Joe Coletti
Hello, and welcome to Pathfinders, a podcast series from RBC Capital Markets, where we explore the fast moving world of biopharma, and healthcare. I'm your host, Joe Coletti. On today's episode, we'll be talking to RBCs healthcare technology analyst Sean Dodge. He’ll unpack some of his predictions on the most impactful forces affecting health care delivery, from disruptive technologies to alternative sites and value based care. Sean, welcome back to the podcast.
Sean Dodge
Hi, Joe. Thanks for having me back on.
Joe Coletti
Healthcare is growing at a steady rate, but we're finding that this can be detrimental to the quality of service. Can you talk about why that is and how IT technology can improve the quality of health care?
Sean Dodge
It's been well documented US healthcare is big and inefficient, it's not broken, but it's certainly not functioning optimally either. Our costs are growing at an unsustainable rate, and something needs to be done, otherwise, it'll eventually consume our economy. And there are a lot of smart people both inside and outside of healthcare right now working very hard to fix it. We have these guiding principles that we've always used to help shape our views. These are the things that we believe are the endpoints that all of the efforts in healthcare right now to fix it are being aimed at.
Sean Dodge
Anything that can be automated or digitized eventually will, that there's so much administrative waste and unnecessary manual labor, that's part of the system right now, that doesn't create any value. In fact, it detracts from it. And that technology is advancing. And as it does, we'll be able to generate a lot of efficiency by leveraging it.
Sean Dodge
Anything, any care that can be delivered to someone in their home, eventually will be. And like digitization, this transition is not going to happen overnight, but something that has been gaining momentum, And that's going to all be very disruptive to the current healthcare delivery system.
Sean Dodge
We need to change how we pay for health care. What we need is a system that pays doctors based on how good of care they deliver how good their outcomes are, and at the same time how low they can keep their costs. The combination of these we think would drastically improve our healthcare delivery system and put it on a much more sustainable long term trajectory. So this is what we think the future state is for healthcare. This is where everyone's efforts are directed at right now. And underpinning all of this are one of the big enablers that's helping make all of this happen we think is technology.
Joe Coletti
Do you expect the adoption of these new technologies to accelerate? Or how much do you expect them to accelerate as we look forward in the coming years?
Sean Dodge
Yeah, I think they absolutely will accelerate, and we're already starting to see it. So on one side, you have an explosion of tech enabled solutions, where you have all of these things embedded in and enabling. And then on the other side, all of the pressures in healthcare are continuing to intensify. So the need for these solutions are continuing to grow.
Joe Coletti
So let's talk about this a little bit further. So how do you see the adoption of AI, sort of more specifically across the patient journey, sort of drive the quality of health care delivery? And, and maybe a little bit I think some of our listeners would benefit from this, could you talk maybe about some of the players working in this in this space right now to make an impact?
Sean Dodge
So if you think about like a typical patient journey, you wake up in the morning with something wrong. Normally what you do is call your doctor's office, you get an appointment, hopefully they had some time to see us soon. And then you take a few hours out of your day to travel over there, sit in the waiting room and then see the doctor, figure out what was wrong and what they're going to do about it.
Now technology is helping revolutionize that whole experience. You can wake up and without even leaving your bed companies like 98.6 are developing virtual AI powered chatbots that can help you begin into triage you, and in some cases take care of the issue without any human involvement.
Joe Coletti
What happens if you need to see a doctor in person?
Sean Dodge
Companies like TelaDoc have developed are these stepped care models where they use AI to clear the low acuity stuff upfront. And then if it's determined, a human like a doctor or nurse practitioner is needed, they can then segue into a virtual consult. So tech and AI are significantly improving how we even begin our healthcare journeys.
Companies like Freesia have developed very user friendly solutions that help digitally capture and automate the registration and patient payment processes. And then that helps take a lot of labour and potential for things like transcriptional errors out of the process.
Joe Coletti
Healthcare has long suffered from a staffing problem. What are the use cases players in the space are exploring to solve it?
Sean Dodge
Along the same lines, companies like Health Catalysts are using AI to help optimize staffing levels to help Doc's offices and hospitals make sure they have the right number of people around when things get busier. And then companies like Ogmedics are leveraging AI, they they've created this really novel solution that listens in to the interaction between the doctor and the patient. And then from that using AI structures, all of the relevant information from that conversation in automatically embeds it in the patient's chart. of the relevant information from that conversation in automatically embeds it in the patient's chart. And so this is saving physicians hours a day, versus what they'd normally be spending entering all of that information into the electronic health records manually. And then there are companies like Evolent and OptimizeRx that are leveraging all of that data in the EHR to help doctors develop better care plans and make better prescription decisions and presenting patients with options to help afford it all.
There are a whole myriad of devices and programs out there that have been developed where a doctor can send you home with it, it'll monitor your vitals and use AI to understand if you're trending in a bad direction. And then it'll trigger some type of alert or action to get you to do something to correct it to keep you from crashing back into an emergency room or a hospital.
