Part 1: Taking the plunge into Care Delivery
Nihal Shah joined Crossover as Chief Financial Officer in January of 2023. His career path, which had been following a more conventional financial services trajectory, pivoted to healthcare some years ago when he followed an old boss into a healthcare investment management firm. Nihal was compelled by the enormous impact healthcare spending has, the imbalance of how costs are allocated today and the importance of doing healthcare right. His thoughts are compelling.
I would love to get your personal backstory prior to Crossover
I was born in Mumbai, India and my father was a CPA there which is a really hard professional achievement. When we moved to the US, none of his educational or professional qualifications were recognized and he had to create his own business from scratch. For a variety of reasons, he chose to start a toys and novelties wholesale company in the Sunnyside neighborhood of Queens, NY. My first memories were of our tiny one bedroom apartment with my father, my mother and then little brother. As my father’s business grew, we moved to New Jersey and that’s where I tell people I am from, given I spent the majority of my life there from elementary thru high school.
I did my undergrad at Georgetown, majoring in finance and accounting with a minor in theology, as I had developed a deep interest in major world religions. Right out of college, I went into investment banking at Merrill Lynch and then Morgan Stanley. After my time at Morgan Stanley, I left with one of my bosses to join a firm called Healthcare Management Partners. Its focus was on distressed healthcare investments, which was effectively turning around failing hospitals and related health services businesses. It was a really formative two years I spent there because I got to see the underbelly of healthcare in America, like the small rural hospitals that had no systems in place for quality, finances, or even care delivery. This was my start in the healthcare sector which also influenced my decision to attend MBA School at Wharton where I focused on healthcare management and strategy.
What did you find most interesting about the healthcare sector?
Generally, I have been interested in the value paradox with the US health system. We allocate almost 20% of our GDP to healthcare but the quality of what is delivered is not up to par with many OECD countries. It’s worth paying attention to. After business school, I worked at Barclays in equity research covering healthcare services, which is basically the large payers and the large providers. I got a good understanding of the commercial segment covering the large managed care providers, as well as Medicare and Medicaid, and the providers, hospital chains like HCA and Tenet, post acute senior housing, the healthcare REITs and more. In those three years I got what felt like a PhD in healthcare, because I was exposed to the best and the biggest healthcare services companies in the country.
How did your journey progress to become interested in health care delivery?
After Barclays, I was recruited to work at Included Health, a healthcare navigator. My role there was VP of Corporate Development and Strategy. In my time there, I helped grow the business almost five fold, I led the company’s Series E financing and acquired several companies including Doctor on Demand. Our goal was to create a platform that combined navigation with virtual care. One of the smaller transactions was for a company called Included Health, a name the overall enterprise ultimately adopted. While it was a smaller acquisition, it allowed the company to focus on something near and dear to my heart, equality of healthcare access.
This transaction was important for two key reasons: 1) there are many large underserved populations in the US like the LGBTQ, BIPOC, Hispanic and women for which our healthcare system really isn’t optimized to care for. The acquisition of Included Health created a DE&I practice with solutions specifically designed for these disenfranchised groups; and, 2) from a business standpoint, a lot of forward looking employers had started carving out real budgeted dollars separate from the general benefit pool, to address these specific populations. This turns out to be quite a big opportunity to do well by doing good.
What do you see as the underlying challenges in healthcare?
To understand the economics of healthcare, you have to go to its original sin in my mind, which is when we created a third party payer system. This introduced all sorts of complexity and perverse incentives. I know a lot of people are trying to do things like value based care and I would love to see a day when you will actually see true upside for providing more value in healthcare. However, I just don’t think that is the way business and business leaders are wired today. I believe at some level, people don’t want to pay for healthcare at all. That’s why I think universal healthcare is so popular in many other countries because people think it’s a fundamental human right, not something that you should actually be paying for.
Because of this value mismatch and unspoken social expectation, we have seen the rise of “digital health” to fill in the many misallocations so prevalent in healthcare. There’s not much that digital health is doing that shouldn’t already be done in traditional healthcare– putting the patient at the center of care, treating a person like a human being or using available technologies to provide smarter care. But obviously the status quo has not adopted these technologies or practices. Just look at the NPS scores of managed care companies – the only thing that has a lower score is your cable provider. These are NPS scores of 15, when most digital health companies have NPS scores well north of 70.
The biggest problem and opportunity that digital health companies have is the opportunity to attack the excessive “waste” in healthcare. There are so many situations where people are getting care at the wrong location, getting the wrong type of care, duplicative care, uncoordinated care and receiving low quality care that just causes more complications and waste. However, given the massive influx of investment and the thousands of companies that have been created, it just seems that all the fragmentation that exists in the old status quo healthcare system has just been recreated in the emerging digital health world. Unfortunately, this really doesn’t do much to advance the types of improvements that are needed.
There is also another issue that nobody talks about. The way we pay our doctors is really messed up, given that we pay so much more for specialty care than primary care. Healthcare matters, and we as a society want the best and the brightest to not only become doctors, but incentivize these people to become primary care physicians. The country as a whole is heading toward a big primary care physician shortage if we don’t change our current practices.
How did the opportunity for your new role at Crossover develop?
After my 3 ½ year stint at Included Health, I was ready for the next opportunity. From a career perspective, I’d done everything you could do in that role such as leading an IPO effort, capital raising, a multitude of strategy projects and multiple M&A deals. I wanted to find an opportunity where I could step into a Chief Financial Officer role. Secondly, my experience at Included convinced me that I wanted to get involved with direct care delivery with next gen primary care.
What attracted me to Crossover was, first and foremost, Scott. I think he’s a visionary, he’s really trying to solve a hard problem and he’s actually a good human being. There are so few people in the world who bring that combination of attributes together. Secondly, I really was blown away by the Crossover care model. I think over the past three years the world has over-rotated on virtual care and written off physical care. I believe the future is going to be hybrid care and Crossover is going to succeed because it’s such a strong blend of a great care model that mixes the best of virtual and physical care into a comprehensive, integrated, and accountable health “system”.
Could you speak some more about the value of the Crossover Model?
When you simplify things in healthcare, when you align incentives in a straightforward way, healthcare actually starts to work as intended. Putting the member at the center of the healthcare journey is a powerful thing and Crossover achieves that by focusing first on the member experience. If the member’s experience is architected in a specific way you create trust by design. If you can earn members’ trust, then you also earn the privilege to guide them in their healthcare decision-making. That’s good for medical outcomes, for reducing waste and helping lower health care costs for the entire country.
Our model’s power is amplified by the alignment that we have with our employer clients on two fronts. First, we are working to improve the medical outcomes for the population that we serve, through greater productivity, happier workers and better employee retention. And then second, we’re also reducing the healthcare cost for the client, which is obviously better for their bottom line.
However, the ultimate–and often unappreciated–value of the Crossover model is the steerage that you get from primary care. Ironically primary care represents only 7% of medical spending in America, but it strongly influences the spending for the other 93%. Crossover is a true quarterback, making sure you’re not only getting the right foundational care but you are also going to the right place for secondary care; and in the best case scenario, you may not even need to go to the very expensive specialty care network at all.
In my next post, Nihal speaks candidly about the challenges and the opportunities Crossover must address as it positions itself for success in a rapidly consolidating healthcare world.