The U.S. spends more on health and gets less than any other developed country. But we won’t likely see an “Uber of healthcare” upend America’s dysfunctional system. What role will innovation and tech play in the transformation of American healthcare?
Below is an excerpt of the session, but the full transcript can be accessed here.
David Kirkpatrick: We’ll come back to some of the other scathing points you make about the system, Dan. But let’s just quickly introduce the other two people up here. Steve Krein is a CEO and co-founder of StartUp Health, which runs what he likes to say is an army of health transformers. It’s basically a community of startups, which is, what, about 200 health tech startups in which you invest, but more importantly you coach, you mentor, you network them together, you help them figure out ways to intersect with the system broadly. Based in New York, which we’re very happy about as New Yorkers.
Andrew Cohen is vice president of the healthcare vertical at Cognizant and very involved in healthcare, and he’s been doing healthcare for an awfully long time and has worked for a lot of different parties in the system. Just talk about some of the different parts of the healthcare system you’ve worked in.
Andrew Cohen: Thanks. I started my career actually at Kaiser Permanente, and I was part of Kaiser’s national expansion group where we came up into the northeast and other parts of the country to try and get the Kaiser model up and running. You know, one of the things that really impressed me about Kaiser was that when we sat around and really started to run the business, it was really about getting the physicians, the insurance folks, the finance folks, the actuaries, everybody together in the same room to have a conversation and to build consensus around how we were going to take care of people, how we were going to finance things, how we were going to run the business, pay claims, do operations. I thought it was brilliant at the time, and I said why isn’t this everywhere? And again, that was early 1990s.
From there, I went to Health Net and Cigna and then spent about ten years at United Healthcare, doing network strategy and a lot of product development, so developing a lot of United’s value-based insurance plans, all of their private exchange products and things like that. And then the last five years I’ve spent really focused around financial and strategic advisory work on the provider side, so really helping providers understand what’s behind the black curtain at big health insurance plans and trying to figure out how I could be a marriage counselor, so to speak, between the different parties and try to bring the conversation together for formerly sort of adversarial roles. And now as we we’re kind of moving back to that Kaiser model or to an ACO model or more collaborative model, things are coming full circle 25 years later.
Kirkpatrick: Well, I’m glad you say you think we’re moving back to a Kaiser model, because I just want to quickly say one or two things about Kaiser, and the reason you were so excited about it way back then—for anybody that doesn’t understand, Kaiser is both the insurer and the provider. So basically, they have—what, how many? Is John in the room? How many people do you have, 10 million?
John: Eleven million.
Kirkpatrick: Eleven million, okay. Kaiser basically has a huge incentive to keep people healthy because they are also the insurer. So that’s frankly the system we need to have and the system more or less that every other country has nationwide. So it’s just worth keeping in mind, it does exist in microcosm in the United States, and there are a few other examples of that that exist at smaller scale. Cleveland Clinic has elements of that and are going to be on stage later, but they’re not quite the same, because they’re not an insurer.
But it is interesting, when you say we’re moving toward that—let me just ambush you right now. Why do you say we’re moving—and quickly, one more thing, with Phillips, I did a thing at Davos the year before last with Zeke Emanuel, who’s one of the Emanuel brothers and a big philosopher of healthcare, and he says we are heading toward the Kaiser-ization of American healthcare, which is a very optimistic statement. I’m glad that he thinks that. Do you think that?
Cohen: I think we’re trying to get there. When I think about how we’re financing healthcare or how we’re looking to finance healthcare. We talk about value-based reimbursement today and value-based purchasing, to the extent that we really haven’t fully adopted that. Even though all the major health plans are saying 85% of our physicians are reimbursed in a value-based arrangement and 80% of our members are taken care of under value-based care delivery models, the reality is it’s just sugar-coated fee-for-service. I think that’s really where we still are today. So I think everybody kind of wants to get there, but there’s intense pressure and barriers not to get there, and I think that’s one of the biggest challenges we’re trying to solve now. And technology and data, I think, can help accelerate that, but we’ve got a long way to go before we get there.
Kirkpatrick: Okay, in a second, I want you to answer the question does everybody really want to get there? But Steve, I wanted to ask you to talk a little bit more about the perspective of the startup, which you’re so conversant with. I mean, we’ve heard a couple of great startups today on the stage today, quite a few, and Katelyn, what she was doing with Eligible, I think maybe we’ll talk about that specifically. But how do startups look at this opportunity and how optimistic are they allowed to be in the United States?
Steven Krein: [LAUGHS] Well, it’s a great question, and I want to just kind of remove the word startup and replace it with entrepreneur, because behind all these organizations are people. And what we’re seeing, not just here in the US, but globally, through this global army that we’ve built that are out every day talking to payers and providers and pharmaceutical companies and patients, is that the mindset of the leaders of these organizations is the biggest stumbling block to moving forward.
