Taking On Healthcare's Trillion Dollar Crisis (feat. AJ Loiacono)
TRANSCRIPT
Click here to listen to the episode, published March 19, 2026.
JOHN: Thank you all for joining us today for another episode of our podcast, Moving to Value Unscripted. My name is Dr. John Rodis, and I'm a recovering ex-hospital president and am proud to be the president of the Moving to Value Alliance. The Moving to Value Alliance, a 501c3 nonprofit, is a multi-stakeholder grassroots organization whose purpose is to foster a community that aims to create a value-based healthcare ecosystem with high-quality outcomes at a reasonable cost for plan sponsors and their members, beneficiaries or employees. I want to thank our members who support makes this podcast possible. We'd like to give special recognition today to our trade member, Hartford HealthCare. I'm joined by my fellow board members, Dr. Steve Schutzer, Lisa Trumble and Kim Lynch.
STEVE: Hi, I'm Dr. Steve Schutzer, orthopedic surgeon, co-founder of the Moving to Value Alliance. I'm also co-founder and chief medical officer of Upswing Health, a national virtual orthopedic company focused on improving patient access, the clinical outcomes and all value in musculoskeletal care.
LISA: Hi, I'm Lisa Trumble. I'm president and CEO of Southern New England Healthcare Organization based here in Windsor, Connecticut. We're a physician-led, clinically integrated network focused on population health and value-based care in Connecticut and Massachusetts.
KIM: I'm Kim Lynch, founder and CEO of Metis Health Technologies, where we help clinicians and healthcare organizations streamline operations, increase revenue and deliver better patient care. I'm originally from Michigan, now based in DC.
JOHN: Our guest today is AJ Liacono, co-founder and CEO of Judi Health. You may know AJ as the force behind CapRx, a company that took on the PBM giants by introducing a transparent, flat-free model. Last year, that mission evolved into something even more ambitious. With the launch of Judi Health, AJ and his team are tackling what he calls the, quote, one trillion dollar problem, end quote, of administrative waste. They've built the industry's first unified claims processing platform, a system that puts medical, pharmacy, dental and vision claims into a single ledger. As a serial entrepreneur with more than twenty years of experience in pharmacy benefits, finance and software development, AJ has spent his career developing solutions that have redefined the pharmacy benefits industry. He joins us today to tell us more about his work moving towards true value in healthcare. Welcome to Moving to Value Unscripted, AJ.
AJ: Thank you for having me, John, Steve, Lisa, and Kim.
JOHN: So AJ, could you just tell our listeners a little bit about how the heck you got into this space? You know, you have an amazing career, but for most of our guests, I would say, up until now, there's usually some tipping point, something happened, some epiphany somewhere along the way, that got them on their journey. So maybe you can give us a little about your background and how you kind of got on this journey.
AJ: Yeah, it's funny. I just answered this question yesterday. Once a week, we have a meet and greet with the founders. So I get to meet our latest class of new hires. And the question comes up, what made you enter this field? What made you pick up this mission or develop this mission. And for me, I go back to — I was just happy and ignorant for the first eight years of my career. I joke all the time, I had one of the most boring jobs in America, which is — I used to be part of a project team that used to help implement and upgrade old supply chain systems for pharmaceutical manufacturing. So upgrade old MRP systems to MRP2 to ERP systems such as SAP and Oracle. And I did that for eight years and I was very happy. And I worked with a great group of people. I had a first rate education in supply chain logistics and drug pricing that still serves me to this day. But it was at the tail end of that time period that a friend came to me and said, could you look at this claim file for me? And I'm like, sure. He goes, you're great with databases. Like, help me make sense of this. And I'm like, well, what am I looking at? And he said, this is PBM data. And I'm like, what's a PBM? And he's like, how do you not know what a PBM is? And I said, well, my life is in manufacturing. I'd like to say it ends at a loading dock. I'm going to date myself. We make a pallet of Lipitor and it's pre-sold to McKesson, ABC or Cardinal. And I just assume it shows up at hospitals and pharmacies across America at a reasonable price. Boy, was I wrong. And so I looked in this file and I said, your file is corrupted. And he said, why do you say that? And I said, it looks like drug prices are changing every hour of every day in every pharmacy for every drug. That's impossible. Drug pricing is quite stable. You know, I know because I sit on the database here. You know, we do a price change in December for January. We do a price change in June for July. And if it's generic product, it's based upon your purchasing schedule, which, you know, it could be quarterly, could be monthly, depends on your size. And I go, this file is just wrong. I go, give me another file, different employer, different PBM, and I get another file and it's the same thing. And I go, ah, this isn't an anomaly. This is a pattern. Question is how deep is this pattern? Is this structured? Is this intentional? So I quit my job and I formed a company that would do audit and procurement for self-insured payers. And the goal here was taking large data sets that were very cumbersome. You can't work with them in Excel, obviously, it would break it from the field size. But the whole point was, can you help people, people being the payer, make sense of these complex claim files? And really what you're doing is what I call reverse adjudication. You're basically reversing the sequence of logic in which the price was chosen. And this is where I was introduced to all sorts of things that don't make sense if you come from manufacturing. The first thing is, I think of the world of drugs in a binary structure of either it's patent protected or it's not patent protected. And the commoner lay person would say that's a generic or a brand.
