The Keckley Group
VP, Applied AI & Growth
Chris Hemphill: And we’re live. All right, we’re live. Hello LinkedIn, hello healthcare, hello YouTube. However, you’re watching this, welcome to the conversation. We are excited to bring in two people, two brand new people that you haven’t seen before. One works with me, Ann Stadjuhar who’s our VP of sales at SymphonyRM. Ann Stadjuhar: Hello. I feel like [inaudible 00:00:29] to introduce myself. I most recently joined SymphonyRM from Optum and Optum Advisory Services, Legacy Advisory board and a history of health grades have been in the consumer digital space for quite some time. And I’m excited to also have Paul Keckley here with us. Chris Hemphill: And We’re excited about Dr. Paul Keckley who has a background helping to facilitate conversations around the Affordable Care Act between the White House and private sector as well as some really interesting research in consumer healthcare behavior, partnerships and work with Deloitte and Vanderbilt in the past. I could go on and on bragging, but Paul don’t let me talk too much, want to give you a chance to say hi. Paul Keckley: Hey, I’m good to go. Let’s do it. Chris Hemphill: All right. So everybody, we are ready to rock and roll. And the conversation that we’re having today is actually based on something Paul put out in his weekly report, the Keckley report, which is something you can subscribe to if you want really topical updates on what’s going on from a policy perspective in healthcare and how that might impact some of the work that you’re doing, operations, IT or what have you within healthcare. But this article is called, throw out the old hospital playbook and it was based on the fact that these policy changes… Well, a combination of the policy changes that are happening as well as just different things happening like, we have the pandemic and we have people responding to how these various healthcare [inaudible 00:02:08] are going. And it’s just looking like it’s not going to fully work for hospitals to continue with the way that the business has been done in the past. So some aspects that he identified were around fiscal pressures coming in from governments, employers, physician frustration and increasing regulatory aggression. But also one of the major aspects was around consumer backlash to current policies. So Paul, I just wanted to hear from you and especially to help level set with the audience. Why won’t current operating models work for consumers? And within the healthcare space, who should be worried about this? Paul Keckley: I think conventionally, every incumbent in the industry is susceptible to a backlash. I think there is an occupy healthcare movement that’s breeding. It doesn’t represent the majority at this point, but it represents a sizeable vocal in growing minority. And it’s not one dimensional, there are some common features across various groups that you pick up. There’s this growing sensitivity to affordability which they tend to define as, how much am I paying in a premium? And then after that, how much am I paying in out-of-pockets and what’s not covered? And I go to the drug store and this is not covered and that’s covered, and how confusing can it be? Paul Keckley: And then growing issues of inequity, the bifurcation of haves and have-nots, which carries with it a residual affiliation and a kinship between those that are left out of the system, which is about 15% who basically have no access to the system and another 25% of the population who are their kin. They feel that, they believe healthcare is a fundamental right, it’s not a privilege, shouldn’t be defined by your checking account and your investment portfolio. It [inaudible 00:04:38] be defined because you’re a part of a community, not unlike the way folks think about public education. So the Bernie Sanders part of the public discussion about, quote, Medicare for all and that group basically are speaking that healthcare should not be treated differently than a public service and you’re accessing that system without a copay or a deductible. The access should be free and accessible, even though that would probably raise taxes. So I think that’s the reason we’re facing a backlash. And not surprisingly, when you do surveys and focus groups and things, and run price elasticity models and see who’s actually checking out a pocket and who’s going to these shopping [inaudible 00:05:47] and this and that. You find out that few people are paying attention to the stuff that’s out there to help them make decisions. Depending on which study, two to eight percent of the population that are actually consumer savvy about healthcare and most are basically blindly consuming the system and absorbing it. And I think that’s going to change. So I think it’s timely. Chris Hemphill: And… Oh, Ann go ahead. Ann Stadjuhar: Oh, no. Thanks Paul. I think that is very astute in terms of really looking at terms like occupy healthcare and this bifurcation of the haves and the have-nots, and just general awareness and consumerism for being able to navigate what is an incredibly difficult system, not knowing really how to even take advantage if you are fortunate enough to have a great health plan. How to take advantage of even that or what it means when you sign up and you have a high deductible or anything else. And those are certainly the halves and let alone being one of the have-nots. I