David Williams: This is David Williams, co founder of MedPharma Partners and author of Health Business Blog. Small and mid sized employers have a hard time affording health insurance. One reason is that their carriers, third party administrators, and brokers tend not to provide the information and tools that would help keep costs under control. WellNet Healthcare is addressing this issue by taking client friendly approaches to pharmacy benefit management, third party administration and care management.
I spoke recently with Keith Lemer, the company’s President. He discussed WellNet’s current offerings and its newly announced Point-to-Point health care platform.
Keith, what is WellNet Healthcare?
Keith Lemer: In short we are a health management company, typically assisting businesses, plan sponsors –anywhere from 200 to about 10,000 in size– get control of their health care expenses.
In doing so, we come at it from the standpoint of data. If you have your data and you own your information and you understand your information, you can ultimately control and reduce your overall health care expenses.
We assist organizations with the analysis, the interpretation, and managing their overall expenses by understanding where problems are. And the reason we are really different from everybody else is that everyone else that is out there, the carriers, the administrators they do a wonderful job but they are primarily claims payers. They are not sharing a whole lot of information to help the businesses make better decisions.
David: That is interesting. You are starting with the data, which I am all in favor of. Would a typical company not have access to data from their carrier even if the carrier is essentially just doing claims payment? Do they not get the data?
Keith: Well, it is funny. You have lots of groups –and 60 percent 65 percent of the country is self insured, but the balance being fully insured. The groups that are fully insured, they get little to no information and the carriers want to keep it that way because they are able to protect their revenue streams. And the groups that are self funded already, they may get data but what they get is raw information and when they get it, it is typically late where the episode has already occurred. And so it is too late to actually go in and fix a particular patient or patients to get them back to member health because the episodes have already occurred.
So what good is getting information if you get it late or what good is getting information if you don’t understand it? So we help organizations and we give them all of their data. We help to determine where their problems are, how to fix those problems and then, how to actually provide action to it.
And the area that we specifically focus in on that has allowed us to grow in the manner in which we have and begin other entities within WellNet Healthcare is that we have used pharmacy benefit information, prescription drugs as a catalyst to what we do because it is the best predictor and the most real-time predictor of future risk in a medical plan.
David: That is interesting, so what you are saying is not only is the data available before it is too late to do something about it but you can also use that 15 or 20 percent of the cost picture to have a good view of the 100 percent.
Keith: That is exactly right and that is the biggest item that separates WellNet from everybody else. Other organizations say, “Well, I get my prescription data and I get my medical data and we do some predictive modeling.” The problem is that these carriers… are waiting to marry the Rx data with the medical and that person has already been into the hospital once you are doing that.
Because we are providing the prescription drug benefit, what is called “The Stand Alone Rx Card” to almost all of our clients, We are seeing the Rx data real time and we are analyzing it and we are running it through our predictive model, which is only using prescription drug information to identify the cost factors in the overall health care plan –not six months or nine months after effect– but right away.
So, once we are able to do that David, we can actually begin to work with these members and get them back to member health before the episode or before the train runs off the track.
David: You talked about having the Rx benefit. Would you consider yourself to be a pharmaceutical benefit manager?
Keith: I am, I am. We have been doing pharmacy benefits now for about 14 years. As I mentioned, our sweet spot is groups about 200 to about 10 thousand in size. We started off as an organization in providing pharmacy benefits on a fully insured basis for groups 25 to about 150, taking the risks on those benefits and what we realized is that those benefits are very profitable for the carrier.
So, in order for us to grow we try to go to other states aside from Pennsylvania, the Washington Metro Area, and we tried to get the carriers to un bundle the benefit. And they said, “No, sorry you’ve got to be over 200 or you’ve got to be over 500.” So we said, “Wait a minute, this information is so powerful and there is so much profit; there is so much fat in there. Let us go to these companies that can either self fund their pharmacy benefits to keep their medical benefits fully insured or who are already self funded and give them better buying power.”
But we now come back to each one of these groups to say, “Here is what is right with your plan, here is what is wrong, here are the inefficiencies and here is how we can make the plan run better.” Not at the end of the plan year though David, right at 120 days.
So, now these businesses that have never had any data can now make a decision on how to run the plan the rest of the year before a catastrophic claim occurs.
