Rae Woods: From Advisory Board, we're bringing you a Radio Advisory. My name is Rachel Woods. You can call me Rae. Rae Woods: Medicare continues to push forward on risk, albeit, slowly. Commercial risk, however, is a bit of a wild card. Yes, we have had fits and starts, but we haven't landed on a clear model for the commercial population. That's why Advisory Board has been researching whether commercial risk is actually possible. And spoiler alert, we believe that it is. We've been analyzing a national database of commercial claims. And today, I've brought two experts to talk us through it. We've got Clare Wirth, who is our tried and true value-based care expert, and a new voice, Alex Tallian, our quantitative insights team. Hey, Claire. Hey, Alex. Clare Wirth: Hey, Rae. Alex Tallian: Hey, Rae, how are you doing? Rae Woods: Doing well. I'm excited, Alex, to have you on the podcast. You are our second true data nerd to be joining us. So no pressure, but it's difficult to talk about numbers and analytics on an audio-based format, but I think you're up to the task. Alex Tallian: I've been practicing, I think, for 10 years, but we'll see how I do. Not too many numbers, hopefully, today. Rae Woods: Advisory Board has historically been pretty optimistic, maybe even too optimistic about Medicare risk, but we've had a different tone on the commercial side. Maybe we've been too pessimistic. Why have we actually taken that stance historically? Clare Wirth: Well, Rae, there's good reason to have been pessimistic, and that's just because commercial risk has been harder in a number of ways. So for example, just look at who's in the commercial patient population. It's people younger than 65, so they're younger, they're healthier, and there's just less avoidable cost. In addition to that, there's a shorter time window to reduce costs. So these patients are switching their employers because that's how they get their health insurance. And then employers are oftentimes switching between different health plan partners. And so there's a dual sense of churn they're happening. So there's a short window of savings opportunity. Rae Woods: I'm not sure that there's just churn in the patient population, but I almost feel like there's this sense of churn, or maybe it's more like fits and starts when it comes to the kinds of partnerships we've seen with commercial risk. There's not a single central body like Medicare that's trying to figure out what we do as an industry. Clare Wirth: Yeah. And I think that makes it harder to have that glide path that we see in Medicare of, and here's the step then moving on. We don't have one group defining the standard or even defining what the viable path forward should be. Rae Woods: Alex, from your perspective, are we right to be pessimistic or have we been right to be pessimistic in the past? Alex Tallian: I think it made sense in the past, especially if you think about where we were three to five years ago from a data and information perspective. For all of this, we need to have the building blocks to be able to have conversations with each other to be looking at the same information and data to be making decisions. And I think even three to five years ago, if you look at just the prevalence of commercial data, commercial information, wasn't very easy to get your hands on unless you were a payer, other organizations. Rae Woods: Everything you just said are huge barriers. And I'm not sure that all of them have necessarily gone away, but you two are here because our perspective has actually changed. Why has it changed? Clare Wirth: Yeah. So the barriers are still there, like you said, Rae, but there are a number of reasons that commercial risk is worth pursuing. The first is that all purchasers involved want lower costs. Patients want less cost out of their pocket, plans want to reign in costs, employers want to spend less on benefits. The list goes on and on. But essentially, what I'm saying is there is some common ground. And our analysis gets into some of that. There are some obvious and non-obvious opportunities that could have a pretty tremendous impact. Rae Woods: Plus, we can't ignore the fact that CMS is not backing down. And we do know that commercial payers tend to follow CMS's lead here. Clare Wirth: Yes. And that's completely true, Rae. I want to take this as a moment to urge your audience what I've been saying to a lot of provider executives, and that is that Medicare has been dictating the story when it comes to risk for the last decade. And commercial risk is a place where providers and plans have more agency. It's a place to play. It's a place where you can control the future that you want in your market. And that's a pretty powerful statement that would have ripple effects for the entire industry, whether we all are able to realign around one reimbursement standard, or if the industry remains split in hybrid incentives forever. Rae Woods: That's actually a really interesting way to reframe a barrier we talked about earlier. We said it was a barrier that there wasn't this single entity that is creating a glide path. What you're actually saying is the sense of agency that individual organizations and parts of the healthcare enterprise has. That's actually a benefit when it comes to commercial risk. Clare Wirth: Yes, exactly right, Rae. Rae Woods: So it's not just that we're less pessimistic. What I'm hearing is that there's actually a sense of hope for commercial risk in the healthcare industry. But let me take a step back for a second to start with, how did the two of you even go about answering the question, is commercial risk possible? Alex Tallian: It was something that at the Advisor Board, something that Clare and I were really excited to partner on with our research and data teams. We've gotten access to a really exciting new database of commercial claims that covers over 20 million covered lives. It's a really robust national dataset that covers the entire country from there. What we wanted to do was dig into the data to surface key areas of opportunity for commercial risks. So what are the specific service lines or subservice lines that we can focus on or draw the conversation to that are going to be really rich starting points as different providers, payers, entities in this space enter into that conversation? Rae Woods: I don't want to hide the ball here. Is commercial risk actually possible? Clare Wirth: It's possible. It may just look different than