Value-Based Care Explained. Digital Health Interviews: Mendel Erlenwein

Welcome to the newest episode of Digital Health Interviews! We continue our journey exploring the US healthcare system and introducing you to key opinion leaders in healthcare innovations. Before we start, there are two simple things we want to remind you. First — please support Ukraine in any possible way, and second — subscribe to our YouTube channel.

So we’re happy to introduce Mendel Erlenwein — the founder and CEO of soapnotes.ai and the host of the #1 Podcast in Value-Based Care: The Healthcare Trailblazers Podcast.

Introduction:

Mendel Erlenwein: “I started in healthcare marketing right out of school — and I didn’t like it very much. The reason was really twofold: number one — I didn’t really know what I was selling (that’s typically an issue), and number two — I think that there’s a common misconception in the sales world that doctors are swimming in cash. I worked in a company that was a part of a larger healthcare conglomerate, so there were different pieces of a puzzle. I was doing a lot of supporting marketing work for other companies in the network, but not making any kind of external sales. That lasted about two years, and shortly after ending that chapter, the opportunity presented itself to take over a chronic care management company. There weren’t very many patients, the company wasn’t really making money. The person who started the company, a fantastic guy, decided to move on, so the company was just sitting there. So the opportunity presented itself to me to take over this project, which I decided I would do, and that was about four years ago. It’s been a lot of fun since we’ve brought everything in-house: we’re talking about 5,000 patients a month now, building out a great company culture, and it’s been a lot of fun. That’s kind of a journey for Previva Health Group; the company was rebranded a couple of years ago.”

Mendel can be rightly called an ambassador of the value-based model of healthcare. It’s a model that aligns the incentive for the doctor with patient care. What we’re used to is called “fee-for-service.” Every time something breaks — you go to the doctor, and they fix the thing, each time getting paid. The doctors actually incentivized the patient to be sick rather than healthy.

Mendel Erlenwein: “What value-based care looks like is, for example, we’re going to give this healthcare system (let’s call it “the doctor”) an amount of money — $1,000 for Alex’s health — whether you’re healthy or sick. But the catch is the doctor or the health system takes responsibility and liability for your health outcome. Saying, I’m accepting that money but now I will pay for your healthcare, so if God forbid you end up in the hospital, I’m footing the bill. The average hospitalization is like $17,000 or something like that. Well, now my job has become two things: lower-cost, so I need to spend less than $1,000 for your health in total, and higher quality. Usually, when you’re making quality higher, it’s with a huge focus on preventive care. Leaders in value-based care are thinking about where can we manage our patients the best for the lowest cost but it can never be at the cost of quality because then you just shoot yourself in the foot. So you’re always pulling these two levers.”

We can assume that everybody wants value-based care as a patient, but it comes with its challenges: “Patient-facing is actually something that I’ve been exploring. I think most patients are living their lives, and they’re not necessarily keeping up-to-date on the various reimbursement models in healthcare. A lot of doctors don’t really understand this model yet. There are multiple really fantastic straight value-based care organizations: ChenMed, Oat St. Health, just various organizations that are doing a fantastic job, and there are ones like Northwell Health and other large systems that have verticals of value-based care within the system. The biggest challenge of adaptability is that we have an entire health system, I think, $3 or 8 trillion cost in totality. It’s constructed around the fee-for-service. There’s Dr. David Pate who was the CEO of St. Luke Health System, and he managed over 10 years to grow them from a billion to $3 billion in revenue. Still, he also managed to create a third of the revenue into value-based care within the confines of a fee-for-service organization. That’s really challenging. Another fantastic doctor, Dr. Zenobia Brown from Northwell, is doing this right now with Northwell: she’s leading a lot of value-based care initiatives.”

The companies named above operate in the VBC market in the US against the traditional system of fee-for-service model. As Mendel says, data and execution make them successful. In order to execute properly and create a successful value-based care organization, you are to have systems in place, to have proper data on your patients, and to be able to break down who your sickest patients are with the highest complexity and chronic conditions. That’s step one in identifying who is costing the most money from a care perspective. Then you have to actually have the operation to target those people and manage them so well that they stop that you drive down those costs. That’s where a lot of prevention is, and that’s why it’s so vital in value-based care.

