COVID Series: The Business of Healthcare with Eric Bricker, MD
Episode 2614th June 2020 • This Week Health: Conference • This Week Health
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 Welcome to this week in Health It 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 some, a special request here, the programming team at this weekend Health.

It would like to highlight solutions that deliver hard dollar savings to healthcare in under 12 months. This is in direct response to, uh, comments we're hearing on the show, as well as comments I'm hearing in my consulting practice. Uh, before you drop me an email, I. I need solutions that have successful client stories.

I receive about 10 emails a week from companies that wanna highlight their product on the show. And my first question is always put me in touch with a reference client. And, uh, amazingly about 90% of those requests fall away, which I find really interesting. Um, we wanna see what kinda response we get from you guys and then we will, uh, determine how we're going to.

You know, get this integrated into our programming and get it out there. So, uh, you know, send in your responses, bill at this week in health it.com. Love to hear from you. Love to hear what you guys are doing. That is showing hard dollar savings, uh, real money savings for healthcare. Uh, this episode and every episode since we started the C Ovid 19 series has been sponsored by Sirius Healthcare.

Uh, they reached out to me to see how we might partner during this time. . And that's how we've been able to produce daily shows. Uh, and you know, it's just a special thanks to Sirius for supporting the show's efforts during the crisis. Now onto today's show. This morning we're joined by Dr. Eric Bricker from a Healthcare z the end author of Healthcare Money Campfire Stories.

Good morning, Eric, and welcome to the show. Good morning, bill. Thank you so much for having me. Well, I read your, read your book this weekend in preparation for this interview and I, I, I'm gonna put you in the category of physician economist, someone who has studied how transactions in healthcare have done.

And really from a financial and a psychological standpoint, I, I have my economics degree as well, and I, my son asked me, you know, what degree should I get? And I told him, economics is a great foundation. 'cause it's really the study of, of finance, but it's also the study of why people make the decisions they make.

And healthcare economics is something I think people really struggle with, which is, I guess why you, you've been so successful with, uh, a healthcare z. Yeah, absolutely. Well let, let, let me give people a little background to get us started. So, uh, university of Illinois College of Medicine, grad John Hopkins residency practice at Baylor Scott and White.

rvices company. Grew to about:

And now you are sort of independent, not sort of, you are independent, you're out there, you're a creator, you're an author, and, uh, as I across. Uh, Rob Deha recommended. I watched some of your stuff and then, um, and I started watching the a Healthcare Z videos, and I love the fact that you. That we're all asking, trying to figure out, and, uh, and you just break it down.

You, you just do whiteboard sessions. What? It's, it is that, is that your intention to just do it like a whiteboard session? Yeah, I just try. I mean, as you can imagine, healthcare finance is incredibly boring. I mean, even for me, and I'm like into this stuff, so I kind try to keep it short and visuals and, um, and I just, I, I keep it low tech because people kind of get PowerPoint to.

And, uh, the response has been very positive. Yeah, I, the, uh, the, the reason I say answering the questions we we're all having, you know, you, you talk about, hey, losing the, um, elective surgeries, why was that a big deal? And you talk about, you know, the different, uh, carriers and where they make money and where they don't make money, and how much money is made.

Uh, elective procedures and, and why this was such a big hit on the, uh, providers and I mean, there was, and, and you have the numbers to back it up, which is I think, really helpful. Especially, you know, this is, this week in health. It, one of the things I'm always talking to health IT people about is they have to understand the business of healthcare in order to serve healthcare effectively.

Yeah. All right. Well, we're, we're, we're gonna get into it. I read your book this weekend, bunch of questions in your book, you start, I'm just gonna start with um Sure. And, and I'm gonna start with something completely outta context. You say if you want change, wait for the crisis. Well, I believe we're living through one right now.

And, um, 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? Yeah. Um, so it's, it's a great question and it really come, you know, I'm a, I'm a big, uh, Stephen Covey fan from, you know, seven habits of highly affected people, et cetera.

And, uh, and he actually, uh, passed away, uh, several years ago. And that, that actually was from his book. He said Pain causes change. And so, um. To your point, there's a lot of pain points specifically on the provider side, uh, docs, hospitals, et cetera. And the, the way that that pain is manifesting itself is a way that I, I certainly didn't expect.

