EP518: How Do You Explain the Difference Between an ASO Vendor and a TPA? With Claire Brockbank

[00:00:00] Episode 518. Today we're going to do an Ask Me Anything. How do you explain the difference between an ASO, Administrative Services Only Vendor, and a TPA, a third-party administrator? Today I'm speaking with Claire Brockbank.

[00:00:27] American healthcare entrepreneurs and executives you want to know. Talking. Relentlessly seeking value. Hi, I'm Alex Summers. I'm president of Astia Health, an advanced direct primary care organization, an emergency medicine and lifestyle medicine physician, as well as a licensed employer health plan advisor from Wisconsin.

[00:00:49] I'm curious how you explain the difference in the real world between a carrier administrative services only arrangement and an independent third-party administrator model to an employer looking for more transparency, cost control, and clinical risk strategy for their health plan.

[00:01:08] What a great Ask Me Anything from Dr. Alex Summers. And let me tell you, if I do say so myself, I got the perfect person to answer this question, the one and only Claire Brockbank, the recently appointed new director of the 32BJ Health Fund.

[00:01:26] Before we get to Claire's answer, however, let me just again thank Dr. Summers for the question, which is especially relevant since Dr. Summers, as he just mentioned, is president of Astia Health, which is an advanced primary care practice that's physician-led.

[00:01:47] And they help employers get their plan members, the kind of proactive whole person primary care and also proactive clinical risk management that we talk about over and over and over again on this show. Listen to the episode most recently, I would suggest, with Patrick Nellie. I mean, advanced primary care and the data necessary to actually do proactive clinical risk management.

[00:02:13] That is what is needed as a foundation to build a health plan that bends medical and pharmacy trend below inflation and members actually becoming healthier as an investment to that end in this model. So, yes, when laying this advanced primary care foundation, access to data, as just one example, really matters. Read that series of posts recently by Kimberly Carlson to underline this point.

[00:02:39] I say all this to say Claire's response to what is an ASO versus a TPA and her thoughts on the whole ASO versus TPA decision are really insightful news you can use to explain to employers the difference in the best way possible. And, yeah, all of this can be very foundational for anybody who's really trying to figure out how to get their health plan back on track.

[00:03:07] This podcast is sponsored by Aventria Health Group with an assist by Payerset. Hi, I'm Jerry DeMasso, CEO and co-founder of Payerset. Relentless Health Value is one of the best resources out there for understanding how health care really works. And it's actually required listening for anybody that comes on board at Payerset. Stacey gets into the real mechanics of health care pricing and what it takes to fix this system. If you care about making health care more affordable and transparent, this is the show to tune into. I highly recommend signing up for the weekly newsletter.

[00:03:36] It's a great resource because it includes all the links mentioned in the show, plus a full transcription of Stacey's intro. Please be sure to follow the podcast on Apple Podcasts or Spotify and forward this episode to someone who should be listening. And here is Claire Brockbank answering the question, how best to explain to an employer the difference between what is an ASO and what is a TPA? Claire Brockbank, welcome to Relentless Health Value. Hi, Stacey. Thanks for having me.

[00:04:05] I am so pleased to have you here to answer this age-old question because I think a lot of times people say administrative services only. And I don't know, like I've always had in my head, it's like administrative services only as a TPA that's owned by a carrier. Straighten us out here. So that is kind of true. It's a TPA that's owned by one of the big insurance carriers. Those carriers have insured business. They have all sorts of other product lines.

[00:04:33] But they sell to self-insured employers, like 32BJ Health Fund, the option of having them process claims, administer a network, do any one of a number of different services that they also provide to their fully insured business. What you're not paying for when you do that is any of the risk-bearing part of being an insurance company. So that's an ASO. A TPA, third-party administrator, does many of the same things.

[00:05:03] So in the end, both of those entities function to pay claims, manage some of the administrative parts of covering your employees. However, a TPA, that's all they do. So a TPA functions to process claims, manage other aspects of the administrative process, whether that's payment review, prior authorization, maybe some claims, high-cost claims management, those kind of things.

[00:05:32] But they don't have insurance companies. They don't have their own networks, typically. They have no other side hustles, if you will, other than serving you the self-funded employer. So if I'm kind of distilling this down to the lowest common denominator, what I'm hearing is an ASO is going to come complete with its own network and all of those trimmings that go along with that.

[00:06:01] Whereas a TPA is like a third-party administrator. So it could rent a network or something like that, but it's a third-party to that network. Like it's not, it doesn't own its own network. It doesn't own its own network, which means you can bring your own network. An ASO, it's very difficult to bring your own network. So you're sort of buying their network.

[00:06:26] So for employers who want to do carve-outs or direct contract or their own audits or a lot of the things that we've talked about, Stacey, the rights associated with your administrative relationships, that is harder to do sometimes with an ASO because that's already baked into their model. Got it. So it's kind of like exactly like you just teed up. I'm a carrier. I have a fully insured business line.

