Max Hakanson (00:00):
We've talked a lot about the unraveling foundational assumptions, and I think the reason we have is because those were not meeting the needs that we had in the market from a cost perspective, from a quality perspective. And this is an opportunity to improve on a lot of those things that weren't working.

Abby Burns (00:21):
From Advisory Board, we are bringing you a Radio Advisory, your weekly download on how to untangle healthcare's most pressing challenges. I'm Abby Burns.

Rae Woods (00:29):
And I'm Rae Woods. The story of 2026 is a story of diffusion. On our last episode, we talked about diffusion of responsibility, which we see as the safety net erodes or disintegrates. But that's not the only place we're seeing the levers of control over healthcare delivery move away from traditional centers in bits and pieces.

Abby Burns (00:50):
Today, we're going to talk about the diffusion of ownership over curbing costs and the diffusion of influence over care decision makers.

Rae Woods (00:57):
To help us break down what these diffusions mean for healthcare business leaders, we've brought back advisory board experts, Natalie Trebes and Max Hakanson. Natalie, Max, welcome back to Radio Advisory.

Natalie Trebes (01:09):
Good to be back.

Max Hakanson (01:10):
Hi, there.

Abby Burns (01:11):
All right. Hopefully you're both warmed up from our conversation last week. So today, we want to dive right in, and here's the context I want to set for today's conversation. Healthcare spend is astronomical, which we all know, right? 18% of GDP, average family premium is about $27,000, etc, etc. And purchasers have reached the limits of their ability to curb it. Here's the question. Why?

Max Hakanson (01:39):
I wish the answer was as simple as the question.

Abby Burns (01:42):
I know, I have the easy job.

Max Hakanson (01:46):
There's a lot that goes into this, and we have talked about this with healthcare executives at insurance companies for hours on end. There are a lot of things, but to try and boil it down, we've seen utilization continue to be elevated. We saw a spike during the pandemic that has continued, especially in areas like specialty care and behavioral health. We know drug costs, especially GLP-1s and high-cost specialty drugs continue to be really elevated. And we've also seen providers get more sophisticated when it comes to some of their billing and coding practices. So, that's elevating the unit costs combined with just an aging population that's getting sicker. That leads to this challenging environment overall with medical costs rising.

Natalie Trebes (02:31):
I mean, so the natural question is, why can't they just deal with this the way they've always dealt with this, which is very fair, and I think a few reasons. One, we just last week had a discussion about all of the different things going on in the provider space, the safety net space, that are going to spill over and increase the challenges in contracting discussions about what rates are providers getting paid. The health plans would like to minimize how much they have to increase those, but it's a very different environment if they're concerned about their network composition, rather than just fighting tooth and nail for as low a rate increase as possible.

(03:08):
You also have to think about, what is the patient beneficiary member population going to experience in this? Generally speaking, a lot of employers in particular still want to offer options for their employees, they want to let people make choices about their doctor. It's a huge part of our cultural DNA in this country when it comes to healthcare and why we have the system we have, and the costs that we have.

(03:32):
And we also are coming from a really difficult years around the control over access to healthcare services when it comes to your insurance company making those decisions. Right? And so there has been a lot of outcry around prior authorization from the patient community, from the provider community. And quite simply, prior authorization exists because it does save money and it stops wasteful spending and it curbs enough of our cost increases that it's worth doing this thing that everybody hates. And so, yes, it's still in place. It's still being used by all of the health plans, but many of them are trying to figure out how do they minimize it, walk it back, rather than go harder. And so, it's moving the opposite direction of where spend is going.

Abby Burns (04:16):
But I think in addition to maybe pulling back on some of those levers, we're also seeing new approaches to spend management. What are some of those?

Natalie Trebes (04:24):
Yeah, that's exactly the shift that we want to talk about, right? That's the diffusion of inviting other players or maybe accepting that other players are a part of this conversation now. I think health plans have always had a wide range of partners that they have worked with to help with disease management, to help with member outreach and communication. The shift that we're seeing is that they may not be the ones doing the subcontracting anymore, right? We're starting to see more ownership happening where a particular vendor might actually take responsibility for a set of patients. We're starting to see the early signs of this likely to be the trend we see for the next decade, as increasingly you have to be really specialized in connecting the dots for a particular disease or particular treatment or modality or what have you.