JOHN: Right.
AJ: You get into the payer side and I'm like, what is a single source generic? What is a multi-source brand? What is what we would say limited supply? What would the impact of dispense of written in changing the classification? And I'm like, I don't even understand this. It's a drug that was either patent protected or it's not. How can it change its state? And what I realized is this was all part of the game, that if I could magically transform something from a generic to a brand, I could pad performance. I could expand spread. It was sad that I didn't realize at the time how many people were complicit with this. And so, you know, long story short, just, you know, go back to the original question, which was, I didn't really ever plan on being in this position, but something impacted me so deeply that I felt like I had to do something about it. And then as I uncovered the depth and scale of what I would say — a borderline fraudulent system, I felt like this was my life's purpose. And it took me from my old company where I tried to not just help the payers, but maybe I was being naive, help the large, what I would say PBMs understand this system isn't appropriate and that you should change it. But when I realized nobody wanted to change it because they were making an absolute fortune on the system, that was after eight more years of trying to fix it from the audit and procurement side, I felt like the only way to fix the problem would be to become the problem, become the PBM, and thus CapitalRx was born.
JOHN: You know, I'm reminded by, I went to a conference once and there were two guys. They were, like, freaking PhDs and they gave an hour lecture on pharmacy supply chain. And like, talk about naive, I mean, I ran a hospital. I thought it was the drug companies were the problem, that, oh, they're just jacking up all the prices. And then I realized, oh, no, it's all these middlemen along the way. It's insane. Well, God bless you for — A, for going down that rabbit hole, first of all, because I know that must have been like, what the heck is going on here? But then you realize, oh, this is designed obfuscation, right? It's by design. And it's not just in the pharmacy space, by the way. I mean, you know that it's across the healthcare ecosystem, but —
LISA: I think that this part of healthcare is probably, probably the best word is the most disgusting part of health care because it is so opaque and so hard for anyone to actually understand what you're getting and what you're paying on any given day. And that was a great intro, AJ, and it might be helpful for the audience to understand a little bit about CapRx. And in terms of complete transparency, our organization, SoNE Health, uses CapRx, and it's been the best thing ever in terms of our ability to manage our privacy spend.
AJ: Thank you.
LISA: So I just want to be up front with our listeners about that. But give them a thumbnail of what CapRx does and how you function and how you expanded it to Judi Health.
AJ: Thank you, Lisa. It means a lot to be in partnership with you and your organization, and it's an absolute pleasure to service you and your membership. And so reflecting on that transition, you found CapitalRx. What are the principles of this organization? And I said that we were founded with two principles. The first principle is do not make money on drug spend as an administrator. It is a massive conflict of interest if you are the administrator and you make money on drug spend because immediately, the more expensive the drug, the more money you make. The more fraud, waste and abuse. You are the beneficiary of those actions regardless if you like it or not. And I often say, what is the fiduciary test if your administrator has alignment with you? This is such an easy test. If your administrator can make more money on the classification of a drug, the formulary decision, the clinical decision, the fulfillment and channel decision, you have a significant problem on your hands. And, you know, I go back to this word complicit. I'm a clever person. I'm not a Rhodes Scholar, but I would like to say other people made these observations besides me, but nobody was doing anything about it. In fact, people were doubling down on the old model. And when I say that, it wasn't just the carriers, and I always want to be fair about this, there were some consultants and brokers that refused to acknowledge this was a problem or a conflict. I always use the example, imagine if my accountants would charge us based upon our gross revenue. I would imagine eventually we would see some proposals in which we would be able to report more gross revenue because their fees would go up. And, you know, a lot of people don't realize that gross to net since about, in my calculation, because I've been tracking this, you know, probably since 2013 in a very detailed way is, you know, gross to net has been negative for branded medication. And what that means is for every price increase, the net amount that pharma is able to bring back, you know, after concessions of discount and rebate and 340B, et cetera, is negative. If you track most pharma branded product, they'll say it went from 53 to 52 to 51. It's this easing of price. But we've had this historical unprecedented amount of drug trend and price inflation. And people are like, how is that possible? And I go, because the person in charge of the money who originally was selling everyone, hey, I am a PBM, and by aggregating this purchasing power, I am going to deliver much better results. And you can't say we had better results when you go and you see what I would say trend for some payers that double digit multiple years. I always say there's a power struggle in the supply chain. It started with pharma being in charge. I often say around 2007 or so with the birth and the expansion of the managed formulary pay-to-play economics that PBM started to take over the supply chain. And the supply chain became even more entrenched on the PBM side with the expansion and vertical integration with mail order and specialty. And so when that happened, pharma was put in a very difficult position. They could either keep playing the game to get formulary position, or they could take a stand and possibly be wiped out. When you have three entities controlling 20 to 30 percent of market share from a formulary position, you don't have many choices. I think pharma has obviously combated that in the last couple of years, and we can talk about that if you want in a bit. But the point of it is going back to the principle, which is don't make money on drug spend. This is a horrible place for an administrator to be. Charge a flat fee. And I point this out to everybody. The PBM industry started in the 80s and 90s from this point. We charged a flat fee. We did not make money on drug spend. This is something that was created in the 21st century as a brilliant marketing ploy because they convinced — they, the PBMs — convinced