PJ SOLOMON Presents

EP 15: Iora Health's CEO on Payment Reform and Healthcare’s Omnichannel Opportunity

April 21, 2021 PJ SOLOMON and Iora's Dr. Rushika Fernandopulle Season 1 Episode 15
PJ SOLOMON Presents
EP 15: Iora Health's CEO on Payment Reform and Healthcare’s Omnichannel Opportunity
Show Notes Transcript

In our latest episode, Dr. Rushika Fernandopulle, co-founder & CEO of Iora Health, and Ryan Stewart discuss the transformation of the healthcare delivery model. As a result of payment reform and a world where face-to-face medical encounters have not been possible, Healthcare is rapidly shifting towards an omnichannel communications environment, where patients are engaging where they want to be met - virtually - over voice, video and text modalities as well as in-office, as appropriate.

With an increasing shift towards value-based risk models, primarily in Medicare, Dr. Fernandopulle talks about the transformation of his business through collaboration with the nation’s leading Medicare Advantage plans and, most recently, through direct contracting with the federal government’s Center for Medicare and Medicaid (CMS) which launched its Global and Professional Direct Contracting model on April 1st.  

Rushika Fernandopulle:

The way we do healthcare in this country is awful good people, good intentions, but the way we do it is transactional. It's reactive. So we have a much closer relationship to the consumer and we decided we just want to build a better vision for it, to actually change outcomes.

Ryan Stewart:

Welcome to PJ SOLOMON's healthcare tech podcast. I'm Ryan Stewart and I lead our healthcare tech and tech-enabled franchise. Today's discussion is going to focus on tech-enabled care delivery in the senior care market with a particular focus on primary care. With me today, I'm thrilled to have Rushika Fernandopulle. Rushika is co-founder and CEO of Iora Health, a national tech-enabled primary care practice. Rushika also serves on the staff at Massachusetts General Hospital and is on the faculty of the Harvard Medical School. I think it'd be good if you wouldn't mind just orienting the audience around the offering and the population you serve - the number of seniors clinics, how you've scaled, and let's just get everyone level set before we dive deeper into the discussion. What is Iora Health?

Rushika Fernandopulle:

Iora is not a startup. We're a growth stage primary care company. The vision is really that the way we do healthcare in this country is awful, right? Good people, good intentions. But the way we do it is transactional. It's reactive. And we decided we just want to build a better vision for it. So we built from scratch and new practices we're pure-play, value-based care. So we work almost entirely in global risk models. We build practices from scratch that are actually aligned around what we want to do. So we have very robust teams. We have an omni-channel care delivery model. We proactively reach out to people. We built our own IT platform from scratch to really help us enable this. And we've been scaling this up. We are about 10 years old. We had our 10th birthday in December. At the moment to give you a sense of scale where we'll cross probably $300 million in revenue this year, we have 47 practices across the country in 10 different markets.

Ryan Stewart:

Far from a startup, but you're quite humble.

Rushika Fernandopulle:

Yeah .

Ryan Stewart:

On the global cap sub cap risks that you do with the leading MA plans in the country, it's going to be real relevant as we get later. And we talk about the whole DCE program and you guys contracting directly with the federal government, but today talk primarily how you work with the Medicare Advantage plans in the country.

Rushika Fernandopulle:

Virtually all of our revenue comes from Medicare Advantage Plans. We work with all the big national guys, Humana United, Etna, CVS , et cetera, as well as a small, but growing number of local plans. We work in what's called percentage of premium arrangements where we get essentially as much of the healthcare dollar as we can. There's sort of roughly 85% of premium on average go up or down. And what we do is we get patients who get attributed to us. They say that we are their primary care doctor, and then we draw down a small primary care cap to pay for our primary care. That's minorly interesting. We don't have to build a fee for service for anything we do, which is great. And actually transformational. Then our patients go downstream and the whole bit here is we're going to double down on the primary care and through doing that, make people healthier and help them navigate the system better. And we dramatically lower the percentage of time. They go to the hospital or the ER, so healthcare costs go down and then we get to keep whatever's left from what we get. So it's sort of a global risk model, w e think it aligns what we do with what the patient wants, which is actually to get healthier and navigate the system. And it means that we can really be creative in how we serve people.

Ryan Stewart:

What advantage do you have to drive better outcomes by being a care delivery business, vs. being a care management or care coordination company?

