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 Thanks for joining us on this week in Health IT Influence. My name is Bill Russell, former Healthcare CIO for 16 hospital system and creator of this week in Health. IT a channel dedicated to keeping health IT staff current and engaged. Today I am excited to have Rob de mache come back on the show. We are going to do a really fun conversation.

Rob was the CFO for uh, UPMC, and he has many other board roles and those kind of things. Now that he has retired, we have a great conversation. We both attended the virtual JP Morgan Healthcare Conference and we are gonna discuss what we heard and what the implications of that are moving forward.

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We, we both just attended the JP Morgan conference. I, I don't have the list of, of companies, but I, I sat through the entire nonprofit track and so, you know, we got to hear from, you know, from Ascension, from Providence. We got to hear from Ohio Health. We got to hear really at Spectrum Health from, from a lot of different parts of the country.

I would say medium sized IDNs to large IDNs. In the other track. I think you attended some of those. We had insurance carriers, we had startup companies, we have, uh, pharma and, and others. So I, I stayed pretty true to the nonprofit track and I'm going back now and, and watching some of those, some of the other videos.

I watched the CVS video this morning. I think we're gonna talk a little bit about CVS. Pretty interesting stuff. No, I, I think, um, . Always look forward to the JP Morgan conference. It's, it's become the defacto, um, standard and, and sets the tone for the, for the upcoming year, I think. And you're right, I I, I like looking and, and viewing the, the nonprofit track and it's interesting.

It, it's, it's a bit of, uh, a paradox because then you see some of the insurers and the digital disruptors saying kind of the opposite or, or countervailing strategies that they have, so. No, no, it it, it was really interesting. And maybe first one observation bill, was that, you know, what the theme non-Financial, that I heard from all of them talking about covid ongoing and the heroic efforts, not only the caregivers, but if you think about it, the executives, the administrators, the IT people, just how long can they go on this whole idea of fatigue?

And so how do you implement strategy? And massive change when you're also, you have a, a workforce that has been, uh, and continues to be fatigued because of the demands of covid. So I thought that was interesting to see and, and everybody, you know, took time to pay tribute to those workers. There was a lot of talk about social determinants of health and, and how that actually needs to be addressed.

And if you think about it as nonprofit health systems, these are things that, you know, . Mission-based organizations. These were things that always were supposed to be important. And I think not only are they important from a mission standpoint, there's a realization that they're important from a financial standpoint and they're drivers of healthcare costs.

And then also the other theme was kind of racial equity health disparities, and really a pledge from many of the presenters that this was going to be an area of focus and investment, and this was something that was important to the. Nonprofit community. So those were some themes that were non-financial.

The financial themes though, were, were very interesting. Bill, we, we should talk, we could talk for a long time about those. Yeah. The, uh, I, I'm, I'm writing some stuff down. You know, usually I have a very defined script, but because JP m just happened and I know you handle this kind conversation, I didn't send over questions ahead script.

Uh, it's interesting. Yes, they, they absolutely taught almost every presentation started with our Covid journey and our heroes on the front lines. And, and that's appropriate. It's interesting to, to, uh, take that with just some of the information we're seeing come out of health systems right now that their, their employee satisfaction, uh, surveys have shown like a 10%.

Bump because of the work from home and, and the flexibility that they're, they're getting now, this is probably not the frontline workers. I mean, they are, they're working extremely hard, but, but your, your back office and whatnot, the, the work from home has seen a, has given people a, you know, just a different way to, to work and they seem to.

How much of that gets incorporated? I didn't hear a lot in the presentation of, you know, plans to bring employees back after, after the covid, uh, uh, pandemic subsides. Did you hear any of that? I, I didn't hear much at all. And, and I think in a way it's, it's an issue that's already been decided, bill, I think not only in in healthcare, but in in industry.

There's an acknowledgement that it's not going to be a hundred percent remote in the future, but it certainly will never be a hundred percent in office. And so. The, the idea of what, what is an office and how do people work has been changed forever. So I, I kind of viewed that as just something that's been accepted by everybody.

I. I, I'll jump into the financials if you want. 'cause I thought there were some very interesting things there. And I always go back to our, our initial discussion last year when Covid was breaking and, and some of the predictions that we made. And, uh, you know, one that's that's held true is around the balance sheets and the kind of overall financial health of these large systems.

