10 – Where Is America’s “Health System” Headed? With Dave Johnson of 4Sight Health

Marcus: [00:00:00] Hey, everyone. Marcus Whitney here, co host of Health Further. Uh, my partner in crime, Vic Gatto is on vacation. He’s with the family enjoying Italy. And so I’m flying solo this week, but, um, I brought in a friend of mine and we’re going to share a great interview with that friend. His name is Dave Johnson and Dave is the founder of Foresight Health, which is, uh, an incredible innovation and really transformation, uh, consultancy and thought leader, uh, Organization, uh, based in Chicago for the healthcare industry.

Um, Dave and I, you know, met through our shared service as members of the national board of HFMA, the healthcare finance management association. And, um, I’ve really come to appreciate just what a wealth of knowledge Dave is. And how clear he is on his view of where the healthcare industry needs to go. Um, Dave is, I think, widely respected, whether you agree or disagree, because he knows his stuff and he pulls no punches when he talks about sort of where we need to go in the healthcare industry.

And so this, this [00:01:00] interview, I think is going to be the first of many that we’ll start bringing onto the show. We’ll continue to cover the news, especially when, when Vic and I are both in the office. Uh, but we’re also excited to bring to you some of the incredible people that we know. And have the privilege to, uh, to, to share ideas with.

And so, uh, with no further ado, with the exception of one commercial for, uh, Jumpstart Foundry, we’re going to bring you the interview with Dave Johnson.

Doug Edwards: Thanks guys for the opportunity to talk about our pre seed fund, Jumpstart Foundry. My name’s Doug Edwards, CEO of Jumpstart Health Investors, the parent company of Jumpstart Foundry. We’re so excited to be able to talk about, uh, early stage venture investing, certainly the need for us to change the crazy world of healthcare in the United States.

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Thank you guys. Now back to the show.

Marcus: All right. Uh, we’re in studio with my friend, Dave Johnson. Uh, Dave is a fellow board member at the national level of HFMA. And, uh, he came there by way of, uh, an incredible amount of insight that he’s been providing to the healthcare industry. Far before I knew Dave, I was a subscriber to his newsletters and, uh, and his podcasts.

And he definitely has formed a lot of the way that I think about the healthcare industry. So Dave, thank you for being here.

Dave Johnson: Well, Marcus, uh, thank you for inviting me and just so your audience knows, uh, I really appreciate the introduction, but it does take a bullshitter to know bullshit. [00:04:00]

Marcus: It is true. I was a subscriber, man.

You could, you could, you need to go check your database, man. All right. Um, uh, So I believe that. I believe that. So listen, let’s, let’s just start with, um, with, with who you are, because I have to admit, uh, I don’t even fully know, you know, kind of how you came to this work, right? I mean, I just knew when it was time for me to start researching, he was thinking about this and writing about it in a prolific way.

You were on that list, but, but who are you and how’d you come to this work?

Dave Johnson: You know, that’s, I wish I got asked that question more often, uh, because now I’m going to have to talk a little bit while I think about the answer, but Steve Jobs, uh, gave a commencement speech at Stanford, a pretty famous one in 2011, and among the things he said were that the dots in life connect in retrospect, so you make the best decisions you can make, because, you know, God Instinct, whatever, and then it really only all comes together in retrospect.

So my background is a really unusual one. I was an English literature [00:05:00] major in college, then a Peace Corps volunteer in Liberia, West Africa. Coached a championship soccer team, lived through a coup, had classes bigger than a hundred students, was really a formative experience. Thought I wanted to do that as a career, international development, loved it so much, and came back and got a degree in public policy at Harvard, the Kennedy School, and without realizing it, had signed up for one of the most quantitative programs.

In fact, it was the most quantitative program at Harvard of the professional schools. So more than the medical school, more than the business school, so on and so forth. And I hadn’t had a math class since high school. It was calculus. I was good at math. Um, and I hadn’t, um, and I’d only had one micro economics class.

So suddenly I’m in with a bunch of quant jockeys and it’s like learning new link, new languages, economics, uh, microeconomics, macroeconomics, econometrics, [00:06:00] statistics, analytic modeling, and so on. And somehow got through it and turned out I really liked all that stuff. And after some time in government, I was a U.

S. presidential management intern. Um, I decided to get some private sector experience. And I, my last job in government was I was the first CFO on the ferry, That now runs between, um, New Jersey, uh, and Battery Park City. So Hoboken and Battery Park. So I went into investment banking thinking they’d put me into transportation and they put me into healthcare.

And I ended up becoming a, a healthcare in investment banker for most of my career, uh, financed 30 billion of hospitals, ambulatory centers, you name it, um, M& A, asset liability management, all this stuff that you do, uh, for nonprofit hospitals who were my client, uh, clients. And the part about, um, dots connecting in retrospect is ten years [00:07:00] ago, I, I was tired of doing transaction work.

