SPECIAL EPISODE - Securing the Healthcare Payment Maze: Boe Hartman on Transforming An Industry Under Cyber Siege
Mar 08, 2024
Sam Maule, Rachel Morrissey
Discover the intricate labyrinth of medical payments and the heightened need for secure data as we sit with Boe Hartman of Nomi Health, whose expertise in banking and payments sheds light on the seismic effects of the United Healthcare cyber hack.
Boe takes us through the trenches of an industry rattled by outdated systems, revealing how his work at Nomi Health is championing the development of real-time payment rails, poised to overhaul the costly and sluggish process of reimbursing healthcare providers. As we unravel the current state of U.S. healthcare payments, it becomes clear that the shakeup may just be the catalyst for a much-needed revolution in how we settle medical bills.
The shockwaves of the recent Change Healthcare ransomware attack, attributed to state sponsored black hat hackers, ripple throughout our conversation, exposing a stark vulnerability in our national infrastructure. The breach's staggering scope, with six terabytes of sensitive data at stake and daily medical transactions grinding to a halt, paints a dire picture. The ramifications extend beyond the disruption of services, as providers are forced back to archaic paper claims and the financial stability of entire systems hangs in the balance. With the industry holding its breath for a potential Congressional lifeline, join us as we discuss the critical demand for resilience and competition in safeguarding the future of healthcare data and payments.
Discover the intricate labyrinth of medical payments and the heightened need for secure data as we sit with Boe Hartman of Nomi Health, whose expertise in banking and payments sheds light on the seismic effects of the United Healthcare cyber hack.
Boe takes us through the trenches of an industry rattled by outdated systems, revealing how his work at Nomi Health is championing the development of real-time payment rails, poised to overhaul the costly and sluggish process of reimbursing healthcare providers. As we unravel the current state of U.S. healthcare payments, it becomes clear that the shakeup may just be the catalyst for a much-needed revolution in how we settle medical bills.
The shockwaves of the recent Change Healthcare ransomware attack, attributed to state sponsored black hat hackers, ripple throughout our conversation, exposing a stark vulnerability in our national infrastructure. The breach's staggering scope, with six terabytes of sensitive data at stake and daily medical transactions grinding to a halt, paints a dire picture. The ramifications extend beyond the disruption of services, as providers are forced back to archaic paper claims and the financial stability of entire systems hangs in the balance. With the industry holding its breath for a potential Congressional lifeline, join us as we discuss the critical demand for resilience and competition in safeguarding the future of healthcare data and payments.
Welcome to the Money Pot. Hey, Money Pot listeners, this is Rachel Morrissey, the Executive Producer. At Money 20/20, we're prepping to launch a new podcast called Artificially Intelligent with Sam Maule and Maia Bittner. Now, as we've been prepping for this, we had the opportunity to have the most fascinating interview with Boe Hartman from NOMI Health about the United Healthcare hack and what it actually means, and it's incredibly significant to the payment space, so we didn't want to wait until we launched to share it. So we're going to share it with you now, ahead of schedule, and we'll be revisiting it, like I said when we launched the new show. I hope you really enjoy this incredibly interesting and timely interview.
Sam Maule:
Hey everybody, welcome to Artificially Intelligent, brought to you by Money 2020. I'm your host, Sam Maule. Maia is off today and when we finish the show she's going to ping me and tell me what are you doing? I so desperately wanted to be there because on today's episode, we're going to focus on a fast-breaking healthcare payments news story that continues To unfold by the hour, and I brought in a subject matter expert to help us with this. I'm going to introduce in just a second, but to give you just a quick bit of background, we're talking about recording this on- I think it's like March 7th and about two weeks ago hackers conducted a massive ransomware attack on Change Healthcare. That's a division of United Healthcare Group that transmits both health providers claims to patients insurers, and the consequences of this are staggering and actually not being talked about that much. So I mentioned I bring in a subject matter expert. We're literally going to call this episode. Bo knows, and you'll understand why in a minute. Let me introduce my good friend, Boe Hartman. Boe, how are you?
Boe Hartman:
I'm doing well, Sam. It's always great to catch up with you, my friend.
Sam Maule:
So Boe's legendary when it comes to banking and payments, but what he's doing now is even how you go from banking to this, I don't know. So, bo, do you want to explain the company you work for and where your focus area?
Boe Hartman:
Yeah, hey, I'm one of the founders of Nomi Health and, as you know, Sam, I don't know the odds it does.