[00:06:55] If I go with an ASO, I'm going to get everything you'd get with a fully insured model subtracting the risk. Yes, along with some of the misaligned incentives. So the other thing that happens is that when you contract with a TPA, your incentives are pretty much the same as theirs. You want your claims processed accurately.

[00:07:26] You want them processed quickly. You set the rules in terms of how fast you pay, what's your prior authorizing, etc. But it's really a partnership between you and the TPA. What you pay for is what you get. When you do that with an ASO, you have to understand that the ASO, you're one piece of their puzzle.

[00:07:49] And so if they have to negotiate a contract with a provider and they can pay Stacy $100 for the service on behalf of their insured business where they have a profit margin. But the provider says, but overall, I want to get paid an average of 140 for my services.

[00:08:09] Then they can say, well, we'll charge Claire, the self-funded employer, maybe a little bit more so that we can pay us on the insured side a little bit less. And it might average out. So their incentives are not so aligned. And we see this, right?

[00:08:28] We see this in the evidence and in the literature that, in fact, self-funded employers, remarkably, you've done it in your podcast, sometimes pay higher rates than the insured book of business. Yeah. Yeah. In fact, Luke Pretall referenced a study that showed that self-insured employers, if they are working with an ASO, pay on average of something like 4.7% more.

[00:08:52] And that's where that comes from because the ASO is trying to make the math work so that on average, a provider organization can get paid its ask. Yes. So your incentives are just not always aligned. Yeah. I mean, you have heard, of course, also horror stories about some TPAs where there I just saw Kimberly Carlson posted something the other day about how some TPA was like, sure, go audit your own claims. But then we still get 25% of whatever you collect.

[00:09:21] You know, so there's still funny stuff going on. Right. But at least on its face, if we go back to first principles, if you're working with someone who is a third party TPA, there is the potential that incentives are aligned.

[00:09:39] Whereas if you're working with an ASO, just, you know, again, first principles, there are some implicit misalignments that you're going to have to deal with just like right out of the gate. Yes. So then it becomes really important if you're doing a TPA that you read that contract carefully and that you know what they will and won't do, of course. Yeah. Reference the earlier podcast with Claire Brockbank where we discuss contracts.

[00:10:10] Exactly. The other thing that we often see, not always, but many of the BUCAs have merged and grown over the years and they have a lot of legacy systems, right? They have old systems. They've been around for a really long time. And so many times the things that you want to do, you find they might even want to do them with you. But their legacy system will take 18 months to fix, to try to figure out how to do it.

[00:10:37] But TPAs are typically a slightly newer entrant in the market and they are often built because technology is their bread and butter. It is not risk-bearing. It is not insurance regulation. It is not building networks, right? It is managing this.

[00:10:54] So often what we found was that their technology is much better, more streamlined, and therefore a little bit faster so that if you want to be nimble in the marketplace, you're more likely to get that with a TPA. We're certainly finding that with the implementation we've been doing. We went with a TPA effective 1-1 this year, and we've thrown two massive direct contracts at them.

[00:11:18] And their ability to pivot and to do that is in large part because they have invested in very good technology. And so that's often a difference. Not universally, but it is a generalism that I think is fair to say. Yeah, that's a really interesting point that you just made that if there is some kind of carve-out, first of all, they can do it to begin with.

[00:11:41] Like I was just talking to someone who had identified 40 very, very unsafe physicians, really bad, doing very bad things, and they couldn't figure out how to cut them out of the network with their ASO for, yeah, for probably all kinds of reasons. But if they had been working with a TPA, that, to your point, probably wouldn't have been an issue. Doing direct contracts wouldn't have been an issue. We had Mark Noel on the pod from Claims Insight who was really able to hook up some pre-audits.

[00:12:10] And basically what he said is, I just get an API and I can easily hook it up with a TPA so the employers themselves on the back end don't have to be doing all kinds of crazy stuff dealing with all this technology. Just hook it up with a TPA. But to your exact point, if you have a TPA that knows how to API, this is not an issue. If you get someone still on COBOL with 17 different manual processes, it becomes problematic.

[00:12:39] Yes. It's a huge difference. And we have seen it in action in this last five months, time and time again. Claire Brockbank, thank you so much for clarifying this. Ask me anything free. This AMA is a FAQ, right? Like how often does it come up where either someone makes something up for what's the difference between, as I apparently have been doing for years,

[00:13:04] what's the difference between an ASO or a TPA and or uses these terms sort of interchangeably and clearly they are not synonyms. Claire Brackbank, thank you so much for being on Relentless Health Value today. You are so very, very welcome, Stacey. Happy to help. Hi, this is Tom Nash, editor and producer of the Relentless Health Value podcast. I bet you're wondering, how can I help Relentless Health Value? Well, that's pretty easy. Have you signed up for the newsletter?

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