August 26, 2022: Two healthcare journalists go head to head! Scott Becker, Publisher of Beckers and our very own Bill Russell. What is their take on Amazon’s Purchase of OneMedical? What is the tech giant trying to do? The number one aim of smart business is to double down on your strengths and close off your weaknesses. But does this ruthless strategy hurt healthcare? Does the American public care about data privacy? What are their thoughts on big tech having access to their medical data? Teledoc announced 1.3 billion in losses. Is this the future of telehealth? And why did Ohio Health outsource their entire IT team to Accenture?
Sign up for our webinar: Challenges and Solutions to Unmanaged Devices in Healthcare - Thursday September 8, 2022: 1pm ET / 10am PT. If we had to troubleshoot just a few devices every once in a while, our hospital systems would run as smooth as butter, right? But when missing devices, security issues and friction caused by interoperability hits, we can’t expect a smooth operation. Our webinar will answer many questions surrounding the devices integral to keeping patients healthy.
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Amazon famously doesn't do partnerships well. Do they ultimately decide to get heavily heavily into healthcare or if they become sort of quote unquote, a healthcare company or not. I love Amazon. I hate Amazon but I love their ability to take big bets, try and figure things out. And then they're very aggressive about stopping the bet if they don't see it going in the direction they want it to go.
Thanks for joining us on This Week Health Keynote. My name is Bill Russell. I'm a former CIO for a 16 hospital system and creator of This Week Health, a channel dedicated to keeping health IT staff current and engaged. Special thanks to our Keynote show sponsors Sirius Healthcare, VMware, Transcarent, Press Ganey, Semperis and Veritas for choosing to invest in our mission to develop the next generation of health 📍 leaders.
All right. Today, we are joined by Scott Becker from Becker's healthcare. Scott, welcome back to the show.
So what a pleasure to visit you always thank you so much for having me.
I'm looking forward to it. So after our last conversation some people pulled me aside and they said they would like to hear the two of us just talk about healthcare news. And so if you're up for, rather than an interview, per se, what I'd like to do is just throw out some of the headlines and talk about what's going on in healthcare and in the world of healthcare. are you up for this.
That sounds like a complete pleasurable way to spend some time bill I'm looking forward to.
All right. So there's a lot of headlines to choose from. let's start with the fun one Amazon's purchase of OneMedical I'm sure you've commented. Read a lot about this and made some comments on it. what's your take on what's going on? What's let's do it from the Amazon perspective. What are they trying to do?
Sure. So from the Amazon perspective, this is gonna be the great question. So Amazon is trying to, if you look at the five largest companies in the country by revenues, Walmart, Amazon I think apple, then CVS and United healthcare. The five biggest by revenues in the country, healthcare is 20 plus percent of the economy.
When you really look at healthcare, it's probably more than that, quite frankly, when you're really taking all the consumer stuff and everything. So what happens is Amazon and all these companies You have to somehow or another be touching healthcare.
in order to drive their multiples, in order to drive their growth, they have to touch it at some point.
They have to touch it and then they have to decide like, so CVS and Optum are four and five in terms of Optum, United are four and five, fourth and fifth largest companies in the country terms of revenues they're much lower in terms of market cap. Just because the healthcare revenues, the margins aren't as high as they are at an Amazon or an apple or something like that.
But what you have to sort of try and figure out what Amazon wants to figure out the best analogy they have is it follows when United first started with Optum now 10, 15 years ago, all of us looked on sort of trying to understand how was United to be in the provider business. And then that company United had to make a decision.
Are they doubling down on this aggressively or are they. United obviously made the decision with Optum to double, triple, quadruple down on it and decide we wanted to be as much in the insurance business as they did in the provider business. Now Optum's a bigger part of United than it's United the insurance business, and they made a decision to double triple down, Amazon in contrast, we all know has opened retail stores has bought WholeFoods Has built Amazon web services and has built several other businesses. Amazon web services ultimately is the driver of growth and profit at Amazon. The whole rest of it is fine whole foods, an important acquisition, their first big bricks and mortars acquisition.
You, and I know. They've handled it well, but they certainly haven't doubled and tripled and quadruple down on if they did, we'd see whole foods, every place, but we don't, we have not seen huge both of the number of footprint of WholeFoods Rather. It's sort of strengthen what they're already doing with whole foods.
