Since joining Rock Health in early March, every conversation I’ve had with entrepreneurs and enterprise healthcare leaders alike starts in the same place, so it’s only fair that my first blog post tackles the issue head on. Yes, I have run out of toilet paper. No, I have not run out of pretzels.1
Inevitably these conversations switch gears to more salient issues and arrive at the $3.6T question: do I think the pandemic will cause fundamental changes in the healthcare industry and, if so, how will the future of healthcare look different as a result?
Rather than bury the lede, here’s the bottom line from my perspective. The pandemic is laying bare two forces:
- Amidst the most widespread health crisis of my lifetime, individuals and organizations across the industry are collaborating boldly and generously in their efforts to speed response and recovery…but these efforts are not nearly sufficient.
- The response and recovery efforts are accelerating trends that will break the healthcare industry—it will take significant action to change course, and these actions have little to do with the COVID-19 virus.
These forces present a moral obligation, alongside tremendous opportunity and formidable challenges, to the healthcare innovation community. Whatever you want to call it—Post-COVIDcare or the “new world order”—it’s time to see clearly and act accordingly.
Collaboration & leadership in the face of an extraordinary event
COVID-19 is a terrible responsibility facing our country. Everyone from frontline clinicians to policymakers and lab scientists are undertaking backbreaking work to tackle the human and economic toll it is taking across the country and worldwide.
While this particular virus is new, the playbook for reaching the other side is not: massively increase testing, deliver scientifically tested therapeutics for treatment, and mass produce reliable vaccines to bring back a sense of health security. Through a combination of heroic efforts by frontline caregivers and essential workers of all types, a record-setting pace of discovery in the biopharma sector to deliver therapeutics and vaccines, and collective sacrifice through physical distancing and other tactics, I’m confident we will find our way to a new equilibrium sooner than otherwise expected.
We must do better in light of visible gaps in the response—look no further than the disproportionate impact felt by the eldery in nursing homes and people of color in underserved urban areas. But even closing these gaps will not solve the structural obstacles to making healthcare in this country healthy again. The trends creating sclerotic behavior across the healthcare value chain were around before COVID-19 and, without an attacker’s mentality, will continue to squeeze value out of our essential ecosystem.
Accelerating trends in technicolor
Trend #1—Jumping curves from digitization to digital transformation
Simply put, the gap in real digital transformation between healthcare and other industries is on full display in the face of the pandemic.
- Drug discovery outside of COVID-19 related therapeutics and vaccines is grinding to a halt because research processes are still predominantly face-to-face and paper-based.
- While CMS and ONC recently provided hope in the form of the new data blocking and interoperability rules, communication between and across delivery systems caring for COVID-19 patients is shining a light on just how far behind we are with respect to a modern system of information sharing.
- Health plans are stepping up to limit member exposure to extreme cost-sharing associated with COVID-19 testing and hospitalizations, but this is taxing legacy claims processing and financial reconciliation systems.
Actions to embrace digital innovations that fundamentally change how these parties do business exemplify the urgent need to pull forward investment in these organizations’ master digital footprints.
Trend #2—Urgently resuscitating the experience of practicing medicine
Burnout in our physician and broader clinician workforce has been discussed at conferences and around boardroom tables for years only to become more widespread and acute. The applause and appreciation for staff putting themselves in harm’s way to care for others, sometimes without sufficient supplies, is well earned. But let’s put actual terms to what we are seeing in practice everyday: rising incidence of depression, PTSD, and other conditions directly related to the strain of patient care and collateral administrative work that adds up and up. If we lay this problem at the feet of hospital administrators and ask them to fix it, we’re simply clueless. Here are some of the jobs to be done to reverse this high risk, high impact trend:
- Health systems must make a commitment to design thinking, creating an environment for clinicians to practice that is built with empathy for those on the frontlines.
- Entrepreneurs and big tech companies should invest in tools that provide actionable insights and real-time transparency when orders are fulfilled.
