My former former employer (that's 2 jobs ago) initially embraced remote work. It made sense -- they're a major telecom…
Mike Alkire, MBA is president and CEO of Premier of Charlotte, NC.
Tell me about yourself and the company.
I’ve been in my role as CEO for the better part of a year and a half. Premier is an evolving business and has been an evolving business in the 18 years I’ve been here. We started as an organization that was focused on supply chain cost reduction and healthcare system quality improvement. We’ve morphed into doing those two elements plus many other capabilities, including standardizing the way that clinicians practice and pharma and med device looking at utilizing our capabilities to help them in real-world evidence studies and in identifying patients for trials.
We created a couple of subsidiary companies in the last few years. They are focused on helping our healthcare systems as they think through new revenue models and are working more closely with the employers in their market. That’s our Contigo Health initiative. We also have an initiative called Remitra, which is all about e-invoicing and e-payables.
Everything we do and contemplate doing is about helping healthcare systems become more efficient, using technology to reduce labor usage and to help them generate more revenue and more profitability.
How can technology make the health system supply chain more efficient?
During COVID, we stood up a coalition of all of the suppliers and distributors of PPE, personal protective equipment. Then we melded that with HHS , FEMA, CDC, and FDA. Because what became painfully apparent in March 2020 was that the federal government didn’t have a real good idea of the location of products to protect caregivers. We quickly stood up that coalition and started getting some traction on getting access to product and getting that supply chain up and running. We understood the utilization patterns of PPE in New York. We used some AI and machine learning capability to forecast from our data as well as the Hopkins data on the progression of COVID. Then we layered our utilization patterns on top our models so that we could help health systems determine the amount of product they needed.
That was important, because everybody was in the market at the exact same time looking for product. That was driving up the cost. Everybody was trying to stockpile against those that actually needed the product. We needed to bring some sanity to that madness. We developed that technology. Some federal agencies are looking at it today as something that they might want to continue to use going forward.
Another element is labor extenders. It’s amazing that 75% of healthcare invoices are still paper. Or focus is to use technology to automate that or digitize those invoices. We have some pretty cool advanced optical character recognition capability and some machine learning capability to make that more effective. But the point is that this invoicing and payment function is still fairly antiquated, and our goal is to bring that up into the 2020s as opposed to being something that has existed for 25 or 30 years.
We are also looking at products and drugs and the outcomes associated with those. We’re so much better at that with our acquisition of Stanson Health. Writing standards of care in Epic, Cerner and Athenahealth that are based on data, how the patient presents themselves, and lab values and other screens is critical. That will evolutionize healthcare. We want to continue to proliferate technology like that all throughout the healthcare system.
You launched Contigo Health three years ago and it recently made a big acquisition of contracts and technology. How is that business doing?
It’s going incredibly well. Thank you for asking. It is meeting its growth profile. Health systems are obviously under a great deal of stress and pain, struggling with high labor costs and supply cost inflation. We are creating new models for them to get access to revenue that maybe they hadn’t had access to in the past.
Contigo is just one of those ways to do that, to help build plans and capabilities so that health systems can go directly to employers, both in their market and at a national level. That program is doing really, really well. We continue to build the high-value network of health systems that provide care to a significant number of large national and international companies. We bought a third-party administrator a few years back for the centers of excellence programs that most advanced employers or innovative employers use, so that when folks need a knee or a hip done, they can be sent to a national center of excellence. The TPA supports that function.
As you said, we recently ran an acquisition of an organization that has access to a 900,000-provider contract. Our healthcare systems that have health plans can leverage a wrapper that is very economical and has a number of providers who can fill the needs of those health plans outside of the region of where that care is being delivered by that provider. We are excited about the direction that Contigo is going.
Will health system consolidation continue to the point that we have just a dozen or two regional and national health systems?
It’s tough to tell. They are battling against the sheer scale of health plans. Optum and UnitedHealth Group have $500 billion in market cap. You have Anthem, Aetna, and Cigna with market caps of tens or hundreds of billions of dollars. Then you look at the health system, HCA being the largest at $60 billion. It’s a huge issue in access to capital. Do you want our health system being innovated by the providers, or do you want it being innovated by the payers? These health systems are trying to create enough scale to bring a bit more balance against the payers on this.
