This is an exclusive BHB+ story
Despite the fact that fee-for-service models have dominated behavioral health reimbursement since their inception, these arrangements may become antiquated—especially in the substance use disorder treatment space.
One provider moving in that direction is Spero Health, a Nashville-based SUD provider. The operator has 75 clinics throughout Kentucky, Ohio, Indiana, Virginia, West Virgina and Tennessee.
Spero CEO Steve Preist said, “The old fee-for-service model needs to go away.” Spero uses bundled payments for between 65% to 70% of its contracts.
“I want fair reimbursement, bundled payment models, sharing clinical outcomes, sharing metrics when it’s working for our organization and for the payer organization and we’re adding real value,” he said. “Yes, I’m all for you paying me either a higher bundle on a per-patient, per-month basis because I’m one of your high-quality providers. I’m also okay if you want to give me outcome bonuses.”
In this BHB+ TALKS conversation, Senior Reporter Chris Larson sits down with Priest to discuss the future of alternative payments, growing thoughtfully and the importance of partnership in advocacy work.
Chris Larson: Hey there, everybody. Thanks for joining us today. I am Chris Larson, senior reporter for Behavioral Health Business. It is my pleasure to welcome you to the latest installment of BHB+ TALKS. In these exclusive digital conversations, we seek to bring together top leaders in the behavioral health industry to have candid, productive, and informative conversations about what matters most. Today, I’m joined by Steve Priest, CEO and president of Spero Health.
Steve, how are you doing?
Steve Priest: I’m great, Chris. How are you?
Larson: Things are going great on my end. I wanted to start the conversation by giving an introduction to you and an introduction to your company, Spero Health. What is the founding story of Spero Health?
Priest: I’m in Nashville. I founded Spero Health in Nashville with a group of great investors in 2018. I’ve spent 30-plus years in health care. Prior to this, I was at DaVita in the kidney care space and had a career aspiration, which is something you do here in Nashville to start a Nashville-based healthcare company to do it with PPU, enjoy working with and to do it in the area of health care you feel you can make a difference.
Going down that path, I began to explore, I like to say back in the day, every ology known to man. I spent about two years as I was departing DaVita, looking at new opportunities, and really came along the outpatient substance use disorder space at the time, really laser-focused on the opioid epidemic, almost completely by accident when a good friend of mine said, “You should check this out. Huge need, huge underserved market.”
Reimbursement’s beginning to happen for it. There are some really good things that could be done here. I was fortunate. Right place, right time, launched the organization, got four great investor groups that are part of our organization. From there, we set off to really develop, ultimately, a nationwide but, right now, a regional play designed around building an outpatient, local, and affordable network of facilities for those struggling with substance use disorder and now, more broadly, mental health challenges. It’s been quite a wild ride. Loved every minute of it and it’s really hard to do this, but that’s why we get to spend these days.
Larson: I got you. Steve, you mentioned right now, you’re focused more regionally. Can you tell me more about what the geographic footprint looks like for Spero Health?
Priest: We’re in six states, Kentucky, Ohio, Indiana, Tennessee, Virginia, and West Virginia. As I mentioned, we’re headquartered in Nashville, so that was for two reasons. One, we physically wanted to be able to go and touch every one of our facilities. As you’re building something from scratch, you need to be a really hands-on operator. It was not growth at all costs. It was focused growth designed around ensuring that we had a long-term, sustainable operating model.
We also knew that those areas were areas where there was a huge underserved patient population. Quite honestly, in some of the states, some pretty thoughtful folks around how reimbursement works at the Medicaid level, which is really where we’ve fundamentally started. The initial goal that I pitched originally was, in five years– so we’re past that now, but in five years, we wanted to have 100 outpatient clinics in five or six states and it was a de novo bill process.
We ended up with 98 at about the five-and-a-half-year mark. Today, we’re at about 75. We’ve actually shrunk over the last two years post-pandemic, post-Medicaid redetermination, payer compression dynamics, so really just ensuring that we have a really strong operating model so that we continue to provide great care for our fellow human beings in need in a bunch of rural communities. That’s been the quest we’ve been on.
Larson: I got you. Now, I want to follow up a little bit on what I’m assuming is probably a pretty tough strategic decision to shrink the footprint a little bit. Everybody has ambitions to grow the next best thing in behavioral health, but you can’t beat reality with ambition is probably a cliché way of saying it. What have been the challenges that you had to respond to? You did touch on Medicaid redetermination, the end of the pandemic. What were other market forces that were at play then? Then a follow-up to the follow-up, are those forces still in play today?
Priest: Sure. I think if you work your way all the way back, let’s go back to the beginning, because when we launched the company, it was really in the early stages of outpatient addiction treatment care that was in-network and that was being paid for by Medicare, Medicaid and commercial plans. Medicare payment didn’t come along until later. Ironically, now, Medicare is one of our fastest-growing patient populations.
