Working with private insurers like corporations and workers’ unions, Rushika Fernandopulle has designed a new model of primary care delivery that challenges the core assumptions of U.S. healthcare and produces better health outcomes at lower cost.
The New Idea
Rushika is founder of Iora Health, a network of clinics that seeks to rebuild the healthcare delivery model from scratch in the U.S. Iora starts with primary care—changing everything from the fee-for-service payment structure to the staffing to the IT systems in order to give more agency to patients and deliver better healthcare at lower cost. Every patient, for example, gets a personal physician as well as a personal health coach from the community who stays in close contact during and between office visits—both of whom are available by email, text, or video in addition to in-person visits. In this way, at the core of the model is the recognition that you must create relationships based on listening and trust to improve medical outcomes, rather than purely medical interventions. Doctors and health coaches, meanwhile, collaborate daily to share information on their patients and identify potential health crises before they arise.
For more than seven years Rushika has been refining new models of care based on these principles and he has been able to show not only improved clinical outcomes but significantly lower healthcare costs, in large part as a result of preventive care, tailored care, and reduced hospitalization, and emergency services.
An essential part of Iora’s model is to link with large companies like Boeing and other private groups such as unions, who provide insurance directly to their employees—and have a major incentive to innovate and deliver quality care at reduced costs. This gives Iora more flexibility to implement its model of care while at the same time reaching large groups of workers with the full support of their employers or unions. With 60 percent of Americans employed by self-insured employers, the potential market for Iora is enormous.
The way we deliver healthcare in the U.S.—and to some degree globally—is poor. The experience of care for patients too often strips them of their dignity and the right to control their own bodies; we ask for the same information over and over; we make people wait far too long and generally treat them in ways that would never be tolerated in other industries. Our health outcomes are also embarrassingly bad: For example, over 20 percent of Medicare patients who are discharged from a hospital get readmitted within thirty days. Meanwhile, the cost of care has now reached 18 percent of U.S. GDP, rising over twice the rate of inflation for decades, and placing our entire economy in peril. The economic pains are felt at the individual and business level too: Members of the Casino Workers Union in Las Vegas, for example, have gone seven years now without wage increases because each year they have had to direct their increases in pay to rising healthcare premiums. This is one area that touches the lives of every one of us and the economic and human costs are staggering.
The reason our system persists is because every dollar in the system is someone’s income, and the huge number of dollars creates lots of entrenched interests who have resisted change. Thus while we have had incredible advances in the technology of medicine (new drugs, devices, etc.) the process of how we deliver this to patients is essentially the same as it was 50 years ago. Rushika describes the problem not in terms of bad people, but bad systems and bad incentives. Truly managing long-term care is a complicated endeavor that requires the right processes, the right people, and the right proactive strategy. And yet doctors are paid by the volume of patients and activities and procedures, rather than to promote wellness. (Most doctors in the U.S. have 2,500 patients and spend about 5 to 7 minutes with each one.) Hyper-specialization adds to the problem. Despite accounting for 70 percent of our healthcare costs, patients with chronic illnesses will visit dozens of doctors, none of whom speak to each other or collaborate in any form.
There is growing recognition across society that our healthcare system is unsustainable. There is even a general consensus that the right place to start is with primary care, which when done right can help patients manage most of their health conditions and help them navigate the rest of the system when needed. It is where true preventive care happens. And yet most reform efforts—from patient-centered medical homes to accountable care organizations—are still essentially making incremental changes to current practices. Many have mistakenly framed the problem in terms of coverage alone, which is only part of the problem. Few have been willing to challenge the status quo and fundamentally change the production process of care itself—in other words, how care is actually delivered to patients.
Rushika’s strategy with Iora is to disrupt the healthcare market: Build a primary care system that works better and costs less, and people will begin “voting with their feet.” Similar to what Southwest Airlines was able to do for the entire airline industry in the 1980s by challenging conventional wisdom and innovating along the entire value chain. The Iora model is built around three pillars of innovation:
First, it is designed around an entirely new pay structure. Instead of fee-for-service, where doctors are paid for each individual office visit and treatment, Iora uses a flat per-patient monthly fee (adjusted for how sick they are). This cuts the huge expense and time most clinics spend dealing with billing paperwork. It also grants patients unlimited access to clinics without charges—including no co-pays—which Rushika believes produces the right incentives for doctors and staff to focus on service, on good health outcomes, and on patient retention. It is the only way Rushika believes the health industry’s interests can become aligned with its customer’s interests.
The new fee structure also enables Iora to deliver health in a fundamentally different way. Care at Iora is more proactive, more collaborative, better tailored, and focused on prevention. Among other things, patients are assigned to “health coaches”—most who come from their community and speak their language. They don’t require medical backgrounds, but do need to be able to connect and empathize with the sick, and accompany them in the fullest sense toward better health. In Iora clinics, for every two doctors there are typically eight health coaches and one full-time social worker. And they all collaborate: For example, clinics have a Friday afternoon call list—people they should have heard from that week but haven’t. By reaching out, they may be preventing a weekend trip to urgent care or the emergency room. Staff also track a “worry score” which is the probability that someone may have a major health event in the next six months. At one clinic, a nurse practitioner was assigned to help every patient who smokes to quit.
