To address rising healthcare costs, new models of care are emerging that focus on value. We spoke with CEO of Tandigm Health, Dr. Anthony Coletta, to learn more about the innovative start-up that was launched to better manage costs in the Philadelphia market. He shared with us factors needed to enable the shift from volume to value, how to manage growth, and broader trends impacting primary care.

PULSE: The theme for our conference is The Innovation Game: The Race between Entrants and Incumbents. Could you talk about the origins of Tandigm as a joint venture between Independence Blue Cross and DaVita HealthCare Partners? What makes Tandigm an innovative entrant? What are your views on existing incumbents?

DR. COLETTA: From my viewpoint, I see some of the incumbents in the healthcare industry as the engines that have driven over utilization.

Regarding the origins of Tandigm, Independence Blue Cross a number of years ago formulated what they called their 2016 strategy. They had Milliman information that indicated the five-county Philadelphia market was one of the most highly utilized markets in the country. The opportunity to manage costs while improving quality in the market was really around decreasing utilization metrics in the market. Independence Blue Cross determined a physician-centric strategy would be the most meaningful approach to try and appropriately cut out the waste and lower utilization resulting in improved quality and lower costs. In other words, driving down unit price lower and lower was not the solution, since that would actually fuel utilization.

That was really the origin of the strategy. Their managed care model is something that many payers across the country have seen and from that standpoint, there’s an incumbency related to it. They were looking for a means to disrupt that, disrupt themselves in a way through managing health in a different fashion – by putting doctors at the center.

Once we knew that our strategy was putting primary care doctors in the center, engaging physicians through incentives, having real-time business intelligence, and providing additional care support for the sickest patients, we then went out and sought a national-scale partner. We looked for someone who could help support the strategy, not only from a capital standpoint, but obviously, from a clinical, innovative, and coordinated care standpoint. That’s how we came to DaVita Healthcare Partners.

Healthcare Partners has been executing a coordinated care model in Southern California and other markets for many years, for decades in some places. They were taking better care of patients, helping lower patients’ costs, making patients healthier, and also building business models around health as opposed to disease. They had legacy market expertise in what the models look like, so they became a natural partner in the enterprise.

PULSE: As you mentioned, Philadelphia was a natural starting point given the high utilization metrics and costs. Were there other regions that were contenders or is there a plan to expand beyond Philadelphia?

DR. COLETTA: Yes, but we wanted to prove the concept first in Philadelphia. Every market is different. In Philadelphia, you have a number of factors that have led to an imbalance in the system. Things like high utilization and legacy pay-for-performance structures drive up costs but do little to increase quality.

All healthcare is local, but there are certain principles that we are testing in Philadelphia that if successful could be translated into other markets. It won’t be identical and we can’t just drop the Tandigm model into another region, but both owners felt that after several years of demonstrating the model, components could be replicated.

PULSE: Could you talk more about the principles necessary for this model, whether it’s for the Philadelphia region or other areas it might be replicated?

DR. COLETTA: The first premise for us was having primary care physicians at the center, not to the exclusion of specialists over time, but we believe primary care doctors gain the most professional and personal satisfaction from keeping their patients healthy. They had the most to gain from a model that incented physicians to promote health and maintain health in populations. To replicate, we would assess the primary care landscape. In Philadelphia, a couple years ago, there were about 2500 primary care Adult Family Practice and Internal Medicine Physicians and about half of them were independent, so there was a large enough independent group of primary care doctors to approach initially. Another important principle is accurately attributing population to the business model. That’s why we picked HMO products in the beginning. When a patient buys an HMO product in this region, they pick a doctor. That ability to clearly attribute financial and clinical data between the patient and their doctor is important.

If you step back and look at Philadelphia, we see a big empty space between the emergency room and the doctor’s office, right? There’s not a lot that’s being developed in this community, to enhance the care of patients in their homes. Philadelphia is a very immature market in terms of development of those services in the community because the emergency room has become the default for a lot of patients, as opposed to the doctor’s office. In markets where some of these community-based services are more highly developed, interventions become more effective faster than others.

PULSE: Could you talk more about building out a community-based delivery system? Has Tandigm experimented with in-house healthcare and if so, what have been the results?

DR. COLETTA: We’re just starting that component now. With about 63,000 commercial and 22,000 Medicare Advantage patients, we had to pick some lanes to focus in the beginning. We started out with just telephonic intervention. But very quickly we realized the need to accelerate and build these additional interventions faster. They are in our business plan. I think of them as people, programs, and places in the community.

People: People refers to the new and differentiated workforce (doctors, nurse practitioners, physician assistants) who need to work beyond their office. This mobile workforce can help move patients from one setting to another in the most efficient and effective fashion. It includes community health workers, behavioral health professionals, social workers, pharmacists and others.

Programs: Programs include house call programs where you actually bring primary care into the homes of the very sickest patients. It also includes community-based health programs, where you find ways in various communities to address the socio-economic needs and behavioral health needs of patients through community-based programs. Sometimes these programs exist, but doctors are not aware of them and sometimes they need to be built.

Places: These are primarily sites with lower costs of care. Assuming that the patient’s acuity level is appropriate, surgeries should be done in lower cost settings. In some situations, there are markets that have even developed chronic care clinics where the most complicated patients go for care. These alternate, lower-cost sites of care will build in communities over time and some of them, such as Urgicenters, are taking traction in the Philadelphia market. In many ways, their utilization in Philadelphia has been slower than other markets.

