospital with a navigator at their hip who's like, no, don't send me to the $8,000 MRI, you know, I'm going over here and then all of a sudden hospital behavior starts to change and the infrastructures and the services purchased by that hospital then therefore are going to align with the asks of their customers who now start thinking about things differently.
Direct Contracting and Hospital Collaboration
[00:20:20] Jonathan Baran: Yeah. So these hospitals then begin to realize, so first off, we need hospitals. They're an integral part of our healthcare system. What we realize, or they realize that there's a giant opportunity to be the hospital of the employers that charge fair rates for their services.
But then importantly, skip the middleman because I would argue that self-funded employers can be amazing customers because they can do a lot of things in a self-funded construct to eliminate a lot of the administrative bloat that hospital systems are saddled with today.
So the biggest thing that you would hear from hospital system executives is that all the work that they have to do to just drive the actual patient care is what bogs them down as an organization. Things like prior authorizations being a great example.
Well guess what? When there are employers that are working with healthcare organizations that offer fair prices, we've seen many that waive things like pre-auths or they will do things like pay for healthcare, literally at the time of service.
This is a lot what Mark Cuban talks about, right? It's crazy that we think healthcare providers should hold risk and not get paid for their services for 30, 60, 90 days after the fact. And these are the things that self-insured employers can do. They can pay for healthcare at the day of service, at the time of service.
And if you think about what that could do to the hospital cost structure, where you are eliminating tons and tons of work that either comes in the form of chasing prior authorizations, chasing bills, dealing with denials, all of these things, think about the administrative bloat that we could remove from the system if we had hospitals and employers working much closer together than they are today.
[00:22:06] Stacey Richter: And we do have a couple of shows coming up about direct contracting and just managing that. But I think the main point, if you've got enough middle people in the middle of a transaction, just whatever their profit margins are of those middle people, you can just cut that out.
If there's some direct, and I'm not certainly saying that all of the services offered there are unnecessary, but there's certainly a better way to do it where the value of what they're doing is designed to accrue to members and patients as opposed to shareholders of those organizations. So could be very, very much a task with a similar name.
But with a goal, which is truly a coming together of the purchaser and the clinical organization without another perverse incentive kind of mixing around there.
The Future of Medical Record Systems
[00:22:56] Jonathan Baran: That then leads us to the last stop on our journey, which is back to the medical record systems. So now realizing that the hospitals have changed their thinking around this.
And doing as they often do, which is listen to their customers. They would realize that now the incentive structure is such that it's all about getting good value for that healthcare dollar. So those medical record systems would orient around becoming an operating system of value.
They would give patients and providers, the tools to navigate, coordinate, get the best value for the healthcare dollar. And this could then ultimately create a structure whereby like the people, the providers who are actually referring for the care or prescribing for the care, understand the cost. Patients do as well, they understand their options and we're in a spot where value becomes the overwhelming goal as opposed to lock in and extracting dollars from the same organization.
[00:23:55] Stacey Richter: And just on that point, I was just reading a post by Dr. Ramy Khalil the other day, who was talking about medical record systems and one of the things that Dr. Khalil was saying is interoperability. Is a technical problem is false. So like the last stop on the chain might actually be easier than we think because as he says, you have everybody blaming the tag, but it's actually not a techno. There's been the technical capability for many, many years to do many, many things which are required and necessary in the healthcare system.
There's also the policy scaffolding to put all this together. ie, the, some of the interoperability laws that have come together. But yet, oddly, the tech isn't being deployed in this way because of the incentives.
So flip the incentives and the technology is probably already there. It's just you know, whoever's got the data, has got the power. And so you can definitely see why even if there's ability to share, there's every incentive not to in the current regime.
Conclusion and Call to Action
[00:24:59] Jonathan Baran: So this is where it's, again, may be viewed as idealistic. It may be extremely optimistic, but at the end of the day, it comes down to the employers putting their money where their mouth is and beginning to drive volume differently.
