The Treasury Update Podcast by Strategic Treasurer

Episode 176

Seismic Shifts in Healthcare

On this episode of the podcast, Host Craig Jeffery sits down with Drew Emrich and Julia McAllister, Executive Directors of J.P. Morgan, to discuss seismic shifts in the healthcare industry. They dive into healthcare consumerism, shifts in care delivery models, growing adoption of data analytics and artificial intelligence. Listen to this dynamic conversation.

DISCLAIMER: The thoughts and opinions shared by Julia and Drew are their own, and may or may not represent the opinions of J.P. Morgan. Their statements are not intended to represent legal, business or tax advice.


Craig Jeffery, Strategic Treasurer

Craig - Headshot


Drew Emrich, J.P. Morgan

Drew Emrich - JP Morgan
JP Morgan


Julia McAllister, J.P. Morgan

Julia McAllister - JPMorgan
JP Morgan

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Episode Transcription - Episode #176: Seismic Shifts in Healthcare

INTRO  0:01 

Welcome to The Treasury Update Podcast presented by Strategic Treasurer, your source for interesting treasury news, analysis, and insights in your car at the gym, or wherever you decide to tune in. On this episode of the podcast host Craig Jeffrey sits down with Drew Emrich and Julia McAllister, Executive Directors of J.P. Morgan Chase to discuss seismic shifts in the healthcare industry. They dive into a range of topics including healthcare consumerism, shifts in care delivery models, growing adoption of data analytics and artificial intelligence, and more. Listen in to this dynamic conversation.


Craig Jeffery  0:52 

Julia and Drew, welcome to The Treasury Update Podcast.


Julia McAllister  0:55 

Thank you, Craig, pleasure to be here.


Drew Emrich  0:57  

Thanks, Craig. It’s awesome to be here. Thank you.


Craig Jeffery  0:59 

So, I’m excited about today’s focus, it’s on health care. We’re going to cover and touch on some of these topics as we had planned on consumerism and healthcare shifts in care delivery models. And then finally, we’ll look at data analytics and AI, so I have a whole bunch of sections. So, in the show notes, you can see where these different sections start, but let’s begin by talking about you know, what do we mean by seismic activity before we get into consumerism, health care. What’s referred to, you know, when you think of something that’s seismic, it’s a big deal. What are some of the big deals in healthcare? And Julia, maybe you can start us off.


Julia McAllister  1:41 

Sure, Craig, excellent question. And thank you. And you know, it’s interesting when you follow all the different industry conversations that you hear the word seismic and seismic shifts being used quite a bit recently. And I think naturally when we think of seismic, we tend to think of some major collision of tectonic plates a catastrophic event, something with you know, high magnitude earthquake and big loud boom.


Craig Jeffery  2:10 

a lot of shaking,


Julia McAllister  2:11 

A lot of shaking. Exactly. But actually, seismic activity can also be smaller earth vibrations that happen over time over a long period of time. And ultimately will cause a major shift in a less disruptive way, if you will. So, when you think of seismic shifts in healthcare specifically, there are three particular themes that come to my mind. First is consumerism, it is how patients apply their experiences that they learn from other industries, on to their interaction with healthcare. And to me, those have been those smaller vibrations that have been happening over a long period of time and we’re seeing some major shifts in healthcare because of consumerism. The second one is actually shifts in care delivery models and subsequently reimbursement models. And they are we have seen combination of changes that happen more suddenly like a major earthquake, as well as those smaller sustained vibrations over time. And those shifts are shift to ambulatory care, our shift in focus to preventive care and wellness. It is moving from fee for service to value-based care and patient centered care, as well as explosion of telehealth that of course, it happened as a result of the pandemic. And the third one is the exponential growth in adoption of data analytics and AI across all the facets of care delivery from clinical to financial to operational. And again, to me it’s a combination of explosive events as well as those sustained vibrations. Think of blockchain, think of AI, RPA, machine learning, think of our adoption within healthcare of ERPs in EMRs, those are big enterprise systems. Think of use of API’s and arguably that is currently exploding. Our use of data and analytics specifically in precision medicine and personalized medicine move from structure to unstructured data in overall use of predictive analytics. So basically, data analytics and AI are helping us shift from mere benchmarking to actually supporting the data in our decisions about care delivery models. We can probably think of a few more topics but those three I think are very key topics are top of mind from a lot of healthcare professionals today.


Craig Jeffery  5:02 

Those are definitely three pretty big themes. The middle one, especially I’m really interested to hear, you know, you know, this idea of telehealth being impacted by people not going to the doctors directly. It’s like the house visit with your internet connection. But there’s seems like there’s a lot of things that are changing beyond just telehealth in that area. Those are really really good themes and thanks for structuring that and maybe we’ll just jump over to Drew now. Drew is you’ve heard these themes I know you and Julia talk regularly about health care and what’s changing. Maybe you can talk about maybe bring it down a level from this, these major themes these tectonic or seismic shifts down to maybe tactics or operational things or what are some of the other elements of change that you’re seeing.


Drew Emrich  5:54 

So, the opinions we’re sharing today are our personal opinions and views and may or may not represent the opinions of J. P. Morgan, without making this another podcast about pandemic or the forbidden word of COVID here, right. You know, it certainly did bring about some major shifts in the healthcare environment. You know, I think one of the biggest things that exposed was how reliant on paper and kind of analog processes the healthcare world is both from what we call payers, to the insurance companies, providers, who are those who render the care, and even the pharma med device med surge type environment, so there’s just a lot of paper in the system and when you had had an event like we had in 2020, what ultimately happened is you saw so many situations where these manual processes became almost impossible to do. I think one of the best examples of…


Craig Jeffery 

Because of being remote?


