Gregg Masters  00:31

This episode of PopHealth Week, our guest is industry veteran consultant and innovator extraordinary John Edelston, president and CEO of HealthPro Associates, we dive into his 36 year plus career of leading strategic and granular innovation in Managed Healthcare recently rebranded as value-based or high-value healthcare. John’s been at the table of a transaction or two, perhaps most notably as co-founder of Caremore. A fascinating history we explore in greater detail later in the broadcast. Welcome, everyone, I’m Gregg Masters, Managing Director of health innovation media and the producer and co host of PopHealth Week flying solo today, my colleague Fred Goldstein is away. PopHealth Week is brought to you by Health Innovation Media. Health Innovation Media brings your brand narrative alive by original or value-added digitally curated content for omnichannel distribution and engagement. Connect with us at www.popupstudio.productions. John is president of HealthPro Associates a consulting practice with over 35 years of deep and granular experience in healthcare systems, provider payer relationships associated with joint ventures specializing in business valuation including transactional representation of buyer or seller in the sale or purchase of a business. So, John, welcome to PopHealth Week.

John Edelston  01:58

Right. Thank you for having me. I’m delighted you can participate in hopefully the collegial and the longevity of the of our relationship, though we’ve not had many, many contact points along the way. We’ve been in this space now for several decades. So first up for those who do not know John Edelston, who are you? Well, I’m a work in progress, really enjoy being challenged and learning and moving into new space and seeing how things fit together. It’s been a long journey. We did go to school together that ought to be put out there by the high school but I was always the kid maybe now it’s ADHD. But I was always the kid looking off in the distance and doing different things but never really properly paying attention. So I’ve traveled from that I went to UCLA got a Master’s at UCLA in cell physiology. My thought I would be pre-med and I thought it would be a doctor at retrospectively I’m glad that my path turned out the way it was because being a doctor was challenging and has been challenging over the past couple of decades or so. Who I am is now somebody who tries to work with clients. I have been doing consulting for about 36 years I work with clients I kind of praise situations I problem-solve, help them make hopefully very good decisions form new organizations. I’ve traveled through a lot of different generations of what I needed to be in order to be effective as a as a consultant. And as an advisor, one of my colleagues describes me as one of the only people he knows that travels from the basement up to the elevator in healthcare. That’s Bill Gill from I used to be CEO and facing that that’s really been it I’ve I’ve tried to do every job that I’ve ever hired people than to do. I started off I worked at the my my first real job after school was the American Heart Association. I will say learn one thing at the American Heart Association. That’s what they taught me that I’ve worked with, for my 35 plus 40 years of working that has been better than an MBA. And that was a course that was taught by the Kepner Tregoe firm out of Princeton, New Jersey, on problem-solving, decision making and situation analysis. I still use it in my consulting, whether it’s forming a physician organization, my help to sell Santa Paulo hospital, I did sell Santa Paulo hospital to Ventura County, but working with a board which was very diverse board, coming to a consensus on what to do going through that decision-making process. So from the Heart Association, into the hospital Council of Southern California, which was a huge transformation. I don’t know why they hired me. Seriously. I had no hospital experience. I think they hired me because I worked with committees and the hospital council had committees, but working with the Hospital Association, I really got the introduction to manage care in the early 1980s and then left them and I just started progressing through looking at meeting needs. I am actually somewhat of an introvert. I don’t like really getting out there and putting myself out. But I enjoy the networking and I enjoy the the personal interaction. And that’s also difficult for me to say, because what about 17,18 years ago, I entered into politics, I ran for office, and my city council is way of giving something back, which I also think is very important. I served on the city council and as mayor for 12 years in Agoura Hills. But I think it’s an important part of also what framed me, I worked with healthcare executives, I was on the board of healthcare executives, I’m gonna say probably from about 1988 87 till 2003. I was president of healthcare executives, I think in 2000. It continued on for a couple of years afterward, but really trying to encourage people to participate. It’s truly a formative process where you’re working with a team of people, you’re working to try to do some things that benefit the industry, and everybody is as professionals, and you’ll learn a lot and I’ve, one thing I really appreciate is, is the ability and opportunity to learn. So that’s who that’s who I am I, I’ve been doing healthcare associates, since 1986. I actually started consulting a little bit in 84, and 85, even while I was at the hospital Council, and then I got fired, there was a new Executive Vice President decided he wanted to reshape it the way he wanted it. So he said, Gee, John, I don’t think we can work together. And that was the birth of HealthPro Associates. So door closes window opens. And in here we are.

