AI transcript
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0:00:20 Hi and welcome to the A16Z podcast.
0:00:21 I’m Hannah.
0:00:27 In this conversation, A16Z BioGeneral partner Jorge Conde, market dev partner Venkat Mochila
0:00:31 and myself talk all about driving value-based healthcare with CEO of Blue Cross Blue Shield
0:00:33 North Carolina Patrick Conway.
0:00:38 Conway, a pediatrician who was also formerly deputy administrator of CMS and director
0:00:43 of CMMI, has worked in both Republican and Democrat administrations and is considered
0:00:48 one of the driving forces behind the national movement to value-based care.
0:00:52 Conway takes a deep dive into what value-based care really means and different models and
0:00:56 ideas for how payers can implement the shift away from fee-for-service and volume-based
0:01:02 care, as well as the role that social determinants play in our healthcare, food insecurity, transportation
0:01:07 and more, how tech can be a driver of change in those areas, and how to take a long-term
0:01:12 view of the ROI in investing in these key healthcare factors.
0:01:15 And finally, Conway shares his thoughts with us from an insider’s point of view from the
0:01:21 Hill on what’s the way to actually affect change in policy and regulation in healthcare,
0:01:24 and where are the areas where we can do that best right now.
0:01:27 So you’re now the CEO of Blue Cross Blue Shield North Carolina.
0:01:29 Can we start with just a little history?
0:01:31 What’s the history of these kinds of plans?
0:01:32 How did they first begin?
0:01:35 So we started in 1933, actually in Cambia.
0:01:37 They’ve been around a hundred years.
0:01:41 Most of these plans basically evolved as like a state resource.
0:01:45 In Texas, it was teacher unions, and the Pacific Northwest, it was timber.
0:01:49 So literally Cambia was timber, and in North Carolina it was a plan that evolved to take
0:01:50 care of a workforce.
0:01:54 Like as healthcare became more expensive, and you don’t want to pick cash, it was well,
0:01:55 let’s take care of a workforce.
0:01:57 That was true in North Carolina too.
0:01:59 So there was two of them that came together.
0:02:02 That’s actually why they’re often called Blue Cross and Blue Shield.
0:02:05 Many of them had like a cross and a shield.
0:02:06 There’s some states where they’re still separate.
0:02:11 Actually, Idaho has Blue Cross and a Blue Shield, but so it’s two blues plans in that
0:02:12 state.
0:02:13 Oh, I didn’t know that.
0:02:14 Yeah.
0:02:15 Same in Washington.
0:02:16 There’s two blues plans.
0:02:18 And then many states like North Carolina, there’s one.
0:02:24 The brand evolved very early on, so 20s, 30s, and it was protection.
0:02:27 Blue Cross and Blue Shield is here to protect you, to take care of you, to take care of
0:02:28 you and your family.
0:02:32 In healthcare innovation, all roads do ultimately lead to the payer.
0:02:37 But as we talk about innovation, there are various sources of innovation that an insurance
0:02:39 plan could undertake to drive change.
0:02:42 What are the big buckets of innovation that you think about?
0:02:44 It’s all about better care, lower costs, sexual experience.
0:02:46 It’s doing it at scale.
0:02:48 It’s across the entire system.
0:02:52 So it’s not like one piece, one program, one whatever.
0:02:55 It’s how do you drive change across a state with 10 million people?
0:02:57 I met a 75-year-old the other day.
0:02:59 We insured every day of our life.
0:03:02 So the platform to drive change is huge.
0:03:07 With that platform, if you actually test new things, if you drive change, it’s a huge
0:03:08 impact.
0:03:11 You need a willing payer to drive change.
0:03:15 And what we’re doing is essentially a virtually integrated system at a state level to drive
0:03:19 change, which I don’t believe you can do from a single provider system.
0:03:23 So you talk a lot about social determinants, so let’s break those down.
0:03:24 What are those?
0:03:27 Yeah, I mean, so, you know, I’m biased, but you can invest in people.
0:03:31 I’m actually working on some proposals to see if Congress would do this.
0:03:37 Invest in food insecurity, transportation, housing, violence and abuse is a major area.
0:03:41 All the drivers of health that are outside that care system.
0:03:45 You could debate whether it’s social determinants or healthcare, but sort of primary care.
0:03:49 So I understand intuitively quite a few of those, but transportation isn’t immediately
0:03:50 obvious.
0:03:52 Why is that a social determinant of healthcare?
0:03:53 There was a great study.
0:03:57 The biggest driver of readmission to the hospital was transportation.
0:04:02 If the person didn’t have transportation home, that was the biggest driver of readmission
0:04:05 because they actually couldn’t get transportation to go to a doctor’s appointment or go to
0:04:06 whatever care they needed.
0:04:10 So they couldn’t get there early enough, in other words, to avoid the intervention?
0:04:13 If you discharge them and they were like, “I have no way to get home.”
0:04:17 If you run all the medical comorbidities, everything you would look for, the biggest
0:04:22 driver of readmission risk was that, that you have no support to get home.
0:04:27 Is that because it’s indicative of their life, their socioeconomic status or is it an actual
0:04:28 cause?
0:04:29 It’s both.
0:04:30 That’s a great question.
0:04:34 It is correlated with socioeconomic status, which is also at risk of readmission.
0:04:39 But it’s also if you had to give them a bus token to get home and they have congestive
0:04:40 heart failure.
0:04:41 Right.
0:04:44 It’s hard to go to the grocery store, hard to go to your doctor’s appointment, all those
0:04:45 things actually.
0:04:46 Yeah.
0:04:50 The chance of them seeing their primary care doctor eating right is way lower.
0:04:54 So we invest in care more in Iowa and Medicare Advantage.
0:04:56 They pick people up.
0:05:01 So they will order Lyft or Uber to get people to the doctor’s appointment because they
0:05:02 know.
0:05:05 If I get them in and I see them and I take care of them, they’re more likely to not get
0:05:10 hospitalized and the biggest driver of cost in America are hospitalizations and drugs.
0:05:15 So if you control hospitalizations, decrease them and control drug costs, that’s the biggest
0:05:16 total cost of care.
0:05:18 So are all those proving out?
0:05:22 Are you seeing examples of how the ROI and those types of social determinants, are there
0:05:24 real examples that you’re pointing to already?
0:05:27 So we talked about transportation, let’s do food insecurity.
0:05:28 So I’m a practicing physician.
0:05:29 I worked in the hospital last weekend.
0:05:31 I take care of kids who get hospitalized.
0:05:32 In all your free time?
0:05:33 In all my free time.
0:05:34 Yeah.
0:05:35 How do you feel?
0:05:36 I do it.
0:05:37 I only do it every weekend.
0:05:43 I take care of kids, including last weekend, way more than should happen, that get admitted
0:05:46 for failure to thrive, which is an adequate weight gain.
0:05:49 And sometimes there’s a medical cause.
0:05:51 Often it is lack of food.
0:05:56 So I took care of a kid last weekend, hospitalized for failure to thrive.
0:06:01 Health system spent $40,000 for that three-day hospitalization and it was lack of food.
0:06:03 We could have fed the kid for years for that hospitalization.
0:06:04 Yeah.
0:06:06 Really about our health system, it’s so backwards.
0:06:09 But when you invest in these things, there is an ROI.
0:06:11 We invest in preventing child abuse.
0:06:14 So I had a for-profit payer that was like, “What?
0:06:15 Why are you doing that?”
0:06:16 I’m a pediatrician.
0:06:21 So I said, “First of all, pretty good evidence of preventing child abuse, has huge positive
0:06:22 outcomes.”
0:06:24 I don’t even understand the place where the question comes from.
0:06:25 His point was the ROI.
0:06:26 Yeah.
0:06:27 But what’s the ROI for something?
0:06:28 We’ll never return to him.
0:06:29 Which is true.
0:06:32 Most for-profit payers, the United Signets, et cetera, including in our market, they’re
0:06:35 like 10 to 15% of the population.
0:06:36 They have churn.
0:06:40 They’ll talk about social terms, but in reality, they’re going to invest in more near-term
0:06:44 things because they know people are moving it out and I’m biased.
0:06:49 But I think the mentality is we ensure people often for decades.
0:06:51 So there is an ROI.
0:06:52 More importantly, it’s the right thing to do.
0:06:53 That’s why we do it.
0:06:56 But in reality, we measure in things that are more near-term.
0:06:58 Some of them are shorter term.
0:07:01 Actually, food insecurity, transportation are probably shorter term.
0:07:07 Honestly, it’s hard to measure preventing child abuse because it’s decades-long outcome.
0:07:12 But there’s good evidence on the return in terms of health and outcomes for a population,
0:07:13 which is why we do it.
0:07:18 So you have the benefit of being able to take a very long view on ROI because you do keep
0:07:19 members and shareholders.
0:07:20 I don’t have shareholders.
0:07:21 Exactly.
0:07:22 And they’re going to stay on for decades over a lifetime.
0:07:23 Yeah.
0:07:27 One of the fascinating things to me and the example of food shortage or access to food,
0:07:33 and so many examples, if you look over the history of public health, for example, very,
0:07:37 very simple interventions have had massive, massive beneficial impact.
0:07:38 So obviously vaccines.
0:07:39 Yep.
0:07:42 I mean, one of my favorite examples is one of the big innovations in public health to
0:07:49 treat children dying of diarrhea or dehydration was just oral rehydration therapy, which is
0:07:50 pennies.
0:07:51 Yep.
0:07:52 Right?
0:07:53 And so worked on that Nicaragua many years ago.
0:07:54 Okay.
0:07:55 So you’ve seen this.
0:07:56 You’ve seen that would die otherwise.
0:07:57 Yeah.
0:08:00 You give them a couple pennies worth of electrolytes, right?
0:08:01 Yep.
0:08:02 And they survive.
0:08:08 But in your case, when most plans are focused on sort of year-long cycles because members
0:08:14 churn out, how should broadly plans think about investing in these interventions if
0:08:16 the ROI is not obvious in the short term?
0:08:17 So you’re right.
0:08:20 We can take a long-term view because we’ve looked at the data.
0:08:24 We ensure 60 to 70% of the population and they’re fairly sticky to us.
0:08:25 They stay with us.
0:08:29 But let’s take the broader view, a couple thoughts.
0:08:33 One is there are some countries, the US doesn’t do this, literally do inner insurance transfers.
0:08:37 So they literally measure like what are your outcomes in terms of quality and cost.
