Lightly edited for clarity.

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[00:22] Justin Venneri: Hello, and thank you for joining us for another episode of the Astonishing Healthcare Podcast. I'm Justin Venneri, your host and senior director of communications at Judi Health, and with me in the studio today is Lynn Garbee, Senior Vice President of Managed Services. I am beyond thrilled to have Lynn in the studio with us here for this one. It's been a while coming, and we finally found the time and lined up the topics. We had a really fun discussion in preparation for this. It is scripted, unscripted. I have a curveball or two for you, but they're not going to be too wicked. And I really appreciate you taking the time, Lynn, because I know you're busy presenting all over the country and working hard on what you're doing here. So we'll get into that too.

[00:57] Lynn Garbee: Well, thank you so much for having me, Justin. I've been waiting for this moment. Thank you.

[01:00] Justin Venneri: So Lynn, tell us a bit about your experience in the industry and your path to Judi Health.

[01:05] Lynn Garbee: Sure. So I've actually spent the vast majority of my career on the payer side, either helping payers with consulting and tech services or actually working inside a payer. I don't think anybody, when they're a little kid, really says, "I want to go work for a payer when I grow up." So how did I get here? Well, I've had this tick since literally when I was an undergrad, which is now quite a while ago, that we really have to address the escalating costs of healthcare. I was an economics major, and I had this epiphany that healthcare is escalating at a faster rate than the rest of the economy. And at that time it was 8% of the GDP, and now it's 18% of the GDP. So in fact, it is growing much faster than the rest of the economy. That means people are making hard choices between healthcare and food and housing. And it felt like a cause that I wanted to really work on for my career. And a wise professor, I think in grad school, said to me, "Go follow the money." So I started working for payers because I figured they had the money and they're trying to figure out how to contain those costs.

So that's how I got into working for payers. But I'll tell you, I first started off trying to align incentives. How can we pay for healthcare like you would any other economic good, being an economics major? They pay based on cost and quality with full transparency between the buyer, the patients, and the seller, the providers. So you may not know this about me, Justin, but really down in my heart, I'm a value-based care junkie, and I really want to get to a place in the world where patients can buy a hip replacement or say, "I'm having a baby," and go and see the prices and the value that they would get for those options. No one in today's world would be able to say, "Hey, I want a 99395," which is what a physical code is, and put a modifier 25 on that so I can ask the doctor about my back pain. Like, that's completely not transparent to patients. So we have to move to a place where patients can see costs and understand quality. And I've been trying my whole career to get there, but I keep getting sidelined.

[02:58] Justin Venneri: Yeah, I would not have pegged you as a value-based care junkie.

[03:00] Lynn Garbee: So every time I get into doing it, I realize that the payer platforms are completely not consistent with being able to get that done.

[03:10] Justin Venneri: Payers here, insurance companies, larger insurance companies.

[03:13] Lynn Garbee: Right. Like, I've worked for many of the big insurance companies, and it really forced me to understand what they have to deal with in terms of the labyrinth of systems that they have and how it's really hard for them to do some of this more innovative work to align incentives with providers. And it really forced me to understand, like, what would I do if I were queen of the day, and how would I design it differently? So that's how I got here. I've really spent my whole career trying to really understand how payers work and how we can make what they have to deal with do what we needed to do.

[03:44] Justin Venneri: Got it. And payment integrity is kind of the topic. And we'll talk about some RCM, or revenue cycle management, too, for the audience's sake. What is payment integrity, and what does claims editing mean?

[03:54] Lynn Garbee: Well, I kind of got into this because, like I said, I really had started my career in value-based care, and I got a little frustrated with how the systems couldn't do that, and I started to really understand how the systems do work. And clinical code auditing and payment integrity is an integral part of all of that, and it's really necessary. Sometimes I hear people say things like, "Oh, we should just do away with all this PI," but it's really a necessary function of a claims platform. It safeguards affordability. What payment integrity does is make sure that the codes correctly represent what happened between the provider and a patient. Period. Does what I see on this claim really say what happened when that service occurred? There's a lot of good reasons for having claims editing. It prevents duplicates from going out the door. It identifies providers who are billing for, say, an office visit you get after you had a surgery, or if a professional provider is getting paid for the technical part of a service.

