2019: Reviewing A Year in Healthcare Innovation Articles
2019 marks the second full year I’ve been sending out Kevin’s Weekly Health Tech Reads, a weekly newsletter where I summarize healthcare innovation news each week (sign up here if you’re not already a subscriber), and this merry little band of healthcare innovators has grown from 500 at the beginning of 2019 to 1,500 at the end of the year.
In wrapping up the year, I decided to take a look back at the top five most read stories in the newsletter from the year and post them here for posterity’s sake. The articles mirrored closely to many of the macro themes throughout the year — the challenges of being a digital health startup, a heavy dose of CVS / retail entering healthcare, primary care disruption, and the unbundling of care delivery services.
Here are the top five most read articles from over the year, my comments at the time, along with some of my reflections given the context of the rest of the year. Enjoy!
#5. Andrew Zallie’s Lessons Learned from a Digital Health Zombie (14% read)
Kevin’s Weekly Commentary: You’ve gotta be a special type of crazy to start a digital health company (that statement comes from a place of love having been in that camp…). This startup founder wrote a really thorough piece on his lessons learned from his now-defunct digital health startup and the challenges that he faced in trying to build the company. Definitely a worthwhile read for folks going through the process themselves, or who want a lens into healthcare startup life. And major kudos to him for taking the time to write these lessons down and share them publicly.
14% of y’all read this piece by Andrew Zallie on his lessons learned while slogging through the challenge of trying to find product-market fit for his digital health startup, Cord Health. It’s a really good reflection on the journey through trying to build a digital health startup and the unique challenges facing those who attempt doing so.
Revisiting this piece in the context of the rest of the year — one that seemed to feature startup after startup raising millions in funding — I can’t help but feel a sense of dread as to what the future holds for most of those startups. It seems like so many of them are out there at the moment bouncing through an odd version of Plinko trying to sell to / partner with employers, payors, or providers (Bob Kocher and Brian Roberts wrote a good piece earlier in the year on how employers are going out of favor with payors now taking the lead as the en vogue partner). Of course, lots of venture dollars are going into this space at the moment, seemingly taking a flier on hoping they identify the next big disruptor in healthcare. Perhaps it was all the excitement around the digital health IPO window opening this year, with Livongo, Phreesia, Health Catalyst, Change Healthcare, and Progyny all going public.
One thing that has become abundantly clear to me is that if you’re trying to disrupt the healthcare system, you are going to need to partner with incumbents effectively in order to stand any chance. This topic came up multiple times throughout the year, highlighted by some great thinking recently on how to partner effectively between startups and incumbents by Bryony Winn and Rob Coppedge.
Neal Khosla penned a compelling counterargument to this belief and putting the partnership approach on notice, arguing that digital health startups focused on selling to / partnering with incumbents have failed to transform healthcare in any meaningful way and that we need more transformative approaches. It’s hard to take argument with the underlying sentiment. And, the recent rise of direct-to-consumer telemedicine startups has presented an interesting potential alternative to partnering with incumbents in line with Khosla’s thesis. Provide consumers with some combination of a better, more convenient, or less costly experience and maybe you can work around the health system, or at the very least partner with it on your terms. Look no further than Hims announcing partnerships with Jennifer Lopez / Alex Rodriguez, and Ochsner Health System over the course of a week in December as case in point. What a bizarre collision of different worlds, and an interesting harbinger of how a consumer-driven health (wellness?) ecosystem might evolve. Will be quite interesting to watch how this plays out over the coming years.
4. Mark Bertolini’s Commentary on Selling Aetna to CVS (14% read)
Kevin’s Weekly Commentary: Bertolini wrote a fascinating piece on why he sold Aetna to CVS. I didn’t realize he in part seems to have wanted Aetna to merge with Humana to create an entity large enough to buy CVS (that he could then run). The vision of the combined CVS / Aetna is really interesting — and frankly its really refreshing to see leaders of large healthcare institutions thinking like this and sharing it publicly. Worth checking this out for sure. I’m going to be really curious to see what Bertolini does next.
Another 14% of y’all read this excerpt from Bertolini’s book discussing why he sold Aetna to CVS. I have found his clarity in thought and willingness to articulate a stance on a position a breath of fresh air in this world of bland senior exec statements ghost-written by marketing firms. Not to mention his reflection on the acquisition and Merlo deserving to be the CEO moving forward — it is refreshing to see that degree of openness and vulnerability from a person in his position of power. It sure seems like the healthcare industry could use more leaders like him.
It seems like the direction CVS is taking with the HealthHUBs is consistent with the vision Bertolini articulated in this piece. As Bertolini put it: “someone asked me if I wanted to expand the CVS MinuteClinic. I said, ‘No, we don’t need three more plastic molded chairs and a countertop. We need something much more radical. We need to create a venue that people actually want to visit.’” Given the expansive store changes CVS is contemplating with the HealthHUBs, it looks like they are at least attempting to take this more radical approach. More on the CVS HealthHUB movement this year in article #2 below…
3. Paul Keckley’s Take on Primary Care Disruption (16% read)
Kevin’s Weekly Commentary: Here’s a really good read on the strategic importance of primary care. It discusses how the next generation of primary care might evolve into ‘primary care 3.0’. Particularly interesting to me was the discussion on which entities will be the right strategic partners for primary care to get there — health systems, insurers, investors, or retail health. Obviously lots of activity from each potential partner in the space at the moment. It feels to me like local market dynamics will dictate different answers in different markets… but everyone is going to competing over that front door. Worth checking out.
