How Centivo is Reshaping Employer-Sponsored Health Plans

“We decided to come to the table with a health-plan model that enables what we like to call radical affordability,” said Ashok Subramanian, CEO and co-founder of Centivo, in this episode of the Vanguards of Health Care podcast. Subramanian joins Bloomberg Intelligence analyst Jonathan Palmer to discuss how Centivo’s approach to self-funded employer plans focuses on reducing costs without sacrificing quality. By leveraging direct-provider partnerships and emphasizing primary care, the company aims to keep 75% of members’ out-of-pocket costs below $200 per year. The conversation covers how Centivo differentiates itself from traditional insurers, its expansion into new markets, and how it helps employers navigate high-cost treatments like GLP-1 drugs while maintaining sustainable benefits for workers.

 

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Episode Transcript

Speaker 1 (00:15):
Welcome to another episode of the Vanguards of Healthcare podcast,
where we speak with the leaders at the forefront of
change in the healthcare industry. My name is Jonathan Palmer
and I'm a healthcare analyst at Bloomberg Intelligence, the in
house research arm at Bloomberg. We're very happy to welcome
A Choke, Supermanian founder and CEO of Sentivo. Prior to
starting Centivo about eight years ago, he was also the

(00:37):
CEO and co founder of Liaison, a benefits marketplace that
had a successful exit via acquisition. Like many of the
guests we featured on the podcast, A Choke also did
a stint at Mackenzie before jumping ship to become an entrepreneur.
Welcome to the podcast, Jonathan, I appreciate you having me on.
Well let's jump right in. So how would you describe
Sentivo's mission in a few sentences?

Speaker 2 (01:00):
YEA, so very simply put, Sintivo is born out of
a sad problem, which is that half of working Americans
don't have enough money in an emergency fund to pay
for the deductible on their health plan. Simply put, healthcare
is too expensive. Health insurance is too expensive. So we
decided to come to a table with a health plan

(01:20):
model that enables what we like to call radical affordability.
And we define radical affordability as seventy five percent of
people spending less than two hundred dollars a year on
out of pocket health care. We'll get into the hows
and the whys and the what I'm sure deeper in
this discussion, but at the end of the day, what
we do is deliver an alternative health plan to self

(01:40):
funded employers and their employees and family members that delivers
on that promise of radical affordability.

Speaker 1 (01:47):
So, maybe rewinding a little bit, you know, when was
the genesis of this idea? You know what part of
your journey? I mean, you've already been a founder and
an entrepreneur. When did you decide you had to start
a company to focus on this problem.

Speaker 2 (01:58):
It really wasn't out of the first company that you referenced.
So in that approach, we took a bet that if
we could introduce competition, more information, transparency, some decision support tools,
everything that you described as in a marketplace, that that
could drive lower prices, that could benefit the consumer capitalism.

Speaker 1 (02:21):
One on one.

Speaker 2 (02:22):
Unfortunately, healthcare doesn't really fit well sometimes with the principles
of capitalism one on one. Specifically, when we looked at
the products and the options that were available to people,
when we offered multiple choices to them and good information
to help them make these decisions, we found that people

(02:42):
were much more interested by people I mean the employee,
the family, the consumer was much more interested than perhaps
a typical human resource executive or a benefit consultant or
a broker in the idea of different types of plans
that could lower cost. Plans that are centered around a
single home system, plans that required a primary care guided model,

(03:04):
plans that incorporated features that made a person more accountable
for their health and wellness in exchange for either a
lower premium or a lower out of pocket. These plans
are fairly popular, Kaiser being one example of that, where
you're locked into a single system, for example, for people
in California or elsewhere, and we found that in a
traditional approach Kaiser might get about ten percent adoption. Through

(03:26):
our marketplace, we found Kaiser to get closer to fifty
percent adoption. That type of five x difference is what
we felt was the driver of Could we create a
model like that that was maybe not national, but more
multi local can we cover more of the map with
a product that there clearly seemed to be demand for

(03:47):
that the existing carrier market was not meeting.

Speaker 1 (03:49):
Interesting. So when you had that, I guess light bulb
go off in your head. After seeing the success of
Kaiser and seeing some of the trends in your previous company,
what did you have to build? I mean, what was
the initial pitch and how receptive were investors to that pitch?

Speaker 2 (04:03):
Yeah. So one of the things about doing a startup
for the second time, it's harder in a lot of ways,
particularly that you're sometimes saddled by the fact that the
first one may have gone well for whatever set of reasons,
And so the money part is usually easier, at least
at the beginning. The money part gets hard. You have

(04:25):
that credit regard mark, Yeah, but to raise the first
couple million dollars, you know, we were fortunate enough to
be able to work with folks who said, hey, you
happen to deliver a return the first time, and you
seem to have some good ideas, let's talk about it
this time. So the money part was something that we
had well taken care of. I think the hardest part
was not getting overly complacent around what you know and

(04:50):
what you don't know. And I think we've all learned
regardless of the line of work that you're in. As
you get older, you start to develop some really specialized
expertise and very arcane parts of the world. Oh, by
the way, there are big broad spots of the world
that you don't get any exposure to as you get
deeper and deeper into something. For me personally, that was
the provider side. So I had a good handle on

(05:12):
what an employee might want, what an employer might want,
how to manage the benefit. Consultant broker community had some
pretty good insights into the technology that have to be
built and how to do that. But the biggest black
box for me was would providers, independent doctors, multi specialty groups,
large healthcare systems. Would they to be direct, be friend

(05:36):
or foe? And what we came to realize is a
little of both. But there are providers and provider systems
that are as disenchanted with the healthcare status quo as
the employers are. And that was something that took some
learning and research and investigation to really figure out.

Speaker 1 (05:57):
So maybe unpack that a little bit more. You know,
is there one client or one provider group that really
put you guys on the map. And I guess what
did you have to do to really convince them? Maybe
they were already looking at these alternative models to begin with,
but was there anything that you had to do to
convince them to sign up?

