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Nate Kaufman
This is Nate Kaufman, the host of the Healthcare Bridge, and our mission is to have an unscripted, brutally honest conversation with industry leaders about our nation’s broken healthcare system. I’m honored today to have Mark Cuban as my guest. Welcome Mark. (Mark Cuban: Thanks, Nate.) Mark and I met via LinkedIn when he was looking for information from “healthcare nerds” - of which I am one, having almost 50 years of experience working in the trenches with physicians and health systems to try to make our broken healthcare system better. Mark is one of the few people who has successfully disrupted healthcare with his Cost Plus pharmacy, of which my son is a client. Mark, we can start wherever you want, but if it’s okay, let’s start with our nation’s pharmacy distribution system, what you’ve done, and why you’ve done [it], why you have disrupted the industry.
Mark Cuban
I mean, because it sucks. [Laughter] There’s no transparency, and it was obvious that people had no idea what the cost of their medications were. That’s an inhibitor to adherence to just good market principles. We saw it as an opportunity to use that as a foundational point from which to work to try to change healthcare.
Nate Kaufman
What really disturbed you that was going on? I call them the insurance cartels because they control 80% of the drug prices in our country. What kind of behaviors did you uncover as you learned about this part of the industry?
Mark Cuban
I mean, there’s a long list of things that the PBMs (Pharmacy Benefit Mangers) and their insurance parents do that are contrary to the interest of patients. Just the fact that here we are, four years after our founding, literally this week, and we’re still the only pharmacy that publishes a price list that tells you all you need to know. We’re primarily generics. We have a growing number of brands, but the reason we don’t have as many brands as we would like is that the PBMs have told the brand manufacturers that if they work with us, then they would see their portfolio of drugs diminished on those formularies. If you’re not on a formulary, insurance isn’t paying for it, or corporate self-insured employers are not paying for it, and that could cause tens, hundreds, billions of dollars in losses. So they’re basically saying to me, Mark, we love you. We love what you’re doing, the changes you’re making, but we can’t work with you yet. I think that’s also one of the reasons you’ve seen direct to consumer from Eli Lilly and Novo Nordisk, Bristol Myers Squibb and others.
Nate Kaufman
One of the things that I discovered in my expert witness work with white bagging - I don’t know if you know white bagging - was that the size of the rebates from specialty drugs is like 35% but the patients don’t get that benefit, because when you pay co-payments and deductibles, you’re paying the full cost of that drug before rebates.
Mark Cuban
Yeah, and what’s even crazier during - as you mentioned - the deductible phase, companies, self-insured employers, public and private, are like 160-180 million members - even they’ll hire PBMs - and that PBM will tell them you need us to negotiate lower prices. Then for every single one of those members who has a deductible that includes pharmacy, they pay retail price - whether it’s a $20,000 specialty drug or a $600 drug it doesn’t matter, you were paying the full retail price. I heard that, and it took a while to resonate. Literally, it took some time because it made no sense that the mission of the PBM was supposed to be negotiating lower prices. Yet for the people who need the lowest price, the most patients with the higher deductibles, they pay more out of pocket. But it gets even worse. When you talk about not sharing rebates, think about the process. Let’s just say you’re somebody who takes home 30k a year - the price has changed, but we’ll use Eliquis price as of last year, $600 list price - you can’t afford a big premium, you have a $2,000 deductible at work, and so those first three months, you’re paying that full $600. But that’s not the horrible part. The horrible part is - let’s just pretend that the rebate is 50% and I think that’s relatively close - of that 50%, that $300, some percentage is withheld by the PBM, but the rest of it, let’s just say $250, goes to the employer. What that translates into is the employer is collecting money from their sickest employees and their sickest family members or those with chronic diseases - forever. You’re literally using your sickest employees to put money on your balance sheet. What’s scarier is when I talk to CEOs - and I try to talk to as many as possible at large companies - and I explain this to them, they have no clue because it’s not a CEO’s core competency to have to understand their health benefits. Now it’s getting to the point for every company where it’s the second largest expense item after payroll. They know they have to pay more attention. Historically, they’ve depended on consultants and brokers who have not done a good job for them, obviously, because this is where we’re at. Then I say to them, well, you have an ERISA (Employee Retirement Income Security Act) responsibility, you have a fiduciary responsibility legally to try to protect your employees and get them the best deal. Someday somebody’s going to put together that tobacco-like class action suit against big employers for just this. That’s part one, but part two, can you imagine how horrific it’ll be when the Wall Street Journal comes to you and asks you about one of your employees that died because they couldn’t afford to pay the full list price of that medication that they needed because they couldn’t, they were in their deductible phase? You do not want to face that. So what are the alternatives? Don’t use the big PBMs or insurance companies, you self-insure. That insurance company acts as an ASO (Administrative Services Only), they just do systems and so they manage it all and you don’t need them. They don’t take any insurance risk whatsoever. You can hire independent TPAs (Third-Party Administrators) or service organizations or caretaker navigators app, whatever it may be, you can find third parties that can do all of those things without putting all that risk on you. You would save ungodly amounts of money, your members would be in a far better position. But it’s all new to them and so I have to go through and explain it to them. A big part of that is scaring the s— out of them.
Nate Kaufman
Well, the other part is, if they are fully insured it’s not an ERISA plan, then what happens is they’re supposed to spend 80-85% of the dollars on healthcare, but that payment for the drugs at the counter is not included. (Mark Cuban: Wait, say that again.) What happens is the medical loss ratio (MLR) is based on the after rebate cost of the drugs, not the retail cost of the drugs.
Mark Cuban
So the MLR - is this just for ACA (Affordable Care Act) plans, or for any, all... (Nate Kaufman: Fully insured plans.) Okay, so not for self-insured, just fully insured. (Nate Kaufman: Fully insured.) Okay and that, primarily in volume quantity, would be ACA plans.
Nate Kaufman
No, there’s a ton of, like, small business...
Mark Cuban
Like, eight million of everybody.
Nate Kaufman
Right. So it’s, I think, 65 million people are covered. (Mark Cuban: Oh, really?) Yeah, it’s big.
Mark Cuban
Okay, well, yeah, that plus the 24 in the ACA, that’s real money. What you’re saying - because I need to repeat it so it resonates with me, you’re saying when they go to the counter for that brand medication - because generics don’t have that right - if there’s a 50% rebate, that probably applies to specialty drugs from their specialty pharmacies as well, oh, my god, so if it’s a 30% rebate on a $20,000 drug, that’s $6,000... so only $14,000... What about the fees that they’re charging the manufacturer? Do those net out at all? (Nate Kaufman: No.) Okay, so just the rebate.
Nate Kaufman
So you were talking about a $600 drug, and the rebate’s 50%. Let’s say I have a 20% co-payment, just for the heck of it. I’m going to pay $120 for that drug in a fully insured plan.
