Chris Severn is the co-founder and CEO of Turquoise Health.
Chris's problem is this: How do you figure out the real price trip of a trip to the hospital -- before it happens?
People have been trying to solve this problem for decades, but there's a good reason to think that this time is different. In 2019, the federal government issued a new rule that said insurers and hospitals have to publish their prices. Not just the fake list prices that nobody pays. But the actual, real, negotiated prices. This rule is just starting to take effect. Its impact could be huge.
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Pushkin. Imagine you're going to buy a car. You go to the lot, you test drive the car, You tell the sales guy I like it, I want to buy it. And the sales guy says, go ahead, drive away. Car is yours and you say, okay, great, But how much is this car going to cost? And the sales guy goes, I don't know. I can't tell you. Maybe it's twenty thousand dollars, maybe it's thirty thousand dollars, maybe it's forty. We'll send you a bill in like a month when we figure it out. This is obviously absurd. It's not the way buying a car works, but it is a lot like the way it works when you go to the hospital for say, surgery. Nobody can tell you in advance exactly how much it's going to cost, and then a month later, when you don't have any painkillers left to blunt the impact, you get the bill. Surprise. I'm Jacob Goldstein, and this is what's your problem. My guest today is Chris Severn, the co founder and CEO of Turquoise Health. Chris's problem is this, how do you make healthcare prices transparent, not just for consumers, but for hospitals, insurers, businesses, for everybody. People have been trying to solve this problem for decades, but there's a good reason to think that this time really is different. In twenty nineteen, the federal government issued a new rule. This rule said insurers and hospitals are going to have to publish their prices, not just the fake list prices that nobody pays, but the actual, real negotiated prices. This rule is just starting to take effect, and Chris says it's impact in the long run could be huge. So it's a pretty simple story. You know, before twenty nineteen, the true price of healthcare was unknown to anybody who wasn't privy to these contracts negotiated between insurance companies and hospitals. And this is a this is an insane fact. Oh insane. I mean, it's obviously true. If you're a patient and you're going to go and they can't tell you, is it going to cost a thousand dollars? It could cost five thousand, they can't tell you. But like one hospital didn't know what another hospital was charging, different insurers getting wildly different rates, like just a weird, weird, huge money world, exactly, And it is crazy. And that's the world that sort of I professionally grew up in for ten years and we were just used to it. You know, these secret PDF contracts that were protected as trade secrets could not be disclosed. There were these things called gag clauses. When you say you grew up and you were a consultant for hospital billing, basically, right, exactly exactly, And you know, there's an interesting nugget in ACA that required hospitals to disclose their standard charges was the word okay, And it was basically the Obamacare law that was passed more than ten years ago, now right, yep. And nothing really happened with that for a while, and then legislators started turning attention and rulemakers started turning attention to it, saying, hey, we really need to get the prices of healthcare out there. We're going to and this came through the Trump executive orders in twenty nineteen. There were a few of them. Hospitals must disclose their standard charges for the price of healthcare, and insurance companies must disclose their standard charges. So you've been working in basically hospital billing, right, hospital revenue, you see this rule come, Like, when do you decide to start the company and like, how does it fit with this story? Yeah, so the rule was proposed, so the executive order. I remember where I was with my co founder Adam because we were running a business together separately or separate from Turquoise, and we saw the rule come out. We were like, are you are you reading this same way? I am. We're like, I think this means all these contracts we see are going to become If it is what you think it is, it's going to be a big deal. Right, Oh yeah, totally. This is going to totally flip the economics of healthcare on its head. It could create true consumerism and healthcare. It could create true macroeconomic pressures in healthcare, and I want to be a part of it. Essentially. So it's this moment when when healthcare, when this giant part of the economy that has been opaque, is going to get less opaque, It's going to get more transparent. You think maybe patients will finally be able to actually figure out what healthcare is going to cost, maybe they'll be able to shop around. And you decide to start this company, Turquoise Health, to kind of get in on this moment. What exactly are you setting out to do. So we decided late twenty twenty that we were going to build the price transparency page of every hospital. You know, a hospital's website's not very good, they're going to hide this information. So at the time, I went on