Introduction
[00:00:00] Stacey Richter: Episode 489, The Margin Part 2. This episode is about margin that creates a path to mission at a multispecialty group. Today I speak with Dan Greenleaf.
Understanding Value in Healthcare
[00:00:28] Stacey Richter: Dr. Ben Schwartz wrote an article recently, and yeah, he makes a really compelling point.
Dr. Schwartz wrote, "Ultimately, the most successful care models are those that create value inherently. The goal isn't simply cost arbitrage, it's creating a sustainable system that makes value attainable. Care delivery innovation is about more than optimizing for VC returns or maximizing operational efficiency.”
Listen or read the show notes with all mentioned links on the episode page.
Mission and Margin: A Deep Dive
[00:00:55] Stacey Richter: That mention of value and how to achieve it for real, like actually create a care model that delivers value inherently is a great segue to introduce the show this week. It's a continuation of our mission margin theme, and this week we're talking about the margin part of the no margin, no mission cliche.
So taking this from the top last week and go back and listen to that show if you have not yet, and you can listen to both of these parts in no particular order. You do you. But last week we talked mission.
That part about value and creating value inherently the tie in here to mission and margin could be a value equation, really like mission divided by margin is how you calculate the value delivered. Less carrier spread, but that's a whole other show with Cynthia Fisher link in the show notes.
So let me introduce my guest this week, who was also my guest last week, Dan Greenleaf, CEO of Duly, which is a multispecialty group in Chicago.
So last week Dan and I talked mission, as I said, but today we're talking margin, which is again gonna be the denominator of so many value equations. Last week in that mission show, quick review or spoiler alert, depending on the order in which you may be listening to these shows.
But last week, Dan Greenleaf broke mission, Duly's mission into four quadrants. The four quadrants of mission being; affordability, access, consumer experience, and quality.
In this conversation today, the margin conversation, Dan Greenleaf emphasizes that achieving these four quadrants reduces friction for patients and clinicians, that leads to not only better care outcomes, but also, financial sustainability, ie, margin. Margin can therefore be a function of mission. And again, as Dr. Ben Schwartz put it, ultimately the most successful care models are those that create value inherently. So here we go.
Challenges in Healthcare Affordability
[00:02:47] Stacey Richter: To be noted with one big fat fluorescent highlighter marker, a big part of this mission that comes up over and over again last week, it's about making prices reasonable and predictable and transparent for patients.
Financial toxicity is a thing. Financial toxicity, not only is clinical toxicity when so many people are delaying needed care. And look, I don't often quote Marjorie Taylor Greene, but last week she was in the New York Times and was quoted as saying, "The cost of healthcare is killing people.” This is what we should be focusing on.
I just read the other day that one third of adults in this country are currently delaying or forgoing care due to cost. One third, not one third of low income or something like that. One third of adults in this country are delaying or forgoing care due to fear of cost.
In today's world, affordability and price transparency is part of what customer experience means, not just like lemon water in the waiting room. This is what struck me the most about the conversation from last week.
But wait. Does affordable for patients spell trouble when it comes to the margin part of the operation? Will an affordability mission wreck havoc on margin? Is this business model doomed? Is there even a successful care model that creates value inherently that is sustainable?
Such a good question, which is why I ask it to Dan Greenleaf right out of the gate.
Balancing Mission-Driven Healthcare With Financial Realities
[00:04:32] Stacey Richter: So just to sum this all up in the conversation that follows, Dan Greenleaf gets into the challenges and the strategies involved in balancing mission-driven healthcare with financial realities.
Duly's approach to being fiscally solid includes, well, I'm just gonna say many of the same types of efficiency things to maintain and retain margin that other more mainstream health systems might deploy. But I'd say there's a really striking difference in the why and the how. And the impact of this why and how is striking when you look at Duly's prices and the impact it has on its overall community.
So even though it's using similar types of strategies, maybe as big consolidated health systems or other organizations, the impact and what it all adds up to is, again, very, very different.
This is what I mean. At health systems, and maybe my head is just lost in a couple of anecdotal bits of evidence right now, but I just had two conversations in the past 2 days with physician leaders at big health systems, different ones, but both of these individuals said variations of the same theme.
And if you wanna picture the scene, picture the saddest expressions, and one of them had a martini and the other one had a big boy glass of wine.
And both of them said, “Look, my organization has lost sight of patient care, but also my organization has lost sight of like financial goals in most parts of the organization. All I seem to do all day is play politics with a whole lot of middle managers or even senior leaders jockeying for position and having turf wars within these sprawling bureaucracies.”
These are just great people who are trying so hard to do the right thing and are just struggling to find the foothold to do so within their own organizations.
Strategies for Maintaining Margin
[00:06:24] Stacey Richter: So let's just say it was refreshing to hear Dan Greenleaf talk about an alignment of incentives and hook the margin up with the mission train in a really tight way throughout the entire organization.
