Latest / Off the Chart: A Business of Medicine Podcast / S1 Ep189: Value-based care is still treading water, with Dan D'Orazio of Sage Growth Partners
Transcript
- Speaker 1 0:00 I think we'll see incremental gains at best. We've been at this 20 years, and I think there's areas we're getting smarter in. Again, we're 10 or 15 years into this. Austin Littrell 0:12 Welcome to Off the Chart, a business of medicine podcast featuring lively and informative conversations with healthcare experts, opinion leaders, and practicing physicians about the challenges facing doctors and medical practices. My name is Austin Latrell, and the associate editor of Medical Economics, and I'd like to thank you for joining us today. In today's episode, Medical Economics managing editor Todd Shryock sat down with Dan Derazio, CEO of Sage Growth Partners, to ask whether value-based care will ever actually replace fee-for-service. Derazio argues that the shift has barely moved since it began and earnest nearly two decades ago, and he walks through why the revenue from fee for service still dwarfs the penalties meant to push hospitals and practices away from it, why AI won't fix the incentive problem, and what capitation and Maryland's global budget model can and can't do. He also explains why physician-led organizations are one of the few places that he sees real promise. With that said, Dan, thank you for joining us. Let's get into the episode. I'm Todd Shryock 1:12 here with Dan Durazio, CEO of Sage Growth Partners, to discuss value-based care. Dan, thanks for joining me. Speaker 1 1:19 Thank you for having me, Todd. Todd Shryock 1:21 So, Dan, how would you characterize where value-based care adoption actually stands today versus where everybody kind of expected it to be five or 10 years ago? Speaker 1 1:34 I would go back even further and say, in 2008 and nine, when the dawn of this really had a lot of hope and aspirations, I don't think we're much further than we were, and I, and I don't believe it's because of a lack of effort. I think we have an inherently very complicated, interrelated system with a very varying degree and oftentimes competing financial and clinical models in the process, and and if you go back even further to say World War II when the fee for service started, and project forward to today, we're about 80 years into this new healthcare system where fee for service has been dominant, and so we're really looking at a window of 10 to 20 years in a history of 80, and and that's what we're trying to make progress on. and And for that reason, I think it's it's been minimal if you look at the just sort of the gestalt of you know everything is going to be value based care. Todd Shryock 2:41 So what what are the obstacles? Why is this not moved along the way that many experts thought it would? Speaker 1 2:49 I think there's a a finance component to this, and then there's a care model, human behavior, workflows, technology, healthcare spending, physicians versus hospitals, so many different dynamics. So if we just dial back a little bit, the way we finance care is still fee for service. Even even if we look at the value based care programs, they're still pegged to fee for service programs, and often the incentives to remain in fee for service, even with the penalties far outweigh the penalties. So, like financially, there's not a lot of risk or alternatively benefit to the current models. You know, comparatively, healthcare is local. Data is disparate and unclean. Technology has really only arrived in the last 20 years, and many people say that the EMR has made things more difficult, not easier. And so we have interoperability and data challenges. So the flow of information is is not easy, and then again these competing incentives. So, if you look at models like remote monitoring, and I'll go back 15 or 20 years, we had implantable cardiac devices that were capable of sending discrete data when someone would sleep next to a bed, and we would know if they were having atrial atrial fibrillation asymptptomatically, which is a good thing because if you if you have it asymptptomatically, you're going to have stroke, and that's not a good thing. So the data from the devices was available. The home monitors had cellular capability, but providers were only remotely monitoring probably 20% of their patients that had this implantable device, even at a time 15 or 20 years ago when Medicare was paying more for a remote visit than an inpatient visit. So we have. Physician behavior and and workflows, which were not easy for physicians, it wasn't a technology problem. We have patient behavior, we have medical legal concerns, we have human workforce concerns. So who's going to catch that data and act on that data? Is that data going to go into four different portals? Because there's four major device companies, and and where does that data flow? So who's going to intersect it? We have alert fatigue. Is the data that's coming across really believable? So when you think about something like remote monitoring or care outside the walls of the hospital, the technology's there. It's everything around