Rae Woods (00:02):
From Advisory Board, we are bringing you a Radio Advisory, your weekly download on the biggest challenges happening in healthcare. My name is Rachel Woods. You can call me Rae. In the first part of our series on the biggest things CEOs need to know, we focused on the near term. Because when it comes to the market environment and how competition is changing and who owns what, there is no shortage of immediate challenges or even immediate opportunities.

(00:30):
But focusing your strategic attention on today's environment alone is actually a huge business risk. So I brought back advisory board experts Aaron Mauck and Natalie Trebes to tell us about what CEOs and health leaders of all kinds need to do today to shape the future of healthcare beyond 2023. Hey, Aaron. Hey, Natalie. Welcome back.

Aaron Mauck (00:55):
Hello. Thanks for having me. Glad to be back.

Natalie Trebes (00:58):
Back so soon. Thanks for the invite.

Rae Woods (01:01):
I know. Long time, no talk.

(01:03):
So I've been thinking about the last conversation that we had about what executives need to know to be prepared to be successful in 2023, and I feel like my big takeaway is that the present feels aggressively urgent. The business climate today is extraordinarily tough. There are all these disruptive forces that are changing the competitive landscape, right? That's where we focused most of our last conversation. But we also agreed that those were still kind of near term problems. My question is why, if things feel like they are in such a crisis, do we need to also focus our attention on longer term challenges?

Aaron Mauck (01:58):
It's pretty clear that the business environment really isn't sustainable as it currently stands, and there's a tendency, of course, for all businesses to focus on the urgent and important items at the expense of the non-urgent and important items. And we have a lot of non-urgent important things that are coming on the horizon that we have to address. Obviously, you think about the aging population. We have the baby boom reaching an age where they're going to have multiple care needs that have to be addressed that constitute pretty significant challenges. That aging population is a central concern for all of us.

(02:35):
Costly specialty therapeutics that are coming down the pipeline that are going to yield great results for certain patient segments, but are going to be very expensive. Unmanaged behavioral needs, disagreements around appropriate spending. So we have lots of challenges, myriad of challenges we're going to have to [inaudible 00:02:53].

Natalie Trebes (02:53):
Yeah. And that's right. And I would add that all of those things are at threshold moments where they are pivoting into becoming our real big problems that are very soon going to be the near term problems. And the environment that we talked about last time, it's competitive chaos that's happening right now, is actually the perfect time to be making some changes because all the challenges we're going to talk about require really significant restructuring of how we do business. That's hard to do when things are stable.

Rae Woods (03:27):
Yes. But I still think you're going to get some people who disagree. And let me tell you why. I think there's two reasons why people are going to disagree. The first reason is, again, they are dealing with not just one massive fire in front of them, but what feels like countless massive fires in front of them that's just demanding all of their strategic attention.

(03:46):
That was the first thing you said every executive needs to know going into this year, and maybe not know, but accept, if I'm thinking about the stages of grief. But the second reason why I think people are going to push back is the laundry list of things that Aaron just spoke of are areas where, I'm not saying the healthcare industry shouldn't be focused on them, but we haven't actually made meaningful progress so far. Is 2023 actually the year where we should start chipping away at some of those huge industry challenges? That's where I think you're going to get disagreement. What do you say to that?

Natalie Trebes (04:22):
I think that's fair. I think it's partly that we have to start transforming today and organizations are going to diverge from here in terms of how they are affected. So far, we've been really kind of sharing the pain of a lot of these challenges. It's bits and pieces here. We're all having to eat a little slice of this. I think different organizations right now, if they are careful about understanding their vulnerabilities and thinking about where they're exposed, are going to be setting themselves up to pass along some of that to other organizations. And so this is the moment to really understand how do we collectively want to address these challenges rather than continue to try to touch as little of it as we possibly can and scrape by?

Rae Woods (05:09):
That's interesting because it's also probably not just preparing for where you have vulnerabilities that are going to be exposed sooner rather than later, but also where might you have a first mover advantage? That gets back to what you were talking about when it comes to the kind of competitive landscape, and there's probably people who can use these as an opportunity for the future.

