AH030 - Plan Sponsors Need a Source of Truth; Get Your Data Now & Find It, with Jeff Hogan

Transcript

Lightly edited for clarity.

[00:27] Justin Venneri: Hello and thank you for joining us for this episode of the Astonishing Healthcare podcast. I'm Justin Venneri, Director of Communications at Capital Rx and your host. And given the timing of things swirling around the media related to the healthcare industry, specifically the employee benefits and pharmacy space, I'm excited to have Jeff Hogan with us again.  

Jeff was one of our first five guests, and we talked more broadly about benefits and controlling costs, a little bit about pharmacy and value based or whole person care via advanced primary care models. I'll link that show in the notes along with some other materials. But today we're going to hit on some more specific topics around data and what plans, sponsors and plan fiduciaries can do right now to get set up for 2025. Jeff, thanks for taking the time today.

[01:10] Jeff Hogan: Great to be here.

[01:11] Justin Venneri: Quick background. You've been in the industry for over 30 years. We go back a long way, consulting on different topics related to employer benefits and point solutions. Give us a quick update of what you're working on this year.

[01:23] Jeff Hogan: Sure. So, pretty exciting. Right now, we work around the country doing healthcare advisory, and because of this piece of legislation that passed in 2021 -- the Consolidated Appropriations Act (CAA) -- it basically forces all employers, small, medium, large, middle market, self-funded, no matter how they're insured, to focus more on their health plan. And every single employer has a named fiduciary. Often it's a CFO. And this person now is required to do a lot more than they were in the past, namely, understand what they're paying for health services and the adequacy and appropriateness of the contracts and the vendors that they have for the health plan. They must act only in the best interests of their plan members. And if they don't, they can be sued and they can be fined.  

So, this has caused an awful lot of activity, chaos, change in the marketplace on both the supply and the demand side of healthcare, namely with health systems providers, PBMs, digital health solutions, and the way that employers handle their own health plan, including the procurement of services, the way that they look at their data, basically the way that they act. So, we're working on both sides, the supply and the demand side. We've seen a lot of activity, namely providers and health systems moving into risk arrangements with employers, and employers completely changing the way that they look at their plans and the vendors to their plans as well.

[03:12] Justin Venneri: So you've had a busy year so far because there have been a couple of lawsuits announced and then all of the focus in Washington, DC and all the states across the US that are looking at legislation related to, you know, what's going on with pharmacy benefit managers and drug prices. So, I imagine your schedule is pretty packed.

[03:34] Jeff Hogan: It's pretty crazy. If you think about it, an employer's health plan is typically the second largest expenditure that they make after wages and we continue to see exponential increases year over year -- that can be double or triple cost of living.  

And particularly now with inflation being as high as it is, the effect on individuals is huge. They really feel it. Deductibles have gotten higher and the cost of drugs and other things have gone up exponentially. So we see legislative things that are requiring employers to be better stewards of employees money, number one. But two, more importantly, we're now talking about the abuses specifically around PBM, the fact that a PBM often extrudes 30% of the cost, and it seems to continually increase exponentially. Also, for employers who self-fund their plans, specialty drugs constitute 20 or 30% of their catastrophic claims. So not only is it costing more, but it's hitting everybody on the largest fixed cost, which is the stop loss for an employer plan as well.

[04:53] Justin Venneri: Okay. When we talk about things like the CAA and the fiduciary responsibilities, the point you've been making for years now, two years, and if not a little bit longer, you're saying you've got to get your data, you've got to understand your data, and then you've got to analyze and make decisions based on your data. Why is this all coming ahead this year? And what do you see as the most important or beneficial thing plan sponsors and plan fiduciaries could do right now, heading into the back half of 2024 to set themselves up for 2025.

[05:32] Jeff Hogan: It's a really good question. I'll use the boiled frog analogy. You know, purchasers have been boiled. Frogs have become immune from these increases. They've just taken it for a long time and they haven't done anything about it. And for the most part, if you think about it, most employers have relied upon their HR folks to do procurement and the management of these health plans. And often HR people haven't been trained on finance or risk or data or analytics or procurement or any of those types of things, and they in turn have conveyed that responsibility over to brokers and consultants.  

So, we find with this law, what is the first thing that CAA requires? It's that employers attest to the removal of gag clauses in their plan documents. Why, in fact, do they have to attest to the removal of gag clauses? Because those gag clauses often have kept employers from receiving their own group's data on what they pay for health services, quality, infections, complications, a whole host of things. They don't even own their own data, and someone else has interpreted it for them on their behalf.

So why did it come to a head this year? Because at the end of last year, all employers with a health plan, an ERISA health plan, had to attest to the removal of gag clauses. And therefore, there is the assumption that they're receiving data on their groups. I often say to CFOs and other named fiduciaries, you have no idea what anything costs, what any health service costs, what it should cost, or what it could cost. And in what other area of your business do you not know what things cost and just give people basically a blank check to write for any of the health services?  

