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Jul 14, 2023 · 10m · a16z

Why 50% of Every Dollar Billed Is Lost In Healthcare

Florian Otto · 5m spoken Steph Smith · 3m spoken
0:00 / 0:00
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In this episode of The a16z Podcast, host Steph Smith interviews Cedar co-founder and CEO Florian Otto to explore how machine learning and modern fintech can solve the US healthcare industry's systemic billing crisis and protect provider profit margins.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The host holds 37.7% of the talking time here. How this is scored →

The host as informed peer 1.3 Guest teaching 3.3 Guest disagreement 0.0 The host pushing back 0.0
05100:0010:000:00–3:08 · The host as informed peer 2/10 The Flaws and Debt in American Healthcare Steph provides narrated framing about the $4 trillion healthcare industry and uncollected debt. Florian explains how medical technology has advanced significantly while administrative processes remain stuck in the 1980s.3:08–6:14 · The host as informed peer 1/10 The Unprecedented 50% Uncollected Revenue Challenge Steph sets up the segment via voiceover narration. Florian details a personal ER billing story and explains how machine learning multi-armed bandit algorithms optimize patient billing outreach.6:14–8:33 · The host as informed peer 1/10 Improving Provider Margins Through Better Collection Steph introduces hospital provider margin challenges in narration. Florian breaks down specific financial math showing how direct patient collection increases hospital profit margins.8:33–10:06 · The host as informed peer 1/10 Removing Financial Anxiety to Prioritize Patient Health Steph closes the episode with series context and call-to-actions. Florian touches on the human impact of financial anxiety preventing patients from seeking necessary medical care.0:00–3:08 · Guest teaching 3/10 The Flaws and Debt in American Healthcare Steph provides narrated framing about the $4 trillion healthcare industry and uncollected debt. Florian explains how medical technology has advanced significantly while administrative processes remain stuck in the 1980s.3:08–6:14 · Guest teaching 4/10 The Unprecedented 50% Uncollected Revenue Challenge Steph sets up the segment via voiceover narration. Florian details a personal ER billing story and explains how machine learning multi-armed bandit algorithms optimize patient billing outreach.6:14–8:33 · Guest teaching 4/10 Improving Provider Margins Through Better Collection Steph introduces hospital provider margin challenges in narration. Florian breaks down specific financial math showing how direct patient collection increases hospital profit margins.8:33–10:06 · Guest teaching 2/10 Removing Financial Anxiety to Prioritize Patient Health Steph closes the episode with series context and call-to-actions. Florian touches on the human impact of financial anxiety preventing patients from seeking necessary medical care.0:00–3:08 · Guest disagreement 0/10 The Flaws and Debt in American Healthcare Steph provides narrated framing about the $4 trillion healthcare industry and uncollected debt. Florian explains how medical technology has advanced significantly while administrative processes remain stuck in the 1980s.3:08–6:14 · Guest disagreement 0/10 The Unprecedented 50% Uncollected Revenue Challenge Steph sets up the segment via voiceover narration. Florian details a personal ER billing story and explains how machine learning multi-armed bandit algorithms optimize patient billing outreach.6:14–8:33 · Guest disagreement 0/10 Improving Provider Margins Through Better Collection Steph introduces hospital provider margin challenges in narration. Florian breaks down specific financial math showing how direct patient collection increases hospital profit margins.8:33–10:06 · Guest disagreement 0/10 Removing Financial Anxiety to Prioritize Patient Health Steph closes the episode with series context and call-to-actions. Florian touches on the human impact of financial anxiety preventing patients from seeking necessary medical care.0:00–3:08 · The host pushing back 0/10 The Flaws and Debt in American Healthcare Steph provides narrated framing about the $4 trillion healthcare industry and uncollected debt. Florian explains how medical technology has advanced significantly while administrative processes remain stuck in the 1980s.3:08–6:14 · The host pushing back 0/10 The Unprecedented 50% Uncollected Revenue Challenge Steph sets up the segment via voiceover narration. Florian details a personal ER billing story and explains how machine learning multi-armed bandit algorithms optimize patient billing outreach.6:14–8:33 · The host pushing back 0/10 Improving Provider Margins Through Better Collection Steph introduces hospital provider margin challenges in narration. Florian breaks down specific financial math showing how direct patient collection increases hospital profit margins.8:33–10:06 · The host pushing back 0/10 Removing Financial Anxiety to Prioritize Patient Health Steph closes the episode with series context and call-to-actions. Florian touches on the human impact of financial anxiety preventing patients from seeking necessary medical care.