all the employers and payers in the country that their services are free. It sold off the shelf. It also enabled lots of other entities to encumber that price or fee structure by kind of joining in in the commission or the share of revenue or the market access or the channel. And this is why there were people that were complicit in the bad behavior. If my commission is coming from these entities, why would I unwind it? And so first principle — don't make money on drug spend. Second principle, which was critical to our thesis is — we need to determine or find a way, I felt through technology, to administrate a claim 40 to 60 percent cheaper than our competitors. And I often point this out. Nobody in the supply chain is buying drugs 30 or 40 or 50 percent cheaper than anyone. The supply chain is quite competitive, even between big and small. The delta, I used to say, was 12 to 14 percent in drug spend. So big entity with purchasing power, smaller entity. Now, people would say that's an ocean, and I go, well, there's two lines in healthcare. There's gross margin and net margin. And the point of it is, can you operate — my target was sub 4 percent, and lo and behold, that's what we operate on today. You know, in comparison, when PBMs were still publicly traded and reporting like Express Scripts and Caremark, they would report net margins of 5 percent to 6 percent, gross margin, obviously not starting at 7 or 8. And so the whole point of it is, can you eclipse that gap? Can you close that gap through efficiency? And that was the birthplace of the concept of Judi. So my co-founder, Ryan, and I sat down and said, can we invest, and I'm going to get to that word in a second, in a platform that is a true enterprise platform, in the sense that it's a single source of truth, like enterprise is a term we use in software to define scalable and secure solutions. But really, the definition of enterprise is a single source of truth. And that was my background, and which was what made enterprise solutions run manufacturing plants is it operates on a single source of truth and creates a huge amount of efficiency and accuracy in order to operate at scale. And so we needed that. And I felt with technology, we could get there. And so these were the principles that we founded the company on and enabled us to challenge the big three. I felt like every PBM that came before us was either going to make compromises and follow in the footsteps of the big three, CVS, Cigna and United, as well as not invest in technology. And I use that, I go back to that word invest because it is a very expensive endeavor to write enterprise software in this industry for these workflows. There's a reason why there's not a lot of people out there.
STEVE: AJ, let me pick up on that. First of all, thank you for joining us again today. It's been great to watch your evolution. I think with 2019, if you recall, you were here in Hartford for our second in-person symposium and you did a webinar with us three years ago in 2023. So it's been really, really great to watch you grow and evolve. But just looking back at your CapRx experience, you know, healthcare is divided into these moats and deeply entrenched. And especially in the PBM area, we have insurance and manufacturers and rebates and migraine headaches. But what have you learned? What's the biggest takeaway in terms of your ability to disrupt the PBM industry? What's been the most underestimated barrier?
AJ: You know, the first thing that comes to mind is — what I did not appreciate was the desire and ability for large competitors to use any dirty trick in power to prevent competition. Boy, I am naive again. And so here's a great example that still exists to this day. We go through an RFP process and it's very difficult. It takes months to go through an RFP. For a consultant or broker, they do an evaluation and you have finalist meetings and you get through all of this process. And I always want people to understand is the switching rate is 3 percent in the United States on carrier or PBM services. And people will be like, is it that low? And I go, yeah, if you look, you know, hiding in plain sight, look at the retention rates of CVS, Cigna and United, they'll say it's 97, 98 percent. There's your switching rate. So the point of it is you have a low percent chance. You're working so hard. You get through this entire process and you are awarded business. And you're just like, this is amazing. You're so excited. And this is what I didn't realize is the fight is just beginning. So the first fight that is going to begin is around the fact that with the Affordable Care Act, we share data for accumulators, medical and pharmacy, which I think is amazing, amazing idea. And I'm so glad we did that. However, the unintended consequences were — there are certain carriers and PBMs that weaponized that delivery of data. Because if the carrier says, I don't want to share data with that entity, what do you do? And so here's a great example. I remember like it was yesterday. It was one of our second or third accounts we had won. And this large national carrier was like, no, I'm not sharing data with them. And I'm like, what do you mean you're not sharing data? And I always want people to understand is — we are so accommodating. I don't ask anyone to move data in our format and our protocol and our standards. I just say, give me yours. And I want people to really understand this. If you're a junior engineer, this is maybe a couple hours of work. There's nothing to this. And they say, no. And everything grinds to a halt. Now, the broker, you would think, would engage with the employer group and be like, this is completely wrong. You are the fiduciary. It's your data. It's your rights to the data. No one can say no. And you know what the answer is? And this is so sad. The broker's like, you got two choices. You either lose the deal or maybe you figure out a way to work with them. And I'm like, what do you mean lose the deal? I just went through all of that effort and I'm going to lose because, and they know this, you know, the carrier, the PBM knows this because they're just like, this is how I'm going to, you know, this isn't even competition. This isn't a better product. This is just, again, someone muscling you out. Now here's the other part of this is what I call the extortion. When someone goes, oh, you want to share data. Okay. I'm going to charge you $500,000 a year. I'll be like, that's more than our admin fee. And they're like, oh, and then you go back to the broker and you say, hey, they're trying to extort us. And the broker goes, well, you could either pay or lose the account. I go, how about the third choice, which is you actually champion the rights of the fiduciary, the employer here and tell them they must. But again, is it — they're complicit? They're not willing to fight. They don't, you know, they have broader business with the carrier. I've heard it's all of the above.