Speaker 2 (06:13):
Yeah, it's a really great question, Jonathan. And again it
all goes back to I'm sure you've had other guests
on the podcast speak to when you try to unpack healthcare,
you need to understand motivations and incentives. So for us,
we started with a premise that as we built out
this business plan, this business case for this radically affordable
health plan, we started with the assumption that we probably

(06:36):
were in a hole when it came to the basic
cost of health care, that our contracts with healthcare providers
would be disadvantaged five, ten, fifteen percent, whatever the number was.
That assumption was based on nothing more than two things.
Number one, conservatism and number two lack of scale. We
had no clients because we were just getting started, and
some of the conversations led us to affirm that point

(06:57):
of view. Then, directly to your point, Jonathan met with
Mount Sinai here in New York, Mount Sinai is a
great example of a high quality healthcare provider that delivers
on value, and they've done it for a number of reasons,
but the biggest reason is they were early in adopting
acos in the Medicare space. And what they did was

(07:18):
make a series of business decisions to be more cost
effective within every dollar that the government provides as reimbursement
in Medicare. And they basically, like most healthcare providers, said well,
we're not going to treat someone fundamentally differently from an
approach perspective or management perspective if you're sixty years old
and work for an employer or seventy five years old
and are covered by Medicare. So they were driving value

(07:40):
that was manifesting in Medicare shared savings programs, other risk arrangements.
The problem for them, despite being a top fifteen hospital
in the country, they do more cancer than anybody here
in the New York market, is that value that they
were providing when blended into a broad PPO type construct

(08:02):
in a typical carrier network, doesn't matter who it is
at NA signa United Healthcare anthem, their value was actually
getting washed out by the fact that the higher cost
players in this market New York Presbyterian and NYU as examples,
if a person went to one of their facilities, or
if a person sold one of their doctors, the out

(08:23):
of pocket for the individual, the cope, the co insurance,
the deductible was the same. So what you have as
a classic economic one on one problem, which is the
supplier's value proposition was not getting reflected all the way
through in the underlying economics of the user. That disconnect

(08:44):
was something that the folks at Mount Sinai understood, and
so when we first met with them and said, hey,
just need you to know we have these ideas, we
have a good background, we have a track record. Oh,
by the way, we had at this point materially zero
clients and zero members deserve their response was, actually, that's
why we're here because you don't have the legacy baggage

(09:05):
that we would have to confront if we wanted to
do something like this with an incumbent.

Speaker 1 (09:10):
So you were able to realize the utility of what
they were doing in a way that the legacy carriers cannot.

Speaker 2 (09:18):
It's an interesting way you phrase the question. I would
edit it slightly, so, Jonathan, my edit would be the
legacy carriers actually understand full.

Speaker 1 (09:30):
Well, Oh, I know where you're going.

Speaker 2 (09:32):
That Mount Sinai is an efficient, high quality provider in
this market. And I want to pause on that for
a second. They're not the cheapest. There are cheaper providers
of facility services, professional services, et cetera. But when you
look at the results from a quality perspective, when you
look at those god forbid moments as a consumer in
healthcare where you'd be comfortable sending your kid, they meet

(09:53):
that standard and they're at much higher value than some
of these others that we've mentioned. So the problem is
it's not that the incumbents don't realize the value. In fact,
and I'm not breaking news here, it is reported in
the Wall Street Journal several years ago a large carrier
wanted to develop a narrower network model centered around Mount Seinai.

(10:16):
It ran into a problem, and that problem is what's
known as an anti tiering clause or an anti steerage
clause in a provider contract with a higher cost health system,
and that higher cost health system basically said, I understand
what you're trying to do, but it's in your business
interest not to make us unhappy and what is that

(10:36):
business interest. That business interest is the fact that that
large mainline carrier needs participation of this other health system
in all of its networks and its broad networks and
its medicare networks, etc. Etc. So that's where the innovation
hits the rub. It's not that the incumbents lack the
insight or the data or the perspective. It's that the
ability to drive the follow through is encumbered by the

(11:00):
legacy arrangements.

Speaker 1 (11:02):
Right, So they're not really incentivized the same way a
new player might be.

Speaker 2 (11:05):
It's not dissimilar from other industries and other markets. Why
why was Southwest Airlines or Jet Blue able to first
undercut and then take market share from the large carriers.
It's not because it was necessarily obvious that if you
fly one type of airplane, or if you could standardize

(11:27):
things in your operating protocols, or if you could turn
planes around faster, that you could be more efficient. Large
airlines knew that as well, but large airlines were saddled,
if you will, by the fact that they also had
to go to Asia, they had to serve small communities
because of the nature of the business that they had.
So there's a good analogy I think between some of
the underlying challenges in healthcare and other industries like airline.

(11:50):
I'm not going to delve into this territory given where
we're sitting, but media and streaming I'm sure there's some
pretty good analogies there too, and it is not dissimilar.
The reason I think that ruption has been harder is
because the number of players is so much smaller. Consolidation
on the carrier payer side, consolidation on the provider side.

Speaker 1 (12:07):
Yeah, I'd love to touch on that theory or the
theme of consolidation down the road, but you know, we've
unpacked the provider side. So now you have some systems
that want to work with you, how do you get
employers to sign up?

Speaker 2 (12:19):
Yeah?

Speaker 1 (12:20):
What was the key? What was the key pushback that
you maybe got in those early days.

Speaker 2 (12:23):
Yeah, So there's there's usually two or three variables that
any entrepreneur in this space has to confront. So the
first is getting in front of the right people. And
the right people are usually decision makers at organizations who
can optimize for the strategic objective and have enough of

(12:48):
the confidence around them, whether it's the trust of their bosses,
whether it's the credibility of having been in the role
for a while to be able to go to their
stakeholders and say, Hey, I'm going to bring to you
an idea and an organization that just I'm going to
start right here you've never heard of before. Oh, by
the way, there's a reason that we're spending time here.

(13:09):
Here's the problem statements, lack of access, cost, out of control,
quality issues. So in order to solve these issues, we
have to think about different approaches, different types of players.
And here's what I'm doing. I found that. So part
one is you've got to find those buyers and then
you have to make a good economic case. You have
to make a good business case. Sometimes it takes a

(13:31):
couple of years. As much as the entrepreneur doesn't want
to hear that they want to yes in that first meeting.
It might take a year or two or three. It
might take a I love what you're talking about. You
need to go do these three things. Go show me
you have a network, Go show me you have technology
that works.

Speaker 1 (13:46):
Go shout you have a client that looks exactly like me.

Speaker 2 (13:49):
Correct. There are some of those proof elements that are important.
And this isn't the question you ask necessarily, but I
think it's important for those in startups or growth companies
to really crystal clear with their buyer what is it
that you're looking for, Like not just take the hey,
that's a great meeting, they've loved what I had to say,
walk out, and not actually having a clear action plan

(14:09):
or a call to action. But to answer your question,
it is usually a combination of the right decision maker
who has a number one, number two who has a
problem that they're trying to solve, and number three that
you can show some reasonable ROI against that problem and.

