How Integrated Delivery Systems Are Transforming Healthcare

Stewart Gandolf  Hi, everyone. We’re interviewing John Marchica, who is an old friend of mine, having been on my podcast before. And I think I’ve been on his. And it turns out we have guitars in common, as you can see. If you’re watching the YouTube version we both have. His office is on a golf course. I live on a golf course. We have lots of common beyond the healthcare stuff. So welcome back, John. Good to see you.

John Marchica Thanks for having me.

Stewart Gandolf Oh, I love it less policy, or the day man, that’s what we’re going to talk about today, but not really that. Into the conversation later.

John Marchica Weave in a little less, Paul, and then a little talk about your keyboard over there. I have not made the jump to bring my one of my keyboards into the office. I think I would probably drive everybody out if I did that.

Stewart Gandolf It’s funny cause my all my client calls. Everybody brings up their guitar almost like I don’t know at least 80% of time somebody refers to it. Nobody brings up the keyboard one person has, and it’s a synthesizer. It’s a good keyboard. It’s not like a little plinky thing that my kids used to play when they were playing music. anyway. So we’re gonna talk about something completely different. 1st of all, John. You know, assuming that you know, the listeners today haven’t all been 100% in red. Listen to the last podcast we did with you a couple of years ago during Covid. Tell us about Darwin research group. What do you do? And, by the way, why is it, Darwin? Let’s start there.

John Marchica Good question. So Darwin research group, we’re based out of Scottsdale and our sort of lens of focus. Our research area focus is in organized healthcare delivery systems of all types. We call them IDNs, big physician groups, big cancer centers. You know, everywhere that somebody has decided to put all of this together under some kind of holding company. And we analyze those systems. And on the client side, most of not all, but most of the people that we work with are in the life sciences. Who are trying to understand the changes in healthcare. So I kicked this off. I will get into a little bit of my background, I’m sure, with some of these questions, but I kicked off the LLC n 2,010. So officially, we’re. I guess, almost 15 at this point, although I will say the 1st 5 years, and if you go back to when you were starting, Stewart, you might remember the days, or who knows? Maybe you just like. And then you have a company, and all these employees, and all this money comes.

Stewart Gandolf Long, long, slog baby. It’s like.

John Marchica Long slot right? So those 1st 5 years was like, if I could afford to bring in somebody for part time from some agency, to help me out with a few things. So. But anyway, so that’s our focus. I spend most of my time. If I’m if I’m not interviewing or talking to people in the space. It’s reading about it, trying to understand the changes. And one of the things that I just love about what I do, and I bet you would probably agree with me on what you do. Is that the fact that there’s so much change going on for so long for as long as I can remember. It makes this kind of work interesting. You know. It’s not like everything is boilerplate, and you’re just you know, same thing year after year after year. There’s always something new, because healthcare is so dynamic, so that part of it I love.

Stewart Gandolf I totally agree. And it’s funny, because, you know, for us, we’ve had to reinvent ourselves multiple times. That’s why we’re all still here. And because we wouldn’t be right, we’ve changed our model multiple times. And yeah, it’s wildly different than it used to be in the old days for us. And you know I have a team. Now that I’ve always had good teams, and this one just is the smoking best team like it’s amazing. And it’s but it’s, you know. Okay, guitar analogy metaphor. We’ll bring that in right now.

John Marchica Alright!

Stewart Gandolf Yeah, I’ll tell you like, I use this with clients a lot, and it’s real. It’s like good musicians play with other good musicians. And so, I find that in marketing the best talent wants to be with other good talent, and you can’t. It’s really hard when you’re starting, because, like you may be really smart, but the talent wants to be with other talent besides just the founder.

John Marchica So true.

Stewart Gandolf Yeah.

John Marchica Yeah, it’s so true. And then to your point about reinvention so early on our 1st sort of market research report, you know that you could. You could buy off the shelf. Was in home health care and our second one, and I really thought this company was going to be all about ACOs and value based care delivery. And like, that’s what people wanted to know about. And look. I know we’re gonna probably dive into that as maybe a topic to talk about. But There’s it’s still relevant. It’s just that I feel like on the research side, at least in those early years. I was a little bit early on stuff. You know what I mean. It’s like I saw, oh, this is gonna be interesting. People are going to want to look at this, and we’re going to go down this rabbit hole. And then folks would say, Yeah, well, home health that it’s hasn’t really come into its own yet. It’s still premature to talk about. You know that kind of attitude, and it took us a while to kind of calibrate on. You know, the integrated delivery network or the integrated health system is sort of being. I don’t know the unit of analysis for lack of a better term to try to sound smart. You know, the unit of analysis is the IDN. and that’s when we really took off. So it. It happens right? I mean, you gotta reinvent.

Stewart Gandolf Well, it’s easy to be a pioneer, but then you get arrows in your back. So it’s like it’s like, but it’s also good to be there, because later on it gets a lot harder. So just briefly what? Tell me a little about your background, and how you came up with this idea that you mentioned earlier your background. I’m just curious prior to this, and we’re gonna jump straight into this in a second. But.

John Marchica Sure.

Stewart Gandolf Yeah.

John Marchica So when I got out of school the 1st time I cut my teeth at Abbott, so I was a Pharma guy, because the division that I was in later became AV when they kind of split the company apart. And I was there and then from there. I I had the entrepreneurial bug. You know what this is like, Stuart. So I had the bug, and I started a medical education. Company called fax watch that I ran for about 11 years, and then I sold it and went to go work on a PhD. And in Dartmouth’s kind of interdisciplinary program. And that’s sort of important to the narrative today, I think, because had I not had that sort of pit stop for 5 years, and where we were, you know, in our doctoral seminars, like inventing value, based care models and testing them and kind of just going back and forth with other students. I probably wouldn’t be doing what I am today. But that time that I you know, I always joke about this. I said, most guys, they have a midlife crisis. They buy a corvette. Yeah. I went off and worked on a PhD. And you know.