So now the assumption is this year that employers have gotten their data, and the assumption is also they have no idea how to interpret it.

Related Content

• AH004 - Data, Fiduciary Responsibility, and Reversing Trend with Jeff Hogan
• The Consolidated Appropriations Act & Prescription Drug Data Collection (RxDC): New Rules & Regulations Equal New Responsibilities
• Self-funded plans ignore the Consolidated Appropriations Act at their peril

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[07:50] Justin Venneri: Who's making that assumption, Jeff? Regulatory bodies or just the market? Generally, the assumption is that you've got your data, you understand what to do with it, etc.

[08:00] Jeff Hogan: So, the gag clause attestation basically said, if you have your data, you need to know what to do with it. I mean, that was the assumption.

[08:09] Justin Venneri: Okay.

[08:10] Jeff Hogan: And it's a flawed assumption. And why is that? Because one, many, if not most of the carriers didn't automatically give the data to employers. Two, there was never a prescribed format for the data that was given over to employers. And three, most of the employers, once they received it, didn't have an appropriate analytics vendor, a trusted source, who could parse through this data and say, oh, you're sending most of your people to this hospital and you're overpaying and getting bad quality, or your site of care is poor, or even your specialty drugs are, you have a bad drug mix. And there was no basic way for an employer to get insight into how they should change their buying, contracting, and accountability in the plan.

One more thing, which is really important, the assumption was that they got their data and that they did disclosure on the compensation received by their broker or consultant. This has been another big problem for employers, that, in fact, they may have had a broker for 10 or 15 or 20 years that they relied upon but that they have not been able to find out what the broker makes in commission and bonuses and stop loss in any of the other features of the plan that has not been discoverable for them.  

So, to finish the answer to your actual question, what can you do now? What can an employer do? Okay, they got their data. They aren't getting the disclosure right now. For many employers, maybe 70% of the employers that are out there that have January 1 renewals, many of you are receiving your renewals from your existing carrier and vendor, your existing payers. You're receiving documents that show you what your projected renewal is going to be. This is a tremendous opportunity for you to use your power and timing to get that data that you have not received in the way of an RFP. Hey, any carrier who is going to handle our plan must furnish us with our data and acknowledge that we own that data literally as part of the RFP process that gets documented into an administrative services agreement, into the contract that binds them on a go forward basis. It may also list the data format that's expected in the frequency of receipt of data. Could be weekly, it could be monthly. Whatever works for the employer specifically. And in that RFP to include language that says upon termination, if we move to a different plan, we expect you to furnish us with our data on incurred claims during that terminal period as well. So, you have leverage to do that. If in fact that carrier refuses to do it, you can move. You're a market maker in that particular instance.  

Secondly, as it relates to brokers who will not disclose their total compensation, you are required under CAA to find out what it is. And if they're not telling you, you can make that an aspect of a broker RFP that says, this is how we expect you to work with us, our relationship. We can't have you conflicted.  

One more thing, back to the employer and the health plan as well. You can ensure your existing health plan to furnish your renewal net of compensation, net of broker compensation, so that you can shore up and get accountability for exactly how much compensation is being built into your renewal numbers to use as negotiation with your carrier as well.  

So, these are just two things that are really front of mind that give you tools and techniques to get the accountability that you need and to build that into your contracting as well.

[12:38] Justin Venneri: And so the broker relationship or the consultant relationship, because you spent a good portion of your career in that space. And I know pharmacy is a sliver of the health plan, which is a sliver of the responsibilities for HR and other professionals. But the cost increases you cited, I mean, everyone seems to have just accepted them, just like maybe they've accepted the disruption or discontinuity associated with the data. My question is, why is it that the plan sponsors may think they understand what's expected of them as it relates to their responsibilities under the CAA and there isn't more urgency around this at this point?

[13:19] Jeff Hogan: Yeah, it's a really good question. And I reflect back on your setup for this particular session. All you have to do is look at the news cycle this week, and we have another big breach of fiduciary duty lawsuit that has been filed against Wells Fargo, specifically as it relates to PBM. And basically, a class action suit that says, “hey, Wells Fargo, as a fiduciary, you didn't do your duty with the PBM. And we're paying many, many multiples of what the drug should actually cost. And because we're participants in the plan and we contribute to the plan, you breached your duty in not doing adequate and appropriate due diligence.” If you look at and listen to the news cycle, you'll see many at this point are commenting, very influential people that if you don't do due diligence on PBM because of the breadth and scope of its influence in your plan, and the cost to plan beneficiaries and catastrophic claims, and the rise in specialty drug costs, if you don't do adequate and appropriate due diligence on your PBM, you will be sued.  

