The Revenue Walking Out Your Door–Capturing Wellness Spend at the Point of Care [PODCAST]

← Back to All Podcasts

The Revenue Walking Out Your Door–Capturing Wellness Spend at the Point of Care

In this episode, Kevin Torf, Co-Founder & Managing Partner at T2 Group, discusses the revenue walking out your door, capturing wellness spend at the point of care.

Highlights of this episode include:

• What to say to leaders who have already optimized every revenue line they have.
• How large the market size is
• Wellness products
• Model for a system based on size
• Compliance
• Implementation and what it costs
• The opportunity is now in wellness

Kelly Wisness: Hi, this is Kelly Wisness. Welcome back to the award-winning Hospital Finance Podcast. We’re pleased to welcome Kevin Torf. Kevin is a seasoned information systems executive specializing in large-scale IT strategic plans, project design, procurement, and implementation. With a career spanning over 40 years, Kevin has successfully led complex IT infrastructure deployments worldwide, including some of the largest communication network systems. As co-founder and managing partner of T2 Group, Kevin introduced the company’s hybrid-agile methodology, guiding program, and project managers in planning and executing client projects. He also plays a pivotal role as a chief strategist and advisor for leading hospital systems in the US. Prior to co-founding T2, Kevin founded and sold several technology companies, including Intelliverse, Mobile Gaming Technologies, Inuntius, Tornado Development, and Torsys. He has also held senior roles as CEO, CTO, and CIO, and other board positions. In his book, Getting the Job Done, Kevin unveils his hybrid-agile approach, dissecting effective project management tips to ensure punctual, high-quality outcomes.

In this episode, we’re discussing the revenue walking out your door, capturing wellness spend at the point of care. Welcome, and thank you for joining us, Kevin.

Kevin Torf: Thanks for the opportunity. I’m looking forward to the discussion, and thanks again.

Kelly: Yeah, it’s great to have you. Well, let’s go ahead and jump in. So, a lot of finance leaders are going to say they have already optimized every revenue line they have. What would you say to them?

Kevin: Well, as you know, with healthcare systems today and the financial constraints they are under, I think everybody’s looking for an opportunity. I think the opportunity we’ve identified is in the purchasing of wellness products. Some healthcare systems do sell these products in their pharmacies, mainly in hospitals, and some clinics will promote one or two different products, but it’s not done at the scope and magnitude of what CVS, Walmart, Amazon do today. So, there’s a huge opportunity for healthcare systems to participate in that revenue.

Kelly: Yeah. No, it sounds like it. So, let’s talk about the market size. How large is this market? And why should any health system believe a meaningful share of it is theirs to capture rather than someone else?

Kevin: Well, people today are spending over $3 trillion a year on wellness products. And wellness products vary. Everything from wellness tech, that could be a Fitbit or even an Apple Watch that you wear on your wrist, to taking vitamins, from vitamin D, C, the different types of vitamins people take every day. And then there’s other categories that would include nutrition, sleep aids. So, the industry is relatively large, and each one of these market segments make up a good couple of hundred billion dollars, totaling over $3 trillion, as I said.

Kelly: Yeah, $3 trillion in wellness products. That is a big number. So, Kevin, walk us through what happens today after a patient visit. The care team makes a recommendation, and then what happens next?

Kevin: Well, I don’t know when you were last at your physician, but Kelly, if you recall, they might have done a blood test and told you that you need some vitamin C or maybe D based on your blood tests. Those aren’t covered by insurance, and they’re not part of the DME products that a doctor might prescribe to you. You are obligated to go to the store and buy those products yourself. And there’s no real telling whether you do or you don’t. So, when you’re at that physician visit, they might verbally tell you this. In many cases it will actually be in your visit summary where they would suggest go get a sleep aid, maybe some eye covers. Or maybe noise is interfering with your sleep, get some ear blockers. With that said, you are then, when you leave that physician practice, are either going to go to the store and do this yourself or go to even Amazon today or online. And half the time you do, half the time you don’t. And there’s no real full cycle in understanding, did you actually do what the physician suggested?