Stewart Gandolf Poor guy!

John Marchica Poor guy you know.

Stewart Gandolf I’m sure there’s help for you somewhere. Wouldn’t the car better been more fun.

John Marchica Corvette would have been way. More fun, and I probably would have picked something even more fun than that. Maybe. Maybe a Ducati or something. But anyway, I being exposed to that kind of thinking and like understanding where healthcare was going and looking at the economics, looking at the policy implications. Looking at the outcomes and epidemiology, you know, kind of clinical epidemiology where we were going, the important areas to focus on. I just got. There’s like that second wind you get, you know, sometimes midway in life. And so starting this company, as I said, early on it, was trying to find our footing and what I wanted to focus on. But you know this just because you want to focus on something right, leader, gonna get arrows in the back right? But it’s really what the marketplace wants and what’s most needed, what people are willing to pay for what they want to know. And in this business the biggest question. Well, there’s a bunch of question marks. But one of the biggest ones is, you know. What about the integrated delivery network. What about this sort of model of care? And in some cases model of payment as well? it seems like there’s a lot of movement over the last decade or two in this area, a lot of mergers and acquisitions. Some of the bigger getting bigger and seems to be the place where, at least from the life sciences, perspective, where they have the most questions, and where there’s a lot of change happening. And so that’s where we ended up. I guess you know the other way that I would describe it sort of in a non-healthcare way, Stuart, is I get to write, I get to do talks and keynotes, I get to read a lot and like, think about how and build models. I’ve sort of constructed this company to do all the stuff that I like to do.

Stewart Gandolf I love it.

John Marchica You know what I mean. So it’s like it. It’s kind of worked out that Darwin. And so, by the way, you did ask about the name.

Stewart Gandolf Yeah.

John Marchica So the doing I get to do a lot of what I like to do. Also, as you know, you don’t get it. You don’t get away from doing some of the things you don’t like to do, just because we don’t like to do them. So there are those tasks as well but At the time when I go back to that sort of 2010 timeframe. and having sold my company and working on a PhD. And I didn’t mention marriage. The 1st marriage didn’t go so well, so that one ended and there was a lot of change. And so, I was thinking about evolving sort of like, what’s my next step? Where am I going? And that word evolution kind of kept? So, it’s sort of a nod to that, even though I don’t think that that Charles Darwin 1st of all came a lot earlier. But he wasn’t thinking about self-actualization, and you know Maslow’s hierarchy When he was talking about the theory of natural selection. But that’s kind of stuck with me, and it kind of goes to your point earlier, which is, you know, about trying different things and reinventing yourself, because if you don’t, you die.

Stewart Gandolf Yup!

John Marchica You’ll make it.

Stewart Gandolf Absolutely natural selection. Awesome. Okay? So let’s go into the you’ve mentioned the integrated delivery network, and I would love you to take a moment, just to define that to some of the audience who may not be as familiar with that. And then I’d love to hear some of the common themes and trends that you’re seeing.

John Marchica Sure. So what I like to think of is, I start with the premise of sort of a holding company, you know. of an entity that, and it can be in any different kind of industry, right? But just a holding company that has a lot of interest and in the, in the healthcare world, that sort of moniker IDN or integrated delivery network. It also means integrated health system. It means a lot of different things to different people. And it’s kind of become this catch all to describe something big that’s delivering care. But really it’s a holding company where there are varying degrees of the ability to deliver care. So you might have a system that has a couple of hospitals and maybe a physician group. and they all are under the same umbrella, and you know the doctors and the physician group are referring to the hospitals for procedures, and maybe they’re contracted. Or maybe they’re even employed. And so that’s an example of a small delivery system or IDN. And then you kind of go to the other spectrum, and you look at an organization like a Kaiser or an Intermountain or here in in Phoenix? like a banner. One of these organizations, where they have not only the hospitals and the physician groups. but they might have a home healthcare wing. They might have clinics. They might have partnerships, for like urgent cares. Maybe even with some of the retail groups they may have their own specialty Pharmacy and infusion sites. So any way that you think about healthcare could be delivered. And then, if you want to add on to that with like a Kaiser, the insurance component of it, too, right? So organizations like Kaiser had their roots in managed health care. Then it’s like cradle to grave. I forget who they used to say that about was it, Sears? And, of course. what’s.

Stewart Gandolf Life cycle.

John Marchica Yeah, right? So you had the life cycle talk right? So but that’s and so a lot of the conversation that people have when trying to understand these groups is, you know how many, how many different ways are they delivering care, and how truly integrated are the different ways of care. For example, you have a problem that gets identified by your primary care, doctor, that doctor sends you to a specialist. The specialist determines that, you know. Let’s say that you know you have a non-threatening cancerous lesion on your face, and that’s got to be taken care of. And so then the derm sends you off to surgeon that handles that. And maybe if you’re in the Kaiser model through work. your insurance is Kaiser, and so you go to a Kaiser facility, and you see initially a Kaiser primary care, doctor. Then you see a Kaiser specialist and you get a procedure probably in an outpatient setting in a Kaiser clinic right? And the degree to which everybody knows what everybody else is doing. And there’s some planning and forethought and some measurement on the back end. So pretty typical management business management things. That’s one way that we assess whether a healthcare delivery network or IDN or healthcare system is advanced or not so advanced. How well are they communicating? How advanced are they Technologically? and so a lot of these kinds of questions we ask, because. you know, there are some that think that if we project out 5 years, 10 years, whatever, that in the end we’re gonna have, like a handful of these big delivery networks that are just, you know, today, depending on how you measure them. There are 600-700 of them across the US. You know. Maybe we’re gonna end up with a half dozen to a dozen that are gonna be dictating how care is delivered and paid for in the US. So it is important to pay attention to them. If you believe that that’s kind of where things are trending, regardless of Where they’re actually going. So does that make sense, as far as explanation, anything you’d add to that in terms of my definition. I mean. That’s the way that I look at them.

