Hi, everyone. This is Lucas Voss with Becker's
Healthcare. Thanks so much for tuning in to
the Becker's Healthcare podcast series. It's fantastic to
have you. An exciting topic today, very wide
ranging, the challenges of costs in the payer
market, and nobody better to talk about it.
So excited to have him on for today's
discussion. Kevin Adams. He's the CEO of HealthEdge.
Kevin, so great to have you. Thanks for
being here. Pleasure to be here. Looking forward
to the conversation.
Absolutely. I do wanna start off for our
audience with just a little bit of an
introduction.
If you could just talk a little bit
about yourself too and but also about HealthEdge
and and what you do on a regular
basis in health care.
Absolutely.
So Kevin Adams,
I'm relatively new to the role of CEO
of of HealthEdge.
It's been about sixty days since, Bain Capital
acquired,
the prior company that I I founded,
and combined us with HealthEdge.
I've been, in the health insurance space specifically
as exciting as it is for the last,
twenty six or twenty seven years,
came out of Wall Street,
into what I thought was a
area of
of need
Mhmm. And have spent the last
twenty seven years trying to help,
Americans across the country gain better access to
health insurance.
The last ten years,
we we,
ran a company called USD health proof.
That company was focused on outcome based services
and technology
for health insurance company
companies where we were running the back office
and,
deploying
next generation technologies to support modern day products,
networks, benefits
in those health insurance companies
had about,
25
customers where we were running our BPAD solution.
And, I'm sure we'll, we'll talk more about
that later, what that is. And
one of the key partners
in our efforts over the last ten years
was a company called HealthEdge.
And so HealthEdge provided,
much of the
software
that we were leveraging for our solutions.
And,
we became, obviously, a critical partner to HealthEdge
for deploying their software
and,
just so happened to have been their largest
customer.
And so,
in
in early twenty twenty five,
we went to market along with health edge.
I'd like to say that was well planned,
but luck sometimes is is a great benefit
also.
And,
so health edge and health proof went to
market in early twenty twenty five,
and,
we were able to work with a number
of private equity firms. But at the end
of the day, Bain Capital was not not
just
the best
solution
for from a standpoint of having understanding and
direction and desire,
but,
also happened to have been the the best
price for both health edge and health proof.
And so at the end of the day,
they won the the process.
And for both Healthproof and HealthEdge and and
effective,
September 6,
put the two organizations
together, and,
I was either
blessed or cursed to become the CEO of
combined company. So I'm sure it's it's blessed
in this case. Yeah. Yeah. Exactly. It's a
awesome awesome honor,
and and we have some absolutely amazing owners
in Bain Capital.
And, we are truly looking forward to the
future that we can we can bring to
The US health insurance market.
I do wanna
level set us a little bit in terms
of where we're at today from a market
perspective, but also in general from your perspective
at HealthEdge.
What are some of those biggest market operational
and and tech certainly technological
challenges that
US health plans are facing today?
Wow. I'd say, a wide range of challenges.
And I would say number one,
you know, nontechnical,
just the reality of health insurance,
is that you are cost wise impacted
on many, many different fronts. I think you
see every day, MLR utilization
is through the roof for for The US
population,
whether that is a,
effect
from COVID or not, meaning,
the results of people not going to the
doctor for a long time are now manifesting
itself in terms of higher rates of disease
or higher rates of utilization.
And,
that is having an outsized impact on on
health insurance companies bottom lines.
Not a lot you can do whether it
be technology
or otherwise.
That's just a reality.
The second thing in the l m l
r portion of the the cost
is
that providers,
oddly,
because their systems
are
somewhat easier to
to manipulate and use,
are able to leverage AI
slightly better. Actually, I would say measurably better
than the health plans have been able to
leverage AI
and are
increasing the accuracy of coding
through the leverage of AI. And that increase
in coding is causing a higher
medical cost also for health plans. It's about
a you know, I've heard numbers vary from
20 to 30% of the increase in MLR
is coming from coding accuracy.
A lot of people
tend to say
upcoding,
but I I think that's a it usually
held as a negative statement, meaning upcoding is
trying to,
maliciously
add code that shouldn't be there. This is
just accurate coding.
And so where the providers were losing revenue
because they were unable to accurately code their
claims,
now they're able to increase the accuracy through
AI, and that's driving 20 to 30% increase
in MLR costs. So you put those two
things together, MLR
is a huge impact to to health plans.
