Rae Woods (00:02):
From Advisory Board, we are bringing you a Radio Advisory, your weekly download on how to untangle healthcare's most pressing challenges. My name is Rachel Woods. You can call me Rae. Here on Radio Advisory, I talk a lot about the future of value-based care, because honestly, I want to equip health leaders with actionable guidance to make the right investments for meaningful downside risk. And I know that value-based care is challenging, but there is no doubt in my mind that it is the way forward. So today I want to have a different conversation. I want to talk about the misconceptions or maybe the misaligned expectations that leaders have around value-based care. So I brought Advisory Board's own value-based care expert, Daniel Kuzmanovich, as well as Erik Johnson, the SVP of value-based care for Optum Advisory Services, to talk about the mindset shifts they think leaders should be making when pursuing a sustainable value-based care strategy.

(01:01):
Daniel, Erik, welcome to Radio Advisory.

Erik Johnson (01:04):
Thanks. Nice to be here.

Daniel Kuzmanovich (01:04):
Morning, Rae.

Rae Woods (01:07):
Erik, this is your first time on Radio Advisory, and Daniel, this is far from that. We were just talking about that you are the second most frequent guest on Radio Advisory. How much does that make you want to battle your way into more episodes before we close out 2023 so you can get to that top spot?

Daniel Kuzmanovich (01:29):
It's actually got me thinking about 2024. What do I have to do to win 2024? I'm already at second for 2023. How do I show improvement year over year?

Rae Woods (01:40):
Erik, this is what it's like every time. You're going to have to try to wiggle your way into our leaderboard here.

Erik Johnson (01:46):
I'm a little hurt that this is my first time. I'm starting behind the eight-ball here.

Rae Woods (01:51):
Well, we also like having lots of new voices on. I think it's important to show the breadth of thought leadership that we have at Advisory Board and at Optum and at UnitedHealth Group writ large.

Erik Johnson (02:03):
Well, I do appreciate being invited. It's just an honor to be invited. I [inaudible 00:02:08] that.

Rae Woods (02:08):
Just an honor to be nominated.

Erik Johnson (02:10):
Exactly.

Rae Woods (02:17):
So the two of you, if I can reveal a little bit about what your real jobs are like when you are not coming on Radio Advisory, you spend, I think, every day talking with real health leaders about value-based care. And I have to believe that for as many conversations as you have that are hopeful, that are positive, that are really energizing for you, I'm willing to bet that more often than not, there's a conversation with a health leader where you go, "Oh, that's a red flag. Uh-oh, this is going to cause me to get on my soapbox and say they're thinking about value-based care totally wrong." What are some of those red flags for you when you talk to health leaders?

Erik Johnson (02:59):
That they think they can do it quick and they think they can do it off the side of their desk.

Rae Woods (03:06):
Oh, yeah. Yeah.

Daniel Kuzmanovich (03:08):
"That'll never happen here. That won't happen to us. It couldn't possibly be me." That's one of my favorite ones where folks, they're thinking about it, they're discussing it, but fundamental realization is, "It doesn't apply to us."

Rae Woods (03:21):
Yeah, "We can opt out of this. I can just avoid this maybe forever." I also really get frustrated when folks say, and maybe they say this to you when they're asking for advice, "Can't I just be like Kaiser?"

Erik Johnson (03:34):
Oh, gosh. Yeah. That drives me crazy for any number of reasons, but the biggest reason is that Kaiser's been doing this for a very long time. It's built into the DNA of the organization. You're not going to replace your DNA over the course of a benefit year if you're trying to start this from scratch. Yeah, I hear it a lot and it drives me nuts every time.

Rae Woods (03:57):
I might admit one that I used to say that maybe I'm a bit embarrassed that it used to be a pretty regular part of the way that I talked about value-based care. That phrase, "Foot in two boats."

