Hello, all you Relentless Tribe members. Lately, I have been just obsessed with what's hiding in plain sight: the root cause glitches in how American healthcare is built. Not the symptoms now. Not the noise. The actual ground zero.

I mean, what we call healthcare in this country is really, if you think about it, a pretty bizarre construct. It's kind of a Franken machine stitched together from misaligned incentives and historical accidents.

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So, if the goal is to actually fix healthcare in this country, you gotta hit these underlying pressure points. And if you do, you don't just get incremental improvement; you really get a massive unlock.

I feel like the Relentless Tribe, by the way, is inching our way—there's a number of you who are inching your way—toward these kind of first principal truths. So, look out for us, world. We're coming is all I can say.

But yeah … so, we talked about Ground Truth Unlock #1 in episode 511 with Dr. Siva and Monica Lypson, MD, MHPE.

Today we are moving on to Ground Truth Unlock #2.

This realization dawned on me during an email exchange with the YouTuber Coffeezilla. Check it out. It's a great channel. But Coffeezilla spends some of his time exposing fraud, not really talking about policy decisions, as he puts it.

But as we were chatting, I was thinking about the one-third of healthcare dollars, these trillions lost to waste, fraud, and abuse; and it brought up for me a question.

What is the bright line between normal, legally acceptable business operations and outright fraud? Because in the healthcare industry, I'm not sure that there is one. I can, and I'm sure you can, too, think of like 15 examples off the top of your head that fall in the what might be a massive gray area where practices teeter into the fraud zone—things that are technically legal in theory, but common sense is they probably should not be.

They're pretty unpalatable on their face. And this matters. These are trillions of dollars here. These are our taxpayer, employer, patient coinsurance dollars that are potentially—not always, but often enough—these are trillions of dollars going in someone's pocket while a patient is potentially getting hurt financially and/or clinically simultaneously.

So, then I started to try to understand why this is happening and how it came to be, and I think back to when I studied economics in Sweden. In Sweden and in many other smaller countries, there is a nationwide shared understanding of what, I'm gonna call it, the floor of human dignity looks like.

Doing harm, therefore, is universally understood to mean breaching that floor of human dignity. That shared belief system is an invisible hand, actually, that is at least as powerful as the invisible hand of capitalism. You know, Adam Smith underpins the supply and demand curve, fair prices, and all that.

The thing is, here in the US, in our land of rugged individualism, there really is no counterbalancing invisible hands of ethics and integrity and dignity.

Said another way, what's the whole-person product? In the US healthcare industry, the human being is the product; but there's really no minimum standard for what the product even is.

So, yeah … here we are. And this brings us to Ground Truth Unlock #2: things that are so obvious once you say them out loud.

Right now, we are endlessly trying to keep up with thousands of profit-extracting geniuses and creating mazes of complexity to regulate actors who have absolutely no incentive and no societal construct invisible hand to be kept under control.

If we have no agreed-upon definition of what constitutes harm, then perverse incentives are just incentives. Think about this. I know I am going to be.

My guest today is Michelle Cera, PhD, from Hunterbrook Media. Today we are unpacking their latest investigation. If you recall, their earlier one was about offshore GPOs taking rebates on behalf of PBMs. So, this is their next investigation, and it is just as salacious and possibly even more sad than the first one.

Toward the end of the show, we get into four concrete solutions to counter the discussed. Is it fraud? Is it bad behavior? Is it simply responding to an incentive? I have no idea. I'm not a lawyer. But it's kind of terrifying in whatever case.

But wait … there's more. Throughout the course of this conversation about this latest Hunterbrook investigation into SNFs (skilled nursing facilities), we wind up diving into what I am now calling the Usual Suspect's Playbook to perverse incentives:

Perverse incentives that result in profiteering, the mother of all of them being to cut staffing because of Baumol's cost disease
Figuring out how to "grade your own homework" so you can obscure the impact of aforementioned profiteering
Regulatory capture (lobby, have lunches, and get any unfavorable regulations struck down)
Paying related parties, such as companies you already own

What might be the most exciting part, though, of profiteering using these usual suspects? Indeed, it is the rapid spread of the practices, of course. Once one private equity–funded or publicly traded entity figures out a trick and starts making money using it, the trick becomes a best practice and discussed on earnings calls and then justifies executive comp incentives across the industry tied to exploiting said identified "opportunities." Right?

So, if you're an executive and you don't do these things now, you are at a disadvantage or you might get fired.

Relentless Tribe, please use this Usual Suspect's Playbook to spot the bad actors and protect your honest partners. If you have other additions to our playbook, by the way, please comment on a post on LinkedIn or contact us on the Web site. Or do the same if you have thoughts on the two Ground Truth Unlocks that I've mentioned so far or you can think of others. As a tribe, I think we're really on to some big things here on both fronts.

So, with that, here is my interview with Michelle Cera from Hunterbrook Media; and she's going to introduce herself and Hunterbrook Media in like T-minus two minutes. So, I'm gonna let her do it.

This podcast is sponsored by Aventria Health Group, and thank you so much for being here.

Also mentioned in this episode are Hunterbrook Media; Ahilan Sivagenesan, MD; Monica Lypson, MD, MHPE; Payerset; Aventria Health Group; Patrick Nelli; Charlene Harrington, PhD; Preston Alexander; and Jerry DiMaso.

For a list of healthcare industry acronyms and terms that may be unfamiliar to you, click here.

You can learn more at hntrbrk.com, read the full article, and follow Michelle on LinkedIn.

You can also send her your investigative story ideas at ideas@hntrbrk.com.

Michelle Cera, PhD, is an investigative reporter at Hunterbrook Media, where she covers corporate wrongdoing in the healthcare industry. She holds a PhD in sociology from New York University and uses a data-driven, systems-level approach to bring visibility to areas of the industry that get overlooked. Michelle is based in Brooklyn.

00:00 Introduction to this episode.

00:40 Fixing the root cause problems with the American healthcare system.

01:40 EP511 with Dr. Siva and Monica Lypson, MD, MHPE.

01:50 Today's root problem topic.

05:12 Introducing today's guest and her latest investigation.

07:43 The conversation with Michelle Cera, PhD.

08:35 How Hunterbrook Media's latest investigation into skilled nursing facilities got started.

11:07 EP509 with Patrick Nelli.

12:58 Article where you can learn more about Hunterbrook Media's investigation and the stories of neglect.

13:20 How inadequate staffing creates neglect in SNFs.

14:03 Connecting the dots between staffing and resident needs.

15:33 Why skilled nursing facility chains are extremely profitable to the detriment of patients.

17:15 How star ratings on CMS can be skewed in the favor of these SNF chains.

21:56 The perverse incentives playbook.

23:20 An example of how executive bonuses are tied to perverse incentives.

27:53 How lobbying walked back the CMS minimum staffing regulation for SNFs.

29:05 Another note in the perverse incentives playbook.

30:08 University of Pennsylvania study on minimum staffing levels.

30:59 How much of these chain SNFs' funding is from taxpayer dollars.

33:16 Another perverse incentive: overpaying sister companies.

34:17 EP482 with Preston Alexander.

35:07 Why CMS can flag overcharging, but they don't have a cost recoup structure.

38:10 The case to be made about how current business dealings within SNFs is fraudulent.

39:30 How to fix the perverse incentives happening in skilled nursing facilities.

Recent past interviews:

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Matt Cantor, Brennan Bilberry, Doug Aldeen, Dr Siva and Dr Monica Lypson, Betsy Seals, Patrick Nelli, Lee Lewis, Stacey Richter with 15 experts (EP507)

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