In Part 1 of our interview with Mark Nelson, Crossover’s Chief Financial Officer, we discussed how he joined the company over three years ago just after a significant financing round propelled the company to a new level of growth. In Part 2, Mark speaks about integrating financial conversations deeply into the DNA of Crossover operations, how the “digital first” model enables scale, and how core corporate values have helped the company grow.
What do you think of digital-first care?
I think it’s absolutely fantastic. There are plenty of members who want to maintain the relationship with their provider, which means they want to be able to come into the office sometimes, but most of the time, they just want to quickly get the answers they need from the provider they trust. They might not have the time to go across town to visit in person, but they certainly appreciate the ability to log in, have someone get back to them really quickly, and get their situation resolved. In our fast-paced world, with people being remote more often than not, our digital-first strategy has already been really well received.
From our perspective, the onsite business model has no financial downside—that was how we grew our business for the first seven years. The nearsite business model really expanded our reach and opened up the market to new employers but it did come with location selection, millions of dollars of capital improvements, and the 6-9 months build out that our facilities team has gratefully standardized. Digital first allows us to use our virtual business model, and pull forward that care (and its associated revenue) without all those financial and operational delays. It really allows our business to get some leverage. Not to mention the inherent efficiencies that are built into the actual care model as well. Being able to provide care to the entire population now, as opposed to only small numbers of eligible employees who live physically proximate to our care, is a very positive game changer for the business.
How do you price for this new model of care?
When we acquired Sherpaa, Jay Parkinson, MD brought in the concept of the Episode of Care, and we’re building our pricing model around this. It’s a pretty elegant concept on one hand, but given its novelty, it is still somewhat challenging for clients to understand, given how ingrained the concept of a “visit” is for them. As it turns out, we had already begun to adjust our entire financial model and prior pricing model pre-COVID. When the pandemic actually hit, we were glad we were pretty far down the road as far as working through how to move beyond the visit into a full-cycle episode of care for the various conditions we treat. We still have some things to figure out, and are working on simpler ways to communicate the concept, so we can pick up momentum in the market. Our early adopter clients have an intellectual understanding of the concept, but the experience with this new model is so early that we still have some work to do to better articulate the value. We do believe this will be the future of how primary care is priced.
How has COVID-19 affected the business?
As I mentioned previously, so far we’ve been holding up well. I think, though, that if there is a protracted period of disruption and people working remotely, employers, who thus far have been very understanding and appreciative of all we have done to keep our care teams engaged with their members, may start asking for changes in the pricing model if in-person utilization remains low. For the most part, in these situations, we have been able to use our current care teams to expand the populations we are serving by adding virtual or new COVID-related monitoring or testing services, to ensure we are continuing to add value.
Many of our health centers operate as onsites and the clients have good visibility into the economics of practice. There isn’t a lot of gross profit in primary care and clients have full transparency into our costs, as well as the risks we’ve taken on in general. It’s somewhat ironic that clients occasionally will grind on our pricing when they never do any checking into the network rates they are paying for primary care (or especially speciality care) as contracted by the insurance companies. I see this as a massive opportunity—as employers get more familiar and understand the dynamics of healthcare pricing, they are not going to tolerate the excessive costs that occur in the community, and they will expect and demand better value…or they will continue to pay for more and more healthcare directly as they do with us. The short-term pain of the pricing transparency for us allows us to learn to be highly competitive in this new environment while giving employers a tremendous advantage as they start to directly contract for more services in the network as one way to take on more ownership for the total cost of care.
How do you communicate the importance of finance to people who come from a clinical background?
People in healthcare have never really had to think about the business side of care before. At my previous company, the leaders in the different areas were trained in operating, achieving goals, and profitability, and they knew the language of finance. In healthcare, people who run clinics have no training in finance and business processes and have almost been pre-programmed to feel they do not need to worry about costs because the care itself is so important. However, as we remind our medical group occasionally, “where there is no margin there is no mission.” It’s a key part of my job to move past this challenge, to be part of the education process, and to ensure we have tools, reporting, and analysis that help our leaders “run their store” and understand how to achieve our financial objectives, just like they are already trained to achieve our clinical outcomes. But you also need a complete end-to-end training system to align incentives, motivation, and education for the medical group in becoming leaders of their practices.
To be fair, most of the costs and revenue of a clinic—number of members, revenue per member, depreciation, consumables—is either out of a clinic leader’s control or immaterial. What a clinic leader can do to manage the financial performance of a clinic is primarily around staffing. They need the training to understand the impact of, for example, adding one more doctor, and we can help by providing the dashboards that not only let them see their current state, but also project what their staffing needs might be in the future. Helping them forecast their staffing has been a critical body of work we have been developing over the last year.
Crossover has traditionally talked about the Triple Aim—access, experience, and cost. I often remark that sometimes it feels like we are only actually focused on the “Double Aim” because there isn’t enough education, skill training, or proactive insights to go after the financial aspects with the same intensity that the other two naturally get. This is where I have partnered with our Medical Group leaders Sally Larwood, RN (Chief Nursing Officer) and Stephen Ezeji-Okoye, MD (Chief Medical Officer), as well as our operations leader Joe Ennesser (VP of Operations) to get our teams focused on the full Triple Aim. It’s been a work in progress, but I can see the forward motion, and the company’s financial performance has started to reflect this work.
What are the new financial “metrics that matter” when you are training your clinical leaders on financial acumen?