Boe Hartman:
I was a partner at Goldman Sachs, where I built Marcus by Goldman Sachs and Apple Card 30 years international banking payments and one of my co-founders, mark Newman, who founded a company called HireView, discovered a niche inside of the medical health care system where, if you pay doctors directly, the cost of the service is 30 to 50% less. And he, Mark Newman, and my other co-founder, Josh Walker, who was a 20-year veteran of the industry, approached me in the end of 2019 and said hey, do you think you could build payment rails to allow us to pay doctors in real time, because most doctors don't get paid for nine months to a year, and that way, they will then put a network together which would allow us to submit that cash payment, reducing the overall cash spend of self-insured employers, state and local governments on programs by 30 to 50%. And so being a partner at Goldman Sachs seemed a little bit too easy and I decided to be a pure startup guy of this late in life. I said, yes, let's jump on and make a difference.
Sam Maule:
Yeah, you went from. Yeah, let me do a partnership with Apple, and all of us are smiling because we know how easy that is. And not only that let me build a new bank and a new product inside of Goldman, which is what a 150-year-old institution. Yeah, and so, from the success of what you did there to go into health care payments, I think you are nuts personally.
Boe Hartman:
Yeah, well, let me set the groundwork before we jump into this change health care situation because, as you and I were talking earlier today, the impact to a $4.5 trillion market that's going on and it just doesn't seem to be getting what I would say, the airtime that it deserves. And I want the audience, the payment audience here to think about what this means and how we can actually bring innovation to this world. So NOMI Health let me give a little bit of quick background of what NOMI Health is. So NOMI Health is a medical data claims analysis program and medical payments company. What we have done is we've brought together a medical claims data company who takes self-insured employer claim information or state program information and we do proprietary analytics on it to help what we call the purchasers of health care where their spend is going and how to enhance that spend, make that dollar go further. We also have a pharmacy optimization program which reduces the overall cost of drugs for the different purchasers and their constituents. And then we have the financial rails that we have built. So we've built financial rails to do all these payments in real time.
Boe Hartman:
As I said earlier, these payments usually take months and months and months to actually make it through to providers, which is causing a provider issue, and we're also building a network of these providers who want these direct cash payments to reduce the cost. So we're talking same provider, same service, less cost, and so those are the things that we're putting together and that is what Nomi Health is, and we're changing the face of the healthcare system in the United States. So that's a little bit of our background. So let's set the table, sam, if you're ready, of medical payments in the United States, change healthcare, what's been going on and the impacts of why we're both shocked that it's not getting the coverage that we think it should, you know.
Sam Maule:
what I find fascinating is the similarities between the US banking system and what we're about to talk about so just a level set for everybody, because I saw this fact this morning in the US six out of the 10 top banks use Hogan as their core banking platform. Hogan came out in 1977, everybody. So pre-internet, pre-k car how's that? Let me date it. Forget mobile phones and internet. And AI, pre-k car from Chrysler, google, that somebody. So we always talk about the legacy systems when it comes to banking. Boe, can you kind of set the scene for what this is like in the medical industry.
Boe Hartman:
We're going to cut the rents. Yes, I'll make the correlations. By the way, was the K car the one with Rich Corinthians level? I can never remember.
Sam Maule:
That sounds like Lee Iacocca, but I'm not sure. I just remember it was one ugly car.
Boe Hartman:
Yeah, it was one ugly car. So for those out in the audience who aren't familiar with medical payments in the United States, let me set the stage of the size of the market and then we'll make the correlaries to banking and to where medical payments are in the United States. So in the United States, the healthcare industry is a $4.5 trillion industry, just the United States alone. Just to level set everyone. The United States is the number one military spinner on the planet, the number two and number three. China, Russia make up about $500 billion a year. We spend over a trillion dollars. The healthcare industry is four times that. The healthcare industry is also on its way to be a $5 trillion market by 2025. Now, inside of inside that market, you have one major player that does all the claims adjudication in there, which is ChangeH ealthcare, which was purchased by Optum, which is owned by UnitedH ealth. So that is the basic equivalent of JPMorgan Chase owning MasterCard, Visa and The Clearinghouse.
Sam Maule:
Let's go back and repeat that, just so everybody understands, because within banking we talk a lot about monopoly. I'm just throwing that term out. They basically own all of the rails. When you're saying that, The Clearinghouse, Mastercard and Visa, that's basically all payment flow.