Gregg Masters  06:42

So I want to get back to that in a moment. I mean, HealthPro has a sort of a very interesting trajectory in history. And we’ll, we’ll get a little into that. So let me recap. So, so cell physiology to voluntary Health Agency, the American Heart Association to the Hospital Council, and we’re talking now circa really the the mid-80s. And for those who may not recall this, the HMO Act was passed in 73. And it’s sort of baked along there with not a whole lot of fanfare until about the mid-80s, when Managed Healthcare and specifically HMOs became innovation, the innovation of that time, we had the PPO movement, that was birthing, we had the HMO movement that was moving from staff or group model HMOs into the more mainstream independent or individual practice associations that would then contract with health plans. This was all baking back then. So in the context of that, and please add to any, anything that would add to the the ambience of the moment, you were baking HealthPro. So what was HealthPro about given these sort of macro dynamics that were going on, at least in Southern California?

John Edelston  07:59

Yeah. And actually beyond Southern California. So the way that it all came about is I left the hospital council because in one of my mentors who really did a lot of initial shaping of me was Steve Gamble. Steve Gamble was the president of the hospital association. He was one of the smartest men I’ve ever met. And he allowed me the opportunity to succeed and fail and, and to work with him and learning the business. What I found is that I could not engage the hospital association at that time to understand that the physicians in the medical staff and the physicians in the community were just as important, if not more important than the hospital that it was a very symbiotic relationship. Hospitals don’t exist in California, at least they don’t exist without the physicians. There’s a corporate practice of medicine. So let’s say in California, there’s a separation of church and state, if you will. We’ve learned how to bridge that in California with a friendly PC, but back then, that was a very contentious area, because I couldn’t get people within the hospital association, the leadership to move into that direction. I decided I would leave and start to start the physician integration process with hospitals myself. So I started HealthPro Associates I actually started it started as the Health Resource Group, that person at the hospital association that replaced or was coming into replace Steve felt that my name was too close to their name, so I had to find a new name. But tell for associates I started off consulting, helping hospitals put together IPAs, I’ve probably put together anywhere in the neighborhood of three or 400 IPAs over my career full-service IPAs, specialty IPAs, B advanced behavioral network, pediatric cardiology, ophthalmology, oncology, all the way up and down one side and the other frequently, it was with a hospital paid me to do it. But very commonly, there is a group of doctors that did it and I tend to to take the simple approach right Other than there was I forgotten his name, but one person was charging $40,000 back in the mid-80s to form an IPA. I was doing it for maybe a third of that class. I did a lot of work back then with Miller Rosenberg, we were kind of the Mutt and Jeff. We actually some of the clients referred to us as the Smith brothers. You know, the two bearded guys on the box to the cough drops did they have for quite a while and I got some very interesting projects. I constantly tell people that I happened I think I’m one of the luckiest people in the world. I was at the right place at the right time with you know, just frequently so what I was planning to leave the hospital council Elliot Singer hired me to write a marketing plan for managed care for the western United States for Charter hospital. From there. St. Vincent’s hire me with Jerry Kay left to take us cardiovascular surgery program to Good Sam. I was hired by St. Vincent’s to keep the cardiovascular surgeries at St. Vincent’s, which, because of my experience, I was extremely luckily successful that we kept the 1,100 this is going to be funny in today’s terms in terms of numbers, but 1,100 out of 1,200 open-heart surgeries, how many facilities other than Kaiser do 11 or 1200 open-heart surgeries a year. But the second project I got asked to do at St. Vincent was to do an analysis of their IPA because it wasn’t performing. I did that I presented it to St. Vincent’s. And they said, Okay, so now John, you’re tapped to fix it. And that’s how I got in really into the IPA site. It was just an opportunity. They liked me, they felt I was, you know, that I was an honest and straightforward person. And so I did and then they started working on that. And they said, We want you to manage it, not just consult with it. So I formed a company called, at the time, before the AIDS epidemic, I formed a company called ABS Aids, health management for alternative delivery systems. I did both companies, but I hired a general manager for for that and worked at for six or seven years from about 87/88 to 94. But what I found was, I was the worst hire a person to hire that you could possibly find because I hired people, I they just could not manage that business. And I I had about eight or nine IPAs, we had about 30 35,000 enrollees. But it just seemed that it could never, we just could never make it go in and do the quality of work for the clients that I wanted to do. So I ended up selling it. And back in 94, Aetna was in inline and a third in line of a health I knew thought they knew how to do this as well as anybody else. So they bought my company, they had bought a company called Gateway, they formed that in a professional management Corporation, they bought my company, they brought me on on a consulting basis to help them with additional acquisitions. So I worked with them on coming really close to acquiring health physicians that fell through but doing other things. And then they decided to get out of that business. But all the way along, I continued to do consulting, so it just a wide variety of consulting. And around that time also there was more acquisitions going on. And we started doing acquisitions for groups, did equity worked a lot with Healthcare Partners worked a lot on the other side of Healthcare partners, Memorial Medical Group merger into health care partners. There’s another group in the South Bay that merged into Healthcare Partners. So got to know you know, got to know those players. But really the the, the consulting has has morphed as we’ve gone along with. Back in the day with IPAs, it was getting contracts getting enrollment, almost at any cost. It was the bigger the enrollment, the better, the better it was. And then it was all the spin-offs. I don’t know if you remember how he took Provider Services and provide any provider group, Reggie Friesen and Fred Mackay.

