Shane Foss is the founder and CEO of Hooray Health, a limited benefit medical plan provider focused on providing practical health care plans and protecting their members against predatory balanced billing practices. We talk about the main stages of a business life cycle, how to avoid the predatory balance billing trap, and the main drivers of the medical debt crisis.
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Learn the Lifecycle Metrics Framework with Shane Foss
Our guest is Shane Foss, the founder and CEO of Hooray Health, a limited benefit medical plan provider built to use with the National Provider Network of retail clinics and urgent care centers. Hooray’s goal is to offer low-cost practical health care plans that are supported by technology and protect their members against predatory balanced billing practices. Welcome to the show, Shane. Great to have you.
Thanks for having me, Steve. Look forward to it.
Well, lots of things to unpack in the introduction, which we will go to in a few minutes, but I’d like to start with how do you get to start a health insurance company? How does how does that even work?
You know it’s funny this is not where I grew up professionally. I actually grew up in medical device sales leadership. So, in other words really in orthopedics my whole career has been really in the operating room and working with physicians and other healthcare professionals selling orthopedic implants. So, I’ve always been a very curious person, always a constant learner. And so, obviously I have an entrepreneurial bug. So, what was interesting was I had left the orthopedic industry with a very good friend of mine.
And I got introduced as I was a COO of a company that created access for large self-funded employers for surgical bundles. And so, we built that provider network out and that was right up my alley because I understood that space really well, but it was kind of an entry into employer benefits. So, when I got there, really, as crazy as it sounds, I fell in love with it. It was really interesting. And what I found most interesting was that there was a huge opportunity to improve.
And what I found was there is dark side to healthcare that is interesting because you think dark side to healthcare really, but providers in their Hippocratic Oath, doctors and nurses, but a doctor in the Hippocratic Oath, they take this oath and it’s do not harm. And 99.9% of the physicians I know, that’s their credo, they live by it. But what they don’t realize is the ugly side or the dark side of healthcare is when you have bills that don’t get paid for one reason or the other, whether your insurance didn’t cover it, so guess what? They get sent to collections. And over 70% of personal bankruptcies are due to medical-related bad debt.
So that was really kind of my entry into that space, and so I understood it really well. And I, myself, we sold the company, and we stayed on six months, and then we went out and we were consulting, trying to figure out what we were gonna do next. And so, I had this idea of Hooray Health when I myself went into an urgent care and got an $800 balance bill. And so, you know, understanding the market, I was able to negotiate it down. I knew, you know, what it would take to get out of it.
And so, I took care of it, but, you know, the average American, that’s not what they do. And, you know, and it’s just such a screwy market. And so, I thought, you know what, this is a good opportunity for us. And so that was where I really got the foundation for Hooray Health and started building it from there. So really without the intent of saying, hey, I want to get into the health insurance space, it was more, you know, really solving a problem for a group of people.
That’s very interesting. And I’ve only been in this country for 10 years, but I also had an early experience with getting hit by a $5,000 bill for a visit or something like that. I was shocked and I fought the system and I mean I don’t have to get into it but it was a long hard fight. Eventually I prepared but I don’t know if it was worth it. a little bit later.
But before we go there, I’d like to just address the topic of our podcast, which is managing blueprints, business frameworks and conversation. You mentioned the, I think, what you call the lifecycle metrics framework, which you explained as companies have different life cycles and then they need to measure themselves in different ways. So, if you might be telling us a little bit about how that works?
So, you know, when you talk about business structures, businesses are different phases of their life, you know, their life cycle, everybody’s different. So. When you start a brand new company you’re at the infancy stage. Right? Just like a baby, you can’t hold up your neck and that’s financially, I can’t hold up my neck because I’m not making any money yet. I don’t have a product. I don’t have a sales distribution line. So the evolution of your business, you have to have different skill sets, different organizational structure, financial structure, and KPIs or metrics that you’re measuring.The evolution of your business, you have to have different skill sets, different organizational structure, financial structure, and KPIs or metrics that you're measuring. Click To Tweet
And in the beginning, if you’re measuring sales, sales revenue or profitability, and you’re just starting out, it’s kind of ridiculous, right? I mean, that’s why when you talk to investors and they’re like, well, where are you at profitability wise right now? What are you making? It’s like, dude, we’re growing so fast, we need more money. We’re growing, right? We’re in the growth phase. So, what we need money for is funding the growth phase. We don’t wanna make money right now. We wanna continue to ride the wave. So yeah, so when you and I spoke earlier, when you’re an entrepreneur, it’s really being able to identify what phase you’re in and then comfortably navigate through that.When you're an entrepreneur, it's really being able to identify what phase you're in and then comfortably navigate through that. Click To Tweet
So, I’ll give you an example. When we started the organization, we started off with a sales leader that his knowledge was in really the individual and small group setting. And that was perfect for us, because what it did was it gave us entry into that market where we were able to really start building sales, getting some use case, right? Understanding the data, understanding what we’re doing, you know, the customer experience. And then as we transitioned into the next phase where we actually raised a lot of money and then we had to hire all the infrastructure. We did a complete 180 and now we went into the large broker setting which is much more professional.