And I think the takeaway was all of them from a, a balance sheet standpoint, from a liquidity standpoint. They're all in and still in very good shape. You know, they, they've taken steps around moderating CapEx, so all of them really many put a freeze on CapEx or moderated new projects or building, and so they, they throttled back on CapEx.

There was, there were borrowings, so really kind of shoring up the balance sheet from a line of credit standpoint, the Medicare advanced payments. And then, uh, one thing we got wrong last year. Was, I had forecast that equity portfolios would take years to return. And, uh, we've seen that, that that's already happened.

So I'm, I'm still not sure I understand why, but like all of us, I enjoy the fact that that, you know, the equity markets came back. So all those things together led to real stability in the balance sheets of these systems where it got interesting. And I know you wanna talk a little bit about risk and, and value-based care.

but lemme talk about the income statements for a while because the income statements were, were, as you would would agree, bill, uh, absolutely brutal. And, uh, all of them were really improved by the Caress Act funding. And so those results were all embedded in the results that were presented. But even with those Caress Act funds being recognized.

I almost, uh, all the systems had operating margin losses, or I know all of them had significant degradation from the prior year. So, you know, and, and that's really when, when I read or see any financial report from a health system, I immediately go to the Caress Act funding. I pull that out because what you're trying to really understand is what I call the annuity earnings of the organization.

So Caress Act funding is one time, or it may be two times if there's another round of funding approved, but this certainly won't be an ongoing . A method or means of support for health systems years into the future. So you've gotta pull that Caress Act funding out to see where you really stand from a true volume less, uh, volume slash revenue, less expense standpoint.

So all of them were, I think, showing very difficult results. Some were forecasting a return in volumes in the second half of the year. And some even return to profitability in 21. I don't see that and I think that's going to be a really a tough put. But others were forecasting no return to profitability.

But what's it, I don't know if you are open to really talking about individual company returns. I, I, the, the one that really every year sort of shocks me is, is Intermountain. Because they actually did talk about their financials and they took out the Caress Act money and they were still able to weather the storm without e Even if they hadn't gotten the Cares Act money, they would've been able to weather it just fine.

Is that just indicative of their health going into it and their, the, the, the makeup of their, of their, their business having, having that diversity already built in. Well, I think it's, you know, for one, Intermountain is a, is a powerhouse, is a titan. They've got significant market share and, and, and reputation.

Well, well earned, I should say, but interesting. You know, let's not forget they also have an insurance division and, and I, I'm always looking for one-time items. Not even one time, but . There are things that are specific to insurers and Intermountain. I think what they had disclosed Bill was they recognized the risk corridor payment of about $290 million.

So although you're right, they did exclude the CARES Act funding. They included as you should, as an insurer, the risk corridor funding, and that's, that's from taking care of. Those that have a number of conditions basically. So, so your risk population has heavy needs, and so there's a way for you to be reimbursed for that higher risk pool that you're taking on.

So, so that improved their financial results. But, but you know, in general, Intermountain's got a very strong payer mix and, and market share. And so they're a very strong system. So even they were impacted though by the, by the Covid volumes. Well, well, yeah. Everybody was impacted and I talked about this.

Who get, uh. Into all the areas of care and, and one of the things that's I think, pretty consistent across the board is we have not gotten people back into the, into the emergency departments, and that was a significant feeder into the, the rest of the system. Do you, do you, do you think that's going to continue into, uh, 21?

We're still gonna struggle to get people back in or are.

There's, there's a. Issue. And then there's a longer term issue. And so I think the whole idea, and, and, and I know we wanna talk more about the, these longer term changes to healthcare around volume. So I think as, as covid, as the, as this starts to take on a longer period than we, uh, had hoped for. And, and the vaccinations continue and you know, now we're talking about summer or fall for return to normal.

So this, this covid period's going to be extended maybe a little bit longer than when we, than we had hoped for. And so that's going to continue to impact volumes and elective procedures and people's idea about utilizing the emergency room. And, and some of these things may not be short term, but they may, may become, you know, a permanent fixture in the way people think and utilize healthcare.

So, so I think the volume issues will continue this year because of covid. And nobody really got back to a hundred percent in general. Bill. There was, there was sort of a, a spike in, in the summer where people were working down backlog that had been created from, from the, the spring time. And I think once that backlog was worked down, then the fall, it kind of, you know, plateaued a bit.