Gregg Masters  13:59

Absolutely.

John Edelston  14:01

Okay. But, you know, there’s a reason they no longer live in the country. You know, they got into some things that got them into big trouble, you know, risk retention groups offshore, and other things. But these were things that look like opportunities where you could make money not just being serving the patient. And rather than just focusing in on the care of the patient and in delivering the service of the patient, it’s how do you how to use it as a tool or platform to do other things and make money. All of this led through and I actually bought was the transactional consultant for what was called a physician to the greater San Gabriel Valley, which we bought San Gabriel Valley portion of Southern California IPA, another one of that went down in San Diego, but we bought that and I worked with Bart Wald on that and that developed in a very successful organization. But then I’m going to take a little bit of a step back in my IP management I blended the two is we were managing a group at a hospital that no longer exists Rio Hondo Hospital in Pico Rivera competed with Downey community so you have the empty hospital you have the DO hospital, if you will. And try to remember Ed Scott and Patrick Petri were in succession the CEOs, there an entrepreneur whose name is Shelley Zimber came to the IPA. Then El Raman who was the president said, I want to form this Heart Institute and start doing open-heart surgeries at La Mirada Hospital. I was managing community IPA and there was a lot of different entrepreneurial activities going on. And now I don’t know how many people know La Mirada out of hospital but not exactly the St. Vincent’s or Good Sam of open-heart surgery. And I strongly I tend to be a direct person and I I strongly recommended and contradicted the president of the IPA against the physicians in the IPA investing. And so Dr. Ramin thought it would be just a whole lot of fun if he invited me to dinner with Shelley Zinberg, where he could sit back and watch us duke it out. And what actually happened is, we hit it off incredibly well. We spent the whole dinner matter of fact, we close the place and we could close the place because doctors embraco I don’t know if he owned it at the time, but he had owned the restaurant we were in called the Del Rey and we started having meetings about what we he may be able to do with community IPA, he had a medical group called medic, internal medicine specialist Medical Group. They were endocrinology, cardiology, gastroenterology, which is what he was in oncology. And we started we were talking about and I said, Look, Shelley, the driving force here is primary care. So if there is anything to be done, there’s going to have to be we’re going to have to figure away, where you’re all internists, you all could be primary care. But once you start becoming primary care and specialty, or even just specialty in HMO site, you’re going to lose probably a third of your referrals because there’s a lot of physicians back in the early 90s. You’re either an HMO doctor, or you are not an HMO doc. Well, he took a leap of faith on all of our discussions, he and Mickey Goldsmith, who was an oncologist, we had meetings and we set up this model to consolidate and merge community IPA and Internal Medicine specialist Medical Group, we did an offering memorandum, we went through the you know, everything that you do to merge two organizations, but two very disparate organizations, you had the 10 physician specialty group, and you had about a 25/30 primary care physician-owned IPA, and putting them together. So we started that process. And one of the steps along the way was a gentleman who I met that was very influential in both myself and ended up with CareMore. With from Saxier medical, Senate garden, Saxier Medical Group, again, they were they I don’t think they exist anymore. But they were big in the late 80s, early 90s as being Free Foundation, one of the big organizations, and we had a meeting at the Marriott Hotel at LAX.

