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IORA’s co-founder and CEO Rushika Fernandopulle, MD, has spent the past decade trying to improve primary care. Hear how IORA Health is delivering on that long-time pursuit.
Rushika Fernandopulle is a practicing physician and co-founder and CEO of Iora Health, a healthcare services firm based in Cambridge MA whose mission is to build a radically new model of primary care to improve quality and service and reduce overall expenditures.
Tom Salemi: Hi, everybody. Welcome back to the Breaking Health Podcast. This is Tom Salemi, your introducing guy. I’m here with Steve Krupa, the actual host of the Podcast. Steve, how are you?
Steve Krupa: Great, Tom. How are you doing?
TS: I’m doing great. It’s fall in New England, Steve. I know you’re now a proud Boston resident, or actually Boston area resident. Have you picked any apples or peeped any leaves yet?
SK: I have not. I have not – leaves don’t seem to be coming down. I did learn how to operate the heat in the house.
TS: Is that a good deal?
SK: Which I was surprised I needed to do. I mean in New York we turn our heat on around the 15th of October. So up here it gets a little colder a little sooner, I guess. A little crisper.
TS: Yeah. You got the single family house now, the big house in Winchester, and it’s hard to keep those things cool or warm.
TS: But we’ll heat things up with this Podcast. You had a great talk with Iora CEO, Rushika Fernandopulle. And it’s an area we’ve hit upon before. I know we had talked to Hearken Health sort of about realigning or redefining primary healthcare. Maybe get a bit into what Iora’s doing before we get into the conversations.
SK: Yeah. So I think that the difference between Iora and Harken is they are attacking the same problem from a little bit of a different angle. Where Harken obviously is thinking of themselves as an insurance company that is trying to build an enhanced primary care delivery model as part of an insurance choice, Iora is coming at it a little bit different. They are building an enhanced primary care model. We’ll talk about why that’s important. And they’re looking to offer that as an independent set of physicians primarily, I think, initially to corporations, which is where I think most of their business came from. But they’ve also got an eye towards Medicare, and you’ll hear about that in the Podcast.
TS: So is the competitive edge the way it’s delivered? Or do they have a technology element that’s giving them the ability to do things differently?
SK: Well, I think they address the fact that they’re building their own workflow technologies for themselves because the model that they believe in is a new model that was executed many years ago, differently, but with the same idea, that being an effective primary care physician where you’re able to see the doctor more often, or assistants that are directed by the doctor more frequently should improve your wellness, should allow you to address any of your health related issues more comprehensively, with greater guidance and greater coaching. Should be able to integrate the behavioral health piece of things, which we talk a lot about in this Podcast. And the result of all of that should lead towards less utilization of expensive services like emergency rooms and hospital stays. And so the argument is give us your patients and we’ll stay on top of them in a more comprehensive way. And the benefit is a better interaction with the doctor for the patient, better quality care, and lower cost of care with the model of selling that service to corporations that are interested in trying to reduce their healthcare inflation.
TS: Wow. And I’m sure you put on your VC hat and asked the hard hitting questions about are you making money.
SK: Yeah. Well, it was interesting because I think the story comes from a physician’s point of view, which is when you and I were young, we got a lot of our doctor’s time. And that’s eroded away through the managed care reimbursement model where for primary care doctors to be successful, they have to handle a large patient load in terms of the number of patients, and they have to actually do a lot of paperwork because of the insurance regulations. And what the idea here is to sort of take it back to a physician oriented model. And the fundamental question was, and we asked it of Harken Health, can you make money doing this? In the example of Iora, if they’re selling their services to corporations that are self-insured, and individual employees are selecting them to be their primary care doctor, the corporations are going to pay them a premium, and if they can manage down the other elements of the care spectrum for their population, then they’ll continue to use them and they’ll have a successful business model for themselves.
SK: And we’ll have changed their work life. You know, we talked about the triple aim, right? Better quality, better care, I mean less expensive care, better quality, better patient experience. Then there’s the quadruple aim where people want to add a better experience for the doctor because there’s the sense that doctors are getting burnt out out there. If you add the fifth piece on there is you have to be able to accomplish those 4 things in a business model that generates profits enough to keep you in business. And that’s where Iora is going. And I think that’ll come out in the talk.
TS: Excellent. We’ll let’s just hop right into. You’re going to talk to Rushika Fernandopulle, the CEO of Iora.
SK: Welcome to the Breaking Health Podcast. I’m here with Rushika Fernandopulle, the CEO and cofounder of Iora Health. Welcome to the Podcast.
Rushika Fernandopulle: Thank you. It’s great to be here.
