John Zutter on Health Tech Nerds: The Problem with Traditional Centers of Excellence—and What Comes Next 

Think about what the traditional Centers of Excellence model actually asks of a member: you’ve just received a diagnosis or a recommendation for major surgery, you’re scared, you’re already navigating a complicated insurance system — and now someone is suggesting you get on a plane to Cleveland or Rochester.

It’s an ask that made more sense on paper than it ever did in practice. COEs were built on the premise that concentrating complex procedures at high-volume, brand-name institutions would produce better outcomes. And for certain procedures, at certain institutions, that’s true. But the model came with a hidden flaw: it only works if members actually use it. And most don’t.

Lantern CEO John Zutter recently joined Kevin O’Leary and Martin Cech on Health Tech Nerds to discuss how Lantern has evolved the traditional COE model, the company’s $30 million raise from Morgan Health and Echo Health Ventures, and what it signals about where specialty care is headed. The conversation covered how Lantern’s distributed Network of Excellence differs from legacy COE models, what a guided member experience looks like end-to-end, and why utilization is the metric that separates real cost containment from vendor noise.

1. You don’t need to travel to a name-brand hospital to get excellent care.

One of Lantern’s first clients was a school district in Western Houston. Benefits leaders there didn’t care as much about sending members to well-known, faraway hospitals. They wanted them to be able to get excellent care closer to home. Lantern soon found that quality doctors don’t just practice at those name-brand facilities—and that not every doctor at a famous hospital necessarily meets Lantern’s high standards.

“Most hospitals around the country are going to have a pretty diverse range of docs in their panel and a few of them are going to be exceptional and a few of them are going to be less so and a bunch are going to be somewhere in the middle of that bell curve. And so if you can positively select, you can deliver really excellent quality care on a distributed basis.”

By building a local network, Lantern also didn’t need to limit itself to high-acuity only procedures, unlocking higher utilization as well.

“When you think about the original centers of excellence, they were very narrow in scope to joint replacements, spinal fusions, cardiothoracic events, bariatrics, and kind of that’s it, which meant you were already starting with such a small segment of the market.

But when you can eliminate the travel piece, you can go to lower acuity type of procedures and you can simplify the message to a population to say, ‘Do you need a procedure? Give us a call.’”

2. Quality selection happens at the individual provider level — with no exceptions.

To find quality providers across the U.S., Lantern leverages a combination of baseline data from sources like CMS and Leapfrog and a proprietary set of criteria developed with its Medical Advisory Board, including specialty-specific case logs, outcome data and appropriateness measures. That last category is where the real differentiation happens. Zutter explained:

“Not, are you a good orthopod, but are you appropriately doing spinal fusions on the right patients? Are you appropriately doing knee replacements? Are you not doing knee scopes before knee replacements at the wrong frequency? That would be a negative indicator from an appropriateness perspective.”

The provider application process is 100% controlled by Lantern’s clinical team — the growth side of the business has no vote. And Lantern is the only specialty network with its own federally licensed patient safety organization, allowing the team to collect and assess outcomes data when things don’t go perfectly.

3. A local Network of Excellence drives 5-8X more utilization.

One huge challenge with traditional Centers of Excellence is low utilization. When care is close to home, benefit usage skyrockets. As Zutter said:

“If you ask someone to get on a flight versus stay in their closest, most proximate metro area, it’s like an 8X difference in utilization. If you ask them to drive a couple of hours from your metroplex to the next closest major metroplex, it’s a 5X difference in utilization.”

Needless to say, a benefits program no one uses isn’t saving anyone money. For employers and funds facing mid-teens trend increases heading into 2026, that gap in utilization is the difference between a vendor and a real cost-containment solution. Zutter put it directly:

“The most important question is how much do people actually use your service? Because in the absence of utilization, there’s not much value and you’re just kind of pushing vendors around.”

Zutter shared that a Fortune 200 client that switched to Lantern in January told them within the first quarter that we had already done more member engagement than their prior vendor had generated in several years.

“We had a client, a very large, call it Fortune 200, well-known brand that was with a near peer for the last number of years and switched to us in January and heard from them last week that we will have done more in the first quarter than that near peer did in several years in terms of member engagement.