think there’s a lot of different major consumer initiatives that are happening right now. And one of them has been… CMS is price-cost transparency legislation that was passed right at the end of the Trump administration. I think it was something that was ultimately a little bit overlooked sometimes because of the politics that may have been going on, but is incredibly meaningful for consumers right now. I’d love to get your opinion on the price-cost transparency piece and how it might now empower consumers to make some different healthcare decisions and if you think that’ll impact the providers at all, when they’re in fact getting this message from the plan. Paul Keckley: Well, remember there are three different sets of price transparency executive orders. You’re referencing the one that was passed in November, 2019 that all hospitals had to make prices and underlying costs and negotiations with plans available for 300 shoppable services. In 2023, the health plans have to do a similar exercise for 500 shoppable services. And the Trump administration enacted some requirements for drug companies to make, for instance, prices for any drug that you take for more than 30 days accessible if you advertise it on TV. So theme of transparency in pricing in healthcare is a constant. The question of how much impact it has is very, I’d say, suspect because we don’t have experience because we still operate a B2B model. Everything about healthcare is mark it up and pass it through. Everything about healthcare treats individuals as either enrollees or patients or maybe clinical trial subjects, not as consumers that have a lot of skin in the game that compare rational choices for treatment or that bear responsibility for outcomes. So we’re [inaudible 00:09:23] so far from a consumer oriented health system that the question of how’s it going to impact, how would price transparency impact? We’ve had a couple of States that tried it and they found out nobody paid attention, zero, negligible. Why? What’s going to prompt you to go? And if you get a good price for a screening mammogram and you can compare that across six locations in your market, but your premium and your total financial responsibility for healthcare is driven by big ticket items, not by diagnostic tests or primary care visits. Then what are we solving? What are we fixing? So that’s where there’s a disconnect right now between, quote, direct to consumer price transparency and all this stuff, and bending a cost curve by engaging consumers as persons and that’s key. They’re not enrollees, they’re not patients, they’re not clinical trial subjects, they’re persons. And they’re in the population that we manage, not because they visited our doctor, showed up in the ED or enrolled in the health plan. It’s because they live in the community. So it’s a whole different paradigm if you think about consumerism in healthcare and we’re still living under presumptions of an archaic, pretty well antiquated system where we want to kind of talk the talk about consumers and choice and rational decision making and all that. But we honestly make all of our money and like it if they’re treated as enrollees, patients or clinical trial subjects because we control that. We just don’t want to take accountability for outcomes. We’ll take everything up to that point, but not outcome because we say, “Oh, wait a minute! Outcomes are something that’s dependent on their behavior,” but we do very little to actually manage their behavior. So I think it’s a great opportunity in healthcare, I think it’s our biggest challenge. I think it’s the only way that we’ll actually bend a cost curve. And I don’t think that it’s simply a matter of going to the 85% of the population for whom they can respond potentially in a rational way. I think it applies to all of them. I think it applies to even those in the dual-eligible population. About all the things we know they could be doing that we don’t manage, we don’t manage it well. So yeah, it’s going to be a while before we know. By the way other industries have gone through this, we’re late to this party. Chris Hemphill: So that leads me… And first of all, I’m excited to have this conversation and to hear these perspectives because it’s a big question and it’s tough, might not have a solution within 30 minutes, but I’m really excited to hear a little bit deeper on that perspective. At the same time, I appreciate everybody who is commenting right now and just wanted to make sure that we all know that the invitation is open for your questions and comments. But as we dig a little bit deeper, Paul, into where this change might come from. Like there’s a blueprint that’s been established in other industries and I don’t know if the change that we would see on the horizon, would it come from increasing regulatory aggression? Is it something that is going to be a response to this consumer backlash? Do you see kind of a blueprint or some sort of path, like knowing that healthcare is late to the party and other industries have gone through this. What’s that path within healthcare? Paul Keckley: Yeah. And I think some industries that are even further behind us, are higher education and public education, generally in some others. But I think the analog most meaningful is to go to the financial services industry, which is about 20 years ahead of us. Who would have thought that the fastest growing