What if your company purchased technology, equipment, professional services, or raw materials the same way it purchases healthcare?
You probably wouldn’t tolerate it.
In this episode of The Healthcare Heist Podcast, Louis Bernardi challenges employers to stop thinking about healthcare solely as an insurance problem and start treating it like one of the largest supply chains in their business.
Most organizations would never accept unclear pricing, limited access to their own data, unexplained cost increases, misaligned vendor incentives, or purchasing decisions made without meaningful information. Yet these practices have become remarkably normal in healthcare.
Maybe we don’t just have a healthcare cost problem.
Maybe we have a healthcare purchasing problem.
Lou explores why focusing exclusively on premiums and annual renewals misses the bigger opportunity: understanding and managing the underlying claims that ultimately drive those costs.
You’ll learn why employees are effectively making healthcare purchasing decisions every day, why navigation and advocacy matter, how opaque pharmacy and provider pricing can undermine your plan, and why knowing how every partner in your healthcare supply chain gets paid is so important.
Lou also explores the role of partial self-insurance. Self-funding isn’t magic, but when structured correctly, it can give plan sponsors greater control over the pieces of their healthcare supply chain—from TPAs and PBMs to navigation, Centers of Excellence, data, and other specialized partners.
And you don’t have to be self-insured to start.
RegarDless of funding arrangement, employers can begin applying the same principles they use throughout their businesses: transparency, competition, data, accountability, aligned incentives, and smarter purchasing.
It’s another way to look at the P.L.A.N. System—and another path toward uncovering your Healthcare Dividend.
Because maybe the question at your next renewal meeting shouldn’t be:
“What’s our increase?”
Maybe it should be:
“What exactly are we buying—and why are we buying it this way?”
In This Episode:
- Why premium is often the result—not the underlying problem
- How to think about healthcare as a supply chain
- Why employees need better information and navigation
- What healthcare “discounts” can hide
- Why compensation and vendor incentives matter
- How partial self-insurance can create greater choice and control
- What fully insured employers can do right now
- How the P.L.A.N. System applies to smarter healthcare purchasing
- How better purchasing can help uncover your Healthcare Dividend
If healthcare is one of your company’s largest expenses, perhaps it’s time to start purchasing it like one.
—
Listen to the podcast here
Your Health Plan Is a Supply Chain: Why Employers Should Buy Healthcare The Way They Buy Everything Else
Welcome to The Healthcare Heist Podcast, where we pull back the curtain on one of the biggest, most misunderstood expenses in your business.
I’m your host, Louis Bernardi, founder of BritePath and a Benefit Optimization Officer.
And today, I want to approach healthcare from a completely different direction.
I want you to forget about insurance for a minute.
Forget about premiums.
Forget about deductibles.
Forget about networks.
Instead, I want you to think about procurement.
Because I believe one of the fundamental reasons employers continue to overpay for healthcare is actually pretty simple:
We don’t buy healthcare the way we buy anything else in our businesses.
And if we did, I think a lot of what happens today would be completely unacceptable.
So today, let’s talk about your healthcare supply chain.
THE OPENING QUESTION
Imagine your CFO walking into a leadership meeting and saying:
“We’re about to spend $5 million with one of our largest vendors.
We don’t know exactly what we’re paying for everything.
We don’t have complete access to the underlying data.
We’re not entirely sure how some of the vendors and intermediaries involved are being compensated.
We know prices for the exact same service can vary dramatically depending on where we buy it.
The consultant helping us negotiate the arrangement may earn more as our spending increases.
And we’re probably going to renew the contract again next year.”
What would you say?
You’d probably think they’d lost their mind.
You certainly wouldn’t call that procurement.
You wouldn’t call it financial management.
And you definitely wouldn’t call it good governance.
But change the words “vendor contract” to “health plan”…
and suddenly we’ve accepted it as normal.
Why?
HEALTHCARE MAY HAVE A PURCHASING PROBLEM
We’ve spent decades talking about America’s healthcare cost problem.
And yes, healthcare is expensive.
