Podcast interview with Dr. Roy Schoenberg, CEO of American Well (transcript)

This is the transcript of my recent podcast interview with American Well CEO, Dr. Roy Schoenberg.

David Williams:  This is David Williams, co-founder of MedPharma Partners and author of the Health Business Blog.

I’m speaking today with Dr. Roy Schoenberg, CEO of American Well. Roy, thanks for your time this morning.

Dr. Roy Schoenberg:  Thank you for coming here.

:  What is American Well?

Dr. Schoenberg
:  American Well is a software system that is made available to health plans to allow them to bring their membership and their provider networks together with the efficiencies that the Internet brings to the table.

It allows consumers to access the healthcare system by sitting in their living room without scheduling appointments or stepping out of their homes, asking to see a physician of any type, and literally getting in front of them within about 30 seconds to a very live interaction.

It allows physicians to gain the freedom to practice and deliver services, also from their living room. They don’t have to go to an office, hold office hours. They don’t need to have staff. They don’t even need to get malpractice insurance. They can decide as much or as little as they would like to practice, and it will generate revenue and money will show up in the bank account.

David:  It sounds like there are three main constituencies that you’re dealing with; you mentioned the health plans, the physicians, and the consumers. Is any one of them more important to get on board as a key constituency to get critical mass with upfront?

Dr. Schoenberg:  Well I think that the reality is all three; the consumers, the providers, and the health plans really have to see tangible value in this for it to fly.

First of all because this really is a marketplace, it’s an open platform. It does require that there’s going to be some kind of corresponding uptake by each and every one of them.

The only sure way to get there, at least in my opinion, is to generate tangible value on something that’s very speculative.

We know already that consumers find the convenience of this extremely appealing, and it’s no surprise. If you live in Boston and try to get an appointment with a dermatologist, it’s going to be about three months before you get in.

For providers it is that freedom that we mentioned. From the health plan standpoint, it’s the ability to offset care to a much less expensive setting. The longer you can allow healthcare to be delivered to consumers at the home setting, the better things look for everybody.

We are at this very rare point where this value exists for all three parties, and that allows it to get the adoption rate that we’re seeing.

David:  We’re sitting here overlooking the Boston Harbor, and meanwhile your first big deal is pretty far out into the Pacific, in Hawaii. How did that happen? Why is Hawaii the first place?

Dr. Schoenberg:  Well Hawaii kind of found us in one of the very first conferences that we’ve participated in (WHIT in 2007) – really one of the very first exposures that we’ve given the system.

Since then, they’ve just been extremely pragmatic and decisive. They actually have a very, very significant track record of introducing technology, and tying technology into a vision and into their unique values about serving community.

The difference was that they were very, very clear and very passionate about making this a reality there. So, they were pretty much the first to market. They are not the only ones, but they are going to be the first one to introduce online care.

David:  Is there a critical mass that you have to gain in the local market? You talk about getting a doctor online within 30 seconds, which is great, but to actually guarantee that there’s a lot going on in the background, both in terms of network development and technological infrastructure. Tell me a little bit about that.

Dr. Schoenberg:  You actually nailed it on the head. There are two components here; one is technology that has to be sophisticated enough to allow this brokering to happen and I dare say that we have established this kind of technology.

Part of it relies on the fact that you need to really understand the underpinnings of the healthcare system in order to make it work. This is where some of the track record or at least the scars that we’ve learned in the last 15 years of working with health plans, have probably delivered the benefit.

But, you’re absolutely right, in the sense that the other aspect of it is really to make it accessible to a critical mass of both consumers and providers. This is why the system was built from the ground up, such that it integrates into the existing pools of members and providers that the health plan already has.

Instead of trying, like many viral marketing Health 2.0 applications, to open it up and hope that people will come in, (and then maybe the craziest thing is to try to make money out of ad revenue- good luck doing that!), this system allows the existing membership of the PPO or HMO product to interact with any provider that is already in the provider networks.

They don’t need to create a new virtual network for providers; they don’t need to re-enroll them. They don’t need to publicize aggressively, because as of day one of that system, essentially all of the providers on the network have the ability to care for the same patients in a different way.

So, there is no recruitment process that’s usually is painful. It’s just exposing the same relationships using technology.

David:  It sounded also like you were also thinking of extending the relationships in a way that I haven’t seen before, which was not just for providers to get new patients or for people to be involved in some viral scheme, but actually for health plans to offer coverage to people that aren’t their members. Tell me about that.

