The way we pay for healthcare in the US has long been by fee-for-service: per doctor visit, per test, per surgery, per hospital stay. But that system has led to rapidly escalating volumes of services and cost to the system—without actually improving outcomes. What if we shifted everything towards paying for value—and outcomes—instead? In this episode, Todd Park, co-founder and executive chairman of Devoted Health, and formerly Chief Technology Officer and technology advisor for President Barack Obama; a16z General Partner Vijay Pande; and Bio Eats World host Hanne Winarsky—talk all about the megatrend of value-based care, and how it is redefining healthcare itself. Why is now the moment for this massive shift? How do we implement it? What does it mean for doctors and patients, insurers and policymakers? What is tech’s role in making it possible, and what’s the business model and incentive for creating value?
- Discussion of what value-based care is [1:20], and how it emerged as an alternative to the current system [4:35]
- The importance of targeting healthcare [7:11], and how to scale the value-based system [13:11]
- Why there is no “silver bullet” to fix the current system [16:00], but how we might shift toward a new paradigm [24:13]
- Discussion of first steps that may be taken [31:06] and what it would look like to rebuild the healthcare system from scratch [34:00]
Lauren: Hi, I’m Lauren.
Hanne: And I’m Hanne. And this is “Bio Eats World,” our show where we talk about all the ways that our ability to engineer biology and reengineer healthcare is transforming the future. And when it comes to reengineering healthcare, there’s one concept that gets a whole lot of airtime — the concept of value-based care.
Lauren: Value-based care is a term that we’ve thrown around on many different episodes about how the healthcare system is evolving, but we’ve never really gone straight to the heart of the matter.
Hanne: So, that’s what we do in this episode with Todd Park, co-founder and executive chairman of Devoted Health, and formerly chief technology officer and tech advisor for President Barack Obama — along with a16z general partner, Vijay Pandey, and me, Hanne. So, what exactly is this big mega trend of value-based care all about? And how is it redefining what we think of as medicine, treatments and healthcare? What does it mean for doctors and patients, insurers, and policymakers? Why is now the moment for this big shift, and what exactly is tech’s role in it?
Defining value-based care
Hanne: We hear the term value-based care thrown around an awful lot, but we’ve never really talked about what that means. So, this conversation is really about what is value-based care? How do we implement it? Why is it better? And what is technology’s role in that? So, maybe we could just start with — how is it different from the healthcare system today…
Todd: Oh, it’s really different from how the healthcare system generally works today, famously, or infamously.
Vijay: Even aspirationally. I mean, when you think about how the plumbing works.
Todd: That’s right. The root cause, honestly, is how the healthcare system is paid for. So, historically, U.S. healthcare has been paid for in what’s called, “a fee-for-service.” Frank, right. So, doctors, hospitals, and healthcare providers are paid per thing they do — like, per doctor visit, per test, per surgery, per hospital stay. That has led to a situation where we have rapidly escalating volumes of services being delivered. But, unfortunately, we don’t actually have commensurately improving outcomes. We spend the most per capita of any country in the world. We rank at the bottom of the developed world on metrics like avoidable death, preventable death, adverse events, healthy life expectancy — and that’s because we fundamentally have a pay-for-volume payment system.
If you want to change the situation, then change how healthcare is paid for. Basically, [we should] move away from pay for pure volume to engage in value-based payment — which, in a nutshell, is a payment system that actually financially supports, aids, and abets right care, right place, right time. Value-based care, to me, is the right care, including non-clinical support, delivered in a consistent, coordinated, and proactive way that both improves outcomes and lowers costs, [thus] saving money.
Vijay: It’s interesting to think about how this came about historically. Basically, [it was] a perk given to workers to help them stay with a given employer instead of somebody else. And so, that perk was, like, “We’ll get together, and we’ll pay for your medical bills or pay for things.” It’s kind of akin to, like, I don’t know, like if we gave a perk to say, “We’re going to pay for your plumber bills,” or, “If you have some major catastrophic problem, we’ll pay for the plumbing.” But that doesn’t mean we’re going to keep track of your house, or try to see if your plumbing is in good shape to avoid the problems. We’re not paying for that. That was never part of the plan.
