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Lessons from Andrew Schutzbank, MD: Creating and Capturing Real Value in Healthcare
Andrew Schutzbank is the CEO and Founder of Schutzworks. He is also an advisor for Credo, SCAN, Kivo Health, a board member of Activate Care, and on the Pear's Healthcare Advisory Council
Welcome back to the Pear Healthcare Playbook! Every week, we’ll be getting to know trailblazing healthcare leaders and dive into building a digital health business from 0 to 1.
Today, we're excited to get to know Dr. Andrew Schutzbank, former Chief Product Officer at Cricket Health and Medical Director at Iora.
Andrew spent almost a decade at Iora health, where he held the esteemed positions of Medical Director and Senior Vice President, overseeing clinical operations and product development. He was also the former Chief Product Officer at Cricket Health, an organization dedicated to value-based kidney care. He was the Corporate Development Operating Partner at SCAN and now contributes as a board member, advisor, and investor for multiple startups. He is also a clinical instructor at Harvard Medical School. Dr. Schutzbank completed his residency at Beth Israel and holds an MD and MPH from Tulane University, along with a BA in neuroscience from the University of Pennsylvania.
In this episode we talk about his journey to medicine, experience with Iora and Cricket Health, what he looks for in a healthcare pitch, tips/tricks for founders, and insights on the high burnout rate among clinicians.
If you prefer listening, here’s the link to the podcast!
Why Medicine and Public Health?
Dr. Schutzbank hailed from a family deeply immersed in the scientific realm. With an organic chemist for a father, it was inevitable that he, along with his brother and sister, would tackle organic chemistry in college—a non-negotiable rite of passage.
“Once you take organic chemistry you might as well go to medical school since this was the hardest part.”
Growing up, Andrew was surrounded by science enthusiasts. His mother worked as a speech pathologist, while his sister pursued a career in medicine. Science and service were paramount in their household. Andrew's father often pointed out exceptional restaurants, emphasizing the importance of exceptional service, a notion that resonated with Andrew.
It was the combination of science, technology, and service that captivated Andrew's interest—the very essence of medicine. This led him to pursue medical school at Tulane, drawn to its robust program, which integrated the medical and public health schools. The allure of the dual degree program was difficult to resist, especially the health systems management track, which piqued Andrew's curiosity thanks to Gene Beyt, one of the course directors.
Throughout medical school, Andrew enjoyed the learning process, the art of memorization, and the camaraderie among his classmates. However, the pivotal moment in his education arrived with Hurricane Katrina. For a span of nine months, Andrew found himself evacuated to Houston, distanced from the familiar grounds of Tulane. Transitioning from the small and familiar Tulane to the vast Texas Medical Center made Andrew realize his affinity for smaller, chaotic environments.
What Started Andrew’s Path in Advising Healthcare Startups
The journey of becoming an advisor for startups has evolved over the past decade for Andrew. His time at Iora Health was marked by working under the inspiring leadership of Dr. Rushika Fernandopulle, a remarkable communicator who consistently ensured that his teammates received recognition and visibility.
“Rushika was an incredible communicator who was always out there in the public and made sure his teammates also received the spotlight”
An illustrative example of this supportive approach occurred three months ago when someone emailed Dr. Fernandopulle, inquiring about the software development at Iora Health. Without hesitation, Dr. Fernandopulle redirected them to Andrew, emphasizing his expertise. This pattern of referrals to Andrew continues as numerous startups seek his guidance.
This pattern of freely providing advice and answering founders' questions has continued over the years. Andrew finds parallels between this guidance and the experiences of medical school's third year, where distinguishing between normal and abnormal becomes crucial. In his role, Andrew advises startups, helping them determine if their experiences align with the normal trajectory of the startup process or if the problems require immediate action steps.
"As I gained more knowledge and experience, I was able to provide better advice. Honestly, at some point during the COVID period, people began asking if they could compensate me for my guidance instead of receiving it for free. They recognized that I was consistently offering valuable insights. Since then, I have been building an advisory panel, and it has been an enjoyable journey."
When assessing startup opportunities, Andrew follows a discerning approach. If he believes in a company but has limited time, he may make a modest financial investment. With more availability, he offers advisory services. For ventures that deeply resonate with him, Andrew is open to dedicating significant time and even considers actively joining them. This thoughtful mindset guides his decision-making process when evaluating various opportunities that come his way.
