Exec Insights Call Notes & Replay: Advanced Primary Care | The Train Left the Station, What's Next?

Overview

Watch the replay below of our call with Ryan Schmid & Jeffrey Hogan, who joined us for another live discussion and Q&A moderated by Hedgeye Health Care sector head Tom Tobin. As a reminder, Ryan is the Co-founder, President & CEO of Vera Whole Health, which recently received a substantial capital investment from Clayton, Dubilier & Rice to help expand its next-generation, value-based advanced primary care (APC) model, as well as a $50MM investment from JPMorgan (8/4). Jeff is the Northeast Regional Manager for Rogers Benefit Group and Founder of Upside Health Advisors, which advises clients, including states/municipalities, corporates, and providers on all things value-based care. This conversation was a great follow-on to our December 2020 interview: CLICK HERE for the Call Replay & Notes from the last time we hosted Jeff and Ryan.

1. Advanced Primary Care penetration is low and has a long way to run, the TAM is "very large" for the successful models
2. Legacy Providers will have a difficult time following APC which requires wholesale conversion of care patterns
3. This time is different because: higher levels of consumer demand (Consumerism), CMMI model templates
4. Employers are rapidly moving beyond point solutions, demand is shifting to integrated care, pricing risk, "In 35 years I haven't seen employers taking agency (like they are now)"

Time Stamps and Call Notes

Edited for clarity and length.

00:00-01:30 Intro

01:31 - Why is this "physician practice 2.0" model sustainable/real this time? Where are we now and is it really different?

• JH: COVID inspired a substantial amount of change. 17.7% of GDP - i.e., the health care sector - hasn't had a lot of consumerism-related disruption. The healthcare consumer has been a unicorn. Provider groups that weren't providing direct COVID care were on the sidelines, didn't have access to care, and lost all their volume and revenue. There was a threat to their existence. Some of the telemed solutions that were set up weren't very good - no longitudinal care, not interoperable, etc. 
• Now, there are plenty of models - One Medical or others are paradigm models: in-person+virtual, interoperable, and graded via NPS scores - that's a huge contrast to legacy provider organizations. The opportunities have evolved, attitudes have changed on the consumer side. Will providers' attitudes change? Yes, a little. The bottom line is there are huge expectations for primary care that haven't existed before - probably not all can be fulfilled, but some are and that's why we're seeing change.

07:00 - Ryan, that consumer point is important, as people can choose or have a say in where/how they receive care. What's your view?

• RS: There's a huge myth that the younger generation doesn't want a PCP. We don't see that to be the case at all in any of our populations. What we do see is their expectations are dramatically higher, they are used to a better user experience and on-demand services, and being put first. It's the opposite of how traditional models have operated. We're also talking about generations dealing w/ stress, anxiety, depression of the likes we've never seen. A care model that supports a relationship between providers and members (i.e., meets those expectations), even if virtually, is really powerful. The expectation for a better services model will not change. You can't unwind that.
• Will 100% of the care model go this way?
• Yes, eventually. But you have to follow the money. That's another part of what's different. New payment models out of The CMMI provide a significant incentive for primary care to do better (health outcomes, better medical management (i.e., total cost of care), and experience/satisfaction). That's creating a financial incentive that did not exist before in a fee-for-service model where primary care is a loss leader for a hospital or health system. It's coming out of Medicare Advantage and some of the DCE contracting and making its way into the commercial environment for employer-sponsored programs - fully insured and self-funded. You're seeing more sophistication that will allow for better economics for PCP. Primary care has never captured the value it could deliver, but now the new payment models allow for control of more of the overall premium dollar for doing the right things for the member, it's a self-fulfilling prophecy.

10:35 - In one of your slides in your presentation there's a 17%-20% cost savings - we've been hunting for numbers like that and would like to understand how many dollars are in that unnecessary care bin, how many [dollars] can you spend on other stuff, and what's the difference between the two?

