130 – Why Healthcare CEOs Are Panicking : Tariffs, Jamie Dimon, and the $33B Medicare Advantage Fallout

Marcus: [00:00:00] If you enjoy this content, please take a moment to rate and review it. Your feedback will greatly impact our ability to reach more people. Thank you, Paul. How you doing, man? I'm good. It's good to see you. You too, man. You too. Thanks for, uh, sitting in for Vic. My pleasure. Yeah, you are, uh, you're, you're now sort of our default go-to man.

You know, you, you know, you're kind of the, the, the, the third man. I love it. Yeah. I love it. Yeah. I have the 

Paul Kappleman: time to do it. I enjoy the show. I enjoy keeping it up. Forces me to stay relevant and stay focused on what's happening out there. So thanks for inviting me. Glad to be here. Yeah. 

Marcus: And, and you, you, uh, got to spend some good time on the course this morning.

Paul Kappleman: Yeah, it was a beautiful day. You know, it's, uh, master's week. Uh, yes. It feels like spring in Nashville. It feels like 

Marcus: spring. 

Paul Kappleman: So that's, those are good things. Things are starting to bloom. My allergy's a little, a little brutal, but, uh, it's, it's a good sign for, for the spring coming. 

Marcus: Awesome. Well, we, we, uh, we don't have a, a huge show because there just hasn't been that much stuff going on, and I think it's because the world is.

Uh, just trying to sit back and see what, well, where are we going here? Somebody's 

Paul Kappleman: sucking up all the oxygen Uhhuh in the road. Uhhuh, 

Marcus: he's a pro at that. Yeah, [00:01:00] he is a pro at that. I mean, it's, it's actually quite, quite, uh, amazing. You have to wonder in the history of the world, where does this guy rank now in terms of being known by, you know, people across the world?

He's, he, he's get, he's gotta be an all timer at this point, right? Yeah. 

Paul Kappleman: I've never seen anything like it. It's, I've never read anything like it. Of course, now it's, it's amplified because he's on social media and we're seeing him every day. But just yesterday, like listening to him, uh, signed those executive orders and he's got time to talk about shower head faucets and toilets so that he can wash his beautiful air.

It's like he. He's something, there's no doubt about it. And whether you like him or not agree with him or not, uh, his energy level and just intensity is, is is something I, and for a guy his age, I just don't know that I ever had that energy. Certainly don't now, but it's, it's impressive and from that standpoint, but I, it's creating some chaos, that's for sure.

Marcus: You know, I like your objective take on that. I, I agree. [00:02:00] I think, um, you have to find, you know, when, when, when people are this, uh, impactful, you have to find ways to, to talk about them that are honest, right? Yeah. And, and, and you don't get to be this impactful without having some really strong qualities.

Right. Right. And I think his, I think his energy levels, uh, uh, and just kind of consistency and ability to, to, you know, for it, it's so tiring, I think for us to be on the receiving end of it. But for him to be driving this much change in this kind of period of time, um. 

Paul Kappleman: Yeah. I've never been a part of it as a, as a, an executive or in a company or on a board level, seen anything like that.

You've 

Marcus: gotta have ice in your veins. Right. To, to, to move, to move, to be this sort of, um, brutal in, in terms of, in terms of. The kinds of changes we're talking about, right? Yeah. And the implications of those changes. Yeah. That's, that's some serious ice in the veins, man. 

Paul Kappleman: It is. And when you're, when you, you know, you think about it from a business and he's a businessman, but if you were a leader of a company [00:03:00] and just, you know, one day here, the next day here and, and people not understanding sort of where you're going and could flip on a dime, it's chaos.

And that's, that is challenging. And I, and I, and I don't like that. 'cause I've never run a business that way. And if I was an employee in a business, I wouldn't like my leader run it when the other end of it, he feels a sense that we have to act and we have to act fast and I gotta a short period of time to do it, and we're gonna shove these things down and, and let it play out.

And, uh, whether that's right or wrong, we'll we'll see. 

Marcus: Right? 

Paul Kappleman: But it's certainly not the way that a lot of, lot the way I would do it. But anyway, 

Marcus: yeah. One of the things that, uh, I, I, I talked to Vic about when I returned from, uh, a delegation trip that I took in February to Riyadh was just the stark difference of being in a kingdom.

Right Where, um, the, the Monarch can, can establish a multi-decade strategic plan and have visibility that this is going to be carried [00:04:00] out because there are no elections. Right. You know what I mean? There's no democratic thrashing that's gonna happen on a, on a every two year basis. Like, no, like, this is what we're doing and everyone gets bought in and then you see the progress.

And that's kind of, it's, it's a little more like a company, right. You know, where, where, and if they're 

Paul Kappleman: benevolent, people can buy into that because they know where we're going. They can get behind it and here's how, here's my role in getting us there. Uh, and it's laid out. And I think people like that structure and order 

Marcus: and companies are not democracies.

Yeah. Right. You know, I mean, it's kind of a benevolent dictatorship, right? Yeah. Exactly. At the end of the day, uh, and he is bringing that model into, you know, and I think he sort of learned something from the first time, you know, that like, you kind of gotta go shotgun, you gotta go at light speed. Yeah. You gotta go at Lightspeed just because you're, you're gonna be in on the campaign trail next year.

This time he'll be on the campaign trail. Right, right. You know, to, to try to keep the position he's got. 

Paul Kappleman: Yeah. In the midterms, or we'll be honest, before we know it, we'll be talking about him. That's exactly right. Yeah. So that's exactly right. I'm, I'm with [00:05:00] you. It's, it's an interesting time. Uh, the news that you put together yesterday is almost stale today.

I know, I know. On that. But we're gonna talk about it. Yes. We're gonna talk about it anyway. 'cause it's, it's interesting stuff. Yeah. Ab absolutely. And I, you know, let's, uh, try to always bring it back to. You know, like how does this impact us as healthcare leaders? That's right. Uh, and, and know what are healthcare leaders thinking about all this.

That's right. That's right. And, and they should be apolitical, which is what does this mean to me and my business and my company and my investments? Um, and sometimes you just gotta put that lens on when we talk about it. 

Marcus: Absolutely. So with that, let's dig in.

Uh, yes. As you said, uh, the stories are, you can't, um, you can't have a once a week show and expect for your stuff to be relevant anymore. Like, like the, the, we're we're oscillating too quickly. Right, right. So, but [00:06:00] I, I think it, I think the, the main story this week is that, uh. T the intensity of tariffs were, were paused for 90 days.

And that pause did immediately result in a stock market sort of, uh, spike, uh, you know, best day since 2001 for Nasdaq, et cetera, et cetera. Now, you know, that was sort of yesterday's story, right? And as of today, we're looking up at the, at the, um, the banner at the top of the Wall Street Journal online, and we're back to all red with the VIX now back over 40, I think, I think yesterday had, had gotten into the mid twenties.

Um, but we're right back into the volatility. And, you know, I think some of this is probably, I, I'm, I'm, I'm interested in your take on this, but I think some of this is probably related to the way that it was position that the 90 day break was positioned. Um. And the rest of the world did not corroborate that.

Right. You know what I mean? It was positioned like this was art of the deal. This was how we were going to [00:07:00] negotiate. Look, we've isolated China, we've proven they were really the bad actor. Now the whole world is gonna come to the table, do deals with us, and China's now isolated and now we're gonna double down.

We're taking 60, going to 1 25 with them, which is like, I mean, 1 25 is, is basically like, you can't do, you can't, you can't do business there. You have to get out. Right. Um, 'cause a lot of businesses had had factored in 60% and between, between some cost cuttings, you know, moving some assembly things, and then probably also some, uh, bumping of price.

They were like, you know, with all of that, we'll, we'll, we'll figure it out. 1 25 people are out. Right. Right. People are out. But I, I just saw, uh, you know, a tweet talking about the European Union is in talks with China about totally removing tariffs on, on Chinese vehicles. Right. So, so, you know how, how, uh.

How, how well choreographed was this entire process, and is the world actually coming to the table to do all the deals that the White House is, is saying or, or not? 

Paul Kappleman: [00:08:00] Was that just banter to in reaction to the markets? Um, yeah. So hard to say with him. It's so hard to say. I, I think at the end of the day, when think about running an organization, uh, or investing in the, in the market, um, you sort of, once you know what the delta is, you go after it and you figure out, all right, how do we manage through this?

When you have a moving target. It's, it's just impossible to manage through that. And I think, uh, other countries are feeling that and investors are feeling that, and the individual companies are feeling that. So to me it's just, we've gotta kind of know where we, we gotta stop for a bit and say, right, this is what it is, let's figure out how to get through it.

Um, but yeah, we'll see what happens. I've try, stop trying to figure out the market. I, I learned some valuable lessons way back in the day, which is, it's usually easy to figure out like when to sell, but like when to get back in is, yeah. Yeah. I made that mistake. I thought I was very smart and I won't take it again.

Marcus: The, the, the number of people that were talking about buying this dip, I was like, I, I don't, I, I understand how you could [00:09:00] characterize this as a dip, but. How do you know this is a dip? Like, you'd, you'd have to know something about what, what Donald Trump is gonna do tomorrow. And you don't know. 

Paul Kappleman: You do not 

Marcus: know.

You don't know. 