Similar with MGM, they bought MGM and studio company. They'll either double down on Amazon streaming, Amazon prime, or they won't the big question for us in healthcare with what medical is. This is Amazon's it's their second or. Serious investment in healthcare, but you have to remember, it's not that serious for them.
it's a multi-billion dollar acquisition for a company that does 400 billion a year in revenues. When in whole foods I think was a fortune billion dollar acquisition we'll know over the next two years or so for the next five years. Whether Amazon took the tact of United healthcare as United do with Optum, or they take more of the tack that, you know that Amazon's taking with whole foods is to whether or not they really double down and, or just minded, or it's more of an experiment.
One that Amazon's been famous for and anti GSE is now the CEO of Amazon is which Jeff Bezos too is taking bets on a lot of areas. And then deciding are they really doubling down on them or not? And so the big question for healthcare is what does Amazon do next with it buying it's one thing where they double down on it, where they commit that the margins are gonna have to double down on it or not is anybody's bet.
Obviously they're not gonna be margins. Like they have an Amazon website, web services, AWS. There's just, they're just never gonna be margins like that, but will they be good enough margins or will it solve a different problem for Amazon with their own employees? Healthcare, like Kaiser was built for it to do originally or. But the great question for me is will they double down it or not?
Yeah, it's interesting. one of the problems with Amazon is they, as you said, took bets on things, right? So it's almost like every department had every leader sort of touched on healthcare, but there was no concentrated strategy.
You had something around voice. So you had your Amazon echo strategy that they were going into hospitals with. You had your pill pack and you had that strategy that they were going with. I think the anomaly obviously is Haven. but I think what's happening now is you're seeing with the addition of Erin.
And coming from Providence and all the work that he's done, you essentially have somebody coming in there who I think understands healthcare. It's not that they didn't have people. They have some great people who understood healthcare and even came from healthcare. But I think he strategically understands healthcare.
And if he can get the mind share, I think his path makes a lot of sense and they want primary. I don't, we're gonna talk about another story here. TikTok buying hospitals and or parent company buying hospitals in China. I don't think Amazon apple and the rest of them are looking to get into large into the hospital business, low margin, high acuity, high risk.
I don't think they're looking to do that. they're really looking to get into that path where they're connected with the. it makes sense that CVS, Aetna and United Optum are buying up primary care because quite frankly, if they can control that, that spend, they get the insurance dollar, the first insurance dollar, they also get the opportunity to control where that next dollar is getting spent, which hospital system is it getting spent at and potentially coordinating that to lower their overall costs a across their entire business. It's really an interesting model. But when I look at Amazon, I think they have the potential to do something, but I agree with you.
I don't, I don't know how they're gonna get to scale. United's just spending money. Optum's just purchasing practice after practice. Yeah. Amazon. I'm not sure how they're gonna get to scale. I think they believe they're gonna be able to do it digitally. And that remains to be seen whether they're going to be able to build out a comprehensive digital strategy.
And the thing I put out there about four years ago, four or five years ago was I thought Amazon eventually had to get into the insurance business somehow. And back then I was people told me I was crazy. And the more I look at it and I. It sort of makes sense. I don't know that they'll do it and there's no indication that they will, but it's just one of the things I think is is an interesting opportunity out there.
Well, there's so many things that you said that are so interesting. I'll just tag off a couple of those very quickly. Bill one, you mentioned Aaron Martin. Aaron was an Amazon leader. Before he was a Providence leader. So for Aaron to return to Amazon and he does have the experience with both and fasting perspective on both.
So you're absolutely right. That's fascinating. you mentioned that Amazon. CVS has talked about for the last several years. And obviously Aetna is, but if you go to a CVS store and they've built out like Walgreens did all these hubs for healthcare at their stores, none of which are very well staffed. And so at least I shouldn't say that at least all the ones I ever see are never well staffed.
Well, we used to staff 'em in Southern California. I mean, there was a partnership between us and CVS and our doctors were in the CVS. It's back in the.
And the last thing you mentioned was Haven, and Haven's fascinating too, cuz this is Amazon doing a partnership with Brookshire Hathaway and JP Morgan and Amazon famously doesn't do partnerships well, and none of the three of them were that committed to the whole thing either. They were really looking at it first and foremost, cuz they used to lower their own employee healthcare costs. Then could they use it? Could it become, kind, gotten a business, but none of 'em plays very well as partners. So not surprised where Amazon's got. 4 billion a year in sales, only behind Walmart.
And so they've got the ability to fund stuff if they choose to fund it. But you're absolutely right. Do they ultimately decide, oh my goodness, this looks cool, but it's gonna be a Walmart in business to get heavily heavily into healthcare or do they decide, okay, we're gonna do this. And of course, United opts multiples, the multiples that United Optum CBS trade at are literally a third or a fourth of what the Amazon's trade at the technology gonna trade at.