Stewart Gandolf No, I love it, and I think we talked a little bit offline about it. You know we work with a one of our clients is a, you know, sort of community hospital, 500 beds. And it’s trying to do kind of a variation at a clinically integrated network. But that’s not really the same thing, because they don’t have that level of organization. And that’s just it’s a tough model. And, you know, going back to that example, they’re in a major metro area. And you know, there’s now, health systems all around them. And so you know, that’s what people are running about on the health side. Right well, how many of these independent hospitals will survive? And then and then you get into things like you mentioned infusion. We have an infusion client. And so, like, you know, there’s natural progression of okay, you’ve got gastroenterology. What about the infusion? Or referring them out to an infusion center. Do you, you know, have an affiliated ecology like, how does all this stuff fit together? And you know you’ve come from a cottage industry of, you know hundreds of different players. The private equity owned and also larger health system owned systems that you know, we’re all hoping there’s some economies of scale and efficiencies by doing it that way, you know, like versus, you know, sea of hundreds of different independent providers. So that’s ex to me. This is fascinating for you watching it from your point of view well, tell us about some of the trends you’re seeing now with, you know, maybe touching on all the stuff we just discussed like.

John Marchica Yeah.

Stewart Gandolf That all work.

John Marchica Well, I think you know the overarching trend. I don’t know how many people would agree with me on this. Maybe this is just my bias. But I would say, the overarching trend that we’ve been seeing over years is this notion of value based care, and the triple aim and things like that. Meaning paying for the quality of the outcomes rather than the number of services. You know, we’re in a fee for service world. Right? So I would say that underneath everything that’s going on, or maybe it’s above depending on how you want. Your picture isa movement to get more value out of healthcare. Right? Would you agree with that? I mean, it’s just. That’s what we’ve been trying to do. You could say we say like. There’s all this inefficiency in the system, all this waste and if we could just get more efficient and smarter about how we do things and focus on the outcomes, because I mean, think about it back in the day. I don’t know what you were doing at that time, but let’s say, you know, early nineties, late eighties. When I was just starting to work, you know, kind of becoming a professional the everything was managed Health care, and that managed care.


Stewart Gandolf Yeah, for sure. Like good everybody and.

John Marchica And everybody oh, managed care, and you know, and in some ways people might have been right to be afraid, because managed care. Look that their tool was just the scalpel. Their tool was to say, we’re just gonna deny care. And I’m over generalizing, obviously. But this is this is the knock on traditional managed care. We’re just gonna not pay for things, and if we don’t pay for things, then we’re profitable and we’re holding down healthcare costs. Well, that’s ridiculous, if you really, if you think about it. Yeah. And so you know, some folks came along it’s largely credited to Don Berwick, and he says, You know, it’s not just him. It’s a couple of other guys, too. But from the IHI came out in the early 2000s and said. You know, we want to improve the health of populations. And we want to improve people’s experience with care. we also want to hold the line on costs, and we want to do all that at the same time. And triple aim, right. And so people said, Well, that’s crazy. You can’t do that because we have this old notion. or I don’t know if you even know if it’s old. Maybe it’s an American notion. But we definitely, I think equate price with value. Right? The easiest thing is you know the BMW. Versus you know a Honda or Peugeot, or something, or and then above that, you got your Maserati’s and all these fancy sports cars. people say, well, I’m going to pay 200 300 grand for a car, because I get XY. And Z. And they associate that pleasure or the value. But when you talk about healthcare it really kind of breaks down, and I think the biggest reason why is we’re talking about life and death at the end of the day and quality of life when we’re around. And so the consequences of decisions around healthcare are so much bigger than consumer goods, and some of the other things that we, you know, do make our pricing models on that it’s hard for us to get our arms around, and I think I don’t know you think, Stuart, but I think it becomes even more complicated when you’re trying to pay for value when you’re trying to put a  dollar amount or trying to say, Okay, well, this is the outcome that we want, and we want to pay for that versus. You know the way that we do pricing today.

Stewart Gandolf Well, it’s yeah. It’s so hard, and, you know, like the I don’t know if we talked about this last time, John. But I, you know, first got. I’ve always been as a consumer interested in patient experience, but I was invited to speak at Cleveland Clinic about a little over a decade ago about patient experience on their big symposium. They were, they were really leading that my friend Jim Rolando, has been on our podcast a bunch. And so like. That’s one whole category that you know. Back then a lot of still but back then, especially a lot of people, including doctors like I don’t care if they like me. It’s like no, it’s missing the point right? It’s a little.

John Marchica Right.

Stewart Gandolf And then the idea of you know keeping the cost per patient down. That’s you know, that goes back to managed care. But then improving the health of population. That’s like, okay. Now, that’s a lot. And then we start thinking about, you know, when we talked about this sort of thing in the past. And I podcast with various providers and different people. You know, I always think about allergies and asthma. And so you know, it’s like. It’s more than just giving the right inhaler. It’s like, if you go to their house. It’s, you know, especially on lower income side of this. and they’ve got dogs and cats, and it’s dusty. And it’s all running around. And you know, like, there’s just a you know, you would think this is really obvious. That’s gonna help your kid. But it really isn’t obvious to a lot of people. And like, How do we do that? And who’s gonna pay that bill. But who’s gonna pay the bill in the emergency room like there’s a lot right.

