Introduction
[00:00:01] Stacey Richter: Episode 445. "Can a Primary Care Only Practice Survive in 2024?" Today, I speak with Dr. Tom Lee.
American Healthcare Entrepreneurs and Executives You Want to Know. Talking. Relentlessly Seeking Value.
Today I am talking with Tom X. Lee, MD, who has a long history in primary care. He founded one medical and then also most recently Galileo. Dr. Lee also was a founder at Epocrates, tossing that in for context.
To listen to the episode or read the show notes with links, visit the episode page.
The Paradox of Primary Care
[00:00:45] Stacey Richter: I wanted to talk with Dr. Lee because so many RHV, Relentless Health Value, listeners are trying to figure out how to sustain primary care as a standalone entity when the most obvious and most common way to make enough money in primary care is to drive and maximize the dollars from downstream volume of high priced service lines.
Which, if you think about it, undermines the entire point of primary care. I'm starting to call this the paradox of primary care because when you start seeing the promise of primary care have to erode if you're going to stay in the business of primary care, then yeah, it's sort of a paradox. Said another way, if you do primary care really well and use evidence based preventative care to curb the need for excess specialty care, ie, you reduce specialty revenue through primary care, now you're asking specialty to not only make less money, but use the remaining money to pay for primary care, which is the entity that is reducing its revenue.
So, again, I am hereby coining the term the paradox of primary care to express the conundrum for why a consolidated entity that knows where its bread is buttered is going to do much, if anything, to empower primary care with the technology and the staff and the time, which if it goes well, is going to cannibalize its own major source of revenue.
Meanwhile, if you choose not to participate in this paradox within the context of a consolidated entity, it's kinda hard to stand up a pure play primary care practice, and I've heard this so many times. Most recently from Dr. Paul Buehrens, who said, he wrote on LinkedIn, "my own primary care clinic lasted independent from 1946 to 2017. And when costs were rising faster than reimbursement with no alternatives available, we sought out purchase by our hospital, giving up on trying to stay independent. Consolidation is not driven by bad actors, nor by quality, nor volume savings, but by the bizarre economics of healthcare as a highly regulated, but hardly rational market."
Challenges in Sustaining Primary Care
[00:02:51] Stacey Richter: I just, I simply don't get why knowing as much as we know about the importance of primary care, CMS and others continue to follow RUC guidance on PCP rates.
How much power must be wielded by the AMA or the AHA or who knows? I don't know the half of it, admittedly. Listen to episode 437 with Brian Klepper for more on just the RUC. Also despite, again, all of the lip service about the importance of primary care, our current cohort of payers seems to have a thing going where they do not offer value based care contracts, VBC contracts, to the primary care folks who seem most likely to succeed.
Add to that the moving goalposts for ACOs and the lack of available data to even know how you're doing, and yeah, here we are. So, again, the question is how to sustain primary care without falling into a paradox. That is the hard question that I asked Dr. Tom X. Lee today. I asked Dr. Lee flat out what it takes to stand up a standalone entity doing primary care.
And he said, enlightened leadership with a value mindset. Combined with big time chops in service operations. I, of course, asked, what does enlightened leadership and mad skills in service ops mean exactly and specifically?
Dr. Lee broke this down. Part of it, he said, is finding an eliminated hidden waste, which, according to Dr. Lee, does exist in primary care, although maybe in a thinner layer than elsewhere. And trust me, I asked Dr. Lee what is this waste exactly and specifically of which he speaks. Turns out, a lot of it is cutting out busy work. Like clicking 90 times to order a Tylenol, or dumb paperwork, or doctors doing stuff that a nurse navigator could do in between visits, or the medical assistant could do, or technology could just automate.
If you think about wasted time as capital W waste, then yeah, there's a hefty amount of waste that could be cut. This also comes up in episode 446 with Dr. Spencer Dorn, which is next week. Now, you know me, you start talking about getting rid of waste, and I am immediately going to ask you how you define value.
How you define what you value, because when cutting waste, it's really easy to cut more than waste. Listen to the show with Kate Wolin, Rik Renard, or Dr. Will Shrank for more on that one. So I get into a proper grilling with Dr. Lee on how he defines value, which leads us to talk about open access as one component of delivering value.
But then, of course, I bring up, yeah, well, access was Walmart and Walgreens hypothesis, giving patients access to care, and they will come and that didn't work out so well. The rebuttal there is access, sure, but access to what? And good point. Clearly, there was a disconnect between what patients thought good primary care should be and what was on offer.
And around the wheel we go, because again, we're back to the delta between the promise of primary care and what often exists. Again with the paradox. Okay, now, just let's sum this all up here because I really want to get to the interview. The trick to doing a pure play PCP or indie PCP practice without falling into the paradox of primary care is enlightened leadership with a value mindset combined with service operations to find the balance between human centeredness, process, and technology.
That's kind of the big wrap up of a many pronged conversation that there is a balance here.