Daniel Kuzmanovich (04:11):
That's my soapbox moment right there. When someone brings that over, you'll hear me metaphorically drag the soapbox and talk about how that's not the right way to think about it. There's no magical future where we step off of fee-for service and solely into value-based care.

Rae Woods (04:29):
Totally.

Daniel Kuzmanovich (04:29):
I think a lot of our data actually says that many organizations, especially on the plan side, don't want to be in a world that's a hundred percent capitated or a hundred percent value-based.

Rae Woods (04:39):
I do think that it is really important that we take some time to bust the myths that are in the market about value-based care. And if I think about the right way to do this, I almost want to do it in segments and I want to think about the very real journey that health leaders are on, because the truth is, they can have different misconceptions based on where they are in their value-based care journey. And I want to be clear, I'm not saying that there hasn't been positive progress. I'm not saying that there aren't success stories in value-based care, but the reality is that there are still a lot of organizations that are at the very, very beginning of their journey or maybe they're starting over. So my question is, how do you know when a leader or an organization has the completely wrong mindset before even launching a value-based care strategy?

Erik Johnson (05:32):
There's a selection bias for me, because if they're talking to me, they're already interested in VBC and paying for consulting to help them get there. So for the most part, that qualifying exercise has already happened. That doesn't mean they're fully aware of the challenges that they're going to face, and there is some education that goes into it. I think when they think about this without thinking about it as a growth opportunity, I'm thinking that they haven't fully grasped the challenge ahead, because I do think it's about growth for them and I think it's about margin, but I think a lot of times they think just in terms of lost volume, in which case they're already self-defeating.

Daniel Kuzmanovich (06:18):
The growth point is really interesting and your point about loss volume reminds me of one of the things I hear a lot as someone who provides a lot of that education about VBC. When folks don't want to involve the physicians, one of the Advisory Board research best practices is to involve and engage your physicians in value-based care. And when someone's like, "We're only going to do this in a population health function," or, "It's only going to be in primary care," rather than everything-

Rae Woods (06:45):
Separate.

Daniel Kuzmanovich (06:46):
Immediate red flag.

Rae Woods (06:48):
I actually want to talk about both of these, but I'm really intrigued by Erik's comment about growth because that seems like the highest level mindset shift, and if I'm honest about the conversations that I have, I don't think any health leaders, at least in the hospital and health system space, is thinking about value-based care as a growth strategy. In fact, if I think about the very fragile financial state that a lot of these leaders are in, they're telling me, "I've got to pull back on my value-based care objective for 2024, maybe even 2025, because I just have to focus on my margin right now." But what I'm hearing you say is that's actually not the right mindset to have.

Erik Johnson (07:25):
Yeah, I think that is a false choice that they end up being forced to make because the competition that they really need to engage on is the competition for lives, and volume will follow if you win the life. But because in all lines of business, Medicare Advantage, commercial, self-insured lives, getting those lives and having responsibility for them is the fulcrum by which you can actually drive growth. You have to manage them, but yeah.

Rae Woods (07:55):
There's a lot of myopic thinking that I feel like folks get trapped into, this either/or mindset. Or even if they're adopting their value-based care strategy, they're saying, "Oh, but we're going to leave all the physicians out and we're just going to have our population health function focus on this." Exactly like what you were talking about, Daniel. Siloed thinking, myopic thinking. Why is that dangerous when it comes to the success of your overall strategy?

Daniel Kuzmanovich (08:18):
This is part of why I hate that expression, "A foot in two boats," because it sets up the idea of opposition, whereas growing volumes and growing lives are not actually opposed concepts. At some point in time, you think about life versus volume differently, but they're not opposed.

Rae Woods (08:33):
No more dipping your toe in anymore.

Erik Johnson (08:36):
This is the crux of the matter. You got to commit, and we call it the burn the boats decision. You've got to burn the boats and fight your way off the beach at that point. And despite all the methodologies, and we've got a lot of methodologies in consulting that can help them get there, the number one criteria that we try to instill is patience. You are going to be on this journey for a while. And we'll do the math. We'll show them how the math works out over the course of a number of years and they respond to the math, but you got to commit to the math too.