John Marchica It’s a lot.

Stewart Gandolf But we know we all agree. The emergency room is a bad idea, but so if you don’t want to pay, you know, $20,000 for that visit. Maybe there’s worth sending a social work over there to help them clean it up once in a while, or and I’m there’s no easy answer. This is really complex. And a mess so yeah.

John Marchica It’s out of. It’s out of the box like I remember years ago. What was it, Montefiore? putting air conditioning units into a certain area in the Bronx, where there were high asthma rates. And then, you know, you hear about like food cooperatives that some of the health systems do. And some of the housing work that Kaiser and some of the other systems have done for homelessness. So it’s like Penny wise and pound foolish. Right? We’re gonna save money here. But if we don’t invest in this over the long haul, it’s gonna come back to bite us. And so I think that’s where a lot of that thinking comes from. Like, let’s address some of the root causes, or the, you know, get at the root. But that’s not how health in general. That’s not why people get into healthcare, or what doctors train for, or nurses train for. Right? You know, it’s so. It’s it makes forces them to be kind of out of the box. And they’re thinking.

Stewart Gandolf Well, I get, you know, in talking to doctors, as I often do especially back when I was leading seminars for them, like every week like I used to do. You know, I would always ask even the most sort of status quo doctors out there who felt like anything is just talking about Socialism when you said, Would you design the healthcare system the way it is now, if you started from scratch? Oh, no.

John Marchica Right.

Stewart Gandolf Who would? Who would do that? Who would design the healthcare system from scratch the way it is now, even like I’m sure there’s people out there listening to this. Who would say I do. But most people I know even the most conservative status quo kind of leading folks are like, yeah, no, that’s probably not the best model ever. And that is, you’re right about the training. It’s like, you know, things like palliative care. For example, nobody wants to do palliative care. You want to get the patient better. You want to do 1, 3 and get them better. And preventive isn’t very exciting yet, you know, if we’re trying to look at the broader population, and you know, broader costs, it’s we need to think about that. So let’s go back to trends like, what is the good news and bad news? Let’s frame it that way like since you started this, and studying this seriously, like what things are like, oh, thank God, that’s finally working. And what things like. Why is this still a problem? I’d love to know. What are your thoughts? There.

John Marchica I would say couple of things back to the trends. One of the disappointments for me I’d say at this point is the permanent uptick in telemedicine. and that if, when we’re coming out, if you remember and I’m sure we talked about this previously coming out of Covid, and during Covid there are a lot of people who did heroic things with telemedicine to be able to keep care being delivered in the middle of a pandemic and so much switched to that. And you know there was changes in reimbursement to allow for more telemedicine. It got people to where you know. Right place right time, right? Right? That that those kind of con conversations well, turns out, people like to look on their phone or on their computer and have a visit. It’s very convenient for them. There was a lot of hype and a lot of we wrote a lot about it here. I’m sure you did, too. And you know here, as we sit in mid towards the end of 2024, I’ve got like a big yawn, you know, like, well, what really happened? How much did it really take over? How much did the payment mechanisms really adjust for this? How much did you know? And so I don’t think that it’s remotely realized its promise. Not just because we don’t talk about it as much today as we were a few years ago. On the other hand, something that does show a lot of promise. And it’s probably, I said, there’s the overarching trend, but it’s probably the number one trend is the adoption of AI into various elements, every element really, that you could think of in healthcare? It seems like somebody’s testing this out. but the introduction of AI into not just clinical decision making or clinical support, but in population, health. The financial sphere. In communications. I mean. It touches so many different areas that it’s clearly to in my mind the hottest trend we’ve tried not to write about it. There’s so much on it every single week that’s coming out on AI and I think you know it’s kind of I don’t know. I guess everybody sort of says this is to some degree that the jury is out. I don’t think that people think the jury is out like AI is gonna be gone in a few years. It’s more like. well, now that we have this new technology. how do we refine it? Where is it? Good? Where is it not so good. And I think some of the largest systems, and even some of the more medium sized groups out there. And physician groups are trying to figure this out as well as the Googles and the Microsofts and the Apples of the world. I’m still kind of in that game, so.

Stewart Gandolf So I would. Let’s go down to that a little bit. I’d love to get your feedback on the following. So in terms of healthcare and the application. I’m just. I can. You know, with our position on the Internet, I see a lot of things. I hear a lot of things. I get pitched a lot of things right? And so some things have been pitched recently is AI for the purposes of taking routine. New patient calls, you know, trying to help them navigate or scheduling an appointment or following up with patients for routine things. And I’m talking voice, not that’s not just text or email. The A venture capital based company did some work and was showing that the AI doctor that they had created was doing a better job of diagnosing patients than the human doctors. Because you know, the thing about AI is at least in theory, you can control like it’s going down a certain protocol. It’s not prone to human error or bias. Right? It’s like, step 1, 2, 3, 4, 5 will always be the same. And then, if they say this, and that’ll always be the same. So those are 2 areas. Then you look at cost control, and you know, sort of accounting you’ve got things like trying to find, maybe hidden clues in the data where illness might be in a certain community like those are just a few examples like, do you hear about any of that stuff? Or is there other stuff like, where do you see the biggest, most common, maybe groups of applications.

