David: 0:02

Hi friends, David Stoltzman here. As we slide into the end of the year, we're serving up a few encore episodes. These are conversations our listeners love the most, or at least didn't complain about, so they earned a replay. It's a great chance to revisit some big ideas, get a spark of inspiration, or finally catch that episode you meant to listen to before the fourth quarter turned into a holiday-themed obstacle course. We'll be back on January 6th with brand new interviews and insights. Until then, I hope you get a little time to rest, recharge, and please hang out with people who don't ask you for benefits advice over dessert. Thanks so much for being a part of the Shift Shavers community, and here's to a healthy, happy start to the new year. As we've discussed on previous episodes of the podcast, high deductible health plans have created some people and some families who are what we've been calling functionally uninsured. That is, they've got a card in their wallet, but they're not able to access care because of high personal responsibility amounts in their plan design. How can we overcome those hurdles? We'll find out this episode of Shift Shapers.

Announcer: 1:07

This is the Shift Shapers Podcast, connecting benefits advisors with thought leaders and entrepreneurs for shaping the shifts in the industry. And now, here's your host, David Saltzman.

David: 1:21

And to help us answer that question, we've got an old friend who last time he was on the podcast was almost 10 years ago. Seems like not that long ago, but it's 10 years ago, Tom Policelli, who is CEO at Paymedics. Hey Tom, how are you today? I'm doing great. And you know, we both look exactly the same. We haven't changed a bit. I actually think you're looking younger, but you know, that's how I flatter guests, I guess. So I'm glad you're here anyway. And your arc has touched down in a couple of places since we last talked, but but you're now at Paymedics, and what sparked your vision for trying to simplify healthcare payments?

Tom: 1:56

Well, I mean, it starts off, as you just said, people can't afford to use their benefits a lot of times right now. And that has a real financial impact to them and really impacts their health. But just to step back for a second, even before we get to the money, the number one issue we found for all consumers with commercial insurance is actually not money. Money's number two, it's a close number two, but number one is confusion. They don't understand a blessed thing. Their benefits are just impenetrable to them. They get these EOBs that don't make sense, these bills from providers that can't reconcile it. So 100% of the people don't understand what's going on. And then a lot of people can't afford it. But getting to the affordability, what we've been seeing is a whole bunch of studies, and they all gravitate towards about the same number. About 45% of people last year avoided getting necessary care. People with insurance avoided getting necessary care because they were worried about how they were going to pay their part of what they were going to owe at the end of the day. At the same time, we've seen hospitals increasingly concerned that they're not going to get paid what the consumers owe them. Just under 30% of those hospitals are now requiring a form of payment before they will schedule a service. So you can still stumble into the emergency room because that's the law. But if you want to schedule something, put down your credit card. And the last data point I know so I'll put out is for our own membership, what we know is that if we weren't there to help them, a quarter of our members today, all of whom have commercial insurance, an ID card from their employer, a quarter of those people have no available commercial credit. If they have a credit card, it's maxed out, or they can't get one in the first place. So when those hospitals say, you need to give me a form of payment, they can't. And some of those who can, who do you have a credit card, are scared. That gets you to the 45% or avoiding necessary care. You roll all this together and you have a real access, a financial access to care issue for consumers that flows through to drive increased costs for the employers because people simply access care when they're a train wreck and not earlier on in the process.

David: 4:09

Well, that's what I was going to ask you. Do you guys have any stats on that? I mean, it it's, you know, it's we've all seen it. Those of us who've been in the business more than two weeks, you know, little Joey has a cold. Mom and dad look at what their out-of-pocket's going to be to take him to a pediatrician and they say, well, let's wait and see if it resolves. And you fast forward a couple of weeks and the kid is in the pediatric ICU with pneumonia.

