Cost Plus is Great, but Doesn’t Solve the Healthcare Problem
Mark Cuban doesn’t have the faintest clue how to do it either.
Introduction
On April 3rd, 2025 Dr. Graham Walker sat down with Mark Cuban of Cost Plus Drugs to discuss the overall healthcare market. Dr. Walker is a co-founder of “OffCall” the podcast where this interview originated and a practicing emergency room physician and an informatics and technology leader. Mr. Cuban is a serial investor, Shark Tank celebrity and former owner of the Dallas Mavericks. Per usual, someone with a little success is seen as brighter and better than the rest of us. The interview can be found here. We at Sentia, however, are going to debunk Mr. Cuban’s answers to Dr. Graham's questions categorically by listing the question or point as a heading, Mr. Cuban’s answer and our response to it.
Pay Doctors More
Mr. Cuban states:
Let me just tell you: Doctors are underpaid. When I look at individual bills, like a heart transplant: $25,000. Amount paid to the doctor: $2,200, for literally taking a heart out. If I’m getting a heart transplant, I want that motherf*cking doctor to make $10,000, so that he or she is paying attention, and not worried about getting to the next heart transplant or worried about the patient who’s got a boo-boo. It’s a f*cking mess.”
Well, Mr. Cuban, let’s just throw out the capitalist system that supports all this and do what instead? Nationalized healthcare maybe? That won’t work here. No, doctors are paid what they are worth. If they weren’t they would go somewhere else and get more, or do something else entirely. That is the way capitalism works. You might be able to make an argument for hospital systems that work the ends of the insurance and the doctor against each other for their own outsized profit, but that isn’t what you said.
At Sentia we have an ERP style practice/hospital management system designed and are in the initial stages of producing it. This will take into account everything that goes into running your hospital or practice, like real estate, improvements, equipment, inventory, personnel, capital equipment and all the accounting tricks to make it all go. That makes the P&L a report that takes one click. While this doesn’t help the “where does the money go” problem directly this makes it far easier to see where it is going and in the case of publicly traded companies, available to the public.
Criminalize insurance practices that screw over doctors
Mr. Cuban states:
“Insurance companies are the worst of the worst of the worst of the worst of the worst. If you look at how insurance plans are designed, it should be criminal. It’s the antithesis of trying to optimize for patient care. If they design a high-deductible health plan and they make it available to somebody with a take-home pay of $25,000, and there's a deductible of $5,000, [doctors] are screwed. Even if the patient is broke as a joke and doesn't have two nickels to rub together, you still have to care for them. That risk of debt default is something [doctors] have to take on and now you're the one also responsible for figuring out a payment methodology if there is one.”
Insurance practices that “screw over doctors” are already illegal. Obama and the ACA came in with their misguided government programs and now we have part nationalized healthcare with a government payer, but without any of the guardrails that contain costs PLUS the big insurance doing everything EXCEPT pay claims and raking in huge profits.
At Sentia we have proposed to create a new kind of insurance company. We have reference based pricing of 150% of medicare. That gives everyone on the delivery end plenty of money to work with, addressing the first point. This new insurance company provides the Electronic Medical Records Management system (EMR) to the practice or hospital, free of charge. As patient encounters are documented, we pay for procedures performed at the aforementioned rate, in real time. This eliminates medical coding, denials, delays, adjudication, networks, rate negotiation, claims negotiation, expensive agents, brokers and salesmen, all the big buildings in every city in the country and hundreds of thousands of employees. We estimate that this should save at least 50% alone from the cost of health insurance.
Make medical school 100% free
Mr. Cuban states:
“If you can add 10,000 doctors and there were residencies for them, or you create a different program that doesn't require a residency, you're just an apprentice in a primary care organization, great. You have to deal with some of the most simplistic things first.”
So we’re back to socialism. Scrap Capitalism and let’s follow Europe down the rabbit hole so we are in there with them during the next crisis instead of bailing them out. What could possibly go wrong?
