Hosted by Travis Tasset, the Value Talks podcast explores a range of topics that matter to people, including healthcare, leadership, and culture. In this episode, Travis and I discuss consumerization of healthcare.
For more episodes of Value Talks, you can subscribe to the podcast on these channels:
Transcript of Episode 6
Welcome to another episode of Value Talks, with your host, Travis Tasset.
Travis Tasset: Welcome to this episode of Value Talks. I’m your host, Travis Tasset, and my guest again today on the show is Dan Tasset, the chairman of Nueterra Capital and also the CEO of NueHealth. Welcome to the show, Dan.
Dan Tasset: Thank you. Glad to be here again, Travis.
Travis Tasset: Today we are going to talk about the future of healthcare, value-based healthcare, consumerization in general. So, first I wanted to share with you my definition or what I have come across as a definition of healthcare consumerization and then get your thoughts on what you think and feel about consumerization, how you would define that. So, I’m working from the definition that healthcare consumerization are new solutions that are changing the way healthcare goods and services are delivered to the population, and at the same time, anything that the consumer uses to interface with the health system itself.
That’s kind of the definition, very broad definition. What are your thoughts on that? Do you agree, disagree? How would you define healthcare consumerization?
Dan Tasset: Yes, I like that definition, I do. I might use a little bit different terminology, but I think it means the same thing. When people ask me, “When you talk about consumerism or the consumerization of healthcare, what are you trying to say?” I just keep saying it’s about the way healthcare is delivered and the way it is consumed. It needs to be different than the way it is currently being delivered and the way that it’s currently being consumed to keep up with the changing world. So, I think that was a good definition.
Travis Tasset: All right, so, with that definition, let’s talk about what makes the healthcare industry different and how does that industry and the consumerization that’s happening in the industry, how is that different from other industries, and what does the consumerization look like there?
Dan Tasset: Good question. We, as an organization, whether it’s Nueterra Capital or NueHealth or any other of the portfolio companies, we pride ourselves in being innovators and early-in investors. I did a previous podcast on innovation and what are the elements of innovation and all those kinds of things, so, it’s really important I think, for us, when we start innovating in the healthcare industry to say, what other industries are leading in consumerization or any aspect of healthcare that we want to do differently?
As we know, consumerism and consumerization of other industries over the last 10 years has been phenomenal. If you look at what’s happened with iTunes, I mean, music, very few people anymore would go in and buy a complete album, and if you did, you rarely would purchase that album at Target, or Walmart, or Barnes and Noble, right? So, the whole music industry has been consumerized, buying one song over the internet in a matter of a split second for 99 cents from literally any musician on the planet.
Same thing with movies. Obviously, the same thing with Amazon. Almost any goods or service now, Amazon has expanded and grown way beyond. So, again, if you look and compare that to what we are doing in healthcare to other industries, the way goods and services are both delivered and consumed, Amazon is a good example of that. I mean, I haven’t been in a department store for years. Why would you? You can shop online, and have it delivered directly to your house. Again, it’s the way it’s delivered and the way it is consumed.
So, those industries, you can go into the ride sharing or taxi cab industry and look how Uber has consumerized the taxi cab industry, or the ride sharing industry. I mean, it’s been phenomenal. And now, of course, fast food or the delivery of food, you know, Uber Eats, or ClusterTruck, or all of those are all about consumerizing the food industry. Grocery stores consumerizing, deliver grocery shop online, deliver the groceries to your door. I mean, it just goes on and on and on. So, the real question is, we, as an organization, being early-in investors and innovators, we should look at what can we learn from other industries.
That is precisely what we have done and are continuing to do. We are not the only ones, others in healthcare have done the same thing and are doing the same thing, but we’re just in the beginning, very early stages of consumerizing the healthcare industry.
Travis Tasset: Do you think that consumerism is tied to innovation? I mean, can there be consumerization without innovation?