SK: I’m glad you could join. We’re going to talk about how to deliver better healthcare, right, at the end of the day. But before we do that, you’ve gotta tell me how you got into healthcare and how you decided to create your own model for healthcare delivery.
RF: Yes. I’m a primary care doc. I trained in internal medicine and was working in typical practices. Have also always been interested in the system side of things. So I was an undergraduate government major. Actually studied ethnic conflicts. I did a masters in public policy while I was in the middle of medical school. So I’ve always been both interested in medicine, per se, taking care of individual patients, but also how we think about the system by which we do it. And found myself out in practice, and it just became really clear really quickly that the model that we were delivering, the care we were delivering was sub-optimal. And again, not because of bad people or bad intentions, but the system was poor. And a colleague put it really well. I remember very clearly the day in February, here in Boston, where it gets dark at about 3:30, and it was cold, and he had seen, you know, 30 patients in a row, 7 minutes each, some were double booked. He barely had time to go to the bathroom, let alone eat lunch. They just put this new electronic health record in, so he couldn’t even do all these points and clicks and notes during the day, so would have to sort of take, scrawl notes on a piece of paper and then come back for about 2 hours in the evening after the last patient left to try and write all my notes so he wouldn’t get slapped on the wrist. And I was sitting there with a colleague who was doing the same thing, and what she said was quite telling. It was, every day, I lose a little piece of my soul. Because we went into this to help people, and they come to us with such big needs and we have so much we can offer, but we can’t do it because of the stupid system. And that’s when I realized I need to do something different.
SK: When you talk to people in the industry, and they talk about the various – and of course you hang around Boston and New York City long enough, and you wonder if there’s any primary care doctors anymore, they’re so specialty driven because of all the academic institutions and so forth. But the choice to become a primary doctor is an interesting choice because I would imagine when you make that choice, you know what you’re getting yourself into, or do you not?
RF: You know, the reason I decided to be a primary care doctor is really sort of I really think it’s not about primary care as a specialist. It’s sort of generalist versus partialist. And I went into medicine not because I was enamored with the heart of the skin or the eye, but really felt like I liked people and I liked putting together the whole picture, and how does sort of illness sort of interact with social issues and all of that, be able to sort of think about things holistically, and primary care was a great place to do that. It was really I like relationships. And so that’s why I went into primary care. I couldn’t see myself spending my life focusing on just a few square inches of one system.
SK: Sure. So just for sort of background on primary care, so when I remember when I was a kid, and I’m older now in my 50’s, but I remember my pediatrician. I remember my sort of general practitioner physician. And the one thing I remember is I spent an awful lot of time with those guys when I went to see them. When I was seeing the pediatrician, the doctor was in the office with me. I don’t know how long it was, but it felt like too long because I was scared of the guy, and I wanted to get out. But even as I got older into my teens and sort of see a general practitioner, they were there to calm you down, they were there to offer advice about life style, they were there to offer insight into your biometric screening to the extent that they were doing that for you, or insight into how to avoid catching an illness. Obviously it’s much different today. When I’m with my primary care doctor, and they’re very nice people, I do get this sort of sense of urgency that they gotta get the hell out of the room to go someplace else. Is that really what it’s like, where you’re just like I gotta get out of here because somebody else is waiting to see me, and I gotta see 30 people a day or I can’t break even.
RF: Yeah. So what’s happened is we’ve got ourselves on the wrong side of a vicious cycle. So what happens is the primary care, believe it or not, is 5% or less of total healthcare spending. What’s happened is the cost of everything else goes up; primary care has actually ratcheted down. So you’ve got sort of sub-optimal – you can’t spend enough time, don’t have the support. That means what happens is you deliver sub-optimal care to people. Again, I think of what through the cracks and you don’t proactively manage things, so that means that people end up in trouble, get to the hospital or the ER or the specialist. And that increases healthcare costs. And what happens when healthcare cost increases? People ratchet down primary care even more. So now you, instead of 7 minutes visits, you have 6 minute visits. That means that care gets worse and people go to the hospital more, costs go up, and you have 5 minute visits. So that’s unfortunately we have gotten ourselves in. And I think part of that is we just thought wrong about this. And in general, I think the big problem about primary care, or maybe you could argue it’s about healthcare in general, or maybe you could argue it’s about healthcare in general, is we’ve turned it into a transactional business. It’s all about documenting, coding, and billing. The way you get paid is per doctor sick visit, and there’s an inane set of codes, 99213, 99214, and you have to check off x number of boxes and x number of systems to get that. And so everything – it’s transactional, right? And I think, as you pointed out, the real realization is that – and by the way, all the things we’re doing to try to fix primary care, which is through a medical home criteria and meaningful use and all these largely well-meaning things should add more transactions on top of that. And we can – doctors do more and more and more, but now they have to do more stuff in the 6 minutes we give them, right, and all these quality metrics, etc. And none of that works. The bottom line is what actually heals people is not transactions. What heals people are relationships, sort of conversations you have with your doctor. And the way to get to relationships, you have to get rid of the transactions. One of my favorite quotes is Michelangelo, the great artist. They asked him, you know, how did you get this Pieta, this beautiful sculpture? He said, It’s really simple. I take a block of stone and I chip everything that’s not the Pieta. Right? And that’s exactly what we have to do. I think the way to fix healthcare isn’t to add more stuff on. It’s actually to take things away that we think don’t add value. And so much of the stuff that we’re doing now in healthcare does not add value, if you define value as better care for patient. Really simple. And so let’s get rid of that stuff. And so that really – so the whole genesis of Iora is that what everyone else is doing, ride it for most of my career to try to fix healthcare because everyone is trying to fix it because we know it doesn’t work – that’s not a secret – is incremental and small and adding stuff on. And the simple insight for Iora was why don’t we just start over. Why don’t we start from scratch, chip away the stuff that’s not the Pieta, and create a new model of care from the ground up. So that really is what we’re trying to do.