Tom: 4:31

Yeah. So, David, I'm not going to startle you at all and I'm at risk of making your audience, you know, had their foreheads hit their desk. I'm going to go straight at trend. Now, I've been playing in this market for 30 years now, plus, and we've always been looking at trend. What's driving medical trend? Is it specialty meds? Is it behavioral health? Yeah, what's driving trend in this in, you know, in whatever time period we're looking at? What I had never looked at until coming to our company four years ago, I'd never looked at trend by income level. It never even occurred to me to look at it that way. And what we found is fascinating. And it's before an employer comes to us when they're just doing what they normally do. If you break down the utilization of medical services by income tier, we broke it into five levels. What you see is the bottom two income tiers access care very differently than the top three. The bottom two income tiers are accessing care in a fashion similar to the way a Medicaid patient does. They delay, delay, delay, show up in the ER when everything's a mess. And that's really expensive. What you see after we step in is that all five income tiers start consuming care very similarly. They get care earlier. And so what that translates to at the end of the day is the use of professional services for the entire employer population goes up and the use of inpatient services goes down. But it's really disproportionately driven by those bottom two tiers. The bottom two tiers access far more professional services and use the ER and the inpatient overall, far less. And that's what brings down the overall trend. So our employers, we have we've been in the middle market and small end of the middle market for years. We have 95% employer retention, which every all of your listeners will know that's very high retention rate for this market segment. Usually you lose your third of your clients a year. We keep them because we're saving employers two to three points on trend every single year. So that's compounding. So employers have been with us for 10 years. Even if they didn't like us, they have to stick around. They can't afford to get rid of us. Thankfully, they like us too. But uh, but that's a long-winded way of saying that if you focus on these people who are currently financially unable to use the benefits that were given them by their employer, you can save the employer a ton of money and have much healthier people.

David: 6:56

And those are both the things that employers look for. At least most employers do, I think. So you guys use this thing called a super EOB to consolidate building and offers guaranteeing financing out of out-of-pocket costs at 0% interest. First of all, what is a super EOB? And then can you walk us through how that actually works in a practical example? Sure.

Tom: 7:17

So what the super EOB does is it really replaces both the EOBs that your typical insurance plan would send out that people don't understand anyway, and the bills that they get from the providers that they also don't understand and sure don't reconcile very well to the EOB. So our job, what our engine does, is to do all of that matching and reconciling for the consumer. As we do that, we then so the consumer gets a one-monthly statement, no longer all this blizzard of paperwork. They have one monthly statement, kind of like a cell phone bill or a credit card bill or something like that, that summarizes here's everywhere you went, consumer, here's everything you did. We've checked, and it looks like you owed $712.09 or whatever to all these various providers. We've paid that on your behalf. So if you think about it, that's just the same way an American Express card statement would work. Now, we're not a credit card, to be clear. We're very much not a credit card, but it's the same idea. MX summarizes all of your statements, all of your charges, that is, and it pays the merchant because it believes these are correct. And then you get your statement, and your job is to then turn around and pay American Express back. We do the same thing. So we validated everything. We pay with our money, that provider. And when consumers get that monthly statement, what they have for the first time is one source of truth. We did the reconciliation for them. And the consumer knows that we're really sure that we're right. We're so sure that we already paid the provider with our own money, which we obviously would not have done if we thought there was something wrong here. Now, if the consumer has a question or anything, or maybe there was an or they call us and we fix it just like you know, a credit card company would or someone else. But it's not wrong very often, right? Because we do run these checks. We're very careful with it. So that's what the consumer gets out of this. And the provider is now out of the asking for money up front or chasing people after care job. Right now, consumers, I'm sorry, providers spend an enormous amount of money to irritate their patients and confuse them and end up with very low yield financially. And we make that go away for the provider. So the last part, how do we do this with no interest or fees or anything to the consumer? The way we do this is we have two sources of revenue. One is the provider, and the second is the plan sponsor, the employer. The bulk of our revenue comes from the providers because we're getting them out of a business that they hate and they're not good at doing anyway. And so they pay us a fee for doing that. And to a lesser extent, it's on the uh employer side.

David: 9:58

So it's also a compelling value proposition for advisors. You know, if I based on our conversation offline, under 5% client churn versus 30% industry average, we've already talked about the trend savings and 90% consumer satisfaction. That that's huge. If it's an advisor, what's that conversation like, that first conversation like with an employer?

Tom: 10:23

It's uh it's funny. I can give you two answers to that question because it depends where we are. If we're new in a given market, then I'll be honest with you, David, we're doing something different. And so at first, people are they want to like, what are you talking about? This is this is kind of new, kind of weird. What are you talking about? As soon as we explain it to them, they get it and they they love it. And then once they're on board, then they become our greatest, our greatest salespeople are really our existing clients, again, with with the retention rate like that. So what we find is that it kind of what we migrate through. So when we start off with if a given uh producer has a client who signs on, pretty quickly more and more of them start going into it. They start switching everybody in because why wouldn't you? Right? It's it's working for them, they're saving money, and and their people are happier with their benefits.