There's a million rules about how claims get coded, and you really have to make sure that they represent accurately what happened. In short, if you're going to be a good fiduciary of a plan's funds, you really want payment integrity to happen because it just really prevents you from overpaying just based on bad coding. Unfortunately, you also have to be careful about bad actors. There are bad actors out there. There are definitely providers that are trying to make the most and maximize their revenue. And that has to be safeguarded as well. But when I started doing this, this was really about just correcting the codes and making sure that that was accurate. And somehow it changed. And over time, it became something that was about savings and targets and making the PI department in a payer function almost like an opportunity center for savings. If you were really looking to make your numbers for the next quarter, it was like, "Well, how can I deny more?" Which is not what we want from a healthcare payer.

[05:46] Justin Venneri: Right, right. And I think in all the codes and everything else, it's definitely confusing for the patient. You get your explanation of benefits, or you get your bill afterward, and you see the little code and the description of it, and you're like, "Did that even happen in the office with the doctor or in the ER?" And so making sure there aren't mistakes and things like that makes sense. I can see how a lot of education is needed to make this work better too.

[06:07] Lynn Garbee: Yeah, it's hard to fathom how we got here. It's gotten really, really complicated. I remember a time, this sort of dates me a little bit, that payers literally got a shrink-wrapped disk in the mail, and once a year they would update the codes in their system. And that's how it worked. And now we have really advanced technology, and we have API real-time systems that look through rules and edits and millions and millions of edits, I should tell you, that are updated daily, weekly, monthly. And there's in-the-moment kind of editing as the claims are getting processed. So we have advanced this over time, but like I said, we've kind of changed the whole game from being something about correct coding to something about maximizing savings. And it's become almost like a drug for the industry. So the PI teams literally have targets on their heads, and they are asked to look for more and more savings every year.

[06:56] Justin Venneri: And how did that happen? How did that switch? Was it just the incentives and following the money and just the need to hit targets, like revenue targets, EPS targets, et cetera?

[07:05] Lynn Garbee: Like we said in the beginning, healthcare just becomes such a bigger, more expensive part of every group's costs. And I think everyone's looking for where they can save, and this has become like an easy target. How can I find places where I can deny more and deny more and deny more? And lots of PI companies have noticed that this is now almost 20% of the GDP, and there's lots of opportunity to be had here. They've done a ton to figure out how they can do more and more and more kinds of editing that has really become like stacks of PI vendors inside these payers. But I want to tell you one thing, Justin: providers aren't dummies. They recognize that all these claims are getting denied, and most of the time they're correcting whatever was denied, and then they're sending it back in, and it's getting paid.

In reality, the payer is seeing it twice and maybe three or four times, right, as the claims cycle around and around and around, and that's costing everybody money. And the provider is also doing the same thing. They're correcting it and resubmitting it. And if they don't get it right, they correct it and resubmit it again. And everybody is paying for that, all those cycles of, I call it, the washing machine effect. And if they don't get paid, it's not like they're leaving the money on the table. What happens is then, at the next contract negotiation, the provider says, "Well, you took all this money out of my pocket, now your rate increases even more." I think we're all kidding ourselves that this savings is sticky or sustainable, because at the end of the day, the providers are going to get what they're due.

[08:30] Justin Venneri: That sounds wild. It's like a battle between the payers on one side, the providers on the other. And even though everything is coded and clear, mistakes happen too. And you want to be able to correct those quickly. But having it go around that washing machine... Here's a curveball for you. What's that cost us? Have you tried to quantify that? Or just, like, objectively, is it... You know, we talk about a trillion dollars plus of waste in the system at 18ish percent of GDP. Now, GDP is obviously a much bigger number than it was decades ago. So this is a huge number.

[09:00] Lynn Garbee: I would say the administrative waste is about 3 to 400 billion of that trillion. Right? Like, it's an astronomical number. And the PI industry is a little bit guilty. They've created all of these companies that are backed by PE firms that are looking and hunting for more savings. They say the addressable market for PI is about 45 billion.