And I think that kind of tells you everything in terms of what’s the value of a distributed network versus a network where you might be providing inadequate access and across a too narrow set of procedural categories.”

4. Lantern’s member experience: Waived cost share, concierge guidance, and smart choices

Member noise is another common objection to bringing on a COE solution like Lantern. People generally don’t like having their choice limited. Lantern’s member experience helps assuage these concerns, especially when clients are able to waive cost share for members who use Lantern, which most do. Lantern’s Care Advocates explain the process to members, understand the member’s needs, and share a list of providers who meet Lantern’s strict criteria, so there is still some choice in the process. Zutter described the experience:

“We’re going to send them a selection of providers with bios and profiles so that they can be empowered in their own decision making, but we’re only sending good choices, only choices that have met our quality and our cost standards in our network.”

From there, Care Advocates handle medical record transfers, scheduling, pre-procedure check-ins and post-procedure follow-up.

5. The $30 million raise is about strategic partnership.

Lantern has been self-sufficient for years. This raise from Morgan Health and Echo Health Ventures was no different. As Zutter explained:

“We viewed this as an opportunistic way to partner with folks that could help us strategically as we think about evolving the business and in particular around the role of indirect distribution partnerships in the channel in the go-to-market.”

Cost containment is becoming more and more important for employers and funds. Zutter sees Lantern’s target market only getting larger—and predicts Lantern will continue to be a market leader.

“We do three to five times the activity of our near peers on any fundamental metric you could think about. And so I think we’re in a really good position to continue to extend our lead in that way.”

Read the full segment with John Zutter below.

Martin Cech (14:59):

Congratulations on the round, $30 million from Morgan Health and Echo Health Ventures. Welcome to the show, and I’m going to kick it over to Kevin to kick us off.

Kevin O’Leary (15:08):

Great. Yeah. John, congrats on round. It was fun to read about that last week. I’d be curious, I don’t know if you heard us just talking about network builds, how you’re thinking about Center of Excellence model. How do you think about Lantern’s approach to building that network out versus traditional Center of Excellence models as probably most folks think of them on the market today?

John Zutter (15:28):

Yeah, I think that one of our biggest points of differentiation over the years has been that we have evolved the thinking around centers of excellence from what they were in yesterday or to what they are in a more practical and usable fashion. And so a little bit of our origin story, if you go back, we used to call ourselves a Surgeons of Excellence Network rather than a center of excellence because one of our first clients was a school district in Western Houston, and they didn’t really care very much about what was our access to our rates with big institutions like Cleveland Clinic or Mayo Clinic or HSS or the names we typically think of as centers of excellence because none of their people were going there. And so their kind of problem set was how do we get people to high quality care at affordable prices in our community?

(16:23):

And to do that, you really needed to cherry pick the individual doctors and you needed to be thoughtful about the individual facilities. You needed to be thoughtful about site of care. And so kind of from our genesis, it was solving that use case of how do you deliver what people thought of as center of excellence quality, but do so on a much more distributed basis in the community setting where possible with the safety net of those big institutions for the scary stuff. And it turns out that that just scales a whole lot better. It scales better for a couple of reasons. One is most hospitals around the country are going to have a pretty diverse range of docs in their panel and a few of them are going to be exceptional and a few of them are going to be less so and a bunch are going to be somewhere in the middle of that bell curve.

(17:12):

And so if you can positively select, you can deliver really excellent quality care on a distributed basis. The second piece to that is if you can do that on a distributed basis, you don’t have to pay for the cost of travel, which if you’re going to send someone for a surgery somewhere where they’re going to be under anesthesia, you got to also send a travel companion because you can’t be discharged after general anesthesia without someone with you. And so now you’re paying for two people, hotels, flights, all the rest of it, and that’s just a fixed cost that you can’t really amortize. And so when you think about the original centers of excellence, they were very narrow in scope to joint replacements, spinal fusions, cardiothoracic events, bariatrics, and kind of that’s it, which meant you were already starting with such a small segment of the market.

