June 4, 2020: Our guest on this episode is Dr. Eric Bricker from AHealthcareZ and author of Healthcare Money Campfire Stories. After his medical training and co-founding Compass Professional Health Services, he became increasingly interested in healthcare finance and has since pivoted to healthcare finance training which he does through videos on AHealthcareZ. Today he talks to listeners about the triple aims of improved quality, lower cost, and better access, specifically as it pertains to the institutions best equipped to effect change. Rather than the onus lying with healthcare systems or insurance carriers per se, he argues that it comes down to individual teams and organizations who are committed to making these changes, stating that, for the moment, it still only happens in pockets and is by no means a national priority. Dr. Bricker also makes a case for why healthcare should fall in the middle of the spectrum between laissez-faire capitalism and governmental socialism, arguing that a bit of both is needed to ensure the best for all parties, and he elaborates on the septic dynamics of healthcare that he thinks requires regulatory oversight. Join us for more on the business of healthcare!
Key Points From This Episode:
COVID Series: The Business of Healthcare
Episode 261: Transcript – June 4, 2020
This transcription is provided by artificial intelligence. We believe in technology but understand that even the smartest robots can sometimes get speech recognition wrong.
[0:00:04.8] BR: Welcome to This Week in Health where we amplify great thinking to propel healthcare forward. My name is Bill Russell, healthcare, CIO, coach and creator of This Week in Health IT, a set of podcast, videos and collaboration events, dedicated to developing the next generation of health leaders.
Well, we have a special request here with the programming team at This Week in Health IT, would like to highlight solutions that deliver. Hard dollar savings to healthcare in under 12 months. This is in direct response to comments we’re hearing on the show, as well as comments I’m hearing in my consulting practice. Before you drop me an e-mail, I need solutions that have successful client stories. I receive about 10 e-mails a week from companies that want to highlight their product on the show and my first question is always, put me in touch with the reference client and amazingly, about 90% of those requests fall away, which I find really interesting.
We want to see what kind of response we get form you guys and then we will determine how we’re going to get this integrated into our programming and get it out there. Send in your responses, [email protected] Love to hear from you, love to hear what you guys are doing that is showing hard dollars savings, real money savings for healthcare.
This episode and every episode since we started the COVID-19 series has been sponsored by Sirius Healthcare. They reached out to me to see how we might partner during this time and that’s how we’ve been able to support producing daily shows. Just a special thanks to Sirius for supporting the show’s efforts during the crisis. Now, on to today’s show.
[0:01:35.5] BR: This morning, we’re joined by Dr. Eric Bricker from AHealthcareZ and author of Healthcare Money Campfire Stories. Good morning, Eric, and welcome to the show.
[0:01:45.2] EB: Good morning, Bill. Thank you so much for having me.
[0:01:47.1] BR: Well, I read your book this weekend in preparation for this interview. I’m going to put you in the category of physician economist, someone who has studied transactions and healthcare have done, and really from a financial and a psychological standpoint, I have my economics degree as well. My son asked me, “What degree should I get?” I told him, “Economics is a great foundation, because it’s really the study of finance, but it’s also the study of why people make the decisions they make.” Healthcare economics is something I think people really struggle with, which is I guess why you’ve been so successful with AHealthcareZ.
[0:02:28.5] EB: Yeah, absolutely.
[0:02:30.1] BR: Well, let me give people a little background to get us started. University of Illinois, College of Medicine grad, John Hopkins residency, practiced at Baylor Scott and White, a co-founder and chief medical officer for Compass Professional Health Services. For those people who don’t know what that is, it’s a healthcare navigation services company, grew to about 2,000 plus clients, some big names; T-Mobile, Southwest Airlines, Chili’s, Maggiano’s. Compass was acquired by a division of Aon in 2017, Alight Solutions. Now you are sort of – not sort of. You are independent. You’re out there. You’re a creator. You’re an author.
