The Value-Based Healthcare Podcast: John Gorman

Episode 13 of The Value-Based Healthcare Podcast series brings us guest John Gorman. Mr. Gorman talks with host Jay Ackerman about his start in healthcare at the US Health Care Financing Administration (now CMS) and his time at the company he founded, Gorman Health Group. Mr. Gorman also discusses his exciting new company he founded called Nightingale Partners which focuses on a hot trending topic in the healthcare landscape; - social determinants of health.

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Podcast transcription: 

Jay Ackerman:
Hello. I'm Jay Ackerman, CEO of Reveleer, a software company committed to providing health plans with innovative technologies to maximize their return from quality, risk adjustment and compliance initiatives.

We're back again with yet another installment of The Value-Based Healthcare Podcast where we engage with thought leaders and visionaries working across the healthcare ecosystem.

Through our podcast, we aim to widen the visibility and voice that people working to change how healthcare is provided and the impact it has on all those who participate in the care delivery chain. Let's get started.

I'm thrilled today to be joined by John Gorman. John is the founder and former chairman of Gorman Health Group. For 22 years, he led the development of the industry's leading consulting practice in several entrepreneurial ventures and government health programs.

His work focuses on Medicare Advantage, Medicaid and Accountable Care Act strategy, governance and social determinants of health. John is a speaker at over two dozen industry conferences each year and he's regularly quoted in the trade press and national media.

He serves on the editorial advisory boards of several industry publications. If you follow what is happening in government sponsored healthcare, you will of course have seen or heard from John. John it's great to have you today.

John Gorman:
Thanks for having me Jay. It's a pleasure to be here.

Jay Ackerman:
Yeah well let's have some fun. Why don't we dive in with some questions just regarding your healthcare journey? So, first, can you talk about how you found your way into this incredible industry of healthcare?

John Gorman:
Incredible is a good word. I was born into it actually, Jay. I'm the son of two doctors who met at Wayne State Med School in Detroit, and so I learned a lot about healthcare from them. I'm actually the only non-physician in my entire family. My little brother, my little sister, my stepmother, my aunt, my uncle are all doctors.
And when I got into it for real was when I came to DC to work for my hometown Congressman, John Conyers from Detroit. And this was in 1990 and Chairman Conyers came to me one day and said, "We're gearing up an effort around single payer healthcare and I need you to staff it."

And I was like, "Mr. Chairman, I don't know a thing about healthcare." And he laughed and he said, "Son, you've forgotten more about healthcare from 20 years of kitchen table conversation in your family than most of us will ever remember."

And he said, "So forget about it. You're on healthcare, you're doing it." And so that put me in helping to run the single payer coalition. In the early 90s, he was at the time, the Dean of the Congressional Black Caucus, so it was mostly rallying members of the black caucus around single-payer, which Conyers was driving the time with Congressman Jim McDermott from Washington.

When I finished helping run president Clinton's campaign in Michigan in ‘92, when he won I got appointed to, what was then the healthcare financing administration, which now of course is CMS.

And I helped run what was the inaugural office of managed care. So, we were a direct report to the administrator and we managed all of the Medicare and Medicaid HMO programs. And this was at the point of their greatest growth in the early 90s. And after doing that for three years and getting known as the guy who got shit done, I started Gorman Health Group and here we are.

Jay Ackerman:
Well hey that's a great story of your introduction to healthcare and I'm sure being the only non doc in your family probably creates some interesting conversation for you around the table over Thanksgiving and hopefully they even give you a seat at the table.

John Gorman:
Man when I was at HCFA it made holidays just awful because all I was hearing about was just constant bitching about ENM codes and everything else. And I was like, guys, I'm managed care, I don't deal with fee-for-service. I can tell you who to talk to but I can't help you.

Jay Ackerman:
So let's keep it going and-

John Gorman:
Sure.

Jay Ackerman:
I know you're up to something interesting and so what's the next chapter for John Gorman?

John Gorman:
Well after a lovely year of retirement, after I left Gorman and had sold the company, the new venture is called Nightingale Partners and it is what we call a qualified opportunity zone fund and a qualified opportunity zone business.

So opportunity zones are one of the provisions of Trump's big tax giveaway bill Jay, that basically said if you invest money in one of these 9000 opportunity zones that have been designated across the U.S; and opportunity zones are economically disadvantaged and medically underserved communities.

And it says if you invest money in these neighborhoods and you leave it in for at least 10 years, that money is going to be completely exempt from capital gains. And that unleashed a gusher of about 6.2 trillion. That's trillion with a ‘T’ dollars in available capital.