Yeah, I think there’s a lot of remote work. There were processes that were requiring people to be in an office, and so they didn’t have either the infrastructure for their employees to do the work anywhere but the office. So, there’s a mad rush to go buy laptops and buy webcams and to buy all of that stuff. You think about one of my favorite examples is check print outsourcing. This is something we’ve been talking about for 10 plus years with clients. Banks have never had so many check print outsourcing requests in our lives. This ballooned off the shelves because suddenly nobody wanted to send their employees to the office. Another example I had with clients quite frequently was hey, we collect credit cards. But we all over the phone using a point-of-sale terminal that sits in our office. Well, when people sent their employees home, they weren’t going to give them that point-of-sale terminal A because they only had one of them or two of them. So how do you decide who gets it? And B, it’s a PCI compliance risk to send that home so that I sat locked up in an office with nobody there. And suddenly this client had no ability to take a payment at all. They had never thought through that in their business continuity planning. And so, we ended up setting up a number of virtual gateways really, really quickly. But the challenge with that is that still takes six to eight weeks to do with no customization generally and you got six to eight weeks where you’re not collecting money, and that’s a huge hit on treasury works in a catastrophic period of time where you’re needing cash flow. We talked about the telehealth shift. That was both a delivery of care shift and how that care is rendered. But if you think about it, you generally interact with the patient in person and so part of that is taking a payment in person, you often collect those copays and so suddenly, healthcare organizations had to figure out how am I going to collect the payment do I collect it pre care, point of care somehow, do I only get to now collect post care and once you get post care, the likelihood of collecting that money is significantly drops. And so, you know, that was a whole concept as well as how you bill for that. You had to train physicians with how to actually code those transactions because if you look at some of the CMS coding rules, certain little triggers of maybe camera on versus camera off will trigger whether or not you get paid. Did the person have good Wi Fi? Or did they have bad Wi Fi? Could they even turn it on? They tried to but do you get to collect money on that. So, there’s this kind of shift of delivery of care as well as do you even get to get paid for that? I think the final thing there would just be we saw a huge shift in vendors or suppliers actually asking for virtual card payments. So, it’s something that in the past the payer, in this case, our clients or hospitals, etc. we’re always trying to push this out to their suppliers, hey, we want to pay you with a virtual card. And so, we’re really here we saw a big shift in saying hey, we need money quick. However, you can get it to us, and we’d prefer it not be paper because that means somebody has to go to an office, that means it has to be some other manual process and so we saw a big shift towards digital payments via virtual card, you know, ACH, etc.


Craig Jeffery  7:30 

We do a lot of surveys and capture information across all industries, not just healthcare. And during, you know, really the first year of COVID it seemed based on our statistics that the normal amount of conversion from these paper manual processes to digitize processes or automated processes, seemed like we had about two and a half to two to three years’ worth of normal conversion happened in one year and I know it varied by industry and type is that how does that square with what you saw during this time?


Drew Emrich  10:31 

Yeah, I would say that certainly. I don’t have the numbers behind me to back it up. But I would certainly say that is statistically around what we would have seen as well it just this rapid impetus for change and what we saw was inklings of certain activities starting to happen suddenly launched into happening real time. It was budgets were suddenly approved, where they had been stagnated for years in many cases.


Craig Jeffery  10:57 

And I know this isn’t really in the exact vein of what we’re talking about today. But do you think that, and either of you guys can jump in, do you think that’s a pull forward of just the conversion activity that would happen over two or three years? Or do you think everything is slid forward to you know, is it just you know, is there you know, are we going to see a drop off and, you know, when will the reversion to the mean, happen? Is it as it accelerated the adoption rate?


Drew Emrich 11:24 

Craig, I don’t think the reversion will happen. I think what’s gonna happen is maybe some normalization that we swung so far in one direction and so quickly, that perhaps, you know, we kind of will bounce back a little bit but I think these strands will certainly sustained because if you really look across all the industries, including healthcare, digitization, move to paperless, contactless payments, we’ve now have gotten a taste of that and I think going back is not going to be feasible.


Craig Jeffery  12:02 

Yah, yah, yah, yah, certainly not going back. I’m just wondering is the rate of adoption going to start to decline in terms of instead of this percentage, is it? Did we just borrow from a couple years which is awesome? And that’s probably that’s one thing I’m interested in seeing what’s going to happen did we do we increase the rate towards electronic permanently to close that gap and to get rid of it?


Drew Emrich  12:27 

Yeah, I would. I would only just add, I think that one of the major themes we’re talking about here is consumerism. And I think that consumerism across healthcare, but across all industries has radically changed to an instant gratification culture. And I think that spans every industry now, and I think that’s part of this acceleration that we’re seeing. I think to Julia’s point we might see what happened I think at the very beginning was lots of technology was bought to solve for a specific need. I think the technological advancements a lot of what we’ll see in the next few years is optimizing all of the practices and all of the processes and all the technology that we’ve bought over the last, you know, 18-24 months, I think a lot of that will be right sized into more streamlined sets of services versus maybe some hodgepodge kind of technology that was bought to meet an instantaneous need.