You have to have a very good reputation to even get access into that space. And then our average employer size wasn’t five, it was you know 3,000, 4,000, 5,000 people right. So, it was a completely different mindset. And so not only did our metrics change, but really our capabilities had to change. And so, we had to make a change in what we were doing from a sales leadership standpoint. And so, one of the most challenging parts of being an entrepreneur, just being a CEO, even if you’re not the entrepreneur, it’s making those hard decisions and identifying them and then being real with what you’re doing.
So, Shane, so what are the major phases that you see? I mean, you can give your company as an example, if that’s appropriate.
Yeah my company.
What sort of phases and what were you measuring? What was the most relevant?
Absolutely. To measure that. So, when I first started, it was really the pre-product phase. So, the pre-product phase is really, what I was measuring was, can I get the product built, the network, the insurance carriers? And so really success was measured through the number of contracted providers, the area, you know, the metro statistical areas we were able to cover and the scale we were able to create there and what providers. So, then we went into the commercialization phase, which is really, or I’m sorry, not commercialization.
We went pre-commercialization, which was with the testing phase. And so now I had to bring in financial support, right? Not a true CFO, but just financial support. We had to have marketing support. We had to have some operational IT support. And so, we brought in a few employees to figure that out. And we brought in sales and distribution, which is, you know, who I spoke about earlier. So then, then the measurement was, okay, from a sales standpoint, what were the reactions? So how many requests for proposals were we getting? What was the close ratio? What were the key eliminators, if you would, the gaps in our coverage or the gaps in our product, measuring those?
And so, we collected all of the feedback. And then we went into the next phase, which was the commercialization. So, we raised money to prove the concept. And so, when you do that, now you have to have legal involved. You have to, you really do need a financial partner. So, we brought in a CFO to make sure you manage that because you have, when you have investor money. But now the KPIs are, okay, what is our revenue growth? So, before it was really just on just sales. Are we getting clients?
New business sales.
Correct, and so now what we’re looking at is, now we’re looking at revenue, retention, right? Renewal retention, employer and employee feedback. And so you’re tracking all of the calls. How many calls are you getting per, you know, per thousand people enrolled in your plan, stuff like that. And then once you get from there and you’ve proven the concept and you’re going out, now it’s evaluating what your real total addressable market is and what it’s gonna take to get there, raising that money and then now you’re really your KPIs are group size, again, retention, participation rate, right? So how many people are actually enrolling in your plan, revenue per member, and then you’re looking at profitability, obviously. Now we’re looking at profitably, what does our margin look like per employee? But we’re not looking, I shouldn’t say profitability, it’s margin per employee, because we’re still outstripping our revenue just because we’re growing so fast.
So that is, so you’ve got the first phase is called pre-product, then pre-commercialization, then commercialization. And this last one is what, scaling? What do you call this?
Yeah, so now we’re scaling. Yep. So, yep, and then we’re scaling. And then at that point, after the scaling, after we now kind of level out. So right now, we’re at that hockey stick. So the hockey stick will eventually kind of level out. And then that phase is really gonna be your-
Maturity or something?
That’s your maturity phase, right? That’s now you’re really digging in on how do you improve profitability? How do you use technology to improve that profitability? Take out a lot of the overhead, streamline your distribution channels, stuff like that.
I love that, that makes a lot of sense. Pre-product, you basically just want to get the food or you want to survive. You figure out whether you even have a product, right?
Exactly, that’s your testing phase, right?
That’s the testing. And then the pre-commercialization, you really are trying to prove to your financiers that there is a product that can be scaled. There’s a demand in the market. There is something to finance. And then the commercialization is when you really are kind of slamming on the gas and you are proving your case and expanding and maybe raising another round of financing. Then you scale this thing. And hopefully by that time you are self-financing. You don’t need to bring in outside investors. You are generating cash.