JOHN: It's all of the above.
KIM: It’s all of the above.
LISA: And the commissions come into play.
KIM: No, I think, I mean, I'm so glad to hear you lay this out so plainly, AJ, because my background is on the EHR regulatory side. I was at ONC when we were doing meaningful use. Makes me really popular. That's said with sarcasm for those that are wondering. But what you're describing is regulatory capture. It is industries either writing the rules for themselves or making sure that they are not held accountable for what would be in any other industry, basic competition, basic response to that kind of information blocking. The idea of walking into a store where someone says, no, no, no, I can't tell you any price. It's proprietary. Doesn't make any sense in a grocery store. And yet we tolerate it in healthcare everywhere we look. Again, I'm so appreciative of the plainness with which you lay this out and from a manufacturing standpoint, because I think we get too wrapped around, you know, we're too cute in healthcare. Oh, we need all of these things. Oh, it's proprietary. The hell it is. It's quite simple. It's market protection masquerading — yeah.
LISA: Yeah, basic business practice doesn't exist in healthcare at all. It's completely upside down. You know, you take someone from any other industry and put them in healthcare and they're like, you do what? What do you mean you don't know your price? You don't know the cost of your goods. You don't know whatever. You don't know what you're being charged for commissions and you don't know that your own employee health insurance, you're being hosed on every transaction in the deal to deliver healthcare to your employees. And the point that you're pulling out, AJ, is the reason the brokers don't play that honest middle person is because they're paid commission by the players.
KIM: They're benefiting from it. Exactly. I think that complicity to silent tolerance of the status quo is such an important thing to throw light on because that's exactly right. You can be actively trying to create, as I worked for an insurer many decades ago now, who's like, well, we just got small market reform. We got to go back and get individual market reform. There's always more we can get. This is different. This is the insidious status quo of we're all trying to make it better, but really the status quo is being maintained. Those funds are still going into your broker's pocket and you don't know. So my question after reflecting, is how does this actually play out today and maybe in the next couple of years for a clinician practicing in the field, a doctor who is feeling all of this weight that you were describing and all of this frustration and just trying to serve the employers, employees, families, retirees successfully. Help us illuminate what it looks like on the ground, this burden and hopefully the relieving, the unburdening future that's maybe coming soon. I'm with you that we're just at the beginning of it. So give us some hope, AJ.
AJ: Well, I mean, I think that's exactly where we are, Kim. We're at this, I would like to say the dawn of a new age. I often say it's the end of the beginning, you know, not the beginning of the end.
KIM: Love that.
AJ: And in the sense that —
JOHN: I think Churchill said that first, AJ, but it's okay.