As a general nerd related to all things primary care I really really love this piece by Paul Keckley; be forewarned that this section will be a long one. Keckley’s article succinctly argues why primary care is the battle ground for healthcare disruption — highlighting that while primary care is merely viewed as a loss leader for health systems strategically and is arguably the one item that healthcare underfunds (we spend 5% — 7% of healthcare dollars on primary care vs other developed countries at 14%), it also sits in the drivers seat for so much healthcare spending, and consequently, opportunity in the value based care space.
The single craziest stat I read all year remains from a story in August about seven primary care docs in North Carolina who were suing to leave CaroMont Health — those seven physicians drove $120 million in referrals to CaroMont Health. Just a staggering amount of dollars for seven physicians (I means seriously, each doc controls $17 million of downstream revenue annually in the health system?). Provides a good reminder of the economics at stake here.
Keckley does a good job outlining the pros and cons of different potential primary care providers of the future: health systems, insurers, startups, or retail health. To his point, there has been a ton of activity in the primary care space across each of those constituents — lets take a look at a run down of the activities across each of these players over the course of the year:
- Health Systems: Perhaps not surprisingly given the dynamics above, health systems are the one actor that didn’t make the news for investing heavily in primary care in 2019. There were a few examples of health systems partnering with startups in the space — i.e. One Medical and Mount Sinai; Advocate Aurora and Oak Street. The other interesting news this year was out of North Carolina where they saw primary care providers leaving health systems to go to independent practice. It will be super interesting to watch if that is the beginning of a trend. Mayo Clinic made a relatively interesting move partnering with employer clinic provider Premise Health. Of course, one needs to look no further than One Medical’s partnership traction in 2019 (Mount Sinai, Advocate, Providence, etc) to find evidence that health systems are willing to partner to capture downstream commercial volume. Acquiring commercial volume without having to invest significantly in the primary care losses up front?! Cha-ching!
- Insurers: The most interesting activity in the insurer space has likely been out of BCBS NC, which launched a major primary care initiative in the first part of the year, bringing CareMore, Cityblock and Iora Health to North Carolina to improve the quality of primary care in the state in one fell swoop. BCBS California also made a rather interesting move in the space, creating a NewCo called Altais, to help providers operate a value-based care platform in partnership with Aledade. Humana expanded their clinic model with Walgreens, announced a partnership with Doctor on Demand, and expanded its relationship with Iora. Meanwhile, UHG continued its quiet march toward a hostile takeover of the entire healthcare industry, sharing that OptumCare intends to reach $100 billion of revenue annually in the next decade, via primary care, urgent care, and surgery centers. Holy cow.
- VC-Backed Startups: It was a big year for venture-backed primary care startups raising huge amounts of funding and announcing major partnerships / expansion. Babylon Health raised $550 million, VillageMD raised $100 million, Cityblock raised $65 million, Iora Health was rumored to be raising another $100+, million, Carbon Health raised $30 million, Firefly Health raised $10 million and brought on Jonathan Bush, Aledade raised $10 million, and One Medical was rumored to start the IPO process (which of course, is now confirmed as their S-1 has already been filed in January). And that’s just the funding news! The variety of partnerships they’ve inked are well covered in the paragraphs above and below. Despite all of this activity, there is still the looming question: can any of these companies scale their care models meaningfully? Jury is still out on that one.
- Retail Health: CVS HealthHUBs are already well covered in this piece, but CVS wasn’t the only retail player that made major moves. Walgreens went in the opposite direction of CVS in taking an entirely partnered approach, including closing its 150 clinics owned by Walgreens and replacing most of them with Jenny Craig weight loss clinics, and also announcing a partnership with VillageMD. Walmart made some moves this year as well, both opening a new clinic model in Georgia and also rolling out some really interesting offerings to their employee populations. That includes a virtual primary care pilot with Sam’s Club employees, 98point6, and Humana. Best Buy also made some significant moves into the space and their new CEO looks to be leaning in to healthcare in the home. And of course not to be left out is Amazon, which made waves by launching its own virtual primary care offering for Amazon employees and acquiring an under-the-radar startup called Health Navigator, which was started by one of the creators of the triage protocols every virtual care company uses. Interestingly, Haven, the brainchild of the Amazon/JPMorgan/Berkshire triumvirate, was oddly silent over the course of the year after a great deal of publicity in 2018, although they shared a bit on their insurance offering toward the end of the year (a no-deductible offering that sounds an awful lot like Bind, one of the more interesting startup (or UHG?) insurance concepts emerging this year).