0:08:42 And if somebody churns, you either pay a toll because you didn’t do so well or you collect
0:08:43 a toll because you did well.
0:08:45 The US hasn’t done that yet.
0:08:47 I’m not sure politically we’ll do it.
0:08:49 But I do think there are policy changes.
0:08:54 If I was still at the Innovation Center at CMS, which I ran for five-plus years, one
0:08:58 of the models I was working on that I hope they launch because it’s still on the queue
0:09:01 was Medicare Advantage for a three to five-year cycle.
0:09:02 Okay.
0:09:04 So just extending that window would change behavior?
0:09:05 It would.
0:09:07 So it’s a great test.
0:09:10 And you’re not going to force it on people because we’re not going to do that politically.
0:09:15 But let’s imagine to my mother or anyone else in America, you say, “Well, you can buy
0:09:16 a plan, but it’s three to five years.
0:09:17 But here’s what you get.”
0:09:21 And you probably have to have an opt-out politically, but they’re going to invest in
0:09:22 you.
0:09:25 They’re going to address all your needs because they know they’re going to insure you for
0:09:27 the next five years.
0:09:31 And so then it broadens the investment window because it’s a longer time horizon.
0:09:35 This is actually a fascinating topic because the famous quote is, “Culture eats strategy
0:09:36 for breakfast in the world.
0:09:39 Policy eats culture and strategy in healthcare.”
0:09:42 And politics eats policy.
0:09:47 And you’re a physician who’s spent time a lot of time in D.C. and in public stage.
0:09:51 What is it about you think the industry doesn’t know about changing American healthcare policy
0:09:55 that you wish all of us knew around the table?
0:09:57 One is everybody focuses on the Hill like law.
0:09:58 Law is important.
0:10:00 We should focus on that.
0:10:06 People often discount and don’t realize regulation, CMS, Medicare and Medicaid, FDA, they actually
0:10:09 within the law, they have, I would argue, a much bigger impact.
0:10:14 So that’s point one, focus not just on law, but also sort of the regulatory side.
0:10:18 I think point two is get CMS, I had so many people come in and they like have their talking
0:10:22 points, how this will help me, then they read through them and you’re like, well, this is
0:10:26 pretty worthless because I could have read those to myself.
0:10:28 That’s your vested interest.
0:10:34 What rarely happens and is much more effective is think about what makes the system better.
0:10:38 It may help you, but actually come in and be like, here’s a policy proposal that would
0:10:39 make the system better.
0:10:42 That unfortunately in D.C. is really uncommon.
0:10:45 Can you give an example of that, the difference between this two kind of ideas?
0:10:46 Yes.
0:10:52 So I’ll give two, both a positive and negative and autism arena.
0:10:57 We had some people who came in with true, here’s what you need to do in coverage.
0:11:00 Here’s what you need to do in benefits.
0:11:05 Here’s a child or a mother that brings a personal side.
0:11:10 Here’s the data that if you do this, it actually has and that actually led to a series of changes
0:11:14 in our autism coverage and how we thought about autism.
0:11:19 Even as a pediatrician, I knew some of this, but it was helpful to push it forward.
0:11:21 Let me give you the negative example.
0:11:29 In drugs, unfortunately, we still have the pharma companies say, it’s the middlemen,
0:11:34 the PBMs, the hospitals say we can’t possibly control it.
0:11:39 I had to testify and this is on YouTube about Part B drugs paying for value and I was called
0:11:42 chair of the death panels by a senator.
0:11:46 He literally was like, the death panels are real and you, Dr. Conway, are chair of the
0:11:47 death panels.
0:11:49 I’m like, you got to be kidding me.
0:11:50 When’s the next meeting?
0:11:51 Yeah.
0:11:52 It never happened.
0:11:53 It wasn’t the chair.
0:11:54 It didn’t exist.
0:11:57 But it was a good attack line and we did some things that were pretty aggressive.
0:12:03 So we probably drove a little too far, but that was a great example where we wanted to
0:12:12 pay for value in drugs and Democrats, Republicans, everyone was against it because the short
0:12:17 version is the pharmaceutical lobby combined with doctors that also had a vested interest
0:12:20 and drug prices still going up, came against it.
0:12:26 Can we stand that topic for a second because there’s one area in American society that
0:12:28 is politically charged, it’s healthcare.
0:12:33 You alluded to the fact that Medicare Advantage is one area where there’s actually some level
0:12:35 of real bipartisan support.
0:12:38 It seems like it’s the one place where actually both the left and the right actually agree
0:12:39 that there’s a model that will work.
0:12:42 Why don’t we define Medicare Advantage for our listeners who may not be as familiar?
0:12:44 I love that you asked this question.
0:12:48 So Medicare Advantage essentially, instead of paying a fee for service, traditional Medicare,
0:12:52 you just pay every provider that the person sees, you pay a health plan, a capita rate
0:12:55 for care for a Medicare Advantage person for a year.
0:13:00 And then those health plans actually control the cost and get better quality and outcomes.
0:13:03 So most Medicare Advantage plans are $0 premium.
0:13:06 This is why I tell my mother to buy a Medicare Advantage plan.
0:13:07 It’s zero premium.
0:13:11 You get enhanced benefits, things like dental, vision, et cetera, that you don’t get in traditional
0:13:13 Medicare, but they manage your care.
0:13:17 So Medicare Advantage works, I said that in Republican administrations, I said in Democratic
0:13:23 administrations, like it is the right financial model, the right set of incentives.
0:13:27 The only downside, if you will, is people say, “Well, was the network the same?”
0:13:32 Well, the network is not every doctor in America, but it is a very broad network of the vast
0:13:34 majority of doctors in your area.
0:13:36 But you’re actually investing in managed care.
0:13:39 So actually to take the policy around, when people talk about Medicare for all, I think
0:13:41 most people would say that, “Don’t actually know what they’re talking about.”
0:13:46 But if we defined it and said, “Could you have Medicare Advantage buy-in at $55?”
0:13:51 And the $55 to six to four-year-old age group in the individual market, it’s very expensive.
0:13:54 What could you let people buy-in to Medicare Advantage?
0:13:56 I think that’s a legitimate policy debate.
0:14:00 It’s actually coming at a fascinating time because as we learn more about social determinants,
0:14:05 the fact that we need to stock the fridge or have the bathroom rod differently, Medicare
0:14:08 Advantage is a model where it can actually pay for it in a clear way, and that’s been
0:14:10 the interesting aspect of all this.
0:14:15 Are there other areas that you think we can make real progress on in this environment?
0:14:21 I actually think CMI, the Innovation Center, delivery system reform, I’ve worked on it in
0:14:24 Republican Democratic administrations, it’s bipartisan.
0:14:28 Paying for value, changing the system, I think is bipartisan.
0:14:30 Actually social determinants, we actually did some research, we should probably call
0:14:31 them something else.
0:14:35 We actually call them now Opportunities for Health or Drivers of Health in North Carolina
0:14:40 because we did research that actually pulls well in Republican and Democrats because people
0:14:41 get it.
0:14:42 Oh, so just a simple terminology change?
0:14:46 In North Carolina, in the Medicaid transformation, they call them Opportunities for Health because
0:14:47 people get it.
0:14:48 Yeah.
0:14:52 If you’re like, “You should invest in food and housing and transportation,” people
0:14:53 are like, “Oh, I get that.”
0:14:57 Actually, people are willing to pay taxes for it, which is not common in America.
0:15:03 If Opportunities for Health are better access to food, better access to transportation,
0:15:06 et cetera, one of the big challenges that I think the healthcare system in the United
0:15:12 States has is the ability to effectively coordinate care across silos.
0:15:16 Now if you’re including food and housing, what is the connective tissue that enables
0:15:18 us to actually coordinate this in an efficient way?
0:15:21 Right now, it’s a patchwork, if we’re honest.
0:15:23 Let me give you a clinical example.
0:15:27 If I have a kid with an ear infection, I can click a button and send a mock seal into
0:15:30 any pharmacy in the United States like that.
0:15:38 If I have a child with food insecurity who needs WIC program for food, it’s a whole long
0:15:40 system to make sure it gets done.
0:15:42 It’s got to be the same.
0:15:47 So you need a system for the Opportunities for Health or Social Terminates Health that’s
0:15:48 the same.
0:15:50 So what we’re trying to do in North Carolina right now with the state, we have a secretary
0:15:55 of health who was our chief of staff at CMS, Medicare and Medicaid, Dr. Mandy Cohen.
0:16:00 We have a Medicaid managed care transformation going on, and we’re actually going to try
0:16:05 to screen for Social Terminates Health for the entire 10 million people in the state
0:16:09 and then measure, do we address those determinants?
0:16:10 So what’s the referral patterns?
0:16:12 How do we make that seamless?
0:16:14 Make writing a prescription.
0:16:17 And then measure, do you close the gap?
0:16:18 Did they actually get food?
0:16:19 Did they get transportation?
0:16:21 Did they get the housing they need?
0:16:25 One of our board level metrics, which is a big debate in our company, is now food insecurity
0:16:29 for the state, for every person.
0:16:32 Not just our members, but the entire state.
0:16:36 So we think we can bring down food insecurity by 20% for the entire state.
0:16:41 From North Carolina, about 20% of the population is food insecure, and you have some counties
0:16:43 where nine out of 10 kids are food insecure.
0:16:44 They’re hungry.
0:16:46 The only meal they get is at school.
0:16:48 So we’re measuring it for the whole state.
0:16:50 We think we can move it by 20%.
0:16:51 That’s a big goal.
0:16:54 I don’t know if we can actually move it or not, to be honest, which was the debate.
0:16:58 But I know if we don’t commit, then we’re never going to do it.
0:17:03 What do you see as the places where technology has the opportunity to or is beginning to intervene
0:17:07 in making those social determinant outcomes happen?
0:17:12 We’re looking at array of partners that are the data and analytics behind social determinants.
0:17:17 Who can we partner with that is reliably not just screening and identifying, because that’s
0:17:19 helpful, but what’s the next step?
0:17:23 So how are we going to actually close the gaps in these areas?
0:17:28 Right now, the reality of social determinants and social services is like a cottage industry.
0:17:33 So if you go to any state in America right now and you’re like, “Tell me who in your
0:17:36 state is food insecure right now, but can’t do it.
0:17:38 Tell me who needs transportation.”
0:17:39 They don’t know.