I’d come to the conclusion my, um, my clients were a big part of the problem. And I know we’re gonna get into, to, uh, The health system right now, I’d started doing some, uh, writing on market based health reform. I like that. I like the strategy work. And I just went into my boss one day and said, it’s not you, it’s me.

Um, and I just can’t do this anymore. So then it was, a function of, well, what do I do now? And I had a coach who was kind of a full contact sport. He’d come in, call me on my nonsense and I’d fight back. And anyway, the last session, which was supposed to last an hour, lasted two hours. It was a Friday and he came in and said, well, you think you got something to say, uh, You want to write a book.

And I told him, no, I didn’t. But in much more colorful language than I would do on your show, and, uh, and he wouldn’t leave until I agreed to think about it. And, um, and [00:08:00] so I eventually did. And I went home, got over myself a little bit and said, well, I’m Maybe I do want to write a book. Why would anybody care about what I have to say?

I mean, a lot of smart people in health care, and I decided it was, um, this unusual background I had in, in literature, um, Peace Corps, uh, public policy and, and investment banking. And it’s such a nuanced, complex industry that maybe you need some combination of literary sensitivity, cultural or literary sensibility, cultural sensitivity, public policy acumen, and market knowledge to make sense of this.

And I find in my writing, I was using each of those lenses. And what I told myself, and this is now almost 10 years ago, was, um, Maybe because I have these different lenses, I’ll see some things that others don’t. I’ll make some connections that others haven’t. And, um, so that became the start of [00:09:00] Foresight Health, uh, my little media and advisory company.

And I’ve since written two books. And depending on how you want to count, we got somewhere between 15 and 20 people, part of the platform. And we produce a tremendous amount of Content on market based health care reform and I, I still think down deep, Marcus, I’m a Peace Corps volunteer. And so if you care about something, you’re supposed to try.

And, uh, I think fixing this broken health care system is an existential challenge for us. If we can do it. as a country, uh, will free up enormous resources to pay people more money, to invest in more productive industries, to, um, you know, fund vital societal needs that we’re crying out right now because we’re spending too much on healthcare and not getting enough back.

So, um, whatever talent I have, um, I’m using to try to fix the broken system. And it’s, It comes from, I think it comes from a good place. Um, I’ve certainly got some strong [00:10:00] opinions as your audience will find out. Uh, but at the end of the day, I, I want to live in a country, uh, where everybody has access to affordable health insurance, uh, that provides appropriate care without bankrupting them or the country.

And if we can do that, we’ll be a better country. If we can’t do it. We’re looking at an ever sicker population, more inequality, uh, less productivity, less happiness, and who wants to live in that America, right? So, that’s, I hope that answers your question, probably a bigger answer than you wanted, but that’s, that’s how I got here.

It’s fantastic.

Marcus: Um, it, it’s fantastic. It, uh, it fills in some gaps that I had in my understanding of, uh, how you came to do this work. I mean, I think one of the reasons why I wanted to ask is it’s one thing to have strong opinions, but as someone who has taken various shots at creating content, it’s an entirely different thing to do it for a very long time at a very, very high level.

Level of prolific [00:11:00] output, right? And so that’s one thing you’re known for. It’s undeniable. And I mean, so that’s, you know, you got to really care about something to do it at the, at the level you’re

Dave Johnson: doing it. Well, that is, I’m really glad you pointed that out because, um, I didn’t realize how unusual I was in terms of being someone with a professional background that Actually was a good accomplished writer.

I thought lots of people are like that. And what I’ve discovered the hard way, um, is that most people aren’t even people that publish. They usually have support behind them. And I’ve really grown in my admiration for people with journalism skills. degrees, professional writers and so on. We diminish them, marginalize them in many ways in current society.

But when it comes to producing high caliber content consistently under deadline, um, that’s a real skill set. And the core of our company, [00:12:00] core of Foresight Health, the five people who really make the engine run. It’s, it’s me and four people with professional journalism and or writing training. And, um, I think that’s really what, what drives it.

And what I’ve learned from the people that are part of Foresight Health who have the journalism training is, uh, as like they say in New York is what I’ve learned is a lot. And, uh, And that I do pride myself on the ability now to be a very fluid, productive writer. And so I think I have found what I was meant to do took a long time to get here.

But, uh, um, but the other, I guess, good thing is I did have, I haven’t forgotten all these things I learned being an investment banker. And as we’re trying to make sense of what’s going on in the marketplace right now, that, that Perspective that knowledge is, is enormously helpful.