Speaker 1 (14:26):
Has a tenor of that kind. I mean, I'm sure
it's kind of morphed a little bit as you guys
have scaled, But are there any real, big fundamental changes
from when you were starting to let's say, the conversations
you're having Ina twenty twenty five.

Speaker 2 (14:38):
I think it's a really good question. The calculus that
a buyer goes through is not that dissimilar. Number one,
Is there ROI from me implementing the solution? Number two?
Are there trade offs to me implementing this solution with
respect to either budget or mind share, team bandwidth? But

(15:01):
usually what we there's a there's a push and a pull.
The positive push in twenty twenty five versus the early
days is the credibility issue has been has.

Speaker 1 (15:13):
Been bridged, so you can have that momentum.

Speaker 2 (15:15):
You have momentum. You can name clients, they've heard about
it from other clients. They they've they've seen conference presentations, webinars.
All that's very good. The flip side is you start
to get beyond the evangelical mission driven buyers. And that's okay.
That's actually as a sign of success that you're now
talking to folks who are making more nuts and bolts decisions.

(15:38):
And then you run up into new issues. You run
up into issues like I would love to do this,
but we are also doing a major HRIS implementation, and
I and and my IT team is going to say no.
Or I would love to do this, and I understand
the value proposition, but I've got a union negotiation coming up,
but is this really the time for me to bring

(16:00):
this up or not. It's not that those examples, whether
it's IT or other workforce dynamic issues, weren't in place before,
but because the cohort of people you were talking to
were more of the evangelists, those issues are trying to
push through those They've been quietly rollodext and would have
been resolved. Now they come out more in the forefront,

(16:21):
which again speaks to the importance of a very disciplined
sales process to make sure that those issues are if
they exist, and they always do, they're coming up in
the first hour and not the eleventh.

Speaker 1 (16:32):
You know, if I think about the challenges that you have,
what are the big pain points for your customers? You know,
if I were to talk to a CHRO today, what
would they list to be as like their main pain
points and why they want to have the conversation with Sentivo.

Speaker 2 (16:48):
Yeah, so I would structure that in sort of three levels.
Level one is is cost and cost can manifest as
my CFOs on my back. Our healthcare trend is too high.
Cost can manifest itself as hey, we have adopted high
deductible plans other mechanisms of cost shifting. And I have

(17:11):
employees coming to me saying I can't do this anymore,
or you guys are off market or uncompetitive, or it's
just plain stinks and let's forget right. Human resources is
a very hard job, and the typical human resource executive
got into the profession to make the workforce better off.
They don't like coming to benefits meetings every year and
saying I've got bad.

Speaker 1 (17:31):
News for you.

Speaker 2 (17:33):
So cost slash worker affordability is usually the catalyst. If
someone has zero cost concern, probably not going to be
one that we spend a whole lot of time with.
Once you've cleared that cost and affordability piece, then I
think there's two other levels of things that resonate with
a typical employer. Level two to me are ideas around quality.

(17:58):
And we haven't talked much yet about primary care. Primary
care is a huge part of our model to drive
both affordability and access and quality. So we do get
a lot of resonance around this idea of, well, you're
saying that I can give my average employee a real,
ally a real partner in care with this sort of
advanced primary care team, whether it's in the community or virtually,

(18:19):
and that's very exciting to people. And then the last
one is again this idea of as an employer, are
my partners really focused on me? Are my partners accountable
to my dollar, my performance, my workforce? And I think
historically in this industry we've had these multi threaded large

(18:41):
incumbents who operate in all segments of the market, be
it the senior care market, the insured market, the self
funded employer market, on and on, and increasingly have become
vertically integrated by buying physician practices, by owning PBMs, by
owning the companies that do the pre certification. And those

(19:01):
conflicts have always been nuisance factors to employers, they've become
more than nuisance factors with both rising cost and some
of the legislation that has made clear the fiduciary responsibility
that employers had, so to sum it up cost as
table stakes, driving to better quality and member experience is

(19:24):
usually second, and then really creating alliances with strong, accountable
partners for employers dedicated to the employer community would be
the third.

Speaker 1 (19:34):
So one of the things you mentioned was just how
you're differentiated verse the incumbents. Maybe let's unpack that a
little bit more and really talk about what are the
key elements of differentiate differentiation from a Centibo plan versus
anything else that's out there on the employer market.

Speaker 2 (19:49):
Yeah, so I think three things. The first is the
fact that we only work with self und employers, so
we are able to look employers in the eye and
say our success and our failures are square going to
be tied to this market and very tangibly. Back to
my example of contracting in New York, we're never going
to go to a healthcare provider and say, we're negotiating

(20:11):
a total contract value across our whole relationship. Can you
give me five cents less on the medicare side, because
that'll help me out, and I'll make sure you're made
whole with an extra five cents on the self funded
employer side when it's not really my money. That's an
example of a conflict. People don't want to maybe talk
about it, but it's a conflict that is part of

(20:32):
the world today. In a traditional payer provider negotiation, there's
no such conflict. We're always trying to get the best
value for all parties and the employers are only stakeholder.
So that's one differentiator. The second differentiator is because we
build these provider network centered around primary care. We administer claims,
we answer phone calls, we act as the administrator for

(20:55):
the employer. We don't have to feed other parts of
our business. We don't feed a stop loss insurance business.
We don't feed a PBM business. We don't feed a
care management business, so we can work with best to
breed partners, or if an employer has a strong point
of view I really like a certain pharmacy benefit manager,
we can accommodate that. So an example of how we

(21:16):
do that is we have a close partnership with Capital RX,
who we think is one of the strongest disruptive pharmacy
benefit managers in the space. And some of your listeners
may have heard a little bit about them.

Speaker 1 (21:26):
Really just at Aja from Capital RX on a couple
weeks ago.