[09:21] Justin Venneri: And what would, like, an actuary say about all this from, like, a plan sponsor's perspective?

[09:25] Lynn Garbee: A wise actuary once said to me that the water always comes back to the same level. Or you can call it a whack-a-mole game, whatever you want to call it. Because you might deny this claim over here, and the providers are going to resubmit something else over there. They wouldn't think that at the end of the day you're really winning anything. And if anything, all the admin costs of having those claims recycle around is just adding more cost to the system and in theory could just cost the ASO groups more, around that washing machine comment. But I'm not sure if people realize this, that of all the claims that are submitted, 15% are denied. Of that 15%, 50% are eventually overturned. So you really don't get very much goodness out of all of that that you've denied. And then, what's left? Those providers know exactly what's left, and they bring it back into their contract negotiation. For prior auth, 94% of auths are approved. Everyone is guilty until proven innocent. In the prior auth world, 81% of the 6% are overturned.

[10:25] Justin Venneri: Interesting.

[10:25] Lynn Garbee: There's a very tiny percent that really stick and don't get approved. Everyone's guilty until proven innocent. And that's how it works in the PI world too. Every claim is subject to all of these PI routines when most of them are not going to hit anything.

[10:40] Justin Venneri: When I'm kind of thinking about the effect on providers, can you elaborate on that? Everybody talks about the friction and the administrative burden and having staff to deal with this stuff.

[10:49] Lynn Garbee: Sure. So from a provider's perspective, where I said the PI industry on the payer side is 45 billion, I would say the RCM, the revenue cycle management for providers, is more than double that. And I've read somewhere that hospital admin costs are now 40% of their total operating expenses. And like you said, they have literally hundreds of employees who just code claims. That's it. So they've got lots of nurses who are just, like, making sure that we have the codes on the claim to get it paid. And from my perspective, I'd rather have those nurses taking care of patients, and instead they're managing the washing machine of getting those claims resubmitted. Revenue cycle management is its own beast. Those providers are doing just the opposite of what the payers are doing. They're trying to make sure they get paid. And that starts with making sure that every appointment slot is filled, every patient shows up, every patient pays their co-pays, and every bill has the right codes on it.

And in today's world, what happens is that they can copy and paste from one EMR to another EMR. They know from an AI how to code those claims so that they can get paid correctly. What's happened now is that level one ED visits used to be 11% of visits in 2004, and in today's world it's about 2%. Over time, they've started to build higher and higher acuity visits, so that I think it's like 35% of ED visits are, like, for someone who's crashing. Could that really be the case? And similarly, NICU babies used to be a very small percentage of babies. Now they're like 11 or 12% of babies across the country and escalating every year, because they figured out, like, if they put a more intense DRG, they get paid more. So, like, nobody's innocent here is the message, I guess, on both sides. They're both trying to figure out, "How do I maximize my revenue? How do I minimize my costs?" It's become, like you called it, the cold war between the providers.

[12:40] Justin Venneri: Sounds like a heck of a battle. The NICU side of things is interesting too, because there's a lot of stuff, kind of premature births and other things for family planning, benefits, IVF, all of that. It's an interesting trend.

[12:51] Lynn Garbee: Yeah. And, you know, speaking about the babies that were there for over months in the hospital and really sick babies, now what the trend is, is for babies who are there maybe, instead of being there two days, they're there for four days, and they call them NICU. They even have babies that were not even admitted into the NICU unit; they're with the mom, but they gave them a little extra oxygen and they're called NICU. There's a plethora of these babies that are, like, just slightly inflated in their coding, and that's becoming the trend, rather than a couple that were very long stays.

[13:21] Justin Venneri: Can you unpack a little bit the cold war? Like, why does this exist? And to the extent that you have some ideas for addressing it, we'd love them.

[13:28] Lynn Garbee: Sure. And in my mind, it exists because there've been lots of vendors that are funded and have incentives to reach certain savings targets, reach certain revenue targets. They're working against each other, but they're both funded and incentivized on their respective sides. And that's how this has really kept going. I'll even run into PI that forces it to happen after claims are priced and even post-pay, because they wanted some evidence of the savings. If we were to prevent these things from happening in the first place, you couldn't put a number on how much you saved. And everybody stopped short of that. Like, "Oh, if I can't measure how much I saved, then I can't show the worth of what I'm doing to my investors." So therefore they let the claims go all the way through after they're priced, and then they say, "Look, pin a gold star on me because I saved this much money."