Marcus: So one of the reasons why I wanted to have you on the show, besides the fact that you’re in town and it’s just a, you know, [00:13:00] opportunity for me to grab you and sit you down and ask you some questions.

Sure. Um, is you’ve managed to do something that very few people have managed to do, which is consistently communicate ideas. I would say very close to the proximity of the health care industry, um, amongst health care industry leaders that I would, that I would say a large percentage of Americans believe, even if they believe it at a layman level, right?

Not at the level of depth of economic experience that you have. And that’s pretty unusual because you don’t really hear those ideas coming from health Within the industry or those who orbit the industry closely and largely depend on the industry. Right. Um, yeah, I, I, I don’t really know another way to say it, but like, it just is a reality that while people know all the things that you said are true in terms of [00:14:00] access, not bankrupting people, you know, helping people to more regularly, uh, Maintain and focus on their health, not be rejected for basic, uh, you know, basic needs in the healthcare setting.

We all know those things are, are good things. I think we’re all stumped by how to get that done. And that, and being stumped reverts us back to I’m doing the, I’m doing the best I can, and maybe this is the best we can do collectively. I’ll just say one, one more thing on, on this topic. Uh, last week I was at.

Aspen Ideas Health, which is a pretty cool conference because it’s a conference that was able to get the FDA commissioner, the HHS secretary, and the Surgeon General all there. So, I mean, shy of the CMS administrator, they had the power players, right? And so, and they had them on stage for 50 minute interviews by real journalists, right?

So, not some industry person throwing up softballs, but like real industry people asking them real [00:15:00] questions. So, What I sensed from all three gentlemen was clarity on the imperative to fix the problems we have, but also some level of frustration by their own limitations, uh, by the limitations of their mandates, by the limitations of their influence, by the limitations of just their ability to even properly coordinate.

Yeah. Okay. So talk to me about how. You are able to bring these, these ideas that outside of the health care setting, they would not be seen as very radical. I don’t think I think most people who are not in the industry would just say that, yes, this is what we need, right? But in the industry, a lot of your views are pretty radical.

And I want to ask you to, like, save those views, but but also, like, talk about the fact that you’re on the H. F. M. A. Board. You have to be elected to that board. And you know what I mean? Like, you know, and you’re constantly writing in the publication. So, [00:16:00] you know, How does that work? How did that, how did

Dave Johnson: that happen?

You know, I do write a monthly column for the, for the magazine, for the HFM magazine and Kevin Brennan, former board chair, you know, Kevin, uh, came up to me the other day and goes, Hey Dave, you’re writing some pretty provocative stuff, you know, some, Some academic medical center is going to take you out, man.

You got to be careful. But, uh, anyway, I think there may be three different levels to answer the question you ask. Um, the first one is. It, I, I think it is complicated, um, and the smartest people I know are able to take very complex topics, break it into digestible elements and assemble it in a way that are reasonably smart person can understand.

So I’m not saying I always hit that standard, but when I’m writing and when we’re writing for our platform, that’s what I’m striving to do, which is to [00:17:00] take complicated relationships, ideas, and so on, find, and that’s where the different perspectives come in handy. Um, you know, I was just writing up, we had in Nashville a week and a half ago, sorry you weren’t there, the first ever, Cain Brothers sponsored it, the first ever conference with health systems and private equity.

Under the theory that, uh, it’s going to take a village to, to, for in health systems to get the capabilities, expertise, money they need to build out customer friendly platforms. Uh, but I’m writing that up for Cain Brothers and for our site. And what came to me was that famous quote from, um, Victor Hugo, which is there’s nothing more power.

There’s nothing more powerful than an idea whose time has come. So, um, I said, well, what a great way to start an article on a novel concept that I think has real power to change the industry. So that’s, that’s sort of level one is taking [00:18:00] these complex nuance topics, breaking them up and, and reassembling them in ways that, um, reasonably smart people can understand and having the metaphors, having the narrative flow and so on.

Uh, the second thing, which is, is a harder one, um, is the inherent, um, you know, duplicity, shared, you know, conflict of interest and so on. I mean, I’m from Rhode Island, at least grew up Went to junior high and high school in Rhode Island, which was, used to be a corrupt little state. It’s, it’s improved, but we used to, uh, we used to joke about Rhode Island that if there was no conflict, there was no interest.

And, uh, um, and the, the truth is that, the health system at 18 percent of the economy, which is four and a half trillion dollars, which is just beyond the scope of anybody to reasonably understand how big that is. I mean, honestly, we have to live [00:19:00] 32, 000 years to live a trillion seconds. So the amount of money churning through our healthcare system and those benefiting from it is, is enormous.