Dr. Lee puts it this way. He's like, if you think about it as a paradox, you're kind of creating a binary. What you want to find is the productive middle. Find the productive middle of primary care and you can get rid of the paradox.
Probably some of you are thinking direct primary care/DPC is a solution here and yet for sure, but to do DPC well, you still have to have enlightened leadership and do a good job with service operations.
Especially if you're thinking you want to work with employers or others who are going to measure outcomes.
My name is Stacey Richter. This podcast is sponsored by Aventria Health Group.
Interview with Dr. Tom Lee Begins
[00:06:58] Stacey Richter: Dr. Tom Lee, welcome to Relentless Health Value.
[00:07:00] Dr. Tom Lee: Thank you. Thanks for having me.
[00:07:02] Stacey Richter: I thought you would be the perfect person to talk about something that I'm wrestling with and I know that a lot of our listeners are wrestling with. And this is what I'm starting to call the paradox of primary care.
This is the idea that the promise of primary care is through evidence based preventative care and by addressing issues early to prevent or slow disease progression, so specialist volume is thereby reduced, and therefore one might assume that specialty revenue is reduced.
However, one of the few, it seems, sustainable ways to pay for primary care is by vertically integrating primary care into a consolidated stack, and then using the money from specialty care to subsidize primary care.
So I don't know, I'm starting to call it a paradox. Like, why would a consolidated entity that knows where its bread is buttered, why are they going to do much, if anything, to empower primary care to cannibalize its own major source of revenue?
[00:07:59] Dr. Tom Lee: Yeah. No, I get it. Look, I think the world is sliced into uneven slices, and when you look at it from a variety of lenses, it looks odd or maybe paradoxical that the two should cooperate, certainly within one combined entity.
And so I understand that maybe that might be one lens to look at it. Another lens to look at it is if you improve primary care by itself, there's an opportunity set there. But what's implied in the paradox is that you can't make primary care work better on its own. And, you know, that was the whole premise of starting up One Medical was, can you start a pure play primary care concept that's not dependent on specialty revenue and otherwise to self sustain itself and scale.
So there is an opportunity to do so by itself, but certainly when you combine the two, then you need what I would call enlightened leadership to move off of fee for service and more towards value. But not all organizations can traverse those waters at the same time.
[00:08:57] Stacey Richter: So, one of the things that you said there is that there is an opportunity to start a pure play primary care practice on its own. Do you feel like that is a hypothesis that has been borne out?
[00:09:11] Dr. Tom Lee: Well, let's just say this. It's not easy. You know, One Medical and Galileo are somewhat exceptions to the rule. But it's possible. The reason why it's hard to do is the world has become increasingly complicated and it's increasingly hard to run an independent primary care practice without a lot of sophistication.
And so through unintended consequences, through the policies that we have, you know, starting up de novo specialty practices is almost as hard as primary care these days. So the hospital consolidation has been happening for a reason and so, yeah, it's increasingly hard, but it is financially theoretically feasible. It's just it requires a different mindset to care in service operations that most folks don't have training in.
[00:09:54] Stacey Richter: When you say a different mindset, what exactly do you mean?
Defining Value in Primary Care
[00:09:58] Stacey Richter: And you also use the term enlightened leadership. Maybe we start here. What are the barriers exactly and specifically? And I know a lot of our listeners are like, obviously, fee for service, the RUC has destroyed primary care. So, you know, everybody's immediately going to be going, the incentive payments are low with primary care. What else?
[00:10:16] Dr. Tom Lee: Yeah, so the main thing to think through is a lot of the world is kind of viewed as a zero sum or binary state world where it's either A or B, meaning fee for service or value and you can't do both at the same time.
The reality is you can do both at the same time, it just requires a bit more creativity and innovation. And the way you do that is frankly to lower your unit costs. If you can lower your unit costs, you can make margin on fee for service. And you can actually now increase your scope and do more, across value with the extra infrastructure and enhanced resources.
So I think there's a lot of different ways you can do both fee for service and value. It just takes a slightly different mindset to believe you can do both. And I think so many leaders kind of have these binary talking points about you can have your foot in two canoes and a lot of that can be done. It's just, you kind of have to unlock yourselves from these kinds of binary modalities.
[00:11:13] Stacey Richter: So it's interesting what you're saying, and we're talking about a pure play primary care practice right now. What I'm hearing you say, you can do this if you have some value based contracts, some of them, and you also have, you know, if you have some value based, you're going to have some fee for service.
I was listening to, I think it was a Radio Advisory show where they basically concurred with exactly what you're saying. They're like, it's not a binary. There's these spots in the middle where you've got varying amounts of value based contracts with fee for service. And that's not going to go away anytime soon.
It's not this kind of like messy middle on the way to some Shangri La, like it is the way it is. So what I'm hearing you say is you can do a pure play primary care if you have some mix of value based and fee for service and leadership is able to contend with having value based contracts as well as fee for service contracts at the exact same time.