Craig Jeffery  13:23 

Are we speeding things up? Are we removing friction? What is automation, is both of those as some of those but that can be a little bit more too broad of a question, but maybe I’ll turn back to Julia, you had started off with consumerism and health care. Maybe a few more specifics or examples of where consumer experiences in one area bleeds over, particularly with health care. What are you seeing? What are some key takeaways in this industry?


Julia McAllister  13:52 

That’s an excellent question, Craig. I think it’s practically impossible to pinpoint exactly where consumerism and healthcare started. But I will answer your question by looking at it through the lens of my own professional experience because I have seen consumerism gain a prominent spot in conversations and in our approaches to care delivery throughout clinical financial and operational facets of care delivery. So, I think we’re all remember mid to late 90s, right? Most of us do. And remember, internet became a major source for information. We started searching for online. We consumers were very hungry for information that could be found on the internet. And so, providers, actually as an example, providers, leverage that trend and offered consumer health libraries on their websites because what they wanted to do is to offer information on symptoms, health conditions and procedures, perhaps either prescribed by a physician or contemplated by a consumer to make available there were tools like search engine optimization and search engine marketing available that allowed those providers not only offer consumers information online, but also leverage those tools to connect consumers searching for information to service lines to their centers of excellence, to their physicians and ultimately drive appointments, and that became a patient acquisition tool. As a matter of fact, back in those days, I worked with one of my clients that health care system in the northeast, who was a thought leader at the time and actually leverage that very approach to patient acquisition. And they were able to track over 6 million in revenue directly related to online searches, which was fascinating.


Craig Jeffery  16:09 

And that’s a that’s a decent percentage of their, their overall revenue or just…


Julia McAllister  16:13 

They were large and it was it was a substantial enough to be noticed, and to actually make conclusions that there’s actually something more in there. Because the narrative back in the day was that the patients must be informed of their treatment, and they also need to be able to shop for health care. Very much like consumers started to shop online for airline tickets for hotel reservations, for TVs, appliances, and even a pair of socks, and the more data we collected on consumer healthcare consumption patterns and preferences and behaviors, the more we connected the data to outcomes and demographics, the more the data itself, became or started to inform decisions around service line marketing decisions around strategic planning, clinical decision support as well as population health, and so care quality, price, transparency and access to care claim quite a prominent spot. And amongst policymakers, providers and payers alike, and the decades that followed the early you know 2000 to 2010 actually resulted in a number of legislation that was introduced in healthcare as a result of consumerism. There was patient activation measures that were introduced, that not only measured individual’s ability to understand their own health, but also their ability to navigate the healthcare system. We introduced triple aim that really connected patient outcomes to patient experiences and cost of care. We also introduced meaningful use that actually became a catalyst for not only EMR adoption but patient portal adoption, which at the time, was merely considered a patient communication tool, but now has become a major vehicle for patient payments. And let’s not forget that actually high deductible health plans were introduced right around that time. They gained more prominence with the Affordable Care Act in 14. And today, high deductible health plans really represent the major type of commercial insurance available. And so, the factors that continuing to drive consumerism in healthcare are of course technology advancements we’ll learn from other industries. It is patient centric communication tools. It is also changed in benefit design, price transparency rules, there are a lot of conversations about that currently. We are all wear our wearable devices, right so the patient generated health data is now a big factor in health care. And of course, we already talked about telehealth, you know, telehealth, too, is propelling a lot of changes related to consumerism in healthcare.


Craig Jeffery  19:25 

I have a bit of a side question that as you’re talking through the changes in the advertising, you know, it always seemed like when if people aren’t paying for something directly, like it’s covered by their health insurance, they’re like, whatever is ordered that’s fine. I don’t pay for it. I’m not going to shop for it. And you know, higher deductibles are having an impact in your point that 29% of total covered workers have patients as payer. Is that the biggest issue or is it also people are becoming more informed? You know, to search for these things? Is that the biggest issue right there the high deductible health plan where people have their money, their money in the game, really close to the transaction?


Julia McAllister  20:09 

It is certainly a catalyst and one of the major catalysts, but I think it really is a compound effect of the fact that yes, you know, if you really think about it, my grandmother never questioned the decision that her doctor made and the treatment that the doctor prescribed. With adoption of internet and just as a consumers embracing this culture of verifying information, looking for a second opinion, asking, you know, our peers potentially and our friends for you know, their experiences that certainly accelerated our ability to make sure that we assess what we’re about to in type of care, we’re about to engage, but then also the fact that consumers essentially became a payer of healthcare, the laws of supply and demand started applying within healthcare a lot more prominently than they were before because Craig to your point, you know, consumers only paid anywhere from two to 3%. And now it’s as much as 30%. So, that makes a big difference.


Craig Jeffery  21:22 

More skin in the game. Yeah. Yeah, that’s, that’s really helpful. Just the broader educational shifts and you’ve given us a I guess, I would say, a 20, about a 20-year history of where we’ve come from and so as you look at where are we today, where’s that important as we look forward. Is there anything to add on that that that we should be thinking about, or healthcare providers should be thinking about?


