Joining Matthew Holt (@boltyboy) on #THCBGang on Thursday July 6 at 1pm PST 4pm EST were futurist Ian Morrison (@seccurve); writer Kim Bellard (@kimbbellard); health economist Jane Sarasohn-Kahn (@healthythinker); & patient advocate Robin Farmanfarmaian (@Robinff3);

Two special guests joined us today, Bob Rebitzer, these days at Manatt Health & brother Jim Rebitzer Professor at Boston University’s Questrom School of Business. We discussed their new book “Why Not Better & Cheaper“

The video is below. If you’d rather listen to the episode, the audio is preserved from Friday as a weekly podcast available on our iTunes & Spotify channels

Joining Matthew Holt (@boltyboy) on #THCBGang on Thursday June 1 at 1PM PT 4PM ET were double trouble futurists Jeff Goldsmith and Ian Morrison (@seccurve), and delivery & platform expert Vince Kuraitis (@VinceKuraitis). Lots of discussion about Kaiser and Geisinger and what this means about the model for the future of care delivery. Do incentives or professionalism matter more?

The video is below. If you’d rather listen to the episode, the audio is preserved from Friday as a weekly podcast available on our iTunes & Spotify channels

Joining Matthew Holt (@boltyboy) on #THCBGang on Thursday November 17 are futurist Ian Morrison (@seccurve). delivery & platforms expert Vince Kuraitis (@VinceKuraitis); and fierce patient activist Casey Quinlan (@MightyCasey).

You can see the video below & if you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels.

Joining Matthew Holt (@boltyboy) on #THCBGang on Sept 1st were THCB regular writer and ponderer of odd juxtapositions Kim Bellard (@kimbbellard); the double trouble of vaunted futurists Ian Morrison (@seccurve) & Jeff Goldsmith, and Consumer advocate & CEO of AdaRose, Lygeia Ricciardi (@Lygeia). Great conversation going from the personal (Jeff’s Covid August & Ian’s tour round the wilds of Canada) to the policy and political.

If you’d rather listen, the “audio only” version it is preserved as a weekly podcast available on our iTunes & Spotify channels a day or so after the episode — Matthew Holt

Joining Matthew Holt (@boltyboy) on #THCBGang on Thursday July 21 were futurist Ian Morrison (@seccurve); medical historian Mike Magee (@drmikemagee); and fierce patient activist Casey Quinlan (@MightyCasey)

You can see the video below & if you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels.

Joining Matthew Holt (@boltyboy) on #THCBGang on Thursday June 30 were THCB regular writer and ponderer of odd juxtapositions Kim Bellard (@kimbbellard); Principal of Worksite Health Advisors Brian Klepper (@bklepper1); futurists Ian Morrison (@seccurve); and fierce patient activist Casey Quinlan (@MightyCasey). Lots of discussion of the Dobbs ruling and also of the CAA regulations which have gotten somewhat less play in the press. Quite the impassioned discussion !

You can see the video below & if you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels.

Joining Matthew Holt (@boltyboy) on #THCBGang on April 14 for an hour of topical conversation on what’s happening in health care and beyond were fierce patient activist Casey Quinlan (@MightyCasey); futurists Ian Morrison (@seccurve) & Jeff Goldsmith; Jennifer Benz (@Jenbenz); and policy consultant/author Rosemarie Day (@Rosemarie_Day1).

Lots of chat about McKinsey and conflicts of interest, what’s next with COVID, where employers are now, and Casey has a unique idea about how to profit from data brokers.

You can see the video below live (and later archived) & if you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels.

Hospital consolidation has risen to the top of the health policy stack. David Dranove and Lawton Burns argued in their recent Big Med:  Megaproviders and the High Cost of Health Care in America (Univ of Chicago Press, 2021) that hospital consolidation has produced neither cost savings from “economies of scale” nor measurable quality improvements expected from better care co-ordination. As a consequence, the Biden administration has targeted the health care industry for enhanced and more vigilant anti-trust enforcement.

However, as we discussed in a 2021 posting in Health Affairs, these large, complex health enterprises played a vital role in the societal response to the once-in-a-century COVID crisis. Multi-hospital health systems were one of the only pieces of societal infrastructure that actually exceeded expectations in the COVID crisis. These systems demonstrated that they are capable of producing, rapidly and on demand, demonstrable social benefit.