Andrew’s Experience with Iora Health
During the third year of medical school, when Andrew was immersed in the internal medicine rotation, he found himself reflecting on the nature of healthcare. The realization dawned upon him that the primary focus seemed to revolve around completing notes rather than delivering the intended service to patients.
This revelation prompted Andrew to question the existing healthcare system and its priorities. He recognized the need to reorganize healthcare to align with its fundamental purpose, emphasizing the provision of quality service. It became evident that the prevailing approach often neglected the well-being of practitioners and hindered the delivery of optimal care.
“I became obsessed with how we delivered and experienced care. I went on this journey to find like-minded individuals and came across Rushika, Co-Founder of Iora Health, who was one of the most engaging and exciting people I met who was thinking of starting a business centered around improving the care we delivered and I did not let go of that connection.”
Andrew's unwavering determination to contribute and be of value solidified their connection, eventually paving the way for their joint endeavors at Iora Health.
The earliest phase of Iora Health revolved around the relationships that Rushika and the investors had with self-insured employers and unions. This sector provided an intriguing space for innovative care, allowing for a departure from the strict rules and constraints imposed by the fee-for-service model. Payment systems based on stringent note-writing and E&M coding were not applicable in these environments, as payers had more flexibility in determining payment structures. Primary care's enthusiasm for value-based care stemmed from the inherent difficulty of quantifying and describing the services they provide. Motivating patients to make lifestyle changes or managing complex conditions is not easily quantifiable, making traditional fee-for-service models insufficient.
“If we could easily quantify the value of what we do, we could simply stick to the fee-for-service model due to its straightforward payment structure. However, when it comes to motivating individuals to adopt healthier eating patterns for diabetes management, it becomes challenging to measure the impact.”
The first phase of Iora Health focused on serving self-insured employers and unions, a population that Andrew deeply cared about. He believed that there was a crisis in caring for working-age individuals in the country, who often lacked adequate attention and support. While pediatric care received significant attention and seniors were covered by various programs, the majority of the population was left to navigate healthcare on their own. This presented a tremendous opportunity to make a meaningful impact. However, building dedicated practices for self-insured employers and unions in locations with a low concentration of individuals, such as outside Las Vegas, posed a challenge. The next phase, Phase Two, involved expanding into Medicare Advantage, as seniors represented a demographic with significant health improvement opportunities.
Andrew saw Iora Health as a company focused on solving complex problems for individuals with a high degree of complexity, rather than solely making sick people better. Additionally, there was an attempt to bring the same model to those on the Affordable Care Act exchanges through a company called Harken, created in collaboration with United. However, the challenges of navigating the politics surrounding the Affordable Care Act exchanges and the competing interests of United hindered the success of this venture.
“With Harken, we were unable to achieve the long-term impact we desired. However, the experience taught us valuable lessons about consumer service, particularly through our interactions with younger populations.”
Ultimately, Iora Health was acquired by One Medical, and Andrew departed during the COVID era, which he referred to as the "virtualized era" of Iora Health. This period marked a shift from a predominantly physical care model to a hybrid approach, combining in-person and virtual care to meet the needs of their patients.
Cricket Health & Patient-Centered Care
During his time at Cricket Health, Dr. Schutzbank focused on addressing the challenges of chronic disease management. He describes chronic diseases as transforming once-automatic tasks into burdensome manual ones, with no possibility of reverting to the previous state.
The main objective at Cricket Health was to slow down the progression of chronic kidney disease (CKD) and ensure a smooth transition for patients from CKD to end-stage kidney disease. This involved providing coaching and support through a virtual platform, with an interdisciplinary team comprising nurses, dieticians, and mental health professionals. The goal was to prolong CKD without the need for hospitalization and to facilitate a seamless transition for patients into outpatient settings.
Dr. Schutzbank believes that the current healthcare system is predominantly facility-centric, where patients are often brought to hospitals or clinics for care. He advocates for a shift towards a more patient-centered approach, allowing individuals to receive dialysis at their preferred location, usually at home. He emphasizes the importance of providing patients with comprehensive information, addressing their concerns about skills, loneliness, and fear.
However, Dr. Schutzbank also acknowledges that not all medical services can be effectively delivered at home, as certain cases require specialized facilities. Striking a balance between home-based care and facility-based care is crucial for improving the healthcare system.
