Plan Sponsors Spend About $1.20 to Buy $1 of Healthcare, and Clinical Organizations Receive 80¢ for Every $1.20 Spent, With Mark Newman

Plan Sponsors Pay $1.20 to Buy $1 of Healthcare — and Providers Collect 80 Cents of That

A self-insured employer pays $1.20–$1.30 to access a dollar of negotiated healthcare. Providers budget their business around collecting 70 to 80 cents of what they are contractually owed — because denial rates, unpaid patient balances, and collection timelines of 2 to 9 months are the operating reality. The gap — roughly $1.5 trillion a year by Mark Newman's accounting — is not one boogeyman. It is just the cost of the friction.

In this episode, Stacey Richter speaks with Mark Newman, CEO and founder of Nomi Health, about why the life of a claim produces administrative waste accounting for 28–30% of total US healthcare spending — and the two structural reasons behind it.

WHAT YOU'LL LEARN

✅ Revelation 1 — Data isn't data: as a claim moves through the system, each stakeholder — provider clinical team, provider billing, TPA operations, TPA payments, TPA treasury, plan sponsor HR, plan sponsor finance — works from a different data set with different fields, accounting periods, and definitions of what the transaction was

✅ How the fragmentation creates a barrier to negotiation: a plan sponsor says "we spent $10 million with you last year"; the hospital says "we received $5 million" — and both could be correct, once you account for member balances never collected, accounting method differences, and what the plan funded vs. what it accrued

✅ Revelation 2 — A dollar isn't a dollar: the employer pays $1.20–$1.30 to access a dollar of care (admin fees, consulting fees, PEPMs, transactional fees, broker costs, stop-loss); the provider collects 70–80 cents of what they are owed; and 12–15% of any health system or practice budget now goes to RCM staff — the cost of just figuring out how to get paid

✅ Why payment delays are not accidental: payers make 10–20% of profit margin on float — on billions held while providers wait 2 to 9 months to get paid — and providers, unable to run their business on the hope of a dollar, budget for 80 cents and absorb the rest as RCM overhead

✅ Why finance and HR within the same employer will have fundamentally different numbers: HR tracks cash claims outflows against a budget burn-down; finance accrues a flat monthly amount and hopes not to overrun Q4; neither may have line-item visibility into what the TPA is actually doing with the funds

✅ Why the gap is an opportunity: self-insured employers know how to negotiate, buy things, and manage cost of goods sold — the infrastructure to do that directly in healthcare is finally starting to exist

WHY THIS MATTERS

School districts cannot hire teachers because per-family healthcare costs have hit $40,000 a year and rising. Every dollar in friction is a dollar not available for wages, not available for better care, not reducing premiums — Figure out the comp model, as Charlie Munger said, and you know the outcome. The comp model for large payers rewards earnings per share and swagger — not lower costs. The only way forward is to bypass the 27 layers, and self-insured employers are the parties with purchasing leverage to do it.

=== LINKS ===
🔗  Show Notes with all mentioned links:  
https://cc-lnk.com/EP496

🔗  Visit our sponsor Nomi Health:  
https://www.nomihealth.com/

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06:48 What is actionable to know about the life of a claim?

08:14 How data can change as it moves through the claims process.

11:45 Why a dollar isn't a dollar in healthcare.

18:50 Why employers are actually paying more than a dollar to access a dollar of healthcare (the medical loss ratio).

21:54 Why cutting out the "friction" is actually better for employees and members.

22:48  EP482 with Preston Alexander.

22:50 EP472 with Eric Bricker, MD.

23:36  EP490 and EP492 with Sam Flanders, MD, and Shane Cerone.

23:53 Infographic by Andrew Tsang showing 27 streams of income.

26:53 How do we fix these issues?

28:05 LinkedIn comment from Sandra Raup.

28:59 How Nomi Health is experimenting with a no co-payment, no deductible model.

31:29 INBW42 with Stacey on moral hazard.

32:26 EP486 with Stan Schwartz, MD.

32:31  EP485 with Cristin Dickerson, MD.

32:56 The Innovator's Dilemma by Clayton M. Christensen.

34:55 How does Nomi Health work with and help employers?