Exemplary health system performance during COVID begs an important question: how do we maximize the social benefits of these complex enterprises once the stubborn foe of COVID has been vanquished? How do we think conceptually about how systems produce those benefits and how should they fully achieve their potential for the society as a whole?

Origins of Hospital Consolidation

In 1980, the US hospital industry (excluding federal, psych and rehab facilities) was a $77 billion business comprised of roughly 5,900 community hospitals. It was already significantly consolidated at that time; roughly a third of hospitals were owned or managed by health systems, perhaps a half of those by investor-owned chains. Forty years later, there were 700 fewer facilities generating about $1.2 trillion in revenues (roughly a fourfold growth in real dollar revenues since 1980), and more than 70% of hospitals were part of systems. 

It is important to acknowledge here that hundreds more hospitals, many in rural health shortage areas or in inner cities, would have closed had they not been rescued by larger systems. Given that a large fraction of the hospitals that remain independent are tiny critical access facilities that are marginal candidates for mergers with larger enterprises, the bulk of hospital consolidation is likely behind us. Future consolidation is likely not to be of individual hospitals, but of smaller systems that are not certain they can remain independent. 

Today’s multi-billion dollar health systems like Intermountain Healthcare, Geisinger, Penn Medicine and Sentara are far more than merely roll-ups of formerly independent hospitals. They also employ directly or indirectly more than 40% of the nation’s practicing physicians, according to the AMA Physician Practice Benchmark Survey. They have also deployed 179 provider-sponsored health plans enrolling more than 13 million people (Milliman Torch Insight, personal communication 23 Sept, 2021). They operate extensive ambulatory facilities ranging from emergency and urgent care to surgical facilities to rehabilitation and physical therapy, in addition to psychiatric and long-term care facilities and programs.

Health Systems Didn’t Just “Happen”; Federal Health Policy Actively Catalyzed their Formation

Though many in the health policy world attribute hospital consolidation and integration to empire-building and positioning relative to health insurers, federal health policy played a catalytic role in fostering hospital consolidation and integration of physician practices and health insurance. In the fifty years since the HMO Act of 1973, hospitals and other providers have been actively encouraged by federal health policy to assume economic responsibility for the total cost of care, something they cannot do as isolated single hospitals.

• Managed Competition. Under the Paul Ellwood/Alain Enthoven/Jackson Hole Group vision of managed competition, a fragmented care system comprised of individual hospitals and autonomous physicians would be replaced by a limited number of Kaiser-like capitated integrated delivery systems serving regions and competing on price (e.g. premium/PMPM).  This vision of a consolidated health system assuming population risk has been the holy grail of US health policy for five full decades, embraced by Republican and Democratic policy advocates alike. For hospitals to remain independent was to risk being isolated and commoditized by larger enterprises, either insurer- or provider-sponsored. This fear of isolation resulted in waves of hospital consolidation during the late 1970s and 1980s in anticipation of a health care marketplace populated by regional integrated delivery networks.   

• Clinton Health Reforms. Under the proposed Clinton reforms in the early 1990’s, hospitals would only have access to revenues through capitated health payment from the anticipated regional purchasing alliances and could contract to be paid directly if they were capable of bearing and managing population risk. Otherwise, hospitals would have become isolated subcontractors whose offerings would have been commoditized by those who accepted population-based payment. Even though the Clinton reforms faltered, a large wave of hospital mergers and integration activity in the mid-1990’s anticipated their passage. 

• HITech and the ACA. In the wake of President Obama’s 2009 Hitch Act, White House technocrats actively encouraged hospitals to absorb their physicians’ practices as a vehicle for facilitating the adoption of electronic health records. Similarly, the ACA’s payment reform initiatives, particularly the centerpiece Shared Savings (ACO) Program, relied upon on the ability of health enterprises to reach and manage the care of large populations as a bridge to a fully capitated future, spurring yet another wave of hospital consolidation.

Integration of Care and Financing has Failed to Achieve Ambitious Social Goals

The fact that health systems have struggled to integrate insurance financing into their care operations has left a legacy of at best partial integration. According to business historians, the core strategic idea at the root of these policy proposals was flawed; health insurance and care delivery are very different businesses, in some ways diametrically opposed to one another.  