Rushika Fernandopulle:

It's almost all of healthcare costs are being driven by chronic disease and chronic disease is all about engagement. So we have several huge advantages. One is we have real clinical data. These are our patients. Number two is we have a real relationship with the patient. There are these care management companies that are nurses trying to call people on the phone from Idaho. And if they get 2 or 3% of the people on the phone, they declare success. We get a hundred percent of the people engaged and then we can actually change care. So we find something going wrong, where their doctor, we can actually, we don't send mother may I faxes to their doctor and hope that they read it, which they don't. We actually just changed the care. So we have a much closer relationship to the consumer, which is what you need to actually change outcomes.

Ryan Stewart:

It's very intriguing to watch your business model. And in particular with the pandemic over the last year, you've sort of given me permission to do this, but I use Iora as the poster child of a business that innovated through the pandemic, through the leveraging of technology and communications, where you were able to shift what was pretty much a hundred percent face-to-face clinic model. Today, or post pandemic, you're about a 50 50 mix between voice, video, virtual chat and face to face with a , to face-to-face isn't all in the clinic. It can be over video or telephonic or chat. Talk about that transformation that's gone on in your business, just here in the last year.

Rushika Fernandopulle:

Yeah. So like everyone else, you know, we realized when the pandemic hit almost exactly a year ago, that we had to change how we do things, right. And I think the thing that really changed, because we didn't have to worry about the stupid rules. We didn't have to worry about the payment model, right? Because we have global risks. We don't have to worry about billing codes for telemedicine, but for us, what changes patients started being much more open to interacting in a different way. So what we've developed is omni-channel care delivery model. So we do an average Ryan, 19 encounters per patient per year 19. Um, and again, these are largely seniors. These are older sicker people. Half of them are asynchronous, which is a chat asynchronous chat, text , video, et cetera. And half of them are synchronous where we're on the we're on at the same time and of the synchronous about 10, four are by video four in person and two or by scheduled telephone. Right? So it's a really nice Omni channel model. And again , I think the way that the industry is evolving, where there are companies that just do chats with people, there are different companies that are doing videos with people, they're practices that make you come in person. There may be home visit companies, that'll go and see you in your home. And the dirty little secret is that the same patient needs all of those things at different times. So what they really want the consumer wants is to organize around them and not around the modality. And so we need to be able to provide all those to the same patient with the same record, the same team, the same relationship.

Ryan Stewart:

Post-pandemic, roughly 10% of the volume is at the clinic versus a hundred percent pre-pandemic. How much do you attribute to you having to do this, because you had to just, you know, you kept your clinics open during the pandemic. Credit to you in your business and doing well by doing good or how that saying goes. I mean, that is just truly mind boggling to think about where your business model is today and how much of it was pandemic driven, because you would think post-pandemic, as we're moving that in that direction, it might snap back, but it's not. Is it a patient preference which has driven this and what's allowed it to stay where it is?

Rushika Fernandopulle:

I'm a firm believer. And I think Rahm Emanuel used to say this, but I think he was channeling. Machiavelli's never let a good crisis go to waste. This is actually exactly where we've always wanted to be, is this omni-channel delivery model. And I think the pandemic has sort of allowed us to do it , to change a few of the stupid rules. And it's let patients sort of try this. And I think what really changes patients, all of a sudden said, okay, I'll try the video. Oh, this is actually pretty good. Maybe I don't need to come in for everything. And so we're about a 20% 20 to 25% of these encounters overall are being done in the practice. Right? So the rest are not, and we think that's right. So the right question to ask is simply for this particular need this interaction, what's the best way to do it. And are there, are there things that need to be done in person? Absolutely right. Meeting people for the first time, we think it's really important in person. We think there some clinical encounters where I need to feel your belly and listen to your lungs and, and we should do. And there's some conversations that are important enough that we should do face to face telling you your cancer, right? And so if it's done in person, do it in person, but if it can be done as well by video, that's better for everyone, but it's ridiculous to make people come into an office in 2021 for things that we can just as well be done through a chat or video, or telephone.

Ryan Stewart:

When I think about your business and I think about the term population health management, first off, I think of population health management as a verb, not a noun, it's an action. And it's very much at the center of what you do on a day to day basis because the risk is aligned with the clinical outcome for the majority of the country that is still fee for service. Is this omni-channel dynamic happening? Is this level of engagement happening or is it really tied to when you get the care delivery tied with the right financial incentives, these value-based structures that a lot of these magical things can happen.

