Organic Growth Podcast: Scaling Healthcare: How AI and RCM Power Real Growth

Stewart Gandolf (Healthcare Success): Welcome again to the Healthcare Success Podcast, our special edition at McGuireWoods Private Equity in Healthcare Conference. Again, this one is in cooperation with McGuireWoods and our friends over at Levin Associates. We were just talking about how we love their newsletter. So they've been friends, they're content partners.

So this episode we're talking to Roy Bejarano, correct? from Scale Healthcare, and I've seen your business out there for a while, but we've never met before.

Roy Bejarano (SCALE Healthcare): It's nice to meet you, Stewart.

Stewart Gandolf (Healthcare Success): Yeah, so for the people who aren't familiar, help us understand what Scale, we'll get into the questions in a moment, but just to give you, talk about what you're doing.

Roy Bejarano (SCALE Healthcare): Scale is really two things today. We are primarily a billing business, RCM, revenue cycle management focused, and in today's world, that means heavy focus on AI. as well as our offshore captive BPO.

We target the MSO space. We have a large portfolio of leading MSOs as billing partners, billing clients. And we are developing more AI products that are maybe more front office centered. That will come over time. But for now, our portfolio of AI products is really focused exclusively on RCM on the back office.

We are secondarily a community of MSO leaders, me being a former leader myself. I founded my own MSO with 150 physicians, single specialty focus, sold to private equity. So I went through that journey and then merged my asset into the national leader in my specialty. We ended up with 600 physician partners across 70 locations, 17 states. So I really cut my teeth on... what it means to have a 300 plus corporate office, a 300 FTE, all the different departments, full practice management, many surgery centers, just lived and breathed what that complex business model really is like.

And scale is narrowly focused on revenue cycle management, but also broadly focused on this executive community that we've built over the years, 1,500 members, over 700 CEOs,15 national events per year, in-person events, a large national conference, and a rich velocity of interaction between different MSO leaders. And I'm surprised with our overlap. We haven't knownbeach other sooner.

Stewart Gandolf (Healthcare Success): Yeah, well, today's a historic day. Yes, it's a big day. So, yes, and as you know, we talked about a little bit offline. We work with multi-location providers all the time, and I love events.

So let's talk more about your event when we finish up here. But I guess the first thing is, for your billing business, are you typically brought in at the beginning when it's been newly acquired? Is that a big lever? I would assume it is. With some of your relationships, or is it from the management? Like, how does the business evolve?

Roy Bejarano (SCALE Healthcare): There is some of that, investments that come with private equity groups that have a very clear urgency and pathway towards value creation with revenue cycle management being one of the core areas of focus and they want to feel very comfortable that the day the transaction closes they can bring in groups such as ours to immediately start generating value cost savings and KPI improvements They know what they're buying.

They're not satisfied with it. And they want to move now, now, now. I would say more typically on the acquisition side as a catalyst, historically, we did a lot of consulting to the MSO space. And we were somewhat of a generalist in the MSO consulting world. This was sort of a derivative of our former days as operators. We had over 100 consultants. We had several hundred 1099 consultants. And we were working with... 600, 700 plus MSOs, over 120 different private equity firms.

So I can tell you far more used to seeing integration work in billing and performance evaluation work in billing associated with MA. The whole let's pick a billing partner to replace what we currently have or improve on what we currently have is somewhat more of an elongated timeline, more measured, maybe an RFP. maybe incremental, and so the whole wham-bam, I just closed something, I just acquired something, go, go, go, is less associated maybe with that, finding a billing partner, and more associated with doing some billing consulting work and doing some integration work. That makes sense, totally. It's very similar to our business, it's the same thing.

Yeah, so I don't actually view it as an M&A cyclical business, the work that we do today.

Stewart Gandolf (Healthcare Success): So this podcast is all about organic growth because certainly there's a lot of growth through M&A, but for the organic side, and so you're mostly revenue cycle management, but what are the levers that you see that really impact organic growth, revenue cycle management specifically or more broadly?

Roy Bejarano (SCALE Healthcare): Yeah, more broadly because we've done it all. We've had teams in compliance, we've had teams in marketing, we've had teams in finance and accounting, office of the CFO. So we've covered a wide terrain both as entrepreneurs, as consultants and now truly as billers where we've become a lot more narrow and we certainly maintain a very broad lens in scale community.