AJ: Oh, no. I take no credit for that at all. But the point of it is, if you think about it, you finally have — I have this slide that I presented at our national sales meeting a few months back. And I said, I talk about the first five years. So we started this company in 2018. And the first five years of this company, I talk about the age of indifference. Nobody cared. Nobody cared. The broker didn't care. The consultant didn't care. Even the employers didn't care on some level. I am like, oh my gosh, how many times do I have to make these, you know, speeches? And, you know, you first get like, oh, that, you know, that's interesting. And, you know, the sad thing is there's like the flat earthers would be like, that's not how it works. That's not right. You know, and you're just like, oh my gosh. And then about the next two and a half, three years, you know, which takes us up to January of this year, I talk about the age of confusion, which is, it's not indifference, but they're like employers are like, maybe, wait, maybe this does make sense. Like, yeah, that sounds like a problem. And I talk about why are people starting to question this over that three-year period. And I talk about the press has done a really good job of, I don't want to use — to say, demonization of some people in healthcare, but they've really tried to expose, I think, the bad practices, you know, be it unreasonable compensation, opacity, complexity, taking advantage of patients, et cetera. So I think that, you know, stacks. I think you also begin to see legislation and regulation, state legislation start to take root where federal maybe regulation and legislation was not working or wasn't taking an active role. And you start to see, I think there's over 42 regulations and what I would say, PBM reform bills across the country trying to dismantle some of this. And it's very difficult, but at least it's bringing the topic to the surface. And then I think the last part that I want to talk about that's kind of triggering this is pharma started to disintermediate the PBMs where they're saying gross to net, the best value used to always be through a funded benefit. But if I'm willing to show equal value gross to net to a cash pay or direct to consumer, this is going to remove that power that the PBMs have enjoyed since 2007 with the creation of the managed formulary. And so these really helped kind of create that confusion. But then also the employers through fiduciary concerns started to ask questions. Brokers and consultants, you know, I often say for every broker and consultant I cringe at, there's, you know, two or three that I love working with, you know, and they are asking the right questions. They are starting to get more involved. And so the market confusion is where we start to see the market open up, where we grew dramatically over the last eight years. But if you had to have a chart, it's a typical hockey stick chart where we made good progress, but we started to really start to bring in what I would say the customers that only were serviced by CVS Cigna and United, the Fortune 500, the largest health systems, the largest health plans. No one else could service these entities. Small PBMs fight downstream in the small market and suddenly we're there. And the market confusion opened up to what I call market acceptance. And market acceptance begins now. So here's the long prequel to the hope here, which is you suddenly have people understanding that this isn't a novelty or some sort of niche product. This is the appropriate way to be managing benefits. Here's an aligned entity and an aligned model that's going to deliver value. And I'm never going to question, are they making decisions that are the right ones for my membership or my plan? And if I introduce a new idea, they're not going to fight me because they're not thinking about losing market share in the pharmacies and mail and specialty footprints that they own. They're going to be thinking about how do I continue to deliver better value? And so when we go to the frontline worker, the physician, the nurse practitioner, the health system, how do they interface better in this age of promise? And I think what I am seeing is companies like ourselves that are, when you're not focused on the arbitrage of drug pricing, you're focused on how do I use technology and services to create better interoperability, better information? You know, I often say plan information, you know what I mean, plan design and formulary information, should not be proprietary and neither should be — the drug pricing should not be proprietary. You know, I often say like my cup of coffee that I'm holding up as we're chatting here, everyone knows, let's just say in New York City, my cappuccino is $5 here. Okay. No one is going to charge me 50 bucks for a cappuccino in New York. I'd be like, you're out of your mind. Well, this happens all the time in drug spend. This happens unfortunately sometimes in procedures. And so what I am most excited about is that we have built out the Judi Health platform. We can talk about more later, but you now have a single operating system that not just helps the patient in the plan, but it's removing provider abrasion. If you talk to most providers, I think when they go to prescribe a drug, a lot of times it's like playing Battleship, like G5, miss. You're like, ah, like B2, hit. and be like, oh, okay, this is the one we're going to prescribe today. But also, you're blind as a provider to all of what I would call the safety and clinical information on the PBM side. So think about it — if you're on the medical side, and even if you have the medical insurance, you're blind to the pharmacy benefit in a carve-out scenario. And the reverse is true. If you're coming from a pharmacy benefit, you're blind to the medical. And so what I get excited about is removing the abrasion points for the plan, the patient, and the provider. It goes away and we're seeing it go away because you can now do all of this integration. You have a neutral party that doesn't think any of this information is proprietary. And to be fair, we don't mind the sunlight because everyone gets the same pricing. What a novel concept, you know, on their drug pricing or on the services. And this is what we want to focus on. And so this is what gets me excited. And I think this is the best chapter that's about to be written in U.S. healthcare.
STEVE: AJ, while we're moving to Judi Health, serendipitously, there was a Stacey Richter's podcast this morning. I don't know if you had a chance to listen to it or not. She had a lady on this morning, Ivana Krajcinovic, and the title was, Why Pay $13,500 When You Can Buy It for $135? It was a great, great podcast. Ivana talked about the whack-a-mole principle, and it sounds like you already addressed that. You resolve one problem, another one pops up. You think broadening out Capital Rx to Judi Health will kind of level out that whack-a-mole so you got like a mallet?
AJ: For me, I'm a practical person. And what made us or give me the conviction to go to my board and move in this direction — I often say that's a very difficult thing to do. I go back in a time machine to 2022 with me to my board of directors meeting and me telling them, I've created this concept called the unified claim. Unified claim is one operating system for medical, pharmacy, dental, vision.
STEVE: Beautiful.