• RS: Those numbers are only medical and Rx spend. There's a whole separate bucked, especially in employer-sponsored plans that are fixed fees related to ASO fees, various point solutions that are in parallel, etc. The total spend bucket is significantly better than what most people talk about. We're not even touching on that. There's so much fragmentation that you have to wonder if you're driving down the total cost of care. We think it's a cost center. If you take all of that aside, in a fee-for-service world, there's almost no incentive to manage medical margin.
• All workstreams, reporting, and analysis, and billions of dollars of infrastructure, go into FFS. You can't flip a switch on that. That said, 80%-90% of the care that most people need should be delivered through primary care. Most MDs can handle a broad range of conditions that span social, mental, and physical health. Urgent care -> primary care, ask questions like "Why this happened?" vs. just treating what's wrong when. You naturally reduce downstream waste by understanding the whole person - fewer Dx, fewer referrals, fewer Rx, etc.
• Also, we're getting more price and quality transparency. A true APC offering can and should be able to longitudinally control the whole "supply chain" - i.e., refer a patient to a specialist that's high quality at a reasonable price and participates as a part of the care team. The site of care savings is there if the primary care chassis is responsible.

16:35 - Why is that going to be different? We've known that. Also, you have a couple of sites in lots of cities. Is that adequate? Do you have enough data and awareness - enough scale?

• RS: One of the main reasons this time can be different is there's a financial incentive to do it. If a doctor is employed by the hospital, or only charging FFS revenue, who cares? That's not a knock on individual physicians. They are in a tough spot. In our world, financial incentives exist to improve medical margin, that's why. Those payment models are largely out of CMMI, and I think we will see more of that. These models are being aggressively adopted in Medicare Advantage and will evolve into commercial settings.
• JH: In 35 years, I haven't seen employers taking "agency" over plans [like they are today]. They can't get enough employees, or can't  pay them enough. The ridiculous health care trend is now meaningful. My definition of value points to predictability in spend. Employers want to offer a benefit that's valuable to employees and lacks asymmetric risk. It's easy in certain markets to look at RAND data - cost of care, outcomes - and steer to the best providers for labor & delivery, hips, knees, and even onsite clinics, or specialty meds -> 50% of specialty is on the med pharmacy side, and hospitals mark-up infusions that can be delivered in sites of care (this brings down cost by 40%). Employers are really, really interested in predictable, quantifiable outcomes, and it impacts what they pay for stop loss as well.

20:50 - It sounds like you're replicating what insurance does, and it seems like it'd be difficult from 1 - 2 sites in a market...

• RS: There are a lot of factors. The two levers to pull and impact spend are utilization and price. We cannot impact price without significant scale in a market - i.e., control X% of the market and we'll only refer to you if you give our clients Y% discount. You must have scale to do that. The long-term intention is to go deeper and increase density in key geographies. Historically, it's been all about managing utilization. Using data and decision support tools, the care teams can make referrals to specialists in a high-performing network. Even in a small population there's enough waste that utilization management generates savings.

24:08 - The modeling question - Oak Street, Cano, One Medical/Iora, etc. - we look at where the practitioners are and how many PCPs are in the same region. What are the barriers? The risk piece seems like a potential hand grenade, but if utilization gets you savings, we have more confidence that there's a lot more share. Can go from 1-2% share to 20%.

• RS: The TAM for a provider group that can manage risk successfully is very large. It's one thing to talk about it, but to do it at scale, multi-state, and do it well, etc. is not easy. You can't just pluck a provider out of hospital that's worked there for 20 years and expect his/her behavior and patterns to change overnight - you have to rewire the whole system and have a model with tight bumpers. It's a phenomenal opportunity if you do it well.

26:22 - When we talk to medical directors and PCPs, the first bin of savings, or upward revision, is documenting every ailment, diabetes, hypertension, etc. Medicare model - "exactly" - it's a high touch, care team model and the data piece is not for everyone... also, can a Presbyterian flip the switch one day?

• RS: Right, you can't pluck an MD and expect them to immediately operate - it's definitely not for everyone. There's a different level of taxation on the provider - 4-7 min appointments leads to one type of exhaustion vs. 30-60 min w/ each member (you must document well, get under the hood and figure out social/emotional factors, and really understand everything happening to or for them, who else they see, and get records back, etc. It's another set of stressors - 12-14 patients per day, not 20+, but you must go deep. That's NOT for everyone, but most family medicine docs and internists want to address the whole person and can take the leap when they have the infrastructure. There is a big gap out there.
• Regarding Presbyterian, change management is hard, especially in health care. For a large provider to flip the book to value is a massive lift. And as they start to do it, the economics go out the window (it's very risky). Also, back to consumerism and employers taking agency, most provider organizations are ill-equipped to serve employers as customers (it's not a muscle they've developed). They don't have the [clinical] infrastructure to take risk, manage populations, etc. Many have a "partnership mindset" - there are some good existing PCPs that can't capture the value they are delivering and there's a huge opportunity to bring some along and allow a whole system to taper into the value concept.
• There are opportunities for multi-specialty groups and IDNs too, but the message to deliver to specialists is something to consider. The transition will happen but will be slow and painful.