So as they get further and further into. This gonna be very dilutive to their multiples. If they become sort of quote unquote, a healthcare company or not. So fascinating perspective. Fascinating to see. I mean, I love Amazon. I love Amazon. I hate Amazon, but I love their ability to take big bets, try and figure things out. And then they're very aggressive about stopping the bet. If they don't see it going in the direction they want it to go. And so it'll be faster to see where they. a year or two or five years in it.
And we misread that a lot of times when it doesn't work, we go, oh, see, they failed. They're gonna, they're gonna run away. And then they just keep coming back.
Well, it's actually the opposite. It's, they're smart enough to understand you. And I know the core of businesses you keep on doubling Downing, your strengths. You be smart enough for close off your weaknesses, stuff like that. They're very, very smart about it. And people might see it as a failure.
We view it. They're smart, smart people. Now, what happens is United was already in the insurance and healthcare business when they started to double and triple down on Optum in hindsight, 10, 15 years later, it was brilliant. And the provider side is a higher margin side. The insurance side, they both are great, great businesses for them.
And they have so many synergies too. Amazon's in the spot where they're trading at a whenever I look at it and the earnings are so screwed up the last quarter or so, but they're usually trading at a 50, 60 types price to earning. These other companies traded a. At 12. And so it'll be interesting to see how far they end up going into it for United.
It was a creative to their multiple for Amazon. Certainly that could be a creative to their multiple. So it'll just, we'll see where that goes.
📍 📍 We'll get back to our show in just a moment. I wanted to take this opportunity to invite you to our next webinar "Challenges and solutions to unmanaged devices in healthcare." This is where we're gonna take a look at the tools that are integral to keeping patients healthy in what we're doing to secure those tools and find them in some cases, guests will be leaders from children's hospital of Los Angeles Intermountain. And we're also gonna have representatives from mitigate by clarity on the call as well. And they're gonna share their experiences in maintaining these devices. And just some of the success stories, some of the challenges that they've had as well.
We're gonna do all that on September 8th at 1:00 PM. Eastern time, you could register on our website this week health.com top right hand corner has our, upcoming webinars. Just go ahead and click on that love to have you register for that. You could also give us your questions ahead of time.
I can give them to the guests and we can make sure that we talk about that. On the webinar. So your topics get addressed before the webinar, we're going to be having a briefing campaign, five short episodes on the channel about this important topic of securing your unmanaged devices in in the hospital setting. You wanna check those out as well. You can also check out those on this week health.com. So look forward to having that conversation. Love to have you join us now back to our show. 📍 📍
Let's talk privacy. the TikTok story is sort of a. Goofy thing. I mean, it's in China, so it's a different market. as a parent company of TikTok, I almost hesitate to talk about it cuz it's pretty new and it's kind of goofy, but the privacy thing did come up with regard to Amazon and OneMedical And I think early on there was a group of OneMedical Patients that essentially said, I don't know how I feel about Amazon having my data. And I'm curious as you look at it does the American public care about privacy or is this just a minority of people that are saying. Hey, we care about privacy.
We don't want big tech to have our medical data and that kind of stuff, because when I talk to the younger generation, they're like, yeah, I'll trade it for convenience. When I talk to the older generation, they're like, yeah, I don't really care. I mean, is this just a small vocal population that cares about privacy these days?
I think what happens is yes and no. I think what happens is it's a great, great question. It's a complex question. Oh, my goodness. We've all sort of assumed with the big tech companies that are gonna have all our data, all our data's gonna be available. You follow me. Yeah. And then nobody really cares about it until it turns up.
I mean, there's obviously people that care about it that are just litigators or false claims. People are trying to make hay out of it to make money. But the time when people care about it is when embarrassing stuff comes out about them. That's when people care about their data. So for example, if you're secretly.
Crazy right. Wing, a crazy left wing person. And nobody really knows that, but somehow or another, somebody's got date on it that like, all you do is watch Trump videos all day. All of a sudden somebody will look at it and say like, oh, this shouldn't have told everybody I'm trying to hide it. I don't do that.
Whatever whoever it is, or if there's in the old days where HIPAA was first came into play. And that's not a knock on president Trump. It's just a question as to whether somebody themselves doesn't wanna be known like that or doesn't wanna be known for what they watch or what they do, and there's so many things like that in the old days, when hip really became law was when the pharmaceutical companies were buying data. And then they were using it for marketing purposes. So you don't want the whole world to know that you've got whatever illness you have. And it wasn't really that you're so concerned that somebody, maybe you were concerned, but there are a ton of different illnesses. You wouldn't want the world to know. You might not want the, I see a therapist
So Scott, one of the things that keeps coming up is, Hey, we don't want the insurance carrier to know. And so you have United and Optum together, and we don't want the insurance carrier to know this and make decisions based the information that they have.