2. CVS’s 2019 JP Morgan Presentation on Healthcare Strategy
http://investors.cvshealth.com/~/media/Files/C/CVS-IR-v3/documents/2019-jp-morgan-slides.pdf
Kevin’s Commentary: CVS Health presented at JPMorgan and shared more detailed plans regarding their overall healthcare strategy and how they aim to own the front door to healthcare. I am impressed by the clarity of thought in these slides — it is nice to see one of the large disrupters in healthcare tell a coherent story of what they’re going to do rather than just blather on about how they’re going to transform the industry. For instance, it is really interesting to me to see a slide on the patient journey for joint replacements. Go forth and execute on this please!
It’s pretty impressive to look how far CVS has moved over the course of a year in terms of their overall strategy in the healthcare space. In this deck from the JPMorgan Conference last January you can see the first mentions of their HealthHUB strategy, although it’s not even articulated yet as the HealthHUB. Fast forward to the end of the year, and here we are with CVS having rolled out HealthHUB concepts in Houston that are ‘outperforming’, as well as plans to expand to multiple markets in 2020 and then to 1,500 HealthHUBs across the country. Heck, Larry Merlo is even writing opinion pieces in Fast Company talking about how CVS has made mistakes in the past not listening to consumers, implying that HealthHUBs are the answer moving forward. It’s a huge bet to place for an organization the size of CVS, particularly one in the middle of digesting a huge acquisition in Aetna. It also shows how quickly large organizations can move with the right leadership and organizational commitment to change. It’s early innings on HealthHUBs certainly, but you have to give CVS kudos for their execution over the past twelve months.
The retail space certainly has been a fascinating one to watch this year. Many of the big movements have be covered off on above, so I won’t re-hash them here. In case you got tired and skimmed through the paragraphs above, I’ll leave you with this article from the end of the year that does a great job covering off on much of the disruption in the primary care space, both by retailers and by insurers. Going to be quite the battleground moving forward.
1. Julie Yoo Shared Andreesen Horowitz’s Views on the Unbundling of Care Delivery (20% read)
Kevin’s Commentary: This is a great blog post from Andreessen Horowitz — the famed tech VC — on why the timing is right for software to eat healthcare delivery. It’s a must read for folks in the care delivery world — it does a really nice job describing the tail winds they see for disruption and the markets that are beginning to emerge. They also list a bunch of startups in these spaces. Fun to see how a tech investor views the care delivery world — very little focus on payment model / market segments (i.e. the report doesn’t even mention Medicare Advantage once!). Their slide on fin tech for healthcare is particularly interesting — the stat on labor productivity is jarring. Healthcare has 810 FTEs per $1 billion collected, vs 100 FTEs in other sectors. Seems like a decent opportunity for a startup or two.
This remains a really really good piece on the opportunity to disrupt care delivery by Julie Yoo of Andreessen Horowitz. I really like the way she frames the topic here: “Much of the conversation here has been around, “Will the robots and will AI replace doctors?” We think that the right question to ask instead is, what if robots could automate away the 80% to 90% of administrative tasks that doctors or frontline staff have to do — tasks that take away from the human experience they could otherwise be providing to their customers? That is the huge opportunity for tech startups to really make a difference.”
One of the tailwinds Yoo referenced — the unbundling of the health system — became a really interesting talking point / trend over the year. The rise of ‘full-stack tech enabled clinical services’ startups was a recurring theme over the course of the year, as highlighted by the linked NEJM Catalyst article. Startups like Omada Health are now referring to themselves publicly as working on building a ‘21st century provider’, which seems to be a really meaningful evolution of the original digital therapeutic concept. 2019 also brought the first example I’m aware of where a digital-first startup built a physical clinic — Tia built a women’s health clinic in NYC after starting as a digital-only offering — andI am guessing they won’t be the last. When will the Omada’s of the world start putting down a physical footprint? I have to imagineat some point someone will take a Warby Parker style approach to clinics— start digital, open up pop-up stores, determine where demand is, and then build a physical location when the demand is there.
The shift we’ve starting to see in the public perception of hospitals / health systems in 2019 also seems to have created an opening to unbundle care delivery services. It’s been a rough year for hospitals / health systems from a PR perspective (and frankly beyond that, also from a moral / ethical perspective). Hospital billing practices are making the news as groups like NPR and Kaiser Health News continue to highlight the insane surprise medical bills people are receiving for care — Zuckerberg San Francisco General was just one such example of the hospitals highlighted for a questionable surprise bill. Sutter Health was forced to settle an antitrust lawsuit for over $500 million related to anti-competitive contracting practices with insurers. Oh, and Ballad Health filed more than 6,000 lawsuits against its patients to collect on medical bills over the past year. Woof.
Given all of this, the unbundling of care delivery seems like a transition we will see accelerate over the coming years, driven by consumer preferences and the realities of rising health care costs. You can imagine both some positive and negative consequences emerging from this over time. As Yoo notes, the next generation of companies that emerge will change how we access care, how we pay for care, and how we experience care. It sure is going to be fun to watch the companies that emerge and see how the incumbents respond.
That’s all for 2019, folks. Looking forward to continuing along the journey with y’all in 2020. And seriously — if somehow you made it this far but you’re not subscribed to the newsletter yet — sign up here. And either way if you’ve made it all the way down here — share the goodness with friends!
-Kevin