Rae Woods (05:13):
Let's talk more about the new experiments for managing this astronomical spend. And Max mentioned some of the high categories of spend, behavioral health and weight management drugs. I think we should start with GLP-1s, because the reality is that for health plans, for employers, these drugs represent a cost crisis without a cure, and that means they're relatively desperate to offload the management of this type of care. For example, we've seen employers either continue to just not offer GLP-1s as a benefit, pull back on offering them, and instead push employees to direct to consumer options, for example. Who is the latest player that's being invited in to try picking up the mantle here?

Natalie Trebes (05:59):
PBMs have really come out very strong with the GLP-1 management programs that they want to offer to employer clients in particular and health plan clients, and effectively lay out a strategy for managing weight management therapies inclusive of GLP-1s. And so, managing GLP-1 costs through a more holistic approach. So, that is going to include not just the prescription management and dosing and adjustments that you'd have with your clinician, but also a nutritionist, dietician, lifestyle management, exercise, therapy, all of the different pieces that you need to have in coaching someone in figuring out, how do you make this work for you and keep that weight off and make sure that you're getting the most value for those drugs? And so, that is a big departure from just the kind of supply procurement function that PBMs have provided in the past.

(06:51):
Typically, the health plan in the past is getting those lower cost medications from the PBM, and that's the role that a PBM is playing. And now it's more of a shift of, the patients are being sent to the PBM to manage, and as a part of that, they will be getting the medications. That I think is the vision, but that's a big shift in terms of PBM's role here.

Rae Woods (07:13):
It's a big shift for the PBM, but there are plenty of other players that are providing that wraparound weight management support. Abby interviewed the head of Knownwell, who's an example of a third-party primary care-like, obesity management provider. The drug manufacturers are increasingly doing this. There's now a whole industry of obesity management trying to get the long-term outcomes that we all want while reducing the total cost of care. So, how well positioned are PBMs to actually provide this kind of wraparound support and hopefully succeed?

Max Hakanson (07:46):
I think it's hard to say, Rae, because these programs are still fairly new. The adoption has been relatively low for a lot of these big PBMs. Now, all three of the big PBMs, Caremark, Express Scripts, and Optum Rx do tout financial savings for their clients that have chosen to use these programs. But I think it's worth mentioning, the types of programs that are a part of the weight management, so we're thinking things like lifestyle and nutrition modification programs, digital support tools, these are things that PBMs historically have not done much of. I would not say it's really in their wheelhouse, but what they do have is they have a lot of scale and they have a lot of existing client relationships with folks. And we know PBMs are very opportunistic in general, they're very adaptable and good at shifting their business model. So, that's why we're watching them, and they're also partnering with a lot of those vendors you mentioned. So, they're integrating them into their solution packages.

Abby Burns (08:48):
It's also interesting when the big three that you just mentioned all have provider arms as part of their larger enterprises as well. That'll be interesting to see, are you able to cross-pollinate those disciplines?

Natalie Trebes (08:59):
When you think about pharmacy data and claims, it moves so much faster than traditional health claims.

Abby Burns (09:04):
That's a good point.

Natalie Trebes (09:05):
There's a lot more steps in the process. Providers have to think not set up to submit as fast, and they take longer to adjudicate, and so there's a lot more real-time data moving in the pharmacy space that I think does give you the opportunity for success here, potentially.

(09:19):
But what we haven't talked about is, a lot of employers are dropping these, right? And a lot of employers are thinking about, maybe I don't want to procure GLP-1s through traditional healthcare avenues. I maybe want to go directly to the manufacturers. Maybe I want to go access through the TrumpRx platform, which has got a lot of deal making that has happened to offer prices in certain populations. But all of this, I think, points to employers starting to get themselves out, not of healthcare, not of providing healthcare benefits, but of what is in that old, very tightly regulated structure of healthcare benefits and what is more expansive and give them flexibility if it's more of a wellness approach. And that of course is going to correlate with a lot of variation by employer type and by level of resources the employers have.