SK: Very cool. Very cool. So at what point in your career did you realize that you needed to do something? I know you talked about that one incident where your colleague was giving up a piece of their soul. But of course there’s primary care doctors out there that I guess are giving a piece of their soul every day, and not doing anything about it other than continuing to be primary care doctors, right? So you obviously said, I’m not going to give up a piece of my soul anymore, but you didn’t change jobs. You started a company to do something about it. When did you make that decision?
RF: Yeah. So the good news is at the time when this happened, I was also spending a chunk of my time running this inter-faculty health policy program at Harvard. So this was a brainchild of the provost at the time, a guy named Harvey Feinberg, that Harvard ought to lend some of its intellectual weight to solve big problems in society, things like the environment and healthcare, but that the way the university was organized in their little silos didn’t work, right? So he was fixing healthcare in medicine, business, public health, public policy, economics, sociology. Problem. So which department? The answer of course is all of the above. Right. So they realized that this structure didn’t work, so they created this sort of new structure, which sat sort of at the President’s office level and could allow you to sort of work across those. I was running this program. And so the good news is on Harvard’s dime I was able to say, Hey, this is exactly the sort of problem we should think about: how do you redesign healthcare delivery, starting with primary care? Let’s actually think about it a bit. And had the time to go around the country, meet people who were doing cool things, think about what I’d do, again, if I was going to start from scratch, and really come up with a design of OK, if we were going to start over, what would se do. And I think one of the things I learned from one of the people I talked to, which were the guys at Disney Imagineers, if you know the folks who did a lot of the cool stuff at Disney, one of their insights was that you need to build before you’re ready. So you could sit and white board and do this academic exercise all you want, but what you really need to do at some point is prototype and build a lab and just try it. So I actually went to all the big health systems here in town, in Boston, which is, quote, the Mecca of healthcare in maybe the US, at least people around here think so, and said, that Hey, I’ve got this great idea; I’ve been working on this project at Harvard; what if we started over, built a new primary care model from scratch that was solely aimed at making better care and not all this other dross. Will you let me build a practice and try it? And they all sort of pat me on the head and – and this was, by the way, around 2003 or so – and so, you know, that’s really interesting, but our practices are full; we’re making money, what’s the problem you’re trying to solve? And the obvious answer is care sucks, patients hate it, doctors hate it, it’s bankrupting the country, outcomes are embarrassing. But to their point of view – and by the way, these are, in theory, academic, not for profit, mission driven places, right? But in any case, put that aside. They decide that this is not something they’re interested in. And that’s when you come up to the moment where I think every sort of entrepreneur faces, where at some point you say, Look, if I really want to do something, maybe I just need to do it myself. And the simple insight was I’m a doctor, I could just start a practice. So I ended up quitting the day job and starting a practice in Arlington, Massachusetts, which is a suburb sort of near Cambridge –
RF: – and said, Let’s just try this. Got lots of ideas. I won’t know if they work until we try it, so let’s just give it a try.
SK: Yeah, I know Arlington. I’m in Winchester, in Burlington, as you know.
SK: So sort of our neck of the woods. What’s funny about it is that that is the issue with healthcare, right? If you measure it by the money, it’s only broken in certain places. If you measure it by the triple aim in it, and you would probably fit into the quadruple aim, right, because you’re thinking about the doctor –
SK: – it starts to look pretty funky. You start to sit there and say, Well, –
SK: – we’ve got businesses that are making money. Nobody at the large health insurance companies aren’t doing well, nobody that runs a large hospital system isn’t well paid. But somewhere down in the functional aspects of the business, the care is too expensive, the outcomes are unpredictable, the consumer doesn’t have a good experience, and the doctor is losing a part of their soul every day.
