John Zutter is the CEO of Lantern which is a company managing specialty care. It has evolved from a centers of excellence model, and changed its name from Employer Direct Healthcare earlier this year. The trick is product expansion into the expensive stuff, especially cancer care, infusion and specialty surgery. John has thought a lot about where there is money to be saved–and how health care can be structured, and how cost and quality can be managed. This is a fascinating and in-depth conversation about how employers can save money, and how that might make the overall market evolve–Matthew Holt
Above the Fold
Brad Kittredge, Brightside Health
Brad Kittredge is CEO of Brightside Health, which he co-founded with CMO Mimi Winsberg. They are a large online mental health group that aims a providing more access with higher quality. They have built their own technology stack and medical group, and are in network for about 135m lives. They also take patients from the emergency departments of health systems–as well as direct patient outreach for “standard” mental health conditions. Brad talked to me about measurement, quality and care improvement, including how they are using their algorithms to improve their clinicians’ prescribing accuracy. I also asked him where Brightside were in the process to, err, return at least some of the $150m they’ve raised back to their investors. Matthew Holt
PatientsUseAI: Hugo, Gilles and e-Patient Dave on the race to patient autonomy — THCB Gang Special Episode 149, Thursday December 19
Joining Matthew Holt on #THCBGang on Thursday December 19 at 1pm PST 4pm EST are three leaders in the patient movement Hugo Campos (@HugoCampos); Gilles Frydman (@GillesFrydman); and ePatient Dave deBronkart (@DavedeBronkart). They will be bring us up to speed on the very latest in patients using AI.
You can see the video below live (and later archived) & if you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels.
Danielle Vaeth, Qbtech
Danielle Vaeth is Head of Growth and Strategic Development at Qbtech, a company that helps diagnose ADHD, working mostly with virtual providers. They use facial recognition and tracking to do this. Qbtech can diagnose 50% more patients than self-reporting and has approval from a big NHS study, the FDA and many peer-reviewed studies. They raised $6.8m in 2022 & have just tested their millionth patient. Plenty more to go!–Matthew Holt
Managed Care History Part III: The Rise of Machine-Driven Managed Care
This is part 3 of Jeff Goldsmith’s history of managed care. If you missed it read Part 1 & Part 2
By JEFF GOLDSMITH
Two major changes in health insurance ensued as the US health system entered the 21st century- a strategic shift of health cost risk from providers to patients and the emergence of machine driven managed care.
Insurers Shift Strategy from Sharing Risk with Hospitals and Doctors to Markedly Implicating their “Patients’.
After the 2008 recession, employers and their health plans shifted strategy from putting physicians and hospitals at risk through delegated risk capitation to putting patients at risk through higher patient cost sharing. In the wake of the recession, the number of patients with high deductible health plans nearly quintupled–to over sixty million lives. By 2024, 32% of the lives in employer-based plans (50% among small employers’) were in high deductible plans regardless of patient economic circumstances.
The stated intention of the High Deductible Health Plan movement was to encourage patients to “shop” for care. In real care situations, however, patients found it difficult or impossible to determine exactly what their share of the cost would be or which providers did the best job of taking care of them. For an extensive review of the literature on how healthcare “consumers” struggle to manage their financial risk, read Peter Ubel’s 2019 Sick to Debt: How Smarter Markets Lead to Better Care.
Employers and insurers, working together to “empower consumers”, rapidly shifted “self-pay” bad debts onto their provider networks. Some 60% of hospital bad debts are now from patients with insurance. Instead of “shopping for care”, consumers found themselves saddled with almost $200 billion in medical bills they could not pay, and hospitals and physicians ended up eating most of it.
This escalating “insured bad debt” problem forced providers to hire revenue cycle management (RCM) consultants to revise and strengthen their policies regarding patient financial responsibility, “revenue integrity” (meaning crossing all the “t’s” and dotting all the “I’s” in each medical claim and making sure care is coded properly) and rigorously monitoring the flow of claims to and from their major insurance carriers. As a result many providers found themselves spending 10-15% of their total operating expenses on RCM!
