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October 4, 2023: Robbie Hughes, CEO at Lumeon joins Bill for the news. How can healthcare strike a balance between leveraging technology for lower-risk patients and maintaining a human touch amid clinician shortages? How should existing healthcare providers adapt to compete with emerging consumer-centric players like Walmart and Walgreens? As value-based payments impact appointment availability, what alternatives can maintain both quality and accessibility of care? How can health systems evolve their business models and secure the "first dollar" in a shifting market landscape? How should the increasing consumerization of healthcare and patients' immediate action desires be addressed, considering clinical recommendations for patient-centered approaches? What potential lies in tech-amplified centers of excellence like back pain clinics, and which areas might benefit from similar focus? How does the prioritization of value-based care overlook urgent medical issues, affecting patient wellbeing and healthcare efficiency? And as external competition from companies like Amazon and Walmart increases, how must traditional healthcare systems adapt to ensure effective patient care?

Key Points:

  • Business Model Evolution
  • Tech-Enhanced Care Coordination
  • Value-Based Care Challenges
  • Consumerization and Choice
  • Retail Competition and Disruption
  • Centralization and Operational Efficiency

News articles:

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Transcript

This transcription is provided by artificial intelligence. We believe in technology but understand that even the smartest robots can sometimes get speech recognition wrong.

Today on This Week Health.

health systems have been telling themselves for a long time that they're in the business of delivering health and well being, but they really should be in the business of coordination of care. And I fundamentally agree with that because ultimately the coordination of care is what's needed to deliver all these kind of disparate piece parts together 

Welcome to Newsday A this week Health Newsroom Show. My name is Bill Russell. I'm a former C I O for a 16 hospital system and creator of this week health, A set of channels dedicated to keeping health IT staff current and engaged. For five years we've been making podcasts that amplify great thinking to propel healthcare forward.

Special thanks to our Newsday show partners and we have a lot of 'em this year, which I am really excited about. Cedar Sinai Accelerator. Clearsense, CrowdStrike,. Digital scientists, Optimum Healthcare IT, Pure Storage, SureTest, Tausight,, Lumeon and VMware. We appreciate them investing in our mission to develop the next generation of health leaders.

Now onto the show.

 All right. It's news day. And we are joined by Robbie Hughes, CEO of Lumeon. And Robbie, we're going to have a frank discussion about the business model of healthcare. And we're going to start with a, by the way, welcome back to the show. Thank you. It's great to be here.

I'm so in a hurry to get to the story so that don't welcome my guests. This is my wife would be really. Not happy with me. We're going to start with Lyle Berkowitz, who is the CEO of KeyCare, had a LinkedIn post, which sort of sets up this article, and it's an article by Jeffrey Milstein from Penn Medicine, pointing out that we need to use tech Enhance team based care to manage the lower risk part of populations.

So office based MDs can focus on higher risk patients. My only question, disagreement, was that his final conclusion was that we also need to attract more clinicians to primary care. But do we? My alternative ending is that if we use tech teams appropriately and scaled, then using virtual care, then we can truly amplify our current PCPs to easily manage larger populations.

As an analogy, when we had a shortage of anesthesiologists, we fixed that by creating MD led, tech enhanced, nurse based anesthesia teams to make the job much more efficient. Time to apply that thinking to primary care. And then the article... is a really good article. It's in Stat News. Value based payments are making it harder to see primary care doctors on short notice.

And you and I, prior to this, we're having a conversation at the business is changing underneath us as you and I are having this conversation. The business of healthcare is changing. I'd love to hear your thoughts on this post, then we'll go into the article a little bit.

Yeah, so I think, fundamentally, the kind of tech enablement of healthcare is the right thing.

It's the only way we can amplify and scale our sort of dwindling physician population and meet the needs of the broader population. I'm not sure it's a value based care thing per se, rather a not fee for service care thing. So, once you decouple the RBU and the fee for service reimbursement, then you start opening the possibility that you can, bring in other people, other models, etc.

to fill this gap. But, I'm sure as you are, Bill, I'm seeing this everywhere. It's the Walmart thing, it's the now the Costco thing with Sesame from yesterday, Walgreens. These guys are coming in providing accessible, frankly, inexpensive, what's likely to be very high quality because they need it to be from a branding perspective care.

And... It's going to siphon off a good chunk of the lower risk patients from the populations that a lot of these incumbents are servicing, and that's going to be highly problematic. And as we were talking before, I was at a conference last week where the CEO of a health system was talking about these disruptors, and his view was that really health systems have been, They've been telling themselves for a long time that they're in the business of delivering health and well being, but they really should be in the business of coordination of care.

And I fundamentally agree with that because ultimately the coordination of care is what's needed to deliver all these kind of disparate piece parts together, but I don't see that as a differentiator. I don't see how you can be differentiated against these new guys coming in, if you are a better coordinated system, because that is exactly the thing that they're going to be differentiating on, and they're going to be really good at it.