RF: Right. Exactly.
SK: So we’re in the midst of trying to tackle a big problem. People say, Well, let’s use technology to do this. Maybe technology has a role. So when you sat down and you said, OK, I’m going to go at this, how did you convince yourself you could start to attack those? And I’m assuming the 4 issues that I mentioned are the 4 issues that you’re attacking: quality, cost, consumer experience, and physician working life. How do you build a business where you can attack those 4 things and still make some money?
RF: Yeah. So it’s actually easier to figure out what the thing is you can do to make those 4 things better. The harder one is actually – I should call it the quintuple aim. You gotta add a 5th aim to that.
SK: The making money part?
RF: Which is profitability. Making money part, right, because I can do the top four.
SK: But we’re not Communists, right?
RF: Right, that’s not hard. So really what I’ve always thought it’s quintuple aim. We need to improve patient experience, we need to improve health and outcomes, we need to lower the total cost of care and reduce waste, we need to improve the life of the docs and the people working in the system, and we need to do it in a way that’s profitable, or else we go away. Right. And so that’s what we need to do. And so the proposition was let’s just change everything, right? Let’s re-center the system on relationships and not transactions, and let’s build a system which – this is where a little bit of a leap of faith comes in. Like I think it’s very clear in lots of studies with the Institute of Medicine and other people that at least a third of what we’re doing in healthcare in this country is waste. And again, be clear: waste is defined as things we’re doing to people that either have no value or are causing harm. So the idea was let’s not try to aim at that. Let’s aim at doing the right thing. If we do the right thing, we will create all this value by not doing all of the things that have waste, and that we will somehow find a way to harvest that value and get paid for it. Right. So we started – another design principle, by the way, that we learned in this initial work at Harvard is back-load constraints; don’t frontload them. Right. So if you start in healthcare with the constraints, you know, I want to do this innovative, you get a You can’t do that because, you know, you won’t get paid for it, you’ll get sued, doctors won’t like, you know, etc. And you won’t go anywhere. So the design principle is design in the absence of constraints. Imagine you can do anything, come up with the idea, and then put the constraints on the back end. Right, OK, now the world has to change. But then you’ve gone somewhere, right? So we designed a model that was OK, let’s be relationship based. Let us have everyone have a shared care plan. Let’s wrap a team around patients, which include not just the doctor. Of course we’re important, but these folks we called health coaches who are from the community and help people execute on the plans they have, and innovate mental health into the model, and do emails and text messages and let people see their whole medical record, and go for walks with them, go to their home, take them grocery shopping. You know, proactively reach out to them, help manage the downstream stuff, right? So really a very different model. And then you get slapped with OK, that’s all well and good, but most of the things you just mentioned don’t get paid for. So what do you do? So the first model –
SK: Well, yeah, I thought the same thing, but I figured you’d get to it.
RF: Yeah, yeah, yeah, so that’s the obvious thing, right? So by the way, most doctors, the thing I just described, they wouldn’t disagree that all the things I mentioned are the right things to do. And unfortunately what they say is, if we won’t get paid for it then I guess we won’t do it. And I think my version of it was last I checked, we took an oath to serve our patients, not the insurers or whoever decided what gets paid for. So the fact they won’t pay for it is sort of their problem. We need to figure out a way to deliver this stuff if we think it’s the right thing. And so the first kick at this, the only thing we can figure out, was let’s ask our patients to see if they could support this. So we literally, back of the envelop, we said, Look, if everyone – we’re going to bill insurance for whatever they’ll pay for the doctor sick visits. But all this other stuff we’re doing, emails and walks and proactive management and all of that, health coaches, IT, if everyone paid us about 40 bucks a month, which is what you pay for your AOL at the time and your lattes or whatever – and by the way, if you were a young person, which is defined as 35 or below for the good reason that I was 35, so I had to be in the young category, you pay us 20 bucks a month. And by the way if you can’t afford it, pay whatever you can, 5, 10. And if you want to pay more, by all means pay us more and it will help support other people. So it was this sort of funny little cooperative direct patient care thing. And it actually worked. We gathered patients and people paid us, and that business model worked. It was slow, it was painful, it took a while. But it allowed us to build a practice and learn a ton.