Hanne: We’re not paying for copper pipes. We’re paying for when something really goes wrong.
Vijay: We’re paying for when the pipes burst. But we’re not paying for maintaining your house. That’s something that was always assumed to be on the patient side, so to speak. The thing is, we’ve gotten very good at trying to come up with therapies for cancer, for stroke, for massive heart disease. But, what we’ve come to realize is that that’s actually more expensive, because if we wait that long, those therapies can work. But [these therapies are] painful in many different ways, emotionally and physically for the patient. We want to get there before the pipes burst. Think about the house and the overall health of it.
Hanne: So, can we talk about when this concept started to emerge? Why was there this gradual dawning of realization that [value-based care] was a better north star to orient towards, or would everyone say this is a better north star?
Todd: I think in the last five years, the move to value-based payment and care has gone from, “Is it going to happen?” to, “It’s going to happen. It’s just a question of how fast.” It’s an idea that’s been around for decades. I mean, it goes in the category of a super obvious idea.
Hanne: Right. Right.
Todd: For example, if you have diabetes, or hypertension, or congestive heart failure, there’s an incredibly well-known best practice pathway in the form of medication regimes that get adjusted, based on each patient’s evolving situation. Along with very basic coaching on diet and activity. It’s very, very straightforward to execute. If I’m a primary care doctor being paid fee-for-service, and I’ve got a patient in front of me who has diabetes and hypertension, and I want to spend an hour with that person — to really help educate them about their condition, and really get into it, in terms of coaching and what to do, in terms of coordinating their care and providing them with the right support — I literally can’t afford to do it. Because I have to, in that same hour, see another three patients and get paid the fee per those services to stay alive. It is a bankrupting action for me to actually spend the extra hour; it is far more difficult to actually financially support and execute those pathways than it should be.
Poorly controlled chronic illness is the greatest single driver of more serious events like heart attacks, strokes, kidney disease, eye and nerve damage, and vascular disease. And it’s just nuts. We as a country don’t do these incredibly basic things to keep people healthy during these chronic conditions. In addition to these patients being cared for the way they should be, you will save so much money, because I’m going to actually save you one, two, three hospitalizations that cost $20,000 each. We’ve invested so much in developing incredibly advanced therapies for acute situations, but we aren’t doing the basics. Because systemic execution of the basics, with process control and improvement that every other industry would find routine — it really does require value-based payment and value-based care as the paradigm to make that happen.
Vijay: Yeah, otherwise, there’s no incentive.
Getting patients the care they need
Hanne: Todd, when you say the right care at the right place and the right time, can you talk about what exactly that means? And what would that mean on the entire country model?
Todd: Maybe the simplest way to explain it is, as opposed to me as a primary care doctor being paid X dollars to see people for 15 minutes, I am given what’s, in effect, a global budget for all medical spending — physician, drugs, tests, surgeries, and hospital stays — for my patients. It’s risk adjusted. If I’ve got a patient panel that has significantly sicker patients, then my budget’s higher, because essentially, the budget’s set to be equal to what the healthcare system has generally been spending to care for folks in a situation where patients have not been getting — in a systematic, universal way — right care, right place, right time. Highly prevention-oriented care. So, I have this budget that I’m working off of, and my goal as a primary doctor is to proactively get patients the right care in the right place at the right time. If you do that, then it’s been shown, for example, that you can cut hospitalizations versus the status quo by 40% or more.
Todd: It’s a significantly positive financial ROI transaction for them, because the way these arrangements work is that they get a share of the savings from keeping folks out of the hospital. That’s why primary doctors are so much happier when you put them in value-based paying arrangements, because under those arrangements, they can afford to spend that extra time with the patient. They can afford to hire personnel on their teams to help care for that patient, and give them the really straightforward care and support that those patients need to actually stay healthy [and] out of the hospital.
The primary care doctor, basically, generally speaking, doubles their pay under value-based payment by delivering care the way they always thought they were going to [when] they graduated from med school. As a bonus, then you significantly increase your pay, because you’re saving the healthcare system so much money.
Vijay: Yeah. The proof of this is where you have a cohort at risk, and it’s the same provider, and the outcomes are fundamentally different.