Now most OZ businesses and funds have been using their money for real estate. We're putting a totally different spin on it in that we're going to be making big investments in social determinants of health interventions with Medicare and Medicaid plans and with large capitated health systems.

So we'll be investing in things like housing for the homeless and for housing insecure people, food security benefits and meal delivery. We'll be looking at transportation to doctor's appointments and to urgent care. We're working on some social isolation and loneliness interventions, and we're looking at a number of projects involving community health workers for complex and chronically ill patients as well.

It's exciting and that it's going to make us both bankers and investors, but also really help to unleash our entrepreneurial spirit because frankly, in a lot of the markets where our clients want to do this stuff, a lot of these interventions don't even exist yet, we're going to have to grow. It's going to be an exciting time for us in this next setup.

Jay Ackerman:
Hey, so just to drill down on that one a little bit, so you mentioned exciting times in being bankers, investors. You didn't mention operators. Do you expect to be an operator as part of that as well?

John Gorman:
Yeah. Absolutely. For instance, one of the projects we're doing is figuring out how to house 20,000 homeless people in Los Angeles. 15,000 of those folks are moms and kids who are homeless because of... frankly, of utility debt. And because of an eviction that they got as a result of that debt. It's not because they have serious behavioral health problems or substance abuse, it's just financial.

So what we've done is we've struck an arrangement with a number of corporate housing outfits like Extended Stay America, and they made over a thousand suites available to us in Los Angeles County. And now one of the things we're going to have to do with our affiliate that we're setting up in Los Angeles for this project, is to stand up basically a management services organization that can manage, rent and utility subsidies for 15,000 moms and kids.

And that's never been done before and we're going to have to just figure out from a green field how to go about doing that for a great many people in Los Angeles County. It's going to be really interesting to see how we go about doing that.

Jay Ackerman:
Well as someone who's now... considers LA home having been here for 20 plus years. It's great to hear you making that kind of focus on the housing crisis, the homeless crisis in our town.

John Gorman:
Absolutely. It's desperately needed in LA.

Jay Ackerman:
It sure is. So, I'm sure that with your background, your track record, that there's quite a team that's getting assembled around you. Any thoughts you want to share about how that team is coming together?

John Gorman:
Yeah. Absolutely. I mean you put your finger on it and that we've got to have a lot of experience in operations of a lot of these subsidiaries and these new codes that we're going to have to set up to meet this need. So, my managing partner in Nightingale is my friend Andrey Ostrovsky, he was the Chief Medical Officer for Medicaid under President Obama.

And Andrey is a really experienced investor and governor of companies himself. And I'm really excited about Dre running day to day operations for us. Rita Mills is going to be our new Chief of Corporate Development and Rita was the Head of Medicaid or State Community for United Healthcare for the entire company.

So nobody knows Medicaid Managed Care operations like Rita does. And a number of other operating execs and folks who have experiences serving as strategic investors and to start up. So that we're bringing a wealth of experience here. It's going to be particularly relevant to operating a number of companies that until we show up, it never really existed.

Jay Ackerman:
Well congrats on assembling an all-star cast. Let's talk about the industry and some of the change unfolding. What do you see as the industry trends that are most beneficial to healthcare organizations?

John Gorman:
Well that's a very broad question. As a guy who, my entire career has been around coverage and making sure that vulnerable people got insurance. So, I tend to think that the broadest thing that helps the greatest number of stakeholders in the healthcare industry is just getting more people covered.

From that standpoint the best thing that we can do as a country is get President Trump out of office, to be blunt. We've seen a four million person increase in the number of uninsured since this clown took office. We are witnessing daily acts of sabotage of the Affordable Care Act, him and his minions, like Seema Verma over at CMS.

Just from the standpoint of improving coverage, the best thing we can do is ending the Trump presidency and then also getting new leadership in all these red states that refused the Obamacare-Medicaid expansion. Literally nothing we can do more for the health of America than to get these recalcitrant red states to take the Medicaid expansion in Obamacare. That would cover another 28 to 30 million people right out of the bat or right out of the gate.

Jay Ackerman:
Yeah. I mean, I can see that a clearly taken a step back and you look at the ACA numbers, right, and other backing up, clearly going in the wrong direction. What do you see as the barriers and challenges that affect patient improvement?

John Gorman:
You mean patient improvement from the standpoint of improving their experience or?

Jay Ackerman:
Improving their care and their overall wellbeing?

John Gorman:
Okay. So, thank you for that clarification. So one would be some bold action around surprise billing because that's an epidemic in this country and it's getting bogged down here in Washington Jay by all of the extremely powerful special interests at work here, not just the hospital lobby, but the growing influence of private equity in the provider community.