Paul Kappleman: And betting on that, I, I think that the tariffs, I think the thing is, I thought about all the back and forth and it's like, all right, what's the, what are the big takeaways here? And I, I think for me, one of the big takeaways was like, we are in a war with China now. Yes. Like it is on Yes.

And I, we've known it was coming, but it's now official. It's real. And that is scary. I mean, it's scary because, you know, wars, wars are ugly. Yes. And they come to, they, they will come to an end, hopefully it's an end where there's a deal. But you don't know that. And they're not, they're a formidable opponent.

They, they're very, I don't know if, I don't know how we do against them. So it's scary. 

Marcus: Well, they're very formidable and um, and some of our behavior makes them more formidable. 

Paul Kappleman: Yeah. [00:10:00] 

Marcus: Right. Um, you know. It's, it's, it's weird to see them being cast in a position that previously we held in terms of the way that other nations Right.

Are looking at engaging with them and some of the messaging that's coming out of Beijing. 

Paul Kappleman: Yeah. 

Marcus: Right. Um, and, and then quite frankly, the messaging that's coming out of Washington, right. The way that we're talking about longstanding allies, you know, the language Yeah. That we're, that we're using. Um, and you know, and interestingly it's not.

That much Donald Trump. It's, it's many of the members of his cabinet, you know, some of the, the, the statements and the words they're using are, um, you know, they're derogatory. They're, they're, they're not the ways that you would speak to your, your partners. Your partners speak about your partners in public.

Paul Kappleman: If you're a, in a joint venture and, and your lifelong partners, right, you're, you're gonna have odds. But at the end of the day, you gotta, you gotta work together. Especially in [00:11:00] public and Yeah, yeah. Behind closed doors, you can have a lot of disagreements and arguments, um, but you don't throw 'em under the bus in public.

I, you know, with China, I, I don't know. You know what I mean? Their, their economy has a lot of weaknesses to it, their population growth. Um, but then they have a lot of advantages. They don't have midterm elections coming up in a couple years, and I don't, I don't see them backing down, you know, I don't think they, so I, they hold a lot of our debt.

Yeah, yeah. They hold a lot. There's, there's, it's gonna be an interesting time, but that to me was the one walkaway. It was like, I knew it was coming, but you know. Last week was, it was, it is official now. Yeah. We are at war. It's just, it's an economic war. Yeah. But it's war. 

Marcus: Yeah. And, and, and I guess when you say it that way, um, this was going to happen at some point.

Yeah. 

Paul Kappleman: It just happened to, that was the final straw. 

Marcus: Yeah. 

Paul Kappleman: The other piece of it that I, I'm a little frustrated with and, and I'll just speak to my colleagues in healthcare, is I felt like we had an opportunity, um, during Covid, like we saw the weakness in the [00:12:00] supply chain. Um. And we talked about it and we didn't fix it, Marcus.

And that I'm frustrated at myself and, and at others that we, we had a, we had a crisis, a golden opportunity to fix where we got stuff where we manufactured drugs, key critical supplies to take care of patients and we didn't really make a dent. I mean, if you look at what we're buying from China today versus PO pre Covid, it's not that much different.

And it's like, what were we doing these last three years? Why didn't we work on that problem? So that's frustrating to me. That was one of the, my frustration takeaways. And the other one is just, you know, this is gonna be, is gonna be ugly with China. I. 

Marcus: Let's keep moving because I don't, I don't want to get stuck on that Hook.

Hook. Yeah. We can talk about it forever. I don't wanna get stuck on that hook that you just like the, the the not fixing it thing. 

Paul Kappleman: Yeah. It's, it's frustrating. 

Marcus: Yeah, it is. Okay. So, so then, you know, there was some good news, uh, which is, uh, CPI came in 2.4. I mean, that's, that's a pretty low CPI rating below what the experts thought.

Uh, [00:13:00] 2.8, um, was the core. So, you know, we're, we're now, when we're below 2.5, I feel that something is working favorably and I don't think that this was the number that people necessarily expected. So like, how did you read this? 

Paul Kappleman: Yeah. Pleasant surprise. Um. You know, I'm wondering if it's a relevant statistic given the world has, you know, it's, it's backwards looking and it's, it's just a different world today.

So is, is it relevant? Is, are we gonna do anything with it or is good to note? I don't know, but it's positive. I mean, certainly if it was going the other direction going into last week, it would've been. Incredibly concerning 

Marcus: here. Here's, here's just a couple of, um, you know, data points were relative to it.

So used vehicle prices were off 0.7%. Um, airline fares declined, uh, 5.3% in March. Uh, motor vehicle insurance dropped 0.8%. Uh, prescription drugs fell 2%. I mean, you know, when I think about these things, these are all things that I have been more [00:14:00] conscious about in my shopping for, for them across, across the board.

Um, you know, I've, I've changed every, every insurance provider I've got for home and auto for both myself and for my parents. Just, you know, just crazy rate increases that, that came in year over year. And I was like, we don't have to put up with that. Yeah, we don't need to put up with that. So I wonder if, you know, some of those results are driving, you know.

Some rationalization into the pricing. 

Paul Kappleman: Yeah. And, and clearly oil prices are a positive. Yes. I mean, that's, you know, paying at the pump, we feel that Yep. That is real. Yep. It, it, it affects consumer sentiment quite a bit because once a week you see it, you feel it. It's like you have anger or sadness depending on, or happiness depending on what the prices are.

And Americans feel that, so that, that's positive. That's right. 

Marcus: 6.3% drop on on gas. Yeah. 

Paul Kappleman: We'll just, we'll, we'll see, we'll see what it means after, um, everything that's happened with tariffs. 

Marcus: Yeah. It, I I, I, I agree. I think this is gonna be a really important baseline Yeah. For the next six months. Yeah. Right.

You know, we, we, we will know how well the tariffs are, uh, [00:15:00] impacting us based on, you know, a 2.4 starting point. 

Paul Kappleman: Yeah. And I listen, I enough on tariffs, but I think it's clearly certain that we're gonna have short, short term pain, whether we have medium term relief at all, uh, with deals, uh, or some onshoring of stuff.

Uh. Questionable. Um, there's gonna be deals to be made. Hopefully that helps, uh, long term. That's where I'm, I'm really curious to see what happens. 

Marcus: Yeah. 

Paul Kappleman: Are we able to que, and this is a question for me, are we able to onshore the stuff and really make an impact? Is that gonna happen at the magnitude we needed to happen in the next year to two years?

Marcus: It's a real question. That's the question. It's a real question. Right? I 

Paul Kappleman: hope I'm, I mean, I think we all hope that it happens. I don't know that anybody on either side of the aisle says like, that's a bad thing. If we can start making and, and producing things in the United States that we're offshoring now, I mean, that's a great thing.

I just hope we can do it. 

Marcus: Yeah. And we, and we're gonna end as we always do with the AI rundown. And I think that that is gonna be, yeah. That, that plus energy are gonna be two very important considerations. Yeah. For, for all this re [00:16:00] onshoring, right? Because it's not, this is not the beginning of the industrial age.

It'll be a very different type of model for manufacturing going forward. Uh, related to that, um, the story in NPR, I just thought it was, I thought, I thought it was interesting because, uh, thi this is a, a very important specific thing for us to track, which is Nvidia as a company. We are, we are quite fortunate in the midst of all of this, you know, um, sort of economic s rattling happening between the United States and China, uh, that Nvidia is a United States based company like that is.

I don't think people understand like how incredibly fortunate we are, uh, to have a company like Nvidia domiciled here. And so, uh, this story is about how Jensen Wang went down to Mar-a-Lago. Um, after, you know, Trump threw a, a big chip crack down, um, on Nvidia and after, you know, having dinner in Mar-a-Lago, that that was, that was.

Sort of unwound now there's a fair amount of like doing and then unwinding that, that, that happens with the Trump administration over the last 80 plus [00:17:00] days. Uh, this one I think is a really important one. And I think this was, uh, heralded very well by Silicon Valley, uh, investors because they sort of understand.

This is not a company you want to hamstring, right? It is like, this is a company. You need to let it run wild across the world, be dominant, be strong, and continue to be the primary chip provider. And know, by the way, let's make sure that Google is number two, you know, here in, in this race. Um, but what was sort of your read on this?

Paul Kappleman: I was interesting. It's sort of the second tier chip. Like it's not a, it's not their best chip. No, no. So how, how, how important is that? I mean, how big of a difference does it, is that meaningful? 

Marcus: I, I mean, I, I I think it's symbolic. I think getting access to any of these chips Okay. Is kinda like an arms race.

And so, you know, the second best chip, uh, is is probably still pretty. Still pretty good. Yeah. Still pretty important. Um, there's a whole lot of stuff that's happening in the AI space where, uh, we're sort of moving out of training because we have, we have sufficient, um. Frontier models in place, and we're sort of moving more into inference.

And I think this H [00:18:00] 20 chip is a really, really strong chip for inference. So, um, so I, I think as AI becomes more robust, all may, you know, you need a diverse array of chips to sort of, uh, handle the array of, of different jobs you're trying to deliver on. Uh, but, but I also found it to be pretty, pretty symbolic.

But, you know, in the midst of these 125% tariffs with China, this was rolled back. 

Paul Kappleman: And that he is impacted by market dynamics because NVIDIA influences market. I mean, anyone massively seven influences the market. So it, 

Marcus: I mean, NVIDIA's driving the Mag seven. Yeah, 

Paul Kappleman: yeah. 

