ADAM: Hey guys, Adam and Jason here from Trilliant, bringing you the Prescription for Growth … wild, wild week in healthcare. We've got Walmart opening up retail clinics in Florida. We've got HCA and United posting banner profits in the middle of a global pandemic. We've got pricing transparency coming through. We've got site neutral payments. It's been an insane week in healthcare. And so, Jason and I are going to take a minute break each of those down and discuss what that means for you and your health system in your market. So, stay tuned. Thanks for joining us.

Yeah, it's like you alluded to, it's been a really tough week I think for the community health system, for the smaller hospitals, and the private practitioners out there. What we see from the publicly traded companies are the rich getting richer, right? And they're doing it not just on volume, but they're doing it on the lack of volume. Then we take a look at United's Q2 profits, not a really big shock there, right? They're an insurance company and less people are going to the hospital, so what does that mean? More money for them. When we look at HCA it's a little bit different, right? So, they were able to rebound a lot quicker and they were really able to control their price. And that's really what HCA has been down for. They're great operators and they are ruthless when it comes to margin and maintaining that margin. And so, making aggressive steps, taking aggressive steps, to open up and to get people and patients in for care as soon as possible. And also, the services that aren't doing as hotter have a much longer lead time, really tramping those down with it and to really exploit that margin. But, for the smaller folks out there, for the rest of the market, do you have that ability to really play the margin game? HCA has a huge back office and a huge, buying power within the market that not everybody has, right? And they're leveraging that to their benefit. When you think about it, you're United and …, we can exchange United with Blue Cross and Anthem. All your major insurance is out there. If they're not going to, if they don't have care, they're just going to take the money and kind of walk away with it. So, it's really hard out there for everyone else who don't really have those large economies of scale.

Yeah. Yeah. It's rough. It's brutal right now. So, and another headwind that we're seeing come in, it was just released with Walmart, making a much larger investment especially in their Florida market opening up more and more clinics. We're obviously seeing that across the board with a lot of private companies going into this space, probably a lot of our hospital and health system operators are likewise thinking about opening up more retail based clinics, but the mega that is Walmart has now put a stake in the ground and said they’re going to be aggressively investing in this space, especially right now with the headwinds coming on. So, what's your take on that? How do you think that hospitals, especially ones in Florida right now, need to be looking at this and then everybody outside of Florida, what should they be thinking about as Walmart certainly has their eye on, on other markets?

Yeah. I mean, Walmart, one of the largest retail footprints in America started a trial run of offering clinics within their, some of their stores in Georgia. And very, very quickly expanded that into to Florida. They've also come out into the day will offer their own Medicare Advantage insurance product and apply for that in their stores. And so, what is Walmart doing? Well, they're meeting the consumer where the consumer is, right? They have more data, they have more understanding about who a Walmart shopper is, what they like, what their behaviors are. And they're going to utilize that information to provide healthcare for them. Overall, from a macro point of view, if we take a little business school framework here, the barriers to entry that really were a foundation of bedrock if you will, for a lot of healthcare companies out there to really stay afloat, the limitation of competition has been good for healthcare. Some of the care companies now, those are also coming down, right? Retail is not going to stop the commoditization of high volume services is going to continue at a faster and faster rate. And you're getting a lot of outside money and a lot of outside investment in there onto that, right? Walmart is a big first one. They will not be the last, right? We already know that CVS has many clinic and Walgreens also has. I think they had a partnership with doctors …


VillageMD, thank you very much. This is, these are big corporations that are coming after a sustained market. Healthcare is not going anywhere, right? They have a square footage, they have retail square

footage all over the place. So how do you boost the sales per square foot? Well, you get other services in there that people are always going to need and want, right? And I think that becomes a tactic for them. That becomes something that they can really lean in on their earnings and really help their share price. They’re publicly traded companies.

This is what they care about. What does it mean for you? Well, they going to have more data on their customers, right? And if they can transform their customers into their patients, they’re going to have a ton of more data on them too. So how well do you know your patients? How well can you actually meet them and provide for them in a way that, they don't just want the MinuteClinic stuff or the nurse practitioner strep throat at Walmart. If you're able to grant that access, if you're able to have that relationship with them as a patient, is that going to be enough for you to stave off all of these retail openings, right?

ADAM: Yeah. Now-

JASON: That's the question out there.

ADAM: Yeah, absolutely. Well, and the final thing that really came out this week was the site neutral payment legislation. And so, we're seeing more come out of DC today. Can you maybe just give a quick background on what did happen this past weekend with site neutral and then more importantly, what really is that impact for hospital operators if they haven't seen that yet?