Abby Burns (10:14):
Maybe this is a good transition point to talk about another area of high spend that we mentioned before, and that's behavioral health. So if you're a plan leader, you've been ringing the bell on behavioral health for years at this point. In my experience as somebody who has researched behavioral health management, there's a lot of either ambiguity or even passing the ball when it comes to who actually owns behavioral healthcare, both the delivery of it as well as the cost associated with it. So, if we're seeing PBMs and others step in on assuming ownership over things like GLP-1s, who do you see stepping into the ownership role when it comes to behavioral health?

Natalie Trebes (10:51):
Yeah, it's actually a new type of middleman in some ways. The tech platforms that really took off in the middle of the pandemic when everyone was switching to virtual as much as possible, and very clearly behavioral health was the thing that virtual care works the best for, and so that's what's persisted. It wasn't just about providing the video conferencing tools, but it was also about providing a service to help with all of the administrative hassles of working with insurance.

(11:19):
Historically, a lot of behavioral health clinicians just haven't taken insurance, partly because of financials and there's so much demand they can get patients in cash pay, and partly because it's just a pain to deal with as an independent clinician. And so, these platforms have really come up originally as advocates for clinicians and helped them access the broader patient pool, and vice versa for patients, that's great to be able to use insurance for.

(11:43):
Now, we have continued a lot of utilization and in this time where everyone's looking at growing premiums, growing utilization, the plans are effectively the source of funding for all of those behavioral health clinicians, and so that's where all the patients are coming from. They have a little more leverage, and so now they are working with the technology companies to say, "Hey, let's actually evaluate what is happening, and is every single visit high quality? Are we driving towards outcomes improvements in the behavioral health space, or is this just ongoing care and are we getting the most for that? Are we using it as effectively as we can across our population?"

Abby Burns (12:21):
So Natalie, to say that differently, if we think of 2021 to say 2023 as really years of expanding access, now we're saying 2026 is really scrutinizing. What has that access actually bought us?

Natalie Trebes (12:37):
Yeah, expanding quality is probably the shift that we're going towards, right? Is all behavioral healthcare that's happening out there good? Probably not. And so, having to bring that in now that we're so broad in our access there.

Rae Woods (12:52):
I want to name a different experiment that I'm hearing about in the market when it comes to this challenge of curbing high cost areas of spend. And it's actually doing something that many, many have tried to do in different ways in the past, and that's actually giving consumers more ownership over the cost that they are willing to swallow. Natalie, I think you know where I might be going here.

Natalie Trebes (13:13):
You're talking about variable copay plans, also known as alternative health plans, also the latest version of consumer directed health plans.

Rae Woods (13:23):
What are variable copay plans?

Natalie Trebes (13:25):
So, variable copay plans are a way of giving patients a different price upfront, depending on the quality and efficiency and overall cost of a particular service with a particular clinician at a particular organization.

Rae Woods (13:47):
And what is different about this attempt to have consumers put financial skin in the game to try to make better, both financial and quality decisions, than things we've done in the past? I'm thinking high deductible health plans.

Max Hakanson (13:59):
Yeah. It's really interesting you'd call out high deductible health plans, because these are almost the inverse but with that same mechanism at play. Instead of having a high deductible, these are a $0 or low deductible, so it's all about the copay. And what's different here, I would say two things I would point to versus the upfront pricing. That was something that was really missing from the high deductible health plans. And then I would say this is probably the best use or one of the best uses of consumerism mixed with transparent data into one platform, making it really user-friendly. As someone that has a variable copay plan, I can say from the user experience, it is very friendly.

Rae Woods (14:40):
Because instead of saying, all right, you have $7,000 in healthcare costs that you are going to have to make better decisions on across the course of the year. Instead, it's, when you are seeking out a particular service for care, you can spend $50 or you could spend $150, you pick.

Natalie Trebes (14:56):
And when we talk to leaders of these plans and these platforms, their goal is to keep members under the deductible the whole time, which is a really unique way of thinking about that because I think any of us, if we're going to have a one major event in the year, we're going to go, oh gosh, I got to do as much other optional stuff as I can. My goal is either $0 of spending or a bajillion dollars of spending, right? And so, what the desires of this plan said is, "Well, okay, that's useless skin in the game." No one has any reason to be discerning at all about how they engage in healthcare services. And we know there's so much variation across providers. So actually, one hospital might be great at this particular surgery, but not so great at this other one, and so I want to make sure that it's not the brand or the organization that's driving those choices, but every single healthcare decision is very clear in front of the patient and that they actually care from a financial perspective.

