TECH/HEALTH PLANS: Interview/Podcast with Mark Ganz, CEO Regence and Luis Machuca, CEO Kryptiq

This is the transcript from an interview I did at WHCC last week with Mark Ganz, the CEO of Regence, the Oregon based Blues plan that operates in the Pacfic Northwest, and Luis Machuca, the CEO of Portland-based health IT messaging company Kryptiq. Machuca is innovative as both and employer and a technology guy, and Ganz is, shall we say, not your typical insurance company executive!

Matthew Holt:  This is Matthew Holt with the World Healthcare Blog, reporting from the World Healthcare Congress, doing a podcast. It’s kind of funky back here because we are in this glass-enclosed blogger’s corner which they put together at the back of the exhibit hall, but they are still setting up the exhibit hall, so you can hear the vacuum cleaners in the background. But no matter, we are on with the first podcast of the day.Today we have got some very interesting folks: Mark Ganz, who is the president and CEO of the Regence Group, which is the big Blue’s plan in Oregon and the Pacific Northwest; and Luis Machuca, whose name I just got wrong again. [laughs]

Luis Machuca:  Machuca!

Matthew:  Machuca! Sorry, my pronunciation is–they never taught you that about proper Spanish accent in the English school I went to. He is the CEO of Kryptiq, which is an IT messaging company. Well, I should let Luis tell you about that. Mark has already been on the podium twice today in two different areas; Luis has just been talking about an initiative that is being run for his employees with Regence. So let’s start there; Luis, give us the quick find out about what are you doing with your employees and how you work with Regence and what innovative things you are doing around employee healthcare at Kryptiq.Luis:  Hi Matthew. So, really what Kryptiq is all about is building tools that enable healthcare transformation. We’ve really, from day one, always felt that transformation starts from the inside out. So before we try to transform the world of healthcare outside, and build tools for them, we wanted to make sure that we were sensitized to the notion of delivering the very best possible healthcare in the most efficient of ways. So we’ve done many things along those lines, starting with reimbursing for email and patient portal enable clinics for employees.More recently, and why Mark is here really, is to align with health plans who also embrace the notion of transformation and the notion of getting more decision in the hands of the employees, and more tools and information for employees to make the right decisions about their healthcare dollars.

Matthew:  So what does that mean in real life? How have
you structured your employee benefits so far, and what’s that actually
mean? I’ll ask you, and then I’ll ask Mark the other side. 

Luis:  Yeah, in real life that means, number one, that we
want to make sure that employees have easy, highly productive access to
excellent healthcare, and thus the email and portal enabled
reimbursement for clinics that do that; and two, a high, high component
of a mix of an HSA combined with tools from our health plan that allows
people to be guided about the decisions that they make, about the
choices that they have, about things that are going to work for them,
both in a preventive and also once they have some disease.

Matthew:  So, are you funding the HSA from the company, or is that sort of more skin in the game from the employee.

Luis:  We fund half of the HSA, so we fund half of their limit.

Matthew:  Well, that’s pretty interesting. Now Mark, tell
me a bit about how it works out from the insurer and the kind of work
you are doing with them.

Mark Ganz:  Well, one of our core beliefs as a company is
that the fulcrum for full healthcare transformation is the individual
customer, the consumer; and that if you look at, when they talk in
healthcare about the misaligned incentives among the various players in
healthcare, it’s because we are not aligned toward a single individual
or person that we serve.Our belief is that if we focus on the
needs of the individual and engage that individual to move beyond the
sort of state of entitlement that they are currently in, and create a
more of a healthcare marketplace that is very responsive to consumers
and in which a consumer is able to navigate and make choices,
value-based choices, that that will begin the seeds of more fundamental
change throughout the healthcare system.Based on that belief,
we’ve started a pilot within our own company with our own 6,000 or so
employees, now we are closer to 7,000 employees, focusing on how do we
engage them in their own use of healthcare benefits, in their own use
of healthcare, so that they have a better understanding of the
interconnection and interdependence, frankly, between and among
themselves around their use of care and even their desire to remain
healthy and not need the care in the first place.

Matthew:  What does that mean in terms of – you showed in
the last session some of the dashboards, and some of the tools and
techniques. Could you go down to the details of what you’re using?