Todd: Oh, yeah. And the evidence is conclusive, as well as it being commonsensical.
Hanne: It strikes me that — in the category of super, super obvious, but it’s a different way of measuring. It takes a different amount of time, a different perspective. So, how do you overcome that challenge, to measure how long somebody stays healthy for?
Todd: One interesting challenge that primary care doctors face is the so-called “foot in two boats challenge.” It’s part of the exercise of transmogrifying from a fee-for-service paid operation to a value-based paid operation. Fundamentally, they’re two completely different kinds of operations. So, in a fee-for-service paid operation, if you’re a primary care doctor, you have to maximize throughput in order to actually stay alive. In a value-based payment paid operation, you’re focused on how do I take the best possible proactive care of my patients and keep them out of harm’s way.
Todd: Exactly. It’s much more proactive, personalized care of people, and following up with them out of the office to ensure that they have their medications. Any changes in their circumstances actually get reflected in a change of their treatment. That things are going well, and they have the right support, and the right iterations are made to their care.
Hanne: So, it’s a different muscle.
Todd: Yeah, it’s a completely different mode of operation. And so, the “foot in two boats” is a famous articulation of this problem. What if part of my patients are being paid for fee-for-service, and part of my patient panel is being paid in a value-based payment mode? Then, I’m trying to do max throughput and also proactive, systematic care.
Hanne: Yeah, and you’re stretched super thin.
Todd: And you’re trying to be, like, two different modes at once. That’s why the most successful provider organizations under value-based payment have gone all in on one boat. And that’s helped by the fact that, for example, Kaiser and CareMore have a built-in health insurance plan, inside themselves, that then actually pays — in a value-based way — the providers that they employ, that operate in a value-based way.
Scaling value-based care
Hanne: So, is that part of the reason why we haven’t seen it happen faster? Because you have to create something from the ground up that is a total systemic shift?
Todd: I think that’s a really, really good way of encapsulating why there hasn’t been this kind of shift nationally — because you have to go all in. As you think about the Kaisers, the CareMores, and even the ChenMeds — they take global risk payments from health plans, meaning, they go to health plans and say, “Pay me a global capitation payment, in effect, for all care expenses.” So they, in fact, are their own kind of mini-payer, if you will. Their existence proves that if you actually do that, and you get people the right care in the right place at the right time, it both leads to significant improvement outcomes and lower costs.
The common denominator across the successful early American experiments is that they’re a full payer/payer provider stack who can therefore actually act with the right incentives. And, by the way, have the right information at the fingertips to then take the right care of people in the right place at the right time. That is a really tall order to replicate. The rest of America is neck deep in fee-for-service, and the payers pay a fee-for-service. The providers operate fee-for-service, and all of their business systems and operations are optimized for fee-for-service.
Hanne: Yeah, it sounds like trying to renovate the foundation of a house, almost.
Todd: Right. You’ve just got to honestly roll in with a new house.
Hanne: Right. Build one.
Todd: That’s right. I mean, that’s effectively the magnitude of the challenge. That’s a good way to think about it. And so, the question has been, “How do we, as a country, take those archetypes — take those results — and scale them to much more of the country — to the whole country?” As opposed to it being available and accessible to limited populations of people in certain pockets of the country.
Vijay: The thing Todd really pointed directly to is that we have a sense for what to do, but how do you scale it? You have all this data and all this logistics. It’s just having to make tons of different decisions in complicated ways. This, ironically, seems like something that’s very well suited for tech, something where if you could build the infrastructure to do that, you could take all the little things that have to be done and do them that much more efficiently. Think about something like Amazon. Amazon and Sears, they both sell things. And actually, they both sold things over the internet. But, by taking a tech-first approach all the way through, whether we’re talking about the website, or the back end, or delivery, just everything — that’s the best bet to try to save and improve every little part. Because there’s not going to be a silver bullet that, like — with this one idea or killer algorithm, that suddenly healthcare is solved, or healthcare is easy or cheap. It’s going to be lots, and lots, and lots, and lots, of little things.
Hanne: When you say tech from A to Z, and there’s no one silver bullet, but it’s all little aspects and incremental accelerations or improvements, what exactly do you mean? Where does it look different?