Rae Woods (09:09):
Yes.

Erik Johnson (09:09):
That's all.

Rae Woods (09:09):
Yeah. Yeah. And I worry that that is another reason, changing your thinking from you have to commit. It can't just be some of your physicians, it can't just be the separate department. It has to be part of your growth strategy. You have to think about 10 and 20 years. That might be fine on an intellectual level, but practically speaking, when it comes to making a decision that's going to move the ball forward for their organization in the next six months, that can be really hard for leaders to connect the dots between the long-term big picture commitment and what I have to do right now. My question for you is how do you help folks make that change in their mindset? Because they are, to your point at the very beginning, Daniel, thinking, oh, I'm going to make money in the next year, or maybe the next two years at the long end.

Daniel Kuzmanovich (09:56):
One of the number one indicators of an organization that is likely to be successful in value-based care is if you commit. If you are willing to get out of that shallow end and into the deep end. This isn't a one one-year contract. This isn't even sometimes a three-year contract. We're looking at, I think UPMC and Allegheny in the Pennsylvania markets, they have 10-year deals in their value-based arrangements. I think we heard, Rae, at the Rashika Fernandopulle's comments in one of your recent live podcasts, [inaudible 00:10:25] does 20-year deals. This isn't a short thing.

Rae Woods (10:29):
Yeah. The math is a means to the end, and the end is not value-based care. The end is better patient care. As Daniel just mentioned, our friend and former colleague, Rashika Fernandopulle, who is the CEO and Co-founder of Iora Health, said to us. Value-based care is not the goal. It's better patient care.

Daniel Kuzmanovich (10:48):
On this idea, though, of changing how you think, Erik, I'm curious, do you feel like especially health system leaders have to change their mindset from being, "I think in terms of hospitals," to, "I think more like an insurance company?"

Erik Johnson (11:00):
I think the other challenge that we've seen is, "I run a hospital," or, "I run a physician group," and my point is that there aren't any hospitals anymore. They're all health systems. They all have ambulatory assets. They all have physician assets that they either own or are aligned with, and so they're starting to think about the continuum of care that they manage. Now they need to figure out how to manage that continuum better and actually make money through the delivery of better patient care like you were talking about. And so they're starting to get there. They're starting to break out of these silos, but they're starting. They're not done.

Rae Woods (11:42):
And on that starting point, I get nervous that some folks are almost stalling their efforts because they're waiting for perfect. They're waiting for the right set of assets. Maybe they're waiting for the right leadership and the right mindset. I hear a lot of folks saying that they're waiting for the right data. When it comes to mindset shifts, how do you balance waiting to have the assets that you need to succeed but not letting perfect being the enemy of the good?

Erik Johnson (12:09):
I'm curious, Daniel, what you see, because in my client base, I lump my executives into three boats. There's the clinical executives, there's the finance executives, and then there are the health system executives. Where do you find that dynamic that Rae just described most dominant? Is it finance, is it clinical, or is it system leadership?

Daniel Kuzmanovich (12:29):
I think it's finance and clinical, but it's two different types of data. I think finance is thinking about one type of data. Clinical is thinking about another, and you-

Rae Woods (12:40):
And I don't know that they're talking to each other about that either.

Daniel Kuzmanovich (12:44):
You can't go in unaligned. One of the things people get wrong is going in unaligned, but if you go in like, "Hey, we need better data," and you don't even have agreement on what the right data is, you are already unaligned, even if you're aligned conceptually. Erik, how do you find it? Rae and I obviously said finance and clinical.