Julia McAllister  21:47 

Sure. Understanding where we came from certainly helps us better understand where we are today and why we’re here today. And actually today, the way we define healthcare consumerism is a personal choice and responsibility in paying for and I underscore that to your question about you know, consumers now becoming peers or our conversation on that the responsibility in paying for and managing one’s own health. So, if you really look at the healthcare ecosystem today, consumer is squarely in the middle of it and drives a lot of decisions around care, care delivery models, as well as payment models. So, let me give you a couple of points for thoughts to ponder on. So how I perceive expectations of my experiences with health care influences where and how I seek care. How convenient it is for me to access care, whether it’s online scheduling or hours of operation, or perhaps proximity distance to my house, or work, influences where and if I seek care and actually in what modality, am I going to go to a retail clinic, urgent care, virtual care, what have you. How engaged I am in my treatment or medication regimen, how will I understand it influences both clinical outcomes, as well as have direct impact on provider reimbursement because there are penalties for readmission rates and the levels of utilization in a value-based care which is capitated risk sharing model really matters and impact reimbursement directly. How well I understand my health insurance benefits influences actually, where I see care, whether I see care at all, and how well prepared I am to pay for care. And actually, how well informed I am of my financial expectation pre-care and how well I understand my bill post-care also influences the speed and the cost of the collections. You know, we started talking about this particular metric or statistic maybe five six years ago and interestingly enough in the recent instrument survey, which I believe we will offer us as part of the materials for the podcast. So, the survey found that 25% of Americans are still struggling to pay a $400 plus bill and half of those consumers will need to set up a payment plan. So, how well not only I understand my financial responsibility, but also how well the provider understands, not only my propensity to pay, but also my preferences for payment also impacts cost and speed of collection. Because think about it what if I am trained by other industries to have already discarded my checkbook? Or what if I’m a millennial who actually never procured a checkbook in the first place. So, you know and expect a full digital experience our earlier conversation, so we certainly need to be aware of that. And lastly, I will add that my overall experiences in healthcare, which actually encompass clinical facilities, cafeteria, and my financial experiences, influences how I’m going to rate providers in the age gap surveys, which are not only required by CMS, but also have a direct impact on reimbursement. And again, interestingly enough, that very instrument survey that I mentioned, indicated that 56% of consumers were willing to change providers just for the better financial experience. So, in my mind, those are quite compelling examples to your question, Craig that consumerism is a major driving force and care delivery and reimbursement. It is a top priority not only for healthcare industry, but also in C suite conversations and as a matter of fact, many health care providers have already created Chief Experience Officer roles to address that very topic.


Craig Jeffery  26:31 

Chief Experience Officer that sounds that sounds great. You know, I appreciate you stepping through the expectations about where and how and then some of those statistics are they’re a bit concerning. A quarter of Americans will have a problem with a $400 bill and then I guess one eighth of us will need a payment plan. Really, really interesting. You know, data points there on the personal side of what we do with health care. Drew, I want to bring you back into it you know, as you think about providers, how are they going to meet these new expectations of consumers, whether it’s for where you get care how you get care, the financial experience and influencing five out of nine, nine people what, what should we be thinking about there? What should hospital systems, healthcare providers, be leveraging?


Drew Emrich  27:28 

Yeah, I think that’s really going to come down to a technology and infrastructure investment that they’ve made. So, I think on the previous podcast a year or so ago, we talked a lot about these macro level EMRs or, you know, patient accounting software. So, these big-time systems that can now do that the kind of medical records that are electronic, as well as the accounting portion behind that and, right, these are coming together and there’s this huge kind of players that are in the market. Our providers are spending tons of money on these systems, and I think a long-term trend that we’ve seen is that healthcare has grown through acquisition. And so, you have a lot of disparate systems out there. You know, a given provider might have three or four of these or they might even have more, in some cases, not to mention their ERP systems or their treasury workstations. So, they have this massive ecosystem of technology that’s out there. And now they have to make all of those systems effectively talk to each other. And then to our conversation earlier, they just went out and bought a whole other slew of technology to go digital all of a sudden in a 18 month span without necessarily looking at the full end-to-end and picture of how all of these data sources all of these technologies interact with each other. I think a couple of statistics that we were looking at 82% of consumers want all of their healthcare payments in one place. They want to be able to get a bill from anyone and pay it in one place. You think about I had I had a medical event about seven or eight years ago and I was in a hospital setting for 10 days. I got bills from seven different providers during that stay the, you know, the hospital radiology, the independent radiologists, anesthesiologists, the surgeon, the house doctor, the ed, the hospital, and what made it even better was they switched patient accounting software’s while I was in so I got 14 different bills for two different parts of my stay on the front end and back end, right. And I had to call every single one every single month to make my payment for my payment plan. It was horrible. And so, as I started to look for that I probably would choose a location if I had the opportunity to from a payment experience in the future, right? So, I think it’s that they want to be able to pay in one place, they want to get bills electronically. I think one of the most amazing things we think about is that, oh, there’s this aging population that goes to hospitals and they’re old and don’t do technology, yet you look at who is really around these days, there’s tons of technology. Grandparents have FaceTime with their kids, or you know, they have cell phones for work. And you know, people are digital by nature now and that you know, even I think that we saw was 75% of all consumers actually want e-statements yet. I think 50 or so percent can’t get access to those statements electronically. That’s a big miss between what consumers are wanting, and what consumers are offered necessarily. And you know, as you’ve made these huge investments in these technologies, these hospitals have, I mean millions of dollars in these events, right? These are 6–12-month projects, 24-month projects, depending on the system size. What was interesting is a lot of these EMR systems originally started building some more around the clinical side and the clinicians and physicians loved them, and some more around the revenue cycle side which is the billing and collecting and the revenue cycle side loves and then you know, the other side don’t necessarily love the respective other software’s out there. But none of them really built around a client centric model. And they all have client facing portals and they all have client facing engagement opportunities. But what we’re seeing is that there’s this onslaught of private equity and angel investment into these health care financial technology companies who are acutely focused on consumerism, and how does your specific consumer experience really get lifted to the next level by you know, XYZ technology. And so, we see a lot of hospitals buying these types of products now and taking them out of these EMR taking the patient experience out of those EMRs and starting to create these little silos of experience around the kind of patient engagement from scheduling to point of care to payment after. And so now we’re seeing these EMRs start to really invest a ton of money really quickly in building these consumer centric tools to kind of match what they’re seeing in the marketplace.