And you, it's actually worse than that, because if you look at the makeup of some of these guys. They're contracting directly with employers, so they've got relationships with the payers. So the first thing they're going to do is say, well, we can bundle this together and we can offer you a path to health, happiness, and long life by doing these things.

And it's going to be cheaper, it's going to be faster, and the income is going to be disintermediated. It's not about... Their ability to coordinate care internally is not going to be the thing because they won't even get a touch to the patient. So, I think it's fascinating and we see this not just in the US, but we see it in France, we see it in the UK.

Staffing is a problem. There isn't enough physicians. But opening up payment models to be much more capable of handling some more creative ways of doing this has got to be the way forward. And again, when Walmart and Walgreens are just sidestepping the whole issue and going straight to employers, that's going to create problems.

It's interesting in reviewing the Costco announcement yesterday, I was looking at their financials and. Like a billion dollars of their profit comes from the membership model, right? And so for health systems, the membership model is the insurance carrier. The problem with the health systems is they don't collect the membership revenue.

The insurance carriers collect the membership revenue and then they provide the service. By the way, same thing's true on Amazon Prime. They don't make a ton of money on selling goods, which people find amazing. They make a ton of money on AWS. And then they make a ton of money on Prime. so health systems that have recognized, Hey, you know what?

We need to get that first dollar. That membership dollar, that payment, are the ones, I think, that are positioning correctly. for the market moving forward. Those that are relying on being downstream, I think, are setting themselves up for very difficult time. Because as you pointed out the CVS Aetna are connected.

You have UnitedHealthcare, obviously Optum are connected and they can divert traffic as well. You have these and by the way, I, in Amazon, I think we'll get into the insurance game but they could do it through Prime essentially. And I think you'll also see Walmart get in this game as well.

Because that first dollar is so important. And then, I think you're right. I think their ability they understand logistics. They understand the experience. They understand how to navigate. And they're very tech savvy in doing that. And so, I guess the question is where should health systems go?

What is the path to differentiate? And then what's the technology to enable them? to compete with such players.

So I think about a little bit as, do you want to be a price maker or a price taker? And I think historically they haven't really been either, depending on where you are, maybe they've got an argument saying we want to be paid a bit more or a bit less and in a competitive market that works, or maybe it doesn't, you know, there's a whole kind of nebulous thing around that today, which is complicated.

But fundamentally, if we think about price as being a function of quality, demand, consumer experience, all these different things. What's going to happen is patients, to a large extent, are going to be given more choice than they've had historically. And then what's going to happen is the person who has first access to the patient is going to be able to drive that traffic and is going to be able to say, okay, I want it, I want you to...

go this way, or I think it's best for you to do that, the consumer relationship with the doctor is a very special one, and doctors will do what they think is right for the patient. And unfortunately, if there's a six month wait to go one way, or a two day wait to go somewhere else, then they're comparable in terms of quality, however you define that, which by the way, I think should include access.

Then, it's very obvious what's going to happen. So, from a long term viewpoint kind of perspective, there's lots of different ways this can play out. So, one way would be to say, okay, we need to tech amplify primary care. We need to give them all of this technology and make it so that we've got kind of support networks around the physician and they're sort of orchestrating these teams.

That, logically makes sense, but a physician would say, and I tend to agree with them, you can't substitute the physician with a nurse, particularly not on initial presentation. So the idea that a patient comes in and is sort of triaged by a nurse, they're not going to be able to do the same job a physician can.

So you've got that kind of problem you need to solve. But what you can do, is, and again this has been well played out in other countries, is you can do centers of excellence around presentation based issues. So you might have a burns clinic, maybe a back pain clinic for example, and you'll run sort of triage protocols there to say okay if it's one of these things then escalate, but that does allow you to handle a lot of issues.

Now back pain is an amazing one. Now I think we spent something like 200 billion dollars on treating or managing back pain last year. Something like 80%, three quarters of people are going to have it within their lifetime. And the funny thing is that most back pain will resolve with rest. But, and this is the kicker early imaging in the adult population is actually correlated with worse outcomes and more invasive treatments.

So there's this bizarre scenario where, from a consumer perspective, I want someone to do something and I want action to be taken. And that's important to me. that's how I perceive value. But actually in many cases, the right thing to do is either nothing or rest or something non invasive, if you like.

Non invasive, non revenue generating.

Non revenue generating. And this is where the membership thing comes in. So the primary care is really hard. Because you can get this situation where the consumer feels like they want something and they want medication or they want a referral or , whatever it might be.

But the right thing to do clinically could be to do nothing or to do something that maybe they don't want. I have a funny story about this. I spend a lot of time in Ubers, as I travel from city to city. And one of the questions I ask my Uber drivers is always, how do you, think about quality of care?