Dan Tasset: No, I don’t. Because if you look at any of the examples of the industries that I just described, all of those are not even tech-enabled, those are technology-led organizations. If you see the sophisticated technology, if you used Uber it’s amazing. The sophistication of the technology with Amazon and how they continue to use innovation and technology. I’ll give you a perfect example. A year ago, everybody is pretty familiar with how Amazon was delivering goods and services using Federal Express or whatever it might be.
But then they obviously are innovating and came up with the idea, “There are all kind of people driving around here, could we use them to deliver and could we use the GPS technology to be able to give them an app to tell them precisely where to deliver the goods and services to people’s houses, using a car that is basically sitting in a parking lot of a college dorm and a college kid could go pick them up, centrally located, and very efficiently deliver all these products to the door?”
So, it’s constant innovation both in business model innovation in the way in which the product or service is delivered, and innovation in the way the product or service is consumed.
Travis Tasset: So, with the definition I was working off of, we talked about the way the product, in this case health services, are delivered to the consumer and then the interfaces that the consumer uses, but you just hit another point: the business models. How do the business models of healthcare tie into consumerization?
Dan Tasset: I’ll just give you an example of one of the companies that we have called Muve Health. The business model itself is really saying, we have to really start with, what are you trying to do with a consumer and what are the elements of consumerism? So, let’s answer that question first and then I’ll go into the business model. The basic or essential element around consumerism is trying to improve the value delivered to the consumer. That’s what Uber is about, that’s what Amazon is about, that’s what iTunes is about, that’s what Netflix is about. Trying to improve the value delivered to the consumer.
Hands down, broad definition, no question that is what it’s all about. In order to break the definition of value down, you have to break that down and look at it and say, “Okay, what are those elements?” That generally is defined as, how does the product make you feel? How do you feel about the product, what happens after you purchase, or while you are purchasing it? Consumer experience – you can call it patient satisfaction, consumer satisfaction, call it whatever you want. Plus, the clinical and healthcare, the clinical outcome and other products would be the warranty behind the vehicle, the quality of the phone, the handheld device, the computer, the clothing.
Not only how it made you feel, plus what was the actual quality? You know, if you buy a jacket and a coat and it all starts fraying within the second wear, it does not have good-
Travis Tasset: If it’s a car, it’s not a lemon that is going to fall apart right when you drive off the lot, right?
Dan Tasset: How it makes you feel plus the quality of the goods or service divided by the cost. So, that is the value equation on any goods or service, in my opinion, and I think you can apply that goods or service. So, back to your question, how does business model itself, and how do you innovate within the business model? It’s pretty easy to describe how you innovate with technology. You see technology innovation happening with Amazon and Uber, and you can go on and on and on, but how does innovation happen in healthcare, we can talk about that. Your question was, what about business model innovation.
So, if you start with the value proposition to the consumer, value equals patient satisfaction, patient experience plus clinical outcome divided by cost, we have this company called Muve Health where we started to innovate the business model itself and saying, “How do we get better clinical outcome? How do we get a higher patient satisfaction, and how do we lower the cost?” So, if we can improve the numerator and decrease the denominator we have higher value, right? And so, we came up with the idea of, is there a place to recover a patient without going to an acute care hospital?
And we can focus more on having more of a concierge or a high end hotel experience at still a fraction of the cost of an in-patient hospital space. So now you’ve lowered the cost, you have improved patient satisfaction, patient experience because it’s almost a concierge type feel, and in addition to that we’re able to get better clinical outcomes because we are able to educate the patient through the process. So, it’s a change in the business model, rather than post-surgical stay in a hospital and all the things that come along with that, a lower nurse-to-patient ratio, infection from other patients that are in the hospital and so on, you know, have this concierge type feel.
So, that is a change to the business model. Now, there’s technology that goes with it, but it started first with innovation within the business model itself, all for the purpose of improving the value delivered to the consumer. Having a higher numerator and a lower denominator.