And the reason I say that is because
the MLR portion is a very, very difficult
thing to impact in the short term.
And so when you're looking at the health
plan, looking for ways to lower your annual
or year to year cost, the administrative
side of your system is about the only
thing where you have immediate or very near
term opportunity to reduce cost.
And the administrative side is where everything around
claims processing, provider data management, enrollment, claims intake,
all those things, provider payments,
all those things are where you need to
find a way to maximize
your efficiency
and effectiveness
because that's an immediate opportunity to reduce cost.
And so that's kind of laying out the
groundwork
of of where the health plans are today
and why,
this business happens to be something of interest.
And then I'll kinda step back as to
why the administrative
side of health plans are inefficient and ineffective
and ripe for for opportunity to help them
reduce costs.
And so, you know, if you look back
over the last, you know, I'll tell you
tell you, out of my career, the last
thirty years,
you know, it was really about thirty years
ago when the technology
used to automate
manual claims processing
began to come to the forefront.
And I'm not saying it didn't exist before,
but it was really starting to become,
you know, computerized.
I'll use that term,
computerized
in around 2000.
And a lot of those systems that were
implemented were predominantly
mainframe based systems,
large mainframes,
or in in the case of the regional
plans, they might have been on mid tier,
you know, a s four hundreds and that
kind of stuff. Still mainframe centric, COBOL based,
and monolithic in nature. And what I mean
by monolithic in nature is that everything around
the back office of process health insurance
was on a single piece of
of software. The Yeah. The in quote claim
engine was So think about that for a
second. I think that that's a very, very
important piece to think about. Right? One single
piece of software. And also the time frame
that you've mentioned, this has been on go
twenty five years. Correct. Correct.
You know, sometimes I look at this and
say, you know, I've had a great career
and I've learned a lot, but clearly I'm
a failure because it's taken twenty five years
to get to the point where I think
we could actually
actually execute against the the the dream that
we've always
had. But,
anyways, that monolithic piece of software in many
large health plans still exist today
and, is a very costly, very complex
capability
to replace.
And it's basically when you try to replace
the claim engine in a health plan, you're
doing open heart surgery on that health plan.
Mhmm. And not only you're doing open heart
surgery, but it's not like you can stop
the blood flow.
You have to actually keep the blood flowing
while you're replacing this major organ.
And, you know, any any,
challenges, mistakes,
or issues
can result in the death of the health
plan.
Certainly, the end of a career for CEOs
and CIOs and whatnot. So
it's a very critical, very difficult thing to
do and a lot of resistance,
hence why there's still many,
many opportunities out there,
is that it's there's never been a company
that could effectively,
execute against a strategy to replace this and
have a high degree of success in doing
it measured over the last ten years. And
that's what USA Health Proof was that we've
been able to execute
in in that time period 25 different health
plans where we've been able to effectively move
them from legacy to modern technology.
So the the just kind of cycling back
to the problem is that that monolithic technology
could not sustain
the needed improvements in
network flexibility
or reimbursement
changes, value based reimbursement,
benefit you know, incentivized benefits or complicated benefits.
And so people over time
started to
plug in,
what they would call as modern technologies
around this legacy footprint,
and you ended up with the micro segmentation
of the business processes across
multiple different technologies
that were all wired through bubblegum and bailing
wire into this legacy platform.
And it added to the complexity
while giving a little bit of measurable benefit
in terms of capability.
At the end of the day, you ended
up through the segmentation of the business process
by having, you know, a specialist business unit
that's running enrollment, a second business running, you
know, pricing, a third one running,
claims reimbursement.
So all of this the segmentation
caused complexity in the environment,
and
that complexity
led to additional resources needed, which at the
end of the day ran to higher cost
to operate your back office.
And so naturally, the question is is how
do I get rid of this complexity?
And people still
think back to,
well, in the old days, I would buy
a monolithic claim engine and boom, you know,
I've solved all my problems. Well, that doesn't
exist anymore.
When you look at a claim engine today,
a la HealthEdge, HealthRoots payer,
and some you know, the equivalent is the
same across all the competitors is that they
are only
a small portion
of the overall
technology set required to run the back office
of a health plan, and it requires an
ecosystem
of technologies
and services
in order to do that replacement
modernization
of the back office of a health plan,
which ultimately is what drives the substantial cost
savings that health plans need. Yes. And you've
you've mentioned the the the sort of the
solution to this in terms of the the
modernization part. And I I I'd love for
you to you mentioned an acronym in the
introduction too that I wanna get to because
it's very important to understand the this modernization
piece, which is business process as a service.