Todd: You have to think about it as honestly reinventing each layer of the stack of American healthcare. You want to have a health insurance plan layer that’s explicitly optimized, from birth, to support value-based payment of care. So, the historical American health insurance company was born in a world, as Vijay said, where they’re paying fee-for-service bills. And so, that’s what they did. As those bills began piling up, escalating speed, their response was, “Okay, I’m going to erect administrative infrastructure that micromanages doctors and patients, and polices what they’re able to do, by making them ask me and give permission.” That’s probably not how they pitched it to people, but that’s effectively what it was.
Vijay: Because the one thing they can do is say no.
Todd: Right. So utilization management and pre-authorization, right? And, things that, for all the physicians listening to this, are epithets. That, then, led to doctors erecting their own administrative infrastructure to interact with the payers, to make arguments about what should actually be paid for, which has massively escalated administrative spending on healthcare in America. It also led to escalating mistrust, distrust, between patients and insurers, and doctors and insurers. It has generally not solved the problem. You want a payer that says, “Look, we’re not going to pay a fee-for-service, we’re going to actually pay in a value-based way,” which is a totally different mode of payment.
Hanne: But that feels like it’s about, again, a kind of framework and mindset shift and payment shift. I don’t understand tech’s element in that.
Todd: You cannot do anything I just said without software, and you certainly can’t do it scalably without software. So, first of all, the notion of paying a primary care doctor in a value-based way — you’ve got to be able to, for that patient panel, for that doctor, set the right risk adjusted global budget. You’ve got to actually be able to actually track everything that actually happens. So you’ve given the doctor visibility into what’s happening to their patient base. And you’ve got to provide the doctor with data from all points of the compass — pharmacy data, lab data, electronic medical record data, claims data about what kind of care that patient’s getting from across the system. To put all that at the doctor’s fingertips, to actually make sure this person is healthy. Beyond that, you need to establish a relationship with a member that is incredibly supportive, where you’re also getting the member information about where they stand and what needs to happen, before they even know it.
Hanne: So, there’s like a whole other information flow happening.
Todd: That’s right. Mark Smith, who’s a visionary healthcare leader, has this great analogy. He says, “I go to Harrah’s casino. And before I even know I’m thirsty, there’s someone there with a drink. Just when I’m about to leave the blackjack table, someone says, ‘Can we comp you some free food? Take some chips while you’re at it.’”
Hanne: As if by magic, yeah.
Todd: Exactly, right. And so, he says, in all seriousness, healthcare needs to be like that. So, before you even realize that you’re about to have a problem, someone calls you and says, “Hey, I think you might want to actually get this med. I think I want to see you and check something out.” If the American health system operated like Harrah’s casino, it would save many more lives and cost a lot less.
This is a classic data and tech problem. I have friends who work in AI in healthcare, and they said, “Look, at this point, the holes in American healthcare are so big you can see them from space.” So, if someone hasn’t refilled their med — they have a chronic illness, they don’t take their meds, they’re going to the hospital. And so, the low hanging fruit in U.S. healthcare is so plentiful — it’s fruit pies on the ground, right, with a cold glass of milk next to it. There’s so much progress we can make if we apply tech-enabled process control and improvement, as has been routine in virtually every other industry, to healthcare. But to do that, you need to actually have a full stack, payer provider ecosystem, where there is a business case for the use of those approaches.
Vijay: All of the innovation we’ve been thinking about has been — let’s say, in therapeutics or how medicine is done — what we’re really talking about is basically how to get better at the existing game. If the game is fee-for-service — how to do lots of services, better services, more services. Almost like if you’re building a machine to do chess, you can do chess really fast, but this is about getting rid of the chessboard entirely and playing a different game. The real point is in giving us the whole stack. That’s really, really hard to do.
But to your point, I think it is particularly intriguing to ask now, if we’re going to start with a new game, how can we set up the game to have the best chance to win — the best chance to benefit the patients, and to reduce costs? How do you construct that game? How do we make sure that we’re constructing the right game? Because whatever game we do, someone’s going to try to win, and will win at those rules. But that may not be what’s best for patients and may not be what’s best for cost.