But then it also sounds like becoming very efficient and lowering costs is also part of this mix. Did I get that right?
[00:12:15] Dr. Tom Lee: Close. I mean, again, there's a lot of subtleties in kind of, uh, the terms.
When I say value, it's not only about value based arrangements and payment architectures. Value is more about a mindset. Can I do more for less? Can I be more effective, more efficiently? And so that mindset can exist in a 100 percent fee for service architecture or a blended architecture where some of my payments are at risk.
So all I'm saying is within primary care, you can, what I call slim down your overhead, run your practice more effectively and efficiently and be in a fee for service world. And that's still a value focused mindset because you're trying to do more for less. And that's how we started off with One Medical, is trying to do more for less, and then we realized that, oh wow, we can make margin in primary care by itself.
And then, you know, scaled it from there. And so, again, it's a bit of the awareness that there is hidden waste everywhere, across every layer of the ecosystem, and granted, primary care is a smaller, thinner layer within the healthcare ecosystem, but there is still opportunities to innovate within that layer by itself.
[00:13:22] Stacey Richter: What are some examples of hidden waste in a primary care practice?
[00:13:27] Dr. Tom Lee: The easiest anecdote I would use, or maybe kind of shorthand, is look at all the people around any service model. And for the most part, let's use knowledge based workers and ask yourself, what percent of their day is their brain effectively utilized?
And if it's, you know, let's call it any reasonable percent, that's an opportunity. And I would argue that most clinicians, most administrative personnel would say, my brain is not being effectively utilized. My body and busy work is being effectively utilized, meaning my busy work is very high, but my effective work, the thing that I'm most skilled at is being underutilized.
And so I think that's where in almost all service models, we don't recognize untapped talent, untapped potential, and the lack of productivity because people are just underutilized and, or the work is not organized to be most effective. And this is true of all service organizations. When we were starting up One Medical, I was looking at all different types of service organizations.
And you just, you can see organizations where workers are engaged and workers are not engaged. And we have a high percent of unengaged workers, particularly in, you know, office space settings, because it's chaotic, right? And that chaos dwarfs the ability to actually think and do productive work.
[00:14:49] Stacey Richter: I could ask you like 40 questions right now, so let me contain myself.
I love what you said about having a value focused mindset, and that doesn't just mean in a value based care payment architecture, that one can have a value focused mindset anytime, including even if it's pretty much all fee for service.
[00:15:09] Stacey Richter: As I contemplate that, in order to have a value focused mindset, you kind of really have to think about what is value, what are we trying to do, what are our goals? And I've heard that there's only four categories of goals, really.
You know, you can have financial goals, you can have patient reported outcome kind of goals, PROMs. You can have clinician reported outcomes, right? Like what is an outcome that a clinician thinks is something to be proud of? And then lastly, some kind of performance metric of some kind, like patient satisfaction, etc. So, as I'm thinking about what constitutes this value focused mindset, probably part of it, or the whole thing, is gonna have to begin with, what do we think value is?
Because if you try to be efficient without necessarily understanding what good looks like, then you wind up cutting corners in ways that actually diminish whatever you're trying to accomplish beyond some financial metric. Would you concur there? Or how do you think about it?
[00:16:10] Dr. Tom Lee: Yeah, dimensionally, I think those are reasonable ways to categorize thoughts around quality or performance.
The reality is that the decision making in any organization is much more subtle than that. You know, let's just kind of pick a simple dimension such as access or service, which correlates with patient net promoter score otherwise, right? What's appropriate? Same day appointments? Next day appointments? One week appointments? One month appointments? What's quality there?
Depends, right, on the clinical situation, the economic model, the economic affordability. So, you can say all you want about the dimensions, but the judgments are still up to the organization to determine what do they value and what can they financially and operationally achieve based on that.
And if we used Axis as a surrogate for quality, which again, I'm not saying that it should be, the industry is not doing great. And so, to me, you know, when I think about care as a clinician, if a patient can't reach me, I've lost the job in step one. If they can't reach me, then how am I supposed to be able to take care of them?
How can I give them great care? To me, access is one of just the first steps to quality. And it precedes quality at some level, we do so poorly of that across the industry. So to me, access is one dimension of quality that we should start with, separate from all the clinical decision making, separate from all the follow through, separate from what I call the experience and outcomes of care.
So you just take a simple metric like access and say, well, are we doing a great job? Probably could be better.
[00:17:41] Stacey Richter: I'm definitely going to loop back on some of other ways or kind of the process by which one becomes an enlightened leader who has a value based mindset.
The Role of Access and Longitudinal Care
[00:17:50] Stacey Richter: But before I do, reconcile for me, you know, the hypothesis that Walmart had and Walgreens and some of these other, let's put a clinic inside a place that our customers/patients/members already are, that is going to be great access, right? Like they're already in the Walmart so they can just pop by and get some medical service.
