A Conversation With Shawn Gremminger, M.P.P., the Full-Length Version

Shawn Gremminger, M.P.P.

Shawn Gremminger, M.P.P.,president and CEO of the National Alliance of Healthcare Purchaser Coalitions, has joined the Managed Healthcare Executive editorial advisory board. The National Alliance represents the interests of self-insured employers. Gremminger has held advocacy and lobbying positions for a number of healthcare organizations. He spoke with Peter Wehrwein, managing editor of MHE. A shortened version of this transcript was published in the April print issue of MHE. The transcript has been edited for clarity.

When did you catch the healthcare policy bug?

I grew up in Seattle. I was always very interested in politics and government. My grandparents lived out in this area, in Alexandria, Virginia, so I knew D.C. pretty well as a kid. I came out a lot in the summers and really enjoyed Congress and policymaking and that kind of thing, so when it was time to go to college, I decided on a school on the East Coast an hour from D.C. and spent a lot of my time doing internships and stuff in D.C.

My first job out of school was doing get-out-the-vote work on a political campaign in ’04 in Pittsburgh. And turns out I hated it. Electoral politics were not for me.

I accidentally landed in healthcare. I applied for and got a job at the Children’s Hospital Association, not because I was particularly interested in healthcare or children’s hospitals, but because I needed a job. It turns out it, you know, I took to it. My first 13 years in D.C., so still over half of my career at this point, were lobbying on Capitol Hill for national hospital trade associations, first for the children’s hospitals and then for the public safety net hospitals.

When I went to George Washington University for grad school, I thought about getting a master’s in public health. The GW School of Public Health is a well-known entry point for a lot of people into healthcare policy, but I still wasn’t sure I wanted to do healthcare. That’s why I went to the Trachtenberg School, which is the public policy school, and decided to get a broader education.

I just stuck in healthcare because I was enjoying it, and it didn’t make sense to restart my career in some other field. It was maybe a couple of years after grad school that I realized, look, I’m a health policy guy. That’s what I do. I might as well just embrace it and focus in that area.

You came into the field just as the Affordable Care Act (ACA) was being born. You were representing the Essential Hospitals group.

I moved over to the Essential Hospitals, or what at the time was called the National Association of Public Hospitals and Health Systems, right before the ACA, at the beginning of the Obama administration. At that point it was very clear that they were going to be moving some major health, health policy legislation. It was part of the reason that I was interested in going over to the public hospitals, because pediatric issues are interesting, but not central to what I knew that kind of fight was going to be.

We were broadly very supportive of the law, along with all the other hospital associations. We represented core urban safety net hospitals that had a very high number of uninsured folks. So anything that we could do that would promote greater healthcare coverage, particularly among low-income people, was the right thing to do, philosophically and also just good for hospitals, right? If you can move somebody from being uninsured and you get paid nothing to being covered by Medicaid, even if you might not be getting paid as much as you might like, that’s still a win from a hospital financing standpoint.

The big fight at the time in our little space was around Medicaid Disproportionate Share Hospital [DSH, pronounced “dish”] payments patterns, because the notion was, if we’re going to have a substantial increase in the number of people who are insured, many of whom would be covered by Medicaid, you would have lower uninsured volume, lower charity care, so therefore you didn’t need as much Medicaid DSH. At one point, the White House proposed $100 billion in DSH cuts. That number was shrunk over time. In the end, we did see some Medicaid DSH cuts in the ACA. I spent the next several years of my life being the main guy — although there are plenty of others who are working on this — on stopping the DSH cuts. One of my big, early professional successes was we managed to get the DSH cuts delayed by one year. We stopped them in whatever that first year would have been, I want to say it was like 2012-2013, and we came up with this idea of, hey, if you stop it in the first year, the budget window moves out by a year, and you can add more DSH cuts at the end. It costs the federal government nothing on paper, but it keeps us whole.

We were able to successfully stop DSH cuts for several consecutive years. I ended up leaving Essential Hospitals, and they have continued to follow that path. To this day, there have been no cuts to Medicaid DSH, and it’s something that I am proud to have been a part of in the early stages.

