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

[00:00:00] On Core Episode, How to Cut Healthcare Admin Burden in Half.

[00:00:06] Today I speak with David Schenker, PhD.

[00:00:11] American healthcare entrepreneurs and executives you want to know talking.

[00:00:23] Relentlessly seeking value.

[00:00:27] I'm gonna on core this episode with David Schenker PhD for several reasons but here's

[00:00:33] a big one.

[00:00:34] Why are we as an industry not doing what David Schenker suggests in this episode?

[00:00:41] Why are we not doing, I don't know, kinds of logical things to reduce admin burden

[00:00:46] in this country when everyone agrees admin burden is a problem.

[00:00:51] But let me back up for a moment for context.

[00:00:54] Two things happened since this show originally aired.

[00:00:58] One is that I was invited to a fireside chat by the advisory board to talk with Abby Burns,

[00:01:05] one of the amazing hosts over at Radio Advisory and we talked about value in the healthcare

[00:01:11] industry.

[00:01:12] And if you define value as benefit divided by costs and you can cut costs like cut admin

[00:01:19] burden costs in half then you have created some really nice communal value which we

[00:01:26] talked about at length during that aforementioned fireside chat.

[00:01:30] Here's the other thing that happened since this show originally aired.

[00:01:34] I read the book by Mike Levitt mainly because Dr. Steve Schutzer kept talking about it

[00:01:39] link in the show notes.

[00:01:41] The title of the book is finding allies and building alliances.

[00:01:46] Maybe I will do a book report about this at some point but let me share a couple

[00:01:49] of key quotes just to get the party started here.

[00:01:53] Mike Levitt wrote, A diverse alliance well led and well managed can bring resources to

[00:02:00] bear on a problem that no organization can match even the largest of organizations.

[00:02:06] The synergy of resources from financial to intellectual can deal effectively with

[00:02:12] a wide range of issues confounding organizations today.

[00:02:17] I found that very interesting.

[00:02:18] Here's the second quote which deals with what the top reason is that such diverse

[00:02:22] alliances may wish to hook up.

[00:02:25] It's a common pain, a shared problem that motivates people and groups to work together

[00:02:32] in ways that could otherwise seem counterintuitive.

[00:02:36] So back to administrative burden.

[00:02:38] Let's review the facts that David Schenker PhD shares in the interview that follows.

[00:02:43] He says any given transaction will cost provider organizations 14% of the total transaction costs

[00:02:51] to manage to get paid.

[00:02:53] Yes, it costs 14% of a transaction merely to get paid for the transaction.

[00:03:01] This is a big reason why both Peter Hayes in the episode with him and also Marshall

[00:03:05] Allen links in the show notes talk about for why cash prices can be a whole lot

[00:03:11] less than going through insurance prices because you can skip a lot of insurance burden.

[00:03:17] Now on the payer side add to that 14% an additional 5 to 15% to pay said transaction.

[00:03:27] That 30% of health care is waste stat that keeps getting tossed around listen to the

[00:03:32] show if Dr. Will shrank for more on that.

[00:03:35] But yeah, here's 20 to 30% of every transaction that is waste.

[00:03:41] And we haven't even gotten into redundant care or inappropriate back surgery yet.

[00:03:45] Our industry spends up to 30% of our money just trying to get paid and pay.

[00:03:51] Here's a case study for you.

[00:03:52] You know who has already solved for this whole?

[00:03:55] It's really hard to get paid and pay.

[00:03:57] Delepa derivative traders.

[00:03:59] It used to cost derivative traders $100,000 to do a contract any given contract.

[00:04:07] And they worked together and got this down to $5,000 by doing some of the stuff that David

[00:04:13] Chinker talks about in the show.

[00:04:15] And I don't know.

[00:04:16] I feel like the health care industry could also do this too if they wanted to.

[00:04:21] But there are a whole bunch of reasons why our industry cannot seem to get together

[00:04:27] and be as ruthlessly practical as derivative traders or banks who have figured out how

[00:04:33] to work together to process credit cards to reduce their own common pain.

[00:04:38] Here are a few of the reasons potentially why the health care industry doesn't get together

[00:04:43] to reduce administrative burden in some of the ways that Dr. Shanker talks about.

[00:04:47] Reason one, some organizations actually make a lot of money off of that transactional waste.

[00:04:54] As but one example and not to just pick on one but we don't have all day.

[00:04:59] How about some RCM, some revenue cycle management companies who may or may not be owned by the

[00:05:07] same vertically integrated stacks as the payers themselves?