Speaker 2 (21:29):
He's doing great things and we have a good integration
and good partner with them. But oh, by the way,
if a large employer comes to us and says, I
think that's super interesting, but I'm in the middle of
a three year contract with ABC traditional PBM, we can
accommodate that too. So that's the second one is the
ability to be flexible because we don't have these business
interests that we're trying to feed. And I think the

(21:50):
third one, which is an interesting one, I'm sure we'll
get into in more depth. We're not everywhere, so we
build out these high value providers networks on a market
by market basis, and that's both a blessing and a curse.
So the curse of it is we have employers to
come to us and say, I wish you were everywhere,
like could you be in San Francisco? And my answer

(22:14):
is I wish that we were everywhere too. But the
reality is healthcare is local, and the reality is people
make decisions that are personal for their lives on a
local market basis. And so if we can drive value
to you and to employees in New York, you'd want
us to drive the best value we possibly can not
in the rush to be everywhere, create a lowest common

(22:36):
nominator situation because we have to be everywhere, and that
is one of the challenges again of the large carriers.
If they're not somewhere, then they are viewed as deficient.
We can take a bit more of a methodical approach
on a market by market basis.

Speaker 1 (22:50):
Well, why don't you talk about that a little bit more?
Where are you today? And maybe where are you going
to be five years from now?

Speaker 2 (22:55):
No, it's a great question. So I did this exercise recently.
We're in twenty of the top forty msas in the country,
and our aspiration within a couple of years would be
to be in about thirty of those forty. To be clear,
it's not that you're out of luck if you have employees,
and it's not in one of those markets that we
don't have a network. That means that we use third parties.

(23:17):
We use a third party PPO network, We have a
relationship with Sigma. We also have some local networks that
we partner with that are third parties.

Speaker 1 (23:26):
So then do you act as the TPA?

Speaker 2 (23:28):
Correct? Correct? And our virtual care capability can apply regardless
of the network that you choose. And we also have partnerships.
For example, we've recently announced a business partnership with Premise
Health where we can similarly deploy the network that makes
the most sense for the employer subject to the footprint
of the company and where they might have a premise

(23:50):
on site clinic. So bottom line is we can serve
all of an employer or part of an employer based
on their objectives, and we're not limited by the arrange mints.
All that said, we drive the most value in our
directly contracted arrangements. And so today again twenty to twenty
of the top forty msas and expect to being about
thirty within two years.

Speaker 1 (24:11):
If I were to break break down your customer base,
you know what percentage are in those direct contract arrangements.

Speaker 2 (24:18):
Yeah, so many of our clients use both. So the
way I.

Speaker 1 (24:24):
Would offers, you could offer more than one option to
the correctlan correct.

Speaker 2 (24:28):
So think of it as if I'm if I'm a
large employer, I'm likely only going to use us as
the as the plan for the directly contracted network. If
I'm a mid sized employer, I want a single administrator,
and so the fact that we can bring multiple networks
to the table is attractive from a membership perspective. To
answer that question, it's about seventy percent direct contracts, thirty

(24:51):
percent third party networks.

Speaker 1 (24:53):
Okay, maybe going back to one of the comments you
made before, you know, when when an employer wants to
have a let's say rainbow a coalition of partners, right,
does that add some level of complexity? And then I'm
just thinking back we had the CEO boot shield on
a couple of years ago, when you know, they broke
apart what they were doing on the drug benefit side,

(25:14):
and they had five different providers, And some of the
discussions I had with with folks in the industry was like, well,
that sounds really good, but it might be hard to
manage those five relationships. I mean, does the complexity there
of managing more partners does it become How much of
a challenge is that for you guys? Yeah, you know,
kind of working within that rap.

Speaker 2 (25:32):
Yeah, So it's why we it's a good question. First
of all, I would maybe separate the types of partners
and where to get complex versus not so example, when
it comes to geographic coverage, it's it's a few lanes, right,
we have we have our direct contracted partners, sorry networks.

(25:55):
We have strong local partners like in HPS and Wisconsin
as an example, they're the So we wouldn't be like, hey,
let's there's six different local partners in Wisconsin. It's it's one.
Most of the out of area coverage is through SIGNA,
so it's a small array of actual partners.

Speaker 1 (26:12):
It's just as much complexity as I might be incorrect.

Speaker 2 (26:15):
It's a different tool for a different job. So that's
on the network side. But I actually want to take
your question in a different direction. One of the things
employers have done, just stepping back massively, is the cost
these trends, these drivers. These problems, these cost issues, they're
not new. They've been happening for twenty years. One of
the things that organizations have done is to say, well,

(26:37):
I don't know if I can attack the belly of
the beast. I like to call the network is the
belly of the beast. That's the provider's delivering care and
the cost of providing that care. So if I'm going
to assume that the network is a fixed asset and
that it's a broad ppo, well, then one of the
tools in my tool kit historically has been to a

(27:00):
ray these point solutions on top of that and potentially
to try to create some order to that chaos with aggregators.
And those aggregators can be benefits, administration solutions, they could
be wellness solutions, they could be navigators, and I'm sure
there's others that I'm missing. We go in and actually,

(27:21):
first of all, we're willing to work with many of
these players, and we do. But we do go and say,
isn't the best aggregator if you're focused on the hub
of the problem as the person, a person's primary care
team is actually the best aggregator of their health care.

(27:42):
So rather than saying we have forty two solutions for
various clinical issues. What about if we actually stepped back
and said, we get it. There's five or six or
eight of these that may help a lot women's health,
behavioral health, certain clients that have very deep issues around
MSK if they're in the distribution center, for example, for retail.

(28:02):
So there are certainly a handful of solutions that make sense.
But is there actually an opportunity to decomplexify by saying
these five or six things are supplements to having a
great care team that cares about you. That's actually a
message that's run and resonated really well.

Speaker 1 (28:20):
Which is interesting that enzyme swing from the point solutions
to I don't need as many point solutions.

Speaker 2 (28:26):
One hundred percent. And we're seeing in the market, and
curious what you're seeing, We're seeing a lot of those
point solution companies coming under increased pressure at renewal. What
is really the engagement level? What is really the ROI?
And I think in a lot of cases, unfortunately, and
these are well meaning people trying to do things around
the broken system, but unfortunately those engagement levels in ROI

(28:50):
have really not added up to justify a renewal and
that's created a world to hurt in that digital health world.

Speaker 1 (28:55):
No, it's absolutely true. I can't remember which guest set it,
but one of our guests said something along the line of,
you know, I'm having a challenge here. I'm visioning every
one of these point solutions, you know, saving me twenty
percent pm PM. It just can't be a reality.

Speaker 2 (29:10):
At some point. If I've implemented seven, am I saving
one hundred.