Hospitals, with some of their bill collecting, have had their share of negative headlines. But it’s not like the payers or big employers like you’re representing now. Was it easier to represent hospitals?

It was. I represented a subset of hospitals that were particularly popular, to be totally frank, among Democrats, because they tended to represent big urban hospitals and urban areas, districts that were heavily Democratic. But we had plenty of Republican support as well.

It’s funny. When I was in the hospital industry, I didn’t realize how powerful the hospital industry was as a lobbying force. It was only after I left it that I was able to look at it from a bit of a distance, and say, oh, you know, that may actually be the most powerful industry in healthcare, from a public support standpoint.

We always thought of pharma as being the most powerful industry. As you know, the pharmaceutical industry didn’t really take a substantial loss in almost any legislative debate for a very long time, arguably, until the Inflation Reduction Act.

As I have worked in different sectors of the healthcare industry, including sectors that have been kind of critical of the hospital industry, or at least some aspects of the hospital industry, I’ve realized how powerful they really are. They don’t have the same dollar figures in terms of numbers of campaign donations, the amount that they spend on lobbying as the pharmaceutical industry. They may not even have the same dollar figures in terms of those aspects as the health plan industry, but they have the kind of broad political support that I think both of those industries would really like and probably will never have.

It’s almost like Congress. People say, “I don’t like Congress, but I like my local congressman.” And they keep reelecting him or her. I think the American public kind of sees hospitals the same way. They may not love the hospital industry broadly. They may not even really think about it as an industry, but they tend to be pretty supportive of their local hospitals. That’s understandable. Hospitals are big employers. They are core foundational pieces of what makes a community. And there are plenty of hospitals that do fantastic work and are trying to do their best. What’s been a frustration, working for consumers [Gremminger lobbied for Families USA for two years] and then for employers and purchasers, is it’s often difficult to break through with really pretty obvious, clear, factual information about some of the real downsides of what’s going on in the industry, the consolidation, significantly higher prices year over year over year, and some of the worst business practices out there that we see — not across the board, but all too common — around lack of charity care, lack of uncompensated care, combined with massive public support. When I say public support, I mean massive amounts of money flowing from the government to hospitals.

There have been significant problems with overbilling patients, taking them to collections, all that kind of stuff. I think the reporters, researchers, people like myself, we can see the whole picture and say we’ve got a real problem. But I don’t feel like that narrative has trickled down to the average person in a way that most people don’t particularly like health plans, right? We’ve seen that particularly in the last month or two, and the pharmaceutical sector has had a negative reputation around the country for many, many years. We’re still not there with hospitals.

What did you learn as a lobbyist in those early years that you’re still applying to what you do now?

A couple of things. One, the value of storytelling. I came up with this idea, and I’m sure I’m not the first person, but the idea that we can use facts and figures. Surprise medical billing is a significant problem. It’s hitting X number of thousands of people a day — I spent a lot of time on the surprise billing fight. That’ll grab people’s attention. “Oh, OK, this is bigger than I thought it was.”

But the thing that people remember, the things that members of Congress and legislative staff remember, are individual stories. Those facts and figures get thrown at them all the time.

I recall when I was working at Families USA during the surprise billing fight, we did a whole bunch of different things, including some in-person meetings and briefings on Capitol Hill, and we brought in a patient advocate, whose son had hemophilia, as I recall, and received a surprise medical bill. The labor and delivery were paid for by the insurer, no problem. But once they realized he had a very significant medical condition that was going to require a lot of work, he was transferred, as a newborn, to a — it might have been to a different facility — and there was no coverage for the care that he received over the course of a month, very high-intensity care. This family was hit with a quarter-million-dollar surprise medical bill. That patient advocate was great. She was a very good speaker, told the story well, was able to really demonstrate impact. Greg Walden [a Republican congressman from Oregon] of the energy and commerce committee heard that story, he understood that story, he latched on to that story. And every time I saw him speak, he remembered her name and he remembered the story and he repeated it. Facts and figures are great, but storytelling is critical.