As I said, I came across your stuff, Rob DeMichiei recommended I watch some of your stuff. I started watching the AHealthcareZ videos. I love the fact that you addressed the questions that we’re all asking, trying to figure out and you just break it down. You just do whiteboard sessions, whether it’s – Is that your intention to just do it like a whiteboard session?
[0:03:35.1] EB: Yeah. I mean, as you can imagine, healthcare finance is incredibly boring. I mean, even for me and I’m into this stuff. I try to keep it short and sweet and you have to have some visuals. I keep it low-tech, because people get PowerPointed to death and the responses are very positive.
[0:03:55.7] BR: Yeah. The reason I say you answering the questions we were all having. You talk about hey, losing the elective surgeries. Why was that a big deal? You talk about the different carriers and where they make money and where they don’t make money and how much money is made from elective procedures and why this was such a big hit on the providers. You have the numbers to back it up, which is I think really helpful, especially this is This Week in Health IT, one of the things I’m always talking to health IT people about us they have to understand the business of healthcare in order to serve healthcare effectively.
All right, well we’re going to get into that. I read your book this weekend, a bunch of questions. In your book, you start – I’m just going to start with – I’m going to start with something completely out of context. You say, “If you want change, wait for the crisis.” Well, I believe we’re living through one right now. I guess, the question is what will the biggest change be that you can imagine as a result of this crisis that we’re going through?
[0:04:59.0] EB: Yeah. It’s a great question and it really caught me. I’m a big Stephen Covey fan from Seven Habits of Highly Effective People, etc. He actually passed away several years ago. That actually was from his book. He said pain causes change. To your point, there’s a lot of pain points specifically on the provider side. Docs, hospitals, etc. The way that pain is manifesting itself is a way that I certainly didn’t expect. It’s not so much from – The increase in patient volume load from coronavirus itself is obviously highly concentrated in places like New York, but for the rest of the country, it’s the dramatic drop in patient volume from the delay, or cancellation from elective procedures, whether it be spine surgery, or joint replacements, or ENT, or even GI procedures like endoscopies, things like office visits as well.
There’s numbers, whether it be from Medscape, or from other places, where some orthopedic clinics went down to 5% of their patient volume, plastic surgeons went down to zero. EENTs went down 15% of their patient volume. These are just unsustainable patient volume numbers for them to just remain open. Many of them have actually just shut down their practices, either temporarily or permanently.
The question becomes, what is going to happen to the underlying fee-first service reimbursement model in healthcare? In healthcare, it is paid for. We won’t we won’t get into the details of fee-for-service. We don’t have time for that.
In healthcare, you just get paid for doing stuff. It’s fee getting paid for service stuff. You don’t get paid for health, you don’t get paid for outcomes, you don’t get paid for anything, except doing stuff. Guess what that does? That cause people to do a lot of stuff. If you don’t do a lot of stuff, by definition, you’re not going to get paid. That entire model has created the situation where we at America probably have 30%, or Intermountain Healthcare actually estimates that it’s actually 50% of healthcare, totally unnecessary.
What will happen to just the amount of provide – the number of providers we have, the number of facilities we have, the number of machines, MRIs that we have, the number of pills that we dispense, when so much of that volume goes down. Are we just going to have a massive, just paring back of the healthcare infrastructure in America? I don’t know. That might happen.
[0:07:52.7] BR: Don’t you think the other thing could happen, which is coming out of this administrative and even physicians who want to make a living look at this and go, “Well, we’ve got a lot of catching up to do. Let’s order a lot of stuff and sprint back to the fee-for-service as quickly as we can.”
[0:08:08.8] EB: Yeah. That would work if they had complicit patients. I think the people are voting with their feet. A lot of the volume is not coming back and it’s not coming back quickly. There’s a fantastic newsletter called Just Healthcare that actually has patient survey data that shows that only about 30% to 35% of people actually have the confidence to be able to go to a doctor or a hospital right now for an elective procedure. If it comes back, it’s going to come back pretty slow. It’s not going to just whipsaw back into all of this.