(18:01):

But when you can eliminate the travel piece, you can not have to amortize that cost, which means you can go to lower acuity type of procedures and you can simplify the message to a population to say, “Do you need a procedure? Give us a call.” So that’s kind of unlock one. Unlock two is not surprisingly, it turns out members don’t really want to get on planes before major procedures. They don’t think the idea of getting on a plane after they’ve had a spinal fusion or something like that sounds particularly attractive. And so you see that come through in the data. If you ask someone to get on a flight versus stay in their closest, most proximate metro area, it’s like an 8X difference in utilization. If you ask them to drive a couple of hours from your metroplex to the next closest major metroplex, it’s a 5X difference in utilization.

(18:52):

So people want to speak to stay local where they can. You can achieve great outcomes. You’re often starting with a lower price index versus going to those highest acuity, biggest brand name places in the first place. And so that all kind of creates this flywheel effect of cover more, cover more conveniently, drive higher utilization while still being able to bring in some of those big institutions. So to your question, from our get-go, we’ve always been more of a specialty network than a centers of excellence. Centers of excellence is kind of by definition, much more narrow, more myopic and leads to the problem that we see so much in digital health, which is like great idea. Nobody used it. What’s the point? Where here it becomes practically accessible. I think last year across all of our book of business, on average, people were going in the dozens of miles range to get to the care that they needed rather than hundreds and certainly not flights by a very, very, very small frequency.

Martin Cech (20:00):

In addition to building this network of excellence, so you’re working across cancer surgery and infusion at the moment. What does the experience for the patient look like when the patient is saying, “Okay, I have this procedure. I’m calling Lantern.” What does those services look like? Yeah,

John Zutter (20:15):

So we’ve put a concierge wrapper around that whole experience. So we’ve got a team of 350 or so care advocates that answer those calls or answer live chats or asynchronous chats. So we can do it kind of omnichannel, but you’re going to be paired up with the care advocate. And if I’m your care advocate, I’m going to, one, explain to you the difference between if you’re going to go through your traditional insurance, whether that be Blue, United, Sigma, Aetna, whatever it might be, here’s how doctor selection works, here’s your range of choice, here’s your deductible, here’s your co-insurance, here’s what that process looks like, status quo. If you engage with us, we’re going to help you at these various different points. We’re going to help you choose great doctors that meet your specific needs. Here’s how we choose doctors on a quality basis. Some of those attributes that we look for, we try not to drown the member in all the excruciating detail, but give them a little bit of comfort that we’re doing a lot of analysis around that.

(21:17):

Here’s the financial what’s in it for you. Almost all of our clients are waiving deductible, co-insurance, copays. It depends based on the plan, but providing a material financial incentive to drive that engagement. So we’re going to talk to them about the financial burden or toxicity that exists status quo and how we alleviate some of that pressure and then walk them through each step. And once they’ve decided that sounds interesting, we’re going to send them a selection of providers with bios and profiles so that they can be empowered in their own decision making, but we’re only sending good choices, only choices that have met our quality and our cost standards in our network. They then choose that doctor. And from there, we’re going to help transfer medical records, help with scheduling, check in with them, make sure they’re ready for their consult, they’re ready for their procedure if when is necessary, that they’re recovering well after the fact.

(22:10):

And then also creating connection points across the ecosystem if and when those are appropriate.

Kevin O’Leary (22:16):

John, I’d be curious when you talk about the quality data, what quality data are you looking at? How do you delineate between high quality, good quality versus less so?

John Zutter (22:27):

Yeah. So there’s a lot of folks that talk about how to do this, and there’s a lot of different tools, and I think they have their pros and cons. We try and pull together data from a lot of different places. So there’s standard regulatory data that exists on every facility. CMS puts out tons of data. That’s kind of table stakes. So we’re pulling in lots of attributes both from CMS directly, from leapfrog and sources like that. We’re looking at what I’d saw associative criteria on the front end. So training, board certification, malpractice, state sanctions, all that stuff, which sometimes folks make light of it, but it’s really important. It’s again, a table stakes item. It’s not where it stops, but that is an important part to both check on the front end and continue to check. One of the worst things that can happen is a member gets a provider recommendation, Googles them and sees that they’re being sued for something.

