Musings on CVS, two-way negotiation, and venture studios

+ we're hosting another dinner! and courses ending!

Looking to hire the best talent in healthcare? Check out the OOP Talent Collective - where vetted candidates are looking for their next gig. Learn more here or check it out yourself.

Hire from the Out-Of-Pocket talent collective

Claims Data 101 Course

Practical introduction to claims. Ideal for all healthcare backgrounds, this course covers what claims are, why they exist, and how to most effectively use them.
Learn more

Featured Jobs

Finance Associate - Spark Advisors

  • Spark Advisors helps seniors enroll in Medicare and understand their benefits by monitoring coverage, figuring out the right benefits, and deal with insurance issues. They're hiring a finance associate.

Data Engineer - firsthand

  • firsthand is building technology and services to dramatically change the lives of those with serious mental illness who have fallen through the gaps in the safety net. They are hiring a data engineer to build first of its kind infrastructure to empower their peer-led care team.

Data Scientist - J2 Health

  • J2 Health brings together best in class data and purpose built software to enable healthcare organizations to optimize provider network performance. They're hiring a data scientist.

Looking for a job in health tech? Check out the other awesome healthcare jobs on the job board + give your preferences to get alerted to new postings.

Check Out The Job Board

Some quick updates on the Out-Of-Pocket front! And some thoughts on CVS, venture studios, and more.

Musings part 1 - Venture Studios and Two-Way Negotiators

Couple idle thoughts that aren't really full post worthy. Throwing it out there for smarter people's thoughts, and a couple more musings further down.

---

Venture Studios

When I wrote out the 5 year ​plan​ for Out-Of-Pocket, the end goal was to become a venture studio. We're now 4 years in! This is the first time in my life I've ever made a 5 year plan and stuck to it - the last one was "join a single company that might actually exit and make my equity worth something". You win some and lose some.

The one place I've changed my mind is the venture studio idea. I think I've become a bit disenchanted with the studio model after seeing 10,000 of them pop up in the last 5 years. And when they're coming to me to be an advisor...just return the damn money to your LPs.

I think some studios have found models that work, but what I've generally heard as the issues with studios:

  • The studio ends up owning too much of the business. This can make it difficult to get follow-on financing because the investors get skeeved out that one investor owns so much. It also doesn't give enough equity to the management team to be long term incentivized and potentially leads to adverse selection of founder quality.
  • The portfolio companies don't actually use the shared services that the studio offers. Many of the portfolio companies would rather vet the contractors they want to use for their specific use case or just hire themselves.
  • The CEOs brought in find it difficult to pivot the company if they need to because it's not their idea + they're usually more execution oriented CEOs vs. creative ones that need to think of other places to take the business.

Again I think venture studios can work and many have made money. One very successful strategy is helping to get a first sales contract in hand, especially if it's a non-standard contract. For example, incubating a company into a value-based care program with a payer partner seems like a strategy that can work.

But for me personally, I don't think that's something I could be uniquely valuable for. So for now I'll stick to my peasant level syndicate investing.

Two-Way Negotiators

I'm refreshing some of the slides in my healthcare 101 ​course​, and one of the things that always surprises me is how many two-way negotiators there are in healthcare.

  • Pharmaceutical Benefits Managers (PBMs) negotiate on behalf of their health insurance clients, but get rebates from pharma companies that they're negotiating against.
  • Group Purchasing Organizations (GPOs) for medical devices/supplies negotiate prices on behalf of hospitals, but their adminfee is usually a % of the total order that's paid by...the ​vendors​?
  • Benefits brokers negotiate on behalf of the employers to get better health insurance rates from carriers, but...get paid commission by the carrier?

The whole thing is just strange, does this happen in other industries to the extent it happens in healthcare? My guess of why this is so rampant is a combination of a few things:

  • Consolidation means that a handful of two-way negotiators basically negotiate for everyone. It's hard for a new "non conflicted" competitor to come in because they'll lack the negotiating power of the existing player.
  • Because no one knows the prices for anything, it's hard to create accountability for decision makers around specific cost-savings they need to achieve. So might as well just picked the tried-and-true vendor, switching is a ton of work on the decision maker. A bunch of expensive wine, dine, and redlines for internal champions probably helps.
  • The buyer very rarely directly feels the pain of this two way negotiation. Usually the cost ends up getting passed to someone else (e.g. patients or the government) or it's felt indirectly through things like worse benefit design, fewer drugs covered, etc.

But I do think that eventually every two-way negotiator ends up pissing off someone enough that a crack emerges, and it's the job of a new company to be positioned to take advantage of that when the time comes. Easy right???

2 courses start next week!! Enrollment ends tomorrow

How to sell to health systems - This course will teach you everything from how to identify the right systems, workshop your pitch to be relevant to your buyer, explain contracting pitfalls, and more.

If hospitals are your buyer, this course will be your godsend. ​Sign up here​, it starts Monday.

US Healthcare 101 Crash Course - Gimme 9 cumulative hours and I'll teach you everything you need to know about the US healthcare system. You'll even learn what a "PBM" does and how they make money.

​Sign up here​, I make it fun.

As always, email nikhil@outofpocket.health for group discounts for either. I got you.