Medicare Advantage Enables Insurer Market Dominance
The movement from Ellwood’s vision of regionally-based provider sponsored health plans to market dominance by huge national carriers was cemented by the emergence of Medicare Advantage as the most significant and profitable health insurance market segment. In 2013, Medicare Advantage accounted for 29% of total Medicare spending. A decade later, in 2024, it was 54% (of roughly a trillion dollar program). And until a federal crackdown on MA coding and payment policies by the carriers, it was a 5% margin business, significantly more profitable than commercial insurance, ObamaCare Exchange or managed Medicaid businesses.
As Medicare Advantage emerged as the largest health insurance market, it was dominated by a cartel of large publicly traded carriers.
Continue reading…Managed Care History Part II- HMOs Give Way to Managed Care “Lite”
This is part 2 of Jeff Goldsmith’s history of managed care. If you missed it read Part 1
By JEFF GOLDSMITH
The late 1990s crash of HMOs opened the door to a major consolidation of the health insurance market controlled largely by national and super-regional health plans. While HMOs by no means disappeared post-backlash, the “movement” begun by Ellwood and Nixon fell far short of national reach. HMOs never established a meaningful presence in the most rapidly growing parts of the US- the Southwest, South and Mid-Atlantic regions, as well as the Northeast.
The exemplar, Kaiser Permanente, damaged its financial position with an ill-considered 1990’s (McKinsey-inspired) push to become a “national brand”. Today, over 80% of Kaiser’s 13 million enrollment is still in the West Coast markets where it began 80 years ago!
HMOs Go Public and Roll Up
Two little noticed developments accelerated the shift in power from providers to payers. One was the movement of provider sponsored health plans into the public markets. PacifiCare, the most significant hospital sponsored health plan owned by the Lutheran Hospital Society of Southern California, was taken public in 1995. A subsequent merger with FHP health plan destabilized the newly public company.
After PacifiCare crashed post the 1998 Balanced Budget Act cuts, and struggled to refinance its debt, it was acquired by United Healthcare in 2005, bringing with it a huge sophisticated, delegated risk contracting network. United then bought Sierra Health Plan based in Nevada in 2007, including its large captive medical group, its first medical group acquisition. Following these acquisitions, United rolled up PacifiCare’s southern California based at-risk physician groups in the late 00’s, and then capped off with its purchase of HealthCare Partners, the largest of all, 2017 from DaVita in forming the backbone of today’s $110 billion Optum Health.
United’s buying BOTH sides of the delegated risk networks-plan and docs-in high penetration managed care markets is not fully appreciated by most analysts even today.
It has meant that as much as 40% of Optum Health’s revenues, including almost $24 billion in capitated health insurance premiums, come from competitors of United’s health insurance business.
However, of greater strategic significance was Humana’s decision in 1993 to exit the hospital business by spinning its 90 hospitals off as Galen.
Continue reading…Sara Ratner, Nomi Health
Sara Ratner is President of integrated Programs at Nomi Health. They work with employers and health plans to connect them to a network of providers (both telehealth and physical) who accept steep discounts in return for immediate payment. The employees in turn get no co-pay/no coinsurance. In addition they have an analytics company called Artemis which recommends care paths and a PBM to lower drug prices. Sara is trying hard to integrate mental health into their program too. Nomi raised $110m in 2022 and also made a decent amount in covid testing earlier in its life before pivoting.
Managed Care History: From HMOs to AI Assisted Claims Management Part 1
By JEFF GOLDSMITH
Healthcare payment in the US has evolved in decades-long sweeps over the past fifty years, as both public programs and employers attempted to contain the rise in health costs. Managed care in the United States has gone through three distinct phases in that time- from physician- and hospital-led HMOs to PPOs and “shadow” capitation via virtual networks like ACOs to machine-governed payment systems, where intelligent agents (AI) using machine learning are managing the flow of healthcare dollars. This series will explore the evolution of managed care in 3 phases.
Phase I- Health Maintenance Organizations and Delegated Risk Capitation
In response to a long run of double-digit health cost inflation following the passage of Medicare in 1965, the Nixon administration launched a bold health policy initiative- the HMO Act of 1973- to attempt to tame health costs. The Nixon Administration intended this Act to provide an alternative to nationalizing healthcare provision under a single payer system, as supported by Senator Ted Kennedy and other Democrats.