David: Do bigger PBMs like Medco or Caremark offer similar sort of services to what WellNet does?
Keith: What the difference is that those PBM’s be it Medco or Express Scripts, everybody does a great job in paying claims and providing access but they give contracts based on groups of a specific size. If you’re 5,000 employees, you will get one price, if you are 10,000 you will get another.
All of our groups are treated as if they are a 150,000 lives so they are getting the best possible discount, but the major difference between us and these other entities, is that we are using the pharmacy to lower the medical benefit expense as opposed to providing a stand alone prescription drug card.
David: Keith, on your website there is a chart that is entitled “How WellNet saves you Money” and it talks about using your pharmacy benefit to lower your medical cost. Could you walk me through that please?
Keith: Sure, again going back to our history, David, we have found pharmacy benefits to be a very accurate predictor of future risk. So, we go to these companies and we say, “Listen, carve out your pharmacy benefits, keep your medical benefits with your fully insured carrier or keep your medical benefits with your TPA or your administrator and give your pharmacy to us.” And by doing that, you as a business now who maybe has 500 employees, have carved out your prescription drug portion and you are carrying a stand alone Rx card.
The most important element you get right there is that you own your data. When you own your data, you can understand where the problems are, you can understand how to fix them, and you can make better decisions. Right now you don’t get any data because the carriers want to keep that data from you. You have no idea, you are in the dark so you don’t know why you are getting that 15 percent increase, or 25 percent increase.[The document Keith refers to in this section can be downloaded here.]
So, (looking at Section One) the key there is owning your data and then also at the same time is carving up the vendor profits. And to answer your question specifically, when a group has their pharmacy benefits bundled with the fully insured plan, you carve it out and self fund that –it’s typically a 20 to 30 percent savings. That’s how much profit is in there. The groups that are self funded already there’s anywhere between a 10 and a 15 percent savings. So we’re removing the hidden margins.
What we now do, looking at Section Two, is we come back to the group after 120 days and we say, “Listen. Here’s some insight into how the plan is running. Here’s what’s right with the plan. Here’s what’s wrong. Here are some inefficiencies. So on top of the, let’s say, one hundred and fifty, one hundred and seventy five thousand I’ve saved you, I now have another seventy five to one hundred and twenty five thousand dollars in voluntary recommendations based on your specific group.
So it could be, as an example, maybe there are medications that are being utilized that can now be given over the counter. So we build a value based design where the company decides to pick up the co pay and offer those drugs that are being utilized and costing one hundred, one hundred and fifty dollars at no expense to the member.
Or, improving mail order use. Or improving generic use. Micro managing each specific group’s plan based on their demographic, their location as opposed to managing a plan based on what a carrier typically does. You know, three million members, or five million members.
What happens here and now looking at Section Three and going back to how, let’s call it how accurate pharmacy data is and how valuable, is we take the Rx data and we run it through our Johns Hopkins Predictive Model and say based on your usage as a group we’re going to stratify your risk against Johns Hopkins’ three and a half million members.
So based on, let’s call it the number of fills that you have, milligrams, everything associated with that prescription we give you, in essence, a risk stratification chart that says based on your Rx usage, your population varies. Some of it’s low risk. There’s a percent that’s moderate risk and there’s a percent, let’s call it 18 to 20, that’s at high risk.
If I know who the unhealthy people are as the plan begins as opposed to either never or at the end of the plan year, I can now begin to implement preventive measures. So we started a disease and care management company called WellNet Interactive. And now what we do is we go back to these members and we outreach to them, looking at Section Four.
And we design customized prevention strategies for the high and moderate risk members based on the prescription drug usage to lower the medical benefit expense. So we’re getting to these members at the earliest possible point. So, we’ve, in essence, identified the risk and now we’re implementing preventative measures to keep these people out of the hospital.
David, are you aware that the people who are in high risk, typically about 80 percent of them have never been into the hospital and had a catastrophic claim?
David: That’s interesting.
Keith: Yes. So if we can get to them, we avoid the high cost. We say, “Alright. If you don’t get to these people, here’s what the potential expense is going to be.” And we put probability charts with that as well. And we also segment the population. So we know who the proper people are to outreach to, whether its employees or dependents or retirees, as an example.
