Okay. This show today is part of our Relentless Health Value "The Inches Are All Around Us" series. This Inches Talk is a metaphor for finding all those little places where there is healthcare waste as a first step in an effort to excise all these little pockets of waste.
For a full transcript of this episode, click here.
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Shane Cerone said this phrase during episode 492, and I loved it because there are inches all around us for sure.
And the thing with all these inches that we're gonna talk about today and last week and next week and the week after that, yeah, these are inches that actually you could cut them. And there are millions and billions of dollars, and you actually improve patient care. You improve clinical team experience.
Also, you're cutting out friction and making it easier to do the right thing to care for patients. These are no-brainer kinds of stuff if your North Star is better and more affordable patient care, but they are also somebody else's bread and butter in a "one person's cost is another person's revenue" kind of way. So, yeah … what makes perfect common sense might not be as easy as it might look on paper, as we all know so well.
So, last week we dug into all of the inches of expensive friction that develop when stakeholders interact—like, a clinical organization and a payer and a plan sponsor, self-insured employer. They try to get paid or pay. They try to direct contract because what will be found fast enough is that the data is not the data is not the data, as Mark Newman talked about last week (EP496); and a dollar is not a dollar is not a dollar.
Again, you'll find this out fast enough. All of you know when you talk to entities up and down the patient journey or across the life of a claim, otherwise known as a healthcare transaction. It's mayhem to get a claim paid often enough. Each stakeholder comes in with their own priorities and views and accounting methods and various rollups.
I like how Stephanie Hartline put it. She wrote, "Healthcare … moves through many hands without a rail that preserves truth along the way. Attribution breaks, and truth gets reassembled later. The difference isn't capability—it's infrastructure. Line-item billing ≠ line-item settlement."
Or I also like how Chris Erwin put it. He wrote, "When the blueprint isn't standardized, you aren't scaling. You're just compounding chaos."
And yeah, then all of a sudden when there's no through line, there's no rail that connects all the data to the data to the data, or all the dollars to the dollars to the dollars. Suddenly 30% of any given healthcare transaction goes to trying to straighten it all back out again—to reassemble it, as Stephanie said.
It's like unleashing 100 chaos monkeys and then having to pay to recapture them all. Listen to the show with David Scheinker, PhD (EP363) from last year about "Hey, how about we all just use the same template and avoid a lot of this." Or read Zeke Emanuel's book about how the USA should potentially consider copying the Netherlands model because they have private insurance. But they cut admin costs 75% or something like that. Oh, right … through standardization.
Jesse Hendon summarized this the other day. He wrote, "Providers don't need armies of coders to fight 50 different insurance rule books [when you have some standardization here]."
I say all this to say after recording the episode with Mark Newman from last week, I have become intently fascinated by what goes on in this non-standardized or otherwise friction points between stakeholders. There are a lot of inches in this gray area land of confusion.
This show today digs into one of them, which is what does it take to process a claim? Just technically. What are the pipes involved to submit a claim and, again, get paid for it, which is a healthcare transaction—just simply the technology moving the data around—even if everything in the pipes is a non-standardized hot mess.
Because just fixing up the processing and the pipes here—again, while this doesn't solve the entire data isn't a data isn't a data or a dollar isn't a dollar isn't a dollar problem—if we can just cut out some of the processing and the moving the data around costs, just this all by itself is $6 billion a year worth of inches.
Plus, as an added bonus, fix up the pipes for better data flow and now patient care can be faster if, for example, the prior auth or etc. processes transpire faster. And clearinghouses have entered the chat.
But you know, when clearinghouses come up, at least in my world, when the clearinghouse word gets dropped, it's usually accompanied by like a puff of smoke because no one is quite sure what those guys do all day. So, we all sort of look at each other in the conversation and move on.
Lucky for me and possibly you if I've managed to suck you into my web of intrigue, I ran into Zack Kanter from Stedi, a new clearinghouse, who agreed to come on the pod here and aid my exploration into this demarcation zone between stakeholders.
So, let's start here.
What is a clearinghouse? Well, a clearinghouse is the same thing as a switch when we're talking about pharmacy data transfers, if you're familiar with that terminology and that's helpful. But either way, in the conversation with Zack Kanter that follows, Zack will explain this better; but clearinghouses are like a hub, maybe, that connects all the payers with all the providers.
So, if you want an eligibility check or you wanna submit a claim or do a prior auth of the payer, whatever you're trying to do, get paid, you as an EHR system or a doctor's office or an RCM (revenue cycle management) company, you don't have to set up your own personal data connection with every single payer out there.
You don't have to go through all the authentications and the BAAs (Business Associate Agreements) and map all the fields and set up the 100 SOC 2–compliant APIs (application programming interfaces). Instead, you can hook up to one clearinghouse, and then that clearinghouse connects with everybody else.