Mark:  Sure. What we’ve done is focused around the key
outcomes we want to achieve in terms of engagement of employees, and
set up a series of programs designed to achieve those outcomes. We
measure our ability based on those outcomes.So, specifically,
the first year we were into this, we designed health risk assessments
that all of our employees filled out. Based on what we learned from
that, from what employees told us they wanted to work on most, we then
developed a series of wellness programs that were designed to address
those very issues.So we had a number of employees that smoked
and wanted to quit. We engaged them in ways in which they could do
this. We had a number of employees – a lot of employees – who were very
overweight. In fact, I think they’d been attracted to our company
because we had rich benefits and they felt they would be well cared for
as employees in our company.

A lot of them were overweight, so we designed a series of financial
incentives and programs that were aligned with those incentives to help
people lose weight. In fact, we’ve had amazing success.And
what’s really been interesting is that once we created those programs
and then helped people engage in them, what we’ve really tried to do is
get employees working with each other to carry it forward. We’ve seen
this amazing interplay amongst employees in terms of their desire to
lose weight, to get more fit, to be more engaged in taking care of
chronic diseases, that we aren’t necessarily mediating. We’ve just
created the opportunity for employees to talk to one another and
support one another as they try to address those issues for those own

Matthew:  You come here with a really crucial issue
(while we’re doing this someone’s trying to break the door down), which
is how do you motivate people, how do you get them to get off the dime
and change behavior? And there are a couple of things going on which I
think are related which were on the previous panel, with George
Halvorson from Kaiser Permanente.There’s also this move in the
information therapy movement which I’m sure you guys are familiar with,
talking about some of the stuff that John Wennberg just mentioned
earlier about decision aids and people making the right decision about
their care. In some ways, take decisions back a bit from some of the
excess we’ve seen in the provider community. I don’t want to put those
words in your mouth! But we are talking about how we change the
behavior of individuals. Some of it’s motivated with money. Some of
it’s motivated with almost a community spirit, that you were

Let’s change the focus a little bit: At the same time, some of us
are saying that the move towards HSAs and individual self-directed
accounts actually mitigates against that and tends to put the healthy
people up against the sick people and then we have the 3% of folks who
drive most of the spending as George Halvorson was mentioning, who are
absolutely not so amenable that type of approach.How do you think that this fits in to the chronic care model?

Mark:  OK, a couple thoughts. First off, the healthcare system is an inefficient, opaque, paternalistic system.

Matthew:  No disagreement. [laughs]

Mark:  And that is true no matter whether you are
suffering from chronic disease or you have a hangnail. The fact of the
matter is that if we’re going to get at fundamental cultural change in
the way the system functions, I believe you start with the 80% that use
20% of the care who have the ability to make choices. You can educate
them about how they use healthcare and about how their decisions impact
the lives of others.And, frankly, another piece is that how
their contribution to the insurance pool is actually helping others out
in the community. I think they have to understand both. And it’s
amazing how little we understand that in this country. We believe that
somehow it’s me against the big machine when it’s time for me to use
healthcare. The mindset of people is often, "How can I extract the most
value out of the system?" which means "How much can I extract the most
value out of the system, " which means, "How much can I use and
continue to use?" They don’t see the relationship about how, when they
use care, they’re essentially taxing other people within their
community for their use of care.Trying to get at that challenge
— that is one of the key challenges we face. If we are able to get the
health-care system to act more efficiently when it’s dealing with 80%
of the people it sees, I believe it will act more efficiently when it’s
dealing with the 20% of the people it sees who use 80% of the
resources. That the system will change fundamentally to become more
efficient, and that maybe that 80% who are elective today might be part
of that 20% five years from now.If they change the way they
view healthcare when they’re healthy, or relatively healthy, that when
they do get to a certain age where chronic disease sets in, they will
be more thoughtful about how they use care. So it’s a belief that
you’ve got to change the fundamental economic rules of the system. I
don’t believe you get there by simply focusing on changing the game for
the 20% using 80% of the care. I think you have to take a broader look.

Matthew:  Luis, How is that playing out with what you’ve
done in your company so far? What are you seeing from your employees so
far, in terms of their changing care?

