Latest / Becker’s Healthcare Podcast / Payer Consolidation, AI Arms Races, and the Future of Prior Authorization with Jakob Emerson

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Payer Consolidation, AI Arms Races, and the Future of Prior Authorization with Jakob Emerson · Becker’s Healthcare Podcast

• 0:00
  This is Scott Becker with the Becker's Healthcare
• 0:03
  Podcast.
• 0:04
  We're thrilled today to be joined by Jacob
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  Emerson.
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  Jacob covers the payer space better than anybody
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  else that we know. I always get a
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  chance to learn something when I visit with
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  Jacob.
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  Jacob, let me ask you to take a
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  moment
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  and share with us a couple of the
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  stories that you're watching currently in the payer
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  space.
• 0:22
  Sure. Good to talk with you, Scott. I
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  thought two
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  broad stories we could talk about today.
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  The first one being something that our finance
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  team has really been clued in on over
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  these last few months, and it's this emerging
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  AI arms race that we're seeing
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  really pick up between
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  insurers and
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  health systems, probably providers more broadly across the
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  country. But for our purposes, we're hearing from
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  health systems about just all the new AI
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  tools that both sides are using, to basically
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  maximize
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  the coding revenues that they can get in
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  terms of services that are delivered or or
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  code better depending on who you're talking to.
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  And that's causing a lot of more friction
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  than than, normal in that type of relationship.
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  And then I also thought we could touch
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  briefly on, some of the latest updates that's
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  happening across the Blue Cross Blue Shield system
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  in terms of, you know, these are these
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  are smaller insurers
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  relatively compared to some of the big national
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  players. And so, talking a little bit about
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  what they're doing to counter
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  the fact that they are having a harder
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  time keeping up with some of these larger
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  players.
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  Thank you. Take a moment on what you're
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  seeing there with the Blues. I'd love to
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  hear about that and then the arms race
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  between
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  payers and health systems and the fighting over
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  pre authorizations,
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  denials, and just, oh my goodness, the challenges
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  health systems have getting paid Yeah. In this
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  world of of highly intelligent systems fighting with
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  each other. Yeah. Talk to us about the
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  blues compared to the big, big payers and
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  what that's looking like. Well, we just talked
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  with the entire c suite team at Highmark,
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  which is based over in Pittsburgh. It's a
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  big integrated,
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  company with its own health system, its own
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  insurance arm. It operates multiple,
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  Blue Cross affiliates
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  on the East Coast.
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  And Highmark is now going to be,
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  affiliating
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  with,
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  the Blue Cross plan in Kansas City. It's
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  the only city specific blues plan there is.
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  And and I say affiliation because for all
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  intents and purposes, Scott, for for most people,
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  it's a merger.
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  But they're the Blues plans are calling these
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  deals affiliations
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  largely because
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  the the actual companies
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  pretty much stay the same in terms of,
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  their c suites, their boards, their, you know,
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  their headquarters, where they operate from. But they
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  can share things like technology,
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  claims abilities, stuff like that. So, basically,
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  pooling resources
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  versus doing it on their own. And and,
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  like I said, doing it all so they
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  can stay competitive with the national payers who,
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  of course, do have those capabilities, especially when
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  it comes to technology. And so Highmark and
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  and Blue Cross of Kansas City is just
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  the most recent that we heard this year,
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  but,
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  we heard,
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  that
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  Cambia Health Solutions, which is, it's a parent
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  company of Regions, which owns the Blue Cross
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  plans on Ottawa Blue Cross plans on the
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  West Coast. They're gonna be picking up, the
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  Arkansas Blue Cross plan and then also the
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  North Dakota Blue Cross plan. And we saw
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  a similar deal,
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  a few years ago with, the Vermont plan
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  becoming a subsidiary of the Michigan plan. So,
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  basically, long story short, the Blues plans are
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  consolidating
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  because we are no longer in an era
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  where they can go it alone. And so
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  I think it's probably fair to say that
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  we will see other types of these deals,
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  in in the the year to come. And
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  then we also saw the Hawaii plan is,
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  gonna be looking at a merger with,
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  a health the the largest health system in
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  Hawaii. So, basically, largest insure largest insurer and
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  largest health system would become one large vertically
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  integrated company. So different strategies playing out, but
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  but all a consolidation,
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  trend. But really remarkable in these,
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  like, Highmark in Kansas City are still not
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  for profits
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  Yeah. Compared to Elevance Health, which was the
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  old Anthem Blue Cross, which is a consolidation
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  of several plants,
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  which is now fairly in the squarely in
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  the for profit range and publicly traded.
