Episode Details

This week, I am with my Aventria team on-site at one of our clients. We are holding a full-day workshop to help our client figure out who all across the healthcare industry they will need to get aligned with to achieve greater success in the market and how to handle all of these inevitably conflicting interests strategically and also potentially from a messaging standpoint.

I'm one of the subject matter experts who gets to pipe up during the part where we talk about all of these market dynamics, what everybody is up to, and who is going to want what so the client team can do their thing and get paid for it. Anyway, I say all this to say that this week, I am pretty darn busy but also thrilled to encore this episode with Nikhil Krishnan, founder of Out-Of-Pocket, and one of our most popular episodes in the past 12 months.

My guest in this healthcare podcast is Nikhil Krishnan, who is the founder of the Out-Of-Pocket newsletter. I was talking with Nikhil, and we identified—or, more accurately, he identified—five business models of digital health. What makes each model distinct is a few factors. If you weren't in the healthcare industry, you'd probably expect that I'm going to say that the biggest factor a business model must hinge on must have something to do with patient outcomes or care or something that has something to do with the hopes and lives of patients. Except no. Mostly, our models do not define themselves by attributes of their patients, except on one dimension: who is paying their bills.

Who is paying has enormous downstream consequences that I don't think people outside of healthcare, or even people inside of healthcare sometimes, really appreciate. It's because of all of the perverse incentives. It's a tangled web we weave.

For example, let's just say you're a start-up founder trying to cook up your unique selling proposition. You can't just decide you're gonna lower costs and improve patient care as general constructs. Because let's just say you do that—that's your USP (lower costs and improve patient care)—and then you try to sell your thing to Medicare Advantage plans or large provider organizations.

Oh, right … Medicare Advantage plans or even commercial ones—they don't care about the total cost of care. Neither do provider organizations unless they take on sufficient risk to care, and many do not.

In fact, as came out in that JAMA article the other day, it could be construed that entities such as these carrier health plans have a perverse incentive to see total costs of care go up. So right, you naively (you're the start-up founder again in this case study, don't forget) trot into some administrator's office with a great something or other to reduce total costs of care—and you'll get cast out upon your petard on the quick.

Every single day of the year in my world, I see people make this same mistake over and over again: not tailoring their product market fit to any particular market, with the recognition that some in this healthcare industry have a vested interest to see costs going up and some have a vested interest in costs going down. Either way, if we're talking about large organizations here and even some small ones, the money wins over patient care. So sad to have to say that, but listen to EP351 with Dr. Eric Bricker and you'll get all the context you need on that point.

Here's the thing, though. I don't know about you, but I can't tell you how many digital health start-ups I run across where I look at their decks or have a conversation with a founder, and I ask who their customer is. Is it employers or health plans or … ?