And, um, I think in all honesty, people are willing to push so far and no further on critiquing the system, because at some point, um, You’re going to end up goring your own ox in some way or another. And I think that’s what you’re hinting on. There is a, there is a lot of duplicity. Not all of it is, is evil.

I, you know, it’s good people trying to do the right thing, but sort of operating within boundaries that limit them a little bit, like you were saying with some of the people at Aspen. And then when it comes to. Us, um, and maybe why we’re a little bit different is I could have stayed on doing banking forever and I, I was the most read author at my last bank.

[00:20:00] Um, but I knew I was writing for a bank, that the bank was paying my check and, uh, Um, I was subject to some of these same limitations that I’m just talking about. And that’s really the reason I decided to form my own company. I said, it may work, it may not work, but the one thing we’re going to have, uh, and that’s been true from day one, still true today is we are not going to publish anything we don’t believe.

So, um, may disagree with me. You may throw tomatoes at me or our team or whatever. Uh, but we believe we need a customer revolution in this country that the industry’s got to change, uh, fundamentally, not incrementally. And that’s going to upset a lot of things. It’s going to turn a lot of parts of the industry on its head and dislocate them.

And I’m okay with that. If at the end of the day, uh, we end up with a system like we were talking about at the beginning that delivers better care to everyone in the country, uh, in a cost effective way that allows us. And to grow [00:21:00] as a country and, and not hold people back. And, um, uh, those are the three things.

It’s complicated, hard to explain. You know, so much of what’s produced is, is got some kind of filter on it. And you gotta be aware of that. And then there are a few places that don’t, we happen to be one of them. I, my guess is, uh, health further is another place where you. Kind of speak the truth to whoever is willing to listen to it.

Marcus: We are in search of the truth. And that’s why you’re here. Right. I mean, you know, we’ll, we’ll put anyone on the other side of this table. Good to know. I meet that standard. Yeah, you certainly are anyone. No, but, but I mean, we’re, we, we don’t. I think, you know, Vic and I have been in this industry, uh, he longer than I, but together as a pair, we’re in year nine of trying to make the industry better through investments, right?

Same, same

Dave Johnson: period of time. Oh, totally. No, this is the thing. When I got

Marcus: serious about trying to learn, I was looking and I found your newsletter. So I’m not [00:22:00] sure when, but it feels like probably 2017. I probably subscribed, started subscribing. Yeah. You, you talked about the Victor Hugo quote. There’s nothing more powerful than an idea whose time has come having conversations this year at HFMA, and I’m not talking about what we’re hearing on stage.

I’m talking about what we’re hearing over coffee and over drinks, right? And in the hallways of the Opry land, the time has come because we’re, we’re, we’re out of runway.

Dave Johnson: Yeah,

Marcus: right. We’re out of runway, right? Um, there’s, there’s not really a belief, you know, you could either look at it from the perspective that there’s gridlock because we have a split house and Senate or because we’re heading into a crazy presidential cycle or because the Fed is, you know, you know, About two quarters away from totally, you know, upsetting the apple cart of banking with the CRE, you know, looming crisis that we have, no matter how you slice it, it’s like, it doesn’t feel like there’s a rescue bucket of money coming from anywhere.

Dave Johnson: Uh, the cupboard spare.

Marcus: [00:23:00] Yeah. And, and the, and the day’s cash on hand are going down. for basically all the nonprofits right now. Um, and so look, my self interested self that is trying to make investments to try to figure out what’s going to work to make this industry better, but also what’s going to get revenue.

You know, if I’m looking at an industry, I’m saying, Hey, this, you know, this, especially this segment of the industry, this health system segment of the industry, uh, is, is feeling.

Dave Johnson: Yeah, you know, it’s so, so interesting, uh, Marcus, I think I mentioned to you this on the drive over. It’s people say, Dave, you got such a unique opinion.

And I say, no, I don’t. I’m just applying business logic and economics to an industry that’s operated under artificial, uh, constraints forever. I mean, um, We’ve got supply driven demand where, uh, providers, doctors, [00:24:00] um, decide what care you need, and then they get paid for delivering it. Uh, hospitals the same way.

And so, it doesn’t take a genius to know that if you’re gonna pay for more stuff, you’re gonna get more stuff. Um, so in terms of what’s happening in the market, I used to think that healthcare could change from the inside out. Um, that, uh, You know, Obamacare is now a teenager. We’ve been talking about value for a long time.

Wow, that’s crazy to think about. Yeah, I know, I know. Uh, and it’s here to stay, despite many attempts to upset the apple cart. And the industry’s had every chance, uh, to deliver on the promise of better outcomes at lower cost with better customer service. And it just hasn’t done it. And despite the, the Fed, uh, not having, or the federal government not having more money and despite, you know, all of the red ink that’s happening in health [00:25:00] systems, the real solution to the problem isn’t more money, it’s fundamentally value.