Craig Jeffery  32:21 

So, in this move more towards the consumer experience, are we are we losing anything on the rev cycle, or even on the clinical workflow cycle are the others being more seamlessly being, you know, pulled together so that consumer experiences at the center but the other ones are not like a patchwork quilt, added on? It’s not some Frankenstein system, what are you seeing there?


Drew Emrich  32:48 

I would say that the big systems that are out there are who are really wanting to make sure that those client and patient experiences are solid are either building the tech themselves or are opening up their API’s to be able to integrate seamlessly from the front end of a given patient experience to the backend. So, it might not be that specific software that’s providing that quality of experience. But it they’re certainly allowing that to come into their ecosystem, if you will, a lot more readily than they had been in the past. And I think both from these FinTechs cover everything from coding and from you know, adjudication of claims to pre-claim submission, scrubbing to make sure that you’re not submitting incorrect claims and delay in your revenue by another 30-60 days, because you submitted the wrong claim, you know, code to everything from that to actual payment processing to HIPAA and PHI form signing on a digital environment, things of that nature. And so, there’s literally hundreds of these out there. And so, I think that’s one of the big challenges we see right now is hospitals are faced with well, if there’s literally hundreds of these out there, how do I pick the right ones? How do I know if they work together or not? To your point? Do you lose something when you start engaging with these and I think the answer is, in many cases, yes? So, if you haven’t made the right kind of organizational shifts to make decisions, then we really do see clients creating kind of a cumbersome, both staff and patient experience because the staff has to work with all of the technology that you’ve acquired, right. And so, you know, for me, I see a couple things that are really important around kind of making decisions on what technology to buy, what partners to partner with and things of that nature.


Craig Jeffery  34:55 

So, it’s not like give us a little bit of a hint about that with you know, API is more, you know, we talked about open treasury, open banking. I’m wonder if you’re going to talk about open healthcare. But as part of that, you know, meeting these needs with hundreds of options. Any other any cheat codes that you would offer to people to help make those decisions getting to the right partners?


Drew Emrich  35:23 

Yeah, you know, I think this starts with making sure that the whole organization is on board with the digital strategy. You have these new Chief Experience Officer roles you also have new Chief, you know, Information Technology officers have taken a front of line role in determining how the organization is going to work. Historically, you’ve seen healthcare organizations work in major silos, you know, revenue cycle made decisions they wanted to make, treasury made decisions, they wanted to make accounting made decisions they wanted to make and nothing really kind of came together. And where I see clients being really, really successful are the ones that have group accountability. If revenue cycle is talking about a project someone, then they have brought in the other parts of the organization, if treasury is talking about a product with someone that they’re bringing in all of the other parts of the organization. And I had an example not too long ago, where, you know, revenue cycle team had decided to go with a certain product and they, you know, had gotten to the contracting phase and even signed the contract. And then they came to the treasurer and said, “Hey, I need you to go open a new bank account and I need you to set up new merchant processing IDs with a provider you’ve never worked with before”. And needless to say, he was a little hurt. And, you know, it was a challenge because you know, they had met a need that they needed, but it wasn’t going to fit into the overall experience of the patient. It didn’t even accommodate for patient refunds, which is a huge problem. And so, it was going to actually move him backwards from digital patient refunds on the back on the credit card to now he was going to have to issue checks for any payment that was taken in this way. So, as I think about it, it’s wanting to make sure that everybody in the organization sees the full chain of custody of a transaction from you know, the point of transaction to the end of it essentially, and fully understands that each and every technology partner that you bring in along the way could have an impact and create friction in that environment. I think the other big theme that I see is, technology is rapidly changing and if Julia’s company has a product or a feature that I think is really slick, I’ll probably go develop one myself, it’s pretty similar to meet the same need. And so, one of the things I would encourage providers to do is really ensure that when you’re starting to talk about a new theme or new feature or something like that, make sure you’re reaching out to your existing vendor base your existing supplier base to say, “Hey, do you have something that would do this?” Because chances are, if they do, it will be a lot more seamless for you both for your patients as well as well as your staff.


Craig Jeffery  38:17 

Interesting. I mean, I think part of the conversation you have this description of like to see straight end-to-end view, a comprehensive view to make the best solutions. And then when you talked about API’s earlier, I thought that was going to be the best of breed and fitting together. But you’re saying, you know, hey, the core ecosystem if they have one, they’ve integrated with it. That might be a better a better fit, because it’s part of the same family of services.


Drew Emrich  38:46 

Yeah, and I think it’s probably both and, right? I think that there’s components where your current provider can probably do something just as easily as another, potentially. And then there might be a situation where another provider can easily plug in and would have enhanced feature functionality that nobody else is gonna build. And so, I think there’s a constant kind of tug and pull against, you know, is it right to kind of plug in or is it right to kind of go with an existing integrated solution, but I think that the API allows for that more holistically now. But I think there’s still that that ability to maximize your existing vendor relationships been a kind of a good first step to explore.