[00:05:12] As I have said any number of times one persons or potentially an entire countries as the

[00:05:17] case may be one parties waste is somebody else's honey pot.

[00:05:23] And I am not sure if this is any exception.

[00:05:26] Here's number two point why we haven't solved for this already.

[00:05:30] Legacy, technology and data systems and all the sunk costs therein.

[00:05:37] There's issue three as Kate Davis and Katrina Hubbard reminded me about the other day.

[00:05:43] There are some serious regulations in health care due to everybody being a vendor of CMS

[00:05:48] that adds a layer of regulatory complication to many collaborations.

[00:05:53] Also state laws sometimes have an unintended side effect of making it tough to collaborate.

[00:06:00] Now, are there any precedents for this type of collaboration in the health care industry?

[00:06:06] Yeah, actually sure scripts, which don't forget was created by an alliance of PBMs who worked

[00:06:12] together because they all wanted to enable e-prescribing and needed a joint platform

[00:06:16] to do it look I could say a lot about this one but nonetheless so much of what gets

[00:06:22] talked about in the show today with Dr. David Schenker is very, very actionable.

[00:06:26] Just want to note that since David Schenker was on the show he and his team have done

[00:06:32] some major research over the past few years into ways that contracts can be standardized.

[00:06:37] If enough of you reach out and say that you're interested we for sure can have

[00:06:40] David come back on the show and discuss David Schenker PhD is a clinical professor

[00:06:47] of pediatrics. He's the executive director of systems design and collaborative research

[00:06:54] at the Stanford Children's Health. He also founded and directs surf Stanford Medicine.

[00:07:00] And with that here is your original episode. Administrative costs in the United States

[00:07:04] have a bad rap. You don't have to look too far to find an article about how there's

[00:07:09] now like 10 administrators for every one physician in this country or three to four

[00:07:14] billing people for every physician. Today we're digging into a paper about admin costs

[00:07:20] written by David Schenker PhD my guest today Barack Richmond Arnold Milstein and Kevin

[00:07:26] Shulman. I have the pleasure of speaking with David Schenker PhD as I mentioned who is

[00:07:31] the lead author on this paper just to underline a major takeaway from this

[00:07:34] conversation with Dr. David Schenker. He reiterates a recommendation to eliminate

[00:07:40] a big proportion of administrative costs. I guess I should say spoiler alert here but

[00:07:44] the major takeaway slash recommendation is this standardized health care contracts

[00:07:49] between payers and providers. Every payer and every provider finds one contract template

[00:07:54] and uses it. A couple of specifics here the template that I'm referring to and

[00:07:59] that Dr. David Schenker is referring to consists of parameters. What do I mean when

[00:08:04] I say parameters? Consider what Airbnb does when you're looking for a place to

[00:08:09] say as an example. How many bedrooms? That's a parameter. How many bathrooms?

[00:08:13] That's a parameter. How many amenities? That's a parameter. After everybody picks

[00:08:18] their standard set of parameters at that point all parties can negotiate and

[00:08:23] come up with whatever they want for what is the price of an extra bedroom or

[00:08:27] whatever value you're gonna assign to that parameter. Go nuts there but from

[00:08:32] a data collection and analytic perspective and getting paid perspective it

[00:08:36] is way easier to do it that way meaning it's way easier to execute and report

[00:08:42] when all of the contracts use the same parameters. Also you can build tech to

[00:08:48] do a lot of that because you don't have to write algorithms with exponential

[00:08:52] variables. My name is Stacey Richter this podcast is sponsored by Aventria

[00:08:56] Health Group. David Schenker PhD welcome to Relentless Health Value.

[00:09:00] Thank you for having me. Administrative costs in the US. If we're talking

[00:09:05] about an average transaction in the United States what's our cost here

[00:09:09] quantitatively? What's the cost? So I'd like to first draw contrast to the way

[00:09:15] we make payments in our everyday lives with a credit card. With my credit card

[00:09:18] I can pay for even more different services and goods than there are

[00:09:23] types of health care received in hospital and that all in cost is about

[00:09:26] 2% 2% of the total transaction. Yeah for health care just on the provider

[00:09:33] side it's about 14 and a half percent to bill insurance companies for

[00:09:39] physician service. So while the rest of the world can manage to get paid 2%

[00:09:45] of the total transaction costs in health care just speaking from the

[00:09:49] provider side it costs an average provider 14.5% of the total transactions

[00:09:54] managed to get paid for that transaction. That's exactly right. The

[00:09:57] estimates of how much it costs on the insurer side just to pay for the

[00:10:01] transaction vary but the two together are almost by every estimate over 20%

[00:10:08] and by many closer to 30%. So one fifth effectively. At the very least yes.