AJ: And here's the reason why. And very simply, if I have to do something twice, do a pharmacy adjudication touching multiple vendors and a medical adjudication touching multiple vendors and doing this data exchange dance, at best, it's twice as expensive. And then add in all these other dependencies and other vendors, et cetera, because each vendor that touches a claim is a rent seeker. And so my board is like, this sounds great, but why don't you just focus on being a great PBM? And here's a crossroads for you. There's one, you know, what I would say reality where I walked away with my tail between my legs and I said, okay, I'll come back maybe some other day. But you take a deep breath and I invoked the Netflix moment that I talk about, which is once upon a time, Netflix was mailing me DVDs to my house and Netflix had to go to their board of directors and say, hey, you know this business model that pays for everything and is the source of all of our success? And the board of directors are like, yeah, we love it. They're like, we're going to sunset it. We're going to move to streaming content from third parties to everybody's household. And they won that argument. And then not only did they win the argument, they came back to their board of directors and said, you know, I'm getting tired of streaming everyone else's content. I think we should become a world-class production house like Sony and Paramount produce our own content. I'm talking movies to comedies to sporting events, everything. And you know, there is a board of directors that would listen to that and be like, that's complete nonsense. And so you have to hope there's some amount of belief in you and you can translate your conviction to your board of directors. And so in 2022, I asked, I was flatly denied, but I would not give it up. And thankfully, I did not. And they eventually moved forward. Now today, they're like, we always believed in this. This is so great. Wonderful job.
STEVE: Good for you.
AJ: I think the point of it is, why were we doing this? What was so important here? And I think one of the things that I kept seeing over and over and over again was the cost to administrate a claim was far too high. And a lot of it is because there's so many what I call single service vendors in adjudication and administration. And so you could have one company and be like, hey, we're a clearinghouse. You have another company and be like, we're payments. You could have another company and be like, we are TPAs. You have another one and we are admin. You have another one, we're care navigation. You have another one, you're pharmacy benefits and data warehousing. And just each one of these things has a sub menu of vendors. And I don't even think people understand even when they say, oh, I have one vendor. I go, no, no, you don't know how many different systems touch this. Because every time you hit a different system, you hit a different rent seeker. And so that was one of my key concerns was how expensive everything was. But if you think about it, if you have that first administrative layer of sunk cost, there's really a small incremental increase in cost for the next service. You know, you're bearing the cost of everyone has customer service and client management and finance and billing and network management. These services, you have to maintain them if you're in what I call the four pillars of insurance, and that's eligibility, that's plan design, both clinical and financial, that's billing and reimbursement. You have to bear these costs if you touch these things. But if you have one operating layer, you start to strip out so much cost. And then the other part about this, which is so important, is this benefit of safety emerges. Everyone can see in real time the precise information, so you have no more eligibility issues. At the start of this year, every year when what we call the kickoff of new plan design season, you know, it's January, benefits start for most health plans and benefit plans. Eligibility is probably 50 percent of the errors I see. You know, this error, this file's wrong, this file's wrong. Because what I don't think people understand is the way that we move healthcare in our antiquated system in the United States is when you move data from system A to system B, it's already wrong, because in seconds, claims are paid, reversed, coded, recoded, people are eligible, ineligible. It's too late. I've already sent this file, like it's a picture in time, and I sent it to the next vendor. And now they're appending that file with new actions and new information. And then they're sending it to the next vendor. And when I started in administration services, I used to think there must be this really cool programmatic way people have figured out to maintain claim integrity when these things come back. And the answer is no. Close enough is the rallying cry in U.S. healthcare on the administrative side. And the only time anyone cares is if you're being litigated or audited. That is 100 percent the truth. And so I was like, oh my goodness, like nobody cares. The only time someone cares is if you're being sued. I'm like, this is obscene. And so what I realized is we now have data integrity and this helps with the safety and the clinical expertise. And the third area is what I don't know. This is where everyone can play a role to improve healthcare. And this goes to the mission of Judi Health, which is to give our country the infrastructure we need for the healthcare we deserve. And I say this all the time because I am not the architect of the future of healthcare. I would like to say I play a very significant role in the administrative infrastructure for what comes next. We could probably think of dozens of brilliant ideas on this very podcast to improve healthcare. Good luck implementing any of them on our aging infrastructure. And so what I see Judi Health, really, the gift of my 26 years and counting, is going to open up a new chapter of care and innovation because once all of this data is surfaced in real time, this unlocks so much power from the provider and this builds confidence in the patients. I use this word in almost every time I address my team. Our whole job is to make patients more confident in the U.S. healthcare system. We have hundreds of stories of people that are healthcare professionals like myself that are lost in our own U.S. healthcare system. And I think it's because of this fragmentation, this antiquated system that is never up to date, never accurate. And unfortunately, there are people that take advantage of this fragmentation to create excess cost and profitability.