(23:30):

You’re going to lose all confidence right there. We then actually go and work with custom data at the provider level where we have bispecialty, specific applications that have been developed by ourselves and our medical advisory board where it’s, “Hey, you’re a joint replacement doctor. I want to see your case logs by code. I want to see your volume. I want to see your outcomes. I want to see what are your protocols pre and post surgical.” So we’re looking at things like that. And that’s all part of a provider specific application process that no one on the growth side of our business has a vote in. It’s a hundred percent controlled by the clinical side so that they get to control that. We look at appropriateness measures. So we use a group called GAM or the Global Appropriateness Measures, which there’s a bunch of different tools out there and we like different ones for different purposes.

(24:26):

They tend to be very deep in specific things. So not, are you a good orthopod, but are you appropriately doing spinal fusions on the right patients? Are you appropriately doing knee replacements? Are you not doing knee scopes before knee replacements at the wrong frequency? That would be a negative indicator from an appropriateness perspective. So we have a collage of that data and then of course our own. I think we’re the only COE or specialty network that has our own federally licensed patient safety organizations. So we can collect information and assess outcomes when things don’t go perfectly. We also collect patient reported outcome measures. We’re doing a study on some of those as well. I think often just asking the patient how things went is highly correlated with outcomes and understanding where they think they are is highly correlated. So we look at all of those different things.

(25:26):

So it’s kind of a collage of different approaches, proprietary and aggregation of lots of data sources.

Martin Cech (25:33):

I’m curious how those conversations go when you’re building the network. What does it look like when you approach a provider and you say, “You appear to be a rockstar when it comes to this. We want to bring you in network.”

John Zutter (25:44):

Yeah, so it’s interesting. We have a situation recently where one of our long-term provider partners has a member of their practice that didn’t meet all of the criteria. And the answer had to be a tough answer, which is like, we’re not going to change our criteria and we’ll continue to monitor that provider. And if some of those variables change over time, then we can have another conversation, but that can sometimes create tension. Sometimes it’s an asset. We have some groups who say, “Hey, we know in our group who’s really good and who has less experience, who’s earlier in their career, earlier in their training.” And it’s hard politically for us to say that, but you guys have an objective criteria and that creates some separation. And so the key for us is create a set of rules and follow that rules religiously and don’t deviate from it unless the evidence tells you that there’s a reason to update your rules, in which case you’re evolving for everybody, but not making exceptions. And I think that’s the only way we maintain credibility.

Kevin O’Leary (26:55):

Yeah. John, funding raises are always good times to check in on commercial traction for businesses, big milestones for organizations. I’d be curious, we obviously heard from Tom Friedman the other week about the progress in North Carolina. I’d be curious where else you are nationwide, how far along you are in the build, and also where do you think this 30 million takes you from a commercial perspective?

John Zutter (27:23):

Yeah. So importantly, we’ve kind of always run our business a little bit differently. So we’ve been a self-sufficient business for years. Many of our capital rounds that we’ve announced over the last five years were secondary, not primary. So when Cerant invested in 2020, when Insight invested in both 23 and 24, those were 100% secondary. It’s just investors transitioning because the company was already self-sufficient. Continues to be the case today. We viewed this as an opportunistic way to partner with folks that could help us strategically as we think about evolving the business and in particular around the role of indirect distribution partnerships in the channel in the go-to-market. Where are we from a business perspective? We think for the last three years have won between 60 and 70% of opportunities in the marketplace, and that’s fairly consistent in that range between those three years, we track it pretty rigorously.

(28:33):

I think the market continues to get bigger. We’re in a really great spot. And if you look at Business Group on health surveys for the last several years, muscular skeletal, centers of excellence, cancer are amongst the top three priorities for the overwhelming majority. We just got back from our three client summits where we had each host about 20 jumbo and super jumbo names, so call it 60 over the course of three months. And a year ago they were surprised or they expressed surprise that they were going to be in the eight, nine, 10% trend range up from years prior. And despite macroeconomics like inflation tapering over the last 12, 18 months, in healthcare, it’s going the other direction. So the majority of folks in the room were looking at mid-teens, like call it 13 to 18% trend for 26 versus 25. And so when that’s the case, there’s just no more money to push around.