Because if they do that, there's a whole host of, at least how I framed it here, particularly fortuitous things that happen as a result of it that could begin to change, at least slow down the spinning of this flywheel so we could get to the spot for some of these better outcomes might begin to fall out as a result of it.
[00:25:34] Stacey Richter: Understood.
About Self Fund Health
[00:25:35] Stacey Richter: So Jonathan Baran, tell me about Self Fund Health.
[00:25:38] Jonathan Baran: Self Fund Health is one of those new age health plans that we have started here in the Upper Midwest to help bring the complexity of all this together in a way that's easy to understand for employers and brokers.
Because that's our belief is that the single biggest challenge that's preventing real change, particularly amongst the employers and brokers is this is really complicated. And so our job is to make that as simple as possible. Offer a plan for employers to begin to go down this path with their EBCs and with their brokers.
[00:26:10] Stacey Richter: So I'm assuming somebody buys the Self Fund Health plan, you're gonna get primary care, you're gonna get navigation. You're going to get a benefit design solution, which is more aligned with the actual prices that we're paying for things as opposed to this whole crazy buying discounts business.
[00:26:27] Jonathan Baran: You got it.
And look, we are far from the only solution. There's a lot of solutions out here to this problem, and everyone that's listening in my opinion, has an opportunity to either. Begin to break the flywheel or continue it.
But oftentimes we still hear this is like, I think a lot of employers hear what we're saying and they say, you know, yeah, all this sounds great, but we're just not ready for it.
We're not ready to make the leap. We're not ready to make the jump into this, whatever this new world looks like. And it somehow feels like the status quo is the safer of the two options.
But the question that we always pose is like, based upon everything that we've talked about today. If the status quo guarantees higher costs and less control, is it really the safer option?
Is this really the path that's going to lead towards any sort of improvement? Is the status quo going to get us where we desire with healthcare, which is lower cost, higher quality, or are we delaying the inevitable? And, it's ultimately gonna come down to the employers taking action and beginning to do something differently if we want this whole loop to change.
[00:27:36] Stacey Richter: So I, I love how you're saying it, that there is an opportunity to break the flywheel here, and I think probably one of the first acknowledgements, it sounds like a 12 step program, when I'm about to say this, but just like, I think we all need to recognize that we are on this flywheel. I think anybody that works for a healthcare organization is like, yep, we're on the flywheel.
But I think maybe it's a revelation for some employers that they are too. You are too, right?
Self Fund Health is one of those entities who's like, let's just do this right. Let's focus on the right issue, which is better member health, which should be in the middle of that flywheel. There's plenty of examples of people doing many of the things that you're talking about.
I was just talking to Candace Shaffer from Purdue University who was doing many of the things that you're talking about and the healthcare costs went down. There's plenty of examples in the, in the Midwest, especially like the Midwest is really a hotbed of some very innovative activities relative to switching around that flywheel.
Jonathan Baran, thank you so much for being on Relentless Health Value.
[00:28:34] Jonathan Baran: Thank you, Stacey.
Closing Remarks and How to Support the Podcast
[00:28:35] Tom Nash: Hi, this is Tom Nash, editor and producer of the Relentless Health Value Podcast. I bet you're wondering, how can I help Relentless Health Value?
Well, that's pretty easy. Have you signed up for the newsletter? The newsletter is great. It tells you when each episode's coming out. It gives you an introduction to the episode with all the mention links. And a way to click through and listen to the podcast.
But there's more ways to help. You can always go over to LinkedIn. Are you following the page? You should be. There's great conversations each week on all the episodes. So go to LinkedIn, find the Relentless Health Value page and follow us.
Have you ever left a review for us on Apple Podcast or Spotify? That would help greatly. While you're doing that, be sure you're following the podcast so you get notified each week inside of Apple Podcasts or Spotify.
Okay, so you've done all those things already. That's great. Another thing you could do, you could head over to our website and donate to the tip jar, maybe become a sustaining member. In many ways, Relentless Health runs like an unofficial nonprofit, a very, very nonprofit. So anything that you give would help us pay the bills.
Thanks so much for listening.