The reality is, is that at the point in time we started the organization, there was a lot of tailwinds. Behavioral health was the golden child at the moment, substance use disorder, a huge need. You saw a lot of investment in the area and a lot of growth. That’s what’s happened. That’s a good thing, but also with that, we did bump up against the pandemic dynamic. When the pandemic happened, we made a couple of really conscious decisions.
Obviously, we had to pivot from effectively no telehealth to a telehealth model, which we did in about two weeks. We went from effectively zero of our patients getting telehealth to 98%, 99% overnight. We also made a decision to keep those facilities open because we knew in many of the small rural communities, we served a purpose as a safe place. Our patients really needed us to be there for them.
We clearly took all the precautions you needed to be. By doing so, we really established ourself as an important part of the healthcare community, which I think, historically, those individuals who are providing care and substance use disorder addiction, it frequently gets put on the way on the side. It’s not on main street practices. We wanted to be an integral part of the healthcare community. That focus happened.
The other thing that post-COVID happened as we went through Medicaid redetermination is let’s be real. That was an issue. National estimates were that Medicaid would be reduced by 15% to 20%. We saw about an 8% loss in patients with Medicaid. Not all those people could then flip to a marketplace plan, although many of them did. All of those dynamics were happening at the same time is this continued to be a competitive marketplace.
There are many subscale providers, many of the pure telehealth providers, and so you’ve got market forces happening as well. Then the be-all end-all happens is that really in the last 18 to 24 months, we’ve seen, unfortunately, payer compression, compression of rates. From day one, we’ve been trying to get all of our payer partners to focus on a sustainable reimbursement model, one that is founded on– this is a chronic disease state, so a bundled rate payment model.
We’ve been able to do that about 65%, 70% of our contracts. Our patients are under that model, but the old fee-for-service model needs to go away. We’ll continue to work through those dynamics as well. I think it’s an emerging market force happening. Then this year, of course, we have whatever turmoil is happening in Washington, DC, we’re going to have to ride that wave too.
The good news. We’ve been able to do it. We’ve been able to be profitable all the way through this journey. The real reason for that is because we’re operators at heart. If you do not have a margin, you can’t have a mission. We’ve all heard that saying. We always want to make sure we were doing it right even if we did it slower. I never wanted to build a company really fast just to sell it to the next guy, who’s then got to fix it.
We wanted to build it from the ground up the right way, in-house revenue cycle, strong clinical model, evidence-based practices, using tools and technology, all the things you want to do, and then having an operating footprint where you actually can build structure around it. I’m very bullish on what the future holds, but you’re going to have to battle your way through some of these challenges. You build any company from scratch. Fortunately, we’ve been able to do that up to this point.
Larson: Big picture, how is Spero Health different today than it was at founding?
Priest: Well, I think I go back to how patients are different. The very first slide at my very first pitch deck when I was talking to people at investing literally said, “We’re laser-focused on the opioid epidemic.” Ironically, I sometimes say, “No, I long for the days of the prescription pills because, at least at some point, you knew what you were dealing with from a patient population and the substance use.” Clearly, we’re just at a really different place.
We are broadly substance use disorder, polysubstance use. In these many states we’re operating in there is an increasing rise of methamphetamine and other stimulants and, of course, the impact of fentanyl and xylazine. It’s a more complex patient population. Clinically, we’ve had to adapt. We’ve had to put contingency management programs in place and a lot of different things that, in the very early days, it was very, very laser-focused.
We have always founded the organization on creating an integrated care model. Counseling has really always been at our core. Certainly, we have physicians and nurse practitioners. We provide medical care and we do MAT. That’s really important. It’s the saving lives part of our mission statement, but I think where a lot of the magic happens is in the counseling and the work we do there to instill hope.
Then last but clearly not least because I guess this is one I underestimated is the magnitude of work we do broadly in recovery support, which is care coordination, case management, social determinants work with our community partners. We have become a full-service integrated substance use disorder, mental health comorbidity provider where, in the early days, it was laser-focused on the opioid epidemic. It’s just what happens if you continue to evolve and grow your clinical model, your operating model over a period of time as you’re presented with changes.
I’ll tell you one of the biggest things, we were 100% in the clinic. We went 99% out of the clinic, going through telehealth and pandemic. Today, we’re about 75%, 25%. About 75% of our patient population visits are in the clinic and about 25% are by telehealth. It just really depends on the patient. Understanding that dynamic, what works for the human being, meeting them where they are, it really is loud flexibility that we didn’t have in the past.
Larson: I got you. One last get-to-know-you question before we dig into some other topics. Which firm is your most significant financial backer today?