The one thing that we’re certain to do is we never share who the specific patients are with the group. So it’s all HIPA compliant. So the CEO, the CFO, the HR Director, nobody knows who these patients are. So if you look at this chart now and you’re, you’re now into Section Five.
But now going back to Section One, I’ve carved out my pharmacy. I’ve interpreted my data in Section Two. I stratified my risk in Section Three. I’m looking for my unhealthy people in Section Four and beginning to work with them and get them compliant. And making sure they’re taking the right medications and the appropriate treatments. And now the patient and the doctor and the nurse are working together to keep a patient healthy. Common sense says that the medical benefit expense is less money.
So we have started a third party administration company, a TPA, combined with medical management where the claims are less. The admin fees are less. The stop loss is less because the data is all fully integrated under one platform. These people are healthier so there’s not so much risk.
And our groups, what we’re seeing, are taking our pharmacy, our disease management and our third party administration offering. They’re saving anywhere between 15 to 25 percent of overall health care expenses.
David: Very interesting. So you actually are picking up the TPA aspect of it as well for some clients.
Keith: We are. This is we’re earning the trust the first year. The second year the group will come back and say, “Well, I’m still with Blue Cross or I’m still with Aetna, or I’m still with Cigna.”
Keith: Listen, anybody can pay claims. We’ll do it less expensively. We’ll put in the same network. We’ll, we’ll put in the same discounts or even better discounts. We have a feature where we actually go in and buy claims down in advance. We front the money in advance. So we’re getting the same discount. That’s certainly an area of concern to be addressed by the federal government. And now we have become experts in administration. We are allowing these businesses to finally own their data to understand it and to be able to use the information pro actively as opposed to re actively.
What I mean by that is, you know, they see high cost claims. They go, “Oh my goodness. Let’s raise the co pays. Let’s cut the benefits. Let’s reduce the offerings.” The consultants, the brokers that surround the benefit plan, all they’re primarily charged with is shopping for benefits. They’re not managing the benefits.
These guys are protecting their vested interests. The more money that the businesses spend, the more money the brokers make. The more money the carriers make. The only people that can’t afford it are the businesses that are providing it.
David: So you’ve started off as a PBM, incorporated predictive modeling and the cost management reporting information back to the sponsor, you’ve added a care management piece as well. And now you are actually taking on the full medical benefit as well with a TPA. And then I see you’re also planning something else called Point to Point healthcare. Have I understood that right? And if so, what’s with this expansion into Point to Point?
Keith: What happens now is that these businesses, they’re able to have more control of their information. They’re able to make better decisions because they know where their risk is, how much it’s going to cost them, what they can do to avoid it. But what they still don’t have at their disposal is all of their data.
We have the data now. Right now we have their Rx plan and we have their medical plan, so we have the data. What we are launching for our clients this summer, and the entire business community, is a platform. And the platform is called, “Point to Point Healthcare.”
It’s a data repository, a little icon that sits on the CFO’s computer or the HR computer. It has all of their medical and all of their Rx data dumped into it. Not an electronic medical record but actual claims data where these people on their own can run reports. They can evaluate the claims. They can do predictive modeling on their own. All deidentified, all HIPA compliant.
But what it’s combined with now is a health care social network. So the member also has an icon on their computer, be it an employee or a dependent. They can do it in their office. They can do it at home. It’s all database driven, all HTTPS.
And it allows me as a patient to work online privately, securely, HIPAA compliant with my doctor or my doctors, my nurse, my care manager, my retail pharmacy. Anybody that’s involved in the care continuum of keeping me, as the patient, healthy and as engaged as possible so the business can now make better business decisions. Because, what they can do is now monitor the percent of the members that are healthy certainly not by name, but let’s call it by efficiency index, which we built in.
So if somebody is at 60 percent efficiency, a company can really now design a better plan and survey if you’re taking your medications properly. If you are seeing your physician regularly, you’re eating right. If you hit 70 or 80 percent efficiency, you know what? We’ll now reduce the premium contribution that we’re asking you to pay because you’re doing such a great job of taking care of yourself. So it’s the business and the member partnering to improve their health care and engaging everybody on one centralized and organized platform to improve member health and save the business money.
David: That certainly sounds like a bold initiative. I can see several challenges that I’m sure you’re thinking about and facing. One is, from the employer side, I’m wondering whether the CFO or HR Manager, if they’ve got the capacity even with straightforward tools and reports, to really be able to manage the information and be able to use it or if they still need a lot of outside help.