35:00 - RPM, telemedicine, and point solutions. On the employer side, how much employer adoption/appetite is there for Teladoc, PMPM, behavioral health solutions, disease management suites, etc.? Any qualitative or quantitative commentary you can put around demand for the rest of 2021 or 2022?

• JH: I do 4 - 5 calls each week with startup point solutions that want to go direct to the employer, which is a really stupid thing because employers don't want to hear it. The "Wellness" industry has been a complete waste of money and/or time for the last 25 years - not integrated into data or even into providers for employees most at risk. Vera, a paradigm tech-enabled APC, has done everything: payment reform, patient/member engagement, etc. and as they look at the bigger picture, they are more relevant w/ steering - cancer, MSK, etc. And, he [Ryan] is probably approached daily by vendors that want to integrate APIs - it's a mess. Then, with Livongo or others, is the data getting back to the docs?
• Collective Health announced a number of point solutions and they'll take care of the integration - but how will that data get back to employers?
• There's CVS too - came out with deployment of its own merchandising of point solutions - another middle man creating shelf space for unintegrated point solutions.
• Has the market caught up with your view, Jeff? We have heard some positive and some negative chatter - TDOC has changed its tone...
• JH: I Agree. The market is demanding relevance from point solutions. There hasn't been a true mechanism for it, but transparency, integration, etc. with point solutions is crucial. It's hard to bring in really good point solutions, but there are some out there. If PCPs are moving to risk, there's a good point solution for PCPs that don't know what drugs cost and want adherence (unnamed) - there are some really good ones, but there's such a shotgun blast - number, scope, hard to validate relevance and ability to integrate. Be a point solution, hope it works - hope not a strategy.

40:30 - ONEM now offers a disease management type of suite that sounded like Linvongo with an in-person add-on... can APC do it better than a point solutions/virtual? What are the points of differentiation?

• RS: What do we mean by point solutions or chronic condition management. The reality is that we are whole people. If all you're doing is addressing diabetes with lifestyle coaching, etc. it's just one small part of the picture. The differentiation is longitudinal social, physical, etc. management -> there's so much more to an individual, and if you can't address everything, A1C won't stay under control.
• Social, mental, and physical - the goal is to get the patient to develop self-efficacy and believe they can control their health and outcomes. The efficacy of that is way higher than anything else.

45:02 - Teladoc virtual first - Primary 360 - it never really made sense to me that you could deliver it without in-person. Longer-term will it work?

• RS: I think 80-85% of what we consider primary care could be delivered virtually - there is real value in a virtual first type of solution. But that 15% or last mile is very important for performance/medical management. Can the virtual-only solutions ultimately win? No. Wrapped around some physical capacity, yes, there's real merit. What's more important than virtual or physical is the care must be continuous - i.e., having a care team responsible for financial and health outcomes is critically important.
• Virtual first for random acute care just drives up cost and there's no value other than short-term convenience.

47:25 - What does all this mean for insurers? Where do they end up? Can they come in, buy practice(s), underwrite? UNH w/ Optum...

• JH: Yes, Optum is already doing this in New England. In Mass, there's a 3x cost of care differential across systems. The lowest cost of care, best quality, is Optum. They have been taking risk on pharma for 5 years. It's already happening around the country. Also in Mass, the most expensive system is Partners, and they are scared of Optum buying Atrius. 

49:22 - Direct contracting - I'm having trouble layering it into the model. It seems like a great template, but it's a handful of limited providers. How fragile is it? Could the rules change? It seems like a big step to take those patients on.