Craig Jeffery  39:32

Yeah, some good points there to think about. Thanks for that. Julia, I want to I want to shift a little bit to some of these macroeconomic themes. I can some of the disruptions or you know, all of a sudden, we have people talking about supply chain, who never talked about supply chain in their lives like where was one thing when we ran out of toilet paper. Now it’s like, where’s the meat in the in the grocery store and we can’t buy certain laptops like whole sections are sold out. There is massive, massive disruption in supply chain, labor shortages seem particularly acute in food service industries and other areas. How have these types of shifts, supply chain labor shortages? Other items, how is that impacting this arena of healthcare?

Julia McAllister  40:22 

Absolutely, and supply chain conversations and importance of supply chain within the healthcare industry. Those conversations have persisted for a very, very long time. The pandemic certainly accelerated our awareness of supply chain and more importantly, our awareness of the need for supply chain resiliency. And actually, what Drew was mentioning in his comments just a moment ago, really ties into the underlying infrastructure that’s needed for supporting shifts in care delivery models. Either due to consumerism or due to pandemic or whatever the factors that you can think of, and the infrastructure that’s really needed to support care delivery. I think telehealth is probably the most obvious example. But in reality, we have been experiencing sites of care shifts for quite some time, earlier I mentioned you know, shift from inpatient to ambulatory from acute to non-acute post-acute to retail, home health, virtual care, what have you. So, shifts in care delivery like this really tie very closely to care utilization and actually have implications related to facilities. If the size, the capacity, the location, the hours of operation? It does, it has they have implications on staffing, both clinical and non-clinical and staff compensation. It naturally the infrastructure and processes and technology that’s needed to support them in the investments that we’re making in sort of, you know, the major technology purchases, as well as partnerships with FinTechs or other technology providers that fill a particular gap or address a certain need. We talked about reimbursement a little bit earlier. So, it’s from, as Drew just pointed out, how to correctly bill for a telehealth visit or you know, the level of utilizations how they really impact utilization and reimbursement in the risk sharing capitated type model. There are also long-term implications related to population health. COVID aside, with this shift to ambulatory we must start asking ourselves a question, are healthier populations shifting their healthcare consumption to ambulatory and hospitals potentially we’ll see sicker patients with longer length of stay, and hence there will be implication on infrastructure, people, processes, technology utilization,


Craig Jeffery 

Has that been happening during COVID?


Julia McAllister 

Oh, during COVID Absolutely. Well, during COVID, there was another phenomenon and what we saw is our health system being stressed overloaded with COVID cases, but on the flip side, there was underutilization as it relates to elective care, chronic care and you know, elective procedures and things like that. So, longer term implications, I think, have we really seen all of the effects from underutilization you know, we were saying what happened to heart attacks and appendicitis during COVID? You know, where did they exactly where did they go? Right? So, what will be the further impact on care delivery models as we move forward? And so, I think as we come out of the pandemic, we must consider these long-term implications and basically what people processes and technology needs, we will have to support and how resilient and nimble we must be should another disruptive event to occur. So, all of this more broadly categorized as capacity management and it’s actually a fascinating topic personally fascinating to me, and I think we can have another you know, really, really long conversation because it has so many implications around infrastructure, labor, supply chain. Capacity management is a critically important concept to overall ability to scale up or scale down actually, to meet care utilization demands in the most effective and efficient manner. So, Craig, to your point about supply chain, supply chain is a big factor in capacity management. And we talked a few moments ago that we’re all became acutely aware of supply chain. We actually, I think, admitted to ourselves realize may or may not be the right term, we admitted to ourselves that supply chain is much broader than mere procurement, and that LMV to supply chain conversations from hospital basement to the C suite. So, supply chain took on a role of truly a strategic discipline. And I’ll give you another stat to ponder. Supply chain expenses actually represent anywhere from 15 to 40% of a typical hospital operating budget. Such a spread is because of you know, depending on the case mix index or supply chain maturity of that facility, as well as adoption best practices, and is actually the second largest spend behind labor. So, as we think about care utilization, delivery model, and really implication for supply chain, effective supply chain management strategies are extremely important, because ultimately, it will help us to speed improve speed and accuracy of reimbursements a will help us realize savings, it will enable us to deliver care where care is actually needed and wanted by consumers as we have discussed earlier. And also, when we’re thinking about supply chain resiliency, we must understand the interdependencies within supply chain between different suppliers and supplies themselves. And, you know, if we cannot procure supplies or a particular item, it doesn’t matter how good a return we negotiated or how good of a price we negotiated because it all becomes moot points. So here comes the concept of supplier segmentation and strategic sourcing and it must apply not only to high dollar ticket items, but also to low dollar suppliers. I’ll give you a couple of examples of the onset of COVID when we had an unprecedented demand for ventilators. Did you know that actually those ventilator patients required a cocktail of 13 different drugs? So, that had implications on you know, drug distribution? The N95 masks for providers were actually fitted with saffron, a very, very fine fine sugar. So, at some point that created also you know, a shortage or perceived shortage of that so something as simple as blue masking tape as the elective part of healthcare started to reopen after COVID, that became in high demand and there was a temporary shortage of it because we needed a lot of blue tape to mask off you know, our social distancing squares where to stand. So, so when we think about strategic sourcing and supplier segmentation, we must consider, as Drew had pointed out in a different context, that full chain of custody of supplies. So, strategic sourcing, supplier segmentation and supply chain finance are actually critically important element of not only supply chain discipline itself, but this overall concept of capacity management. And I’ll also answer your question about labor. So, I mentioned that you know, supply chain costs were the second highest. The first highest is of course, labor, right and pre-pandemic labor costs represented about 60% of operating budgets. And be interesting to see what they are today. Well, maybe it’s the same proportion because the cost of supplies themselves have increased, and also because of the labor shortages and subsequently rising labor costs we see yet another impetus for finding additional operational efficiencies and cost savings and the way we can accomplish those, not necessarily but asking our suppliers to reduce their price because the supply chain shortages are happening to suppliers themselves as well as to healthcare. But we’re really must leverage innovation technology, automation, we talked about RPA, machine learning, AI, and their use cases in ref cycle also use cases and supply chain as well. It’s the whole move to digital in payables and receivables, you know, reducing paper and digitization. I said that without fumbling that five times. So really, finance and treasury are becoming important key partners within the whole healthcare ecosystem.