The evolution of access to data is helping us to teach the finance story. When I got here, and even more recently, we’ve had KPIs that relied on visits. That’s not the way we should be figuring out our performance, even though we created those KPIs. Hypothetically, providers could work the system by just creating more visits and making their schedules look more full, when what we really want to have them focus on is managing their entire population, not worrying about whether their schedule is full. We need to understand how—with a given population and number of physicians—we can cover a population, compare results in our system, and create the standard by which we can objectively measure our overall performance.
It’s been interesting because I get to see this from my financial perspective. I can literally watch a physician leader we hire from the community, who’s been trained their whole career to crank out visits and increase the number of visits by any means necessary, begin to see the larger picture and bigger story of what we are trying to do at Crossover. We don’t care about the visits or how full your schedule is because that is just activity-based metrics as opposed to achievement-based metrics. We have to go through a debugging process where we disabuse the notion of a visit, and instead re-route to the care metrics that show our model improves the overall health of the population at a lower total cost of care.
We’ve got some great studies now, which are a direct result of our investment in a robust enterprise data warehouse, where we can show that in both physical medicine as well as mental health, we can achieve the same outcomes with far fewer traditional visits than in the community. But ironically, the patients love our care much more than what they find elsewhere, and of course our employer clients can see the financial impact of this model clearly. It’s pretty obvious and intuitive—when you eliminate the need to generate visits to increase revenue, and instead measure the actual health outcomes of members, you automatically align incentives to achieve best outcomes for all parties involved.
Interestingly enough, a large part of the debugging lies with the clients themselves, who through a combination of tradition and outside consultants, are often stuck on visits as the only measure of value as well. COVID-19 has really forced this issue, because in-person visits are in many cases no longer possible or practical, and the very idea of what a visit is has come crashing down. The value of asynchronous messaging, and the ability to conduct more care than was assumed outside of a “visit” has really opened their eyes and saved us 3-4 years of “convincing.” It’s all good progress and we look forward to getting into more sophisticated risk models in the future.
Which Crossover values resonate with you?
The ones that really resonate with me are “Be Fearless,” “Stay Curious,” and “Design Everything.” They represent the culture and history of where the founders came from—including what they were, and had to be, to get this company off the ground and disrupt the healthcare industry. Their business model of care didn’t exist before, so they had to find a way to provide an almost membership-like platform in order to get large employee populations engaged so that they could demonstrate the value of the care model. They also knew that they couldn’t acquire members one at a time—they had to get big membership numbers in waves—and that the employers were actually payers who were ready and willing to make some big changes in how they want to pay for care delivery in the future. I think those three values are keystones in the company’s history and what has made it successful.
Personally, I like Design Everything the most. When I joined VIZIO it was still a small company, only four years old, and it grew to billions of dollars in revenue. When I got there, there was very little built in terms of controls and processes, and so we had to learn that for every challenge we ran into, we had to design a way to make it work. We weren’t massively resourced, so we had to learn how to design these solutions while remaining nimble and small.
That has been, and continues to be, very analogous with the journey that we are on here at Crossover. Designing a team, designing processes from care delivery to pricing, all the while fundamentally redesigning the entire care experience—all of these things are going to be key, and we need to hit all the high notes simultaneously. We’ve moved from five to about 50 clinics over the next 9-12 months, and we hope to break 100 as our next milestone. At this scale, you really need to have systems, processes, and teams in place to be able to operate and run well. This is the work we are currently focused on.
Having worked in a variety of companies of different sizes, what is your take on the start-up culture? Where would you be if you were not at Crossover?
I don’t think I’d get the same fulfilment working at some large, slow moving company. In fact, after investment banking, 100% of my roles have been with high-growth companies. Healthcare? There’s pros and cons to any industry and I think the fortunate thing about finance and accounting is that I’ve covered a number of different sectors. Finance and accounting have standard rules and frameworks and those are fungible across industries. With that said, healthcare has a certain long-term appeal to it…it is always needed, effectively recession proof, will be required to manage an aging population, is anticipated to grow over the years, and is not subject to the same economic cycles as other industries. I guess you can say healthcare as a focus has a lot of attractive characteristics.
Any final thoughts?
I think it’s interesting that companies are finding out that they don’t need to assemble the workforce in one building anymore. People are working well remotely. Personally, as a manager, I’m able to manage my team and ensure the outputs of the department in this new environment just as I did before. I think companies are finding out that commercial real estate isn’t as important. They don’t need five floors in Manhattan when they can get away with three floors. And, this entire situation has just accelerated the process of people migrating out of cities after such an inflow the last 20+ years.
We’re probably going to have to have our feet in both worlds. We’re probably going to allow “hoteling”, or to reserve spots in the headquarters location, but if our employees want to work remotely, they can. I think it covers both personality types—those who are climbing the walls at home and the folks that are perfectly fine with it. It’s a bit like our own mantra—“digital first, strategically in person.” Before all of this hit, we were seriously considering expanding our corporate office space but we have eliminated that for now. I think that Crossover will continue with this management approach as an employer ourselves, and I see our clients doing something similar. I also see that our clients’ expectation of our business will be similar, which means our transition to expand into virtual care 18 months ago is really paying off for us now. I cannot wait to see where this takes us over the next 18 months.
Many thanks to Peter Heywood (one of our long-standing brand advisors and business consultants) who helped conduct these interviews.