Luis:  I want to go back to something Mark said on his
speech earlier today, when he talked about an example. He was talking
about a person helping his wife go through the final stages of a
cancer, and how, in summary, they were almost forced to surrender
control in order to really be able to cope with the health-care
system’s role or participation at those stages. What we’re trying to
do, and what we are all about, is whether it’s through HSAs or some of
the things that Mark talked about, that the more that the decisions
become available for people to make — whether it be small decisions or
big decisions — the more the dynamic will change with the providers.What
we do is we understand that most providers, it’s not that they want to
retain control, and it is not that they’re cynical. It’s that, in many
cases, they really are unable because they don’t have access to their
own data. They don’t have access to the continuity of healthcare to be
able to put data, to be able to put the full picture. So they’re only
giving an opinion or a prescription based on what’s in front of them.As
a technology company, what we are trying to do is put in the
connectivity tools to allow those things that are in the periphery to
come in and form a better picture, so people can have more informed
decisions — both as providers, so people can give a menu of choices,
and then also for the patients, to be able to make better choices.The
way we see that with our employees is our employees have become very
discriminating about the providers that they choose, whether it be on
the chronic disease pool or not. The chronic disease employees are
gravitating much faster to providers who are going to help them manage
a compliant state, than who are just going to be there on an episodic
basis. Too early to tell in terms of what data is out, but from a
behavioral and anecdotal, observational point of view, we are right on
track where we want to be.

Matthew:  Yeah, and actually this leads us almost to a
point which is, I know, a slightly controversial point in the Northwest
around managed networks and high-performing networks. [laughs] If this
was TV, you could see Mark sort of cringing there.[laughter]But it’s absolutely a key issue….

Mark:  It’s a hard lesson learned.

Matthew:  It’s a hard lesson learned, but it’s a
lesson…. In some ways, you could argue what Luis just said was that
some self-selection on the consumer side towards the right thing, the
right network perhaps.

Mark:  I think if you actually educate…. If you provide
financial incentive, however that’s structured, whether it be HSA or
whether it be the employer specifically putting more money in the
pocket of the employee and saying, "This is your money; go spend it
wisely." However you create that incentive, and you educate them how to
be good shoppers, you create more of the marketplace economic dynamic
that I think will start changing the dynamic of the supplier of
healthcare, i.e., the physician, the hospital and the like.If
you look in those areas of medicine that are not subject to the
third-party payment mechanism, that are subject to a marketplace
dynamic where the individual is spending their own money and the
health-care provider is responsive to that economic relationship, what
you see over time is costs are stable, and in some cases they even drop.

Let me give you an example:  Lasik eye surgery versus cataract
surgery. You look at Lasik over the last several years, and you see
what’s happened in Lasik. Number one, quality has gotten better.
Customer satisfaction has gotten better. Outcomes are better. Prices
have dropped. And there are more people available to do it, because
it’s a competitive marketplace.Cataract surgery, which is
subject to the third-party payment system — there’s really not much
new that’s happened in cataract surgery over the last ten years. But
what’s happened there? Prices have gone steadily upward, because there
is not a marketplace dynamic. It’s basically "I want cataract on
demand." Physicians, who actually are much more efficient at doing the
surgeries, simply do more of them and charge more for doing it. And we,
as health plans, all the while are sitting back, patting ourselves on
the back, saying, "Aren’t our discounts great!" When in fact, the alpha
upon which our discounts are based continually goes upward.Now,
that’s an example where I think you can look at it and say, "If you
give consumers the right incentives, and you educate them how to be
shoppers, they’ll figure it out." They will make good decisions and
they’ll be more satisfied with the decisions they make, because they
feel like they had a sense of taking charge of their own healthcare, as
opposed to being run like a rat through a maze. Which is,
unfortunately, I think how healthcare works.