I mean you've got a lot of private equity, very powerful private equity firms that are robbing funds, surprise billing laws and regulations because right now they benefit from, for instance, private equity owns many of the biggest air ambulance companies in the country.

And air ambulance is some of the worst offenders when it comes to surprise bills. So actually, getting a surprise billing piece of legislation through the Congress and somehow reducing the influence of private equity in that debate I think would be certainly one. Two would be expanding coverage as we just talked about. Just getting folks insurance because without it you don't have access. And three would be really around social determinants of health. Like we're trying to address in Nightingale because social determinants are attributable to 60 to 80% of the healthcare expenditures in the system. Especially among lower income and elderly patients. So, helping them deal with the effects of poverty because in effect, social determinants of health are just four fancy words for poverty.

Helping to get these folks into housing that's sustainable and isn't bad for their health. Helping them get food when they're hungry. I mean one in five Americans is hungry, helping them get to doctor's appointments where missed appointments are $39 billion expense in this country. It contributes hugely to physician burnout and real difficulty in the provider community as well as for patients who miss appointments just because they can't get to them.

So when you think that this country is only getting poorer and older and that we are facing an epidemic of gray poverty in this country in particular, those are the kinds of things that I think are most meaningful for me.

Jay Ackerman:
Well, I think I've just given you a lay-up then for the next question, which is, today and kind of rolling forward, how do you think we should address these barriers and challenges? Which I think kind of lines right up with probably what your faces is around Nightingale.

John Gorman:
Sure it does. I mean in social determinants we had this revolutionary new policy, but the only thing that I agree with Seema Verma its CMS on, was her changing the rules to allow Medicare Advantage plans to now offer all kinds of anti-poverty benefits to their members.

That ushered in a whole new tool box of stuff that we can do to make healthcare more accessible and more equitable for a greater number of people. The problem Jay, was that they didn't put any new money with it.

And as you can imagine, health plans, one, most insurers are run not by a charismatic CEO, but they're run by their actuaries. The guys who determine risk and benefit designs. And actuaries, aren't real comfortable yet with all the social determinant stuff because their whole world has been around assigning value and costs and projections to clinical services that happen within the four walls of a practice of a hospital.

That's what they're comfortable with. When you're talking social determinants, those are all the services that are happening outside a doctor's office or a hospital and it's all the non-clinical stuff that makes healthcare more accessible and more valuable.

So actuaries are slow to adopt these new types of benefits. And there being no new money for this stuff Jay, and why we decided to go the route we did with Nightingale, is anytime a plan has to use their own money for new benefits means that there's going to be an impact of premium.

Well, most plans in Medicare operate on a zero premium and that's the framework for competition in Medicare Advantage. And Medicaid plans can't charge a premium but didn't have who their members are. So there's been very slow adoption to these new types of benefits over this last couple of years we've been available because there hasn't been new money and plans don't want to impact their competitive position in order off of this stuff.

So we wanted to come riding in with a new source of third party capital that would enable payers and capitative providers to pay for these new kinds of groundbreaking benefits. And then what we'll do is share in the savings that we help them generate as a result of making these benefits. Does that make sense?

Jay Ackerman:
Yeah. It sure does.

John Gorman:
Do you follow me?

Jay Ackerman:
Yeah, I do. And it'll be interesting to see how those effectively pay for performance arrangements unfold with the plans. And we're spending a lot of time inside our company on social determinants of health as well and starting to do some work to see within the medical record information on particular member or patient, what is being captured by the provider that is linking back to issues that would be tied to social determinants of health.

So can you see that they have a transportation issue. Can you see that they are hungry, right? And they are talking to their doctor about not being able to feed themselves or their children.

John Gorman:
Exactly. And that's the kind of stuff that we're really after. What helps us is the astounding and rapidly growing base of evidence that shows that these types of anti-poverty interventions dramatically save healthcare expenditures. I mean, my favorite example Jay, is what Geisinger did a couple of years ago in Pennsylvania where they were spending on average $280,000 per patient per year on their uncontrolled diabetics.

And so they started a medically appropriate meal delivery service for them and within a year they had dropped that cost to $48,000 per patient per year. So, they saved almost $200,000 per member, per year just by feeding people three medically appropriate meals a day at a cost of eight bucks a meal delivered.

So 25 bucks a day to save $200,000 per year. That's the kind of returns we and the Nightingale investors and our partner clients are after.

Jay Ackerman:
I mean that's a... I'm trying to do some quick math here, but that's probably 30 to 35 X return.