Hospital enterprises owning a health insurance business are thus engaged in unrelated diversification, a strategy that has long since lost favor in the business world due to poor returns on the investment. Robert Burns and colleagues found that the greater the investment in this type of diversification, the larger a health system’s losses. As we have argued elsewhere, Kaiser’s success looks increasingly like a one-off example. More than 80% of Kaiser’s enrollment remains in its originating Pacific Coast markets where it originated more than 70 years ago. 

And despite more than a decade long federal push for “value-based” payment and tens of billions invested by health systems in consulting and infrastructure, by 2020, capitated payment accounted for a scant 1.7% of median hospital revenues and risk-based payment (e.g. two-sided ACO-style risk) only 1.1%. Neither revenue source has grown measurably since 2014 (Moody’s Investor Service, 9 Sept 21). Almost 50 years after the HMO Act of 1973, in only a few communities in the country (Pittsburgh, San Diego and Portland) do at least two integrated delivery systems compete for health plan enrollment. 

Realistically, the Ellwood/Enthoven vision of a care system reorganized into risk bearing IDNs is not going to happen in the US. Yet the hospital and physician consolidation catalyzed by that vision has left most metropolitan areas with a few dominant health systems with undeniable market power in their commercial transactions with health insurer. This market dominance and observed pricing power has led to an increasing policy hostility towards health system scale, with commercial prices being used as the singular measure of performance.

Meanwhile, other large corporate actors have appeared that seek to integrate care across regions without owning hospitals. The two largest enterprises in the US health system, each exceeding $250 billion in annual revenues, do not own a single hospital. They are UnitedHealth Group and CVS/Aetna, diversified health insurers with impressive arrays of primary and ambulatory health services as well as pharmacy benefits management and operations and in CVS/Aetna’s case, a nationwide chain of retail pharmacies. How one pays or regulates these vast non-hospital enterprises, just two of which accounted for more than 13% of US health spending in 2020, in a way that maximizes societal benefit is a conversation that has not even begun.

How to Think about Measuring Social Benefit from Large Health Systems

It is not clear to us that having a highly fragmented health system with thousands of actors each covering a piece of our health needs and competing aggressively on unit price is in the society’s best interests.  A comprehensive conceptual framework for assessing the social contribution of complex health systems—hospital-centric or not—is needed. Fortunately, Donald Berwick did exactly such a thing in 2008 by proposing what he called the Triple Aim. While Berwick meant it to represent achievable goals for health systems, we think it is also valuable as a societal benefit framework measured across a region.

Berwick later added a fourth Aim, improving the work experience of clinicians, in recognition of the challenges of professional burnout and stress, which have been dramatically heightened by the COVID crisis.

 In applying Berwick’s formulation, it is not whether a system exceeds a certain numeric threshold of market concentration, but how the merged entity affects its communities’ health and welfare after the attorneys and consultants go home that really matters.

More specifically, a health system’s societal contribution should be evaluated based upon:

1. Its ability to reduce per capita care costs in the populations they serve
2. Its ability to reduce errors and increase measured patient satisfaction by improving the care experience.   
3. Its ability to improve population health in their communities, especially by attacking and ameliorating social determinants of health.
4. Its ability to engage clinicians and improve their practice efficiency and satisfaction. 

Let’s discuss each of these and consider the ramifications for social benefit.

1. Per Capita Cost Reduction

Traditional anti-trust enforcement has focused on commercial price behavior as the measure of social impact of a merger. Yet modern systems offer thousands of products, each of which has a unique charge structure spread across multiple payers. Systems also differ markedly in the degree to which they serve government funded patients whose insurers (e.g. Medicare and Medicaid) pay less than the fully loaded cost of care, and thus rely on commercial insurance markups to offset these losses.    

However, the communities they serve generate health costs summed across all the people who live in a given region. Berwick believed that reducing per capita medical expense for the community as a whole was the highest and best use of health systems, whether or not they were paid for all those patients on a capitated basis. Since it is not realistic to expect that we will convert all provider payments to capitation, health systems will have to manage the tension between per incident payment for services and overall population level reductions in health expense. The burden of proof will lie in evaluating the specific mechanisms systems use to reduce per capita expense.