Aaron Mauck (05:31):
Crises are always opportunities and even for those players across the healthcare system who have really felt like they're boxers in the later rounds covering up under a lot of blows, there's opportunities for them to come back and devise strategies for the long term that really yield growth.

(05:47):
We shouldn't treat this as a time just of contraction. There are major opportunities even for some of the traditional incumbents if they're approaching these challenges in the right fashion. When we think about that in terms of things like labor or care delivery models, there's huge opportunities and when I talk with C suites from across the sector, they recognize those opportunities. They're thinking in the long term, they need to think in the long term if they're going to sustain themselves. It is a time of existential crisis, but also a time for existential opportunity.

Natalie Trebes (06:16):
Yeah, let's be real. There is a big risk of being a first mover, but there is a really big opportunity in being on the forefront of designing the infrastructure and setting the table of where we want to go and designing this to work for you. Because changes have to happen, you really want to be involved in that kind of decision making.

Rae Woods (06:40):
And in the vein of acceptance, we should all accept that this isn't going to be easy. The challenges that I think we want to focus on for the rest of this conversation are challenges that up to this point have seemed unsolvable. What are the specific areas that you think should really demand executive attention in 2023?

Natalie Trebes (07:02):
Well, I think they break into a few different categories. We are having real debates about how do we decide what are appropriate outcomes in healthcare? And so the concept of measuring value and paying for value. We have to make some decisions about what trade-offs we want to make there, and how do we build in health equity into our business model and do we want to make that a reality for everyone?

(07:28):
Another category is all of the expensive care that we have to figure out how to deliver and finance over the coming years. So we're talking about the already inadequate behavioral health infrastructure that's seen a huge influx in demand. We're talking about what Aaron mentioned, the growing senior population, especially with boomers getting older and requiring a lot more care, and the pipeline of high cost therapies. All of this is not what we are ready as the healthcare system as it exists today to manage appropriately in a financially sustainable way. And that's going to be really hard for purchasers who are financing all of this.

Rae Woods (08:09):
So let's dig into these and emphasize the key thing that executives need to know in order to start making progress, in order to find those moments of opportunity. And I want to start with value-based care, which is, again, I'm going to channel the mindset of the cynic, going to be a hard one because I think a lot of folks would look at value-based care and reflect on the last 10 years and, frankly, how little progress has happened there and kind of write this off as something that maybe shouldn't demand a lot of strategic attention going forward. What do they need to know about the future of value-based care?

Aaron Mauck (08:44):
Yeah, I'd say we're at an inflection point with value-based care. The fact is, as you alluded to, the last 10 years haven't yielded great results. And if we're going to make forward progress, there really has to be some demonstrable path forward that everybody can get behind, proving that value-based care is viable. Right now, value-based care has largely stuck with public programs. We've seen some degree of success there, but when it comes to things like commercial, we need to have plans and providers kind of on board with a new approach that would ensure that there was some success that was going to be garnered through it.

Rae Woods (09:19):
Because that's where we really haven't done much other than experimentation on the commercial side. All of these, I'm going to put this in quotes, "success stories". I don't want to say that we've done nothing over the last decade, but none of it has been really deeply focused on the commercial population, which feels like the next path where we need to decide are we going to do this or are we just going to get off this train maybe screaming.

Aaron Mauck (09:43):
And, if anything, there's actually been some pressure back from providers at the moment around value-based care initiatives. I've heard from several plan executives that under the economic crises that we've seen over the course of the last year for providers, many are retrenching into volume-based approaches at the expense of value.

(10:00):
And that's really not sustainable long term. We have to think about a strategy that might work. Now, some of the opportunity might be in Medicare Advantage plans, which can become a playground for value-based care approaches because you have patients for a longer period of time, you can experiment in different kind of ways. Traditional commercial insurance, to your point, has been kind of stuck in a rut of bundles and a few other value-based arrangements or pay for performance and hasn't gone to full risk yet. That may change as we come to develop new approaches coming through Medicare Advantage.

Rae Woods (10:33):
One essential ingredient for success in value-based care is that the industry actually comes together and that stakeholders really decide, like you said, Natalie, how are we going to hold ourselves accountable? What is success going to actually look like here? What are the shared decisions we need to agree on? What kind of paths forward are possible then when it comes to, not just value-based care, but commercial risk maybe specifically.