[0:08:48.4] BR: Yeah, because people – people are still afraid. I mean, there’s still a – Atlantic Health System did a presentation recently and they asked if you had an emergency, would you go back to the hospital? Only 60% said yes. I don’t know what that number was prior to COVID, but I’m sure it was upwards of 90 some odd percent, because when we’re sick, when we have a need, where we had no problem going to the hospital, or going to see our doctor. At 60%, that represents a significant decrease in volumes.
In your book, you call healthcare a zero-sum game. If you make money from one area in healthcare, you’re taking away from another. Talk about that a little bit. Is that still the case?
[0:09:39.7] EB: Yes. One of my favorite sources for information about finance and economics is Ray Dalio, the founder Bridgewater Capital, the largest hedge fund in the world. He has an economic truism that one person spending is another person’s income. That’s how it works. That’s the transaction that occurs in economics.
You can talk about healthcare spending and that spending is typically in the form of employers, individuals and governments. Then the income is on the side of the docs and the hospitals and pharmaceutical companies and the providers of care. By definition, if healthcare income for doctors and hospitals, etc., is going to go up, then the amount that is spent by the government individuals, employers, etc., also has to go up. Then vice versa is true as well. That’s exactly what we’re seeing right now, where the by definition if the income of hospitals and doctors is going down because patient volume is going down, then by definition, that means that the employers, individuals, and the government are holding on to that money.
That’s what I mean by a zero-sum game. Now money just doesn’t vanish. It means that they’re holding on to that money. I did a video at AHealthcareZ, where I calculated that the insurance carriers for their fully insured business are holding on to about 9.5 billion dollars a month, because the employers are still paying out premium, they’re contractually obligated to pay out that premium. It’s not like they’re not paying it out anymore. Then the insurance carriers are just not paying it out in claims.
You’ll see that like for example, like UnitedHealthcare just bought a discharge plan A, post-acute care company called NaviHealth for 2.5 billion dollars about four days ago. Now, who else is making multibillion-dollar acquisitions in the middle of the coronavirus pandemic? No one. That just shows that they have the money and the confidence to do that, because they’re sitting on so much cash.
[0:11:42.0] BR: Well, so let’s go there. Rob DeMichiei who we mentioned earlier is the former CFO for UPMC. He’s been on the show twice since the COVID series started. In the last show he said, we will all be employed by pairs if we don’t do things differently, referring to really providers and how they approach business and whatnot. We have health systems, which have taken on risk and that carriers obviously do the same. Which of these entities do you think are better able to bring about the triple or quadruple aim if they take control of healthcare?
[0:12:18.0] EB: Yes, so here, I will say that I take a little bit of a different tack on it. I just think the vast majority of insurance carriers, their business model is actually not one of taking on risk. I don’t even really think that – They’re really healthcare financial intermediaries. They’re not really insurance companies I mean, let’s just take a look at their business. One, they have a large amount of self-funded business where they’re getting administrative services fees. They’re not taking on any risk at all, because it’s the employer that’s bearing the risk.
Okay, so there, they are just facilitating the transaction. You can almost think of them, like these are a MasterCard, except instead of Visa or MasterCard charging 4%, they’re charging upwards of 20% for their “transaction services.” Then for their fully insured folks, keep in mind that they are so consolidated and there’s so few choices for insurance carriers, that if they have a bad year in terms of the premiums on one of their groups that they’re able to turn around and increase the premiums on them fairly effectively.
At Compass, I worked with insurance workers and benefit consultants all day long. When they have one carrier that increases their rates by 30% and they go to try to “shop it” to other carriers, oftentimes they can’t even get a quote, because there’s just not a lot of options out there. I mean, there’s four. They don’t really bear a ton of risk on their fully insured side as well. Then on their Medicare Advantage side, they’re able to increase the amount that they are paid by the federal government by “risk adjusting” the degree of illness level of their Medicare Advantage population.