Right? Yeah. Yeah. And also business process outsourcing.
There's a key difference. There is. And I'm
wondering if if you could get to where
we are today in terms of modernizing.
First of all, explaining what those two are,
how they're different, but also how they're addressing
those challenges in turn. Yeah. Absolutely. So, you
know, I think the you know, 90 plus
percent of health insurance companies
leverage business process outsourcing.
And business process outsourcing, the way I would
term it is mess for less.
So you are taking the existing technology,
the existing processes,
and you're leveraging labor arbitrage
to do that same work at a cheaper
price.
You cannot
inherently reduce
the operational efficiencies
of
what is going on because it's the same
method you had before.
The only thing you can do is reduce
your arbitrage. You know, you can arbitrage your
costs, I e, outsource to offshore because that's,
you know,
the only way you're going to achieve that.
And so set aside,
you know, some of that negative connotism. I
mean, it it is what it is. That's
a reality across America. So I'm I'm not
gonna, argue for or against it.
But you can only get
somewhere between 1015%
savings.
And because it's still ultimately mess for less,
the outcomes
that the vendor,
is going to give you
is never gonna be aligned with the outcomes
that you need, which is long term
continuous reduction in cost.
Because if the vendor
is executing against that long term need, then
they're reducing their revenues.
And no no
no vendor is interested in reducing their revenues.
They're always trying to increase the revenue or
or increase the profit.
And and so,
you know, BPO
to me was never a long term solution.
And so what we came up with was
that you need to improve the underlying
business
technology
and business processes
that run on that technology
because that's the only way you can drive
ultimate real efficiency.
And then you can leverage arbitrage on top
of that to double down on the effectiveness
of of this new technology.
And Replacing the foundation sort of you're building
a house. Right? You're you have to instead
of fixing everything that's inside without fixing the
foundation, you have to fix the foundation first.
That's a that's a great way to look
at it. A great way to look look
at it. And and so when we,
in
2016,
started our business at at Healthproof,
we understood
that, number one,
the challenges
of replacing
a core administrative
back office were immense.
And there had to be a way to
simplify that. Otherwise, nothing we were gonna do
was ever gonna be effective or as effective
as it it should have been. And so
we created a methodology
and a solution
that was an ecosystem of technologies
prewired together
so that when we deployed
the solution, it wasn't let me deploy 15
different pieces of a solution and figure out
how to tie a to b to c
to z
on the fly. It was something prebuilt out
of the box, health plan in a box,
if you will. And, that was the number
one thing that we we created. And
the reason we created it was not because
that helped us implement, because we wanted to
be a systems integrator to implement it. What
we realized that the true
need of a health plan wasn't new technology.
It was the guarantee
of what the actual operating cost of their
back office would be. Mhmm. Meaning, at a
literally a per member per month cost
that the health plan could take to the
bank and know that in order to be
at 10,000 members, a 100,000 members, or a
million members,
my price point for operating
process health insurance, claims, enrollment, provider, all that
kind of stuff,
was going to be at a very fixed
price guaranteed
from the day you sign on the dotted
line. So that when you think about that,
that is an actual business process
outsourcing,
not BPO. It's the actual process that you're
outsourcing.
And therefore, we said that that was a
business process as a service as opposed to
BPO.
Mhmm. And so when when a customer comes
to us and says, I need my operating
cost to be $10 PMPM.
10 all in whatever all in is, and
that can vary from customer to customer. But
and they say all in. That means I'm
going to give you responsibility
for
all of the technology
to execute that business process
and all of the resources needed to triage
any
fallout in that business process. And at the
end of the day, that's gonna cost me
$10 per member per member.
And that is a true outcome of pricing
that the health plan can then budget around
for a end period of time. And our
contracts are between five and ten years. So
some some customers know for the next five
years what their costs are gonna be. And,
obviously, there's tearing. If they grow from from
a 100,000 to 200,000,
the the volume
will lower the overall PMPM. But the the
key part of it is that the CFOs
can can understand
exactly where,
their costs are gonna be, and the COOs
have an SLA, a long list of SLAs
that define the performance and the quality of
what they're going to receive
for that business process.
So
it just to kind of sum it all
up, you know, BPaaS
is a combination
of the software and services needed
to run the actual business process
at a defined outcome price that is guaranteed
through the contract of of the deal.
I'm not an architect, but building the foundation
is arguably the most important thing for building
a house.