Boe Hartman:
Exactly so. What happens with the payments work in the United States is you go to the doctor, you present your insurance card, your doctor then submits an invoice or a claim through the exchanges which ChangeH ealthcare runs. So that's (like) MasterCard and Visa, since that claim in it gets adjudicated by the different insurance companies, whether that's United Healthcare, Blue Cross, Blue Shield, Signa, Humana. It gets adjudicated, meaning it gets determined what should be paid and what price or reductions. It should be sent and is then sent back to change, which then distributes the money out to the providers. ChangeHealth does about 90% to 95% of all of that in the United States.
Boe Hartman:
Now to give a corollary of the way that it equates to banking and Sam, you and I have talked about this a lot Banking we were forced to mature our technology, our processes, our architecture from about what would you say, mid-aughts in the 20s, all the way up until recent times. Marcus built on modern architectural stack with no incumbency around it, so we were able to bring in the best and the brightest pieces of tech that we could. But then you have other large banks that are struggling with the calcification of old architectures, ganglion sys connections, and it just slows it down. But banks were forced to move forward. This industry has not. They still use fax modems to get claims. Everything is done. You'd be shocked by the way of the amount of CSV files that are batched up in cents with billions of dollars of claims stuck in them today.
Sam Maule:
And just to give you an idea of volumes that we're talking about, because Bo you said 90 to 95% of these running through change I read an article in the Atlantic prepping for this and the Atlantic said that change claims it handles more than 15 billion healthcare claims a year. That was with a, b, everything.
Boe Hartman:
Oh yeah, a, B. And remember you and I were like back in the younger days when I was at Barclay Card processing a billion transactions a year. We thought that was mind blowing. Think about this Aniquated architecture which, by the way, it's just a large organization. The men and women who work there work very hard. But we know, coming from large organizations, it's challenging to modernize these things. But just a fun aside story there are still providers in the United States that submit their claims via fax, modem Back to these cleaning houses.
Boe Hartman:
And so, if you think about this, where banks were forced to modernize Also banks because of regulation, dear chairman letters in the UK, others there are because they are systemic, economic, critical infrastructure you have to have redundant systems in place, right. So, if you think about it, one dear chairman letter in the UK after the Nat West meltdown right, you had to go and make sure. One you had to sign off. As a business leader, I had to sign off at Barclay Card, but I was responsible for national critical infrastructure. That's one. Two, banks had to have redundancy built in, right. How many times they have to do resilient agency tests a year? How many times you have to prove to regulators that you can recover. Those happen as well In this industry, right, it's one company running that entire network of those 15 billion transactions. So do you think we've set the table well enough for folks kind of get an understanding of what we're talking about? For get into the meat of the discussion.
Sam Maule:
I think one thing to add to this, just so people understand the impact of this. So Bo knows that my wife, years ago, went through breast cancer and I have relatives that have diabetes. So think about this when they're going right now to their pharmacist, for example, and trying to pay the co-pay is not going through right now when you think about that. So they're having to pay the out-of-pocket expense. This medication can run $1,000, $2,000, $3,000 for some of these. You have to have them to live. I mean we're talking about you know, you're talking about individuals' lives right now and I mean the impact is having and that's for the pharmacy side of this. Now think about surgery. I mean, honestly, the impact of this is staggering. And, bo, to your point about how this isn't front headline news on every major media outlet, it's mind boggling.
Boe Hartman:
Yep. So let me go a little bit further, talking about the events, of what we're seeing today, the impacts, and then we can even give some examples, and then the things that have happened just within the last 24 hours, which I think are quite telling, right? So, as we discussed earlier on, this is just not getting the airtime. I mean, when you're doing research this morning, you saw a lot of what I would say second level news agencies talking about this very much, and I don't know if you want to say anything about that. Before I jump into the rest, I'll be polite. Okay, got it, got to be polite, okay.
Boe Hartman:
So, as you said, a week and a half ago, change Healthcare has experienced this ransomware attack All indications that we're getting. It was a state-sponsored hacker group out of Russia, black Cat. It was a ransomware attack, from what we can tell, and Black Cat has claimed not only have they taken over the infrastructure, they've also extra filled six terabytes of data. In their claim they said they have all the information on providers, they have information about patients, they have information about hospital networks and the DoD, because the DoD uses United Healthcare as its provider of pharmacy and medical services. So we're talking about this is on the level of the Experian breach. It has information about family groups so they'll know your family, because of your claims, will be associated to your family and it goes deep.