Priest: Well, I’m fortunate. I like to say I’ve got a wonderful group of investors and nobody is a majority. These are primarily all Nashville-based folks who I’ve known a long time. The Heritage Group, based here in Nashville, is our largest investor. Not far behind those guys is an organization called South Central Inc. It’s a family office out of Evansville, Indiana.
Health Velocity Capital, that group has joined from day one with us. Obviously, myself as an individual investor. Then Frist Cressey Ventures. Bryan Cressey, Bill Frist, they’re a smaller venture firm, has been part of our, really, founding along the way. I’d like to say sometimes Bill’s the one who convinced me to do this when he told me that opioid epidemic was the most important healthcare crisis at that time.
Somebody needs to figure out how to do it the right way at scale using evidence-based medicine. Bill graciously serves on our board along with our other investors. I couldn’t ask for a better group. Super supportive, long-term thinkers, want to do it right, compliance-oriented, clinically-focused. They know we’re good operators, so we’re going to give them a return on our investment at the right time, at the right place.
Larson: Understood. A quick pause and programming note to our participants. If you guys want to send a question and answer through the Q&A function, you should be able to find that. Go and get those questions and answers rolling in. We’ll be able to incorporate those into the conversation as we’re going along. We want to try to meet everyone’s needs in real-time as best as possible. We’ll be able to do that in this setting through that Q&A function. Let’s get those question-and-answers rolling in.
Okay, Steve, so you’ve described to us a lot of evolution in your specific slice of behavioral health. It feels like maybe let’s just say the rest of the behavioral health industry hasn’t necessarily caught up with that. At the end of March, you and other CEOs in your part of the industry announced the creation of the National Alliance for Comprehensive Addiction Treatment Solution or N-A-C-A-T-S, NACATS for short.
Priest: Got to have a great acronym. Can’t have an organization without a good acronym.
Larson: There you go. NACATS actually works. It’s very memorable. What is this organization?
Priest: You’re right. I think what we’ve been trying to do all the way along is help treatment providers, and all of us are outpatient-focused, I like to say, grow the pie. All the organizations that are a part of it. Here, we’ll see if I can get them all right without cheat sheets. CleanSlate and Ideal Option and BrightView and Crossroads and ReVIDA and SaVida and us and MATClinics and Porch Light/Front Range out in Colorado. I think that’s the nine. If I’m missing any, my apologies.
Like-minded CEOs, like-minded organizations, clinically focused understand the importance of providing a comprehensive care model, not just Suboxone prescriptions and telehealth models but really building a community of care. Over the years, we’ve gotten to be friends with each other. We know each other well. While we compete, for lack of a better word, the best thing you can do when an industry is really still in its infancy is to help build it stronger and to grow the pie.
About, I don’t know, a year and a half ago, some of that group came together. I’ve been talking about it for a long time, but Dan Reck at MATClinics said, “We should do this.” A couple of other people did. We got a group together. As I’ve talked to others since we announced it live March 25th, and thank you for putting an article out there for us about that time, we’ve had other providers call and express an interest. We’re talking to that group.
We’ve been in the storming and forming phase. What we’ve been able to do is put together an organization, a 501(c)(4) designed around those nine organizations, but we’ll add more provider organizations to it. We’ll probably add others who have an interest in the industry. I know we’ve had some pharma folks and others reach out to us. We want a community because a community together is going to be stronger in advocating for our patient population.
The focus is on first sustainable reimbursement models. We, today, and everybody in that group’s payer mix is different, but a lot of Medicaid, got to have sustainable reimbursement models in Medicaid. Medicare is our fastest-growing one. A few years ago, on the OTP side, they created a bundled model. There was a by-product, the OBOT model of bundle, but I call it a baby bundle. It needs work. We want to work on that. We also want to make sure that we align on what good clinical care is and outcomes.
I was on a call earlier today with a bunch of organizations from across the country. Somebody used the example that they’ve got an organization with 15 providers and payers in one little coalition. That group had 83 different outcome measures for effectively this patient population because everybody has a little different one. We want to align on what’s the five or six or eight things that we think as providers. We are in 28 states. We have 550 outpatient facilities.
Everybody provides telehealth and provides more comprehensive touchpoints of care. We do think it’s a really powerful thing for providers to figure out a way to have a voice. Sustainable reimbursement models, alignment on clinical outcomes, in concert with the CMS and the Medicaid programs and others who have an active interest in this space, and then being able to be a trusted voice where if you want the provider perspective, because it is important, is to reach out to us. We want to be able to try to help do that. We’ve had some folks reach out to us about doing clinical trials in this patient population, all those sorts of things.
Look, we are in its infancy again. We will continue to grow and expand, but I’m really excited about it. I sometimes say when we get the group together, having the group sit around at the end of a long day of work and have dinner together, there’s a little bit of CEO cathartic time where we all are experiencing the same challenges. We’re all working toward the same goals and we’ll be stronger together. That’s a big part of what we try to do. Let’s just get a group of people together who are focused on this patient population, care a whole bunch, trying to do it the right way, and let’s try to help just raise the whole tide of the ocean.