the Medicare path, which is why I think we should get into the data first. Rae Woods: Okay. Let's do that. Alex, when it comes to the commercial population, what did you find were the top opportunities for savings? Alex Tallian: Just to ground us in the analysis. So we dug into a robust series of professional claims focusing on ambulatory costs and how those would present to the payer. And so what we found in our analysis is that there's a lot of things that you'd expect at the top, outpatient E&M, flies in DME, but then also some really interesting secondary categories, like chemotherapy, psychiatry, delivery. And so a lot of these are key subservice lines, and we can dig into them more in a second, but that we see changing how they might be managed or those associated costs as we enter into more risk-based contracting or more of a value environment across the next year. Clare Wirth: As we talk with folks around the industry, we get some common questions around what's excluded from this dataset. So Alex, can you comment on that? Alex Tallian: Yeah, absolutely. So since we're focusing on professional claims, a lot of the facility costs that you'd expect, so surgeries, some costs associated with delivery. We're also digging into DME or durable medical equipment, which is a whole different cost category and presents pretty differently in the data. But I think what we've surfaced is the key medical or surgical subservice lines that may be early movers or lead indicators for us of what's possible. And so I think that's what's most exciting now that we have the data to double click on as we're going forward in our research. Clare Wirth: So to be really explicit on what Alex just said, what in this analysis is not included is things like surgeries and prescriptions. We understand those are big cost drivers, but that's not where this dataset is going to point us toward. Rae Woods: But in the dataset that we have, I'm not sure that I'm all that surprised in what we found. Maybe with the exception of labor and delivery, we would expect things like ed utilization to be a top opportunity in the Medicare population, like in the commercial population. Clare Wirth: Yeah. Rae, I've been researching population health for a number of years now, and ED utilization is always a top priority in Medicare. The issue is in commercial that a lot of the ED utilization is simply not avoidable. It's accidents, it's injuries. And so those folks are in the ED because it's a true emergency. Rae Woods: So it's a top cost, but it's not actually an actionable cost. It's not something that we can really address. Clare Wirth: Right. Not as such. Rae Woods: What were some of the emerging opportunities that you saw in the data? Alex Tallian: When looking at any source of data. The way that you identify opportunity to move is that you see variability, you see a change in trend, you see different people, different players doing different things. And so just taking chemotherapy as an example, we've seen almost a doubling of chemotherapy costs in the commercial population in the last five years. We have to dig into that more. But it's such an outlier compared to all these other subservice lines that we're seeing, it seems like there's a trend there. Just taking that as an example, those service lines that have seen disruption, seen a lot of change or seen rising costs, I think are some of the first ones that we would want to look at. Clare Wirth: Alex, I'm glad you hit on chemotherapy, because it's a complicated one. It is sensitive. It is something that employers may or may not want to get involved in. We have already identified, especially collaborating with our researchers who study oncology in and out, some clear opportunities there, like site of care shift. Chemotherapy is a tricky one, but an emerging opportunity nonetheless. Rae Woods: I'm glad you bring up sensitivities. Are there any areas that leaders should avoid, that should be maybe at the bottom of the to-do list? Clare Wirth: So it's a bit counterintuitive, Rae, because some of these areas are places where we'd see costs decrease. We mentioned ED utilization, for example, but some of these are places we'd expect costs to increase when you better manage this patient population. So for example, immunizations is in the top 20 list. We'd expect those to increase in a better managed population, or just preventive care, so outpatient utilization, also something we'd want to see increase. Rae Woods: And this is why I really value your partnership as a data and analytics team, but also as a healthcare business research team, because it's not enough to just look at the top 20 numbers. There are nuances, where are there sensitivities, like chemotherapy, where are there not actionable opportunities like ED utilization, and where might you actually want to see costs go up instead of go down? Alex Tallian: Yeah, really excited about this partnership with Clare. I think combining the skills that our data team has with the terrain and expertise that she has in the value-based care area, we have a second set of analyses that we would like to pursue in the back half of this year. The first I think that we're going to look at is if you think about value-based care, the entire concept is delivering value on some time horizon. So across a one, two, or three year period that you have, either with a beneficiary or pool, what are all the levers that you can pull to drive value and lower cost for them? We'll be using the data that we have to build those analyses and look longitudinally across those years and see some of the trends that we can service. Clare Wirth: Alex, do you want to give the Radio Advisory audience a sense of what we're working on this week? Alex Tallian: Yeah. We're digging into enrollment data for the commercial population and looking at beneficiary falloff rates, how many people stay on the plan? How long do they stay with the payer? And what we're finding is that actually it's about, roughly, this is early, but maybe one, one in three quarters, years to two and a half, two and three quarters years. So not a lot of time, but still a meaningful period, but you have to be specific about maybe the services or interventions that you choose because of that limited time with the population. Rae Woods: I want to come back to the initial question that you all looked at. There's clearly a lot more optimism around commercial risk than I thought. But what you're talking about