John Gorman:
Are we going to see? There is nothing else in healthcare that has the potential to bend the curve on what we're spending in healthcare than dealing with poverty bolt. And so that's where we're really going with this thing and we know we've got brought uptake by our investors, they're as excited about this as anything.

They've been in, but with our plan partners and health provider partners in really being bold, taking some other people's money, especially rich Republicans money and using it to really help a great number of poor people be better healthcare consumers I think is really where it's going to be at.

Jay Ackerman:
Yeah. Sounds like a great formula for success. Let's turn a little bit internal, kind of a zoom into like the healthcare executive kind of, round table. So, what advice might you have for healthcare executives in navigating our industry? Like at this point of time with a lot of change unfolding?

John Gorman:
Oh, well I mean you've got to give different advice to different executives in different sectors. I mean it's hard to homogenize that three and a half trillion-dollar industry. I mean, the advice that I would give to nursing home administrators would be completely different than what I'd give to a physician groups or to hospital systems.

But I think probably the biggest piece of advice would be with the number of the uninsured rising thanks to Trump, with healthcare becoming just increasingly unaffordable, that this is really an inflection point for the industry Jay, where I think Darwin's whole theorem around adaptation becomes really excruciatingly relevant.

You don't have to be the biggest or the smartest in this industry to survive what we're going through right now. You just have to be the most adaptable. And I think that means that even for smaller local and regional players, if you're adaptable and you can make investments, not where the pack is today but where it's going to be, then you're going to stay ahead of this curve of change that's out there and really position yourself for a future where eventually this administration is going to be over.

We're going to make any coverage gains again and we know we're going to need to be dealing with social determinants and the effects of poverty. That's where I really think a lot of energy and heat is going to be going in this industry in the years to come.

For hospitals and anybody that's an institutional provider, you've got to just come to Jesus and recognize that every knife in this industry is out for you right now. Health plans, government payers, everybody is under a full blown assault on inpatient services.

And the notion of sticking people in these human warehouses that we call “skilled nursing facilities” and there's just a sea change moving to home and community based services and you're either under on that bus or you're under it right now.

And so hospitals that are continuing to busy themselves with meeting a daily census and filling beds are just not going to be the hospitals that are going to be here in three or four years. At the rate that we're going, especially if they're in a red state that did not take the Medicaid expansion. I mean the biggest thing that's killing hospitals and nursing homes right now are those in red states that didn't take the Medicaid expansion, to our point earlier.

So institutional providers are in a real jam right now and a lot of them have one foot on the dock of traditional fee-for-service and one foot in the canoe, of value-based care. And if you don't make a choice pretty quickly you're going to get all wet of where you want to be.

So there's advice there for those who are institutional providers for everybody else, if you're a physician group, the imperative is on getting bigger and bringing in a wider array of services that your practice or group offers that are relevant in a value-based payment environment. That means social determinants as well, especially if you're a primary care group or you're in internal medicine and this sort of stuff.

Getting bigger is a crucial notion here. I mean it's like if you're in a... Marcus Welby is just dead Jay, and the administrative costs of keeping up these days are just way too much for a small or solo practitioner to bear. And so, if you're a three doc internal medicine practice, you're going to be roadkill in this environment. But if you're a 30 doc internal medicine practice, then every payer in the market's got to deal with.

Jay Ackerman:
Do you think we're still in the early days of that kind of consolidation?

John Gorman:
Yes. Now what we've seen so far is a lot of hospital acquisition of physician practices, especially in primary care. And I think we are sort of on the verge of a big revolution in antitrust as those authorities at the justice department and at the federal trade commission start looking more into our industry.

I think it's very hard to argue that hospital mergers and hospital acquisitions of primary care practices have had much, if any benefit for consumers or anybody else aside from those hospitals that merged or acquired those practices.

Jay Ackerman:
I know I'm about to kind of serve up a softball on this one-

John Gorman:
I love softballs.

Jay Ackerman:
Who doesn't, right? So CMS, what regulation change would you like to see come from CMS that would be most beneficial to members under Medicare, Medicaid, ACA?

John Gorman:
First I've got to give some compliments where they're due, the draft of the new stark and anti-kickback rules that they are advancing right now that would enable providers in particular to do more stuff around social determinants and value-based care I think is great, in the safe harbors that they've set up for social determinants and things of that I think are of that sort are terrific.

So one, I really would like to see those rules become permanent and enable us to have a more unfettered ability to make these big investments in social determinants. Secondly, and this has been Seema Verma's signature issue as the Medicaid apparatchik that she is, is to get rid of these absolutely idiotic work requirements in Medicaid that have proliferated in over a dozen state Medicaid waivers and are doing nothing by forcing people to lose their Medicaid coverage through what I like to call weaponized paperwork.