These mechanisms could include the use of targeted comprehensive primary care aimed at older and chronically ill individuals, including the use of “extensivists”—primary care physicians and advanced practice nurses that reach out into the home and workplace to manage health risks proactively, the development of palliative care models for patients with advanced illness, employing digital/telehealth services that target not only chronic illness but also various forms of addiction, particularly to food, alcohol and opiates, telehealth tools that improve adherence to risk-reducing medications like statin drugs, vaccines and the use of predictive analytics, disease registries, and “hot spotting” of vulnerably co-morbid patients, among many other promising innovations.

North Carolina’s Novant Health has used community health workers who assess high utilizer patients for social determinants in their home, shelter, or location of choice. They connect patients to a variety of trusted community partners, addressing food, housing, workforce development and transportation barriers

The result: a 33% reduction in ED utilization, a 40% increase in medication adherence, and a 21% reduction in PHQ-9 score (measuring anxiety and depression).  According to Novant Health CEO Carl Armato, the most consistent piece of feedback from CHW patients is gratitude that someone took time to listen to and address their needs–they consistently report a remarkable patient experience.

Simply focusing on commercial prices as a metric of performance of health systems misses any recognition of the market context these systems operate in such as neighborhood poverty, racial and economic inequity, payer mix and disease burden and thus fails to address the financial viability and sustainability of these enterprises. How many large health systems, particularly Academic Health Centers, would survive in the face of an arbitrary Medicare-related price ceiling for commercial payment?   

We advocate a more nuanced assessment of economic contribution that balances an examination of per capita cost with the overall financial performance of health systems[1]. Since community wide per capita spending is difficult to capture, per capita Medicare spending would be a more easily accessible proxy measure.

2. Improving Safety and the Patient Experience

Health system consolidation should lead to systematic improvements in the patient experience. COVID clearly showed that larger health care organizations with significant IT systems and technical staffs were better able to scale up telehealth operations to compensate for the loss of in-person elective and emergency care and to sustain telehealth use when elective care resumed. The ability to stand up command centers and manage health resources (ICU beds, emergency rooms, clinical staffing and related support services) across a metropolitan area or region cannot be achieved by a large number of competing, freestanding facilities. 

The ability to create condition-specific care plans that envelop and extend complex care episodes (e.g. joint replacement, cardiac nerve ablation, etc) is enhanced by having multi-disciplinary clinical teams supported by data analytics and IT systems. Similarly, the ability to identify defects in clinical and administrative processes that expose patients to risk and to wasted time and cost is enhanced by having a larger base of participating clinicians. 

Pre-COVID, many health systems were building “digital front doors” to their care systems, using smartphone apps, call centers and digital health access to smooth entry into and passage through their care systems. Larger systems created by mergers have not only enhanced clout with regional clinicians but also with health insurers that should be used to bring down patient bills.  

These improvements should be measurable through improved HCAHPS ratings and rising net promoter scores. Similarly, reduced clinical errors and improved clinical productivity are measurable and should be discoverable by patients and community members.

3. Improving Population Health through Addressing Social Determinants

In his “Poverty and the Myths of Health Reform,” the late Dr. Richard (Buz) Cooper persuaded us that the most important intervening variable in the widely observed variation in hospital and specialty use from community to community was not the supply of specialists and hospital beds, but rather the prevalence of poverty—the main social determinant of health.  Homelessness, food insecurity, broken families, unemployment, health illiteracy all stem from poverty, and generate both avoidable illness and costs.

These conditions cannot be ameliorated by health systems, or “competition” between isolated pieces of the care system, because they ultimately originate in our culture and society. The United States has grossly underinvested in the social care needed to ameliorate these conditions. These underlying social conditions that drive a lot of “unnecessary” health care use cannot be ameliorated through the core businesses of health systems, but rather through their collaboration with other entities with community wide reach, as well as neighboring public health systems—the very kind of collaboration we saw across the country during COVID.  

There are many examples of this type of collaboration:

1. California’s public health collaborative to attack and reduce maternal mortality, in which hospitals played a decisive role. This multi-year collaboration succeeded in reducing maternal mortality by more than half to rates comparable to western Europe, with concomitant reductions in PICU stays, infection-driven lengthy hospital stays, etc.

• Blue Zone Collaboratives. These collaboratives focus on specific neighborhoods or districts, and identify gaps in access to food, housing, public safety and social/human services that, when ameliorated, contribute to lengthening life expectancy in the geography chose. Health systems are key actors in most of the 56 projects currently underway.