are that some of the specific steps that industry players need to take are just going to look different in the commercial population than the Medicare population. Is that the takeaway that the directions of commercial risk and Medicare risk are just going to follow different paths? Clare Wirth: Yes and no. That's a potential direction that this could go in. I want to be clear though, that I don't think that this is a world where there's no commercial risk whatsoever. And there is a potential that we could see commercial risk following Medicare, mainly because, if everyone's following that same model, we, by definition, are making it more feasible day-to-day from an administrative perspective. Something I hear from provider executives all the time is that we're managing relationships with a bunch of different payers. We have a bunch of different quality metrics that we have to track and report on, and it's just not workable. So that would be a big benefit to following the Medicare glide path. Rae Woods: That's right. Alex Tallian: Another way that the conversation around value-based care and commercial value-based care might have to evolve to is have the data and information sharing situation look a little bit more like it does with Medicare. Medicare claims are available to so many people who want to analyze them, surface trends, things like that. And that hasn't been the case historically with commercial data. I think now that's changing, but we need to keep that ball rolling down the hill, settling on metrics, definitions as an industry to facilitate this conversation to keep moving it forward. Rae Woods: What other option do we have for the future of commercial risk? There's the Medicare path, and then there's something else. Clare Wirth: Something else that would look like three to five core bundles that would be around some of those top cost opportunities that we were talking about. So for example, a labor and delivery type of bundle that would extend throughout the pregnancy and immediately postpartum. The thing with that is that those bundles would have to be manageable to avoid some of that administrative complexity of I'm managing this big population based payment in Medicare, and yet certain slices in commercial. The other issue with that is, at a certain point, you run out of places to go, you run out of savings to obtain. And so you may, ultimately, just end up back in the population-based payment camp. Rae Woods: I want to channel the mindset of a very tired, very overworked, very frustrated provider leader, who's been saying four years that they're frustrated with the fact that their business model feels like they have a foot in two boats. Frankly, this isn't just provider leaders. This is healthcare leaders everywhere. How is what you're describing, Clare, different from that feeling of a foot and two boats? Clare Wirth: To some extent, we're always going to have our feet in multiple boats, and that's because you can't take a one size fits all approach. The benefit here, at least, is that you'd be aligned around some of the core goals that we have in Medicare, as we do in commercial, rather than growing and increasing utilization like we do today. Rae Woods: Who are the most important stakeholders when it actually comes to succeeding here? Alex Tallian: To me, it's the payers, just the information that they have in this space. They are the true source of the information that the rest of the industry needs to make these decisions and move things along. I don't expect them to throw their proprietary claims datasets over the fence or publish them publicly. But I think even providing leadership and guidance on what we should be measuring, what we should be paying attention with, and then providing at least some of the data for the conversation, they're the only option. So I think it has to start with them. Clare Wirth: Yeah. I think payers have to give up some of their fear of the secret sauce, so to speak. The other constituency that comes to mind is employers here. So employers could make a pretty big impact if they were willing to drive true transformation. I would say that healthcare spending has become less of a top priority for them like it once was that's right. Particularly, as the job market is so hot, they are trying to retain folks and attract talent. They don't want to jeopardize that with changing benefits drastically. Rae Woods: Well, Alex, Clare, want to give you a moment to speak directly to our audience. What advice do you have for leaders that are actually embarking on commercial risk? Clare Wirth: You can't pursue commercial risk without partners. So Alex mentioned that really short time horizon challenge, then commit to a long term partnership with whichever plan or providers in your market, and like any good partnership, there has to be some give and take. One of my favorite insights from a colleague who has studied partnerships has said, "If your partnership strategy is about winning, you've already lost." Rae, can I cheat and do a second? Rae Woods: Of course. Clare Wirth: I would just reiterate what I said before, which is that commercial risk is the place where you can lead with your partners rather than following Medicare and value-based care, which is what we've been doing for years now. Alex Tallian: And I think I would just echo the partnership piece, information sharing, data sharing, just, again, facilitating the conversation. I think it will need to come from people on multiple sides coming together to speak a common language and deciding to measure, analyze, and then make decisions on the same things. It doesn't have to start with the health plans necessarily, but they will be integral to that. And the foundation for the information on which all these decisions are made. Rae Woods: Clare, Alex, thanks for coming on Radio Advisory. Clare Wirth: Anytime, Rae. Happy to talk about value-based care. Alex Tallian: Anytime for me too. And hopefully, more numbers next time, but this was a pretty good balance, I think. Rae Woods: You know that at Advisory Board we've been studying the industry's transition to value-based care for a very long time, but it's new analyses like this that will actually help push all players forward, not just in Medicare, but in commercial populations as well. You heard straight from Alex and from Clare. This is just the beginning of what we're doing in the commercial risk space, because remember, as always, we're here to help.