And it is, it's not so much from the, uh, . The, the increased in patient volume load from Coronavirus itself is obviously highly concentrated in places like, uh, New York, but for the rest of the country, it's the dramatic drop in patient volume from the delay or cancellation from, uh, elective procedures, whether it be like spine surgery or, or joint replacements or ENT or even GI procedures like endoscopies, you know, things like office visits as well.

Um, there's numbers, whether it be from, uh, Medscape or from other places where some orthopedic clinics went down to like 5% of their patient volume. Plastic surgeons went down to zero, ENTs went down to like 15% of their patient volume. And these are just, uh, unsustainable patient volume numbers for them to just remain open.

And so many of them have actually just shut down their practices either temporarily or permanently.

What is going to happen to the, uh, to the underlying fee for service reimbursement model in healthcare? So in healthcare, it is paid for. You know, we won't, we won't get into the details of fee for service. We don't have time for that. But 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. So guess what that does? That caused people to do a lot of stuff. And so if you don't do a lot of stuff, by definition, you're not gonna get paid. And so that entire model, um, has created the situation where we in America probably have, you know, 30%.

Intermountain Healthcare Act actually estimates that it's actually 50% of healthcare totally unnecessary. Uh, and what will happen to just the amount of provider, like the number of providers we have, the number of facilities we have, the number of machines, like MRIs that we have, the number of pills that we dispense.

When so much of that volume goes down, are we just gonna have a massive just pairing back of the healthcare infrastructure in America? No, that might happen. But don't you think the other thing could happen, which is coming out of this administrative and, and even physicians who wanna 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, and sprint back to the fee for service as quickly as we can. Yeah. And that would work if they had complicit patients. And so the, I think the, the people are voting with their feet. And a lot of the volume is not coming back, and it's not coming back quickly. There's a, a, a fantastic newsletter called, uh, gist, uh, healthcare that actually has patient, uh, survey data that shows that only about, um, 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.

So if it comes back, it's gonna come back pretty slow. It's not whipsaw back into, into all this. Because people, people are still afraid. I mean, there's still a, they, uh, somebody, uh, Atlantic Health System did a, uh, presentation recently and they asked, you know, if you had an emergency, would you go back to the hospital?

And only 60% said yes. Right. And, you know, I'm sure that I, I don't know what that number was prior to Covid, but I'm sure it was upwards of, you know, 90 some odd percent. Because when we're sick, when we have a need. Where we, we had no problem going to the hospital or going to see our doctor, but at 60% that, that represents a significant decrease in volumes.

Yep. You know, in, in your book you call healthcare a zero sum game, and, uh, you know, if, if, so, if you make money from one area in healthcare, you're taking away from another, um, talk about that a little bit. Is that still the case? I. Yeah. Uh, yes. And, um, one of my, um, favorite sources for information about finance and e and economics is, is Ray Dalio, the founder of Bridgewater Capital, the largest hedge fund in the world.

And he has a sort of an economic truism that one person's spending is another person's income. Like, that's how it works. Like that's the, that's the transaction, uh, that occurs in economics. When we talk about, so you can talk about healthcare spending and that spending is typically in the form of employers, individuals, and governments.

And then the income is on the side of the docs and the hospitals and pharmaceutical companies and, and the, and the providers of care. So by definition, if healthcare. Income for doctors and hospitals, et cetera, is gonna go up. Then the amount that is spent by the government, individuals, employers, et cetera, also has to go up.

And then, you know, vice versa is true as well. And that's what, 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 in the government are holding on that money.

That's what I mean by a money just doesn't vanish. It means that they're holding onto that money. And I did a video in a healthcare Z where I calculated that the insurance carriers for their fully insured business are holding onto about $9.5 billion a month, right? 'cause the employers are still paying out premium.

Like they, they're contractually obligated to pay out that premium. And it's not like they're not paying it out anymore. And then the insurance carriers are just not paying it out in claims. And so you'll see that. UnitedHealthcare just bought a, um, a discharge planning post-acute care company called naviHealth for $2.5 billion about four days ago.

Now, who else is making multi-billion dollar acquisitions in the middle of the Coronavirus pandemic? Like no one. And that just shows that they have the money and the confidence to do that because they're sitting on so much. Well, so let's go. Let's go. So who we mentioned is former c fm. And he's been on the show twice since the.

