The health care marketplace is evolving rapidly in ways we couldn’t have predicted even a few years ago. Changes in the health care industry are not dissimilar to industries that have seen major recent transformations, such as transportation and the service economy. So, how can health care catch up, and keep up? And how can we make sure there’s plenty of room for new entrants? Namita Mohta of NEJM Catalyst spoke with Rushika Fernandopulle, the CEO of primary care provider Iora Health, to learn more about the challenges new entrants face, how these organizations can measure success, and why we should be optimistic about the changing landscape.
Namita Mohta: What drivers in the health care marketplace are creating needs and opportunities for new players?
Rushika Fernandopulle: There are a number of them, but if I had to pick two, they would be consumerism and value-based payment. Let me say a bit about each of them. Number one is that health care, traditionally, has been actually not very consumer-centric — we structure the system around the needs of the providers, and maybe the payers, but really not the patients or consumers.
And I think that’s changing. Other companies are setting new expectations, there’s a little bit of a generational thing happening, and increasingly the high-deductible health plans are making people more cost sensitive. So in general, health care is moving like every other industry, and I think there’s a real demand for consumerism — consumers voting with their feet.
Number two is, with value-based payment, instead of the old payment model where you get paid for everything you do, there are more and more payers, both in the government and on the private side, that announce they will pay you for delivering value, which is improving peoples’ health, and keeping them out of trouble. And I think those two things mean that to be successful, one needs to really deliver care in a very different way. And that provides opportunity for new players like us.
Mohta: What are the biggest challenges preventing scale for Iora?
Fernandopulle: There are several. Number one is, payment is really important. Trying to innovate the care model by keeping the same mold — these models don’t work at all. You need different payment models. Convincing what we call sponsors, or people who are paying for health care, to be willing to pay differently — that’s a barrier. There aren’t that many of them out there.
And number two is tools: having the right tools to be able to do what we need to do. An example is electronic health records. Well, there plenty of them out there; they’re all built for the old system, they help you document, code, and bill higher, and do more throughputs and transactions. If you think that’s what we need [for what we do] — and what we do a lot is what we call high-impact relationship-based care — you need a whole different set of tools. Those don’t exist. So there’s a bit of a chicken and egg going on.
Finally, we need to convince patients to vote with their feet. What changes almost every other industry isn’t the government or consultants, but it’s actually consumers voting with their feet. And that causes new patterns — think Airbnb, think Uber, etc. — and I think that’s slowly happening in health care. That consumers are starting to do that. So sponsors, tools, and then finally, there are some regulatory challenges, rules that make it hard for folks like us, new entrants, to get into this space.
Mohta: Given the changing health care landscape, what are you most optimistic about?
Fernandopulle: I think this is becoming a lot easier. I’ve been doing this work for the last almost 15 years, and in the beginning, when we were trying to build new primary care models — start from scratch — it was really hard. We had very few people, whether payers or funders, pay attention to us. We sense much more momentum in the market. There are a lot more new entrants like us who are coming up. More and more people, private equity, venture capitalists [are] putting capital into folks like us, which again was unheard of 10 years ago. And what you’re seeing, too, now, is existing delivery systems starting to pay attention.
I think the big picture here is that, if you look at any other industry, what has caused the transformation that’s needed has not come solely from existing players, and not solely from new entrants, but it’s come from sort of an ecosystem where you’ve got new entrants and incumbents working together. That’s what happening in pharma, it’s happening in transportation, etc. We’re just starting to see the beginnings of that, and that makes me feel more optimistic.
Mohta: You mentioned earlier the challenges of the regulatory landscape. What are the one or two most important policy changes that federal or state governments could make to better position organizations like yours for success?
Fernandopulle: There are several of them. One of them is the very fact that this is so state regulated. It makes it really hard for anyone to get national scale because you’ve got different rules in different places. For instance, telemedicine rules, which are antiquated, seem to insist on people being licensed to do it over the Internet, but you have to be in the same state as the people you’re talking to — that seems crazy in 2016. But it varies from state to state. Corporate practice of medicine laws, about how you can get funding for medical practices, varies state to state. And [there are] other barriers to entry that different states put up about how you can become a new entrant.
So I think number one is really thinking through which of these laws make sense given the technology, which of these make sense to continue to be done at the state level or what needs to be able be done at the national level — increasingly, this has to be done across states. And then there are some other particular things. HSA laws, for instance, are a good example. People like us have been developing business models for primary care that are not fee for service but are fixed fee. Unfortunately, the way that regulations are written right now, you can’t do that while having a health savings account, which is a barrier to a lot of employers working with people like us. Again, these all were things that when people wrote these laws, they never conceived of these new models, and we need to now update these and bring them into the 21st century.
Mohta: What are three critical success factors that new organizations need in order to be successful and thrive in the current marketplace?
Fernandopulle: I think the days of being able to make more money by just doing more stuff to people are over, and that consumers are just people doing whatever you tell them to — those days are over. Number one is that you have to become a consumer-centric organization. Patients, customers, whatever you want to call them, are going to increasingly vote with their feet. They’re going to need people like us, who are going to attract them. So if you’re not consumer/customer centric, this is not going to work.
Number two: I think the only business models that’ll work in the future are value-based models. You have to become value based. And the final one is that you have to become a rapidly learning organization. Obviously, for us to get from here to there, from what we’re doing today to what we need to be doing, is going to require evolution, and that requires being able to learn quickly, and do quick iterations, and tolerate a bit of failure. And these are things that I think existing health care systems are not very good at, to be honest.
Mohta: Any last insights or comments for our audience today?
Fernandopulle: It’s almost a truism, but I think a lot of people see the health care landscape as challenging and with all sorts of problems. But the other way to look at it — and maybe this is a little “glass half full” — is that there is huge opportunity. And there’s huge opportunity for us to do things that we’ve wanted to do for a long time, which will in the end lead to better care for people, better outcomes, lower health care costs, and also, by the way, better practice for those of us who are in the system, who are doctors, or other people working in the system. We don’t need to trade those things off; I think there are ways we could do all of the above. But only if we’re willing to try new things. So, we’re excited.
Mohta: Excellent, thank you.
This Q&A originally appeared in NEJM Catalyst on September 29, 2016.