Rushika’s model of care delivery is rooted in a culture change. He describes the shift in terms of moving from “no” to “yes.” When a patient walks in, no matter what the question is, yes is the default answer: “Can I see a doctor?” “Yes.” “Can I get help making an ultrasound appointment?” “Yes.” In his clinics, staff need permission to say “no.” In this way, every component is deeply patient-centered. Rushika has even implemented an open-access scheduling system that guarantees same-day appointments for people who are seriously ill. But the culture at Iora clinics is also patient-empowering. Every engagement begins from a place of understanding and respect, so that patients leave feeling more empowered and effective at managing their challenge. The goal here is self-efficacy: moving the consumer experience from one of fear to one of possibilities, and health coaches play a major role in doing so.
The third pillar of innovation at Iora is a new IT system. Nearly all electronic medical records are currently organized around billing and invoicing. They don’t help doctors see patterns and answer questions like “Who are my diabetic patients and what are their needs?” Instead, they’re built around increasingly sophisticated algorithms that are designed by care providers to justify sophisticated procedures, or are designed by payers to deny those very procedures—what Rushika calls an IT system “arms race,” and which costs tens of billions each year. Rushika and his team are designing a system to facilitate their way of delivering care and their need to monitor data—again, built around a population-management model. This will include developing an electronic information system that tracks whether patients are meeting their goals, and assigning staff to help them do so, so that care can be delivered proactively, not reactively.
Despite requiring more investment of time and money up front, what makes the Iora model work—for patients, for doctors, for investors—is that it gains better health outcomes at lower costs overall. Though still young, the early results have been remarkable: with emergency room visits and hospital admissions down by more than 40 percent, and surgical procedures down by a quarter. Overall cost reductions at Rushika’s clinics have ranged from 12 to 25 percent. 90 percent of the cost reductions are captured by employers (and thus employees too) with just 10 percent going to Iora. Beginning in 2012, Iora will partner with the Dartmouth Institute for Health Policy and Clinical Practice to conduct a comprehensive third-party evaluation of its model and cost-saving results.
To reach large numbers of patients while maintaining ownership over care delivery, payment structure, and processes, Iora targets companies and unions who manage their own insurance (virtually any company with over 500 employees is self-insured). Each of these companies is paying for the healthcare of their employees out of their own banking accounts, and thus have a major incentive to find something that works better (unlike insurance companies and payers, for example, who typically get a 7 percent cut of the overall costs—and thus actually have a disincentive to reduce overall costs.) Because it’s in their own interests, companies and unions will often market the new health model internally, meaning that Iora does not need to spend time and money on direct consumer marketing.
Iora currently runs three clinics—in Las Vegas, New Hampshire, and New York (2012) with the Freelancers Union—but over the last seven years Rushika has tested his model in clinics ranging from Atlantic City to Seattle. To continue growing, he will need to engage progressive payers who are willing to pay Iora differently for their primary care model; innovative and high-quality doctors and staff to work and lead practices; patients who will vote with their feet and come for care at those practices; and visionary and mission-oriented investors who can provide growth capital. Rushika plans to have four practices by the end of the year, and fifty more across twelve markets by the end of his fifth year. All of this meanwhile, with capital costs of roughly $18 million, which is the cost of many new hospital wings. Ultimately, however, his goal is to transform care for everyone, and he hopes that by challenging the status quo, raising the bar of performance, and demonstrating a powerful alternative, he can inspire others in healthcare to replicate the model in their own ways.
Short-term success will be measured in terms of improved patient experience (measured by Net Promoter scores and Cap Gemini surveys), health outcomes (both patient-reported and biometric markers), spending levels (everything from ER to drug costs to imaging), and finally, whether his team of doctors, health coaches and others are feeling successful and loving their work. Long-term success will be measured by seismic shifts in health delivery in the U.S., with accompanying policy change to facilitate those shifts.
Iora has done well to attract private capital over the last two years, in addition to some grant money (including from Robert Wood Johnson Foundation), and they are poised for a major growth phase. Rushika has been careful to keep complete control of the governance of the company and intends to do so in the future. Iora will finance ongoing activities with patient care revenue and at least one further round of private investment; they expect that within a few years they will break even and be able to fund further growth through free cash flow from their existing practices.
Rushika likes to describe three types of people: Those who see problems and imperfections and want to profit from them, those who mostly complain about them, and those who want to fix them. He places himself squarely in the third camp, despite admitting that’s it’s always “a much harder road” and often requires starting things from scratch.
Throughout his life Rushika has had a habit of solving problems and taking initiative, including organizing a group to help high school classmates get home safely on weekends if they had too much to drink; founding a program to teach sign language and expose students in college to the deaf community; starting an exchange program between his medical school and students in Russia as the Berlin wall fell to increase mutual understanding and respect; and founding a new interfaculty health policy group at Harvard to bring innovative thinking to entrenched healthcare challenges in the U.S. In 1999, he worked with a partner to develop a user-friendly encyclopedia of medical conditions with the goal of empowering patients, which he ultimately donated to a university. Rushika also co-wrote a book with a medical anthropologist about what it really means to be uninsured in America, born out of the recognition that storytelling, much more so than data, was the way to get Americans to care about the failures of our health system and demand something better.
Over his career in healthcare, including as a practicing physician, Rushika has spent time in every state in the U.S. in addition to dozens of countries around the world like the Dominican Republic, Russia, Malaysia, South Africa, and Sri Lanka, which helped him gain a broad perspective both on healthcare problems and potential solutions. He discovered that no one had the incentive to be a first-mover and push changes through the healthcare system—after all, the incentives were such that people were making money and ultimately were satisfied. Except of course, for customers. All the innovation, meanwhile, was in new drugs and new “toys” but not in systems and care delivery itself. After years bumping up against the status quo, he decided to strike out on his own, build something new, and recruit others to do the same.