Speaker 1 (29:13):
And forty percent, they're paying you.

Speaker 2 (29:15):
That's right, That's right. No, it's a it's a key point.
And engagement's really hard, especially in the larger employer setting,
and it's a different conversation we can get to. But
I do believe HR benefit managers implement these solutions for
all the right reasons, but actually getting people to engage
and getting the follow through throughout the year is tough.

Speaker 1 (29:36):
Maybe from your perspective, I and you've been in this
industry a long time. You know, what do you see
as the root cause is for the burgeoning healthcare costs
that we're all experiencing.

Speaker 2 (29:44):
Yeah, so I'm always reminded by different people like to
cite different things, but I always go back to the
seminal paper in two thousand and three by the late
professor Uva Reinhardt at Princeton, and his title could not
have been simpler. It's the price is stupid. So his
and his team's analysis, and I believe that study was
reaffirmed in twenty nineteen by a set of researchers. The

(30:09):
biggest driver of the differences in cost in the United
States versus other OECD countries is unit price, and it's
typically unit price for hospitals. So there are a lot.

Speaker 1 (30:22):
It's interesting, it's not utilization, it's not you know, the
drug prices, which get a lot of headlines.

Speaker 2 (30:28):
There are a lot of things that are brought up.
There are things like the aging population. There's things like
innovation and technology. Do we really need seven Tesla MRIs
versus three testlamris and everything in between. All of those
are factors. But prices of healthcare supply side provider prices

(30:48):
typically hospital is really the largest, the next largest. Again,
maybe controversial, maybe unpopular, but I like to use third
party sources. So there was a really good artarticle in
The Economist less than two years ago which did a
fantastic distillation of where do the dollars go in American healthcare?

(31:09):
And fifty percent of the dollars go to six to
eight intermediaries, and those intermediaries are number one health insurance companies,
number two PBMs, and number three drug distribution, not drug
manufacturers to your point with drug distribution. And so we
can unpack some of that a bit more. But as

(31:31):
the costs have gone up, a lot of it is
price on the supply side, but a lot of it
is increased profit in those PBMs in particular, but the
other distributors as well. One of the things that I
like to talk about is early in my career you
mentioned I was at McKinsey. It was really before the
internet had taken off, and they would put staffing. They

(31:54):
would have a staffing office and projects would be listed
on a piece of paper outside of the staffing office board.
And so this is the late nineteen nineties, and there
were some companies that I was a young pop I
had never heard of, But there are companies that were
hiring mckensey for services. One of them was called Medco,
another one of them was called express Scripts. Right, these

(32:15):
were early companies in the PBM day.

Speaker 1 (32:16):
Yes, and care Marke, and you've.

Speaker 2 (32:18):
Got it, Well, guess what these are all now part
of fotsun ten companies because of the consolidation and the
vertical integration that's happened.

Speaker 1 (32:26):
So you talked a little bit about the consolidation, you know,
on the on the corporate side, maybe touch on the
provider side. Do you see that as one of the
key causes as well?

Speaker 2 (32:36):
Yeah, it certainly is.

Speaker 1 (32:37):
Particularly does that make it more challenging for Sentivo just
given that every provider relative to ten, fifteen, twenty years
ago is at a much bigger scale I imagine every market.

Speaker 2 (32:49):
Yeah, so let's talk about consolidation and let's talk about
the impact on us. So the consolidation is clearly a
driver cost there. As much as we would love to
buy into theories such as if we can create, if

(33:09):
we can take two entities and make them one while
there's fewer operating costs and there's fewer administrative overhead, and
on and on and on, but unfortunately, good quality researchers
have looked at the subject, and Professor Zach Cooper Yale
being one of them, and the answer never is that
two entities came together and costs go down, two entities
come together and costs go up, and it's one simple reason.

(33:31):
It's market power. It's market power in these pair provider negotiations.
So part one to your question is, yes, consolidation drives
cost up. Part two is does it make it harder
for us? Not necessarily. So what I'd like to kind
of remind everyone of is so that consolidation in of

(33:52):
itself affects everybody. The old expression is a rising tide
lifts all boats, well whatever. The opposite of that is
a tide that's going in a direction of consolidation and
rising costs hurts all boats. So we come in and
there's two dynamics. The first dynamic is is this a
market that may not be as competitive as it once was,

(34:15):
but is somewhat competitive. And if it's somewhat competitive, then
there's an angle for us. There's an angle for us
to work with a healthcare system that's committed to value
to try to drive market share on their behalf and
so good examples of that we markets like Tampa and
Orlando and Dallas Fort Worth are These are not seven
to ten player markets, but these are two and three

(34:37):
player markets, and they're very effective markets for a model
like hours. As you go to a single player market,
then the question is well, how do you get an advantage.
What we've typically done in those types of markets is
appeal to variables other than market share. So example would
be I went back to at the beginning of this

(35:00):
conversation we talked about learning about the provider market. One
of the biggest challenges that providers are having is collecting
dollars from patients under high deductible plans. Typical bad debt
write off is anywhere from eighteen to twenty three percent.
So we can go to a system and say, look,
we're this is not a pair diversification play for you.

(35:20):
But what about if we were able to work with
employers around this design to convince them to offer this
very affordable benefit that drops your bad debt ratio to zero.
That's appealing. Why can't a large carrier do that? A
large carrier could do that, But back to a large
carrier is to be everything to everybody, and so their
ability to go out and say we're only going to

(35:40):
offer a low deductible, no deductible, high cost, high value
plan is not in keeping with their current model. So
there's other levers that we can play to still get
an appealing value proposition in front of providers in consolidated markets.
But all that said, yes, petition is good for the

(36:01):
employer when it comes to keeping cost down.

Speaker 1 (36:05):
No, that makes that makes a ton ton of sense
as I sit here and think about some of the
hot button issues at the day. I mean, every conversation
I've probably had in the last year or two is
always around GLP one. Are we touch on GLP ones
and we touch on technology? You know from your vantage point,
you know GLP ones high cost, a lot of utilization.
We've we've seen the the numbers out of Lily and

(36:26):
Novo just go through the roof. How are you helping
employers manage those you know, high cost? I would say
new innovative treatments. I mean it's like really a sea change,
right compared to the past. And then I guess maybe
as a follow on and we'll touch on it maybe
a little bit deeper. It's just how are you guys
implementing technology across the business as well?

Speaker 2 (36:46):
Yeah, so excuse me, let's on this.

