Latest / Becker’s Healthcare Podcast / Jakob Emerson on Payer Trends, AI ROI and UnitedHealth's Expanding Financial Business

Transcript

Jakob Emerson on Payer Trends, AI ROI and UnitedHealth's Expanding Financial Business · Becker’s Healthcare Podcast

• 0:02
  - GLP ones, Medicare Advantage Headwinds, a Medicaid landscape
• 0:06
  - that looks different
• 0:07
  - every quarter.
• 0:09
  - Their leadership right now means making durable decisions
• 0:11
  - in an environment that keeps moving, and the
• 0:13
  - organizations pulling ahead are the ones that stopped
• 0:16
  - waiting for stability
• 0:18
  - before acting.
• 0:19
  - Becker's fifth annual fall payer issues roundtable convenes
• 0:22
  - more than 500
• 0:24
  - executive level attendees
• 0:25
  - and 70 plus speakers November second and third
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  - at the Swiss Hotel Chicago.
• 0:30
  - Two days of senior level dialogue on affordability,
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  - benefit design, value based care, and the strategies
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  - shaping how care gets financed
• 0:39
  - and delivered, featuring a celebrity keynote from pro
• 0:43
  - football hall of famer, Emmitt Smith. Agenda and
• 0:46
  - registration at beckerspayer.com.
• 0:48
  - Click events in the upper right.
• 0:51
  - This is Scott Becker with the Beckers Health
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  - Care Podcast.
• 0:55
  - I'm thrilled today to be joined by Jacob
• 0:57
  - Emerson.
• 0:58
  - Jacob covers the payer area, I think, better
• 1:00
  - than anybody else in the country. He updates
• 1:03
  - us regularly on issues, trends, and stories he's
• 1:05
  - watching.
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  - Jacob, let me tee you up and turn
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  - it to you.
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  - What are the couple of the stories that
• 1:10
  - you're watching in the payer arena currently? What
• 1:13
  - what's happening there?
• 1:14
  - Sure. Good to talk with you, Scott. So
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  - I thought one story that caught my eye
• 1:20
  - or
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  - a small story that adds to a bigger
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  - trend at UnitedHealth is a purchase that they
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  - made of a health benefits platform. So HSAs,
• 1:30
  - FSAs, stuff like that, they bought a new
• 1:32
  - platform
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  - company,
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  - that goes under that part of their business,
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  - and
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  - the executives last year kind of hinted it
• 1:40
  - that this is a a growing area for
• 1:42
  - them to expand margins,
• 1:44
  - the the financial side of their business. And
• 1:46
  - so I'll dive into that and I think
• 1:48
  - kind of what it means and how the
• 1:49
  - company is using,
• 1:52
  - basically, the bank that they own to continue
• 1:54
  - to grow profits and and what this new
• 1:56
  - purchase
• 1:57
  - means within that.
• 1:59
  - And then another story that I thought we
• 2:00
  - could talk about is,
• 2:02
  - insurers talking about how they're they're investing and
• 2:05
  - implementing in AI, which
• 2:08
  - is is a lot. But but we heard
• 2:10
  - something new, a contrasting take during these last,
• 2:13
  - second quarter earnings calls,
• 2:15
  - for the first time from one insurer, Centene,
• 2:18
  - their CEO getting on the call and talking
• 2:20
  - a little bit about how she doesn't wanna
• 2:21
  - just get on earnings calls and talk about
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  - how they're investing in AI just to essentially
• 2:26
  - please investors, but they want to bring,
• 2:29
  - how those investments are actually translated into increased
• 2:33
  - ROI for the company.
• 2:34
  - And I thought that was a really interesting,
• 2:37
  - candid take, and and really the first side
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  - I've personally heard,
• 2:40
  - from some of the big insurers around how
• 2:42
  - they're how they're using this tech. You know,
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  - I and I'd love that. More of the
• 2:46
  - discussion from just investing in it to real
• 2:48
  - use cases. Yeah.
