Healthcare’s Original Gangster: Jonathan Bush (Part 2)
PublishedApril 29, 2021
Andrew Le MD: Jonathan, I remember hearing you speak at an Optum Ventures panel. You had just started Firefly, and you were talking about “the stack” – that full stack of medicine that's going to run parallel to the rest of medicine.
You hit on the importance of the role of the employer there. Specifically, sales cycles. You started talking about how the innovative employer is really going to be the key to fixing care, not by rearranging deck chairs on the Titanic, but by creating that alternative path.
Jonathan Bush: Right, mm-hmm.
Andrew Le, MD: Today we're seeing companies like Amazon come out with alternative paths for their own employees and for others. Can you talk about your thesis there?
Jonathan Bush: Yeah. I think in all transformations, except for highly destructive plagues or wars or earthquakes or whatever, change happens from the outside in. Then that outer area kind of accumulates energy and mojo, and the core is slowly transformed.
This is what Machiavelli wrote about. This is the notion of Muhammad walking alone in the desert. It's Jesus alone. It's the iPod. It’s the wilderness that these heathens, called teenagers, are dealing with. They don't do anything. They just lie their beds and listen to music. This beautiful, heavy, metallic feeling they’re experiencing allows them to play through a thousand songs. All of the things happen that way.
These digital health companies happen that way.
The reason I like employers, as I mentioned in the Optum conference, is because there are more of them, and they have more range of motion than the payers do at the core, right? In fact, Firefly Health – of which I'm chairman of the board and a big fan – is actually figuring out ways to help even smaller employers become self-insured so they have more range of motion.
Buoy, for example – you're going after these large, self-insured employers because they have some range of motion. They have the budget and the freedom to try new things.
The problem, of course, is that you have to wait in line for ever. It's like going to the opening night of Star Wars every time, trying to get to these overwhelmed benefits administrators who have so many different ventures coming to them – and of course they can't piss off their employees. If you're big enough to be self-insured, you probably are making a lot of money, and you probably really don't want to cause any voluntary attrition by changing your benefits. Even if it's a great deal, even if it's great savings, you're not going to risk it.
Buoy would not take a 20% savings in employee benefits costs if it meant a 2% increase in employee attrition. So, it's like, "Eh, better not. Better let it go. Let Blue Cross have their way with me.”But that's not true of machine shops and tree services and restaurants, because all of these places just dump their employees on Medicaid, cut back on what they can cover, or go out of business.
These smaller businesses are, again, further out in the periphery. They're willing to go out on the shop floor and say, "Well, team, we're not going out of business, but everybody's going to get all their care virtually, unless it can't be delivered that way, because that's the only way we can afford it. Now, instead of paying $600 per employee per month, we can actually pay $200 per employee per month.” And that’s something a lot of Americans would happily afford.
So, one of the great magics of Buoy is all that elaborate technology that guides someone to a cost-effective benefit that they already have. No one at the employer has the will to just stick the employee with the difference in costs.
The idea is to migrate from the payer to the big employer to the little employer – and hopefully, God willing, we find a way to preserve the safety net – and then move it all to the individual. Then people can say, "I don't need any of this, but I want all of that," and you have lots and lots of room for cool entrepreneurship. But in the meantime, the employer is our proxy.
Instead of going to the appropriate level of care, people get scared and head to the ER. Buoy helps work like a PCP and A) helps the person figure out what is wrong and B) what they should do next.
Andrew: I love that. When you think about the future... I mean, God, the last six to twelve months have been crazy for digital health.
You've hit on themes of the employer and the periphery and all the change there. And you’re seeing a lot of successful companies go direct-to-consumer. You're talking about Firefly's strategy of going to a small employer, and then there’s Livongo/Teladoc, which took a more traditional distribution path through the payer.
Jonathan: Well, remember, Livongo and Teladoc started with big employers. As they got traction, they could show enough data that the payer got FOMO and included them. But they did not start with payer contracts because they couldn't get them. Again, there are so few payers, and they're so bogged down by regulatory constraints and their market dominance, that they're really in the business of minimizing scenarios of maximum regret rather than trying to improve or aspire.
They're past that stage.
But I think if you check the record, you'll find that Livongo started with employers, and then the payers lumbered along behind.
Andrew: I totally agree with you. I guess my point here was that their later stage of their evolution really leaned on payer distribution, which is different than going direct-to-consumer or directly to the small, self-insured employer – from a pathway perspective, at least.
Anyways, the question I was teeing up is related to all these different pathways, these frothy valuations – all of the money that you cited going into venture, from VC going into digital. Walk me through your view of what's going to happen over the next two to five years.
Jonathan: Well, I think we have to remember there are two things going on, right? First, there's something that has nothing to do with us, which is the federal government literally printing money, and the value of money is declining at a rapid pace. Whether Jerome Powell says there's inflation or not, we are looking at inflation, right?