Marcus: Right. 

Paul Kappleman: Yeah. Yeah, 

Marcus: I agree. So, so it, this, this is, uh, I just feel like this dynamic of Jensen and Trump being, being able to have these discussions positive and Jensen being able to influence decisions, is I, I consider it to be very positive and something we want to continue to, to watch.

Paul Kappleman: And the Jamie Diamond piece, which we're gonna talk about too, right? Yeah. I mean, it kind of leads into that. I think they're, we, we, we were talking earlier that these two have, have had an [00:19:00] interesting relationship in the past. Mm-hmm. But he was able to, um, get his ear and I, I, I give the pres the president credit that he, he not only took the meeting and had conversations, but I think listened at least a little bit.

So, 

Marcus: yeah. Yeah. I, you know, I mean, J Jamie Diamond is a, is, is a very, very, very interesting person. Um, you know, he's, uh. He's, he's not so much sort of positioned as a, as a hero, but certainly positioned as, um, you know, a very, very strong wartime leader. Um, he's clearly been battle tested. Um, JP Morgan has come out on top through all of these battles.

I, I would say, you know, I think about the great financial crisis, I think about Covid. Um, I think about even, even the Signature bank, uh, sorry, a Silicon Valley Bank, you know, you know, fallout. And in each one of those, I think JP Morgan has only gotten stronger, uh, in each one of those positions. Um, and when he speaks about America, he's [00:20:00] speaking about it from a strong position of, of, uh, institutional knowledge.

Paul Kappleman: Yeah, it's a good letter. I encourage people to read it. I'm not sure that I took away anything that, you know, gave me sort of vision into what the future is going to be, but it was, I, I, he's got some good points in there and he's pretty, pretty disciplined in his principles. 

Marcus: Yeah. Uh, I, I, I, I thought to me the, the one thing was that he started, you know, with this section talking about, you know, America and the world are at a critical crossroads, comprehensive action and leadership are imperative now.

It's, you know, it, it's just there aren't that many, um, companies in America where their annual letter, uh, actually is addressing the nation. Um, and so I, I, I found that to be a, a, a bit interesting. Um, you know, this is the number one bank, right? I mean, it's kinda like the Fed and then JP Morgan, right? Uh, and, uh, you know, what, what was, what, what did, what did you, what, what did you sense he was trying to [00:21:00] communicate here in this section?

Well, 

Paul Kappleman: you know, I think it's, I think he's just constantly trying to remind his shareholders and all of us that, um, the economy, um, and our safety and the strength in the military, they're all intertwined and linked, and you can't have any of. You can't have strong any one of them without the other. That's, that's what I walked away with.

And, and I think we all know that, but to, to have a CEO of a, of a bank remind us of that, I think is, is interesting. 

Marcus: Uh, so I, uh, I I I felt that he was, um, trying to lay historical context for what we were facing for people who may not be thinking about this. Uh, from a how history rhymes perspective, um, I thought that he was not specifically calling out President Trump, but was certainly saying, these are the ideals and this is the position that America holds in the world.

And, uh, losing [00:22:00] this is a, is, is is tantamount to losing America. Right. So, so it's like when you talk about America first, or we're gonna be doing so much winning, it's like. W what does it even, what does America even mean? You know, he starts this section talking about, um, only America has the economic, military, and Yes.

Moral power. Right? That's, that's his, that's his starting salvo right before he, before he digs in, he goes through talking about, you know, Lincoln, FDR, Eisenhower, et cetera, and then, and then he says, these are five things our nation needs to do well in order to secure the future we should want for our country and our companies.

I fear that if we fail at one of them, we may fail overall. One, celebrate American values and virtues with humility in order to restore civic pride, citizenship, and purpose. I think humility was a specific call out. I don't think that was. Put in there unintentionally. Um, two, acknowledge and fix our problems at home by regaining common sense and being resolute.

[00:23:00] Three, recognize that the best strategy for America's success is to implement effective domestic policies that drive robust economic growth for the benefit of all citizens. That seems like an, an interesting, you know, uh, nod to, to Trump's focus on, on the domestic agenda. Four, initiate, uh, comprehensive economic, foreign policy to win the new globe Economic war.

America will be first, but not if it is alone. Right. That, that seems pretty clear. Yeah. 

Paul Kappleman: Clearly we 

Marcus: talked about it. Um, and then five, affirm that our national security and the world's best military at whatever cost are paramount and necessary for peace. So. To me, you know, I, I always feel like Jamie Diamond is one step away from announcing a run for president.

You know what I mean? Like, like he kinda lays out these things and you could see how this could be sort of the foundation for a presidential, you know, strategic plan. 

Paul Kappleman: Yeah. It'd be, that would be an interesting, uh, candidacy, I think. Um, he, he's, he's, um, certainly got the charisma. 

Marcus: No question about that.

He's, you know what else he's got? We talked about Donald Trump's energy. Yeah. Jamie Diamond's got [00:24:00] energy. He, he, he's, he's, he, he defies a lot. He matches the energy. Yeah, it's true. He matches the energy. Alright. So, you know, if you got the time, uh, the link will be in the show notes that we think it'll be a good read for you.

Alright, so moving to the VC rundown, we got one story. There was, this was a quiet week on the VC side. I scrubbed and I tried to find stuff. I looked on Axios, I looked on Fierce Healthcare. Those are kind of the normal two where you see those announcements. There's really nothing. But there was, uh, the, the communication that Transparent has completed their $621 million merger with Accolade.

Uh, and they, I further investment in AI technology. So, um, this is a, this is a totally private transaction here. Uh, Glen Alman, um, working with General Catalyst and, and his 62 ventures firm. Uh, has taken Accolade private, so, um, that's, you know, it was, it was a small cap company. Uh, and now, now they are, now it's a pri fully private affair.

Paul Kappleman: Yeah. Well, good. It's a, it's a deal. It's a $621 million dollar deal. That's good. I think for me, um, I, I, I [00:25:00] like the fact that they're focused on the employer side of healthcare. Uh, and I, you know, I, I think you've talked a lot about it on the show. You had Stu Clark on premise. Yep. And to me, it's, it's critical.

This, this is where we invest, right? And so it, we've got, the employers have to step up and be the ones who figure this out. Like, we learned that CMMI was not gonna do it. Right. It's not gonna be the government who innovates and figures out ways to drive down costs. It has to be the employers. And I, I'm not familiar with the companies necessarily, but the focus and the idea of employers are gonna own this and drive down costs.

'cause it's just, you know, they quoted 12%, uh, it's double digit increases Right. Every year. And, and I, I, I was actually thinking like, and I wanted to ask you like every year, 10%, 12%, we've been going through this forever, it's unsustainable. But yet employers take a very soft approach to this still today on managing, like actively managing their costs.

And if any other item in the p and LI. [00:26:00] Your supplies were growing that or, or, um, an other expense, you'd just be all over it and figure out like, what are we gonna do to fix this? But yet it's sort of hands off. And overall there are companies doing it hands off when it comes to managing their employees actively.

So I guess like what is your take on why that is? Why, why is it taken And we're still not there yet. Yeah. We're just not actively getting after it. 

Marcus: So I th I I think it's two things. I think one, um, you know, we have not had, we really have not had stable ground, um, since Covid. And I think most CEOs, just 

Paul Kappleman: as far as like employee and talent, retention, all of it, recruitment, all of 

Marcus: it, all of it.

You know, fed funds rate, yeah. Inflation. Everything from over hiring to quiet, quitting Right to now, you know, massive layoffs. It has, it's, it, it is just not been a stable enough environment [00:27:00] for, even though it's a nasty part of the p and LI would consider it relative to keeping your core business operation functioning.

Um, a side quest at the end, at the end of the day, now, not for a healthcare company. If you're a healthcare company, you damn sure have every bit of expertise to dig in there and actually manage this better. You should, you should, you should. Many who don't. But you're right, you're right. You should, you should.

But, but if you're a direct to consumer company or if you're a, you know, whatever amusement park company, I think, I think it gets really hard. And then I think the second thing is just. A continued, um, reliance, uh, and and dominance of influence of brokers. The, the brokers, as far as I can tell, they still run the purse.

Yeah. They still drive the influence. And I do not see brokers saying it's time for a revolution. You know, I, I definitely don't see that. No, I definitely don't see that. 

Paul Kappleman: But if you think about [00:28:00] our ability to compete, you know, back to our discussion on are we, are we gonna be able to. Make these things in America and onshore things were offshore when our, when the number one cost in in a car is healthcare.

Like how are we gonna compete? And so it, it, it, it hamstrings us. And so I, I think we've gotta address it and I think the employers are equipped to do it. And I think there, there are things that can be done that are that, that are not that complicated to be able to do it and actively manage your employees.

Like, deal with people who are high risk and chronic conditions, like steer them like, you know, back. You've got to, and it's maybe not what you want to do, but you have to find low cost and make sure that your employees are going to low cost providers that maybe narrowing networks. I think you've got to incentivize or penalize healthier, unhealthy behaviors, right?

And make people who don't want to do the things that they need to do to stay healthy. Um, pay more. Yep. Like, you can do that, or you can choose to have a plan where you can go [00:29:00] anywhere, but you're gonna pay a ton. And we were moving in that direction. It just feels like we've lost momentum. And I, I think it's actually, not only is it a way to reduce the, the, the, the line item on the p and l, but I think it's, it's good care for your employees if you're actively managing them.

