EP486: The Secrets to Operationalizing Direct Contracting From an OG, With Stan Schwartz, MD

Let us begin with something Ramy Khalil, MD, wrote on LinkedIn the other day. He wrote, “Is it just me, or is the world of healthcare claims designed to make people feel dumb? Asking for … well, myself.” You and me both, my friend. You and me both.

For a full transcript of this episode, click here.

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And then Ann Lewandowski, she wrote, “David Bolduc and I sat down this morning. The clear message we need to be delivering to self-funded plans is that you are not purchasing health insurance. Full stop. End of story. You are not offloading risk to their risk pool. You simply purchase their administrative services to manage your healthcare finance dollars.”

And right? We’re telling employees to go get screened, to go get a wellness exam, go get a knee replacement, go see your cardiologist. In general, some pretty predictable things. And then every week we’re gonna reactively let a third party tally up the volume. And after it’s all over, tell us how much it costs, vis-à-vis the so-called “Mystery of the Weekly Claims Wire.” Listen to the show with Justin Leader (EP433).

This feels very, I don’t know, submissive. Kind of chaotic. It also feels very expensive, and it is of course very expensive. I’ve heard multiple times from multiple guests—Cynthia Fisher (EP457), amongst others—that medical spread, some TPAs (third-party administrators), not all for sure but some TPAs, are scraping off the top 30% plan total spend times 0.3. That’s a lot of money.

And add to that (and Leon Wisniewski has posted plenty on this topic) how common it is for prices for any given healthcare service to vary wildly in the same geographic region. Check out an example of one service where you go one place in a local geography and it will cost 10 times more than some other place—10 times more expensive!

Or just for, you know, kind of normal stuff, an employee could wind up getting a colonoscopy for $14,000; or they could get one same quality for $2000 or $3000. It’s not chump change that we’re talking about here. It’s $5000, $10,000, $600,000 differences I’ve seen.

And what do these two factors, the spread pricing and also some entities in any given market charging lots and lots of money, what do they all add up to if you’re a plan sponsor? Well, big renewals. Lots of effort needing to be placed into trying to figure out how to balance the budget.

So, now what if you’re a plan sponsor? Well, a very common gambit here is to cost shift to employees—for example, raise deductibles. But one (there are many), but just one point to ponder as a downstream consequence of this “raise the deductibles” strategy, the higher the deductible, the more clinical organizations become subprime lenders.

Mark Cuban wrote this to me the other day, and (massive spoiler alert) he’s coming back on the pod to discuss this topic with Cora Opsahl—and I could not be more excited.

But, yeah, if I was in a mood, I could easily argue that when deductibles start to sky, clinical organizations take on more risk for self-insured employers than carriers who literally take on no risk in actuality when the employer is, as I said, self-insured.

I’ve heard way more than once about indie practices, and this really matters because obviously indie practices tend to charge a whole lot less than consolidated health systems. So, if you’re a plan sponsor, you sort of want to make sure that you’ve got options in your market.

And I have heard way more than once about indie practices who simply cannot stay in business because they don’t have the infrastructure or the capital reserves to basically be a bank. And not just any bank, but one really bad at vetting who they give loans to because, yeah, they actually aren’t able to vet who they give loans to. That would be in violation of their TPA contracts and/or network agreements. If you’re in network and a patient has an insurance card, you gotta follow the financial terms as per the card.

Cristin Dickerson, MD, said something in the interview from last week, in the episode from last week (EP485) that stuck with me. We had to cut it for time, but maybe I’ll put it in a bonus show sometime in the future. She said sometimes some kind of slick clinical organizations, when it comes to ordering imaging, they will try to schedule a high-deductible patient’s image for as late in the year as possible in the hopes that, by that time, the patient will have met their deductible and some other schmo healthcare organization will be the one on the hook to have to collect the patient portion.

Nothing like not-at-all-timely follow-up, depending on when this happens. I hope I just didn’t give somebody some ideas. Nah! That type wouldn’t be listening to the show.

So, all this being said, listen to the show with Preston Alexander (EP482). Listen to the show with Vivian Ho, PhD (EP466). Listen to the two flywheel shows with Jonathan Baran (EP483: Part 1 and Part 2). And all of the deep heavy topics I just glossed over here are deeply raked over the coals in those earlier episodes I just mentioned.

But in all cases, you know, one solution to all of the above? Yeah, direct contracting.

Now, this Relentless Health Value direct contracting as a solution trifecta, of course, began with Elizabeth Mitchell talking about it in the Take Two (EP436) from two weeks ago.