Let’s speak about Previva Health Group, the CEO of which Mendel is. The company runs five preventive services: chronic care management (otherwise known as CCM), remote patient monitoring, annual wellness visit support, transitional care management, and behavior health integration. The primary program, which is chronic care management, looks like a Medicare-funded one, and so the reimbursement is about $62 per patient per month to a doctor. The eligibility requirements are that the patient with two or more chronic conditions has been seen in the office in the last 12 months and then obviously has the correct insurance in order to pay. The idea is that you pitch the patients on the program. They choose to opt in, and you build a care plan, which is going to revolve around the two chronic conditions that the patient has. You’re trying to have the patients make some progress on their goals; you talk to them every month, and they should always be able to call back. You can also help them if they need a medication refill or an appointment request and just make sure that you’re catching things that would otherwise fall through the cracks as well as try to proactively move them on their health goals. This is super effective in keeping patients out of the hospital.

Just a couple of months ago Mendel started another company, called soapnotes.ai. Thinking about a new project, he, as he says, took a care coordinator and split their features into “Heart” and “Brain” departments. By “Heart” he meant personality, empathy, and delivery of care. AI has a unique value proposition in the “Brain” department — the ability to process a ridiculous amount of data. The mission of soapnotes.ai is to build the “Brain” and amplify the “Heart”. They’re building the omnipresent application that understands patients’ care plans, goals, challenges — all that context about the patient. It’s also listening to phone calls between the care coordinator and the patient. The really important part is including behavioral science, persuasion techniques, and human psychology to build the “Brain” in a way that prompts the care coordinator to provide such a level of excellent and efficient care that is simply impossible to provide as just a human.

Mendel Erlenwein: “One of the things that I aim to solve with soapnotes.ai is to build this “Brain” in a way that we’re almost hacking patients’ brains and almost manipulating the direction for them to actually change their health habits. Here’s an example: imagine a 12-month chronic care management plan. For the first 3 months, we didn’t even talk about the plan, but about the patients. Why do they want to manage their diabetes: do they want to have more energy? Is it because they want to be at their grandchild’s graduation? What are those reasons? We’ve built a relationship with the patient, and we’re now both showing up to that conversation with an equal amount of emotional equity. As a human, it’s extremely difficult to track 300 patients that you speak to a month, that’s impossible by building this one synchronized brain that’s able to keep track of everything and then prompt the human. We can do that. While the whole world is busy trying to make AI as good as humans and have humans prompt AI, I’m trying to go in the opposite direction where we’re going to try to make humans as good as AI and have AI prompt the humans.”

Within The Healthcare Trailblazers Podcast Mendel has talked to many leaders and innovators in the HealthTech space: “Recently I had a chance to have John Kao — the CEO and founder at Alignment Health. I think that the passion that really shines through with John is tremendous. For me, to talk to these leaders is heartbreaking to see that so many of them are in it for the right reasons. The conversation that I’ve repeated the most would be with Gordon Chen from ChenMed. He talks about a lot of what I want to build into this “Brain” with soapnotes.ai. He says: “When you’re taking liability over a patient’s health outcome, you have to change their health outcome, and that’s a huge challenge for the doctor.” They train their doctors to be experts in persuasion, not just medical experts, and I think it’s such a powerful concept.”

In conclusion, here are some recommendations to startup founders in digital health and MedTech: “I think first of all, have the end user in mind if you’re creating technology for nurses, doctors, clinicians or patients. Make sure that you understand them, their behaviors, and the way that they’re going to use something. Lots of people come into the sphere from a technology perspective, looking at healthcare as a ton of opportunity, and lots of them miss the mark with the actual end user. So have representation from your end-user on your advisory board or people that you speak to and make that definitely a priority.”

Our previous episode was with Yatin Patil: Do Doctors Invest in Digital Health Startups?