And then covid round two started back again with the, the colder weather. In the north, so, so volumes didn't return and, and, and, and have not yet returned and, and may never return longer term because of some of these issues. So, and we'll talk, let's talk more about the longer term. You know, a couple other, you, you talked about highlighting a few of the presenters and, and I'll, I'll never wanna present or criticize, uh, anyone, but some of the things that I really liked, I'll talk about.

And the only criticism, criticism would be that I think certainly people weren't necessarily proud of all their results. And so some were, some of the presentations were very transparent and others actually had no numbers or no income statements that were presented. So, you know, just an observation there.

And, and I think there's an acknowledgement as to why and, and everyone knows why the results weren't, income statement results weren't great this year. But you know, a couple that stood out to me, Prisma, which . People may or may not have heard of. This is a, a health system in South Carolina and it's the combination of the old, uh, Palmetto and GHS health systems, and they actually had improved financial results.

Bill, I don't know if you, if you caught that. Uh, there was a reason for that. They actually, with a new CEO and management team started to integrate those two entities, I think very aggressively. And what I really liked, they talked about how they were restructuring their business, not only. Because of the integration, but also because of Covid.

So there was talk about restructuring the business. They made some moves around personnel and staffing until the volumes returned and they really started to restructure their physical footprint. So I thought that was kind of interesting and, and a nice highlight. The other one was, was Jefferson. And, uh, the thing I liked about Jefferson in Philadelphia was the transparency.

So I thought that was, you know, unique or, or stood out. But actually before you go to the next one, it's interesting that you brought those two up 'cause I was gonna bring those two up, which is, uh, fast. And the question I have on this is, isn't it timing though? I mean, because Jefferson sort of got caught.

They got caught, they were expanding rapidly. I mean, they had acquired. Every health system that, that made an overture towards them. They had acquired in the last, you know, two to three years, and actually they had to pull back from a, from a, i, I forget the name of it, but a cancer center that they were going to acquire

Yeah. And so they were on a, a very aggressive track. They were using a lot of capital when.

Their integration, really their optimization of, of the two organizations, probably almost at the exact right time. In order for this, I mean, because when Covid hit everyone did exactly what Prisma already had in the, in the pipeline. Was, was there a significant timing aspect to this? I, I mean, it, it, it all depends and, and I don't know the, the, you have to think about the kind of the quality and the strategic fit of the acquisitions that were.

completed. And so a lot of Jefferson's acquisitions I think were higher quality organizations. So they weren't fixer uppers, if you will, where they were taking on something that was already unprofitable. The, these were more ones that made sense from a geography and service line standpoint. So I think there was some of that from a timing standpoint and, and you can look at somebody like a Tower Healthcare and you know, tower has been struggling and that was a roll up of

Several health systems that maybe weren't as financially strong. And so, you're right, this volume impact becomes exponential then when you are in a mode of trying to repair or fix something that you've brought into your system, and then the, the bottoms fall out on the volume. So I think there were some of that with Jefferson, but you know, it's just, it's really to all of them, bill.

And it isn't, you know, this is an issue. There are, there are income statement profitability issues for all these systems and. And just to kind of cap this off without the return, full return of volumes, um, they need other strategies to return to profitability without Caress Act funding if they don't have risk-based upside, because that's the other thing that, the other theme on this was many of the systems were truly use this as a hedge, if you will.

So they had risk contracts, they had risk positions, whether it could be anything from an Intermountain or UPMC who wasn't at the. JP Morgan conference, but, but also has a large insurance enterprise. You know, these insurance and just like the insurers have had very successful financial results because of the utilization going down significantly.

And so that, uh, goes directly to improving their medical expense ratios and then falls to the bottom line. So, so the, these income statement impacts from the provider side. In the organizations that had value-based contracts or had taken on risk, these acted as natural hedges and, and improve the, the operating margin results.

So, so without those, their, their pure provider results would've sort of shown through and, and, uh, and their, their overall results would've been much worse. Do you think the boards right now are are, I mean, so they looked at this and they said, all right, look, we need diversification. We've got to accelerate our value-based care.

We've, we've gotta accept risk, get into this more covered lives, insurance plays for providers. Is is, is that the primary conversation that, that you think is going on in the boardroom? Well, you know, certainly those that have been on that path before are looking very, very smart right now. And, and, you know, we often talk about where's the tipping point between value based and fee for service.