0:17:41 “Tell me who needs housing.”
0:17:42 No idea.
0:17:45 Because it’s like these little cottage industry at every county.
0:17:48 There’s offices and clerks and it’s like on paper.
0:17:49 And they do what?
0:17:50 Like make phone calls and pull people?
0:17:51 Yes.
0:17:58 And like there’s CDC data that will measure on an annual basis, but that’s, it is helpful
0:18:01 because it tells us to identify the problem, but it’s not real time.
0:18:06 Like any other need to actually change it, we’re going to have to be able to identify
0:18:13 the need at scale through technology and close the gaps at scale through technology.
0:18:17 The short version of this is you got to build the connectivity, the push button system like
0:18:19 we did in pharmacy.
0:18:22 I mean, 20 years ago I wrote scripts on paper.
0:18:23 Now it’s all electronic.
0:18:25 You know, I never write a prescription anymore.
0:18:26 I like click a button.
0:18:30 In fact, my residents usually write it and I click a button to co-sign it.
0:18:33 These social determinants you just have to become the same where there’s a network of
0:18:38 providers of entities out there addressing these needs and we have a system that identifies
0:18:41 the need and closes the gap and measures it.
0:18:44 Like many things we’ve talked about here, like social determinants, for example, we’ve
0:18:47 talked about a state, right, healthcare is local.
0:18:48 That’s the phrase we have.
0:18:54 You talked about this, you know, the relationship you now have with cambia is pretty stunning
0:18:57 and you have to think about a multi-state sort of strategy.
0:19:00 What does that mean, you know, because is healthcare just getting bigger?
0:19:04 Can you talk us through what it means to be a multi-state organization versus thinking
0:19:05 about North Carolina itself?
0:19:10 Yeah, specifically, it gives you the benefits of scale in terms of things like investing.
0:19:14 We all invest in the same things at Blue Splint, data analytics, customer experience,
0:19:18 seamless platforms, technology, and now we’ll do that together.
0:19:22 We are combining because it will accelerate our pace of change for our customers.
0:19:23 I’m not from North Carolina.
0:19:25 I grew up in Texas.
0:19:30 My second day, I went to the retirement party for Brad Wilson, the CEO retiring of Blue
0:19:36 Cross North Carolina after 20 plus years and born and raised in North Carolina.
0:19:40 There were like governors, CEOs of companies in North Carolina.
0:19:42 There were like 1,000 people.
0:19:44 He got like 49 gifts.
0:19:50 He announced that he and his wife were donating millions of dollars to app state his alma mater
0:19:52 in her name.
0:19:54 My wife and I got in the car.
0:20:01 We were like, “Wow, that was awesome and also very scary.”
0:20:07 We ensure like 60, 70% of people in the state for their lives, so it’s like a big deal.
0:20:12 The beauty of this relationship is you get the benefits of scale, but we will still be
0:20:15 Blue Cross Blue Shield in North Carolina and regions of Oregon.
0:20:18 That’s important to the people in those states.
0:20:23 I’m biased, but that’s fundamentally different than a national payer.
0:20:27 They’ll talk about how they care about all the states, but it’s not the same.
0:20:32 You don’t have the same connective tissue, if you will, to the states and communities.
0:20:37 What do you see as the consequences and the challenges coming with this big wave of consolidation
0:20:40 that we’re seeing this year in the industry across the board?
0:20:44 In the pharmaceutical arena, I think it remains to be seen.
0:20:48 I serve on the board of a pharmaceutical biotech company.
0:20:50 I think the evidence is less clear.
0:20:54 You could argue like consolidation can drive more research and development.
0:20:57 In the tech arena, I think consolidation scale matters.
0:21:04 I think in the payer area, within a state, there may be decreased competitiveness, but
0:21:10 I think when payers like we are with Cambia, a partner across states actually does drive
0:21:11 value.
0:21:13 I think it will lower cost and improve quality for customers.
0:21:19 I think in that arena, I can imagine investing in new companies and tech and those get bought
0:21:20 by other companies.
0:21:24 I think that actually has a much higher likelihood to drive value for the customer.
0:21:31 On the flip side, if you dominate a market and you price set at an unsustainable price,
0:21:33 that has negative effects and it’s not a real market.
0:21:37 I said publicly when Atrium was going to buy UNC and then it fell through.
0:21:45 I’m not aware of any two hospital systems in America that have merged and costs went
0:21:46 down for consumers.
0:21:49 Is there any space in the healthcare system where costs have come down, period?
0:21:50 Actually, let’s talk about that.
0:21:52 Blue Cross, Bush Hill, North Carolina.
0:21:53 What a shock.
0:21:57 Lower individual premiums last year by almost 5%.
0:21:58 What drove that?
0:21:59 A couple of things.
0:22:01 Mainly our value-based arrangements with providers.
0:22:02 We said we got to bring cost down.
0:22:03 We got to do this together.
0:22:05 We were pretty aggressive about it.
0:22:09 One of our markets actually, and this is publicly known, the Triangle Era in North Carolina,
0:22:14 UNC said they were willing to do that and Duke said not as much.
0:22:18 We put UNC in network and had Duke not in network.
0:22:20 It lowered cost in that area by 21%.
0:22:23 I think this is a real issue.
0:22:28 Affordability is a major issue in healthcare.
0:22:29 Costs actually have to come down.
0:22:35 I’ve said publicly, and I mean it, I want our premiums to be as close to zero as possible
0:22:36 and when possible, negative.
0:22:43 I had a call yesterday with a health system CEO who said, “Well, I just need a X percent
0:22:45 increase in addition to the value-based payment.”
0:22:49 I was like, “Look, it’s an and.
0:22:50 We’re going to do value-based payment.
0:22:54 You’re going to be responsible total cost of care, quality and experience, and we’re
0:22:58 not doing fee-for-service increases because people can’t pay more.”
0:23:03 Given the structure of the industry and how hard it has been because a lot of the incentives
0:23:08 in place, how hard it has been to drive down costs, one of the other big challenges I think
0:23:10 is that innovation is expensive.
0:23:16 If you’re working in the technology space, how do you introduce new technology into a
0:23:23 system that is actively trying to reduce spend, to actually take cost out of the system?
0:23:29 Many new technologies and companies display their technology but don’t actually think
0:23:31 about total cost of care.
0:23:35 I think if you build that link, they’re often like this, a new shiny object, it’s a new
0:23:36 thing.
0:23:42 You’re like, “What does it do specifically for total cost of care?”
0:23:47 They’re like, “Well, I don’t know, but you’ll get data and AI and machine learning.”
0:23:51 You’re like, “Once again, what does it do for total cost of care?”
0:23:54 Is that because they’re expecting you to connect those dots?
0:23:58 We can, to a degree, but connective tissue has to go to the outcomes.
0:24:00 It’s a total cost of care and quality outcomes.
0:24:04 It can’t just be for the sake of the next new shiny object.
0:24:08 If I’m a technology entrepreneur, I have a shiny new technology.
0:24:13 I think it can be impactful somewhere in the continuum of care.
0:24:18 The challenge I have is I have to manage the jiu-jitsu of, let’s say, for example, trying
0:24:24 to sell something into the provider when really I need you as the payer to help me drive the
0:24:26 provider’s behavior to incorporate my technology.
0:24:33 My hypothesis is for these companies, you’ve got to focus on what is your actual problem
0:24:34 you’re going to solve.
0:24:39 This general, I’ve got a lot of insights for payers and providers.
0:24:43 You tell me, “Payer and provider, what I can do,” because I’m super smart and I’ve
0:24:49 got a lot of data people, and I’ll figure that’s not very compelling.
0:24:55 What I would tell companies is, focus on the niche area you’re actually going to address
0:25:00 around quality and total cost of care, and drive that through the system.
0:25:06 I have so many people that pitch me, “Pay me $3 per member per month payment,” and I’ll
0:25:09 drive amazing quality and total cost.
0:25:12 I’m like, “Well, you’re willing to put that at risk?
0:25:13 You paid zero if it doesn’t happen?”
0:25:15 They’re like, “Oh, no.
0:25:19 Not willing to do that,” and you’re like, “Well, there you have it.”
0:25:23 They have to drive to a level of fidelity that they know the problem they’re going to
0:25:28 solve, and they’re willing to put their money on the line that they’re confident that they’re
0:25:29 going to solve it.
0:25:31 We have some joint accountability for that.
0:25:35 Is that the same way you assess, because that’s, let’s say, a software technology with AI,
0:25:39 but for new therapies, for example, that can cure diseases?
0:25:40 How do you think about that?
0:25:41 What’s the filter set there?
0:25:46 We’re not there yet in the US, but it should be the same.
0:25:50 I met with the new therapy company the other day that’s groundbreaking therapies, gene
0:25:54 therapies that the program costs a million plus, and I was actually trying to help them
0:26:00 on the financial mechanism, because on the therapeutic areas, we should pay for value.
0:26:03 It should be the same mechanism of return.
0:26:09 I think, unfortunately, in the current environment, it’s often a yes/no decision, and on the therapeutic
0:26:14 area, they want a yes, and on the payer side, they want a no, because it’s very costly,
0:26:16 and we’ve got to get to a more nuanced answer.
0:26:20 One of the proposals that’s been put out there is a Netflix occasion of medicine, because
0:26:24 if you get the gene therapy theoretically, if it’s pay for dose, that thing is going
0:26:27 to continue to dose over the rest of your life.
0:26:32 What have we treated a gene therapy patient as having a preexisting condition?
0:26:37 In other words, if that patient were to move from plan A to plan B, one of their preexisting
0:26:43 conditions is that they have a gene therapy, and therefore there’s an added cost of X dollars
0:26:45 per year to cover that patient.
0:26:46 I think that’s smart.
0:26:49 I think there’s a number of ways to solve this, which we haven’t figured out.
0:26:52 I think the subscription model is one way.
0:26:57 I think preexisting conditions or like it’s in the risk adjustment model is another way.
0:27:04 I don’t know if there is an answer, but I do think the current environment where it’s
0:27:06 a million dollars, I don’t want to pay for it.
0:27:07 That’s not sustainable.
0:27:08 I’m going to try to push it off.
0:27:09 It’s not sustainable.
0:27:12 Actually, I’ll give you a real example in North Carolina.
0:27:15 We have a business that employs hemophiliacs.
0:27:19 Every national payer somehow figured out how not to insure them, because they knew they
0:27:21 employed the hemophiliacs.