Marcus: No, the, the, look, there's no question about that. We, you know, I, I loved Vic's interview with Stu. Stu is a, um, you know, he's, he's a passionate guy and I think you gotta be pretty passionate to do the employer health thing. Yeah. Because like, it, it takes timelessness to, to kind of continue to push and premise is doing very well.

So that, that's the good news. Yeah. Is that premise is doing well. Um, but you know, we've had a lot of smart people. In this town, this smart healthcare people, um, try to tackle the employer thing and premise, I would consider to be a bit of an outlier Yeah. In terms of its success. Right, right. You know, and, and, and so, you know, related to transparent and, and, and accolade.

Do I, do I think that some of these companies can do well? Yes. Do I think it's sufficient to do, to be a movement that that [00:30:00] really changes the way that employers are looking at healthcare in America? I think it's more likely employers just say, screw it, I'm going icra. And I've, I think that's more likely than them actually rolling up their sleeves and saying, let's, let's fix this thing because it's fundamentally broken for our employees, broken for our p and l.

And if we don't get a, if we don't take control of it, it'll be a runaway cost that we'll never be able to get a handle on. 

Paul Kappleman: And in some ways that gets to, hey, you know. You're responsible for the payment. If you wanna have bad behavior, if you don't wanna do the things, you don't wanna go to your primary care, then that's up to you.

We're gonna give you a fixed amount. And yeah. So that's right. That's, that's a piece of it. Um, the challenge with that is you end up, you know, having people that have plans that are basically just, you know, catastrophic plans and they're, they're not getting healthy. But, but yeah. I, we, we can debate that in another time, but I, I, it's gonna be interesting to watch.

I just feel like at some point there's gotta, there's gotta be a tipping point where it becomes a major focus. I, 

Marcus: I, I think one other thing I would, I would just point out is that, um, the attitudes around [00:31:00] this I is, is, it is kind of cyclical and it's tied to the who's, who's holding power, is it employer or the labor force.

Right. You know, and that kind of goes back and forth. Um, but it feels like between the model that's being set in Washington, DC today, right. Which I would say is definitely an employer. Like standing fully in their power and just saying, you know, employees, you have effectively no power, but you'd be happy.

You even have a job. Right? I mean, that's, that's certainly the message when 25% of HHS is out of a job, right. Uh, within the first a hundred days. Uh, and then you overlay that with sort of the aggressive move back into the office that we're seeing happen across, you know, um, across industries. And then the final thing I would say is, uh, industries really taking, seriously replacing human labor with digital labor.

Right. And we, we haven't even gotten into a world of robotic yet, have to go 

Paul Kappleman: to primary [00:32:00] care. 

Marcus: That's right. 

Paul Kappleman: That's right. You don't have chronic conditions. 

Marcus: That's right. They just go to the repair shop. Right. You know what I mean? So, so all of those trends to me, say the way this ultimately gets solved. Is the social contract, this century old social contract.

It really started with World War ii, right? Where employers are on the hook. It feels like that that could just deteriorate. You know what I mean? And that could be the way that, that this gets dealt with, which is not the same as what we're talking about or we're advocating for. Right? Yeah. 

Paul Kappleman: Well, anyway, we, it's a, it's a tangent, but I, I, it was just interesting to see the one, the, the one kind of deal that got done was in that space, which makes me happy.

'cause I, I, it's, it's been a passion of mine and it just, the thought of, yeah. And I, and for the healthcare folks out there. I think we have to do a better job. You know, we should be leading the way, no question. Health systems should be leading the way on actively managing their own populations 

Marcus: and, and what a dent that would make.

'cause you're number one employer in the, in the country. Right? What a dent it would make if [00:33:00] our industry actually did a great job, did a great, did a great job with that. And we don't. 

Paul Kappleman: And we don't. Uh, and we should. And by the way, it also gives you sort of a, a laboratory for being able to go out. Hey, we do it well for our own employees.

I always thought that anybody who went out and said, Hey company, we want to, we wanna manage all your employees' lives. Well tell me about how you're doing with your own employees. That's right. If it was a blank stare, that's a problem. Yeah. 

Marcus: Yeah. Uh, alright. Medicare Advantage is getting a rate boost and, you know.

Oz was a little coy with this one. Wasn't, wasn't clear when he came in, what he, what, what he really felt. And he was talking a lot about, uh, you know, there, there's, there's fraud and there's abuse in this space, and we gotta get tighter. But, but it does seem that he is generally, um, an advocate for doctors getting paid.

You know, if there is a theme that I, that I feel like I'm starting to tease out from him is, doctors should be paid, you know, a, a proper wage. And so, um, this is definitely a, uh, a, a 180 from the direction the Biden [00:34:00] administration was taking Medicare Advantage over the course of the last two years. Uh, scary, scary outlook for all.

Heavy med, med Advantage, um, Medicare Advantage stocks, but all, all the stocks got a, got a boost on this news. 

Paul Kappleman: They're lobbying must be incredible. That's all I have to just say, because I was like, I mean, I was surprised. I'm like, this is shocking, but I'm not shocked. Right, right, right. Like, because I know how strong, I mean, so it does signal that they're in favor of, of, of privatizing Medicare.

Yes. And, and not wanting to stint the progress that has been made on moving people towards that population. So that is one, but the other one is to give it everything we have going on with cuts and the amount of job cuts to then turn around and say, well, listen, we're, we're gonna give you a 5% increase.

Uh, it's, that's pretty amazing lobbying to me. Um, and then the flip side, in the same week you had the news of a focus, we, we will get to the story of, uh, of just the amount of toying and playing with risk adjustment scores to boost it. Yeah. So in the same week we have like polar [00:35:00] opposite stories. Um, so I don't, it's just, it's interesting.

Marcus: Yeah. Yeah. I mean, trying to. Put together a theme on these shows since, um, since Trump has coming to office. It's, it's tough. Been very difficult. 

Paul Kappleman: It's tough. And if I, I still, and I've said this for a couple years, I just, I being in that Medicare advantage space, it's just, it's hard to imagine that that target isn't gonna be on you for a while, but, but this signals otherwise.

Marcus: That's right. That's right. That's right. Um, alright. So this one was the one that Vic dumped in there. And I, I, I read it and I was like, you know, I wanna keep this, I want to keep this because, uh. W we we're, we're gonna have some, some real interesting, uh, ethics dilemmas, right? Uh, that, that are gonna come down the pipe over the course of the next four or five years.

And to me, this, this was a sign of one of them. So this is story from the Wall Street Journal's opinion section. Um, the headline is, we won't sign an Implicit Bias [00:36:00] Pledge. This puts our certification as physicians at risk. So it's written about, um, uh, a, a, a code of professionalism that the American Board of, uh, emergency medicine published, uh, in 2021.

And so, 2021, a different time in America, obviously, right? And the code requires to promise to mitigate both implicit or explicit biases based on race, gender, age, you know, on and on and on down the list. Uh, and so they, they cite that they're comfortable signing a pledge to fight bias. So they acknowledge that.

Um, but then they say implicit bias, unlike explicit bias, can't be measured. And so they're not gonna sign this pledge, and therefore they may not, you know, they, they won't be re-certified, right? Because they won't sign this pledge. And I, I mean, I have to say that, um, there's one thing to acknowledge that implicit bias exists.[00:37:00] 

And, uh, I actually think that, that the author of this, um, article is not saying that it doesn't exist. I think what they are saying is how, how do, how do I, how do I know when it's present? Because it's implicit. That's, that's kind of the point. Um, and so if, if I don't necessarily know that it's. Present. Uh, then how can I promise to mitigate it, you know, consistently, right?

I can't measure it. We're not measuring it today, right? It's not being measured today. So I'm gonna sign this pledge, but then like, what, what, what am I actually signing here? Right? What, what am I signing onto? You're 

Paul Kappleman: signing up for something that I cannot, am I 

Marcus: signing off for 

Paul Kappleman: something? It's like a double whammy.

Marcus: That's, that's exactly right. So obviously we're talking about a code of professionalism that went down in 2021. Yeah. Very, very, very different time, uh, in America. But these things are coming back up, right? They're, they're coming back up. They're going to be questioned. Uh, and I [00:38:00] think this kind of thing actually really, you know, this, this op-ed in the Wall Street Journal, this is an easy win for the authors.

Um, and I think it point, it puts a spotlight on the American Board of Emergency Medicine that I'm sure gets some amount of grant money and other things. And quite frankly, like this opinion piece is. Is going to be a threat to any federal support that they may get because this is exactly the kind of thing, um, that the Trump administration doesn't wanna see anywhere.

Yeah. 

Paul Kappleman: I don't know much about the pledge. The first time I heard about sort of the issue reading this, um, working in hospitals for, uh, almost 30 years. There is bias, of course. Patients get, treat different levels of treatment. And I think, you know, the, the doctors show up and wanna do a good job. Uh, and there's some real bias that occurs that's implicit and there's some that's unknown and there's, there are things that, so I wish they were talking about like, how do we do a better job taking care of patients and this isn't the, the spark because [00:39:00] we know there are issues.