• 2:50
  - Let's start with the first story of what
• 2:52
  - UnitedHealthcare is investing in,
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  - and and where you see that. And
• 2:56
  - we we we certainly see
• 2:58
  - a lot of the big payers
• 3:00
  - have softened their coverage in some Medicare Advantage
• 3:03
  - markets that's led some people out of Medicare
• 3:05
  - Advantage back on the uninsured roles. Or not
• 3:08
  - not so not so much Medicare Advantage, but
• 3:09
  - the ACA as well. Both. Both, really. But
• 3:12
  - but talk to us about United's acquisition because
• 3:15
  - we we're we're we're hearing a lot from
• 3:16
  - health systems about
• 3:18
  - ACA enrollees
• 3:20
  - rolling off of the ACA coverage and going
• 3:22
  - back to uninsured,
• 3:24
  - and some of the Medicare Advantage coming down
• 3:26
  - from the 54% high a year or so
• 3:28
  - ago to 51 or 52%.
• 3:30
  - Mhmm. But but tell us about the United
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  - acquisition and how that fits into everything. Yeah.
• 3:34
  - And I think going off what you just
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  - said, I mean, at the end of the
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  - day, these are everything companies like we've talked
• 3:39
  - about many times, Scott. And so how do
• 3:41
  - they keep,
• 3:43
  - growing revenue? How do they keep
• 3:45
  - pleasing Wall Street? And they've got to find
• 3:48
  - new profitable areas to expand into or grow
• 3:51
  - margins in existing areas. And so,
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  - UnitedHealth,
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  - we we found out through an SEC filing
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  - just this past week that they paid $3,000,000,000
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  - for
• 4:01
  - benefits administration
• 4:02
  - platform, Allegis.
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  - And, we didn't know the price before, but
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  - but basically, Allegis is it's a,
• 4:09
  - it's they have 6,000,000,
• 4:12
  - customer excuse me, 26,000,000
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  - customer members, and they process $6,000,000,000
• 4:17
  - in in health care payments every year. So
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  - that's things like HSAs, FSAs, health reimbursement arrangements,
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  - COBRA coverage,
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  - everything that's kind of like the little extras
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  - attached to certain commercial health insurance plans. Right?
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  - And
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  - so what I thought was interesting,
• 4:33
  - it's an it is that this is, you
• 4:35
  - know, a big purchase, of course, but maybe
• 4:37
  - not for United overall, but it is a
• 4:39
  - big purchase.
• 4:40
  - But last year, we heard their CFO talk
• 4:43
  - about how
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  - the opportunity to expand within the financial services
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  - arena overall is a major substantial opportunity for
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  - them and talked about how,
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  - growing in this area, they're gonna they wanna
• 4:55
  - accumulate more deposits. They want, it's more cash
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  - flow for the business. It's a very attractive
• 5:01
  - margin
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  - business, and it's been somewhat
• 5:04
  - at the time, he talked about how it
• 5:05
  - had been somewhat sidelined at the company, but
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  - I think this latest purchase shows it's becoming,
• 5:10
  - it's becoming front of mind. And then he
• 5:12
  - also talked about how they they restructured,
• 5:16
  - Optum Optum Financial earlier this year, which is
• 5:20
  - under Optum Insight, the tech arm.
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  - It doesn't really matter, but, basically,
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  - that's Optum Financial is a bank. It it's
• 5:27
  - headquartered out in Utah. It's not even in
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  - Minnesota, and that's their portfolio of all their
• 5:31
  - financial products, solutions,
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  - those same things, HSAs, FSAs.
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  - And and the big piece here, Scott, and
• 5:37
  - this is this is just data from 2023,
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  - so I'm sure it's grown a lot since,
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  - especially with this most recent recent purchase.