And you, you said this, you said, access is going to be an important metric, but not the only one. Talk a little bit about the experience maybe that some of these clinics found out the hard way.
[00:18:25] Dr. Tom Lee: Well, I mean, let's call it the retail clinics, just broadly speaking, which has, you know, been a 20 plus year concept in general and has failed to what we call really truly deliver great longitudinal primary care.
They've been convenient vaccine shops and, you know, what I call minor urgent care type of clinics, but very few have really become longitudinal primary care destinations. And that's the key difference, right? Access is different from somebody who knows me and can manage my care longitudinally as a true primary care provider.
Most of the retail clinics are really servicing as, you know, other versions of urgent care, which there are plenty of with plenty of access. And so in the absence of what I call longitudinal access, there are convenient options out there that are transactional if need be, right, including the ER.
They aren't the best places to get your care necessarily, but those are other access points. And so the second point is really who is on the other side and what are they doing for me at this location. There's a separate issue of just the economics of this when it's not your core business to run a service operation.
It's hard to stand up a service operation, and I think people don't realize that service operations aren't a second job, they should be your first job. And I think people tended to underestimate, and I think still do, how hard it is to run a service operation, particularly within primary care.
[00:19:53] Stacey Richter: Yeah. I mean, I have heard that in Walmart, just to echo this point, they were looking at the square footage the clinic was taking up and deciding they could make more money selling tires in that same square footage.
There's all kinds of issues that were going on there. But from what I'm hearing, if we're thinking about what is a value focused mindset, that one of the first things to figure out like, what are you trying to accomplish and what does that look like? And you're highlighting the idea of access as a proxy for some performance metric.
But you also need to be really contemplative of how do you become a longitudinal care destination? It sounds like that's kind of like high on your list to really think through. What is a longitudinal care destination? What does that look like? I mean, probably relationships, right? Like, that seems to be a thing in and of itself that you sort of have to get right.
[00:20:39] Dr. Tom Lee: Yeah. I mean, it all depends on how you define primary care and for what reason. The reason why people like primary care conceptually is in theory, again, it offers a better way to get value for your dollar in care. That's true if primary care is delivering on its promise.
Today, it's not delivering on its promise because it's been obviously low reimbursement and high complexity overhead have really diminished the capabilities of most primary care offices in general. But if you were to say, hey, primary care's purpose is to be a general place of care longitudinally to handle most issues, that's the promise of primary care. And I think that's very different than a MinuteClinic or some transactional system that's focused on convenience, and so that second dimension that we talked about after access is important, and that is where the economics really struggle. You know, open access is somewhat of an operational problem.
That doesn't cost dollars, that just costs management discipline. And, you know, open access is a concept that's been based around for 20, 30 plus years. You just have to execute it, but not many organizations execute open access. The second dimension is running a longitudinal primary care practice in a cost efficient manner, given the reimbursement architecture.
And that is challenging. And what you include in the scope of primary care. Not just kind of the label, but the actual content matters, and how you do it matters. And so that's where the service complexity starts to really take hold. And I think people tend to not really understand what that means in a traditional environment.
[00:22:16] Stacey Richter: So we're talking about the two dimensions that are super important to be contemplative of. One is access and convenience, and then the other one, is this, how do you be perceived as and execute on a longitudinal patient journey? And now I'm going to go back to something that you had talked about before, which was also, it definitely sounded like making sure that amongst the employees or those that are working within the practice, there's a lot of untapped talent potential.
And checking to see what percentage of someone's day is effectively utilized and how much of it is busy work and then getting rid of the busy work. Another way to say this, which I don't like because it's become a euphemism for all kinds of bad behavior. But this idea of working at the top of your license, just making sure that everybody is cognitively able to deliver at the level that they know that they can and not get bogged down into just bureaucratic madness that burns people out and is often so frustrating for really good people who understand what they could achieve and just the latent potential that's kind of lost.
So like, that's kind of like one side of this, but then the other side, I know you've talked at length about like the One Medical App and other things that you've created on the technology side and then processes also. Is that kind of the sum of what you're thinking about as you think about how do you efficiently and effectively within the current kind of crappy payment models for primary care actually succeed in a primary PCP or what am I missing or what do you want to dig into?
[00:23:48] Dr. Tom Lee: Yeah, I mean, I think some of the nuances on a service business are challenging for a lot of quote, unquote, traditional managers, when you look at a service business, the human beings are the service.
Balancing Human Touch and Operational Efficiency
[00:24:00] Dr. Tom Lee: And so you really have to think about the dynamism of what it means to be a caregiver, a team member that's interacting with a patient. There's that human organic dimension. And then there's just the basics of operations and finance on running a sustainable practice.
And those two sometimes work against each other. In some places you see humans doing work that machines should be doing as an assembly line. And, you know, that's not a great use. And in other situations, you have people that are purely just ad-libbing and that's not great from an economic perspective.