[00:10:13] Okay and everybody wonders why health care costs are so high here we have

[00:10:18] just to get paid adding no value at all to the patient add a fifth to the

[00:10:22] bill. Exactly. And in the aggregate what does this contribute to our

[00:10:27] gigantic health care spend in this country. Just the waste associated with

[00:10:32] health care billing and administration costs is $360 billion. Wow 360

[00:10:38] billion with a B that would seem to pay for a lot of patient care even if it

[00:10:42] was a zero sum game if we could repurpose that to a more positive

[00:10:46] use case or even keep the same amount of patient care and reduce that from

[00:10:51] the premiums that are cutting into people's take home pay or the

[00:10:55] deductibles that are making people reluctant to seek care. Yes or that.

[00:10:59] So you know considering the huge dollars that are at stake here what's the why

[00:11:03] here like why isn't anybody frantically working to save these dollars so that

[00:11:08] they can either be saved or deployed with some greater impact here.

[00:11:12] Before I go to the why just want to answer the why would we think it's

[00:11:17] possible. Okay. I want to point out that there's at least two really

[00:11:21] strong pieces of evidence that a better way is possible. One is that every

[00:11:26] other OECD country practically has far far lower billing and administrative

[00:11:31] costs than we do. The other is the motivating example that Barack

[00:11:36] Richmond told us about and it's from swaps or code of swaps which are

[00:11:40] derivatives contracts. I mean this is a $200 trillion market over 600

[00:11:46] firms in 50 countries and they used to negotiate contracts much more

[00:11:51] like we do in health care. They used to pay about $100,000 in legal and

[00:11:56] other fees per contract in the swaps industry. And then they made an

[00:12:01] effort to standardize all of it and they brought that cost down by a

[00:12:05] factor of 20 to about $5,000. Wow. That's one of the few markets in

[00:12:10] the world that's as complex as health care and as large as health

[00:12:13] care. And it made clear that it's possible to have significant

[00:12:18] standardization while keeping the level of customization and

[00:12:23] flexibility.

[00:12:24] You're the mathematician, but it would seem very much like you

[00:12:27] could take that 20% health care, you know the cost of

[00:12:30] administrative being 20% and put it down to 2% if this the same

[00:12:36] ratio applies.

[00:12:37] Yeah, if it was the same ratio would be down to 1%, but yeah,

[00:12:41] absolutely. And in fact, in some ways, the problem for

[00:12:44] health care should be simpler.

[00:12:45] So it sounds like you're almost setting up two paths forward.

[00:12:49] One way is to do what all the other OCD rich countries do,

[00:12:54] which provides some level of single payer health care. That's

[00:12:58] one way to standardize a contract. You have one. Or the

[00:13:01] other way is to actually use the skills that we've developed

[00:13:04] in other areas in the financial, as you said, like in

[00:13:08] order to adjudicate or whatever they call it, these

[00:13:11] other contracts, obviously it's a developed skill set that

[00:13:16] somebody has apply that those skills and those learnings into

[00:13:20] the health care sector.

[00:13:21] I'd say it's a continuum between the two. Many of these

[00:13:24] other rich nations, they have a combination of a government

[00:13:27] payer and private payers. So we're thinking about how do you

[00:13:33] revise the system if you have just the government doing

[00:13:36] it? Or how do you revise the system? If you're going to

[00:13:39] take that innovation and technical advancement that the

[00:13:42] competition in the free market is supposed to facilitate.

[00:13:45] So it sounds like if we're going to do the free market thing,

[00:13:47] we need to do the free market thing and use the learnings

[00:13:51] that the free market has devised elsewhere and apply them

[00:13:54] here. Absolutely.

[00:13:56] What does this actually look like in a doctor's office?

[00:13:58] The complexity of the current system looks like

[00:14:01] physicians spending lots of time while they're providing

[00:14:05] care for a patient trying to figure out first, okay, which

[00:14:09] set of rules guide the documentation required for

[00:14:13] this patient because it depends on who's paying for this

[00:14:16] patient's care. So it's two types of complexity, one that

[00:14:19] arises from the number of different contracts a provider

[00:14:23] has to deal with. And the second arises from how

[00:14:26] complex each of those contracts is.