I would argue so much that I know.
Oh, Kevin, I I wanna close this out,
with a little bit of a future outlook,
and and you've touched on AI earlier in
our conversation too, and it's certainly something that
we're seeing in the space as well. And
we're now sort of in this process of
transitioning. Right? We have
generative AI gen AI, but now we're switching
to this the the agentic AI piece that's
really evolving, has evolved in 2025, and will
certainly evolve in 2026.
I'm wondering how you're seeing this affect
core administrative functions in health care and also
what it can mean for the future of
payer operations.
Yeah.
So I I will be completely honest with
you is that for the last
10 now let's prior to
I would say between 2016
and twenty twenty two ish,
I was an AI.
I did not believe in it. Yeah. I
didn't believe in it because there was no
proof points.
And I think the whole,
OpenAI
and and generative
activities
have opened up a whole new realm of
capability.
I will still say, as of today,
2025,
there is still limited
value points that have been realized. I I
can go into where we have seen the
value in health plans. It's not so much
agentic as it is ML,
Yeah. But, there's definitely areas of of focus
and and opportunity.
But I what I will say is that
the normal approach
to agentic AI that I see most
either service providers,
meaning SIs or or or people who wanna
implement it,
are approaching it as is essentially a glorified
version of RPA,
robotic process automation.
And you're using
AI to help you with the gathering of
data and interpretation of that data so that
you can execute a defined process to move
forward with.
I I find that to be
analogous to mess for less. You're you're you're
you still have a mess underlying you, and
what you're trying to do is put a
fix on top. You know, from my perspective
is that if you to put RPA on
top of a mess, you're actually managing another
layer of technology on the complicated
technology that you have.
You know, honestly,
prior to the combination of of HealthEdge and
and Healthproof,
our only alternative really would have been to
take that approach because there we didn't own
the underlying software.
As the owners now of the underlying
software that runs the back office of health
plans with the combination of health edge and
health proof,
you you have the ability to build a
Gentec within the core software itself
and to be able to,
understand
that,
as transactions are coming through the system,
our people remember because we are administering the
the health plans also.
Our people are looking at that data and
are able to interpret where
there are inefficiencies, meaning I do the same
thing every single day. I wake up in
the morning, I hit next next, next, next.
There's no real value in the human executing
that function. It just is, you know, the
human can correlate a to b to c
and be able to hit to say whether
it's right or wrong. Yeah. That knowledge now
can be conveyed to our product organization who
can then use other agentic
product organization
who can then use other agent capabilities
to build it directly into the software
such that the the next step in the
evolution will be
the answer is there, and the the agent
is validating that answer
for some period of time, let's say, a
month or two months. And then at the
end of that two months, it becomes an
automated activity within the software itself because
the the the enough proof points have been
done to train the engine to understand that
I no longer need to even present this
as a as an option.
And so,
you know, to me,
the best people to leverage
in the the notion that we're gonna move
towards is human less claims processing.
Right? The idea that it will be the
exception to the rule for there to be
a human in the loop of claims processing,
the only way we'll get there is through
leveraging adjunctive capabilities to automate all the activities
in health insurance.
Health insurance
problems
inherently come from poor data.
And,
you know, health insurance is an incredibly dirty
transaction.
Dirty in that there's lots of errors, lots
of nuances,
and lots of alternatives
to to how how data come, like, the
an enrollment transaction is called an eight thirty
four, and you'll always hear every health plan
say,
if you've seen 1834,
you've seen one eight thirty four. Right? They're
always going to be different and and done
differently. And so you're gonna use AI over
time to be able to normalize
the transactions
into an understandable
transaction that can then be automated
through through this solution.
Yeah. Again,
you come back to understanding people need to
understand what it actually does. Is it actual
AI? Is it automation? What does it do?
Again, coming back to the foundational piece that
we've touched on earlier. Earlier. Kevin, what a
wonderful conversation. Thanks so much for being here
and taking some time for us. This was
great.
It was my pleasure. And, Lucas, I hope
to to talk again. I I have,
as I said, twenty seven years of experience,
and and, and and I'm still passionate about
this business, and I really look forward to
helping make America healthier again. So Yeah. It's
so much to talk about. I I agree.
So many different topics. We certainly want to
thank our podcast sponsor Health Edge for this
conversation. It was fantastic.
And you can tune in to more podcasts
from Becker's Healthcare visiting our podcast page at
beckershospitalreview.com.