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Within the Shore Resource Team is a specialized group called the Centers of Excellence (COE). COEs came from operating careers to provide subject matter expertise and support to portfolio companies. COEs directly support companies on projects, share best practices between companies, and promote connectivity between companies so that 40+ companies create a competitive advantage through collaboration. 

 

In this episode, we discuss Shore’s COE focused on healthcare payor strategies. Christy Vitulli, Head of Payor Strategies for Shore, talks about the importance of implementing a payor strategy from platform inception through the typical 5-year holding period for our portfolio companies. Christy shares insights that can help optimize the business, evaluate acquisition targets, and maximize company valuation upon exit.

Transcript

 

Introduction

Anderson Williams: Welcome to Bigger. Stronger. Faster., the podcast exploring how Shore Capital Partners brings billion dollar resources to the microcap space. Centers of Excellence at Shore Capital are subject matter experts who provide their functional expertise to support our portfolio companies. COEs, as they're known, share best practices, and engage with our portfolio companies to address real business challenges and to create opportunities far beyond what a traditional microcap company would be able to do on its own.

In this episode, we highlight Shore Capital Center of Excellence focused on Payor Strategies. So will you just introduce yourself and say who you are, what you do, where you've done it, how long you've done it, that kind of thing.

Christy Vitulli: I'm Christy Vitulli. I am the Head of Payor Strategies at Shore Capital Partners.

I have been in and around the managed care space for a little over 30 years. I hate to say that out loud, but it's true. Prior to joining Shore, I have worked on both the payor side as well as the provider side. So, I spent probably 15 plus years with two different Blue Cross Blue Shield plans, Vice President of Payor Contracting, Vice President of Network Operations.

I also worked most recently as the Senior Vice President of Payor Strategies and Network Innovation for Amedisys Home Health and Hospice, which is one of the largest national providers of home health and hospice services. I've been on the technology side of the equation as well with a few years at McKesson Health Solutions, where we sourced data network management and provider analytics solutions for payors and providers as well.

So I've been in and around the space for a long time.

Anderson Williams: So, it may seem silly to ask with that kind of background, but how do you define this idea of a Center of Excellence around payor strategies for Shore and for our portfolio companies? What is the Center of Excellence as it relates to this topic?

Christy Vitulli: I think of the Center of Excellence as a domain expert across anything related to managed care or payor strategies.

We're a payor whisperer for our portfolio companies. It may be process orientation. It may be hiring. It might be looking at market-based reimbursement rates and helping to define contracting strategies for the portfolio companies. It might be looking at credentialing and ensuring that we have all of our providers appropriately attributed and licensed for our contracts so that we can recognize revenue.

It might be looking at the relationships in a market around clinically integrated networks, ACOs, or unique payor opportunities, value-based contracting initiatives that help leverage our domain experience to drive better results for our portfolio companies.

Real World Challenge

Anderson Williams: And when you think about our portfolio companies and the acquisitive nature of our approach to the microcap space, what does it look like for you?

What's typical when you see multiple companies rolling in together with or without payor strategies coming into that fold? What's the real world kind of challenge for creating or sustaining a payor strategy for a platform company?

Christy Vitulli: I like to think about what do they need to do first as a launch of a platform? What do they need to do as they're growing their platform? And then what do they need to be doing as they're preparing to exit Shore?

All of it's predicated on running the best payor strategy business that you can, and it starts with basic blocking and tackling. Do you have copies of your contracts? Do you have copies of your fee schedules?

Have you loaded your fee schedules in your practice management system so that you can measure actual versus expected rates? Do you understand competitively how your contracts compare not only in an affiliate practice but across markets.

As you're growing, it's how are you leveraging your value proposition? What unique story do you have to tell to a payor about why they should pay you more? How are you positioning that platform in a payor conversation to maybe defend your rate ask, to propose a different approach to reimbursement strategies where margins are already thin and you're trying to drive a unique approach to, whether it be a capitated agreement or a bundled payment agreement, or another bundling of services that gives the platform the opportunity to drive better margins and grow their revenue.