And we spend 18 percent of our economy, the next big countries with the next highest percentage are France and Germany at 12%. I haven’t met a single person who yet thinks that. We need to spend more than 18 percent of our economy to provide great health and health care to everyone in the country. So it’s not a question of funding.

It’s a question of distribution. And I thought the industry could figure out the distribution question itself, but it’s fundamentally just had no, no interest in doing so. It’s hard, right? I mean, you’re going to shut down hospitals. You’re going to push, um, push volume into, um, Into virtual care, you’re going to have people practice at the top of license.

You’re going to piss off all kinds of people. So they’ve preferred to just continue to play the old game, um, where revenue is flexible. God, you see the number of revenue cycle companies at [00:26:00] HFMA and, uh, Right now, my head is exploding because I’m literally trying to figure out how big revenue cycle management is in the United States.

And I think if you put in all of the, the actors and all of the associated costs, we might be looking at the single biggest industry in the country. We can get into that if you want. My head will explode some more. Um, But so now I’m of the opinion that the industry is going to change from the outside in.

And I don’t think the, the, there, there’s a not very subtle move by these big retail chains, uh, CVS, uh, Amazon, uh, Walmart, and partnership with Optum to essentially change demand management. So healthcare has, because of the nature of the, of the model has historically controlled both the access to care and the price of delivering that care, you know, with some pushback here and there, but largely, um, has been able to, uh, control that.

It’s [00:27:00] not too hard to imagine an organization like CVS in the future, say five years from now, with 30 to 40 million members, great primary care. Um, clinics, uh, and urgent care centers within five miles of most of the population, the vast majority of 75 80 percent of the population. Um, post acute services as needed up to and including hospital at home.

Uh, and all of that. Within a framework that Aetna is going to manage the demand and the risk of the population. And maybe the government will be smart and put in some type of insurance protection so that above a certain level, secondary insurance protection, you know, you, you know, the government will cover it with solid case management that would allow for tighter pricing on products.

Either way, um, CVS in partnership with its members will [00:28:00] determine which individuals receive referrals to specialty care, which specialists receive those referrals, um, and on what terms they receive them. And so the demand management function will fundamentally shift out of the control of the healthcare system into these big retail entities and others like them that, that will.

Manage the full risk either on an episodic basis or as I’m suggesting with CVS on a population health basis. And when that happens, and it’s on its way to happening, um, it’s game over for the traditional players. Uh, they can’t exist in a world where you get paid three times as much for doing something in the hospital that you could do in a, in a, in a clinic, um, or 10 times as much.

Um, you’re not going to get paid for overtreatment. You’re not going to get. Paid for overpricing, um, you’re not going to get hospital based pricing for anything. You’ll get hospital based pricing for [00:29:00] things that have to happen in hospitals. And oh, by the way, that’s a whole lot less than we’re doing today.

And we’re also going to use our facilities in a much more rigorous fashion than we do today. Typical hospitals, a ghost town at four o’clock on Monday to Thursday, 12 o’clock on Friday and, and over the weekend. A single capital intensive industry in the world that uses its assets on a less limited basis.

So huge amount of capacity. Um, so we’re going to see downsizing in the sector, probably restructuring government might have to get involved in that. But make no mistake, Marcus, we are very close to jumping that. Classic innovation chasm, where digital health and, um, capitated risk, uh, full risk contracting will be big enough, uh, that it will shape the outcome.

supply demand cycle of the industry. And I, I think we’re, the time frame we’re looking at there is five to seven years with, uh, because these companies have been at it for a [00:30:00] while. Uh, government is essentially paying, uh, insurance companies to learn how to manage risk through the Medicare Advantage program.

Um, I don’t think they’re doing it on purpose, but the byproduct, I can live with the byproduct. And at the end of the day, that’s, that’s good for America. That’s good for Americans, but it’s bad if you’re clinging to a model that depends on getting paid premium prices for routine services that expects to get paid 15 percent margins for administering claims, which is a one to 2 percent function.

So I’ll, I’ll, I’ll plagiarize or channel my inner Martin Luther King a little bit. Um, the arc of the economic marketplace is long, uh, but it bends toward value and that’s true in healthcare as it is in any other industry. And we’ve seen other industries tipped upside down and, um, I think healthcare is, is going there and that’s even before we get into [00:31:00] what genetics and everything we’re learning about.

The way the body operates comes into it, which is going to help extend lifestands, identify disease earlier, treat diseases that we, we couldn’t treat before. And, uh, that’s all on top of this fundamental restructuring I’m describing. So a lot going on. Um, but the change leaving the station, and I think what you’re feeling in the quarters and around as people are.