that technology, the components I just described that make it really challenging to bring everything together. Todd Shryock 5:45 So, where are we going with this? If there's so many challenges, like is it possible to overcome these challenges, or is value-based care always going to be kind of in the background? Speaker 1 5:59 It's a big question. After 20 years, I think we're still treading water at its finest. So, put a little of this in perspective from a financial means. So, on paper, Elon Musk just became the first trillionaire about a month ago. So he calls me to say, how much would it take? How long would it take to spend a trillion dollars? He's one person, so if you spent a million dollars an hour for 24 hours, it would take 117 years to spend a trillion dollars. To put that in perspective, healthcare spends $5 trillion every year at this point, so we're talking about spending a million dollars an hour for 24 hours, 571 years to spend that $5 trillion. Spending a million dollars an hour-it's remarkable, right? So we're 250 years old. Spending that much, it takes 570 years. So then the question becomes: Value-based care. What are the financial corollaries between fee-for-service and value-based care? So if you look at something like hospital readmission penalties, which have basically been in the 15 to 17 percent range, they haven't really moved too much. They've gone up and down in the last 15 or 20 years. The average hospital is facing a penalty of 150 to $200,000 for voidable readmissions that they get a penalty on. So if if I'm and we've heard hospitals say this, if I'm a hospital and I take that readmission. I'm still getting paid on a fee for service basis, and I'm not getting fully penalized for it. So if I'm not at capacity, I'm still putting people in those beds and getting revenue for my operating costs. So now, if if I'm facing 150 to $200,000 as a smaller medium hospital, the average penalty is about, or the average revenue could be 15 or 20 times the penalty, even though it's a penalty. So the incentive is wildly disproportionate to keep going down the fee-for-service route, and I wouldn't even consider it 150,000 to 200,000 a drop in the bucket. I mean, we just talked about how we spend 5 trillion a year. So if you add up all these programs, we are so marginally making a difference. Now we are getting better with treating patients. There are better outcomes. We've seen better performance with bundled programs, right around specific conditions. I think medically speaking, patients are very complex, and so for a physician or a provider or a hospital to really be able to say I can control or change their behavior on my own is not realistic. So when you look at social determinants of health and other factors that that drive health status. 15 or 20% is actually controlled or directed by the clinical performance. The other components are unrelated to the physician or the or the physician's abilities, right, or their span of control. So then you put the consumer in this mix, and and we have to partake in our own health and behaviors, and that's not something we've been very successful at as Americans. Todd Shryock 9:28 So, if the challenge is so great, why do we keep hearing from payers, especially and and the government as well? You know, value-based care, value-based care, value-based care. You know why do we keep going down this road if if it's really not you know the panacea that it was made out to be you know a decade ago? Speaker 1 9:49 So we spend five shilling a year. Healthcare costs rise on five to five to 7% on average every year. The spending's out of. Control and unsustainable. Roughly 61% of Americans are covered by commercial insurance or the employers. The rest, that 40% is Medicare and Medicaid. Employers didn't get in this business to be healthcare companies, but they're bearing the cost. So every dollar we spend on healthcare competes with $1 for infrastructure, education, paying off the national debt, right? And so, we're the large. The U.S. is the largest economy in the history of the world, and healthcare is the largest vertical in the history of the world. And so, when you have something growing at five to 7% a year, it means it's going to double every eight to nine years. So if we're at 5 trillion, we're going to go to 10 trillion. You, we can't sustain that growth, right, with the total GDP projection and the costs. So everyone says we've got to do something about this. The reality is, what we're impacting is so small in terms of total dollars that I don't think it's meaningful to really move the system, and because of all the other reasons I've described, it's just fundamentally fundamentally so difficult. Here's another example I often use. You know, we often say, "Why can't we just do online scheduling in healthcare like we do for the airlines? Should be easy, right? I need a doctor. Are they available? Well, there's something called provider data, which is how accurate is the data on a provider. So health plans have this information, and they put it in a directory and say, you know, Joe is available. He's a