How Evolent Health grew to a billion dollar company and IPO in just four years | Rock Health

Evolent Health

On Friday, June 5, Evolent Health debuted on the New York Stock Exchange, raising $195 million. Earlier this week, evolent closed above a $1 billion market capitalization, a meteoric rise for a company that was only founded in 2011 with the backing of the firm’s advisory board and upmc.

Reading: Evolent ipo

Shortly after the market close on Tuesday, Rock Health spoke with Frank Williams, CEO of Evolent Health, about the company and the market for value-based care. Few people understand better than Frank how provider organizations are moving away from a fee-for-service environment. a lightly edited interview follows. [malay gandhi] tell us about the formation of evolent. What would you cite in the origin of the company that tipped the odds in favor of being successful and getting to this point?

  1. Deeply understand the customer base. We spend a lot of time with health care system executives through the advisory board company to understand the issues they face, understand their vocabulary, and test different solution concepts with them to get feedback. we were in the field, getting real feedback, not in a lab.
  2. seeing talent as a strategic function, not a management function. we made an early investment in hiring a senior to develop our talent and professional development capabilities. that allowed us to bring in a lot of amazing people and impress clients with these hires.
  3. earn revenue early. I have always observed that people underinvest in business development and revenue early on. we’ve always been focused on revenue and the belief that if you can get revenue early, it builds trust and becomes a self-fulfilling prophecy.
  4. execution. In the beginning, there is so much to do and so many things that could distract us. our team really put a lot of thought into the results we wanted to get from the first few clients, and obviously things weren’t always perfect from an operational standpoint, but we got consistent results.

How could you and your early investors develop such a belief that the market was moving toward providers who took risks and formed responsible care organizations (ACOS)?

Part of it comes from having worked in the industry for a long time. When I heard from health system CEOs that the economics of their current business were going to deteriorate rapidly, it was the first time in years that I heard a real argument that standing firm wasn’t going to work. If doctors and health systems were worried about their future income, if the market didn’t allow people to continue to focus on fee-for-service, and if [health systems] couldn’t just rely on price increases, that would convinced, for an industry that has been incredibly slow to change, that there were enough economic catalysts in place.

We have, perhaps to a misguided extent, adopted a research-based approach to all new businesses. it’s all based on a real analysis of things: what’s going on with employers, medicare or benefits administrators. All of those comments pointed to the market moving in this direction, and the market is so big that even if only part of it moved toward performance-based payments, we would still have a great opportunity. eighty percent of our [advisory board] customer base thought this offer would be really attractive to them and that gave us a lot of confidence.

evolent builds on what upmc, kaiser Permanente and geisinger have done well, and helps others fit in and take risks. What would it mean for the future of health care if there were many more clinically and financially integrated delivery systems across the country?

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What we believed when we started was that these integrated clinical and financial delivery systems provide better care and have higher member satisfaction rates. If you really want to drive innovation in care management and engage chronic disease patients, those who cost the most, then you need to be able to change physician incentives, integrate their care teams, and give them better tools. Physicians then engage in problem solving and may spend two to three times as much time with high-risk patients, with all reach through their office rather than around the doctor. we believed this model was far superior in terms of cost management compared to the traditional payer model.

What we discovered along the way is that not every system needs its own health plan. If a payer is willing to share many clinical functions, share data, and share benefits with providers (what we’ve found is at least 50% savings), then we don’t necessarily need to see a proliferation of providers. health plans driven by each market.

If payers aren’t willing to partner with providers to share risk, then providers must launch their own health plans because they can’t get payers to collaborate. providers are also part of the equation. they can’t just ask for the upside and all the premium dollars and not accept part of the downside. and then they have to be able to act under these arrangements.

There has been a lot of merger and acquisition activity in the supplier sector. Do you see vendor consolidation as a good thing or a bad thing?

I would say it is both. On the plus side, if you generally believe that a shift to electronic reporting is beneficial, then consolidation has allowed some vendor organizations to make and rationalize certain investments in technology, including EMRs, technology they need to stay competitive. scaling, in some cases, can also lead to deeper specialization and better results.

A downside is where providers consolidate to the point where they gain an amount of leverage that doesn’t necessarily translate to what’s best for patients, even if it benefits the business. and in other cases, community health systems are worried that their mission will be sidelined for a larger organization and they don’t want to consolidate.

Fortunately, evolent’s model is an example of how organizations can access the benefits of consolidation while remaining independent. I’m very interested in businesses that help bring the benefits of scale, whether it’s purchasing, revenue cycle, eicus, or anything where many organizations can leverage common infrastructure, without having to go through full consolidation.

hhs stated that they want 50% of medicare payments to be value based by 2018. do you think that is a reasonable goal? what will the mix of value-based models look like?

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I think it will take a variety of forms. Medicare has a huge cost problem that could break the federal budget, and Medicare is clearly moving toward a preferred model of prepaid health care as a way to handle that cost problem. we’re going to see a lot of movement towards these prepaid models, whether it’s medicare advantage, next generation acos, [new] follow-up acos 3 or up/down shared aco models. I think by 2020, when you look at $1.3 trillion in medicare spending, however you cut it down, hundreds of billions of medicare payments will be under these models. and that’s enough is huge, whatever happens, that’s the point.

has created a clear focus on revenue: the services that lead to the technology platform lead to the upside if the technology works well. Did you face any challenges in explaining this to public market investors and managing their expectations accordingly?

Public market investors generally like to simplify where they can, because they are looking at many companies. it was easy to get us into a tech cube or consulting cube quickly. and we faced that challenge when we started sharing what we were doing.

so we worked to keep the conversation focused on our customers. and when we took the time to tell that story, there was a shift in understanding. we started talking about what was needed to help our clients transform to reach 50% of value-based payments by 2020: scale across multiple segments, launch their own health plans, take on delegated risk deals, understand actuarial science and new economic models, and so on. We were able to show public market investors that the company was more than a consulting business or a technology business – it was about our ability to improve business outcomes for our clients, and that there was tremendous opportunity beneath that.

We also thought that leaving early and being in a leadership position was important to being able to tell our own story. we have a point of view on the market and we wanted to define it because we have learned a lot from our clients.

evolent was one of the fastest growing private companies before it debuted in the public market and has always told me how important it was to manage the culture of the company. how are you managing it now that you have reached the initial public offering milestone?

We are placing as much emphasis on employee culture as we always have. We are firm believers that the culture does not change because the ownership structure does. it can still be a very mission-driven company like a public company. we make sure our people understand that this is a moment in time on a long journey, and not a time to sit around opening bottles of champagne. this is just one step on the road to impacting patient care in the us. uu., and we have to stay really committed to that.

A message was sent to our team about the IPO in terms of getting the capital and brand awareness we needed to make that impact. I feel that we have done a great job, but the creation of culture never ends. every month we talk about it, and we work on it. we survey and measure to know where our gaps are and where to invest. is important.

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