banks don’t operate branches and that you segment markets and certain types of banks focus on certain segments of the consumer population and offer a different range of services than the bank across the street or that, for the most part, the checkbook is a relic of the past. So the common thread… I studied retail banking and branch locations as I was beginning my research around the government’s approach to dealing with consumer-driven healthcare. And I found it fascinating that, ironically, when we displaced tellers and branches with ATM’s and then we lived out the life cycle of ATM’s to electronic banking. The cycling of those three was about 15 years in each cycle before you saw a prominent lead brand take ownership of that next trend. And there are, in healthcare, lots of fast followers, but the innovators tend to be few and far between, and we rail against those that are on the bleeding edge of anything. So it’d be interesting to your audience, how many organizations are actually known for having implemented a consumer-driven model of health, one of healthcare. Consumer-driven model of health that’s person-centered, that presumes people are rational and can make decisions, that it’s about tools not rules. That’s a big difference, tools not rules. The changes that have occurred in these other markets, especially in financial services, have been technology enabled. They’ve been driven by lower cost and higher value. It’s actually cheaper for the folks that operate the banks to do this electronically than it is to put a ATM on the corner or put a couple of branches up. So there’s a value proposition for the operator and there’s a perceived value proposition for the consumer. Consumer doesn’t have to now take a check from the employer somewhere, it’s going on its own. So I just find that intersection between value to the sponsor who could be an insurance company, could be a hospital, could be a medical group, and value to the patient. The part of that equation that healthcare misses on, it is we’re defining value to the sponsor. We’re saying, “Boy, this is awesome. We’re going to get paid more to do the right thing.” Well, if that was the case, why aren’t we sharing those incentives with the individual consumer? The risk-based models that CMS put out, let you measure patient experience to score well, right? But they don’t say, you should share half of these savings directly with the individual because they have to associate value. It’s not just value to you, but it’s value to them. When we marry those two in healthcare, it will be a game changer. And we’re hearing about these interesting models. Some are way ahead, but they don’t tend to be from healthcare. They tend to come in and say, “I’m not going to ask permission, I’ll get forgiveness, but I’m going to drive this thing toward the dual value proposition for the sponsor and the value proposition for the individual and balance the two.” So that’s big, that’s a huge part of this whole discussion. Ann Stadjuhar: There’s no doubt for nudges and teachable moments for the consumer that is going to get them to move. I think earlier, before we started the call, you talked about, really, fear and consequences are being kind of the two things that drive the consumer. Consequences of course can be price too. There’s no doubt in that being a weight and a consideration, but when you talk about some of these new models, I’ve seen a few of them. I think wealth is one where it’s about rewarding, really, the patient for the behavior and sharing, and whether it’s a dollar for taking your pills every day or whatever it may be, people potentially being a little bit coin operated or incentive operated for this, but what are some of the best models that you’ve really seen to nudge and push patients along? Paul Keckley: One is recognizing how they define value in a very discreet way. So if on a late stage prostate for a fellow, the potential for sexual dysfunction is a great concern to some men and not to others. And the ability to have an intimate relationship with a spouse or a significant other varies as part of that equation. So the simple answer is, everything discrete population of individuals who have a continuum of healthcare needs defines fear and consequence of declining poor or suboptimal health in a different way and it’s not a one-size-fits-all. That’s the reason private equity is cherry-picking the conventional healthcare platform by saying, “The way you’ve approached early stage dementia for seniors sucks.” You don’t understand them and you don’t understand what happens with their family. It’s not just about the individual. So I think we got a long way to go. I think we’ll be segmenting the healthcare market very differently than the way we conventionally have. I think the continuum of health status from in good health or excellent health up to poor health or declining health needs a lot more gradation. It’s not just simply binary, healthy or not. And we’re going to find that behavioral factors in defining that health status will be measured much more discreetly. Let me say that in a different way, everything about the US system has been geared toward kind of an allopathic view of Western medicine and that’s largely dominated by physical view of a body and how it ages or how it responds to various environmental stimuli, but in Asia [inaudible 00:22:11] and other systems of the