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An Interview with Bill Trombetta, PhD, Professor Emeritus, St. Joseph’s University

Pharma Commerce: What are the keys to successfully navigating what you describe as “the coming perfect storm” in healthcare?

Trombetta: The coming perfect storm is broken into three parts. First, there’s the transition of healthcare delivery from volume based care to value based care. Volume based care is based on the healthcare provider, whether it’s the doctor of the hospital. The more money I make, the more patients I see, etc. The more expensive stuff I can do for you, the more money I make. Value based care means my goal is to keep you out of the hospital, out of the emergency room, and keep you healthy up front. This way, if I only get paid when you’re sick, that’s fine. But now, I can get paid to keep you healthy. So, I get access to the full healthcare dollar. That’s easier said than done, we want to shift to value based care. With that in mind, remember that ever since the time of Hippocrates, for 5000 years, it’s been a volume based world. The regulations took effect and said “wait, we want to curve the attempt by drug firms to make money on expensive drugs and devices by doing things for you,” The regulations have focused on issues that have been called fraud and abuse, and anti-kickback. Let’s take a homeless person who has diabetes too, and you’re saying “Gee, I’m going to give this guy some insulin, and the patient says he’s homeless and lives under a bridge.” What good is the insulin going to do? This guy is going to be in the ER about 15 to 20 times a year at about $1000 a pop. Then, he’s going to be in a hospital bed maybe five times a year. You’re talking about a $30,000 cost a year to keep this guy relatively healthy. If you did some things up front like give him a home, provide healthy food, that’ll cost $10,000. You just saved $30,000.

The other issue is that I want to do value based care, and that’s premised on something called the triple aim. I want to lower costs, improve patient outcomes, and increase access to healthcare. I want to try and frame whatever I do in terms of that triple aim. For example, Geisinger Pharmacy in Danville, PA has something called Food Farmacy, and what they do is give healthy meals to diabetics. Well, that costs money. The healthy food gets you to eat better and be healthier and you save money in the long run.

There are things called advisory opinions. There are about 450 of them, which is a lot to read. But, there are about two dozen of them that focus on the kind of things that we’re talking about. You’ll go through those, and you’ll see the officer of inspector general and the justice department come back and say “We will not challenge you based on what you said you’re going to do, and here are the reasons why.” Then they’ll lay it out.

Pharma Commerce: There has been this transformation of healthcare delivery from volume-based care to value-based care. As a result, healthcare providers (HCPs) will encounter regulatory constraints that many say are critical to volume-based healthcare but stand in the way of value- based care. How will HCPs handle this?

Trombetta: First of all, doctors didn’t go to business school. At St. Joe’s, I had the privilege to teach at Philadelphia College of Osteopathic Medicine for about 25 years. I see doctors in my sleep. I’ve gotten to know them very well. You can see now that they’re thinking “Oh my god, this isn’t what I went to med school for.” The doctors are now undergoing this transition. At the end of the day, the crunch issue is going to be risk. The more risk you can take on, the more you’re going to minimize the fact that you’re going to get challenged by the regulators. Here you’re saying I’m not as interested in making money as much as I am keeping you healthy, keeping you out of the hospital. One thing would be to say “when I treat you, I get a fixed, capitation fee.” That’s scary because doctors are used to getting paid on an ICD10 code, which means no matter what I do, I get paid based on that code. For example, I have a situation now where I have a contract from doctors that are possibly going to enter into a healthcare provider group for diabetic patients. The plan is going to give the doctors $14,000 per patient. There are 1,000 patients in target population. Even with that $14,000 per patient, are you going to make money? One of the crunch things up front is an analysis of profitability. Putting all those things together, this is what’s going to make it tough for the doctors. It’s going to come, because the feds have said that by 2030, they want the vast majority of all the things healthcare providers do to be in a value based healthcare setting.

Pharma Commerce: You recently worked with our sister publication, Pharm Exec, to publish the 22nd Annual Industry Audit, which offers a look at the performance of the top 15 companies across seven business-key metrics, including the latest standouts in market capitalization and creating shareholder value. Could you describe the process involved with gathering and presenting these metrics?

Trombetta: I got the idea back in 2002. I proposed it to the editor and he said yes. That just blew the roof off the joint. So, he said “hey, do you want to do this every year?” I said yes. I take a look at publicly traded drug companies, specifically the top ones and the ones that are on the stock exchange. The first process is take a look and narrow the drug companies by that. So, I look at 15, and the 15 is because of mergers. At one time, I think we did 25 but now there’s only 15. I use a lot of sources. The biggest and best is called Fact Set. They give you so many financial aspects that you could drown. I use seven metrics. The three crunch metrics are enterprise value, enterprise value sales, and return on investment capital.

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