• Mental Health Collaborations. In many communities, both public and private mental hospitals have closed, and services for those in mental health crisis have been absorbed, with predictable results, by local law enforcement. In metropolitan Seattle, health systems that normally compete for patients—MultiCare and CHI Franciscan Healthcare—collaborated to build a $41 million 120 bed inpatient psychiatric facility
   
• Addressing Homelessness. Numerous health systems (including Kaiser Permanente, Promedica, Truman Health, etc. ) have moved to create living spaces for homeless people in their communities, which has vastly simplified bringing community-based services and job opportunities to them.

Many health systems are engaging community partners in addressing income inequality, unemployment, educational opportunity, food insecurity, homelessness and racism. Some health systems such as Promedica in Ohio and Novant Health in the Carolinas are making upstream investments in housing and social services and to act as “anchor institutions” for community development. Other systems such as Ohio Health and Inova Health focus on their core clinical mission but embrace partnerships with community organizations. 

Novant Health has created a program for “Expanding Opportunity through Education”—investing in education programs with students of color and economically-disadvantaged communities where there are significant disparities in college readiness rates. Individuals who do not graduate high school are more likely to report suffering from at least one chronic health condition—asthma, diabetes, heart disease.  

Under new CEO Dr. Stephen Jones, Virginia’s Inova Health System has a partnership model for community engagement. Inova established twenty care clinics in zip codes of need based on data and community input with over 100,000 visits in 2021. Realizing the effects of what Jones terms “social drivers of health” the Inova Cares Clinics house Community Health Workers embedded in the neighborhoods to build trusting relationships, as well as pantries to address food insecurities. In addition, in partnership with local Title I schools and non-profits, Inova is working to create career journeys for students. Inova also supports 30 community organizations through health equity grants totaling $1M to leverage relationships for real impact in the community.

The normative expectation should be that because larger health systems serve larger populations, and therefore are exposed to larger community risk factors and needs, they can and should be expected to devote resources and talent to addressing them. The existing approach to evaluation of community benefits (as in the IRS definitions and the requirements under the Affordable Care Act) are sorely in need of re-examination to account more fully the range of initiatives being pursued.   

4. Improving Care Giver Experience

One area where large health systems have struggled is in improving the working lives and professional satisfaction of its caregiving workforce. COVID clearly demonstrated how much stress and pressure in health systems devolves onto front line care givers. While large health systems were ultimately able to procure the PPE needed to make their jobs safer, they were less effective in ameliorating the stress at the root of care during this crisis. Being highly dependent on an aging workforce, health systems face huge staffing gaps in the wake of COVID as burned-out baby-boom vintage doctors and nurses retire or transition to other, less stressful work roles.

Health system leaders are acutely aware that their clinical workforce are “spent” after more than two years of delivering front line care in a pandemic, increasingly to unvaccinated  and often hostile or violent patients. It has become a strategic imperative that health systems respond effectively in acknowledging and managing the mental health problems of their clinical workforce. Failing to acknowledge this problem has resulted in avoidable shortages in clinical staffing, and excessive reliance on mandatory overtime and temporary clinical workers or travelling nurses.

Clinician engagement is an important precondition for improving clinical quality and reducing medical errors. Large health systems have fewer excuses for not having worker sensitive (as opposed to litigation sensitive) human resource policies. Workforce satisfaction is easily measured through physician and staff engagement surveys.

Conclusion

We do not propose this performance framework as a regulatory guide for state or federal authorities. Rather it is presented as a voluntary alternative for managements and Boards seeking to demonstrate the community benefits created by their institutions.   

At their best, large health systems can deliver sophisticated, complex care to their communities. But they can also play a key role with community partners in addressing the social determinants of health, thus reducing per capita health cost. Large multi-billion health systems are here to stay. The conversation about how to enhance the health systems’ benefits to their communities, which have been so vital during COVID, has barely begun.   

Jeff Goldsmith is President, Health Futures Inc & Ian Morrison is the former President of Institute for the Future. One of them is America’s best known health futures, but we’re not sure which!

Acknowledgements

This essay has benefitted greatly from review, comments and examples provided by colleagues. In particular, we would like to thank health system CEOs and health policy experts Nancy Agee, Carl Armato, Carmela Coyle, Stephen Jones MD, Chip Kahn, Stephen Markovich MD, Tom Priselac and Michael Gentry.

