How outcome-based contracting can improve access to innovative therapies
How outcome-based contracting can improve access to innovative therapies28 April 2021 | 12min
Value-based healthcare can help to deliver the right care at the right time to the right individuals while improving accessibility and affordability
Outcome-based contracting is helping to enable the shift from fee-for-service payment and delivery models to more value-based models
At this stage in the transformation, it’s not important to get things 100% right, but to get things going
Outcome-based contracting is helping to drive value-based healthcare (VBHC) by transforming the way cutting edge and high-cost therapies are being delivered to patients and paid for.
In this interview, we sat down with Girisha Fernando, CEO of Lyfegen, whose company exists to improve the life of every patient by driving the world’s transition to value and outcome-based healthcare. Girisha shares his insights about the move towards VBHC, why this is so vital, and how corporations and startups can work together to be the necessary change.
Improving equality, affordability and access to healthcare
HT: What problem in healthcare did you set out to solve when you created Lyfegen, and why was it important to you to solve that problem?
Girisha Fernando: When I was a teenager, in just a short period of time, both of my grandfathers had passed away at a young age due to cancer and heart failure. If they would have had access to the right treatments, they might still be alive today.
We all have seen loved ones falling ill to a serious disease, and we want to make sure that they have the best possible treatment. This is why we created Lyfegen. We want to make healthcare more equitable by increasing access and affordability to healthcare and treatments for patients.
There is an increasing number of medical innovations that are available and many more coming to market, which can be life-changing for patients. Some of these therapies work quite differently, and in many cases, the patients only need a one-time administration. Promising cure, these therapies come at a much higher cost, such as in the example of one gene therapy costing more than $2M USD per patient.1
The problem is that healthcare systems are struggling to pay for such novel therapies and make them available for patients. We are used to paying for volume and continuous treatments, rather than cures. This is described as a fee-for-service or volume-based payment model.
Lyfegen has set out to help solve the problem by providing a software platform that enables healthcare insurances and the manufacturers of medical innovations to agree on outcome-based contracting models. In an outcome-based contracting model, the health insurances pay for therapies based on how well they have improved the life of patients and receive a partial or even full refund for the cost of the therapy by the manufacturer such as the pharma company producing the therapy.
The right care at the right time for the right individuals
HT: Do you feel outcome-based contracting will impact the way healthcare is delivered, moving from sick care to preventative care? And how?
Girisha Fernando: Yes, absolutely. We want to enable healthcare systems to provide holistic and patient-centric healthcare. And in order for this wider shift to happen, the way healthcare is paid for needs to change and incentives must be aligned.
We can see a shift and incentive structures are being created for patients when it comes to prevention. For example, there are programs that enable patients to pay reduced premiums if they exercise and eat healthy. But what about how other stakeholders are paid such as doctors, hospitals, caregivers, pharma and medtech companies?
In a fee-for-service or volume-based model, they do not have any incentive to foster health prevention as they would run out of business. So imagine this.
What if we lived in a world in which doctors and healthcare entities get partially paid for keeping you healthy, rather than only getting paid when treating you when you get sick? The good thing is, with the increasing shift towards value-based healthcare, and the shift towards more consumer-driven healthcare, the world is moving into this direction.
In a consumer-driven healthcare market, individuals can choose when and how they receive healthcare services. Additionally, the quality of service and added value for the patient is even better. For instance, you can digitally visit a doctor from the comfort of your home or office at any time you want, without long waiting times and any paperwork involved.
In other words, doctors are getting paid initially for keeping you healthy, and reducing the risk of expensive healthcare services further down the line. A value-based approach can help us deliver the right care, at the right time, for the right individuals.
Moving towards VBHC with outcome-based contracting
HT: Talk to us about how your solution enables the shift from a fee-for-service to a value-based healthcare model?
Girisha Fernando: The shift from fee-for-service or volume-based, in the case of medical innovations, to paying for value and outcomes poses a big challenge for health insurances and manufacturers. If the price / cost for a medical innovation is based on value and patient health outcomes, which outcomes should be used? And how can these outcomes be measured? Who should be responsible for measuring the outcomes?
Lyfegen’s platform and outcome-based contracting solution has been built to answer these questions. As an independent 3rd party, we are given the trust of the health insurances and manufacturers to help define which outcomes to measure for a given medical innovation, and to collect the necessary data to confirm whether these patient health outcomes have been achieved or not. Depending on these results, the health insurance only pays for the therapy if it achieves the desired results for the patients.
HT: Are you measuring the value of medical innovations based on patient-reported outcomes?
Girisha Fernando: There is a variety of data that can and, in the future, will be used to verify value and outcomes. We are seeing a great potential in the use of patient-reported outcomes as they can help reflect the value of a health service and product through the eyes of the patient. These patient-reported outcomes can even be further enhanced by the smart and purpose-driven use of a variety of other data sources.
Incorporating information from medical devices, smartphones, wearables, medical and pharmacy claims data, clinical data and even financial data creates a more holistic picture of patient health outcomes. We are able to derive meaningful insights from these datasets with a high degree of accuracy, how well a service or therapy has worked for the patients, and even an understanding of the outcomes for an individual patient.