And, and there is no good tipping point. You know, they're, they're truly, um, countervailing strategies and, and as, as utilization goes up, that's great for fee for service. And as utilization goes down, that's bad for fee for service. And, and, uh, and, and the, the reverse for. For payers, but you know, yes. I think not only from a board strategy standpoint, but also from ACMS standpoint, the, the Obama administration had been

One that brought bundles and, and risk and value-based care. And, and we expect to see some of that returning with the Biden administration. And so, and we all know when CMS implements initiatives, it tends to, you know, talk, you talk about what changes healthcare and certainly CMS and how systems get paid impacts healthcare.

So I think it's going to be a combination of the board seeing what has happened from the impact of lower volumes, but also the activities of CMS. See a lot of people, uh, well, not a lot, but I saw a bunch of 'em broke out. The number that, that they get with regard to Medicare revenue, and a lot of them it's, it's 50% or greater.

I mean, I guess that's the, just the baby boom generation. It's just turn, just demographics and, but that's a significant amount that's tied to that. And when you get into those bundles and you get into those payments for certain things, and they don't, by the way, don't take the really low end things. The things which generally generated an awful lot of revenue and profit for organizations and they put bundles around those things and it's, and it's not only the cost of delivering those services, the bundles actually make you take responsibility for pre and post.

Yes. So you have to orchestrate an awful lot. Even not only within your health system, but sometimes outside of your house Outside, absolutely. You've, you've got to now coordinate care and so, you know, it, it's difficult to do, but it's actually very effective in lowering the cost of care. And we saw that with the, the, the total knee bundle because, you know, it was very easy to send people to inpatient rehab.

Just through force of habit. But if that becomes part of, uh, what needs to be paid through a bundle, you take a very hard look about where somebody's going to do rehab. Can they do it at home? Can they do it in an outpatient setting? And so, you know, this, this idea of making people accountable for the cost of healthcare, it actually works.

And so that's what the, the, the total hip, uh, total knee bundle did. It, it caused systems to start looking that at the entire continuum of care. And, and that's, this is a good segue. We talked about the other presenters, and you know, this, this whole notion that, that I've been calling with you, bill, the, the balkanization, uh, of healthcare.

And that just means, you know, the disorderly fragmentation of . Healthcare, but specifically provider revenues. And there is a, a giant target on, um, Medicare Advantage. So you mentioned the aging population and uh, also the increase in prevalence of Medicare Advantage. And so many of the for-profit presentations at JP Morgan were organizations that are in that space.

Either the traditional insurers. But also some of these digital startups that, um, are solely focused on addressing Medicare Advantage spend. This market, I think is actually going to double, um, in the next five years from some of the presentations. So this is a high growth market when you think about where providers make money, right?

The, the, the, the math for revenue is, is volume utilization and rate. And so we, we also wanna talk about price transparency, and that's the rate discussion. But from a volume standpoint. Think of your older population, Medicare, those are your high utilizers, right? As we get older, we get chronic conditions, we get bad knees and bad hips, and so you know, that's where the insurers are focusing.

And so the insurers, their presentations, they were talking about the continuing. Vertical integration of the insurers. So they're becoming providers, they're insourcing providers. And I think yesterday it was announced, um, that Optum acquired, uh, the, the largest remaining independent physician group in Massachusetts.

So 700 physicians, independent docs, Optum acquired them. And if you think about the role of a physician. A primary care physician on the provider side, in addition to providing good care, they become the conduit or the feeder to refer to a specialist, and the specialist becomes the conduit to refer to the hospital.

So this is all about really being a, uh, referral engine, if you will. But when an insurer owns a primary care physician, um, what they're trying to do is, is become a wellness provider or a gatekeeper. So the primary care physician's role is to keep the person from needing the specialist and the specialist's role is to avoid the inpatient event.

And so this whole thing takes on a whole other meaning in terms of the utilization of, of these provider resources. So not only are they continuing this, this vertical integration with owning surgery centers and physician groups, but now you've got all these startups and, and so some of them were, you know, Oak Street Health.

I. Clover One Medical. Another example is Ken Med. These are all businesses that are based on reducing utilization. Reducing medical spend and, and it's focused on Medicare Advantage, and they have proven results where they're, they're focused on not fee for service, not generating RVs or or or CPT, but when they're focused on wellness and keeping people healthy.