Finding the Sweet Spot in Service Organizations
[00:24:35] Dr. Tom Lee: So you have to find that right balance of operations and human centeredness to create the best service organizations.
Otherwise, they feel like a machine and soulless. Or they have too much organic behavior and they feel chaotic. So that, that middle ground is where the service businesses, at least from my observation, the best ones tend to thrive, but you got to find that right balance. And this is one of those things that capitalism and business school don't do a great job at, which is, kind of finding that gray middle where you get a bit of both working well together.
And I think that's a lot of what makes, to me, services, businesses, you know, exciting and challenging and, and dynamic.
Starting with Care: The First Step
[00:25:17] Stacey Richter: How do you start? If you were going to give somebody some advice who's sitting here thinking, huh, I would like to check and see how I'm doing with this. What's step one to figure out where that sweet spot in the middle is?
[00:25:31] Dr. Tom Lee: Number one, and I don't know if this can be taught, but you kind of have to give it, I don't know if I can say this, but you have to give a shit. You really have to care about people. If you don't, then you're, you're going to be losing that side of the equation. And so you fundamentally have to believe in supporting your team and supporting patients as humans.
That has to be an eight or at least very high on the list of things you care about. If you don't start there, then you're actually working against yourself.
The Role of Math and Operations in Building a Positive Ecosystem
[00:25:59] Dr. Tom Lee: The second, I would say, is just understanding math and operations and basic machinery. And those are the two ends of the pole. And then the beauty is using the tools of math and science and whatever to shape ecosystems that are more likely to produce positive outcomes for your team and the patients we care about. And so that's kind of the nuance that, at least, you know, in most of the work I've done, have, at least so far, resulted in, you know, pretty positive ecosystems.
[00:26:31] Stacey Richter: I definitely hear what you're saying, that on one side of our axis here, we have, you have to give a shit and also understand people.
And by people, we're including colleagues and, and being a good manager, and then also patients and what good patient care looks like. The healthcare is, is fundamentally a very human operation.
The Importance of Emotional Intelligence
[00:26:52] Stacey Richter: It will succeed if there's relationships, if there's trust, and that has to happen very much at a level where someone's EQ is high enough to be able to do that. I had a mentor one time that would, would say repeatedly, you can't legislate the heart. And I think that might be what you mean by that.
On the other hand, it's also understanding how operations works, and math and, technology what can be automated and is there an API for that? That side also becomes incredibly important because if you have a human doing something repeatedly, that's where we get ourselves in tons of trouble.
You know, it takes 90 clicks to do the right thing for a patient, even the most caring person in the world could be undermined. So, finding that middle ground is certainly not something that's easy, but I can see exactly what you're saying that is really essential to be able to do. Is there any other kind of summary advice that you might give to someone who's now thinking to themselves, Hmm, I got to dig in here?
[00:27:51] Dr. Tom Lee: Yeah. I mean, the only other thing would maybe be, you know, especially coming from a medical world where it's like research, validate, and then do.
Trial and Error in Innovation
[00:28:00] Dr. Tom Lee: A lot of, you know, real world innovation happens from trial and error. And I think people tend to underestimate that in service oriented clinical cultures, and so you kind of have to always be tweaking and figuring things out.
It's a dynamic industry. That is the challenge. Is how do you continue to innovate and learn and change given all the human machinery? It's easy to upgrade software. You just upgrade the software and it's there. But how do you continuously upgrade the service operating platform? A little bit more challenging, especially at scale.
Leadership and Talent in Service Organizations
[00:28:32] Stacey Richter: How do you put together this enlightened leadership team then that is able to do that? Is there a certain composition of who's leading? Is there, you know, like they got to work with patients three times a day? Maybe what advice do you have to put together a leadership team that is capable of finding that middle ground?
[00:28:51] Dr. Tom Lee: It's challenging. I don't know if I've got the right playbook. I've only done this now twice with One Medical and Galileo, we've relied on different talent, different pools of talent, different equations. So I don't think there's necessarily a one size fits all playbook. I think it has to be adaptive to the strategy, the operations and kind of the people goals.
It's just like anybody who's being thoughtful about architecting their org. It's at some level a bit more intuitive, I guess. And imagining how things should work and what talent types you do need. So it's a little bit like cooking. It's like, what ingredients do I need? It varies depending on what you're trying to cook up.
So the ingredient mix, at least for me, has changed between One Medical and Galileo and between Galileo early stage and we're moving into middle stage of the organization in terms of scale. So, the types of people and the types of needs are different.
I guess maybe the only other corollary is I don't see a lot of talent you can hire and suddenly you have an instant voila, you know, there's just, the industry is so immature from my perspective. That you can't just find somebody and just bolt them in. Very often it needs to be a skill set or a mindset that's being added and it needs to be shaped within the org dynamically. It's very rarely just plopped in.