First every high school graduate in the world would try to get into medical school. Then they wouldn't make it because they simply don’t have the necessary skills. We don’t have the capacity to train 10,000 new doctors and making it free wouldn't help, it would just make another big, failed government program.
Second, Let’s say it did work and we did have 10,000 new doctors in 6 to 15 years. Now we have too many employees chasing too few jobs. The salaries of doctors tank. Didn’t he just say that we should pay doctors more?
We don’t have a solution to this problem at Sentia because this isn’t a problem that needs to be solved. WE DO have a training module that could be adapted to automate the education of new doctors, but that is a long way off, and I suspect no doctor wants to answer the question “Where did you go to medical school?” with “Sentia’s cheap automated education system.”
Get rid of prior authorizations
Mr. Cuban said:
“Prior auth is designed to drive doctors crazy. But here’s the real reason: If you have a billion dollars a year, let's just say you work through prior auths and you just extend them as long as you can, 4% of that is a shi*load of money, that's $40 million. If you're a bigger insurance plan, it's $10 billion and now it's $400 million. So if I can keep a bunch of doctors pissed off at me, but I'm making an extra $400 million, what am I going to do?”
Well, Here is the first thing Mr. Cuban said that actually makes sense, but how are you going to accomplish it? Would he advocate passing a law to stop prior authorizations? How exactly does he want to tie the bell on that cat?
As we stated previously, the way to fix this is to supplant the big payers and pay for procedures in real time with automation. Add into the 50% savings another 25% from having a built in health and wellness system that offers a small discount for reading our automatically prescribed patient education, and a large discount for following it as evidenced by improving or at least not worsening lab results. 84% of the healthcare expenditures in 2003 were on behavior based, avoidable chronic disease. The OECD average mortality of this behavior on average is 225 deaths per 100,000. In the US the mortality is 335 per 100,000, or about a third more. Get us more inline with education with incentives, or ‘teeth’ and you save an additional 25% off the cost of healthcare.
Ban hospitals from charging facility fees
Mr. Cuban relates:
“Now the hospitals are playing all kinds of games in how they over-charge. So you've got facility fees. Are you kidding me? Like, I'll pay for what I need. I had my hips replaced, bam hit me. But a facility fee for the doctor that’s coming? Anybody who complicates the program, who complicates the economics takes responsibility, at least at some level, for being the bad guy in all of this.”
Well, again, this government control pie in the sky thinking is rearing its ugly head. If you ban facility fees, they will figure out something else to tack onto the bill. This is just what happens in big publicly owned and traded businesses. In fact the decision in 1919 in Dodge v. The Ford Motor Company upheld “Shareholder Primacy,” that is, everything the company does is to increase shareholder value. That means that a public company is required by law to increase shareholder value.
At Sentia we have already realized that our paradigm won’t survive an IPO. This company can never go public and be subjected to the vicissitudes of “shareholder value.” We solve the problem and produce a superior product and thrive, or we do not, and we fail. We cannot answer to Venture Capital or Private Equity looking for an exit strategy, or a shareholder population looking for a dividend.
What we CAN do is to hold the hospital to a higher standard and regulate costs from without. You, the corporate hospital, get 150% of medicare. If you can provide the service for that, great. We don’t, won’t and can’t have the luxury of negotiating with you. We can help you run a tight ship and be profitable with our ERP style practice management as described previously, but if you can’t make it, then we will buy you and run your company for you, efficiently.
Allow direct contracting between employers and hospitals/physicians
Mr Cuban pontificates:
“If a hospital or a doctor or a practice walked into Shark Tank, how would I redesign their business? Do a direct contract deal with the employers. There’s going to be no deductible from the employee. We'll cover all of it so you have zero risk. Now, in exchange, I want a better price than you’re giving insurance companies.”