Speaker 1 (36:50):
Sorry I threw two questions in there. Let's just focus
on GLP one to start.

Speaker 2 (36:53):
One at a time. So on on GLP ones, it
is we see in our data, it's not it's not fiction.
It is a material driver of cost. It may be
a material driver of value. I think the jury is
still out. Excuse me. There's some very strong proponents that
the ROI on GLP ones is as good an ROI

(37:14):
on anything in healthcare. And then there are others who
are skeptical, and that's probably a complicated calculus that that's
let's get back together in a couple of years, and
I'm willing to just take the data as it reveals
it to be. So we've done a couple of things.
We're in the process of doing a couple more so.

(37:34):
The first is, and I think the most important, is
working with employers very consultatively on what their goals and
objectives are. If you have a high turnover workforce versus
a low turnover workforce, you might have a very different
perspective on whether these types of drugs should be covered
and how they should be covered, whether they should be

(37:55):
promoted versus tolerated. So we have public sector employers, for example,
with high costs, a large number of may I say,
middle aged workers and family members, very low turnover. That
is an opportunity to lean into this as possibly being a.

Speaker 1 (38:15):
Good So little bit, but then the cost careful.

Speaker 2 (38:17):
Term one hundred percent. You're not making an investment that's
paying off in somebody else's plan. You're actually making an
investment paying off in your plan. Very different from hospitality
organization that might have fifty percent turnover or more have
to be really cautious about making that kind of decision
to cover these sorts of treatments and see the ROI
payoff not at all or to somebody else. So that's

(38:40):
an example just being flexible, being consultative. We work closely
with our PBM partners. We've mentioned a couple of them
already on this. And then the third thing that we're
now starting to do it's early, is working with a
digital health company on the idea of being a center
of excellence for prescribing. So the purpose of that is
to basically say, this is a high cost area, however

(39:04):
we manage it, we want it to be managed in
a low volatility way across our book of business. And
so ultimately it's a decision that is employer by employer,
but employers are interested in this idea of saying, because
there's so much new happening, we want a single expert
who is making the decisions on how to manage, how
to dispense, and really treating this whole issue from a

(39:26):
soup to nuts perspective. The way we look at it
is whether it's one percent of our spend five to
ten over time, we can hold a single partner accountable
to managing that well both cost and clinical outcomes for
our entire book of business, as opposed to having to
really now start to think about this on a one
off basis.

Speaker 1 (39:46):
Got it.

Speaker 2 (39:46):
I think we're going to see other employers and payers
move in this direction of basically saying this has gotten
big enough, kind of like labs and imaging might have
been ten or twenty years ago, that we need a
single or just a couple of partners in crime who
are focused on this.

Speaker 1 (40:05):
Okay, that makes a ton of sense. And then maybe
the follow up question that I had before just you know,
one of the other big trends in the industries around technology,
You know, how are you putting in AI into your
business and predictive analytics all that good stuff.

Speaker 2 (40:17):
Yeah, we've done some really interesting things and we've got
a fair bit of work to do. So I'm certainly
not going to plant a flag and say we've got
that all figured out for us. The way we look
at technology primarily is not from a cost perspective. It's
from a member experience perspective, so we take great pride.
For example, when someone calls in, there's no incentive or

(40:40):
metric to get somebody off the phone. There's no internal
compensation structure around reducing the number of calls or reducing
the length of a call, so we really want to
make sure a person's problem is solved. All that said,
I think we can probably both say from personal experience,
it's a whole lot better just to not have to
pick up the phone and call someone. So examples of

(41:01):
things that we're doing is moving more to self service
through our app and using for example, in our virtual
Care product, there is an AI module to that that
can allow a lot of the intake to happen and
it feels personal and it feels responsive, but it's being
done through AI. A second example is from an internal perspective.

(41:22):
If somebody is asked a question when they're on the phone,
rather than potentially sorting through a lot of information and
saying hold on and I have to wait for you,
and that three minute call becomes a twelve minute call.
We've all been there. We've all been there. The ability
to search, you know, through our internal knowledge base, again
using AI to generate a couple of answers. It's not

(41:42):
going to spoon feed the exact answer, but it triage
that nine minute research process down to about a minute.
That's been implemented on a pilot basis. We're showing some
good results early. We haven't yet scaled that, but that's
something that I'm really excited about and I think we'll
really drive an improvement in our customer satisfaction. And the

(42:04):
last element is more. You know, we are a growth company,
that's why we're here. So if we can issue more proposals,
if we can get in front of more RFPs, if
we can identify RFPs. So that's another area that we're
piloting right now, is the use of AI as it
relates to sales and growth and marketing and proposals and
a lot of that which would have been rate limited

(42:26):
by how many proposal writers you have to hire and
how many people who are going to internally manage that process.
We can now have one or two people scale a
much larger volume of that type of proposal work. That
makes sense then we would have been able to do before.

Speaker 1 (42:40):
Well, you mentioned growth company, and that piqued my interest
as a as an analyst. Maybe can you share some
metrics around the business, you know, your size or your
growth over the last seven eight years.

Speaker 2 (42:49):
Yeah, so you met. You mentioned founding seven eight years
ago a couple of times. So one of the things
I like to say is the first two years were
R and D and so really we've been in market
for This is the sixth year that we're administering plan
sort of. We have clients coming up on their fifth
and sixth anniversaries, which is which is pretty exciting, you know,
from a growth perspective. We serve one hundred and fifty

(43:13):
self funded employers today, roughly one hundred thousand members that
are on the plan. That that math, you know, translates
to three types of target customers. We have small customers
that we serve in a risk sharing captive based arrangement.
The typical client size of that is eighty employees. We

(43:35):
have a second type of employer, which is that mid
sized employer four or five, six hundred employees that is
self funded and we serve their whole population. And then
the third is the large account where we're offered as
a choice side by side. Back to that Kaiser like
analogy that we gave earlier. So all three types of
customers you know, get you go about to that number.

(43:58):
You know, we have some andcious growth goals. We've grown
eighty to ninety percent each of the last two years. Wow,
and if we can hit that in this third year,
you know, we would love to be able to tell
the market that we're over one hundred million dollars in revenue. Excellent,
that's where we're trying to be.

Speaker 1 (44:12):
That's great. What is your you mentioned it being in
the market with clients for five years, what does your
retention rate look like?