Gregg Masters  18:15

And if you’re just tuning in to PopHealth Week. Our guest is industry veteran consultant and innovator extraordinary John Edelston, president and CEO of HealthPro Associates

John Edelston  18:25

and it included a couple of people from Downey, it included about five or six of the doctors from Internal Medicine specialist Medical Group and from Community IPA. And this gentleman was the facilitator and I was sitting next to Shelly and we were going through this and we were Generally passing notes about the comments that were being that we were being given about what was being successful in their organization and what wasn’t. And that created the formation of doing a really a clinic without walls Caremore was a partnership with corporations so that none of the individual physicians within the IPA would feel put upon by the specialists who were a part of a group each of the doctors could do their special deductions that they took that they wanted to take, you know, whether they had their wife working in the practice, or somebody else working in the practice, or they wanted to have a Mercedes Benz car, or they wanted to have this or that all of those things were managed in their own individual practice. But one of the interesting things was we started showing he asked me is what are we going to call this? And so we started pushing, you know, a piece of paper back and forth between us. And no, there was also you know, all sorts of organizations, there’s Bristol Park because of where they were, there was Huntington Medical Group, there was Bob Margolis’, his company, which was blank on the name here, but primary physicians, something very maybe primary physicians Medical Group, but there was the health plans of, you know, take care of we were pushing, you know, variations and iterations back and forth and, and I said, Well, you know, there’s always Maxicare Shelley sent back on he wrote on it, cross it off and said, Who cares? And then I said, well, we’ll care more. And that’s how CareMore and Shelly are did an artistic thing with any capital C and a capital M. And that’s how CareMore got born. And then it progressed, did more with, you know, forming it, got it form, we got the 33 total, original partners. And the interesting thing here is these were people who all work together. I worked with Memorial Medical Group. Memorial Medical Group is considered to be a premier Medical Group, all MD’s, and I will tell you, their ability to work together was very moderate, great group of guys, Glen Libby. I mean, I did a lot with them and I loved them all. But they all thought that their specialty and they they contributed greater to their group than than anyone else in the group. Then you have CareMore on the other hand, Do’s most all DO’s but the most cohesive group of doctors I’ve ever worked with, they all trusted each other. They all viewed Shelly is Shelly Zinberg is a kind of a benevolent dictator and they are all okay with that. He took them down the road and we did a lot with with Downey and we did. We had the, the, our fortune was the misfortune of another group was American Health. I don’t know if you remember American health and Jose cvac and Rami Fermin. But yeah, and they fell out of favor and they lost the outlet contract to to CareMore and CareMore started really hold it up. And and then it created a certain amount of that friction with Downey because Danny wanted to be in control and , the doctors and CareMore said, and Shelly said no, the doctors are going to be control. And the board voted to try to take it over and they lost that board vote. So they ended up selling to CareMore 50% of the interest for about $10 million. That was in 209 99 ish time. And then in 2005, six CareMore sold for $280 million dollars to JPMorgan and Crystal Cove partners. So you can you, you can kind of get a that’s the sense of where the trajectory of say has taken me not. I’ve worked with a lot of other organizations, and a lot of groups, but what I learned from my earlier days, and all the way through and forming CareMore and forming physician associates. And I wrote the white paper on friendly PCs for tenants. So which will work with Mitch Levin. So in the work with, with Noah and all that they really are the ones who recreated me and kept reinventing me. And I just became a vessel of everything that I learned and everybody that that I was able to absorb with their knowledge and experience and expertise was all the way along. I feel really incredibly fortunate. I have to tell you one other story, I worked with a guy who had a behavioral health company, and he’s he was an EAP Employee Assistance plan. And he wanted to become something much more so he had hired me as a consultant and we did a limited Knox Keene scheme for behavioral health. And then I ended up selling it to to Anthem, just to clarify,

Gregg Masters  23:15

that’s the HMO law governing really California entities. Right?

