EP524: Beating Provider Network Pricing Games by Thinking About Buying Healthcare Like a Manufacturer Supply Chain, With John Quinn

[00:00:00] Episode 524, Beating Provider Network Pricing Games by Thinking About Buying Healthcare Like a Manufacturer Supply Chain. Today, I am speaking with John Quinn. American healthcare entrepreneurs and executives you want to know. Talking. Relentlessly seeking value.

[00:00:30] Hello, all you Relentless Tribe members. First off here, I would like to thank Casey Cormier for the really nice recurring donation. Thank you so much, Casey Cormier from Stratus Group. Lately, traditional provider networks are increasingly being called into question. Here's a post by Mark Cuban. Mark wrote,

[00:00:53] Why do we need networks? It is just a way for insurers to play pricing games. Link in the show notes to that post with something like 1700 comments detailing these pricing games. But like buyers cannot see the true net price. There's different prices across insurers.

[00:01:10] Then the out of network starts to get taken advantage of with these crazy shared savings fees. Listen to the show with Cynthia Fisher from Patient Rights Advocate and the one with Justin Leder about how that has been gained to the tune of millions of dollars sometimes in just one claim. Jim Jusko wrote an article in Medical Economics a couple of years ago that was entitled, An Idea Whose Time Has Come and Gone, Healthcare Provider Networks.

[00:01:38] And just one more point to ponder. I am recalling a recent conversation with a jumbo employer who had identified 40 ridiculously incompetent or maybe unscrupulous physicians. And we're talking about not a gray area here. We're talking like these 40 doctors cost the plan upwards of $15 million, I think, in one plan year. While meanwhile, patient harm was actively transpiring and the self-insured employer could not kick these doctors out of network.

[00:02:06] Their carrier, their ASO was unable to figure out how to get these doctors out of network within the constraints of the way that the current network was constructed. So broad access has its downsides. But let's be scrupulously fair here. Networks also have their upsides. They provide basic infrastructure for administration, claims coordination. Doctors know they're going to get paid.

[00:02:30] And kind of also like broad access for all manner of services that a patient may need, which is something you simply cannot just like throw out and expect no disruption. We probably could do a 20-hour show on this network pros and cons business. So we're not going to go there right now.

[00:02:46] Except to remind you that, yeah, just doing a big old school provider network and hoping patients wind up at a high value care setting that doesn't cost a million dollars more than the also in network place right down the street, which is an actual example from the episode with Ivana Krejcinovich.

[00:03:05] So as with most questions plaguing the healthcare industry, the right answer, at least in the short term, and for most who are unwilling to take a winger and try something completely new, let's consider what Goldilocks looks like. Hi, I'm Luke Trocchio, an employee benefits consultant with Lavosco. I listen to Relentless Health Value because I trust what they're saying. Stacey and her guests have deep healthcare and health plan expertise, the credibility, and the tenacity to back it up.

[00:03:35] I'd also recommend signing up for the weekly newsletter. It makes it easy to access the links, sources, and everything referenced in the episode all in one place. The conversation doesn't stop with the episode. Follow Relentless Health Value on LinkedIn. It's where the tribe is building and pushing these ideas forward. The solution that we're hearing is to maintain a kind of like basic network, but then utilize direct contracts to handle specific functions that are deemed necessary for specific patient populations

[00:04:03] or are possible to procure separately and potentially in a better way. Today's guest, John Quinn, has a fascinating kind of spin on this. He refers to these targeted alternative direct contracts as sub-assemblies or pods of care. What follows in today's episode, which is right-sized for summer, is largely an outtake, honestly, of the show with John Quinn from last fall.

[00:04:31] But it's John explaining how we can break down healthcare's monolithic fee-for-service model by thinking about network optimization exactly like a manufacturing supply chain, which is kind of a comfy way to frame it if you're talking to or you are a CFO or on the leadership team at a self-insured employer. Considering what the network looks like as sort of a supply chain is leveraging a model that most senior executives are familiar with and know how to make it work.