Travis Tasset: I’ve heard it said that price is what you pay for something and then value is what you receive, so, I think that still works with your definition. If I can use an example of a stock, if I buy one share of Amazon, that has a certain price, right now it’s probably $220 or something around that, but the value is what I would receive in terms of earnings, perhaps stock appreciation, any future dividends. So price is what you pay in healthcare, what you pay is the cost, but what we would be receiving is the clinical outcomes, the experience itself.
Dan Tasset: The convenience of all of it and all of that. All of that plays into the value.
Travis Tasset: Well, that brings up another point that I think it would probably make sense to talk about here is, transparency. A lot of people, the consumer, we have no visibility for the most part, not much transparency in terms of what our cost is for the value that we’re receiving, so, what are your thoughts on transparency and how that can help drive consumerization within the industry?
Dan Tasset: Good question. So, first of all, let me say I think the total transparency of the value equation in healthcare is a real challenge, particularly the denominator or the cost. That is a real challenge. Are we ever going to get to total price transparency? I really question whether that’s achievable or not, at least in the next decade. But if you go to the value equation right now to the patient and you say, “Okay, patient experience, convenience, plus clinical outcome, divided by cost” and if you really think about the cost, we don’t necessarily need transparency of the overall cost to the patient, because the patient, in most cases, will not be paying the overall cost, they will be paying a deductible or co-pay.
Travis Tasset: Just a portion of it.
Dan Tasset: Right. So, the bottom part, the denominator to the patient is really, more than anything, the co-pay and deductible. So, what we should be achieving in transparency is not just rating the patient satisfaction and the experience and the convenience, also the clinical outcomes, how many surgeries has this doctor done, the facility and what is his outcome? But transparency in deductible and co-pay, and I think that is achievable and that’s something that we should all be working towards.
In other words, if you go here and have this medical episode of care, procedure, whatever you want to call it, this is what your co-pay and deductible is going to be. If you go here, it will be this, and then the patient themselves can make the decision regarding both the numerator and the denominator, and I think that’s achievable.
Travis Tasset: We’re in the process of coming out with a program that helps that on the surgery side, called SurgerySavings Program. Do you want to say anything about that?
Dan Tasset: Yes. Again, if you look at healthcare in general, there is a $3 trillion industry and two thirds of that overall healthcare dollar goes to their hospital facilities or physicians. If you slice it another way, almost a third of it is in that episodic and diagnostic surgical care arena. So, we as an organization aren’t trying to solve every problem with disease management and cancer oncology, cardiology; what we’re are really focusing on is this $900 billion industry, which is surgical diagnostic care.
So, most of the things that I make references to are going to be into the space that we are in, which is a massive space, and we believe is low-hanging fruit. We think we can cut $200-$300 billion a year out of that space. But back to your question, if we really are transparent to the consumer, to the patient, on value, then now we need innovation to be able to communicate that to the patient. So, one of the companies that we invested in called HealthJoy has the ability, through a smart app on the phone, to be able to go to the patient, the insurer, the employee, whoever that might be and look at the difference in the cost to the patient, whether it’s co-pay or deductible or the overall cost on a generic drug versus a name brand drug. And we’re doing the same thing on surgery. So, what is your co-pay and deductible? There is a calculator. If you go here to have that surgical procedure done, what is your co-pay and deductible going to be? If you go here it would be less because it’s a lower cost site of service rather than going to an acute care hospital where this procedure can safely be done in a lower cost setting, maybe even in the innovative business model that we called Muve Health, how much could we save them on co-pay and deductible?
And could we even waive the co-pay and deductible completely and with the employer or the insurance company we are going to do that, based on the overall savings of the procedure. Meaning the overall savings, meaning what did it cost them for the facility, the hospital, the surgery center, whatever it might be, for the extended stay, whether it was done in a lower cost site of service or an acute care hospital. The surgeon fee, the anaesthesia fee, the implant, whatever that might be, physical therapy, home health: all of those wrapped together, what does that mean to the patient themselves and what would the overall cost be to the insurance company, to the employer, and are they willing to motivate the patient through a lower co-pay and deductible, or none at all, to move into a lower cost site of service? So, all of that technology enabled in order for us to do that, and so, it’s an interesting piece of technology, we’re using it, it’s working very well. The HealthJoy app, available to employers and insurers.