Speaker 2 (44:18):
Yeah, so retention overall is ninety five percent. The where
we find the differences in that number, large market retention
has been closer to ninety eight ninety nine. There's one
or two that have have left for various reasons.

Speaker 1 (44:32):
Yeah, or or USUS conditions change. There could be a
whole host.

Speaker 2 (44:36):
There's a there's a consultant I got to know over
the years who said there's no bad this is technology world.
But she said there's no bad systems, there's only bad fits.
And so sometimes people change objectives change. We have a
very large client that we were serving very well and
was very the results were all good, but they had
a business philosophy change around vendor management. And so that's

(44:59):
an example of of I think the term would be
non regrettable churn, but we would love to still serve them.
And I know we have people who we miss having
as members, and I think they miss having us as
their plan administrator. But where that ninety five percent is
really reflected on as sort of a balance of ninety
eight ninety nine in the large market and closer to
about ninety in the small market. And in that small

(45:21):
market the pressure that we are not immune from. We
control cost and we do a lot of things, but
you're not able to, at the end of the day
fundamentally address the volatility of a smaller population. So if
I'm an eighty person group or one hundred and twenty
person group, we could take out a lot of cost.
But if you have a high cost claimant or two

(45:43):
or three or four, that could drive an increase in
your stop loss premiums and ultimately and.

Speaker 1 (45:49):
Then you have to shop around to find you have.

Speaker 2 (45:51):
To shop around. We can usually still manage that pretty well,
but Occasionally you'll have a couple of situations, and we've
had these where someone looks back and says, Hmm, I'm
actually getting an option on the fully insured market that's
better than what I could do if I stay sol funded. See,
And so that's a source of churn that we may
not have fully predicted when we started. But is something

(46:11):
that's that's come up still in the single digit rate,
not not anything worse than that.

Speaker 1 (46:17):
No, that makes sense as you think about that one
hundred million dollar revenue goal, what are the key KPIs
that you use to manage the business day to day
or week to week or whatever the right timeframe is.

Speaker 2 (46:27):
And one thing I know, it's a great question, Jathan.
One thing I'd want to remind everyone of is we
as we look to clear that number, that's pure administrative
fees and other things that we're doing. So there's not
a claim dollar that goes into that revenue number. So
if we were actually an insurance carrier, if we were
like some of the ones that went public like an

(46:48):
Oscar or a Bright would we would be reporting premium
eighty five percent of which is claims would would be
well north of that number, probably not far from a
billion dollars at this point, but we just don't work
that way. Just wanted to clarify some sometimes people might
think of premium dollars and claims dollars and not follow
the margin profiles right. Our gross margins are closer to

(47:12):
forty to fifty percent as opposed to insurance carrier which
are very low. All that said, so from a KPI perspective,
I'm very much focused at this point on three key things.
The first is the fundamental product performance. So are we
showing those cost differentials fifteen to twenty percent without compromising

(47:33):
on the employee affordability and so that's tracked very well.
We continue to track that, but we always when we measure,
when our boarder directors measures, we've always outperformed on that metric.
The second, of course is revenue, and revenue is has
a seasonal element to it because, as you know, a
lot of plans renew on January first, but as we've

(47:55):
increasingly been able to sell in the smaller market with
our captive product, actually has become a little bit less seasonal,
so we're able to sell cases throughout the year with
off cycle effective dates. March first, April first, June first,
so we have a little bit less volatility in that.

Speaker 1 (48:10):
Our seasonality with JEN one correct.

Speaker 2 (48:13):
But the revenue set of metrics is a second and
then the third is operational KPIs and it relates to
things like you know, obviously expense, but but but deeper
than that, so you know, looking at leading indicators of
claim turnaround, looking at leading indicators of call volumes, looking
at leading indicators of provider fidelity. You are we keeping

(48:36):
everybody in the network. If someone's going out of the network,
why is that? Is it because of a rare cancer case? Well,
that's fine, that's totally acceptable. Is it because somebody didn't
know how the plan worked? Or a provider referred us
to someone outside of the network without really knowing what
those are? Those are deeper points that can be fixed
and improved. So a lot of I think where I'm

(48:57):
focusing now is making sure it's gotten harder with one
hundred and fifty clients to know what's going on at
every client. But can we sort of step back and
really start to understand what's going on as it relates
to thematically? Are there leading or lagging indicators around? Is
the product getting better on a day in a day
out basis.

Speaker 1 (49:18):
Maybe taking it one step further, you know, from the
from the product perspective to maybe the dollars and cents.
But what are the key weavers in terms of profitability?
Is it just scale?

Speaker 2 (49:28):
Scales a big one. So scale and volume is a
substantial one. And by that it's part of it is
overall volume. Part of it's also getting depth in some
of our in some of our markets. So for example,
it takes you know, it takes a certain seven figure
amount of money to stand up a new market. If

(49:49):
someone says, heyn, can you go to Atlanta, Well, we're
actually talking to people in Atlanta right now. We'd love
to go to Atlanta. We've clients with people in Atlanta.
They want us to open in Atlanta. But we need
to figure out the ROI of that. So getting more deep,
getting deeper and getting more leverage on a market by
market basis is a key area of driving profitability. The

(50:11):
other is if we now effectively have four products that
we typically sell as a bundle in the smaller market,
the TPA, the net value based network, our virtual care program,
and our risk based captive. If we saw those four together,
that is more profitable than otherwise up market. We're not

(50:32):
going to put the groups in a captive so it's
three of the four if we saw those together. We
get approach from time to time saying, hey, you guys
seem like you are onto something, but can you just
be at my TPA And that's an example of something
where well.

Speaker 1 (50:45):
That's a tip of the sphere hopefully correct.

Speaker 2 (50:47):
We might look at that historically as a way to
get some traction. Nowadays we look at it and say, well,
that's occupying a slot. Is that the most profitable way
to manage that slot? Probably not as as much as
it might have been a couple of years ago when
we were simply chasing volume.

Speaker 1 (51:05):
So maybe just switching gears again. You know, as we
think about the regulatory front, a lot of new stuff
coming out of Washington. You know, maybe you're a little
bit insulated being in the employer market to maybe the
potential changes at CMS. But are you watching anything that's
coming out of Washington or is there anything that matters
to you on the policy front.