Rushika Fernandopulle:

So hard to do the right thing. If you're stuck with the wrong payment model. And I think the whole premise of Iora is that what we need to do is align the payment model with what you want to do. By the way , I think value based care, Ryan, is a red herring. It is a means to an end. It's not an end in of itself. The fact is we use the payment model in order to provide the right consumer model and then the consumers vote with their feet. In the end. That's the thing that matters, right, is actually changing the consumer experience and actually changing outcomes. Value based payment model is just necessary, but not sufficient. So what's happening a lot of times the industry is the institution. The health system might get some version of risk, but the problem is they pay the doctors the same way by RBU's fee for service, regardless of how that helps us, it gets paid . And then they don't change the actual chassis. They don't change the IQ system. They don't change the process. They don't change how they pay people. And so of course they don't get any change. So I think that's why you don't want to take people out of a lot of these ICO's have been very disappointing and showing outcomes just because they haven't really changed care delivery. If you don't change how actual people get actual care, it's all a waste of time.

Ryan Stewart:

That's a perfect segue to direct contracting with the federal government. But before we go there, I want to talk about the virtualization of healthcare, right? The "zoomification" of healthcare . That was the last year. Clearly providers do not have the, the adequate infrastructure yet to be able to manage their practice the way Iora manages is practice, right, meeting that patient wherever they want to be met - voice, video mail, async, sync, in the practice. Virtual care seems to have advanced fairly quickly away from the episodic and moving more to a longitudinal model. Your entire business is a longitudinal primary care model. Talk a bit about maybe beyond Iora, as you think about the broader virtual care marketplace, how does that market shift from being episodic? Where every time I go for a visit I'm meeting a new doctor and never meeting the same doctor twice to something where you can start to have some connective tissue between me and my doctor or my doctor's colleagues. So it feels more like I'm going to a medical practice.

Rushika Fernandopulle:

I think that is the evolution of this, right? So I think i t obviously the first take, version 1.0 of quote telemedicine, e nd quote, where a lot of standalone companies, several of them are big and public. And it was really killer, urgent care, right? And, by the way, people call th is d igital health. In some ways, a video chat with a doctor isn't really digital health. I mean, it is i n t h e m inor se nse, bu t, but the productivity gains, it 's a ctually not that great. Just you'll pay the do c t he expensive part of that. So d octor, and yes, th ere's a l ittle bit of savings. I'm not sure I' ve b e en t o t he office, al l o f i t, but in general, it's the same. I think digital health really is when we started automating the entire process. And there's a chunk of it that doesn't require a physician to be online. And that's the next frontier is actually automating the rest of it. The 80%, maybe that doesn't need to be a face-to-face synchronous encounter. I think the evolution- and it's you see it happening. You see Teladoc doing some of this is where you do try to build some longitudinal relationships. Now, the hard part is everyone was tried to do this, realizes that X percent of the encounters are going to how good the video link is, et cetera, does require a face-to-face encounter, right? It is what it is. This is healthcare. You can't suture. You can't give people a shot. You can't feel the belly. There are just some things you can't do through the video. It is what it is. And so what you really end up having to do is build these hybrid models, right? Where, and by the way , what's that X. So again , out of that, X is 20% for us. 20% of the encounters need to be done in person. It Is what it is. And that's what seeing , I bet you actually, I know there's data from crossover health and what Babylon did in London, that number for them, it's about 10% of the encounters when you're dealing with young and healthier people fall through. So I think we need to start building these integrated models, right? Again, stop building around our little needs , stop building around the consumer's needs - a t the end, what the consumer wants is take care of me. It's okay to start with t he video. But if for whatever reason, this thing needs to be done in person, figure out a way to do that.

Ryan Stewart:

You talked about synchronous and asynchronous and, we're seeing from a modality perspective, I'm very intrigued with the emergence in the last couple of years of asynchronous chat. It's scalable in terms of on average, an asynchronous chat versus voice or video you can do, you know, somewhere in the six to eight encounters per hour. One, how much efficiency and value have you gotten out of that? And what is your view on the expansion of asynchronous chat? There's businesses out there like Sirus MD that are scaling at a pretty interesting clip and being able to do it with a very small network of doctors. You don't need thousands of providers. You can have hundreds of doctors or less, and being able to serve large populations . So what do you think about the emergence of asynchronous chat?

Rushika Fernandopulle:

The question, the wrong question is what is better asynchronous or synchronous. It's stupid question. The right question is, are there a set of needs that are as well or maybe better served by asynchronous the answer is absolutely right where we don't need to be on at the same time. And we can actually do it. It's much more convenient. You can do it 24 seven, as you said, you can do it much more efficiently. Now, again, this is the key is that sometimes you could start something off as an asynchronous chat, and then you realize, wait a second, this actually can't be solved with an asynchronous chat. We need to get on synchronously. And then some of those fall through and say, we need to maybe see you in person. Right? So again, I think the way we've got to start thinking about these is how we integrate these things together to create a unified consumer experience, not I'm going to build a chat company.