Sort of realizing that the avalanche is falling. They’ve been square dancing below on the mountain and they can’t get off and whatever’s going to happen is going to happen to them. Not from them.

Marcus: I kind of got hooked on your framing that you used to think health care could fix itself from the inside.

But now you think it’s going to happen. From the outside and then when you mentioned the players, you know, with the exception of Amazon, uh, I mean, [00:32:00] CVS stopped selling cigarettes because it wanted to be a healthcare company. How long ago was that now? Oh, five, seven, five, seven years ago, right? Yeah, I guess one of my big questions is.

You know, health care is not just health systems, right? Right. At the center, we have the regulatory apparatus between the payments and the, you know, safe and effective use of food and therapies and things of that nature. And then sort of surrounding it, we’ve got those who provide the care, those who pay for the care, and then the data providers, labs, and the IT folks, et cetera, right?

The shape of the folks who provide the care used to just be hospitals and physician groups. And now. Optum is the largest employer of physicians in America, right? And, uh, And Amedesis just agreed to their buyout as opposed to going with the option care player. I don’t think they had a choice. No, they really, well, their shareholders certainly didn’t allow them to have a choice, right?

But, you know, I guess, I guess just my My [00:33:00] question is, is this actually the outsider thing? Like when I think about outsider, I really think about Airbnb, Uber, you know, um, these things that truly were not the incumbents in any way, shape or form. They were just these capital innovations. But, you know, United Health Group evolving itself into effectively optimum with this balance sheet.

You know, uh, uh, actuary back end that is United Healthcare, but really optimum clearly driving the future of that organization in no small way. And I think they would articulate that as their strategy. I’m not speaking for them, but, um, you know, CVS Aetna, um, the evolution of, of Anthem into Elevance, right?

This entire payvider. You know, not all the pay providers have a true retail consumer front door, but boy, are they trying, right? Boy, are they trying to figure that part out. And if they’re not doing that, they’re, they’re aggregating providers and heading into the home or so, [00:34:00] so I think I get what you’re saying.

Dave Johnson: I’m saying outside in, but. There’s a fair amount of insiders that are part of the outside in just not the hospitals, right? Just not the hospitals. Um, so, uh, and I think some of the traditional insurers, um, are also on the sidelines. You’re right. Yeah, for sure. For sure. Um, but the payviders and, and. You know, to be fair, there are some health systems that have insurance plans that are also kind of

Marcus: absolutely, I mean, we have, we have to state that, right?

Because I think those are able to evolve into value based care and they look like they’re standing on more stable ground, quite frankly.

Dave Johnson: So I’ll tell you an interesting story, Marcus, the, um, Mark Bernalini, uh, used to be the president of Aetna. And you may recall that Aetna tried to merge with Humana. I do remember that.

Yep. Yep. That was recent. Uh, yeah, it’s probably again, like four or five years. Four or five years. Yeah, but close enough that I remember.

Marcus: Yeah. [00:35:00] Right.

Dave Johnson: And, um, and the government shut that down. It also shut down, um, Anthem’s merger with Cigna. I remember that. Yep. Those two were kind of going in parallel, right?

Yeah. Okay. And they would have created two mass and the government, I think rightly said, Too much market concentration. Um, so Bertolini turns around and then merges Aetna into CVS. And I was with him maybe six months after all this had happened. And I said, uh, essentially, hey, dude, you’re giving me strategic whiplash.

Um, You’re going for a horizontal merger. The government shuts that down and then you turn around and decide you want to be vertically integrated. What’s that all about? And he said you may or may not believe this, um, but the end play was always to merge with CVS and become vertical. He said the only question was who was going to write the check.

Aetna needed to acquire Humana [00:36:00] to be big enough so that we could have written the check to acquire CVS. And he said, my first phone call after, um, after the government shut down the merger with Humana was to Larry Munroe at CVS. And he, and uh, I basically said, well, Larry, you get to write the check. Yeah, your checkbook.

Um, but, but the model, and honestly, I, I, I always had enormous respect for Mark, but that, Made complete sense to me because, um, while you could say CVS has been a player for a long time, they hadn’t been in the insurance business and the new entity, uh, That are, they’re creating, they’re changing everything are those that are able to take full risk capitated risk for population health, uh, bundle risk for, um, for episodic care.

So, I, I think Mark captured that it’s hard for me to believe, um, Amazon, you know, doesn’t get in the risk business at some point. I mean, they, they’ve bought all, they bought everything except an [00:37:00] insurance company at this point. And they’re going to be able to deliver on the promise of better, better care, better prevention at lower costs with great customer service.

Um, you know, Walmart and Optum have a partnership, you know, and we’re going to see different flavors. We’re going to see different flavors. Which is good, by the way, because because because

Marcus: it puts us back into a world where we have competition, which is one of the big flaws for health care for decades is the lack of competition.