Larson: I got you. We got our first question in the comment here in the Q&A. I want to pause the program conversation to tackle that right away.
Priest: Sure.
Larson: I’ll just go ahead and read this verbatim. “How do you motivate payer partners to collaborate towards value-based care? Tremendous efforts are made just to pass the gatekeepers and connect with the right stakeholders on the other side of the table.” Very astute observation.
Priest: Yes, so I would tell you, it’s damn near impossible. Let’s just be bluntly honest. Because you use the word called “value-based care.” I spent 16 years in the kidney care space and went from a fee-for-service model and, over time, has become a value-based care model. That was a 20-year, 25-year journey. Even the value-based care part of that, with those folks struggling with end-stage renal disease, is still forming and storming right now. This is a marathon. This is Steve’s version of it.
There are very few true value-based care models out there in the comprehensive definition of value-based care. Now, 65%, 70% of our payer contracts and patients are in a bundled model. The Bundled payment model is a way better model. If you want to call it value-based care, then we’re 65%, 70% of that. I think being able to have some form of value created or given is reality. Getting paid for it is hard.
One of the first things you’ll hear from a payer representative is, “Well, how do we know where to put attribution?” We know you’ve been on the cost curve. We have some really strong relationships with a few of our payers. The reason we do is because we worked really hard for seven or eight years. Bluntly, we’ve built really personal relationships with the right people. I think it takes some of that.
I spent a tremendous amount of my time working with leaders in payer organizations in the states we operate to build those relationships. I think it’s about having the right relationship with the right person. You are absolutely correct. Getting past the gatekeeper, you’re going to get nowhere at the gatekeeper level. Getting past that, getting real engagement, and not asking for the moon and the stars but just asking for, “Let’s talk honestly about the data you have about us.”
I’ve challenged CEOs of health plans and said, “Give me all the data about me that you possibly have.” Bluntly, if I’m not bending the cost curve for your patient population, if I’m costing you more than what you’re getting out of it, then I need to get better. We want to be able to prove our worth.” We’ve been able to do that with a handful of very select payer partners who have been really focused on this space.
Look, it’s going to come. I’ve been in health care since 1991. You see this ebb of this move toward different payment models. Let’s even call them value-based care. There’s momentum happening right now. I think what the OTP space did a few years ago at the Medicare level to create the bundle model they did was really strong and really good work. I wish we had been more actively engaged. We might have done better at the OBOT model, but we’re going to work on that.
I think if you can establish something at the federal level, then it tends over time, we see it as healthcare trickles down to the Medicaid programs. There are states. In Tennessee, we have called the BESMART program, the ARCH program in Virginia, or the Center of Excellence program in Pennsylvania. There’s state-mandated overlays that can begin to help some of that. Look, I’m not one of these folks who’s running around saying value-based care is the be-all, end-all. Value-based care where you take risk is damn near impossible for provider organizations.
I want fair reimbursement, bundled payment models, sharing clinical outcomes, sharing metrics when it’s working for our organization and for the payer organization and we’re adding real value. Yes, I’m all for you paying me either a higher bundle on a per-patient, per-month basis because I’m one of your high-quality providers. I’m also okay if you want to give me outcome bonuses. You’re going to get there, but boy, it’s going to take a little bit of work and a little bit of time. It starts with human relationships.
Larson: Definitely good to know. If I can maybe step out of my typical role of just moderator and actually add some insights from the coverage of the addiction treatment space, but also autism therapy, outpatient mental health, residential inpatient, and psychiatric levels of care, it’s the same for a lot of the other divisions of behavioral health. There’s not very much value-based care.
Even if you’re using the more open and liberal definition of anything, that’s just not fee-for-service. That’s how the industry is taking to using value-based care. True value-based care in the terms of what is defined in academia, what you see at the hospital level, it just doesn’t exist because, fundamentally, it’s a completely different industry or completely different type of care that requires a completely different approach to reimbursement.
Priest: Chris, if you layer on top of that, a lot of the times, behavioral health providers getting paid out of one bucket of money, behavioral side of the payer world. The savings come on the medical side. Frequently, those twains do not cross sometimes. You can generate savings for that part of the plan, but you’re part of the plan, you’re still just a cost. Getting those real conversations at a high-enough level, CMOs are generally great.
If you can ever get to the point you’ve got the relationship with the chief medical officer, then that’s an awesome thing. Obviously, if you can get a relationship with one of the senior leaders, senior operating leaders, senior contracting leaders, CEO of a plan, more power to you. Boy, you got to get up in the organization. The reality of it is we’re still a little niche. We know it’s important, but it’s more important to me than it is to all of them quite honestly. It takes a lot of elbow grease, a lot of hard work.