Last week, I discussed the upsides and also three barriers to doing direct contracting for imaging with the incredibly wise and articulate Dr. Cristin Dickerson from Green Imaging. Dr. Dickerson gave a bunch of proven suggestions to overcome said three barriers, by the way (she did not leave you hanging).

And now this week, we’re talking mostly about how to think about and operationalize a direct contract with an OG of direct contracting, Dr. Stan Schwartz.

What an honor to get Dr. Schwartz on the pod, and I am doubly thankful because he stepped up and offered to help support Relentless Health Value financially as well as spending his time with me and you. So, thanks to everyone over at ZERO.health for being part of the kind of folks who support shows like this one.

Dr. Stan Schwartz is co-founder over at ZERO.health. ZERO gets members access to high-quality providers for $0 out of pocket, leveraging bundled payments and direct contracting.

This episode, as I just said, is sponsored by ZERO.health, with an assist from Aventria Health Group.

Also mentioned in this episode are ZERO.health; Ramy Khalil, MD; Ann Lewandowski; David Bolduc; Justin Leader; Cynthia Fisher; Leon Wisniewski; Mark Cuban; Cora Opsahl; Tom Nash; Cristin Dickerson, MD; Preston Alexander; Vivian Ho, PhD; Jonathan Baran; Elizabeth Mitchell; Green Imaging; Jim Millaway; Kimberly Carleson; Ge Bai, PhD, CPA; Dan Ross; Mark Flores; Purchaser Business Group on Health (PBGH); Peter Hayes; Keith Smith, MD; and Dave Chase.

You can learn more at ZERO.health or email info@zero.health. You can also follow Dr. Schwartz on LinkedIn.

Stan Schwartz, MD, FACP, FIDSA, is the co-founder and chief medical officer at ZERO.health, an employer-facing digital health company created by Stan and his co-founder James Millaway in 2016.

ZERO provides direct contracting services between self-funded employers and providers offering pre-priced bundled healthcare services at significant savings. All ZERO services are at no cost to the covered members—healthcare simplified to $0.

His time at Warren Clinic and participation in Centers for Medicare and Medicaid Innovation’s landmark Comprehensive Primary Care initiative sparked a drive to work on future transformative projects.

He founded WellOK, the Oklahoma Business Coalition on Health, a not-for-profit organization dedicated to improving the value of healthcare for Oklahoma businesses. The coalition later became the Oklahoma Business Coalition on Health at Oklahoma State University.

Dr. Schwartz serves on the Medical Director Advisory Council of the National Alliance of Healthcare Purchaser Coalitions and on the Clinical Quality Committee of MyHealth Access Network, a multistate Oklahoma-based health information exchange.

07:59 How did ZERO.health start?

10:38 EP480 with Kimberly Carleson.

11:04 Why does the emotional energy behind understanding how the problem of healthcare affects individuals matter in changing healthcare?

12:45 “If you can schedule it, you can put a price on it.”

15:32 EP420 with Ge Bai, PhD, CPA.

16:38 EP436 with Elizabeth Mitchell.

18:21 How do employers ensure that patients and clinicians are coordinated and on board with direct contracting within their health plans?

20:26 EP475 with Peter Hayes.

22:52 Why is it important that this direct contracting system isn’t mandatory for health plan members?

24:50 How does direct contracting affect excessive utilization?

26:41 EP477 (Through Line Show) with Stacey.

27:29 Why is it important that your plan benefits benefit health?

29:39 Why is it important to educate not only members but also providers who agree to participate in the program?

31:06 “It’s all about simplicity.”

33:11 How do you ensure plan members use the service after it is installed?

You can learn more at ZERO.health or email info@zero.health. You can also follow Dr. Schwartz on LinkedIn.

@stanschwartzmd discusses operationalizing #directcontracting on our #healthcarepodcast. #healthcare #podcast #financialhealth #patientoutcomes #primarycare #digitalhealth #healthcareleadership #healthcaretransformation #healthcareinnovation

Recent past interviews:

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Dr Cristin Dickerson, Elizabeth Mitchell (Take Two: EP436), Dave Chase, Jonathan Baran (Part 2), Jonathan Baran (Part 1), Jonathan Baran (Bonus Episode), Dr Stan Schwartz (Summer Shorts), Preston Alexander, Dr Tom X Lee (Take Two: EP445), Dr Tom X Lee (Bonus Episode), Dr Benjamin Schwartz, Dr John Lee (Take Two: EP438)