speaking balance: gold is the host, purple is the guest (3 minute bins)

0:00 · the host 54.7% · guest 45.3%0:00 · the host 54.7% · guest 45.3%3:00 · the host 24.5% · guest 75.5%3:00 · the host 24.5% · guest 75.5%6:00 · the host 17.6% · guest 82.4%6:00 · the host 17.6% · guest 82.4%9:00 · the host 88.1% · guest 11.9%9:00 · the host 88.1% · guest 11.9%
Sharpest disagreement ▶ 2:15 Distinguishing medical vs administrative innovation

Florian reframes the narrative of healthcare stagnation by forcefully pointing out that while medical technology has surged ahead, administrative processes remain stuck in the fax-machine era.

 Hardest push from the host ▶ 0:50 Framing the $4 trillion billing crisis

Steph independently establishes the scope and severity of the $4 trillion industry breakdown rather than relying solely on the guest's overview.

 Biggest teaching moment ▶ 6:24 Quantifying hospital margin physics

Florian educates the listener on health system economics, demonstrating how a 30 percent boost in patient payments yields a critical 1.5 percent margin increase for a $1 billion health system.

 The host holds their own ▶ 0:50 Host presenting market metrics and fintech intersection

Steph demonstrates industry domain knowledge by articulating the four-trillion-dollar market size and explaining how emerging fintech solutions target uncollected billing.
the scores for every segment, with the reasoning behind each
ChapterTopicThe host as informed peerGuest teachingGuest disagreementThe host pushing backWhy
The Flaws and Debt in American Healthcare 2300 Steph provides narrated framing about the $4 trillion healthcare industry and uncollected debt. Florian explains how medical technology has advanced significantly while administrative processes remain stuck in the 1980s.
The Unprecedented 50% Uncollected Revenue Challenge 1400 Steph sets up the segment via voiceover narration. Florian details a personal ER billing story and explains how machine learning multi-armed bandit algorithms optimize patient billing outreach.
Improving Provider Margins Through Better Collection 1400 Steph introduces hospital provider margin challenges in narration. Florian breaks down specific financial math showing how direct patient collection increases hospital profit margins.
Removing Financial Anxiety to Prioritize Patient Health 1200 Steph closes the episode with series context and call-to-actions. Florian touches on the human impact of financial anxiety preventing patients from seeking necessary medical care.

Statements from this episode (7)

Opinion
Florian Otto: Healthcare administration remains stuck in the 1980s
“When you see on the administrative side, I think it's still completely stuck kind of in the eighties, right? So you literally have the fax machine still there. You're still having checks being mailed right and left. And you still have something like prior auth…”
Florian Otto Jul 14, 2023 ▶ 2:39
Assertion Partly supported
Otto: 50% of invoiced healthcare dollars are uncollected
“Around 50% of every dollar that is being invoiced is being uncollected.”
Florian Otto Jul 14, 2023 ▶ 3:17
Insight
Otto: Poor Medical Billing Destroys Patient Trust in Healthcare Providers
“So overall, what was really interesting, she basically said, never take me back to that hospital because she lost trust in us. So if the billing is so messed up, she also lost trust in the medical side.”
Florian Otto Jul 14, 2023 ▶ 4:29
Disclosure
Otto: Cedar infers patient job class and demographics for billing outreach
“And then we know, what is the insurance plan? That's also another data point. So that infers, is it a blue color, is it a white color plan? Then, of course, we know what is the demographics of that, of a certain invention, because we have date of birth, right?…”
Florian Otto Jul 14, 2023 ▶ 5:10
Disclosure
Otto: Cedar uses multi-armed bandit algorithms to personalize billing follow-ups
“So we use these multi-armed bandits, they're called. And then based on how the patient clicks through the app, that gives us another set of data, which is engagement data. And together with this engagement data, then of course the follow-ups are different. I m…”
Florian Otto Jul 14, 2023 ▶ 5:43
Assertion Supported
Otto: $1B health systems collect roughly $50M directly from patients
“So when you consider a health system, for example, of a billion dollars in net patient service revenue, they probably get around fifty million from patients directly.”
Florian Otto Jul 14, 2023 ▶ 6:28
Assertion Not checkable as stated
Otto: Hospital operating margins typically hover between 1% and 3%
“And when you before Cedar only had a margin of maybe one or two or three percent, getting additional percent or percent and a half is of course very impactful.”
Florian Otto Jul 14, 2023 ▶ 6:51
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