Larson: Just for you personally, roughly, do you have any estimates on what percentage of your time is spent trying to foster and build relationships with these types of executives in the payer space?
Priest: Well, let’s call it more broadly. I would say 80% of my time is focused on relationships and connections within the industry as I said, whether it’s the NACATS organization or with payers or with state regulators, the Medicaid programs, the Medicare programs, communities that we serve in the healthcare ecosystem. Unfortunately, in Nashville, where there’s many of the large hospital systems here, having relationships with those folks who then have rural hospitals and communities we serve, so much of the CEO role.
Ensuring you have the right team and I’m very, very fortunate here at Spero Health. I’ve been lucky enough to work with some great people in my career. Remember, one of my original three premises, I wanted to do something with people I enjoyed working with. I have some folks who have been with me at various stops on the way. My CFO, Rick Adams and I, actually started in public accounting, August 17th, 1987, together when we were fresh out of school. We’ve been together four times.
I’ve got a really strong team of leaders. Many I’ve worked with 10, 20 years in different places. They know what scale looks like. They know how to do it. Personally, I don’t have to spend a lot of time worrying about my team. Obviously, there’s always internal things you have to deal with, making sure you’re setting the direction for the organization. We spend a lot more time talking about the externalities and headwinds each and every year. One of the first things I talk to my board about every time we’re together is, what’s the externalities, the headwinds? What are the things we’re facing that are difficult? How do we have to adapt and change in that process?
You can talk about all the rosy and cool things out there. If you’re not addressing the stuff that’s not going well, whether it’s our own underperformance, which, trust me, we make our share of mistakes in the journey, or whether it’s something impacting us externally, those are things we ought to work on. If you think about those things that are happening externally, that’s about connection and relationship. It’s really important to get out and do that, but you got to have the right structure and team in place or you can’t spend any time. You get internally focused instead of externally focused.
Larson: Excellent insights. That was all inspired by a question out of the question-and-answer section. Thanks so much for sending that in. Any other questions that you all have, feel free to roll them in. While we’re waiting for those to queue up and come through, I want to go to a specific externality and headwinds that I know a lot of people are thinking about, and that is Medicaid and potential Medicaid cuts. What preparations, if any, are you making at Spero Health in light of potential Medicaid cuts? Then generally, what approaches are you hearing discussed across the industry?
Priest: If you frame up our payer mix and you go back to the beginning, we were 90%-plus Medicaid. The rest was commercial, little self-pay. Over the years, our Medicaid mix is down to about 65%, followed by a bigger commercial population, although many of those folks are people who have moved into the marketplace exchange plans. Somebody who maybe lost Medicaid post-redetermination moved into the exchange plans, and then we still have a commercial population that continues to grow.
One is just diversification of a payer mix is really important. Let’s be honest. If there are ridiculously large cuts in government spending on this patient population, everyone will suffer. Providers will go out of business. It just will happen. We have focused from day one on being an operator and creating– It’s one of the reasons I went from 98 clinics to 75. We shut clinics down and shrunk our footprint because we said we’ve got to be able to survive the storms that come forward.
Now, we didn’t know that we were talking about $880 billion of savings that maybe a lot of it’s going to come out of Medicaid. I think it’s probably a high likelihood, given what’s happened in DC, there’ll be work requirements. We’ve lived through work requirements in the past in some of our operating states. I am very hopeful. That’s where we’re spending our efforts is on lobbying around the fact that individuals in active recovery programs need to be focused there and not a work requirement. We’ve had exemptions for folks in that space.
Senator Kennedy was here just this past week at the RX summit, speaking about some of these things. There’s ways in which I think you can mitigate some of that. In fact, if one of the exemptions from the work requirement is to be in an active treatment program, it can actually help influence people to get and seek treatment. I think there’ll be some other cuts along the way. Bluntly, it’s why you have to have a really strong, really efficient, really lean operating model.
When you work in the government pay world, you can’t have frills. You can’t have bells and whistles. You go to any one of our clinics. They’re beautiful. They all look the same. We can open a clinic, just easy-peasy, because we’ve done it so many times. The footprint looks similar, depending on the space we’re going in. We don’t skimp on the care. We don’t skimp on the variety. We don’t have 500 people running around with big titles doing stuff. Just can’t afford to do that.
You got to get really laser-focused on providing care. Let’s be clear. If too big a cuts come, scale’s going to matter. You’re going to have to see consolidation. This space already needs to consolidate. One of the challenges in any evolution of a healthcare ecosystem is consolidation does need to happen over time because scale is going to matter. I think that will also be a by-product of all of this. Whether it’s in ’25 or ’26, obviously, some stabilization in interest rates in the economy, the broader economy, forget Medicaid, I think, will help.