Aaron Mauck (10:57):
On commercial risk, it can go in two directions we see. Of course, there is the potential for commercial risk to follow the governmental path essentially, a sort of population-wide approach to value-based care. Medicare Advantage has some potential to do this, but there are some pretty big constraints and we have to have shared understanding of what the goals would be if we're moving down that path.

(11:19):
On the other side, it could stay on the shallow end, really focused on a couple of high cost conditions. Now, admittedly, even if we move the bar on those high cost conditions, it would be a big step forward, but it would be a much more constrained approach to value-based care if we were just approaching it through diabetes [inaudible 00:11:36].

Rae Woods (11:36):
Or just a very different approach and accepting that a foot in two boats might just be... First of all, it'd be the wrong way to think about this, but it also might be a reality that we need to follow different approaches when we think about different populations and that might be the right answer.

Aaron Mauck (11:52):
And what we just need to ensure is that there's a shared consensus around the goal. Whether it's a population wide approach or whether it's a little bit more constrained, have to have shared consensus.

Natalie Trebes (12:01):
That's right. And I think on the commercial savings opportunity side, you see so much room for improving outcomes and reducing costs in specialty care, but that's going to look very different because of how independent and fractured the specialty care landscape is. And so how are organizations going to balance having a standard model for a bunch of different subspecialties across a bunch of different payer organizations that doesn't make the specialists crazy? So I think there's a lot of logistical challenges to pursue those opportunities, but it's an area that-

Rae Woods (12:39):
It's value-based care. Of course, there's logistical challenges.

Natalie Trebes (12:41):
...but it's an area that everyone wants to head towards.

Rae Woods (12:44):
Now, health equity on the other hand, this is probably one that everyone who's listening to this podcast would've guessed that we would talk about because we are talking about longer term, seemingly unsolvable, almost existential challenges in the healthcare industry. This is one where, again, every leader would say, "We support the design and delivery of equitable care." But I would say almost all organizations still grapple with how that works in practice, especially when their incentives might directly conflict with that mission. So how do we actually solidify equity as a business imperative?

Natalie Trebes (13:24):
I don't even know if I'd say it's that the incentives directly conflict. I would say that they're just not explicitly aligned. And so that's actually where I think we've seen some really interesting activity that's made us more optimistic about the future of baking health equity into the business models. Several progressive plans and employers have started to push for the building of equity into quality metrics when it comes to what they're asking providers to report to them.

(13:52):
And so if you think about, in the past, just general quality metrics, we started with pay for reporting before we could build towards pay for performance. You have to collect that data and standardize that.

Rae Woods (14:02):
That's right.

Natalie Trebes (14:03):
So there's been a lot of activity over the last year or so. Morgan Health, in particular, Blue Cross Blue Shield of Massachusetts and CQA starting to push on what are the exact measures that codify health equity outcomes? And what are the ways that we want providers to capture that because they have to get comfortable collecting that data.

(14:24):
And I think that's a turning point. Ultimately, that builds a foundation for being able to later say, "Okay, it's not enough for you to be performing well on average with your patient population when it comes to clinical quality. You need to make sure that all of these different socioeconomic demographic groups are meeting that bar, and so we can start to separate that out and reward performance and maybe ultimately penalize poor performance along that."

(14:50):
And so that might be the turning point that we need to make it not just a nice to have, but a must have when it comes to financial success in healthcare. I don't know if it stops there, though. That could be the risk here of it's just we've got our few measures that we're tracking and performing against, and we're not actually zooming out to work on structural inequality and a bunch of these bigger factors that play into the real disparities and outcomes that we see.

Rae Woods (16:25):
Our colleague, Darby Sullivan, has been on the Radio Advisory a bunch talking about health equity, and last year, she came on the podcast to talk specifically about behavioral health, in part because she described it as a meta inequity, and that's certainly an area that would benefit from what you outlined in terms of next steps for equity writ large. But the other reason why behavioral health kind of stands out as something that should demand executive attention in 2023 is because, first of all, the system that we have isn't working and it's also incredibly expensive.