And then as the platform is preparing for exit, it's leveraging those best practices around contract management, renewal management, understanding of your contract rate trends, understanding your regulatory trends, and being able to demonstrate the value that you've created and the value still to be had in the marketplace.

A Unique Story

Anderson Williams: When you talk about a unique story, to a payor, can you say more about what that is? How do you craft that story as you begin to grow, and what makes for a genuinely unique story?

Christy Vitulli: So when I'm thinking about the value proposition, I'm really trying to answer the question, why should the payor pay me more or treat me differently than my competitor down the street?

So, I want to tell a story about who I am. I want to tell a story about what differentiates me: whether it be access, whether it be quality of services, whether it be outcomes, or what will really get the payor's attention is lower cost of care and my ability to demonstrate that. So one of our platforms happens to be in the urgent care space, and a great story that they have to tell is their footprint across a state, the penetration that they have in rural markets, and their ability to avoid expensive emergency room visits and hospitalization stays.

So they're able to specifically demonstrate by coming to our urgent care, and not going to the emergency room, you are avoiding a material medical spend and we're driving great patient outcomes and we're getting these patients back to their primary care doctor for appropriate care.

Not everybody has that story to tell, but they do have the stories to tell about access or services or credentials of their doctors or their growth, their acceptance of new patients, their growth across seeing patients for a specific payor over time, or maybe the percentage of patients they can serve in a geographic region, because we have the data to help them tell that story.

So being able to position what's different and where that value prop comes from will help engage the payor a lot better than not telling that story at all.

Anderson Williams: It sounds like a lot of negotiation. Is that accurate?

Christy Vitulli: Yeah. We're selling all day long. We're selling who we are. We're selling what we do. We're selling why we're better than the practice or the platform down the street. We should be selling our outcomes, our quality, our access, our services, and our value prop.

Anderson Williams: I mean, to me, as someone who doesn't know this space at all, that seems incredibly laborious and the kind of resource that you would need to be typically a massive company to even be able to manage or invest in. Is that fair?

Christy Vitulli: It is resource and intensive in that it's time consuming. But it also requires some skill and knowledge of how contracts are structured.

What are some of the key contract provisions you should avoid? What are some of the key contract provisions that are negotiable? And, even if you're small and you don't think they'll say yes, you should ask for because someone will say yes on some of those provisions that you can negotiate more to your advantage.

Yes, early in the launch of a platform, it's an expensive position to fill. It's something that Shore is invested in to be able to bring access to those resources as the platform is planting and growing. Then, to bring the knowledge and expertise to help them build a job spec and requirement to go higher when they reach the right scale to bring that position in-house.

So that's one of the resources that we can offer, is how to write that job spec, how to fill that position, how to interview for the right outcomes, and we leverage a lot of tools to make sure they get the right person in the seat when they're ready.

Material Impact

Anderson Williams: You started with making sure you have copies of your contracts all the way through creating your narrative and negotiating your pricing.

Give us a sense of, and maybe an example, even without naming a company, what kind of impact material are we talking about for a company to go from, what you would say is standard expectation of not being in order, to having things in order and ready to scale and grow?

Christy Vitulli: It's a hard question to answer, but let me try with a little bit of perspective.

All of our platform companies that have revenue coming in from managed care organizations see anywhere from 40% to 80% of that revenue being negotiable. So, when you think about why I care so much about payor strategies, it's because there could be material opportunity to get rate lift over time. So, one of the variables that I want our companies to understand is how much of that revenue is coming in from lines of business that are traditionally receptive to rate negotiations.

So how much of it is traditional Medicare, which is defined by the federal government. How much of it is commercial, which is highly negotiable? How much of it is Medicare advantage, which is also negotiable, but not all of our portfolio companies realize this. How much of it is managed Medicaid, which can be negotiable, a little bit harder. And how much of it's state Medicaid? That's very difficult to negotiate because it's typically driven off of a fee schedule.