Matthew:  Let’s just raise that, though. I’m going to try
and draw two things together here. The issue of Lasik versus cataracts
has come up a lot, and there’s been, as you know, studies going both
sides of that equation. But it’s a very definable, neat piece that you
can do. Whereas we know, when we talk about chronic care, which is
where most of the money is spent, it’s less definable. Part of the
problem is something that Luis brought up, which is that the average
physician doesn’t have enough information about the patient, the
average patient, is seeing how many number of patients?So let
me ask both of you to jump in on this. How far are we along — maybe
just here in Oregon and the Pacific Northwest — how far along are we
in the integration of information that makes that potential easier?
Then the next question is speculate, about the end state and the way
that you’re going to be paying for that expensive chronic care, because
of stuff that isn’t like Lasik?Luis:  Well I want to stay to your example, because I
think that it’s a good place to frame the difference of possibilities.
The popular notion is that people think that we want to know who gives
the greatest chronic care. "Tell me who the good doctors are versus the
bad doctors."I think that’s really a bad question to ask, for
the following reason. You’re not going to be able to drive the
healthcare system with 20% of the doctors, no matter what. The premise
of my point is that the data is there to make the overwhelming majority
— a very large number, 80-plus, 90% of the providers — to compliance,
to manage a chronic disease in a very effective way, both a cost- and
outcome-effective way, if they were connected to the data.So
what I want my health plan to tell me, in terms of their network, is
not "who are the good doctors and who are the bad doctors," but steer
me to the people that know how to manage to compliance — as opposed to
darkness, where I don’t know the difference. I don’t need to know,
tomorrow, all of the details about a particular provider versus another
one. But I would like to have some qualitative information about: What
kind of tools do they have? Are they committed to a compliance
management system? Are they willing to take whatever those steps are?That,
to me, is an important question that can be answered by health plans
and others, in terms of the managed networks and which are the better

Matthew:  And where would you say we are, on a one-to-ten
scale? How far down the path are we to that kind of information
integration between those providers, which is seriously a lot of the
problem that we’re talking about?

Luis:  I would say, that’s not going to give you a
numerical answer, but I’ll tell you this: the toothpaste is out of the
tube. We are headed in that direction; it’s going to happen, certainly
within the next five years. Any attempt to suppress it or repress it
will result in market uncompetitiveness and either people losing jobs
or people going out of business. But I think we’re past the point of no
return on that. So I am very optimistic.

Matthew:  I love your optimism! At Institute for the
Future, I remember we always used to say that the electronic medical
record, you know, it’s a technology that is five years in the future
and always will be. [laughs]

Luis:  A very good example, the electronic medical
record, you know, 80% of physicians today do not have an electronic
medical record, but 95% of that 80% can do an electronic referral or
could do an email consult or could send me my lab results
electronically. And those get me to my next step in the healthcare
chain much better armed and much better informed.So the
electronic medical record is an example of something that I think
became a big initiative without a benefit/value proposition that was to
the purchaser; unlike this idea where me as an employer, you know, I
want to get guidance from my health plan as to where my employee is
going to get better disease management for diabetes or hypertension.

Mark:  I want to come back to culture here for a minute,
because I am leading the effort in Oregon to try to create an
interoperable free exchange of data amongst the healthcare providers.
We are starting in the greater Portland area because that is where the
greatest population center is. We created a committee, a steering
committee under the auspices of the broader business community, the
Oregon Business Council, which I chair, and we have at the table the
CEOs of the major hospitals; and they are the key to making this work.If
they don’t play, because, I think as you know, the value proposition
that hospitals have used into selling the idea of EMR to their own
boards has generally been that by having EMRs within their own system,
that in a sense it creates a higher set of castle walls.

Matthew:  Yes, sure.

Mark:  They keep patients within the system, they keep
doctors referring into the hospital; it’s a way to make sure that the
beds stay full.It’s been an interesting impediment to the
conversation that when you realize that when you talk about
democratization of that information across hospital systems, that is
very threatening to an old business proposition. It was what I referred
to, I was trying to refer to, in my earlier speech about how sometimes
things that have gotten us here from a profitability standpoint, we
have to put at risk, we have to let go of and look for other ways to
provide value. And right now the challenge for hospitals is to provide
a greater degree of value to the community through the more easy flow
of information.When we did the study to determine where the
economic benefit was of that project, the numbers that came back were
essentially, the primary economic benefit was in reduced tests,
duplicate tests. Because right now, you know, I am being treated at
Legacy, I go up to OHSU, OHSU gets to run all the same tests because
they can’t get the information from Legacy. If they can get it, they
don’t have a reason to do those tests. And that is, I mean, I
understand, I have compassion for the CEOs of the hospitals saying
"Wait a minute, why is this a good thing for me?"