So what drives organic growth is firstly an appreciation that it exists as opposed to a bias towards external growth or acquisition based growth. And then secondarily... the willingness to spend the resources to evaluate where you are today, to dig for outside resources that are really going to be complementary, the time necessary to make the investment, the dedication to build the skill set, the muscle, so to speak.

So if we use an example, patient acquisition, the skill set in digital marketing, the skill set in integrating all your different patient interactions, whether it's your CRM or whether it's your... EMR or whether it's your billing team or whether it's your front office team or whether it's your patient follow-up team are all these different teams coordinating and using the best tools possible whether they're technology based or human capital based to maximize performance and the level of oversight that that's that is required in that so thinking about how much investment needs to go into every one of your departments to really get the best out of them is somewhat daunting and somewhat overwhelming but also very very exciting There's many opportunities to achieve Six Sigma in a healthcare MSO. And what we often find is the speed of change in MSOs, practice acquisitions, new state entry expansion, payer disputes, changes in reimbursements, regulatory, all these different distractions, you sort of lose the ability to focus on what excellence actually means in every single one of your departments.

Perfect example, you know, just the difference between acquiring your way into a footprint and building your way into a footprint. Well, building practices is a skill set, right?

Dealing with nurse recruiting, you know, when you're recruiting a team of nurses for the very first time. I mean, that is a daunting thing to do. So, you know, MSOs are really hotbeds of intellectual capital. It's just an amalgamation of different pockets of intellectual capital spread across all your different departments. And recognizing that that's a big part of the job requirement is to build those pools of capital, invest in those pools of capital.

I think it's the funnest part of the job. I think the rinse and repeat of roll up, but let's not integrate too much because that will slow us down is a phase of the cycle that we go through that I'm not a huge fan of.

Stewart Gandolf (Healthcare Success): So you actually have written about that, getting the foundation right before expanding. Expand upon that a little bit. Or elaborate, I should say.

Roy Bejarano (SCALE Healthcare): I think that sentence says it all. Get the foundation right before expanding. And I think it's in the name of our business, which is SCALE Healthcare. And what's not said in that name, because it's just two words, is you can scale well and you can scale poorly. But the word scale in itself doesn't necessarily tell you that you're doing a good job. And you find out in hindsight whether you scale well. Good indicators, indications that you're scaling well.

We all know what they are, right? You have a full grasp over the performance of your business on a real-time basis. Pockets of black box. I don't actually know what's going on in that department. I have to wait one month, three months. I'm never satisfied with the actual analytics around that department. A sign that you haven't scaled very well. You don't have the people and you don't have the systems to actually speak a language that you can follow in order to make optimal decisions.

And we see that time and time again, right? And it's not universal. There are MSOs that have spent the time to select what they're building, what they're acquiring, who they're hiring in such a way to maximize information flow. Their data is centralized and unified, and it's real time, it's current. And so the contrast between those that scale well and those that don't, I think, is one of the most interesting things about our business, our industry. For sure. And one of the things that's...

Quintessential theme today is this idea of the different levers. You mentioned the input process, the RCM, the marketing. Obviously, it matters to us, but so does the patient experience and the communication and how it all fits together.

Stewart Gandolf (Healthcare Success): Let's talk about with RCM. By the way, scale on its own often used as the number one indication of effective, well-organized infrastructure. “I'm large. I'm the largest in my space. Therefore, I must have built great infrastructure.” And I can tell you from experience, it is not always the case.

You know, it's funny. We often say that about with multi-location providers, you would assume the bigger they are, the better they are, the more sophisticated they are at marketing. That's not always the case at all. Some can be incredibly sophisticated. Some are delegating marketing, if there's anything, to their friend. or somebody, you know, they know. And so, for sure, to every lover. With RCM, that's something we're not as much involved as you are. Like, what are the limiting factors? Where are the areas of opportunity? Where can you create value? I know it's a broad question,

Roy Bejarano (SCALE Healthcare): No, I love because the limiting factors are everywhere. Okay. We see, look, different specialties are more sensitive to different elements of RCM. A DSO might be less sensitive to denials, pure denials in the back office once the claim is actually submitted, to sensitivity like physical therapy and dental, very focused on authorizations, benefit verification. So shift in bias, depending on which specialty you're talking about, in terms of what the major issues are, who the payers are, and where the inefficiencies tend to reside. But for the most part...

Operationally in billing, we see poor performance in every single aspect of billing. I think of billing as 12 to 16 different departments, operational departments, starting with maybe all the way credentialing, and then from credentialing, authorization, from authorization, benefit verification, and then from benefit verification, you get the actual claim, the claim needs to be coded. And then you go from coding. You need to actually submit a claim. And then you need to follow up. And then you need to post the actual payment of the claim. And it just keeps going.