And, and in his last, in the last show, he said, you know, we will all be employed by payers if we don't do things differently. Referring to really providers and, and how they approach business and whatnot. Um, you know, we have health systems which have taken on risk and the carriers obviously do the same.

Uh, which of these entities do you think are better able to bring about the quadruple aim take? Yeah, so. I will, I will say that I take a little bit of a different tack on it and that I think the vast majority of insurance carriers, their business model is actually not one of taking on risk. So I don't even really think that they're, they're really healthcare financial intermediaries.

They're not really insurance companies. I mean, the, the, let's just take a look at their business. So one, they have a large amount of self-funded business where they're getting administrative services fees. They're not taking out any risk at all because it's the employer that's bearing the risk. So there they are just, uh, facilitating the transaction.

So you can almost think of them like Visa or MasterCard, except instead of like Visa or MasterCard charging, you know, 4%, they're charging, you know, upwards of like 20% for their, you know, quote unquote transaction services. Okay. And then for their fully insured folks, keep in mind that. They are so consolidated and there are 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. And I, you know, I, at, at Compass, I worked with insurance brokers and benefit consultants all day long. And when they have one carrier that increases their rates by 30% and they go to try to quote unquote shop it to other carriers, oftentimes they can't even get a quote.

'cause there's just not a lot of options out there. Marine, there's like four. So, um, so they don't really bear a ton of risk on their fully insured side as well. And then on their Medicare Advantage side, they're able to, to increase the amount that they are paid by the federal government by quote unquote, risk adjusting the, the, the, the degree of, of illness level of their Medicare advantage population.

And you know, 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. So in other words, these insurance companies are doing everything they possibly can to actually not bear risk.

And so, as a, so that, that being said, that's my opinion. Then how that relates to then, um, achieving the, um, the, the aims of improved quality lower cost. I don't, uh, you know, better access. Um, I don't think it's an issue of organizations, whether it be insurance carriers, you know, versus major health systems versus physician groups.

I think it's really at the, the individual and the team level, because all organizations are just like sports teams. , right? And so you can have a, a team of doctors, hospitals, insurance carriers that they just don't have players that are, um, that are, are motivated or incentivized or have the skill to achieve those aims.

But then you have other groups that are, so let me give you one example. So I would say like Chen Med, um, based out of Miami, which, um, is a group of. Uh, primary care physicians in like 16 states. I mean, they have thousands of employees. I mean, it is, it's a real going concern. I mean, they are a force for, you know, change in the, uh, triple aim, uh, direction.

So I think, I think there's pockets of it, but as of now, the vast majority of, um. Whether it be insurance carriers or hospitals I'll, I, speaking with heads strategy, um, hospital.

He was trying to get the health system to actually move more into this, like taking on risk and you know, actually, you know, whether it be starting a health plan or doing an a, CO, yada, yada, yada. And this health system had outside consultants that I won't name, but they, they charge very, very high amounts of, you know, very, very high fees.

And these consultants were like, you guys just need to keep, uh, charging fee for service and riding that gravy train. And they paid them probably millions of dollars for. So it is not, I mean, it is just, it it, anyway, to wrap up the answer to your question, it, it exists in pockets, and it could be on any of the sides, but by and large, it is not the, um, it is not the thrust of the industry as a whole.

Wow. Well, that's a, that's, that's interesting. Uh, so if I hear you right on this, um, you, you could have, you could have markets that operate really well. Um, you could have systems that operate really well. You could have a good partnership between payers and providers, that, that operates really well for certain markets, but we, we don't necessarily have it across, uh, sort of as a, a national going concern to really move these things forward, even if one or the other.

Sort of takes a lead that, that's right, that's right. It, it's highly local. It, it's kind of like the weather, you know, like in San Francisco, the weather like varies by neighborhood, right? It's, it's almost that specific. Yeah. All right. So which leads me to the next question, which is, you know, can healthcare be treated like a business?

That that is it, it operates on free market principles and, and, and still improve the health of our communities. You know, you, you wrote in your book, in, in one of your sentences, said that the good and the bad size of capitalism are starkly juxtaposed in healthcare. Yeah, so it's a, it's a great question.