Key Characteristics that Andrew Looks for in a Pitch
In the realm of healthcare businesses, there exists a distinct challenge involving two key components: value creation and value capture. This challenge is not exclusive to healthcare, but it holds particular significance within the industry. The unfortunate reality for new founders in healthcare is that creating value, which entails outperforming the existing system, is not the most difficult aspect. Instead, the real challenge lies in capturing and sustaining the value that is generated.
“Drawing from my nearly 20 years of experience and immersion in the field, I have seen numerous case studies of companies that embarked on ambitious endeavors only to stumble due to their inability to effectively capture the value they were creating.”
When assessing founders, Dr. Schutzbank looks for a mission-oriented mindset and a clear and specific vision for making a tangible positive impact on the world. Personally, he tends to lean toward companies with a patient-focused approach rather than being solely provider-centric. This preference stems from the recognition that doctors, as customers, do not necessarily contribute substantial financial resources. Additionally, he values founders who possess a realistic understanding of value capture and exhibit a well-thought-out go-to-market model.
Conversely, Dr. Schutzbank is cautious of companies that exhibit an overly mercenary approach, merely optimizing inefficiencies within the billing system without a broader mission. In his role, when investing both his money and his time, he seeks individuals who are committed to making the world a better place, who possess a clear vision of how to achieve their goals, and with whom he enjoys collaborating.
"I want to see these individuals succeed, which is why I invest in them and dedicate my time to their endeavors."
While market size and financial calculations hold importance for venture capitalists investing other people's money, Dr. Schutzbank places a higher priority on supporting individuals whom he believes have the potential to make a positive impact on the world. What intrigues Dr. Schutzbank is the consensus among many investors that a startup's success predominantly relies on the team and individuals driving it, rather than the market's size or extensive calculations. While a large market may appear promising, without a motivated team dedicated to capturing and creating value in the healthcare sector, the chances of achieving success are significantly diminished.
Tips for Founders when Developing their First MVP
Product strategy and positioning hold significant importance, often surpassing the product itself when it comes to getting started with a MVP. This is primarily due to the challenge of capturing and creating value. To tackle this issue effectively, it is crucial to have a clear understanding of your users and customers, along with their distinct value stories. This necessitates investing time in conversing with these individuals.
For instance, let's consider Kivo Health, a virtual pulmonary rehab company that Dr. Schutzbank is currently assisting. Kivo serves patients with COPD who are undergoing virtual pulmonary rehab, and Medicare is the payer in this case. Thankfully, Medicare already covers virtual pulmonary rehab, so there isn't a convoluted value story to communicate. By aligning with an existing fee-for-service code, Kivo can deliver its services and bill Medicare accordingly.
"I actually advise all companies, whenever possible, to make their business work for fee-for-service. Whether it's direct-to-consumer retail fee-for-service or health insurance fee-for-service, it is highly recommended because value-based care can be incredibly expensive. The payment for value-based care comes much later, and it requires significant resources to operate, ultimately driving costs through the roof."
As a product analyst, Dr. Schutzbank’s approach revolves around gathering feedback from users and customers to understand their perspectives as early as possible. Every company starts with an expert in the field, and while their expertise is valuable initially, it becomes less reliable after about six months. They become biased and are no longer representative of the customer base. This is a trap to avoid, as the history of medicine is replete with instances of substituting doctors' opinions for patients' opinions, leading to failures.
Similarly, companies often fall into the same pattern. It is crucial to seek consumer validation and avoid relying solely on the certainty and understanding that comes with clinical expertise.
During the early stages, both quantitative and qualitative validation methods are invaluable. These methods involve observing how individuals interact with the product, identifying their struggles, and actively seeking feedback. It is important to strike a balance between measurement and the collection of useful feedback. While some degree of measurement is necessary, it should not take precedence over obtaining valuable insights. Detailed measurements can be incorporated at later stages when the product is operational and more data-driven.
Insights on Reimbursement and Pricing:
Startups often face challenges when developing innovative digital therapeutic products or medical devices that may not be covered by established codes or lack a reimbursement mechanism. This uncertainty surrounding unit economics and future forecasting makes it difficult to invest in such startups. The key question to consider is who will pay for the service or product.