There has been some question around the math and the measurement of that to see if they’re actually increasing the “severity” of those people, so that they can increase the pay from the government. In other words, these insurance companies are doing everything they possibly can to actually not bear risk.
That being said, that’s my opinion, then how that relates to then achieving the aims of improved quality, lower cost, better access. I don’t think it’s an issue of organizations, whether it be insurance carriers, versus major health systems, versus physician groups.
I think it’s really at the individual and the team level, because all organizations are just like sports teams. You can have a team of doctors, hospitals, insurance carriers that they just don’t have players that are motivated, or incentivized, or have the skill to achieve those aims, but then you have other groups that are.
Let me give you one example. I would say ChenMed based out of Miami, which is a group of primary care physicians in 16 states. I mean, they have thousands of employees. I mean, it is a real going concern. I mean, they are a force for change in the triple aim direction. I think there’s pockets of it.
As of now, the vast majority of whether it be insurance carriers, or hospitals – I’ll tell you a quick story. I was speaking with one of the heads of strategy of a major hospital system and he said that he was trying to get the health system to actually move more into this by taking on risk and actually, whether it be starting a health plan, or doing an ACO, yada, yada, yada. This health system had outside consultants that I won’t name, but they charge very, very high amounts of very, very high fees. These consultants were like, “You guys just need to keep charging fee-for-service and riding that gravy train.”
They paid them probably millions of dollars for that advice. I mean, it is just – Anyway, to wrap-up the answer to your question, it exists in pockets and it could be on any of the sides, but by and large, it is not the – it is not the thrust of the industry as a whole.
[0:16:34.7] BR: Wow. That’s interesting, because – So if I hear you right on this, you could have markets that operate really well. You could have systems that operate really well. You could have a good partnership between payers and providers that operates really well for certain markets, but we don’t necessarily have it across as a national going concern to really move these things forward, even if one or the other takes a leap.
[0:17:09.7] EB: That’s right. That’s right. It’s highly local. It’s like the weather. In San Francisco, the weather varies by neighborhood. It’s almost that specific.
[0:17:20.1] BR: Yeah. All right, so which leads me to next question, which is can healthcare be treated like a business, that it operates on free-market principles and still improve the health of our communities? You wrote in your book and in one of your sentences said, the good and the bad sides of capitalism are starkly juxtaposed in healthcare.
[0:17:42.9] EB: Yeah. It’s a great question and the short answer is yes, in a regulated fashion, because you have either one end of the spectrum or the other. You have totally Laissez Faire capitalism and then you have, just it’s completely run by the government in a socialized fashion. As you can imagine, most things lie in the middle somewhere and healthcare lies in the middle somewhere as well and there’s a couple of aspects to healthcare that really require regulatory oversight.
One is healthcare is highly episodic. It’s like, meaning that you do it once and then a lot of times, you don’t really do it much anymore, especially for people that are in the employed age population. The largest source of funding for healthcare in America is employers, okay. It’s actually not the government. For people between the ages of let’s say, 18 and 65, their healthcare happens and then it stops and then they don’t typically need a lot of healthcare services after that.
In other words, it’s moving. What is almost everybody’s experience with movers in America been? It’s not good. Why is it not good? Because there’s not a repeat business, there is not the incentive for them to do everything – be competitive, do everything humanly possible to try to gain your business again, because you’re not going to move for another 10, 20 years.
What is the exact opposite of that? The grocery store, because you got to go to the grocery store every week, or multiple times a week. The grocery store – I mean, you walk into a grocery store, I mean, it’s a miracle. They literally have 40,000 different types of things. They’re mostly pretty cheap and grocery store margins are very small, they’re only like 3% or 4%, because they have to be so competitive to get the repeat business of people coming into their stores.