Erik Johnson (13:02):
It's always finance and that's always part of the challenge, part of the education process. I think the clinical case is almost easier to make in some respects because, Rae, to your point, this is really about delivering better care. If you can show me a way that I can deliver better care, I care most about that. The finance challenge is a lot harder because it's multi-year, and it's a different set of variables than just volume times rate. So there's a little bit more work to be done there, but the challenge at the end of the day is what Daniel was just describing was like, okay, you've got two very different business cases now. How do you get them aligned at the executive level so they can agree?

Rae Woods (13:44):
And the truth is you might not have all of the data or the "perfect" data in-house and you need to be thinking about other partners or you need to start thinking like an insurance company, like you said, or you start working with an insurance company like you described in order to get the right complement of materials to really feel like you can, to Daniel's point, commit. But if I'm honest, there are a lot of folks who've maybe not made a full commitment but have at least put more than a toe into the water of their value-based care journey, and now the rose-colored glasses are off, they're in the thick of implementation and they're actually doing the work. And there are also misconceptions and mindset shifts that we want to nudge our listeners and leaders towards when they're in the implementation phase. What are some things that you hear in this part of the value-based care journey?

Daniel Kuzmanovich (14:35):
The data's not right.

Rae Woods (14:37):
Yeah. My doctors are mad?

Erik Johnson (14:41):
Yeah. Yeah.

Rae Woods (14:42):
My doctors are mad about the data that I'm showing them perhaps?

Erik Johnson (14:46):
Yeah, but in my experience at least, that's been a great impetus to performance improvement. Nobody likes to see that they're below average particularly.

Rae Woods (14:56):
Yeah. Or nobody likes to be not just be told that they're below average. Nobody likes change, and the change management of this is incredibly hard. Perhaps it's especially hard with physicians, but it's incredibly hard.

Daniel Kuzmanovich (15:11):
Even just how people think. Erik made the point earlier about how this is not a short-term period. You're not going to beat your margin every single year. To our conversation about finance executives, that is completely unheard of for them. Imagine telling a CFO, "Hey, you're going to crush it year two, three, and four, especially in year four, but year one and year five, you're not." That is a sense of loss, that is a sense of change, that most of us are not hardwired for or trained for.

Rae Woods (15:39):
Yeah, but it's the truth about succeeding in this strategy long-term. We'll be right back with more Radio Advisory after this short break.

(17:28):
The change management of it all intrigues me. What does meaningful change management look like in this implementation phase? Because something that's been itching the back of my brain is when Daniel said, "I'm leaving my physicians out of it," or, "I'm just focused on the population health managers," and I get nervous that that is a reaction to what we've been talking about, which is, my physicians aren't going to like the data. My physicians aren't going to be like to be told that they're underperforming, so I'm just going to leave them out of it rather than bring them in to the change management of it all. So what does meaningful change management look like when you're in the thick of it?

Erik Johnson (18:06):
A lot of our clients start in the world of ACOs. They start with upside only risk or maybe a little bit of downside risk, and a lot of folks will argue, "Well, that's not really risk." And I said, "That's okay." They need to develop the muscle memory. They need to get used to looking at data. What does that data look like? What do I do with it? How do I socialize it with my physician leadership and how do they socialize it with their docs? And it's okay to take a couple or three years to figure that out, just explaining what the data mean, what it means in terms of your next best action. It's very painstaking, the change management, but it's also very linear too. It is a path that you can go down in a fairly predictable way as long as you're patient and have the backing of clinical leaders.

Rae Woods (18:56):
I feel like that's a misconception in and of itself, that your value-based care strategy is going to be closed within a very small part of your organization. And the mindset that you're going to need to be doing more, adding more, changing more, turning up the heat more, and that is going to be essential for success is a mindset shift in and of itself. And the way that I hear this most often is the trap that people get into when they think this is just primary care. All of that value-based care strategy is going to begin and end with primary care, which I don't actually think is right.

Daniel Kuzmanovich (19:34):
When we do this, what should be done, who should do it, and how should be done are all questions we need to reevaluate. We know what that looks like in a world about volume. We don't always know what that looks like in a world about lives, and in primary care, what should be done by who and when and how, all of those things change. But a lot of primary care physicians actually like practicing in a value-based environment. It looks different in specialty care and that's okay, but people are afraid to upset their physicians sometimes and they're afraid to communicate how those changes are going to happen.