[1] Nancy Kane, Robert Berenson and colleagues have pointed out that the financial performance of health systems differs materially based on their resource position, payer mix and other variables, and proposed a financial performance evaluation framework  based on audited financial reports to account for these differences .  The same is true of the geographical areas served by systems; those which serve communities like the Bronx or South Central Los Angeles face greater challenges than those serving suburban communities. Adding socio-economic domains based on geography to the Kane/Berenson framework would facilitate “apples to apples” comparisons of potential social benefit created by systems. 

Joining Matthew Holt (@boltyboy) on #THCBGang at 1pm PT 4pm ET Thursday for an hour of topical and sometime combative conversation on what’s happening in health care and beyond will be: double trouble futurists Ian Morrison (@seccurve) & Jeff Goldsmith; consultant focusing on platform business models and strategy Vince Kuraitis (@VinceKuraitis), & back after a long while analyst and Principal of Worksite Health Advisors Brian Klepper (@bklepper1).

Today there will be more discussion than usual about platforms and whether health care is ready for them!

You can see the video below. If you’d rather listen than watch, the audio is preserved as a weekly podcast available on our iTunes & Spotify channels

TRANSCRIPT

Ian Morrison:

Hi there, I’m Jess DaMassa. Actually, no, Jess DaMassa. Jess DaMassa is a friend of mine and I am no Jess DaMassa. I am Ian Morrison. I am pinch hitting for Jess DaMassa, how could I possibly pinch hit? Matthew told me I had to go and put my kilt on and spruce myself up a bit. But anyway, it’s an honor, a deep honor to be here for the February 18th episode of Health Teach Deals.

Matthew Holt:

So Ian, it’s a Dan Quayle line. No, it’s not the Dan Quayle, it’s the Lloyd Bentsen line about Dan Quayle.

Ian Morrison:

Exactly.

Matthew Holt:

I’m surprised you didn’t get the brunette wig on, but thank you very much for pinch hitting. Jess is I believe in the wilds of the hills of Arizona in some Buddhist retreat in Sedona or something taking some well deserved time off. And thanks for coming in and pinch hitting and asking me the questions. She, by the way, has had me replaced like eight times. Lots of other people have done my bit, but her bit is really hard. So we’ll see how you do.

Ian Morrison:

You are eminently replaceable, but she is not. So this is kind of like we go from Beauty and the Beast to grumpy old man. It’s a different gig. But anyway, no, I’m flattered to be included in the-… the same pantheon.

Matthew Holt:

So people that don’t know you, we worked together 25 plus years ago.

Ian Morrison:

A long time ago.

Matthew Holt:

At Institute for the Future. But you’ve been sitting in Silicon Valley, but been looking at the American healthcare system for a long time, despite the Scottish, Canadian, Californian accent you have.

Ian Morrison:

Yeah. No, I’ve been doing this a long time. And I actually look to you and Jess to monitor the digital health space. I mean, I kind of helped think it through at the very beginning when we launched you, unleashed you on the world in the 1990s from the Institute for the Future. But you guys do an amazing job on this show of keeping up with all that’s going on in the marketplace, and you gave me the secret sauce to work off of, which is the database. And I have deals to-

Matthew Holt:

Don’t tell anyone there’s a database! They might want to steal it. All right. Fantastic. All right. You ready to go?

Ian Morrison:

Yeah. You got the weird chicken thing going?

Matthew Holt:

The chicken comes later, but you’ll see the clock going. Don’t forget the rules, which is that once you see this go, so long as… you’ll probably hear the alarm. So long as one of us is speaking when the alarm goes, we can answer the last one. Okay. You ready?

Ian Morrison:

Yeah, I got it. I got it. Got it.

Matthew Holt:

Go.

Ian Morrison:

Okay, straight out the gate, MindMaze raised $105 million for a total of 340 million.

Matthew Holt:

Okay. This is a sort of video game. It’s a digital therapeutic, but it’s got hardware. It’s also got software. They’ve got a coat you wear that… this is for people with stroke, Parkinson’s, other complex neuro diseases. And money came in Concord Health Partners, and you’re an advisor to them, right? Isn’t that the AHA fund?

