Field Notes I Former ONEM Exec I Cautious Check but ONEM Should Have the Tools to Win

When we speak to clients of ONEM (enterprise), we don't hear anything negative about it – people like the tech stack, service level, etc. but at the same time there's a ton of skepticism about the profitability of boxes and white space for expansion in certain cities… What are your thoughts on today vs. 2020 and the outlook?

• Back in early-/ mid-2020, I saw significant runway in 2nd tier cities (w/ employers). I assume that people expect them to lose money as they are investing, but they had that opportunity to capture a larger share of employer market. My thinking has somewhat changed on health care delivery in general, and specifically on the ONEM model.
• I'm not skeptical of their ability to run a business, but I'm questioning their ability to run profitably on a go-forward basis. This opinion is irrespective of how ONEM and Iora come together.
• Two things going on. First, with COVID-19, insurers jumped in and were willing to fund virtual care claims at about same rate as in-office (macro level, that kept providers afloat), but that will have an impact at least in non-medical insured basis as it ends. Revenues may have been inflated across the medical economy.
• Also, leaning into telemed, I think we enter a "second stage" in the evolution of telemed. The actual brick-and-mortar physician practice will change dramatically in years to come. The majority of in-office services don't require a patient to go into the office - it's the advent of "virtual care first" providers - they are connected to a physical light infrastructure. Primary care will still exist, but the change is PCPs handling more technical things in the offices - Dx, blood draws, etc. where hands-on is required, but "other" Primary Care things can be done virtually first (picture of a wound or rash w/ a quick text or video visit).
• Given claims and reimbursement, virtual could yield less money vs. physical visits, and for practices like ONEM that are capex heavy(ier), it could pose a challenge.

What % do you think can go virtual? 

• I think the 80% figure is about right, but nobody has been able to pinpoint it. ICD10 codes are needed to formalize it. 

Legacy vs. new models and the utility of disease management and RPM - i.e., Livongo et al. ... it sounds like you think legacy FFS (8-12 min visits, etc.) can gradually convert to something like ONEM?

• Health care is complicated because of the payment structures and who pays. My personal opinion, if we assume that insurance companies always make money, as they almost always do, is that they suspect that the majority of visits could be done virtually, so we'll see more "digital first" insurance plans enter the market.
• Legacy folks say, "Yes, you need a relationship." But it could "unlock" point solutions - Livongo, Omada, Spring Health, etc. [for wider use]. If we go to sign up for benefits and are presented with a 3rd or 4th choice that's a digital first plan w/ $0 out of pocket, it'll be considered. I think the forces moving the economy are forcing a sea change into digital first practices that will unlock point solutions.
• I also assume the tech will get better on the digital front - light Machine Leaning/AI and better data sets will be used in combination w/ traditional measures = a high quality, low cost product for people w/ out complicated health care needs.

OK - how can the legacy providers convert to hybrid models?

• First, think about a practice w/ 3-4 pediatricians - ours just started charging a membership fee. If we want access to them - digital, weekends, etc. - they are taking fees. That's a concierge model. In that sense, there's no IP in what ONEM does w/ the model. They blazed the path for anyone to charge a membership fee, even in the $300-$400 per year range. Many people would potentially pay more than that because nobody wants to wait in line for health care anymore.
• So, it's just fewer patients per panel and a concierge model. There are "medically homeless" people - they have to choose a PCP, and if a plan says choose this virtual first w/ an umbrella network for a broken ankle or specialist issue, and you layer on Rx, or other options (e.g., behavioral health, diabetes (Omada, etc.), checking out through drive through, consumers can see what the cost is. Most people see the doctor every 3-5 years.
• So just pair it up w/ a high deductible plan w/ stop loss? Yes.

When you see the roll-ups of companies pulling this together... how much can the consumer take, how much change do they want?

• It's a new [health care] consumer. They are just starting to experience what it can be, and they are used to on-demand.

In a decentralized market, how is ONEM positioned?

• They do have all the capabilities and ~700k patients now. There's no reason they can't compete. When I look at the financing structure, it being a public company, and they spend a lot. ONEM has the tech to do something, acquire patients, and win. At some point, the rate of customer acquisition comes down though. I don't think reimbursement will be going up (that's coming down too). If you're an employer, and you now know that your average employee is scattered and only goes to B&M once a year, you don't want to pay the same rate for those touches. I know a large media company in NYC that saw virtual visits rise by 8,000% - yes, it was off a very low number, but they are not likely to pay for virtual visits at the same rate as in-person.
• I also know a provider that left ONEM who was surprised they can manage patients efficiently remotely at the same level of care. It can work, but if the unit economics don't improve, you can't get value out of virtual, and that'll mean business as usual in terms of quarterly losses (I say that based on what I see top line).