Mark Cuban
You pay $600 if you’re in your deductible phase.
Nate Kaufman
Correct, and that’s not recorded as part of the MLR.
Mark Cuban
Okay, so who tracks what the rebate is? I guess the insurance company is the only one. Is there anybody who audits that at all?
Nate Kaufman
Yes, I have the database. There’s a database called the CMS Medical Loss Ratio (MLR) Database that basically shows you exactly what’s going on and how money is being spent.
Mark Cuban
How can I get access? I’m looking for a pen to write this down.
Nate Kaufman
We actually have a tool to be able to mine data from it. I’m happy to do a Zoom with you at any time. Every health plan, we can give you the P and L for the health plan. We can show you what the drug costs are. We can show you how much they’re paying for this...
Mark Cuban
Did you build this or is this public information and you just optimized it?
Nate Kaufman
Public Information, I optimized it. CMS, MLR Database.
Mark Cuban
That’s insane. So you effectively can see whatever the rebate is for any brand drug.
Nate Kaufman
I have it. Well, they don’t list it by drug, there are no rebates for generics. [For example] what you get is: this year Anthem spent $140 per member per month on drugs, that was the gross charge, it was a 30% rebate and so the net cost of drugs which goes against the MLR is X.
Mark Cuban
Okay, so you get the aggregate rebates, you don’t get the individual drug. (Nate Kaufman: Correct.) Okay, so that’s not quite as powerful, because I can’t use individual information to call them out, and you don’t even know if it’s accurate because they’re the ones providing the information.
Nate Kaufman
They do it for the purpose of calculating that rebate - not the drug rebate - but the rebate for the health plan if they don’t spend 80-85%. They’re supposed to be accurate.
Mark Cuban
And who penalizes them if they don’t hit their MLR? (Nate Kaufman: CMS.) CMS does even for private insurance? As long as it’s a funded insurance company.
Nate Kaufman
I can show it by ACA plan. I can show it by small business and large business.
Mark Cuban
Has CMS ever fined anybody?
Nate Kaufman
Oh, yeah. I don’t know if they fined anybody, but you can see the rebates that are paid back.
Mark Cuban
Wait, when you say rebates paid back, that is the insurance company refunding to the employer, to the sponsor? (Nate Kaufman: To the health plans, yes.) And have states ever audited that to see if they deserve to get money back?
Nate Kaufman
No. As long as you mentioned audit, what’s even worse, to me, is like for Medicare Advantage, you have to have an adequate supply of providers, and that has to be audited by somebody, but it’s not.
Mark Cuban
Right, no. Yeah, every willing pharmacy, all that stuff.
Nate Kaufman
Yeah. So it’s kind of... anyhow, we could spin it up...
Mark Cuban
This stuff is important stuff, [Laughter] I’m always looking for the things that I don’t know, because there’s so much to learn in all this stuff. These are the things that pop up that are critical, because it demonstrates one more line item or one more issue where the insurance companies and their PBMs are stealing. (Nate Kaufman: Yeah, yeah, absolutely.) And that doesn’t even go into if they go to a captive pharmacy that charges them more... Well, I guess if it charges them more then they can use that in the total for the sponsor, but it doesn’t affect the net that applies to the MLR. Okay.
Nate Kaufman
That’s correct. You got it. You got it. But let’s talk about another issue, which is doctors. Because I know you’re a detailed person, all I do all day is negotiate physician contracts. That’s part of my life. (Mark Cuban: For who, what parties?) For emergency physicians. I’ll give you an example. If an emergency room physician relied totally on Medicare and Medicaid - I can get you the data on this, if you’re interested - they would make $150,000 a year. If an anesthesiologist relied on payments for Medicare and Medicaid, they would make about $120,000 a year. What has happened in this country - which is a big deal - is that I pay stipends for anesthesiologists. I’ve seen stipends that range from 8 million to 20 million a year to subsidize the underfunding that is paid by the federal government.
Mark Cuban
Okay, so I’m going to challenge you on that, (Nate Kaufman: Okay, good.) because when I look at it - and I’m still learning, so feel free to correct me, because I’m going to get a lot wrong - when I look at it, you’re talking about the net earnings that come back to the physician after everything that they have to do to earn that money from CMS.
Nate Kaufman
And pay malpractice and pay benefits, yes.
Mark Cuban
Right, pay benefits and go through all the paperwork and all that stuff. And so the question becomes, how does their net income change if everything else is simplified? Put aside malpractice for a minute, because that...
Nate Kaufman
In their case, it doesn’t help you. It doesn’t help you because of the Medicare fee schedule that’s been structured over the last two decades has increased 11%.
Mark Cuban
Yep, yeah, no, I get that, right. I know it hasn’t increased with inflation. So again the question I always ask as an entrepreneur, within the things that I can control, potentially, I can argue with MedPAC (Medicare Payment Advisory Commission) and we can go in there... You guys, I’m sure, have done a good job of screaming and yelling at them and they understand that for some reason they chose not to agree. And by the way, I agree. I think all physicians are underpaid. That’s a given. I say this all the time. I want my doctor - particularly if they’re a surgeon - taking off Wednesdays so they’re rested and relaxed. I want them golfing on Wednesdays, maybe that won’t relax them. But when I look at the overall economics of a clinic or a practice, I see a lot of extraneous expenses that if they came on Shark Tank I’d be like, why? Why? Why? Why? Why? Why? You also see them generating income from having equity in different parts of their practices because they know CMS limits what they can do. They generate revenue from having equity ownership in a practice or having other elements where they’re paid, and that’s fine, I’m not arguing it or questioning it, but when you add them all up, their arbitrage is on the system because the system is designed incorrectly. Particularly with independent physicians, you guys from the insurance companies are underpaid, mispaid, late paid, clawed back, all that s— Which is the exact same stuff that independent pharmacies go through and that has put so many of them out of business or acquired; the exact same thing. What I’ve always seen - you’re obviously taking steps here - or always thought, is independent physicians are really, really bad at having an association that represents them and gets the story out. I mean, I think I’m screaming it louder than anybody that represents them right now to say that. You guys should be doing the same thing that the independent pharmacy association is, led by a guy named Doug Huey, who just goes hardcore, and that’s why you’re seeing a lot of PBM legislation starting to happen. Oklahoma has led the way. They’ve done great. Arkansas has done a great job. But you need that for physicians. That’s why you guys have gotten s— on so much, because they did the same thing with independent pharmacies, like whether it’s a coupon program from a third party. All the fees get hit against the pharmacies, the independent pharmacies, and now those same things are happening with physicians and it’s going to get even worse. The reason why is the s— rolls downhill. It used to be to the pharmacist, but now it’s becoming more of the physicians because the pharmacy laws, or the PBM laws, are changing, and all the big PBMs are owned by big insurance companies. The big insurance companies are big for a reason, they’re not dumb. And by the way, we should make them divest all non-insurance assets to make the market more efficient. But they are so big, they know that what they can’t get from those independent pharmacies anymore - the extra $73 times 50,000 or, let’s just say, 20,000 independents - they’re going after the physicians and taking that $73 there somewhere, because they know you guys don’t fight back.