Craig Jeffery 

Yeah, that’s good. So, there’s a number of things I have learned there but if there is a increased shortage on the blue tape, I’m blaming you for that, yeah, you know if you don’t think about that, but yeah, thank you. Thank you for those points. You know, this is this a podcast on the health care industry vertical, our podcast channel is heavily geared towards treasury, its Treasurer Update Podcast. So Drew, maybe I can ask you to bring back the links, where they may not have been as obvious to the treasury organization. How does treasury and helped organizations? How should they think about this? How does this create some adaptations, both for them, but also for others who think about how one of these areas impacts someone else like in treasury, and maybe a hospital system?


Drew Emrich 

If you wanted to boil down what Julia said, I mean, costs are skyrocketing, while revenues are plunging, and if you’re sitting in the treasury office, that’s always a scary place to be, right? And so, you know, obviously, a lot of the hospitals got some stimulus money which helped them, you know, weathered the storm which was, which was fantastic for the industry as a whole. But in general, costs are skyrocketing, whether it be the cost of goods or the cost of labor, and at the same time, you see this shift towards reimbursement models being driven down, you saw underutilization of care going down. And so how do you deal with that? Well, you really have to have effective cash management, policies, procedures, practices, you have to have the right systems and technology in place to automate. It comes to a point where you really need to be able to do things in an automated and efficient way without having to hire more people to do things manually. And so that might be again, your treasury infrastructure. What are you investing in? From a technology perspective? What’s your treasurer workstation? What’s your ERP system? Does it have capacity to do some of these various functions in an automated fashion that are otherwise manual right now? I think the word or the theme that I would date is really two words but is working capital that was suddenly a buzzword that came. It’s always been a theme for banks to talk about it suddenly became a theme that client listened to and asked about. And so, that’s really about how do you maximize your days payable outstanding while minimizing your day sales outstanding, managing your inventory loss effectively, and all without disrupting the global supply chain as a whole you know, you have these health care organizations who are trying to provide care and they’re trying to manage, you know, their supply base and making sure that they’re not taking out a small supplier who they’ve hired for the last, you know, 20 years and if they just to say, hey, we’re not going to pay you for 90 days now. That’s not a win for that supplier. They’re going to go out of business, it might push the downstream manufacturer of a component or the raw material that that downstream manufacturer buys. So how do you create kind of a win-win for the overall supply chain? So, what we saw a lot of clients really moving to was working capital management. So how do you drive essentially a win-win for everybody in the solution, which would be things like supply chain finance, we saw a lot of interest in that we saw a lot of interest in dynamic discounting and a lot of interest., we mentioned it earlier as well, the virtual payable so virtual cards. And how do you know, leverage, extending your payment terms while maybe paying quicker? Or getting a discount of some sort. And what we found was the cash in hand for many of these suppliers was a lot more valuable than a cost of goods sold, if you will. And so, I would say, effectively managing your day-to-day cash flows, your forecasting and then using those data tools to effectively drive a solid working capital picture for you.


Craig Jeffery  

Yeah, it sounds like you said cash flow is king in the in a nuanced way for healthcare, which is, which is good now, I did want to bring in some of the discussion around data analytics AI. Both of you talked a little bit about that what what’s going on with AI, machine learning, you know, even RPA what are some things you can get us up to up to date on with regard to that type of tech and data?


