Rewiring Specialty Care Around Value: Vanguards of Healthcare Podcast

If specialty care were a country, it would be one of the largest in the world. Specialty care represents a $2.5 trillion economy with incentives that reward volume over value, despite the decades-long push for value-based care.

In this Bloomberg Intelligence Vanguards of Healthcare episode, Carrum Health founder and CEO Sach Jain sits down with Bloomberg Intelligence senior equity research analyst Jonathan Palmer to tackle one of the core challenges facing healthcare: incentives.

Employers and benefits leaders are hungry for any innovation that helps value-based care finally achieve its potential. This conversation reveals how, with Jain’s vision and persistence, Carrum has built a high-performing value-based specialty care solution. One that delivers high-quality care by prioritizing aligned incentives through bundled payments (and other value-based payment models) and risk shifts…resulting in real-world, sustainable impact.

“The real hurdle in specialty care isn’t access—it’s incentives.” — Sach Jain, Carrum Health founder and CEO

Episode highlights 

Value-based care vs volume-based care

Jonathan Palmer (JP): Over the last 12 years, Carrum has evolved into a premier marketplace, tackling some of the most severe cost centers and corporate benefits. We’re going to focus on whether value-based care will finally fix the incentives in U.S. healthcare, and what Carrum has learned after a decade of trying to fix it. What did you set out to build initially?

Sach Jain (SJ): The core thesis behind Carrum in specialty care was, “we have to change the provider incentives.” Value-based care was a big buzzword back in those days—the 2011 timeframe. I actually spent a lot of time with large health systems and plans on their value-based care strategies, and it became clear that there wasn’t really an intention to move away from the fee-for-service PPO network model, because the whole system was built around it. 

JP: Decades ago, we [U.S. healthcare] decided to incentivize providers to get paid on volume of care as opposed to the value of care. You combine those misaligned incentives for providers with the payer focus on a broad uncurated network, and that leads to this mess we are in, where whether it’s a payer, a provider, or anyone in between, they all benefit from more care delivered at high prices.

SJ: You think you have nice insurance, but once the procedure is done, the bills start rolling your way. It’s just the system we have built, where every single stakeholder is benefiting either directly or indirectly from more care delivered at higher prices, and that’s the world of specialty care. It’s half of all our healthcare spend. 

Curating quality in specialty care

JP: Specialty care is surgical care, cancer care, behavioral health treatment, etc. What did you focus on to get up and running?

SJ: Specialty care is so many different things, so we zoned in on self-insured employers. They have a direct incentive to make sure the care is more affordable and high quality. Self-insured employers cover roughly a third of the U.S. population, spend roughly a trillion dollars on healthcare every year, and half of that is spent on specialty care. So we focus on that vertical, and even within specialty care spend, we focus on surgeries…and even within surgeries, we focus on specific surgeries like knee replacement and hip replacement.

JP: So diving into that a little bit deeper—when I think about it, I think most people who listen to this podcast are well aware that the cost ranges for any surgery, whether it’s a hip replacement or a C-section, can be wildly different. The question I have, though, is: how do you measure quality?

SJ: For us, quality starts with appropriateness. The best procedure is when it actually never happened because a clinician recommended something more conservative that led to a better outcome. We rigorously curate providers and shoot for the top 10%. So we combine that quality thesis with changing the incentives. With bundled payment contracts, the price is defined for the entire episode of care…and it comes with risk on the provider side. 

For any member that uses Carrum for one of their procedures, we bill the employer for that entire bundle, and our fees are baked into that bundle price. And that bundle comes with a risk-bearing arrangement and warranty where, if there’s a readmission or complication during the warranty period, then the provider will cover that. It completely shifts the risk from the employer to the provider and gives full predictability to the employer.

Overcoming the chicken and egg problem

JP:  I understand exactly what you’re saying about appropriateness, improving outcomes, and lowering costs. But was there a hurdle to get over on the employer benefits side and the HR managers who manage these contracts?

SJ: It’s a two-sided marketplace. On one side, we are building a value-based care network by partnering with some of the best providers in the country; on the other side, we are trying to get employers on board and convince them to send members to this high-value, high-performance network that Carrum Health has built instead of to their current PPO uncurated networks.

JP: So, where are you on that journey? How national is the Carrum network?

SJ: We partner with roughly 1,400 Centers of Excellence across the country, and that provides coverage to roughly 95% of the U.S. population that is within driving distance of one of our Centers of Excellence partners. So the average distance for a member to the closest Carrum Centers of Excellence provider is less than 30 miles. 

For the full episode, listen to Vanguards of Healthcare by Bloomberg Intelligence on Apple Podcasts and Spotify, and iHeart Podcasts.