One of the other things I’ve learned is that lobbying, so much of it actually is engagement with journalists. I know other lobbyists who feel very differently, and they’ll say, “I don’t like to lobby through the media. It’s all about personal relationships with the members of Congress and their staff,” and that’s all important. But setting a narrative and driving a narrative.

And the last thing I’ll add, maybe to that end, is this is something I very much learned at the public hospitals, and I got this through a couple of mentors at the time, which is really trying to be and brand yourself as a straight shooter. I want congressional staff, members of Congress, members of the media, to know that they can call me with a question, and I’m going to give them a straight answer based on everything I know. I’ll also be very honest about what my perspective is, like, I am here, representing employers and purchasers. I have a slant. I’m not a neutral arbiter. But if you ask me a question about a particular issue, and you know the data isn’t necessarily in my favor, I’ll say, “Well, here’s what I know. Here’s the data I’ve seen. I’ll share it with you. It isn’t necessarily in my favor, but here’s my perspective.” I think doing that drives a level of comfort and trust between the people that I’m trying to influence and myself.

Let’s talk about your current job, president and CEO of the National Alliance of Healthcare Purchaser Coalitions. You’re representing self-funded employers, Employee Retirement Income Security Act (ERISA) plans. I think we got acquainted talking about pharmacy benefit managers (PBMs) and PBM reforms, and how PBMs weren’t necessarily working on the behalf of employers and employer plans the way they should. It that still your A-1 priority?

It is absolutely still at the top of our list. When we were drafting our 2025 policy agenda, we listed things in three columns: hospitals, PBMs and drug manufacturers. You could break that down and say it’s really two things, hospital care and prescription drugs.

That is not by accident or because I find those things personally interesting, although I do. It’s because we survey and talk to employers and purchasers all the time, and we’re always asking the questions, “What are your biggest pain points? What are the things that you feel like you can’t control?” I’d say 90% of what they’re concerned about is how much they’re paying for hospital care and how much they’re paying for prescription drugs.

Actually, I think purchasers are more focused on prescription drugs than, arguably, they should be. If you look at their overall spend, prescription drugs are a relatively small slice, but they are the slice that their employees complain about the most. Depending on how you count it, between 35% and 50% of all employer spending is on hospitals. So clearly that should be No. 1. Prescription drugs is more like 10% to 15%.

But, if you’re a health benefits manager, one of the core groups for people that we work with, the complaints that you’re getting from people are usually not about hospital care, because most people aren’t going to the hospital every year. But just about everybody takes prescription drugs, and they notice when the price of those drugs goes up.

Our policy agenda, it really is what can we do about a distorted and broken hospital sector market and prescription drug pricing. We focus on things like hospital consolidation, anticompetitive business practices, lack of transparency, those sorts of things that we know are driving up healthcare costs for employers and purchasers around the country.

On the prescription drug side, we tend to focus on the entire drug supply chain. So are there things that manufacturers are doing that are meaningfully driving up the price of drugs? The answer is yes: patent thickets, other games. And, course, [there is] the PBM sector. You and I have spent a lot of time talking about it, but it’s everything from lack of passthrough rebates, lots of fees that are added on, really bad formulary management and formulary placement that is designed to make money for the PBM but not make money for us or to help patients get access to the best drugs at the cheapest price.

I think our agenda will probably stay on those two big buckets for the foreseeable future. There are a few other things that we do focus on, because maybe even though they’re less of a spend, they’re still important to employers and purchasers. Mental and behavioral health is a big one, and lack of access to mental and behavioral health is something that a lot of employers focus on and struggle with, and we’re doing what we can in the policy space to try to fix some of those things.

Is there any piece of legislation or policy idea about hospitals that would address some of the concerns of your members? Aside from antitrust and transparency, what are the policy solutions there?