David: 11:13

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Tom: 12:44

It's a great question. And one of the keys is that we're a bunch of insurance geeks. And so we approach this with an insurance mindset. And what I mean by that is, again, we're not a consumer credit company, and that's a good thing because the way consumer credit companies work, it's their job is really to narrow the scope of what it is their how far their product will reach. So if there's a given population, their job is to say, okay, I'm going to exclude this whole chunk of the people, half the people I'm not even going to give any credit to. And those who I do give it to, I'm going to set caps: $1,000 for this person, $2,000 for that person, whatever. And then they put, they also put on a bunch of fees. So their job is to make the pool very small and to really tightly manage that small chunk. And that works for that business, I guess. That's the banking mindset. The insurance mindset is I want to have as broad a pool as possible. I want to spread my risk across everybody. Because by doing that, I'm greatly decreasing the volatility. Because that's sort of our whole job as insurance is to decrease volatility, right? And to manage the overall economics. And so that's what we do. When we go into an employer, what we don't say is, hey, let's put this out there and see which 5% of your people want to do it. When we put in payments, we walk in and say, everybody automatically gets us. Consumers don't even need to enroll. They don't have to do a blessed thing. All they know is that all those EOBs and bills that they never understood went away. And all this, this the superview just started happening. And this credit just started happening for them. And they don't have to do a blessed thing. So by doing that, it decreases our administrative costs, greatly spreads our risk across that entire population. And then we're able to have very sustainable economics. We've been doing this for 20 years now as a company. We've put over $7 billion through this. We're really, really good at underwriting.

David: 14:40

So how is adoption scaled for you guys? Any numbers you'd like to share?

Tom: 14:45

It's changed a lot. So and a little bit of the history of our company. Historically, our whole paymetics product, as we now call it, wasn't even called Paymetics. It was baked into a PPO network that we also still own that is in Wisconsin only. And the only way you could get paymeds is if you were a self-funded company that happened to rent our network, which was only in Wisconsin. And so four and a half years ago, I came in with some investors who could write much bigger checks than I could. And we bought the company. And what we did is we split apart that PPO network and what we now call Paymetics and retooled it. So now Paymetics works in conjunction with any underlying benefit plan using any network anywhere in the United States of America. And so unsurprisingly, we've been growing a lot since we did that because now our total addressable market is America, not just, you know, the western shore of Lake Michigan.

David: 15:47

Now you have recently partnered with EXO Health. What's that all about and what drove the collaboration and how has it advanced what your guys' mission is?

Tom: 15:56

So EXO is a great example. We we we love these folks. I mean, they are really out to disrupt a lot of how care is accessed and consumed by by patients, by consumers. And so as part of that, and a lot of it wraps into how they they bundle their services into these alternative benefit structures. What we have done as their as they've been rolling out is we have baked into their network contracting so that part of the value proposition they can offer a provider is that they're not dealing with all that standard insurance stuff, including consumer, you know, chasing consumers or billing up front or any of that. So we've we've removed that issue for the providers, and that helps XO Health get a much better deal out of the providers. What we've seen in our own PPO network back in Wisconsin is we've only got 45,000 lives there, but our rates, contracted rates with our PPO, are at or better than Anthem and United, which are the each have a million lives in the state. But providers so value paymed that they give a lower reimbursement rate to the to our PPO network because they want to drive more volume. XO is seeing the same thing as they're going off and doing their network contracting. So baking in with XO is more efficient for us and more effective for them so they can get better deals.

David: 17:21

Now, last year you guys acquired Tempo Pay. What is what is what does Tempo Pay bring to the table? And again, how does that help your mission?

Tom: 17:30

So Tempo Pay first is it's it's uh related to what Paymedics has been doing, but a simpler version. So a tempo pay is a card-based, runs you know, Visa MasterCard Rails, a debit card, in effect. It also charges no interest to consumers or fees to consumers, and it runs off a PEPM from the employer. It is a cap dollar amount set by the employer. So for example, $2,000. And the employer gets to say what that those dollars are going to be used for. Could be dental, RX, pets if they want, medical, whatever they want. And it runs on the, like I said, the credit card rails. As such, it is a banking product, so it has to be activated by the consumer. That's that's sort of the rules. What we're using it for is really two things. One is it is a fantastic kind of beach head product for us, for an employer or even a whole TPA or health plan to get the basic of this consumer financial assistance into the hands of the members before we've got the full-blown paymedics ready. And on a more focused basis, what we've been using it for is we've rolled it out for free to our clients in our test kitchen of Wisconsin for pharmaceutical costs. Everything I described in paymedics, historically, we've done just on medical, and we did a phenomenal job on the medical costs. But if you walk into a pharmacy today, what you're gonna see behind the counter is a whole slew of these little bags. And each little bag has a name on it. And if you ask the person behind the counter how many of those bags don't get picked up, they're gonna say something between 20 and 30% are never picked up, which is another huge problem. So we heard from employers and from our brokers was hey, great job on the medical, but people aren't picking up their drugs, and that's another area of potential savings. And so we've rolled out tempo pay RX for all of our clients at no additional cost for them to say first $500, everyone gets it, everyone can access and get the first few meds. If the employer wants to buy up and say they want $1,500 or then they can do that, but at least get out there for that first $500.