Ian Morrison:

I’m conflicted, I can’t say anything about it. You’ve said wonderful things, but-

Matthew Holt:

Hopefully you know something. We’ll talk later.

Ian Morrison:

We have a great team at Concord and I trust their judgment. Okay. Memora Health, 40 million raised for a total of 50 million. What do they do?

Matthew Holt:

Yeah. Interesting, interesting. Newish company, money came from some of the big guys, Transformation Capital. My old buddy Julie Murchinson is there, Andresen Horowitz and some others. This is kind of a thing which is trying to go on the inside of hospital systems, figure out what is actually going on with between Epic and all the other stuff that’s on sticky notes, and take all that through some kind of AI system and build it into an alerting system which both messages patients and doctors. Highly complex, going to be interviewing the CEO and finding out more about it.

Ian Morrison:

Yeah, it sounds interesting in terms of helping doctors. Ro, Joe Ro.

Matthew Holt:

Ro! Ro!

Ian Morrison:

150 million for some astronomical total amount. I mean, is this not erectile dysfunction for young people?

Matthew Holt:

It is, but it’s worth $7 billion. Now their competitor Hims and Hers, its market cap is under a billion. So I don’t know if they’re doing seven times more, if they’re going to completely revolutionized primary care, if anyone is going to buy them, who knows?

Ian Morrison:

Amazing. PriorAuthNow. It’s obviously not a navigation company, right? 25 million of a total of 57 million.

Matthew Holt:

Yeah. Very similar to a company called CoverMyMeds that did this in pharmacy. They’re doing it for regular stuff. Difficult. Oh, we’re out!

Ian Morrison:

Equip, Equip [crosstalk 00:05:00].

Matthew Holt:

Too late. We missed it.

Ian Morrison:

Oh, come on!

Matthew Holt:

It’s two minutes, it’s two minutes.

Ian Morrison:

Come on, I’m an amateur.

Matthew Holt:

All right, all right. We’ll do Equip, we’ll do Equip. Okay, I love Equip.

Ian Morrison:

I’m going to throw a flag. I’m going to throw a flag.

Matthew Holt:

Throw a flag. Okay.

Ian Morrison:

I’m going to throw a flag. We’ve got to get Equip in at the… put 10 seconds back on the clock.

Matthew Holt:

Go on. Okay. We’ll put 10 seconds back on the clock.

Ian Morrison:

Equip, well, they got 58 million out of a total of 74.7 million. You have decimal spot.

Matthew Holt:

Ah, we have decimal spots. Call it 75, yeah.

Ian Morrison:

Yeah, call it 75.

Matthew Holt:

So this is a fascinating company. I know the CEO, Kristina Saffran very well. She started a nonprofit called the Project HEAL foundation. It’s a mental health company specializing in eating disorders. They’ve built this incredible team approach of both family, other external peers, psychologists, et cetera. Basically, she was doing this in the nonprofit world called Project HEAL. She herself founded that at age 15. She’s only in her twenties now, but was a while ago. And basically she talked about… this as kind of a replacement for doing facility-based treatment for eating disorders which doesn’t really work, or people regress a lot. And now she’s got 10 health plans nationwide, one Medicaid plan starting to pay for this. And it’s actually a great thing, because this is an awful condition that people don’t hear much about. And it, by the way, leads to the most suicides of any mental health condition, or deaths, which is quite incredible. So I love what she’s doing. And with that money, they’re looking to go nationwide. You should be hearing a lot more about that.

Ian Morrison:

Great, great.

Matthew Holt:

All right, we got to it, even though we cheated. Only a little bit.

Ian Morrison:

Yeah. Well, but the referee has the right to extend the game under the right circumstances. That was a worthy extension. That sounds like a really worthwhile thing.

Matthew Holt:

Did you see the African Cup of Nations when one of the referees just ended the game five minutes early?

Ian Morrison:

That’s pretty brutal.

Matthew Holt:

So, I mean, Ian, I got to ask you about this. I don’t know how much you can say if you know anything about MindMaze, I know you’re an advisor of Concord Health Partners, but that’s a really complicated… I mean, it’s a Swiss companies, it’s been around for 10 years, they’ve got a bunch of plans and what have you. that’s going after the stuff that people have really not gone after, which is all that neurological stuff like stroke and Parkinson’s and all that. And ALS and some other stuff in that zone. I mean, that’s an interesting area. Do you hear a lot about that from the folks you stick around with in the hospital world and the plan world, those kinds of diseases?