The goal of this legislation was to restructure healthcare financing in the US into risk-bearing entities modeled on the Kaiser Foundation Health plans- a successful group-model “pre-paid” health plan founded in the 1940s and based on the Pacific Coast. These plans would accept and manage fixed payments for a defined population of subscribers, and offer an alternative to what was perceived as an inflationary, open-ended fee for service payment system. In varying forms, this has been the central objective of “progressive” health policy for the succeeding fifty years.
The HMO Act of 1973 provided federal start-up loans and grants for HMOs, much of which went to community-based healthcare organizations and multi-hospital systems. It also compelled employers to offer HMOs as an alternative to Blue Cross and indemnity insurance. While a few HMOs either employed physicians directly on salary (staff models like the Group Health Co-Operatives), or contracted on an exclusive basis with an affiliated physician group (like Kaiser’s Permanente Medical Groups), many more delegated capitated risk to special purpose physician networks- Independent Practice Associations (IPAs)- whose physicians continued in private medical practice.
By 1996, according to the Kaiser/HRET Employee Benefits Survey, HMOs covered 31% of the employer market (roughly 160 million employees and dependents), and the federal government had begun experimenting with opening the Medicare program to HMO coverage. The impact of HMO growth on overall US health spending remains uncertain, because health spending as a percentage of US GDP continued growing aggressively during the next fifteen years, before levelling off during the mid-1990’s around the Clinton Health Reform debate.
Two things brought the HMO movement to a crashing halt in the late 1990’s.
Continue reading…THCB Gang Episode 148, Monday December 16
Joining Matthew Holt on #THCBGang on Monday December 16 at 1pm PST 4pm EST are patient safety expert Michael Millenson, physician, entrepreneur and technologist Shantanu Nundy; and Digital Health and Emerging Med-Tech Practice Co-Founder at Marsh & McLennan, Beracah Stortvedt.
You can see the video below live (and later archived) & if you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels.
The Next Steps in Parkinson’s Disease Research
By STEVEN ZECOLA
Steven Zercola is back with his latest insights into research in Parkinson’s disease. You can say previous part of this series here
In its latest report, the National Institute of Health (NIH) references 508 active Parkinson’s disease (PD) projects as the recipients of $243M in grants.
A few caveats are warranted about these numbers:
- The information is not as precise as it seems. The NIH report states that: “NIH does not expressly budget by category”. Rather, it “categorizes diseases, conditions, and other research based on a computerized process that it uses at the end of each fiscal year”.
- NIH alludes to $74 million of the overall budget as indirect costs without an explanation of this distinction.
- Only about half of the aforementioned research grants are available to review. The NIH report specifies that “{t}he minimum reporting threshold for a specific disease/condition is $500,000”.
- NIH isn’t the only federal government agency providing grants for PD research. For example, the Department of Defense also maintains a budget for PD research, albeit much smaller.
Generally speaking, one can categorize basic research into having exploratory, explanatory or diagnostic objectives. Given that basic research for PD has gained some important insights over the past several decades, I have added some PD-specific categories to the more general categories of research, as shown in the chart below.
Once these additional categories were identified, I assigned each of the reported studies and associated costs to the corresponding categories as follows:
| Category | Number | Costs ($000) |
| Explanatory | 50 | 18,162 |
| Exploratory | 32 | 13,178 |
| Diagnostic | 21 | 11,499 |
| Tools | 7 | 4,444 |
| Biomarkers | 9 | 3,541 |
| DBS | 13 | 3,598 |
| Alpha-synuclein | 38 | 16,642 |
| Physical therapies | 17 | 18,119 |
| Indirect | 27 | 18,975 |
| Total | 214 | $108,158 |
As you can see from the activity on explanatory and exploratory research, NIH is still very much in a discovery mode when it comes to PD research. From my perspective as a patient, only about 25% of these identified grants are in a position to produce game-changing results within the 10-year window of the legislation (namely, tools, biomarkers and alpha-synuclein).
In terms of clinical research, clinicaltrials.gov provides a listing of all trials, broken down into phases, including those that are completed, recruiting or terminated. However, the inputs are not reviewed by an independent party, and the overall numbers are not reliable and do not reflect the funding status of the trials.
Nevertheless, there are a series of individual trials that show promise.
Continue reading…
