FHIR & The Art of the Possible: Episode 3

Nolan Kelly: Alright. Welcome back. I’m Nolan Kelly, Chief Customer Officer at 1upHealth.

Kevin Yamashita: And I’m Kevin Yamashita and I lead our customer enablement team here at the company. 

Nolan Kelly: Thanks for joining us again. Round three, Kev. 

Kevin Yamashita: Oh, crazy. Where does time go? 

Nolan Kelly: We’re back for more. 

Kevin Yamashita: Yeah – Nolan, last time we talked, you teased us, Art of the Necessary, not Art of the Possible. 

Nolan Kelly: I know. 

Kevin Yamashita: Well, we’re here to talk about that. What does that mean? 

Nolan Kelly: It means the first two times we had these sessions, we focused on truly the Art of the Possible during some regulatory change. There’s a lot of change happening in the industry. What does that mean for the incumbents and the new entrants in healthcare, and how can they operate differently? What are all the new and unique ways to continue to advance and change how healthcare is delivered, really with a focus on data centricity, but yeah, sort of with a lens of imagination, right? All the cool things that could happen. 

Kevin Yamashita:  Oh, optimism. Yeah. What could you do? Why?

Nolan Kelly: Exactly. Yeah, no, I had thought or we had thought together that while there’s a lot that can be done in the Art of the Possible, the focus really needs to be on what is necessary. Why is all this change happening? Why is it happening now? And sure, it’s fun to think of everything that can happen and to dream that way, but we’re kind of in a tough place in the industry right now, and there’s a reason why there’s all this regulation. There’s a reason why all this change is happening. So let’s focus on that. Let’s focus on the here and the now, and really driving change that’s necessary in the industry. That was kind of the thesis. 

Kevin Yamashita: Love that, let’s focus on things that are in front of us, the real challenge that we can solve. And it’s like you said, it’s nice to dream, but at the end of the day, I think the impact is felt with the real things and it’s hard work. One step at a time, it gets us there. 

Nolan Kelly: So we’re going to tell the narrative through four themes, and those themes have articles that we’ll reference. We’ll link them into the video so folks can kind of click over and read them on their own. But I’d like to go through four trends in particular. The first one is around, and we’ll focus on Medicare Advantage. That’s kind of the proxy for what’s happening in the industry. The canary in the coal mine, so to speak.

Kevin Yamashita: Now for those that don’t have that context. Medicare Advantage. What do you mean by that?

Nolan Kelly: I mean private insurance carriers that are essentially doing the work of Medicare for the federal government. So the federal government paying private insurers to deliver Medicare, with a real focus on utilization management, network management, helping the Medicare members achieve better care through the Medicare system.

Kevin Yamashita: Got it, got it. So when most people hear Medicare, they think of a monolithic government program. You’re telling me that there’s private insurance carriers that support some of these workflows as well? Interesting.

Nolan Kelly: That’s what I’m telling you..

Kevin Yamashita: Love it, yeah. Okay. I might’ve known that. Now we all do.

Nolan Kelly: But it’s a great indicator for what’s happening more broadly across the healthcare industry.

Kevin Yamashita: Which is why I raise this. I think that the trend of privatization and trying to enable the free market to start to solve some of these problems, I think that’s an important piece of this story. I want to –

Nolan Kelly: Free market?

Kevin Yamashita: What is that?

Nolan Kelly: Exactly, and what is it in healthcare? So let’s talk about a couple of trends. The first is the utilization growth in the MA space, and we saw some really interesting stuff coming out of earnings calls in terms of Q1 cost trends. So we’ll talk about that. I’d like to talk about the very recent CMS news around their rates that they’re going to set for fiscal year 2025.

Kevin Yamashita: Finalized that a couple of weeks ago. It was pretty recent.

Nolan Kelly: Yeah, it’s pretty recent. Yeah, exactly. Some trends that are happening with providers and their interactions with Medicare Advantage plans. And then last but certainly not least, we kind of buried the lead here, what that means for patients and consumers.

Kevin Yamashita: I have a feeling it’s not good.

Nolan Kelly: Not great. It’s not great. So do you want to open? Do you want me to talk about the first?

