Dan Gallagher: Thank you for having me. I'm really excited to be here and talk with you today.
Mikulas: So tell me, you spent twenty years inside places like Anthem, Change Healthcare and Optimum. What finally pushed you out of the door?
Dan Gallagher: that's a a funny story. I I started with a very interesting and narrow space in healthcare called payment integrity. And what I found in that space was there was a a shelf life where initiatives would stall or initiatives would be successful and then investment would stall because of the success. And found myself regularly on a cycle of trying to defend my job. And I had a good mentor who came along and said, you know, you can do better by doing this for yourself if you can bear the risk of having to find your next client. And that sat with me for two or three years. And my mentor crossed we crossed paths professionally several times before we started working together. And finally He came to me and said, you know, really, I again, Dan, I think you should do this. You'd be good you have the right mindset for it. You have the right skill set that's not easily replaceable. you have the right family situation to where your kids are older now and you can you could invest in in yourself a little bit more. And that pushed me to make a call about a year ago of work was again in another one of those cycles where investments were waning. And it was time to do something new. And rather than put myself on the roller coaster for another ride with another company, I decided to do it for myself. I couldn't do it alone. I I had good advisors, and then I also had someone willing to invest in me to provide the startup capital to not have to worry about where the first client was coming from. and to be able to focus on growing the business for scale from the beginning rather than growing it one piece at a time.
Mikulas: Right, right. Yeah, and we were talking about this before recording that you took a pretty different approach to it than other firms. Can you tell me what else do you do differently than kind of your standard boutique firm?
Dan Gallagher: Yes. and and thank you for asking. So one thing we did differently is we looked at the b the market and we knew what a viable client size would be to support a staff. where many that get into consulting start by working for themselves and then add one more person as they need it, and then they add one more person, then accidentally they become a a five person firm. We started with a target. Of what can a five to 10 person firm realistically chase? What size clients, what size engagements, and then backed into what assets are needed to chase clients of that size. So one of the things we did in the payment integrity space, because again, it's a it's a very niche area around ensuring that improper payments on claims are identified, on health insurance claims are identified and either prevented from happening. Or retroactively corrected with the funds recovered, is we built and spent investment dollars in two places. One was in market intelligence, because the pitchbooks of the world, the CB Insights, the other tools that bigger firms use that focus more mainstream didn't address specific needs around payment integrity. And since we couldn't find a source for that, we invested in building it. And in building that, we profiled 215 companies in the space. As of this morning, it's it's 215. We found 35 active private equity firms that have done meaningful deals. And we found 509 health plans, TPAs, and employer groups that were buyers in the field. And by starting with that profile, it gave us market credibility. When we talk to private equities, we know who their competition is. When we talk to vendors in the space, we know again who they're working with, who they're potentially selling to, and who they're buying to, and we can be more specific in that. So because we were sizing to go after certain clients, which are generally speaking a little bit larger, certain engagement sizes that would support multiple people over multiple months, we needed to have some assets to differentiate ourselves. And then the second thing that we did was we looked at the industry and said there's no common language. So we went and defined that language. We built a reference framework. we defined payment integrity into 10 core functions. We built a cost containment reference area that touched on the adjacent spaces so that when we talk to a client, we could we equate what the client is saying into our framework, which then makes connection to their to their competition more apparent. So now we're all speaking the same language. And out of that we built a piece of curriculum on, we call it PI Core, which is a a four-hour workshop that clo prospective clients, actual clients, investors in the space can take to become acquainted with that framework. So those investments allowed us to start by engaging clients bigger than what we would have been I would have been able to reach on my own. Say, here's something I have that everybody else doesn't. Do you want do you want to hear more about it? And that became an inroad to some larger firms and to larger deals and by extension, more repeat business faster.
Mikulas: Yeah, that's a great approach and you know so many firms I think miss a lot of business because they are afraid of giving something away without asking for a for a something back and so your workshop it's yeah it's a smart idea. Your LinkedIn bio says healthcare doesn't fail because of big ideas, it fails in the details. So my question to you is: what do health plan executives tend to get wrong about you know payment integrity before they call someone like you?