- The biopharma and medical device training and sales programs that require face-to-face time with physicians should learn something from the rise in telemedicine to make it more convenient for physicians to seek needed counsel.
- Health plans/plan sponsors need to look closely at what kinds of activities they currently require (e.g. manual prior authorization) that create non-value added work for clinicians as well as what they want but do not currently pay for (e.g. home-based inpatient medical care and observation) that can create unnecessary burden on patients, hospitals and clinicians.
Trend #3—Embracing the true implications of the rise of telemedicine and liberation of health data
For weeks I’ve been speaking with medical groups, health systems, and industry analysts about telemedicine’s escape velocity. All of these parties rightfully point out that more progress has been made on the regulatory and adoption front in three weeks than in the last ten years. But attributing this trend disproportionately to the impact of social distancing misses several critical points. One thing COVID-19 doesn’t change is that, without digital transformation in the practice of medicine, both access to and the cost of healthcare services will lead to mass shortages and de facto rationing.
- While virtual visits have lessened the blow to medical groups whose volumes are cratering in the face of shelter in place, seeing telemedicine’s rise only through the lens of patient-to-physician video visit adoption is a dangerously naive view of the market. Rather, we should be lauding practices that use virtualization of visits to scale provider intervention over a greater number of patients as the import of today’s expansion.
- As I said in our Q1 market update, the most significant problem facing healthcare is a historic mismatch between supply and demand. This was true before the onset of the pandemic and will remain true after it peaks. The human capital (MDs and nurses) mismatch is most acute today—hence the liftoff for telemedicine and remote patient monitoring solutions. If there is one thing I am confident in predicting, it is that healthcare cannot go back to a time when virtual or automated care was not normal operating procedure.
- Within a month, we will instead see a shift to the largest supply and demand mismatch for post-acute services in history. As COVID-19 survivors transition out of the ICU and onto a long road to recovery, companies positioned to use technology to communicate with and monitor patients from the hospital all the way through recovery will be in urgent demand.
- Finally, virtualization and/or automation of care will get a bigger boost in the months and years to come given the grave supply and demand mismatches for mental health, behavioral health, and fast growing areas of demand like services for older adults facing cognitive decline. This will increase the urgency on regulators to push forward with efforts to liberate patient data and make real investment in interoperability a more urgent priority for health plans and health systems alike. Stay tuned for our upcoming podcast episode on the topic with HHS Deputy Secretary Eric Hargan and Google Health’s Dr. Karen DeSalvo.
Trend #4—Feeling the reality of healthcare consumerism (See also: “delayed procedures”)
Physician groups and their affiliated hospitals are arguably suffering the strongest financial whiplash within the healthcare economy, and delayed non-essential procedures are a big part of that pain. However, it seems every consulting shop and CRM company in the world is trying to frame the problem as a rush to efficiently reschedule delayed procedures. Personally, I see this as a prelude to the new normal for medical group consumer strategy.
It is time to realize that those patients you think are awaiting your call for a reschedule aren’t waiting. Given time, these patients are reconsidering whether it’s really the right time for a procedure. Too many of these patients are decompensating to the point that procedures will not be safe when ORs/cath labs/endoscopy suites open up—and they may have moved on to another practice with access to non-hospital sites of care. The advice I have for all physician groups is to view patients facing delays through the lens of consumerism and maintaining relationships, meaning that you have tools for:
- Awareness and education, customized for the patient: the longer the delay, the more likely a patient is to lose interest and urgency for a procedure
- Reacquisition tactics for patients: Use call center/patient relationship management businesses to ensure consistent messaging and keep patients from being poached by other practices/sites of care
- Seeing around corners for accessibility: Realize that pre-op testing and prior authorization will almost certainly be necessary after weeks/months delay, so get that work started early
- Making targeted service upgrades: After all the coverage of hospital and healthcare facilities “under siege” from COVID-19, perceptions around safety may be skewed, so navigation and/or meeting patients curbside can make the difference between same day no-shows and completed procedures.