Speaker 2 (51:23):
We're definitely watching, and you are right that we are
somewhat insulated relative to either the ACA market or the
medicare market. I think the things that we're watching. You know,
Number one, I think IKRA is a popular theme, you know,
individual coverage, health reimbursement arrangements. We're monitoring. Is there a
major shift potentially in terms of group saying I'm going

(51:45):
to get out of the group insurance game and move
people to the individual market Right now, My read is
that is more buzz than reality. But things start in
these sorts of ways, so we're gonna keep our eyes
on it. Personally, not opposed to it. It's something that
we have to adjust for and monitor. But I actually

(52:05):
think having smaller employers in particular, move how they manage
their plans into this more individualized basis, there's a lot
of merit to that. So that's an example of something
we're monitoring. Another example of something we're monitoring we hope
gets rectified is the lapse and the Care Act cares
Act and the telehealth exemption for high directable plans. That

(52:27):
is not a good thing when it comes to access
to care, and it's not a great thing for our
business because we have a virtual care product. It means
on an HSI qualified plan, we would have to charge
a cope or something to pay for that. It's a
nuisance factor at best, and it hampers the message of
an ease of use and clean experience to use your

(52:48):
primary care without any expense. So we would love for
that to be adjusted and rectified, restored to what it
was prior to the end of this year. And then
I think the third thing again, we're not in the
PBM business. We work with PBMs, but about twenty to
twenty five percent of our clients spend is PBM and
pharmacy focused. So we are continuing to look at some

(53:10):
of the legislation as it relates to rebates, as it
relates to transparency.

Speaker 1 (53:14):
And winning pharmacies, just little things like.

Speaker 2 (53:17):
All that little stuff right has it definitely has an impact,
not a direct impact, but could have an indirect impact
on the types of things.

Speaker 1 (53:23):
There could be a trickle down and if there's a
sea change, right absolutely interesting. You know, if you look
out five to ten years from now, what do you
think will be a trend that we're not really thinking
about today but will be ubiquitous in your world.

Speaker 2 (53:37):
What has driven change historically has been some level of
economic dislocation. So stagflation in the early nineteen eighties helped
drive pick up in HMOs recessions in the early nineteen
nineties forced conversations around the administration and healthcare reform, though

(54:02):
those ended up not being successful. The dot com bust
in the early two thousands led to employers looking at
different solutions, and that spawned the rise of consumer driven
health plans, diffinity health, illuminas, et cetera. So I think
as we look at today, clearly those who thought the

(54:23):
election itself would be the solve for the inflation pressures
that businesses and consumers were experiencing. Where we sit today
that doesn't quite seem to be the case. But I
think the more that the cost of eggs are going
up and the cost of gas isn't coming down, and
the basic things that we look at when we measure
the personal impact of inflation, that's going to continue to

(54:47):
drive the healthcare conversation. So that'll be interesting to see
over the next three to five years. Is there a
macroeconomic impact of fiscal policy, monetary policy, tariffs, all the
things that are happening in the political vernacular. What does
that do to household income and business fiscal stability. If

(55:12):
they don't have a big impact, I think we'll kind
of have more of the same and changes on the
edges from a healthcare perspective, if those actually continue to
drive sustained inflation and high trend, which is what the
consultants are saying is going to happen, I expect to
see bigger change than people expect, including potentially some things

(55:32):
that are in our favor given the nature we work.
I'll sort of close that question on this thought, Jonathan,
which is it's interesting healthcare moves very slowly, and people
are used to healthcare moving very slowly until it moves fast.
And we have some historical examples where the biggest carriers
in health insurance were companies like Travelers, Guardian, Metropolitan Prudential,

(55:56):
none of them who are in the healthcare business fifteen
years later due to some of the shifts that happened,
the rise of managed care, United Healthcare ATNA, which was
really different from the original ATINA, you know, on and on.

Speaker 1 (56:07):
That's interesting. You know, I even think it's just virtual
care during the pandemic, right. You know. One last thing
I like to touch up on before we wrap it
up is I always like to end these conversations a
little bit on a personal note, focusing a little bit
about like what drives the guest on a day to
day So with that in mind, to show, is there
something like a lesson from your personal life or your

(56:28):
business experience that kind of drives your your day to
day mission for you personally?

Speaker 2 (56:33):
Yeah, it's a it's a I appreciate the question. You know,
I was neither a you know, entrepreneur at the age
of eleven, starting a lemonade stand in front of my driveway.
Maybe I should have, maybe I'd be better at what
I do today, but but I came late to this
from a startup perspective. And I also, you know, wasn't
always a deep healthcare person. You know, what really drives

(56:57):
has driven me, And you know, I did go to
busines in the school, but I focused a lot of
my time there on the use of management principles to
solve social problems. I fervently believe that over the last generation,
you know, we have as a country, as a society,
we have failed the average worker. And there's a lot

(57:18):
of reasons for that that are well beyond this podcast,
but it's sort of manifesting in the political climate that
we have today. Maybe we aren't talking about it as
much as we used to, but healthcare is one of
the top three reasons, and there's a lot of work
that's been done on this, but ultimately, you know, one
of the books that resonated with me is one called

(57:39):
Deaths of Despair. It was about the opioid crisis. Is
by professors Angus Deaton and a Case from Princeton. But
they spoke about the material and unique impact that health
care costs in America have on the working class. And so,
you know, I grew up in Buffalo. I speak a
lot to my passion for communities like Buffalo, bluer collar

(58:03):
and nature aren't sort of coastal, high tech go go,
And I think a lot about the impact that health
care and health insurance and the costs of these things
have on the typical type of family that I grew
up with, and hopefully, in some small way, you know,
we can make a difference in those people's lives. The

(58:24):
stories that resonate most with me is when I hear
from clients, most of whom skew to being those who
employ you know, bluer collar, grayer collar type populations, and
they're really telling you know, when we hear from members,
when we hear from patients who are free to the
financial anxiety that the status quo a high deductible open

(58:44):
access plan gives them, and that certainly gives us the
motivation to keep going.

Speaker 1 (58:48):
No, that's very well said. Thanks for sharing that with us,
and with that we'll wrap it up, and that's a choke. Supermanian,
founder and CEO of Sentivo, thank you so much for
joining us on our latest episode, and please don't forget
to give us a review and make sure to click
the follow button on your favorite podcast app or site
so you never missed a discussion with the leaders in
healthcare innovation. I'm Jonathan Palmer, and you've been listening to

(59:11):
the Vanguards of Healthcare podcast by Bloomberg Intelligence. Until next time,
take care,