And I say, okay, well, what does that mean? And I asked them the question, well, you've got a choice between two physicians. One physician, they've got a beautiful office, they've got , a piano in their waiting room, they've got a beautiful receptionist, they get welcomed in they get charged a ton of money, the doctor does everything that they say and they get the medication, they get everything they want and it takes them, I don't know, two months to get better.

You're going to see another doctor who's maybe in a slightly more run down office. The bedside man is terrible, the patient doesn't get what they want, they're ignored, they're told to do this other thing which, they don't like, but you know, it costs them a fraction of what the other guy is charging, they're better within a week.

And so my question to the Uber driver is, who's the better doctor? Who do you want to go and see? And in almost every case, without exception, I get the same answer, which is, it's the first guy. And the reason given is that this guy gave me what I was asking for, he listened to me, and this is the mind boggling one, you can't scrimp on healthcare, it's more expensive, so it's going to be better.

And I at this point, I'll remind the person saying, but he's charging more and it's taking longer to get you That doesn't make any sense. And I'll say, yeah, but, he's charging more, therefore he's better. And so I think there's a really interesting problem from a consumerization point of view, where

If you've got anything other than a capitated or a membership model, or you're massively improving access, you're going to get this confusion from a consumer perspective where to value stuff being done, even if it isn't right. And so. I think that the approach to tech amplification and protocolization I think that works fantastically well in scenarios where we know the diagnosis, we know the protocol, we know what needs to get done, and we're just really about driving that efficiency and driving that quality.

I think that's great. I think in the primary care space, It's much, much harder to introduce those kinds of techniques and you need to balance the combination of a physician who will be able to rapidly diagnose a wide variety of presentations. And you need to layer on top of that the complication around the consumer demands and expectations.

Doesn't mean it can't be done, but it's harder than it looks, I suspect.

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  📍 So I want to talk about this. We have weird incentives in healthcare, and this is from the article, value based care payments focus on rewarding the, actually, summary of the article focuses on rewarding the quality of care provided by doctors, based on measures such as success in patient screening for cancer and control of chronic diseases.

However, this often means that preference is given to encounters that fulfill payer requirements. And population based metrics, leaving less room for urgent issues like acute pain, suspected infection, or new mental health concerns. As a result, the patients often have to resort to urgent care centers or emergency rooms when they cannot see their primary care doctor on short notice.

And I bring that up because you brought up back pain. My father, 86 years old, has back pain, debilitating back pain, And he needs to see a doctor and was given an appointment two weeks out. This is in the United States. I know we often talk about, in socialized medicine in Canada or, in the UK, you might have to wait two weeks.

Well, that's happening in the U. S. and it's happening. This could be one of the reasons that it's happening. Could be a shortage of doctors, shortage of nurses, could be misaligned incentives and those kinds of things. But I think it also points to the inefficiencies that exist. And I'm going to give you what I think is a big difference between a health system and Amazon.

And I think the big difference in the experience in the one medical and whatever is this. When you go to most health systems, they operate, let's say, hundreds of call centers. And the reason I say hundreds of call centers is because people want to call their physician practice directly. And so they call that place directly and they talk to whoever's answering the phones.

Now, if you have hundreds of partners and clinician partners and whatnot and independent physicians and whatnot, you're going to have a hundred different call centers. And those call centers are going to be loosely coordinated. That will never happen at Amazon. What will happen at Amazon and Walmart and the others is they'll recognize that, hey, if you're going to, if you're going to manage these resources, if you're going to smooth out the supply and demand curves, what you need to do is to have centralized control of that.

Therefore, and I would recommend this for every health system, You need to coordinate. You need to pull all those hundreds of front desk call centers you have where there's somebody answering the phone for that physician practice. You need to centralize that almost immediately. If you think you're going to compete in this world and be able to smooth that demand out and then be able to say, Hey, look we can see the supply and demand for our entire system.

Therefore, instead of waiting two weeks on your back pain, we know you're in pain. We would like for you to go over here. The idea of competing with the Amazons, Walmarts, and the rest of them without undertaking this kind of approach of managing the supply and demand. Is, I don't think it's going to work and it's going to, it's going to require some technology, but it's going to really require some operational excellence.

Yeah, you know what, one of the most interesting things I observed when I started this business was health systems going out, buying either specialty practices, imaging units, or primary care groups, and then putting them under the one logo, but not actually integrating them operationally. So you've acquired 32 imaging sites, but you can't schedule them centrally.

And you can't manage the demand and you can't look at the load and you can't look at all of the kind of the end to end needs and demands of your patients in the context one of another. Even when you look at how scheduling, for example, is done today. It's often just on the unit, on the visit. I want to schedule this visit.

They're not looking at, okay, here is a series of things that need to get done for a patient, and that's the latent demand that I need to service and need to optimize according to that. These are basic operational issues that need to be solved for, but it fundamentally requires a change in operating model.