Nate Kaufman
Right. So here’s the issue. You have this situation with the physicians. For a primary care doctor or a neurologist, there’s not a lot of ancillaries that they can get so they end up with half their patients are [sic] Medicare. Their income’s declining. The insurance companies shadow price against Medicare, they’ve had 11% increase over two decades and they basically can’t make it. So what they do is they go to either PE (private equity) or they go to the local health system. And there’s this concept that there’s a conspiracy by health systems, that health systems can’t afford to invest in all these doctors, but that’s another story. And then one of the other big problems is that physicians make lousy employees and health systems don’t know how to employ them. One funny story I just heard yesterday, a big cardiology group couldn’t afford to practice any longer. They went to the health system, and my friend said, well, how was it? And the doctor said, well, it’s kind of like working in a minimum security prison. [Laughter]
Mark Cuban
Which is true. So my question becomes, Nathan, if you were going to design that practice from scratch, it was an oncology... what kind of practice was it? (Nate Kaufman: A cardiology practice.) Cardiology. If I was going to design a cardiology practice from scratch... put aside what I would earn personally, I’m going to plug my number in [later] just like any company I’ve ever started, I don’t know what I’m going to earn until I see how the company performs. Every Shark Tank company, you don’t know how they’re going to perform until they perform. And so for this cardiology practice, could I design the practice in such a way that my capital and expenses were low enough that I can make a little bit more as the physician working there?
Nate Kaufman
Probably not. From a standpoint, the Medicare Fee Schedule is so broken...
Mark Cuban
If I were designing... because I know there are hospitals - maybe it’s because they don’t pay their doctors enough - that make money on Medicare, even on Medicaid. But they don’t have artwork in the foyer, there’s no piano player and they have 7,000 consultants. If you had this cardiology practice that never hired a consultant, never hired anybody to do RCM (Revenue Cycle Management) didn’t have anything fancy other than the basic technology that you need there, you could outsource it and probably even get a - I don’t know if you’re allowed to get referral fees on that stuff for like MRIs or anything - but you could at least use them third party and not have the lease payment across it. Is there a way to make it so that each cardiologist can make - and hear me out - $80,000 a year or $100,000 a year? They say it wasn’t hard, every startup, every company... and I get that you also have your med school payments and that’s a big part of it as well. But if, as an entrepreneur, the way I look at it is, - and it’s the same with Cost Plus Drugs, our margins are only 15% - but I know that the key element for me is how I build trust, and the way to build trust is by having a set margin. I literally have even had some basic conversations about buying hospitals, and if and when I did buy a hospital - and I’m not saying I will - I would get rid of all the ancillaries, all of it, and market it much like we do Cost Plus. I’d pay my doctors more. We don’t have many employees, but we pay them well. And for those folks that are part of that mission in doing this, I would put out there and market here’s what we pay our doctors. Here’s our overhead down to the penny so that you can see what it costs and here’s what we get reimbursed by Medicare and we’ll charge you the same. We’ll grow, I know that practice would grow, because even though the basic Medicare doesn’t make you much money, the people who have real issues, you can make money from.
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Nate Kaufman
I mean, it’s an interesting concept. I do want to invite you, by the way... because I know that you have this opinion about Medicare and Medicaid and things like that. In fact, in the 1970s I worked for Hospital Corporation America, and it is true that many of the for-profits are breaking even on Medicare. There are no frills, they pick their markets, and they do a [good job]. They’re very disciplined. I can’t advocate for the not for profits; they have all kinds of issues that I don’t agree with and I work with them every day. One of the things that I want to offer you as an option is I’ve got two health systems that are willing to open their kimono and sit down with you and go through as detailed as you want.
Mark Cuban
Now, do they even have the details?
Nate Kaufman
Well, you can find out.
Mark Cuban
I’ve only talked to one health system that actually could provide a bill of materials for anything that they did, because that’s what you need. You need to get it down to that lineup. I’ll give you another example, We have Cost Plus Marketplace, it’s a virtual wholesaler, where, if you go to business.costplusdrugs.com, we sell injectables, we sell specialty medications, and whatever we buy it at, we mark it up 10%; that’s it, because it’s virtual. We’ll do an analysis for health systems, and we’ll show them for everything that we carry, that we sell, we can save you one million, two million, four million, five million dollars a year. Hospitals become part of these GPOs (Group Purchasing Organizations) that do them no favors. The GPOs, where they think they’re saving money with group buying, charge so much and have so much mishigas associated with it that I don’t know why they’re still there. My point being is we’ll show them how we can save them millions, and they might buy one or two or three drugs that aren’t even the ones with the most savings, but they determine that it’s too much disruption for their purchasing agents to switch.
Nate Kaufman
Yes, yes.
Mark Cuban
That’s management. That is management. If I saw something like that on Shark Tank, I’d be like, I’m out.
Nate Kaufman
I wrote an article recently for the Healthcare Financial Management Association. What I talked about is in hospital systems - and even at our hospital - there are silos. You have a supply chain that optimizes what they do, you have HR that optimizes what they do, legal, you have nursing that optimizes what they do, but nobody looking at the overall.
Mark Cuban
That’s what a CEO is supposed to do, I mean, and so that drives me nuts. When I hear you can’t make money at Medicare, Medicaid... I talked to CEOs and I talked to CFOs, and they don’t know what their costs are. I literally did a Grand Rounds for a couple big hospitals and I sat with the CEOs, told them about Cost Plus Marketplace, they connected. We showed them how much money we can save them. And then when you go back to CEOs... why are you not? I can’t Mark, I’m sorry, I can’t tell them what to do. Like, what the f—. [Laughter]
Nate Kaufman
When I meet with a health system to deal with a transaction representing a group of doctors, it’s like Hollywood Squares. I mean, there’s like...
Mark Cuban
And everybody’s...
Nate Kaufman
Paul Lynde, right, to age ourselves. [Laughter] There are covert stories that we can’t go into here, but yes, you’re absolutely right. It is very complicated.
Mark Cuban
But it’s not complicated, it’s not complicated. It’s like every other business. Your doctors are going to save the lives, you’ve got to have the protection systems in there, just like a computer company has got to protect against hacks and attackers and all that kind of stuff. There’s all kinds of stuff that are just the price of being in business. But it’s just a normal business, the best price for the best quality, managed in a system where the processes are optimized, where doctors are important employees, and to the patient, they’re the most important employee. But every company has super important employees that they can’t live without. There’s nothing unique about running it, and yet what you said is emblematic of every single hospital I’ve talked to. The couple I’ve looked at potentially buying or working with or saving - when you start saying, okay, you ready to get rid of all your consultants, are you ready to show me every general ledger entry so that we can run it through AI and see what it spits out - haven’t heard back from either one of them.