Natalie Trebes (17:01):
Yeah, I think that's a good place to start talking about all of these big expensive things that we need to deal with as a healthcare ecosystem. Behavioral health is really interesting because it's already been marginalized in the past. We have been inadequate in how we've approached it and how we've structured it. We have pushed it outside of traditional healthcare structures. It's really possible for a lot of organizations to leave it outside of insurance payment, for example. This just kind of exists separately. We've got behavioral health management organizations that take care of a lot of this. And so it's really been bifurcated and suffered as a result in terms of expectations, funding, how we investigate value and outcomes there.

(17:50):
And so I think there's a big question for the industry around how do we want to bring it inside of the overall healthcare infrastructure rather than exist off to the side and how do we make behavioral health as a starting place look more like physical health in terms of how we coordinate it and decide that we want to pay for it. We have a really hard time articulating what is quality behavioral healthcare and what is standard of care and all of that that translates to a really hard time paying for it because it's hard to justify that. So there's a lot of work that players in the industry need to do in quantifying this, in defining quality, agreeing with each other on that, and collectively acknowledging that we're going to have to invest more without a clear short-term payoff because of the long-term needs.

Rae Woods (18:44):
Earlier in this episode, you mentioned that there is an opportunity sometimes for moving first or at least you can avoid kind of exposing vulnerabilities. But you also admitted that there is a risk sometimes to being a first mover advantage. When it comes to behavioral health, who should move first?

Natalie Trebes (19:02):
So I think that's actually one of the hardest parts about behavioral health is how intertwined these challenges are. So the consequences of this being marginalized have equally generally fallen on a bunch of different stakeholders, and everybody's having that slice of, "This isn't really working for me. My medical care patients are expensive because of this, but it's going to cost me so much to try to transform this entire system."

(19:32):
So much of this is intertwined that I think the players actually have to really look together at a few of these specific challenges in terms of the number of clinicians we have, the rates that we're paying and the evidence we have for what appropriate behavioral healthcare looks like, and work together on getting to consensus on those places. There are compromises that organizations and stakeholders have to make together. They cannot make alone by definition, and they're all going to reinforce each other in terms of if you have more clinicians available, then you can do more research that then demonstrates the value that then turns into justification for reimbursement. And so there's a lot of this that actually has to move together.

(20:13):
I think individual organizations need to really look at where they are actually being most affected and articulate, not just the general, "Oh, behavioral health is a problem for us," but specifically how is that influencing and impacting their success in a very tangible way so that they can then try to make the case for what their investments should be and what their participation should be in that consensus.

Rae Woods (20:40):
We're circling around the challenge in general about healthcare spending, which is a huge problem in our industry, at least here in the United States. And the aspect of healthcare spending that I do think executives have been paying attention to is just how expensive it is going to be to care for an aging population. I feel like we've been watching the baby boomer population get bigger and older and, oftentimes, sicker for a while now, and just like with behavioral health, the industry just is not prepared to treat or pay for the size of the aging population that we have. What do executives need to do now so that we're not kind of caught underfoot because I feel like we've been kicking this can for a while now.

Aaron Mauck (21:27):
I think the challenge is exactly the same as we're seeing in behavioral health. There's no strong first mover advantage here. And, again, like behavioral health, we're all going to have to hold hands on solutions to the challenges associated with an aging population. We have an aging infrastructure for an aging population, if you will. Everything was built for a population that was never expected to get past the age of 75, and suddenly we have a lot of baby boomers over 75.

(21:54):
So we have to have certainly legislative changes in terms of how we fund the management of the care needs of this aging population. This is true in the U.S. Actually, of course, it's also true in Europe, for instance. Even though they have a different structure of systems, they run into the same challenges of how you're going to manage this aging population. It's a global problem in some ways.

(22:15):
So we're going to have to think deliberately around what that's going to mean for reimbursements, for post-acute care settings and how we manage those patient populations. When we talk about things like the rise of home-based care, we have to think about why that might be the case. Well, of course, a lot of it is we don't have the right kinds of nursing home environments or skilled nursing facility environments to manage such a huge burden of disease and age coming through our population.

Rae Woods (22:42):
And nursing homes and long-term care facilities were never meant to be a permanent, fixed solution for the entire adult population, but isn't Medicare Advantage supposed to be at least somewhat helpful here?