0:27:23 We insure them.
0:27:28 It literally drives our small business segment 2% higher for everyone else, because hemophiliacs
0:27:30 are really expensive.
0:27:32 We don’t cut them off.
0:27:35 On some level, if you cut them off, it’ll make it cheaper for everybody else, but that’s
0:27:36 not who we are.
0:27:42 There should be some model that accounts like risk on the extremes or risk adjustment models
0:27:44 don’t capture.
0:27:48 Subscription models, I think it would start to capture on these like very high end curative
0:27:50 therapies in some cases.
0:27:53 We have to think about a financing model that’s more long-term.
0:27:54 I would say I’m an optimist.
0:27:58 My assumption is that the innovation will force the business model change.
0:27:59 I hope so.
0:28:04 You’re considered a thought leader on driving towards value-based care.
0:28:10 I would love to get your take on where we are in the journey to going from fee-to-service
0:28:15 to true value-based care, what’s working, what’s not working, and what should give us
0:28:18 cost to be optimistic that we’re going to get there.
0:28:20 Public payers and then private.
0:28:25 One, on public payers on value-based care, when I started running the CMS Innovation
0:28:30 Center for Medicare and Medicaid, we had 0% of payments and alternative payment models
0:28:36 where the provider is accountable, the doctor, the hospital for quality, total cost of care.
0:28:43 Over a course of four years, we went to over 30% of payments, over $200 billion, and over
0:28:48 200,000 signed provider agreements with doctors, hospitals across America.
0:28:52 It was the biggest shift in Medicare payment history.
0:28:58 On the public side, and that continues, it’s at 36% now, I think it’ll keep going up.
0:28:59 There’s no going back.
0:29:01 It’s a short answer.
0:29:05 On the private payers side, we have 87% of our payments in Blue Cross, North Carolina
0:29:12 tied to value today, but what we’re engaging on is a much deeper value-based payment system
0:29:18 which is joint accountability with doctors and hospitals for quality, total cost of care,
0:29:24 and experience, including two-sided risk, meaning full arrangements.
0:29:28 We think within less than nine months, we’ll have over half our payments and those kind
0:29:31 of full risk arrangements.
0:29:37 There’s no payer in the country that it’s accomplished at, so if we do it, it’s a model
0:29:41 for the nation, and then there’s good evidence for Medicare and private payers.
0:29:46 When you do that, it is a much higher likelihood to lead to better quality and lower costs
0:29:51 because the hospital, the doctor, the payer are all aligned on behalf of the patient,
0:29:56 and you’re no longer paying a fee-for-service volume payment system.
0:30:01 As we shift from fee-for-service to value-based care, has there been a study done on how that
0:30:06 impacts the top line for the doctors themselves?
0:30:08 There is some work on this.
0:30:13 Our version is, as we shift to value-based care, independent physician groups actually
0:30:17 have done the best, not tied to a hospital.
0:30:21 Even better if they’re larger, which might have been a major question, are organized,
0:30:28 and then next best was health systems and least successful, on average, hospital at ACOs.
0:30:32 I think we do have some evidence on who’s successful.
0:30:36 In advanced primary care models, which we’re actually investing in, their compensation
0:30:40 for primary care does go up, including down to the provider level.
0:30:41 We’re okay with that.
0:30:43 Is that because they’re doing more of the coordination?
0:30:44 There’s actually pretty good evidence on this.
0:30:47 Most payers spend about 6% on primary care.
0:30:51 We in Blue Cross, North Carolina, spend about 8%.
0:30:53 We have a goal to be 10% plus.
0:30:57 There’s actually evidence from UK and other international systems.
0:31:01 If you spend 10% plus on primary care, you get better health outcomes at a lower cost.
0:31:04 Because the primary care physician becomes the front door of the system, as opposed to-
0:31:05 Yeah.
0:31:07 -investing in care management.
0:31:13 A person in our system with a substance use disorder is five to six times the cost.
0:31:16 You treat that disorder, you bring down the cost, and it’s better outcomes.
0:31:19 Any mental and behavioral health condition, three times the cost.
0:31:23 We’re focusing on how you integrate and treat mental and behavioral health conditions because
0:31:26 you’ll get better health outcomes at a lower cost.
0:31:29 What about the role of employers, which has been getting some press lately in terms of
0:31:34 rising cost crisis, what’s the role there, especially in value-based care?
0:31:37 Employers need to step up, and then let me describe that.
0:31:41 The Amazon, Berkshire, Hathaway, JP Morgan thing, I interact with them some.
0:31:46 One of the CEOs, without naming who, was like, “Well, I really want to drive change, but
0:31:51 I don’t want to disrupt any of my employees.”
0:31:58 To which I said, “I hate to tell you lofty CEO, but I know the healthcare system, and
0:32:03 you will not drive change if you don’t want to disrupt any of your employees.”
0:32:04 Employers have to step up.
0:32:07 Unfortunately, it baffles my mind on some level.
0:32:13 They focus on the administrative fee, and I’m self-funded, because I’m going to whoever
0:32:18 gave me a million dollars back on the administrative fee, and your healthcare costs are like 500
0:32:19 million.
0:32:24 Seriously, and the whole broker game around self-funded is on the spreadsheet with the
0:32:26 administrative fee, and you can get a better deal.
0:32:30 We actually have started on employers, we guarantee medical trend.
0:32:34 I learned by going to meetings, so I went to our sales meeting, I was a big employer.
0:32:41 We will hit 15 to 30 million of savings, and they said, “Well, United just gave us a million
0:32:44 dollars back on the administrative fee, so the broker told us to go with United.”
0:32:50 I was like, “You got to be kidding me, I just told you 15 to 30.”
0:32:52 They were like, “Yeah, but we don’t know.”
0:32:55 They guaranteed us on the administrative fee.
0:32:56 I was like, “I’m done.
0:33:01 I will guarantee you will beat that price on the administrative fee, because this is ridiculous,
0:33:04 and will you switch to us?”
0:33:07 They switched, and we’ve now done that multiple times.
0:33:10 I think we have to make it simple for them, so you’ve got to get to a place where you’re
0:33:13 like, “Okay, you don’t believe our fancy math?
0:33:14 Fine.”
0:33:19 We promise, and we’ll guarantee it with our financing, because we’ve got actuaries.
0:33:23 Your costs are going to go down, and your quality experience will be better.
0:33:25 Every business is a healthcare business at the end of the day.
0:33:29 It’s amazing, it’s such a big cost stream for them, but they downgrade it to the benefits
0:33:35 person below this chief people officer who’s like, “I don’t know, my broker told me to
0:33:36 do X.”
0:33:39 It’s very disappointing, actually.
0:33:44 The fact that the employer has to even step up to manage their employee’s healthcare,
0:33:47 that’s an accident of history in the United States.
0:33:52 Do you think with all of the other changes that are happening in healthcare, will that
0:33:58 employer mandate ever change, or is that just set in stone so we do need the employers to
0:33:59 step up?
0:34:03 I mean, no, this could sold to Medicare for all, another debate.
0:34:08 I think our current political environment is people like their employer-based insurance.
0:34:12 Could we evolve to more of a Germany-type system or some system where you have private and
0:34:14 public payers competing?
0:34:20 We could, but in the near term, I think there’s a low political reality that we’ll move away
0:34:25 from the employer-based coverage because you’ve got 150 million-plus Americans that have that
0:34:27 coverage and like it.
0:34:32 If we learn one thing from the Affordable Care Act, people care about healthcare and
0:34:36 they don’t want to be disrupted in a major way.
0:34:42 This gets to the challenge, like how do you innovate and help people, but also in something
0:34:46 so personal, also make sure they feel they have that safety net, they have that care
0:34:47 they need.
0:34:51 I don’t think our health system realizes how quick we need to change.
0:34:56 We talked about the Amazon, Bursha, or Hathaway, JPMorgan thing, what I say internally is a
0:34:59 part you should think about that.
0:35:05 Those are people that are angry, but the costs are too high, the quality is uneven, and experience
0:35:07 often sucks.
0:35:08 We’ve got to focus on that.
0:35:12 We’ve got to get the costs under control, quality’s got to be reliable, and experience
0:35:13 should be better.
0:35:16 But why does it have to happen faster than we think?
0:35:19 Because I think we all know those problems, but we think things, it’s sort of where it
0:35:20 feels like it’s how it is.
0:35:21 It’s the disruption part.
0:35:22 It’s a scandal.
0:35:23 Yeah.
0:35:28 As opposed to other industries, I think healthcare has had a challenge and that it’s even more
0:35:34 status quo driven than a lot of industries of like there’s such fear of disruption and
0:35:35 something bad happen.
0:35:41 My opinion, I don’t think we fully recognize the urgency at which individuals and families
0:35:43 in America won’t change.
0:35:47 So you’ve served in government, you’ve been a practicing physician, you’re running obviously
0:35:50 an extraordinarily large insurer.
0:35:51 Are you optimistic?
0:35:53 I am, or I wouldn’t do this work.
0:35:54 We got to do better.
0:35:59 I don’t know why I always want to do healthcare, but it’s what I want to do forever.
0:36:02 And I was initially going to do international healthcare, and then I realized I did this
0:36:06 project which saved kids lives with oral rehydration therapy.
0:36:09 And I was in a family’s house, and they were like, we have nine kids, only one of them goes
0:36:11 to school because that’s all we can afford.
0:36:18 I was just like, oh my God, the system is so broken, I’m not sure I can fix the system.
0:36:23 In the US, we have enough money to fix our healthcare system, we just got to get it done.
0:36:26 And so I’m optimistic we can do it.
0:36:28 What a powerful call to action.
0:36:30 Thank you so much for joining us on the A16Z Podcast.
0:00:10 tax or investment advice or be used to evaluate any investment or security and is not directed
0:00:14 at any investors or potential investors in any A16Z fund.
0:00:18 For more details, please see a16z.com/disclosures.
0:00:20 Hi and welcome to the A16Z podcast.
0:00:21 I’m Hannah.
0:00:27 In this conversation, A16Z BioGeneral partner Jorge Conde, market dev partner Venkat Mochila
0:00:31 and myself talk all about driving value-based healthcare with CEO of Blue Cross Blue Shield
0:00:33 North Carolina Patrick Conway.
0:00:38 Conway, a pediatrician who was also formerly deputy administrator of CMS and director
0:00:43 of CMMI, has worked in both Republican and Democrat administrations and is considered
0:00:48 one of the driving forces behind the national movement to value-based care.