We know there are d there are different levels of treatment depending on what your zip code is. Yep. And yep. In the emergency room, it's, it's, it's a challenge and a problem. And, uh. Um, I wish they were talking about that versus a pledge. Um, but I understand the issue, I guess. Yeah. Yeah. I, 

Marcus: I, you know, you know, Vivic put it in there and, and, uh, I, I, I know why he did it.

Um, for, for me, I, I thought what was interesting about this was this, this wasn't like a DEI thumping piece at the end of the day. Um, but it will have the same effect, right? It's getting there. It, it, it will have the same effect be because it's highlighting, Hey, this organization has this pledge with these words in there, and you know, those words or you know, those words or those DEI words.

Right? You know, and I, I would expect at some point in the coming months. Either this pledge gets rewritten. Yeah. Uh, because of this opinion piece or that there is, you know, some, some, uh, negative impact to, to this organization. 

Paul Kappleman: Hmm. 

Marcus: That's, that, that's, that's that, that's what I'm [00:40:00] expecting coming out company.

Paul Kappleman: Yeah. The pledge. Or not the pledge. That's not changing. It's not changing really what the issues are. That's right. Uh, which is unfortunate, but I, I understand. I understand it. Um, hopefully they get to the meat of the issue and, and don't get caught, caught up on wording. I don't know, you know, whether they're gonna sign it or not.

That's not the hill to die on. Hey, listen. I mean, and, and I hope it's not the, the part of me thought like, none of these guys wanna go through board recertification like this. This is a good excuse to have hospitals drop their requirement for recertifying because it is, you know, that's it. It's, it's an nag for those guys and they'd love to not do it.

And hospitals require it, right? You have to be board certified or board eligible. And if they're saying, oh, whoops, we weren't, we can't do it because of this. I don't, yeah. 

Marcus: Yeah. See that? That's, that's, that's the realist right there. Well, no, the realist, the experienced hospital operator there saying, I, I know these folks.

Yeah. Um, so. I wanted to include this for two reasons. One, I'll, I'll start with that and then we'll dig into the actual meat of this. But, [00:41:00] uh, uh, Manatt has, has started this newsletter called The 80 million, um, where they're talking about Medicaid. Yeah. And I think it's fantastic. Yeah. Uh, every week just really good analysis, but it's not like a website.

It's a, it's a newsletter. So we're gonna include a link to this specific piece, but I, I encourage our listeners to subscribe to this because every week I'm reading it and I, I feel like I'm getting, uh, deep insight into what's actually sort of happening, um, on the House and Senate floor and, and also, you know, what's happening in the halls of the regulatory bodies when it comes to Medicaid.

So anyway, I just wanted to give them a shout out for what I think is, is really good work so far. Um, and then, yeah, let, let's, let's talk about, um, you know, speaker Johnson and, uh. Him, him pushing through, you know, the resolution, unamended. And so we, we don't have any Medicaid spending cuts yet to discuss.

Yeah. 

Paul Kappleman: As I talk to my, you know, friends in the industry, you know, nobody's kind of, everybody's nervous, incredibly nervous, particularly about supplemental [00:42:00] programs that have to get sort of re-approved. Um, and, and they're nervous that one, they're gonna take forever to get approved because we're sort of in a state of limbo.

Yep. And that's great if it gets approved and it's retroactive, but nobody, but in the meantime, particularly the public exchange and it's cash, I mean, it's cash. There's cash on hand in 

Marcus: the, in the meantime 

Paul Kappleman: it is cash. They're holding your cash. That's right. And it creates uncertainty in the markets. Nobody likes explaining it to their stakeholders that, you know, we didn't get it this quarter, but we're gonna get it, you know, three quarters now.

And there's a lot of uncertainty on what's gonna happen with them. Uh, so, um, it's, it's. A positive sign. I, I still don't feel good about, you know, these supplemental plans, payment plans, whether it's Dish or the DPPs. I, I feel like they gotta get, 

Marcus: so, so Paul can, like, as a very experienced hospital operator, can you, can you help us understand, other than the money was there, so of course we're gonna take it.

Can, can you give a little bit of [00:43:00] background on to like, how we landed in this place with this supplement supplemental payment model? That, that I think when you communicate it to, uh, someone who's not invested in, in, in, uh, receiving those payments, they kind of look at it and go. That looks a little wonky.

Right. You know what I mean? The way the money's flowing and, and, and Right. We're gonna, 

Paul Kappleman: we're gonna get it here. We're gonna send cash up to the government, they're gonna match it plus, plus send it back to us. It's gonna be based on some formula that nobody understands. Yeah. I I get it. And I, it, it is tricky.

So the, the, the intent originally, you know, when you think about, let's just take disproportionate share what we call Dish. The intent was to say, okay, we're gonna pay everybody sort of a fee for service Medicaid and we know it's not enough. Then we're gonna look at the hospitals who have a disproportionate share of uninsured, underinsured, and we're gonna try to make up the 

Marcus: gap.

Right. 

Paul Kappleman: Okay. Um, that was sort of the intent. Um, there, there are lots of other programs and other ways where [00:44:00] similar type programs got put in place to do the exact same thing. Is Dish got. Whacked at one point and hospitals went and said, Hey, we basically are, are taking care of these Medicaid patients and we're losing money on every patient.

We can't continue this. We're gonna have to cut services. Said, okay, there's other ways, other programs we can do. And so they came up with the waiver programs and other programs, same thing. We, we find dollars here that we match, we send up, they match it and send it back to us. And the goal is to take care of more Medicaid patients, so like make it a little easier and to try to get, to break even on Medicaid.

Okay. Then you had all these states who didn't expand and basically this was their way, they weren't expanding Medicaid, so it was like, all right, we're not expanding. We're gonna continue to take advantage of these programs and send our money up and get it matched. Yeah. And that's the way we're gonna sort of deal with, uh, Medicaid versus expanding Medicaid.

Yep. Tennessee, Texas being all this, so. Yep. Um. At the end of the day, I wish it was simpler because it is so complex, like how it gets [00:45:00] matched, the, the, the, the, the formulas for who gets it and how it gets distributed when it comes back. It's so complex. It takes external consultants. So you pay millions of dollars to help you through these programs, which is waste in my opinion.

Yeah. So, which makes it 

Marcus: easily, which makes it easily saleable politically in a moment like this, right? It does, right. 

Paul Kappleman: Yeah. 

Marcus: I mean that's, that, that, that's the scary thing. 

Paul Kappleman: Yeah. I, the first time I looked at it, um, we had a program in Florida and you're just like, what? Like, are you kidding me? But, but, um, I think the health systems are taking advantage of, um, legal actions and legal programs and trying to maximize their reimbursement.

And quite frankly, without it, I mean, it's just impossible to, to, to take care of these Medicaid patients and do it at that kind of a loss. 

Marcus: Well, so, so that, that was, that was kind of my. It, it gets right back to the whole m and a thing, which we're gonna talk about here in a little bit, right? Which is, okay, I get that.

You may not like it. You may think X, y, z, blah, blah, blah, blah, blah. Play it all the way out. Right? Play it all the way out. [00:46:00] What's gonna happen for-profits are just gonna turn people away, right? They're just gonna not take care of those patients. 'cause they don't have to. Right? They don't really, you gotta see '

Paul Kappleman: em through the er.

But that's, but that's it. That's the extent, but that's 

Marcus: it. That's it. Right? So, so, so crash and burn through the er and then, you know, we, we sort of manage our losses there. And then all the nonprofits where this is their payer mix, like the payer mix is this population, I mean, how much scale do they need to make it work?

I mean, we, we saw coming outta Covid, common Spirit, we saw Ascension. You know, they just finally crawled outta these multi-billion dollar holes in the ground. They've, they've done it, they've done it, they've gotten out. But if you take away these supplemental payments, they won't stay out. Yeah. Right. 

Paul Kappleman: Yeah.

Correct. And I don't, I, I, I don't, I don't see a world where they're. Taking them away, but they can be shifted and reduced. Uh, which I, I is unfortunate, but probably likely. Um, and then, you know, you talk about, you know, not extending, [00:47:00] um, subsidies on exchanges, that has an impact as well. That's a negative impact.

We'll see about that. It, it'd probably be one or the two. I don't think it'll be both. Yeah. Or, but one of the two is likely to happen. 

Marcus: Yeah. 

Paul Kappleman: Right. 

Marcus: Yeah. 

Paul Kappleman: Maybe a little bit of both. Um, which, when, 

Marcus: when, when do you think, you know, with this whole kick in the can situation, when, when do you think that lands? 

Paul Kappleman: Uh, I think it's gotta be within the, I mean, we're Q2, we're supposed to have a, a budget by Memorial Day.

Right, right, right. So I think we'll have some certainty by then. Um, the deadline for the subsidies on the exchanges is, I think the, uh, I'm not sure about that. The spring or the fall it's coming up and Congress has to act to, to actually renew the subsidies. 

Marcus: Yeah. 

Paul Kappleman: So. And otherwise you have tons of people who were able to get on the exchange, um, and have subsidies who won't be able to afford that today.

And so basically they will be uninsured. Okay. And then for hospitals, what does that [00:48:00] mean? Well, that means you're, you're chasing them down when they show up in the emergency department and you're not getting any money for 'em. They're basically uncompensated care. 

Marcus: Yeah. 

Paul Kappleman: So it, it's gonna be interesting to watch.

Is this positive? Yes. I, I, I don't think many in the industry are, are overly optimistic that they're gonna come through totally unscathed. 