The particular section of the HealthJoy app is really called SurgerySavings, and try to get complete transparency to the patient, to the consumer themselves. It’s really cool. It’s a really good example, so, thank you for the question.
Travis Tasset: Yes, HealthJoy and I think SurgerySavings Program will be big wins for the consumer in particular and any employer or employee that has access to those. So, we’ve talked a lot about the definition, how it compares to other industries, the transparency of value, and really the value and the cost that the consumer has to pay. A lot of these other aspects that are in play right now, with you know, you have primary care, direct primary care, I mean, any thoughts on mobile enabled health with health home, any thoughts about any of the other pieces?
Dan Tasset: Yes, I think we’ve just begun to see the role of innovation in business models, the role of innovation in technology, in the way healthcare is delivered and the way it’s consumed. I think we’re just seeing the tip of the iceberg and I think every aspect of healthcare, everybody now, particularly the entrepreneurs and innovators in the space, as much the status quo, are really working hard in all of those areas, whether it’s disease management, whether it’s wellness and prevention, regardless of what it is, all driven by, enabled by technology.
I think that some of the telemedicine, you know, it struggled improving the value delivered to the consumer, the adoption rate has been slower than expected and the utilization rate is lower than expected, but I think as the technology gets refined and we get better and better at doing it I think you are going to see it proliferate in every section of healthcare and every aspect of healthcare, regardless of who’s paying for it. Whether it’s Medicare or Medicaid, whether it’s TriWest or Veterans Care, whether it’s going to be a commercial payer, whatever it might be, self-funded employer, fully insured employer, it is moving in the same direction across all care continuum.
Travis Tasset: I think that’s why we are starting to see some of the tech giants really get interested in the healthcare space, whether it be Apple with their Apple Watch and all the features and functionality that can do, or the likes of Amazon starting to look into the space. So, wrapping up, what’s kind of bottom line? Give me your final thoughts on healthcare consumerization and what needs to happen? What can I do as a consumer other than try to understand what I’m on the hook for, the quality and value that I receive?
Dan Tasset: For me to simplify the whole thing, the role of the government, which we’ll talk about in a future podcast, I am sure, the role of the government should be to cause an environment, to put together an environment, a legislative environment where innovation and competition can thrive. That’s really important: where innovation and competition can thrive. If the environment is such where those two can thrive, then what we can do in consumerization of healthcare is we can get the patient, who ultimately is the consumer, if we can get them to purchase healthcare like they do any other goods or service, then we will see a decrease in the overall cost of healthcare.
Until we do that it’s going to continue to rise. So, when we say we want the patient to purchase healthcare like they do any other goods or service, what that means is, the patient looks at both the numerator and the denominator. In other words, when you go buy a jacket or clothing, a car, a smart device, a television, you look at, “How do I think I’m gonna feel with this product? What is the quality of the product? What is the cost?” and until we get the consumer to look at all of those elements and be motivated to do that, until we get the patient to be motivated to do that, the patient is not a consumer.
Converse to that is, when we make that happen, we get the patient to do that, you will see even more innovation and you will see even more competition and then you will see the value equation, the value proposition improve, which means you will see the quality go up and you will see the cost go down. Until we make that patient a true consumer it won’t happen, so, that should be all of our goal to make that happen.
Travis Tasset: Innovation through competition which is going to benefit the true consumer.
Dan Tasset: It’s worked in every other industry. Uber, it’s less than the cost of a taxi cab and it’s clean, the windows are up, you have air-conditioning, you have a bottle of water, you have a mint, and it’s good for everybody. Same is true with every other thing that has been innovated in the consumerism space.
Travis Tasset: All right, thank you for your time today, Dan.
Dan Tasset: You’re welcome. Thank you.
Thank you for listening to another episode of Value Talks. Please subscribe and be sure to leave a review.