Erik Johnson (20:07):
Yeah, I think that's right, and I think it also depends on who you're taking risk on. Primary care is always going to be a cornerstone of this, but you build a house around the cornerstone. You don't just leave it at the cornerstone.

Rae Woods (20:18):
Sure.

Erik Johnson (20:19):
So if it's Medicare risk, you have to care about post-acute. If it's Medicaid risk, you have to care a lot more about behavioral and pediatrics and maternal and child. It really does start to address the populations that you're taking that risk on. The water's going to flow there, and I think that is something that, if you just think about it as primary care, you're missing a lot.

Rae Woods (20:43):
At the beginning of this conversation, we talked about red flags, and one for me that I think has only emerged recently as a very big red flag is when folks start talking about doing this alone or when folks start rejecting the opportunity that partnership could provide them, because partnership also always requires sacrifice, and the misconception is thinking that partnership is something that is soft rather than realizing that partnership is something that is hard. Is this something that you come across in your conversations and how do you want to change the way that leaders think about partnership?

Daniel Kuzmanovich (21:26):
Partnership is a skill. In any particular format, partnership is a skill, and you cannot do value-based care alone. You need to partner in that regard. That can be bringing an outside help, that can be having a deeper relationship with a health plan, that can be bringing in life sciences in a new and innovative way, but you cannot do this alone, and anybody who thinks they can I bet is going to lose.

Erik Johnson (21:53):
I like that partnership is a skill. I think that's very true, and we tend not to advise our clients on the consulting side to do this by themselves. Some do because it makes sense, but it's a bespoke challenge. But I think the bigger issue is that the partnerships that Daniel was just describing are partnerships that previously had been fairly antagonistic in nature.

Rae Woods (22:17):
Oh, yeah.

Erik Johnson (22:18):
That mindset that the payer is my ally in this, not my foe, or the physician group that I depend on for referrals is somebody I need to partner with as opposed to really beg for referrals, that's a big shift in the way you think about the ecosystem.

Rae Woods (22:36):
Yeah. Talk about a muscle that has not been flexed or a skill that has to be learned. Partnering with your competitors, partnering with folks you haven't partnered with before, is going to be a challenge. I want to do something. Go with me on this for a second. I often play the naysayer role when I do these podcasts and have these conversations, and I have to believe that folks that are listening to this are going, "Oh my gosh, Daniel and Erik and Rae are talking about all the things that the industry is doing wrong in value-based care, and we've been trying to do value-based care for several decades now, and everyone still has the same incorrect mindset even at the very beginning of their journey," and I have to believe that that naysayer is thinking, "What the hell are we doing? Why are we still pushing for payment transformation?" What do you say to that naysayer who's listening to this going, "Gosh, is this even worth it?"

Erik Johnson (23:34):
Well, I think the train's left the station. Again, there's enough competition for the lives out there right now, and there are a lot of large physician groups out there who are grabbing those lives and they're taking delegated risk on those lives, and we know what works and we know how to make the math work, and we know the clinical models that work. And if you're saying no to these things that are fairly well-documented, it's being a little obtuse in my opinion. There's a lot of opportunity here, and I think it's being exploited by a lot of groups out there at the expense of folks who have decided to stick their head in the sand and not go down this route.

Daniel Kuzmanovich (24:16):
I'm going to agree with Erik's answer, which is more politically correct than mine, and then I'm going to give my own. Erik, your point is just so well-taken. 2$0 billion shelled out on One Medical plus Iora, Signify, and something else. Three deals worth $20 billion. That's with a B, not an M. Obviously, the train has left the station. The biggest medical group in the country is all about managing the Medicare Advantage life. The train has left the station. That's I think the first thing I would say to the folks who are pushing on the payment transformation piece. Can I add one, Rae?

