Michael J. Alkire, MBA is president of Premier of Charlotte, NC.
Tell me about yourself and the company.
I’ve been at Premier for about 16 years, filling a number of roles. My current role as president is focused on driving the two big strategies that we laid out at the beginning of the year. We are technology-enabling the supply chain for our healthcare systems. We are also building out enterprise analytics, embedding machine learning and artificial intelligence into an analytics platform that helps our healthcare systems reduce costs, improve quality, and migrate to new payment delivery models.
What is the ownership structure of the company now that it is publicly traded?
Our healthcare system member owners hold 46% of the Class B shares. As of our last 10-Q filing in September 2019, we have 155 member owners. The remainder of shares are held by the public.
What challenges do employers have in managing their healthcare costs?
The rising cost of healthcare is the primary reason that large employers are looking for alternatives to how healthcare is provided to their employees.
Our journey for Contigo Health started about 18 months ago. A very large, self-insured employer came to us. They spend billions of dollars on healthcare and believe that 20% of that spend involves unnecessary variation and waste in the system. They would call out things like wanting a total knee or total hip in Orlando done the same as it is in Fargo. The way they described it is that there’s huge cost variation and huge clinical outcomes variation. They had an interest in building a high-value network of healthcare providers, both healthcare systems as well as other providers, to participate in this network.
They provided interesting statistics. From an oncology standpoint, 10% of their employees who are diagnosed with cancer don’t actually have cancer. Of those who are diagnosed with cancer, 30% are placed on the wrong regimen. Not only is the patient not receiving the right medical attention, the employer bears a huge cost. The patient may miss work due to being on the wrong medication and then getting established on the right regimen. They use that as an example of lack of standardization of care across the country.
They also talk about OB and C-section rates. Somewhere around 30% of all US births are done via C-section. In western Europe, the C-section rate is 22% or 23%. CDC says that C-section rates should be near 20%. This employer studied markets in which C-section rates were more than 50%. This creates significant cost as well as significantly more risk to the mother.
The prevalence of data that is available to these large employers is helping them understand where variation is occurring. They are looking for a partner that can help them manage this variation. I think they came to Premier because of our history of using discharge data from 45% of all US hospitals and our work with physicians and their quality reporting to Medicare. They liked the idea that we have the data. They also liked the idea that we have been working in collaboration with our healthcare systems for the better part of 15 years in improving the standard of care.
Is it an awkward conversation to tell health systems, which may be Premier’s members or owners, that your employer customer thinks they charge too much and don’t practice evidence-based medicine?
When this large player came to us and we built this collaborative that was the precursor to Contigo Health, we reached out to 35 healthcare systems that represented 440 hospitals. We said, “Very large employers are interested in building this high-value network, but we need your data, your claims data, and your electronic health record data.” We had clinical and safety data for many of them, but we needed to build data capability for this initiative.
At least 90% of the folks who participated in those first meetings provided us with their data or their interest in sharing their data with us. I think their reasons are twofold. One, they know that the market is moving in this direction, where the necessity for care to be standardized across the country is an imperative to drive down the cost of healthcare globally. Two, being part of a high-value network provides them leverage when they are negotiating with the payers in their markets. Saying that they adhere to and implement these standards and that they use the highest, best capable analytics to implement clinical protocols will differentiate them in their markets.
I don’t think that the idea is that employers will demand lower costs. They see so much variation in how care is being provided that their interest is reducing waste and standardizing the approach to providing care, as opposed to a negotiated perspective of wanting procedures done at a lower cost. The initial goal is to create a high-value network of a high standard of care.
Does this involve offering fixed prices for certain procedures, and similar to what Walmart is doing, sending employees out of their local geography to receive care from providers whose cost or quality may be better?
Payers are providing a lot of ancillary benefits to the employees of large employers, who aren’t taking advantage of them. Think about smoking cessation. We have the ability, given our Stanson Health acquisition, to write detailed analytics into the workflow. Large employers are interested using these workflow protocols to help ensure that employees are taking advantage of the ancillary benefits that they have access to. When an employee meets with the physician, it pops up on the screen that they work for Employer X, which has a smoking cessation program that they would like this patient to enroll in. There’s a free benefit that’s helping them do that. We will focus on these ancillary benefits as we get the Contigo Health programs started.
Then I think there will be two parallel paths. We will create this high-value network for things like maternal health, which will be nationally based and will involve certain protocols that these large employers would like these providers to follow. Second is exactly what you said. Large employers like Walmart call them centers of excellence, where they send employees out of geography for specific services. There will be a path for that in the short term.
But I will tell you that unless it’s something that’s very serious, very rare, or where the expertise just doesn’t exist in the local or regional markets, these large employers have an interest in getting care provided as close to the patients as possible. You will have these centers of excellence in the short term and mid term. They are nationally based today, but you’ll see more regionality of these centers of excellence, where you’ll have them in pockets along the various regional geographies of the US. Eventually I think they will become more localized to the extent that those geographies actually have the providers who can provide those services.
Premier’s health system customers should have been able to recognize and address their clinical variation given the reports you send them that highlight it. Why did employers have to apply the financial pressure to make them take action?
We work with some of the largest IDNs in the country, many of which span states and regions. They have their own focus on driving standardization of care across the entire healthcare system.
As healthcare systems are moving more towards taking downside risk, it’s imperative for them to standardize the way that care is being provided. It provides a benchmark for them to improve from. For quality outside of healthcare, such as in the automotive or high tech industries, you want to have that basis way to produce product, use that as the baseline and then always innovate off of that baseline. That’s what healthcare systems are attempting to do when they are trying to create that baseline. It’s two- sided risk.
Second is the movement to ACOs and capitation. A number of our healthcare systems that are creating partnerships with ACOs know that they have to be on the hook to provide standardized care across the communities that they serve.
The final driver will be differentiation. I spoke about this earlier in terms of their leverage with commercial health plans, but organizations that can prove that they are standardizing care and can prove that their outcomes are different than the big brands in their markets — or in some cases, bigger and smaller systems in the market — are the ones that are going to be the winners in the long term.
All of this is going to become transparent. That’s the fourth aspect, that healthcare systems are becoming aware that their outcomes are going to be transparently shared with the communities that they are serving.
Clinicians don’t always believe or follow evidence that is accepted elsewhere, or they think evidence needs to be tailored to local practices. How will you weigh the available evidence for a national group of health systems that haven’t followed it so far?
Stanson Health’s CEO is Scott Weingarten, MD. He was CEO of Zynx, which was all about creating standards of care, trying to standardize different protocols, and those kinds of things. They have had a very successful run. We were interested in Stanson because it takes those clinical decisions that come from the analytics and embeds them into the workflow.
For the first time, you will see a lot of this evidence-based clinical decision information show up in the workflow, when the physician is practicing or at the point of having conversations with their patients. They will see the clinical evidence at their fingertips.
The tool itself is unique. If organizations don’t want to use it from a proactive standpoint to provide alerting and other capabilities to the clinicians during the time of care, then a function on the back end can audit whether clinicians are following standard protocols that they have set up. Technology has allowed us to take this issue to the next level, both in being proactive at the point of care and to understand whether clinicians are following the standards of care.
Do you have any final thoughts?
Premier is working to fix US healthcare from the inside. We believe that healthcare needs to be consumer centered and provider led. Leveraging the providers, the data, and the analytics that we deliver to providers, along with the ability for them to collaborate, is the best way to solve our national healthcare issues.