cardiologist. Well, there's all kinds of different cardiology, electrophysiology, general cardiologist, primary care deals with that. So even if I wanted to go to my health insurance portal and say I want to find a cardiologist, a do I actually know that I need a cardiologist? What kind of cardiologist? So there's provider data, and then there's interoperability, like can actually connect the systems, and then there's something called physician schedules, like how they look at their templates, their available slots. It's not like I just know I need a seat on a plane, right? I could be a very basic person, and frankly, an orthopedic doctor doesn't want to see a sprain because they operate. So even down to something as simple as how can I schedule something and drive capacity, there's so many intervening factors, and if you relate that to then value-based care, and I'm just talking about scheduling an appointment for access, let alone how we pay for it. We have an access challenge. We have rural health deserts. All of these things come together and make up this 80-year-old system that's wildly complex. And back to your question of why do we keep talking about it? We don't have a choice because it's the the spend is so tremendous. The question is, how can we really make a meaningful dent? We're we're 10 years or 15 years into this experiment of an 80 year system that is really out of control, and the other problem is the physicians are different incentives than the hospitals than the med device companies, the insurance companies. No one is really there's not a through line into all these parties benefiting. It's sort of more zero sum in terms of I win you lose. The average person might stay on a health plan 18 to 24 months in the commercial world longer in Medicare Advantage. So, what's my incentive to really longitudinally, which is value-based care's real goal, monitor and measure that progress, those health outcomes, and how do I benefit? It's not that physicians show up every day and say I don't want to do the best job. It's not what I'm saying. The system is incredibly, the connective tissue is real, and you can't really just pull something out and say it's going to be fixed because it's so intertwined. Keith A. Reynolds 14:23 Hey there, Keith Reynolds here, and welcome to the P2 Management Minute. In just 60 seconds, we deliver proven, real-world tactics you can plug into your practice today. Whether that means speeding up check-in, lifting staff morale, or nudging patient satisfaction north, no theory, no fluff, just the kind of guidance that fits between appointments and moves the needle before lunch, but the best ideas don't all come from our newsroom. They come from you. Got a clever workflow hack, an employee engagement win, or a lesson learned the hard way? I want to feature it. Shoot me an email at kreynolds@mjhlifesciences.com with your topic, a quick outline, or even a smartphone clip. We'll handle the rest. And get your insights in front of your peers nationwide. Let's make every minute count together. Thanks for watching, and I'll see you in the next P2 Management Minute. Todd Shryock 15:17 With all these technical challenges, you know you just mentioned scheduling. You know, I hear a lot about oh, don't worry, AI is going to solve all these issues. AI is going to solve all these issues. What's your perspective on that? Speaker 1 15:32 The first component that you have to deal with is data quality in healthcare. So AI will only be as strong as the data that it sits on top of, and in fact, AI can make things worse quicker because we don't have the right data. So when we think about routine tasks, call centers, scheduling, and and the voice technology is really coming up to speed. The ability to interact with an agent is powerful. AI is real, and I'm hopeful. It does not change all these other challenges I described. It doesn't change the incentive problem. It might make the data cleaner if the data's foundation is clean. It it doesn't change the physician's clinical opening of how they create their scheduling templates, right? It doesn't change fee for service. So we have a ton of administrative waste, and I think AI is powerful for removing manual tasks. But so much of this is is the human dimension, right? So what do I do as a patient that's different because of AI. Maybe I could research my condition. I might be able to schedule easier because there's call automation. I think we'll be able to do stuff sooner, quicker, faster. But does it get at the core of all the other issues I've described? I still don't think it changes those challenges. I think it will marginally improve the routine, way too high of administrative burden in healthcare. So if you look at healthcare compared to other industries, and you look at the percentage of economic impact that healthcare drives on the economy, healthcare is the number one driver because it's so big. But if you look at how healthcare drives that economic growth, it's from adding people. And if you look at finance and retail and other industries, you see a huge shift in technology and automation. So I think that's what