And that's hard. It's particularly hard if you're underwater from an EBITDA perspective. And I'm not optimistic that it can get done without serious cultural change in many cases. And as you say, whether it's Amazon or anyone else, anyone starting from scratch, they're not burdened by this legacy.

They don't have these issues.

The boiling the frog analogy, right? You put a frog in a pot of water and it'll stay there and you turn up the heat and then it eventually it'll die. It'll stay in the water and it won't jump out is the theory.

I've never tested the theory. That's the theory as it goes. I think that's what's happening to healthcare, because it's not like the Costco announcement in and of itself is significant. But again, when you marry that with Costco, CVS with Amazon, with Walmart, when you marry that with all of it, let's just say it's impacting.

10%. It's not impacting. I mean, it might even be 5%. 5 percent of your business has all of a sudden stopped coming in. Plus you have the economic impact. So in a down economy, we have people deferring surgeries and deferring things as well. So you have, let's say 10 percent is being impacted. And that's enough In this industry, given our margins and our approach, that essentially, that has a significant impact on the health system.

But it's only 10%. Right. You hear this sort of arrogant statement all the time, it's like, that's not going to work. It doesn't have to work. In aggregate, it's working. In aggregate, it's pulling people

There's actually a this is a second order issue here. Which is, okay, we're stripping away some of the primary care demand, maybe they're the easy patients and, maybe they weren't going to result in referrals, etc.

I don't know. So that's fine. So that goes away. And yes, to your point, exactly right. Yeah, we're going to lose some margin, possibly at the breaking point there. But the other thing this should do is with improved access and improved screening and improved primary care, you should see earlier management and treatment of diagnosis for patients, which should then result.

In lower downstream costs at a population level. So there's another scenario, which is, over the first period, however long that is. you're skimming away that, that kind of light demand. But in the second period, all of that other demand that you would otherwise see for acute services goes away as well, because it's been managed upstream suddenly really well.

And as a society, this is great. But if you're that, if you're the guy who makes the money from managing those conditions, maybe that's not quite so good anymore. I have no idea what the economics look like that, but I can imagine that being, if this works, I can imagine that being an interesting consequence.

Yeah. And this is why you. have to participate in that first dollar if you're not participating in the first dollar. Essentially value based care makes sense because you're sharing in that profitability. But if you're not, then essentially you're actually cannibalizing your downstream fee for service revenue.

And that's that's that Clayton Christensen talks about that we are trying to navigate. It is not an easy problem to navigate, but it's the world we're living in. And so sometimes it looks chaotic. Like you're asking for more money. It looks like the health system's bringing in a ton of money.

but people are worried. It's like, what are they worried about? Our patient visits are down three percent. Is that really something to be worried about? It could be. I mean, that three percent is a certain type of patient, that's going to be pretty impactful.

We're actually at our limit here, and we haven't solved this problem. Can you believe we haven't solved this problem in 20 minutes?

I'm shocked, Bill. Shocked.

going to be with us for a while, and I'm not sure there's a solving it. I think there are... First of all, it's defining the business that we're in.

It's the age old thing. What is the business we're in? And and how do we get to that next point? In that business evolution with the appropriate amount of disruption. Because if you have too much disruption, you go away. But if you don't have enough, and we're seeing that.

I mean, we just saw the common spirit numbers. Those are startling numbers. I think the losses, was it 1. 2 or 1. 4 billion in loss? Yeah. Crazy. Yeah, I mean, the thought was if we get to scale, these health systems are going to start to become profitable and no one sort of epitomizes that more than common spirit and the number of acquisitions and things that happened.

And now it's a question of, okay, at scale, is it just harder to pull some of this stuff off?

Yeah, I guess the good news is there's plenty of opportunity. Yes, exactly.

The challenge is addressing it. Exactly. Robbie, thank you again for your time. Always great to catch

up. Thank you. Cheers.

And that is the news. If I were a CIO today, I think what I would do is I'd have every team member listening to a show just like this one, and trying to have conversations with them after the show about what they've learned.

and what we can apply to our health system. If you wanna support this week Health, one of the ways you can do that is you can recommend our channels to a peer or to one of your staff members. We have two channels this week, health Newsroom, and this week Health Conference. You can check them out anywhere you listen to podcasts, which is a lot of places apple, Google, , overcast, Spotify, you name it, you could find it there. You could also find us on. And of course you could go to our website this week, health.com, and we want to thank our new state partners again, a lot of 'em, and we appreciate their participation in this show.

Cedar Sinai Accelerator Clearsense, CrowdStrike, digital Scientists, optimum, Pure Storage, Suretest, tausight, Lumeon, and VMware who have invested in our mission to develop the next generation of health leaders. Thanks for listening. That's all for now.

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