There's a significant impact on, on volumes and utilization. And so this is part of this, when I talk about this, this attack on the, the whole idea of provider volumes, you know, these, these startups that have very high valuations and they're the darlings of the investor community because of this gigantic opportunity that they present to reduce healthcare spending.

You know, it's, it's interesting in the, again, I'm gonna go back and listen to some of those presentations. I think it was Ascension that actually broke out the five areas that they are looking at. For horizontal integration or, yes. Yeah. Horizontal integration. It was a pharmacy, ambulatory surgery centers, imaging lab and home.

I, I think it was post acute home care, right? Yes, it was. Yes, it was. That was actually another one of the interesting ones. I didn't, I didn't mention, but. You know, they talked about this horizontal strategy. So, so we talk about the attack on revenue, and the question is, what are you doing as a provider to prepare for that and, and strategically to be ready for that?

And so Ascension was one that says, you know, yes, we're going to look, we have this expansive health system and we're gonna look horizontally. With a service line, service center strategy to optimize these five areas. And again, not just for cost savings, because those will happen, but also for standardization and for qualities.

When you do this as a center of excellence and you eliminate variation and you eliminate the different, different ways of practicing, you get higher quality and better results and better outcomes. So, so that one was, I thought was, was a very forward-looking strategy that that ascension's implementing.

It's, it's, so, it's, but that will still drive their revenues down, right? Where, where do they make it up? Because it's not, it's not in rate. It's not, it, it, it, it's not in utilization. I mean, where do they make it up? Don't they have to, uh, essentially assume risk for that population to make it up? So if you, if you can't get higher rates for what you're doing and you can't do more of it, you've got to become efficient from a cost standpoint.

And you've gotta differentiate your offering from a quality standpoint. So if you think about . What's, what's the new growth strategy for the future for health systems? And in the past it was like, well, we're gonna build more ASCs, or we're gonna geographically expand, or we're gonna take market share. You know?

Yes, in some markets you can still do those, but I would argue, bill, that the new growth strategy is a quality cost and patient satisfaction. So how do you differentiate yourself in a, in a static or a, a shrinking market? How do you grow? Will you grow by differentiation? And, and this also ties into to price transparency.

You, you can't have your rational pricing, but you can charge for something that's a premium and you create a premium service by having something that's new from a technology standpoint or innovation standpoint. But you also do that by having an amazing patient experience. By having great quality and outcomes and, and also on cost.

And so that's the new paradigm. So when I hear Ascension talking about horizontal integration and, and, and cost management, those kinds of things, to me that is, is where success lies in the future. It's, it's inter, I, there's a couple things I want hit with you and, but you know, we're wanting more with this show.

I have a.

So I wanna talk price transparency, but I also wanna talk about the new entrance, right? So I, I watched, uh, cvs, well, let's start with price transparency. So out there, they're supposed to have their. Pricing published at this point. It was interesting because that was a question that came up in a lot of the q and As and, and, and most people said, yeah, we're, we're compliant.

Others may not have been compliant. They sort of walked around the the question, but the question is, does this really lead to price transparency? Does putting your shoppable services out there really lead to it? So again, you know, back to this balkanization, this absolutely is going to impact price, uh, eventually.

And what I mean by that is this isn't a tool that's going to be easy to use for a consumer, but if I'm a competing insurer and if I'm an employer, I'm either scouring through those records or I'm hiring a third party to help me find these kind of nuggets of gold in those, in those 70. Shoppable services that are required to be disclosed, so.

It's, you know, first it's, they're not easy to find. I mean, I've been doing some searches trying to find 'em for different systems, so might have been helpful. And so, you know, for from CM CMS, a lot of criticism, but for me it's a good first step. It's not perfect, but it's going to lead to something better.

I. I would've had some standardization about where on your website you had to place this and maybe what, what kind of a user format, but eventually there are, there are some smart people that are gonna find the, the data on these 70 shoppable services that are required and start, um, really analyzing them for what I'll call this irrational pricing.

And, and, and it's out there, there's significant variation. So if I'm an employer. I'm pointing out other, other places in my market that I have a significant price discrepancy. So it's going to lead. Inevitably, it has to lead. Transparency, leads to lower prices. It, it just does. But if that gets back to the point where if it's a commodity, the prices should go down.