(29:32):

You need real cost containment. And so I think we’re in a unique position for that where the market will just get bigger for us. We do three to five times the activity of our near peers on any fundamental metric you could think about. And so I think we’re in a really good position to continue to extend our lead in that way. At the end of the day, the most important question for a client to ask about is a Of course, you have to ask about what are your quality metrics and how do you think about that and what’s your network construction look like and what’s access look like? But the most important question is how much do people actually use your service? Because in the absence of utilization, there’s not much value and you’re just kind of pushing vendors around. We had a client, a very large, call it Fortune 200, well-known brand that was with a near peer for the last number of years and switched to us in January and heard from them last week that we will have done more in the first quarter than that near peer did in several years in terms of member engagement.

(30:47):

And I think that kind of tells you everything in terms of what’s the value of a distributed network versus a network where you might be providing inadequate access and across a too narrow set of procedural categories. And that creates a real network effect from a remote perspective in that it’s really hard to build that network. It takes a long time. The system, as you guys know, is highly fragmented. Each market, generally the provider group is a separate entity from the hospital, separate from the surgery center, separate from anesthesia. So stitching that together across multiple different procedural categories is it’s putting together a pretty complex spiderweb and we have that nationwide. So our clients represent our membership of 12 million people today represents a heat map that looks just like the US population across union, public sector, private sector, super jumbo, middle market, et cetera.

Martin Cech (31:50):

John, this has been hugely helpful. We really appreciate it. We know we’re a little bit over time. Where can people learn more about Lantern if they have questions?

John Zutter (31:59):

So of course they can go to our website, lanterncare.com, but they can reach out to anyone on our team. I think we try and be really active on LinkedIn, try and be responsive there. People can reach out to me directly on LinkedIn or find me at a conference near you. So we all try and make ourselves as present as possible.

Martin Cech (32:22):

Thanks so much for your time today, John.

John Zutter (32:24):

Yeah, thanks guys. Yep.

Kevin O’Leary (32:27):

See you.

Martin Cech (32:32):

I think that that conversation paired really nicely with your conversation with Tom Friedman from the NC State Health Plan. The big question … Oh, I’m sorry. The big question that we didn’t get to ask because we ran out of time was how they’re getting those better engagement rates. So I think you, and maybe you can expand on this a little bit, but you talked about this issue of trust a little bit in the newsletter this week and had an interesting conversation with Tom about trust.

Kevin O’Leary (33:01):

Yeah. I mean, Tom’s, so context setting for this, North Carolina State Health Plan, 750,000 employees, or I should say covered life-ish on the plan. They brought later in zero cost surgical benefit as part of their trying to turn the plan around over the next couple of years from a financial perspective. I think they’re projected to lose what, a billion dollars or be a deficit of a billion dollars by end of 2027. And so the zero cost surgical benefit is a big part of the offering. And one of Tom’s interesting comments that sticks with me coming out of that, he made a comment of, you think you can design this program that’s where you can stop. As long as you design the right program and have the right incentives in place. But he’s like, when you actually roll it out, you realize that these are folks who are going through health issues and they have a lot going on in their lives and you need to get in front of them and ultimately drive behavior change for them.

(33:57):

And to drive that behavior change successfully, they need to trust you. And that was part of the conversation that Tom and I were having around payers don’t do a lot to earn the trust of their members. And that’s true of employers as payers as well. And as Tom mentioned, in their first days on the job as the new plan administration, they had to raise premiums for their employees to solve that deficit issue. And you can imagine you’re an employee of a state health plan, you’re a teacher in North Carolina, your premiums are going up and you lose some trust and you’ve then got to work to regain that trust as the plan through showing up consistently, through offering programs like these, through explaining why the benefit’s there. And I thought it was a really cool example of trying to drive positive change from the state health plan and then also thinking through partnerships with organizations like Lantern.

(34:54):

And they just brought in Novant Health, big health system in North Carolina to help drive more awareness, more trust, more credibility building in that local market with a provider group as part of that. And so I think it’ll be interesting to keep an eye on that model, how it evolves over time, how it grows and scales up, because it’s cool to watch.