Dr. Schoenberg: For the first time what we’re seeing is we’ve managed somehow to electronically package healthcare services, and that allows them to be projected or to be made available beyond the notion of a membership of a health plan.

What you would notice, and many people have overlooked it, is the fact that Hawaii –being the first to introduce online — has acquired licenses for this service not only for their membership, but for the entire population of Hawaii; literally anybody in Hawaii. That’s going to be, by the way, extended into medical tourism, and so on.

Anybody in Hawaii will be able to go onto that system, and using their credit cards have the ability to acquire medical services in front of the good physicians who have been accredited and selected for the network that Blue Cross Blue Shield of Hawaii has, literally for the cost of the transaction.

Now, whether these are folks that currently do not have health insurance, maybe even these are young people who don’t want to spend $800 a month because they think it will never happen to them. But, when the time comes, and this young woman needs to speak to an OB/Gyn, she can actually go onto the system and with her ATM card get in front of an OB/Gyn.

That allows us to introduce healthcare, open up the healthcare system to the uninsured population literally in a model that is very different than providing subsidies, and government sponsoring, and everything else. It’s just using technology to make it universal healthcare, kind of flip the idea on its head.

David:  It’s also interesting, because I know you have previous experience building portals for health plans. You’ve commented that you can build the greatest portals, which is what I’m sure you did, and you still don’t have that much uptake within the membership.

Now, what you’re talking about is instead of the health plans looking at a Google Health or Revolution Health or someone else taking in their members, they’re actually going to go beyond their own membership. So it’s quite interesting.

It sounds like what you’re describing is a way for the plan in Hawaii to extend its reach. In the longer term if you achieve your vision; are you more of an asset or a threat to health plans would you say?

Dr. Schoenberg:  Health plans have realized over the last years that in order for them to both generate value and to have some kind of impact on how health care is delivered they need to have a greater role in the process of health care delivery.

Now, they do not intend to become delivery networks. Over the years through the process of interacting with physicians and through the health portals as you mentioned, they are trying to promote the notion of appropriate utilization of health care.

I think what they are doing here is establishing a more key role in this because the actual platform of interaction between their membership and the providers goes through the health plan. By introducing online care they are actually reaffirming their position as the way for people to get care.

If you were a consumer and not part of the health plan you would still need to go through the health plan to get online care. Actually the CEOs of health plans we talked to reaffirmed this and kind of emphasized that this is a way for them to not only maintain their business but grow their business in the face of a market that looks at disintermediation as a big threat.

David:  Let’s talk about the physician’s side for a minute. One question I have is just what sort of services are actually applicable. What are the right sort of services that can be done using your platform these days and how do you expect that to change? I want to ask you about that and then to talk a little bit about how the physicians feel about doing it since it’s something they’re not used to.

Dr. Schoenberg:  Well I think one thing that is very clear and needs to be clear to everybody is that online care is a complementary tier, a complementary care setting. It is very clear that if you have chest pain, do not try to logon to your computer. Go to the ER.

David:  Even though you’ll get service in 30 seconds instead of in an hour?

Dr. Schoenberg:  You know it’s true but frankly from my past practice as a physician I can tell you if you have chest pain and you are in the age group where that may actually mean what it means don’t use online care.

The reality is that there is tremendous amount of health care that is time sensitive; so if you have a medical condition that requires you to get guidance from a physician but notoriously it is three months away in terms of scheduling an appointment. There is a lot of meaningful interaction that can take place, even as a preliminary stage to that kind of office visit. Sometimes these office visits are not necessary even. There is a lot of interaction that happens between consumers and providers that has to do with understanding and educating and elevating a lot of the anxiety.

Many parents of young kids who need to decide at two o’clock in the morning whether they need to go and burn the night in the emergency room would actually cherish the option, appreciate the option of getting in front of a pediatrician to have a conversation for five minutes to decide whether it really is indicative for them to spend the night.

There are so many busy professionals that are simply going to put things under the rug because they just don’t have time to go into an office visit. There are those many individuals who have disabilities or have chronic conditions that simply don’t follow up effectively because of the financial implication and the hassle of going to see a physician –you know a chronic condition requires going to see a physician every two weeks.

