RubiconMD and Vericred Featured in Forbes article on Reducing Wasteful Spend in Healthcare

Platforms Help Reduce The $935 Billion In Wasteful Healthcare Spend

https://www.forbes.com/sites/sethjoseph/2020/09/03/can-platforms-help-reduce-the-935-billion-in-wasteful-healthcare-spend/

9 years ago, Marc Andreesen wrote that “software is eating the world.”

Perhaps software has already digested its meal, and now platforms are getting hungry. Multisided platforms have quickly become today’s dominant business model, disrupting industries and fundamentally changing how business (and much of life) gets done. Look down at your smartphone and you’ll likely see apps for no less than a dozen platform-based businesses (not to mention that the 99% of smartphones in this country that are iOS or Android-based, which are platforms themselves). Amazon connects suppliers and consumers. Uber and Lyft connect drivers and passengers. AirBnB connects hosts with guests.  

Multisided platforms create substantial value by facilitating an efficient exchange of information, goods, or services between users. A number of factors impacting just how much value a platform ultimately delivers — including how well the platform is managed, and the various ways in which each type of platform achieves and experiences network effects, which broadly refers to the fact that the more users you have on a network, the more value that network will derive.  

Digital health platforms allow different healthcare constituents directly connect and interact with ... [+]

The healthcare industry is particularly ripe for platforms to add value. Healthcare involves coordinating care, information, financing, and payment among a highly fragmented set of constituents (payers, employers, people, and many, many different parts of the care delivery system). 

The ability to coordinate care and make timely, effective decisions is frustrated today by the complexity that fragmentation brings. Currently there is often a tremendous amount of information asymmetry between different constituents - think of the difference in knowledge and agency between a doctor and the average patient (one-third of whom have limited health literacy) facing a new diagnosis. Conflicting or competing interests (often financial) between constituents complicates things further; for instance, payers employ utilization management tools to try to reduce inappropriate use of high cost tests, procedures and prescription drugs, while doctors want to get their patients timely care and spend their time providing care (not processing paperwork). Beyond these challenges, there are technology systems in place that are woefully out of date, lagging behind the rest of our economy by a couple of decades. 

Create efficiency and reduce search times by allowing users to directly interact with each other, improving their ability to share information and reducing the need for middlemen who serve as antiquated gatekeepers. For example, in June, 2020, the National Institutes of Health launched the National COVID Cohort Collaborative (N3C), an analytics platform that gives scientists direct, secure access to critical Covid-19 data to better understand the disease and develop targeted treatments. A platform’s ability to facilitate direct user interactions leads to more frequent interactions and more iterations, leading to more rapid and expansive opportunities for innovation.

Bring parity to asymmetrical relationships by making technology, information, and tools available to individuals or smaller organizations who have not historically had the time, focus or resources to make such investments. For example, Aledade recruits independent physicians to become members in and lead Accountable Care Organizations (ACOs).  ACOs are arrangements in which a group of providers contracts to take responsibility for the cost and quality of a population of patients. Early on (between 2010 and 2015), most ACOs were led by health systems or hospitals, in part because of their experience with risk-base contracts, and also because they had the resources to invest in new technology (e.g., population health management and analytics), tools and change management efforts. Now, thanks to Aledade’s platform and the technology, tools, expertise and processes it makes available to all of its users, independent physicians collectively are able to enter into risk-bearing contracts with payers (who typically have significantly larger and more sophisticated operations) with confidence. 

Facilitate rapid information and knowledge sharing, allowing any individual user to gain insight from, access to, and communicate with a network that is far broader than their own. Health care providers have typically relied on their own training and experience to treat their patients; when patient needs exceed their own expertise, however, providers seek expert second opinions. Historically, the availability of second opinions has been limited to the provider’s own professional network. In today’s technology-enabled world, that is now an artificial barrier to securing timely, highly valuable expertise. RubiconMD, for example, operates a platform that connects primary care physicians with a nationwide network of specialists for an “eConsult”. Such a consult allows for the primary care provider to quickly validate a course of action or determine if a specialist visit (of which 40% are avoidable) is warranted.  

Introduce transparency and reduce information asymmetry in complex buying processes by allowing for an easy way for sellers and buyers to search for and find each other. This then offers a significantly better match of supply and demand in real time. It’s tough to find an industry where there is a greater need for information transparency than health care; numerous application examples abound, from avoiding medical billing surprises to simplifying complex negotiations between pharmaceutical manufacturers and pharmacy benefit managers to establish consistent drug pricing. 