Dan Gallagher: So there are several places that there are mistakes or missteps. And I think the the first place is that many health plans assume that incentives are aligned across different organizations. But the in effect what happens is you're Payment integrity is part of an intercon interconnected system. It's a mindset. So you have one team responsible for finding mistakes, and they're incentivized by how many mistakes they can find. And you have another team that is doing configurations upstream and they're responsible for getting the claims accurate the first time. Both are very noble intentions. But as you can imagine, if you make an investment to do more accuracy related work, The error rate is naturally going to fall. So you could invest on one side, and then the other side gets starved, and that person, you know, becomes a target for why aren't you finding more? So in many cases, the details are identifying those connections and creating a working relationship across a health plan specifically, to where mistakes that can be converted into. accuracy in those systems when they're moved to an accuracy-based place, such as from post payment to prepayment or prepayment to pre-service, that we get the incentives to track along with it. So that's that's one big detail. the other detail is that that that I'd use as an example is fraud waste and abuse, which is a big topic in the US news these days. You know, the Trump administration talks a lot about fraud. And fraud implies intent. and in that event of intent, identification does not mean recovery. so people fail at that detail of, there's 200 million dollars in fraud or whatever the number is. That doesn't mean there's 200 million dollars to go and get back. Odds are that money's already gone. So just that little
Mikulas: Hmm.
Dan Gallagher: detail of Trying to understand that the mindset of how you disposition different areas of payment integrity. So fraud, a common disposition is to put providers on some form of prepay review for everything to make sure there is no nothing wrong. the other is to remove the provider from the network, which is a very different disposition than would be for an improper payment where there's a contract configured incorrectly, where the the Provider isn't doing it intentionally. there just may be an error in a configuration either on the provider side or on the payer side where they're being paid more than they should be for that service. And in that case, there's a recovery technique of, hey, I need the money back or I need to offset it off of something else. So, so just really getting into that that lower level of detail drives a lot for how to how to differentiate across a larger. I call it a big box. So like a a larger non-boutique firm that looks at all misappropriated spend or more i all improper spend the same way.
Mikulas: Right. Where do you see AI come into the work that you do? Because we were talking about this no prior to recording that
Dan Gallagher: Right.
Mikulas: a lot of companies see AI as a replacement for the work that you do, for example. What's been kind of your experience and where do you think that these AI tools aimed at, you know, payment integrity are failing short?
Dan Gallagher: So artificial intelligence is vital to advancing the industry. It it's a it's a form of automation that allows our our industry to review claims at a lower dollar amount. So find and extract smaller errors at reduced administrative costs. The Industry talking about payment integrity for a second, and then I'll talk about 13.1. the industry uses artificial intelligence in a few different ways. One is to research policies, changes in medical policy, changes in payment policies, to extract those into discrete rules to be used for claim processing. Artificial intelligence can be used for testing, to test configurations. And then can be used to do some analysis to help with appeals or to optimize reviews. So if you have a nurse that's reviewing knee replacements, artificial intelligence may find, maybe used to find other claims that look similar so that the reviewer can be doing you know an optimized flow of work. Where the industry is not willing to go, which there's regulation around it, but there's also just human feel to it. The industry is not willing to accept using artificial intelligence or as a mo or a mo as a model on its own to determine if a claim should be paid or not. the industry is still digging after real rules that are very discrete, binary, and explainable. On the 13.1 side, as a as a consultancy, artificial intelligence is necessary to all the work that we do. On One hand, it's used we use it to streamline how we build slides and proposals. So there's less effort in it. It allows us to query our knowledge bases, which makes associate level resources significantly more powerful from day one. And then the correctly written prompts allow much of our market research to occur at a fraction of the time it did even a year ago. We produced something we call a market profile, which is a public view using all public information on a vendor in the payment integrity space. And when we started, it was a list of manual questions with a little bit of plod or clod or take your AI tool to help answer the questions one at a time. And it would take our team somewhere around 20 hours to produce the intelligence packet. As we've become more mature with writing. Better prompts, refining the questions that we ask, refining our output formats. We're at we've been able to cut that down from 20 hours to about three. And that scale, going back to earlier, 213 vendor or 215 vendors that we profile has allowed us to move from a we only profile when we're asked, to we can profile now when we reasonably expect an ask to come. And then we can maintain those records where once a profile is done once, with our with our tooling, we're able to update those profiles on a weekly or bi weekly basis if we want. It's just a matter of when is a customer asking for it. And that's reduced our costs drastically.
Mikulas: Hm. Yeah, AI and the kind of time efficiency that you're able to save with it is it's it's magical. I I actually found out quite recently that some of the podcasting that I'm doing right now can like the post production parts can be also like eighty percent be done with AI. So yeah, I'm all pumped for saving time. Where can I, you know, where can I save more time to do more of the stuff that I like? you called your first year at 13.1 drinking from a fire hose. what was the hardest stretch for you now that you look back
Dan Gallagher: So we we started August of 2025. And I I took a jump with you know, I had support and I had a few clients in the bag right away of that that was what made the decision to start the company easy. Is I had a good mentor, I had some financial support, and I had a couple of clients to get going. And in that, I we we quickly grew from myself and one other resource to about five or six resources that contributed. And with that scope suddenly becomes standing up 401k plans, doing employee benefits, having to do broader prospecting. I took on a remote employee from a different state and had to learn registration on the fly for Secretary of State and whatnot. So When the work was here and we could focus on the work, it was very very easy. Like that, that that was my zone is building a solution for a client and working. But then the the scale at which you have to prospect to bring in deals of a size that that are meaningful. at first it was, you know, I don't want to say any deal is a good deal, but a five or ten thousand dollar engagement, great. and then you quickly advance into needing needing to find fifty thousand, hundred thousand dollar, two hundred thousand dollar deals. And those can get stuck for so many different reasons that the the width of the pipe that you needed to maintain to keep that work coming was a lot for a small team. but you asked about the hardest time and I I'd say the hardest point was probably May June this year, where early work was completed. We're we're very happy. A hundred percent of our clients have either extended work, done a second engagement, or referred us to somebody else. So so to me, that means we're doing something right. But
Mikulas: Ha ha.