[00:14:29] And I can see that this also could lead to, you know,

[00:14:33] doctors often get dinged or there's the implication

[00:14:37] that there's this in quotes, gaming the system, you know,

[00:14:40] like I know I'm going to get through the PA criteria if I

[00:14:44] code it this way instead of that way.

[00:14:46] I could see that the impetus to do that and I'm not talking

[00:14:50] about someone committing fraud, right?

[00:14:51] I'm talking about that messy middle where you've got some

[00:14:54] poor doctors who can't remember because of all this

[00:14:57] complexity, which contract is governing whatever it is.

[00:15:01] So they're just trying to figure out how to code

[00:15:03] this properly so that under the specifics of that

[00:15:07] particular contract, it turns out to be what that

[00:15:12] contract is looking for.

[00:15:14] Right? Like I know there's a bunch of nuances here, but I

[00:15:16] could see that that puts the doctor in a very potentially

[00:15:19] awkward spot.

[00:15:20] Exactly.

[00:15:21] Doctors at large academic medical centers probably aren't

[00:15:23] explicitly doing this, but the hospital has all sorts

[00:15:27] of guidance and decision support that makes sure the

[00:15:31] doctors do it or if the doctors end up not documenting

[00:15:35] something they need to them, they may have somebody reach

[00:15:37] out to them from the billing office and ask them to do

[00:15:40] retrospectively.

[00:15:41] So in effect, it does filter through to doctors.

[00:15:44] So again, this isn't necessarily about providing better

[00:15:47] patient care for the most part.

[00:15:49] This is trying to figure out how to characterize or

[00:15:52] classify the care that somebody either has given or wants

[00:15:56] to give in an effort to describe it using the proper

[00:16:01] terminology so that one can get paid.

[00:16:04] Exactly right.

[00:16:05] We explicitly want to avoid thinking about the value

[00:16:09] generated by the guidance insurers provide to avoid

[00:16:13] low value care or to prevent inappropriate care.

[00:16:17] There are lots of positive valuable additions to hospitals,

[00:16:22] insurers, medical associations and others identifying

[00:16:26] what's appropriate, what's ideal under which conditions

[00:16:29] and we do not look at that value as part of this equation.

[00:16:33] We really just want to study as close as we can the direct

[00:16:37] analogy of, you know, you've decided the latte you want

[00:16:39] to buy, you decided what kind of milk and toppings you want.

[00:16:43] They've made it however they've made it and now you just

[00:16:46] swipe your credit card.

[00:16:47] That credit card swipe.

[00:16:49] Yeah.

[00:16:49] So that's a really important distinction that what we're

[00:16:51] not talking about here is an insurer trying to

[00:16:54] incentivize a high value care and dissentivize low

[00:16:58] value care, which is what you're talking about.

[00:16:59] What we're talking about here is how do you manage to get

[00:17:03] paid for the care that you should get paid for?

[00:17:06] That's exactly right.

[00:17:07] And obviously you did a study looking into these

[00:17:10] administrative costs, what they are and then potentially

[00:17:15] what we can do to help minimize them since they are

[00:17:18] the quintessential, you know, if you're going to

[00:17:20] identify anything that's low value, it's certainly this.

[00:17:24] Do you want to maybe just give the really top level of

[00:17:27] the methodology that you use just in case someone is

[00:17:30] interested in how you went about this?

[00:17:32] And then let's talk about your conclusions.

[00:17:33] The reason this is so relatively understudied is

[00:17:37] that few people understand how this works or see how

[00:17:41] it works or have the data about how it works.

[00:17:43] So that first paper that I keep referencing is the

[00:17:47] foundation of the work because they spent an immense

[00:17:50] amount of time actually following physicians and

[00:17:54] administrators around with a stopwatch to track exactly

[00:17:58] what they were doing, how long it took, why it was

[00:18:00] necessary and that articulation of exactly what goes

[00:18:04] into swiping the credit card in healthcare is what

[00:18:07] we base our work on.

[00:18:08] Based on that first analysis, we characterize the

[00:18:10] drivers of cost and complexity and how long it

[00:18:13] takes.

[00:18:13] And then we think about ways that other industries

[00:18:16] have standardized and automated to reduce those costs.

[00:18:21] So one way would be to reduce the number of contracts.

[00:18:26] For example, the extreme that people talk about is

[00:18:28] single payer.