Nate Kaufman
By the way, look, you don’t want to get rid of every consultant. I mean, I’ve got to make a living. [Laughter]
Mark Cuban
No, but what I’m saying is you’ve got to go back to a base level.
Nate Kaufman
No, I agree with you. I totally agree with you. I agree. I don’t want to take too much of your time. But let’s talk about...
Mark Cuban
I’ll go on longer, because this is important and this is good.
Nate Kaufman
And by the way, any details, anytime, as you can tell, I’m in the trenches.
Mark Cuban
And I’m learning. This is the first podcast I’ve done where - I always talk a lot - I’ve learned things. I’ve taken notes. It’s been a while since I’ve taken notes in a podcast.
Nate Kaufman
Where we met was LinkedIn. And on LinkedIn, you have all these people kind of pontificating about, oh, oh, we should just give my 99 year old - I have a 99 year old mother - the money and let her figure it out. (Mark Cuban: Oh, that’s ridiculous.) Two questions. One, because you’re such an amazing business person, what’s the difference between a strategy and a hallucination? [Laughter] There are a ton of those.
Mark Cuban
The drugs you take, the drugs you take. [Laughter]
Nate Kaufman
Or the candy, it depends. And then the second question is well, what do you think we should do? I mean, I’m obviously a failure. I spent 50 years in the system. I can’t figure out how to...
Mark Cuban
Here. Let me tell you. Go ahead...
Nate Kaufman
One fix. Every insurance company has the same process for admitting claims. There’s one claim submission process, there’s one medical necessity determination process, there’s one denial process for the 20 insurance companies that a hospital or doctor has to deal with. Now, you’ve just eliminated two thirds of your business office expense, and you haven’t affected patient care at all.
Mark Cuban
The only problem is you affected patient flow, they’re your sales funnel. That’s their issue, that’s why whoever has the market dominance gets the best deal. Is it the insurance company that can generate more patients or is it the hospital system that can generate more patients? If you don’t need the insurance company to generate patients, you’re going to get a better deal. But let’s put that aside. What I would do - and this is a work in progress, so feel free to f— it up and tell me I’m wrong, my feelings won’t be hurt, this is how I learn - when I look at it, we pay premiums to an insurance company that we have to fight to get back. I would take those premiums and put them, preferably into an HSA because of the tax benefit, but without the $4,400 or whatever limit per year, and allow you to make a contribution so that you can ramp up however much you can afford to ramp up. I would allow you to accumulate however much you use - still with the same rules of HSA, so that you can only use them on qualified healthcare expenses - and then we get a bank, not Optum, not some of the big insurance companies that run their HSA banks, but an independent bank, and we say to them, you’re going to be able to compete for these new HSA deposits, and it should be a lot of money, because they can’t keep it. You’re going to grow your asset base very, very, very quickly, and the way we’re going to approach it is, when somebody has something that’s expensive, like, if it’s your $600 because there are no deductibles, there’s no insurance company so there’s no plan, there’s no deductible, you’re going to pay whatever the best price you can get for that medication and we can offer different services to do that. There are plenty of third party services that we can connect with that can help you find the best price, whether it’s a healthcare service or a medication. But you get to choose, and you get to choose where you buy it, how you spend your money. But if you get to the point where you’re in a bad wreck, you need a heart transplant, and you don’t have enough money, then what we’re going to do is have a program where you can borrow from that same bank for whatever it is that you need, hopefully. Now here are a couple elements. Hopefully we’ll get the federal government and the taxpayers to guarantee that amount so that the banks are more willing, they’re not going to look at the credit risk of the potential patient, because they know it’s being guaranteed. We do that already for SBA loans, we do that for home loans, we do that for school loans, we even loan you money for school loans. But if you get messed up in a car wreck and it’s super expensive, good luck to you, you’re on your own. This just takes that same principle of we’ll help people. Now, part of the limitation when you’re borrowing money for that is you can only spend at Medicare rates. Maybe we index that based off of location - I know, I saw your eyes - maybe New York’s more, just like they index it.
Nate Kaufman
I believe in a single rate system, I just think it needs to be a little bit higher than Medicare.
Mark Cuban
We can work on that, but start with Medicare rates. I don’t want to get into a reference based pricing relative to Medicare but let’s just start there. Now all of a sudden you have billions and billions - growing to probably tens of billions of dollars - of people who have money, who can walk into that cardiology practice. And that cardiology practice has basic paperwork, immediately knows they’re going to get paid because it’s guaranteed by the federal government, and in exchange for that they’re working at Medicare rates, and they don’t have the limitations and all the, again, the mishigas administrivia that you were alluding to, that cut 30-40%, whatever percent it is, of those costs. [Imagine I] walk into the cardiology, I have afib, I want to get an ablation and I only have $6,000 in my HSA. The Medicare price is whatever that Medicare price is, I’m going to borrow that, and you’ll get paid within seven days after the ablation is performed, then the follow up, you’ll get paid at Medicare rates. You’ll get paid within seven days. If I come back, you get to charge me. You don’t have to limit it to seven minutes. That’s probably a way you’ll arbitrage the system a little bit. You’ll spend two hours instead of [minutes] you’ll talk about your golf game, etc. But that’s the way it works. And to repay that note - because I just borrowed $10,000 or whatever it is, for my ablation - I’m going to pay it back at the same amount I would have paid in premiums to an ACA silver plan with the tax credits. So if I’m a family of four, I’m paying to repay it. That kind of makes it means tested. I’m paying it back the $784 a month, whatever it may be. But wait, there’s more. Now, if you’re paying $784 a month forever, premiums are forever, and that’s not horrible, but there’s no reason why - if the numbers all work, as I think they will - we get the taxpayers, the government, to buy reinsurance and you set that at $10,000 or $20,000 or $30,000, whatever it is that makes that number reasonable. So now I’m paying my $784 until I pay back for my ablation, up until the reinsurance number, and then past that, I’ll continue to pay my $784 into my HSA. And now, gotten rid of insurance companies - I’m not saying we get rid of them in that we make them illegal - they get to compete, like everybody else. In terms of healthcare providers, if your cardiology clinic thinks that there’s enough business dealing with these people that are in this program, and because there’s going to be billions of dollars flowing in, because it’s not single payer, but it’s single price, because there’s so much money there, everybody’s going to want to adapt their practices or their hospitals to be able to collect as much of that as possible. And then you or I, if there’s a specific cardiologist and I want special treatment and I want you to do [more] I’ll pay more. I have the option, but I’m not borrowing the money, if I borrow the money, it’s Medicare rates. If I don’t borrow the money, you can charge me anything you want, that’s your choice at the clinic, and whatever ramifications come if I’m using insurance. But presumably, if we simplify everything, the insurance companies either adapt or die.