And to do this really well, achieve that mission/margin alignment across the whole entire organization, Dan underscores the value of clinician involvement in leadership and having, as I just said, aligned incentives with clinical teams.
The Role of Clinician Involvement
[00:06:49] Stacey Richter: Keep in mind, this is the margin show where clinical leadership came up and the number of doctors on their board and the level of physician ownership in the organization.
I'm highlighting that this is the margin show here because usually so-called dyad leadership with physicians in leadership roles, only comes up in mission conversations, right? Like in situations where somebody wants the doctor to be the defender of mission and the battle to keep the MBAs in check.
And I say this as the comic book stereotype, obviously, but yeah, it's true often enough.
But then we have Dan, who is thinking about clinicians who have, again, aligned incentives across the organization so you don't have your physician leaders day drinking while I'm sitting across from them finding myself quoting Sun Tzu The Art of War, and helping them craft the perfect PowerPoint slide to weaponize a reorg.
Honestly, in my experience, there's no better way to waste metric ass-loads of money than in an organization where personal power grabs start to supersede anything that smells vaguely like an organizational imperative.
And again, these just big bureaucracies at many health systems, yeah, too big not to fail at this is often the way of it.
Private Equity and Healthcare
[00:07:59] Stacey Richter: Then lastly, I grilled Dan Greenleaf about capital partners and how to manage to achieve private equity funding, where there's support for a model that delivers inherent value. A model that benefits both patients and providers as well as investors. And I'm saying this, keeping all of the things that Dr. Yashaswini Singh said in that episode about private equity a few weeks ago. Go back and listen to that.
And by the way, Dan Greenleaf in this show has roughly the same ideas as Dr. Tom X Lee, (EP445) founder of One Medical and Galileo told me, and also Dr. Rushika Fernandopulle, (EP460) founder of Iora. Great minds think alike.
So should figuring out how to work with PE be a topic of interest. There you go.
Listen to my conversation today with Dan Greenleaf, and then go back and listen to those other two shows.
Dan Greenleaf's Insights on Healthcare Management
[00:08:59] Stacey Richter: Dan Greenleaf, CEO of Duly, my guest today, has been in healthcare for 30 years. He's a six time CEO. Three public companies and has also run three companies backed by private equity and thus very aware of the many different funding mechanisms that exist in the marketplace.
My name is Stacey Richter. This podcast is sponsored by Aventria Health Group. But I do just wanna mention that Duly offered Relentless Health Value, some financial support, which we truly appreciate.
So call this episode not only sponsored by Aventria, but also Duly. And with that, here is my conversation with Dan Greenleaf.
Dan Greenleaf, welcome to Relentless Health Value.
[00:09:37] Dan Greenleaf: Thank you, Stacey, for having me. Super excited to be talking to you today and I think you do an unbelievable job. Your podcasts are just incredible. So thank you for everything you're doing.
[00:09:47] Stacey Richter: Well, I very much appreciate you saying that, those kind words, and I also very much appreciate the opportunity to speak with you today, my friend.
So I wanna pivot now to margin. I wanna tee this up in a very specific way. By underlining a couple of things you said, which make me curious. The first thing you said, you were talking about some of your outbound patient activation and you said, we don't get paid for it, not that it matters.
And now I'm thinking about that in direct contrast to that Charlie Munger quote that everyone loves to repeat, which is "Show me in an incentive and I'll show you an outcome.” Those two things are in direct contrast.
Additionally, you know, no margin, no mission, right? So we have to have some margin here. How are we reconciling these things in the current IRL payment reality where we've got fee for service? So obviously volume is incentive. We've got these value-based contracts, which sure, but they sometimes have just as many of the equal and opposite problem.
So how are you achieving this very well-defined mission that you have given the margin realities.
[00:11:00] Dan Greenleaf: So just as a setup for this, like, just so everybody knows, we have 1800 clinicians. We have 190 locations. We're adding another 150 clinicians this year. We have a scaled fee for service business. We have a scaled ancillary business, and we have a scaled value-based care business as well.
And I'd also say, you know, just because I feel like saying it, is that we're a hedge for the payers related to the hospital consolidation that's occurred.
So how, how do we do it? I would say number one is that we do keep patients in our network. We do a really good job of that. We have 300 primary care physicians and about 65% of all referrals that we have, stay within the Duly network.
So in other words, they go to one of our specialists if a specialist is needed. From a specialist to ambulatory surgery center, we capture about 76% of that. And there's a lot of value add to that.
There's value add because we do have labs, as you know. We have 30 lab sites and 6 ambulatory surgery centers and 16 imaging centers, and. 11 immediate care centers. So like you said, ER lite and then 40 physical therapy, locations, and a hundred infusion chairs.
