Hours after the birth of his second child, Utah entrepreneur Mark Newman received a $ 4,500 bill for the birth. When he took out his credit card in the hospital room to pay it off in full, the finance manager looked shocked. In that case, she told him, the cost would be 30% lower: $ 3,000 instead of $ 4,500.
âOn the one hand, I was like, ‘sweet’,â Newman recalls. “But on the other hand, it was like, ‘How the fuck is this?'”
The experience prompted him to consider how he could directly pay the medical bills of many of his part-time employees at a reduced cost. âIt was not a medical problem. It was a cash flow problem, âhe says.
It also prompted Newman to start a new business, Nomi Health, which is boldly trying to change the way employers pay for health care. Based in Orem, Nomi sells software and employer systems that allow businesses and governments to cut out middlemen (health insurers) by paying hospitals and doctors directly at prices 20-30% lower. Payments are made digitally, directly and in real time. âIt’s Venmo for healthcare,â Newman says.
A healthcare outsider, Newman first spent two years delving deep into the healthcare matrix to understand how the system works. He tapped into his connections from his days as CEO of tech company HireVue and then partnered with former Goldman Sachs executive and fintech expert Boe Hartman and tech veteran Joshua Walker, who has spent years working for a health insurer. Together, the trio set out to create Nomi Health, which would allow employers to cut insurers and simplify healthcare payments. A year later, Newman’s wife gave birth to a third child.
Health insurers aren’t equipped for out-of-pocket payments, Newman says, and employees often can’t afford to pay all of the bills. Employers, however, can afford it. Hospitals and doctors are willing to take less money because they get paid faster instead of chasing tons of paperwork with insurers. It takes time for providers to be paid by insurers, but it is much more difficult for them to be paid by patients: for every dollar billed to patients, hospitals only charge 70 cents.
âThe only way we’ll be able to fix health care is to build a new infrastructure to run it on,â Newman says, âand remove the man in the middle. “
Disruptions related to Covid
Nomi has long planned to expand its healthcare services to employers, such as direct-to-consumer pharmacy, telehealth, and home health. But the pandemic has usurped those plans. In 2020, Newman and his team saw how traditional means of caregiving failed to perform large Covid testing.
âWe haven’t had the time to go through traditional healthcare processes which are too complex and take too long,â Newman says. So the company worked with local and state governments to help.
In April 2020, Nomi mobilized TestUtah and aligned the supply chain and labs to conduct high-throughput testing in the state. The company quickly supported more states across the country and expanded its role in testing operations by equipping them with QR codes, online recording systems, robotics for laboratories, best practices and program management. Last fall, Nomi started setting up their own labs, hiring nurses, couriers and other staff for larger-scale testing. Nomi has hired 2,000 people and performs 3,000 to 5,000 tests per day nationwide, or 4% of tests conducted nationwide.
Newman never expected testing sites to be ongoing today, but demand continues due to testing required by event planners, theaters, colleges, travel programs, airports and cruise lines. To keep pace, the company will hire an additional 1,000 to 2,000 people over the next six months. The state of Utah alone paid Nomi a estimated at $ 24 million during the pandemic and the company now has a nationwide footprint, handling testing for a number of other local and state governments, including Nebraska and Hawaii.
âIt’s been a mad rush,â Newman says. “We are at the intersection of politics, health care and money in one of the most polarized times in our country.”
The pandemic has brought to light the problems of our health system: high costs, incomplete coverage, limited access to care, underinvestment in public health and racial and ethnic inequalities. While hospitals, physician groups and other health care providers have lost money because they have been forced to cancel cost-effective elective procedures, health insurers have posted record profits last year.
All of this has happened against a backdrop of steadily rising health care costs. Large employers are a primary source of private coverage, and these premiums increase steadily each month. Premiums rose 4% in 2020, according to a Kaiser Family Foundation survey, to an average of $ 21,342 per year, with workers contributing about $ 5,558 in out-of-pocket expenses.
Senior executives at nearly 90% of large companies say the cost of providing employee health benefits will become unsustainable over the next five to ten years, according to an April survey from the Buyer Business Group on Health and the Kaiser Family Foundation.
Innovations in the field of health
Nomi’s approach is fairly new, but the direct payment model isn’t entirely new, says David E. Williams, president of the Boston Health Business Group healthcare consulting firm. A company called Averde Health tried something similar a decade ago and went bankrupt, and over the years employers have tried on their own to cut costs, improve quality and increase efficiency. ‘access to health care.
They tried to create high performance networks in which patients only saw the best doctors and hospitals. Other companies have used referral-based pricing, a strategy that pays doctors, labs, clinics, and hospitals a percentage of an established referral. Others have tried to cut costs by building medical clinics on corporate campuses, which may not be as useful after the pandemic with remote working.
Williams believes the government needs to step in to make a real difference in health care. âInsured employers can’t fix health care â unfortunately, they’re at the mercy of it,â he says.
Williams says Nomi can save employers money and appeal to suppliers, but there are downsides to paying directly. Since Nomi has to sign contracts with every local supplier and hospital, this will likely mean patients will have a “tight network.” It’s fine if you are the preferred provider of a network of employers – you will receive all of these patients – but it means patients have less choice of providers for their care. It may work in a small community, but would be less ideal in a large city, Williams says.
And direct payment works when it comes to an ear infection or an x-ray. But what about a terrible car accident or cancer diagnosis? Employers would likely be forced to buy reinsurance to protect them from catastrophic health costs that may not necessarily be paid immediately out of pocket.
There’s also a chance that Nomi’s model doesn’t encourage responsible employee behavior either, Williams says. Because employees do not pay copayments or deductibles, there is a risk that they will abuse the medical system. âThey won’t hesitate to see a doctor,â he says.
Newman believes that Nomi’s network will be wide open, that employers already have stop gap insurance for catastrophes, and that deductibles do not lead to abuse of the system. âIt’s a red herring,â he says. In fact, medical debt jumped to $ 140 billion last year, with an average debt of $ 2,400, according to the American Medical Association. At least two-thirds of bankruptcies are linked to medical debt.
This problem stuck with Newman from the start. What about his initial urge to pay the medical bills of employees he knew in difficulty? This has, in some ways, also come full circle. In September, Nomi Health donated $ 2 million to RIP Medical Debt, which paid off $ 200 million in medical debts accumulated by 176,000 people in Colorado, Florida, Nebraska and Utah. These people earn less than double the poverty line or less than $ 53,000 per year for a family of four. Nomi’s donation was the largest corporate gift received by RIP Medical Debt since the association was founded in 2014.
Newman, who says he always wants to build Nomi differently, called the gift “obvious.”