It’s difficult, right? I think on the antitrust side, we are very much encouraging the Federal Trade Commission [FTC] and state actors to turn a very skeptical eye to any merger in the hospital sector. I was at the same conference as Zack Cooper from Yale, and he made the point that 80% of hospital mergers probably are not a problem. They don’t meaningfully drive up prices, but 20% do, and the FTC only takes action on about 10% of those, so that’s only 2% of mergers that the FTC actually take action on. That means that 18% of mergers that are clearly a problem, but the FTC chooses not to take action, maybe because they are under-resourced, etc. But I also feel like the cat is out of the bag. Most metropolitan areas are highly consolidated already, so I want to stop further consolidation. But you can’t. It’d be very hard to undo what has already been done. So you have to deal with the current framework.

There are a couple of things that we think will make a difference. We support site-neutral payment policy in Medicare because we think it helps. Those policies don’t directly impact employers. There’s no policy that I know of that would say commercial payers must pay a site-neutral payment. But a lot of times, commercial payers do follow Medicare, so if Medicare is doing it, it helps us to be able to do it.

More importantly, it helps to reduce the incentive toward further consolidation. If you know that buying up a physician practice is going to make you a lot of money, when that’s no longer the case, then you’re not as interested in buying up that physician practice. So that’s one piece, by no means a silver bullet, but certainly a meaningful step.

A second is banning anticompetitive contracts. This is something I’ve been working on for several years, going all the way back to my time at the Purchaser Business Group on Health [PBGH].

You will remember there was a landmark case that was settled out in California against the Sutter Health System, a dominant hospital system in Northern California. We saw in the data that hospital prices in Northern California were 20% or 30% higher than Southern California hospital prices. Both have the same sort of issues around high cost of living in California, but the prices were significantly higher in Northern California. The only reason for that was that there was real competition in Southern California and there wasn’t in Northern California. If you were going to have a comprehensive network as an employer, you had to have Sutter, and Sutter did everything they possibly could to leverage their size so they would say to employers and purchasers in Northern California, we have an all-or-nothing contract. You can’t just contract for your obstetrics in one place, or your mental and behavioral health in another place, or whatever. They’d say, if you want any part of our network, you gotta contract with all of us at the prices that we demand.

They also said that employers could not encourage, through financial means, their employees and their families to go to lower-cost, higher-quality sites. This is something that a lot of employers have tried to do. They’d say, I’m not going to have a narrow network, but I’m going to have a tiered network. And if you’re willing to go to the lower-cost, higher-quality site, your copay will be less or we’ll waive the deductible, or whatever. Sutter said, absolutely not. You can’t do that, either. So they got sued by a union; PBGH joined the suit. Ultimately, the [state] attorney general, Xavier Becerra [HHS secretary in the Biden administration] stepped in. Sutter settled, paid hundreds of millions of dollars back to employers, and they said, we will not engage in those practices for 10 years.

The notion behind the federal legislation is, well, if Sutter has agreed this is bad and they won’t do it, why should anybody else be able to do it? And we see that kind of practice all over the country all the time. We have gotten some progress on that legislation, not as much as we would like, and it has been vociferously opposed by the hospital industry because in the end, the AHA [American Hospital Association] and others have to defend their biggest member, and they are the kind of people that are dominant in their health area. We think that actually banning anticompetitive practices will have a meaningful if not deflationary impact, a lowered inflationary impact for hospitals and health systems.

There are more radical policies out there that we have looked at, but they’re not on our immediate agenda. One would be, if you can identify geographic areas where there’s really no competition at all, in those locations, I think there is a solid case for price caps and price setting. I know that that freaks some people out. We’ve talked to employers and purchasers on this. We’ve surveyed them about it. They’re actually comfortable with this notion that where there is no real competition, you can’t use market forces to try to drive lower prices, and we’re no longer willing to accept paying 300%, 350% of Medicare, which is what we see in a lot of these smaller metro areas. We think that there’s a really solid case that either the states or the federal government should be able to step in and say, you’re engaging in price gouging. We’re going to say you can only get paid up to a certain amount.

There was a bill that said if you have a highly consolidated health system, more than X percent of the beds in that area, there would be a price cap of 200% of Medicare. I think that was the right number. So the hospital systems would have an option. They could either just accept that price and deal with it, or they could break themselves up. So it was a back-end way of full Teddy Roosevelt trust-busting. Either you accept a lower price or you break yourselves up and you compete over price.