Hanne: It’s interesting, because when you’re describing this, I’m thinking about all the ways that healthcare as an industry is particularly challenging to introduce innovation into, because of how unique it is, and certain regulatory hurdles. And I’m also thinking about the move towards more consumer facing, and the market-driven forces that are pushing in that direction. So, I’m going to ask either a really hard or really dumb question. I don’t know which it is, but — how does this value-based shift work with that, kind of, market-driven shift? You know, you see these two big forces. Are they opposing tides? Do they come together? What’s the fit between those two?
Todd: So, in a nutshell, look — if you lower costs and improve outcomes, you can actually put a better health plan product in front of people in a market like the Medicare Advantage market. And more people will buy it.
Hanne: So it’s quality really?
Todd: It’s quality, and it’s cost savings. It’s then the ability to use those cost savings to fund better benefits in your health plan than the competition. And this intersects with consumerization, right. So, in a market where you can offer a health plan that is better for consumers, there’s also a significant positive ROI in investing in and delivering on a world class consumer experience. Why is this? Because if you actually deliver a world class consumer experience, that’s both helpful to you as you seek to win more customers, but it’s also directly helpful to your ability to deliver better outcomes and lower cost. Why? Because if you’re actually working with a member, and they do not trust you, then when you ping them and say, “I think you…”
Hanne: It all breaks down.
Todd: Yeah, the member will say, “Pound sand. I don’t trust you further than I can throw you.”
Hanne: Yeah. So, it’s about strengthening the relationship so that when you need to direct them, it works.
Todd: Exactly. Both when you need to direct them, they will actually listen to you, and B, when they have a problem, they’ll call you.
Hanne: Oh, wow.
Todd: As Atul Gawande says, “The true superpower of a primary care doctor is that people will tell them things that they don’t tell anyone else.”
Hanne: Oh, my gosh.
Todd: So, basically, a patient will call a primary care doctor and say, “I am not feeling so great about X,” right? And that’s an early warning signal to jump on. So, if you are a health plan, and you are genuinely trusted by your members, not only will they listen to you when you call them and suggest something — or ping them and suggest something…
Hanne: They tell you more important stuff.
Todd: They will call and say, “You know, I’m having this issue. I’m not sure what’s going on. Can you help me?”
How to shift towards value-based care
Hanne: Yeah. So, if this shift towards this model depends on gathering new types of data and knitting them into a more holistic picture of the patient for the provider and for the whole healthcare system, what are the types of information that we’re using now that we haven’t been using before? How are we thinking about that whole picture of the patient in a different way? And what is it that we need from the provider lens for this whole model to work?
Todd: Yes. So, building on what we were talking about earlier about the operation of a primary care physician practice, you’re really moving from a paradigm where you’re maximizing throughput to a paradigm where you are maximizing the outcomes you’re delivering to patients. And so, armed with the right comprehensive data, you want to actually make sure that you are getting members the right care in the right place at the right time in a highly coordinated, proactive way. The role that technology plays in that is not just the assembly of data and the catalyzing of the right action, but also actually enabling virtual care and home care on an epic scale. Because it’s increasingly obvious that the right place for the right care is the home.
Hanne: Right. Not getting you into the ER, not in a hospital.
Todd: Or forcing you to come to the medical office, right. So, going to the early examples of someone who has diabetes, or hypertension, or congestive heart failure, as opposed to you going into the medical office, which is a big logistical exercise. Getting a measurement taken, and then the doctor deciding to put you on this particular med and saying, “Come back in three months.” You come back in three months, they make another adjustment, and then so on and so forth. That takes months or years to get your chronic condition under control.
Instead, a patient has a continuous glucose monitor that streams data in the software. It has a wireless scale — streaming data into software. It has a wireless blood pressure cuff — streaming data in the software, which then analyzes the data in combination with humans, if necessary — then triggers a set of actions where the care provider can, basically, through a televisit, say, “Okay, I’m going to adjust your med by X,” and then see in 24 hours what the result was. And then adjust it again, then adjust it again, and adjust it again. Within a matter of one to two weeks, literally get that chronic condition under control — vis-a-vis a pattern in the old world, where it would take years, and in a way that’s dramatically more convenient for the patient. You’re basically dramatically — through remote monitoring and virtual visits aided by software, you’re both detecting issues a lot earlier, and you are increasing, by orders of magnitude, the speed of “intervene, see what happens, and adjust.”