Nate Kaufman
So let me just raise what I call the transparency fallacy, and tell you a real story.
Mark Cuban
Are you going to tell me about patient shopping? I know nobody shops.
Nate Kaufman
That’s not the issue. The issue is there’s a piece missing. My buddy has leukemia and he needs a bone marrow transplant. I’m in the secret society, so I’m able to figure out who’s the best. What you care about with bone marrow transplants is mortality rate, not cost. You care about mortality rate. So I go on the web and I look around, they have reports on mortality rates, and it says reports explicitly state they are not intended to rank centers or generate best or worst [inaudible.]
Mark Cuban
I’ve seen those.
Nate Kaufman
The point is, he doesn’t care what the cost is. He just wants to go a place with the lowest mortality rate. I found it out by calling people who I know in the business, but part of this plan has to be, by the way...
Mark Cuban
Oh, for sure. Let me give you an example, because I agree with you 100%. We have a site called CostPlusWellness.com - I encourage everybody and anybody go look at it - I created it for my own employees, the members that I’m responsible for. Having this whole conversation, there’s no need - I self-insure it - there’s no need for the insurance companies, other than to maybe be a wrap around network for if someone’s in a wreck in a city that I don’t have a direct contract. We went to all the providers in Dallas and the surrounding areas, and now we’re expanding. We said, look, whatever it is you want to charge us, we want it to be as cheap as possible. We created this website, costpluswellness.com, and whatever deal I sign with you for my members, we want to publish the contract on costpluswellness.com so that any employer can use it. And now we’re starting to see employers take it up. Now the next part of that is for my members, for my employees, if they use one of those providers that we’ve signed up with, they have no out of pocket and no deductible. (Nate Kaufman: That’s great.) So they’re incented to do that. Now in terms of qualitative aspects of that employer, I forget the name of the organization we use, but they do all the mortality ranking and do all the ratings - surgical something or other, or surgeon something or other. So yes, that’s part of our process, because you’re right, you just want to live. Now, if you can’t afford it, you’re actually being directed by the insurance companies anyways. They don’t care if you’re getting the best surgeon or your best bone marrow transplant. You’re just going to whoever is in their network, period.
Nate Kaufman
Whoever’s cheaper. Cheap is what drives and that just can’t be.
Mark Cuban
It’s unfortunate but true that even in my system, if you’re wealthy or you have good credit, and maybe the best one won’t take Medicare rates, you can borrow the delta; if you can afford the delta, more power to you. It’s unfortunate, and it’s not universal healthcare in the way people think. But like, even when I got kidney stones when I was in Canada and I went to the hospital - it’s a funny story, like I’m dying, I feel like I’m giving birth - Toronto City Hospital, and I’m just sitting there waiting like everybody else. Everybody’s coming up asking for pictures and autographs, [laughter] and then they put me on a gurney in a hallway to hide me. There were people all around me yelling and screaming in pain and then finally they got me in because somebody I knew called somebody I knew. I wasn’t asking for special care or anything, I just wanted to be seen and getting all my morphine and everything. They put me in a room with just a curtain, which I was fine with, I had no problem. But the point being is, like you said, no matter what the system, it’s not equal for everybody. And while this system might not be perfect and equal for everybody, everybody gets a chance to get care. And that’s the most important part.
Nate Kaufman
I agree. I agree. Well, I don’t want to take up too much more of your time, unless you want to keep going? I can keep going for hours. (Mark Cuban: Keep going, I love this.) What haven’t we covered in this discussion that you think is important?
Mark Cuban
Should we break up the insurance companies? Should we make them divest non-insurance assets?
Nate Kaufman
Everyone, everybody demonizes the hospital. One thing is, everyone says they’re too expensive. Believe me, I’m in the inside. I see it. It’s horrible. I’m begging them to stop meeting with each other and get out into the field. But that’s a whole nother story. It’s a difficult situation. But the insurance companies, I mean, at least if you go to a hospital, they try to cure you, not sure if the insurance companies... [inaudible, crosstalk] What’s the value in these giant cartels that are dominating and denying care?
Mark Cuban
None, and that’s why you need to make them divest. Just like ATT in 1984 changed the telecom industry so that we got MCI and now we have internet and all that. You’ve got to make them, in my mind, my opinion, you’ve got to get them to divest non-insurance assets. Because they have so much scale, they’ve effectively captured the economics of the entire healthcare system.
Nate Kaufman
Yeah. Who’s the biggest PBM for United Healthcare patients? It’s Optim RX, and there’s all this transfer pricing there...
Mark Cuban
Of course, and they game the MLR, And now they control all these physicians, and so they pay those physicians more, so they just keep the profits with the physicians. And now, with all the laws being passed against PBMs, they’re going to move it somewhere else. Most likely, they’re going to ding the independent physicians even more, because they have no voice to speak up for them, just like the independent pharmacies didn’t before all these pharmacy laws were passed in Oklahoma, Arkansas, etc. Let’s go through... tell me if I’m wrong here, because you’ve done this and you’ve forgotten more than I know. The way it starts is the insurance companies design plans. They go to either the full funded or more likely the self-insured employers, and they say, hey, here’s a bunch of different plans that are options for you and your employees. Even though, for self insured, they’re only managing it they’re still designing the plans. They’re saying, here’s high deductible, low premium, vice versa, okay? And then the employer determines what they’re going to contribute, and then the employee makes their decision, high deductible load. Now we mentioned the pharmaceutical issue during the deductible phase, but let’s think about what happens if you do have leukemia, god forbid, and now you can’t afford your deductible, and you present yourself at the hospital. The hospital is in a catch 22. Or you go to the cardiology clinic - or the oncologist, I guess it would be, right - now they’re in a bad spot, because, to your point, they want to care for this patient. The patient can’t afford their deductible. Let’s just say it was a high deductible plan, or now one of the catastrophic plans, and it’s $10,000 deductible and they’ve got $47 in the bank. They’re not going to just want to say no, so they’ll say, here’s some alternative financing. But those financing companies want credit, they want you to have some stability. So effectively now the hospitals or the clinics turn into subprime lenders.
Nate Kaufman
Yes, I’ve quoted you on that a hundred times. (Mark Cuban: Yes, I appreciate that.) Yes, and I’ve given you credit.