[00:18:29] So there's just one monstrous contract that covers

[00:18:33] any type of care anybody could ever want or deliver

[00:18:36] and how the government is going to pay for it and

[00:18:39] ask that it be documented.

[00:18:41] This would correspond to a provider that previously

[00:18:44] had 5000 contracts having only one contract.

[00:18:47] The second feature is contractual complexity

[00:18:50] and in the single payer model to continue with the

[00:18:53] example, the average contractual complexity may go up

[00:18:56] because if a provider is administering care for

[00:19:01] every possible patient under one large contract, that's

[00:19:04] going to be a very complex contract.

[00:19:06] Alternatively, there's a world where you can keep

[00:19:09] the current number of contracts or reduce it.

[00:19:12] But each contract would be based on a more

[00:19:16] standardized digital format.

[00:19:19] That would reduce the contractual complexity so

[00:19:23] that it becomes a mostly automated interaction

[00:19:27] or at least one that you're very familiar with because

[00:19:30] it's not different for 1000 different contracts.

[00:19:32] OK, so either we can have one or a very small

[00:19:36] number of really, really complicated contracts

[00:19:38] because that's what winds up happening when you

[00:19:41] try to consolidate under one contract is that

[00:19:43] the contractual complexity goes way up or we

[00:19:46] can have a bunch of contracts.

[00:19:47] But as long as each contract type is simple, then

[00:19:50] you know the sum of each of those two formulas

[00:19:54] winds up being roughly the same.

[00:19:56] Don't I understand that right?

[00:19:57] The only distinction I really want to emphasize is

[00:19:59] it doesn't have to be simple.

[00:20:01] It should be standardized.

[00:20:03] So in the credit card analogy, the negotiations

[00:20:07] of the prices and the bills that credit

[00:20:11] cards are used to pay for, they can be incredibly

[00:20:14] rich and complex and on these online market places.

[00:20:17] But they're very standardized.

[00:20:19] So all of that complexity can be done by a computer

[00:20:22] rather than a person.

[00:20:23] And do you mean standardized across contracts?

[00:20:26] So in other words, there's a larger number of them,

[00:20:28] but they're very similar or the same in their nature.

[00:20:32] Exactly. Exactly.

[00:20:33] One way you can think about this is if you have

[00:20:36] a contract where for hip replacement, a certain

[00:20:40] amount is negotiated.

[00:20:42] So one way to do that is if you're an

[00:20:43] institution, every insurer that comes to you,

[00:20:45] you hammer out and negotiate the price of a hip replacement.

[00:20:50] That negotiation is going to take different factors

[00:20:52] into account and it's going to have some customized

[00:20:57] payment and criteria for a replacement.

[00:20:59] Now that leads to many, many contracts, each with

[00:21:01] its own somewhat idiosyncratic rules.

[00:21:03] The alternative is you create some parameters

[00:21:07] to describe a hip replacement, a clinical complexity

[00:21:09] parameter, the price should be covered for

[00:21:12] some quality conditions.

[00:21:14] And then each of those is just a parameter.

[00:21:17] Now, any contract can then just be specified by

[00:21:19] setting these parameters that can still lead to

[00:21:23] millions of potential contracts, but they're all

[00:21:26] standardized in the sense that they're all fully

[00:21:28] described by just a few parameter values.

[00:21:31] It almost sounds like what you're suggesting

[00:21:33] is that we turn these contracts into structured

[00:21:35] data in some way that you then can parse

[00:21:38] and have a computer look through and search and sort.

[00:21:42] You can have a template contract, a provider and

[00:21:45] ensure they say, OK, here's our template contract.

[00:21:48] And here are the seven ways in which you're

[00:21:50] allowed to modify.

[00:21:52] Maybe you think your population is a little

[00:21:53] healthier or maybe you think you are a little

[00:21:56] more efficient in these clinical procedures

[00:21:59] or maybe you're more competitive in this area

[00:22:02] of your service.

[00:22:03] And so each new contract should be generated

[00:22:06] from a standardized contract based on a relatively

[00:22:10] small list of parameters having to do with

[00:22:14] quality cost and risk.

[00:22:16] And the resulting modified contract should be

[00:22:19] something that can be administered by both

[00:22:22] sides with the exact same documentation

[00:22:26] as the original contract.

[00:22:28] OK, so everybody agrees that like for a hip

[00:22:31] replacement and I'm making stuff up here because

[00:22:34] I have entirely no idea what I'm talking about.