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  - But as of 2023,
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  - Optum Bank had 5,000,000 customers. They have $400,000,000
• 5:49
  - in broker deposits. They were making almost $600,000,000
• 5:52
  - a year in interest income. Again, that's three
• 5:54
  - year old data. So I can't imagine what
• 5:56
  - it's become, but I think just overall, this
• 5:58
  - is like the CFO said, it's a high
• 6:00
  - margin business.
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  - This purchase points too, they wanna grow more
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  - of it. And and as you said, the
• 6:06
  - insurance business, you know, it's it's been struggling
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  - for a few years now. It's a low
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  - margin business just in general,
• 6:12
  - and we've seen what hap what has happened
• 6:14
  - in the last year or so with the
• 6:15
  - Optum Health side, the care delivery business, and
• 6:18
  - the difficulty with the margins there. So now
• 6:20
  - we see this is how UnitedHealth is gonna
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  - is gonna keep growing revenue. We're one area
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  - where they're gonna keep,
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  - Wall Street happy.
• 6:28
  - Oh, fascinating. You referred to it as like
• 6:30
  - you know, it's years ago, people called Amazon
• 6:32
  - the everything store, and and I love the
• 6:34
  - fact that you use the term the everything.
• 6:36
  - They do everything, which is really true of
• 6:38
  - The Unites of the world as well. So
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  - the the the terminology of the everything. Right.
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  - The insurance business is part of the portfolio.
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  - Huge part of their business is different technology
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  - and AI businesses and
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  - practices and, you know, the actual providers of
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  - health care and and everything. It's really fascinating.
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  - Talk about the next thing you said, which
• 6:56
  - was you had mentioned that
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  - one of the big payers started to talk
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  - about
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  - not just investing in AI, but where are
• 7:04
  - they seeing actual use cases and and talk
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  - about where you're seeing that and where they're
• 7:08
  - seeing some success so far if if they're
• 7:10
  - seeing it. Yeah. And so, I mean, just
• 7:12
  - to preface, I'd say, like, we've been covering
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  - all the the talk of the size and
• 7:17
  - speed of AI investments
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  - from I mean, pretty much every company that
• 7:21
  - that Becker's covers and talks to health systems
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  - included,
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  - and certainly from the payers
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  - United has, talked to us about how they're
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  - investing a billion and $0.5 this year, a
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  - billion and $0.5 next year into AI. Elavance,
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  - a billion dollars. CVS has been talking to
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  - us about a $20,000,000,000
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  - decade long technology,
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  - investment commitment that includes AI. So everything on
• 7:43
  - these earnings calls, Scott, for the last year
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  - or so has been AI, AI, AI. And
• 7:48
  - and it's I think it's also reflects what
• 7:50
  - investors have been wanting to hear. But then
• 7:54
  - this past earnings
• 7:56
  - call,
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  - chapters
• 7:58
  - for the second quarter, Centene's CEO, and Centene
• 8:01
  - is the the largest Medicaid managed care insurer
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  - in the country,
• 8:05
  - gets on their earnings call and she says,
• 8:07
  - you know, that it's easy to get on
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  - one of these calls and say we're doing
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  - AI everywhere. We've got all these great partnerships,
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  - but her view is that there's also a
• 8:15
  - risk of spending a lot of money in
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  - on AI and getting no return for it,
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  - and that's not something that they can do
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  - as a Medicaid first company, especially in the
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  - margin compressed environment
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  - that insurers are operating in. And I I
• 8:27
  - think that's interesting
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  - because, again, I have not heard a health
• 8:30
  - insurer be that explicit about it in terms
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  - of not just kind of honestly sounding a
• 8:35
  - bit like a press release when it comes
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  - to talking about AI, but also that, you
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  - know, over these last few months, we've started
• 8:41
  - to see companies outside of health care
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  - definitely talking about blowing through their AI budgets
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  - and not being able to connect those budgets
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  - to to,
• 8:51
  - an increase in revenue or to measurable improvements
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  - in in their products. And and that's not
• 8:56
  - to say that Centene didn't do that because
• 8:58
  - Sarah London, the c CEO, she did talk
• 9:01
  - about how
• 9:02
  - they they are producing tangible results with AI,
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  - through financial forecasting, fraud and abuse detection algorithms
• 9:09
  - for for their claims data. Their legal department
• 9:11
  - is saving money, because of, they're able to
• 9:14
  - go through,
• 9:15
  - counsel invoices faster. They're able to do clinical
• 9:18
  - documentation reviews quicker, and I think anybody who's
• 9:21
  - used these tools knows that that makes sense.