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  These other plans remain not for profit. Correct?
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  Exam not for profit?
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  Right. It's it's totally different all over the
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  country. Some of them are are nonprofits,
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  especially if they're still independent. But then to
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  your point, a a lot of them are
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  part of larger holding companies that are publicly
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  traded. So it's kind of, yes, they are,
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  but, no, they aren't, if that makes sense.
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  I know Yeah. No. No. It just depends
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  on the plan. It depends on the situation.
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  It was the elements versus the Anthem Blue
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  Cross and a variety of others.
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  Got it. It's publicly traded, but you're got
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  it. But some of these other plans, many
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  are for profit, many are not for profit.
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  Fascinating.
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  But but I think the take home point
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  is harder and harder for smaller independent plans
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  as well as harder and harder for health
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  system plans
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  to to really compete in a very sophisticated
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  tech technology world that also requires a lot
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  of scale to operate.
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  Definitely. And I I would say in terms
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  of where we're seeing some of the health
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  system operated plans be successful,
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  it's few and far between if if I'm
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  being honest with you, Scott. And I'd say,
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  at this point,
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  we're I think UPMC,
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  Kaiser, Permanente, and then Intermountain through their SelectHealthArmor
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  probably,
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  probably to be the most successful right now
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  in terms of operating those vertically integrated
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  models.
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  But, you know, the rest I don't wanna
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  say all, but they're they're struggling,
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  for sure. It's it's turned out to be
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  a pretty difficult business model to to stay,
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  turning a profit.
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  Thank you. And and and very, very challenging
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  for smaller systems.
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  The three that you mentioned are very broad
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  systems with lots
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  of market strength and and lots of economies
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  of scale. Mhmm. Yes. Definitely.
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  And then the other story I thought we
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  could, touch on today is this AI arms
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  race that, to be frank, is, you know,
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  if we ask any hospital CFO about this
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  at this point,
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  they do have an opinion about it because
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  they're seeing it on the ground. And then
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  the insurers are being, or at least some
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  of them are being pretty candid about,
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  that this is a notable impact on their
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  financials,
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  during their earnings calls with investors. And so,
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  this past year, as we're digging through those
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  earnings calls, the,
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  just for example, Elavance, the CEO, they're flagging
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  elevated utilization rates, in terms of care that's
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  being utilized, and and that's nothing new this
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  year. And then,
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  cost pressures that they're blaming on aggressive provider
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  coding, and that's a direct quote,
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  for for driving up costs. But then when
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  we talk to hospital executives about this, you
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  know, they
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  they push back on that saying that it's
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  a a almost a scapegoat,
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  about a about a very real problem, which
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  is that continued
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  adversarial payer provider dynamic that's now being further
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  fueled
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  by automatic denials, administrative friction,
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  that is seems to be getting worse with
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  with the advent of all the new AI
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  software and tools that both sides are employing,
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  to to basically get as much money as
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  they can from the other.
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  And so
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  that's basically what what's what we're what we're
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  seeing. And, you know, to be fair, insurers
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  are facing very real cost pressures.
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  We know, you know, care utilization is definitely
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  up. The GLP one factor is is a
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  massive,
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  behavioral care, ER visits. It's all up.
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  So so these are very real things. But
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  then on the flip side, we also know
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  that, for example, like UnitedHealth,
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  they have a thousand AI use cases,
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  across the company right now, and that includes,
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  you know, using
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  AI for for,
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  coding and and things like that. And so,
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  basically, the providers are now having to play
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  catch up, and they're having to employ tools,
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  like ambient listening, for example,
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  to make sure that they're capturing
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  all or that they're coding, all the services
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  that are actually being provided. And then now
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  and then insurers come back on those earnings
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  calls, like I mentioned, and and saying that
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  aggressive provider coding is driving up their costs.
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  So it's a very real friction that's, like,
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  it's always existed, but it's been it's getting
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  worse because of AI.
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  And both of them are having margin challenges.
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  Large insurance companies Yeah.