[00:05:01] Many companies are very used to managing complex, very complex supply chains in their core business, and they may feel more comfortable if it's framed in this way. For example, you know, when building an automobile, this involves breaking down the process, breaking it apart into a whole bunch of sub-assemblies sourced from high-performing specialized providers across the globe. John Quinn, in the clip that follows, argues that employers really should use,

[00:05:26] you know, these regular day job types of expertise and apply them to their health plan provider network. Maybe if they feel, again, comfortable enough in this context, they'll pull the trigger faster. So yeah, again, in the short show that follows, John Quinn talks about what these sub-assemblies or pods of care, as he calls them again, what they look like in practice. What he says is if you can define the boundaries of that care pod or care episode

[00:05:55] and purchase it for less than the average fee-for-service cost, the plan and the member will win. Assuming quality is neutral, of course. As John says, we have the tech and we've got the tools to do this at this point. We just have to get ourselves out of our, he calls it, fee-for-service hangover. For insight into some other ways to consider sub-assemblies slash pods of care, otherwise known as, at least according to me, various flavors of direct contracts and or point solutions,

[00:06:23] listen to the episode with Ryan Wells, Adam Stavisky, and Dr. Leo Spector. That's episode 503. Let's go from lazy PPO networks to smart collaboration with direct-to-employer specialty care. Also, Dr. Kristen Dickerson talks about imaging direct contracting. That is episode 485. The show is entitled Imaging Costs 6 to 11% of Plan Sponsor Spend, How Direct Contracting Can Save Money and Improve Access.

[00:06:49] Then we also have the episode with Dr. Stan Schwartz from Zero Health for another example of direct contracting. All of these shows talk about layering on direct contracts as these pods of care with boundaries, and that is exactly what John Quinn is talking about when he talks about sub-assemblies. And or if you want to listen to more from John Quinn, go back and listen to a full episode with him.

[00:07:11] That's episode 493, where we're talking about revelations that mainstream CEOs may be having right now about the healthcare industry. My name is Stacey Richter. This is Relentless Health Value. We are sponsored by Aventuria Health Group. I also want to thank Wellness City for the contribution to keep this podcast on the air, and also to John Quinn, who is the CEO of Wellness City, for coming on the show today.

[00:07:37] Wellness City does health plan management for employers that self-fund their health plan. So without further ado, here is John Quinn on how a self-insured employer might consider approaching their network and directly contracted sub-assemblies. And he talks about kind of just the whole construct at a high level, but then also conceiving of it like a supply chain. And here is my conversation with John Quinn. You know, I'm going to start with an old statement. How do you eat an elephant one bite at a time?

[00:08:07] There are many things that are predictable from the perspective of a provider. So, childcare. With a fairly high confidence, if they know the number of people, they can tell you how much does it cost to support a child on a per-year basis. There are things like cancer, where, let's say, outside of everything but the drug,

[00:08:33] there is an average price to manage a cancer patient through an episode or cycle. When you talk to the provider community, they actually have a really good handle on all these pods of care. What would be very interesting is to have either providers or vendors price that as a subscription and then re-bundle those subscriptions into a plan.

[00:08:59] So we have that out there as emerging options. I've said that the suite of vendor solutions or point solutions is next-generation healthcare. We've taken it out of the bricks and mortar of the hospital and we've unbundled everything and we're putting with high-performing players. That's what I think we need to do more of. So instead of a fee-for-service, it's like, hey, what's the value of supporting a child with their pediatric care?

[00:09:28] What is the price of supporting a cancer patient through a journey of cancer? What is the price for, you know, I had a doctor that was a kidney doctor, right? And they're like, do you know the average kidney stone, you know, is, so don't quote me on these prices because like, let's call it 10 plus, 10 grand plus. And he said, I now have the technology. I can do these in my office in a 48-hour window or, you know, three to five-day episode for like two to three grand

[00:09:58] instead of the experience, which is six weeks of pain and too much use of pain drugs and, you know, 10 grand. Let me ask you something though. Is that realistic what you're saying? And let me just point out a, I've heard this a million times kind of thing. Whenever you start to try to calculate value, what you're trying to calculate is the counterfactual that didn't happen. And I think that's one thing that those who are trying to, and we've had so many people on the podcast,

[00:10:27] just kind of wrestle with this underlying thought that if you prevent something, how do you calculate what would have happened if only? And that right there, that sort of fundamental philosophical, how do you calculate what the cost of what didn't happen and then claim those savings? Yeah. So the first thing you have to do to me is create boundaries for each of these care pods.