And I think the opportunity though, bill, is if you truly have a premium service and you've differentiated yourself. It may be initially by reputation, but ultimately it's by patient satisfaction. It's by outcomes. There's no reason you can't charge more for that premium service, right? And, and so it, it, it may sound, um, like it's going against the grain, but it isn't about just lowering the prices, it's about getting rational prices.

Because if something actually costs more justifiably and it's a premium, you should pay more for it. And so this is. Hopefully a bit of a plug in terms of, of cost management, cost accounting, the, the, the work I'm doing with, with Health Catalyst and course it actually matters which service lines are profitable and which, which individual procedures are profitable and which physicians are profitable.

And until you actually know that, honestly, with accurate data. You can't have, you can't, you don't really care about cost if you have irrational pricing, now that we're going to have eventually rational pricing, you need to have rational costs, but where you do have higher costs and they're justifiable.

So, you know, if you wanna have cardiac procedures at the Cleveland Clinic, that should be a premium. Or you want to get cancer treatment at the Hillman Center at UPMC. That's a premium or neurosurgery at Mayo. But you know, to get imaging or labs, or I'd even say total knee replacement, like, is that still a premium service?

They, they, they become shoppable. You can go to many, many places to get these services done with, with the, the same, same quality and outcomes and so. I think that's where we're headed. It. It's early, but this price transparency, it's, it's sort of the first crack in the dam, but I think what you're going to see over the coming year and years will be more disclosure, more transparency, and these, once these brokers and insurers and employers get ahold of this data, it's going to lead to lower prices for providers.

No doubt. And then they really do. This is where the cost-based accounting with the, that's our first conversation. If people wanna listen to this, the first conversation you and I had was completely around cost-based accounting. And what Health Catalyst was doing, it was actually at the Health Catalyst conference.

You really have to have, we we're, we're gonna change to an, an industry that understands our costs really for the first time. I mean, we, uh, we, we sort of, sort of put our thumb in the air and said, yeah, it sort of looks like this. As a whole, we're making money, but we didn't really know what our costs were.

But that's, that's about to change, I would think. It's, and, you know, most, most cost accounting systems were developed in the seventies and eighties in healthcare, and it was before the, the electronic medical record. And, and why that's significant is because the EMR has all the data you would ever want around consumption.

We can tell which physician consumed how long the length of stay was, how long they were in the operating room. And, and the, the secret in healthcare is that, you know, about 70% of your costs are in these areas that are used by multiple patients. So the, the length of stay with an inpatient, a bed, a nursing resources, operating rooms, labs, imaging, they're utilized by multiple patients.

So you can't just say, you know, here's, here's a knee implant and I'm gonna properly cost that. Now I understand my costs. It's a small percentage of the inpatient stay. And that's on a, a surgical procedure. On a medical procedure. It's mostly these indirect clinical costs. And so you need to understand there needs to be actually a cost of a length of stay.

If I'm a physician with a a four day length of stay and my colleague has a three day length of stay, that's a significantly lower cost profile that needs to be reflected. And so we need to hold people accountable for their consumption. So again, as pricing gets squeezed because of transparency, costs will matter much more than they ever have in the past.

Alright, so we're, we're gonna get to the, the other, the new entrance. They're not really new anymore, but the entrance into the market. I wanted to ask one last thing about real estate. I, I have a feeling, you know, based on what we've seen during Covid rise of Telehealth, the ability to do more things out of the home, you know, I mean, we've, we've sort of proved it.

I mean, we just had a massive pilot of a lot of these programs. We sort of proved that it can be done well. This mean a significant shift in what the, the real estate profile looks like for, for a health system. I think it has to. You know, we can't just make telehealth an incremental cost. And, and granted it's a much lower cost than a, a physical visit, but I've seen different presentations that say, look, this isn't a cost savings initiative.

Well, look, if you're gonna move a significant amount of your volume to a virtual setting, that means your physical settings are going to be even more underutilized than they are today. And so, you know, interesting with telehealth, what we saw is we saw this immediate spike. With C and people not wanting to, uh, visit an office in, in neither physicians nor patients feeling safe to, once the summer came, you know, it, it sort of dropped back down again, still higher than it was pre covid.