Then on the employee side, whether you can get the employees, and especially those that are at the higher risk, to really engage in their care the way they should do that would be in their best interest. Then, when you talk about putting this network together, there hasn’t been such great success in terms of getting health care providers –especially physicians– to participate in the communication platforms.
Keith: You’re asking all the right questions and we’ve actually addressed all of those. It goes without saying, there certainly is an adoption cycle. So I guess maybe hitting on your first point of the business is, if the business doesn’t want to do anything with the data, they don’t have to. They can still rely on WellNet to come out several times a year and explain the information to them.
We’re simply giving them the access to the data in the same way that they had expected for their manufacturing decision or their banking decision. They’re in control and not relying on a carrier who’s protecting their revenue stream or a broker consultant, as an example. But while they can still certainly rely on WellNet, we’re hearing from our businesses that they would like this data, they would like to at least access it in the same way that they access payroll information and other data that they have to run their overall business. This is the only black hole out there.
Then as you look at the employee, unless the employee begins to be engaged and take care of themselves, a) you’re going to continue to see health care expenses skyrocket even further than they are; cost being transferred to them even more. In addition, maybe benefits even being reduced, so those people that are driving the cost the 20 25 percent of the population they’ve got to become engaged.
They want to become engaged. They just have had nowhere to look and nowhere to go. Because they’re at work, typically, they can’t talk to their physician. So what our platform does is allow them to work online here at home or in the office in front of the computer, privately, securely, and in their own little environment with only the care manager and physicians they approve.
It’s funny, David, really. The people that we’ve identified as high risk, those particular patients, they don’t have one thing wrong with them or two things wrong with them. They have an average of 78 different conditions, seeing four to five different physicians. None of those physicians know what the other one is treating in terms of medication and other items that the doctors are recommending.
The platform allows all these people to work together in one collaborative environment. The patients are looking for something like this.
Look online and do a search on Google, as an example, for health, job, and war. Health has many hits as job and war in terms of what people are looking for and information on the Net. People are using MySpace, they’re using Facebook.
They’re ready for a tool like this, there’s just never been anything like it. They do their banking online, so they are asking for something like this. Then, I guess, as it relates to the physician and the physician community, it all comes down to adoption.
There’s one very successful platform out there, you may have seen or you may have heard about called VistA, the Veterans Administration platform. They have three million members on it and if you look at some of the statistics, they have perfected this platform for 10 years now.
They have cut up to a 30 percent waste factor out of the health care system because all the data, all the members, all the physicians, everything to do with that patient is online working together and all secure, all HIPPA compliant. There’s nothing like that for the rest of the business community though.
We have a subset of doctors that we know are going to early adopt and be on the system. If they choose not to, WellNet has a concierge set up where our care managers, our customer service act as that go between, between the patient and the physician who may not want to get online.
You’ll certainly see that, but it is coming. Certainly, with the medical records going the way of the electronic message as well as scripts now being done all electronically in the next couple of years, we’re moving in the right direction. We’re simply going to be the first people to do it.
David: Keith, last question. It sounds like all the things that you’re doing are great at attacking cost in the system. How do you get paid? How does WellNet Healthcare ensure it’s own financial success?
Keith: We’re a privately held organization, we charge a small management fee for each one of our services, both for pharmacy benefit management, disease and care management through our WellNet interactive unit, and an administration fee for our third party administration.
Typically, these fees are either on par or at times 50 percent less than what the other organizations are charging. Then our stop loss is less money because again, we’re identifying and working with these people at the earliest possible point. In terms of the Point to Point Healthcare, we’re giving this away to all of our clients at no cost.
We’re launching it August 1st, 2008. Out of the over 100,000 lives we have, we have 80,000 of our members committed to using this platform in the Beta version. We’re going to give that to them at no expense, and then we’ll develop some sort of licensing or revenue model in the future. If you build the best platform in the best business, we’ll figure out a way to make money later on. But we know that we can help to take that 30 percent waste out of the overall health care market. This is certainly, with the point to point platform, an absolute way to do that. There’s nothing else out there like this.
David: I’ve been talking today with Keith, President of WellNet Healthcare. Keith, thanks for your time today.
Keith: David, thank you for having me. I appreciate it.