At $3.8 trillion, the cost of healthcare in the US now surpasses federal revenue. It’s a tremendous burden for employers, and with medical debt as the leading cause of bankruptcy, consumers suffer as well.

Goodroot CEO Michael Waterbury (pictured above) says complexity drives up the cost and keeps it high. “I’ve never met an employer who fully understands the healthcare business. But after payroll, it’s often their biggest expense and it’s rising dramatically every year. It’s a black box that allows for excessive profiteering.”

Unlike sweeping initiatives such as Haven, the defunct healthcare partnership between Amazon, Berkshire Hathaway and JPMorgan Chase, Goodroot’s approach to lowering healthcare costs is “reinventing healthcare one system at a time.”

Goodroot has affiliate companies — four new ones in 2021 alone — that disrupt one particular aspect of the healthcare industry. For example, by some estimates 80 percent of medical bills in the US contain errors. Auditing companies catch these errors for health plans, but since they’re paid by volume there’s no incentive to fix the problem. Penstock Group closes the loop with outreach to ensure the same errors don’t reoccur.

In a sense, Waterbury is the “10th man” of healthcare, trying the contrarian approach at every turn. It’s a dogged kind of innovation, and it’s working. Goodroot affiliates have eliminated over $800 million in wasted healthcare spending since 2015, and they’re just getting started.

Misaligned incentives

“We like to ignore that our healthcare system is full of conflicts of interest,” Waterbury says. “I reached a point where I couldn’t pretend the incentive to put profits over patients didn’t exist.”

Before he became an entrepreneur in 2015, Waterbury held a series of coveted healthcare executive jobs, including an executive role at the largest insurer in the US. The seed that grew into Goodroot was planted early in his career.

“In 2006, I was tasked with lowering the cost of chemotherapy in New York,” he explains. “In the data, we could see that patients were receiving chemotherapy right up until their deaths, long after any hope of recovery.

“I’m not a provider, but I know those drugs have horrible side effects and those patients died in pain. I also knew that a round of chemo generated $70,000 worth of billings at the time. Profit simply had to be a factor in some cases in the decision to continue chemo. I learned there was a term for it: ‘pouring chemo into a casket.’”

Waterbury says when he heard that phrase, he knew he had to change the status quo. But he makes it clear that he hates the game, not the players. “Oncologists should make a profit on chemotherapy. But we have to recognize that profit motivations can shape decisions about care and build a system around that.”

Employers have options

Waterbury says that employers, who generally accept 5 or 10 percent annual increases in healthcare expenses as a fact of life, have many levers to pull in order to lower healthcare costs. They just don’t know they exist, or how to pull them.

“Small businesses really get beat up in the healthcare landscape,” says Erik Wallace, president of Goodroot affiliate CoeoRx. The company launched in April of 2021 under Waterbury’s mentorship to help small employers increase their leverage in the healthcare marketplace. Wallace and his team use pre-negotiated pharmacy contracts, drug pricing outside of insurance, international prescription filing and other tactics most employers would never know to try.

Whether they’re working with CoeoRx or not, Waterbury encourages business owners to push back against rate increases. “Once you begin to use the right language and ask the right questions, you’ll find more flexibility,” he says. “Insisting on more info on drug rebates and the total cost of care can open doors.”

Companies should also consider their unique demographics and usage. Goodroot affiliate Famulus Health creates custom prescription cash price networks that provide discounts that are often lower than prescription copays on drugs your employees are most likely to need.

All of the Goodroot affiliates and their different methods of increasing healthcare access and affordability were borne out of other professionals, like Waterbury, who came to know the system so well that they could see a change that would be both feasible and meaningful.

And employers have a unique ability and responsibility to help move things in the right direction, he says. “You’re already in this healthcare fight whether you like it or not. Don’t leave one hand tied behind your back. Demand better and ask the direct questions. You owe it to your employees and their families to source all available options to fight for better care, costs and access on their behalf.”