TS: Hey, everyone, this is Tom, just taking a quick break from this Podcast to introduce you to a new program that’s being rolled out by Healthegy. Healthegy is the company that produces the Digital Healthcare Innovation Summit and the Breaking Health Podcast. We’re trying to build the next big booming voice in healthcare, and we want to add your voice to ours. Check out our Companies to Watch program. Go to healthegy.com. That’s the word health followed by the letters EGY.com. Companies to Watch will give you the opportunity to tell your story, to share your voice, or add it to ours, and to get your company’s story out to our communities across healthcare: ophthalmology, medtech, digital health, we’ve got it all covered. So what you would do is you’d come to one of our events. You’d be able to video record one of your company’s story, and we would produce that video, make it available to you, of course, and also send it out through our own channels. So it’s a great opportunity to have your story told to a broad community of potential investors, customers, and partners, and it’s something you should certainly explore. So go to Healthegy.com, check out the Companies to Watch link, or just send an email to my colleague Maureen Linnemann. Her email is email@example.com. Either way, you’ll get the information you need to decide if you want to be one of our Companies to Watch.
SK: So at some point down the road, I think you’ve gone out and raised some money for your business, right?
RF: Yeah. So this was bootstrap, right, so we were bootstrapping this. We had a sort of loan from an old boss of mine. We went sort of, as I said before that, we sort of more – this retail model sort of was all well and good. There were two big problems with it. So one was it was really clear to me that – well, the big problem was that we’re asking people to pay extra for healthcare. And the problem with US healthcare is not that there’s too little money in it so we need people to give us more. That’s the problem in Rwanda, right? The problem in US healthcare is there’s an obscene amount of money in healthcare, so asking people to pay more is like pouring gasoline on a fire. We want to take money out of healthcare, right, back in people’s pockets, so asking them to pay more seems silly. Point two is it was clear that where that plenty of money was was really in downstream care. So that this better primary care, more intensive care to people, not just improving experience and outcomes, but we were keeping people out of the hospital, out of the emergency room, out of the cath lab. And that whoever’s on the hook for that ought to pay for what we’re doing. Right. So that’s when we sort of morphed the model and said what we ought to be doing is doing this. And so the next obvious place to go was self-insured employers.
SK: Right, sure.
RF: Right. So we ended up working with Arnie Milstein, who worked for a company called William Mercer. Working through him we got a gig with the Boeing Company in Seattle to serve their employees. And that really worked well, right. So Boeing cares about healthcare costs because obviously it’s an international competitiveness issue. Whenever they put a 737 up against an A319, they have a big cost differential because Airbus, who makes the A319 is in front, and they don’t pay healthcare costs. And so they were willing to sponsor this. So we said let’s do this working with some existing health systems, Virginia Mason, the Ever Clinic, Valley Medical Center. Let’s have Boeing pay for this extra into the primary care, and then they would get the benefit of the downstream savings.
RF: And by the way, they would give us the data. So in the old practice in Arlington, we tried to get the health plans to even give us the claims data so we would be able to show we were making an impact in downstream savings. They wouldn’t let us. So but now when Boeing tells their health plan, they say, Yes, sir. And so we did that. And we did that for 3 years in Seattle and showed great results. So Arnie Milstein published in Health Affairs.
SK: So the clinic on site there? Or at the Boeing factory?
RF: So we were near site. When you look at any sort of employer, at least half the problem are actually the spouses.
RF: So if you think about it, you have to be sort of healthy to be able to go to work every day. So if you look at who are the people who are racking up the costs for an employer, it’s often not the worker, but their dependents. So we would build near-site clinics, and again, sort of near. There’s one up in Everett, so down near where they have a big plant to build the double-aisle plains, the 787s, 777s. We have one in Renton, right near where they build the single-aisle plain, the 737s, the 717s. And then we had one downtown where they had the corporate offices at the time before they move to Chicago.
RF: So there were near-site clinics, exactly.
SK: Interesting. And so you were able to demonstrate to an employer that – because in the old days, when I first started to get exposed to healthcare, we were just coming out of – this was in the mid-90s, so we were just coming out of this cycle, this HMO cycle, right. And the original HMO cycle was really all about group model HMO benefits, where you would have, and Signa and Prudential were big pioneers in this, you would have a central medical group that would be the primary care focal point of every member in the HMO. Those groups were often built near employer facilities, and they performed many of the things I think that you’re performing. I don’t think they had as much of an integrated mental health model or health coaching model. I think they were relying on the docs to do a lot of that labor. But that business lost traction because of the desires of the consumers for open networks. So do you find that your model conflicts with an open network? And if it does, how are your customers reconciling with that?