This is a fantastic idea. Again, how are you going to get it accomplished? Let’s take the case of a self-insured business. They contract with a broker, who represents several Third Party Administrators (TPAs) to administrate the care of their employees. This TPA sets up the networks, negotiates the rates and actually IS, in most cases, a big payer. Except that they don’t do the paying. They set up a bill for the business at the end of the month so it can pay the practice/hospital directly. According to my research, the gold standard for this service would be about $375 per employee per month. Yes, you heard that correctly, your self-funded employer pays somewhere around that figure per employee per month and STILL has to pay the doctors. It is still cheaper than paying the big insurance companies though, and that is why they do it.
All of that said, let’s get back to Mr. Cuban’s assertion: He wants every self insured business owner to put themselves into the TPA business and build a private network of healthcare providers and negotiate rates with every one of them and do all the things they pay the TPA to do now? That is going to be far, FAR more expensive than just using a TPA and shows exactly how short sighted and out of touch Mr. Cuban actually is.
At Sentia all this just vanishes. We automate the system. We will be making calls to practices to get them signed up in the system, but it will be just that, to help with registration. We need to have a bank account for practice or the hospital to have payments transferred to, we have to have employees set up with passwords and the like to be able to access the system. This, however, is NOT a negotiation like the one that happened with one of my healthcare providers two weeks ago. UT Southwestern could not come to an agreement with BCBS Texas and were not available for my insurance for a while. I had an appointment with them too.
Get rid of RVUs (Relative Value Units, a method that determines what physicians get paid from reimbursements)
“RVUs? That stuff's insane. You're getting paid based off an RVU that's going to the hospital, who then has to pay you. But what if all that just came to you?”
Just like above, if the doctors will put up with the MBAs telling them how much they can make, they deserve what they get. Vote with your feet. Go somewhere that values your services more. Open a private practice. Get with your colleagues and open an Ambulatory Surgical Center. This doesn’t need to be regulated or controlled. Let the smart people do the smart things and don’t try to solve problems they don’t have.
At Sentia we have partnered with Physicians First Bancorp to begin providing financing for doctors who want to start their own practice or ASC. If we need legislation it would be to rollback the restriction of doctors owning hospitals. Outside of that, show hospital administration where the money is going with automated reporting and systems as described previously.
Mark’s Big Idea
The article goes on, with a paraphrase:
For hospitals and doctors, Mark points out, the primary value of big insurance companies is patient flow. “If the cause of most of these problems is insurance companies, and their value proposition is patient referrals, you need to look for other ways to get patient referrals. Instead of being in the networks. I would organize and take that as far as you can.”
Mark knows that this kind of epochal change won’t happen overnight. But, for now, Mark urges doctors to do two things:
- Only work for employers who treat you fairly. “I would identify the hospitals that really simplified things, that are being innovative with payments. Because as long as there's a shortage, you're gonna be in demand.”
- Be entrepreneurial and think differently about how to set up a practice today. “PE understands how to do arbitrage, that's what they do. And so they come in and they buy everybody up, and now you're working for the hospital. When that happens, where there’s change like that, that’s where there’s opportunity.”
Finally here is some thought we can get behind. Take control for yourself and don’t just take what you are handed.
At Sentia this is precisely what we have done: eliminate the red tape “sludge” and empower doctors and practices to make good decisions.
Conclusions
Mr. Cuban seems to be a little ready to jump into bed with the government. We all know that won’t work, and we have designed and built a system that will work, and will accomplish the goals of reducing the cost of healthcare and improving the lives of patients through patient education. In this article we have provided real concrete solutions with real concrete executions. We have the insurance system in prototype and can show it off at any time, proving that this will work.
We have shown a way to save 50% from the cost of healthcare immediately.
We have shown a way to save an additional 25% from the cost of healthcare with patient education with ‘teeth.’
We have shown a way with our partners Physicians First Bancorp to empower doctors to start their own practices and ASCs and just walk away from the greedy MBAs and their for profit hospital systems.
If you like what you read, join our newsletter at https://sentiahealth.substack.com/.
You can also read this article on our site: https://sentiahealth.com/WebLog
Or you can read it on our parent’s site: https://sentiasystems.com/WebLog
Watch the video version of this article on YouTube.com