Kevin Yamashita: Take us out, take us away.

Nolan Kelly: Okay. So the first trend really is around what we saw in Q1 earnings calls from a lot of our large insurers, the Humanas and CVSs, Uniteds of the world as they were reporting on Q4 earnings, a tremendous uptick in utilization, a tremendous uptick in costs, and a subsequent drop in profit, and a subsequent drop in stock prices, and sort of the cascading effect of all that. Humana had a $541 million loss that they reported in Q4 of 2023. So we’re seeing the cost growth in the MA plans, and is that something that we can continue to weather as an industry?

Kevin Yamashita: Yeah. It’s kind of remarkable when you think about it because I remember even two, three years ago, folks were looking at MA as this shiny new toy, right? Oh, we can improve care delivery quality and we can reduce costs. And how many startups had incredible valuations around MA business models. But now we’re seeing all these incumbent vendors and the big dogs realizing that there’s no silver bullet, there’s no magic, right? The fundamentals still matter. And if you’ve missed the mark on those fundamentals, your profit margin’s going to be taking a haircut.

Nolan Kelly: Well, there’s an underlying thesis that the private insurance plans, this is what they do. They build products and they bring services to the marketplace to help these members better manage their care. They can understand the risk of these members. They have care management program offerings and the such, and that collaboration that’s required between the payer and provider is really at the center of success in these plans. We’re seeing that not really happen.

Kevin Yamashita: Yeah, I mean, fundamentally, I think this is an operational challenge on the part of the health insurance organizations. I think you said it best, MA profitability is really driven by utilization. And how do you control utilization? It’s just simple. Operational levers don’t have line of sight. If you’re not sharing data, if you don’t have visibility to these things, you can’t control it.

Nolan Kelly: Right? Okay. So let’s go from the first one there, which is the MA plan saying it’s costing a lot to run these plans and we’re paying providers more to deliver care for these members. Well, CMS just issued their fiscal year ‘25 rates, and when they set the preliminary rates, there was a lot of pushback from the industry saying, we need more. The rate increase proposed for ‘25 aren’t enough. And when that happens, normally CMS goes back and they move things around a little bit and you’ll see an adjustment up when they publish the final rates. That didn’t happen this time around. So you’re having CMS, the piggy bank say, you know what? We’re not going to bail you out this time. You need, –

Kevin Yamashita: That’s remarkable. Yeah, maybe it shouldn’t be remarkable, but it’s, there’s no magic answer.

Nolan Kelly: What signal does that send?

Kevin Yamashita: Well, I think the signal is really that there has to be a different way to make do with the resources that we have. In so many ways, we’ve gotten all these ‘get out of jail free’ cards in the healthcare space, the system doesn’t work. Let’s come up with a new program, let’s pour more money. Let’s offload this and innovate that. I think at the end of the day, the signal from the government is that there are rules to the game and we now need everyone to play by those rules. And if you’re not going to make money based on the rules of the game, like I said before, the market is free. They’ll be winners and losers. I think the problem, the frustration here is that with healthcare, we all use it. So if there’s losers, we all lose.

Nolan Kelly: And don’t get me wrong, there’s still rate increases happening in fiscal year ‘25. They’re just not to the degree that the industry is saying is necessary.

Kevin Yamashita: And I think in some ways, as an American citizen, as a taxpayer, part of that makes me happy, right? This is my money. This is your money that’s being spent on all these programs. There should be accountability.

Nolan Kelly: Now your W2, you look at your pay stub every two weeks and there’s a line item that says what you are contributing to the Medicare fund. So as a taxpayer, as a citizen, you might be okay with that.

Kevin Yamashita: But it’s a hard spot to be in because I also want to make sure that our brethren here are getting the care that they need. Yeah. How do you balance that, right?

Nolan Kelly: Yeah. No, it’s not easy. Alright, so cost going up, utilization going up, CMS saying we’re not going to continue to respond to exactly what the market demands are, and we’re going to put other levers in the market. And we’re seeing this with regulation and policy, something we’re paying close attention to. There’s another trend which might be most disturbing, which is what’s happening on the health system side, the hospitals –

Kevin Yamashita: This is terrifying.