RF: Yeah, so two things. One is this is a choice. So we’re not – we ask the question all the time, How is this not going to turn into managed care of the 80s, right, which we saw how that ended, right? And one of those is that you don’t want to force people into this. So this was a choice for people, and they weren’t forced to do it, and you could choose. And so the key then is so again, it’s not just value based. A lot of people are talking about value based care. The other flip side has gotta be very consumer-centric. It’s gotta be a better experience for people than what they have now to make it – people are looking for choice. They’re looking for a better choice, right? So let’s just give them a better choice. And so this is sort of concierge care for free, right? You can email your doctor, same day visits, we’ll Skype with you, we’ll let you see your whole medical record, do a lot of things that a lot of companies do about hiring for attitude, train for skill, high service. So our practices have net promoter scores. And if you’re familiar with net promoter scores –
RF: – where you ask people how likely you’d refer to a friend or colleague. And what you do is you get the people who love you – it’s a 1 to 10 scale – so the 9’s and 10’s, people who love you, and you subtract out the zero to 6’s, people who sort of are lukewarm or don’t like you, and you get a net number. So the airlines, they throw parties when they break zero. Health plans are in the minus 2, minus 4 range. Most primary care practices are in the10 range if they’re lucky. The best people in the – so Cleveland Clinic is very proud of their number, which is in the 50s. We are – Apple, Trader Joe’s, paragons of the economy are in the 70s. We score in the low 90s routinely. So people love it. So that’s the key is you’ve also got to build things that people want to go to, and so then they beg for it, right, as opposed to feeling that someone’s putting me in there. And number two is what we do is we have – what most people are trying to do is wide open primary care and try to narrow the specialist network, so you can only go to this set of specialists. What you want to do is flip, right? Narrow primary care, theoretically wide open specialist network. Right. So the question isn’t – so here in Boston, we have a health system, Partners, which is very high quality, high brand, but very high price. And the way people are trying to fix the network or should Partners be in or out of the network. That’s the wrong question to ask. The question is when should you go to Partners. Right?
RF: So if you have a real leukemia, should you go to Partners? Absolutely. It’s the only guy who knows how to treat it. By all means. If you need a knee x-ray, which is a commodity, should you pay three times the market price to go to Partners? You’ve got to be an idiot to do that, right? Why? And so that’s the idea. Let everyone in, and then let the primary care help patients navigate when should you go where, and for what things. That’s a very different way to think about how to manage this. It’s sort of more supply chain management. So in general, people like it, right, and it’s a choice. People come vote with their feet.
SK: And so generally, your business is – is it still mostly the self-insured employer market, where employees opt in to have you be their – basically it feels like ombudsman, concierge and primary care doctor around their healthcare.
RF: Yes, all of the above. Again, the key is we’re not just trying to change primary care. We’re using primary care as a lever. And it’s a great sort of lever point because you can help people with what I call upstream: how to eat better, how to actually improve their health, as well as downstream: how to navigate the system, go to the right place when you need it. So primary care is a really – it’s only 5% of healthcare spend, but we can make an impact on almost everything by doing – it’s a great lever point. I don’t want to own all the rest of the system.
RF: Right. But what I want to do is own the primary care so we can control that. So we started in the self-insured employer space, right, so we’ve been working with employers. We work with union trusts, so the Casino Worker’s Union in Las Vegas and Atlantic City. We have worked with the Carpenter’s Union in Boston, work with Dartmouth College for their employees up in Hanover, New Hampshire. About two years ago we made a pivot, but we said, you know, the other places work. So this model works particularly well with sicker people and people with chronic disease.
RF: Right. So you can imagine this sort of relationship based, high impact primary care and we’re spending for sicker people. Where are sicker people? Well, they’re in Medicare, right? People who are older.
RF: And so we’ve started now working a lot with Medicare practices, so through contracts with what’s called Medicare Advantage plans, so Part C plans, where we actually build practices dedicated for them, and can serve those patients. And then the third branch we started to do is for patients on the Exchange, so through Obamacare. Again, we have a joint product with the payer, which is sort of our primary care as the front end and sort of they bill to sort of build for purpose back end insurance product that’s offered as a product on the Exchange. And so we now are – so we’ve gotten – the point of Iora was to how do we do this and do this at some scale. I think a lot of people are trying to innovate healthcare and putz around with small scale. Right?
RF: The infrastructure one needs to build is reasonably robust, and let’s do this scale. We raised a bunch of private equity money. So we’ve raised several rounds of venture capital, which I think helps us both build the infrastructure and sort of tolerate working capital to be able to get these things going. We have 34 practices as we speak around the country. We’re in 11 different cities. About a third of them are in the employer space, a little more than a third are in the Medicare space, and then a bunch are in the Exchange space right now.