So, most medical claims transactions have a clearinghouse in the middle, like an old-timey telephone operator routing your claim or denial or approval of that claim or eligibility check or whatever to the right place. And unfortunately, old-timey telephone operator is a pretty apt metaphor, depending on which clearinghouse you're using.
Anyway, Zack Kanter told me that the price to just send and receive an electronic little piece of data in healthcare through a clearinghouse costs about 1,000 times more than any other industry would pay. Like, if you do an eligibility check, that's gonna cost 10 to 15 cents per.
The trucking industry pays that much for 1,000 such data transfers. They would riot if someone asked them to spend a dollar for 10 data transfers. That'd be ridiculous in their eyes.
But in healthcare, all these dimes add up to, again, $6 billion a year—them's some inches there—which also equal delays in payment and patient care. Now you might be thinking, "Oh, well, maybe it costs this much because healthcare is so much more complicated than trucking or whatever."
Well, turns out the opposite is true: Because of HIPAA, ironically enough, healthcare is, in fact, much more standardized (we were talking about standardization before); but healthcare is actually much more standardized than many other industries due to HIPAA's administrative simplification rules, which mandate a universal language for transactions—the pipes I'm talking about now.
So, actually, for as much as I was just kvetching about chaos monkeys, compared to other industries, the baseline construct here is actually much more orderly than, for example, the trucking industry or whatever, like Amazon or Walmart has to deal with with their millions of vendors.
Now—and here's a really big point, especially for self-insured employers—you know who the main customer is for a lot of the more programmatic, the newer kinds of clearinghouses? I'll tell you: newer digital entities who do RCM (revenue cycle management) for provider organizations, and that can be great if you're a practice just trying to keep up with payer denials and expedite patient care.
But look, all you plan sponsors and self-assured employers and maybe unions out there, the more RCM purveyors start working with programmatic clearinghouses, the more you not doing programmatic prepayment integrity programs with unconflicted third-party prepayment integrity vendors who are as hooked into the data streams and the clearinghouses as the RCM vendors are, the more, as I said last week, increasingly you're bringing an ever more rusty knife to a gunfight. So, that is certainly something to consider.
There's a whole episode next week about this with Mark Noel from ClaimInsight. Or if you just can't wait, go back and listen to the show with Kimberly Carleson (EP480) just for the gist of it, or the one with Dawn Cornelis (EP285) from a few years ago. They're talking post-payment integrity programs, but a lot of the same rules apply.
The show today is sponsored by Aventria Health Group, as usual. But I do want to say that we got some very appreciated financial support from Stedi, the only programmable healthcare clearinghouse.
And here is my conversation about all of the inches that are all around us, specifically in the healthcare data pipes, with Zack Kanter, who is the CEO and founder over at Stedi.
Also mentioned in this episode are Stedi; Shane Cerone; Mark Newman; Stephanie Hartline; Chris Erwin; David Scheinker, PhD; Zeke Emanuel, MD, PhD; Jesse Hendon; Mark Noel; ClaimInsight; Kimberly Carleson; Dawn Cornelis; Aventria Health Group; Preston Alexander; Eric Bricker, MD; and Kada Health.
For a list of healthcare industry acronyms and terms that may be unfamiliar to you, click here.
You can learn more at stedi.com.
You can also follow Zack and Stedi on LinkedIn.
Zack Kanter is the founder and CEO of Stedi, the only programmable healthcare clearinghouse. Stedi has raised $92 million from Stripe, Addition, First Round, USV, Bloomberg Beta, and other top investors. He has previously appeared on podcasts, including In Depth by First Round Capital, Invest Like the Best, Village Global, and Rule Breaker Investing.
09:47 What things are being paid for that we might not be aware we're paying for in healthcare?
12:09 Why HIPAA actually makes healthcare more standardized than other industries.
15:35 How healthcare is ahead in some ways and behind in others.
18:03 Where do the 4 to 5 days come from in healthcare transaction processing?
20:39 Why these transaction delays affect care delay.
23:14 EP482 with Preston Alexander.
23:18 EP472 with Eric Bricker, MD.
27:10 How should the process work from the time a provider clicks "validate"?
30:19 Why is the clearinghouse the right place to solve all these issues?
31:41 Why are we where we are in terms of these issues?
35:28 Why people should be looking at their clearinghouse costs.
36:59 What to know about Stedi.
Recent past interviews:
Click a guest's name for their latest RHV episode!
Mark Newman, Stacey Richter (INBW45), Stacey Richter (INBW44), Marilyn Bartlett (Encore! EP450), Dr Mick Connors, Sarah Emond (EP494), Sarah Emond (Bonus Episode), Stacey Richter (INBW43), Olivia Ross (Take Two: EP240)