Right. It's, it's complicated because they're gonna have that information and then it's a, of having roadblocks or barriers. So can't use in the way, the challenge it's, what's interesting about president Trump, president Biden is president raised the wire a couple years ago about TikTok Kevin, all our data.
And we all thought he was sort of, was just sort of like, we didn't know what he was talking about really. and it turns. He wasn't so wrong. He explained it very poorly because the same thing came up in, in the last few months with president Biden, being concerned about how much data TikTok has. And so I think most Americans, the day to day American person, the day to day, one of us have largely realized that a lot of our data is at risk.
We've left this huge electronic footprint for whatever we do. And then we don't really care. It's just. Until once in a while something happens. We're like, Hey, I thought that was private. So I didn't think that was gonna be spread to the whole world. So I don't know, but I don't think day to day, I think your point is really well taken bill.
it's interesting being in this space for a while, and I've done a little bit of research here. The the reality is our digital exhaust tells so much about us Scott you're out on LinkedIn, you're out on other platforms. And when you just click like on this, or put a comment on this, that, that becomes a trail the people who friend, you becomes a trail.
And it's interesting. I did see. Back office kind of stuff, where they put all these things together and said, bill, here's your profile. And I looked at that profile and I. Yeah, that's me. That is me. They've got me down in terms of my political persuasion. They got me down in terms of my religious persuasion.
They got me down and I'm just, I'm reading all this going, oh my gosh, I, and I'm like, how did you get this information? I never gave you this information. They're like every click every.
Yeah. And so what happens is where it becomes problematic. I mean, if you have the justice department, the IRS, others targeting people based on their political persuasion, it becomes problematic. There, it becomes problematic. If that stuff is used to embarrass you, like, like you might truly be Wayne Wright, Wayne left, but you might not portray it to the public. You might just sort of like, keep your politics to yourself. People, there was the old adage. You don't talk about sex, religion, or politics, but now that everybody has all of your.
They could talk about what your physicians are, all those things without you even wanting to. And so that's when somebody gets embarrassed by it is when they care about privacy again, I think. Or if the government misuses it, I mean, Republican administrations, Democrat administrations have periodically misuse data. People worry about it for that purpose too.
All right. I put a post out there on LinkedIn on this one, Teledoc announces 1.3 billion in losses. And the question I asked was, is this more about Teledoc and their acquisition, or is this more about the future of telehealth? I'll leave it there and throw it to you and say 1.3 billion. A lot of that was the write off of the Livongo. Acquisition and whatnot. Does this tell us anything about telehealth or is it, is it more just about the business and the acquisition?
No, I think what happens with telehealth really is the no telehealth should be here to stay. It's gotta be managed closely. Cause at the same time, it's not a people talk about things I I've heard. 'em talk about from an artificial intelligence perspective. Are they truly an incremental change or are they completely a game changer? So telehealth is a way to better leverage doctor's time or clinicians' time.
It's not a way to replace clinicians or doctors. So it's a better leveraging model cuz now a doctor could see 20 patients over five hours. Versus having to sit through 30, 40 appointments, whatever the numbers are. And you could also leverage people without being in the same location. So if you're in a rural area, you could see a doctor, even though those doctors aren't as present than rural as you'd like.
So it's an enhancer, it's a ER of people it's not a changing, it's not as transformative as it would be to plug your data into a computer and a computer, tell you what is wrong with you and what's going on. That would be sort of the next level. You know of not leveraging, but replacing headcount, replacing people.
So at the end of the day, telehealth is a business. Like all others, it's got revenues. That's gotta come in. It's got costs that gotta come in. When during the pandemic, when one, there was this quantitative easing intra went down to zero and somebody's technology businesses reviewed as like the next, next home run.
These things got valued. So incredibly highly the pelotons of the world, the Netflix of the world, a lot of these businesses that were completely pandemic driven as was telehealth to a whole different degree than it was before. Got really blown up in terms of their valuation, not their earnings.
Most of 'em weren't showing great earnings at that point or now Livongo, telehealth, Teledoc is like that. At the end of the day, They've gotta become a real profitable operating business. And this is what's going on throughout technology now. And bill, this is near a, you're an expert in many of these venture capital fund companies that were built to grow like crazy until profits.