John Marchica I, so I’m sure I don’t talk to as many of these people, but I am sure, like on the financial side. For instance, in just getting better and smarter with coding right and maybe identifying. Did this patient come? Did we code this properly, and the kind of flags that would help out that are revenue generating potentially for that system. So I’m sure there’s a lot of that going on. We just don’t see it as much where I see it the most is in pop health and clinical decision, support and all of the realms of what they could probably fit, like 50 companies with offerings in this area. That kind of fall under that. But you know, back to your point about does the who makes the better decision. I mean, look, I I’m not. Gonna get into a matrix conversation about you know where we’re headed with machines. But if you think about. you know. how does a doctor or nurse how do they? How do they make decisions? And don’t they kind of go through? Maybe not consciously, or maybe consciously, if it’s built into the HR. But sort of a decision tree in their heads. Right? I see this. That means can’t be this. So I’m going to go down this path. And that’s kind of the way I think they make those decisions, of course, prone to bias. And sometimes those biases. I think we call that learning and wisdom could be a good thing that maybe we haven’t quite marshaled in the AI age.

Stewart Gandolf Yup!

John Marchica and then it’s sort of on the flip side. The bad thing, from what I hear, at least in just sort of like the ChatGPT realm of AI, that if it doesn’t really know the answer to something, it can make something up and sound really good. including references.

Stewart Gandolf Yeah.

John Marchica Right. Do you remember? The story was that the lawyer who had prepared some? I don’t know. I don’t remember, but it was relatively recently, in the last year or 2 that everything turned out to be made up, even the references, and that were put into the case law. So. I’m very careful. You know what in our world AI is great for brainstorming, not so great for facts.

Stewart Gandolf Yeah, for sure. Going back to you said there a minute ago, like, so I think you mentioned you know, population health planning. And so I’m gonna throw a scenario out there to you and tell me if this is something you’ve seen, because especially with sort of the IDNs. But like, if I think about okay, if I’m looking as an idea. And where do I want to have actual physical facilities for care? That’s a complex decision. There’s transportation issues. There’s, you know, the demographics of that area. Physical barriers, mental barriers to different areas. Have that, too. You know. Are we going to steal from other locations that feels like the kind of place is really, really complex that I would probably wouldn’t rely on AI. But I just want to know what AI has to say. Hey, is that an area using it? It seems like it would be natural for the kind of work you’re doing, or at least talking about.

John Marchica Again. then we are. We also have to be careful here, too, Stuart, because I don’t know if you’ve seen this, but it seems like everything these days is falling under the AI moniker.

Stewart Gandolf Oh, it’s a sales thing.

John Marchica So if you’re talking about, I developed an you know, an Excel algorithm that maximizes the potential for visits traded off with socioeconomic blah blah blah and traded off with all these other variables that’s already being done. And I would think, yeah. And you and I could sit down with our screens and a spreadsheet, and probably fill out a pretty decent prediction just on that. So I don’t know if AI is actually in that world. But I think you know ultimately it’s gonna come down to I mean, there’s some ethical issues. But I think right now. Because look, I don’t think on balance, there’s some systems that do pretty well, but on balance with the technology that we had available 5 years ago, and 10 years ago. I don’t think that these health systems are maximizing their efforts in population health and identifying the right patients right? And so the newer technologies hopefully can help out with that. But they bring again a whole host of other things. So I guess my kind of a lousy answer, Stuart, honestly. But it’s, you know, it’s kind of it depends. And then I asked the question, Well. is it really AI, or is it just good analytical thinking that built a model that is a good, predictive model.

Stewart Gandolf Yeah, that’s totally.

John Marchica Not the same thing.

Stewart Gandolf Yeah, well, it definitely has a lot of sex appeal. Like I said, there’s and I can see applications and all the stuff we discussed. And but yeah, at the end of the day. you know, we’re we are figuring out it’s not going anywhere. It’s really helpful. In a lot of ways, the you know, organizing the notes for the podcast my, you know, the writer that’s gonna go summarize this meeting between you. And I will probably use AI just to get a start. She’s not gonna do it that way. But that’s you know, part of. We use these tools in any way we can. So I want to go back to something you alluded to a minute ago, and my dogs by the name is Pirate, and it’s national speak like a pirate day. So there’s that right. He’s speaking right now. It’s Pirate in Spanish, actually. But.

John Marchica Did I start.

Stewart Gandolf Those of you that are listening to the actual recording here. But let’s talk about value based care. And you didn’t mention the sort of disappointment with that. So I’d say, value based care has been around now for a long time, and when I talk to people, you know leaders and clinicians privately, like, yeah, what I mean. It’s there. But you know, I thought it’d be a lot bigger by now, just like I thought we’d all be driving flying cars by now, and that hasn’t really happened the way we thought it would. So, you know. Give me a sense of I asked you earlier offline. You had an answer to this like, what is the penetration of value Care? Is there a percentage? How do you quantify that? Where is it now? Where is it going? You know all that kind of stuff.

John Marchica So it’s really interesting. It’s a question. Some form of this question is something that I’ve been asking in research interviews for well, over 10 years, and to your point. It’s been around a long time, I think, I said. 10 or 15 years or so. The concepts have been around longer than that. I mean, we were having our conversations back in school in ‘06 and ‘07. So it’s been around a while. I think there are good reasons for this, but I don’t think that it is really met the promise, at least sort of like where people thought that we would be, and I go back, and I don’t remember if I mentioned this last time. But it’s really. It was a really kind of a seminal moment for me. I go back to. you know, 2013, 2014 timeframe around that time, as I said, when I’m trying to figure out where this company was gonna go and what we were gonna focus on. And I went to a lot of the conferences back then that were really focused on value based care and ACOs, and you know some IDN stuff, too. And the people back then. So you figure 10 years ago, these conferences were on a scale relatively small to ones that we normally think of. But they’re specialized conferences. So maybe say, there’s a thousand people there, maybe 750 people there, and these are like, these people drank the Kool-Aid. They were totally. you know, a billion percent behind value based care and wanted to talk about what they were doing. And a lot of these guys, I bet, looked a lot like your clients. So there are a lot of physician groups, a lot of really strong, like entrepreneurial physicians that were moving their organizations in this direction, maybe to your point, putting together, clinically integrated network on top of everything. Bring other doctors into the fold. But every time I read a paper. you know, every time I see something come out. Avalier does a you know? An analysis of ex-government program and healthcare. And how they did. And I just, I just wanna yawn, right? The numbers…

Stewart Gandolf Tell us what you really think, John, tell us what you really I love it.