[00:22:36] You're saying hypothetically for every hip

[00:22:39] replacement for every insurer, every provider,

[00:22:41] everybody agrees on like three parameters as you

[00:22:43] call them. One parameter, let's say is the risk

[00:22:47] level of the patient.

[00:22:48] And then the second parameter is the quality

[00:22:52] of the hip replacement delivered based on something

[00:22:54] or other.

[00:22:55] And then lastly, I don't know, you have

[00:22:57] patient satisfaction with the service.

[00:22:59] Now the insurers and providers can brawl over

[00:23:03] how much the payment will be for each hip

[00:23:06] replacement, but they're fighting within the

[00:23:08] framework of those three parameters and the

[00:23:11] provider performance is based on those parameters.

[00:23:15] I could see the pushback there is going to be

[00:23:18] that you lose the ability to finesse.

[00:23:22] Like if every contract is its own unique

[00:23:27] snowflake of a contract, then we can get

[00:23:30] incredibly specific relative to whatever I want

[00:23:34] to get incredibly specific about.

[00:23:36] Like the second that I move to a template, I'm

[00:23:39] going to lose the ability to drill down at the

[00:23:43] most finely tuned level of detail.

[00:23:46] How would you address that pushback?

[00:23:49] That's absolutely valid.

[00:23:50] And to take our example from the financial

[00:23:53] world, if you want to continue paying a

[00:23:55] hundred thousand dollars per contract and

[00:23:59] bearing all of the massive overhead costs

[00:24:02] to physicians and patients of administering

[00:24:03] them, then yeah, that's worth it to you.

[00:24:05] Then you get to keep the beautiful individual

[00:24:07] snowflakes.

[00:24:09] If you want to give up some of that finesse

[00:24:11] and individuality and move to a five thousand

[00:24:14] dollar per contract world where you have

[00:24:17] algorithms doing a lot of the work instead

[00:24:20] of physicians, then hopefully what you lose

[00:24:22] in that finesse, you gain in cost savings

[00:24:27] and standardization and transparency.

[00:24:29] So in a way, you might actually gain more

[00:24:33] like whatever you think you're going to gain

[00:24:34] by having, you know, finesse to the nth level,

[00:24:38] you're probably losing in the inability to

[00:24:41] actually operationalize those details anyway.

[00:24:45] Right? So it's almost not even a kind of a

[00:24:48] fair statement because of the impossibility

[00:24:51] of the administrative.

[00:24:52] Like we're not living in the real world here.

[00:24:54] Exactly. If we take the absolute minimum

[00:24:56] estimate of 20 percent wasted spending around

[00:25:00] contracting, then you're saying, OK, if we

[00:25:03] could standardize contracts and get down to a

[00:25:05] few percentage points of cost, then the

[00:25:08] reason to not do that was because you think

[00:25:11] that finessing the contract is adding these

[00:25:13] 18 percentage points of value.

[00:25:16] And I would be hard pressed to believe

[00:25:20] these individualized contracts are really

[00:25:22] adding value of that magnitude or anywhere

[00:25:24] near it.

[00:25:25] So if I'm in insure and I'm picking up

[00:25:28] what you're putting down, you know, like

[00:25:29] I'm a decision maker and I work for a

[00:25:30] pay organization, I work for a large

[00:25:32] employer, for example.

[00:25:33] What's your advice for me?

[00:25:35] Because if I'm thinking things through in my

[00:25:37] head, you know, I've got all these different

[00:25:39] care settings and what I mean, there's just

[00:25:42] some inherent complexity here.

[00:25:43] What do I do?

[00:25:44] What's my first step?

[00:25:45] Never let a good crisis go to waste.

[00:25:48] Take advantage of the fact that there's

[00:25:50] this huge transition to telemedicine.

[00:25:52] If you're an insurer, you're aware of

[00:25:54] the incredible headache and cost associated

[00:25:57] with updating legacy systems and trying

[00:25:59] to move away from the infrastructure you have in place.

[00:26:01] I think and I desperately hope that at some

[00:26:04] point this will get done, but I realize

[00:26:06] that it's much easier in health care to build

[00:26:08] something new than to change something

[00:26:10] that exists.

[00:26:11] So I would take all of this new

[00:26:14] demand for telemedicine and all of this

[00:26:17] new demand for appropriate telemedicine

[00:26:19] payment models as an opportunity to

[00:26:22] build something totally new, something

[00:26:25] efficient and standardized and scalable

[00:26:27] and algorithmically administrateable.