But I think employers need to consider another possibility.
Maybe you don’t just have a healthcare cost problem.
Maybe you have a healthcare purchasing problem.
Think about how your company buys almost everything else.
If you’re purchasing technology, equipment, raw materials, professional services, transportation, real estate—whatever it might be—you probably have a process.
You define what you need.
You evaluate suppliers.
You compare pricing.
You negotiate terms.
You establish performance expectations.
You measure results.
And if a supplier continually raises prices while delivering the same or worse results, eventually somebody asks:
“Why are we still buying from them?”
Yet with healthcare, we frequently start somewhere completely different.
We start with the renewal.
“What’s our increase?”
And then the game begins.
Can we get 18% down to 14?
Can we change the deductible?
Can we increase the copay?
Can we change employee contributions?
Can we move to another carrier?
And eventually everyone congratulates themselves because an ugly increase became a slightly less ugly increase.
But did we actually fix anything?
PREMIUM IS THE INVOICE. CLAIMS ARE WHAT YOU BOUGHT.
Here’s one of the biggest mindset shifts I want employers to make.
Your premium isn’t necessarily the problem.
The premium is often the result.
Your claims are what’s underneath it.
Think about any other supplier.
If your costs suddenly increased 20%, would you just negotiate the invoice?
Of course not.
You’d want to know why.
What changed?
Which products increased?
Which locations?
Which suppliers?
Was there more volume?
Did unit costs increase?
Was there waste?
Was there fraud?
Was somebody buying from the wrong supplier?
You’d investigate.
But healthcare renewals too often start and end with the invoice.
We negotiate the premium without doing enough work on what’s creating the premium.
That’s backwards.
IMAGINE RUNNING YOUR SUPPLY CHAIN THIS WAY
Let’s take it outside healthcare again.
Imagine you’re a manufacturer.
One supplier charges you $10,000 for a component.
Another qualified supplier can provide the same component for $3,000.
Would you tell your purchasing department:
“Don’t worry about it. They’re both in-network”?
Of course not.
You’d want to know why you’re paying more.
Yet enormous price variation exists throughout healthcare.
The same procedure.
The same imaging.
The same medication.
Sometimes even the same physician.
Different location.
Completely different price.
And here’s the really crazy part:
The employee frequently doesn’t know.
HR doesn’t know.
The CFO doesn’t know.
Sometimes the broker doesn’t know.
And the person receiving the service is expected to make the purchasing decision.
Imagine doing that anywhere else in your company.
THE EMPLOYEE IS THE PURCHASING DEPARTMENT
This is another piece that I think we’ve completely overlooked.
Your employees are making purchasing decisions with your healthcare dollars every single day.
Where they get an MRI.
Where they have surgery.
Which hospital they use.
Where they receive an infusion.
Which pharmacy fills a prescription.
Which specialist they see.
Those are purchasing decisions.
But we’ve given the purchasing department almost no information.
We don’t show them meaningful pricing.
We don’t consistently show them quality.
We don’t explain alternatives.
We don’t give them somebody knowledgeable to call.
And then we get surprised when the claims are high.
That’s not an employee problem.
That’s a supply-chain design problem.
If you’re going to ask your people to participate in purchasing healthcare, you need to give them the tools to succeed.
That’s where navigation becomes so important.
Not another app buried somewhere on their phone.
Real, easy-to-use resources.
Someone who can say:
“Before you schedule that procedure, let us help.”
“Before you fill that specialty medication, call us.”
“Before you accept that treatment plan, let’s make sure you understand your options.”
That’s good healthcare.
But it’s also good procurement.
HOW MANY MIDDLEMEN ARE IN YOUR SUPPLY CHAIN?
Now let’s follow the money.
Think about how many organizations can potentially touch a healthcare dollar before care ever reaches your employee.
The insurance carrier.
The PBM.
The hospital system.
The pharmacy.
The broker or consultant.
The TPA.
Specialty vendors.
Networks.
And depending upon how the arrangement is structured, different organizations may generate revenue at different points along the way.