What we really should be working toward is a place where we can see that a claim is not coded right in the moment, while the claim is getting submitted. But everyone is hesitant to do that because they can't measure how much they've saved in that moment. But that's where we should be. All of the rules that we should be coding by are not secret. They're all out in the ether. They exist in the public domain. But yet we let the claims go through all this washing machine to enact things that are sitting there out in the public. So it is, like, amazing to me that this still exists, but I have to think it's because we're feeding it with all of these vendors who are looking to prove out their savings and their worth.

[14:54] Justin Venneri: What about the ease with which we can address this problem or find a happy medium between these entities that are well funded and have opposing missions?

[15:02] Lynn Garbee: Well, I don't think either of them is going to want to do this on their own. It's going to take someone to disrupt this industry to say, "Okay, neither one of you is going to want to do this independently." It's going to take someone who is finding that place in between, where the providers and the payers can collaborate. And we really need two things to do that. One is technology. And, goodness, I'm amazed that we have cars that drive around without drivers in them. How could it be that we can't let a claim get paid without having all these people touch it? It seems, like, illogical to me. So I know the technology is there. We know we can do this. The problem is the second thing that we need, which is a will. It's going to be hard to find that independent disruptor who's going to say, "Okay, let's figure out how to get providers and payers to really work together and fix this problem." This sounds like we say this every year, right? But healthcare claims are increasing at 9.5% for '27. How can the ASO groups be shouldering that year after year? How is that sustainable? But we keep saying it, and it does keep going on. And I think there are a couple of things that are going to change that.

One is that the ASO groups are waking up to the fact that they are in fact fiduciaries. They are being called to the carpet to be held accountable for how much they're spending on these healthcare costs and being good stewards of those funds. And I think this is a moment for them to say, like, "We can't do this anymore." Intelligently, like, we're buying every other supply for our employees. And the second is the reaction of the public. When I first started talking about healthcare way back in the day, when I was an undergrad, and I was saying to people, like, "Oh my God, this is going to be a problem," I think I was, like, the only one saying that. But the way I see it today, it is a public issue. Like, their reaction to Brian Thompson and how people were celebrating when that happened, it was really impactful to me. Normal people are recognizing how big a problem this is, and they're starting to say, like, "This can't continue. And we have to figure out a way around it." My way around it is to get rid of the middlemen. And that's why I'm at Judi. We have to figure out how to be that disruptor, to get in the middle of the provider and the payer and to do the good, to get rid of all of those vendors who are taking a piece of the pie and putting their fingers in the pot and taking out pennies. So, like I said, I'd love to get to a place where I can do value-based care and everything else in the system, but the system doesn't work with us to do that. And I think that Judi has the opportunity to do that. I'm excited to be in a place where we're trying to remove all of that hassle, remove all those places where data gets lost and middlemen are taking fees, and we're able to pay claims in a more efficient way without all of the admin cost.

[17:30] Justin Venneri: I can definitely tell you're passionate about this and excited about the opportunity to streamline things, improve the efficiency with which claims process and pay, working on new network structures and things like that. What's resonating with the market about the messaging right now?

[17:43] Lynn Garbee: Like you said, I've been working on building networks, and I'm trying to figure out how we promote independent providers and help them to get paid faster, get paid smarter. I've had several providers say to me, "If you just pay me, and pay me cleanly with correct codes and promptly, and don't hold my money, I'll give you a huge discount." Their frustration is that they've become a lender in the marketplace. One provider said to me he has half a billion dollars in outstanding AR. They just want to get paid. And if we can create a network of providers where we can commit to them with Judi that we can pay them simply, faster, smarter, upfront, they would help us to build networks that become affordable. And that's what I'd like to do.