One timely example of platforms bringing transparency to health care decisions is real time benefits tools (RTBTs) that companies such as RxRevu are bringing to market. These tools connect doctors using EHRs to payer information in real-time to see what a drug will cost a patient before they leave the exam room, as well as whether there are any alternative therapy options. Providing options and accurate cost information helps doctors and patients make better, more informed decisions, which can lead to better health outcomes and fewer abandoned prescriptions at the pharmacy counter due to surprise costs. 

Eliminate the “many-to-many” integration problem that is endemic to the fragmented health care industry. There is a burgeoning industry of innovative technologies now helping health care organizations increase access to care while providing more holistic, higher quality care. They can  improve their patient population outcomes through a variety of means, including via telehealth technology, care coordination systems, remote patient monitoring, social determinants of health and patient engagement. Historically, however, each of these technology solutions would need to build one-to-one individual integrations with each health care organization, and vice versa, resulting in tens or hundreds of often duplicative connection points required to achieve connectivity and electronic data exchange. 

A two-sided technology platform that sits between healthcare organizations and the various novel technologies offers each side a single, scalable, reusable connection point that has the opportunity to massively improve economic efficiency for all involved. Rather than expending IT resources on weeks’ worth of integration projects for each new deployment, technology firms can instead allocate those resources to improving their core product.

One such organization making headway in this space is Redox, a health data platform that is building a platform of integration tools while using a networked approach to dramatically bring down the costs of integration. Niko Skievaski, President and cofounder, noted recently that the “company’s ultimate goal is to enable the frictionless adoption of technology in healthcare.”  

Bring down costs by spreading them over a continually increasing number of users.  Multi-sided platforms have become referred to conventionally as “winner take all” markets, in part because of network effects and the advantages they create. Essentially, the value of the platform increases as more users come onboard - and because the platform company is able to spread a set of fixed costs over an ever increasing number of users, it gains a cost advantage over competitors. While there are several counterexamples to the “winner take all” point (see Uber, Lyft and local competitors), it is true that as platforms grow their user bases, they realize economies of scale and users often realize lower fees as a result. 

In some cases, it is possible to create value for users of a platform at no cost to them at all: CoverMyMeds is a multi-sided platform that connects doctors, pharmacies and pharmacy benefit managers to improve the prior authorization process. The company charges fees to pharmacy benefit managers and pharmaceutical manufacturers, so it is able to make the platform free for doctors and pharmacies. Doing so has lowered the barrier to adoption for both sides, and users of the system on each side have naturally attracted more on the other. Replacing a byzantine system of thousands of different forms and communication via the fax machine has saved countless pharmacy and doctors office administrative hours; more importantly, it has helped get patients get on therapy faster.

Unleash a virtuous cycle of further innovation.  Simply by bringing distinct groups of users together and allowing them to conduct standardized, efficient transactions with each other (and reducing costs as a result) platforms can reduce barriers to entry. But beyond this, when platforms are built using modern technology and allow other innovators to build solutions “on top” of the existing platform infrastructure, they reduce development, distribution and deployment timelines and costs. This, in turn, reduces adoption and implementation costs, allowing existing budgets to stretch further. 

We have examples of what this type of virtuous innovation can look like: in the fintech space, Plaid built a platform to enable standardized data transfer between financial institutions and digital applications that power various consumer needs. Today, there is a plethora of financial applications that Fortunately, we don’t have to look too far in the health care space to see others leveraging such platform concepts to rapidly reduce transaction costs and foster an environment for rapid innovation. Vericred, based in New York City, is building out a data transfer platform between health insurance carriers and digital health and “insuretech” and “benefittech”  firms such as Gusto and Zenefits. Solving for similar types of “digital plumbing” challenges as Plaid did, Vericred may be taking us one step closer to a world in which consumers can easily shop for, compare the costs of in- vs out-of-network visits, and schedule doctor appointments.

The Opportunity: Reducing Wasteful Spend

The United States spends more on healthcare on a per capita basis than any other country in the world, and it’s not even close, according to the OECD. Out of the $3.5 trillion that we spend on healthcare, researchers last year estimated that roughly 25%, or between $760 billion to $935 billion, was wasteful. Reasons for waste included failure of care delivery, failure of care coordination, overtreatment or low-value care, pricing failures, and administrative complexity. 

Regardless of this November’s election and whether it leads to further weakening or reinforcing of the Affordable Care Act, it is clear that entrepreneurs and investors putting time and resources into platform businesses have no shortage of opportunities to reduce waste by connecting different constituents and facilitating efficient information exchange. 

Perhaps platforms won’t eat the world, but can simply help make it (and our healthcare system) a bit more healthy.