I’m not saying every intermediary is bad.
Far from it.
Many provide tremendous value.
But here’s the question every business leader should ask:
What value are we receiving for what we’re paying?
And then another:
How does this organization make money?
Those are ordinary procurement questions.
They shouldn’t become offensive just because we’re discussing healthcare.
THE DISCOUNT GAME
Healthcare also has one of my favorite purchasing concepts:
The discount.
“We negotiated a 55% discount.”
Sounds fantastic.
Until you ask:
55% off what?
If something has a sticker price of $10,000 and you receive a 50% discount, you pay $5,000.
If another provider charges $3,000 without the giant discount, which one was the better deal?
The discount doesn’t matter.
The net cost matters.
Yet employers have been trained to celebrate discounts instead of asking what they’re actually paying.
Try that with your procurement team.
Tell them Supplier A gave you a 60% discount, so obviously they’re the winner.
Their next question should be:
“What’s the final price?”
That’s the question healthcare purchasers need to start asking too.
PHARMACY MAKES THE PROBLEM EVEN EASIER TO SEE
Pharmacy is perhaps the easiest place to understand this.
An employer sees a prescription claim.
But behind that claim can be manufacturer pricing, rebates, discounts, formularies, spread pricing, specialty pharmacy arrangements, and other contractual terms.
So once again, ask basic procurement questions.
What did the drug actually cost?
What did we pay?
Was there a rebate?
Who received it?
How much came back to us?
Could we have sourced the medication differently?
Was there a clinically appropriate alternative?
That’s not being difficult.
That’s doing your job as the purchaser.
THIS IS WHERE SELF-INSURANCE BECOMES INTERESTING
And this brings us to self-insurance.
I talk a lot about partial self-insurance because, when structured correctly, it can check so many of these boxes.
But I want to be careful here.
Self-insurance isn’t magic.
You can absolutely have a poorly performing self-insured health plan.
If you self-insure and then use the same misaligned partners, accept the same opaque contracts, ignore your data, and leave employees navigating alone, you’ve changed the financing without fixing the problem.
But self-insurance can give you something incredibly valuable:
Choice.
You can have greater control over the components of the supply chain.
You can select an independent TPA.
You can select a transparent or pass-through PBM.
You can evaluate pharmacy differently.
You can introduce Centers of Excellence.
You can create direct arrangements.
You can use navigation.
You can analyze claims.
You can customize the plan around the needs of your population.
Instead of buying one giant black box, you can begin selecting the pieces that perform best.
That’s procurement.
BUT YOU DON’T HAVE TO SELF-INSURE TO START
And this is important.
I don’t want somebody listening to this with 30, 50, or 75 employees thinking:
“Well, we’re fully insured, so none of this applies to us.”
It absolutely applies.
Maybe you can’t control every component.
Fine.
Control the components you can.
You can still ask how your broker is compensated.
You can still introduce navigation.
You can still educate members.
You can still analyze available data.
You can still challenge your renewal.
You can still evaluate alternative funding arrangements.
You can still make certain services easier for employees to access.
You can still align the incentives of the partners you control.
This doesn’t have to be all or nothing.
THIS IS REALLY THE P.L.A.N. SYSTEM AGAIN
And if you’ve listened to previous episodes, you may have already noticed something.
We’re really talking about the P.L.A.N. System again—but through a procurement lens.
Prioritize Employee Health.
Don’t buy the cheapest healthcare. Buy healthcare that produces better outcomes.
Those aren’t necessarily the same thing.
Leverage Transparency and Data.
You can’t manage a supply chain you can’t see.
Know where the dollars are going.
Know what’s driving costs.
Know where the opportunities are.
Align Incentives.
Your suppliers and partners should benefit when the plan performs better—not simply when more money flows through the system.
And finally:
Navigate the Health System.
Give the people making healthcare purchasing decisions the information and resources they need to make better ones.
When you look at it this way, P.L.A.N. isn’t really an insurance strategy.
It’s a business strategy.