0:00:52 Conway takes a deep dive into what value-based care really means and different models and
0:00:56 ideas for how payers can implement the shift away from fee-for-service and volume-based
0:01:02 care, as well as the role that social determinants play in our healthcare, food insecurity, transportation
0:01:07 and more, how tech can be a driver of change in those areas, and how to take a long-term
0:01:12 view of the ROI in investing in these key healthcare factors.
0:01:15 And finally, Conway shares his thoughts with us from an insider’s point of view from the
0:01:21 Hill on what’s the way to actually affect change in policy and regulation in healthcare,
0:01:24 and where are the areas where we can do that best right now.
0:01:27 So you’re now the CEO of Blue Cross Blue Shield North Carolina.
0:01:29 Can we start with just a little history?
0:01:31 What’s the history of these kinds of plans?
0:01:32 How did they first begin?
0:01:35 So we started in 1933, actually in Cambia.
0:01:37 They’ve been around a hundred years.
0:01:41 Most of these plans basically evolved as like a state resource.
0:01:45 In Texas, it was teacher unions, and the Pacific Northwest, it was timber.
0:01:49 So literally Cambia was timber, and in North Carolina it was a plan that evolved to take
0:01:50 care of a workforce.
0:01:54 Like as healthcare became more expensive, and you don’t want to pick cash, it was well,
0:01:55 let’s take care of a workforce.
0:01:57 That was true in North Carolina too.
0:01:59 So there was two of them that came together.
0:02:02 That’s actually why they’re often called Blue Cross and Blue Shield.
0:02:05 Many of them had like a cross and a shield.
0:02:06 There’s some states where they’re still separate.
0:02:11 Actually, Idaho has Blue Cross and a Blue Shield, but so it’s two blues plans in that
0:02:12 state.
0:02:13 Oh, I didn’t know that.
0:02:14 Yeah.
0:02:15 Same in Washington.
0:02:16 There’s two blues plans.
0:02:18 And then many states like North Carolina, there’s one.
0:02:24 The brand evolved very early on, so 20s, 30s, and it was protection.
0:02:27 Blue Cross and Blue Shield is here to protect you, to take care of you, to take care of
0:02:28 you and your family.
0:02:32 In healthcare innovation, all roads do ultimately lead to the payer.
0:02:37 But as we talk about innovation, there are various sources of innovation that an insurance
0:02:39 plan could undertake to drive change.
0:02:42 What are the big buckets of innovation that you think about?
0:02:44 It’s all about better care, lower costs, sexual experience.
0:02:46 It’s doing it at scale.
0:02:48 It’s across the entire system.
0:02:52 So it’s not like one piece, one program, one whatever.
0:02:55 It’s how do you drive change across a state with 10 million people?
0:02:57 I met a 75-year-old the other day.
0:02:59 We insured every day of our life.
0:03:02 So the platform to drive change is huge.
0:03:07 With that platform, if you actually test new things, if you drive change, it’s a huge
0:03:08 impact.
0:03:11 You need a willing payer to drive change.
0:03:15 And what we’re doing is essentially a virtually integrated system at a state level to drive
0:03:19 change, which I don’t believe you can do from a single provider system.
0:03:23 So you talk a lot about social determinants, so let’s break those down.
0:03:24 What are those?
0:03:27 Yeah, I mean, so, you know, I’m biased, but you can invest in people.
0:03:31 I’m actually working on some proposals to see if Congress would do this.
0:03:37 Invest in food insecurity, transportation, housing, violence and abuse is a major area.
0:03:41 All the drivers of health that are outside that care system.
0:03:45 You could debate whether it’s social determinants or healthcare, but sort of primary care.
0:03:49 So I understand intuitively quite a few of those, but transportation isn’t immediately
0:03:50 obvious.
0:03:52 Why is that a social determinant of healthcare?
0:03:53 There was a great study.
0:03:57 The biggest driver of readmission to the hospital was transportation.
0:04:02 If the person didn’t have transportation home, that was the biggest driver of readmission
0:04:05 because they actually couldn’t get transportation to go to a doctor’s appointment or go to
0:04:06 whatever care they needed.
0:04:10 So they couldn’t get there early enough, in other words, to avoid the intervention?
0:04:13 If you discharge them and they were like, “I have no way to get home.”
0:04:17 If you run all the medical comorbidities, everything you would look for, the biggest
0:04:22 driver of readmission risk was that, that you have no support to get home.
0:04:27 Is that because it’s indicative of their life, their socioeconomic status or is it an actual
0:04:28 cause?
0:04:29 It’s both.
0:04:30 That’s a great question.
0:04:34 It is correlated with socioeconomic status, which is also at risk of readmission.
0:04:39 But it’s also if you had to give them a bus token to get home and they have congestive
0:04:40 heart failure.
0:04:41 Right.
0:04:44 It’s hard to go to the grocery store, hard to go to your doctor’s appointment, all those
0:04:45 things actually.
0:04:46 Yeah.
0:04:50 The chance of them seeing their primary care doctor eating right is way lower.
0:04:54 So we invest in care more in Iowa and Medicare Advantage.
0:04:56 They pick people up.
0:05:01 So they will order Lyft or Uber to get people to the doctor’s appointment because they
0:05:02 know.
0:05:05 If I get them in and I see them and I take care of them, they’re more likely to not get
0:05:10 hospitalized and the biggest driver of cost in America are hospitalizations and drugs.
0:05:15 So if you control hospitalizations, decrease them and control drug costs, that’s the biggest
0:05:16 total cost of care.
0:05:18 So are all those proving out?
0:05:22 Are you seeing examples of how the ROI and those types of social determinants, are there
0:05:24 real examples that you’re pointing to already?
0:05:27 So we talked about transportation, let’s do food insecurity.
0:05:28 So I’m a practicing physician.
0:05:29 I worked in the hospital last weekend.
0:05:31 I take care of kids who get hospitalized.
0:05:32 In all your free time?
0:05:33 In all my free time.
0:05:34 Yeah.
0:05:35 How do you feel?
0:05:36 I do it.
0:05:37 I only do it every weekend.
0:05:43 I take care of kids, including last weekend, way more than should happen, that get admitted
0:05:46 for failure to thrive, which is an adequate weight gain.
0:05:49 And sometimes there’s a medical cause.
0:05:51 Often it is lack of food.
0:05:56 So I took care of a kid last weekend, hospitalized for failure to thrive.
0:06:01 Health system spent $40,000 for that three-day hospitalization and it was lack of food.
0:06:03 We could have fed the kid for years for that hospitalization.
0:06:04 Yeah.
0:06:06 Really about our health system, it’s so backwards.
0:06:09 But when you invest in these things, there is an ROI.
0:06:11 We invest in preventing child abuse.
0:06:14 So I had a for-profit payer that was like, “What?
0:06:15 Why are you doing that?”
0:06:16 I’m a pediatrician.
0:06:21 So I said, “First of all, pretty good evidence of preventing child abuse, has huge positive
0:06:22 outcomes.”
0:06:24 I don’t even understand the place where the question comes from.
0:06:25 His point was the ROI.
0:06:26 Yeah.
0:06:27 But what’s the ROI for something?
0:06:28 We’ll never return to him.
0:06:29 Which is true.
0:06:32 Most for-profit payers, the United Signets, et cetera, including in our market, they’re
0:06:35 like 10 to 15% of the population.
0:06:36 They have churn.
0:06:40 They’ll talk about social terms, but in reality, they’re going to invest in more near-term
0:06:44 things because they know people are moving it out and I’m biased.
0:06:49 But I think the mentality is we ensure people often for decades.
0:06:51 So there is an ROI.
0:06:52 More importantly, it’s the right thing to do.
0:06:53 That’s why we do it.
0:06:56 But in reality, we measure in things that are more near-term.
0:06:58 Some of them are shorter term.
0:07:01 Actually, food insecurity, transportation are probably shorter term.
0:07:07 Honestly, it’s hard to measure preventing child abuse because it’s decades-long outcome.
0:07:12 But there’s good evidence on the return in terms of health and outcomes for a population,
0:07:13 which is why we do it.
0:07:18 So you have the benefit of being able to take a very long view on ROI because you do keep
0:07:19 members and shareholders.
0:07:20 I don’t have shareholders.
0:07:21 Exactly.
0:07:22 And they’re going to stay on for decades over a lifetime.
0:07:23 Yeah.
0:07:27 One of the fascinating things to me and the example of food shortage or access to food,
0:07:33 and so many examples, if you look over the history of public health, for example, very,
0:07:37 very simple interventions have had massive, massive beneficial impact.
0:07:38 So obviously vaccines.
0:07:39 Yep.
0:07:42 I mean, one of my favorite examples is one of the big innovations in public health to
0:07:49 treat children dying of diarrhea or dehydration was just oral rehydration therapy, which is
0:07:50 pennies.
0:07:51 Yep.
0:07:52 Right?
0:07:53 And so worked on that Nicaragua many years ago.
0:07:54 Okay.
0:07:55 So you’ve seen this.
0:07:56 You’ve seen that would die otherwise.
0:07:57 Yeah.
0:08:00 You give them a couple pennies worth of electrolytes, right?
0:08:01 Yep.
0:08:02 And they survive.
0:08:08 But in your case, when most plans are focused on sort of year-long cycles because members
0:08:14 churn out, how should broadly plans think about investing in these interventions if
0:08:16 the ROI is not obvious in the short term?
0:08:17 So you’re right.
0:08:20 We can take a long-term view because we’ve looked at the data.
0:08:24 We ensure 60 to 70% of the population and they’re fairly sticky to us.
0:08:25 They stay with us.
0:08:29 But let’s take the broader view, a couple thoughts.
0:08:33 One is there are some countries, the US doesn’t do this, literally do inner insurance transfers.
0:08:37 So they literally measure like what are your outcomes in terms of quality and cost.
0:08:42 And if somebody churns, you either pay a toll because you didn’t do so well or you collect
0:08:43 a toll because you did well.
0:08:45 The US hasn’t done that yet.
0:08:47 I’m not sure politically we’ll do it.
0:08:49 But I do think there are policy changes.
0:08:54 If I was still at the Innovation Center at CMS, which I ran for five-plus years, one
0:08:58 of the models I was working on that I hope they launch because it’s still on the queue
0:09:01 was Medicare Advantage for a three to five-year cycle.