And, you know, this is the message that you're seeing all over the marketplace. Simultaneous to this, and not orchestrated this week, we saw the State of Illinois recover in an audit against CVS, a very large amount of money in the millions for overcharges and overpayments. So, this is specific to accountability as well.  

So, the message is clear out there. You must do your due diligence because you are spending your plan members money, and you must make sure that the various elements and vendors to your plan are appropriate and the contractual terms are in the best interests of your plan members.

[15:25] Justin Venneri: So, going forward, assuming plan sponsors can take advantage of this unique opportunity, get their data, get the disclosures they need, how are you recommending people approach the analytics of the data and actually managing this process going forward? What should they be looking for in the data? How does it tie in? You brought up stop loss and some of the other aspects of the broker relationship where there's compensation. Can you talk through just a couple of other things that, you know, our listeners should keep their eye on, or just be aware of.

[15:57] Jeff Hogan: I mentioned first, you have to have your data. But really the guiding light is to have really intuitive health analytics that can break down that data and give simple direction to employers around the inefficiencies that are seen in their plan.  

What does that mean? That means that many employers starting out on their CAA journey are picking two obvious elements of their plan. One, PBM. Why? Why PBM? Because PBM drives a tremendous amount of cost, if not the highest trend factor of any diagnostic category close to it, and also drives many of the catastrophic claims. It has an outsized influence on total cost of care and therefore, for plan beneficiaries, is really important. So many employers are starting with fiduciary PBM procurement so that they can learn the ins and outs and vagaries of their existing PBM arrangements, getting their data on the PBM side, and trying to reconcile that to make sure that they have the right vendor and the right contractual terms.  

Number two, the other big thing for most employers that they realize, and we're looking at the largest employers in the country, for an example, the outsized value of hospital inpatient and outpatient costs. And just to bring that down to a more granular and manageable level for many employers, they are looking for health systems, ambulatory strategies, you know, arthroplasty and freestanding infusion, and things that are done outside of the hospital setting that reduce the costs significantly. Just doing this aggressive PBM procurement and doing some direct contracting for ambulatory features will have a dramatic effect to right size an employer population.  

It will also, from an employer's fiduciary point of view, show action to get accountability and to embrace that fiduciary duty as well. So, these are the big things we're seeing, you know, what else are we seeing out there? Many employers are also seeing the value of what I call advanced primary care, where primary care groups can create accountability over total cost of care. So those are the bigs, and a lot of groups are embracing those tactically.

[18:37] Justin Venneri: Okay, maybe just one more question for you, Jeff, and ill rope this into my usual last question for the podcast. But with data in particular, I think one thing that's interesting, and this is not meant to plug JUDI here, our adjudication platform, but I think standardization of data and the ability to kind of structure it so that it can be shared and integrated across all the different pieces of the continuum of care that are helpful for an employer, you know, plan sponsor to offer a comprehensive benefit to their employees.  

What's the coolest thing you've seen someone do to pull these things together, or what's the most interesting thing that you're seeing people try because I feel like there's a lot of momentum here and there's a lot of positive things going on that we may not be seeing because of the negative news cycle.

[19:26] Jeff Hogan: Yeah. So let me give you a boring answer first.

[19:28] Justin Venneri: Okay.

[19:30] Jeff Hogan: Your analytics vendor must be unadulterated, one, unbiased, and you must be able to trust it, which means it shouldn't be furnished to you from your payer. Your broker should not own it or be able to influence the analytics at all. What does everyone want in our culture right now? Trust. Who can I trust? What can I trust?  

So, analytics should be intuitive and proactive on a go forward basis. This is where you are at this particular time, for better or for worse, at a baseline, and then be able to chart a course forward as your risk changes to show you the things that you need to do to change on behalf of your plan beneficiaries. You don't want to plug JUDI? I will.

[20:27] Justin Venneri: Okay.

[20:28] Jeff Hogan: I think that the JUDI platform gives employers what they need to know about a very complex thing, which is PBM. All the vagaries and all of the rebates and the drug choice and all of this. It boils it down for an employer's own population, not everybody else's, but for the employer's own population, the things that they need to know to make decisions relative to their PBM unadulterated -- again, I use the word in a pure format. That's what employers need. They need a trusted source of analytics that drive their decision.  

So, I hope that answers the question, no, it's not exciting. Employers and others crave trust, and that's what they need right now to be a good fiduciary.

[21:26] Justin Venneri: Got it. Jeff, thanks so much for joining me today. Look forward to staying in touch with you and having you back on.

[21:31] Jeff Hogan: Likewise. Thanks so much.

To learn more about Upside Health Advisors, click here, or you can find Jeff on LinkedIn.

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