Healthcare is the exact opposite of a grocery store. In cases where you have the lack of repeat business, you subsequently then have to have some type of regulation to ensure the cost, quality, access, etc., etc., of that service is up to certain degrees of standards. You cannot rely on market forces to do it, because you just don’t get the repeat business around, okay. That’s dynamic number one that requires some degree of regulation.
Then dynamic number two is and this has been well documented by healthcare economists for decades, is the informational asymmetry. In other words, that the doctors just know so much more about what’s going on than the patients that the whole – one of the bases for the free market is caveat emptor. It’s buyer beware. In healthcare, it’s impossible for a buyer to beware totally because of the information, or asymmetry. Again, you have to have whether it be through stricter licensing processes, or orbs, or stricter regulations around protocols and procedures, etc., etc., that those things need to be in place, because the informational asymmetry does not allow the market to function effectively.
There’s more things than that, but those are just two examples of how some degree of regulation and I would argue, it needs to be more and it needs to be at the federal level, because so much right now is at the state level. That’s why you have so much inconsistency. Those are a couple of things that need to happen for it to function more effectively.
[0:21:06.0] BR: Well, so I’m doing a little off script here. So that CMS is pushing a lot in that – CMS, HHS, others, the 21st century CARES Act is pushing a lot of things around the availability of information, the availability of pricing information to create more of that perfect information that you need for economy to function. Do you feel that is going to have the impact that they desire on healthcare?
[0:21:37.0] EB: No. Here’s the problem is that typically when a person needs healthcare, they typically are suffering in some way, shape or form. They have pain, they’re having a hard time breathing, they have decreased mobility. Information is really only effective if it can be dealt with in a rational way. Guess what, when you’re suffering, like the part of your brain that is in charge of being rational, your frontal lobes, is not the part of the brain that’s in charge. It is the more central parts of your brains that are emotionally driven, so the vast majority of healthcare decisions are emotionally driven. They’re not even rationally driven.
Even if you had somebody with a high IQ and a PhD given all this information, it still wouldn’t work, because they would be in an emotionally driven state. They would not be able to effectively make a good judgment. It’s like, even if you had incredible amount of information about fires in your house, it’s really hard to make a rational decision when your house is on fire. That is somewhat what they’re trying to accomplish.
[0:22:42.5] BR: A lot of care doesn’t fall into that category. I mean, Compass was built on the fact of looking at it and saying, “Hey, you know what? Don’t go to that radiology center. Go to that radiology center. That’s a better decision.” Doesn’t a lot of care still fall into that category of all right, I’ve got to figure out what doctor to go to, I’ve got to figure out what imaging center to go to, I got to figure out what surgery center to go to. They do have different cost structures associated with them.
[0:23:12.2] EB: That’s absolutely true and that is true in regards to like you said, the majority of care. Now what Compass was able to accomplish and really other organizations that are doing the same thing is is because you had a person who was not in the thick of it. They were well-trained, they did it – At Compass, we did this every day, so we had expertise around. Then we had the data and the software and the systems, etc., etc. We were not literally experiencing the pain or the suffering that the person themselves. We were able to act as that rational person.
Actually, one of the best examples of that is in the Steve Jobs biography, when he was dying of cancer, he didn’t have Compass. He had his wife. Here you had a genius who needed to have another person to effectively navigate one of the best healthcare systems in the world at Stanford. Even she said it was a disaster. I mean, it is possible from a timing perspective. Your point is absolutely correct. From a timing perspective, it is possible. Again, it is it is something where it has to be done in some sort. Really to effectively do it, it hasn’t been done in some objective rational fashion by a party that is not fee-for-service, financially incentivize to do this.
There’s another way to accomplish this. Put all the physicians on salary like they do at Mayo. You don’t necessarily have to have this adverse influence of fee-for-service on medicine if you put the physicians on salaries. There’s other ways to do this.
[0:24:53.8] BR: It’s interesting, because I’ve sat through a bunch of pitches from Silicon Valley type organizations and you just blew a bunch of the presentations out of the water, because you’re saying look, because they’re based on, “Hey, we’re going to provide this information, this information.” People are going to start making educated and informed decisions and they’re going to be able to navigate their care.