Dan Gallagher: there's still a there's always a lull between the first job and the second job. So so we we burned through that first pile of work and we're waiting for the second pile of work and we were prospecting. We we kind of let our foot off the gas and then paid the penalty for that in the middle of the year of. there there wasn't the new work coming in as consistently. So it really taught the entire team the discipline of no matter what's going on, you you have your your clients that you reach out to, you have your I I'll call them prospects that you reach out to. And even if it sounds like there's nothing there, and you've done three check-ins at it, you know, let's check in next month, let's check in next month. Well, sometimes you have to do that eight times. And and it's discouraging, but you you just keep swinging. The same thing with understanding the breadth of how to publish and get noticed on LinkedIn and other social platforms. Of at the beginning you have a lot of ideas and then you feel that the well's getting empty. So just to think about how much you still have to invest in yourself and in your firm to remain relevant and to keep bringing new ideas, to keep testing. That that's been the the challenge of for me is How much goes into keeping the machine running so that you could deliver solutions? The solution delivery part, in all honesty, was the easy part.
Mikulas: Mm-hmm. Say I'm a VP at a re you know regional health plan and I reach out to you. what what happens from you know that first contact to call it a a signed engagement? what are kind of the steps?
Dan Gallagher: Okay. first engagement is normally let me hear about you. we never try to sell the first time around. We try to get to know each other. So let me tell you a little bit about my story, about 15 to 20 years in industry, about what I see that what I'm seeing at other clients, what I'm seeing in the market. I normally lead with a few market trends. And then ask on the other side of it is, okay, does this resonate? Is this what you're seeing? And normally that that person on the other side opens up a little bit of, yeah, we're seeing that. No, we're not seeing that. Okay, what's keeping you up at night? And that normally ends the first call. The second call normally comes just a little bit later. and it becomes a I've had a chance to think about what you said. If I were in your shoes, here's what I would want to know. And and we lay out, because we're smaller, we have less name recognition, we have to be more transparent than others. So we lay a little bit more out that somebody else might keep behind a paywall, for lack of a better term. And that normally breeds a okay, that makes sense. Can you tell me a little bit more? Which leads into what would a first engagement look like. and what the first engagement looks like for us is normally Based on two tenants. One is we have a specific problem that we can solve for you within, we try to do something within eight to twelve weeks. we don't go after a year-long engagement, we don't go after staff og we go after a solution. And we back that solution two ways. We always provide this the approach, what the solution is, and an expected return on investment. And then for that first engagement, we'll guarantee the ROI. And we always credit any evaluation work we do to engagement number two. So
Mikulas: Mm.
Dan Gallagher: normally speaking, the first engagement is smaller dollars. And it's about us getting in the door and proving what we can do. it's trying to stay out of the way of a McKinsey or a Bain or somebody big that's there. We try to find something smaller that's being ignored, and then we try to deliver something that's in our wheelhouse for expertise. So it could be vendor intelligence, it could be. system optimization around claim editing. It's the the small pieces that get left on the floor that are still material that normally don't hit a a large transformation initiative because they're too small or too narrow or whatever the reason is.
Mikulas: Right, right.
Dan Gallagher: And then eight to twelve weeks later we, you know, we execute, we put points on the board, and then like I said, the hundred percent retention rate speaks for itself.
Mikulas: Hmm. Yeah, so I know we are kind of running out of time here, but tell me if people wanted to reach out and, you know, get in touch or just check you out and see what you're doing. what where can they do so?
Dan Gallagher: So two things. One would be thirteen point one advisors.com is our website. But I would say our team is active on LinkedIn every day. We publish every Tuesday at 7 30 AM Eastern. we produce research-based white papers about once a quarter. There's always something new to learn from the team. And I I'd start on LinkedIn and reach out. you could get there on the website, but most of our content lives on LinkedIn because that's where That's where people casually engage and and we go from there.
Mikulas: Okay. Well thank you then for joining and thank you for listening.
Dan Gallagher: Thank you so much.