Ryan Stewart:

So at the end here, it's an omni-channel offering. You need to have the financial incentives in place. So move to risk. If you're going to risk to be successful, you need omnichannel. And then as you think about virtual it's that hybrid model of there's going to be voice there's video there's async and then tying in the practice, which sort of gets back to that, that longitudinal point. That seems to be a big focal area for virtual care.

Rushika Fernandopulle:

By the way, this shouldn't surprise us Ryan. This is about building relationships and that you and I will occasionally pick up the phone and call each other. Occasionally we'll do a video chat. Someday you'll come to Boston and we sit and have a cup of coffee. Right. Someday I'll come to your house. Or Cape Cod. Come on. Yeah, absolutely. And I know it's funny, we do this omni-channel thing in every other part of our lives. Why do we not think healthcare ought to be this.

Ryan Stewart:

It's a great point. I want to make sure we spend some time on the global and professional direct contracting model. It went live last week. There's a lot of long faces out there that people have been on the outside looking in because the administration has hit the pause button. But before we talk about the long faces, let's, let's talk about those that are in. And what is it, what does it mean to be a direct contracting entity? And what does it mean to Iora and what does it mean to the Medicare overall?

Rushika Fernandopulle:

We're really happy and excited to be in the program. What it means is that we can take the thing that we've been doing. We and other people have been doing for years through Medicare Advantage Plans, and now apply it to the people who are on original Medicare. So , you know, there are about 60 million ... in this country, only about a third, but growing of those are in Medicare Advantage and we could serve those people. And all of a sudden, now we can go directly to the federal government through CMMI and take essentially full risk on the seniors who are the 40 million seniors in original Medicare. So this is transformational for obviously for our business is transformational, I think will transfer the federal government. Is there it's been a long progression at CMS, largely through CMMI the innovation center to say, we need to move from this fee for service payment model to more integrated risk models for providers, right? Accountability, models. They started and what they've got now as a set of steps as the MSSP the Medicare shared savings program was sort of fee for service with the crew app. There's next gen, and this is the next step in the progression, right? So the reality, I think, is that medical groups are different stages of their evolution, of how much they can take on risk . Can they take on a little bit of bonuses, g onna take a little bit about the downside. Or can they take full global risks like we do. And I think what's really exciting is this puts a stake in the ground at the high end of that scale. Right? So t hat used to be that t hey were just as beginner programs, which are great and slightly more advanced t hat this is sort of the very advanced program for groups that feel like they can take full responsibility for total cost of care. And I think what we see is maybe not surprisingly, people like us control the biggest impact because we actually change things the most. I think this is good for the beneficiaries. It's good for Medicare. It's obviously good for us.

Ryan Stewart:

There's a lot of talk out there around vertical integration at the payer level, right? So the payers are aggregating providers and the community level with the success of this program and coming from a global cap provider today, you are an in a Medicare Advantage business model inside a primary care delivery delivery mechanism with the success of this program. You know, what does this mean sort of longer term, right? You're actually enrolling the members. You're acquiring the members and you're managing all , all of the risk . What part of Medicare Advantage will you not be doing if this program is successful and you guys, you know, the 53 folks that are in here in phase one, pull this off and show that this works. What does that mean in terms of the broader Medicare Advantage market?

Rushika Fernandopulle:

The way that Medicare works is if you're in direct contract, if you are a beneficiary, you still have subject to all the Medicare rules, you still you're still responsible for 20% of the cost, et cetera. It is still, if you're a consumer, a better deal to go into Medicare Advantage by far , in general, unless you're, you know , a former employers paying your med, sup you are better off financially going into a Medicare advantage plan. Are there plenty of them out there, a number of people? So in terms of Americans, for whatever reason choose not to do so , right. And we can argue why that is, but our attitude is we ought to give people choice. And I think that's, what's great about the Medicare program is you can choose to go into MA and we will work with you there. If you choose not to go in MA we can work with you over here. So I think that's great. Remember in Medicare is different than an employer thing. When they send an individual making the decision, this is not an HR director, trying to make a decision for all thousand of their workers in every individual makes a decision for themselves, the platform to do that has been Medicare advantage plans. This creates an alternative platform, which is the primary care group like us. Right? And I think the key is that, well-financed, well organized primary care groups like us have shown that we can actually handle this. We can handle f or risk. So I think it creates sort of another platform for people to actually take care of patients, which I think is really interesting.

