Financial health checkup with Scott Walker, chief financial officer

January 2024 | Leadership Perspectives

Scott Walker, Point32Health’s chief financial officer, is responsible for our organization’s financial management including actuarial, underwriting, risk adjustment, risk and capital management, financial planning and analysis, financial reporting, and budgeting and cost management. We recently spoke with Scott to discuss financial health learnings from 2023 and what’s ahead in 2024 for Point32Health.

Q: Financial health is an important part of whole health. How will Point32Health prioritize its own financial health in 2024?

Scott Walker: Consistent with the practices that the enterprise has had in the past, we will continue to focus on making health care more accessible, more affordable and of the highest quality for our members.

What that means more tactically for us as an enterprise is that we will continue to look for ways to manage the total cost of care, which is items that include unit cost, utilization, intensity, benefit payment policy, fraud, waste and abuse and overpayment recovery—to name a few. As an organization, we have a responsibility to review those items in detail and ensure that we are providing the most affordable care and managing utilization effectively.

And we have work to do as a nation to ensure that health care consumption doesn’t tip beyond the 20% to 22% GDP levels it is at today because it’s pushing out other innovations and ways to use resources for other industries.

I would also say in that in addition to managing our total cost of care, we have an obligation to be good stewards around our administrative costs, which are our costs associated with selling service and delivering the care we need to our members, patients and consumers. Ultimately, we have to make sure that the general and administrative expenses stay in check so that more of our premium dollars can be used to take care of constituents versus paying for how we sell service and deliver our business.

Q: What do you see as being potential cost drivers in the health care industry this year?

SW: One of the more significant cost drivers that we continue to see is the increase with pharmacy-related costs. We’re looking at an overall trend between 15-18% or more at times, and that has to do a lot with the manufacturers who are doing really good work around thinking about different ways to bring medications to the market. At the same time, it’s very expensive for that research and development and then getting that medication to the market and to our members. With pharmacy costs, there are many things that we continue to look at as it relates to our formulary, tiering and medication adherence and reconciliation of medicine our members are taking.

There’s nothing worse than prescribing a very expensive orphan drug or specialty medication and then not having it adhered to. It becomes quite devastating to the cost structure when people are unable to get to the pharmacy to get their medication and, therefore, aren’t adherent to these costly medications.

What we also continue to see is hospitals, facilities and ambulatory surgery centers under great pressure economically. There was a lot of federal funding supporting hospitals for the past couple of years and as that funding dissipates, I think hospitals are beginning to realize the challenges they’re facing in their business, operating and economic models. As a nation, we need to get more thoughtful and creative around what types of care are needed and in what setting.

For example, some may not want to be inconvenienced by not having a hospital in their community, while, at the same time, having a smaller hospital (that is struggling with affordability) may not create the right quality outcome for the patient. And ultimately, that hospital is going to be under a lot of distress financially to try to make it. How we think about the delivery side of health care and trying to keep it affordable at the same time is something we’re seeing hospitals struggle with economically not just across the Commonwealth but across the nation as well.

Q: 2023 was a financially challenging year for many. What are you keeping in mind for 2024?

SW: There are many things that we as an enterprise need to focus on this year. We need to continue to focus on how we think about our total cost of care and the management of that, and we need to consider medical cost utilization generally, as well as our unit cost and different components.

Another focus for 2024 is on having a continued understanding of the market and being in tune with our customers. We must understand what our customer needs, aspirations and health goals are to be able to support them in a meaningful way as they access health care. When you service your customers, listen to them and build products, solutions, services and experiences that meet or exceed expectations, we will grow, and we will take market share and continue to be successful.

Additionally, our operating model is very complex. That is for good reason. We had two outstanding organizations that had different platforms, technology, infrastructure and ways to run the business. We are now doing the hard work of defining our sources of truth, IT roadmap and infrastructure that will allow us to grow, scale and service out constituents (members, brokers, employers, providers) in the most effective and efficient method. That takes hard work and that is what is required of the enterprise over the next few years.

Q: There’s a lot going on in the world right now that can have a financial impact. What broader areas are you keeping a close eye on?

SW: There are a lot of macro considerations within the industry that can affect both the health care industry and our personal lives. The fact that we’re heading into an election year can have dramatic changes in health care policy and the way in which health care will be delivered depending upon who’s in the White House, Congress and Senate. For me, I watch and listen carefully to the different candidates and what their position is and expectations for how they’d like to see health care continue to evolve to service our nation.

Inflation has been top of mind the last couple of years. I think given the high of 9%+, which are rates that we haven’t seen since Jimmy Carter was in office back in the 70s. It’s beginning to moderate and it’s important that we continue to watch what the Federal policy makers are doing. They only have a few tools in their toolbox, and historically haven’t done a great job being able to land the plane softly. I expect we’re going to continue to see elements of that as we remain at a 3%+ kind of inflationary level and the Federal policy makers want to bring that back into the 2% range.

So the question is, are the indices that we’re looking at around Consumer Price Index (CPI) and consumable goods and employment and the other metrics that are looked at regularly by economists in line and heading in the right direction? Or are the Federal policy makers going to need to take stronger action, which could again force the economy to have a not so smooth landing that could create some tension and some anxiety across different sectors and verticals of the economy.

Q: And during challenging times, how do you prioritize your own health and well-being?

SW: This is this is an important topic to me; I care a lot about making sure that we have balance in our lives.

We all come to work and want to feel connected to the work we do. We want to be able to answer the question: “Why do I show up every day?” For me, it’s an easy answer. At Point32Health, I get to work for an organization that ultimately helps people achieve their best health. What a great purpose to wake up for and be excited about. At the same time, we ask a lot of ourselves and the colleagues that work with us, so we need to find ways to decompress and manage the workload.

I have created a few habits in my personal life that have helped me professionally with building my endurance and resilience and keeping my focus on work:

  1. I care a lot about sleep; I make sure that I get the sleep my body needs to recover.
  2. I exercise daily. You may even see me running around the campus when I’m at our headquarters in Canton. Getting physical exercise is important to me.
  3. Being connected to nature is also important to me, especially as an introvert who finds that being in meetings all day often drains my energy. I need time to reconnect and be alone, and I find being in nature helps with that.
  4. Over the past several years, I’ve also been focused on diet and the types of food I’m eating. My wife has been an incredible advocate and has done a lot of research about the impact food has on the way we feel.

You have to find that rhythm and what’s important to you. And the sooner you start those disciplines that work for you, the better it will serve you—because at the end of the day, the goal is to live a healthy, high-quality active life and make sure you can enjoy yourself.