Ian Morrison:

Yeah. I mean, if you think about… what I think is sort of the split going on here in the digital health space is that a lot of the activity is for for serious conditions, but they’re more chronic conditions. But a massive amount of our investment in healthcare is in complex, very sick people with tough stuff. And certainly the hospitals. And there’s a sort of division in strategy in the hospital world between people who are sticking to the knitting, and others who are trying to engage more broadly with this new ambulatory decentralized world. But the common thread is that all of those hospitals are still going to be complex things. So, I mean, I think this is on point with the burden and opportunity to make meaningful improvement and care for people with complex neurological disease. I think that’s kind of where the sweet spot for this particular offering was, as I understand it.

Matthew Holt:

And then you told us, apparently… Jess told me that you told her, so I’m calling that you told us, that we had to guess about emerging acquisitions. So Ro and those folks, I don’t know whether… Do you think you could build a big nationwide primary care program monster out of selling Viagra, starting with selling Viagra in pharmacy? Do you think that’s a possible route to get there?

Ian Morrison:

No, I mean, what I was urging Jess and you to do in your show is to have a feature called fantasy deal of the week, which is your best guess of what the next big merger would look like. I think there’s going to be massive numbers of roll ups. I mean, you track this more than I do.

Matthew Holt:

Yeah. Yeah. I would say-

Ian Morrison:

It could be people with the financial muscle. And the thing about Ro and Hims and those guys is that they’re not really dealing with the insured world, right? I mean, it’s cash in the barrel, is it, mostly?

Matthew Holt:

Yeah. I mean, it is now, but it can’t be eventually, right? Eventually if you look at the other big player… If I were to give you a merger, it would be Ro and Amazon, right? Although Amazon’s probably got a lot of the pieces and probably doesn’t need it, because Amazon already has PillPack and it’s now doing Amazon Cares. I did a fascinating interview with Farzad Mostashari and Mandy Cohen-

Ian Morrison:

I love that.

Matthew Holt:

Aledade, not Ale-dade as I keep on calling it. But basically it’s the old story, how do you do primary care at scale, sensible primary care that’s not just a feeder to doing more stuff in the big medical palaces? And I don’t know if Ro can convert over there. Just this valuation blows my mind. I mean, $7 billion valuation, raising a billion. You could have bought Hims today on the stock market, the whole of it for the same thing. Are they doing 7 times the revenue of Hims? Maybe. I don’t know. But it’s going somewhere.

Ian Morrison:

It may be somebody valuing the brand, that they got ahead of the game. Because it’s not a hard thing to replicate, as you said. I mean, why would Amazon pay 7 billion for it when you could just do it, right? But they presumably have built up users. Look, it’s the thing we did for years. Everyone talks about consumerism in health, but we actually did surveys, you and I, over the last 30 years and found like 7% of Americans would actually use their own money to stuff. People talk about consumerism in Medicare Advantage, it’s free for God’s sake. No one’s writing a check.

Matthew Holt:

Actually, Sachin Jain grew SCAN Health Plan by sending people money, paying them to join up!

Ian Morrison:

I do things for money as well! But no, I do think you’re pointing to the fact that there is an upper limit about what people will pay. But we haven’t saturated that yet, as evidenced by I think some of these plays where people are willing to pay subscriptions for a service that adds value.

Matthew Holt:

Well, we shall see indeed. And talking about people doing stuff for money, as we’re not paying you for this, we should probably wrap it up. But want to thank you a lot for coming on, for playing Jessica.

Ian Morrison:

Thank you. It was an honor, it was a privilege and a pleasure. And I hope my Oscar is forthcoming.

Matthew Holt:

Your Oscar will be clearly in the mail. And for those of you who follow along, you can follow Ian, @securve, S-E-C-U-R-V-E. One C, right, in that?

Ian Morrison:

Yep.

Matthew Holt:

On Twitter. You can follow me, @boltyboy. Jessica’s not here, but also follow @jessdamassa. And then you can sign up for the newsletter at the healthcare blog, and you’ll find all these health tech deals and a bunch more in your inbox every week. And with that, thank you, Ian. Great pleasure having you on.

Ian Morrison:

Good to see you.