[00:26:30] You know, you're referring to inertia in

[00:26:32] the in the health care industry number one,

[00:26:33] but then also the whole innovators dilemma.

[00:26:36] But if we're thinking about building something

[00:26:38] new such as the infrastructure around

[00:26:41] telehealth, that might be a perfect opportunity

[00:26:43] for everybody to just start afresh.

[00:26:45] So going back to the standardizing

[00:26:48] contracts, reducing administrative burden.

[00:26:50] If I'm a provider and I am seeing exactly

[00:26:53] what you're saying, right?

[00:26:54] Or I know my front desk is seeing exactly

[00:26:56] what you're saying.

[00:26:57] What do I do?

[00:26:58] Is there anything that I can do

[00:27:00] that either, you know, proactively or

[00:27:02] reactively relative to either the

[00:27:05] contracts that I am negotiating myself

[00:27:07] for the contracts that I'm getting?

[00:27:08] I think the ideal would be if as a provider

[00:27:12] you identify look, this is the contract

[00:27:14] that is the most efficient for me to

[00:27:17] administer. It'll probably still be

[00:27:19] pretty inefficient.

[00:27:20] And this is again a gamble.

[00:27:22] But what I'd imagine is if every

[00:27:25] payer that comes to me and wants to

[00:27:27] negotiate their own contract, I say,

[00:27:29] look, how about we just take this

[00:27:31] contract and as a bonus to you for

[00:27:34] accepting a contract that's not yours.

[00:27:37] I'll just give you a 3% discount

[00:27:40] across the board.

[00:27:41] The idea being that if a hospital

[00:27:43] can save 14% on the cost of getting

[00:27:47] paid by turning all of their many

[00:27:50] contracts into one, then they could

[00:27:52] afford to give a discount and it would

[00:27:54] still be more than cost effective.

[00:27:57] I can see why there's all sorts of

[00:27:59] practical reasons that would prevent

[00:28:01] that, but that is the kind of approach

[00:28:03] that in theory should be possible

[00:28:05] because of the magnitude of the

[00:28:06] wasted effort and money.

[00:28:08] Yeah, you definitely think that at a

[00:28:10] minimum, that's a great starting

[00:28:11] point to contemplate just

[00:28:12] recognizing the fact that there's

[00:28:14] huge dollars that are on the table

[00:28:16] there that could be saved.

[00:28:18] So like if you've got a 14%

[00:28:20] categorical bucket to be playing

[00:28:22] with there, there's probably a lot

[00:28:24] of negotiation leeway that you have.

[00:28:27] The more practical advice I'd give

[00:28:29] the provider is you're launching all

[00:28:30] sorts of telemedicine programs or

[00:28:33] you're scaling up telemedicine in

[00:28:34] areas where it was a fraction of your

[00:28:36] volumes before.

[00:28:37] So you could start there by going

[00:28:39] out to insurers and saying, let's

[00:28:42] build a new standardized

[00:28:44] algorithmically administerable

[00:28:46] approach to our telemedicine

[00:28:48] programs rather than trying to

[00:28:50] jam telemedicine into our existing

[00:28:53] contract in a way that's just going

[00:28:54] to increase its complexity.

[00:28:56] That would be more practical.

[00:28:57] An algorithmically administered

[00:28:59] telehealth program would be

[00:29:01] something as we were discussing

[00:29:03] before that you could categorize

[00:29:05] like, you know, something about

[00:29:07] the visit itself. It's something

[00:29:09] numeric as opposed to long hand.

[00:29:12] Exactly. Telemedicine has two

[00:29:14] huge benefits from this point of

[00:29:16] view. One is that it's a

[00:29:18] digital interaction whose duration

[00:29:21] and cadence can be tracked so

[00:29:23] that if the care model doesn't

[00:29:25] punish providers for providing

[00:29:28] care quickly and efficiently in

[00:29:30] short episodes, then it should

[00:29:32] be possible to generate both

[00:29:33] value for the provider, patient

[00:29:35] and the payer. And second is

[00:29:37] that a lot of telemedicine is

[00:29:39] associated with data collected

[00:29:41] from remote devices. For

[00:29:42] example, we do a lot of work

[00:29:44] in continuous glucose monitoring

[00:29:46] of our type one diabetes patients

[00:29:47] and remote care for them.