Mark Cuban
And you don’t need to do that. So now they’re a subprime lender and they’re not going to collect 50% of it, if they try to collect any of it. They’re the problem for there being hundreds of billions of dollars in medical debts, even though the foundational issue is how insurance plans are designed and implemented. (Nate Kaufman: Exactly.) Wait, there’s more. Now the insurance companies have pushed off the funding mechanism and made the providers, whether it’s a hospital, clinic, physician, whatever it may be, into the subprime lenders, and that’s one loss that they’re taking. Now then we go to the pre-auths and the denials. Denials are not about denying care. Denials are about time value of money (Nate Kaufman: Correct.) Because those insurance companies have got tens of billions of dollars that they want to earn 4%, or whatever it is, a year, and the longer they can keep your doctors busy and talking to the 97 year old pediatrician that used to be a veterinarian and hasn’t practiced in 46 years. As long as they’re keeping you guys talking, it’s costing you money as the doctor and the provider, but they’re making money, so that’s another thing that the hospitals and the providers have to compensate for. But wait, there’s more. Then there’s a contract that now we are able to see - thanks to Donald Trump, one of his wins - where, it’s not perfect, but they put up the contracted rate for all the things that you can determine because with CMS (Centers for Medicare & Medicaid Services) you just don’t know, if it’s a heart ablation, if it’s a hip replacement, whatever it is. And so let’s just say, for the hip replacement, $25,000 is the contracted rate between the insurance company and the provider. I’ve had my hips replaced. I go there to get my hips replaced. They ain’t paying $25,000. They’re paying $20,000 of the $25,000 and saying sue me if you don’t like it, we’ll go to arbitration if we need to or I’m just going to pay you what I want to pay you when I want to pay you.
Nate Kaufman
And just one thing about that, and by the way, thank you for that, because I’m an expert witness in a case involving that exact situation, and it’s costing a lot of money.
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Mark Cuban
Because they just underpay them, they just do. Now, all of a sudden, that provider has got tons of administrators and clerical people and lawyers that they’re paying non stop. You take all those things - and there are some other things, but we don’t need to go into all the minutia - now all of a sudden, the hospital’s got to make up that revenue, or the provider, or the clinic or the physicians got to make up all that revenue so they start inventing s— - facility fees. Of course, it’s a facility, I’m paying... it’s like getting a facility fee when you go to a restaurant: here’s your burger, it’s only $4.99 or $9.99, your facility fee for the restaurant is $12. It’s just an invented thing.
Nate Kaufman
We’re always looking for work arounds for the underfunding that we experience from Medicare and...
Mark Cuban
Right, but you understand there’s first order issues and second order issues that are caused by the most underlying issue, which is how insurance plans are designed (Nate Kaufman: Exactly.) and how they’re selected.
Nate Kaufman
One great example. Here’s a great example, a hospital - this is a true story - just discharged a patient after 897 days because no government or private long term facility would accept the patient. Who had to pay for that? What other business has to accept everybody that comes in their front door, regardless of their ability to pay?
Mark Cuban
And so did the hospital have to eat it or what happened? (Nate Kaufman: Yes, yes.) They ate the whole thing. They fight, but then there’s the flip side, because particularly with long term care, they fight to find spots for people to take, and the long term care facilities know that. There are companies that game that whole system and they jack up rates in long term care. Long term care rates go up because they know they got you, because it’s more expensive to keep them inpatient than it is to pay them to take it. And so the hospitals will pay you to take that patient, right, right, right.
Nate Kaufman
One other example. If you have an elderly patient, they need skilled nursing facilities and of course, if they’re Medicare Advantage, you have to get approval. It takes four days to get approval.
Mark Cuban
Now they’re eating that money, they’re eating that money in there. That’s the same thing as the pre-auths, just the difference of pre-auths is that pushes more expenses to the hospital. (Nate Kaufman: Exactly.) Going back to breaking up the big insurance companies - break them up, create standardized contracts. Now you’ve got the hospital who’s got to invent new ways to compensate for all that, all those costs, facility fees being one of them, knowing there’s an information asymmetry with patients is another. They’ll add all this charge master s— to a bill in hopes that it’ll get paid. More and more people understand that you can argue about your bill. You’ll talk to a friend and bitch about your bill and they’ll say, well, don’t pay the whole thing or just don’t pay it at all. Make them come after you, they’ll get bored because the hospitals know that they’re just charging stuff that they shouldn’t be charging for, and the stuff they should be charging for, they’re overcharging for dramatically in hopes somebody will pay.
Nate Kaufman
There’s a whole bunch of people gaming them on the other side who aren’t paying. It’s crazy.
Mark Cuban
It’s easy, [Chuckling.] and this goes back to my plan. You’ve got to get those insurance companies either broken up or out of the mix. I understand if I’m a hospital, it falls into two categories. One, I have market dominance and I get to say, f— you to everybody and the insurance companies. I don’t need you because I’m going to get my own patient flow. Or two, I don’t have enough patient flow, so I need insurance companies to send me patients, so I’ll do the deal that you want me to do, because otherwise I don’t have a patient funnel. (Nate Kaufman: Right.) That’s the fundamental thing about all this, which gets down to, those dumb-ass CEOs, in a lot of cases, that don’t know how to market (Nate Kaufman: Not all.) Not all. No, I’m not saying all, god forbid, no, but I’m just saying there are plenty there. The ones that can’t get the job done are the ones that are going out of business, getting fired, whatever. But the point is, you’ve got to know how to sell like anyone else; doctors aren’t great sales people, hospitals aren’t great at sales. They’re good marketers or branders but the ones that are really good, by definition, they’re spending so much on marketing and branding and expanding and trying to be number one that they have to charge more and their costs go up. I tell people, don’t go to a hospital that has a piano unless there’s a specific doctor that can save your life, because you’re going to get overcharged. And so you’ve got all these misaligned incentives that are part of the big picture. Again, how do you simplify the whole thing? How do you make it so if I was looking at buying a hospital - which I’ve looked at several, like we talked about - and they just don’t know how to run a business, the ones I’ve talked to, the smaller ones. You’ve got to be able to get down... like any other startup... you’ve got to think of your hospital as a startup and your first doctors as being your first employees or your partners. Even if - I know doctors aren’t allowed to own hospitals - you can pay them more. That can be just like if I start a new AI company right now and I need some AI technologists that I know are really, really good, I’m paying a premium and I’m raising money to compensate for that. I think part of the challenge is that most hospital CEOs are rewarded by revenues and scale, so they default to more buildings. Everything’s got to be a building. Everything’s got to be I need higher revenues, because this 100 bed hospital is not my final destination, I want to be the 60 hospital, six zillion beds, because that’s where I’m making $10 million a year. (Nate Kaufman: More.) Even more. So the incentives for those CEOs and CFOs and C-suite folks are to scale because they’re not making... if I keep my hospital at 67 beds, I’m not planning on being here till I retire.
Nate Kaufman
Well, if you have one hospital, 67 beds, insurance companies aren’t going to pay anything. You have no negotiating clout at all. You do need to consolidate to get big, but you have to know how to run that business. There is some benefits of economies of expertise for hospitals, I think. And one other point, you were mentioning paying the doctors more. There is a strict government rule. There’s an entire industry within healthcare of what is fair market value for a physician, and there’s litigation, and there have been cases...