Rae Woods (15:58):
So, I'm thinking about the last conversation that we had and we kept saying over and over again that nothing in healthcare happens in a vacuum. No decisions that health leaders make are going to happen in a vacuum, whether they're those protectionistic moves or the opportunistic ones. So, what are the ripple effects that we can expect from, I'm sure at least growing employer interest, in things like the variable copay plan?

Natalie Trebes (16:22):
Well, one ripple effect immediately is consumer patient conversations sometimes are a little more complicated because A, they care a little bit more about understanding the prices and saying they have that and wanting to make sure that the service they're going to get is covered. I know when I have talked with my providers, they are super confused. Typically, clinicians are not the best position to engage on the financial discussions.

Rae Woods (16:44):
Or panic. They're saying, "How did my health plan come up with this number or this rating for my quality?"

Natalie Trebes (16:50):
Exactly. So, it is a different level of engagement and the patient is primed to have those conversations more going in. So, that's going to take work on the provider side to help train and equip their staff as more of these start to crop up.

(17:04):
But also, it's going to affect everything from contracting and network relationships, because you're not going to be able to hide behind a brand or do a little horse trading of, okay, we can take a lower rate here for this service if you'll give us a higher rate on this service. And so, now it's every single service is under the light and you have to haggle each of those because people are going to shop based on that, rather than just based on what tier your organization gets put into at that health plan product. And that's going to start to influence what services are you really trying to advertise and be known for and invest in so that you get picked, and you're going to have to make sure that that cost is not too high so that patients are gravitating to you.

Abby Burns (17:48):
Bringing it back to where Rae started us with, actually seeing some consumerism in healthcare. Maybe?

Natalie Trebes (17:54):
Possibly. I usually try to steer away from thinking consumerism will ever happen, but this one-

Abby Burns (17:59):
Same.

Natalie Trebes (17:59):
... has me maybe the most-

Abby Burns (18:01):
Intrigued.

Natalie Trebes (18:01):
... intrigued that I've ever been.

Max Hakanson (18:05):
Natalie, I think maybe is a good word though, because we don't know if any of these things are truly going to work. They are experiments, as Rae said earlier. And so, we are starting to watch how these are being adopted into the ecosystem, but not a lot of variable copay plans are out there yet. There's not a ton of adoption, and there are legitimate challenges to expansion. They do require competition in the market, they do require that those upfront prices are correct, which is not always the case. Just to let you know that we're not banking all of our money behind each of these as the future solutions, but these are things we are watching.

Rae Woods (18:40):
We're all just going to watch what Max is doing with his particular health plan. I

Natalie Trebes (18:45):
Talk with a lot of employers and brokers and consultants, and these are the only things that are really out there as an option for trying to change the product design. And so, employers I think would love something that definitely works or alternatives to this, but this is the only thing being pushed. So, we are going to see some amount of adoption because of that.

Abby Burns (19:07):
So, thinking across the examples we've shared of managing GLP-1 spend, behavioral health spend of variable copay plans, as we navigate the diffusion of ownership over unmanageable spend, what is the takeaway for CEOs?

Max Hakanson (19:22):
For health plan CEOs, I think they are recognizing where they have weaknesses, where they're having challenges. That's why they're inviting those third party vendors in. But as they look to continue to provide value to the market, to their employers, to patients and members, I think the key for them is going to be coordinating across all of those disparate vendors, making sure that it's a cohesive experience for members. We're all really frustrated when we need to sign into 10 different platforms, when things are not a cohesive experience. So, I think it's more incumbent on plans than ever to make sure that they are working to make it consistent.

Abby Burns (20:59):
Okay, so we have talked about the diffusion of responsibility over the safety net. We talked about the diffusion of ownership over managing astronomical spend in the healthcare industry.