world, mind-body is much more important, environment is much more important. Suddenly in healthcare, we discovered this real sexy term, [inaudible 00:22:23] social determinants of health. That’s not new. That’s just something we started talking about. So healthiness and health and wellbeing is the aspirational goal for consumer-directed health. And that will be multi-dimensional. And it will not be simply defined by what’s on the claims record, the scripts that we take or whether we’ve seen a primary care physician in the past six or 12 months, it’ll be multifactorial. We know that a degree of social isolation or loneliness is strongly correlated to better health and lower cost, go figure! That doesn’t require a visit to a doctor’s office. So I really believe and [inaudible 00:23:18] this is something I’m passionate about, we got to start building the system of the future instead of just feeding kind of incremental change and calling that innovation. We’re not innovating in consumer-driven healthcare, we’re just putting a new coat of paint on it, putting a little chrome on it. Let’s go all the way. And if the healthcare system of the future ends up as one system for individuals who are purchasing and responsible for the cost and outcome of their care, which could be as many as 40% of the population and another 60% of the population who say, “I want to use the public schools, I want to stay in the system that has been created for me.” It’s like going through McDonald’s, I don’t think I’m going to necessarily get the best, most nutritious meal, but I know what to expect and I don’t have to think about it. Then that’s the way other systems of the world have evolved into kind of a bifurcation between kind of a consumer-directed kind of semi-private system and a public system. And I think that’s where we’re going. Chris Hemphill: So Paul, you mentioned a little bit earlier on how private equity is cherry-picking based on models, looking at [inaudible 00:24:59] performance and saying that there’s not a real understanding of the consumer in this particular segment. And when I think about it, all the different services that a health system may offer and all the different consumers they may serve and then when we tie in the picture of the whole health environment, whether or not housing, food and shelter are available and like the many places where there’s been demonstrated impact on health outcomes by improving those, it seems like a really big undertaking for individual health system to take or healthcare leader to take. So one thing that was really striking about your most recent Keckley report was around hospitals making investments into certain innovations or technologies. But I’m curious about, hey, how much of the change… I mean, we have a great collection of healthcare leaders here today curious about where they can exact change, but I’m curious, how much of the change might come from these kinds of group innovation projects and what are some other factors that might move us towards this direction of whole health? Paul Keckley: Well, remember that for the acute sector, most of these investments are to offset what they think are forecastable declines in their operating margins. So this is for below the line operating income, money that comes not from delivering patient care, but from investing your bank account, your cash in other investments that can pay for services that you’re not going to get reimbursed for. So it’s a continuum, but if you think private equity, private equity is run by shareholders. They’re in it for a return. They typically want to be out of their investments in five to seven years, they typically need about a 20% compound annual growth rate on the money they deploy. They typically add debt to the deals they acquire. They typically get a management fee for a period [inaudible 00:27:15] run this thing and then they flip it. So they’ve got a short period of time to create value for their shareholders. And one of those domains in which they’re going to create value is to crack the nut on this notion of consumer-driven healthcare. If as everyone concedes, consumer behavior and social determinants are correlated to North of, depending on your study, 70 to 85 percent of cost. Then they’re probably going to figure out how to draw value there faster than incumbents who have to make sure that the specialist on the medical staff are happy or they’ve got a board that really doesn’t want to see too much change or they’ve been successful in the old model and they just want to buy time, keep the model going as long as you can until fee for service is dead on the vine. It’s the outsiders that seem to be way ahead of the insiders because they don’t have to risk that, right. And I think that’s kind of the challenge the system faces. Chris Hemphill: And Ann, did you have any thoughts on that as well? Ann Stadjuhar: No. I mean, certainly we’ve seen the private equity and the roll-up in the acquisition, I think, of a lot of medical specialty practices and the ability to obtain and drive some of the fee for service initiatives with private equity. On the VC side though, no doubt there is a lot of innovation and investment that is coming from outside of industry too. And I know that we’re getting a lot of the large healthcare organizations that are participating in VC as a secondary stream of income, a way to invest and a way to innovate. I’m