[00:30:12] Stacey Richter: It feels like what you're saying, it's super important to make sure the leadership team is purpose built to achieve the goals which are set forth, which are clear. Because it's not necessarily like, oh, this person checks all the boxes relative to skills, so it's going to work out here.
It's also, do they believe the same things? Do they care in the same ways as well? So it's definitely, it's going to be a special blend depending, I mean, even on what part of the country, healthcare is local, right? So there also could be a consideration relative to what the needs of the local community are so maybe.
[00:30:48] Dr. Tom Lee: Yeah. Fair enough.
Challenges in Sustainable Business Models
[00:30:49] Stacey Richter: I just want to go back to this longitudinal patient journey, thinking about, you know, you've got the access part of the equation, which may in a way, if you can figure out how to operationalize it, be somewhat of the easy part. The other part here is how do you pay for and have a sustainable business model around this longitudinal patient journey, given just kind of this paradox here that you may not necessarily get the help that you want from entities who are downstream that in a way you're eating their cheese.
So if you're thinking about this longitudinal patient journey, I was talking to Dr. John Lee the other day who was basically, he had gone to some seminars, a summit. And they discovered that one of the best ways to get heart failure patients to report their blood pressure in between ER visits and subsequent readmissions was to have a nurse call them on the phone and ask them what their blood pressure reading was. But nobody was doing it or they were having a great struggle figuring out how to do this because it wasn't paid for.
I could certainly see that if we're thinking about a longitudinal patient journey that examples just like that would come up day in and day out because it requires outreach. You know, the reason why a patient has uncontrolled something or other is because they're not controlling it and they're, you know, like the patients that most need engaged are the ones who are not engaged.
How do you think about that, especially in light of what you were talking about before, where a lot of this world is still fee for service. Like if you can get a value based contract, great, but if not, what do you do?
[00:32:20] Dr. Tom Lee: Yeah, you know, a lot of the work we do at One Medical and at Galileo is, if you can be efficient wherever you can be efficient, you generate extra margin where you can make incremental investments in quality that aren't paid for.
So a lot of quality based metrics, unless you're an ACO or value based arrangements, don't really pay for themselves, but they're important to do. So a lot of times I'm investing in quality programs through the margin you can generate through reimbursable services. So that's why, you know, being lean allows you to do the quality based care, regardless of payment architecture.
But that level of investment varies depending on how labor intensive the quality investment is. And, or, you know, uh, the systems you have to support it. All of that kind of needs to fit as part of the thesis on what kind of care system you're trying to build.
[00:33:11] Stacey Richter: What I'm hearing you say is maybe you find services you can get paid for through fee for service, you figure out how to do those billable things as absolutely efficiently as possible, then you wind up with a couple of bucks left over that you can throw in the pot of, all right, we're going to outreach our heart failure patients, even though we're not getting paid for it.
[00:33:32] Dr. Tom Lee: Correct.
[00:33:33] Stacey Richter: Does margin at a certain point start eating mission?
Because I could see if you've got private equity or you have entities in the mix here who are really, really into value extraction, meaning getting, making as much money as possible, that they may not be super happy with that plan.
Navigating Financial Incentives and Mission
[00:33:48] Dr. Tom Lee: Yeah, those are the trade offs of mission and trying to achieve societal impact versus margin, whether it's third party capital or your own home equity loan to finance your practice.
It's all the same thing. Financial incentives versus, human and human factor dimensions. And those always are, at some level traded off. It's just an issue of what's the right ratio at what time frame. And can you make more of it work than less, but that's true of almost all businesses at one form or another.
[00:34:19] Stacey Richter: How do you address that trade off. Like if you are standing in front of a board of directors who's basically saying make more money, do you have any lessons to share?
[00:34:33] Dr. Tom Lee: Yeah, I mean, I think as younger innovators and entrepreneurs, you just have fewer degrees of freedom to make that trade off on behalf of investors.
But as you get more experience and have credibility and frankly, you still need a financial equation on everything. You can at least have a coaching dialogue with investors, but that is inherently the challenge and where more organically funded entities have more degrees of freedom to do so. I think that's just kind of the trade off on professional capital versus not.
Professional capital allows you to, you know, scale quickly and, and grow an entity. With One Medical, we knew there was inherently a trade off by taking professional capital, but it allowed us to scale the concept more rapidly. And that was the trade off we made. And same thing with Galileo. At some level, you're always trying to find that right balance and dialogue.
It's the power of capitalism, but also the downside of it if it's unchecked. And so we always need to, as humans, try to find that right balance, whether you're on the investor side or on the operator side. I think both sides need to find that right balance.
[00:35:36] Stacey Richter: Yeah, it certainly sounds like, again, we've got a situation where it's no binary, right?
Like there's no right or wrong. There's this gray area in the middle. We'd been talking about that earlier, you have to have people that have some level of autonomy and freedom, but it can't be complete chaos. Also, you can't tech your way out of a problem cause by tech a lot of times, so there's a lot of edge cases.
