Which companies will capitalize on the value-based care movement is still an open question, but Evolent Health is making a play to be a part of it.
Evolent, which provides value-based care services through partnerships with providers, announced last week it is partnering with Nicklaus Children's Health System and Baptist Health Care to launch Medicaid plans in Florida. It's the second Florida Medicaid contract win for the company, which announced in May it will work with Lee Health to create provider-sponsored Medicaid plans.
CEO Frank Williams called the Medicaid market a "large and high-growth" market opportunity during the company's Q1 earnings call. Since then, Virginia lawmakers voted to expand the program under the Affordable Care Act and other states are exploring expansion options.
The company, which went public in 2015, also announced a partnership in May with SOMOS IPA to assist the development of value-based care in New York.
Wall Street is taking note. Jefferies analysts in a June 5 note wrote that "Evolent remains one of our favorite ideas across all of Healthcare IT," citing the recent contracts and positing the company's margins will improve due to added lives on the platform. Leerink analysts in a June 6 note echoed that sentiment, writing: "As the market moves to new reimbursement mechanisms and as states seek to control costs, we believe EVH is well positioned to continue to grow."
Healthcare Dive recently caught up with Williams to discuss why the shift to value-based care has been slow and the difficulties of selling technology to providers.
The interview has been edited for clarity and brevity.
Healthcare Dive: You've taken two companies public, including Evolent in 2015 and Advisory Board Company in 2001. How have the concepts of value-based care shaken out so far?
FRANK WILLIAMS: If you look at this movement toward ACOs and value-based care and population health, it initially took on a variety of flavors. Some were very simple shared-bonus or shared-savings programs where you'd hit a couple of metrics and get a small bonus. You had a number of ACOs participating in that. But there's not really any downside risk.
If you look at the highest performing ACOs, the ones doing the most in terms of higher-quality and lower-cost healthcare have had some real downside performance risk. Not surprisingly, if you have real downside risk then you really have to change behavior to make sure you perform and address quality and cost of care issues.
What we've heard and what we see potentially happening in the industry is trying to push providers into more risk-based programs. Medicare Advantage would be an example of making that attractive from a financial perspective for providers or some new version of the Next Generation or Track 3 ACO programs where providers have real downside risk.
If you suddenly said that to qualify for MACRA and MIPS physician bonuses, you couldn't do it by just doing a Track 1 ACO model or a shared-savings bonus program and had to have real downside risk, that would really shift the market.
Obviously, there are major challenges for providers switching to value-based care. But why are many scared to take on downside risk?
WILLIAMS: There are a lot of things they've never been really good at previously. I think that's the broader point.
One is getting data and information. If the entire population of Washington, D.C., were suddenly at risk and we wanted to know as much about that population as we could possibly know, we would want to pull in data from every source of information available. This includes claims data from payers, pharmacy, labs and inpatient data from every EMR. Traditionally, hospitals really haven't been able to do that.
Second, you need sophisticated rules to stratify the population from a risk perspective so you know which patients are going to get very sick in the next 12 months but know if we intervene, we can really change the course of their health. Because there is limited coaching and care management resources, care needs to be coordinated across the continuum and outside of the four walls of the hospital. That's a very different thing than what they've done traditionally.
If you think about the administrative component, providers don't have claims processing operations in general or member-based call centers or ways to manage a network. That's a whole host of new capabilities that they need.
So why are providers scared of risk? Because their traditional business has been very stable and had very limited volatility. It's very low margin and physician practices run pretty lean.
In the risk business, you can lose a lot of money quickly, so in larger risk arrangements or full health plans, you could lose $20-30 million a year. For an organization that's been relatively stable, those are pretty daunting numbers and they're scary for health systems' boards and physician groups that don't have a lot of capital.
Given the apprehension and the cost of technology and long sales cycle, how hard has it been to sell providers on new services?
WILLIAMS: That's absolutely why we haven't gone all in on selling a technology platform. We don't believe technology solves this problem. We surely don't want to replace the EMR, which has been a difficult but necessary investment to get things electronically recorded.
Our point has been that we want to provide individuals clinical knowledge in an embedded technology platform that helps them manage a case to an outcome. A lot of EMRs have been transactional for billing purposes and coding, not for decision support in the moment and proactively managing a patient population.
We've tried to show that our technology component is not particularly expensive, but an enabler to drive better analytics and patient targeting to manage workflow across a large disparate network so someone who's a coach at a practice or a home health nurse or mental health professional or pharmacist can all communicate around a patient and assign tasks and manage across the episode of care.
What have been some wins? What about some challenges?
WILLIAMS: On the positive side, we've found if you have complex patients within Medicare that have multiple co-morbidities, we've been able to demonstrate pretty consistently through a high predictive value which of those patients are about to get sick and cost a lot of money. We have a way to engage and give that information to physicians so they can engage patients. When we engage those patients, we've able to reduce total medical costs by a third and reduce hospitalizations by a third to a half.
Engagement includes getting patients to take their medications, get them on the right diet, get mental health support and making sure their family member knows how to care for them. We think we kept people out of the hospital 33,000 nights through those types of interactions. That's good news.
However, it's very difficult for people who've been in the business for years to change behavior. It's really hard work to educate everyone from the executives to the physicians to the people in their practices to get them to think differently, accept a different economic model and think about managing patients differently.
The good news is when you work through all this behavior change, there are good things on the other end. I will say we've had situations where an organization, though dipping a toe in the risk-based waters, wasn't fully committed to doing things differently and they sort of get caught in no man's land. You don't get people's attention and you don't have success. That's why we've tried to be really careful about selecting partners that are really committed and want to make the investment. That makes a big difference in terms of results.
On your Q1 earnings call, you said Medicaid was a big growth market for Evolent, highlighting state innovations to address social determinants of health. Why are social determinants so important to this patient population?
WILLIAMS: Your health status and the social factors that influence your health are very closely linked. If you only have one part of that picture, you're going to miss a very important piece in managing a Medicaid population so the business model in our world is very clear. We work with provider organizations that are at risk for treating that population so they have to manage health and total costs and outcomes.
Right away, the financial incentives for them to address social determinants which address health are linked. We work in Kentucky with 300,000 Medicaid lives through Passport Health Plan, for example. We're relocating the Passport headquarters to West Louisville and building a campus which will have housing and nutrition to mental health support services all integrated in that campus.
We are committed to incorporate social determinants data into our informatics system so we have a full picture of the patient.
If we find a complex patient, we could find out one of the main reasons is they don't have transportation to pick up medication. Then it becomes very easy for systems to say "OK, we want to sign them up for a complex care program. We're going to involve a pharmacist in their system. We're going to drop medication off at their house and going to pick them up to come visit our practice" because the economic models align.
In terms of scalability and growth markets, what are you watching?
WILLIAMS: Every market is different because of how physicians or health systems are organized. Medicaid state by state is very different. That does present challenges and that's why, at least in my experience, you could find a great model from South Florida or Southern California, try to scale to 50 states and find that rarely works because that's not how the physicians are organized or how the dynamics of the health systems work in other markets.
The point is to find areas of commonality that transfer across markets. Sometimes the analytics, clinical program development or some of the high opportunity areas in certain populations are the same but there can be an acknowledgement that you're going to have to have some level of customization and flexibility around a physician group you're working with and the local delivery system. We're doing our best to find that balance.
Fortunately, in some areas we've found it and we see that repeatability and scale. In some areas, it's more of a challenge and we have to do more customizing but our hope is that through that customization, we find that there are perhaps three other markets that have that particular customization fit that we've worked through.