We have portfolio companies within the last year that have picked up anywhere from $500,000 to one specifically, that's picked up over $5 million in the course of a year's worth of concentrated and dedicated negotiating efforts.

So there's material opportunity. It will be specific to the size of the platform, the age of the contracts, the distribution of services across each of those respective lines of business, and the focused, and one of our CEOs likes to say relentless persistence, that they apply to the effort.

Anderson Williams: And, do most of our portfolio companies, and maybe this varies by phase, so you can define by phase. Do they have someone, or at what stage do they have someone, on their team that is payor focused?

Christy Vitulli: Early in the launch of a platform, it's usually someone like a practice administrator or maybe a member of the revenue cycle management team that has been appointed responsible for that contract that came in the mail, signing it, and getting it back out the door to the payor.

But, there's typically not an individual inside our small platforms that have real negotiating strategies or payor strategies that have applied to that book of business. Probably the end of year one, going into year two of our hold period, we start to see the C-suite pay attention to the revenue that's coming in from these plans and start asking for rate lifts and different reviews of contracts.

And probably about year two-ish, they start looking to hire and bringing in someone either from the organization that's demonstrated competencies around contract negotiation or specifically going to the market to hire someone who has done managed care contracting as a career path. And, they've got experience and demonstrated success in it, which is what I recommend.

Anderson Williams: And, that's a process you can help facilitate and advise as well.

Christy Vitulli: Absolutely. We've helped, within the Center of Excellence, build job requirements. We've customized job descriptions around a specific company's need. We've crafted interview questions to help drive towards demonstrated success and outcomes in their career. We've used Predictive Index (PI) to help assess their fit in the culture as well as their potential for success and the role.

The COE Cohorts

Anderson Williams: Can you just describe what the payor strategy cohort is and how that works and what the participants are doing or getting out of that process?

Christy Vitulli: Yeah, one of my favorite aspects of the Center of Excellence and what we've built within Shore is bringing together almost an advisory panel of experts. So, within each portfolio company, someone has been designated as responsible or accountable for payor contracting.

And either by volunteerism or appointment, they've been designated to the payor cohort. So, three to four times a year, and at least once in person we bring this advisory panel together. It's a group of like-minded individuals who are solving the same problems with the same payors across different states. And, we talk about what we're facing and we talk about solutions that are available in the marketplace.

And we problem solve and issue process together as a cohort to help drive better solutions and faster learning across the organizations. Isn't it great that we have immediately access to 10/20 individuals that are doing the same thing that we're doing across the country that we can reach out to and ask for help.

I think the cohort is one of the most exciting aspects of the Centers of Excellence.

Anderson Williams: Yeah, and I can't help but think with the complexity that I can't even begin to get my head around across states and payors and so forth, that shared learning and experience in those different markets and with those different types of services and those different payors and so forth.

That's kind of the only way you can keep and facilitate the kind of breadth of learning for portfolio companies that are spread around the country.

Christy Vitulli: Yeah. Every one of our portfolio companies is a different specialty. They're at a different place in their growth stage. They're solving different types of payor issues with different problems, but they all have this common antagonist in the conversation of the payor, and we can help bridge some of the unknown together.

We build a directory of contacts, so half the battle sometimes is figuring out who to call. We solve similar billing collections or maybe contract interpretation issues together. Have you ever seen, have you ever dealt with, how would you approach a payor on a conversation like this and leverage each other's experiences?

The conversations are never the same, and we're all bound by confidentiality provisions within our contracts. But, the themes repeat themselves over and over again, and we are always able to learn from each other in our experiences.

Seconds Away

Anderson Williams: That's an extraordinary opportunity. Going back to you, your team, as a Center of Excellence, if I am a portfolio company, just practically speaking, if I'm a CEO or whoever's been charged as the sort of other duties as assigned to do payor contracting in an early stage.

How do I find you? How do I reach out to you? How does that initiation of an engagement with a company start for you?