Mark Cuban
What happens if you pay more than fair market value?
Nate Kaufman
That’s fraud and abuse. It’s a federal offense.
Mark Cuban
Even if it’s a private hospital?
Nate Kaufman
Yes, you cannot pay for referrals.
Mark Cuban
You can’t pay for referrals...
Nate Kaufman
If you have a referring physician, and you’re paying him above fair market value, they don’t tell you what it is...
Mark Cuban
I get for a referring physician, I get like, you can’t even... like if I was a doctor working in a hospital, and my best friend was out of network working at another hospital, but he’s also the best at heart ablations, whatever, I know I can’t refer and do all that.
Nate Kaufman
You can refer to them, but you can’t get paid for that referral. I mean, there is this giant industry, I was in it...
Mark Cuban
Even then you can’t refer if they’re out of network. That was the point I was making. The insurance company probably won’t pay for them, even if they’re better and will save them money because they’re out of network. (Nate Kaufman: Exactly.) All of this. So, put my entrepreneur Shark Tank hat on [chuckles], then I say, what would it take to get people to choose me? Just like on Cost Plus Drugs, how much money I’ve spent on Cost Plus Drugs on marketing, on advertising. Now, I’ve got a big mouth, that helps, but at the same time, if I was doing it with the hospital and doing it the same way, I would take the same approach; I would be completely transparent on my costs. Here’s what I pay my doctors, here’s what I pay in rent, here’s what I pay every step of the way. If you want to look at it, you’re more than welcome to, here’s my bill of materials for that hip replacement. This implant cost me $1,500. I want somebody to speak up. It’s like with costpluswellness.com putting our contracts out there. We want somebody to speak up and say, you’ve got good or bad rates. Literally, we had an insurance company that looked at our contracts, they had millions of lives, I’ll just say, and we had a better contract for my members than they did as an insurance company. They wanted to know if we could use it, but the provider said no, because they don’t trust insurance companies to pay for all the reasons that we said. So they charge insurance companies a premium over what they would charge me for my members at my companies. That’s how messed up it all is. And so if you have any small, small hospitals in the Dallas Fort Worth area, I’d be happy to try to take a look and help them market, if they’re willing to be totally transparent on everything. Like, I think, by law, if you’re a non-profit hospital, you have to make your general ledger entries public.
Nate Kaufman
Yeah, you get audited financials, absolutely.
Mark Cuban
Not audited - public. I don’t want to see this is how much cash we have, this is what we have in AR (accounts receiveable). I want to see how much we spent on all the purchasing invoices and everything. Everything has got to be... because there are no competitive advantage issues. It’s not like, like, to your point, if you’re sick and you want to live, it’s not like they disclose this or that. The only reason not to disclose is because your vendor says no, because they’re afraid. Okay, I understand that sometimes, but if you’re a non-profit you should have to disclose all of it. If you do, then there’s going to be people like me who geek out on that stuff and look at it and say, this is ridiculous. Why are you [paying this rate], here’s the Cost Plus Marketplace price for this injectable medication, this JCO (Joint Commission Only) medication, and you’re paying three times what it would be from them. Well, it’s just easier, our cost to deal with multiple vendors. Bulls—. And now with agentic AI, it should be even easier. I want the agent. Here’s what we need to buy. Here are the inventory levels we need. When we use something in surgery, whatever it is, then we need to reorder, we’re going to automatically talk to their agents to find the lowest price within the value and quality perspective requirements that we need. Okay. That is where it’s going, all this stuff, particularly in hospitals but in all businesses. All my Shark Tank companies, there are so many little jobs that are so detail oriented, but only result in minimal savings that you just say, okay, it’s the cost of doing business. Now, with the agenetic AI, you can do that stuff. One of my Shark Tank companies, a woman named Kirsten Maitland... I’ve got a Shark Tank company, RebelCheese.com. RebelCheese.com. If you’re a vegan and you want the best tasting vegan cheese, RebelCheese.com. In any event, they ship cheese. I’m a sales guy. They ship vegan cheese from RebelCheese.com all over the world and when you ship the different UPS, FedEx, etc, they have these different price lists. The price list will say for this size box or this amount of weight going to from this zone that you’re in, going to this zone that you’re sending it to, within this period of time that you expect it to be delivered, or whatever the parameters are - this is the price. And you would think that these big companies get that price right all the time intentionally, because they know - even if it’s 50 cents, 75 cents delta - that’s money in aggregate, that’s real money. It’s not worth Rebel Cheese to check it. Kirsten Maitland, the CEO and co-founder, she put together her own little agent through Anthropic so that it takes computer vision, looks at the price list, compares it to the invoice, determines if it’s right, creates the credit, sends it to get the credit, receives the credit, verifies it, puts the money in the bank, saves thousands of dollars a week for a company that just does a few million. Actually, they’ve grown a lot bigger now, but it just makes them a boatload of money. And we’re like, we’ll replicate that across all my Shark Tank companies. That’s what I go out and tell people when they ask me where can I use AI today? Because AI and healthcare right now, everybody wants to change the world, AI doctors. Put all that aside, that stuff’s going to happen, we can argue about when and how and what’s good and what’s bad. I personally think it saves physicians time and effort, and it’s just to check your whole chart, but I understand that there’s a downside, because now everybody’s a doctor.
Nate Kaufman
Here’s a fun fact for you. One of my clients just acquired a 250 bed hospital. It was bankrupt, owned by a PE firm, but that hospital had over 3,000 contracts, 3,000. I mean, that’s not a 600 bed hospital, that’s a 250 bed private hospital. So that just gives you some idea of the magnitude of management that needs to occur.
Mark Cuban
Yes, yes, right, you’re exactly right. Now imagine all those processes associated with all those contracts automated with AI agents, because there’s nobody verifying all the financial information associated with transactions from each one of those contracts. No chance, you can’t hire enough people to do that. No, that’s what agentic AI is really going to do for hospitals and clinics and practices; low hanging fruit. What I’ve told kids coming out of college now - my daughter is getting ready to graduate from Vanderbilt - and I’m like, learn agentic AI and don’t worry about going to work for the big companies because they got a million people that will figure it out. [Go to] all the small companies, like the 250 bed hospital, who have an IT department, but don’t have somebody who can sit there and say, show me all the stuff you don’t have time to do. Show me all the places where you lose a dime at a time and you don’t know what it adds up to. I’ll put together an agent, sit down, and we’ll work it through. It’ll take a little bit of time to work it through, to get it right, because you have to verify, verify, verify, but once you do, it’s all automated, and you’ll save and you go on to the next and the next and the next and the next.
Nate Kaufman
Let me leave you with a couple things. Number one, if you actually... one hospital is in Connecticut and one’s in San Diego - that’s where I am - they’re more than happy, if you are ever in that area...
Mark Cuban
San Diego, Connecticut’s too far and cold.