You know this as well as I do. I mean, there’s a bunch of Silicon Valley companies. That’s the Holy Grail. We’re going to put this on their iPhone. It’s going to tell them all sorts of stuff about the quality of the doctor, their effectiveness in surgery, the cost and whatever. All of a sudden, we’re going to have it all over in our fingertips.
In some cases, this works, right? It works in the case of medications. You could look at it and say, that pharmacy is far less, go to that pharmacy. It seems to work in those cases. You’re saying, because we don’t make logical decisions at these times, it may not work in the delivery of care.
[0:25:56.1] EB: That’s right. Especially because it stratifies in terms of the 80/20 rule of healthcare, where 80% of the spend is on only 20% of the procedures. Even if you had these “non-emergency” “rational tests and procedures,” etc., etc., they tend to be low-dollar stuff. You care about the stuff that is really expensive. It typically involves a crisis, so the three largest areas of healthcare spend for an employer are cancer, cardiovascular and musculoskeletal. All three of those situations involve death, immobility, pain and not being able to breathe.
The most high-cost areas of medical spend are involved in places where you cannot think rationally. The reason that IT companies love that idea is because it scales and they can make a lot of money off of it. Just because it scales, doesn’t mean it works.
[0:26:47.4] BR: Well, let me tell you another one that I think works and actually, this will be the last question. I could talk to you for the next two hours, I think, but we’ll cut it short just for the podcast and hopefully, we’ll have you on another time.
I’m thinking of the Walmart program. Walmart for their employees, largest employer, I think still the largest employer in the country, has a program where essentially, if you get a cancer diagnosis locally that they will get a second opinion at Mayo and something with Geisinger now as well for second opinions. They did the research and they found that it was some high percentage. I don’t know the percentage, but I think it was above 50%, either the diagnosis was wrong, or the care plan that was prescribed was wrong. They were able to really drive down the cost overall for their – Is that a model that is – what model is going to be scalable here, I guess is the question.
[0:27:42.3] EB: Yeah. That’s a great point. A long time ago, I actually met with them and what’s interesting about that program, or in second opinions is I don’t think it’s a 100%, but the vast majority of time one of the requirements of being a “second opinion” center of excellence is your physicians who are on salary. They said that that was really the secret sauce for the program working, because there you were seeing a competent physician at Mayo or Cleveland Clinic, whatever, who was not financially incentivized to do, or not do the surgery. Aha, isn’t that interesting?
[0:28:20.0] BR: That is interesting. Wow. What would it take for all of us to go on salary?
[0:28:25.4] EB: Well, and I made two videos about that. I did point-counterpoint on AHealthcareZ around okay, what are the pros and cons of physicians on salary? What are the pros and cons of not putting physicians on salary? I think that it is we’ll see, all I could say is that my friends from medical school, some are on salary, some are not. I could just tell you that the ones that are on salary right now with the decreased job in patient volume, they’re much happier that they’re on salary now, because they’re keeping the same income.
[0:28:53.8] BR: Right, right. That makes sense. Eric, thank you very much for your time. I really appreciate it. Yeah, I look forward to having more conversations in the future. If people have a chance with AHealthcareZ, I’ve subscribed to it, get the e-mails on a daily basis. I think it’s for me, I wish I had had it seven years ago coming in as a CIO, just understanding the things that you’re talking about would have really helped me out as a CIO.
[0:29:20.6] EB: Well, thank you so much, Bill. Thank you to your listeners.
[0:29:23.5] BR: Appreciate it.
[0:29:24.0] BR: That’s all for this week. Special thanks to our sponsors, VMware, StarBridge Advisors, Galen Healthcare, Health Lyrics, Sirius Healthcare and Pro Talent Advisors for choosing to invest in developing the next generation of health leaders.
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