0:09:02 Okay.
0:09:04 So just extending that window would change behavior?
0:09:05 It would.
0:09:07 So it’s a great test.
0:09:10 And you’re not going to force it on people because we’re not going to do that politically.
0:09:15 But let’s imagine to my mother or anyone else in America, you say, “Well, you can buy
0:09:16 a plan, but it’s three to five years.
0:09:17 But here’s what you get.”
0:09:21 And you probably have to have an opt-out politically, but they’re going to invest in
0:09:22 you.
0:09:25 They’re going to address all your needs because they know they’re going to insure you for
0:09:27 the next five years.
0:09:31 And so then it broadens the investment window because it’s a longer time horizon.
0:09:35 This is actually a fascinating topic because the famous quote is, “Culture eats strategy
0:09:36 for breakfast in the world.
0:09:39 Policy eats culture and strategy in healthcare.”
0:09:42 And politics eats policy.
0:09:47 And you’re a physician who’s spent time a lot of time in D.C. and in public stage.
0:09:51 What is it about you think the industry doesn’t know about changing American healthcare policy
0:09:55 that you wish all of us knew around the table?
0:09:57 One is everybody focuses on the Hill like law.
0:09:58 Law is important.
0:10:00 We should focus on that.
0:10:06 People often discount and don’t realize regulation, CMS, Medicare and Medicaid, FDA, they actually
0:10:09 within the law, they have, I would argue, a much bigger impact.
0:10:14 So that’s point one, focus not just on law, but also sort of the regulatory side.
0:10:18 I think point two is get CMS, I had so many people come in and they like have their talking
0:10:22 points, how this will help me, then they read through them and you’re like, well, this is
0:10:26 pretty worthless because I could have read those to myself.
0:10:28 That’s your vested interest.
0:10:34 What rarely happens and is much more effective is think about what makes the system better.
0:10:38 It may help you, but actually come in and be like, here’s a policy proposal that would
0:10:39 make the system better.
0:10:42 That unfortunately in D.C. is really uncommon.
0:10:45 Can you give an example of that, the difference between this two kind of ideas?
0:10:46 Yes.
0:10:52 So I’ll give two, both a positive and negative and autism arena.
0:10:57 We had some people who came in with true, here’s what you need to do in coverage.
0:11:00 Here’s what you need to do in benefits.
0:11:05 Here’s a child or a mother that brings a personal side.
0:11:10 Here’s the data that if you do this, it actually has and that actually led to a series of changes
0:11:14 in our autism coverage and how we thought about autism.
0:11:19 Even as a pediatrician, I knew some of this, but it was helpful to push it forward.
0:11:21 Let me give you the negative example.
0:11:29 In drugs, unfortunately, we still have the pharma companies say, it’s the middlemen,
0:11:34 the PBMs, the hospitals say we can’t possibly control it.
0:11:39 I had to testify and this is on YouTube about Part B drugs paying for value and I was called
0:11:42 chair of the death panels by a senator.
0:11:46 He literally was like, the death panels are real and you, Dr. Conway, are chair of the
0:11:47 death panels.
0:11:49 I’m like, you got to be kidding me.
0:11:50 When’s the next meeting?
0:11:51 Yeah.
0:11:52 It never happened.
0:11:53 It wasn’t the chair.
0:11:54 It didn’t exist.
0:11:57 But it was a good attack line and we did some things that were pretty aggressive.
0:12:03 So we probably drove a little too far, but that was a great example where we wanted to
0:12:12 pay for value in drugs and Democrats, Republicans, everyone was against it because the short
0:12:17 version is the pharmaceutical lobby combined with doctors that also had a vested interest
0:12:20 and drug prices still going up, came against it.
0:12:26 Can we stand that topic for a second because there’s one area in American society that
0:12:28 is politically charged, it’s healthcare.
0:12:33 You alluded to the fact that Medicare Advantage is one area where there’s actually some level
0:12:35 of real bipartisan support.
0:12:38 It seems like it’s the one place where actually both the left and the right actually agree
0:12:39 that there’s a model that will work.
0:12:42 Why don’t we define Medicare Advantage for our listeners who may not be as familiar?
0:12:44 I love that you asked this question.
0:12:48 So Medicare Advantage essentially, instead of paying a fee for service, traditional Medicare,
0:12:52 you just pay every provider that the person sees, you pay a health plan, a capita rate
0:12:55 for care for a Medicare Advantage person for a year.
0:13:00 And then those health plans actually control the cost and get better quality and outcomes.
0:13:03 So most Medicare Advantage plans are $0 premium.
0:13:06 This is why I tell my mother to buy a Medicare Advantage plan.
0:13:07 It’s zero premium.
0:13:11 You get enhanced benefits, things like dental, vision, et cetera, that you don’t get in traditional
0:13:13 Medicare, but they manage your care.
0:13:17 So Medicare Advantage works, I said that in Republican administrations, I said in Democratic
0:13:23 administrations, like it is the right financial model, the right set of incentives.
0:13:27 The only downside, if you will, is people say, “Well, was the network the same?”
0:13:32 Well, the network is not every doctor in America, but it is a very broad network of the vast
0:13:34 majority of doctors in your area.
0:13:36 But you’re actually investing in managed care.
0:13:39 So actually to take the policy around, when people talk about Medicare for all, I think
0:13:41 most people would say that, “Don’t actually know what they’re talking about.”
0:13:46 But if we defined it and said, “Could you have Medicare Advantage buy-in at $55?”
0:13:51 And the $55 to six to four-year-old age group in the individual market, it’s very expensive.
0:13:54 What could you let people buy-in to Medicare Advantage?
0:13:56 I think that’s a legitimate policy debate.
0:14:00 It’s actually coming at a fascinating time because as we learn more about social determinants,
0:14:05 the fact that we need to stock the fridge or have the bathroom rod differently, Medicare
0:14:08 Advantage is a model where it can actually pay for it in a clear way, and that’s been
0:14:10 the interesting aspect of all this.
0:14:15 Are there other areas that you think we can make real progress on in this environment?
0:14:21 I actually think CMI, the Innovation Center, delivery system reform, I’ve worked on it in
0:14:24 Republican Democratic administrations, it’s bipartisan.
0:14:28 Paying for value, changing the system, I think is bipartisan.
0:14:30 Actually social determinants, we actually did some research, we should probably call
0:14:31 them something else.
0:14:35 We actually call them now Opportunities for Health or Drivers of Health in North Carolina
0:14:40 because we did research that actually pulls well in Republican and Democrats because people
0:14:41 get it.
0:14:42 Oh, so just a simple terminology change?
0:14:46 In North Carolina, in the Medicaid transformation, they call them Opportunities for Health because
0:14:47 people get it.
0:14:48 Yeah.
0:14:52 If you’re like, “You should invest in food and housing and transportation,” people
0:14:53 are like, “Oh, I get that.”
0:14:57 Actually, people are willing to pay taxes for it, which is not common in America.
0:15:03 If Opportunities for Health are better access to food, better access to transportation,
0:15:06 et cetera, one of the big challenges that I think the healthcare system in the United
0:15:12 States has is the ability to effectively coordinate care across silos.
0:15:16 Now if you’re including food and housing, what is the connective tissue that enables
0:15:18 us to actually coordinate this in an efficient way?
0:15:21 Right now, it’s a patchwork, if we’re honest.
0:15:23 Let me give you a clinical example.
0:15:27 If I have a kid with an ear infection, I can click a button and send a mock seal into
0:15:30 any pharmacy in the United States like that.
0:15:38 If I have a child with food insecurity who needs WIC program for food, it’s a whole long
0:15:40 system to make sure it gets done.
0:15:42 It’s got to be the same.
0:15:47 So you need a system for the Opportunities for Health or Social Terminates Health that’s
0:15:48 the same.
0:15:50 So what we’re trying to do in North Carolina right now with the state, we have a secretary
0:15:55 of health who was our chief of staff at CMS, Medicare and Medicaid, Dr. Mandy Cohen.
0:16:00 We have a Medicaid managed care transformation going on, and we’re actually going to try
0:16:05 to screen for Social Terminates Health for the entire 10 million people in the state
0:16:09 and then measure, do we address those determinants?
0:16:10 So what’s the referral patterns?
0:16:12 How do we make that seamless?
0:16:14 Make writing a prescription.
0:16:17 And then measure, do you close the gap?
0:16:18 Did they actually get food?
0:16:19 Did they get transportation?
0:16:21 Did they get the housing they need?
0:16:25 One of our board level metrics, which is a big debate in our company, is now food insecurity
0:16:29 for the state, for every person.
0:16:32 Not just our members, but the entire state.
0:16:36 So we think we can bring down food insecurity by 20% for the entire state.
0:16:41 From North Carolina, about 20% of the population is food insecure, and you have some counties
0:16:43 where nine out of 10 kids are food insecure.
0:16:44 They’re hungry.
0:16:46 The only meal they get is at school.
0:16:48 So we’re measuring it for the whole state.
0:16:50 We think we can move it by 20%.
0:16:51 That’s a big goal.
0:16:54 I don’t know if we can actually move it or not, to be honest, which was the debate.
0:16:58 But I know if we don’t commit, then we’re never going to do it.
0:17:03 What do you see as the places where technology has the opportunity to or is beginning to intervene
0:17:07 in making those social determinant outcomes happen?
0:17:12 We’re looking at array of partners that are the data and analytics behind social determinants.
0:17:17 Who can we partner with that is reliably not just screening and identifying, because that’s
0:17:19 helpful, but what’s the next step?
0:17:23 So how are we going to actually close the gaps in these areas?
0:17:28 Right now, the reality of social determinants and social services is like a cottage industry.
0:17:33 So if you go to any state in America right now and you’re like, “Tell me who in your
0:17:36 state is food insecure right now, but can’t do it.
0:17:38 Tell me who needs transportation.”
0:17:39 They don’t know.
0:17:41 “Tell me who needs housing.”
0:17:42 No idea.
0:17:45 Because it’s like these little cottage industry at every county.
0:17:48 There’s offices and clerks and it’s like on paper.
0:17:49 And they do what?
0:17:50 Like make phone calls and pull people?
0:17:51 Yes.
0:17:58 And like there’s CDC data that will measure on an annual basis, but that’s, it is helpful
0:18:01 because it tells us to identify the problem, but it’s not real time.
0:18:06 Like any other need to actually change it, we’re going to have to be able to identify
0:18:13 the need at scale through technology and close the gaps at scale through technology.