THE CFO TEST
So here’s a little exercise I’d suggest for your next leadership meeting.
Take your health plan and put it through what I call the CFO test.
Pretend it isn’t healthcare.
Pretend it’s simply one of the largest vendor relationships in your organization.
Then ask:
Do we know exactly how our partners make money?
Do we have access to the data we need?
Can we measure performance?
Can we identify our biggest cost drivers?
Do we competitively evaluate important components?
Do we audit the arrangement?
Do we know whether we’re receiving high-quality services for what we’re paying?
Are the people making purchasing decisions equipped with good information?
Would we accept these contract terms from any other major vendor?
And here’s the big one:
If this wasn’t healthcare, would we continue buying it this way?
If the answer is no…
you’ve probably identified an opportunity.
STOP SHOPPING INSURANCE. START PURCHASING HEALTHCARE.
I think that’s the shift.
For decades, employers have been shopping for insurance.
Maybe it’s time we start purchasing healthcare.
Those are not the same thing.
Shopping insurance asks:
“Who will give us the best renewal?”
Purchasing healthcare asks:
“How do we get our people the highest-quality care at the best value?”
Shopping insurance focuses on financing the claims.
Purchasing healthcare focuses on improving the claims.
Shopping insurance reacts after the money has been spent.
Purchasing healthcare creates a strategy before it is spent.
And when you begin doing that, something else happens.
You start finding the Healthcare Dividend.
THE HEALTHCARE DIVIDEND
Remember, the Healthcare Dividend isn’t created by cutting benefits.
It’s created by eliminating artificial costs and unnecessary waste.
If your organization can recover 10%, 20%, 30% or more of healthcare spending that isn’t creating value, those dollars don’t disappear.
They go somewhere else.
Into better benefits.
Into wages.
Into hiring.
Into technology.
Into equipment.
Into expansion.
Into profitability.
Into what I call your Growth Fund.
That’s why I don’t view healthcare optimization as a benefits initiative.
It’s capital allocation.
THE LEADERSHIP CHALLENGE
So here’s my challenge to CEOs, CFOs, and HR leaders listening today.
At your next renewal meeting, don’t begin by asking:
“What’s our increase?”
Ask:
“What are we buying?”
Ask your partners to show you.
Where did the money go?
What drove the increase?
What are we doing differently this year to lower the underlying cost of care?
What parts of our healthcare supply chain can we improve?
What haven’t you shown us?
What alternatives exist outside the traditional carrier solutions?
And what are we doing to help our employees become better healthcare consumers without asking them to become healthcare experts?
Those questions completely change the meeting.
And if your current partners can answer them?
Fantastic.
Give them the opportunity to become part of the solution.
If they can’t?
Well…
that’s useful information too.
CLOSING
Healthcare is probably one of the largest expenses in your organization after payroll.
It’s time we start treating it that way.
You wouldn’t blindly renew a multimillion-dollar technology contract.
You wouldn’t accept secret pricing from a major supplier.
You wouldn’t reward a procurement partner because your costs went up.
And you wouldn’t send employees out to purchase millions of dollars of goods without giving them prices, quality information, or guidance.
So why do we accept it in healthcare?
Maybe the biggest healthcare innovation your company needs isn’t another insurance product.
Maybe it’s simply applying the business principles you already use everywhere else.
Transparency.
Competition.
Data.
Accountability.
Alignment.
And smarter purchasing.
Because you may not have an insurance problem.
You may have a purchasing problem.
And once you recognize that…
you can finally start fixing it.
OUTRO
Thanks for listening to The Healthcare Heist Podcast.
I’m your host, Louis Bernardi.
I hope you learned a thing or two, and more importantly, I hope it helps you get the results you and your people deserve.
If today’s episode has you wondering how your organization is actually purchasing healthcare, start asking the questions we discussed.
And if you want another set of eyes on it, I’d be happy to have that conversation.
Because sometimes the first step toward finding your Healthcare Dividend is simply discovering where the money is going.
Thanks again for listening, and I’ll see you next time on The Healthcare Heist Podcast.