Rae Woods (24:50):
Absolutely.

Daniel Kuzmanovich (24:51):
Do you like what you're doing now? That's the other reason I would push on why payment transformation is-

Rae Woods (24:57):
A hundred percent.

Daniel Kuzmanovich (24:57):
... going to keep going. Executive turnover is up. The workforce shortage is real. Patient quality is down.

Rae Woods (25:04):
Yeah. Does anyone think healthcare is working today?

Daniel Kuzmanovich (25:08):
In some ways, we are no longer trying to fix healthcare. We are just trying to make what we have better. Value-based care might actually help fix it. At a bare minimum, we could make it better.

Rae Woods (25:19):
It's why we use the word transformation when we talk about this because what we are describing is the need for transformation, and if I'm reflecting on the conversation that we've had, we talked about different stages of the value-based care journey. Before leaders actually get started, when they're in the thick of it. My last question is, if we're talking about transformation, is there actually ever going to be an end to the value-based care journey?

Erik Johnson (25:47):
Hopefully not. Hopefully we keep getting better at this stuff, right? There will be better payment models, there will be better clinical models, there will be better partnership models. It is a competitive marketplace and competitive marketplaces tend not to get to a point of stasis, so I think the future is going to be a challenge, but it's exciting to me.

Rae Woods (26:11):
Yeah, that's very hopeful To me. It doesn't feel like, "Oh God, we're going to be trapped in this forever." It's a very hopeful message to say we are of course going to commit to changing because we are going to commit to continuously trying to make sure that healthcare is better for the patients that we serve and the providers that deliver care, and the communities that we work in

Erik Johnson (26:32):
And the people who pay the bills.

Rae Woods (26:33):
Yeah, absolutely.

Erik Johnson (26:34):
The people who pay the bills are sick of these increases, and so they're going to demand - they are demanding, I think - differences.

Daniel Kuzmanovich (26:42):
I'm going to cheat on this question. I actually do think someday, or at least I hope that someday we're going to stop talking about value-based care, because it's no longer going to be this standalone thing. It's just going to be what we do, and we don't talk about fee for service. We talk about value-based care as the change from fee for service. Someday, I hope we get to a world where we're talking about health and wellness and value-based care is how you do that, so we don't talk about value-based care anymore. That's just the foundation.

Erik Johnson (27:08):
Yeah.

Rae Woods (27:09):
Wow. Well, I hope we get to that point as well, and I know that the two of you are pushing health leaders to help them get there, so I want to thank you both so much for coming on Radio Advisory. Erik, time number one. You've got one check mark on our leaderboard and we'll have to have you back.

Erik Johnson (27:30):
Thank you very much for having me. It's been a pleasure.

Rae Woods (27:32):
Thanks, Daniel.

(27:39):
Clearly, Erik and Daniel and I just had a real talk conversation about what it's like to work in this business and advise health leaders to make forward progress on value-based care, and this kind of casual real talk conversation is something that we actually embed into certain Advisory Board events. You've heard on this podcast us talk about summits. Those are huge events where we get to do things like live podcasts. But coming up on November 9th and 10th in Nashville, Tennessee is an exclusive executive-only round table. This is a much smaller session, and in fact, these are my favorite kinds of Advisory Board events, because across two half-days you get to have smaller conversations. You get to have more in-depth discussion, and frankly, you get to hear real ideas from other organizations, other leaders, other folks like Erik and Daniel. If you want to join that event, which is exclusively about the future of value-based care, you can click on the link in our show notes.

(28:41):
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, Rae Woods, as well as Katy Anderson, Kristin Myers, and Atticus Raasch. The episode was edited by Josh Rogers with technical support by Dan Tayag, Chris Phelps and Joe Shrum. Additional support was provided by Clare Wirth, Carson Sisk, Leanne Elston, and Erin Collins. Thanks for listening.