And then the maturity is when the business stabilizes, the growth stabilizes, and then you start the fine tuning, you improve your profitability, and you’re institutionalizing the business, you’re creating systems and processes so that you can be successful. This is awesome, that’s a great framework. So let’s talk about the business that you have found that you are running, it’s kind of a very interesting one because you’ve got the big insurance companies on the one hand, and then you’ve got the medical providers, and then you’ve got companies like AFLAC who are really basically trying to cover the lowest segment of the market for people who don’t have coverage, don’t have money for insurance. And you talk about limited benefit and unique benefit medical plans. So what are these plans and how do they fit into the big picture?
So where we fit, it’s really interesting. So you’ve got AFLAC. AFLAC is really – they’re actually an income replacement. That’s what they focus on. What we focus on is affordable access to care for the population that either gets a plan for free on the exchange and their lawyer, you know, because they, so if I get a, if I get a plan for free or a subsidized plan on the exchange today, I have a $5,000 deductible, right? Well, that population doesn’t have $400 in the bank account. So per the federal reserve. So I’m functionally uninsured, period. I’m functionally uninsured. I have no money to pay a bill. So I really, unless that’s something catastrophic, it doesn’t really matter.
So that person can use our plan and, you know, get to the doctor, go to our network, pay $25 copay with no balance bill, do that. The other population that we serve is, if you look at major medical, today, the prices continue to rise. So, the trend is participation is going down. You know, 15 years ago, carriers had a mandate of 75% participation from an employer. Well, that’s out the door. They don’t, they just don’t, they don’t get that participation anymore in most businesses. So if I opt out of that, now they could put us in as a supplemental health product to where that person can buy us at a much reduced rate. And we’re what you call first dollar coverage.
We’re a fully insured product that has a limited medical hospital indemnity product and an accident medical expense that act as one and they’re combined. And what happens is we take care of sickness and illness. And if I had 14 stitches in my hand a couple years ago and I went into the emergency room. They stitched me up and they built the insurance company and our insurance company, because we push eligibility to providers. So, they identified me as insured.
They built our insurance company or our third-party administrator. And it was $980. They paid it all. I had no out-of-pocket costs because we don’t have deductibles. We have fixed amounts that we cover. So, it’s this insurance really our insurance and indemnity insurance this is how insurance was designed to be right this is what you had back in the 60s and so it’s a it’s a very common place product but it’s you know it’s just now that we’ve had major medical and everybody expects you know that’s gonna pay for everything, and then the reality is they don’t pay for everything.
So, what I’m hearing is that, let’s say I have a major medical plan and I have a 5,000 that are deductible. I could go to you and you would insure my 5,000 are deductible as the first payment? Could I do that?
So we’re, what you would call a non-coordinating benefit then. So, you can actually buy us, put us under there as an individual, you buy us, but we could pay up to the $5,000, we could pay more than the $5,000, depending on which policy you buy with us and what you’re doing. The idea is that you would be able to use us to, let’s say to go to the first, our network, which is the Hooray Health Network, you’d be able to go in there and for a $25 copay with no balance bill, be seen by a doctor, get an injection, get a chest x-ray, whatever you’re there for, and that’s all you’d pay is $25.
And so, it wouldn’t go towards your deductible because it’s not coordinating, but the reality is the average American family spends less than $1,500 on their deductible a year. So, the reality is, you know, it’s, you know, having that deduct or having us sitting under that deductible, you get more value because we’re, you know, we’re actually paying for what you need, which is the doctor for an illness.
So it’s a replacement of a major medical with the exception that there’s no, you know, if it’s a major disaster, I get cancer, that doesn’t lead to what you can reimburse, I guess.
Yeah, so we’re not a replacement for major medical. I want to make that very clear. We’re not major medical because we don’t cover catastrophic. We are really there. We’re what you call a supplemental health benefit. We are, we sit directly under a major medical product policy or, you know, the reality is there’s a lot of people out there that can’t afford major medical. So, yes, we people do use this as their primary source. But, you know, the reality is if you can afford major medical, you know, we want you to buy major medical, period. But the reality is that there’s a large population that just can’t afford it.