Kelly: Yeah, that’s very true. I know I purchase a lot of things myself on Amazon. So, when a vendor tells a CFO they can add revenue with essentially no cost to acquire it, most of them stop listening right there, but why shouldn’t they?

Kevin: Well, the opportunity is that the healthcare system, it’s their patient, it’s their customer. And they’re the ones that are making these recommendations, but aren’t participating in that revenue. So, the opportunity here is that these products can be fulfilled through many other organizations. The healthcare system isn’t obligated to carry this inventory and actually incur the costs to store it and manage it. They can take the order, have someone else distribute the product on their behalf, but they would participate in receiving the profits that come from that. So, there is no burden on the healthcare system. They don’t have to make any upfront investment. This is something that they’re doing already today in their visit summaries and basically can continue doing it this way, but participate in that opportunity to profit from this.

Kelly: Doesn’t seem like there’s a downside there. So, give us the model for a system based on their size. We have seen plenty of projections built on optimistic assumptions. What are yours and why should we trust the margin that you’re quoting?

Kevin: Well, there’s numbers out there and there’s no shortage of them. As I mentioned, it’s a trillion-dollar industry. So, CVS has financials, they disclose a lot of what they’re doing. There’s lots of healthcare companies that have done studies on wellness products. So, I think there’s a lot of evidence out there as to what the opportunity is. The model right now generally reflects that any of these types of products that are sold, a healthcare institution can generate approximately 26% margin. So, if a healthcare system, let’s take a very large one. I had a million clients. That’s unique clients, unique patients. And not every one of them is going to be using the patient portal. So hypothetically, let’s assume only half of their patients, or 500,000. And then, what is the potential spend today that a person does buying wellness products? It’s anywhere from $1,500 to $2,500 a year a person spends. When you do more analysis on that, you’ll find that the average conservative spend online is about $600. So, assuming you’ve got 500,000 potential patients that might purchase products, and each one of them are going to spend $601. Now, you’re not going to be able to successfully penetrate that market fully. So, if you took a 6% market share of that, which is very realistic for something of this magnitude, you will generate approximately $18 million in revenue, and you can profit at least just under $4 million from that.

Kelly: Wow, those are some big numbers there. So, isn’t this model just the health system monetizing its own patients? I mean, convince us that this is not a compliance and trust problem waiting to happen.

Kevin: Well, they buy these products anyway, and they buy them based on your physician’s recommendations. So, it’s not like you’re getting them to buy something they wouldn’t buy. There are lots of laws relating to what a healthcare system can and can’t sell. There’s the anti-kickback laws that relate to what we call DME products. These are products that would be prescribed. So hypothetically, let’s say you needed a wheelchair. Your insurance company normally would cover those types of products. And there’s laws relating to that. And healthcare companies sell those products today. They just are very controlled in the mannerism they sold. There’s a lot of regulations around it. Obviously, there’s what we call the physician self-referral law. It’s mostly a law that is self-governed. And there is an ethical obligation to do what’s right for your patient. You shouldn’t be recommending them something that you wouldn’t be doing it anyway. But as I said, if these patients are going to be buying these products anyway, you giving them the opportunity to buy this actually is helping them. You’re helping them choose the correct product because many times, they go to these stores and they don’t buy the correct product. Here they have now the ability to actually take a product that’s recommended, and you, as a physician, get to actually see the purchases they’ve made. So it really adds to your whole care and your health plan as to the physician for the very first time ever knowing actually, did you or didn’t you actually go forward and execute on the recommendations they made?

Kelly: No, I mean, that makes a lot of sense, Kevin. So many vendors say that implementation is easy. What does an organization actually have to build, staff, and pay for? And where are there costs involved that you aren’t mentioning?