kind of curious Paul, your thoughts on, are you better off actually having that strategic input from the old guard and the old realm or the VC players that have played completely outside of industry are looking at some different models and uniqueness. I think we’ve got another LinkedIn live coming up with Heather Fernandez, right? She came from Trulia, she was the founder at Trulia and she started Solv healthcare and went straight for fundamentally urgent care and access and completely did a bang up job and accelerated the growth of her company tremendously by being an outsider and not being… Bill Gurley was behind her in the VC investment that went in there, being truly innovative and that model has been proficient. But Paul, what are your thoughts on really the old guard and this investment that’s happening? And is it one of the best ways for them to get a taste of the progress and move towards consumerism as well? Paul Keckley: Okay. I’ve started four companies with venture money and you have the, it’s good news-bad news. The minute the CEO raises series A, you’re out raising series B and series C, and looking for an exit or a strategic partner. So it’s tough, but I think venture money, the deal sizes get bigger and the number of deals get fewer going forward because the risk in the system, the macro-economics of the system are not going to let us throw money at everything. I think the funds are going to become much more selective and at the same time, we have this really interesting dynamic we haven’t talked about, which are the SPACs. There are 53 SPACs out there right now that are fishing for healthcare deals and they have to consummate their deals within two years or their SPAC is moot. So what the entrepreneurs are doing that are trying to position themselves for a SPAC is, they’re cutting their cost so they can jack up their margin so that the multiple of that is the money they take from the SPAC. That will create some distortion in the market. We’ll have some inflated values of some of the acquired targets and we’ll have some very embarrassing failures which healthcare doesn’t like experiencing. We don’t like the stories like Theranos. We shutter when we see executive [inaudible 00:32:14] that’s completely out of sync with performance in our industry. So I think that’s reality for venture money and early stage money, and now the SPACs. Healthcare is labor-intense, capital-intense, highly regulated at a local state and federal level. That’s a bad combination. But the fact that it’s capital-intense means the entry barriers are always going to be, can you get money? So I think they play a role, I think any organization… Most recently you saw where 14 health systems, including [inaudible 00:32:51] and 13 not-for-profits are monetizing their data in the startup called [Truveta 00:32:56]. I think that’s the future, access to capital through collaboration and partnerships and not necessarily demonizing the people that have that capital. Chris Hemphill: Looking at that partnership early on, just from a data science and AI perspective, I thought it was extremely interesting given that one of their approaches was to make longitudinal data available so that people could start looking for models, correlations and things that raise these pictures. Paul Keckley: Yeah. That’s always the ambition. The ambition and what ends up as the business model are often two different things. So we have to watch. Chris Hemphill: Is this the first time that you’ve seen a partnership like Truveta? I’m actually just really curious. Paul Keckley: No. I mean, organizations have talked about pooling and monetizing their data for 15 years. This is not new. I think the fact that we’ve had success in companies like Health Catalyst that went public last year, the prominence of Optum and the old [Ingenix 00:34:10] assets that it’s rolled up, this constant drumbeat about access to data, interoperability, the future is data-driven, information-driven healthcare. I think they felt that, why be left at the station if this train’s already left? So I respect the fact they’re going to pursue that. Ironically, they chose a couple of folks at Microsoft to run it for them. And that kind of signals they’re going to start with the notion that this stuff’s going to sit in the cloud, that Microsoft’s cloud services is going to be a key collaborator with them. So I think it’s just another kind of reality in our system that large-cap technology companies are going to play a prominent role in defining our future. It’s not going to just be the doctors, the hospitals, and the plan is get together, negotiate deals and say, “Here it is.” I think there going to be outside forces. And I think those forces bring big capital, not surprisingly the capitalization of the Microsofts, the Amazons, the apples, dwarfs people in healthcare. Closest we have, candidly, is United with about, what? 270 billion of market cap, but they’re three times that size. So scale changes and the degree of sophistication around consumers changes in tandem and I think that’s not 10 and 15 years out. I think we have to deliver that kind of healthcare system in the five to seven year timeframe period. And it’s irrelevant about the 22 and 24 election cycle, it’s because the market demands it. It’s not going to be because we have an election campaign and somebody says, “Medicare for all is government run socialized