In Part 1 of our interview, Nihal Shah, our new Chief Financial Officer, described his journey through finance and healthcare that led him to Crossover. In this second part, he digs deeper into what he sees as our company’s unique qualities, and how in a rapidly-shifting and consolidating healthcare industry Crossover will ride the waves of change to success.
In your new role as CFO, you are going to have to wear both the care delivery as well as financial sustainability hat. How do you balance these two often contradictory forces in your new role?
I’m probably more of a non-standard CFO which fits well with my focus being much more oriented toward strategy. My mandate is helping Crossover become a bigger platform and the economic implications that come with that. I think if you pull back the covers on all digital health companies, the majority don’t make money and have no path to making money anytime soon. We are going from a world of free money from investors to now much higher interest rates and so suddenly issues like profitability, cash balances, and burn rates have returned as priorities. We have to ensure the care delivery and business model both are strong and self-sustaining, and put Crossover in a place to win.
The bar for healthcare service excellence is pretty low and a comprehensive, integrated, and accountable model like Crossover doesn’t even seem possible. What type of education is required for employers to actually purchase Crossover services?
This was my point about simplicity. People want to go to just one place, and they want everything taken care of. In Crossover’s model, you walk in, you get the primary care you need, your blood is drawn and labs processed in 10 minutes, you’re getting your prescription with the dispensary filled right there, all of this in one simple visit with your trusted care team. And if you need to go get your teeth checked, or you need to see an optometrist, in some of our health centers that is available as well. Think about trying to replicate all of that in a non-Crossover world. Think about the amount of time, cost and waste that is reduced by Crossover’s integrated care model.
When you’re talking to investors about Crossover in this new business environment, what are the key differentiators for Crossover?
I think the biggest point of differentiation is first understanding what the most defensible moat is. For Crossover, the moat is our true hybrid care model which is an integrated care system that is delivered physically and virtually. Our client list is a testament to this. There are very few digital health companies that have the logo list that we do – Apple, Comcast, Meta, Microsoft, Micron, nVidia, Pepsi, Amazon – and other Fortune 500 companies. We’re installed either right in their facilities or right next to them, in the beating heart of their businesses which gives us a really strategic “center of gravity” from which to embed into their benefits ecosystems. It then becomes easier to extend outwards from our physical care delivery core into the virtual side, into point solutions, and other specialty services. It feels that our underlying positioning, as well as our positioning relative to that employer benefits ecosystem, is what creates the defensible moat.
So you’re saying that a hybrid model is stronger starting from a physical presence orientation?
That is the dirty little secret of digital health, and this is something that you also see in general tech. We overemphasize what we can do with innovative technologies, and don’t talk enough about the integration between the physical world and tech—which by definition is virtual—and this is where things fall apart. All the digital health companies talk about how they successfully meld physical care and virtual care, but it’s not nearly as built out as people are selling it today. I can now see, with my new Crossover perspective, just how hard, complicated, and challenging it is to deliver true hybrid care seamlessly across various care channels. And, when you get it right, how powerful the experience and truly differentiating it can be.
We talked at the beginning about value based care and at risk contracting models. What’s your view on how well prepared the market in general and employers specifically are prepared for this?
It’s two sides of the same coin. Value-based care is very complicated, and the employer market doesn’t really want to spend a lot of time thinking and talking about these care delivery nuances. It’s not their core business. They don’t want to bring in an actuary on their team to help them understand what their healthcare costs can be. They want a cap they can take to their Chief Financial Officer to get through budgeting and then they want to get back to the rest of their business. Furthermore, most employers can’t always justify a care model which requires heavy first year investments with the hoped for return 3 to 5 years out–they just aren’t in a position to make these decisions. The incentives in Medicare Advantage, like being the bearer of risk and sticky populations, don’t actually exist in the commercial markets to the same extent so I think it will continue to be an uphill battle.
