“There is no substitute for being curious, going straight to primary sources, performing your own analysis, and coming to your own conclusions. It’s harder, but it’s the difference between following the crowd and leading the crowd.” – Ryan Cochran
Introduction
2022 was a transformational year for the value-based care model, as the incentive to reduce costs and become outcome focused rose for both the payer and provider. As the healthcare industry continues to transition from quantity care and fee-for-service models to quality care with a value-based care approach, the popularity of the value-based model will only grow. Ryan Cochran, Chief Financial Officer at onehome, discusses the largest industry impacts in 2022, and his predictions for 2023.
Q: In 2022 value-based care continued to grow at an accelerated rate due to private capital in-flows and an industry wide shift to cost reduction. What other growth trends occurred and how did these trends make an industry impact?
RC: The largest growth trend I saw in the healthcare industry was the formation of many virtual care and telehealth platforms – different than those I had seen arise in the past. These new platforms were a direct response to a labor force and a patient contingency that wanted to access remote healthcare in a more exhaustive way than a basic telehealth visit.
Primary care enablement was another value-based care trend last year, with certain Centers for Medicare & Medicaid (CMS) programs enabling physicians to take on more “plan like” functions. I do believe that providers can now do more in terms of aligning with CMS (as opposed to years ago), as well as managed care.
Healthcare services with innovative technology also rose significantly, both from a consumer and B2B perspective.
Since these types of services enable value-based care, I believe that they will only continue to grow in 2023.
Q: onehome was an early adopter of the value-based model. How did this first-mover advantage help onehome amongst sharp competitors?
RC: onehome was an early adopter in being a value-based care model, but onehome’s true differentiator and value proposition is in thetype of value-based care it delivers.
While there is an entire spectrum of value-based care, I have seen two major categories within the healthcare industry. The first category is: (a) capitation with delegation for major health plan functions. In this model, if a provider does not deliver value, then the provider will underperform financially than if it didn’t negotiate this type of arrangement and (b) retrospective shared savings is probably more common and involves bonus payments if certain thresholds are made. However, if value isn’t created for members and patients, the provider typically does as well as the provider would have done without even entering this type of arrangement.
onehome is in the first category, and most providers are in the second category. For onehome, this has created more incentive to innovate, take the best care of patients, and energize clinical teams and deliver highest quality care.
Additionally, Florida has an excellent regulatory and business environment to innovate within value-based care. Many managed care and primary care models have been first movers in Florida, and as a result, onehome found success to innovate in an new and adjacent provider category.
Q: Why did you choose to invest in onehome, and how did you position onehome for success?
RC: In 2016 and 2017, I was observing some of the private equity backed health insurance companies tackle value-based arrangements with primary care and integrated delivery systems (e.g., hospital systems). While doing so, I became curious about what other areas in healthcare had big amounts of spend that could be more efficiently managed. After quick analysis, post-acute care was the obvious area of investment. That immediately began a 1-2 year long process to identify a business partner.
When I was introduced to the founders of onehome, it was a clear they were solving a critical need for patients recovering from disease and in need of coordinated care. After acute health events, it’s extremely helpful for patients to have coordinated care in the healthcare system. However, many patients do not have this, and they find themselves stressed, burdened, and attempting to navigate a complex healthcare environment. Often referring provider difficulties are exacerbated, and patients suffer poor and expensive health outcomes.
This was onehome’s differentiator: its model coordinated care, managed care, and had such successful patient outcomes in a single market, I knew there was opportunity to scale. At the same time of course, the most important ingredient in any business is product – market fit, with an excellent team, and capital. I knew this was a business that could be a national platform.
I positioned the business for success through a combination of detailed analysis of the company’s financials resulting in opportunities to be efficient, new product investments, as well as articulating its value proposition to customers. On the financial side, we renegotiated many of our supplier contracts to best understand the profitability of various lines of business. This yielded substantial improvement that allowed the company to invest more money into growth of new products and new plans. We hired a growth team to pursue new contracts, developed actuarial capabilities, and developed adjacent product offerings for our existing member base. The next step was to bring it all into a story that a customer could appreciate. If your customers are managed care plans, this involves significant financial analysis, and innovation around high quality care.
Q: When you joined onehome in 2018 what was your core strategy for scaling its value-based model?
RC: The product market fit was already there. The company had the best outcomes out of any company we had seen in the space and the care coordination model across DME, Infusion, and Home Health (often which are delivering in an uncoordinated fashion in the rest of the country) made so much logical sense as a contributor to those outcomes.
The strategy was around taking market fit and investing in the infrastructure to sell to additional customers, as well as serve our existing customers with even deeper clinical integration. We did that successfully, including adding several new customers, and developing programs in clinically adjacent areas to serve our patients and customers.
Q: What are your predictions for value-based care in 2023? Where do you see the largest challenges and opportunities?
RC: I believe that home healthcare will continue to grow, and there will be increased understanding of the overlap and relationship between homecare, outpatient rehabilitation care, and skilled nursing care across all major companies that do any independently.
Additionally, there will be highly successful virtual health companies that successfully bridge the divide between virtual and in person medicine, or that capitalize on a physician workforce.
Lastly, CMS / CMMI will continue to release interesting programs that if read from primary sources can lead to great opportunities for provider-led businesses.
Q: In an ever-changing industry like healthcare, how do you remain sharp and ahead of the curve? What resources or advice would you offer to stay knowledgeable and focused?
RC: Reading and staying on top of healthcare industry trends is the best way, but making time to connect and network with intelligent professionals to discuss ideas is another effective strategy.
For those looking to learn about new categories of healthcare providers they aren’t familiar with in a value-based context, reading MEDPAC reports to see what is being recommended to CMS is another excellent strategy. Each chapter is organized by provider type, and lays out the spend, what is driving it, and ideas for impactful spending to the Regular Medicare program. For example, here is the home health report from March 2022. There is also a chapter for every category CMS reimburses. For healthcare technology, which I’ve always also followed, I recommend Gartner reports. I believe their hype cycle framework is excellent and provides a concise understanding of a particular emerging area.