Marcus: Mm-hmm. Agree. Agree. Alright. Uh, so one, uh, acquisition here on the payer side. Uh, small, small, but uh, car source acquires Commonwealth Care Alliance for $400 million.

Had you heard of, of, I have never had 

Paul Kappleman: any interest. I've heard of the names, but I've never had any interactions. No contracts with these two. It sounds like they're sort of California northeast. Yeah. Um, but I, you know, I take it as listen, you sort of had a, a failing, um. Concern here. And, and they, they were able to merge with some, somebody who's got a chance.

So it's positive. 

Marcus: Yep. 

Paul Kappleman: Do you know much about 'em? 

Marcus: No. No. I mean, it was, it, it was a, it was a deal. So I wanted to track it. And especially with you being here, maybe you had some, some context for it. I don't have 

Paul Kappleman: any inside [00:49:00] baseball, you know, other than it's, it's, it's, it's good to see a deal get done that otherwise this company would've probably gone outta business.

Right. That's right. So, 

Marcus: that's right. Alright, so back to the Medicare Advantage stuff. Um, plans reaped 33 billion extra from coding intensity. So this is kind of digging into, uh, you know, what, what is actually underneath, uh, some of the investigations that people are calling for. So, you know, specifically with, um, uh, the, the biggest, uh, Medicare Advantage plans.

Yeah. See, I 

Paul Kappleman: mean, this doesn't bother me 'cause I, you sort of understand it, right? I mean, they're playing within the rules. Yep. Um, if you align incentives and say we are gonna incentivize you right up front. If you have sicker patients and you're able to document that you have sicker patients, higher risk patients, we're gonna pay you more for those patients.

Um, insurance companies tell the primary cares, Hey, if you can have, if you have sicker patient panels, we're gonna pay you more for that. Yep. Doesn't sound wrong. And it shouldn't be surprising that they're gonna find that they have sicker patients than fee for service. That's right's. Right. Who has really [00:50:00] no incentives.

And you could do everything perfectly. And of course if you're, if you're incentivized to document incredibly well so that you can get paid for your intensity versus somebody else's, like, yeah, we have intense patients, but it doesn't really matter. We're gonna get paid the same. That's right. Now, are there bad actors?

Of course, they're of course, right. But overall, it's not surprising that you have a population that you find, uh, have higher intensity and they're doing a better job. There are companies who make their living off of helping insurance companies and providers document the intensity of their patients. Why?

Because if we can document them correctly, which is a good thing, that's a good thing. That's a good thing. Um, we're gonna get paid more. Um. Whether that's the right end game with this program. Um, but it does seem interesting that you have this and this intensity and scrutiny on the other end. They're getting a, a 5% increase.

So 

Marcus: yeah. There, what's your take? Well, my, my take is that there was a window of time where, um, every time Vic and I would sit down, he'd have another PBM story. Yeah. And it was clear somebody was paying for the PBM stuffs, [00:51:00] uh, and then there was the private equity window. Every week there's a private equity story, and I was like, someone's paying for the private equity stuff.

Someone's paying for these Medicare Advantage stories every week. Yeah. One of these stories sort of pops up and, uh, it's, it's fun to track news cycles because you start to realize like that's what's happening. There's, there's, someone is using, um, the media for an agenda that they have that they want to get out there, and they can just get a drumbeat of stories and it usually goes for about three months.

Um, that's, that's kind of what I, that's my take on it. 

Paul Kappleman: If we found. Systemic abuse and overcoding or improper risk adjustment scores or gameplay, I think that I, that needs to be cracked down on. Yeah. I'm, I'm, I, I'm not aware of that. Um, and I, you know, but it's not surprising. You incentivize a behavior and that behavior happens and then you say, well, why'd you do that?

Well, of course you want me to do it 

Marcus: of, that's right. That's right. And, and that seems to be a pretty common theme in health, in healthcare, right? Yeah. 

Paul Kappleman: Well, now. Uh, there are bad actors out there, whether they're primary care groups or pockets of insurance [00:52:00] companies. I don't know anybody who's doing anything bad systemically, but I'm sure it's out there.

Marcus: Yep. Uh, alright, so you, you, uh, found this story, uh, modern Healthcare CVS Express Scripts, Optum warmup to biosimilars. So what, what about this, um, stuck out to you and then Well, I think we'll kind of dig in. Well, 

Paul Kappleman: I think from a, a overly positive standpoint. If you think about what's happened with autoimmune diseases over the past 10 years mm-hmm.

It's pretty impressive with just the amount of drugs and biosimilars and the amount of options these patients have. That's like, so that's great. So, you know, if you thought of somebody with Crohn's or colitis or some other autoimmune disease, there's like one drug. 

Marcus: That's right. 

Paul Kappleman: And not surprising that drug was ridiculously expensive.

Yeah. 'cause it was the only drug on the market. Oh yeah. Remicade, right? Yeah. Yeah. I, I mean, I mean, 

Marcus: I mean, how much money has Humira made? 

Paul Kappleman: Humira is the other one. Right. So it's incredibly positive that we've had in advances. And now, now the trick is gonna be like, how do they, there's all so many of them, like how do they work?

How do they work together? Which, what's the sequencing? That's the wild west. Right. But it is very positive that we have [00:53:00] competition, we have choices. Because a lot of times these drugs work for patients and then they stop working. 

Marcus: Yeah. 

Paul Kappleman: And what happens when they stop working? Well, now you have other drugs you can go to.

So all amazing. What was. Yeah. Kind of just shocking is like, it would seem every, if you ask anybody, like, would this be a good thing for the people who buy these drugs? Right. And your pay, and they're the PBMs are sort of doing the opposite. Yeah. Yeah. Which 

Marcus: is, 

Paul Kappleman: Hey, we have these deal rebate deals with the legacy sorta, um, drugs at the Remicades of the world and, and we're, we're not gonna move to these lower cost drugs.

So, which just, that was kind of weird. And I think it's just something to watch kind of, not a, not a good look for the PBMs. No, um, another, not a good look for the PBMs. It's just, it, we gotta fix the incentives there and we've gotta get us focused on, listen, we have the opportunity to buy cheaper drugs. We need to do it for all the right reasons.

Marcus: What's what? So, so play it out for a second. What's the counter step that the. That the, um, the big pharma brands take once, once this move happens. Right. Okay. [00:54:00] So biosimilars get equal presentation equal footing, which obviously is gonna take huge percentage of the share from, from the big brands. Yeah. 

Paul Kappleman: I think the counter is, Hey, we have longstanding relationships with you.

Okay. You buy other drugs from us. This is part of our bigger deal with rebates and such on compliance. And so the PBMs are incentivized to continue to work with the large manufacturer. Yeah. 

Marcus: Yeah. 

Paul Kappleman: Because they're getting dollars back in other ways versus just sort of on that particular drug. 

Marcus: That's, that's it.

That that's, it's not. 

Paul Kappleman: The other thing I thought about just in this is it'll be interesting, you know, that I, I, I've thought sort of the infusion businesses, the IBXs of the world, we know the folks there. Yeah. Um, the great Right. It's great for patients. Yes. They're there. Um, there's also, everything's moving to self-administered and what's, what's, what's gonna happen.

Yes. That's gonna be an interesting shift as a lot of these infusions that were done in hospitals and outpatients. They're gonna be done at home, right? Yeah. Like, it's just a matter of time. Like 

Marcus: is is, is is the infusion business a, [00:55:00] a, a transitional business? 

Paul Kappleman: It seems that there's gonna be a pretty massive shift over the next five to seven years.

Yeah. 

Marcus: Agree. 

Paul Kappleman: Agree. 

Marcus: Alright. So K and Hall came out with their Q1, 2025, uh, m and a quarterly activity report for health systems. Uh, activity was down in a, in a pretty significant clip. Um, and so, you know, some of that could just be, Hey, we're gonna wait and see. We have a big, you know, new administration in place and, and we don't want to do deals while we're trying to figure out what that looks like.

Um, but, you know, the, the, the Q1 announced transactions year by year. You know, look, going back to 2018, there were 30, uh, even last year there were 20 in in in Q1 and this year five. So, I mean, really sort of fall off a cliff from historical norms. 

Paul Kappleman: Yeah, I. You would've thought that, you know, sort of coming outta Covid, you would've seen a ton of deals.

We had sort of a unfriend, you know, the, the, the Lean Con and the ftc Yeah. Just really making it unfriendly. Either block deals or people just hesitant to do deals because they were, they weren't gonna put up the fight. [00:56:00] Yeah. It's like, let's not even try. That's right. That's right. The, the market share argument is just not gonna go anywhere.

Yep. 

Marcus: We saw HDA do that when, when the Utah deal, they said, you know what? Okay. Nope. We're, we're out. We're 

Paul Kappleman: it happened with CHS and Yvan. Mm-hmm. There, I mean, it was just kind of silly stuff. You're like, you know, this is good. Uh, and if these, these deals don't get done hospitals and closed, they still didn't happen.

So you would expect that that would've popped with new administration. I think you just, you're dealing with all the uncertainty stuff. Yeah. Until we have some certainty it's gonna be, it's gonna, it's hard do deals. It's hard, but I think get some certainty on the economy, on tariffs, um, assurances. The deals can get done with the new administration and I think you have to see.