Trend #5—Reaching the logical end of fee-for-service as the dominant payment model
As a recent convert, I’m now firmly in the camp of the inevitability of “shared math” between providers and payers. While there will always be outliers when it comes to contracting dynamics (e.g., trauma, transplant services, pediatric subspecialties), fee-for-service medicine is bankrupting doctors and hospitals alike, making some shift in equilibrium necessary for both payers and providers.
- The past month’s financial run rates for inpatient hospitals should be used in management suites and boardrooms as a scenario planning exercise to sharpen plans for the inevitable case mix shift bearing down on hospitals’ legacy cross subsidy economics. With more and more surgeries moving to the ambulatory space, and increasing medical admissions from an aging population, we are seeing a prelude to the inevitable slow motion disaster hospitals face without new rules of engagement for operations and rationalized managed care contracts.
- For medical groups and private practicing physicians, especially PCPs and cognitive specialists, the inability to survive under FFS when per-click visits aren’t reliably flowing is today’s reality. In the face of possible bankruptcies, these practices are forced to consider employment by hospitals, health plans, or other aggregators that would have been wholly unattractive just months ago. Re-thinking prepaid reimbursement or contact capitation may be the only way to maintain private practice medicine in the near term, and this is not hyperbole. Time will tell whether this is a blip or an enduring trend.
Embracing an “attacker’s advantage” stance
What does this mean for digital health entrepreneurs, investors, and enterprise healthcare companies? Simply put, it highlights that taking control of uncertainty is the fundamental leadership challenge of our time.
Ram Charan, in his 2015 book The Attacker’s Advantage, laid out five characteristics of leaders best prepared to turn uncertainty into breakthrough opportunities:
- Perceptual acuity;
- A mindset to see opportunity in uncertainty;
- The ability to see a new path forward and commit to it;
- Adeptness in managing the transition to the new path; and,
- Skill in making an organization steerable and agile.
I don’t claim the trends above are categorically exhaustive of the uncertainty we face in the years ahead. But innovation leaders who look at these and other events, trends, and anomalies from the outside in—rather than through the lens of what their business or portfolio companies do today that can be “repositioned”—will be able to identify changes in human needs and wants ahead of others and make the next move first.
Startups: Alongside your efforts to pivot for near term COVID-19 market dynamics, spend time to improve your product’s intrinsic value. Focus on how the needs and wants of your economic buyers and end users may be changing. Core value proposition still matters, and investment in that through product focus amidst a moribund sales environment over marketing to the “COVID audience” is a choice that all entrepreneurs need to make right now. And while you’re at it, dig deeper into the business opportunity and value propositions you can offer to Medicaid programs and Medicaid MCOs. No population is growing faster than this one across the next twelve months.
Investors: We should be funding companies that will blossom in the new future over those that tackle narrow aspects of the crisis itself. What do we think this new world will require? It has been truly incredible to see that everyone in every sector has pivoted toward pitching in to address COVID. And now it’s time to realize that just pivoting isn’t good enough—we have to be able to look beyond this period in time, 12 to 36 months out, and begin to work toward building solutions for the problems that will persist until the entrepreneurs we back solve for them.
Enterprise: Now is the time to ask yourselves what balance you can strike between being a legacy world business and entering the new future as a large scale entrepreneur. That requires as much outside-in thinking as your peers in the entrepreneur space to build products or deliver services that make you different on purpose, buy what’s necessary but not differentiating for your expanded business model, and partner with anyone who can quickly magnify your impact.
For our part, Rock Health’s promise is to be catalysts now. We are actively investing, deploying our capital behind the right teams, technologies, and business models to thrive in the world illustrated above. And we are grateful for the opportunity to inhabit the space between today’s new entrepreneurs and enterprise healthcare companies who choose to reach for that attacker’s advantage. We will continue to meet you all in that space where tomorrow starts now.