So keeping those patients in our network is really valuable to us. That's kind of number 1. Number 2 is that, you know, we have to be tough negotiators with the payers. I mean, you, like I said, physician comp over the last 25 years, adjusted for inflation is down 36%. And so, you know, we use in some shape or form, is best we can, our scope, scale, and size to make sure that we're getting fair rates.
The other thing we're doing is because we have a scaled business, we're able to keep our contact center costs lower. We're able to keep our revenue cycle management costs lower. We're also able to do a much better job on the purchasing side. So think procurement. And I think you also know that we've got 600 physicians that are shareholders, and 40% of our company is owned by our physicians.
So there's a high degree of aligned incentives. When the company wins, we all win. And I think from a psychological standpoint, that really matters.
And I also would say that we continue to invest in technologies, and I just look at a few of the ones that we've done that I do believe really benefit our clinicians.
Ambient.ai. It's fascinating what we've seen there is that they're spending four and a half hours per physician, less on a weekly basis, is a result of Ambient.ai.
We've also seen a five percentage point improvement in the patient experience. Because the patient's able to talk to the physician more directly.
We've also invested in tap to access. When I got to the company, we were, our physicians were logging in 40 times a day. We just use a card now, and so that makes a difference. We use AI for scheduling, so we'd made it easier for the patient to schedule. That makes a difference for the patient. It makes a difference for the physician.
We're also using these inbox, AI inbox, because I don't know if you know much about the way MyChart works, but patients could get in touch with the physicians constantly. And many of the questions they're asking are things that can be done by an auto-response. And we're using AI also to ascertain those.
The point is, is like, we're always looking for ways that we can do things more effectively. We're looking for ways to lower the cost to serve that patient. That's part of it as well. And because we've got scope, scale, and size, we're able to do much of that.
[00:15:06] Stacey Richter: If I was gonna distill down what you just said there, and this is meaningful.
Many of the, you know, "tactics" that I'm hearing are not that dissimilar from the way that a big consolidated system might think about it. For example, let's make sure that we're limiting network leakage or make sure that we're optimizing referrals and that we've got the scale and the scope. And that we have the efficiencies that can be derived from economies of scale.
So in and of itself, if you just look at this from a tactical perspective, it's kind of a, “sure.” This though, i'm gonna make exactly the same point that I made from a mission standpoint.
That what is fundamentally different here is to what end. And if you roll everything that you just said and say, why are we doing this? And then you had mentioned Dr. Vivian Ho, and I'm gonna mention her as well. One of the things that she said relative to consolidated health systems, if you look at, how their C-suites are incented or what the objectives are or the kickers for them to get their bonus.
A lot of times it's, add more beds to this hospital, for example. And you start thinking about the downstream implications of that, add more beds, like first of all, you wind up with stuff like Dr. Scott Conard talked about. You wind up with stuff like Dr. Stan Schwartz talked about. I'm not gonna repeat those stories, go back and listen, but these very perverse incentives where it's justifying, let's not prevent heart failure readmissions because we need to get these heads in beds because we need to have more beds because somebody's comp depends on having more beds. That drives consolidation, acquisition in a really big way. It also, you know, you think about more beds.
What does that mean? More brick and mortar. What does that mean? More buildings. What does that mean? Less community tax revenue. Higher operational costs, right? Like there's a lot of downstream impacts to the C-suite of an organization having an incentives that may not necessarily be in line with the healthier community.
What I'm hearing you say is, “Sure we are doing similar things. But because we have 600 physician owners.” What that implies to me is you've got kind of implicit or explicit dyad leadership, which we have talked about in multiple shows. Dr. Rushika Fernandopulle mentioned it. Dr. Tom Lee mentioned it, Vivek Garg talked about it at length.
The importance of making sure that there are clinicians who are able, in a very fundamental, real way, weighing into the direction of the organization. Which is even amplified more by the fact that you have quantified what the mission is. And you talked about the healthier community also as the piece of this.
But the interesting thing also I believe relative to having the 600 physician leaders in this kind of dyad leadership is that, to a large degree, the quality of the organization or how well the organization functions depends on what's up with the clinicians.
So if you've got these individuals in leadership roles, then you not only can make their jobs nicer, just you talked about Ambient scribes, you talked about all the different things that just like, let's just make this efficient.
But also from a moral injury perspective by having that mission front and center and quantified in the way that you do, I could easily see the ability to attract and retain the really good docs who wanna work for a place that is more aligned with the values that they have.
So I'm definitely seeing, in this particular case, the mission margin, I see what you're saying, if you really double down on mission, you can amplify margin or these two things can work hand in hand.
[00:18:50] Dan Greenleaf: Yeah. I remember one of your conversations you had around hospital systems not having physicians on the board. Five of 11 of our board members are physicians. There isn't another healthcare company out there like that, I promise you. And that also says a lot, that we're putting our money where our mouth is.