David: 19:44

Very, very interesting. So, you know, I I've known you for a while. As I said, the last time you're on the podcast was a few years back as a thought leader. In a recent podcast, you said that consumer engagement is the key to affordability and better outcomes. So how are you guys keeping consumers engaged and financially resilient, for lack of a better word? And what are the broader payment trends that you're watching today?

Tom: 20:08

Well, the broader payment trends are all kind of moving towards the need for what it is we're doing. I in a way, I wish they weren't. Is it moving at a really rapid pace? I mean, look at the trend numbers we're looking at in the medical world right now are really bad. I mean, the latest studies coming out are showing you know the worst trends we've seen in a couple of decades. Really, really terrible on the employer side. On the provider side, despite all these, all the more money flowing in, that's why the trend is so high, shocking number of providers are in really bad financial shape right now. And so big health systems right on down the line. And so you look at that and say, wow, okay, you're both in trouble. That doesn't, you know, that that's that shouldn't really happen, but it is. And so since we're stepping in and really solving some of the math problem for the providers, right? We they're gonna they actually end up making more money when after paying our fee because we're taking rid of all that inefficiency and foolishness. And we're saving on the trend for the like and the immediate cost for the employers. It's just helping grow our market overall. It's again, we're here to solve a problem. I wish the problem weren't growing at quite the pace it is, but it is.

David: 21:23

And so so I think we're in the right place at the right time. And the receivables that they're seeing are primarily responsible for why they're in such bad shape?

Tom: 21:31

I think there's a lot of reasons why providers are in a bad in bad shape, but certainly it's one of them. And that's well, I said at the beginning, we're about 30% of hospitals in the country are are requiring a form of payment before the schedule of service. Providers know this is not a good idea. They don't want to do this. They simply feel that there's no alternative, that they're spending so much money to irritate their patients and to get such low financial yield that they have to do something else. And so they're resorting to this, I'll just charge everything up front or I won't do any service at all, as out of desperation. I don't think any of them think this is desirable. And so what we do is we walk in and say there's actually a third option. It's not vibe care and prey that you get paid, or demand money up front and scare away people who are lower income and create more health problems for them. There's a third path, and that's what we're here to provide.

David: 22:28

So I we always like to ask a wrap-up question, which is kind of the future question. So, you know, are there new markets, technologies, or partnerships that that you guys are exploring? And and what do you see the healthcare payment landscape looking like over the next five years?

Tom: 22:43

So geographically, we're looking at a very massive expansion. And and really what we've been doing on that is simply following our customers. What we do from a build perspective is the opposite of build it, they will come. We find customers and we follow them. And we follow wherever their members are and we we go in that direction. So in doing that, we're we're expanding dramatically geographically. So for us, the the expansion is going to be with a lot of partners and geography by geography largely. So it's a big country and we're gonna be covering it as rapidly as we can, but not on our own. We're we're only doing it by partnering with people who have the same vision we do, who are trying to achieve the same goals and where we can leverage each other.

David: 23:30

Tom, if folks want to know more, what's the best way for them to find out what you guys are up to and how they might be able to talk to you about building paymeds into what they're bringing to employers? Well, thank you for asking.

Tom: 23:40

They can go to our website, which is paymed, which is P-E-M-E, P-A-Y-M-E-D-I-X.com. We you didn't know there was going to be a spelling quiz, so that wasn't firm. I didn't.

David: 23:55

Thanks so much for sharing your expertise with us.

Tom: 23:58

Yes, thank you very much, I really appreciate it. Let's uh not not another long stretch, not another 10 years.

David: 24:03

We'll we'll we'll tear it down. All right.

Announcer: 24:06

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