Dave Johnson: Well, and if if if somebody made me czar, um, what I would do is take the Obama exchanges and really make them robust. I would push Medicare Advantage into the Obama exchanges. I would push manage Medicaid into the exchanges. I would give employers the right to still take. the deductible for health insurance, um, encourage them to do that.

But then I also give them the right to direct their employees into the exchanges to buy the policies. [00:38:00] And if they can find, if my company gives me 20 grand and I can find a policy that I’d like for 15, I get to keep the 5, 000 as taxable income. You want to unleash consumerism in this market? Imagine.

Really robust exchanges, uh, and all the insurance companies will have to play in them and they will have to build their networks and consumers are going to be, wow, you mean I can get comprehensive coverage and get an extra five grand? I’m going to take that. So, part of what I’m talking about doing is unleashing both the American innovation machine.

And the American marketplace to solve what has been an intractable problem up to this point. So, um, I think it’s at our fingertips. It’s, you know, I can feel the tingling. Um, we, we got some, a lot of crap to go through before we get there, but, um, I think we’re going to get there and I’m hopeful we’re going to get there and I’m doing everything I can to beat the beat the drum that says, okay, [00:39:00] yeah, we’re going to get there.

So,

Marcus: okay. One, one final question. Yep. Um, what is the role of the employer? Right. Because they, they’ve, they’ve played this massive role for almost a century now in being the, you know, the, the core provider of, of, of healthcare. Coverage, right? And, uh, and that’s not going away immediately. It’s not going away immediately because that process of educating a consumer to know how to do and even trust or even believe it’s their responsibility to do that.

Right? So for at some, at some level, the employer will at least transitionally Be the proxy for the consumer, right? Um, in kind of like a GPO model, you know, it’s it’s basically how it how it functions, right? You

Dave Johnson: know, yeah, well, you know, the The old observation that if you’re in a game of poker and you don’t know who the mark is, you’re the mark.

[00:40:00] In, uh, in healthcare, the employers have been the mark forever. Uh, my biggest disappointment has been that they pay premium prices for routine services and haven’t demanded more value for their purchases. So number one, um, And I’m actually talking to the, um, the National Alliance of Healthcare or Business Purchasing Organizations.

I’m giving a keynote tomorrow night to them. Uh, and part of what I’m, it’s going to be a tough love message, which is we need you to become better buyers. So, first and foremost, uh, let’s put responsibility on businesses, uh, that are funding a lot of the silver price care to become better buyers. Um, the second thing, I, I absolutely agree with you that this can’t happen overnight.

Uh, but I also think there are very few companies that are very good at the benefit design business. They have to hire brokers. They have to, yeah, I mean, the brokers, right. I mean, [00:41:00] so, and that’s a, that’s like travel agents that should disappear, you know, uh, Andreessen always says, you know, Software eats the middle.

Well, there’s a lot of middle to, uh, right there. We need intermediary disintermediation in a big way in healthcare. Um, so I think the companies that can, uh, Um, can continue to design benefits and help their employees along. Um, there are a whole lot that, that can’t and, and we should develop the capabilities, uh, for, you know, people to go on exchanges and get high quality risk management and all the things you need.

Um, so, I, I do think it will be a migration. And the other thing we need is we need the corporation’s money. Um, we, we can’t put all this back on the, the government. I mean, the, the, the, I debated Bernie Sanders economists on, um, single payer versus pluralistic payers. And, [00:42:00] um, I just don’t think we have the wherewithal as a society to suddenly say, okay, companies, you don’t have to contribute to healthcare anymore.

And we, the government are somehow going to find it funded through some massive tax scheme. And oh, by the way, and this was where, um, I, it was funny with Bernie’s economist. Um, Jerry Friedman, he’s from the University of Massachusetts. We agreed on the outcomes. Everybody gets access to health insurance. Uh, outcomes are better, services better, and we don’t bankrupt the country.

Um, and I think the problem with Medicare for all is, um, we see how badly Medicare works, uh, today. And if we suddenly say, okay, we’re gonna, we’re gonna, Apply that to everyone. Suddenly, we’ve got centralized pricing with ferocious private sector, um, exploitation of perverse incentives and we’ll be in a worse place than we are today.

Whereas I think if we use some of the mechanisms I described, which [00:43:00] use level field competition, innovation, um, and allow companies to compete on value rather than sort of optimizing, Um, perverse payment incentives, we got a shot at pulling this all this whole thing thing off. So anyway, back to companies, um, we need their money.