[00:10:53] And I think the second thing that you have to do is say, what's the average cost of that care pod? And can I purchase it for something less than that? If I can do that, I'd want. In other words, you're basically saying you are looking at costs. Like what is everything? If I just do a fee-for-service analysis of what's in the pod and I'm actually buying it for less cost, then even if there's no appreciable, like quality is neutral here or the outcomes are neutral,

[00:11:22] I still am paying less. Yeah. So the boundary definitions are what we're going to have to negotiate, which we do all the time when we buy stuff. We do it when we buy services for our home. We do it when we buy cars. We do it when we go to restaurants. We do it when we go on vacation, right? If you think about business and a supply chain, we're really good at an automobile. We're really good at breaking apart the car into a whole bunch of sub-assemblies

[00:11:51] with a whole bunch of service providers spread across, you know, however much time it takes to assemble that car across the globe. So in many respects, what we're trying to do is the same idea of what sub-assemblies are easy to put my hands around, what sub-assemblies are kind of consistent in their profile. So why did I pick pediatrician?

[00:12:20] Because a five-year-old is a five-year-old is a five-year-old. You'll hear doctors say that, right? They know when they manage or set up a practice that this is the service mix that they need to serve, you know, a panel of children. So the only next step is they've already put their cost model together. If they want to compete and make a better margin, they then offer a price for children, not for all the visits.

[00:12:49] I've had a lot of doctors bring those kinds of packages forward as examples where they could beat the current system by a significant margin if they could just offer that supply outside of the main network. So one of the big issues for us is to come up with an alternate for the main network.

[00:13:14] So A, how do I get wide access and exposure to sub-assembly prices? And what we've said is instead of making it one thing, one network, make it two things. You've got your wide network for anywhere access. And then if you understand the health condition of a person,

[00:13:39] you can expose each person to the appropriate sub-assemblies in their local geography. All of that kind of requires digitized information or it's too complex to manage. Our financial services work in a very analogous way. Anywhere in the world, if I want to buy a bond, that's a service package. And then I say, who offers bonds?

[00:14:05] And then I say, which bonds are good and which bonds are bad? So I educate myself and then I shop and then I transact. All of those happen with very low friction. If we attacked that friction in healthcare, which I believe we can actually surmount, we have the equivalent of efficient purchasing. Sometimes I buy sub-assemblies. Sometimes I rent a car, right?

[00:14:34] Sometimes I want to buy a car that's built for me. And sometimes I just want to rent a ride for a day. We have to break those things apart. We have the tools. We have the tech. We got to get ourselves out of the hangover, which is, you know, fee for service and big buildings in the center of every city. The takeaway here is, again, self-insured employers calculating the cost of sub-assemblies or pods of care that have defined boundaries.

[00:15:03] So they're easy to, in a way, carve out of the broader network and negotiate separately. I just want to take 30 seconds here to go through and dip into the clinical organization point of view and remind everyone of the episodes with Dr. Mick Connors and also the one with Dr. Siva, where we cover in detail the fact that many, maybe most,

[00:15:27] clinical organizations have absolutely no idea what it costs for them to deliver these sub-assemblies. They have no idea. And that's a problem if an employer comes bumping around looking for a direct contract. Just like the buyer in a supply chain has some best practices, there's also some fairly must-haves on the supplier of the supply chain side. One of them being, you need to know your costs. Mark Cuban also wrote a post about this.

[00:15:56] All these links are in the show notes. And I say all this to say, in sum, I appreciated how John Quinn made constructing a provider network, which is a really big deal to think about how to ensure members have access to affordable care,

[00:16:14] how he made it more familiar ground for some self-insured employers to have this touchstone and feel a little bit less like a stranger in a strange, strange land. Hi, this is Shane Cerrone with Cotta Health. I like to think of Relentless Health Value as a solution center, a unique place where industry insiders and experts gather to break down the failures of our nation's health system

[00:16:41] and talk honestly about the problems we confront and the solutions we need. It's a rare place where you hear strategies that are actually being used to drive the changes we all want and need to see in the industry. If you're interested in making an impact, I'd encourage you to sign up for the newsletter. It's the easiest way to stay connected. Thanks for listening.