Executive Insights: Working effectively and efficiently with startups
HT: What advice do you have for healthcare executives that want to work with innovative startups like yourself ? What is the best method of working together?
|1||Curiosity and alignment on goals and expectations: It starts with creating a mind-set of curiosity with employees. Corporate blindness and notions of “we already have something that’s working” or “we have always done it this way” will not drive change for the better. Openness towards external ideas and perspectives is key. Secondly, having an aligned understanding across the organization as to why you want to collaborate with startups creates a common understanding. Being pro-active and conscious about what you want to get out of such collaborations and making sure everyone in the organization is aligned sets all parties up for success and alleviates a lot of frustration on corporates and startups.|
|2||Set yourself up to collaborate with startups: Startups are under immense pressure to provide value and demonstrate that value to the customers in a short time. Most of the corporates are currently not set-up to collaborate with startups, as they are process heavy and in many cases, treat startups the same way as multi-billion dollar entities to manage risks. A perfect example of that is how a corporate assesses to work and contracts with startups. It can take more than six months to just set-up the paperwork for a collaboration and go through corporate legal and risk assessments. In many cases, the legal and financial requirements to work with a corporate for startups are the same as for other large corporations. These factors pose big challenges for startups, and having a clear framework, adapted to working with startups, can be beneficial for both parties and can result in bringing innovations to patients faster, instead of losing months on paperwork.|
|3||Clear decision-making: Typically, the decision-making process takes a long time in corporations, and often it is unclear for startups who the key decision maker is and what they need in order to make that decision. Having clarity around the organizational structure and key stakeholders, efficient and effective decision-making processes, and communicating these to startups helps to speed things up and achieve better outcomes.|
|4||Value focus, use cases and exploration: Startups like Lyfegen, for example, are clear on the need. Sometimes it’s okay to not have to look for use cases and spend months understanding how this startup can be of value. It’s better for startups like Lyfegen to have a clear ‘no’ rather than lingering and trying to figure out how we can make this work. Of course, there should be room for discussion and exploration, but if this takes months or years, then it could be time wasted, especially for the corporate individuals that then spend their time looking for something that is not of value.|
HT: From the point of view of a corporation, how do you most effectively search for startups to potentially partner with to add value to the business?
Girisha Fernando: I recommend a two-fold strategy. Setting up a corporate “inbox” funnel, enabling startups to proactively reach out and present their ideas and solutions and then assessing the value of these ideas and solutions by channeling these requests to the right people.
Secondly, what works well is to reverse engineer the search by setting up internal problem statements and hypotheses and communicating these externally. From this point, you can see what startups exist in this space and how could their product or service help you to solve your challenges.
This requires a strong understanding of and alignment on the strategy, the landscape, the environment and the problem statements of the corporation. The method of reverse engineering helps startups to be at the right place at the right time with the right people.
The journey to VBHC begins with a step forward
HT: What recommendations do you have for healthcare executives looking to implement VBHC solutions like yours? Could they be doing something now to ready themselves?
Girisha Fernando: The first recommendation I have is for healthcare executives that are not looking to implement value-based healthcare models for their organizations. Considering the shift to a consumer-driven healthcare market and increased competition amongst pharma and medtech and the resulting need for value and differentiation, how far will organizations fall behind and become followers versus organizations that are driving and directly shaping these new value-based healthcare models?
Secondly, I would say to focus on experiments. So, before you know what to do or how to do it, think about what you want to achieve and be open to experiments because, “if you can’t measure things, you can’t improve them”. It’s important for you to see value-based healthcare as an integrated business model rather than an activity or marketing stunt for your organization.
Define what value-based healthcare means for you and what are the different ways to get started. When it comes to how to get started, we believe that experiments and testbeds are the ideal scenario to figure out what the long-term could look like. This means quickly onboarding startups, and quickly onboarding partners or customers. The customers you want to attract should be an integral part of the exploration phase.
It’s not important to get things 100% right, but to get things going.”
At this stage, it’s not important to get things 100% right, but to get things going because the main point here is that this is a journey. We’re at the beginning of a huge transformation to value-based healthcare.
The world has never before seen the types of medical innovations that are coming to market – where therapies are designed for you as a patient, rather than for mass production. So, we need to understand that we’re right at the beginning of understanding how the business model of the future looks like across the entire healthcare system as more and more of these therapies become available.
Imagine what will happen when cell and gene therapies, that are now primarily focused on oncology or rare diseases that affect smaller populations, are being used to treat chronic disease such as diabetes or heart failure. There will then be millions and millions of patients who potentially need therapies that are fully personalized and typically come with a very high cost.
This is something that should be on the minds of healthcare executives everywhere, because the world of healthcare is changing and will change a lot and needs to be sustainable.
Lyfegen successfully participated in Startup Creasphere, a leading digital health accelerator that strives to transform healthcare together with startups.
Girisha Fernando is the founder and CEO of Lyfegen, a SaaS analytics platform to improve the lives of patients worldwide. Girisha, who brings a strong healthcare background after almost a decade at Roche, is a thought-leader in the value-based space, driving change in healthcare to increase health equity and improve access to medical innovations for patients. Lyfegen has raised over 3 million dollars in funding and continues to shape and enable value-based healthcare contracting, working with some of the world leading healthcare companies
- Dearment. (2019). Article available from https://medcitynews.com/2019/05/fda-approves-novartis-gene-therapy-zolgensma-for-spinal-muscular-atrophy/ [Accessed April 2020]