medicine,” or somebody says, “The system is uniquely wasteful and a mess and need to start over.” It’s the market demands it. Chris Hemphill: So I appreciate everybody who has stayed with us over time. I know that we promised 30 minutes. We provided some bonus minutes in there, but Paul, with your passion around this subject and the vision that goes beyond what’s going to come from policy on the election cycle, what would be… Just a final thought? Like I know that there’s a reason that you came and you’ve seen the audience talking and conversing. What would be a final thought that you’d like to leave with the audience that we have? Paul Keckley: Two things, in your organization define and distinguish the difference between patients and enrollees or trial subjects and persons. We’ve got to make the transition from patient to person and that’s not an incremental, that’s not an assumption that we just have to nudge them a little bit, but we’ll do their thinking for them. So that’s first, second is this parallel notion of value for the sponsor, for the risk taker and value for that consumer. All these industries that have made transformational changes didn’t define value just in terms of an alternative payment program for the sponsor, for the doctor, for the hospital. They said there was a value for the patient and it’s not ambiguous, it’s not something we say, “Well, they’re going to love it because somehow in the great [inaudible 00:38:11] their premiums would have been a lot higher if we hadn’t done this,” that’s bogus! It’s true real value delivered now. Chris Hemphill: Paul I love that focus on how you even frame the conversation that you’re having, patient versus enrollee, et cetera. One thing I’d like to throw out to any of the data scientists or people who are involved in data as well, is that patients aren’t data either. What we see coming in a EMR system and what we see coming in the various claims systems that we have, are incidents where people were trying to better their life situation. So encounters and data and everything like that… Also implore that people think of the data sets that they receive as people and events as well. Ann, I wanted to hear your final thoughts too. We’ve discussed a lot, but what would be something that you’d like for people to be able to leave this with? Ann Stadjuhar: Well, I think you know undoubtedly there is a history of what I kind of call the US health [inaudible 00:39:20] hostage crisis. People are viewed as members and have a planner… A participant in the reality of not really always having a choice and not having a choice of consumerism and that it’s a bit of a hostage crisis and you’re in the plan that you kind of get dealt in on the basis of the employer or even with CMS and the liberation of some consumer information and intel, and really becoming, I think, more educated on the options that are out there are going to hopefully drive some of the change, but it’s going to take a lot of time. I mean Paul, when you talk about like ATM machines and what we need in healthcare is to be able to go and very much so look and say, “What’s in my wallet?” Or “What’s left?” Or “Where am I at in the process?” And what I have to spend versus just being blind to it and really having the trust that all of us may have, for instance in our mechanic, to say that, “You know what we need? We need something fixed and this is what it’s going to cost,” but really not knowing enough about our vehicles or the engines in our bodies to really make some of those decisions. So I think we are all a little bit of hostages to a certain extent until we can get more educated and more data can be liberated for us to make some better decisions. Chris Hemphill: Liberate the data. Thank you Ann. So unfortunately, we’re coming to a conclusion here. Of course, we’d love to have this conversation go on longer. But I just wanted to thank everybody who’s been contributing. I saw Janae Sharp who’s been a guest here in the past, Alan Shoebridge, hey there. Happy to hear from everybody who comes back and continue supporting this conversation. John Marzano, Chris Saxon with some great information on the difference between BC and PE. With that, I just wanted to let you know about a few future conversations that we’ll be having. We’ll be speaking with the market research firm MDRG next week. And one thing that’s really exciting is that at the end of the month, if you look on our page, there’s a conversation called Breaking the Ceiling. And that’s going to be one that Ann was referring to a little bit earlier where we’ll have the CEO of Solvhealth and the access innovation lead from [Pfizer 00:41:53] discuss, not only some of the consumer-driven efforts that they’ve been focused on and what they’ve been focused on enabling, but the broader perspective of concluding women’s history month as women, how they were able to break ceilings and break barriers to be able to get to the positions to exact that type of change. But with that, hope you have a great weekend and hope that amidst all the chaos of the pandemic and all these different things going on that are so complex that we have been a good Island to sit down and be able to sit back, think and focus on some important issues. Ann Stadjuhar: Thank you Paul for joining us today, especially. Paul Keckley: You’re welcome. Thank you much.
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