John Marchica But I mean I just I it doesn’t mean that I’m not a fan. It doesn’t mean that I don’t think it’s cool, and that we shouldn’t be moving to extract more value. And there isn’t waste and blah blah. I get all that, and I’m on board. But and you know, you look at it this way. So. and this is what I saw 15-20 years ago with the ACO model. You have a situation where you have an entity. Let’s just say a big physician group. They go to Medicare, and they say we want to be an ACO great. You did all your paperwork great and at our core. As an organization, we follow the triple aim. You know we want to improve the health of populations, reduce cost, so on, so forth. And as part of this agreement. Medicare says, sorry I’m going to do a little quick 101 here. I’ll try to do quickly. Medicare says, here’s your budget. Here’s how much money we think you’re going to spend. Talk to us in 18 months, how much money that we actually reimbursed you. and if there’s savings there, I’m really simplifying this. But if there’s savings there, we’re going to share in that savings. And so let’s say it’s 50/50 split we said you were going to spend. you know, a hundred million dollars on care for your patients. You only spent 90, and so there’s a 10 million dollar difference. And so let’s split that 10 million. We’ll give you a physician organization. We’ll give you 5 million great and we’ll keep as the government will keep 5 million. and that’s sort of a shared savings model. And we could talk about risk. And you know, quality and other things that go into it. But that’s sort of the basic gist, right? And so. But if you break down, if you look at that 5 million dollars, which seems like a lot. And then you say, well, according to our charter. 60, 75% of that has to be reinvested in the organization for technology, for improved care, and all of that right? So now you’re 5 million dollars. Now you’re down to, let’s say even a million, which is probably more realistic right once you’ve done all those other investments and let’s say that you’ve got you know a few 100 physicians in your physician group, or let’s say you’re an IDN. and you’re dealing with, you know. hundreds of millions or billions in that patient revenue overall, and you’ve got, you know, 2,000 docs under that are under salary, and another 2,000 that you’re contracted with number, right? So it starts to look really small. And the doc that was in that practice or part of that network. Part of that ACO looks at and says. Okay, well, I upgraded all my computer systems. I had to hire 2 more people that I didn’t have before, because I’ve got to manage this process, and they have to have a little more experience than the other person that that I had as an office manager. So I’ve done all of this. I’m also seeing more patients because I figured out how to become a little bit more efficient. and I just got a check for $450 from the ACO.


Stewart Gandolf Woohoo!

John Marchica Right?! So I I’m making a big deal out of this. But if you look at the numbers and look some of these convening organizations that put together the bundles that do the bundle payments and some ACOs. You know, there’s one in Florida that year after year seems to have 50, 60 70 million dollars in share savings. They seem to be killing it. But what is the net effect? The only thing that I will say at this point. I’m dying to hear what you think to Stuart on this point. But the net effect, I think, at this point that’s positive, has been an overall change in attitude. And I’ve said this from the very beginning about the ACO model and value based care models in general that if you can get people to shift their thinking from. I’m gonna save money because I’m gonna just not approve this procedure. I’m gonna cut costs versus I’m going to focus on outcomes that will lead to savings if I do the right things like preventive care and some things you mentioned. Well, if there’s that shift in attitude that helps us in the long run. I think that’s a good thing. But as far as the actual results that I’ve seen, and in terms of real impact on the cost side of things. Not a lot.

Stewart Gandolf
Yeah, so it’s funny, like, we were involved. you know, sort of tangentially with one of the pioneering ACOs. And like a lot of those really did get arrows in the back right? And so, yeah, I didn’t follow it. I don’t follow this anywhere nearly as close as you do, but I know a number pulled out, and they brought ones back in, and that that’s a whole thing. And now you’re done with the Government a lot to that whole story way beyond the scope of this call. But you know, I do remember. And even as recently as we’re talking to a major health system in Florida recently. If you just come back to like how to keep you out of the emergency room like, that’s the big driver. I think that seems to be like, okay, practically speaking, at least from the marketing side. How can we do our part? It’s like, let’s keep them healthy, and especially. And then, if you’re looking at the 80/20 rule that Pareto principle, like, okay, generally keeping people healthy is like, okay, it’s ambitious and broad. But you know, usually gonna find 1% of any population is going to be responsible for 50% of the results. Let’s think about that and figure out how to count. Keep them out of the emergency room might be a way to do this, but I so I’ll put that aside, and then going back to why, I love the way you just broke that down in terms of the numbers. Knowing the doctors, I do, boy, that would be less than a collective shrug like, Wait, I lost money. I lost a lot of money right? Exactly. Oh, you know, ethically, I like this. But, man, I’m working really hard. So I guess then, like, let’s say, you know, there’s election coming. You’re now that they appoint you as the Czar of this topic, which they could you know a lot.

John Marchica
They could.

Stewart Gandolf
So what would you do like? How’d you make things better? What can you do? What’s realistic goal? What’s like? Not a realistic goal?