Sam Maule:
I was reading on NBC News about this. They're not sure if this ransom has been paid, but through research they have found that there is a Bitcoin wallet that received a payment of more than $22 million on Friday. Yes, obviously, you're just going to imagine how many people are focused on this right now and trying to track through this, but that's a whole nother show when we talk about Cyber Ward.
Boe Hartman:
That's a whole nother show. Yeah, that's a whole nother show, by the way, that wallet, so Black Cat actually went online. There's a bit of a drama in the hacker community because Black Cat actually said someone to expand it with their wallet on the infrastructure they rented to do the attack.
Rachel Morrissey:
So that's, it again.
Boe Hartman:
All right, yeah, so it's really insane. So here it is. I'm going to put the transaction for our fintech friends in a way that we can appreciate, right now in the United States, $10 to $15 billion of medical spend on a daily basis is not moving If you annualize it, that's $3.5 trillion that are not moving. Of that $4.5 trillion we spoke about, because it cannot be moved, the other thing is doctors, hospital networks, pharmacies, have resorted to writing in paper claims and faxing them in. So think about what has happened.
Boe Hartman:
You already had an overtaxed workforce in the hospital and the provider network. You are now having them go and actually do paper forms or do extracts from their electronic health record system and trying to figure out a way to get that into United Health Care and Change so they can process payments which, by the way, they don't have access to their systems right now, so they can't process.
Sam Maule:
Yeah, the Washington Post estimates that as many as 25% of physician practices are now exhausting their cash reserves and that many hospitals and health care providers have been able to pay a bill for services since February 21st, and again, this is March 7th when we're recording this.
Boe Hartman:
Right, and did you see the article about the New Mexico Oncology Center that says they have about two to three weeks of funds left or they are going to have to shut the door? Yup, unbelievable, so unbelievable.
Boe Hartman:
And so that's the impact by the way and again, I'm not trying to beat up on United Health Care. My heart goes out to everybody involved in this, but United Health Care is a $440 billion market cap company and in the last 24 hours, aha has lobbied Congress to start preparing a PPI or PPE-like program for these providers in these hospitals. Cms and HSS, who oversee the health care networks in the United States, have already sent a letter to Congress saying that we would like for and not their words, but a bailout to start to be prepared, because this is critical national infrastructure that has been knocked off. This is the same as if our electrical grid had been taken out.
Sam Maule:
Right. So another great example of this, again from the Washington Post. So a woman by the name of Kristen Meyer who owns a primary care practice outside Philly that serves 20,000 patients, she's watched payments from insurance companies literally be shut off. Typically her practice gets between 20,000 and $70,000 a day in deposits, but by Tuesday it received $1,600.
Boe Hartman:
Right, and that is the hospitals you go to, that is your medical providers that you go to, like you said, the pharmacies that you go to.
Boe Hartman:
And this is why, before we dig into the underlying things that are taking place here, this is why I can't believe we are not talking about this. I mean, this is insane and Congress is now having to, in the last 24 hours, start having to kick off dialogue of a bailout of a single company because it's critical infrastructure, which, by the way, united Health Care spent, or United Through Optum spent last year, spent $12 billion buying changed health care $12 billion. Now the DOJ had brought a case against the purchase because they wanted to review a monopolistic idea and a federal judge stepped in and Blocked it to let the deal go through, which I can't understand why, in this deep, deep market that's nationally critical to us, that we don't let competition or innovation in this. This is where the pay that folks listening to this podcast could really start thinking about. How do we actually, you know, bring in competition? Because you and I know we had resiliency, where you had multiple Credit bureaus inside your bank and you had to go across each one of them, right?
Sam Maule:
Let me stress this podcast is sponsored by money 2020. Yeah, y'all caught that title right. It is 2024 and we're still talking about faxes, faxes, everyone. I don't even know what to say, I. But honestly I mean, how do you fix something like this? And so again, if I look at you, we said this is we called this bow knows so jokingly. How do you approach this?
Boe Hartman:
So, exactly so, back in 2019, when Mark and Josh approached me, right, and they said hey, here's this opportunity for us to reduce medical costs that we're already going up by 5% a year in the United States, but also help providers stay in business.
Boe Hartman:
Because in the United States, we're losing providers at an alarming rate because they can't stay in business because by the time they submit a claim and by the time it actually gets paid, it's already been deducted, reduced and the delay of payments, so they're barely hanging on to keep things running.