[00:36:02] Dr. Tom Lee: That's where the productive middle is. We tend to underestimate that productive middle as gray zone, but that's where I think there's a lot of productive energy, you know, and not to make it overly political, but ideally the political system would be a little bit more actively engaged in the middle as well to be more productive.
But, these kind of binary states of the world are just not productive for solving our problems and so we just need to kind of figure out ways to find that right balance.
[00:36:28] Stacey Richter: What's your message for payers? And I'm thinking, for example, Medicaid, and I know a lot of your current work with Galileo, I do believe, I could be wrong, is with Medicaid and managed Medicaid, maybe Medicare.
A lot of the work that you're doing should, again, if we're achieving the promise of primary care, reduce the total cost of care. But there is kind of a short sighted quarter by quarter thinking, and then nobody's going to pay for the nurse to call up the heart failure patient to keep them out of the hospital next quarter, right?
What would be your overarching message for them?
[00:37:00] Dr. Tom Lee: Yeah, so, you know, we work with all program types, commercial, ACA, Medicare, Medicaid, and operate within all the constraints on reimbursement. I think I understand the challenges in the sense that when you're running a state based Medicaid program, there's a limit to what you can really do and shape.
You're mostly controlling the reimbursement architectures, and so, whether through intent or not, a lot of the reimbursement on a fee for service basis in most states is unsustainable for most practices to achieve any basic form of margin, so when you do that, you limit access to the upstream outpatient medicine, and then you have excessive utilization of more downstream resources like ERs.
It's just, you know, everywhere we've under reimbursed in the upstream and the downstream is where most people end up showing up.
Innovating in Medicaid and Complex Markets
[00:37:51] Dr. Tom Lee: So the constraints are harder, frankly, in a lot of these Medicaid programs, but we've been able to kind of innovate into that. When we started Galileo, the goal was to service less small communities, rural communities, Medicaid communities, because if we can do that sustainably, we knew we could take care of everybody else sustainably as well, because it was what we called the thinnest air.
And so that's been our North Star on innovation. So if we can service a higher quality model to all lives, including complex Medicaid lives and rural lives, then everybody else serves to benefit. So it's a harder challenge. I wouldn't have done that as my first company and doing One Medical was hard enough, but it allowed me the insight to understand how to innovate into some of these more complex situations.
[00:38:36] Stacey Richter: And what are the conversations that you then have with these Medicaid plans who, as you said, have these unsustainable payment models for fee for service? Obviously you've got some IP that's in this space, so I don't want to ask you anything untoward.
But how do you do that? Like, as you said, it's the thinnest air, the reimbursement levels, a lot of times, I mean, not in some states, but in others, for sure, are incredibly thin. Is this kind of going back to what we were talking about before this kind of people process, finding that middle ground, or is there something else going on here?
[00:39:10] Dr. Tom Lee: No, it's a, it's the same mindset with more intensity. How do we more effectively care for populations and individuals more efficiently using tech and data? We believe we have one of the most efficient care models that can service lives across broad demographics, across broad geos, and then we have high intensity services around high cost lives.
And so wherever we can get value alignment or value arrangements, we do. That allows us to scale up our operations, even in what we call complex markets or low reimbursement markets. So that's how we've generally operated. It's still early innings in terms of how do we validate this across every state, but so far, the early data points seem promising.
[00:39:55] Stacey Richter: And what message would you have for like CMMI or a policymaker who's in this mix, who may be hearing about these thin margins, but also kind of stuck between a rock and a hard place. A lot of times there's not enough money to go investing in infrastructure, paying a lot for value based care now to save money, you know, years down the line.
There's just not this bolus of cash that's available right now. So it is really hard, but maybe through your experience, you have some sage wisdom.
The Role of Policy and Collaboration
[00:40:24] Dr. Tom Lee: I understand if you're at CMMI's position, it's hard to watch all the different kind of machinations and translations across each state, particularly on the Medicaid side, but there are operators that are working within the system to innovate on quality and affordability as broadly as possible.
It does take time. We should continue the innovation grants and other experiments, but at the same time, allow enough stability in the marketplace to continue to evolve. A lot of these innovations just take time. More importantly, it's just the lack of what I call operational understanding and operational wisdom in the broader industry, that that's where we need to, you know, even consider reinvesting our insights. It's just a, it's a very challenging business. Hospital operations are complex, outpatient operations are complex, insurance operations are complex.
They all need to kind of work together. Now having gone down the rabbit hole and partnered with almost every type of institution, you just have empathy for all the different organizations and how everybody wants to do the right thing, but they're trapped in their own economics. And the architectures and sure, a radical reimbursement change in policy might change things, but politically that seems just untenable.
So we just have to figure out how to operate within the system and ideally figure out how to get more collaborative partnerships in place so that organizations can really validate what's possible.