LISA: Yeah, well said. And I'm interested in your take on how Judi can be integrated with the provider community, because we talked about, let's say, the supply side or the service side. And on the other side, you have the providers that are delivering the care and trying to navigate the complexity of our healthcare system. And oftentimes, you talk about all the data exchanges that can create flawed views of what's actually happening with a patient. Well, then you apply health plan policies to that, and it's even worse. And then you hold the providers accountable in a value-based care arrangement, but then you don't apply half of the downstream income they're making on plans to the cost in a value-based care arrangement. And so what our organization has seen over the last five years is a tripling of pharmacy spend that's outstripping everything on the medical side. There's no level of intervention that can be done to right-size that cost differential in a way that's economical for the patients or for the employer. So I'm wondering how you're envisioning the connections of Judi Health with the provider community.
AJ: I think there's a couple ways, you know, that the providers benefit from this new workflow or this new framework. And, you know, let's start with access to information. You know, our first job should be — make sure any provider has all the information they need. And to this point, it's always been unidirectional or trickle of information. And what should be and what we're very excited about by starting to integrate our Judi platform with large EHRs is what we call this bidirectional transport layer of information. I need information from the provider. Because think about it, could we — I don't want to use the term remove a prior authorization, but compress a prior authorization or streamline a prior authorization where I know everything that you've done on an instant pull from the lab work and the electronic workflow side. You know everything about my patient from a history and the information as well as their formulary or whatever clinical plan design and what I would say financial plan design, which is best in the treatment of your patient. And you're not guessing anymore. You know, it's very straightforward. It's deliberate. It's intentional. And it's not random. Like you're not going to see a same patient from a same carrier plan. And it's different economics, like the price is distorted. So if price is the same and you don't believe in these proprietary walled-off information, it makes the job of the provider easier, engaging with the insurance side. I think that's first and foremost. I think the second part of it is if you have bidirectional information, it doesn't have to end there. Could you provide additional information back to that provider? You know, so someone has a new prescription from a different provider. And is that information helpful? You know, because it won't appear in, let's just say, the EHR of that provider because they're in a different health system or a different setting. You know, and so there's lots of things that can be done. I think also there's what we call automated engagement with members, which is to help remind them of the things that we may have actually pulled in that data transport, which is if we're the touchstone or if you will, like the communication point for the patient, should we be reminding them like, hey, you need this checkup or this follow-up to go with that. You should have a six-month checkup. You've been on this biologic. It's important for you. Do you want me to make that appointment with Dr. Rodis? You know, like, you know, how could I help you? And I feel like this is an important part. The last area is if you're no longer fighting payer provider — you know, if you think about it, we've had a lot of, I don't want to say diametrically opposed energy, but there's been a fair amount. And the point of it is if we can ease that tension and get to the truth — you know, the other thing that we're seeing is the flow of funds improves, you know. So before we started operating everything on Judi, I can tell you the exact date. I think it was August 25th of 2025. We paid our last medical claim for 2024. And I was like, my gosh, that's brutal. When we moved to Judi all of last year for our plan, we didn't have a single claim penned past 18 days.
JOHN: Wow.
AJ: Now that is great news for providers. People would be like, why were you able to do that so much faster? Because I wasn't waiting for another vendor for information.
LISA: No kidding.
AJ: As we were that single transport layer, I had all the information. And if it met all the guidelines, what are we waiting for? I don't want to be contemplating these things. And to be fair, sometimes it impacts the patient. And so the same thing we're seeing this year, but I think we're down to 11 days. And I am very hopeful. I don't want to say it's going to be the same level of efficiency, but if you had to track something like the stock exchange, it used to be T plus five for settlement, T plus three plus settlement, T plus one for settlement, T plus zero for settlement, which kind of was T plus zero to millisecond reconciliation. And I believe we can get there, but you needed to create this infrastructure because I don't want to hold up a patient or the plan or the provider. I just want to be the most effective administrator. And I just think the people that were masquerading as administrators, some of them unfortunately focused far too much time on making an arbitrage on patient ignorance, as well as the plans, like lack of oversight due to not being given the information or being given appropriate counsel that they should care as the physician.
KIM: I mean, AJ, what I'm struck by listening to you lay out this detail is the depth of the dysfunction represents the opportunity on the other side for coherence and a future that doesn't suck. And so I like to remind people, we've only been paying for healthcare this way in this country for 50 years. That's it. We can absolutely write a new chapter. So thank you so much for absolutely being our hope peddler today on, there's a lot of dysfunction, but it represents the opportunity on the other side of things as we put our shoulders against it.
JOHN: Agreed.
STEVE: Yeah, AJ, I wish I was a fly on the wall in that 2022 board meeting after you had a beautiful, successful raise here last year. But we have a tradition. We've had a variety of entrepreneurs on this podcast, and we asked them to put their blue sky thinking hat on, as you probably are thinking way down the road. But you're radically changing the infrastructure in healthcare, not just pharmacy benefits, but now through Judi Health and your other companies, much more broad than pharmacy alone. But putting that thinking cap on, where do you see it's gonna play out in the next, I would say four to five years, but knowing you, maybe two to three years?