SK: Very cool. And is there a role that you see in technology? Are you developing your own systems? Are you using off the shelf products? How does technology aid you in this effort?
RF: A great question. So when we started doing this, in the first few iterations, we tried to work with existing electronic health record. And we worked with Cerner and Epic and eClinicalWorks and a lot of the ones that are still around. Greenway. And not surprisingly, it was very clear that these products were built, not surprisingly, for the old world. They’re built to help you document code and bill higher. They’re a throughput engine, they’re transactional, they’re very focused on the doctor. They’re reactive, they’re sort of – which was exactly what we don’t need. So one of the things we do is we do no fee for service billing. So it doesn’t matter for us.
RF: Right. What we need is what I call a collaborative care platform that’s relational, that gets data in from everywhere, that prompts proactive care, that allows patients to get engaged, lets us manage teams with data. That’s what we need. And those don’t exist. And so we made a decision about 6 years ago and we started raising capital is we would build our own platform. And so we call it Chirp. So Iora is a bird, so Chirp, obviously.
RF: And it’s a collaborative care platform built from scratch. It’s modern software. It’s Ruby, it’s cloud based. We use agile development. Every two weeks we have a new iteration. Really, what we’re building is I would call it a new operating system for healthcare. And that’s a tight meld of a technology and a people platform, right? So thinking that technology will solve healthcare is silly because this is at root a behavior change issue.
RF: Right. So you need to get both patients and docs to change behavior. Computers don’t do that, right? But that said, if people alone aren’t going to fix this because healthcare is inherently a data-driven thing, you know, who to focus on and what to do. So let’s put those together, right, where we have systems in place where the technology tells the people what to do, but the people are the effector arm. They have a relationship with the patient. They can actually turn that insight from the computers – a lot of people have these great systems. They’ve created beautiful reports that sit on people’s desks. That doesn’t change healthcare.
RF: Right. But if we now have a task on the health coach’s app, who knows the patient and reach out to the patient and get them to do something because they care about them and they care about each other, now all of a sudden we change behavior. Right. So we’re really doing both. It’s a little crazy for a small company like us to build our own IT platform, but we have to.
RF: Because it doesn’t exist out there. And what’s interesting, there are a handful of us, by the way. We aren’t the only people who are doing this, started from scratch, built new care models. So ChenMed, Qliance, Crossover. There are a few handfuls of us. Almost every one of us came to the same conclusion independently that we had to build our own stuff because nothing existed.
SK: Right. It’s very interesting. It’s a lot of what some of the HMO’s did when they build their automation systems. Of course, they were not really automating anything. They were basically just building workflow systems, and then ultimately the whole world of insurance changed, and there was plenty of commercial technology that got built up to help them.
SK: Do you imagine yourself having built commercial technology? Or do you feel like it’s really your internal system, and you focus on making sure that it’s just delivering what your business needs?
RF: So for right now, we’re building for what we need. And it’s really nice when – it’s very different when everyone who uses the software works for you, versus that they pay you for it. Right. And then we’re also no in the position where we can –
SK: It’s not supposed to be that way, but I hear you.
RF: And we also now can ignore things like meaningful use and c-sheet and all these other sort of noise about government regulating what features you ought to have. To me, that’s a dumb way to create good software. We can actually purely say what do we need to build to help us do the job we need, which is quintuple aim. Right. And we keep improving it. Might there be a day in the future when we actually commercialize this? Sure. To be honest, the market for it now is very small, right, because this is built very explicitly for people who are not doing any fee for service. And that the market for how many people are actually really not doing any fee for service is very small. Despite all the hoo-ha about people taking a risk, most of the quote risk people are taking are these sort of little bit of pay for performance or risk share on top of fee for service, or screw-ups at the end of the day. Right, not really true population based payment.
SK: Well, you know, the medical groups in California got very aggressive.
RF: Have been doing it, yes.
SK: And they do a pretty good job out there.
RF: They’ve been doing a great job for 20 years. And we’re learning a lot from them. And I think there’s some groups in South Florida that have been doing it for a long time, and doing it very well. And I think what we’ve said is can we build a model that we can actually scale nationally, right, because I think many of those groups have had a really hard time scaling nationally. But it’s hard. It’s really hard.
SK: No, no, no, and like when I look out into the marketplace, I mean let’s face it, I mean Medicare is an example, right, because of the acuity. But every large corporation is looking to try anything to get their trend down because it’s driving them nuts, right?