Maybe a good example is in Hawaii where you have a consumer, you have a member who has all the will and intention to follow up on their condition, it’s just that the right specialist is an island away. With soaring fuel costs it actually becomes very expensive for them to follow up effectively.

In many different circumstances online care really brings healthcare closer to individuals but it is very clearly applicable in some places and less applicable in other places and that’s fine.

David:  Let me go to one of the examples that you raised, which was about the parent wanting to figure out whether they need to take their kid to the emergency room during the night. What often happens, I think, is if somebody has a pediatrician, which they typically would, if that pediatrician has call coverage they probably won’t get their pediatrician but they might get somebody that’s affiliated with the group. If it’s a pediatrician that they don’t know, my experience is the pediatrician may be more conservative. Whereas my own pediatrician may say, ‘It’s OK, it’s nothing,” or, ‘Why don’t you call back in a few days?” somebody who’s on call may say, ‘Well I don’t know. You may want to go in just to be sure.’ Now what you’re talking about is somebody that is not randomly selected, I grant that, but has less of a connection even than a physician who has call coverage. Is it actually going to be a satisfying interaction?

Dr. Schoenberg: First of all the system does acknowledge the fact that any physician you have had a preexisting relationship with, most importantly your primary care physician, is going to be the preference. If you actually went into the system, the first thing that you would see on the home page is essentially an indication of whether physicians that you are affiliated are currently available. We are trying preferentially drive interaction to those.

Having said that, when those physicians are unavailable –and that is a reality in many cases– it is really up to the consumer to figure out whether they choose to wait for those physicians to become available or whether the matter at hand could benefit from a conversation with someone who is a professional but doesn’t have immediate recollection and intimate knowledge with your matters.

In those cases we are investing a lot of effort in making sure that when you do get in front of a physician who doesn’t have any previous knowledge about you, they have in front of them more than what they would typically have. We are collecting a lot of information from the health plan systems, from personal health records, and through our partnership with Microsoft, through HealthVault. Through HealthVault we have labs and other medical records.

We are making sure that all of that information gets presented to those physicians when they care for you. Tie that together with your ability to communicate and their ability to actually hear you and see you, which are the fundamental essence of this system, and it is really kind of, I’m not going to say it mimics completely what you have in an exam room but it’s not very far off. The fact that you actually have that interaction as a consumer standing in the middle of your living room and it is an uninterrupted ten minute conversation actually gives it a very, very intimate kind of flavor.

We’ve had physicians telling us that sometimes it’s even more intimate than when they are being chased by nurses between exam rooms and they have like seven minutes on the dot to go in and out and look at patients.

David:  It sounds like the fact that the physician may have more information than they normally would and then also some of the technical means, some of the communication media that you’re using, the ability to see somebody in some cases or to do the text messaging and so on may make a difference. That might distinguish you from some of the lower tech players that are doing some of the same things, like TelaDoc. Can you talk about how you would think about your value proposition compared to TelaDoc’s?

Dr. Schoenberg:  There are many interventions and TelaDoc is a very good example that is trying to get into the same place, to give consumers the ability to acquire services from the healthcare system in the immediate fashion that we all grew accustomed to in today’s world, you know with Expedia and Travelocity and so on.

I think that in terms of technology we do, at this point, represent the edge of the envelope in our ability to integrate not only asynchronous messaging, like RelayHealth or Medem, but also into the synchronous area. TeleDoc offers the ability to get into, to talk to a physician over the phone. We add to this the ability to share information, have a very, very rich web consult, and the visual aspect which is very, very, very important: the ability to see each other.

In addition to this, because of the fact that we have that brokerage engine under the hood, we’re not exposing to consumers 50 physicians who sit in a call center and just allow them to answer phones. We’re exposing the existing provider networks of the health plan. These are not physicians paid by a company to deliver diagnosis. These are the ones that have been accredited and are the ones that would treat you otherwise if you wanted to schedule an appointment in their practice. Tie that with the fact of that great investment in making sure that these physicians have a lot of information in front of them, and you get to the point that you have a higher probability that this is going to be a meaningful interaction than just getting someone over the phone to answer your call.
David:  In one of the videos on your website, you talk a little bit about the “medical home.” I couldn’t quite tell from your answer if you were saying that you were supplementing the medical home or offering an alternative. You sounded perhaps like you were skeptical about it. Where does American Well fit into this overall medical home concept?
Dr. Schoenberg:  Well, first of all, we are far from skeptical. We believe the medical home has a tremendous future. The only thing is that a little bit like personal health records, the medical home really is an environment that uses mostly technology in order to follow-up with patients at their home setting. It has the capability to monitor certain biometric parameters, whether these are the electronic scales, or the peak flow meters, or the glucose meters, whether these are kind of self management tools.