a New Year's vacation with my girlfriend at the time now my wife, and I was on my computer New Year's Eve checking hospital websites with Adam, my co founder, and we were basically waiting for these files to come live, these pricing files to come live. And I remember laying out by the pool with my laptop and just like refreshing common health system pages because these files ended up being so hidden, just like we predicted on every hospital's website. So to go find them to make sense of them became really our whole challenge of last year a twenty twenty one. And then this year there was another step right where insurers also had to post what they pay for each procedure freach hospital. Yes, that was just the summer, right, Yeah, this is step two and that is just another huge watershed moment. So can we go online right now and like actually look at something that will sort of help me understand kind of how this works and why it's meaningful. Yeah, So how would you like me to do it? Would you want to pull up a page or um? So? Okay? So I have turquoise dot health uh and it says enter service name or code and has a zip code. UM, So exactly what's a what's a what's a good basic service? That's gonna just tell me what to enter? Just talk me through it? Yeah. I usually type in colonoscopy. Okay, there's a lot of different uh sub subsets that that auto populate. Is there one particular version of it I should type in? Yeah? Maybe some diagnostic colonoscopy is is pretty common, okay, colonoscope Comma diagnostic yep um. And the zip code here in New York. Okay, So I got one hundred and twenty six results yep um, and it looks like what it's showing me first is the is the cash price? So there's Memorial Sloan Kettering, very well known hospital four thousand, one hundred and thirty six dollars, So seems like a lot. But then I scrolled down and I see New York Presbyterian, while Cornell Medical Center also fine institution eleven thousand, seven hundred dollars. So the difference between four thousand and eleven seven hundred for the same procedure is huge. We kind of know this, right, it's absurd. We also know that the cash price is not that meaningful, right, it's sort of arbitrary. It's weird. Most people don't pay it. So it also says, see all rates? Should I click? That? Is that where the action is? Yeah, and when you see y'all rates, you'll see a drop down of whatever insurance plans they disclosed to let me do. Oh, one of them doesn't take my insurance, which is kind of surprising to meet. This can't be right, There's no way. There's no way. Sloan Kettering doesn't take Signet and doesn't take Blue Cross. Right, there's no way. And so the open secret in healthcare in our industry is that even though the rule required hospitals to disclose their negotiated rates, their prices for healthcare, pricing often is not that simple. It's not a flat dollar amount, and so sometimes the way that a rate is calculated is using a formula or convoluted math, so they omit it. So is this not that useful yet? Is that what I should take away from this that like this really common procedure at this really big hospital, they don't have the information for like really big insurance companies. That seems like a problem. And now what we have is a bit of Swiss cheese. You know, you sometimes find the rate and sometimes you're left scratching your head with cheese with maybe more whole than cheese. At this point, still we don't have all the information we need yet, like is it coming yep, So we're at a snapshot in time where this is still you know, we're in the first inning and as of July first, we mentioned that pair rule that came out. That pair rule remedies the issue that you're looking at, and that means that companies like Turquoise can fill in the gaps of what you just mentioned. So we probably now have in our data the signa rate from Memorial slum kettering, and you're going to add that if I come back in what a month, six months, when's it couldn't be there? Yeah, this is pretty new. So we're forty nine days in and we're gonna be rolling out services at a time, so you know, realistically one to two months for now for common services like that you would see this really soon. Yeah, so there's there's a lot of optimism. So so okay, the data is some of the data is there now but kind of not enough, right you, kind of there's some critical mass and like we're almost there. There's going to be a lot more information available about pricing in a really granular way soon. Yes. So then the big question is like what's it gonna mean? Who's going to do one with it? We have a couple of different products. One is a data product that's basically like get an idea of the rates an XYZ region and so who would use this? Um and new surgery center may use is to figure out where to set up shop. So you have money, you're an investor, you want to start surgery centers, and you see that this particular kind of surgery that you are set up to do is like really expensive at a certain place, you might go open your surgery center there and offer it at a lower price. Yeah, Like it's so silly. I'm a nerve, but I get goose bumps thinking about that, because it's like, if you see that there is a health system that is you got the whole northeast portion of a state, just unlock and their prices are really high. And now