Companies like TelaDoc and Omada specialize in this this chronic condition management area. After all of this care take place after all your interactions with the healthcare system, there's a lot of labor that goes into taking all of what was done. And using that to create the healthcare claim or the insurance claim that's sent to the insurance company that helps doctors and hospitals get paid for all of this. And there are companies like R1RCM that have created very advanced capabilities are helping automate and streamline the whole billing and collecting process. So again, lots and lots of use cases for things like AI and healthcare.
Joe Coletti
I want to kind of pivot a little bit and go back to something you touched on at the beginning, value based care, Can you maybe remind our listeners, what you mean, exactly, when you say value based care, and talk a little bit about the specific benefits?
Sean Dodge
Right now the system primarily operates on a fee for service basis, the way we pay doctors for the care they deliver, it's very simple. It's based on how many patients they see and how much they do to each patient. While this may be simple from the docs standpoint, it's not optimal in then it creates a whole bunch of waste and perverse incentives. You don't want to pay a doctor to do as much as he or she can. You want to incentivize them to do exactly and only what is needed to drive the best outcome for their patient. And so to do that, we need a reimbursement system that pays based on value. That's value based care.
And how you structure this typically involves some form of paying the doctor a fixed number of dollars per patient that is attributed to them per year. And then in return, that doctor is then responsible for all of that patient's health care for the year. And if it ends up costing less than what they get paid this fixed amount of dollars per patient, they get to keep the difference. But if it costs more than they're on the hook for it, so this does a much better job of aligning doctors incentives.
The challenge, though, there's so much more the doctor needs to know and is responsible for there. They need to know, first of all, who their attributed patients are, who are they responsible for. And then they need better more complete data on the health status of each of those patients, which is no easy task, because a doctor may have 1000 or more patients in their panel. And then, because they only have a finite set of resources, they need some way to prioritize or stratify which patients they should be focused on taking care of, you can't be on top of everyone all the time, so you need to be able to identify those most at risk of generating a lot of costs. So it aligns incentives. Technology will help doctors better leverage all the patient data they have and prioritize and take better and more proactive care of their patients. And then giving patients options and leveraging all of these new lower cost care sites, it's easier to keep them in the appropriate locations in lower acuity less expensive locations and avoiding things that the high cost places like, again, emergency rooms and hospitals.
Joe Coletti
What else is driving this greater mix of healthcare services going outside of that traditional setting, you know, via sort of lower cost virtual at home or those near home channels?
Sean Dodge
A lot of this is just from consumers, or patients having more options than they had before. Most of these alternate sites never existed before. But it's also being driven by convenience. These options tend to be in a lot more convenient locations than the traditional ones. They're closer to where people live, they're easier to park at navigate and get to. And then it's also by the amount of financial responsibility for paying for health care that individuals are bearing. High Deductible Health Plans, and even typical HMO plans have big deductibles. So we're paying for a lot more of our health care out of our own pockets. So now we care more as individuals, patients, consumers, we care a lot more about what things cost, and we're much more motivated or interested in seeking out these lower cost alternate sites.
Joe Coletti
Sean let's hone in on virtual care again for a second. In what ways do the benefits of virtual care extend kind of beyond the pandemic?
Sean Dodge
Virtual health is just so much more convenient and cost effective than most of the other in person options. And in going forward with more doctors participating in value based care, and individuals having to pay for more of their own health care out of their own pockets, there's just naturally going to be a lot more demand for them. And then I think one of the big silver linings of the pandemic is, a lot of these virtual options have existed for a while, it was just not a lot of people were aware of them. Going through the pandemic forced a lot of people to use these alternate options.
Sean Dodge
So there are also now a lot more care navigation solutions. So with companies like quantum health, that are helping people understand their health benefits and direct them to all of these virtual channels. And then alongside that, we've also seen so much expansion in what is able to be addressed virtually. Pre pandemic, a lot of what was done via telehealth was around general medical kind of semi urgent needs. Now, we've seen a lot of the specialties layer in virtual capabilities. And so as an individual have so many more options for all of the healthcare situations you might find yourself in. So it's the combination of all of these. More awareness, more navigation options directing you into these channels, and then just the breadth that we think helps steepen the adoption curve of virtual health going forward.
Joe Coletti
Sean, I mean, I know we just scratched the surface, but it's just a really fascinating discussion on the disruptive forces at play in healthcare services. And there's certainly just amazing potential in this space and growth that we expect to see in the years ahead. And before I let you go, I do want to make a plug your report, RBC Imagine product or research report called disruptive forces in healthcare tech, alternative sites and value based care are reshaping healthcare delivery. I urge folks to contact RBC representatives to check it out. It's what we're talking about today. Sean, thanks so much for joining us.
Sean Dodge
Thanks very much. Great to be here.
Joe Coletti
Well, that's it for our conversation today. Thanks for listening to Pathfinders in Biopharma, brought to you by RBC Capital Markets. Remember to subscribe to the podcast to stay up to date on all our future episodes. This episode was recorded on February 16, 2024. If you'd like more information or to continue the conversation, please contact your RBC representative or visit rbccm.com/biopharma. See you next time.