Right now, we know everybody’s waiting to see. That’s the mode a lot of people are in. I think it’s a combination of all those things. Look, I wish they were like, “We should give more money to behavioral health. We should give more money to everybody doing SUD.” At the same point, I just realized that’s not reality sometimes. You got to live within your means. You got to make sure you can have a margin to carry it forth the mission. It’s got to work for everybody.
I will say we’ve also, though, been very clear is we’re– I call sorry on the low-cost provider side. There’s a point in time which we just can’t take a cut. That’s sometimes why we have to close a clinic, sometimes why we may have to leave a state. We do work in West Virginia right now. Steven Lloyd, who’s a physician, I don’t know his official title. He came in as the governor’s opioid czar, has been really a great guy. Really helpful.
We’ve known him from his time here in Tennessee. We only have close-up shop in West Virginia and pull out of that state just because, structurally, reimbursement is not enough sometimes to even provide the baseline care that needs to be provided. We’re not going to provide inadequate care. We’re either going to do it right or we don’t need to be doing it. That’s unfortunate because that patient population then may go underserved.
Larson: Let’s get into talking a little bit about the care model. We have a question here from an audience member just about that. Let me just go ahead and read it. “I’d love to hear more about how you retain high-quality clinical and line-level staff. This has been our biggest challenge in the current market reality. I also want to know what retention rates look like across your business.”
Priest: Yes. Well, there’s two types of retention. Teammate retention and patient retention. We’ll talk about team because that team would be focused towards team. First of all, on the care model. From the very early days, we said we wanted to integrate a set of services within the four walls of our clinics. We wanted to make sure that counseling is the foundational core. MAT physician, nurse practitioner, primary care light, that we were going to do as well.
Then obviously, we talked about recovery support, all those things around social determinants. We do all of our own in-house toxicology. We try to treat it as a cost center. I try to bundle everything together and just get one paid rate per month and make everything a cost center at that point. Then you can manage against that. That’s really the care model. I will say what I underestimate is how much work we would do on social determinants.
I guess in hindsight, that was pretty stupid on my part because this patient population has a bunch of needs in social determinants. We partner with communities we serve and care partners. It’s so rewarding to help people, whether it’s get your kids back out of the foster care system or find a place to live, those sorts of things. Although we don’t get paid for any of that, we know it helps stabilize somebody in their recovery journey.
Our retention pre-pandemic of teammates, our turnover, let’s say, was about 22%. We’d worked it down, started a company, got the budget turned up. We’d worked it down. We got down to just low 20s. The pandemic happened and all hell broke loose. We were hitting 50% teammate turnover. Pretty consistently for what felt like a year and a half. I’m 60. I’m old enough to not be able to understand it. Clearly, there was like, “I’ll work for three months and then I’ll take a month off and then I’ll do these.”
A lot of that was going on. There’s competition. There’s a limited number of high-quality caregivers in any given geography, especially in a rural space. We’ve had to get really thoughtful in how we’ve focused on recruiting and retention of our team. I didn’t know if our teammate retention rates would ever go back down. We’ve been able to bring them back down. Actually, they’ve been dropping month over month and that’s awesome.
I don’t know if we’ll ever get back to teammate turnover in the low 20s. Boy, I’d like to get to 25%. I think that’s a healthy number. You always need turnover. I tell everybody it works. I said, “Look, there’ll be a day you leave, probably not the last job for all of us, including me. That’s not how life works anymore. Boy, when you leave, I hope you’re running towards something and not away from something.”
We really focus a lot on culture and team. Just simple things like we have Spero University, where we focus on each individual’s personal professional development. Yes, we’re using part of it to teach clinical things. Most of it is really about helping that individual become a better teammate and become better integrated as part of the team and understand they’re part of something bigger and understanding the uniqueness of this patient population.
What does harm reduction really mean? How does it show up every day? How can I, in a difficult period of time, learn techniques for myself to be able to cope? A big part of this space is also helping our caregivers cope with all the burden that gets placed on them. At the beginning of every month, I do a call with every new teammate who joins. We do a 30-minute “welcome to Spero” call. It’s to set a little bit of the tone.
I know you just took a job and you live in a little town in Indiana, but you’re actually part of something bigger. There’s a mission and a set of values. There’s some history here. There’s a way in which we’re going to operate and we’re going to work together. Everybody here has my cell phone number. People feel free to call me at any– we don’t believe in hierarchy BS. We want to be very much a flat organization where everybody is working toward our mission.
I think in many ways, we talk about mission and values. Our mission does ground us. I frequently say, if you could just live your mission every day and live your core values, then the reality is you wouldn’t have to have a policy or procedure for a single human being. We invest in our people. We are not the highest-paying in the communities we serve. We have very good benefit programs, which we think are important and complementary to the work we do, including 401(k)s and those sorts of things.