you might see a savvy entrepreneur say, hey, I'm going to PLoP a bunch of orthopedic surgeons out in Northeast forever, and we're gonna start undercutting this health system because we know how much it costs to do this procedure. So that's one. What are some other kind of lines of business for you? What other kinds of people or institutions are paying you? Yeah, So one example is we have several startup insurance companies paying us. And these startup insurance companies say, hey, wow, some of those other insurance companies in my market don't seem to be operating efficiently in negotiating appropriate prices for this population. And we think we can create a leaner health insurance platform so that we could charge you know, our patients pay less and they have a better member experience. And so that's I'd say, that's in the same vein as like a large employer will come to us and say, hey, we've been working with this carrier for a long time, and we just want insurance company with this insurance company, yeah, and we just want to see if there are other options out there and if we're getting a fair deal. And that's a very common conversation we have. Are like big hospitals coming to you also are big insurance companies. I mean, so far you've talked about the kind of STARTUPPI you know, disruptor types. What about the kind of big incumbents are they? Are they your clients? Yeah, there's a lot of the big I mean, the big incumbents are They're concerned, they're concerned, they're over priced, They're concerned that they are not doing all they can to get patients, and so they are coming to us. And part of the thing with hospitals is they're not just competing with other hospitals, right, They're also competing with places like outpatient surgery centers, and it seems like there's huge potential for price competition there. Yeah, So we talked earlier about a NIE meniscus repair. If you get that NI meniscus repaired done in a hospital outpatient department, you have a different cost structure because that hospital has to run, lights have to stay on, they have a bunch of employees. And meanwhile, you know, five miles down the road there may be a surgery center with a very comparable surgeon, and the cost structure is just simpler. You know, they've got the nathesiologists, they've got a smaller building, they've got fewer nurses, simpler billing practices, simpler contracts. A lot of these surgery center contracts are just almost like a restaurant menu. Can you give me just a sense? I mean I could, I could go look it up, or we could look it up. But do you know since I mean, if meniscus repair is when you look at a lot, yeah, more or less, what might the price be at the hospital versus at a at a surgery center. Yeah, very common to see common knee procedures and shoulder procedures, all those kind of like ligament surgeries to run in the twenty to thirty to forty grand range at a hospital all in, and then at a surgery center sometimes you know, five to ten, so huge, ten versus thirty is wildly different. Yeah, that that happens all throughout the US. That's extraordinary. Let's just let's just sit in that for a sec right, Like, I know we're used to healthcare blah blah blah, but like that's that's out of control in some way, Like that shouldn't persist. That doesn't make sense and why why why has that persisted until now? I mean, it's part of it market power? Is it that you know a lot of places there's basically one hospital and so the insurance company kind of has to pay what the hospital asks because it's the only hospital. That's a huge part of it. That's probably the main driving thing. It's just market power and no other options. So it's kind of an antitrust problem. Although if you recognize the surgery center as part of the market, then like there's a solution. You don't have to go to the hospital. There is a competitor. Well, that is the problem. How easy is it to affect change in the market, Like how easy is it for a top orthopedic surgeon to open a surgery center and to move out of the hospital environment. And it's that a regulatory question. Is it a sort of access to capital question? Like what affects that? It's all the above, regulatory access to capital, comp practice privileges. You know, once you're out, you're out, like forget about you can't if the hospital says if you go open a surgery center, you can't admit patients to the hospital. Anymore they do. Yeah, oh yeah, that's definitely a thing. So how easy is it for this side of service shift to occur? And so there are a bunch of barriers, and I think price transparency forces will work to you know, be down those barriers. Okay, but really, really, what is it going to take to get to a world where we know what a trip to the hospital is going to cost before we go to the hospital. That's coming up after the break. Now back to the show. What's the thing you haven't figured out how to do yet? What's like a problem you've been kind of working on but you feel like you haven't really cracked yet. So there's two big ones. One is how do we convince and or enable the providers and payers to agree to an upfront price for healthcare? So a hard problem we're working on is for your average insured patient to give them an upfront binding price that the hospital and the insurance company will stand by. And there's a