(21:10):
Let's shift gears and focus on our third diffusion here, the diffusion of influence, and in particular, influence over clinical decision makers. If I have my vocabulary right in this research, I think you use the term sprawling advisors. Who are the advisors that we need to be thinking about here?

Max Hakanson (21:28):
Yeah, we're seeing the influence on both sides of this equation, so both the patient and the physician, we are seeing influences on them. So, I'll boil this down to three buckets to help simplify it. First off is on the physician side, we are seeing changes in clinician employment. So, who are those owners who are purchasing those practices? Then we are seeing shifts in operating pathways. So, how is AI and technology being incorporated into clinical workflows and into payment behind the scene? And then lastly, patient engagement. So, how are direct to consumer platforms, social media, AI chatbots, really starting to impact how patients come into those interactions?

Abby Burns (22:14):
Yeah, and I think this is sort of in keeping with... We've talked before on this podcast about the rise of scientific misinformation, for example, rising patient distrust. We know that patients are shifting away from automatically deferring to the word of their physician. So what I would say for listeners is, if you want to learn more about rising distrust, how to start rebuilding trust, etc, we're going to leave this one to the side for the purposes of this conversation. I'll put a few episodes in the show notes. Let's spend the rest of our conversation talking about these other two.

Rae Woods (22:44):
And Abby, you know the one that I want to talk about?

Abby Burns (22:47):
I have a sneaking suspicion.

Rae Woods (22:48):
It's what's happening with the physicians, the medical groups. And Max, I got to say, a lot of different players in healthcare employee physicians. At this point, 77% of physicians are employed, about half of which by hospitals. So what's actually new about physician ownership and how will that influence care decisions?

Max Hakanson (23:09):
Rae, this one took me as a surprise because they are a player we don't focus on a lot in our work and in healthcare in general, they're drug wholesalers. They are the ones that are starting to acquire more and more physician groups. And there's really three big ones that control 96% of the market, Cencora, McKesson, Cardinal Health. These are ginormous companies generating hundreds of billions of dollars in revenue annually. Now, they're not the sexiest businesses, they have very low profit margins, and that is the reason I think they haven't garnered a lot of attention, but we're watching them purchase physician groups in high cost specialty areas, really drug centric ones. Think of things like oncology, urology, gastroenterology, areas where they're looking to have greater influence over that drug supply chain.

Natalie Trebes (24:04):
What I'm watching is the age-old question, Rae, you in particular have studied for like a decade now. Does buying physicians translate to changes in how they practice and whether they listen to you or not? This is interesting, because I think typically when we have looked at acquisitions of physician practices in the past, the thesis has been something about changing where referrals are going. And this is the first one that feels like the thesis is more about, again, the supply costs and just shoring up vertical integration of the supply chain. And so, I think this is fundamentally a different approach, but it doesn't mean it wouldn't potentially have spillover effects if there's good alignment there and the wholesalers find that they are actually able to drive change, then that's what's worth watching. But it is not a guarantee that this will change physician behavior.

Abby Burns (25:05):
So, we can think about this move from wholesalers as how physician employers are influencing care decision makers. We also have to talk about how technology is influencing care decision makers. At the end of last year, we had a team from Ohio State University on Radio Advisory, and they shared an example of how AI enabled care decision support tools influence nurses' clinical decisions. What do CEOs need to know about how technology is influencing the care decision makers or the care decision making?

Natalie Trebes (25:35):
I think there's so many different angles to how this is reshaping what's possible in healthcare and decision making and workflows and all of that. What I want to note is that technology applications, and especially harnessing AI and automation, is ubiquitous and is just going to increase. So it is going to be everywhere, there are going to be a lot of vendors involved. The question is, how tailored is that application to your organization's needs, and how standardized are your needs with the entire rest of the market? And I think in places where there is a clear standard that makes the most sense for all health systems, all health plans, that's great and it'll be very useful to have these national vendors setting the standards and pushing those technologies forward. In areas where particular clinician preferences, particular patient populations, particular organizational cultures, specific incentive structures, are different or unique, that will be a little harder because increasingly as our reliance on vendors grows, there will be a pressure to conform to the median, and that might be a little difficult for certain organizations.