I don’t necessarily have a prediction in terms of what large health systems will look like. I think you’ll have a lot of regional health systems and then still have local health systems, because those communities have specific needs to the point that they will probably need to remain independent, especially as healthcare continues to move outside the four walls of the hospital.
The way that we will look at health systems in 20 years will be much different than today. We have these big acute settings, non-acute settings, clinics, physician practices, rehab, labs, and all those kinds of things. But health systems are trying to move as much into the community as possible. That means trying to figure out ways to lower overall variable cost and fixed cost. The way that care will be provided in the future is going to be dramatically different, and advanced technology will be needed to help drive that transformation.
Optum is hiring a lot of physicians and buying practices, and at the same time, big retailers could be planning to cherry-pick the most profitable parts of the health system business. How are health systems responding?
When you have well-capitalized companies getting into any space, you’re always going to keep an eye towards that. Our interest, and that of many of our health systems, is to figure out ways to partner with those entities and help them meet the needs of what they’re trying to accomplish. That’s one of the reasons that Contigo got started. It was driven by Walmart trying to figure out ways to get more value for their healthcare dollar. I don’t think this is going to go away. With the rising cost of health insurance, you will see employers continue to look at unique models. We want to be there with capabilities, services, and technology to help them as they transform their healthcare costs.
How is the data connectivity between health systems and life sciences companies changing?
The most important aspect is data security and data protection, making sure of de-identification capabilities and using things like avatars to represent people. Those will be essential in research going forward. That scale will be important. That pharma or med device doesn’t have the ability to reach out to 5,000 hospitals, so scaling all that data and technology is going to be important.
How you consume the data and serve it up will be important in the future as well. Everybody will have different needs in terms of what they’re trying to consume from a data standpoint. You’ve got people in the middle of trials, you’ve got real-world evidence studies, you’ve got off-label utilization of products, you’ve got identification of patients just because of the need for more heterogeneity in these studies and those kinds of things. It depends on the prevailing needs. But the most exciting thing is that technology is coming to a place where we can meet all those challenges just because of a lot of the work that has been done over the last 10 years.
How do you see the business environment playing out over the next two or three years, especially for smaller companies?
It is incredibly important to have strong ROIC, return on invested capital. We want to have nice return for our shareholders and to drive our EBITDA and our cash flow and those kinds of things. Those are the most important parts of a business. When you launch new businesses and you’re making investments in those kinds of things, you have to make sure that you have the right plan in place and that you are getting the right level of returns. Organizations that have great ideas, a strong history of delivering ROIC, and a strong history of delivering performance will generally do well going forward.
The other side of that, as you were talking about it from an investor standpoint, is that it is even more important that we are creating offerings that can show short-term, mid-term, and long-term returns for our customers. It is no longer the day that you’re implementing something that will provide a a return in a year. Health systems are under such duress. You have to be able to walk in with options, services and technology that will help you drive results very quickly. Then, as much as possible, get a lot of that information and insights embedded into the electronic medical record so that you have long-term sustainable improvement as well.
What will be important for the company over the next three or four years?
A couple of things will be critical for us. Even with market’s labor factors being the way they are, this is all about getting great talent into the organization. Recruiting great talent is so interesting. I had a conversation with a student in an MBA program that is top five in the world. I was impressed with her and asked, “Where are you thinking about doing your internship, Google, Apple, or Amazon?” She said, “Yes, I’m considering those because I’m really interested in what they’re doing in healthcare.” I said, “One of the things that we think is unique about Premier is that we truly understand healthcare and have been building incredible technology capability over the years, as opposed to a great technology company that is trying to understand healthcare.” Getting access to great talent is going to be really important.
I constantly challenge my team. Are we continually pragmatically innovating? How are we taking the platforms that we’ve created and creating those next layers of innovation? We’re doing some amazing things using a artificial intelligence, machine learning, and natural language processing.
The sky is the limit for us. Now it’s a matter of getting the right use cases built and getting the right products developed to support our health systems along their journey to transforming the way they are providing care to their patients.