AJ: Yeah, I always want to speak to my world. It's hard for me to expand that view too much further. But what I see first and foremost is in two years, I see unified claim being the industry standard. Once you see claims adjudicate in real time with the same eligibility, same accumulators, you're not going back to the world we were. So I think that will in turn create a huge amount of opportunity to really leverage value-based care and contracting or whatever your definition of innovative reimbursement or cost structuring is. I don't want to label it as one thing. We can make it a broadly different reimbursement model. But the system of Judi in this process enables for the tracking calculation and resolution of that in an automated workflow versus someone saying, did this really happen? How did that happen? Because you're sitting on all the data to hit the qualification. And one of the things that we programmed Judi to was for that reality. We have this whole system of claim tagging, which I could spend hours talking about, which is this incredibly flexible framework that we did patent to be able to program these kind of sequences of not just how you adjudicate something, but something else that is dependent upon that on an outcome. And this is that chaining effect of reimbursement or payments or other things that are triggered from what is defined as that outcome. And that could be in lab work. That could be in some sort of procedural determination. Whatever it may be, you can now achieve that. So that's my first prediction is — I see people — and we're seeing it now. And what I do like about what we are doing here is — I try and point out is — we want to empower great healthcare systems, healthcare companies, TPAs with these tool sets. People often say to me, why did you create a PBM first and then create administrative software? I go, because well, one, we needed to figure out what we were building. I say this all the time. If you ask me to make croissants and follow a recipe, I'll be okay. But if you give me the opportunity to work in a French bakery for three years, I'm pretty sure I'm going to make some pretty damn good croissants. And this is what we were able to do by being hands-on. You're not writing code to spec. You're writing code to experience and observation firsthand. We're doing that same process on the medical side. People say we dog fooded our own employees to run everything on Judi for our employees because it gave us a great place to start and test. My big belief is this capability is available for everyone. I'm not a carrier. I'm not a blues plan. And to be perfectly frank, I want everyone to understand — I hope everyone uses it. I have the opposite approach of competition is I would like to give everybody the ability to use this technology. And I think people could come up with their own novel ways to differentiate and provide better care and engagement with patients. And so that's the change in the mission of the company, is focusing on — to give our country this infrastructure for the healthcare we deserve. And so I believe people are going to take the Judi engine and do amazing things. I have three, four different health plans already reaching out to me and I'm blown away. They're thinking of things I never thought of before, but that's because they do this day in and day out in a framework, obviously, of delivering that care, you know, and across all lines of business on an incredible scale. And this is what I get excited about, giving the Judi infrastructure to people to just unlock what comes next. And the last part of it is when you have this hyper-efficient transport layer, and I point this out, a lot of people view AI as the ability to fix the sins of the past. Like I have all these broken little disparate systems and AI is going to fix everything for me. I go, well, first of all, AI is probably 400 to 500 percent from an LLM token perspective, more expensive than what I would say, good old fashioned coding and programming and just modernizing your infrastructure, operating on an efficient transport layer to begin with. Where you want to be spending your token dollars is going to be on the oversight and insight of the patient journey. And so one of the things that I see that is going to really revolutionize care and that we're already testing is because everything sits on a data layer in real time, the ability to go, hey, Judi, I need to book a primary care appointment. What's available for me today? Judi coming back to me and saying, it's time for your teeth cleaning. You're going to have this, your UI/UX framework of navigating on a phone is going away where you're going to be talking with this care, what I would say coordinator that's building confidence in the patient. And you can't do this without unified architecture. And if you think you can do this on old infrastructure, I often joke, it's like putting the shell or chassis of a car on a horse. You still have to rely upon that horse as your transport layer. And it will still have all the data gaps and all the inefficiency and vulnerability, as well as infrastructure problems. It never goes away. And so that's my third prediction, which is — I think people are going to, one, benefit from the ability to create a care layer. And I always want to make this clear — that's not necessarily our job. Our job is to unlock the care potential of our partners. So if I work with a health system or I work with a healthcare company, they can begin to make observations on the platform and develop their own care protocols. I don't think once I've said I am the architect of what is best for care management of patients. That's not our role here. Our role is to be the efficient administrative infrastructure.
JOHN: Wow, that's a great answer. And I think maybe you were wrong about something you said earlier. I'm not sure this is the end of the beginning. I think it actually might be the beginning of the end. I think you're really — based on what you just said. AJ, thank you so much for being our guest on Moving to Value Unscripted. AJ, we wish you all the best. You're brilliant. We love you. And I suspect we'll have you on here again in a couple of years to talk about the next thing. But thanks so much.
AJ: Hopefully not too long of a wait. But thank you, John. Thank you, Steve. Thank you, Lisa and Kim.
JOHN: To learn more about MTVA and how to join our community, visit our website, movingtovalue.org. If you enjoyed this conversation, please follow us and leave a review on Spotify or Apple Podcasts. Thanks again for listening and for being part of this important movement.
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