10 years later are all of a sudden a spot where their venture capital investors, their funds are saying you, you gotta find a way to get to a pathway to profitability sooner. That's why like when Uber showed much better revenues results, this quarter lifted too, their evaluations blew. They blew up positively for the right reasons.
Cause they're starting to get closer to profitability rather than just being a darling of the time or due to quantitative easing. So for Teledoc, the proof will be over the next several years, whether it becomes truly a profitable business. They could bring in more revenues than they have cost or if it was just a pandemic driven on up stock.
Yeah. The last couple of years, well, last decade really we've had a lot of this VCs coming in and essentially say growth, growth, growth in a way you go that changed. It feels like overnight, at least to these to these founders. And these startups feels like it changed overnight and that's a pretty uniform.
Thing that the private equity companies, VC firms are sitting down with their portfolio companies and saying, yeah, we said, focus solely on growth. Now we want you to, I mean, you hit on that pretty well. Get to that. Operational break, even operational profitability a lot sooner. And it feels like that that game has changed.
If you were going, I'm gonna come back to telehealth. But if you were doing a startup right now, Would you pitch a growth kind of model or would you even change your pitch to be more about getting to profitability pretty quick?
Sure. So it's a complicated question and I'm not in that position right now, so it's harder for me to discuss it. There's a couple things that are going on. There's great. Article in the Washington journal the other day, about how the amount of cast being put into startups and venture type. Is a lot softer than it was at one time. So founders people starting companies technology companies, and others have much less leverage than they did just a couple years ago or a year ago.
So that's one, two is I'm an investor in a handful of companies that were funded by huge venture capital funds, where I have very, very, very small investments, but it's been a huge education for me to learn. I built businesses where you had to get to profitability immediate. Not outside funders and stuff like that.
Just a very different business than I was in. And so for me to see companies that are funded by giants, I have small, small pieces, incredibly small pieces, like not infinitesimally small, but what's been an education for me is sort of like the pathway. The pathway of what they are trying to do and some of these VC funds are so good at it.
So good at understanding once they have a conviction around an area, understanding the area, how they have to back up the boss to sort of get that area to profitability. They just have a very different world view than most of us do. You follow me? I mean, yeah. Like they just have a very different view of how they could get something from point a to point B over the course of years.
Whereas most of us can't live like that. Cause it's our own business we're only reliant on it where they're, they're both investors, speculators, business growers and stuff like that. So I don't know what the answer is. Certainly there's more appetite for any growth equity or private equity fund.
Where you can get to profitability quicker, but there is still very much the VC view of we don't wanna do something unless it's gonna be a huge game changer. And we understand there's gonna be a huge amount of dollars to go behind this, to get the spot where it's gonna be a game changer and very valuable.
So, I don't have an answer to it. Yeah. But there's, there are two different types of investors, the VC investors versus the PE investors.
Yeah. When I talk to People who are going out for money. And they asked me what my thoughts are on it. I said think of it like your marriage. I mean, this is an important, important, important, I mean, who you take money from is a really big decision because some of those firms could come alongside you, as you were sort of alluding to. Some of those firms could come alongside you and really make you successful because they really have a knowledge or they really have the partnerships or they really have mechanisms to catapult you forward.
So it's really important to find the right partner as you move forward. So when somebody's like, Hey, somebody offered me money. I'm like all. Who offered you the money and what else is coming along with that money.
but your point is well taken and there's a bunch of studies in this that a handful of venture capital funds. And seeing better deals have better connectivity have better results than the whole rest of the venture capital funds. And it's not that it's completely an 80 20 type bra principle time, but it's pretty close to it. There's a handful of leading VC firms that just have a much better track record than the rest of 'em.
And there's there's others as well, and that's why those ones see better deals too. Cause there's more confide. They'll get from point a to point B a hundred percent.
All right. So you talked about telehealth, you talked about it from an efficiency standpoint and there was a great article Harvard business Review article on the telehealth era is just beginning.
It was written by former CEO for Kaiser Permanente medical group and the current executive director for Intermountain healthcare. The question I asked here is Intermountain and Kaiser have been incredibly successful with telehealth Where it's not that other, I mean, we can find other health systems that are doing you know Some good work, but the question is why is it just because they have taken on risk for a population that they have been so successful with telehealth?
it's a big part of it. What happens with Kaiser's the great example of this Kaiser before the pandemic. Was famously touting that they were doing more than half of their visits virtually in some way or another. And everybody else in the world was very envious of that because how was Kaiser able to do that? They were doing 50, 60% of their visits, virtually pre pandemic and why they were able to do that as it's cheaper to see the patients virtually than in person saves a lot of money.