Ryan Stewart:

You're no stranger to being able to go out and raise capital. There is a tremendous amount of capital available in the market. I can't think of a sector in healthcare other than biotech that is getting the focus and the capital. Just a couple of staggering statistics in the first quarter of this year, 8.4 billion of capital was raised. And that's up from 3.8 last year and 5.8, nearly 6 billion of that 8.4 wene in capital raises North of a hundred million where there was 1.7 billion raised a year ago. So we've just, we've never seen a market like this before. We've got many, many companies running to the public markets. The SPAC market is very, very hot and around our last conversation, there's a lot of people making big bets on the GBTC model and , and being there and hoping that this opens up for round two and three and four. What are you seeing from your vantage point across the market and what excites you beyond the investment you've made in your own business ?

Rushika Fernandopulle:

I have been doing this almost 20 years ago, Ryan. And when I started building a new primary care business, 20 years ago, people thought we were crazy. No one gave a wit about primary care. And we, we obviously couldn't raise any money. We were getting SBA loans, right things , second mortgages on the houses because no one was funding it. So it's sort of remarkable to see how the industry is as evolved, right? And now that people are realizing the potential return . So that's really exciting. I think one of the issues is this is a huge opportunity. I actually think that the opportunity to take this three and a half trillion dollar healthcare industry we have and rationalize it , uh, you know, we all know that 30% of what we're doing is way it's, that's a trillion dollar a year opportunity . It's bigger than the internet, bigger than Google and Facebook. And I think there's a huge opportunity that said, this has got to take a while and what I worry a little about sort of public companies in particular, quarterly appetite and showing returns. And , and the short-term thinking that we built into these annual reports and the like, and I think there's a huge opportunity in this space, but it may take awhile . I've been doing this for 17 years. And so we need to make sure, I think from a public policy point of view, that this capital is going to have the patients it needs in order to let these models work out, right. It takes a while and we need to have patience.

Ryan Stewart:

The patience is a great point, you know, and we've seen a lot of, I won't call them newcomers, but folks that have been just extraordinarily aggressive, Tiger Global, General Catalyst, that really just emerged as leaders deploying, billions of dollars into the space, taking that long view of not trying to flip the business in the coming year and, and funds like O ak, just in terms of how fast the c apital i s getting deployed. You know, they raised an $800 million fund in August o f 19. They've deployed it and raised a $1.4 billion round since then in the first quarter. And they're already well underway. It's just a truly extraordinary. You're placing some bets beyond global cap a nd primary care and risk. What are some areas that you're really excited about?

Rushika Fernandopulle:

The health technology space is still ripe for disruption. I think that no offense, but the Epics and the Cerners and the EHRs of the world are built for the old world. And someone's going to figure out how we build the technology platform for the new world, like people like us and what have you, all of us have been building it ourselves. It's a little ridiculous that each of these little companies is trying to build their own technology platform. We do it because we have to, and it actually works, but at some point to get this to scale, we need to have sort of the next version of Epic that actually powers value-based care and not sort of optimize it on end to end for us . I would be bullish on that. I think that this new world of digital health broadly, like we need to be able to get sensors from people's homes. We need to be able to engage people outside the office while people like us don't need to build it. And we need to have people doing that. And finally, I think precision medicine, broadly that the way we do healthcare now, which is where we're sort of randomly guessing when we did the trial, that 51% of the people benefit from this drug. So we give it to everyone. Ridiculous, right? We need to know for this patient, what's the interval to do the mammograms, what drug is the best anticoagulant for them. And I think as we do that, this'll be obviously much better for patients and also much more efficient. And that's, this is genomics proteomics and the whole Omix bit , it's a data it's putting it into workflow. I think that's the next frontier .

Ryan Stewart:

It's truly extraordinary the blurring of the lines, right? I mean, I'd go out and talk to med tech companies and they don't want to talk about devices. They want to talk about data because see biotech companies, they want to talk about digital therapeutics, the FDA approving apps, amazing times we're living in. And I think we're , we're still in the early innings. Rashika thank you so much for sharing your thoughts. I can't wait to see you before the fall sometime this summer in Boston, but we will see you out in Cape Cod at our annual summit at the Chatham bars in late September bounce . Great. Thank you, Ryan. Okay. Thanks Rushika. Take care. Thank you for listening to PJ Solomon presents. For more information, please visit [email protected]