John Marchica Well, boy, there’s a there’s another hour or two on this podcast. That we could, that we could pontificate about this. I am for non-political, non-ideological reasons. Because I’m going to preface that because for some reason, if I say this, then everybody’s going to take it politically. I think some form of, for lack of a better term, a Medicare for all is ultimately where, as a nation, as a society where we’re going to need to be.

Stewart Gandolf Yeah.

John Marchica And I say that with you know, understanding that especially from the world that I came from, and that I grew up in, that’s like a major heresy to say something like that right?

Stewart Gandolf
Yeah. It’s the only company ever.

John Marchica Yeah. Yeah. But if you really, if you just sort of take out, you know that whatever political nonsense that you’ve heard over the last 20 or so years, or 30 years, or whatever you know, and you think about it. A lot of the inefficiencies that we do have in healthcare have nothing to do with or can’t. We can’t innovate our way out of it. Necessarily. The inefficiencies that are there are structural, and one of the biggest ones I mean, we could talk about. You know, PBMs right on the Pharma side we can talk about PBMs, and whether that’s a market distortion. If it’s a good thing or a bad thing. But there’s so many of these things that I think we’d solve a lot of problems with, and I’ll give you a more tangible example. Why, I say this. we’d solve a lot of problems by having a more unified payment structure and not having to introduce the concept of competition in the way that we do today, like the way we have it now with the Affordable Care Act. And you know the old Heritage Foundation, you know. Model that became Obamacare. It’s a good interim step, but it’s not. I don’t see it as being the end goal and the example that I was going to use. We did a project for a client that was and this is a Pharma client that was looking to essentially implement a money back guarantee for across the board for all of their products. Have we talked about this? I mean, I’m trying to think we’ve had a conversation. I don’t think that we have and so basically, if our product doesn’t work. if we have something that lowers cholesterol, and your cholesterol is not being lowered. If we have something that is supposed to grow hair on your head, and it doesn’t grow hair on your head whatever. And obviously I’m using simpler examples. But it becomes much more difficult when you’re talking about heart attack, death, cancer bunch of other things. But this is the value proposition that if you use our product and it doesn’t work, we’re gonna give you money back. And so the 1^st so very much so, a pure value based contract. The goal is, you want these better, patient outcomes and not just better. But if there isn’t a positive outcome that is expected. Then don’t use the drug, and we’re going to give you your money back. And in its very simplest form. so perfect example of a value based agreement. The problem is, well, the 1st question is, who gets their money back? Does the patient who did a copay get their money back. Does the IDN that has the patient under their care get their money back? Does the payer, which may or may not be the IDN get the money back. And oh, by the way, what if they’re a Medicare patient? They’re not. And what if their Medicare and they’re part of an ACO or their Medicare and their Medicare advantage. And you start going down this road. And you see in the comments that we got spoiler alert people didn’t like it. So I did about 30-35 interviews with people. and ran through this model with very knowledgeable people in healthcare. And you know who are delivering care or paying for care. And it was almost universally panned. And a lot of it had to do with this question of Well, how do you who gets the money? And one of the recommendations that I gave to our client one of the positive recommendations, should they want to go forward with. This is what I said was, or what our where our company landed was. This kind of model is only going to work in a Kaiser or a Geisinger, or you know any health system. If you’re going to do it in a health system and not just with a payer, it’s got to be done in a health system where they have the total cost of care under their umbrella. So they’re a payer as well. so that it makes financial sense for them to track these outcomes. They might have the ability to track the outcomes better, but otherwise trying to it just becomes so difficult to implement, and so that the process of measuring all of this costs more than any potential savings could possibly be, with a lot of headache involved.

Stewart Gandolf Yeah.

John Marchica So.

Stewart Gandolf Also, you would take the incentive for the pharma, for example, out like way we’re gonna spend all these billions of dollars to develop a drug, and we may not get paid. So that makes it hard, too. That’s a that’s a little barrier to entry like, Okay, you go do that. Then.

John Marchica Yeah, and he.

Stewart Gandolf And you’ll never ask.

John Marchica Even if they stand by their product. And they say, Well, we know our product is good. There’s the potential upside for that company right? Because their competitors that aren’t under this agreement. Well, maybe whoever has that value based agreement says we’re going to use more of the product where we know that there’s this money back guarantee.

Stewart Gandolf Yeah.

John Marchica
Right, and so maybe they could grow their pie a little bit more. But that’s why I say that. You know, when we’re talking in these terms, I really feel like, and if it’s not a single payment type system, then it’s something a little bit more that approximates what I talked about before, which is a fewer number of health systems to be able to sort of control the pie.

Stewart Gandolf
So perfect. I this is really fascinating. So as we wrap up a couple more things and we’ll save it for the next time.

John Marchica I haven’t put you to sleep yet, Stuart? Ha ha

Stewart Gandolf I love this stuff. It’s like I love anything. It’s like, forward thinking about healthcare. And you know, it’s like, it’s important to keep the vision of what’s possible and not get to sort of downtrodden, because.

John Marchica Yeah.

Stewart Gandolf Pretty glacial times like, for all the changes. There’s some things that are like you said. It’s like going back to what I said a little while ago. Would anybody design it the way it is now? Because with that creates all these other unforeseen, you know, unanticipated consequences. And you know, it’s like it’s you can totally get political there, too. But you know it’s like, sometimes things evolve. You have to start over or figure out something. Because if you’re doing incrementalism eventually, it stops working. And that’s, I think, kind of where we are in some ways. So I’m going back to the pharma and life sciences. You know. How? How does Pharma view ideas in terms of. you know, research or other partnerships like, what is pharma thinking about? They’re paying, and they must care so like what are some of the conclusions there.