And they weren't worried about fee for service reimbursement. Because they were capitated on those patients. So for them, it just made sense to see the patient in a more efficient way regardless. So are we in an early innings of telehealth? Absolutely. Te there's just, there's no way around it.
There's just, we have too big a population. We have too many clumps geographically of where doctors are versus where people are. I mean, there's just for the whole reason why tele radiology was the early 4runner of telehealth. There just wasn't people to read x-rays and images in small towns in America, or sometimes in urban hospitals.
And so telehealth and radiology was way in front of everything else. And as we have a growing population, not enough providers and this disproportion of where providers are versus where we need them, there's no way around, but telehealth has to get better. I mean, anybody that has had telehealth visit. It, my parents had telehealth visits for something very complex was a total debacle.
They ended up in the ER, I mean, it still has to get better and they're getting better and everybody's getting better science, like anything else have to get better. How you deliver, how you take care of the, how you I mean, it's gotta get better, but it for sure is early innings in it's gonna be pervasive. It has to be.
Well, it's interesting in this article cause they talk about better. I mean, obviously access is there. Cost is there, but they talk about better outcomes. And the Intermountain part of that story is pretty compelling in terms of the fact, just because of the fact that they're able to have more touch points and yeah, and intervene.
Earlier in the process. And so they just look at the numbers and say you're more likely. To survive in their program than you are generally in the rest of the country, because they have that model, when I look at telehealth I agree with you. We are absolutely in the early innings of this, but I think it's people who figure out how to marry the efficiencies of telehealth and the outcomes of telehealth with a business model that pays them for it. The people who are waiting for the government to all of a sudden up their rates and pay them a fortune for telehealth, even though we did just, or actually I think it's going to the Senate now to take the pandemic reimbursement rates through the next two years.
But those who are waiting for the government to do it, I think are. That's not a winning game. But it's the but it is the people United has a good telehealth program and they get paid on both ends CVS. Amazon's heading in that direction. Intermountain, Kaiser. I mean, if you're getting paid that first dollar and you can add those efficiencies, even though we see Kaiser with their 1.3 billion loss, they had an operating gain.
This quarter, and this is a quarter where a lot of other health systems did not show that kind of resiliency they had it was generally a down quarter for a lot of integrated delivery networks. So I would be looking for the business model to marry with. With telehealth and see where you could take it. And I think those organizations that take on more risk more capitation across the board, I think they're gonna be better off long term.
Yeah. So we couldn't agree with you more that this is where it's going and there's no way around it. I totally agree with everything. I'm sure the Intermountain study said it just is so much more convenient, so much more access, just convenience and access.
Makes it more likely that people are gonna get care I just think you're still at a spot where the actual visit. Depending on the doctor, the attention, the focus of the doctor, the focus of the patient, the ability for the patients to convey things in the right way is still a work in progress. But overall we're a big believer that it's where we're, there's no way around it. It's where we're going.
All right. Let's hit on one of your favorite topics, which is the economy and the finances. And there's a couple things around this one is the pandemic was sort of a mixture of results for organizations.
It was extremely bad that first year. And then the government stepped in did okay. Second year was a little better. He actually was better. But now we have the economy sort of slipping into this. I know we're not calling it a recession, whatever we're supposed to call it.
But you have high inflation. You have people making a decision on healthcare, not related to their health, but more related to finances do I really need that surgery? Do I really wanna see my primary care doc? And so when we look at the financial picture for. Healthcare are we just in another one of those up and down cycles that we normally see in healthcare that's down now, it'll go up. Or, yeah. Are we starting to see more of a trend that's related to increased competition? Different options for people in terms of getting care? Are we just not there yet?
Well, I think that you're in a very challenging time economically for health systems. There's no question about it. And as health systems would explain it, reimbursement is flat to relatively flat, maybe up a couple percent. The cost of providing the service, the inflation on clinicians nurses, physicians, everybody involved in clinical is way, way up. So if your reimbursement is gonna up 2% and your cost of providing and your staff is gonna 10, 15%, your drug costs are going, supply costs are going, those go up a lot higher than your reimbursement.
Cause they're going. You're in a relatively low margin business to begin with. It's a very challenging situation. Ascension reported an 880 million loss. This last quarter. Those are real losses. Those are real numbers. And you're absolutely right. The pandemic was a very daunting time for hospital members of people staffing everything.