Aaron Mauck (22:53):
Yes, Medicare Advantage is growing. It will be the dominant form of Medicare within two years in some sense. But Medicare Advantage also is not equipped for those kinds of long-term challenges. We're going to see greater pressure and scrutiny on Medicare Advantage plans coming from the federal government within the next several years. And, ultimately, this is probably not sustainable through Medicare Advantage itself.

(23:15):
We're going to have to find solutions even within Medicare Advantage to help to address the cost associated with this. This is a topic where there are more questions than answers at the moment, but we know it's going to be a pressing priority. So when we're thinking about long-term strategies, long-term concerns that every leader from across the healthcare system is going to have to tackle, this is certainly near the top of the list.

Rae Woods (23:37):
And partner together on. I think that's the theme of the conversation we've had thus far, and I would put money that that's also where we're going to go in the rest of this conversation is that these are problems that haven't been solved because they can't be solved by one stakeholder alone.

Natalie Trebes (23:52):
And I think Medicare Advantage players, too, need to be ready for this pivot in the financing. I think right now the financing of Medicare Advantage has been pretty generous and pretty easy to share the wealth, so to speak, across all the different payers, providers, vendors, technology support, etc. That's probably going to a, as Aaron said, come under scrutiny and potentially change with the federal government, especially as MA grows and grows.

(24:23):
Players are going to have to start thinking about how are they delivering outcomes and value and cost management through Medicare Advantage and not just playing the financing game of making sure that they're coding appropriately to get the right reimbursement because I think that conversation is going to shift over the coming years.

Rae Woods (24:40):
There's another financing problem that the industry is unprepared to address. We actually talked about this a couple of months ago when we did our first live Radio Advisory episode, and that's just the massive pipeline of specialized, but very expensive therapies that are going to be hitting the industry very, very soon. In fact, this is a good example of why we can't wait beyond 2023 because a lot of these therapies are going to be hitting very, very soon. How do we prepare to deal with that huge influx in spending?

Natalie Trebes (25:14):
There's a big recognition we have to have of we are moving from an era of one-off high-cost therapies that are miraculous to an era of this becoming kind of routine. And I don't want to say we should take it for granted, but this is going to become more and more the norm, partly because there's pressure on the traditional drug model of pharma that the blockbuster drugs, there's patent limitations now. There's a lot of frontal scrutiny on prices. They've tapped out a little bit there. Not entirely, but the big pivot has been into specialty and especially the high-cost curative therapeutics and gene and cell therapies.

(25:58):
Those target more niche specific populations, but as we have more and more of those, we're going to have therapies for all of those different niche populations. So that still adds up to the entire population and you can't spread the costs as easily the way we do with the current insurance model when we have that many drugs on the market and that many therapies on the market.

(26:22):
So there's a lot that breaks with our existing infrastructure, in particular how the benefits accrue over time for a patient and how the costs accrue over time. So if you have a super high cost expenditure upfront that then extends life or improves quality of life for decades and decades, and that's productivity that's up, that's maybe avoided extra treatments over years and years, which financer is actually getting those benefits back to them is not going to work right now. And so we have to start exploring how are we sharing that over time? Is there reinsurance? Is there portable disease-specific insurance? How are we tracking that over time?

(27:07):
That's just one example of the ways where we're not prepared to finance this right now. There's also questions on the evidence side of how are we going to equip clinicians to prescribe and adjust these treatments according to really specific DNA-specific patient needs? How do we get all of that information to them in a way that they can understand and interpret because we are just looking at exponential growth in the amount of evidence and information that clinicians have to weigh as they think about these things.

Rae Woods (27:40):
I'm going to be honest with you, Natalie. This is the one that makes me the most scared. And the reason why is because when I reflect on the other things that we've talked about, I do believe that most healthcare leaders are at least aware of or making some progress on the things we've talked about. Value-based care, behavioral health, health equity, preparing for the aging population.

(28:03):
This is one where I get worried that a lot of leaders are still kind of putting their head in the sand or don't fully accept the complexity of dealing with this challenge. And it is one that will probably be exposing vulnerabilities the fastest of everything that we've talked about so far. I'm not saying that one necessarily should be prioritized over another of all the things that we've talked about, but this is one where, at least in my conversations with executives, they feel the most unprepared or maybe even unaware that this is a problem.