There are these companies that are worth, say, 20 times revenue with no profit. I mean, one cause of that is that you can now replace 80% of the value of an equity with debt that the federal government is managing at zero or 1% at the core of the wholesale price of that debt. So, wow. Let's not get carried away with ourselves.
The late Ed McMahon was the co-host of the Tonight Show with Johnny Carson.
Still, the other side is we are in a second, ripe place at the fringes of healthcare. The exchanges have normalized. They're there. They're maybe even less screwed up over time. The employers have adjusted to the fact that they are still at risk for this. It's not going away. There was a period where they kind of pulled back and didn't innovate because they thought Ed McMahon was going to come from the Obama administration and make everything free, so why would they risk pissing off their employees to try and save money?
Those things are normalized. And as I mentioned, I think we all know that the technology environment and the data-sharing regulatory environment are both ripe. It's a really good category to invest in because the size is so vast and the room for improvement is just falling off a log everywhere. I think that's the other side – there's a lot of room to make minor changes, but across many, many people and many, many dollars, and then generate return. So, we're seeing both.
Andrew: I love those two reasons as to why you're seeing these frothy valuations and the amount of money coming in. I guess the follow-on question, Jonathan, is – do you see a lot of consolidation happening? Do you see further fragmentation?
Jonathan: Well, it is the natural way of things, right? In the early stage of a category, of an industry, of a movement, of whatever, there are many, many, many people, right? Like the Monty Python where there's... You walk out of the castle. One guy's Jesus, but then there are, like, 16 other Jesus-like creatures that could've ended being Jesus. We ended up centralizing on Jesus and in Christianity, but there was a guy who claimed that God was a chicken, and clearly that guy lost out.
What's the next Holy Grail of healthcare?
Similarly, in digital health, it's, "Oh, it's the internet of things (IoT)," "No, it's health and how you eat," or "No, it's all those things.” And all of those things have legitimate pathways, and based on accident and leadership and technology choices, a subset of those will track and grab and accumulate the others. In more mature areas, you're down to very few players.
Most of the economy is mature at any given time. And most of any mature section of the economy is owned (as Karl Marx would tell us, right?) by a very small number of players. We've got, what, 50 payers that make up 80% of all the commercial market and probably the Medicare Advantage market? Every once in a while, we see them even consolidate. If the government would let them, they'd probably consolidate further, right?
Andrew: Not going to argue with that.
Jonathan: Because there's no range of motion. The regulatory environment and the market expectation are such that there's not much they can do to change it up until you move outward from the core to find where most of that range of motion is.
We've got, what, a bazillion direct primary care, virtual primary care, and virtual care players? Firefly has decided to go with a full virtual Kaiser, a full benefit, cover the whole thing, pull specialty care in, and so on, so they can go after medium-sized, and maybe eventually small employers with full benefit.
Other guys are saying, "Nope, I'm just going to build near-site clinics with a thing." One Medical is like, "Hey, all our waiting rooms have orchids. And our staff is so modern and friendly," or whatever. They've got positioning with law firms and tech firms, and that works there. We can imagine each of these settling on the tectonic plates and then consolidating once they figure out what works.
My favorite time is this busy time when it's not clear what'll work. It's when I think some of the best of human potentiality is expressed, and most people get heard and most... lots of businesses fail. But it's a little bit like war with no violence. It brings out the very best in us, causes us to stretch.
Andrew: I love that. You really are now in your second war. You were there at the EMR war and the revenue cycle management war, and now you're in the virtual care war. Super interesting.
Jonathan: Two wars – make me feel old. It's odd to feel old. I never noticed. I'm still sort of 35 in my own mind, and then I go running, and 60-year-olds are blowing past me on the reservoir.
It’s fun to be able to be back on another turn of the film loop without the same Napoleonic tendencies that were natural to me when I started. I like the idea that I work with a portfolio of CEOs. I'm the CEO of Zeus, but hopefully there'll be a new CEO of Zeus before long. And I'm a little bit more of a reservoir of experiences and humility. I do some cheerleading support. It's a nice feeling to see the game and not feel so existentially threatened by its rises and falls.
Andrew: Jonathan, I feel like I could just talk to you for like nine hours and just hear every little thing that comes out of your mouth. It's so refreshing.
We’ve covered quite a bit of history, too – Muhammad, Jesus and Napoleon, and in mythology, Zeus and Athena, and in popular culture, Monty Python and sweepstakes pioneer Ed McMahon.
Jonathan: Well, I'm a talker, dude. I'm always free.
Andrew: Well, this was so good. As someone going through their first war, literally everything you say is gold. It's amazing. Thanks again for sharing your wisdom.
Jonathan: I had a ball. Be well.
Jonathan Bush, Co-founder and former CEO of athenahealth, executive chairman of Firefly Health, Board member at SonderMind and Innovaccer, man about town in Boston circles, and (as Andrew nicely puts it in the opening of this exchange) the “OG”, or “original gangster” of digital health innovation.
Andrew Le, MD, is the CEO and Co-founder of Buoy Health.