I mean, just in Arkansas alone, we saw almost 20,000 people lose their coverage just because the state put these work requirements in place that are just so draconian that people just couldn't get through the paperwork and lost their coverage as a result.

These kind of work requirements are being challenged increasingly in court and losing. And I hope the time is near that this entire policy is going to get struck down and that CMS will back off of it.

But I just think work requirements in Medicaid are just stupid and all the evidence shows that they fail and basically everything that they set out to do because the vast majority of people on Medicaid are working already. And if they're not, it's because they're too sick to work or they're actually home taking care of another Medicaid beneficiary, usually a spouse who is really sick and needs constant care. So those would be a couple of things just off the top of my head.

Jay Ackerman:
Yeah. Those are great. I appreciate you sharing those. This has been amazing dialogue with you, John. Let's start to bring it to a close with our rapid-fire round. So, I've got kind of five questions to finish it up. What keeps you up at night?

John Gorman:
Trump. I mean, to be blunt, when you live here in DC and you see the daily horrors that this guy and his administration are wreaking, not just on our industry but on our country, and you have children, that's what keeps me up at night. This guy keeps me up at night. And it's scary to be here and watching this unfold every day and this guy's behavior with impeachment hanging over him get more erratic and dangerous by the day. So that's what keeps me up.

Jay Ackerman:
All right, so when you're struggling to fall asleep at night, what book might you grab from your nightstand and why are you reading it?

John Gorman:
I'm on my second read through of Kitchen Confidential by Anthony Bordain. He's a wonderful writer. It's a great book. I worked in restaurants for years and I just find it takes me away from my nine worries about the man in the white house.

Jay Ackerman:
Yeah. I'll have to put that one on my reading list.

John Gorman:
It's a great book. Even if you didn't get to watch his TV series, the book is what kicked it all off, it's a great read.

Jay Ackerman:
Getting a little bit personal with this one, if you could redo one decision in your life, what would it be and why?

John Gorman:
Oh man. To be honest, it would be my choice of partners in Gorman Health Group. For 22 years I had one partner with me who ended up being a huge mistake and then for the last 15 years, a second partner who was just a disaster for the firm and for my mental health. I think I trust or I did at that time, trust too easily Jay, and put these guys in important positions in my company that they never should of held and that would be one thing I've always regretted.

Jay Ackerman:
Well I appreciate you sharing something so personal and I'm sure that's had an impact in thinking about the team that you're assembling around Nightingale with Dre and Rita. So, I wish you the best with that leadership team.

John Gorman:
Thanks.

Jay Ackerman:
All right, so I'm kind of lightening up a little bit, what's your favorite app on your mobile device?

John Gorman:
Twitter to be honest, it's my like go-to newsfeed, I follow all my favorite journalists and pundits here in DC, I follow folks like Andy Slavitt and everybody else in the healthcare industry that I really respect and value. And for me it's just a real quick hit of news. And then of course I get to monitor what President Cheeto is doing on his favorite social media and see what the enemy is doing.

Jay Ackerman:
Yeah. Well you being someone I follow, I can tell the Twitter is a pretty active application for you.

John Gorman:
Yeah. Absolutely.

Jay Ackerman:
Keep that up. And then lastly, how do you invest in yourself?

John Gorman:
How do I invest in myself? One of the things that I did when I retired a year ago Jay, that was really just great for my mental health was I went and rescued a pit bull puppy named Loki and he has been just a light of my retirement and my preparations to bring Nightingale to merge.

It's just great having a rescue dog around and I hadn't realized how much I missed that. We always had dogs when I was a kid and he is just a big, adorable goofball. In my house it's just me and my wife, my two daughters and my mother-in-law. And so it's me and four women and it's nice having this big mutt here to help balance out the testosterone a little bit in place of estrogen (laughs).

Jay Ackerman:
(Laughs) Alright. 

John Gorman:
It's being great for my mental health and I recommend a pit bull rescue to anybody.

Jay Ackerman:
Fantastic. Well, that's probably a great place to bring it to a close.

John Gorman:
My pleasure. Thanks for having me, Jay.

Jay Ackerman:
Yeah. John thanks again for your time and your openness. This will bring our Value-Based Healthcare Podcast to a close. Please follow up-

John Gorman:
Thank you very much, Jay.

Jay Ackerman:
Thank you John, and have a super afternoon, a great... best of luck with Nightingale.

John Gorman:
Thanks very much. Appreciate you having me. Take care.

Jay Ackerman:
Thank you for joining us today. Listen to more episodes at reveleer.com or find us through your favorite podcast platform. For episode updates, follow Reveleer on LinkedIn.