Hanne: The whole feedback loop becomes much faster.
Todd: Exactly. That’s one of the many possible examples. But overall, that’s what’s happening. The accessibility of care dramatically improves, the richness and the timeliness of information dramatically improves, the frequency of touch points dramatically improves. And you experience a significant acceleration of improvement of outcomes, and associated with that, lowering of cost.
Hanne: So, I’m thinking about providers listening to this and thinking, “Well, the information itself sounds like a dream, to have all that at your fingertips, to understand all that about your patients. But actually parsing all of that?” How do we make sure that we deliver that to providers in a way that it’s not this giant, hairball mess of more data and information that they then need another administrative layer just to figure out?
Todd: Well, this is a classic problem where software could help — is helping today. What I would say is that the optimal approach to acting on this opportunity is where you’re fusing software and humans together in an optimal combination, such that you could actually deliver the actual result.
Hanne: Right. So, it’s precisely where those two meet that you have to make sure it’s joining well.
Todd: Yeah. You want to design a tech-enabled service, which leverages both software and humans in the right combination with software doing a ton of the work to be able to efficiently, effectively and scalably deliver the actual outcome to the patient.
Hanne: So, if we’re talking about this massive shift from treating sick people — treating [the] chronically ill — to keeping people healthy, healthier. Preventing illness, catching it earlier — how do we begin to shift the whole system conceptually around that? What other types of information do we need to be thinking about? Transportation, food security? Or new types of treatments that we haven’t been thinking about?
Todd: If you have a full “payvider” stack — and by that I mean a payer and provider healthcare stack that is optimized for value-based payment and care. One inevitable additional layer of action you take on is non-clinical drivers of terrible health outcomes. And again, you talk to every primary care doctor in America, they say, “A huge portion of what actually drives terrible health outcomes for my patients are not clinical.” So, social determinants like transportation, food, how your house is equipped, social and emotional support, etc. I’ve talked to primary doctors in Florida who say, you know what the number one thing that you could do to help people with COPD in Florida, and reduce adverse clinical events?
Hanne: No. What?
Todd: Get them air conditioning.
Todd: One of the things — it makes a lot of sense for payvider stacks to provide aid to members that includes fixing up your bathroom, with bars and mats that stop you from slipping and break your hip.
Hanne: Oh, my gosh, yeah.
Todd: To be able to actually get you healthy food that is tailored for your chronic condition, and other non-clinical artifacts and services that have a huge impact on ultimate clinical status and health status.
Hanne: It’s so interesting, because while you’re telling that story, I’m thinking about the unseen caregivers of those patients that are doing those things now, and how if the healthcare system can take over that role of the son, or the daughter, whoever it is taking care of that person that needs that extra air conditioner, or needs the handrails set up. It feels like the healthcare system is doing more, but it’s actually making it more cost efficient. It feels like everybody wins then.
Todd: I think you hit upon something very important there. In that, for the average patient, the American healthcare system can seem very forbidding, and confusing, and fragmented. And it’s very hard to understand. It’s the healthcare system that only works when it works, because the individual doctors and nurses in it are by far the best in human history. The problem with our healthcare system isn’t the doctors and the nurses. Far from it. It’s that the system in which these professionals are operating is so disorganized, fragmented, confusing, incentive misaligned, information poor, reactive. The notion of having a professional daughter and son to help you navigate the system as a patient, and be able to get the right care, right place, right time — is, I think, a crucial, crucial role. That’s, again, another role where technology can be extraordinarily helpful in helping that happen. So, a major barrier for a lot of patients is literally transportation. This ability to literally get to your doctor’s appointment, or get to where you’ve got to go as you travel through the healthcare system. And so, a very significant benefit to patients getting the right care, right place, right time is to actually provide them with medical transportation.
Hanne: Right. It’s not just the doctor’s visit, it’s getting to and from the doctor’s visit.