• 9:23
  - They can go through documents and large large
• 9:26
  - datasets much faster than a human could.
• 9:29
  - But overall, she's basically just saying they're not
• 9:32
  - gonna deploy AI just to talk about it
• 9:33
  - with investors.
• 9:35
  - They wanna do it in a way where,
• 9:37
  - it it it makes sense and they get
• 9:38
  - a tangible return on that investment. And so,
• 9:41
  - like I said, I just think that that's
• 9:42
  - it's an interesting,
• 9:44
  - point to make right now given given the
• 9:46
  - context of what other companies have been saying.
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  - But but I love that. I do think
• 9:51
  - that is the next level of people trying
• 9:53
  - to make sure that they're not just making
• 9:55
  - lots of noise with AI Mhmm. But actually
• 9:57
  - getting useful
• 9:58
  - and ROI use cases out of it. I
• 10:00
  - think that's I think that's right on, and
• 10:02
  - I and I love the clarity of the
• 10:04
  - thought on it. Yeah. Definitely. And I I
• 10:06
  - would just close with, she she she closed
• 10:09
  - by basically saying
• 10:10
  - that long term differentiation
• 10:12
  - with AI among maybe just all companies, but
• 10:15
  - I think she's probably referring to health care
• 10:17
  - companies, will increasingly come from proprietary data and
• 10:20
  - context model technology that becomes as the technology
• 10:24
  - becomes more
• 10:25
  - commoditized.
• 10:26
  - So basically saying they need to make sure
• 10:28
  - they have a good foundation
• 10:30
  - for AI,
• 10:31
  - because,
• 10:32
  - you know, we we've seen a lot of
• 10:34
  - lawsuits pop up more in the Medicare Advantage
• 10:36
  - space of,
• 10:37
  - insurers getting sued,
• 10:39
  - for for allegations they've been using AI algorithms
• 10:43
  - to
• 10:44
  - deny care,
• 10:45
  - or and maybe not in even in an
• 10:47
  - illegal way, but,
• 10:49
  - in a more industrialized
• 10:51
  - way or a quicker way. So, you know,
• 10:53
  - in a in a in an environment where
• 10:55
  - they have to be, you know, compliance and
• 10:57
  - audit ready, I think it's a really good
• 10:58
  - point.
• 11:00
  - No. I love that. And and you're absolutely
• 11:01
  - right. It's not so much. It's just more
• 11:03
  - systematic, more industrialized way than used to do
• 11:05
  - it before where people were slow at it.
• 11:07
  - The machines are very fast at turning out
• 11:09
  - denials, pre auths, whatever it might be.
• 11:11
  - And I think the evolution, the point on
• 11:13
  - being context specific,
• 11:15
  - being domain specific or dominant, being really good
• 11:18
  - in specific areas of it is probably so
• 11:20
  - important in the long run so you're not
• 11:22
  - just commoditized with generally,
• 11:24
  - you know, good LLM models. I think that's
• 11:26
  - a fascinating point. Yeah. Jacob, I wanna thank
• 11:29
  - you for joining us today on the Doctors
• 11:31
  - Healthcare podcast. It's always one of my favorite
• 11:32
  - ten, fifteen minutes of the week. Thank you
• 11:34
  - so much for joining us. I hope that
• 11:36
  - our listeners enjoy it as much as I
• 11:37
  - do. Thank you very, very much. Thank you,
• 11:40
  - Scott.