That’s why I would continue to give them the tax deduction. I try to figure out ways to steer more volume over time to the exchanges, let them mature, become the robust. I mean, exchanges were a Republican idea. Obama just happened to steal it. And one of the ironies is Obama passed Republican healthcare legislation with no Republican support.

I mean, if I were in charge of the Republican party, I’d say, you know, we gave Obama the idea, but he screwed it up. Democrats have screwed it up. Elect us. We’ll, we’ll get it working again. Instead, we got sort of this weird dynamic where Republicans are running away from the very ideas that they created and that can [00:44:00] help solve the system.

So, um, The politics, you know, there’s a lot of irony in American history. And that, that is a, that is a rich one. Um, so, uh, I think there is this possibility to get business back into it, have them contribute in the right way, become better buyers. The things that also are help are going to help what I call the force multipliers in addition to better buying our, uh, liberated data.

Um, and honestly, the Trump administration did a lot. To promote interoperability, um, and that’s, that’s starting to take hold, um, data wants to be free. It wants to go where it can have the greatest value. And then the final thing is what I’ve alluded to earlier, which is pro market as opposed to pro business, like regulation.

We’ve had a very. lacks regulatory structure in healthcare. Um, um, companies have used their market leverage and their political leverage to, um, twist the rules in their [00:45:00] favor. Uh, the government at its best creates pro market, not pro business environments, level field, competitive playing field, what the best ideas come.

And, um, and we’re starting to, to see that. I mean, uh, I just, One of the things I chuckle about, I’m chuckling now just as I think about it, I think in the entire history of the world, there have been no organizations other than non profit hospitals with monopoly pricing power that have figured out how to lose money.

So, so part of what we need to do is we need to get. Oh, we need to create level playing field. We need to let value rise from wherever value rises. We need to sort of eliminate this fiction between for profit and nonprofit. It’s all health and healthcare and let the best companies win. Um, and they’ll win because they deliver greater value to the American public.

That’s the American way. Um, And we’re a, we’re a big, messy country and we’re not going to adopt Canada or we’re [00:46:00] not going to adopt Germany. We’re going to create a unique American solution that’s got to work for a pluralistic, messy country that has divisions in every conceivable way. But what’s made America work in the past is that we’ve sort of accepted that diversity of experience and we’ve put it to work for our own benefit.

And we’ve let the cream rise to the top. And we need to do that in health care in a big way. Um, not just to save the industry. I think in some ways to save the country.

Marcus: Uh, can’t think of a better note to end on. Dave, thanks for being here. And, uh, you know, we do have people in remote. So, we will, we’ll call back on you, man.

Um. Okay. Actually, one last thing, anything we should look for from you, uh, you know, your, your prolific writer and people please for foresight health, uh, you know, go, go Google it, go subscribe. But I mean, are there any books or, or, or projects in the works? You

Dave Johnson: know, you mentioned a medicines. I just helped, um, Paul Cucero, who’s a former Rhodes [00:47:00] scholar, uh, Right.

A book about the emeticist experience is really a guy coming out this fall. Oh, that’s awesome. And it’s a great book. But part of what I did with Paul was I cut out 100 pages of policy stuff, which, uh, really didn’t belong in the book. He wasn’t happy about it. So he was beating me up and saying, we got to write a policy book together.

So he and I, over the summer, Uh, are going to write a book called, um, Gradually and Then Suddenly from the Hemingway. Uh, from Hemingway quote. Uh, ten macro and market forces revolutionizing U. S. healthcare. And we, we sat down a couple of weeks ago. Uh, we knew it was going to be ten trends. We had to figure out which ten are which.

And we, uh, we divvied up the responsibilities. And we’re going to start writing it. And, um, hope to get it done. By early fall into print, so that it’s ready early next year. Um, but it’s going to incorporate a lot of the thinking that, that, you know, you heard on up to this point, but, uh, we want to make the case.

And [00:48:00] the other thing I’ll say is good writing leads to good thinking. I’m writing this book in part because I want to sharpen my arguments and, um. Uh, and I, I have found nothing better than having to sit down and write out and articulate, and you’re nodding, and so I agree with you, but, uh, thinking, until you can express it on paper, your thinking is just that.

Mush. It’s mush. It’s mush. And, um, And the discipline that comes with, with writing and Paul and I doing this together, I think will create some market intelligence and perspective that hopefully will be useful as companies begin to try to figure out to say what you’re talking about, where do we put our money?

Where do we make our bets? Who wins? Who loses? And we’re going to try and shape that dialogue a bit.

Marcus: Looking forward to reading the book about Paul and the Ameddas experience. Have to be honest. Even more looking forward to the policy book. So I’m glad he beat you up about it. And you guys are going to put that out because we need to read that book.

All right. Uh, Dave, thanks a lot, man. Awesome. Thank you, my [00:49:00] friend.