Deals happen. Um, I, I, I'm a believer that in, in order for hospitals and health systems to survive, they have to continue to gain scale, uh, regional scale and, and to somewhat national scale. Um, they have to be relevant with payers. They have to be able to share systems, share doctors. Uh, I, I just don't see onesies and [00:57:00] twosies being able to make it.

Yep. I've never thought they were, they were gonna be in a position of power and I just think it's getting harder and harder every year that goes by. So you, I hope that we see deals getting done in the latter half of the year going into next year. I'd be surprised. 'cause they need to get done. Yeah. They really don't.

I agree. I 

Marcus: look, look, every time Vic and I have this conversation, I'm always like. The alternative is gonna be these things go outta business, and then the state's gotta come in and like, you know, take care of their people. So then they start running a health system, you know what I mean? Like, like that, that's, you gotta play this stuff all the way out, right?

You cannot have communities around the country not having access to care. You, you, you, this, you can't do it. And, uh, you know, going back to the whole supplemental payments thing, that is inevitably going to happen in some form that is going to drive a need for more scale, you know, a stronger balance sheet, more scale, more centralized operational capacity and, and, and hub and spoke model.

Paul Kappleman: Yeah. And I, I've done a, a bunch of these and I've seen a bunch. And, um, you, you don't always, you [00:58:00] may have some price increases, um, and sure you may have some more leverage with the payers and get some better rates, but the alternative is you don't have a health system, you don't have a hospital, right? And so it's like, and, and by the way, for those communities.

Um, they're not, they're not feeling that, right? No. I mean, most, most, right. So, so for them it's like, are you really gonna deny us and, and risk our hospital closing for a potential price increase when like, we're not paying for it anyway? Right. Right. So I I I, I don't like the, the, the one that really the, the c the whole, the ch HS Novant one when I'm like, these, these hospitals are struggling.

Like if CHS like they can't make it work, like they're gonna close if a deal, something doesn't happen. Yeah. Are you telling me you're not, like, what's the worst case scenario? Price prices probably would go down because actually the charge master might go down, but rates aren't going up and there's not that much commercial business in these small communities, these rural communities.

So it's like, and, and governmental is fixed. So it's crazy to, to risk a, a hospital closing [00:59:00] for a, a potential anti-competitive situation that might happen. 

Marcus: I. We could not agree more on this solidly on the same side. So bottom line is, 

Paul Kappleman: let's, let's hope this chart looks better in a couple. 'cause I think it needs to happen.

Marcus: Yeah, yeah. But, but you know, there, there are some really interesting shared principles between the last FCC chair and this FTC chair that, that we're gonna have to see play out as this FCC chair starts making more statements. 

Paul Kappleman: Yeah. 

Marcus: Um, I'm hoping, uh, a hard stance against health system transactions is not one of them.

Yeah. It, it, it's not thoughtful. 

Paul Kappleman: Yeah. It's 

Marcus: not thoughtful. 

Paul Kappleman: That'll be, that'll be interesting to see. And, and. See a couple that actually come forward that may not have gotten approved under the last administration. See what, see what happens with this one. 

Marcus: Uh, AI rundown time. So Wall Street Journal opinion section, uh, mark Benioff, uh, is, is he has been steadily communicating, um, in every form that he can, that, um, AI is going to impact the labor force.

He's, he's, he's not hiding from [01:00:00] that. He's made it very clear that Salesforce is kind of on a hiring freeze when it comes to software developers, right? Because I, I think we all now can recognize the power of these LLMs when it comes to writing code, at least the level of a junior or even sort of emerging mid-level developer.

Um, maybe not sort of a power of 10 developer, but the, you know. A lot of the workforce can be replaced today by the code capabilities of, of Claude Sonnet right now. So, um, so this is him sort of saying, say hello to your new colleague, the AI agent. Today's CEOs are the final generation of executives who will lead exclusively human work workforces.

And I think that that is, um, that's a concept that so many people have not internalized. And at the same time, there are companies like Nvidia, like Salesforce, that actively have a digital workforce in place today. Like there, there are agents that are actually tasked and monitored and doing things and working in collaboration with humans, right?

So the future is here, it's just not evenly distributed. [01:01:00] This is probably, you know, exhibit A of that in the AI world 

Paul Kappleman: and you know, the tech companies, it makes sense. But what, what's kind of hit you here is that it's, it's not just the tech companies, no, it's the CEOs of the future of any kind of company.

Healthcare, especially healthcare especially, are gonna have to have a paradigm shift because they're, they're no longer gonna be, have exclusively human workforces too. So, 

Marcus: no, we, we, uh, at the summit last week, um, we're still waiting for all the production files, but, uh, you know, it was great and, uh, to run Kippur, um, who is the Chief Digital Transformation officer of Virtu Health.

He was, uh, in, in dialogue with our buddy Nick Holland, who runs AI at HubSpot and TAR has done a lot of real world, like, you know, shipping AI out into the world. And, you know, tar Run's position is, he is, he's a doctor and his position is listen, um, where there's no question we're gonna have a shortage of docs.

We are too. No question. Right? No question about that. [01:02:00] On top of that, medical knowledge is doubling every six months. So the recertification process. At a minimum, a doctor's gonna have to be assisted by AI at a, at a minimum. Otherwise you're going, if, if you make it entirely human, then, then the docs will fall behind the advances of, of medical knowledge just because they can't, they, they can't track the progress.

Right. Um, and so that will necessitate not just AI scribes that are supporting, you know, documentation processes, but actual clinical support, actual decision support, actual participation of an AI workforce in the delivery, not the documentation of in the delivery 

Paul Kappleman: of healthcare. Yeah. So planning physicians who are not there, and I think, um.

I think the clinical workforce knows that. My sense is they know that, and I don't think they're that threatened by it because they know that they're not gonna be out of [01:03:00] a job. I mean, no, they're burned out already. They, they already know they're, and hopefully it'll make their job easier. So my sense is they're, they're aware that's coming.

And yes, it's gonna be scary getting there. Um, but I think just this next generation of doctors is gonna help with that, uh, as well. So, uh, it, it'll be exciting to see happen. I mean, I, and I think it, it will happen. Uh, it'll be effective. And we're gonna bump our, we're gonna stub our foot, uh, for sure. Stub our toe for sure.

But it's, it's exciting. Um, and it's got, it's, it's gotta happen. We're there now. I mean, there are, there are pockets where, I mean, we're, health systems are dealing with it right now, whether it's pathology, radiology, um, they're dealing with real life shortages that are impacting clinical care and. Their pocketbook.

That's 

Marcus: right. That's right. Yeah. So, and, and, and look, uh, to me, the reason why I love starting our, our shows with the economy and then ending them with AI is just because, you know, when we, when we talk about the economy, it, to me it's a lot of talking [01:04:00] about, um, the disintermediation of the world that we knew.

Yeah, right. You know, the, the what, what feels like seemingly endless chaos to the world that we knew. And when we look at ai, it's the world that we're entering. We're like, we're not quite there yet, but it's the world we're entering. And it is the X factor in this transition. You know, when we talk about trade wars and, and the, the reshifting of, of, you know, power in the world, none of that will happen independent of ai.

Like AI will be a driving force in whatever the result of this transition that we're in. Lands, you know, where wherever we, we actually arrive at. 

Paul Kappleman: Yeah. 

Marcus: Uh, this was a big week for Google, so it was Google Next, uh, this is their annual big developer event. Uh, for, I would say the last probably five years. It had been a lot about Google Cloud.

It is now all about Google AI at this point. So we, we've put several links in the, in the show notes here from TechRadar. They did a really good job documenting it. Uh, the first link that we've added is kind of like a full rundown of, of, uh, of the entire event. So we won't talk about that one, but I did [01:05:00] pull out a couple of stories here.

One, uh, Sundar Pcha, who's the Google, CEO. Um, basically double down on the r and d spending. So, um, $75 billion cloud in AI spending spree. You know, every time Vic and I talk about AI stuff, all the numbers are the billions. Like you, you can't, you can't even have a discussion about it without saying you're spending in the billions and it's regularly 20 billion or more.

So 75 billion that, I just have to say that is a notable number. When we look at the funding grounds of open AI and Claude Anthropic recently, 75 billion is a, that's a serious number. 

Paul Kappleman: So you follow the money there. As an investor, where do you, where do you start thinking about, I mean, 

Marcus: well, it, I, I, I think, I think what it says to me is all of the big tech companies have, have come to the complete conclusion.

Like, so I kind of think about like, like poly market, right? You know what I mean? Poly market is people, um. It's polls, but with money online. 

Paul Kappleman: Yeah. 

Marcus: You know what I mean? I [01:06:00] view this kind of like a form of poly market. Do these big tech people think AI is absolutely the future and it is going to eat industries as it totally removes cost of labor.

They're all a hundred percent bought in on it, a hundred percent bought in. So they, they don't care about getting knocked on a quarter over quarter basis for these investments in r and d by Wall Street. They like, I, they, they are just, they don't care. They're all going to do it because they've all seen what I think a lot of us haven't yet seen.

They have seen that this is going to radically change. P and Ls radically change p and Ls and uh, and quite frankly, they will consolidate even more power than they have today. Right. That like, which, like CL clouds will become factories. Clouds will become universities cloud, you know, you know what I mean?