We’re never going to be able to compete economically, I think, with many other healthcare providers. We just had to get really thoughtful around helping people get to the point where this is their passion. Our biggest turnover of new team is within the first six months. I think most people, if you get into this space and let’s say you’re brand new even if you’re working at Walmart last week and now you’re sitting at one of our front desk, you’re going to know pretty quickly if this is a place that’s got your passion.
This patient population, with all its complexity, is something where you feel committed and devoted to. If you make it in six months, you’re probably a lifer. Maybe not with Spero Health but with somebody because you’re in and committed. Our biggest turnover is in the front end. The cool part about it, we do teammate engagement surveys every year. We have world-class teammate engagement scores. We focus when we have broken teams. We got a bunch of clients.
If we have a broken team, we have a challenge with a leader. We don’t just let it languish. We go in and help fix it. We’re really trying to help the individuals who work here be part of a broader community, where they’re really making a difference in the lives of the human beings in their communities. They have a chance to get paid fairly. They have a chance to be rewarded in other ways, whether it’s core value awards when people become shining examples of the work we do, whether it’s getting to come to a Spero University course and focus on your own personal development like you might do if you were going to a conference somewhere.
All these things we do to try to invest in the person because strong people make strong teams. Strong teams provide great care. I hope a little of that trickles home, because if that trickles home and those folks can become maybe a little bit better mom or dad or son or daughter, then we’re creating some ripples out there. That’s a lot of the work that we do. I think the question was retention rates, low 20s, low 50s. Now, we’re probably about in the middle. I haven’t looked at it lately. Probably in the low 30s right now, maybe 35. I’ll call that an accomplishment because I think it is a new world order of work out there.
Larson: Yes, definitely agreed. Again, contextualization from at least another segment of the behavioral health industry, I spend actually most of my time in that, being autism therapy retention rates are abysmal across the industry. It’s a similar thing. Unless that world is your passion and it is your world, yes, you’ll be a lifer. If you’re not, and a lot of people aren’t, you’re going to be gone from that industry forever. It’s not unusual in the median for a lot of those organizations to have 80%, 90%, 100% turnover over the course of a year. It happens in the industry and that’s what you have to deal with.
Priest: Let me comment because if you think about it, our teammate turnover is highest in that first 90 days to six months. You get past that and it drops like a rock. I’d rather spend a lot more time on the front end shadowing, having people understand the dynamic of the patient literally getting a sense for it, helping our teams not eat their young when the new person shows up.
Hiring right and getting the right person in the door gives you a whole lot better chance of getting to a long-term teammate. Bluntly, if somebody doesn’t want to be here, I’d rather them tell me after three weeks than after six months because it’s not for everybody and that’s fine. Nothing against anybody. If it’s not the right fit for you, then the best thing you do is go find the right fit for you. We all shake hands and go our separate ways.
Larson: At the end of the day, isn’t that what we’re all looking for? We’re all looking for our place, whatever that looks like at work. I want to shift gears to a couple of other Q&A questions that are rolling in. Little surprise it took this long to get a question about artificial intelligence. Let’s go ahead and tackle that. Is AI going to help with programming and impact costs? What areas and how?
Priest: The answer is yes and yes. Today, we use it in, I say, the business functions. Probably in our revenue cycle is the place it gets used the most. Our former CI used to talk about all the robots he was building. At the end of the day, it’s AI doing a bunch of repetitive tasks that don’t need to be done by a human being. Really, that’s there. We are using it a lot today. Remember, we’re still a small organization. We’ve got a small team of folks, so we’ve built a lot of it ourselves.
We’ve taken some things off the shelf, but it’s primarily in the IT and revenue cycle space where we have, again, really strong leaders who have done that work at a much bigger scale. They know what scale looks like. Now, they’re still translating it into a startup or small company phase. We have not used it “seen much of it” in the clinical side of the business or the operating side per se. I think that will come.
There are certainly technologies that are improving, I think, the care we provide or the communication with the patient. I wouldn’t throw those into the AI bucket just yet, but it will. In our job, David Hayden, who’s our senior vice president of clinical services, he’s got the job I really want. He gets to check out all the cool new stuff, right? Anytime there’s some cool new thing that’s come along, David engages, learns. We try to pilot a lot of different things. We fail a lot of times when we try something new, but we’re always going to test and try.
Those things that do improve patient care, reduce cost, hopefully improve the patient experience, we’re going to try to implement. The challenge is all those come with a price tag. Somebody’s got to pay for it through some form of reimbursement, whether that’s just a little bit bigger bundle that allows you to do more of those things, or whether that is differential reimbursement on a fee-for-service basis, or whether there’s a specific code for that particular technology or tool, or you got to be able to essentially cover that cost within the structure of your organization.
That’s damn near impossible with what, by and large, is lower reimbursement across health care. We know that, unfortunately, there’s still not behavioral health and physical health parity of reimbursement in many places. There’s differential fee schedules for a doctor seeing a patient for a sore throat and a doctor seeing a patient for substance use disorder for the exact same code. That’s got to get better and change.