0:18:17 The short version of this is you got to build the connectivity, the push button system like
0:18:19 we did in pharmacy.
0:18:22 I mean, 20 years ago I wrote scripts on paper.
0:18:23 Now it’s all electronic.
0:18:25 You know, I never write a prescription anymore.
0:18:26 I like click a button.
0:18:30 In fact, my residents usually write it and I click a button to co-sign it.
0:18:33 These social determinants you just have to become the same where there’s a network of
0:18:38 providers of entities out there addressing these needs and we have a system that identifies
0:18:41 the need and closes the gap and measures it.
0:18:44 Like many things we’ve talked about here, like social determinants, for example, we’ve
0:18:47 talked about a state, right, healthcare is local.
0:18:48 That’s the phrase we have.
0:18:54 You talked about this, you know, the relationship you now have with cambia is pretty stunning
0:18:57 and you have to think about a multi-state sort of strategy.
0:19:00 What does that mean, you know, because is healthcare just getting bigger?
0:19:04 Can you talk us through what it means to be a multi-state organization versus thinking
0:19:05 about North Carolina itself?
0:19:10 Yeah, specifically, it gives you the benefits of scale in terms of things like investing.
0:19:14 We all invest in the same things at Blue Splint, data analytics, customer experience,
0:19:18 seamless platforms, technology, and now we’ll do that together.
0:19:22 We are combining because it will accelerate our pace of change for our customers.
0:19:23 I’m not from North Carolina.
0:19:25 I grew up in Texas.
0:19:30 My second day, I went to the retirement party for Brad Wilson, the CEO retiring of Blue
0:19:36 Cross North Carolina after 20 plus years and born and raised in North Carolina.
0:19:40 There were like governors, CEOs of companies in North Carolina.
0:19:42 There were like 1,000 people.
0:19:44 He got like 49 gifts.
0:19:50 He announced that he and his wife were donating millions of dollars to app state his alma mater
0:19:52 in her name.
0:19:54 My wife and I got in the car.
0:20:01 We were like, “Wow, that was awesome and also very scary.”
0:20:07 We ensure like 60, 70% of people in the state for their lives, so it’s like a big deal.
0:20:12 The beauty of this relationship is you get the benefits of scale, but we will still be
0:20:15 Blue Cross Blue Shield in North Carolina and regions of Oregon.
0:20:18 That’s important to the people in those states.
0:20:23 I’m biased, but that’s fundamentally different than a national payer.
0:20:27 They’ll talk about how they care about all the states, but it’s not the same.
0:20:32 You don’t have the same connective tissue, if you will, to the states and communities.
0:20:37 What do you see as the consequences and the challenges coming with this big wave of consolidation
0:20:40 that we’re seeing this year in the industry across the board?
0:20:44 In the pharmaceutical arena, I think it remains to be seen.
0:20:48 I serve on the board of a pharmaceutical biotech company.
0:20:50 I think the evidence is less clear.
0:20:54 You could argue like consolidation can drive more research and development.
0:20:57 In the tech arena, I think consolidation scale matters.
0:21:04 I think in the payer area, within a state, there may be decreased competitiveness, but
0:21:10 I think when payers like we are with Cambia, a partner across states actually does drive
0:21:11 value.
0:21:13 I think it will lower cost and improve quality for customers.
0:21:19 I think in that arena, I can imagine investing in new companies and tech and those get bought
0:21:20 by other companies.
0:21:24 I think that actually has a much higher likelihood to drive value for the customer.
0:21:31 On the flip side, if you dominate a market and you price set at an unsustainable price,
0:21:33 that has negative effects and it’s not a real market.
0:21:37 I said publicly when Atrium was going to buy UNC and then it fell through.
0:21:45 I’m not aware of any two hospital systems in America that have merged and costs went
0:21:46 down for consumers.
0:21:49 Is there any space in the healthcare system where costs have come down, period?
0:21:50 Actually, let’s talk about that.
0:21:52 Blue Cross, Bush Hill, North Carolina.
0:21:53 What a shock.
0:21:57 Lower individual premiums last year by almost 5%.
0:21:58 What drove that?
0:21:59 A couple of things.
0:22:01 Mainly our value-based arrangements with providers.
0:22:02 We said we got to bring cost down.
0:22:03 We got to do this together.
0:22:05 We were pretty aggressive about it.
0:22:09 One of our markets actually, and this is publicly known, the Triangle Era in North Carolina,
0:22:14 UNC said they were willing to do that and Duke said not as much.
0:22:18 We put UNC in network and had Duke not in network.
0:22:20 It lowered cost in that area by 21%.
0:22:23 I think this is a real issue.
0:22:28 Affordability is a major issue in healthcare.
0:22:29 Costs actually have to come down.
0:22:35 I’ve said publicly, and I mean it, I want our premiums to be as close to zero as possible
0:22:36 and when possible, negative.
0:22:43 I had a call yesterday with a health system CEO who said, “Well, I just need a X percent
0:22:45 increase in addition to the value-based payment.”
0:22:49 I was like, “Look, it’s an and.
0:22:50 We’re going to do value-based payment.
0:22:54 You’re going to be responsible total cost of care, quality and experience, and we’re
0:22:58 not doing fee-for-service increases because people can’t pay more.”
0:23:03 Given the structure of the industry and how hard it has been because a lot of the incentives
0:23:08 in place, how hard it has been to drive down costs, one of the other big challenges I think
0:23:10 is that innovation is expensive.
0:23:16 If you’re working in the technology space, how do you introduce new technology into a
0:23:23 system that is actively trying to reduce spend, to actually take cost out of the system?
0:23:29 Many new technologies and companies display their technology but don’t actually think
0:23:31 about total cost of care.
0:23:35 I think if you build that link, they’re often like this, a new shiny object, it’s a new
0:23:36 thing.
0:23:42 You’re like, “What does it do specifically for total cost of care?”
0:23:47 They’re like, “Well, I don’t know, but you’ll get data and AI and machine learning.”
0:23:51 You’re like, “Once again, what does it do for total cost of care?”
0:23:54 Is that because they’re expecting you to connect those dots?
0:23:58 We can, to a degree, but connective tissue has to go to the outcomes.
0:24:00 It’s a total cost of care and quality outcomes.
0:24:04 It can’t just be for the sake of the next new shiny object.
0:24:08 If I’m a technology entrepreneur, I have a shiny new technology.
0:24:13 I think it can be impactful somewhere in the continuum of care.
0:24:18 The challenge I have is I have to manage the jiu-jitsu of, let’s say, for example, trying
0:24:24 to sell something into the provider when really I need you as the payer to help me drive the
0:24:26 provider’s behavior to incorporate my technology.
0:24:33 My hypothesis is for these companies, you’ve got to focus on what is your actual problem
0:24:34 you’re going to solve.
0:24:39 This general, I’ve got a lot of insights for payers and providers.
0:24:43 You tell me, “Payer and provider, what I can do,” because I’m super smart and I’ve
0:24:49 got a lot of data people, and I’ll figure that’s not very compelling.
0:24:55 What I would tell companies is, focus on the niche area you’re actually going to address
0:25:00 around quality and total cost of care, and drive that through the system.
0:25:06 I have so many people that pitch me, “Pay me $3 per member per month payment,” and I’ll
0:25:09 drive amazing quality and total cost.
0:25:12 I’m like, “Well, you’re willing to put that at risk?
0:25:13 You paid zero if it doesn’t happen?”
0:25:15 They’re like, “Oh, no.
0:25:19 Not willing to do that,” and you’re like, “Well, there you have it.”
0:25:23 They have to drive to a level of fidelity that they know the problem they’re going to
0:25:28 solve, and they’re willing to put their money on the line that they’re confident that they’re
0:25:29 going to solve it.
0:25:31 We have some joint accountability for that.
0:25:35 Is that the same way you assess, because that’s, let’s say, a software technology with AI,
0:25:39 but for new therapies, for example, that can cure diseases?
0:25:40 How do you think about that?
0:25:41 What’s the filter set there?
0:25:46 We’re not there yet in the US, but it should be the same.
0:25:50 I met with the new therapy company the other day that’s groundbreaking therapies, gene
0:25:54 therapies that the program costs a million plus, and I was actually trying to help them
0:26:00 on the financial mechanism, because on the therapeutic areas, we should pay for value.
0:26:03 It should be the same mechanism of return.
0:26:09 I think, unfortunately, in the current environment, it’s often a yes/no decision, and on the therapeutic
0:26:14 area, they want a yes, and on the payer side, they want a no, because it’s very costly,
0:26:16 and we’ve got to get to a more nuanced answer.
0:26:20 One of the proposals that’s been put out there is a Netflix occasion of medicine, because
0:26:24 if you get the gene therapy theoretically, if it’s pay for dose, that thing is going
0:26:27 to continue to dose over the rest of your life.
0:26:32 What have we treated a gene therapy patient as having a preexisting condition?
0:26:37 In other words, if that patient were to move from plan A to plan B, one of their preexisting
0:26:43 conditions is that they have a gene therapy, and therefore there’s an added cost of X dollars
0:26:45 per year to cover that patient.
0:26:46 I think that’s smart.
0:26:49 I think there’s a number of ways to solve this, which we haven’t figured out.
0:26:52 I think the subscription model is one way.
0:26:57 I think preexisting conditions or like it’s in the risk adjustment model is another way.
0:27:04 I don’t know if there is an answer, but I do think the current environment where it’s
0:27:06 a million dollars, I don’t want to pay for it.
0:27:07 That’s not sustainable.
0:27:08 I’m going to try to push it off.
0:27:09 It’s not sustainable.
0:27:12 Actually, I’ll give you a real example in North Carolina.
0:27:15 We have a business that employs hemophiliacs.
0:27:19 Every national payer somehow figured out how not to insure them, because they knew they
0:27:21 employed the hemophiliacs.
0:27:23 We insure them.
0:27:28 It literally drives our small business segment 2% higher for everyone else, because hemophiliacs
0:27:30 are really expensive.
0:27:32 We don’t cut them off.
0:27:35 On some level, if you cut them off, it’ll make it cheaper for everybody else, but that’s
0:27:36 not who we are.
0:27:42 There should be some model that accounts like risk on the extremes or risk adjustment models
0:27:44 don’t capture.
0:27:48 Subscription models, I think it would start to capture on these like very high end curative
0:27:50 therapies in some cases.
