Providing healthcare to the growing Medicare population is one of the biggest oncoming challenges that America is facing. It is a train barreling down the tracks towards us all: our population is both growing and aging, healthcare costs and service intensity are rising exponentially, and the quality of care is not. At all. According to one recent study, healthcare spending increased by $933.5 billion from 1996 to 2013; in the same period, spending on outpatient care alone has shot up 85%.
The question of how to meet this oncoming crisis looms large for the entire industry. How can we both improve healthcare and reduce cost? At first glance, it sounds paradoxical. And yet on a human level, we know this intuitively. If your grandmother has a condition that can be treated through lifestyle change or proactive therapy instead of surgery, she will be better off avoiding that unnecessary procedure (and potential complications) — and the healthcare system will avoid the costs of an unnecessary procedure. If after your dad comes back from the hospital, we could make sure he’s taking his meds, having follow up care, and generally getting the right oversight, he will very likely escape many common, avoidable complications that would lead to readmission.
Better care is the common denominator here. If we can keep people healthier, it’s better for the patient and the wallet. If with better care, more individual attention, and more proactive health intervention before a crisis you can prevent Type II diabetes, heart disease, hypertension, and many other conditions, you will dramatically improve both the quality of lives and the cost of care for Medicare patients.
Unfortunately, the healthcare system itself is not incented or constructed right now to provide this kind of care. Payors (insurance companies, Medicare) and providers (doctors, hospitals) are generally separate and uncoordinated entities. You go to your doctor, they assess that you need surgery or drugs, and the payer pays for it. Under the “fee for service” reimbursement system which has been the predominant way payors pay for care, providers are not incented or financially supported to provide the kind of proactive, coordinated, prevention-oriented care that would avoid future services.
So how do we actually get to better care, and what that actually mean? How can you create a company where the payor is effective at keeping someone healthy, instead of simply paying for services after the disease has set in? A natural approach would be to be both a payor and a provider of care, a so-called “payvidor”. In this case, incentives and action are finally aligned: payor and providers (both virtually and literally integrated) work closely together as a team to help keep patients healthy and collectively reap the financial benefits of healthier patients down the road.
There are examples of these today, but scaling them to reach everyone in America is very challenging. My belief is that what is limiting this scaling is inherently a tech problem. By infusing the efficiencies, reduction in friction, and increase of information that software can provide in data, logistics, planning, and communication (amongst other areas), a payvidor can fundamentally change its scalability, decreasing cost and increasing the quality of care.
Why can’t tech simply be added to existing incumbents? That would be like Sears adding a website and trying to be Amazon. A fundamental shift in the dynamic and incentives between payor and provider has to be in the DNA of the company, and the tech must be fundamental to how the company is built from the ground up. This is why we’re investing in Devoted Health. We believe that incorporating technology from the foundation up will allow a deep, essential restructuring of the patient experience, putting the patient’s care first and foremost above all else.
So when your grandmother next has a healthcare visit and is presented with a list of follow up items from her doctor — from new prescriptions for her chronic medical problems to changes in lifestyle, diet, physical therapy and more — where does she go, who can help her? The challenge is to scale a personal experience for each and every patient, and this is where it is critical to optimize the algorithm interface with the human touch — in healthcare, algorithms do not work in a vacuum and are only as powerful as their ability to enable doctors and patients.
Devoted co-founders (and brothers) Todd and Ed Park are designing Devoted Health to optimize every aspect of the healthcare experience for Medicare patients by optimizing the balance of technology and human involvement. Take Amazon again as a reference point. You could think of Amazon merely as a website that sells stuff. But the magic of Amazon is how it optimizes every micro aspect of the consumer experience, from the ease of use, to the accessibility of a vast inventory, to referrals for what you need based on your previous history. Devoted Health is doing the same for the healthcare experience. It’s hard work, and not particularly sexy. It’s not about one silver bullet of an algorithm but rather the relentless fine tuning of every knob of the user experience.
At Andreessen Horowitz, we seek to identify the very best founders and support them as they build great tech companies. Todd Park is one of the best founders out there, having founded previously two successful healthcare technology companies, Athenahealth and Castlight Health. After doing so, Todd was recruited to serve as CTO of the Department of Health and Human Services, and then appointed by President Obama as CTO at the White House. Todd led efforts to bring the government and the private sector together to encourage innovation in healthcare and other domains, initiating the Presidential Innovation Fellows program, which brings top innovators from outside government for tours of duty in the government. Todd has joined forces with his equally talented brother, Ed Park — an amazing operator who became COO and President of Services at Athenahealth following Todd’s departure, and who quickly scaled the business from $1B to $5B. Suffice to say Todd and Ed Park understand the intersection of tech, innovation, and healthcare like no others. I am delighted to announce our investment in Devoted and to watch Devoted rebuild the healthcare experience for patients from its very foundations.
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