healthcare has been missing for a long time. So we will start to see gains in automation and technology, but it won't mean that an avatar is going to treat me right. It I think will help change some of the workflow or information or administrative components, but we will. need GLP ones if it were easy to change behavior. So I don't see how AI is fundamentally going to change healthcare. We have a behavior challenge, right? These are humans, and there's behavioral and behavioral science and health economics involved in all this, so if it were that easy, we would have the GOP ones of healthcare take a shot and lose weight. It's not going to happen in the same way. Todd Shryock 18:32 I want to ask about capitation. You know, in the '90s, the HMO capitation was was a huge thing, and then it didn't really work out, and and kind of went away. But now I'm hearing that word a lot more now. Is this part of the same value-based care push? Is this somebody grasping at straws to try and find something? You know what's going on with capitation right now? Speaker 1 18:58 You could look at the data and see incremental growth in that, and I think this administration is certainly pushing more towards data technology mandatory programs, which makes sense on some levels. But capitation means you have all the clinical and financial and administrative capability to make it work. So if you think about a Kaiser or a Geisinger, there are these integrated systems between financing and care delivery, and they're closed networks, right? So you have the ability to understand or narrow your network. That whole HMO gatekeeping process left people with a really bad taste. So, if you have an open network, you don't really control where people go. You have to give people choice. We have clients. One of our clients, Integrated IHCS, is a is a fully capitated home health TME and infusion business, and they impact about probably, I think that. Part of the world, maybe a 6% of total Medicare spend. But if you think about all the parts that go into capitating that part of the world, there's a ton of moving parts. You have to be able to underwrite. You have to be on the street. You have to know data. You have to do all the coordination of care. You've got to get someone released from a hospital to get the equipment to their house, right? I mean, the logistics of this are daunting, and the other the the reason I think people think about capitation is it's one person responsible. So if you think about a bundled care episode, that's an episode and you get one payment, but in capitation, it's sort of what the payers have to deal with, right? They inherit a life. They're expected to control the spend in the clinical. That's a really daunting task. So if you look at provider-sponsored health plans, you know health systems that have gotten into operating or having products from a Medicare Advantage or commercial insurance product market. Becker's did an article about a year ago that eight of those systems have sold or folded their health plan operations. It is no easy task, and there's also a separation between clinical and financial. Right? I mean, if someone comes into the emergency department or my doctor, am I really going to say I shouldn't or can't treat you because you have this insurance versus that insurance? So, capitation in theory is let's make one group or entity in the most control of clinical and financial outcomes. And if you look at Maryland, are you familiar with the Maryland model, Todd Shryock 21:41 no. Tell me about that. Speaker 1 21:43 So Maryland is is the only state in the country right now with what we call global budgets at the hospital level. So it's a program that's there were three or four other states that don't do this any longer, but it's coming back into vogue with the ahead program with CMS, where basically you say to a hospital, based on this data, you're going to get the equivalent of 500 admissions this year, and whether you have more admissions or less, you're going to get the revenue for 500 admissions. And so it's sort of like a salary; it's fixed, right? Whether you spend too much and need a credit card, or you save enough and have a savings, it's on you. And in theory, that's great because you won't have to control the care and have these coordinated entities. So capitation, in theory, is like let's get to that point. But if you think about all the parties I've described, so in Maryland they've gone to this global budget for the hospitals, and it certainly has changed behavior. Who I interact with in my post-acute world is different, right? Do I have high-quality providers? Are they going to send me readmissions? Because in this world, readmissions don't mean more money; they mean more utilization of my resources. So now that program will will spread to the physician world, right? Because capitation doesn't mean global capitation, doesn't mean professional services and hospital. So there's these different spends, and so yes, we would love to coordinate this. I mean, CMS is the closest one you can come to this because they control the spend, and it's a single payer