If someone is on a major medical, let’s say on Anthem, then the normal thing for them would be to have a health, an HSA account, health savings account to cover their deductible, and then they go to the major medical. But if they don’t have it, then they could go with Hooray Health and they would get coverage for the first 5,000, whatever, for the first-
Well, the basic- All the bunch. Yeah, they would get their basic, yeah, they’d get their basic health needs covered through being able to go to a physician visit if they’re sick, you know, labs, X-ray, stuff like that.
And the major insurance companies, they don’t do that. They don’t provide this kind of coverage because they want to sell the major medical insurance.
So, some of them do. Some of them have supplemental health benefits for sure. But where ours is unique is we have the mobile app that gets you, that shows you the network, shows you the benefits, centralizes all the benefit function right on the palm of your hand. We have the only provider network in the nation that’s a fixed global co-pay, no balance bill. And so, what’s really nice about that is millennials are really our target audience today, millennials and Gen Xers. And they expect to have a mobile app, that’s just expected. But the other thing is, they do not have primary care physicians. 64% do not have a primary care physician. They go to an urgent care retail clinic.
So that’s why we built the network the way we did. And the reason they do that is, actually it’s very smart, is urgent care and retail clinics, they’re open Friday, Saturday, Sunday. During the week, they’re open until nine o’clock at night, eight o’clock at night. The level of care that you get there. So, if I go to my primary care doctor with a broken ankle, they don’t have an x-ray machine in their office. So, they’re going to tell me, why don’t you go to the urgent care? So, millennials just skip that and they just go right to the urgent care. So, it’s the fastest growing segment from a provider standpoint for the delivery of care and they’re fantastic, we love them.
Awesome, so what are the balance building practices, these predatory balance building practices? What do you mean by that?
So I’ll just give you my own experience. So, I had a $75 copay with one of the large health insurance carriers. I went in and I got my x-ray and then I got an injection, or two injections actually, a muscle relaxer and anti-inflammatory. Well, three weeks later, I get an $800 balance bill. So, me, I was able to negotiate that down and I just paid it. Most people will, you know, if they can’t afford it and they don’t understand, they’re not gonna call and negotiate it down. So, what happens is they let it go to collection and in collection, they’ll send you to collections. And I mean, people file bankruptcy.
Actually, it’s over 60% of the population of personal bankruptcies are due to medical-related bad debt. So, the predatory practices are, even though that $800 balance bill, I paid less than $70 for that $800. And that’s what’s expected. And what’s crazy about the health system is, and I’ll give you a great example. It’s if you walk into a grocery store and you walk to the back, you grab a gallon of milk and you walk out and let’s say you pay $5 for it. That’s how life really is. You pay $5 for it I pay $5 for it. Maybe somebody has a coupon, but for the most part, we all pay the same price.Predatory practices in healthcare lead to over 60% of personal bankruptcies being due to medical-related bad debt. Click To Tweet
Well, in the healthcare world, depending on if you have, you know, if there’s a contract with a provider, if there’s, you know, and there’s all these things, and every insurance carrier network has a different price as well. So, nobody knows, I mean, as a matter of fact, the physician’s office doesn’t even know what they’re gonna charge for that gallon of milk. So, what happens is you pay that $5 for the gallon of milk, you go home and three weeks later you get you get billed 50 bucks for that gallon of milk and you’re legally obligated to pay for it.
Even though the grocery store never told you about it. Why is it called balanced billing? Because it’s you’re paying the balance of the bill. The bill that you never knew you had. And so, our last company that we were at, it was really interesting because one time we were talking to, in Denver, we were talking to the president, who is a general surgeon of this group.
And we were talking to him about how we’re different, they’re sending people to collections today, and how we can eliminate that because they have a lot of basically bad debt that they’re not collecting. And he looks at me and he goes, we would never send anybody to collections, ever. And this is a very large group. And I looked over at the office manager and I said, how many people did you send this last month?
He almost fell out of his chair and he immediately said, we will never do that again. That is not, the problem is the system is, you know, I don’t want to say perverse. It’s, you know, that’s not the right word. It’s just it’s the coordination in the system is so horrible that nobody knows what is really going on, right? It’s so compartmentalized. One doesn’t know what the next one’s doing. You don’t know the pricing. You don’t know. I mean, there’s no transparency. And so, the physicians, you know, you’re thinking, oh my gosh, this doctor’s sending me collections. No, he’s not. He has no idea that he’s sending you collections.The problem with the healthcare system is the lack of coordination, transparency, and compartmentalization, making it difficult for anyone to understand what's really going on. Click To Tweet
Maybe they are not sending you collections. They just sell the receivable that they cannot collect and then someone is going to collect. They have nothing to do with it. They just sold it. You know, it’s off their hands. They got paid 20 cents in the dollar, whatever. And if somebody else, dirty loan.