We've been partnering with a variety of different types of entities to validate this further so we can make sure that we all are working cooperatively together from health plan to, you know, we view ourselves as a provider group to employers and hospital systems, we're all key parts to the same ecosystem.
Long-Term Impact and Quality Care
[00:42:06] Stacey Richter: I was just talking to Dr. Scott Conard and Pat Dunn from the AHA, and they just did a study that showed if a patient has a advanced primary care visit, and when I say advanced primary care visit, there's a bunch of specifications for what that constituted, it took two years for there to be any significant impact in health and cost savings.
But after that two year mark, it was statistically significant. So it's just interesting that knowing that you have to be working with entities who can think in terms of two year timelines, and that's rough.
[00:42:47] Dr. Tom Lee: Yeah, some of those areas are challenging, obviously, because the internal incentives are misaligned.
Where there's clear public goods, where there's very little economic interest for the entities themselves, there's a way to help offset the costs of those types of services. I think that could go a long way to kind of improving on the long term quality and long term health of society, but again, even that alone might be challenging to push through legislatively.
[00:43:15] Stacey Richter: So you're, the point that you're making there is great that we know that, but still you're going to have to figure out how to operate within a context that values the short term to a much greater degree. So figure out how to do it within a fee for service model.
[00:43:28] Dr. Tom Lee: Yeah, that's our bias. I mean, we're trying to do more within the ecosystem and, it helps our providers feel better about our organization.
The fact that we do focus on quality. Even regardless of how it's paid, that's a positive thing as a provider organization to be focused on, especially in today's world where you talk about, you know, the challenges of being a primary care physician today. Half of it's the busy work, but half of it's just the realization that you're not really doing high quality work because of the constraints of the system.
And I think that's what creates what we call moral fatigue or this kind of challenge of purpose for a doc. So many docs, you know, I just got back from my med school reunion and it's just like, we went into the profession wanting to care for patients and this kind of vision is increasingly eroded as just the operations have made the practice, not just kind of a lifestyle unsustainable, but just at some level morally unsustainable.
[00:44:25] Stacey Richter: Yeah, that's really interesting that you say that. And okay, so now I'm connecting a dot back to what we were talking about at the top of this conversation relative to the people are really important. Like you can't process your way into amazing people who really care.
So if you're trying to recruit and attract great doctors who really care, which can solve for a lot, just having people and colleagues who are thinking about things in a really innovative way and able to build these patient relationships, etc. So if you want to attract a great staff, then doing some of this stuff may not be, in air quotes, financially immediately rewarding. But it could wind up in a very significant way contributing to getting the right people who actually do in a direct way contribute to all the stuff that we're talking about that is going to make a primary care practice, a pure play, both financially sustainable, but also in such a way that delivers on the promise of primary care.
[00:45:25] Dr. Tom Lee: Yep, exactly.
Final Thoughts and Advice
[00:45:26] Stacey Richter: Do you have anything that you want to sum up here with any words of wisdom or advice just having done and been as successful as you have been in the industry?
[00:45:37] Dr. Tom Lee: I do feel like a lot of people are pitching value in an easy to consume way. And I would just be sanguine and wary about anybody pitching quote unquote ROI or cost savings in a turnkey fashion. I just think it's much more complicated and challenging to truly do. I mean, we're all interested in long term total cost of care reduction while improving quality.
I think it's harder to achieve than most people realize and I think we should be somewhat humble by the opportunity and also the ability to get there quickly. That being said, we're learning a ton and we're starting to see the needle moving on a lot of populations from total cost of care and quality.
And so on the bright side, I do think it's quite possible for organizations to get there. And I do think that the American society has the potential to get the, get there in a reasonable timeframe. Let's call it the next five to 10 years to really validate improving of the cost trend while improving quality, and hopefully the long term livelihood of our population. And so I do think that there is light at the end of the tunnel, but we have to be patient and somewhat committed to working together on solving this thing, but I do think it is solvable.
[00:46:53] Stacey Richter: Great advice. Is there anywhere that you would direct our listeners to learn more about your work, Dr. Tom Lee?
[00:46:59] Dr. Tom Lee: Yeah, I mean, outside of our website, I don't have anything else to point you to. I tend to be kind of heads down, so. If anything, this podcast and all those, but that would be kind of a circular loop if I had you referring back here.
[00:47:11] Stacey Richter: So listen to the show.
[00:47:12] Dr. Tom Lee: Again and again and again
[00:47:15] Stacey Richter: Dr. Tom Lee, thank you so much for being on Relentless Health Value today.
[00:47:19] Dr. Tom Lee: Thanks Stacey.
So let's talk about going over to our website and typing your email address in the box to get the weekly email about the show that has come out.
[00:47:28] Stacey Richter: Sometimes people don't do that because they have subscribed on iTunes or Spotify and or we're friends on LinkedIn. What you get in that email is a full and unredacted, unedited version of the whole introduction of the show transcribed. There's also show notes with timestamps, just apprising you of the options that are available. Thanks so much for listening.