It didn’t get very far. I think there’s a lot of people who didn’t like that bill for obvious reasons beyond just the hospital industry, but I think there is potentially a place that we get to where we say this may be the future that we have to look at.

Who’s the main sponsor of the Sutter-inspired legislation?

It was Mike Braun [who left the Senate in 2024 to successfully run for governor of Indiana] from Indiana, and the House sponsor was Michelle Steel in California. She lost reelection, so the only one we have left is Sen. Tammy Baldwin from Wisconsin. It’s still early in the session, but we’re looking to try to find another Republican co-sponsor who would be able to. Braun was a real champion on this stuff. Finding somebody like him is going to be difficult, but I will say, Bill Cassidy, the chair of the Senate health committee, has been on this path, and I’m hopeful that he’s going to continue to carry the torch.

Sounds like you’re trying to keep the embers glowing on that one, but PBM reform is what may happen this year.

I think that’s right. I mean, part of the reason we were so focused on PBM reform last year is it seemed more ripe and ready to move. We got 90%, 80% of what we wanted on PBMs in that big bill [the continuing resolution to keep the federal government running] that probably could have passed. Elon Musk decided the bill was bigger than he liked. [The PBM provisions] got chopped. But certainly the case we are trying to make to policy makers now is this is a totally bipartisan, bicameral bill. It didn’t get included, not because of any concern about the PBM legislation, but because of other political considerations.

The folks on the Hill should just pick it up and bring it into the next budget negotiation, which will be in March. I think it’s starting now but will be finalized in March.

What was not in that bill that you wanted?

Well, it didn’t do as much on hospitals as we wanted. We did actually ask for a bunch of stuff in the hospital space. On PBMs, there was one biggest ask that we weren’t sure we were going to be able to get anyway, but that would actually be to make PBMs be fiduciaries to their self-insured employers. There was a lot in there in terms of rebate passthrough, much more transparency, you know, ban on spread pricing, all that stuff, all of which we asked for.

There are two concerns that I have heard from employers about why that’s still inadequate. One, big PBMs are very, very clever. They’ve maximized profits in the current regulatory framework. If you shift the regulatory framework, they will find another way to screw over their clients. So if you were to say they have to act as fiduciaries to us, that goes out the window again. We know what fiduciary means. It’s pretty clearly written in the ERISA statute, and if they try to do things that are clearly not to the benefit of the plan sponsors, they can get sued by the plan sponsors, and they’re going to lose. It would provide a nice umbrella level of protection for employers.

340B, it’s a program that allows certain hospitals to purchase drugs at discounted prices. Now, the program has lots of critics who say it has been abused by hospitals. Early in your career you must have been on the hospital side of 340B. Now I think self-insured employers are among its critics. So as the song says, you have seen 340B from both sides now.

I have. I think it’d be a legitimate critique by somebody looking up from the outside and you’re just a good lobbyist, and you just support whoever you happen to work for and if that means fundamentally changing your position on something, that’s just the cost to do business. I won’t try to defend against that critique. It’s God’s honest truth that I lobbied for the children’s hospitals and the public hospitals, and now I’m on this side.

That being said, I will say my thoughts on 340B, it’s not 180 degrees from where it used to be. It’s maybe 90 degrees from where it used to be.

So when I was with the public hospital group, I was there when some of the big changes happened, and I lobbied on behalf of these changes, and some of the big changes that happened that allowed the program to grow into the space that it’s gone. I don’t think anybody at that time, and I’m talking about, like circa 2010, ACA, really saw 340B growing into the behemoth that it is now.

The law itself is very short, but there were 32 pages written by the House Energy and Commerce Committee that explained why they created 340B, among other things. There is this line that you see all the time like, it was designed to stretch scarce federal resources so that covered entities can blah, blah, blah, blah, blah, extend [services], you know, to more patients, etc. That is in there. It is on the last sentence of the last paragraph on the 12th page of the report. It was an afterthought in the middle of a 32-page report, but it just happens to provide a broad legal justification for why there should be no limits on 340B, which is the position of the hospital industry. Any dollar that flows into 340B is inherently good because it is designed to allow to stretch federal resources. I think it’s bull----.