So they are as optimistic as entrepreneurs in any other sector, but in this sector, the stakes not only are higher, but the barriers and the stagnation-minded leadership of the organizations they need to collaborate with are so difficult to overcome that we’re trying to get them to lock arms with not only each other but batteries-included leaders of organizations so that we can begin to move forward. Because when you talk about an organization, whether it’s a hospital or a startup, look to the leadership and see where their mindset is. And that is what we’re trying to decode, which is who’s batteries-included, leaning into help, support, figure out, validate, iterate, experiment, and who’s not and is locked with their heels in the ground, unwilling to move forward?
Kirkpatrick: Well, since I know your companies interact with pretty much every major player in American healthcare, of the large institutions in American healthcare, which includes hospital systems, insurers, the whole gamut, what percentage would you just roughly say are leaning into the kind of change you think is necessary?
Krein: Not enough, but there are plenty of examples of—and it’s not big nationals, it’s a lot of local, although large for their state. There’s a hospital in Wisconsin, Aurora Health Care, run by Nick Turkal—CEO mindset is we have to do this now, we have to do it this decade, not a decade or two from now, and we’re committed to figuring out and working with entrepreneurs and startups to validate and commercialize and figure out how to almost disrupt ourselves and lower cost and improve access to their local community. It’s the largest employer in Wisconsin, but they’re actually working and collaborating today with entrepreneurs and startups. The same thing’s happening in Denver, Colorado. UCHealth Children’s Colorado, two institutions run by CEOs who believe it’s urgent that we move the ball forward. But there’s not enough of them. So we’re trying to create this model where we show other hospitals and other pharmaceutical companies and other insurance companies how to actually build the leadership team and build the mindset and culture so that the entrepreneurs with a decision maker who says, “Let’s do it,” but then the actual administrators or clinicians who say we don’t want to or can’t.
Kirkpatrick: Andrew, any thoughts on that?
Cohen: Yes, I love the Aurora example. I think Aurora is really changing the paradigm. They’re going direct to employers. They’re putting full-page ads in local newspapers and trade journals, saying, “We don’t just promise better and more cost-effective healthcare, we guarantee it.” They’re actually putting their money where their mouth is, and they’re actually underwriting some of the risk in partnering up with 15, 16 different hospitals, 3,000 different physicians in that market, and they’re going direct, using large insurers in the background to do the administrative stuff because they don’t want to do that, but then they’re going directly to the employers and marketing directly to the employers and saying if you contain your employees’ healthcare or if your employees choose to contain their healthcare within the Aurora network, guess what? It’s lower out-of-pocket expenses, no paycheck deductions, lower premiums, things like that.
Kirkpatrick: Well, the topic of this here is how do we redesign healthcare, and I think we’ve heard—I mean, certainly throughout the day, I have expressed repeated frustration. I think we’ve heard a lot of different forms of frustration with the existing system. One of the questions that I have, particularly for you two and maybe especially for you, Andrew, is do you think that the parties in the system recognize the emergent—I mean, I don’t think the frustration is at the level it’s going to get to, because we’re very distracted by the Obamacare debate frankly, in my opinion, which is really not the main issue, but I think we are heading towards pretty serious frustration. Do you think the industry looks at it that way?
Cohen: Yes, I think we’re already frustrated. I mean, there’s no question about it. Hospitals are frustrated, I work a lot of with them, a lot of large and small hospital systems around the country. The payers themselves are frustrated, employers are frustrated, consumers are frustrated, brokers are frustrated—I mean, all of the different stakeholders are absolutely frustrated. Everybody’s thinking and trying to figure out a better way to do it. How do we build that better mousetrap? I feel like all the pieces are there, we just haven’t figured out how to assemble them in the right way in order to get better performance.
Krein: So in what other industry does the industry look to incumbents to reimagine their industry? The taxi commission didn’t get together and reinvent their industry, the entertainment business or the financial services business didn’t sit as big organizations trying to do it. It’s entrepreneurs for literally as long as history goes who have been the ones to reinvent and reimagine. Now, doing it in collaboration in healthcare is critical. It’s obviously important for the entrepreneurs and these large organizations to work together; no other industry has that. But in order to change this industry, we have to change our mindset and get the mindset of the leaders of these organizations, and from top-down and bottom-up, to literally shift.
Kirkpatrick: But then let’s go back to your article, the main theme of which ultimately was there is not going to be an Uber of healthcare. What do you mean by that, and why do you feel that so strongly?
Munro: So part of the reason is because in order to make the kinds of systemic changes that are necessary, you have to be disconnected from the profit motive. And we’ve lost that in the sense that originally if you look at the real innovation of the internet, it was DARPA, it was the government. It was the federal government that funded those initial exercises. It was the government that gave us GPS, on which in effect a lot of these technologies and a lot of this innovation reside today and we’ve leveraged commercially. But if you look at the underpinnings, where did that happen? It happened inside, initially big, big companies like Bell Labs. And today we have Google, as probably another example of a company that can afford to make a huge investment disconnected from a profit incentive.