This is the transcript of my recent podcast with Frank Williams, CEO of Evolent Health.
David E. Williams: This is David Williams from The Health Business Group. I’m speaking today with Frank Williams. He is Chief Executive Officer at Evolent Health.
Frank, we were at the Connected Health Conference last month and while there you said that there was a need to help organizations transform clinically, but also make it work for them financially. Can you say more about what you meant?
Frank Williams: One of the biggest issues with transforming healthcare is directly related to the incentive system. If you think about changing the way you care for patients — taking a population health perspective, keeping people out of the hospital, much more proactive integrated care teams — in some ways you are reducing revenues and adding cost to the system in a fee-for-service context. You really do need to openly change the reimbursement system. You need to have enough patients that are getting reimbursed in a performance-based context, so that you’re really getting the physicians engaged in a new model of care. Ultimately, organizations can do well financially by moving in this direction but if they’re simply just taking on increased cost and losing revenue, the model’s not going to work.
David Williams: The most notable form of those risk-bearing provider organizations that we’ve seen are accountable care organizations, which were featured heavily in the Affordable Care Act. Do you think ACOs are likely to succeed and what will they need to do to really transform the healthcare system?
Frank Williams: I haven’t liked the term ACO because to me it relates back to some of the pilot programs that were part of the government’s initial launch, and in some cases, involved a very small number of patients. But if you think about accountable care organizations, ultimately being those that take a large portion of a premium dollar and therefore at risk for performance, I do think there’s an opportunity for them to do something very different in terms of a greater value for patients and a greater value for payers.
It starts with engaging the physicians. If you engage the physicians effectively and build care teams around the physicians, you can provide much better care at lower costs. It becomes much more rational, which ultimately aligns with clinical programs by using data from the population, identifying those that have different needs or need more intensive support and ultimately managing care more effectively.
Then, you eventually need to get the financing piece right as well. You need to have good pricing and solid risk arrangements. A lot of the traditional payer yields for ACOs are not good deals, so you’re not making enough up for the revenue that you defer. You need to really put a lot into your financial analytics and understanding the population that you’re managing. You need to structure the arrangement so you’re getting paid fairly for improved care and lower cost for the population that you’re serving.
David Williams: We’re seeing a lot of provider consolidation in Massachusetts, but also in markets around the country. It’s both horizontal integration, by which I mean, hospitals merging with one another and physician groups growing. Then, vertical integration as well, where you’ve got hospitals purchasing physician practices and post-acute facilities and so on. It’s happening pretty fast. I’m wondering, do you think we’re heading for just a few big systems in this country? Or is there a role in the long run for smaller players and even start-ups like there are in other industries?
Frank Williams: You’re going to see a mix. If you think about the traditional consolidation strictly on the hospital side, where you might cover multiple geographies – for example 30 hospitals in different markets combining with another 20 hospitals in another market or two in very different geographic locations – that doesn’t necessarily get you a lot from a population health perspective. It does get you more mass. So if you think about a world where you have to invest increasing amounts of capital and technology and infrastructure, it obviously helps to be larger. But in a population health context, you would much rather have assets that go across the continuum of care.
This continuum of care means from hospital to physician network, to home health, to outpatient care. You really are putting the assets together to more effectively take care of a population. You will see a lot of that consolidation going on where people look at ways of building out their integrated delivery system, and therefore being able to capture the financial benefits of that and also deliver a better clinical experience for patients, because you own more of the continuum.
On the consolidation piece, I think you’re going to see people move away from the traditional approach of merging very large hospital systems together.
David Williams: Frank, you spent quite a few years building up the Advisory Board Company, and I’m wondering if there are particular things you learned there that are informing what you’re doing now.
Frank Williams: First of all, it’s understanding what’s really going on in the industry. What are the up-at-night issues that health systems and physicians face, and how can you design a service offering which really helps drive them positively into the future? A really intimate understanding of the customer, is important.
The second thing has been designing an offering that can scale repeatability in terms of results, and provide benefit across multiple markets and very different geographic situations.
Third, is around talent. We spent a lot of years at the Advisory Board figuring out how to build a value system that attracts the best talent; people with deep provider care experience. How do we get them into the organization and how do we meet the demands and pace of our customer base. We’ve been able to recruit over 700 people in a short period of time. It’s not by accident; we’re really investing ultimately in the HR side.
And then, the last piece, is mission. I really believe that culture is king, and that if we can really focus on the improvements we can drive to the healthcare system and there’s a real aspiration to what we’re doing then we’re going to attract people who are going to be willing to run through walls for this. This is hard work that we’re taking on but people really believe in what we’re doing and that ultimately makes a big difference.
David Williams: Frank, talk a little bit about what Evolent does and what your business model is. We’ve been talking about it a little bit indirectly here, but what specifically does Evolent do?
Frank Williams: We’re really trying to help systems in their full journey to value-based care. So there are a few elements of that. The first is ultimately devising the strategy, the operational plan that would be “board-ready” that the executive team could really attach to and fund over multiple years. The second piece is getting in the technology infrastructure, the analytics, to do population health well. You need to understand the population, be able to stratify them, orient around your clinical programs, and then cascade it directly into your workflow and treating patients on a day-to-day basis.
The third piece is your clinical model and your population health platform, so how ultimately are you engaging the physicians, how you’re developing clinical programs, how you’re sharing data and driving performance that’s really supporting them in all those efforts.
Then, the last piece is the risk and financial management infrastructure, so if you’re going to be taking on performance-based contracts, how are those being priced? What are the incentive systems? How do you have actuarial knowledge? How do you develop your network? All the things that ultimately allow you to manage the administrative part well.
So, in terms of a model, there’s some component of what we do that’s fee-based. There’s a performance-based component. We tend to work with our customers on average for ten years, then hopefully much longer. Our relationships are about becoming an embedded operating partner and ultimately helping to bring technology, platforms and processes as a means to execute strategy successfully.
David Williams: Frank, this has been very insightful discussion. I’m wondering if there’s anything else that we should touch on today.
Frank Williams: Well, I think we’re at a point in the industry where we have a great opportunity in front of us. I think the market is really beginning to move. We’re seeing purchasers of all kinds, from government to employers, to exchange participants very focused on value, who are wanting to get more out of their healthcare dollar and ultimately wanting to get better care. I think we now have a number of organizations that have integrated physician networks and that have a series of assets across the continuum that see the financial urgency to move in this direction.
I think we’ve got an unbelievable opportunity to really improve care across the United States and move the model that many of us had wanted to see for many years that’s much more proactive and integrated in terms of the care that’s being provided.
It’s a really exciting time. We’re happy to be a part of it and play a role, but it’s going to take a lot of organizations working together to make it happen, but in general, it’s a really exciting time in healthcare.
David Williams: I’ve been speaking today with Frank Williams. He is Chief Executive Officer at Evolent Health. Frank, thanks so much for your time.
—December 23, 2014