I, but it, it became more of an event than an integrated strategy. So the question is. Who out there is actually thinking of telehealth as a long-term strategy as opposed to just something that we use to manage through a crisis and, and what is the future role? And once that's been determined, what does that mean for my physical footprint and for my delivery of healthcare?

And, and it, it's gotta end up. So the introduction of new technology. In every other industry results in a lowering of costs. So I think though it has to result in a, a tough look at, again, you know, the horizontals, what are my physical locations? I. Where do I have excess capacity or duplication? And then even where maybe do I, am I not addressing the population growth?

So this isn't just all about reducing, it may actually identify where there's population growth in a certain area that I need to close. . Some kind of physical location on this side of town and I need to open one on, on a different side of town. And so yes, this is where the fixed costs are resident in these physical locations.

So how do we optimize them not only the current utilization, but also the integration of, of new technology and telehealth and, and it's, it's interesting. We, yeah. And we saw that, we saw the telehealth spike. Then we saw it sort of come back down and I've been talking to different health systems and they're like, look, the physicians really drive where telehealth gets done and they're bringing people back into the office.

And it's, it's a misalignment of incentives. You know, you can guarantee that Kaiser's not bringing those people back. I mean, they're, because of the, the different incentives for a. It's this, it's this fee for service. It's, it is a, it is a brutal paradigm you're in. And so the whole idea is like, okay, we're open back up again.

Let's get every back, everybody back into the office. We've gotta get the volumes back up. And so again, it isn't more the long-term strategy of how do I integrate a lower cost? Alternative that our patients love. And it's a part of my ongoing strategy as opposed to like, okay, we're back to normal. Let's try to, to get the volume back.

So this is something everybody needs to work on. What is the true role of, of virtual and, and telehealth and how does that actually again, not only improve my patient satisfaction, and I wouldn't blame this all on the physicians because many of the physicians love the whole idea of virtual visits. It's also the administrators.

How do I actually . Think differently about the immediate impact of fee for service as opposed to the longer, uh, term view of my, my overall offering. All right. I wanna look at three players, and they're big players, so you'll, you'll be able to, and, and I sort of wanna say, uh, ask you, you know, uh, what are their strengths in, in attacking this market and let's you know it's gonna be CVS, Walmart and Amazon, because I think those are the players that, that I see is Bill's prediction that I see making the biggest move over.

So let's start with with CVS. You know, CVS did 10 million, uh, covid tests. I mean, to give you a comparison, Henry Ford did 300,000 Henry Ford Health System. They did 10 million. The scale of CVS, I mean, they are, they're literally everywhere. They've done a million, uh, vaccinations at this point, and they're only doing them in, uh, long-term care facilities.

Mm-Hmm. . Uh, but they're going to be, eventually, they're going to be a location that we can go for a vaccine and they intend to ramp up to about 20 million some odd vaccines. And I, I think it was every month. A they're gonna be able to administer. So talk about what, what is CVSs strength and, and their, their strategy moving forward, and how does that play against, uh, a health system?

So, you know, I, I've kind of said this from the beginning of, of CVS and, and the. The merger with, with Aetna is that, again, this whole idea of vertical integration. So they have not a pure play provider, but certainly they're in the healthcare continuum with, with a, with your hometown pharmacy, if you will.

And so I. All of them will point to their access to population within so many miles of a location. So certainly CVS and Walmart have a national footprint. And, and so from a geographic standpoint, we talked before about health systems are disadvantaged because they're located sometimes in the center city and they've been put together through affiliation or acquisition, whereas, uh, ACVS or a Walmart has been put in based on.

Transportation interstates, population growth, and so they're, they're perfectly fit to service the overall population. Now you've got. Aetna who has a, a series of covered lives. And, and now again, instead of relying completely on the provider health system to deliver care and, and, and send checks to the provider, they're insourcing that care with not only pharmacy, but now these health hubs.

And again, focusing on senior citizens and Medicare advantage, but also moving now towards, what I'll say is, is gaining . Kind of reputational awareness and a bit of a halo as being like, look, we're, we can actually go out and administer a covid vaccine to massive populations faster than, than anyone else.

So, so CVS has, again, they have the, the payer connection. And so there's a question for Walmart. Walmart has a better physical footprint and, and larger scale. So the question that people always ask about Walmart is when are they going to acquire an insurer? And, and to me, I think that would be a really, really smart move for them because, and now we talk about social determinants of health.