And, uh, the short answer is yes in a regulated fashion, right? Because you have, you know, either one end of the spectrum or the other, right? You have totally, you know, laissez-faire, uh, capitalism, and then you have just, it's completely, you know, run by, uh, the, the government, uh, in a socialized fashion. And so, as you can, most things lie in the somewhere.

Healthcare in the middle somewhere as well, and

regulatory oversight. Is healthcare is highly episodic. It's like meaning that you kind of do it once and then a lot of times you don't really do it much anymore, especially for people that are, are in the employer a employed age population. So the, the largest source of funding for healthcare in America is employers.

Okay. It's actually not the government. And for people between the ages of, let's say 18 and 65, their healthcare happens and then it stops and they don't typically need a lot of healthcare services after. So in other. And what is almost everybody's experience with movers in America been like, it's not good.

Why is it not good? Because there's not repeat business. There is not the incentive for them to do every, you know, be competitive, do everything you know humanly possible to try to gain your business again. 'cause you're not gonna move for another 10, 20 years. Right. What is the exact opposite of that? The grocery store, because you gotta go to the grocery store like every week or multiple times a week.

And so the grocery store bus, 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 three 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. And so in cases where you have the lack of repeat business, you subsequently then have to have some type of regulation to

of. Degrees of standards on.

Has been well documented by healthcare economists for decades is, is the informational asymetry. In other words, that the doctors just know so much more about what's going on than the patients that, um, the whole one of the bases, uh, for. Um, the free market is caveat mTOR, it's buyer beware. And in healthcare, it's impossible for a buyer to beware totally because of the informational asymmetry.

And again, you have to have, whether it be through stricter licensing processes or, um, or, or stricter, um, regulations around protocols and procedures, et cetera, et cetera, that those things need to be in place. Because the, um, because the information.

Some, some degree of regulation and, uh, 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. Um, those are a couple of things that need to happen for it to function more effectively. Well, what, so I'm going a little off script here.

So that CMS is pushing a lot in that, uh. Uh, C-M-S-H-H-S others, uh, the 21st Century Cures Act is pushing a lot of things around, uh, the availability of information, the availability of, uh, uh, pricing information to create more of that perfect information that you need for economy to, to function. Uh, is, is that the right, do you feel like that is going to have the.

Uh, I, I impact that they, that they desire on healthcare. No, and, and here's the, here's the problem is that typically in when a person needs healthcare, they typically are suffering in some way, shape or form. Like they have pain, they're having a hard time breathing, they have decreased mobility and information is really only effective if it can be dealt with in a rational way.

And 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's, it's 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. So even if you had somebody with a high IQ and a PhD, given all this information, it still wouldn't work. They would be in a, uh, in an emotionally driven state that would not, they would not be able to effectively, um, um, make a good judgment. So it's like, even if you had an incredible amount of information about like, um, fires and your house, like it's really hard to make a rational decision when your house is on fire.

Right. And that is, is somewhat what they're trying to accomplish, but, but a lot of care doesn't fall into that category. I mean, compass was, was built on. Looking at it and saying, Hey, you know what? Don't go to that radiology center, go to that radiology center, that's gonna, you know, that's, that's a better decision, right?

Mm-Hmm. . So doesn't a lot of care still fall into that category of, all right, I've gotta figure out what doctor to go to. I've gotta figure out what, uh, imaging center to go to. I gotta figure out what surgery Center to go to. And they do have different cost structures associated with them. That's absolutely true.

And that is true, uh, in regards to. Like you said, the majority of care. Now, what Compass was able to accomplish and, and really, you know, other organizations that are doing the same thing is, is because you had a person who was not in the thick of it, so, and they then they were, they were well trained. They did it.

So, so at, at Compass we did this every day, so we had expertise around it, and then we had the data and the software. And we were not literally experiencing the pain or the suffering that the person themselves. So we were able to act as that rational person. So actually, one of the best examples of that is in the Steve Jobs uh, uh, biography, when he was dying of cancer, he didn't have compass, he had his wife, and here you had a genius.

Needed to have another person to effectively navigate one of the best healthcare systems in the world at Stanford and.