Natalie Trebes (28:37):
And I think this is a really good place to point to the very likely inequity that we will see here, both in terms of patients, especially on demographics and socioeconomic lines, but also organizations too. We will see, if we don't restructure, a few select organizations that are very well equipped are going to be the locus for these treatments. They're going to have the technology, staffing, resourcing that they need to deliver them and administer them, and a few select patient populations are going to be able to afford to access them. And we don't go further for most of these than that kind of small locus.

(29:21):
I think organizations right now need to be thinking about laying the groundwork for the partnerships with some of those specialty centers of excellence because it is not realistic for every hospital to be offering every single one of these very specialized treatments because it's going to require so much. They need to start thinking about how are they building those pipelines and relationships for their patients to get access and payer organizations and ACOs need to think about how are they starting to recognize when they will have to band together and kind of share savings over time. And I don't know, in all honesty, I don't know what that looks like.

Rae Woods (29:59):
Yeah, I don't either.

Natalie Trebes (30:00):
The experiments have to start happening now, otherwise you are going to be left with probably being completely out and your covered patient population just doesn't get access to these through you. They have to subscribe to some other type of insurance or you have to go to one of three national insurers to get access to your big, or maybe even PBMs. I'm not sure what this looks like, but there's probably collective financing and I think it's a question of what role do you want to play in that and how much power do you want to have over how this plays out?

Rae Woods (30:35):
Throughout our conversation, whether it's this episode or the episode that we released last week, we've been talking about the essential things that every health leader needs to know. The frustrating reality of their market dynamics, the increasingly competitive landscape or these huge challenges that the industry just simply cannot put off anymore. And the message that I've heard loud and clear from the two of you is that addressing these issues today will have an outsized impact on the future. My question is, what does the future of healthcare look like?

Aaron Mauck (31:08):
Well, I think there's a dynamic tension at play. Different players are looking for different things from that future. And where you sit across the ecosystem is shaping, to some great degree, the strategy that you wish to pursue. You could almost sort of argue that there's kind of two warring gods at play. On one side, you have the efforts to fragment the ecosystem, to break it up. And we see, of course, a lot of the new aspiring companies with point solutions are out there trying to break up the ecosystem, take revenues from incumbents, position themselves in between traditional players, carve out their little niche within the ecosystem.

(31:45):
And then on the other side, we have lots of folks aspiring for greater ecosystem control. And as we've seen, some of the long-term challenges that we're likely to confront are really going to demand, at the very least, greater coordination across the ecosystem, if not something like more control of the ecosystem to ensure that some of those longer term challenges from a cost management perspective, from a patient management perspective, or just the sustainability of the healthcare enterprise as a whole, that those get addressed. And so that dynamic tension seems to be at play across what we're seeing.

Rae Woods (32:21):
Is one of those options better than the other?

Natalie Trebes (32:24):
I wouldn't say that either future is necessarily better or worse. Certain organizations are going to prefer one or the other depending on their own capabilities and operations. I think it comes back to a thing Aaron and I have talked about before, which is really knowing yourself. This is going to be really important to understand which of these futures, which of those themes is better for your organization's assets and strategic differentiation and how do you try to influence the direction that your market heads towards, but also how do you recognize which direction your market is heading towards because you are going to need to adapt differently depending on which of those realities your market or sector moves towards. And so knowing both yourself and the terrain is what's important here.

Rae Woods (33:12):
Well, Natalie, Aaron, when either of those futures happen, I'm sure that we will talk about it on Radio Advisory.

Natalie Trebes (33:19):
I'm sure we will.

Aaron Mauck (33:20):
Thanks for having us.

Rae Woods (33:26):
Look, I know that it is tempting to say that these challenges are impossible or to even accept that very small experiments or pilots or little wins are enough. But I want to be clear. It is time to make serious moves on some of healthcare's biggest challenges. And like we said, in order to do that, you're going to have to work together. And remember, as always, we are here to help.

(33:58):
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 and Kristin Myers. The episode was edited by Dan Tayag with technical support provided by Chris Phelps and Joe Shrum. Additional support was provided by Carson Sisk, Leanne Elston and Nicole Addy.

(34:27):
Thanks for listening.