Yes, AI will be here. It is funny. I was at JP Morgan Health Care Conference here in Nashville last week. Everybody gets this. I love your analogy. We had to wait this long before somebody asked the question. It’s real. It’s coming. It’s exciting. I’m going to tell you, people use ChatGPT already just for jolly. I read somebody’s email now. I’m like, “You’ve either got way better at being a written communicator or you got a little bit of help.” Look, those are ways to improve.
Larson: Listen, I’m not going to judge anybody. I write for a living and still write emails. I’m not going to produce my best work and communicate daily with that, so no judgment on my part. I want to get to at least one more question and answer or rather one other question from the Q&A. We’re going to go back and talk about NACATS. If you had to identify the top three goals NACATS to accomplish in 2025, what would they be?
Priest: 2025. Let me push a little bit. I’m going to say by the end of 2026. Let’s say in the next 18 months. First, I would like us to have built and gotten approved somewhere within CMS, even if it’s a CMMI project, a really more robust bundled per patient per month reimbursement model for broadly outpatient office-based treatment. If people talk about an OTP, they’re pretty clear what they’re talking about.
It’s been a methadone facility and then you don’t have to always do methadone. There’s buprenorphine within it, but that’s what an OTP is. It’s regulated a certain way. The OBOT model is just this big chasm of everybody else who treats this patient population. The reality of it is I don’t like that word because post the X waiver going away, in theory, that could apply to almost anything. Even the states we operate in, they all call it something different.
I think in some ways, I’d like to have some service package criteria that if you’re providing this set of services, which is more all-encompassing than just writing prescriptions, that you can tack into this. I don’t know if the word “OBOT” will survive. Maybe it’s Opioid Treatment Program 2.0 or something like that. Something just a little different. All the bigger organizations are, “We’re all car for Jayco and we’re all licensed in some ilk through every state we operate in.”
I’d love to see that because if you can get at the Medicare level, a robust bundled payment model that’s fair and sustainable, then you can carry that forward. You begin to see states adopt it. If any of you are using the G codes out there, TG-286, 287, et cetera, you already see those. Those are now conversation starters with payers. Then that tends to trickle toward commercial as well.
Along that whole reimbursement vein, interestingly enough, at least for most people in the outpatient world, Medicare, Medicaid are better payers than commercial plans, partly because commercial plans, especially out of exchange, have really high copay or really high deductible, really high co-insurance. I’d love to see our commercial side. Look, there are some that are awesome at this, really taking a look at the total cost of care for this patient population and allocating a more bundled payment model there. It is not just old fee-for-service mumbo.
Fee-for-service does not work for this patient population. You’re fighting like a hamster on a treadmill. You’re just running 100 miles an hour and you keep sliding off the back end. I’d love to see more of our commercial payer partners do that. Again, like I said, 65% of my stuff is bundled. I just would like to see more and get everybody 100% there. That’s a NACATS thing, so all nine of the organizations are saying, “We need more of that.” I want us to have established and be reporting on– and the whole group has talked about this.
We had a meeting just a couple of weeks ago. Let’s agree on X number of clinical metrics. We’re all capturing them. We got more data here. I have all sorts of data, but let’s start figuring out how to use it to compare where we could get better or somebody’s doing something really well or just capture that. Again, I mentioned the conversation that I was in earlier where another organization, they still had 83. If you have 83 different metrics, you don’t have any.
How do you get it down to five to eight, three to five that everybody agrees on? Now, that means then you can present that to insurance companies or to regulators or to the state. Sometimes state legislatures. You can present it to other people and say, “Hey, we represent 550 facilities and, I don’t know, a couple of million, a bunch of patients. In that, here’s the measurements. Here’s our data.” I think the other thing I just want NACATS to be is to be a community partner, a trusted voice that helps the whole group. Not just OBOTs, but everybody, the whole industry. Let’s quit.
The thing about the reduction in stigma since I started this journey, we still have a long way to go. We’re part of the healthcare community, especially providers focused on the SUD disease state that has all these other comorbidities around it. We’re really important to the provider ecosystem. Let’s work together to make the whole pie bigger and help people who are smaller grow. I think a by-product of all this is there will be consolidation, which I said earlier is going to be really important to create scale across the country, or at least in broader regional perspectives.
Larson: Alrighty. We’re going to have to leave it there. Steve, thank you so much for joining us. Thank you so much for being so generous with your insights and with your time. If anybody’s interested in joining the conversation in an event like this or in one of our in-person panels, you can submit your interest to do so at the speaker submission button. That’s just on the event page of our website. I hope you’ll ultimately join us there, or if you want to reach out to me directly and submit your candidacy for a speaking opportunity, just let me know. For now, I’m going to have to say thank you very much and goodbye.
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