right in addition to Medicare Advantage, but if you look at the commercial insurance world and and employers, they don't control all these networks. They have employees in all parts of the country. So, how do you capitate and control this? is a is a wildly daunting task. So, that's the hope to control spending, but it's really, really incredibly difficult to execute and to align the parties and the incentives and make sure it's not a zero sum game, as opposed to you know everyone's winning or losing. Todd Shryock 23:55 So all of this being said, where do you see healthcare in in five to 10 years? Are we going to be any further down the value-based care path? Are we going to give up on it? You know, where do you see things headed? Speaker 1 24:10 I think we'll see incremental gains at best. We've been at this 20 years, and I think there's areas we're getting smarter in. Again, we're 10 or 15 years Into this, one of the promising areas are physician-led organizations. So, when you look at the data from accountable care organizations, physician-led ACOs perform better than hospitals. Their incentives are completely different, right? I think we need to have a rebirth of physician leadership of independent practices. Right now, about 70% of physicians are in some corporate arrangement. It's because it's too hard to operate, right? If you look at rent and labor, and if you look at over time what Medicare has paid compared to years prior, it's not inflation. It's not keeping. With inflation, well, how could Medicare keep up with inflation? The bill's already too large. How can employers continue to spend? So, if we're going to change the system, we actually have to put significant resources in place. We're still optimizing the EMR 15 years later, 20 years later, because the fundamental data infrastructure and the nomenclatures weren't there to be synchronized, and so that's why it's not that I don't want it to work. But if you look back 20 years to today, why we've made such little progress, you can find it in areas of perhaps specialty. Medicare is a great example. End of life spending, a big portion of that comes in the last six months of life, and it's very controversial when the health when Obamacare was here. People were saying, "Oh, you're going to do death panels. Well, if you look at the amount of spending in the last six months of life compared to the quality adjusted quality of life here is adjusted, like the benefit you'll get is very narrow. So why I'm not paying for it on Medicare? I don't have to make a rational decision as the person getting this huge bill versus I want my family member to stay alive. And if I had to pay that bill myself, we don't have a market. We don't have consumerism. We don't have transparency. We're not on the hook now. Increasingly, yes, we have to pay more and more for healthcare, but an employer is now paying 20 or 25 grand for a family. That's unsustainable. So, yes, value-based care is what we want to say. We want more value for what we spend, but whose value and who cares, and what is the care? I think is the question. So incrementally, I think we'll get better, but we have massive other problems in something like prior authorization. Like you know, it's in the news all the time, but there's about 41 to 45 different steps in a prior authorization that are highly nuanced, manual, state-led. You know, it's not like technology can overcome that. And then you can actually be cleared with a prior authorization as a physician, but not at the facility level. Someone can show up and not get the care. So all of these rules that are here are not going to be unwound. And so it's it's not that I want to be down on this. It's just the inordinate task of unwinding fee for service and finding enough meaningful places to have dollar savings when we spend $5 trillion a year, is the real challenge. Todd Shryock 27:45 Great, interesting stuff, Dan. I appreciate your time. Thanks for joining me. Speaker 1 27:50 Thank you very much, Todd. Austin Littrell 28:05 Once again, that was a conversation between Todd Shryock, managing editor of Medical Economics, and Dan DeRazio, CEO of Sage Growth Partners. My name is Austin Latrell, and on behalf of the whole Medical Economics and Physicians Praxis teams, I'd like to thank you for listening to the show and ask that you please subscribe so you don't miss the next episode. As always, be sure to check back on Monday and Thursday mornings for the latest conversations with experts, sharing strategies, stories, and solutions for your practice. You can find us by searching off the chart wherever you get your podcasts. Also, if you think the best stories that medical economics and physicians practice publish, delivered straight to your email six days of the week, subscribe to our newsletters at medicaleconomics.com and physicianspractice.com. Off the chart, a business of medicine podcast is executive produced by Chris Massolini and Keith Reynolds, and produced by Austin Latrell. Medical Economics and Physicians Practice are both members of the MJH Life Sciences family. Thank you. Transcribed by https://otter.ai