Drew Emrich

Yeah, I think this really fits well with the conversation we were just having, right. So how do you leverage technology to automate otherwise manual processes to reduce your cost, right? So, you have to look for every little avenue you can find to automate processes that currently take your employees, three, four or five, six hours to do a matter of seconds to do and so that comes back to that whole decision of what vendors and what suppliers are you are you partnering with? So, I would really break this down into a couple of areas for a treasury organization, kind of cash positioning, etc. and cash forecasting, and then kind of the reporting rules and things of that nature. So, from a RPA perspective, so again, RPA is the remote robotic process automation. So that’s simply an if then statement, if you see this, then do that and you’re telling the machine to do that set of a person. You know, I see that really in a couple places, driving daily cash worksheets. So, how can you automate your daily cash positioning function using RPA that can be done a lot of times your treasury workstations through your ERP, a number of banks offer tools that do that sort of thing for you as well. Another area we’ve seen on that as well is really around the GL posting. So how do you generate an automated GL posting file? Instead of having somebody sitting there manually doing journal entries on an accounting ledger, right? There are tools again, within all these infrastructures that technology infrastructures we’ve talked about, that allow you to automate, if-then statements around posting those to the to the general ledger creating this journal entry. So, those are two areas I really have seen in the treasury world, RPA kind of take off if you will. From machine learning or AI which is the, you know, trendy topic, if you will, I see this really in the world of cash forecasting. So, you know, we’ve seen a lot of clients struggle for many, many years on cash forecasting. And so, technology now is able to leverage kind of basic rules around your you know, your data, so looking at historical data, but then it’s able to take that learn from what your data has said, and create much more accurate and robust, meaningful forecasts for you. And I think the last one there, I would just say I’ve seen this over the last couple of years, is taking receivables and really making that a automated posting file from what would I would call previously analog processes or paper based processes. So, whether you get an ACH payment, the data sometimes doesn’t flow with the payment and so you get an email you get a picture, you get a spreadsheet or something. Somebody’s still keeping that in and manually gathering all that data. There are tools now that are out there that will either pick up the images or pick up data off the images, or it will pick up data from an attachment in an email or it will look for the data in an email. And the systems are actually able to dynamically learn based on what they’re seeing how to actually pick that up so that each and every time it gets better and better and better at picking up the data in an accurate way. So, if you were at 80% auto posting at the beginning, maybe after some of these, you know weeks of learning it’s going to actually be at you know, 85, 90 95% auto posting, right? And that saves a tremendous amount of time when you think about your staff time and being more efficient and hopefully lowering your costs. So, those are some of the areas I see that kind of AI robotics, if you will in the treasury world and then the use cases and revenue cycle for the that side of the healthcare world is, I would honestly say, is endless. I mean, that’s where you see a lot of the FinTechs coming in to do technology, data digging and things of that nature.


Craig Jeffery 

More analytics. Yeah, I think I think we just started scratching the surface on tech and thanks for your comments. And I let’s move to wrap up. I’ve really been enjoying what both of you have been saying but we’ll start with you on the wrap up, Drew and then we’ll start and then finish with you, Julia on that. So, maybe just final thoughts or any key takeaways that we should be thinking about in healthcare?


Drew Emrich 

Yeah, I would say just kind of going with this trend of seismic shifts, right? I mean, earthquakes can’t be prevented. You can’t control them. You don’t get to decide when they hit. But what you can do is prepare for them and you can build an infrastructure, you think about buildings that have the ability to withstand a humongous earthquake, right? So, the idea that I would encourage, you know, healthcare companies to be looking at is how do you create a technological infrastructure that is both strong and flexible. It’s future proofed to an extent that you can withstand something of magnitude that we just kind of experienced. I like the idea of a–I’m a sports guy. So, bend don’t break is what you always heard on defense, you know, so how do you build a resilient organization that has the ability to withstand something that you didn’t expect? And so, I think it’s having again, that kind of groupthink mentality that everybody in the organization is on the same page, rowing the boat in the same direction, that they’re all on the boat, not some people in different boats all over the lake, right? So, I think those are really the themes that I would have is just making sure that the organization is got a single direction you’re headed in that direction is for technological advancement, and that isn’t just fixed in a concrete pillar, but it really is flexible and able to, you know, adapt as the world changes because it’s going to continue to change.


Craig Jeffery  

Very nice. Julia, your final thoughts.


Julia McAllister

First of all, I agree with the points that Drew made, they were absolutely on point. So, to perhaps add or maybe underscore some of those concepts and pieces of advice that Drew shared. Healthcare is very, very complex, and it has always operated on thin margins, and sorry to keep bringing up COVID, but COVID devastated those margins. And we’re recovering from it, but we’re not quite all the way there. So as treasury professionals, we’re really must be aware of the complexities and shifts happening in healthcare, and not only be aware of what is happening but really understand the underlying causes and drivers. Behind the shifts, because they actually have a direct impact on the financial health of health care organizations. We talked about consumerism at the beginning of the podcast and the reality is that consumerism does have major impact on care delivery model and on reimbursement and it is here to stay. So, payers and providers alike, must really understand their consumer, meet them where they’re at, and really understand their preferences of not only engaging with the healthcare industry overall but also their preferences financially, how they’re willing to pay for health care, because as we talked a little bit earlier, quite a bit of payments actually coming directly from consumers’ pocket. We talked about data and analytics and Drew gave some excellent examples of you know, how automation, AI, machine learning, RPA can really free up valuable staff time and introduce savings and the reality is that we’ll probably experience labor shortages quite for quite some time. And I’m not suggesting that we will build an algorithm to replace a nurse. That’s not going to happen, but what we can do by leveraging technology in other areas in automating some of the mundane tasks, a) we can find savings that we can ultimately apply to, you know, where we need to expand more on labor on political staff, as well as free up our staff in other areas to perhaps to do more kind of meaningful from mundane, more decisioning and revenue generating activities. I think we just must embrace data and technology in innovation overall, right? Predictive analytics, data visualization, we must be aware of cybersecurity. We haven’t really touched on it. But you know, with data and technology and automation, cybersecurity becomes top of mind too. Data will help us to speak a common language. It will give us better insights into critical KPIs that we leverage in the industry. It will help us make better and more informed decisions, course correct faster, and ultimately become more responsive and adaptive to the seismic shifts that have yet to come in this industry.



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