So we're starting off building our own organic networks right now, and we're trying to do the right thing with those providers to help bring volume to them, but also do the right thing for them in terms of payments so they don't have the hassle of what they're going through today with many of the BUCAs and other payers out there. So that's the exciting thing that I'm working on, because in my mind, we have the technology that can do the right thing and really invoke all these edits in the moment, find that upcoded DRG or ED visit right there, and not have to let claims go all the way through the process into post-pay to do things that are sitting out in the open ether. To do it right now, that's the exciting thing that I'm working on, and we're starting to really get momentum in building our own organic networks where providers are, like, excited.

[19:03] Justin Venneri: I've got two more questions for you. Of course, the most astonishing one, so I hope you have a good story for us before we get to that. What are a few things that someone listening to this podcast could walk away with, an idea or two that they could address on either side? Most likely it's a plan sponsor, benefits broker, consultant, or provider listening to it. What's a takeaway or two that you could offer?

[19:21] Lynn Garbee: Sure. So if I were a plan sponsor, I'd be thinking hard about direct contracting. That's how we eliminate the middlemen and we join the providers and the payers directly together. And if I were thinking in their shoes, I'd be thinking about three things. First, I'd be thinking about getting a very good understanding of what fees they're paying today, because I bet there's a lot of these contingency payments and all these PI fees that they're paying that they're not even seeing. They're just paid after the fact, charged to them after the fact, and they're not even really understanding all the fees that they're paying to really appreciate the cost of working with the network that they're working with today.

The second thing I'd do is get their claims data right and get a very good understanding of their medical payments. Their medical payments will tell them, are there certain clinical areas, like behavioral or MSK, where they're spending a lot of money, where they might be able to do, like, a center of excellence or do a direct primary care kind of arrangement, and that might be really interesting from a direct contracting perspective? Or are they looking at certain providers where they have a concentration, where they may be able to make a more direct relationship with? Or are they really dispersed across many providers? And lastly, like, the most important thing that plan sponsors should be worried about is high-cost claimants. Most of the cost is coming from a small group of patients that are driving most of the cost. And I've heard recently that with gene therapies and GLP-1s, that's become even more exacerbated. So really having a very good handle on how you're managing those high-cost claimants is very important.

Lastly, I'd really be understanding the contracts, and are there any constraints in how they're working today that prevent them from doing things that are more innovative, that can help them to really eliminate all the things we just talked about, with those admin fees and contingency costs, and say, like, "Okay, is there a better opportunity for me to work with a different contract, different network, change the way I'm working today that could allow me to do these things without those restrictions?"

[21:08] Justin Venneri: Love it. And that was four things. It's great. Thank you. Here we are, end of the show. What's the most astonishing thing that you've seen related to our discussion today? And of course, please keep your compliance hat on. It's got to be safe to share. Tell us a good story, send us off.

[21:20] Lynn Garbee: Sure. So that was an easy one for me. I knew this was coming. I don't think I'd officially share this, but I worked inside one of the BUCAs for 10 years. The word I heard most often was "no." So the most astonishing thing since I worked at Judi is the word "yes." "Yes, we can do that." There's not a hesitation. When I worked inside the BUCA, it didn't matter what I asked for in terms of innovation or any new function or any simple little change in the system, it was, "It takes 18 to 24 months, Lynn, and that's going to cost you one and a half to $3 million." And I used to joke that it would take us 18 months to even sneeze. But here, like, I asked, "Can you pay a primary care doc with a subscription rate? Can we pay for MRIs in an ambulatory setting differently than in an outpatient hospital? Can I pay a bundle? Can I reward providers for doing the right thing?" Like, all the things that I want to do to get the right incentives to providers. And the answer is always "yes."

[22:10] Justin Venneri: That is nice. It's nice to hear "yes." And we try to say "yes" as much as we can. Well, Lynn, thank you so much for taking the time today. I loved hearing your thoughts on this battle between RCM and payment integrity, and it's definitely going to take a lot of work to figure it out, but I'm excited you're on the team helping us try to figure it out.

[22:25] Lynn Garbee: Well, thank you for having me today. I'm excited to work here.

[22:28] Justin Venneri: Look forward to having you back on the show. Have a great rest of your day.

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