But after the first several months of it being a horrible financial situation, the government really did step in. So we had during the pandemic. Record low numbers of hospital closures, which we hadn't seen in a long time, but there just the government stepped in and took care of our healthcare community like they needed to do so, at least economically.
Now you've got a situation with government aid. The pandemic aid is gone. And so you look into this situation where hospitals, health systems have. An airline has increased input, cost, oil, fuel, staffing, pilots, everything else. They raised their rates like crazy, even when I've seen it. It's very elastic, very quickly rates for flying anyways, have gone up tremendously in healthcare.
The system has no control over Medicare or Medicaid. Reimbursement is also tough. And in fact, commercial reimbursement's getting tougher again. Where the big commercial payers are they're fairly consolidated. They're again, getting the message from big employers. I gotta get healthcare costs under control and that gets pushed down to hospitals and physicians who don't see serious reimbursement raises at their spot.
So I think you're, you're in for a very daunting time for hospitals and health systems. I think very, I mean, I hear it every day that it many health systems system CEOs will say after just being through the pandemic, that this is the most challenging time they've ever faced. At least if there was actually running an organization, trying to run it to, to make sure it keeps on sustaining itself.
I think it was a Becker's article. I saw number of turnovers amongst CEOs was pretty staggering. I don't remember the number, but it was pretty, it was pretty high. Yeah. The hospital CEO job is very difficult.
So many of these hospital CEOs said, I'm gonna get my system through the pandemic. I'm gonna work through it. I'm gonna do that. But I'm exhausted. I'm burnt out. I'm ready. And so there, you've had a huge number of people step, start to retire and leave those jobs.
Yeah. The one story that hit me kind of. I'm not sure, it sort of hit me the wrong way. And that was the Ohio health outsources, their it team to Accenture. It wasn't only, it, it was also I think revenue cycle was outsourced as well. And the incredible thing about that story was not. That they're doing that. I understand doing that.
And there's many organizations that have offshore capabilities either. They do it for their existing staff, or they do it through business associates. Right? So we have revenue cycle, data scientists. We have they're working around the world. In fact, I didn't interview yesterday with with a team that does a lot of work in healthcare and we were talking cuz a bunch of their data scientists are in the Ukraine and we just talked through what that was like to.
Really handle that team through culture and safety. But the announcement said, we're not doing this for financial reasons. There's really no financial benefit. We're doing this to improve care, to improve our, essentially improve our readiness for the future. and we feel like we're better positioned to do that by outsourcing that.
But essentially what they're saying is you're in Chicago, it's essentially well, actually I should take a winning team. It's like the Dodgers, they come in second place in the world series and the guy they bring in to run the thing goes I want to win the championship. So what I'm gonna do is I'm gonna fire the entire team and hire somebody else. That's what it felt like. It just, it just didn't sit right to me.
Yeah. No, and I don't think that's, I think there's probably multiple pieces to it and I don't know the people involved there, but I'll tell you what happens in most places. In most places today, over the last couple years, hospitals, now systems have had this absolute horrendous job.
Being able to staff revenue cycle, how they used to staff it, it just, it's just very, very hard. It's a huge turnover area. It's an area that's traditionally been underpaid with great people that have had relatively minimum wage jobs. And so it's an area. And in those many wage shops, the turnover is tremendous 25, 30% a year.
And so at Tampa with many health systems on revenue cycles, why in revenue cycle. Systems are so excited about trying to find AI solutions. They don't want get rid of people. They just can't staff, they just can't staff 'em. And so then what happens with like when you outsource it, there's multiple things that, that typically happen and it's all over the board some places you outsource, but a lot of the line people, the core people doing the day to day jobs stay in the job.
They just have a different. Other times, no, that's not the case. They're really outsourcing it. And everything's moving to a different part of the world, and we've seen studies in this where sometimes you if you cost you 50,000, an employee here and you could outsource jobs, it's costing you 10,000 employee in India, for example, Literally is the difference.
And so if a big enough system outsources, none of those jobs, they're not, they're not really allowed to lot of health systems anyways, because of privacy and other kinds of rules restricting it. But some companies can do it for other kinds of business. And the difference in cost is dramatic. And so there's two or three things.
One is I take all of these statements by these systems with the grain of. So when a system says we're not doing about money, we're doing it an efficiency. Yeah. The truth is always somewhere in between. I mean, the truth is always somewhere in between. Often they just can't staff this stuff as theirs. So they're trying to figure out a solution to it.
Second people wanna outsource, whatever's not their core cuz they don't off bandwidth to these systems have thousands and thousands and thousands of revenue cycle employees. And it's a complicated area. They gotta be good at it and it's gotten a lot harder to be good at the last several.