Yeah, but that’s the problem, right? They’re still selling the bad debt when they should be just writing it off. You know, you look at health systems, which are the worst of the predatory balance building. And you look at the health systems and they are nonprofit. They’re not paying taxes, but yet they send more people to collections than any other, you know, business in the United States. So, you know, it’s just, it’s a challenge. And, you know, it’s just a tough system right now.
Yeah, it is. So, Shane, one of my former clients who was in the health care system, but basically what he, the way he explained it was that because there is no safety net in America, there’s no general insurance if you’re a poor person, then essentially what is the acknowledged, silently acknowledged system is that if you’re sick and you go to an emergency room, they’re going to take care of you. And they’re going to bill you, but you won’t be able to pay for it. So, the way they make it up is they are billing the middle classes exorbitant, they’re sending exorbitant private billings to the middle classes because they have the insurance and they’re going to pay for it. So essentially, it’s a cross-substitution that is happening.
Well, I’ll tell you, I don’t think that’s 100% correct. And here’s why. You know, if you’re in, let’s say, in Dallas, if I’m sick and I go to Parkland, I’m going to get taken care of. And they’re a teaching facility and that’s what they’re there for. In Houston, where my wife trained, she’s a physician, University of Texas has a hospital, LBJ, just on the outskirts of town. They deliver more babies there than anyone else in the United States. 99% of it’s free. So, I think saying that we don’t have a safety net is actually not accurate because we do have safety nets and we’ve got Medicaid. We as a country do take care of people.
I think that there’s a lot of stuff wrong, but the reality is you can find care without going to an emergency room and getting that crazy bill. But the other part of it is billing the middle class for, of course, I mean, that’s exactly what’s happening. I mean, look, if I’m only recovering, you know, 20% of everything I bill at Starbucks, right, I’m Starbucks, everybody else is going to pay for it because I got to raise the price of the coffee from $3 to $5, right? I mean, that’s the way it happens. That’s just, you know, basic economics, but it’s a really complex system and there’s a lot of great people that work in it that just it is what it is. It’s very challenging right now.
You’re not going to solve this on this call, I guess. No. So let me ask you a business question. What are the growth drivers of a health insurance firm like yours? What drives growth for you?
Really, the gig economy. More and more people are right now I think it’s like 55 million, it’s grown at a 17% compound annual growth rate. The individual market is gonna dominate health insurance within the next five years. So, individuals that are shopping, making their decision on what they’re gonna buy. So that’s really driving what’s going on. And I think the continued escalation of major medical costs going up, that’s going to continue to drive people to the exchange and drive people to look for alternatives where they’re able to get their basic care. I think direct primary care is going to be a huge beneficiary. I think virtual telemedicine is going to be a huge beneficiary of that. There’s a lot of really interesting things that are gonna happen over the next 10 years that are gonna really set the stage for something special.
I’m curious to see that because a lot of people are actually not designing, not to spend the rate resignation because they have this conception that, the big company pays our health insurance and it’s so expensive and if they didn’t, then we would be out of luck. We would not be able to cover it. But if there is an alternative or there are alternatives that a gig economy worker can use, which are almost as good, then people wake up to that, then maybe a lot more donors are gonna start to fall.
Yeah I think so. I mean, there’s alternatives out there right now. It’s just, you know, it’s just whether you’re really out there looking or not.
Well, fascinating topic. I think we could spend the next few hours going on rabbit holes in this topic. So, if someone would like to learn more about Hooray Health, how you work, how they can access your products, maybe want to connect with you, where should they go?
The best place to connect with me is on LinkedIn or through our website at hoorayhealth.com. H-O-O-R-A-Y health.com.
Well, definitely check out Shane Foss on LinkedIn. Thank you, Shane, for coming on the show and explaining your lifecycle metrics framework, how the insurance system works and how you are kind of democratizing it with Hooray Health. And for those of you listeners, if you enjoy the show, please don’t forget to subscribe on YouTube and give us a review on iTunes, on Apple podcast and stay tuned because next week I’m going to bring another exciting entrepreneur who will share their business frameworks with you. Bye.
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