But, the reality is that the medical home is only useful if a health care professional can be part of it. It’s OK for you to track a hemoglobin A1C, but what’s the use if nobody’s going to give you feedback on it?

What we’re doing, and that’s part of the reason for our extensive relationship with Microsoft, is we are staffing the medical home with health care professionals. So, now a patient at home using all these devices that are growing in sophistication and capability, will be able to essentially have, so to speak, a doctor around without leaving their homes. That component makes the Medical Home much more meaningful. And we actually see online care becoming a very big player in this area.

David:  Talk a little bit about the physician market and physician demographics, because one thing that we’ve seen here in Massachusetts is that despite having more physicians per capita than anywhere in the US, or perhaps even on the planet, there’s a new law in place that says the University of Massachusetts has to actually train more primary care physicians. As you said you can’t get a dermatologist here in Boston, and so on. And part of this is certainly because younger physicians have different ideas about how they should practice. Tell me a little bit more about the value proposition for physicians and how you fit into that.

Dr. Schoenberg:  Different physicians have different ideas about how they want to practice. And not surprisingly this not only changes from one physician to the other, but also for every physician during different times in their lives. Sometimes they have little kids, sometimes they want to offset their clinic hours; they don’t want to work five days a week or six days a week.

What we have introduced into the mix is the ability for physicians to practice on their own terms. We originally thought that this was going to be very attractive for primary care physicians, but we have been unbelievably surprised with the responses we got from surgical specialties, from hospital physicians, from physicians who are about to retire, from physicians that have already retired.

Because the system is very unintrusive. It allows them to wake up in the morning and say, ‘I have two hours,’ let the system know that you’re there. Sit with your bathrobe and a cup of coffee at home, practice for two hours and money will show up in the bank account. As naive as this sounds, this is a level of simplicity that many physicians found extremely appealing. The fact that you also have complete, professional discretion about who you see, and about what kind of services you offer, and whether you diagnose, or treat, or just decide to refer, or decide to suggest further evaluation. It really gives that physician the comfort level of knowing that for the first time in their lives, the fact that they are a licensed physician is enough for them to generate revenue out of that profession.

And at this point we have a lot of data about what physicians think about this, both nationally as well in specific markets where specific clients are asked for it and it is consistent across the board. Physicians love that freedom.

David:  Roy, you’ve got a lot of ambitions for the company here and so I wouldn’t want to burden you necessarily with solving the whole health care system crisis. But what we’ve seen in Massachusetts and in California, and then looking nationwide is that you’ve got already the highest cost of care in the world, and also a lot of people who are uninsured, and people even if they are insured worried about staying insured, worrying about having access to the system, and so on.

As I look at the proposals that come from the presidential candidates, from Congress, they just don’t add up to me and yet something needs to change.

You talked about having people beyond the health cares membership actually be able to access the system on the same basis. Is there a kernel in there of another way to look at universal health care in this country?

Dr. Schoenberg:  I think, this is probably one of the most exciting things about online care in what American Well has to offer.

Everybody talks about universal health care. And everybody realizes that that needs to be tied with either raising taxes, or finding another means of supporting it. It is a huge cost to the government that will eventually translate to getting money from somewhere.

What we’re doing here is –in a pretty nimble way– we’re opening up the healthcare system for on-demand acquisition of health care services in a way that is accessible to anyone in the street, anyone that has access to a phone, or anyone that has access to the web, allowing them to acquire services without government intervention, without any major subsidies. It is really their determination when they need care, and it is right there for them.

The impact of this means that you’re now exposing the health care system to the entire uninsured population in a meaningful way without having to do any kind of major transformations and overhauls to the budget. Whether it is this presidential candidate or the other presidential candidate, when you flip this on, health care becomes available to the uninsured population for the cost of the transaction. That simple, technological solution may actually be much more disruptive and pervasive to the market than everybody thinks.

David:  I’ve been speaking today with Dr. Roy Schoenberg, the CEO of American Well. Roy thanks for your time today.

Dr. Schoenberg:  Thank you very much for coming, David.

August 25, 2008

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