Yeah, it's the it side that I struggled a little bit with. And I mean, 500, 500 employees gone. And look, I've listened to the Ohio health leadership at the JP Morgan conference. it's a smart group of people. I'm sure it was deliberate deliberated over and looked at and whatnot.
But I've also been on both sides. I've been on. Oh yeah. I've been on the side of when I started as a CIO at St. Joe's, it was an in-source. So we were bringing it in after our 10 year per outsource. And that was daunting to say the least, and the contract was not good in the final couple of years which is why they decided to insource. So I, I understand which.
But you mentioned something, the other that's that's fasting in a bunch of levels. One is the outsourcing and interest of these things. It's there is a great question. Are those 500 employees having opportunities elsewhere in the system or not? And what are their job prospects look like? Who are those people and how do those jobs look?
A majority of them, their job prospects are really good. Ohio. I mean, has a lot of really great employers and we're doing remote work. They could probably work in a Philadelphia health.
the other thing that is fascinating is there are a number of these technology driven healthcare companies and won't name names, but that were built on the venture capital growth concept that you and I have talked about that have announced massive layoffs recently.
I mean, that that were built to try and go after a certain level of business, that business is not there and now they are in heavy and some of them are highly public, highly discussed highly brand centric. But really finding themselves on the other side of this growth situation, where all of a sudden, they have too many people for what they're trying to do.
And that's a totally different debacle built from sometimes sort of like I'm a big fan of don't build armies. You don't need. And many of these companies were building armies. They didn't really need
Scott. How many, how many interviews are you doing these.
Well, we'll do typically somewhere between five to seven, a day of talking to people, but they're short interviews. They're typically 15 minutes. But I do find it absolutely fascinating. I just got off the phone podcast with Dr. J Robinson who runs a few hospitals for runs a market now for Kaiser Permanente. And it just is it just fascinating. And I had one half hour before that with one of our editors in chief or DDA talking about a couple of the issues she was watching, like, which I didn't understand.
I didn't know this, but in this most recent ship bill going to. This is very important to health systems who have been trouble have been seeing huge inflation with anything that requires a chip. I always think about it. There's not enough cars run. There's not enough. This run enough around it.
And the chip companies are, again, of course, you, you watch this closely, this is your world. All a sudden the chip companies are going in the wrong direction. Cause all of a sudden there's an oversupply at chips versus an undersupply supply of chips in certain areas. Yeah. But what a what, how quickly that changed as well.
But, so I was on with Laura. I was on with another leader who ran one of these big urology platforms for a private equity fund. I think typically we'll do anywhere from five to seven. keeps me really sort of learning what's going on. I find it fascinating.
some of them, I appreciate the chance to catch up with them, hear what's going and share what they're doing with the audience, others. I really learn. And it's fascinating for me.
how's the conference or conferences back.
Sure. So the conferences are, we have five large meetings a year at Becker's healthcare. The most important ones from the company's perspective are the hospital health system annual meeting and the CEO meeting that we do in the fall. And then second, third, right? There is our health it digital health revenue cycle meeting, which is grown into bigger spaces fall. The hospital annual meeting in April went tremendously.
People were already, it was very big, very Brit. We had huge fun speakers, paid demanding, man Johnson, president Bush, and huge leadership from the healthcare community. It was just a fantastic meeting. It was probably about 5% less than it was in attendance when it was really going three years ago.
But just fantastic. Some of our smaller meetings are still down a little bit of attendance. Our health like team meetings should be up at attendance, but it was a growing meeting. It was never, was never one of our largest meetings to begin with. So it's going okay. Very interested to like visit again in public.
The thing we worry about. So many things in the conference business, you worry about from a cost saving perspective. You get to a spot where at some point health systems start to cut travel budgets. That's another way to cut budgets don't like that, but no, overall it's going, it's going very well.
I watch everything in the analog to what's going on in business. If you look at Disney Disney hit at this quarter unexpectedly on all eight cylinders for both the digital streaming business is outpaced Netflix and their perks businesses back. And so I view our, our media. In a very similar lens, like our conference businesses, like the in person parks business and the digital business has gone great the last few years.
So we're trying to keep that going great and then make sure the parks business or the conference business is going great too. And and for us, it's critical that we get the the right people there that wanna visit and network and talk and learn from each other. So it's overall going. it went great in April and we're hoping it goes great. come again.
Sounds good. Scott, I wanna thank you for your time. Always a pleasure to catch up with you and look forward to seeing you again in person sometime soon.
Bill can't wait, thank you so much.
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