(26:52):
And you just think about a vendor like Epic has so much market share, and they're very careful and methodical about how they push forward their innovations and progress in the technology, and they're always trying to get to that kind of 75th percentile sophistication level and making sure that it's useful for most of their client base. There are additional vendors you can work with to layer on top of Epic, but the second Epic creates that technology, it is hard to say no to the Epic version because it's going to fit in with everything else, it's probably going to be a little more affordable compared to some other options. So, that's the complexity that we're watching.

Abby Burns (27:30):
Yeah, to the point where we hear from provider organizations all the time, "Hey, we're actually taking a wait and see approach," as in, "Wait and see what Epic comes out with and then we'll make our decision from there." The number one place we are currently seeing AI get to scale, especially on the provider side, is in rev cycle. And I'm curious if you consider that part of this diffusion of influence.

Natalie Trebes (27:51):
Definitely.

Max Hakanson (27:53):
This is something they used to own really by themselves and now they are turning to others to really help supplement what they were doing, they being providers. And it is really an advancement in their capabilities here because for a long time, plans have held an edge here when it came to analytical capabilities, when it came to data behind the scenes. They are catching up here, it's the first time I've really heard plans talk about this shift in dynamic.

Natalie Trebes (28:21):
I do think it relates to decision making ultimately in a couple ways. First of all, when we're talking about the parameters of what is actually covered, that will influence decisions. It might not be that first initial decision, but it's going to start to influence how a provider prescribes differently or what patients go pursue, all of that. So, it's sort of this longer term tale.

(28:43):
And then you think about CDI or clinical documentation improvement initiatives, that's something that's very common in quality reporting. That changes the behavior of clinicians in the documentation and the visit process in terms of the questions they're asking, the tests they want to run, so they can capture that information. So, that type of influence of what is needed on the backend for billing will show up in the clinical setting with patients.

Rae Woods (29:12):
I want to bring our conversation to a close here. The last two episodes have been all about the things that we want CEOs to know. But healthcare CEOs come in all stripes, they come from different corners of the industry. And knowing that none of our decisions, protectionistic or opportunistic, happen in a vacuum, what do you want CEOs to know about what each other are going through?

Max Hakanson (29:37):
We've talked a lot about the unraveling foundational assumptions. And I think the reason we have is because those were not meeting the needs that we had in the market from a cost perspective, from a quality perspective, and this is an opportunity to improve on a lot of those things that weren't working.

(29:56):
So, we know health plans are struggling financially, we talked about About the utilization and cost challenges. Is this an opportunity to partner better with providers around value-based care contracts? Can we change our payment structure? Can we work together on prior authorization and other pain points, to really solve for some of those longstanding challenges that got us to this moment.

Natalie Trebes (30:20):
It's important to remember that providers do know that they have a flawed set of incentives in their underlying business model. So, they do recognize that this cross subsidies between employer pay and Medicaid and Medicare is not ideal. They do know that keeping the emergency room open by financing it through orthopedic surgery is not ideal. There's so many different examples, you can throw site neutral payments into that. I think plans have an opportunity when things are so dire to be exploring, how do we finance the stuff that we really need and that they need to keep open, rather than only focusing on those high spend areas that are the lifeblood of the provider business model.

Rae Woods (31:08):
Well, Natalie, Max, thanks for coming back on Radio Advisory.

Max Hakanson (31:11):
Appreciate it.

Abby Burns (31:18):
As we think about the conversation we had today and last week, it's clear that the longstanding assumptions about healthcare and about who holds the power in this ecosystem are shifting. We're seeing that in the diffusion of responsibility for protecting the safety net, diffusion of ownership over managing spend, and diffusion of influence over care decision makers. There's so much more to come from the Radio Advisory team and the rest of Advisory Board, because remember, as always, we're here to help.

(32:07):
New episodes drop every Tuesday. If you like Radio Advisory, please share it with your networks, subscribe wherever you get your podcasts, and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by me, Abby Burns, as well as Rae Woods, Chloe Bakst, and Atticus Raasch. The episode was edited by Katy Anderson, with technical support provided by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was provided by Leanne Elston and Erin Collins. Special thanks to Chelsea Needham, Marissa Nives, and Morghen Philippi. We'll see you next week.