I would also say to you, I wake up every morning thinking about how can I reduce friction for our patients and how can I reduce friction for our clinicians? And if we do those things really well, good things happen. I'm not naive to think we don't need to drive operational improvements and look for best practices and drive out waste, right, reduce variation. We all buy into that.
But at the end of the day, this is about caring for patients and caring for our clinicians. I'll also say we have people who are dedicated in our company, two physicians, whose job is, to work with physicians who are struggling. We're struggling potentially emotionally. Who are struggling with the job.
And so we've had a dedicated group of clinicians who are doing that. So I think, again, that stuff is in our DNA.
[00:20:04] Stacey Richter: How do you explain this to, you know, “professional capital”? Because generally speaking, shareholders, not all that interested in, let's just say the mission part of the equation.
Not all, you know, there's some exceptions here, but, and you start talking to the hedge fund folks, and I have rarely heard the word patient come up in many of those boardrooms. But that's, you know, obviously you have capital partners here. How do you explain this to them?
[00:20:36] Dan Greenleaf: One of the fortunate aspects of my career is this is the third time I've done something with Ares, who's our capital partner.
I was working with them as an operating partner. They asked me to come run this company. They know what I'm capable of doing and driving, you know, the right mission with the right rewards, with the right performance, and I just have a lot of credibility. I gotta be honest with you, I'm not, and I'm also not going to them asking for money.
I'm, I mean, they are a capital partner and I need a capital partner. Think about, I'm competing against Northwestern who has $10 billion on their balance sheet. Or Advocate who has $20 billion, or Endeavor, who has $6 billion. Or HCSC who has $24 billion. These are all tax exempt organizations, for the record, just so we're, we're clarifying what they are. And I wouldn't describe 'em as nonprofit. But I would also say that physician groups in general need capital partners.
The key is performance, you know, it's like anything else is like you perform well, you get rewarded, it's pretty straightforward. And given the balance of perspectives on our board. We have five clinicians. We don't lose sight of physician experience. We don't lose sight of patient experience. And again, I don't believe under any circumstances are they mutually exclusive to our margin performance.
Because I want to have, not only do I want to have a company that has the best patient experience, the best clinical experience, but I want the one with the best financial performance too. And I want to, frankly, I want to kick ass in all areas, and I don't think any of those things are mutually exclusive.
I'll also say that when we drive fee-for-service business, we're saving the community 30%. So this idea that VBC is good and fee-for-service isn't, is to me, is nonsense. What the problem is, is institutional care. Where they're charging 9, 10, 12 times more than what we charge.
So every time we keep, and this is my message to our physicians, every time we keep a patient in our network, it's more affordable, it's easier to access, it's a better consumer experience, and they get better outcomes from a quality standpoint. It is a win, win win.
Conclusion and Final Thoughts
[00:23:05] Stacey Richter: Let me ask you something and then we're gonna land this plane, what you just said. So you named Ares, you talked about the hospital systems, etc.
Is that on the record, we're obviously recording this. Is there anything that you just said there that you wouldn't want aired?
[00:23:20] Dan Greenleaf: No, I mean, the only thing I would say is Ares they're a great capital partner, but I wouldn't be partnering with a third time unless that relationship was really special.
[00:23:29] Stacey Richter: So what I'm hearing you say, just kind of in sum, you walked in the door with credibility. They trust you. At the same time, you trust them. And they trust, therefore, when you tell them achieving this mission is very important for them to, in a sustainable way, achieve the margin they're looking for, you have the credibility, and the operational, the track record to back that statement, and therefore you can work together very collaboratively.
That is an important takeaway here as we contemplate the first thing that you said, which is, physician organizations need a capital partner. That doesn't have to be a rock in a hard place situation, as long as all of the things you said are true, which not everyone, just again pointing out, has the opportunity, right? Like it takes a while to get to that place.
Dan Greenleaf, if someone is interested in learning more about Duly, if they are in the Chicago area, especially if they're a plan sponsor. If I'm picking up what you're putting down correctly, where would you direct them for more information?
[00:24:50] Dan Greenleaf: Yeah, I think you can go to our website, duly.com.
You can go to my LinkedIn page. We publish a lot of things about the organization and what we're doing. And if people wanna reach out to me, it's dan.greenleaf@duly.com. I'd be happy to talk with people who are involved here. I've done something very similar. I've shared with you, I've reached out to a few people who I've heard on the podcast, so I certainly wanna extend that invitation as well.
[00:25:18] Stacey Richter: That is very kind of you and one of the reasons why I appreciate and love the Relentless Health Value tribe and the community of really smart, really giving individuals that are here. The willingness to share and learn from each other.
Dan Greenleaf, thank you so much for being on Relentless Health Value today.
[00:25:37] Dan Greenleaf: Thank you.
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