And then finally, lastly, you get into AR. And maybe patient balance as well shows up at different departments. So you have all these different businesses that comprise what we call revenue cycle management. And what we find is, firstly, they're incredibly interdependent or codependent on each other, which creates complexity.

You have you know 12 different departments that are all dependent on each other creates a wide variance of of formulae and you've got people embedded in every single one of them they're all specialists right your credentialing team is very different than your coding team which is very different to your AR team you have many instances of EMRs as these platforms get very large so they are they especially it's on top of specialists right you might have a ModMed EMR specialist, PMS specialist, working with an Athena specialist, all under the same MSO, or even within the same EMR, you have different instances and you have different workflows.

So everyone's becoming an expert in their respective workflow. They all speak that language, and so you have 15 different languages flowing through your existing business. And you get wide variance, and that does not correlate well to a very comfortable scaling operation. It creates a lot of unique pockets of intellectual capital that don't scale that well. And so what we're asked to do is to try to create performance improvement within that ecosystem. It's so complex, right? I mean, there's different EMRs, different billing, different insurance companies.

Stewart Gandolf (Healthcare Success): People have no idea that aren't in the business how complex this is.

Roy Bejarano (SCALE Healthcare): Yeah, you can spend a lifetime just on one piece, just patient balances. You can build an entire ecosystem of experts. who are six sigma deep in terms of understanding the complexities of patient balances. So are there any patterns that you look for that you see that are just always smoking guns of areas of opportunity? Or is it just each specialty, each tech stack has its own unique challenges? Well, smoking gun for me is show me a healthcare delivery company, and that's a smoking gun. Because if

they're in the business of providing care... They're in the business of revenue cycle management, and that's an opportunity. I will say the groups that we are less focused on today are pure cash-based because we haven't necessarily focused our efforts on the patient balance component.

I think we'll get there, and I think the more front office we become over time, dealing with call centers, dealing with scheduling, dealing with referrals, the more we end up migrating into the pure cash-based component of our industry as well. But yeah, the smoking gun is anyone that is involved in actually delivery of care and any kind of reimbursement is probably a good candidate for us.

Stewart Gandolf (Healthcare Success): So one thing I'm noticing now is, and I'm, again, not expert at this side of it. This is what you do. But QMD recently came up with AI for claims management for denials. And so a lot of things that used to be bulled on are becoming integrated. And then they also... created or started doing bots to answer phone calls. So finally, it feels like the software is beginning to have the whole package versus a bunch of bolt-ons. Where do you see...

Roy Bejarano (SCALE Healthcare): When you say bolt-on, you mean a multitude of point-of-sale solutions?

Stewart Gandolf (Healthcare Success): No, a multitude of different, you know, for example, in our world, it's like, yeah, different vendors that have to piece in, piecemeal in. Is that a trend? Right now, I'm assuming AI is something you talk about. almost every minute in terms of revenue cycle management. What are the trends? What things should we be looking for?

Roy Bejarano (SCALE Healthcare): It's a wonderful thesis that's being played out before our eyes. And it's one of those age-old questions that never gets answered.

The entry point into AI solutions through revenue cycle management is a wonderful place to start because revenue cycle management touches so many different departments. Note-taking inside of a procedure room is relevant to revenue cycle management.

Patient intake form and patient prep is relevant to revenue cycle management. Everything that ends up in a claim is relevant to revenue cycle management. So it's a wonderful entry point. There are other good entry points. Call center is a good, decent entry point. I know of peers who are developing good AI tools, front office, maybe some back office, that started with human capital call center solutions based in Colombia.

Stewart Gandolf (Healthcare Success): How relevant is that to AI scribe?

Roy Bejarano (SCALE Healthcare): I don't know, but there's a continuum that groups like SCALE follow when they start providing these solutions.

Stewart Gandolf (Heatlhcare Success): Okay, very good. Then I guess the last question is, How should people get in touch with SCALE? Like if it's revenue cycle management or whether it's some of your content? Share whatever you like.

Roy Bejarano (SCALE Healthcare): They can find us on scale-healthcare.com. They can find us on scale-community.com. They can follow us on LinkedIn. They can call me directly. They'll probably find my email somewhere. We're easy to find.

Stewart Gandolf (Healthcare Success): All right, great. Hey, Roy, great meeting you.