Yeah, it is. I mean, it is possible from a timing perspective. So your point is absolutely correct. From a timing perspective, it is possible. But again, it is, it is something where it has to be done in some sort really to, to effectively do. It has to be done in some sort of objective, rational fashion, uh, by a party that is not, you know, fee for service financially incentivized to, to do this.

There's another way to accomplish this. Put, put all the physicians on salary like they do at Mayo. You don't necessarily have to have, um, this, this adverse influence of fee for service on medicine if you put the physicians on salaries. Like, so there, there's other ways to do this. It's, it's, it's interesting.

I've sat through a bunch of pitches from. Uh, you know, Silicon Valley type organizations and, um, uh, you just blew a bunch of the of the presentations out of the water. 'cause you're saying look, uh, because they're, they're based on, Hey, we're gonna provide this information, this information, people are gonna start making, uh, educated and informed decisions.

They're gonna be able to navigate their care. That it's, it's, and I mean, and 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 gonna put this on their iPhone. Uh, it's gonna tell them all sorts of stuff about the quality of the doctor, the qu, their effectiveness in surgery, um, the cost and whatever.

And all of a sudden we're gonna have it all over our fingertips. And in some cases, this works, right? So it works in, in the case of, um, uh, medications. You could look at it and say that pharmacy is far less go to that pharmacy seems to work in those cases. But you're saying because we don't make logical decisions at these times, it may not work in the, in the, uh, delivery of care.

That's right, and especially because it's stratifies in terms of like, you know, the 80 20 rule of healthcare, right? Where 80% of the spend is on only 20 . Percent of the, of the procedures. So even if you had these quote unquote non-emergency, quote unquote rational, you know, tests and procedures, et cetera, et cetera, they tend to be the low dollar stuff.

Like 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. Okay? All three of those situations involve like death, immobility, pain, and like not being able to breathe like the most high cost areas of medical spend are involved in places where you cannot think rationally.

So the, the, the reason that it companies love that idea is because it scales and they can make a lot of money off of it, but just because it scales doesn't mean it works. Well, let me tell you another one that I think works, uh, and, and actually this will be the last question I could talk to you for the next two hours, I think, but we'll, we'll cut it short just for, for the podcast and hopefully we'll have you on another time.

But I'm thinking of the, the Walmart program. So Walmart for their employees, largest employer, I, I think still the largest employer in the country, uh, has a program where essentially if you get a cancer diagnosis locally, that they will get a second opinion at Mayo. Or, uh, and, and something with Geisinger now as well for second opinions, and they, they did the, the research and they found that, uh, I, it was some high percentage and I, I don't, 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, right? And they were able to, uh, really drive down the cost overall for their, is that a model that's, that is what model is gonna be scalable here, I guess, is the question. Yeah. So that's a, that's a great point. Um, so I've actually, uh, a long time ago actually.

Met with them and they, what's interesting about that program around second opinions is, I don't think it's a hundred percent, but the vast majority of time, one of the requirements of being a quote unquote second opinion center of excellence is your physicians are on salary. And they said that that was really the secret sauce for the program marketing because there you were seeing a competent physician right at Mayo or Cleveland Clinic, whatever, who was not financially incentivized to do or not do the surgery.

Aha. Isn't that interesting? That is interesting. Wow. What would it take for all of us to go on salary? Well, you know, and I made two videos about that. I did point Counterpoint on a healthcare Z around, okay. You know, what are the pros and cons of physicians on salary? What are the pros and cons of, of not putting physicians on salary?

And I, I think that it is, um, you know, we'll see. All I can say is, is that my, you know, my friends from medical. And I can just tell you that the ones are, that are on salary right now with the decreased job in patient volume, they're much happier that they're on salary now 'cause they're keeping the same income.

Right. Right. That makes sense. Uh, Eric, thank you very much for your time. I really appreciate it. And, uh, yeah, I look forward to having more conversations in the future. I, and if people have the chance a healthcare Z uh.

Years coming in as ACIO, just, uh, understanding the things that you're talking about would've really helped me out as ACI. Well, thank you so much, bill, and thank you to your listeners. Appreciate it. That's all for this week. Special thanks to our sponsors, VMware Starbridge Advisors, Galen Healthcare Health Lyrics Series, healthcare and Protel Advisors for choosing to invest in developing the next generation of health leaders.

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