But I’ve been very impressed with the vision of
folks so far, to stay with this and believe that this is the right
thing for the community as a whole. And that’s what gives me hope in
believing. I’d say, you know, you asked me how far along we are, I’d
say we are still, we haven’t reached that tipping point. I’d say, I
agree with Luis that the toothpaste is out of the tube. That is going
there, but we haven’t quite got to that place where we have everybody
fully admitting or fully embracing the notion that the new world around
healthcare data interchange is better than the old world of "keep the
castle keep strong, build the castle walls higher."

Matthew:  Right, and the last sort of question on this is
the "Wall Street Journal" article about Virginia Mason a couple of
months back, which I’m sure you saw, regarding them going reducing test. I think Starbucks was their driving employer, saying "could we
reduce tests?" and they were having trouble getting all the health plans to
actually reward them in a way that was conducive to that. What do you
think? I presume you are still largely a fee-for-service based payer,
as it were, what’s your likely evolution in reimbursement for that?

Mark:  We are putting a great deal of focus–it’s one of
our key initiatives right now–in fundamental reimbursement–basically,
out-of-the-box thinking about how we reimburse. I am convinced that
much of the brokenness of the system is a direct outcome of the way we
reimburse.And when George talked today about how fragmented the
system is, how it doesn’t respond to diabetics and the like, I think we
have to turn around and point the finger at ourselves and say that how
we reimburse medicine creates that fragmented approach. Do you think
for a minute that if a diabetic who had complete, you know, had the
financial resources and that the system was completely accountable to
him, do you think for a minute we would continue with this fragmented
system? Diabetics, as consumers, would never allow it; and the system
would respond to provide more of a holistic, comprehensive way to treat
their illness.I think that we, as health plans, have to change
the way, we have to be willing to move away from the discounted,
secret, negotiated rates that we have, that in a sense, I think,
provide very little value in reality. I mean, is it really a benefit to
consumers to have a 20% or a 25% discount off an alpha that is going up
at twice inflation every year? I don’t think that we are really
delivering enough value there. So we better think about a different way
of reimbursing, and then use that opportunity, by the way we reimburse,
to change the way that physicians practice.So for example, if
we were to pay on a regular basis for email visits, would we change the
efficiency and the outcomes of people’s experience of healthcare? I
think we might. On the other hand, it’s very scary to the actuaries and
underwriters in our company who say, "Well, if we start paying for
that, who is to say that doctors aren’t just going to start billing us
crazily for email visits as well as all the other things they bill us
for as an alternative too?"So we’ve put together an
interdisciplinary team of healthcare economists, informatics,
actuaries, and, well I would just say, creative thinkers; to start
working in an R&D kind of context, trying things, seeing if they
work and looking at them in the lab, if you will, to say "Could these
things work, and would they drive a different outcome? Would they
increase people’s experience of healthcare and tend to lower the usage
of healthcare?" And if it does, if we can accomplish those things as
well as increase satisfaction through that, both of the physician as
well as the consumer, I think we are on the right track, and then we
can try it as a pilot, and then if it works in the pilot we can take it
out broadly.

Luis:  Matthew, there is a very good technology example
illustration of what Mark just said. The enormity, perhaps all of the
software investment that has gone into tools for health plans to date,
has been in the claims. How do we pay claims efficiently? And that
really gets to the point of Mark, that that happens very late in the
process, really at the end of the process, and doesn’t take into
account any real intelligence, any real purposefulness as to what are
the behaviors that we want to incentivize.The premise of
Kryptiq’s Courier line, for example, is really to go upstream and help
a health plan, from a software point of view, connect all those dots
that he just went through, so that it can be purposeful and intentional
about the decisions they make upstream, and then the claims payment
payroll takes care of itself.So we are seeing that shift as
well, not just in the strategy piece, but also in the software
investment. So the software investment is also moving upstream as well.

Mark:  Yeah, and actually the primary reason that we
bought that product from Kryptiq and are working together is because it
starts with having a common vision. And that’s what’s made it exciting
in terms of working with Kryptiq, is we sort of are coming at this
issue, this broad issue, from two different angles, but there are many
points where we meet; whether it’s us engaging with them around what
they want to accomplish in terms of employee engagement, or they
engaging with us in terms of helping us with that upstream process.

Matthew:  Fantastic. So the World Healthcare Blog was
started because the World Healthcare Congress was interested in looking
at more innovation, and there we have a bunch of innovation! Luis,
Mark, thank you very much indeed.

Luis:  Thank you.

Mark:  Thank you.

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