0:27:53 We have to think about a financing model that’s more long-term.
0:27:54 I would say I’m an optimist.
0:27:58 My assumption is that the innovation will force the business model change.
0:27:59 I hope so.
0:28:04 You’re considered a thought leader on driving towards value-based care.
0:28:10 I would love to get your take on where we are in the journey to going from fee-to-service
0:28:15 to true value-based care, what’s working, what’s not working, and what should give us
0:28:18 cost to be optimistic that we’re going to get there.
0:28:20 Public payers and then private.
0:28:25 One, on public payers on value-based care, when I started running the CMS Innovation
0:28:30 Center for Medicare and Medicaid, we had 0% of payments and alternative payment models
0:28:36 where the provider is accountable, the doctor, the hospital for quality, total cost of care.
0:28:43 Over a course of four years, we went to over 30% of payments, over $200 billion, and over
0:28:48 200,000 signed provider agreements with doctors, hospitals across America.
0:28:52 It was the biggest shift in Medicare payment history.
0:28:58 On the public side, and that continues, it’s at 36% now, I think it’ll keep going up.
0:28:59 There’s no going back.
0:29:01 It’s a short answer.
0:29:05 On the private payers side, we have 87% of our payments in Blue Cross, North Carolina
0:29:12 tied to value today, but what we’re engaging on is a much deeper value-based payment system
0:29:18 which is joint accountability with doctors and hospitals for quality, total cost of care,
0:29:24 and experience, including two-sided risk, meaning full arrangements.
0:29:28 We think within less than nine months, we’ll have over half our payments and those kind
0:29:31 of full risk arrangements.
0:29:37 There’s no payer in the country that it’s accomplished at, so if we do it, it’s a model
0:29:41 for the nation, and then there’s good evidence for Medicare and private payers.
0:29:46 When you do that, it is a much higher likelihood to lead to better quality and lower costs
0:29:51 because the hospital, the doctor, the payer are all aligned on behalf of the patient,
0:29:56 and you’re no longer paying a fee-for-service volume payment system.
0:30:01 As we shift from fee-for-service to value-based care, has there been a study done on how that
0:30:06 impacts the top line for the doctors themselves?
0:30:08 There is some work on this.
0:30:13 Our version is, as we shift to value-based care, independent physician groups actually
0:30:17 have done the best, not tied to a hospital.
0:30:21 Even better if they’re larger, which might have been a major question, are organized,
0:30:28 and then next best was health systems and least successful, on average, hospital at ACOs.
0:30:32 I think we do have some evidence on who’s successful.
0:30:36 In advanced primary care models, which we’re actually investing in, their compensation
0:30:40 for primary care does go up, including down to the provider level.
0:30:41 We’re okay with that.
0:30:43 Is that because they’re doing more of the coordination?
0:30:44 There’s actually pretty good evidence on this.
0:30:47 Most payers spend about 6% on primary care.
0:30:51 We in Blue Cross, North Carolina, spend about 8%.
0:30:53 We have a goal to be 10% plus.
0:30:57 There’s actually evidence from UK and other international systems.
0:31:01 If you spend 10% plus on primary care, you get better health outcomes at a lower cost.
0:31:04 Because the primary care physician becomes the front door of the system, as opposed to-
0:31:05 Yeah.
0:31:07 -investing in care management.
0:31:13 A person in our system with a substance use disorder is five to six times the cost.
0:31:16 You treat that disorder, you bring down the cost, and it’s better outcomes.
0:31:19 Any mental and behavioral health condition, three times the cost.
0:31:23 We’re focusing on how you integrate and treat mental and behavioral health conditions because
0:31:26 you’ll get better health outcomes at a lower cost.
0:31:29 What about the role of employers, which has been getting some press lately in terms of
0:31:34 rising cost crisis, what’s the role there, especially in value-based care?
0:31:37 Employers need to step up, and then let me describe that.
0:31:41 The Amazon, Berkshire, Hathaway, JP Morgan thing, I interact with them some.
0:31:46 One of the CEOs, without naming who, was like, “Well, I really want to drive change, but
0:31:51 I don’t want to disrupt any of my employees.”
0:31:58 To which I said, “I hate to tell you lofty CEO, but I know the healthcare system, and
0:32:03 you will not drive change if you don’t want to disrupt any of your employees.”
0:32:04 Employers have to step up.
0:32:07 Unfortunately, it baffles my mind on some level.
0:32:13 They focus on the administrative fee, and I’m self-funded, because I’m going to whoever
0:32:18 gave me a million dollars back on the administrative fee, and your healthcare costs are like 500
0:32:19 million.
0:32:24 Seriously, and the whole broker game around self-funded is on the spreadsheet with the
0:32:26 administrative fee, and you can get a better deal.
0:32:30 We actually have started on employers, we guarantee medical trend.
0:32:34 I learned by going to meetings, so I went to our sales meeting, I was a big employer.
0:32:41 We will hit 15 to 30 million of savings, and they said, “Well, United just gave us a million
0:32:44 dollars back on the administrative fee, so the broker told us to go with United.”
0:32:50 I was like, “You got to be kidding me, I just told you 15 to 30.”
0:32:52 They were like, “Yeah, but we don’t know.”
0:32:55 They guaranteed us on the administrative fee.
0:32:56 I was like, “I’m done.
0:33:01 I will guarantee you will beat that price on the administrative fee, because this is ridiculous,
0:33:04 and will you switch to us?”
0:33:07 They switched, and we’ve now done that multiple times.
0:33:10 I think we have to make it simple for them, so you’ve got to get to a place where you’re
0:33:13 like, “Okay, you don’t believe our fancy math?
0:33:14 Fine.”
0:33:19 We promise, and we’ll guarantee it with our financing, because we’ve got actuaries.
0:33:23 Your costs are going to go down, and your quality experience will be better.
0:33:25 Every business is a healthcare business at the end of the day.
0:33:29 It’s amazing, it’s such a big cost stream for them, but they downgrade it to the benefits
0:33:35 person below this chief people officer who’s like, “I don’t know, my broker told me to
0:33:36 do X.”
0:33:39 It’s very disappointing, actually.
0:33:44 The fact that the employer has to even step up to manage their employee’s healthcare,
0:33:47 that’s an accident of history in the United States.
0:33:52 Do you think with all of the other changes that are happening in healthcare, will that
0:33:58 employer mandate ever change, or is that just set in stone so we do need the employers to
0:33:59 step up?
0:34:03 I mean, no, this could sold to Medicare for all, another debate.
0:34:08 I think our current political environment is people like their employer-based insurance.
0:34:12 Could we evolve to more of a Germany-type system or some system where you have private and
0:34:14 public payers competing?
0:34:20 We could, but in the near term, I think there’s a low political reality that we’ll move away
0:34:25 from the employer-based coverage because you’ve got 150 million-plus Americans that have that
0:34:27 coverage and like it.
0:34:32 If we learn one thing from the Affordable Care Act, people care about healthcare and
0:34:36 they don’t want to be disrupted in a major way.
0:34:42 This gets to the challenge, like how do you innovate and help people, but also in something
0:34:46 so personal, also make sure they feel they have that safety net, they have that care
0:34:47 they need.
0:34:51 I don’t think our health system realizes how quick we need to change.
0:34:56 We talked about the Amazon, Bursha, or Hathaway, JPMorgan thing, what I say internally is a
0:34:59 part you should think about that.
0:35:05 Those are people that are angry, but the costs are too high, the quality is uneven, and experience
0:35:07 often sucks.
0:35:08 We’ve got to focus on that.
0:35:12 We’ve got to get the costs under control, quality’s got to be reliable, and experience
0:35:13 should be better.
0:35:16 But why does it have to happen faster than we think?
0:35:19 Because I think we all know those problems, but we think things, it’s sort of where it
0:35:20 feels like it’s how it is.
0:35:21 It’s the disruption part.
0:35:22 It’s a scandal.
0:35:23 Yeah.
0:35:28 As opposed to other industries, I think healthcare has had a challenge and that it’s even more
0:35:34 status quo driven than a lot of industries of like there’s such fear of disruption and
0:35:35 something bad happen.
0:35:41 My opinion, I don’t think we fully recognize the urgency at which individuals and families
0:35:43 in America won’t change.
0:35:47 So you’ve served in government, you’ve been a practicing physician, you’re running obviously
0:35:50 an extraordinarily large insurer.
0:35:51 Are you optimistic?
0:35:53 I am, or I wouldn’t do this work.
0:35:54 We got to do better.
0:35:59 I don’t know why I always want to do healthcare, but it’s what I want to do forever.
0:36:02 And I was initially going to do international healthcare, and then I realized I did this
0:36:06 project which saved kids lives with oral rehydration therapy.
0:36:09 And I was in a family’s house, and they were like, we have nine kids, only one of them goes
0:36:11 to school because that’s all we can afford.
0:36:18 I was just like, oh my God, the system is so broken, I’m not sure I can fix the system.
0:36:23 In the US, we have enough money to fix our healthcare system, we just got to get it done.
0:36:26 And so I’m optimistic we can do it.
0:36:28 What a powerful call to action.
0:36:30 Thank you so much for joining us on the A16Z Podcast.
There’s been a lot of talk about the need for our healthcare system to shift away from volume and fee-for-service, where you pay by appointment, procedure, etc, to value-based care, where you pay for both quality and outcomes—essentially, good health. But there’s also been a real dearth of seeing how that might work in action, or concrete models for how to implement it at scale. In this episode, CEO of Blue Cross Blue Shield North Carolina Patrick Conway dives deep into how exactly we can make the move towards this kind of healthcare a reality, in conversation with a16z’s General Partner Jorge Conde, Venkat Mocherla and Hanne Tidnam.
Conway—also a pediatrician, and formerly Deputy Administrator at the Centers for Medicare and Medicaid Services (CMS) and Director of the Center for Medicare and Medicaid Innovation (CMMI)—gets into what value-based care really means; different ideas for how payors can implement the shift away from fee-for-service and volume-based care towards outcomes; as well as the critical role social determinants (food insecurity, transportation, and more) play in our health—and how tech can be a driver of change. And finally, Conway shares thoughtful analysis from an insider’s point of view from the Hill on how to actually effect change in policy and regulation in healthcare to move the entire system in this direction.
This podcast was recorded on April 10, 2019. As of September 25, 2019, Patrick Conway is no longer CEO and President of Blue Cross Blue Shield North Carolina.
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