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  Other than CVS, which is CVS, Aetna, and
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  PBMs,
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  all the big payers are down this year.
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  The big health systems are barely making margins,
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  and and everybody's concerned about the change of
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  subsidies,
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  which seems to benefit both the health systems
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  and the insurers,
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  but probably causes health care inflation
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  too. So what you've got is this ongoing
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  arm between the two, and at the same
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  time,
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  cost pressures on the average consumer, the average
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  employer,
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  all of us going up significantly too for
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  health insurance and our health care costs. So
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  what a mess overall.
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  Yeah. And I think, you know,
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  a really poignant quote that I heard yesterday
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  during an interview with, doctor Sachin Jain, who's
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  the president and CEO of SCAN Group, the
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  the Medicare Advantage company over on the West
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  Coast. He he used to be at a,
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  a subsidiary of Ellevance. He used to be
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  in the federal government,
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  working on health care policy. So he know
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  he he's an expert on this kind of
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  thing. And he said that right now, they're
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  they're seeing this themselves, that it's the bots
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  battling the bots is a very real thing.
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  And and to quote him, he said, this
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  should be a wake up call for all
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  of us to think about designing a different
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  health care system because this is so much
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  wasted effort that there's now these huge administrative
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  infrastructures,
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  a huge middleman economy in in health care
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  that is basically armed to do nothing that's
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  related to actual patient care, that everybody's spending
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  all this effort trying to figure out how
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  to get paid and how to deny payment
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  instead of figuring out how to streamline the
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  actual experience of health care. And then he
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  ended his quote by he's basically saying, I
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  think we should all take a pause and
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  say, can we end all of this madness
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  because it is absolute madness? So that's him
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  directly responding to me asking about this AI
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  arms race trend, that we're hearing about from
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  both sides right now. Well, in in in
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  his thoughts seem to many of us to
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  be right on.
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  There's so much cost spent in the administration
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  of health care versus providing health care,
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  and it seems to just be another piece
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  of what's blowing up all of the cost
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  in health care. Yeah. Absolutely. And, you know,
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  this all comes amid the context of the
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  fact that, come January 1, CMS is gonna
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  be implementing prior authorization requirements for some services
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  under
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  services under Medicare, traditional Medicare for the first
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  time, and they're gonna be using AI vendors,
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  that they've already selected, many of which are
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  backed by,
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  or used by these large insurers
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  to to do this.
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  And then we're also seeing some states.
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  New Hampshire lawmakers introduced a bill,
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  in the last few weeks that would prohibit,
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  insurers from using AI to conduct audits of
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  provider codes. So there is, you know, there's
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  a there's a policy,
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  context here too. Some of the states seem
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  to be getting involved or at least have
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  their eye on this. And then at the
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  federal level, Medicare is is gonna be jumping
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  into this very issue. So we'll see how
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  that goes. You know? There's nothing that's happened
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  yet, so we we can't judge what's being
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  done. But, but that's also a big piece
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  of this conversation too, I think.
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  And, I mean, the reality is there's really
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  no way around using some of these technologies
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  to try and place what are the cost
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  of health care. So
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  there's no way around this, and it's a
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  matter of how it's used and
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  and and how that authority is exercised and
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  so forth. And, I mean, you could try
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  and guard against the abuses,
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  but trying to stop technology entirely from being
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  involved in these processes
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  seems in insane.
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  You know, it hits a populous tone where
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  I could use AI to deny your claims.
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  But the reality is whether that's good policy
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  or not, it's totally different thing.
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  Yeah. Well, I think one thing is for
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  sure that next year, it's gonna we're gonna
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  hear about this more and more. I I
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  was reading a piece by Molly Gamble here
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  on our team, about just AI and health
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  care overall and some of the predictions going
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  into next year based off of what leaders
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  are telling us. And if if you consider
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  this year the era of the pilot of
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  AI within your health system,
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  then next year's the full it's here. It's
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  implemented. The data's coming back. We're now gonna
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  fully see what this is doing
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  on on
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  health outcomes and then ultimately, of course, on
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  revenues as well.
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  Fantastic.
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  I wanna
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  Jacob,
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  always learning something when I talk with you.
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  I wanna thank you for joining us today,
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  on the Becker's HealthCare podcast. You do an
• 12:27
  incredible job. Thank you very much for joining
• 12:30
  us. Thank you, Scott.