Crossover is very well prepared to begin this journey with our most advanced employers and our newer payer relationships we have initiated. We have a lot of the data and we have the ability to engage in value based conversations but I think we are still very early in the commercial adoption of these models. I’ve been watching value-based care for 10-15 years and the only place I’ve seen it work is in select Medicare Advantage markets given the characteristics I mentioned previously. I remain hopeful and supportive of our team’s early efforts but believe that the level of sophistication needs to mature to make this viable in the commercial sector over the next 5 years.
It’s interesting that companies do not view their health care spending strategically like they do other aspects of their operational expenditures. Do you see a day where, for example, the rigor they apply to standardizing supply chain management will be applied to the health care supply chain expenditures?
I think that awareness is coming slowly, and that’s why I’m hopeful in the long term we can help employers get there. It’s going to take more time and it’s why I personally think it would be financially imprudent of me to push too strongly to put all of our resources into a value-based approach at this time. I am positioning us to be ready for that change as the mindset shift happens, but we need to become operationally much more sophisticated today and focus on strengthening our core operating metrics and business. There is something called being on the ”bleeding edge” and you are going to start seeing a lot more dead bodies in digital healthcare in the near future. Look at the public market where many value based care focused organizations have lost just an immense amount of money. It’s unprecedented how many billions of dollars have been lost being too early, too bleeding edge. There just isn’t an appetite to be that far out on the risk curve right now.
Given those challenges, how are you evolving and guiding Crossover’s strategy now?
Crossover represents what I consider the ideal end state for healthcare, and it’s good business today. But we have an opportunity to better meet each customer on their journey to our ideal, by understanding four things: 1) what their economic realities are now; 2) what are their health needs today; 3) how do we adjust our services to meet both the business reality and the health need today; and, 4) how do we guide the company to meet their needs over the next 36 months as well.
Not everyone is able to do it all at once, kind of like the supply chain concepts that you mentioned previously, which is why we are seeking incremental optimizations bit by bit, year over year. We need to be able to meet them at their economic level, providing them a relevant piece of the total solution and then over time building in the additional services they would value as our clients move toward the ideal integrated end state. Equally, we need to be able to sell them what they need in situations where they already have a mental health or an MSK solution for example. We want to increase our ability to fill in the gaps in a more flexible way and then over time, serve as the integration catalyst given our unique position of trust. But you have to have the small wins to build client confidence towards the bigger wins.
What is the investment community’s interest in the sector and a company like Crossover?
You have to first understand that the whole digital health ecosystem is now very saturated. I saw a report that noted that there are something like 13,000 digital health services, so when people tell me it’s a nascent industry, my response is “not anymore.” I covered managed care and at one point there were also thousands of companies, and now there’s only a handful of major players that remain. It’s just normal industry maturation and the same is going to happen in digital health. There’s going to be a lot of consolidation and investors are interested in this, because fusing things together is where their capital is most useful. That’s part of Crossover’s attraction and opportunity to build out our platform and our business in a way that we will have the opportunity to be the consolidator.
Crossover has always practiced its core values. Which of these stands out for you?
I think the biggest value for me is always going to be the member centricity I see as a result of “Design Everything”. It’s so important for our company and I see it every day in all our various conversations. There have been so many times where business decisions need to be made and the first thing people ask is “what’s the member experience?” This is one of the few industries and specific companies where people care so much about what they do and they’re truly here for the right reasons.
Is there something about you that’s worth sharing that somebody would find surprising?
What surprises people, which is probably the wrong thing for a CFO to say, is I’m a little bit of a daredevil. I’ve done the world’s highest bungee jumping in Macau. I’ve done skydiving, I scuba dive and I feel like that’s a good balance to the more conservative tone that I have to take on in my actual day to day role. I just had my first daughter and becoming a father, I’m already starting to think more risk adversely. I can’t wait to see how that changes how I approach those hobbies as well as my outlook on life and the future.
Many thanks to Peter Heywood (our long-standing brand advisor and business consultant partner) who helped conduct these interviews. Please read Peter’s other Crossover Leader Series Interviews.
Scott Shreeve, MD 