John Marchica So the old school model still exists of how companies market and sell their drugs. So if we just look at the pharma component of the biotech sort of component of life sciences. The old school way is, you have a sales force, and then you go send in a rep to go see a doctor. They talk to that doctor about the product. They educate the doctor, and they “sell” that doctor right. And that model for pharmaceutical marketing worked for a lot of years. not so much anymore. And there are a lot of reasons for that. One of them is that I think the industry sort of shot themselves in the foot. in the nineties, and the and the early 2000s. by hiring armies of sales, reps. and doubling down and tripling down and quadrupling down on certain physician offices, where at some point they just kind of threw up their hands and said enough with the onslaught of reps. Right? So there was that dynamic. But the other dynamic, which is maybe even more important. is the acquisition of these physician offices by IDNs. from private equity, from Insure, from like Optum, I mean, what are they up to? 100,000 doctors, or something like that? At this point, so United Healthcare, Optum and in those circumstances, after post-acquisition, almost by definition, the access gets shut off because these systems want to control. or these PE groups or these insurance companies want to control, how their physicians and their nurses and everybody else, how they spend their time, and the last thing they want them doing is spending time with sales reps, so they immediately will shut off access. And so the question that has been on Pharma’s mind, I think, probably for over a decade at this point is okay. If now, as the business is shifted to these big physician groups and these IDNs and all of this. How do we keep marketing our stuff? right? We can’t just leave it to the peer reviewed journals and let them figure this out on their own, or figure this out on their own at conferences. So how do we market our stuff? So that the 1st response which they did I don’t know 20 years ago, plus is to say we’re going to bypass all of this, and we’re going to pour oodles of money into direct consumer advertising. Right? You cannot watch TV at this point for any duration of time beyond 5 min and a commercial break without seeing a drug. Commercial. They’re everywhere.

Stewart Gandolf Yeah, yep, right.

John Marchica So that’s 1st thing. And we’re gonna create demand by having patients go into the doctor’s office and demand our product right, and that, I think, is pretty effective. But then the other thing they said was, is, well, how do we align our salesforce to work better in this new environment. And then and I think what a lot of them have What they’ve come up with is more of an account management model where they have more experienced people building relationships and having meetings. And so, instead of having 2,000 reps. And I’m oversimplifying here, maybe they? They have 25 account managers and 100 reps, or something like that. but the question is, and the struggle is, if you look at Pharma from an IDNs perspective, from a, or a big physician’s group perspective, they still have the negative thoughts. They still have the. They remember the armies of reps coming in and disrupting their workflow. So that doesn’t go away overnight. Then the question is, okay, well, what value are you do you? Can you bring to us. Do you really bring to us? And how can how can we work with you in kind of a different way? By the way, I don’t think IDNs are asking that question. I think Pharma is asking that question of what they can do for IDN.

Stewart Gandolf Yes. Yeah.

John Marchica And then trying to, you know, have the question come from the IDNs? Because again, as far as the health system or the big physician group or the big cancer center. What they understand the life sciences to be is a test bed of innovation, research, clinical trials, things like that where they have the capabilities. And all of that makes sense. Okay, Pfizer’s developing a new drug. We want to be on board with that. We want to be one of the sites or one of the partners in in in evaluating that drug. So I think, where we are now is kind of at a at a standstill. And I swear I did not intend for this to come across. It’s gonna sound like I’m giving you the big wind up for a promotion. I don’t mean it like this.

Stewart Gandolf Oh, please God!

John Marchica Don’t mean it like this.

Stewart Gandolf No, no, please promote yourself. I want someone to call.

John Marchica
I’m just so we’re in the process of we’re launching a national Id and engagement study. something that we did in the wake of Covid for about 18 months. And now we’re kind of restarting that the environment is different. We’re not asking questions around Covid as we were before. But we’re really trying to get at this partnership or collaboration or engagement piece that identifies the win for the patient. for the health system and for the Pharma company. What does that look like? What is working together on something on a project collaboratively do to improve patient outcomes? And

Stewart Gandolf Exciting.

John Marchica it’s exciting. It’s a big question. And I think that’s kind of where Pharma is today. I think there’s a lot of head scratching. I think some people, said the common refrain, that that I get all the time Stuart, is the wins that we have the WINS. Not WINDS. The wins that we have are very rare. We can point to one or 2 partnership collaboration agreements. Whatever you want to call it, and maybe a value based bit component to that where we can all say that we were successful, that the patients turned out better. The system was happy with the results, and us as a life sciences or Pharma company. We ended up winning out in the end as well, too, very, very rare. So we’re in the process of launching this. We’re going to be fielding, doing all the research in Q 4, and are going to be releasing our results in in January. So pretty excited.

Stewart Gandolf And ready. When you’re ready. You have to come back.

John Marchica Alright!

Stewart Gandolf And I think that’s intriguing. So this has been a I love. This has been a very sort of intellectual forward looking, which is to me is really fun, right? There’s a day to day stuff. And for us this is something that I won’t. I love thinking about where things are like, I said. Try not to be despondent for some things that are really difficult to change, and still find daylight in the opening. So. as always, John pleasure. Thank you for your time. Today we’ll talk again.

John Marchica This is great, and I gotta say, Stuart, one last shout out to you because you make this so easy. You really do, and it’s not. It’s not easy. I hope, that I’m easy on my guest, too. But you you’re just. It’s such a pleasure. I could come on and talk to you all the time. It’s such a pleasure doing this. And it’s it’s because of what the way that you go about it. So I really appreciate that, and thanks for having me.

Stewart Gandolf You’re welcome.