So having people, programs, and places in the community empowers primary care doctors. In order to be a disruptive innovator in healthcare, and in this market especially, we think you need to have the three key components. You need to have a facilitated networks of doctors, hospitals, SNFs, other facilities that are willing to integrate in terms of data and communication. You need technology that provides communication and interoperability around data. And then you have to have a business model that drives the behavior. Taking risk and responsibly accepting the full cost and quality for a population of patients is critical. It is important to be rewarded for doing what needs to be done at the right place in the right time. This is in contrast to just perpetrating fee-for-service or being rewarded for doing more.

That’s all part of innovation. None of that has happened in this marketplace at all, and that’s where Tandigm has entered in as a disruptive innovator.

PULSE: We often associate innovation with digital health. Is Tandigm experimenting with any digital health technologies, either for use with patients or physicians?

DR. COLETTA: Everybody seems to have a different definition of what digital health really is. We think of it as everything from big data to biometrics. We’re beginning to pilot some digital health strategies. First we are piloting a mobile application that allows doctors to connect with their patients through scheduled video encounters. What we’re piloting is connecting our care team with patients and their caregivers. Envision a patient that has a lot of complicated illnesses and just left the hospital. The patient has a daughter who visits three times a week to help. Previously, our team would engage them on the telephone, and might find that the patient has social service needs as well as some pharmaceutical issues. There are many people who need to be involved. Telephonic conference calls are difficult in business and even harder to use in patient care. However, by using this mobile application on an iPad, you could have the team here at Tandigm talking to the patient and daughter; they’re seeing one another and everyone’s engaged.

We are also piloting this same application with primary care doctors where you can set up the app so that the patient can schedule a visit with the doctor via video conferencing. Theoretically, if the patient has a rash, he could turn on the app and show the rash to his primary care doctor. This differs from other telemedicine platforms because patients are connecting directly with their physician, not somebody they don’t know.

Digital health has to be introduced thoughtfully; it has to be built into the business model, and it has to be something that’s accepted by both the patients and the primary care doctors.

PULSE: In just over a year, Tandigm has had impressive growth. Thinking long-term, how do you see Tandigm continuing to grow? Can this innovative model continue to scale? What are you most excited for and what risks do you see in the future?

DR. COLETTA: I’ll reference the book, Predictable Success by Les McKeown. Our biggest challenge is going to be how to manage our growth, while we execute on our strategies. Providing the finest care possible to patients, is really, really complicated, although it’s easy to say. As we grow faster and gain more traction, the balance between growth and execution is going to be critical. We have to manage both, but also demonstrate that the model really works.

The reason why I reference Predictable Success is they talk about startups, and Tandigm is a startup, right? We’re not even two years old yet. So we’re sort of anomaly when it comes to startups given the revenue and size. But that’s healthcare. The startup phase is called the early struggle, where essentially companies are using capital from the outside and just trying to put the pieces of the model together. The next phase is actually fun because what happens is as you demonstrate success, everybody wants to know what you did and how you did it. Primary care doctors theoretically would want to be a part of this as they see greater rewards. Health systems that are looking for ways to find value will be interested.

But you have to be careful that you don’t grow so fast that you’re unable to execute as effectively as you need to or can around patient care. And to me, I think that’s going to be the greatest challenge. In Predictable Success, they talk about the next phase being white water, where suddenly you’ve gotten on this ride and you’ve become so successful that you’re trying to figure out how to get to predictable success. Predictable success is a blend between discipline and innovation. An entrepreneurial startup needs to be willing to pivot when it needs to, so that it doesn’t get stuck in organizational process.

We’ve already struggled with that a little bit in the beginning because our large-scale partners have existing organizational approach to things. We have to adapt to their styles, and there are times we had to consciously step back to make sure that our talented people have the opportunity to bring ideas to the forefront, move, and be facile.

That’s a good problem to have if you’re that successful. We believe that we’re going to be able to talk about some early victories in the next quarter. We haven’t moved the mountain yet, but we think we’re tilting it in the right direction.

We’re seeing 20% lower emergency room visits for our commercial patients and 16% lower emergency room visits for our Medicare patients. As we gain maturity in our programs, the model could become in greater demand and we just have to make sure we execute on evolving as a really smart population health company. Overall, it’s a complicated business, but managing growth with execution will be probably our greatest challenge over the next three years.

PULSE: More broadly, what other trends do you see disrupting primary care?

DR. COLETTA: So I think of disruption as a good thing. First, successful primary care doctors are going to increase both their professional and personal satisfaction in what they do. They’re going to move up their license for capabilities, as a lot of what they do on a routine basis gets supported by technologies and professionals (nurse practitioners, physician’s assistants) who can do it well at a lower price point. The successful primary doctors will embrace that model and be paid competitively. I think that’ll happen in Philadelphia. I think it will happen all over the country. By allowing that to happen, they’re disrupting the typical office-based, “I-have-to-see-30-patients-a-day” model.

From a market-based perspective, there will be strategic partnerships amongst stakeholders who may have previously been seen as competitors.

At the end of the day, there needs to be fundamental behavioral change in the way care is being delivered. It is changing the behavior of doctors, changing the behavior of patients, and changing the behavior of hospital executives and administrators. This takes time and is extremely complex. But at the end of the day, when you’re creating the finest care possible, the value will follow over time.