Michael Meng is the Co-Founder and CEO of Stellar Health, a company focused on improving value-based care. He began his career in investment banking at Lazard, specializing in healthcare, before moving to healthcare private equity at Apax Partners. His passion for addressing the inefficiencies in healthcare, combined with over a decade of industry experience, led him to start Stellar Health. Michael holds a BBA from the University of Michigan and an MBA in Health Care Management from The Wharton School.

Michael Meng, Chief Executive Officer and Co-Founder of Stellar Health

The Pulse: Can you walk us through your career journey so far and how it led to you creating Stellar Health?

Michael Meng: I completed my undergraduate degree at the University of Michigan in their business program. I began my career in banking at Lazard for two years before working in private equity at Apax Partners. That’s when I started working in health care. When you first start as an associate in private equity, you’re usually floating between industries as a generalist, but I specifically said I wanted to work in health care. I knew then that I wanted to make a difference in the health care industry which led me to go to Wharton for its Health Care Management program.

That experience led me to fall in love with health care even more—I think because the industry is so broken and I want to fix it. I think that’s a really important piece of it. I went back to Apax for another eight years. I climbed the ranks, invested, and then I had my first child.

My perspective started to shift and I didn’t feel like private equity was helping to change the system in a meaningful way. A lot of investing, rightly or wrongly, is betting on the right company that’s going to grow and do well. I started to think more about making an impact—changing systems for the better.

A friend from business school, who became one of my co-founders, had been working in the value-based care space. He called me while I was working at Apax and said, “You always wanted to do something to change health care—now’s the time.” The more I thought about it, the more it felt right to me.

We started kicking around business ideas, recruited two additional co-founders, and started building a company that aimed to improve the experience of value-based care for all stakeholders, from providers to payors and patients.

All of this also coincided with my first daughter being born. I was thinking a lot about the future—20, 30 years down the road—and hoping my kids will live in a better society than we do. That was a big motivating factor for me.

The Pulse: What are the biggest hurdles for providers in adopting value-based care and how does Stellar Health address this?

MM: To borrow a baseball analogy, I think we’re still in the second inning of the adoption of value-based care. Payors and providers want to do it, but real adoption is still in the early stages.

Imagine telling a doctor, “I’m going to ask you to do all these extra chores and in 20 months you might get a big check.” Why would anyone sign up for that?

The adoption of value-based care has been hindered by two main challenges:

First is shared accountability, which I think is always a bad idea because it creates a tragedy of the commons—why should I do all this work if my neighbor isn’t? The second problem is delayed gratification, and it’s immensely delayed in health care. We’re not just talking about a few months—it could be a year and a half later. When people point to data problems in value-based care, what they’re really referring to is this super-long feedback loop. You don’t know if what you did was good or bad if it helped, if you got rewarded or not, or if you created value until way later. That’s the biggest barrier.

At Stellar, we focus on delivering value creation in a way that’s timely, actionable, and rewarding. Fundamentally, doctors should care about delivering quality care to patients, but they’re also like you and me—they have mortgages and car payments and they’re going to make economically rational decisions. Delayed feedback—and payment—is the biggest barrier to adopting value-based care.

I’ll also add that our core belief system is about producing patient-oriented outcomes. Our Chief Medical Officer recently reminded our team (and myself) that we’re building the system that our children and grandchildren will one day use. That’s what a patient-oriented outcome means—we’re all going to need this system one day, and we can start making it better today.

The Pulse: How do you see emerging technologies, such as artificial intelligence (AI) and machine learning, playing a role in enhancing value-based care? How is Stellar Health incorporating these technologies into its platform?

MM: I’m really excited about AI and the direction it’s going in. However, the line I draw when it comes to AI is that it has to work within the existing system. If you think AI is going to come in and replace everything, you’re wrong. It needs to enhance the provider’s offering. I don’t mind AI or telehealth, but I see them as adjuncts—part of a comprehensive health care safety net. Maybe AI can handle simple ailments like strep throat, but we still need doctors for complex situations.

For Stellar, the most exciting application of AI is around reducing administrative burdens and tackling the more complex components of value-based care. We’ve been using machine learning and AI techniques to predict value-based outcomes in a tighter timeframe. We’re already able to make predictions within a few percentage points of accuracy. This shorter feedback loop will make value-based care more appealing to medical practices.

The Pulse: What strategies has Stellar Health employed to scale value-based care solutions to a diverse range of health care practices?

MM: Stellar is used by small private practices with one or five doctors, practices with 70 doctors, and health systems with thousands of providers. When you’ve seen one value-based workflow, you’ve only seen one value-based workflow. They may look similar, but because each group operates differently, their workflows need to be fully customized.

Our first objective is to make the product general enough to fit into any workflow. For small medical groups, Stellar might be used on a tablet or physical paper rather than integrated with their EHR (Electronic Health Record), just because that’s what they prefer. Larger medical groups, in contrast, care more about systems and processes. They’re more likely to need EHR integrations and require buy-in from leadership at the CMO or CFO level. When we work at the health system level, it’s about getting the whole leadership team on board.

Across the board, we aim to be flexible enough to handle all possible client needs while making sure the core tenets of value-based care with Stellar still get implemented.

The Pulse: Is there anything that Stellar Health is doing in the next few years that you are particularly excited about?

MM: There’s a lot, but I’ll mention two, both related to AI and technology. The first is the issue of feedback loops and revenue cycles being super long. There’s something called a “claims lag,” where a payer credits you for something you do today four months from now. The feedback cycle is so long that it’s hard to learn from. The faster the feedback loop, the faster you can learn and make changes to improve value-based outcomes. We’ve been using machine learning and AI to close that gap, which is really exciting.

The second part is systematizing the process. No one in health care has operationalized great value-based care. There are some playbooks, but they’re not easily repeatable. By using technology to define key steps with data markers, we can guide people through value-based workflows. It’s a big endeavor, but I think it’s where technology can really make a difference.

The Pulse: Do you have any advice for those looking to start companies in value-based care, or advice for early-stage entrepreneurs going from zero to one?

MM: First, I am a big proponent of non-incremental innovation. If you’ve ever read Zero to One, I think health care is full of incremental innovation. I am a big critic of the way big pharma and biotech make small, slow changes. It’s not always helpful. I challenge people to think about whether their business is truly creating step-change innovation.

Second, the process of identifying your target user and scaling from there can be hard. You need to scale to succeed, but generalizing a tool or product so that it can scale risks diluting your impact. What works for one client may not work for another, especially as you enter a growth stage. Figuring out how to grow beyond that is essential. At Stellar, systematizing workflows was a big unlock.