[00:29:49] So the extent to which those

[00:29:51] digital data are available makes

[00:29:54] it more straightforward to

[00:29:56] measure the efficacy of the

[00:29:58] program and implement quality

[00:30:01] controls. Type one diabetes is

[00:30:03] a relatively small population,

[00:30:04] but think about hypertension

[00:30:06] management. If you have blood

[00:30:08] pressure measurements from the

[00:30:09] patient's home automatically

[00:30:11] sent to the care team and you

[00:30:13] have a cadence with which the

[00:30:14] care team reaches out to these

[00:30:15] patients, then you can track

[00:30:18] the progress in managing blood

[00:30:20] pressure from the digital

[00:30:22] sensor and you can figure out a

[00:30:24] reimbursement that makes the

[00:30:26] program sustainable and rewards

[00:30:28] institutions that manage to do a

[00:30:30] better job managing hypertension

[00:30:33] remotely and efficiently. So it

[00:30:34] sounds like you're using the

[00:30:35] term telemedicine as a

[00:30:37] shorthand for like this is how

[00:30:38] you can actually get paid for

[00:30:40] value for reals. Exactly. Are

[00:30:43] there any other benefits of

[00:30:45] contract standardization that

[00:30:47] you might want to add here

[00:30:48] beyond that inarguably big

[00:30:50] kahuna of saving 20% what we're

[00:30:53] spending on inefficient

[00:30:55] administrative activities

[00:30:56] currently? Another potentially

[00:30:58] significant benefit of

[00:31:00] standardization would be that

[00:31:02] apparent conflicts between

[00:31:04] payers and providers would

[00:31:06] just disappear. There are all

[00:31:09] sorts of apparent conflicts

[00:31:11] that are really just an

[00:31:13] artifact of the complexity of

[00:31:16] the system and the current

[00:31:18] pathways that have grown

[00:31:19] organically to navigate that

[00:31:21] complexity. And if you think

[00:31:23] about the fundamental role of a

[00:31:25] provider is provide care, the

[00:31:27] fundamental role of a payer as

[00:31:29] estimate risk, collect capital

[00:31:32] and generate guidance on care

[00:31:35] value or evaluate the value of

[00:31:37] care, then if you have a

[00:31:39] seamless contractual

[00:31:41] environment between the two, it

[00:31:43] is very easy to align

[00:31:45] incentives or relatively easier

[00:31:46] to align incentives than it

[00:31:48] would be in this current model.

[00:31:51] So why hasn't this happened yet?

[00:31:53] It must be fairly obvious to

[00:31:55] participants in this billing

[00:31:57] Fandango. Like what is the

[00:32:00] reason why it is taking so

[00:32:02] long to address it? The reason

[00:32:04] I think this hasn't happened is

[00:32:06] that there's been a lack of

[00:32:08] competitive pressure to do it.

[00:32:10] It's incredibly expensive to

[00:32:12] update legacy systems. It's

[00:32:14] difficult to renegotiate

[00:32:16] partnerships and contracts.

[00:32:18] And these are barriers, but in

[00:32:20] other industries, these are

[00:32:21] barriers that companies

[00:32:23] either overcome or companies

[00:32:25] end up going out of business

[00:32:27] because of competitors who do

[00:32:29] overcome them. In health care,

[00:32:31] health insurers have the

[00:32:33] expertise to build systems

[00:32:36] that can facilitate this more

[00:32:38] standardized approach. If

[00:32:40] there was more competition and

[00:32:42] more pressure on insurers to

[00:32:44] become efficient, I think they

[00:32:46] would be the party with the

[00:32:47] resources both in terms of

[00:32:48] capital and data that could

[00:32:50] make a serious pass at this

[00:32:51] kind of standardization. I think

[00:32:53] that health insurance state

[00:32:55] commissioners are a great

[00:32:57] authority to potentially push

[00:32:59] for some of this kind of work.

[00:33:01] So all of the consolidation in

[00:33:03] the marketplace actually moves

[00:33:04] us away from this goal as opposed

[00:33:05] to closer to it.

[00:33:07] Exactly. The consolidation moves

[00:33:09] us technically it's more

[00:33:10] feasible because it's a more

[00:33:11] centralized consolidated system.

[00:33:13] But from the incentives point of

[00:33:15] view, it's less desirable.

[00:33:16] That's a little bit of a paradox.

[00:33:17] Dr. David Schenker, thank you so

[00:33:19] much for being on Relentless

[00:33:20] Health Value today.

[00:33:20] Thank you for having me.

[00:33:22] Links to everything discussed on

[00:33:24] the program today can be found

[00:33:26] at relentlesshealthvalue.com.

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[00:33:30] relentlesshealthvalue.com,

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