new rule coming that seems relevant, right where the kind of the explanation of benefits that you get after you go whatever to the doctor, you're supposed to be able to get that before you go, Right, that's like a thing that's coming. Is that relevant here, Yeah, And that is a huge complexity ahead of us, and it's still dependent on new rulemaking coming out of the government any day. I mean, it's probably like there is some amount of actual complexity in healthcare where like the body is complicated. They don't know what's going to happen, Like there's a reason, you know, especially if somebody's really sick, they got a lot of things wrong with them. The hospital doesn't know what's going to have to happen, Like I feel like there's cases where they in good faith don't know totally and it just comes. This is where actualaries come in the law of large numbers. If one person comes in for that nimniscus repair and they have some comorbidities, turns out there in the operating room an hour longer than planned, that could be a loss for the surgery center of the hospital. But if a hundred patients come in, then you know, ninety out of one hundred will follow a similar cost structure, and so they should be able to promise to charge some average rate that over time is the right price at which they can run their business at a profit. Yeah, and that's happening in some places, but it needs to happen in more to create that kind of coverage of the market. Like we've discussed. Okay, so that's one, what's the other. The other is pretty much the same problem, but more to B to B level. How do we create a binding, easy to reconcile payment between the insurance company and the hospital, Because that's where a lot of the waste happens in healthcare, is the billing and claim adjudication mumbo jumbo that goes on between those two entities. That's way more than with patients. Right, Presumably the vast amount of money and healthcare is not going from a patient's wallet to the hospital. It's going from the insurance company to the hospital. Yeah, the lion's share of the waste here that affects our GDP and our premiums and our salaries is coming through that B to B transaction. And so tell me about like in a way it's surprising. I mean, if you know about healthcare, it's kind of not surprising, but sort of naively it's surprising because you would think, oh, insurance companies are giant and hospitals are giant, and they do so many of these procedures. What's the problem there. I'll give you an example hopefully that helps. Yeah, often if you go in for that nimniscus repair, a few other things might happen. They might clear out some other cartilage. At the end of the day, you might end up with three different procedures build on your claim. And if there's any issue with the claim and what you end up with our people like me in the last ten years, well, we'll go through in data mind and find those discrepancies and charge a fee and sort of push these reconciliations back and forth for years after the fact. So, just to be clear, what you wind up with is the hospital and the insurance company negotiating on a case by case basis, people at both places getting paid to It's kind of like going to court. They're not going to court, but they're arguing over like did you do this one procedure on this one patient this one day. That's what you're talking about. It's exactly that. And what ends up is this really long, honestly years long process where these case by case reconciliations are happening, which is wildly expensive, right, and we end up paying for that in our health insurance premiums huge industry and we don't benefit from that. Like, it would be great to get rid of that. It would be an efficiency gain that would lower healthcare prices. Yeah, So how do you get rid of that super costly back and forth? That's a good, big problem. Do you get rid of that? That's the hard thing I guess is this is an industry that's slow to adopt new software. They're setting their ways. It's very difficult. I think that's one of our biggest problems ahead of us if we want to simplify this payment and healthcare is you can't just build that future solution, but you've got to build the steps to get there. Okay, Yeah, that's a big part of what our team's working on. Baby steps, Baby, baby steps. So's the what's like, what's the middle ground? I get the end is it's just software and there's no people whose job is arguing over mindy repair, right, But what's what's the step between here and there? The middle ground for both of those problems. You know, the patient payment and the B to B payment is enabled by this new law that takes effect essentially in twenty twenty three. We're still waiting for guidance. And it's a piece of No Surprises, the No Surprises Act, and you mentioned it earlier. If that says you are entitled to a good faith estimate in advance of care, okay. If that estimate of your cast share ends up being off by a certain amount four hundred dollars the amount currently proposed, then you as a patient have recourse to reconcile that and to argue it, dispute it. Meaning you might not be on the hook. You might not be on the hook for the big bill that you were sent. And so that presumably gives everybody in the system an incentive to come up with a number in advance and stick to it and not