Dinner (Another One)

We've been hosting a bunch of small dinners for people that are a little higher up the management ranks at healthcare companies. We're trying to ~*create spaces*~ for people to talk to their peers about different things they're thinking through.

We're doing another one in New York on 7/24 around Revenue Cycle Management. If the following sounds like you and you want to attend, email danielle@outofpocket.health

  • Your role is in revenue cycle management, operations, or finance
  • Director level and above
  • At an organizations with 150 people or more
  • You're cool and won't start a conversation with "so where in New York do you live?"

Musings part 2

More random thoughts:

---

Dynamic Pricing

In my once a month show of willpower, yesterday I decided to open ClassPass and go workout. Interestingly, Classpass now let’s you use credits ​to buy food​ at restaurants too. This feature has been out for more than a month and I just discovered it, which should tell you how in shape I am.

My guess is that Classpass will offer dynamic pricing now to restaurants the same way it has for gyms (e.g. classes cost less credits at off peak times, more credits at peak times)

We’re starting to see dynamic pricing in more places where it didn’t used to be (e.g. ​supermarkets​, Uber obvi, ​Wendy’s​). It seems like in general we’re moving to this model, and I wonder if it’s good or not? I mean if you frame it as "happy hour" how could you be mad?

It makes sense from an efficiency standpoint to have pricing be like this. You want to smoothen out the supply and demand curves. On the other hand, does it make it harder to budget properly for both the consumer and also the restaurant? Also will it actually make it cheaper for people with flexible schedules that can take advantage of the off times?

When I was born, a witch unfortunately cursed me to think about everything from a healthcare lens. So when I think about this, I wonder if dynamic pricing would be something that would work in healthcare. I mean no one knows the fucking pricing anyway so it's basically dynamic. But also optimizing staffing is a huge issue in the industry, and maybe this can help with that.

There are legal reasons you probably can't do this (e.g. is it inducement if you drop prices to get patients in?). But there are already some areas you see this happening - e.g. ​Sempre​ gives discounts if you pick up your medication on time.

I'd be interested in more areas we might play with transparent but dynamic pricing in healthcare.

The legal contract -> product pipeline

I was reading a value-based care contract recently, which by the way also doubles as 100% effective contraception.

There's a lot of parts of the contract that will eventually end up in parts of the product for this company.

  • Creating of regular reports for the payer.
  • Getting informed consent from patients.
  • Performing specific types of screening conditional on the patient.
  • Compliance things like keeping records on hand for X period of time or flagging how personal health information is moving through the system.
  • Double taking at "Force Majeure", wondering why there's randomly french in the contract, and realize that's actually a great rap name.

One LLM use case might be to digest legal contracts and actually embed them in task management software to make sure that you're doing all of the correct things. I feel like right now product development is reliant on people reading these contracts and translating it into product decisions, but it's easy to miss things.

Or maybe this isn't a real pain point, but either way I just hate reading contracts. The ​"How To Sell to Health Systems" ​​course​ actually goes through what the contracting process looks like because it's such an important part of the sale. But that's the class where I go to the nurse's office "with a migraine".

From the How to Sell to Health Systems course! Starts monday!

Retail pharmacies doing hard things

For the last decade retail pharmacies have been playing the hokey-pokey in healthcare servcies.

"you open a clinic here"

"you close a clinic down"

"you open another clinic there"

"and you shake it all about (reorg!)"

Walgreens made a huge push into the retail clinic and healthcare space with VillageMD but then seems to now be pulling back. Walmart seems to keep going back and forth on whether healthcare is a priority for them or not. And CVS just announced it's ​opening​ lots more Oak Street Clinics but also ​closed​ its clinical trial business last year.

I don't have a very strong sense of what seems to work or not for these retail clinics so I'm curious what others think. My guess is that most of these stores are designed for high throughput/foot traffic kinds of care (eg. vaccinations) where people can get in and out predictably and you can pretty reliably stay on schedule. Plus, for these acute conditions people will most likely go to the pharmacy in store since the price difference between stores for generic drugs is relatively small.

This is not the case for complex care like clinical trials, chronic disease patients with comorbidities, etc. The visit lengths are probably very variable and for things like specialty drugs it actually makes sense to shop around and see where the best deal is vs. just walk next door.

But maybe there's something I'm missing!

Headhunting stuff

We have 3 roles we're helping companies fill.

  • Senior PM at a Series B AI healthcare startup (doing stuff with hospitals)
  • Chief of Staff for a seed stage healthcare AI company (doing stuff in workforce management)
  • GTM lead for healthcare at a Series B company outside of healthcare that's looking for someone with experience selling to Medicare/Medicaid.

If you think you'd be a fit for one of these roles, you should sign up ​here​ and we'll put you in touch with the teams if it's a good fit! And if you're a healthcare company looking to hire for a specific role, you can sign up ​here​.

Oh god I told them good people read the newsletter, don't let me down

Thinkboi out,

Nikhil aka. "A musing bouche"

Twitter: ​@nikillinit​

IG: ​@outofpockethealth​

Other posts: ​outofpocket.health/posts​

--

‎If you’re enjoying the newsletter, do me a solid and shoot this over to a friend or healthcare slack channel and tell them to sign up. The line between unemployment and founder of a startup is traction and whether your parents believe you have a job.

Let's Keep In Touch

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
close
search icon
close