• JH: It's an interesting model. You say to a provider, "OK, you have all the downside risk, no more shared savings." They adopt a risk-progression path, clinical integration longitudinal path, and can do virtual attribution, and they get a whole bunch of $ upfront. It scares legacy providers to death. These providers are used to volume and are risk-averse.
• To organizations looking to the future, or that have partners helping them figure out how to move to risk and learn to engage patients, the revenue opportunity and quality of life are better. Also, providers care for Medicare, Medicare Advantage, Medicaid, Commercial, Workers' Comp, etc. and the whole idea is that learning how to take risk in one segment allows you to do it in others.
• MedAdvantage - there's a lot of revenue vs. commercial. Commercial remains entrenched. To the previous question, BUCA payers and big self-funded, arbitrage between what negotiated in-network and chargemaster, losing FFS arbitrage is a big deal. Brokers and consultants make money on premium or overall cost. There's a disincentive to look at this as a paradigm model; there are headwinds for commercial because of the entrenchments that exist.
• RS: Unless self-funded employers take agency over their plan, payment and contract models exist already. They need to push back on TPAs, carriers to unbundle and strip out waste, etc. the ability to execute on a risk contract is there. But we need a self-funded employer to say, "It's my money, do what I say." When that happens, the rest of the industry will come along.

53:50 - Where are we in that process/cycle?

• JH: You have to look at organizations that can execute - they have agency with purchasers - e.g., on-site clinics have a really great opportunity to say to employers, "You like us, spending 5% of the total cost of care, employees and dependents like what we do, we can do better, we'll take risk on MSK, or mange efficacy on specialty drugs. We'll take big chunks and go at risk for performance right now." There are 3-4 of them around the country looking at just that. There's also workers comp for these employers as well - on-site, infusion or other types of things that are big chunks of the total cost of care. 
• Out of 100 employers interested last year, 5% -> 10%? What you're talking about sounds aspirational or like the template?
• RS: It's early, but it's happening. If it doubles every year, it'll become apparent. Employers have been ripped off - they are paying 4x-5x-6x more than CMS for certain things. Growing awareness is putting pressure on brokers/consultants, TPAs, etc. Also, there's burnout relative to the bombardment by point solutions. So, there's a narrowing focus, deeper integration. demanding results through risk-taking. You need the CFO to get involved and dig into the economics. 5 years from now, we'll look back and see that a lot has happened.

58:28 - How has your selling season been?

• RS: There are some exciting tailwinds. Across the industry, we're seeing groups really wrap their arms around this. We're going to grow very rapidly. A lot of it is driven directly by the output of conversations like this.

59:20 - Any closing comments?

ABOUT THE SPEAKERS

Jeffrey Hogan is the Northeast Regional Manager for Rogers Benefit Group, a national benefits marketing and consulting firm. Jeff has been with Rogers Benefit Group for 28 years. Additionally, he operates a consulting firm, Upside Health Advisors, which provides expert witness services on healthcare-related litigation, as well as advises payers and large provider groups on product development and launch strategies. Jeff has been a resource to employers desirous of implementing strategies to manage health spend more efficiently and is focused on healthcare payment reform, health policy issues, care coordination, value-based initiatives, and healthcare quality measures. He regularly appears on national forums focused on moving to value-based healthcare and is actively working to promote healthcare-related transparency measures in the market. Jeff is a current board member for the Connecticut Business Group on Health and serves as the group’s liaison to the National Alliance of Healthcare Purchaser’s Coalition. He is also is one of the Coordinators of Connecticut’s Moving to Value Alliance. He also serves on the Advisor’s Panel for the Validation Institute and is the Regional Leader for the Leapfrog Group.

Ryan Schmid is the Co-founder, President & CEO of Vera Whole Health, a market-leading “Advanced Primary Care” provider that delivers comprehensive, intelligent primary care to employees via employer-funded worksite clinics and insurers. Vera contracts with companies to build and operate dedicated on- and near-site primary care clinics for their employees and was named one of Washington’s 100 Best Companies to Work For by Seattle Business Magazine, and serves such groups as Seattle Children’s Hospital, The Bill & Melinda Gates Foundation, Virginia Mason Medical Center, City of Kirkland, Anchorage School District, and the Northern Arizona Public Employee Benefit Trust. He is also the co-founder of Hope Central Pediatric and Behavior Health and Rainier Health and Fitness, non-profits dedicated to improving the health and well-being of people in low-income areas.