Why the new(er) kids on the block are so invested in their technology
|Jun 24, 2018||Public post|
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A few weeks ago I watched a debate unfold on twitter around Oscar Health and their use of technology. The question at the heart of the conversation was whether Oscar gains any sort of competitive advantage by building all of their software in-house.
While most health insurers are using third-party applications and hordes of consultants to create the software to process claims and create interaction portals for members and providers, Oscar has, from day one, built their own full-stack insurance software infrastructure.
But Oscar isn’t the only disruptive healthcare entity that has placed a much heavier emphasis on in-sourced technology than we typically see in the industry. Iora Health, the value-based primary care company, built out their own EHR system called Chirp. Cityblock Health, the brand-new population health spin-off of Sidewalk Labs, has their in-house system called Commons. Aledade, which helps primary care doctors create ACOs, has built a powerful platform for managing populations.
The question is why. Why do these companies elect to spend the resources - which are scant - to invest in creating custom systems? Why do these companies believe these systems offer them a competitive advantage, when the old-line companies they’re hoping to disrupt disagree?
Tech = Product
Nobody sits around wondering why Amazon uses in-house software engineers to build their e-commerce infrastructure. E-commerce is a highly competitive space, and Amazon’s ability to quickly and iteratively test new features like one click purchasing, Dash buttons, and the like, enables them to stay ahead of their competition by providing the very best user experience.
This focus on product (for Amazon the product is their e-commerce store itself) is commonplace in the world of tech. When switching costs are as low as typing “walmart.com” into your browser, one of the ways you compete and retain customers is with a superior user experience. The only way to innovate your way to a superior and sufficiently differentiated user experience is by using in-house talent to develop custom applications.
These health care companies are, like Amazon, electing to focus on product. A product focus means an emphasis on meeting the needs of the user.
If you take the standard definition of user experience, which governs a user’s experience in using a software application, then what these companies are doing in health care makes no sense. Users aren’t making decisions here based on the utility of a health plan’s user portal. However, if you expand user experience to contemplate the overall product experience, including value for money, then these health care companies are very much headed in the right direction.
Last year, Oscar started building a new claims processing system from the ground up. No consumer has ever given a passing thought to what claims processing system their health plan utilizes. And yet, the claims processing system can have a dramatic effect on overall experience for all users.. Oscar CTO Alan Warren explains:
While it’s very early, and the use cases will be contingent on varying state and federal regulatory frameworks, the claims system will allow Oscar to significantly improve the consumer experience. Because we’ve constructed a configurable system that ties into all of Oscar’s datasets and services, we’ll be able to power features that were previously impossible. We’ll be able to pay doctors on the spot through real-time claims adjudication, provide doctors with real-time prior-authorizations for their patients (a major problem that most EHR systems have tried — and failed — to tackle), create flexible pricing for doctor’s visits, and make healthcare more transparent for consumers through sophisticated cost estimates. Accessing health care through Oscar will soon begin to feel more like every other modern, consumer-driven industry.
While Oscar’s focus is on very un-sexy back-end infrastructure, it’s a necessary step that will enable them to achieve much grander user-focused product goals. Providers gain a much more positive user experience with things like real-time claims adjudication and prior-authorizations. These reduce the complexity and amount of effort it takes for providers to interact with Oscar, thus enabling Oscar to drive a harder bargain when it comes to negotiating pricing. In the end, this allows Oscar to partner with better physicians in their narrow networks, which increases overall value to their members. It’s not direct, but improving software infrastructure absolutely creates opportunity for a better user experience.
Iora Health is in a similar situation. After struggling to force the square peg of the standard EHR system into the round hole that is their unique brand of value-based care, Iora decided to build their own. The Chirp Collaborative Care Platform moves away from the traditional EHR focus on billings and encounters, and instead places emphasis on the things Iora cares about: allowing a collaborative and diverse team of providers to adequately care for a population of patients, both as a group and individually. It’s an entirely different workflow that an off-the-shelf EHR couldn’t facilitate.
Most importantly, Iora’s in-house software engineering team enables them to develop applications that further improve their core model of collaborative value-based care. VP of Product and Technology Andrew Schutzbank describes the merits of having this team:
We need the ability to innovate constantly. The Iora Clinical Model is always evolving. Decisions that made sense in 2012 make less sense in 2016 as we grow and learn. With a third party product, we have no hope of convincing someone else to build what we need. With our own software and amazing team, we have the ability to test things and move forward with changes in real time based on real world experience. This process replaces the slow, usually inaccurate, large changes done in one sitting to a software platform.
Iora’s main competitive advantage is not just their unique model, but their ability to refine and further develop that model. As they refine and codify the model in software systems that enable operations, they further improve on the value delivered to end users. In taking the holistic product view, hiring a software team and building their own system is absolutely a product-accretive expense.
Oscar believes in rapid experimentation as well. Their SVP of product Sara Wajnberg describes how they build custom tools to allow product experimentation unencumbered by technical resource constraints:
Key to these efforts is our own self-service configuration platform, which we call Automat (named for the fast food restaurants where people serve themselves from vending machines). Automat hooks into all of Oscar’s data sets — from providers, claims, in-app messaging, brokers, etc. — and allows semi-technical users on our business teams to define their own triggers (we call them recipes) that generate various actions, such as creating an internal task, or sending an external secure message or email.
If Oscar can use this framework to more rapidly experiment with ways of engaging their members, it’s a safe bet they’ll figure out better ways to do it than other health plans that are stuck in a much more technology constrained environment.
Aledade, which creates primary care-led ACOs, has technology as a core aspect of their value proposition. In helping PCPs manage populations, Aledade’s platform is instrumental and almost inseparable from their model. It gives physicians visibility into what’s happening with patients at downstream providers, as well as the tools they need to view patients on a population level. And it does so while sitting on-top of the existing provider EHR system, creating a minimally disruptive path for PCPs to become ACOs. Without this home-brewed technology, Aledade wouldn’t have much of a value proposition.
And because they employ their own software team that can innovate applications in this niche, Aledade will have the most current and effective software to facilitate this complex and multi-party relationship. Software, in this regard, is a codification of the things Aledade has learned by innovating this space, and manifests as a sizable competitive advantage by barring new entrants.
These three companies, Oscar, Iora, and Aledade, all use technology in varying degrees to create value and competitive advantage. By having a tight integration between technology and product, these companies can innovate more quickly, provide a better user experience, and improve the overall value they provide.
So, why do these companies expend their scant resources developing technology when it’s not their core business? We’re past the point, in any industry, where tech can be separated from product. In fact, a good way to identify industries that are ripe for disruption is to look at those where tech is treated as a cost of doing business rather than as a way to create competitive advantage and value.
The speed of iterative innovation and the ability to create customized applications perfectly suited to the needs of the business ensure a strong and lasting competitive advantage for those companies that internalize development rather than outsource.
Looking deeper into the future, if we are successful in improving consumer agency in health care, it would only deepen the advantage of these companies that are investing in better user experiences.