And so you've got, you've got food, you've got a grocery store at your Walmart. So think of how, and you've got, uh, consumer information about what they're buying, what kind of food they're buying. Now we, there are privacy issues we can think about as well, but you know, these are the things that drive health.

So Walmart, to me is, is very well positioned. They need to have a reason to do this as opposed to driving bodies into the store. It becomes managing covered lives. I. So I think that if they ever acquire insurer, that's really a real risk . So managing covered lives. So I go in there and I start buying food that's bad for me.

I get to the register and they're good to go, yeah, you can have this, you can't have this that well, or, or, let's keep it positive on, on, on your piece of paper slip. You get discounts for fruit and vegetables and healthy foods. That makes sense in a way they're subconsciously incenting you to, to lead a better lifestyle.

You know, it just, it gets really interesting as to, as, as, as this can change, this is just a whole game changer because we, when I talk about the Balkanization, Walmart and CVS, they're not going to do neurosurgery and they're not going to do intensive care or emergency rooms, but. Health systems traditionally were built on this very large, again, pre acute and post-acute, this entire continuum of care, doing everything primary care and, and everything in between.

Imaging labs, and when I say balkanization, they're not going to take everything, but they're gonna pluck and pick things apart. Focus on them. And so what happens to the traditional provider? The costs don't go away, bill. The inpatient footprint doesn't change. Very hard to get those costs out. But guess what?

The revenue starts to disappear or the revenue starts. There is no growth. And so Covid was an unnatural event. What happens when this becomes part of the ongoing strategy and competition from, you know, these other players in the market? It, it makes for a tough road ahead for somebody who's a pure play fee for service health system.

You know, it's, we saw, uh, Amazon, Berkshire, JPM, their haven sort of implode and, and that was, uh, I mean, hindsight is, it was almost predictable when you take three large organizations like that and say, we're gonna something and different.

Every, you know, all along the way. Now, it wasn't a part of Haven. They, you know, they launched Amazon Health and they have a really cool, uh, uh, service that they set up for their employees in Seattle and now down in, in Texas, they're doing the same thing. The, the employee sat on it is really high. They're doing things in pharmacy and so that's another area they're doing stuff in durable goods.

And there probably could be a significant supply chain, uh, partner for health systems as well. If, if, if they wanted to. But this is another organization that could, they, they, in and of themselves, they could still disrupt the, the employer health plan market if they can take what they're doing for themselves and scale it, which they're really good at, and then all start offering.

You know, midsize and even large organizations. But yeah, no, absolutely. Uh, I, you know, it was, it was funny. I think there was a bit of, uh, of glee when Haven was not successful from the, you know, people were very worried about Haven and, um, so I think people might have been happy to find out that it had not succeeded.

I didn't feel that way. I think they, they maybe had a noble, certainly had a noble mission and cause. But you're right with, with three very different employee demographics and populations in a way, they would've been working against one another in some cases. So, but because the big idea was not successful, that doesn't mean, again, that all these individual disruptors can't do something even, even greater than, than just, uh, one large organization.

So Amazon certainly will be a player, and again, it's because of . Access to consumers, they, they may have the best access to consumers and they have a transportation network that's fully built out. They have goods that are going through their pipeline, if you will, whether it's pharmacy, whether it's DME.

And so, you know, again, they're also positioned to disrupt this value chain. And there's a piece of the addressable market that they can take away from health systems. So it isn't about taking over everything. But they represent and they affiliate with, with large employers. And so when we talk about the cost of healthcare is not only a concern for the government, but it is for large employers as well.

And they're finally saying like, look enough, our, our economics have been impacted by Covid and we've gotta find a way to save costs. And, and healthcare is, is a big line item. So all of these things are, are part of this overall . Long-term threat to the traditional provider business. Well, we still have another hour of this show, but.

That'll give us something to talk about, and you and I are gonna touch base a couple more times this year, so we'll, we'll circle back on some of these things and see how they progress. Rob, thanks again for, for taking the time. Appreciate your, your wisdom and expertise in dissecting the. JP Morgan conference with me.

Thanks, bill. It's, it's always, uh, it's always great to just, uh, sit down and chat with you. Always, always fun and, and interesting. So thanks. What a great discussion. If you know of someone that might benefit from our channel, from these kinds of discussions, please forward them a note. They can subscribe on our website this week, health.com.

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