Nolan Kelly: They’re contemplating and some of them are even actually pursuing not accepting MA insurance anymore. Why is that?

Kevin Yamashita: Oh, that’s crazy. Well, I think there’s a handful of reasons, but at a very fundamental level, I think the providers are seeing that they’re the ones that are losing out when it comes to the economics here. And if you really kind of think about it simply, providers want to provide as much care as they can and payers want to pay as little as possible. And, at the end of the day, who are the folks that were there? It’s providers that want to continue delivering care that are not getting reimbursed for the care they’re delivering. Because it’s really hard when we have someone sitting in front of you that has this need, to ignore them, to send them away. And I think we all get into the healthcare space for these altruistic reasons. So one empathizes and one understands. But then when you wait three to six weeks and you get denial letters from the health insurance organizations, or you have prior authorization processes, you can’t get through all that friction there. If you’re a provider, why do you want to play those games? They’re gone –

Nolan Kelly: This isn’t to point a finger per se, or to say, someone’s a bad actor. Someone’s not a bad actor. It’s all, how do we all work better together to create a system? And these three groups, we’ll start with here, right? Your MA plan, CMS as the largest payer of healthcare in the country, and then your providers who are on the front lines delivering care. This is fundamentally broken. 61% of hospital executives are saying that they are either planning to drop an MA plan or are contemplating dropping an MA plan.

Kevin Yamashita: That is a terrifying, terrifying shift. And I think a lot of this is based on a fundamental lack of trust, right? We set up these rules and all these systems and we hope that folks operate in logical, thoughtful ways. What I think we’re seeing in the industry is that this trust has eroded and eroded and eroded. And because of that, what is logical for an individual organization to be successful and profitable and sustainable is not what’s logical to deliver better care across the country. And the thing that terrifies me most is you think about Medicare Advantage and you think about a lot of these organizations, these are elderly citizens, these are folks with a lot of healthcare needs, and they’re the ones that are no longer going to have access to providers. These are not young, healthy people where we can say, go find a different PCP and they will be fine. These are people that might have long relationships with these provider organizations that now need to find different docs on different systems. And when we talk about the instability of the industry and these death spirals of some of the fundamental economics, you have 60% of providers pulling out of MA, MA collapses just from a very simple supply and demand perspective. What does that mean? This is happening fast.

Nolan Kelly: Yeah, no, it definitely is. You started to go right to the patient, which is the fourth trend I want to talk about, which isn’t totally in the middle of Medicare Advantage, but certainly is right there. And that is the cost sharing and the cost burden that’s now on the consumer. And Massachusetts had put out a study recently, and again, we’ll link to this enrollment in high deductible plans. High deductible plans were going to be one of the saviors to enable cost shifting and have consumers influence the demand curve in the industry.

Kevin Yamashita: Right. The same way that 401k solved the pension crisis.

Nolan Kelly: Exactly. Yeah. It’s almost what it’s done is it’s added just another layer of cost on the industry provider, sorry, employer group costs continue to go up, and now the employers are bearing a bigger piece of that. Over the last 10 years, enrollment in high deductible plans has gone from 16% to 42%. And what’s happening is the consumer, the patient, the member, the employee is literally paying for their insurance and then having to make a decision if they can afford to go get healthcare. I was speaking with a former colleague the other day who called this group the uninsured insureds, and what a disservice the system has done to that population, right?

Kevin Yamashita: Yeah. Oh, it’s remarkable. And I think there’s a whole bunch of different dimensions that get lost in the shuffle and you started to call them out. It is the premium cost of your insurance coverage. It is the amount of your deductible and the amount of cost sharing that routes through. But then there’s other pieces too. You think about basic costs for drugs in the formulary. You think about co-insurance rates. Even if you get beyond your premiums and your deductibles, there’s still all this other crop that sits on top to redirect some of this cost back to the consumer. It’s unsustainable.

Nolan Kelly: It is. And it’s impacting care. So you have one in three patients who are putting off or postponing care due to the cost. These are insured people in the United States of America, one in three are postponing or putting off care, one in five are not filling prescriptions or they’re rationing or skipping their medications because of costs. Again, these are citizens of this country who have insurance plans with pharmacy coverage in place, and this is the cost that they bear on top of their coverage.