SK: Because their margins are not growing at the rate that their medical expenses are. Even when I look at a portfolio company with maybe 2 or 300 employees. As it gets larger, you start to look at the healthcare bill, and it starts to get unbelievable that it’s gotten so large. So there’s a demand to try all kinds of things. And what you’re describing makes sense. And I love this line. I think I’ve got the line right, and you’ll correct me. It’s restoring humanity to healthcare. Is that the sort of tagline for the company?
RF: It is the tagline. It’s exactly what we’re doing. And so that’s why we started from scratch, by the way, because I think a lot of people focus on the process and the technology and even the payment models. And those are really important, but I think the key is you’ve gotta change the culture, right, you change the culture. You walk into one of our practices; it feels different in about 3 minutes. And that’s what really is at the root of it. You get the culture right, the other stuff will follow. You don’t get the culture right, no matter how much payment change and other stuff you do, it won’t make a difference.
SK: Yeah. You got a bunch of Java programmers and database guys running around, it’s not a healthcare company. It’s a software company. Software enabled services is a way to think about it.
SK: So very cool. We’re sort of down to our last couple bits, so let me ask you a traditional closing question. I feel, when I talk to you, that the culture of your business is embedded in so much of what you talk about and what the essence is of what you do. But there’s always an employee culture and a relationship that employees have with the company, and the relationship that they have with its mission and vision. And I’m wondering if you wouldn’t mind sharing that when it comes to Iora Health.
RF: Yeah. So one of our early investors is actually Tony Hsieh, the CEO of Zappos. I think there’s a lot of Zappos’ sort of DNA baked into the company. We made this early on that our goal is build up a large, game changing company that’s going to change an industry. And any, all, I think, good game changing companies start with saying we need to treat our employees amazingly well. Right. I think way too many people in healthcare treat their employees like crap, and then somehow get surprised when they treat the customers poorly. Well, of course, it’s not going to happen. So we do a lot of things to – our big advantage, too, though, by the way, is we can pick who works for us. So we pick people who this is the mission they want to do, and this is what they want to sign up for, and they are a part of it. People feel – we believe it’s sort of a bottom up pyramid, where people – almost all the good ideas don’t come from me, the CEO or people sitting in Boston. They come from people in the practices because they’re the ones seeing our patients. And so we set a culture up where people feel like they’ve got a huge voice, and they actually drive the company. We give everyone who works for the company a share of the company when they work for us for a certain amount of time, so that they’re part owners of it. So lots of little things we do. We celebrate culture all the time. Every two years we’ve been getting the whole company together, everyone from the bottom to the top for a weekend to celebrate each other, get to know each other, and build that culture. There’s just lots of little things you do. They’re not fluff. Some people say, Oh, if you were a drug company, who cares? The culture is not the drug. I say, No, our drug is the culture. Right. So the culture is the drug. And that allows us then to take great care of patients. That allows us to help improve their health, and that improves us to change the economics of healthcare, and that we harvest some of that, and that drives the economics of the company. Right. But the base of that is building a great company culture.
SK: That’s cool. I agree with you. I think it’s also good that the CEO is open to talk to employees and feel like he’s accessible and interested in them. I think people are more become – if management is interested in the people that are working there, and vice versa, you end up having sort of a fun time when you’re in the office, hopefully, even though business is a struggle every day.
RF: Yeah. Exactly.
SK: SO that’s good. Good conversation. Thanks for joining us. The last thing is would love for you to just put out there ways in which listeners can find out about you or be in touch with you. Do you have a Twitter handle, Facebook, website, all that good stuff?
RF: Yeah. So our website is iorahealth, IORAHEALTH.com. There are a number of articles about us, and more about our practice and our model. If people happen to be in one of the cities we’re in, they could stop by and see a practice. We’re in – on the website you would see all the places we are coast to coast. It’s open enrollment time, to put a plug in for Medicare. So if you have seniors who are interested in getting this sort of care, please send them our way. My Twitter handle is @Rushika1. And again, would be happy to take questions and the like from people if they have ideas and thoughts.
SK: Terrific Rushika Fernandopulle from Iora Health, thank you for joining me today. It was fun to talk to you.
RF: Great. Thank you.
TS: And that is a wrap. Thank you, Rushika Fernandopulle for joining us on the Breaking Health Podcast and sharing Iora’s story. Very happy to have you here. Steve Krupa, another job well done. Very happy to have you as our host, CEO of the Psilos Group. And thanks of course to our listeners for joining us on the Breaking Health Podcast. You can see Iora, you can see Steve and myself at the upcoming Digital Healthcare Innovation Summit. It’s happening on November second in Boston. For information about the agenda and to register, you would want to go to healthegy.com, and all the information will be there. Hurry up, though, this one will sell out pretty soon. So don’t wait too long. Thanks again for joining us, and tune next in week for another tale of innovation.