It's hard to 

Paul Kappleman: wrap my brain around that, but I, I, I get it. Does that make sense though? It does. Just [01:07:00] analogy wise, it does. And I, and I don't, I don't disagree with it. I don't know how, I don't know how quickly it happens. And I guess that's the bait is, is when that's I question. I don't, I can wrap my brain around that.

It's going to happen. 

Marcus: Yeah. It's, it's, it's, it's a phenomenal shift 

Paul Kappleman: that we're, I'm an old school guy, but, uh, I do, I don't disagree. 

Marcus: Yeah. It's a, it's a phenomenal shift that we're in. I wanted to highlight that. There, there's a couple of other big stories, you know, like Google released a new TPU chip and you know, some other things like that.

Obviously Gemini's got some things. Um, but I wanted to talk about how they unveiled their new security, uh, AI agents, mostly because, um, you know, a security is a massive, massive issue in the era of ai, but also, um, it highlights their, their recent acquisition. Right. You know, so they just spent a lot of money.

On the Israeli, uh, uh, security company, Wix, uh, what did they end up at? Like 36 billion or something like that? It, it was, I mean, you know, it was a ridiculous amount of huge, huge, huge AC acquisition. Um, and it was a security acquisition. And Google has never really been known [01:08:00] as a security company.

Obviously a very secure, secure company. Company. But they've never branded selling. That's exactly right. They've never proactively sold. It's, and they need their own, you know, in the, in the world of, uh, enterprise cloud, you know, you got Amazon and Microsoft, Google's a distant third, quite frankly, from, you know, against those two.

I think security is a really interesting place for them to focus on differentiation, especially in the era where AI and cybersecurity and quantum chips are all sort of, you know, making everybody very, very nervous. It's a really smart differentiation point for them. I think that big acquisition helped prove to the market they're serious about being in the game here, and so I expect to see more and more.

Google focusing on security specific AI agents. Uh, one last little thing from Google. They, they created something called agent space. So this is, uh, this is their next foray into enterprise, um, into enterprise search. That is more LLL. [01:09:00] LLM enabled. Um, you, you know, so many small, medium sized businesses and probably a growing number of enterprises run on Google Workplace, meaning Google Docs, Gmail, Google Calendar, that whole kind of suite.

Um, and so you start building all this institutional knowledge across all those apps that you're using. And imagine now having an LLM that has enterprise level security and can start to leverage that as its core training base of data. 

Paul Kappleman: That's exciting. Yeah. You know what I mean? I, I thought about this. If you were out, if you were out there right now and you were gonna kind of start from scratch, sort of using one of these, uh, for.

For, for, for email, for communication, for security, for VPN, for, uh, an AI agent. Like which one would you go to? Google. What's Google? Google, okay. You're Google. Yeah, because I'm, I'm still kind of figuring it out and I, I use, I use Outlook and it's just really, it's super clunky. It's 

Marcus: clunky. Yeah. No, I mean, I mean, the reality is Microsoft continues to rely on its incredible distribution and its brand, um, [01:10:00] its impenetrable brand in the enterprise.

Um, I'm not a corporate guy, right. So, so that, that means absolutely nothing to me. And so I look at user friendliness, right. Which is where I am. Right, right. You know, you know, efficiency, feature set, like integrations, APIs, all that kind of stuff. And I, to me, Google beats everybody on that. Like, like, it's actually not even close.

Just 

Paul Kappleman: Yeah. Just ease of use interface. 

Marcus: Yes. They, they were just late to the party on cloud. Yeah. That's, that's the, that's where they, where they have to make up ground. They were very lazy to the look, they were lazy to the party on AI and they invented the damn thing. Right. Yeah. You know what I mean? Yeah.

So they just, they're just slow outta gate, out the gate. Yeah. They're slow out of the gate with this stuff. But yeah, if, if, if I'm gonna start with something, it's gonna be gonna be Google for sure. 

Paul Kappleman: For me, it would take work just 'cause I had so much in, um, in, in the Microsoft cloud, of course. Um, just in OneNote and all that stuff.

But it, so it's like, it's momentum. But I think, I think you're right. It's time to make the shift. 

Marcus: Well, I, I, I mean, I think your question was the right one, which is if you're starting [01:11:00] today Yeah. Like this is the thing Microsoft can keep you 

Paul Kappleman: Yeah, 

Marcus: because '

Paul Kappleman: cause you have all your stuff. 'cause you have all 

Marcus: your stuff there.

Right. And 

Paul Kappleman: you're used to it, and you're used to the look and feel. 

Marcus: Uh, okay. Last story. You know, we, you just said, you know the timing, right? More and more we are seeing people, uh, that are, that are starting to, to forecast. When we're going to get to a GI, superhuman ai, whatever, right? Um, but understanding that it's, it's something to tr it, it, it is actually important to try to think through because at the point when it happens, the world will fundamentally change and it will be like a light switch.

It'll be like we were in the dark and then we're in the light. And, and things are radically different at that point. Now we've had these moments, but humans we're not that good at the pattern recognition of them because we, we need narrative and we don't like this level of change. [01:12:00] We've just talked about, you know, the Trump first a hundred days and how everything is shut down, you know, and we see it as highly volatile.

So no deals, no investing, no value going up, no capital flows, et cetera. Um, I, I view. The, the, at this point, the inevitable coming of a GI or superhuman ai, uh, to be one of those things that generally speaking, humans, uh, are gonna keep their head in the, in the sand on, because for each one of us individually, it presents a truly existential crisis that we, we can't quite deal with.

Like what happens when the a, when the AI is better than me at everything. Yeah. Right. Um, so this, this is, uh, the AI dash 2020 seven.com. Um, is, uh, is, you know, it's, it's a, it's a blog that's sort of pulling together different thoughts, uh, around when we're going to get there. And, uh, Dario, uh, Amede, who was the CEO of, of, uh, anthropic said [01:13:00] 2027.

Yeah. More and more people are starting to converge on 2027 as as like, this is kind of when we're likely to, to get there. Now there's a huge difference between having this capability. Then this capability actually being deployable in a way that we can economically benefit from and being and 

Paul Kappleman: adopted.

Marcus: And adopt. And adopt. Right? So there's a huge difference between those two things. But what I worry about is we already have hyper consolidated our market into seven companies. Those seven companies are saying, uh, quarterly earnings be damned. I'm investing. I, I'm all in, I'm putting all chips in on this.

Right? So the, so the rest of the world is like taking a wait and see approach, right? And they're going, they are, the Mag seven is all in on this, right? And the, and the timeline is 2027. Yeah. This is, this is the, the emerging consensus timeline is 2027. [01:14:00] How much further are we going to go into the consolidation of power of big tech And the, the, you know, it's.

It's getting close to sort of like a chattel society. You're right. It's, it really, you know, I hate to say it, but like it's getting really close to that. 

Paul Kappleman: Yeah. I, I agree. And, and you know, you know, I don't follow it nearly as closely, but I just, from a, from my perspective, from my seat, I don't, I don't argue with that timeframe.

I, it's, you know, it makes sense to me. Um, it's scary. I mean, I'm, I'm scared of it, but, uh, it is exciting and scary at the same time. Um, now, you know, where, what is, to me it feels like sort of, we really get the, the average company, the healthcare company sort of has decent, solid adoption where they're showing ROI, um, their users feel good about the, uh, the applications.

They're sort of across the board, not just in pockets. Uh, that feels more like three to four years, but I mean, still, it's what, either way we're talking right around [01:15:00] the corner. That's right. I mean, whether it's two years or four years, that's a. It's, it's right there. 

Marcus: It's right there. Yeah, it's right there.

So, anyway, thi this is, this is largely a, a, a link. You need, you know, part of what we try to do here is make sure we're providing sources for everyone to kind of like, dig in on their own independent study and, and, and dig into this stuff. And, uh, this, this was one that kind of stuck out to us as, as something we should pass along.

Paul Kappleman: Yeah, it's good, Paul. Hey, it's been fun. We made it. Thank you. We made it. 

Marcus: We made 

Paul Kappleman: it 

Marcus: through. We, we, we, we thought it was gonna be 45 minutes. You, you didn't know, man. You didn't know. I could drag this into one. I can drag this to one 15 anytime, man. Anytime. You know, even with, even with a short list of stories, we, we 

Paul Kappleman: went on a few tangents, but they were, they were worthwhile because there wasn't as much news as normal.

So, listen, I hope we get some, uh, some normalcy. It's like, uh, going to the amusement park, you know, it's good for a day. It's fun. The roller coaster's great, but like three days in a row you start to feel a little queasy. So. Uh, you know, I, I, I'm, I could go for some normalcy soon. I don't wanna live in amusement park, you know what I mean?

Yeah, yeah. You like to go there and visit for a couple days, but I don't know, at my [01:16:00] age, three days, that's like with my kids, I'm ready to go home. Uh, but listen, I, I hope things do normalize and I appreciate you and Vic, uh, for the show. I think it's good. I think it forces us all to think about what's happening and, and for me, co-hosting, it forces me to sort of, you know, look at all this stuff and digest it and say like, all right, what does it mean?

So, uh, I appreciate being invited and, and we'll do it anytime, 

Marcus: man. We're, we're lucky to have such a thoughtful, experienced person like you. Be willing to share, um, you know, your time and do the study to actually come on the show and, and be, and be ready. So, Paul, and anytime, man. Thank you so much. 

Paul Kappleman: Thank you.