“I think about it simply as who is going to pay for your service?
If you insist on consumers paying, each consumer will have a different price point. When attempting to sell to an individual consumer, your price determines both your market size and market segment.”
Pricing plays a crucial role in understanding the market dynamics and potential economics of a business. Different pricing strategies and customer understanding can significantly impact a company's viability. For instance, targeting sick individuals with limited financial resources and expecting them to pay exorbitant amounts perpetually is an ineffective strategy. On the other hand, identifying appropriate codes, understanding pricing options, and establishing a foot in the door can provide insights into potential economics and market opportunities.
When evaluating vendors or startups, it is beneficial to seek those who comprehend the importance of pricing and market dynamics, even if they haven't fully defined the problem they are addressing. Additionally, when engaging with payers, it is important to recognize their preference for lower pricing. Attempting to sell a reduction in medical expenses for substantial amounts may not resonate with payers because they may not believe you and payers typically prefer minimal costs per member per month.
Ultimately, understanding the target users, the benefits they receive, and the value story of customers are crucial factors in determining pricing and reimbursement strategies.
Envision the First Client Before Creating the Product
Dr. Schutzbank believes that starting a business should only be done when there is a specific first client in mind. Instead of coming up with an idea and then searching for customers, he emphasizes the importance of building relationships and focusing on customer acquisition and problem-solving.
He has observed that there have been very few new ideas in recent years, but rather a repetition of existing ideas that fail to attract customers. Andrew advocates for the Lean Startup concept of engaging with customers early on, understanding their pain points, and avoiding the creation of products or services that customers neither want nor can afford.
In the healthcare industry, one of the significant challenges lies in the limited number of payer intermediaries that can aggregate and distribute solutions to patients. Despite the abundance of venture capitalists funding healthcare companies, the distribution channels remain limited. This presents the dilemma of democratizing care and moving beyond reliance on Medicare and Medicaid.
However, this endeavor is complicated due to regulatory constraints and the risk-averse nature of payer organizations. Founders should prioritize identifying customers before developing products, as this approach mitigates the risk of creating something that lacks demand.
Burnout in Healthcare
In post-World War One Germany, particularly after the collapse of the Weimar Republic and the subsequent hyperinflation of the mark, transactions were conducted in millions and millions of marks. This was a time when computers were not yet available, so bookkeepers had to physically transport wheelbarrows filled with logbooks and account books to process these transactions. Consequently, there was a perception of a shortage of bookkeepers when there was not.
Likewise, in the healthcare sector, doctors and healthcare workers, in general, represent a highly intelligent and versatile workforce that often finds itself assisting patients with non-clinical tasks.
“As a primary care doctor, I have facilitated various non-clinical tasks alongside my clinical responsibilities. These tasks have included helping individuals access necessary resources, such as charting their route to the nearest CVS and intervening with their employers when needed among many other tasks.”
There exists a significant work design problem within the field, one that is fundamentally crucial but often goes unnoticed. Over the years, it has been observed that each practitioner has their own distinct approach to combining computer-based tasks with human resources-related duties. This lack of standardized processes and role clarity creates challenges and inefficiencies.
“Continually piling more tasks onto an already labor-intensive system, which operates on a foundation of guilt, contributes to the prevalent issue of burnout.”
Addressing this problem is far from simple; it represents an immensely difficult challenge. Furthermore, it is essential to recognize that individuals outside the healthcare sector often fail to fully grasp the limited understanding clinicians possess regarding their own work.
Advice from Dr. Schutzbank
Success in a career often involves a significant element of luck. Make the most of the opportunities that come your way.
Consistency and perseverance are key. Keep showing up and give your best effort, even when faced with challenges.
If you no longer find joy in what you're doing, it's alright to move on. However, strive to leave things in a positive state.
Approach your endeavors with humility, empathy, and grace. Treat others with respect and kindness.
Nurture relationships with mentors as they can provide valuable guidance and support.
Contribute meaningfully in your chosen field or area of work. Give your best and make a positive impact.
Focus on addressing the problems that ignite your anger or anxiety. Passion for solving these challenges will drive you forward.
Choose a cause that truly resonates with you and commit to making a difference. Don't give up until the problem is solved.
Recognize that the journey won't be easy, but the potential for significant change makes it worthwhile. Stay determined and persevere.
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