John Edelston  23:20

Correct. So the the limited Knox Keene back then, wasn’t that you were you were a full service, IPA or group. And you could just tell take full risk, it was that you did dental capitation or you did in this case, behavioral health capitation. So we ended up selling that to Anthem, and that became Wellpoint Behavioral Health. And then, around 2003 2004, Nick Koenig, who was the the owner, and that I had helped with solid, he brought me into a whole different situation. But to show you how industries are so similar here, he was on the board of a private prison, in a private prison. What does that have to do with healthcare, but you know, it’s a business where it’s heads on beds, you have services, which are basically dietary, you’ve got serving food, and you’ve got the, you know, you’ve got to do laundry and those kinds of services, which hospitals do and then you also provide a certain amount of ancillary services, outpatient psych counseling, you know, you know, hospitals may do PT and OT and RT, and with the this organization did it did outpatient behavioral health counseling to these inmates that, that had worked furlough kinds of programs. And he brought me in to help them in terms of their organizational structure. We, we did a structure like an MSO we did not like we did an MSO. And then we sold it to not Hospital Corporation of America that it was the equivalent Correctional Corporation of America. So it was you know, it’s so many similarities. It was just amazing. So it was you really you can take it transpose what you learn in, in least in healthcare and take it in other industries. That’s kind of who I am. And what I do today is a range of things I do expert witness I probably 20% of my practice is as a as an expert witness on a on a wide variety of healthcare-related topics. I’m selling a fertility infertility clinic right now should close this week, a multi-site Urgent Care Clinic, I’m helping them to get evaluation and and helping them to sell and doing a three room. orthopedics, ambulatory surgery center up north. And all of these people, by the way, most of them might have been clients, off and on for 1520 years. Matter of fact, I sold an ophthalmology group was my third or fourth client ever back in the 80s. And just sold it not that long ago.

Gregg Masters  25:47

So John, this is fascinating stuff. And I, I just want for the the audience’s perspective to appreciate is a your longevity, be your sort of strategic status here as someone who kind of thinks and visions, this stuff and then gets real granular with hands on sort of transactional kind of stuff. So what you’ve just heard is the genesis of CareMore, which is, which is a behemoth and I’ve often referred to CareMore, as the tail that wags the dog, you know, the, because one of my so what I’m what I want to do is I wanted to ask you, why is was Southern California uch a hotbed for this kind of innovation. You know, we talk innovation these days, mostly in terms of digital health technologies, interaction with the healthcare system, whether it’s delivery or finance. But what’s really going on is back, we were talking about HMOs renovation, the 80s. So having heard the lineage of your experience with that moving these pieces around on a chessboard, and basically seeing back then what we’re talking about today, is changing the payment model, aligning the incentives, you know, it’s trying to manage the premium, such that it’s consistent with Triple Aim, and not just layering on top of an ever-increasing premium base, whether it’s government or commercial sector. So what what did you Garner from that experience back then, that you can pull forward into these issues, which in at some level remain the same? healthcare is expensive, it’s beyond the reach of too many people. So in 2021, we’re still grappling with the fundamental drivers of health equity disparities, cost cost sharing this and that. So you were cool to the idea of discussing population health and ACOs you wanted to put more of a spotlight on on medical homes, but then you you go into patient engagement seems to be the driver that could potentially cure this. Why do you say that?  And that is the last word on today’s broadcast. I want to thank John Edleston, president and CEO of HealthPro Associates for his time and insights today, and finally our closing appeal at PopHealth Week. Please everyone we can get through this pandemic only together and we’re so close. So do mask up when in public practice social distancing, and attention to personal hygiene. We can slow the spread of this deadly virus bye now