I represented this core organization; I never represented the broad swath of hospitals and health systems that now participate, so I don’t feel like I’m turning on my former members. In fact, when we talk 340B, we try to talk about the fact that there are core urban safety net hospitals, rural hospitals, community health centers that need the program, [and] they should get the program.

The statutory cutoff to get into the program is you’ve got to be a nonprofit or a public hospital. So for-profit hospitals are statutorily not in, and you have to have a disproportionate share payment adjustment of 11.75%; basically, if you have 12% of your patients [who have] Medicaid or low-income Medicare, you can participate.

Well, in 1992 roughly 12% of the people in the country were covered by Medicaid. Today, roughly 25% of people in the country are covered by Medicaid for a lot of reasons, part of it being ACA. So suddenly, a program that originally would have allowed 100 hospitals — the big urban safety nets, Parkland, Grady, the New York City Health and Hospitals — all of those guys were the original recipients. Now, more than half the hospitals in the country qualify. So it’s hard to say this is really targeted to safety net hospitals anymore.

[Another reason the program has grown]is just market dynamics, because of hospital consolidation, particularly vertical integration. When 340B was created you might have one or two off-campus clinics, but it wasn’t a thing, right? And you could only fill 340B prescriptions at your hospital or community health center-owned pharmacy. Most big hospital systems now have huge networks of outpatient clinics, all of which qualify for 340B, if the mother hospital qualified.

And an HRSA [Health Resources and Services Administration] decision allowed for unlimited use of contract pharmacies. So now Walgreens, CVS, Walmart — there are 50,000 contract pharmacy arrangements in the country, more than there are pharmacies in the country.

[340B] is the second-largest drug purchasing program in the country. More drugs flow through 340B than through Medicaid, than Medicare Part B. The only program that’s bigger is Medicare Part D.

I’m not trying to critique the program as it was in 1992 or even the program as it was in 2010. Those programs were fine. I’m critiquing the program that is now taking over. We’ve done a lot of analysis. We’re going to be doing more of that now. Employers and purchasers are paying billions of dollars more in drugs than they would be in absence of 340B. So we feel like we have a very significant role to play in saying this program has to change.

You said that early in your career you learned the value of a story, a narrative. I know you’re not lobbying directly, but you’re still in the sphere. So what story are you telling about the National Alliance of Healthcare Purchaser Coalitions?

My starting point when I talk about who we are and what we’re trying to accomplish is really to start with our view on the underlying problems in healthcare. My thinking on this is evolving over time as I learn more. One of the things that I start with is fundamentally broken markets. And each market is broken in its own way: hospitals, drug, supply chain, you name it. And the role of employers and purchasers as critical actors in that market who have been largely passive for many years. Employers can share, pointing fingers back at ourselves, a little bit of that blame. We have allowed the markets to be further distorted and broken and have not leveraged the power of employers and purchasers to make a difference.

The National Alliance is providing employers and purchasers the tools, resources, transparent information and courage to make change.

This courage — there’s some self-interest here because of the lawsuits about employers not living up to their fiduciary responsibility, right?

I think yes and no, I certainly think you’re right. I will say there are others in our world, in the employer purchaser space who, I think, continue to think that the best thing employers can do is just stay with the status quo and fight off lawsuits.

It is our belief that the healthcare system requires, particularly the commercial market, radical change, and that it is fundamentally failing the 110 million people that are in it, and it’s fundamentally failing the employers that are spending trillions of dollars.

There continue to be, unfortunately, voices within our community who say, like, don’t worry about it. Just try to keep skating by. You know, keep working with the same partners you’re working with. And you know, if there’s a lawsuit that comes up, we’ll defend ourselves.

There was an adverse ruling to the plaintiff [in the Johnson & Johnson lawsuit] a couple days ago around standing. The National Alliance has not weighed in directly on that lawsuit. Whether Johnson & Johnson is able to get the suit dismissed or not, I really hope that if it does get it dismissed, it does not send a message to people who are very amenable to the idea that we should just all go back to sleep.