Todd: It’s literally getting to and from the doctor. Key. Really important, completely solvable problem in a tech-enabled way.
Vijay: You know, the thing about social determinants is that I think there’s so many more low lying fruit. It’s not something where people have put much effort. It’s not something that payers have really thought about.
I think there’s a huge opportunity for just actually applying analytics, data science, tech, to figuring out what these low lying fruit areas are, and what could be done about it. It’s probably not even a hell of a lot of dollars, it’s probably just figuring out what’s the best place and what’s the biggest need, and when is that need. And that combination of who, what, where, when — that’s particularly hard to figure out. If we could provide a coach or a parent, or, like, a doctor that was with you 24/7, that person would probably know, but we can’t know that. So, that is where tech can sort of fill in the gaps.
A new future for healthcare
Hanne: So, just to go back to where we began, and think a little bit about this major new orientation towards, like — it’s a very obvious shift, but it’s a massive shift to make for the system, right? When the entire architecture of the system and the way it’s been developed over the last decades, and the mindsets and the education and the processes — all those things have to be shifted. If you were able to full stack the entire system — if you were able to start from scratch — what would that look like today? What does a real revolution American healthcare look like?
Vijay: I would love to just go right at the question, which is, what would it take to make the American healthcare system the envy of the world?
Todd: I think a way that the U.S. can leapfrog, going from the bottom of the rankings in the developed world to the top, is to make an increasingly strong move toward value-based payment care. See the rise of more and more tech-enabled payvider stacks across the country. Have those tech-enabled payvider stacks, in all their different forms, compete with increasing energy on the basis of outcomes and cost and consumer experience.
Vijay: And fueling innovation that way.
Todd: And fueling massive innovation, right, versus if the entire U.S. health system were actually being run centrally. We just have to get to a place where we create the right magnetic field from an incentive standpoint, by continuing to move strongly toward value-based payment. So that value-based care innovation and value delivery innovation can really blossom through these tech-enabled payvider stacks and all their configurations competing with each other.
Vijay: Well, how can that come to be? I think that makes a lot of sense from, sort of, a bottom up, but how do we get to it from the top down?
Todd: I actually think that in the Medicare space, all the conditions already exist to enable this to happen. It is entirely possible to build tech-enabled payvider stacks that are wired for value-based payment and care with no incremental policy change. One key to that is that in the Medicare space — say the average Medicare Advantage plan keeps a member for eight years. The cycle time between intervening and helping and saving money is short, given the population. And so, that means that if you’re a tech-enabled payvider, or tech-enabled payvider stack in the Medicare space, you have a very strong business case to make investments in better care. And you’ll realize the payoff. One challenge in value-based care oriented payvider stacks in the under-65 segment of the population is that people tend to have their insurance plan for far shorter than eight years. And so…
Hanne: And that’s because you change jobs, you change…
Todd: People change jobs.
Hanne: …situations. Yeah.
Todd: They go from Medicaid, to the exchange, to an employee and back. And the cycle times between intervention and payoff, on average, tend to be longer, because you are dealing with a population that doesn’t have the level of illness burden of seniors. So, I think a really interesting area of policy innovation could be how would you actually solve that problem? Because if you did, then I think that it would then create the right kind of business case support to do the tech-enabled payvider play outside the Medicare space. I think it’s still possible to do, it’s just a lot harder for this reason.
Hanne: And to your point about the importance of the relationship with the patient being such a powerful tool when you only have a short-term relationship.
Todd: That’s right.
Vijay: You know, what we’ve been talking about trying to innovate a complicated system of analytics, decision making, logistics. These are all things that are, in many other areas, well approached by tech, well improved by tech. If you think about even just the A/B testing for websites, or for services, or for anything — that just constantly, sort of, trying new things, experimenting, having the analytics, seeing if it improves, and carry on. Ironically, that’s also not alien to medicine, that’s also an RCT, in a sense. I think we need to innovate, we need to try new things, see what works, see how it changes outcomes, and incent people to do it. Once you realize that you can set up a system where we are incented for innovation, that will automatically bring tech in.
Hanne: A system that’s incented for value, that’s incented for innovation, and that’s incented for actual health before we even get sick.
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