Christy Vitulli: It's as easy as picking up the virtual phone, whether it be your cell phone or reaching out via email. You can leverage your investment team members to facilitate an introduction. You can leverage or Lead Independent Director to facilitate an introduction.

But most commonly you're going to meet us early in the launch of a platform right around or right after what we call our a hundred day plan with the Shore Resource Team. The vast majority of the COE leads are going to reach out to the leadership team to make an introduction.

Let them know who we are, what our expertise is, and what problems we can help solve at various stages of the launch or growth of a platform. My hope is we're not hard to find. We're seconds away from being available to our platforms.

Anderson Williams: Is there an example for you so far of an engagement that you've had with a team or an executive that you think exemplifies the value of this COE.

Obviously you've discussed some of the financial impact and so forth, but just curious if there's any anecdote that you stick to or that sticks with you that says, yeah, that's why this is so important.

Christy Vitulli: There are a couple of initiatives that we've worked on that I think are really valuable to understand.

One is, we have purchased access to market reimbursement data and payor enrollment data that has helped our portfolio companies assess their mixed distribution, their commercial versus Medicare versus Medicaid mix. Because remember they all pay differently, relative to the marketplace, and assess, am I under leveraged or over leveraged? And do I need to redistribute my mix to take advantage of better reimbursement from a specific population of payors.

So, we've helped a couple of our platforms evaluate mix so that they can make strategic moves with the payors that they do business with. We've also helped our portfolio companies evaluate their reimbursement relative to what the market is reimbursing on average.

By no means guarantees that the payor is going to pay those rates, but they now know what to aim for when they're sitting down and having that conversation with the payor. We helped one of our platforms use both the mix data and the payor market reimbursement data to identify over $500,000 in rate lift potential that they're gonna go after in the next six to nine months. So, that's a real world example of something we're doing right now.

Anderson Williams: What's interesting about this is that as complicated as it is in reality, from getting your head around all the payors and terms and percentages of Medicare and all of that stuff, which my head doesn't work around.

The structure of what you do is very clear cut in terms of the things that have to get in order, the way you get your house in order, the way you benchmark where you should be, and where you want to be, how you pull your story together, and as you grow and scale and have negotiation power with that, how you make a significant impact.

Laying It Out

Christy Vitulli: Yeah, you're spot on. If I were laying this out in a five-year plan, I'd start pre-close getting copies of your contracts. Post-close, I'd get your measurements, and I'd start baselining what your current collections as a percentage of Medicare are, relative to the market.

I'd start measuring and engaging payors at the end of probably a year and a half going into two years. I'm having active conversations with those payors and I'm enhancing my value prop at that time because now I know the story. I know my market position, I know my growth strategy. I've got something to tell them that differentiates me from the marketplace and I know where I stand and now I'm building the business processes to integrate an add-on and repeat the cycle.

And as those contracts renewal becomes almost a repetitive circle here of business processes that start to really drive return, probably at two years, three years, if you're really focused on it right outta the gate. And every six months, that you delay really pushes that return out farther. So again, I cannot emphasize enough start early.

While it's small, it's easier to get copies of those contracts, reach out to those payors, get the fee schedules, and be thinking about your competitive positioning while you're in that, planting an early growth stage so that you've got a process to integrate as you're growing fast. And it doesn't feel overwhelming when hundreds of contracts start flooding in your door, that you've gotta figure out what to do with. Have that process built or on so you can build that repeatable cycle going into late year two, early year three, and it's really demonstrating value at year four as you get ready for exit.

Anderson Williams: This podcast was produced by Shore Capital Partners with story and narration by Anderson Williams. Recording and editing by Andrew Malone. Editing by Reel Audiobooks. Sound design, mixing, and mastering by Mark Galup of Reel Audiobooks.

Special thanks to Christy Vitulli.

This podcast is the Property of Shore Capital Partners, LLC. None of the content herein is investment advice and offer of investment advisory services. Nor a recommendation or offer relating to any security. See the terms of use page on the Shore Capital website for other important information.

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