Kevin: Today, as we said, the physicians are already building out those summaries of the visits. So that doesn’t change. We’re using artificial intelligence. We will extract that information off that visit summary, and we will then match that to products. This is done all in the cloud, so it’s no burden to the healthcare system. They don’t need any technology on site. They don’t need to invest any money in building that technology architecture. We will then provide those recommendations in the patient portal, where the patient can then procure those products. Now, that does require a little bit of integration. It’s minimal. The healthcare system has to allow us to come in and build this into the EHR platform. It’s pretty much EHR agnostic, so we can work with any of these platforms out there. And then once those products are purchased, third-party companies will do the fulfillment. If the healthcare system actually has a company that they work with through their GPO today, we can work with them as well. So, they can still keep their current supply chain and have those same vendors provide those services on their behalf, or we will recommend a vendor to them. But the healthcare system doesn’t have to go through any burden to do this. This is coming directly off that visit summary that the physician did anyway prior to this product being installed.

Kelly: Yeah, no, I love that there is no burden to them. I love that, and I’m sure that people listening love that too. And you talk about finally seeing what patients do at home. Is that a nice-to-have, or does that visibility show up somewhere a CFO cares about? Can you put that in dollars for us?

Kevin: Well, the dollars is going to be on the money they make with the indirect dollars is at the end of the day, your physician’s there to make sure you get better. Usually, these products that they recommend are because you need them, and you wouldn’t recommend them otherwise. So, they don’t really know whether you’ve actually made those purchases or not. And then they don’t usually solicit any feedback from you if any of those purchases actually helped you. So, by having this now all electronically digitized and having a history of those purchases, there’s so much more that we can do with data and deep diving into what you’ve purchased, when you purchased it, how has that affected your health. And the opportunities are endless as we take advantage of this data that for the very first time the healthcare practice will ever have.

Kelly: Yeah. No, I love it. It seems like there’d be a lot of data available to them now, and I love that. So why is this an opportunity to consider now and not in three years? What does a health system lose by waiting? And if there’s interest, what’s the first thing that someone should do?

Kevin: Well, like anything, there’s an opportunity here. And opportunity costs money if you don’t take advantage of it. So, there’s going to be nothing wrong with them implementing this later, but it’s not a big effort for them to implement now. They can do this in different stages. They can pilot this with a few specialties or a few clinical groups. It doesn’t take much effort in getting this up and running. It can all be done within a few months from the moment they decide they want to move forward and then learn as technology grows, as these AI models– as we know, everywhere we go these days, we’re hearing about AI playing more of a role in our life. These AI models need to be fine-tuned. They need to evolve over time. And as different products are recommended, these AI models learn from that. So, the sooner you get started, the better these models will learn about the needs of your patients. And you’ll be able to capitalize and take advantage of it.

Kelly: Yeah, no, I love that. Well, thank you, Kevin, for sharing your insights with us on the revenue walking out your door, capturing wellness spend at the point of care. And if a listener wants to learn more or contact you to discuss this topic further, how best can they do that?

Kevin: Definitely come to our website. We are actually taking healthcare systems that want to participate in our early pilot programs. We’re looking for partners because as I mentioned, these algorithms and models need to learn over time. And we want health systems that are looking to be innovative, that are looking to really find new ways to help their patients. And we are going through a vetting process to select which healthcare systems we want to work with. And the goal is that this is at no cost to the healthcare system, and we will work together to validate and improve these models. And they can come to our website. It’s t2group.com, and they can go to the EasyCare, which is the name of the product. And there’s an application form they can fill out, and we can engage with them and see if this is a good fit for them.

Kelly: Wonderful. Thank you for providing that. And thank you all for joining us for this episode of The Hospital Finance Podcast. Until next time…

[music] This concludes today’s episode of The Hospital Finance Podcast. For show notes and additional resources to help you protect and enhance revenue at your hospital, visit besler.holdings/podcasts. The Hospital Finance Podcast is a production of Besler Holdings.

If you have a topic that you’d like us to discuss on The Hospital Finance Podcast or if you’d like to be a guest, drop us a line at contact@besler.holdings.

---

---