So you think there's runway for top line growth but not for care margin?

• Care margin is driven by the virtual environment. Across the industry, my hunch is that insurance companies will not allow any provider to bill in-person rates for virtual visits, which means you go back and negotiate better in-person care rates, but you can't double them. The person paying is the main variable - is it the patient, employer, health plan?
• How about panel growth and the top line? It's easier to buy doctors to expand panel size - lower cost way to expand panels = roll up doctors in a community to capture the commercial/employer-sponsored patients. That helps to propel what's happening in the enterprise channel.

Is there are path here for APC panels to grow beyond 500-600 because digital interactions are more efficient?

• If you assume that the under the hood tech that powers how providers work as a team is great and that at-home services, whether for diabetes, or other, improve, then the care teams can likely manage lager panels. 

With capitation, there are extra investments in non-medical services (food, transportation, etc.) that presumably come from savings. For every $1 you put in, there's some return. Do you have a sense of what that is, or if all the slides we see are accurate that show [MLR] going from 100%+ to 50% over a few years?

• I don't know how big that bucket of money is, but if we assume we're investing in commodity services that are bought in bulk - rides, Rx deliveries, etc. - and these things keep people out of the ER, then adding those into the bundle makes sense from a capitation standpoint.
• At a macro level, the focus on diabetes and hypertension makes sense - those are two big population sets, and medication adherence, diet, exercise, and lifestyle improvements make them dramatically less expensive. There's a + ROI for every $1 spent there. 

Do consumers have more choice (i.e., are things improving for the consumer and NPS scores are interesting)? Is the patient-provider relationship improving?

• When people refer to the front door to health care, I think that's where the relationship is. That's important. For a preventive colonoscopy scheduled via referral, I might never meet the GI if all goes well.
• I recently got a letter detailing the cost of a procedure that said the anesthesiology cost may not be covered, and I could pay $200 cash. This is the tipping point of them knowing a tidal wave of change is coming.
• There are still issues with things like figuring out Cologuard vs. Colonoscopy (JV: please note, this was an unprovoked mention of Cologuard). If I get it and then have to get a colonoscopy, I could have significant added out-of-pocket cost. Because of the relationship w/ my "steward," which can be more virtual, I'm going with colonoscopy - it's the gold standard, and I could be done for 10 years.

What are your thoughts on panel development at Iora and the ONEM/Iora combination?

• In the enterprise channel, very few people are turning 65 at employers. The enterprise B2B is not advantageous.
• Iora has a substantially higher fee per patient than ONEM. So, why would ONEM make this bet in Medicare? ONEM did manage a small % of people on Medicare plans. In the future, there are tons of people turning 65 every day. Advertising is massive especially as you go into open enrollment, but if we assume that ONEM has a higher percentage of patients, perhaps than we realize, that are Medicare eligible, the economics might look better. 
• It's a very expensive space from CAC perspective, and there's a lot of competitive pressure. As more people enter Medicare, there will be a greater % of people on better, richer MA plans, so this deal could make sense in terms of expanding the landscape. I think the acquisition is something they see as a bet looking out 5-10 years and a hedge against the core business.

What do you think employer benefits executives are focused on today?

• We have to assume that mental health is the top thing for most employers, but it changes the dynamic of health plans. The average 20-30 yo is using all these services; will we see a new health plan focused on mental health?
• I think the way of the future to satisfy the demand (people are hurting) is CBT tech, motivational, and other low acuity digital programs. This will help with the labor shortage, and where the medical necessity is appropriate and digital is adequate, especially for low acuity mental/behavioral issues, employers take comfort in offering a full-stack solution.

Do you see the potential for employers to opt out of Teladoc or fire ONEM? If so, would that be happening now or as part of some sort of post-COVID rationalization?

• I don't think employers are making massive changes. The one thing that I do hear consistently is that there are too many point solutions. So I think we'll see consolidation there. Perhaps we'll see a new breed of more integrated tech emerge.

Can you share your thoughts on Teladoc's Primary360 and MyStrength Complete?

• In my opinion - it's just re-branding. At some point, the term "primary care" probably goes away. It'll all be "care," and the primary care specialty as we know it will include a full spectrum of virtual/digital coverage. 
• Interesting, do you agree or disagree with the thinking that Teladoc, by working with the health plans, is boxed out of the market to a degree? I agree with that - they are boxed out. Think about the macro insurance arrangements, and now Teladoc is going to the buyer with up-sells? I think that's why we're hearing a lot about the sales team leaving. Also, think about that in the context of ONEM - their sales team has turned over recently too.