Kevin Yamashita: Right, and it is one thing to say, it is the end of the plan year. I’m going to wait three weeks to go get this procedure, or I’m going to try to front load this now to play the game. And that’s not good, but it makes a little bit of sense. To say that I’m not going to fulfill my maintenance medications for the next six months because I can’t afford it. That’s different entirely. And I think some of the irony here, at least that resonates with me is on one hand, we here in the US look to prescriptions and maintenance medications for a lot of population-level health outcomes that we desire. We yearn for. On the other hand, the prices of prescription drugs continue to increase. And I think that’s one of the things that’s called out in the Massachusetts survey as well as some national surveys that we can point to. So, in a lot of ways, yet again, this silver bullet, the solution that we had to the problem is becoming the problem. What do we do?

Nolan Kelly: Well, I mean I think we bring it back to why we’re even talking today, right? It’s this concept of the Art of the Necessary. So we’ve had these sort of utopian type discussions recently that are around data flowing more freely across the industry and the adoption of FHIR and RESTful APIs and such. Some of those regulations don’t take hold until 2027, a prior auth and provider access and payer-to-payer and others. But what we’re shining a light on here is really the system and how it operates today. And the providers, sorry, providers that are losing faith in and are no longer willing to put up with some of the challenges of the MA plans. You have the actual MA payers who are saying the financial solvency of these programs is in question, right? You have CMS saying, we’re not going to bail you out anymore. And you have the consumer holding the bag saying, man, I probably can’t get the care that I need even though I pay for it and have paid for it for years.

Kevin Yamashita: And what’s horrible is I believe that the MA population is increasing in the country. So we’re throwing more people into this conundrum, this barbed wire. 

Nolan Kelly: So how do we bring that back to the Art of the Necessary? What do we have to do today to change some of this? 

Kevin Yamashita: Yeah. Well, one of the things that I think is kind of interesting is as provider organizations contemplate dropping MA plans, there are some that are saying we are not going to drop all MA plans, but we are going to focus on partnership with one or two insurance organizations. Specifically those that align better with our values, those where we have more trust or a better working relationship. That’s really interesting to me, right? Because it comes back to this idea of payer-provider-patient collaboration, and what’s at the center of that? Interoperability, data sharing. If we can all agree on the facts, on the details, then I think we can have a higher order conversation based on trust, a little bit of optimism, some pragmatism, right? So like you said, there are all these regulations that eventually kick in in a number of years (provider access, payer-to-payer, prior authorization, improvement to the Patient Access API). In some ways, I see this as CMS giving everyone a bit of a life raft. The system’s not working, we can’t communicate effectively. There’s a lack of trust. But look, here’s a standard that we can all agree on. Here’s a framework for operating, for sharing data. The floor is falling out from under us, and here is CMS with the answer. Here’s a tool that you can use to collaborate better to start to solve these problems in a cohesive, thoughtful, sustainable, scalable way using technology to work smarter, not harder. Now, I’ve got to be careful because now I’m starting to get a little bit Art of the Possible. But I think that’s what this is, it’s being able to say, here is this great opportunity, here is this critical problem, and the time to act is now. I think that’s what I leave people with.

Nolan Kelly: Yeah, totally agree. Separate the wheat from the chaff a little bit. The problem exists, and CMS is saying, to your point, the opportunity, we’re giving you the tools, industry, we have put regulations out there. We’ve given you the tools to be successful. We’re not going to open the bank further, and we need you to figure out how to run this system more effectively and efficiently. And interoperability, data availability, data exchange, as has happened in other industries in this internet economy, needs to take shape faster in healthcare. Yeah. That’s what gets us out of this. 

Kevin Yamashita: Absolutely. And I think I’d push all of us, because if we’re not on Medicare today, we’ll be on Medicare tomorrow. 

Nolan Kelly: I don’t know. We’re still young. Alright, Kevin, thanks for the time. Always enjoy catching up with you. 

Kevin Yamashita: A pleasure. 

Nolan Kelly: Thank you for dialing in and listening to today’s episode and we look forward to catching up in a couple of weeks. 

Kevin Yamashita: Cheers.