Boe Hartman:
And so the way that I approach it is the way that we approach Marcus and Apple, carter Goldman. Whereas, why don't we use modern tech stacks on the financial rails and then pay these, these Hospital networks in these providers, in real time across the clearing houses that exist today, same day H? We also we also run across some of the credit rails when we have to to help people out. But you know, we actually built an entire financial service network rails using the clearing houses, using some of the credit card rails, so that we could pay these providers in real time at a reduced cost, so that they can absolutely get the money to deserve. We also built an innovation around pricing and the way that we do pricing in real time. We adjudicate the claims in real time, just like we did in credit cards right.
Boe Hartman:
So you can adjudicate multiple, multiple transactions around the world in seconds, and it takes this industry weeks and months To adjudicate something that's fairly straightforward. And so that's how. That's how our first step into how do we actually modernize this infrastructure.
Sam Maule:
It's going to be fascinating to watch the fallout Of folks testifying before congress, because you can see this, it's eventually the news dam is going to break. There's just no way, because this is impacting way too many americans lives, you know, I mean, it just is so. There's no way that there's not going to be congressional hearings on this and well, discussions on this, we, we, we have heard rumors.
Boe Hartman:
Well, of course, we've had a lot, of, a lot of um Policy makers get a hold of us in the last 24 hours because they know as well from our time and covered response, and and covered response and we're trying to push this concept that we should turn medical payments in the united states into a real time function, like we do everything else. Um, we've heard through channels that uh congress is is asking the ceo, united health care, to actually come to uh capital hill to testify Into this uh infrastructure that has actually gone down. But if you imagine it, imagine a world right, which is the one, the world that we're trying to build a know me, I imagine this sam. What if we were held to the same standards that if we were to um and we're in banking, where we had multiple providers and multiple rails, this would not have been as catastrophic as what it currently is.
Sam Maule:
Yeah, 100 and and we have so many other verticals that you can look at. I mean, bow, you and I were talking before we even started um, recording the, just the similarities between you. Know the banking sector in the us because, jokingly, when fintech's first kicked off Back, when bow had hair and I wasn't so great, we used to jokingly say every company is a tech company and now we say every company is a payments company and the verticals were just seeing these horizontal trends that go all across them and the lessons that are learned from just this one hack. Let this sink in everybody. This is one hack against one company, the impact it can have on Americans lives and people's lives, and we're and we're talking lives here. We're not talking in inconvenience. This is individuals health and financial health.
Boe Hartman:
So think about this. We were thinking about this this morning. When kovat hit, doctors lost 90 percent of their patients because no one could come into the doctor. All right, right, um, and so there was a trillion dollar bailout around that because they lost 100 of their revenue because they couldn't see patients. This is the converse. It's a year, it's four years ago today, that kovat kicked off in the united states. It's converse here. They have 95 patient caseload and they're getting none of their revenue. So they still have to see the patients to take care of them, but they are unable to pay their staff. They're under under paid their rent, they're unable to pay their bills because they're unable to submit claims to get paid back.
Sam Maule:
So, so well, this is what we need to do, and and I think this is something in a few weeks, we should come back and revisit and see where it stands. This is like I'm not kidding everybody. This is an on-polling story, that is just. It's on par. In my opinion of it, it feels like September 2008 in some respects, except not yeah, it does, but except of having, you know, 80 Bear Stearns sitting out there. Here's one, and it's the only one. Amazing, okay, folks, look, we could keep talking for another hour. This subject is unbelievable, but we've got a wrap.
Sam Maule:
So that's it for this week's Artificial Intelligence Podcast. Look, we love hearing from you. If we don't hear from you on this episode, I give up. Please go out. Give us a review. Five stars, of course, wherever you listen to your podcast, it helps us grow our audience, and please reach out to us, because we love the feedback and you know to hear directly from you. You can find me, find me out on Twitter. You can find me on LinkedIn. Reach out to me there, bo. Where's the best place for these listeners to contact you and also to learn more about NOMI?
Boe Hartman:
Yeah, so I'd go to. Nomihelpcom is always one place to reach out For me. You can always reach out on LinkedIn or on Twitter. At atboartman, that's B-O-E-H-A-R-T-M-A-N.
Sam Maule:
All right, everybody. Thanks for listening to Artificial Intelligence and we'll see you next week.