argue about it after exactly let me ask you. Let me ask you one. There's kind of a subtext here for me. I mean, really, what we're talking about is bringing market forces to bear on healthcare to make healthcare more efficient than better, which makes sense in a certain way of thinking. I do wonder. I mean, clearly, there are a lot of things where the market works great. It does seem like healthcare is a place where there are a bunch of reason to think market forces might not work great. Even if we set up the market better. Right, patients are scared, they trust their doctor. It's intermediated by insurance. And so I don't know if this question is like too big, but does it even make sense to try and make the market work in healthcare? I would argue by saying that the consumer can decide if they if this is worth it for them to make a change. So an example is, if you love your doctor and you care about your health or your family member's health, it is your right to decide if that is worth more to you. And maybe the drive to get there is worth more to you than the five thousand dollars you can save. And so maybe what the market forces in healthcare how they differ is just that it will take more for there to be a change of the consumer decision or the purchase or decision than it does in other industries. Right, It's not like an airline where if one airline is twenty five bucks less, like sure, I'll fly on that airline. It's not exactly. There's a bun of qualitative things that come in around. If you trust your doctor, if you feel you're cared for, that make it a slightly different market, but not entirely in a minute, the Lightning Round, including, among other things, how to talk to your doctor about how much something is going to cause. That's the end of the ads. Now we're going back to the show. Okay, almost done. Last thing we're going to do is a lightning round. Great. What's another domain where pricing is opaque that would benefit from more transparency? Well, you know this is this is interesting, but I've had price transparency as a Google alert for years, and I have seen the other industries where this is a hot topic cattle, agriculture, and foreign currencies, foreign exchange markets. Yeah, it's like a recurring thing. Those three things come up. Agriculture meaning like wheat or what like I don't even know what that means. Yeah, various produce. And I've collaborated this by asking a few friends in those industries like, hey, keep getting these alerts, this is a problem. They're like, oh, yeah, you should fix that once you fix healthcare. Good. Those are not three I would ever have guessed that's interesting. Do you might think you might fix those once you fix healthcare? No. I think what's more reasonable is there are other countries that have a very similar problem where private insurance and providers follow the same kind of archetype that we do in the US that I'd be curious, like ten years down the road if some of the stuff could work in other countries. Ah, So not doing something else in the US, but doing healthcare pricing in other countries. Exactly from working in healthcare pricing and revenue, what have you learned about pricing and negotiation that's helpful to you, you know, personally, say in other domains? In other domains, Yeah, like you good when you like go to buy a car or you know, I honestly it's not another domain. But I can help anybody in my family and myself know the price of care in advance, because right now in healthcare, it takes a lot to figure it out. So like one superpower is that I feel like I'm able to navigate costs and healthcare maybe before other people are quite ready. You get a lot of like calls from your family all the time and just walk through like, hey, here's the best worst case scenario for you to plan for, and here's some things to ask your doctor as you're going through that process. Yeah, it's weird when you ask doctors about pricing. Often they don't want to talk about it in my experience, or they don't know. Yeah, So the way you ask a doctor about pricing is less how much does this cost? And more of do I really need this right now? Or could this wait five days for me to go to that you know, imaging center or somewhere else to get this done. That's a tip. You snuck a tip in, and I appreciate snuck a tip. If everything goes well, what's a problem you'll be trying to solve in five years? If everything goes well. So for us, what that means is that it's as easy to know the price of healthcare as it is buying a toaster on Amazon. If everything goes well, the next problem is really making sure we have all the right data in front of the patient. So not just price, but the quality is still a big issue. Accessibility, So hey, can I have this in three days or do I have to wait two months? And so there's all these other we call them like pillars of the healthcare value proposition that we want to tackle in price. It's just where we're starting. Chris Severn is the co founder and CEO of Turquoise Health. Just a quick note, this show what's Your problem is going to take a two week high US. We will be back on Thursday, September twenty ninth with more shows. Today's show was produced by Edith Russolo. It was edited by Robert Smith and engineered by Amanda ka Wong. I'm Jacob Goldstein and we'll be back later this month