JASON: Yeah. It's... This is the one of the major threats I think to healthcare industry is, you've got folks like hospitals that have to adhere to a much higher bar of regulation than just the retail companies that we were talking about before, right? While they would get preferential payments for that hospital license space, because you have to bring it up to such a high code date, the care for the patients there, that payment, that additional money on top is now going away. And that's a really, really big deal because what it does, it introduces more competition, it introduces higher commoditization and a lot of that volume that really was a bedrock and was a really a sustaining force for a lot of health systems out there, right? I mean, it makes me think, why aren't hospitals space if it's not worth anything anymore. You've got all this upkeep, it's crazy expensive to build. And if you're not going to get any additional payments for, well, then what's the point of it. I know that's facetious and I know that's sort of not where we want to go with it, but it, it does. I feel for the hospital systems out there, I feel for the operators because, it seems that Washington is sort of bent on, caring about not really the industry, but really the money it takes to the money the payments for me, the industry, sorry.


ADAM: Oh yeah, no, no. You're absolutely right. You're absolutely right. And I think that, with particularly I was talking to a hospital, it was a large health system in California, and they said with some of the legislations coming out, particularly around seismic and a few other regulations that are in place, it's 2.5 to $3 million per bed for them to build a new facility. And so, when you're thinking about the history of managing or owning a 400 bed facility, that's, you're in the billions and billions of dollars of real estate costs. And that's just not going to work. And so, I think that site mutual is certainly going to be something that has a fracking effect throughout the rest of the industry. And hospitals need to be prepared and looking at this from a financial standpoint and saying, "what is the potential risk for me? How much money is really on the line if this does or does not go through? And what do we need to be thinking about to offset that loss"? Because the days of building a 500 bed hospital, unfortunately, or fortunately depending on what side of the coin you're on, they're dwindling and the specialization out of hospital is really going to be important to increase. So, again, wild week in healthcare, a lot of different things going on all at once and just make sure-

JASON: You got one more point that you missed, right?

ADAM: Wait. Yeah, absolutely.

JASON: So, we've a ruling now that came out that essentially those contracts that you spend three months on, hammering out with United and fighting tooth and nail for every dollar, cent and a dime that you can get out of them. Well, those are not going to be public, right? And while they are self-reported, and while they're going to be put on your own websites, don't be surprised to have a lot of web scraping going on and to have aggregators out there, right? So, whether there's always been a fear of insurance companies, steering patients and steering care to low cost settings. Well, now that high deductible plans are the norm, now that more and more folks are having to put their own money up, especially up front to be seen. Well, you do want to go to the places that are cheaper, and then you want to go to the more of the low cost settings. The fact that you've got to tell people how much you cost and they can compare that with the doctor or the service down the road, or maybe even a retail company down the road, is really going to change the way that I think patients look and interact with systems. If we were all in the booming economy that was going on back in January and towards the latter half of February, it might be a different story, right? And health insurance benefit plans were growing, and people were okay with taking on a little bit of risk on that deductible. The more and more people getting out of risk,  the more and more the dollars are really strapped within each household. That's just going to be another point of reference, another data point that patients are going to really start to look at. And at first it might be taken up all that much, but I will bet you within six months of this rule being implemented, you're going to have a lot of different websites, a lot of different aggregators out there that somebody can put in their information and they're going to lead them and they're going to tell them about how much each site, how much each facility is going to cost them for a particular service, right? And they're going to be the ones steering patients. Then they're going to be asking you for a lead to get to that patients to your hospital. So, a lot of changing things going on, none of the particularly good for any of the barriers of entry for hospitals that they've enjoyed for the past 50, 60 years, but with change comes opportunity. So, it's not all bad. And I think there are some strategies and some things out there that you can still do and still have a big impact on your bottom line.

ADAM: Yeah, absolutely. Well, of course my light just went out, so apologies for going dark there, but I think that's super important, Jason, and I think you made a great point there. It is specifically with hospitals today, our recommendation to our clients is you've got to get ahead of this in a lot of ways with price transparency going on, you need to know where you stand in the market and you need to know what those rates are. Certainly, with the Sherman Act, you have to be very litigious about that, and about what information you do collect, but you need to know that now and your PR team needs to be ready. If you are the high cost partner, you need to be thinking about quality. You need to be ready for that message to come out. If you are the low cost, that's a great message to be pushing. You still need to be focused on quality but thinking about those areas where you do have some pricing advantage, make sure that you've got that at the forefront. And so, competition is going to continue to go on, hospitals are going to continue to use this against one another, and more information is in the long run, going to be more helpful for the consumer and subsequently the hospitals that use this data and use this information are going to benefit too... Wild week again, if you do have questions, if you do have thoughts about this, Jason and I would love to continue talking about this. We're constantly talking to our clients and our partners about it. So, love to have another offline conversation with you. Add a comment, add a question in the section below. We'd love to have a dialogue with you, but stay happy, stay healthy, a lot going on right now. And certainly, feel free to reach out if we can ever be of assistance. So, thank you guys.