Nate Kaufman
Okay, it’s Scripps, and Chris Van Gorder would be happy to host you and to get you...
Mark Cuban
How many beds are they?
Nate Kaufman
They’re big hospitals, probably 400 or 500 beds. Employees, have probably 1800 doctors. They’re the premier provider, I think, in the region - that’s where I go for care, except for my concierge primary care doctor - they’re a very transparent organization.
Mark Cuban
Do they do cost accounting? Do they know their costs?
Nate Kaufman
Yes. In fact, I talked to Rick Neil, who was their executive vice president. He said when he got there, they weren’t, but they are now.
Mark Cuban
And they do a bill of material? Ask them if they can do a bill of materials for any service.
Nate Kaufman
Okay, I will, but they’d be happy to host you anytime. Anytime you want to see my MLR tool that mines the data just let your assistant know and I’ll make time and we’ll show you that. My last point is - I do have a personal question - did you invest in Squatty Potty?
Mark Cuban
No, that was Laurie that invested. But I did invest in Dude Wipes and I just posted something [about it]. Dude Wipes just passed 300 million in sales. I invested $200,000 I think. I forget if it was 15-20%. I did another deal with a company called BeatBox Beverages, which is like a spritzer wine thing, and they just sold to Budweiser for $600 million. I invested one million for 33% of the company. Now I got diluted down, so I ended up owning like 14-15% with my brother, who I brought in. But yeah, I’ve had some wins: MUSH Oats, Collars & Co. But BeatBox Beverage and Dude Wipes have paid for everything.
Nate Kaufman
That’s great. Any other things we want to talk about?
Mark Cuban
No, I love this stuff. I mean, I learned a lot, so thank you.
Nate Kaufman
Oh, my pleasure. I mean, I appreciate what you’ve done for the industry. I’m so close to everything that I know all the nuances and everything, and so it’s hard for me to see the bigger opportunities to really transform the system.
Mark Cuban
Check out costpluswellness.com, I’d love to add any of the hospitals that you’re working with. Again, the key is, we want the best price possible. Obviously, the better the price, the more interest you’ll get. But the key is publishing the contracts, I think, because we talked about the challenges of working with insurance companies. The more direct contracts a hospital has, the less they work with an insurance company.
Nate Kaufman
In another episode or at any other time, I’d be happy to talk about direct contracts. There are challenges and opportunities there and the key to that is nuances. It’s like, you know this better than I, when you get into an adjacency business - which is insurance, which is direct contracts - if you don’t have the right people there, that business is going to fail [inaudible.]
Mark Cuban
Real quick, the rules of our direct contracts are, you’ve got to pay cash up front, cash at time of service, unless the hospital prefers 7, 14 or 30 days, whatever they prefer. There are no denials. There are no pre-authorizations. By the time it gets to you, it’s already approved. There’s no customer/patient out of pocket. There are no deductibles. It’s all going to be paid for completely, so you have none of the associated administrative or overhead risk.
Nate Kaufman
The mishigas, I got it.
Mark Cuban
The mishigas, so get your guys to participate and all that other stuff disappears. Just imagine if everything was direct contract because cash pay is cheaper for a reason. If everybody was cash pay, you would be in heaven and if everybody was cash pay and direct contracts - which is effectively cash pay by a corporation - you’d be in heaven too. So the question becomes, how can you move away from insurance companies within your own control, putting aside what I put together. How can you move to direct contract? Now, a lot of places, University of Pittsburgh Medical Center, they try to turn it into insurance. It shouldn’t be insurance, because then you’re just an insurer playing the same games only you’re just fully integrated and captive.
Nate Kaufman
Even worse, you transfer pricing, and you become your worst payer to make an insurance company [crosstalk]
Mark Cuban
The hospital hates it and the insurance company loves it or vice versa. But if you’re working to get rid of all that, that’s the mission, there’s a path there. As I can continue to educate employers to do what we’re doing - that’s why we made cost plus wellness.com - and put all those contracts publicly so they can grab them, then you just need a care navigator, which a TPA (Third Party Adminstrator) can do, and some software to manage it, which GPAs (Group Purchasing Agreement) can do, or other companies can do. Now, your fee for service for all that other stuff, as an employer you don’t have the 97 year old pediatrician doing the committees to talk to your doctors and wasting their time. You don’t have those. Now you’re still working with insurance, so you still have all that stuff. But if you took all the businesses in whatever, Connecticut or in San Diego, and you hired one salesperson, and started going to all the San Diego businesses with 500 or more members, and say, here are the rules. We’ll give it to you at 150% of Medicare, 75% of Medicare for digital services type stuff, MRI or whatever, 150% basic stuff, someone breaks their arm, 250% if it’s more complicated. And if it’s inpatient, we have this funky formula where, if you’re there three days, etc. we’ll give you the best formula, as long as you’re paying upfront so we don’t have to worry about collecting. We’ll give you the best price that we can get. And by the way, this is non-exclusive. We’re not keeping up with the Joneses and other hospitals. You can go to them, we’re not stopping you. It’s non-exclusive. If you get one salesperson to go out there and do that, to increase the number of direct contracts, now, all of a sudden you start - it might take five years - you’ll start having your own patient funnel and if you control your patient funnel... You don’t see hospitals promote their cash prices. I don’t know if legally, contractually, they’re not allowed to because of the insurance companies. But if I was a hospital, I’d be like, daughter broke a leg, torn ACL from soccer, here’s our cash price. If you’re a cash payer, I would go to local banks and say let us send something out in all the statements saying if you go through Scripps San Diego, if you break your leg, or if you have surgery and you can’t afford your deductible, whatever, we’ll loan you the money. And then you go to Scripps and say, okay, I want you to guarantee 10% of it, because I know that you would have otherwise not been fully paid, which is just buy now, pay later. That works, because they get a percentage of the revenue from the retailer. Doing all these things, you change the patient funnel which changes the leverage, and that’s what hospitals don’t do. They don’t try to change the leverage. They don’t think that way,
Nate Kaufman
It’s still the old model of Medicare doesn’t pay us enough. We have these unfunded mandates. Let’s charge whoever we can more. And that’s what they’re doing.
Mark Cuban
And that always backfires. There’s nobody you want to go back and do business with again that if you feel like they charged you more.
Nate Kaufman
Well, listen, Mark, this has been unbelievable. (Mark Cuban: I loved it. Yeah, I really appreciate it.) And I really have enjoyed it. I will give your assistant all my contact information.
Mark Cuban
Just email me. MCuban@gmail.
Nate Kaufman
All right, I’ll do it. How did we do Brian? Oh, let me finish, I forgot! [Chuckle] Well, this is Nate Kaufman. I’ve had the honor of spending an hour with Mark Cuban to talk about healthcare. Mark, thank you very much on behalf of the Healthcare Bridge.
Mark Cuban
This is f— great. Thanks, Nate.
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