CareTalk Podcast – CareTalk vs. Venrock’s Bob Kocher: 2021 Healthcare Predictions

We were too lazy to come up with our own healthcare predictions for 2021, so we invited Bob Kocher, MD (Partner, Venrock) to the show to discuss his Fortune magazine article, “10 Non-COVID Predictions for 2021.” Will Medicare go all-in on virtual care? Will Amazon’s pharmacy gain traction? Tune in to find out!


About Bob Kocher, MD: Bob Kocher, MD is a Partner at Venrock and focuses on healthcare IT and services investments. He currently serves on the Boards of Virta Health, Aledade, Renew Health and Lyra Health as well as Devoted Health, both of which he also co-founded, and the Blue Cross insurance company Premera. He is a Board Observer at Grand Rounds, Stride, Doctor on Demand, and Suki. He is formerly a Director at Jiff and Castlight Health (CSLT). Additionally, he is an Adjunct Professor at Stanford University School of Medicine and a Senior Fellow and Advisory Board Member at the Leonard D. Schaeffer Center for Health Policy and Economics at USC. He serves on the Advisory Boards of Harvard Medical School Health Care Policy Department and National Institute of Healthcare Management (NIHCM). He is also a member of the Health Affairs Editorial Board. Prior to Venrock, Bob served in the Obama Administration as Special Assistant to the President for Healthcare and Economic Policy on the National Economic Council. In the Obama Administration, Bob was one of the shapers of the Affordable Care Act focusing on cost, quality, and delivery system reform and health IT policy. He was one of the leaders of the First Lady’s “Let’s Move” childhood obesity initiative, led the formation of the Partnership for a Healthier America, and served on the Federal Advisory Panel charged with developing a national obesity strategy. He also co-founded the Health Data Initiative with Todd Park, a joint effort of HHS and the Institute of Medicine, to release healthcare data to spur private sector innovation to improve healthcare cost and quality. For five years, he served as Co-Chair of the Health Datapalooza. Before the White House, Bob was a Partner at McKinsey & Company where he led McKinsey Global Institute’s healthcare economics work. He has worked widely across the US and international healthcare systems to improve regulatory policy, economic performance, labor productivity, clinical outcomes, and patient experience.


David Williams (00:00):

Well, John, we were too lazy to come up with our own predictions for 2021. What should we do?

John Driscoll (00:05):

Well, let’s steal some from Dr. Bob Kocher who just published his top 10 predictions in Fortune Magazine.

David Williams (00:12):

You sly dog.

Welcome to CareTalk, your holiday home for incisive debate about healthcare business and policy. I’m David Williams, president of Health Business Group.

John Driscoll (00:31):

And I’m John Driscoll, the CEO of CareCentrix.

David Williams (00:33):

Hey, John, our guest today is Bob Kocher and he is a healthcare investor at Venrock and previously served in the Obama administration. He was one of the shapers of the Affordable Care Act. I was thinking about listing out all his accomplishments and affiliations, but we only have 20 minutes so I’m just going to stop right there.

John Driscoll (00:48):

Well, you forgot alpine ski tester, but let’s skip over that for the moment. Bob, you and Brian Roberts, your partner at Venrock shared your top 10 non-COVID predictions for 2021 in Fortune this month so let’s dig in. David?

David Williams (01:04):

All right. The first prediction was confidence and then it said, “And independence is restored in the CDC and the FDA.” And I’m all for that and I can see the independence and the competence, but isn’t it going to take a little bit more than that just to have confidence? People like us might have confidence, but what about the general public?

Bob Kocher (01:22):

I think first of all, at FDA and CDC, that appointing leaders that come from science and who are great leaders and managers, will add competence and independence. Think that confidence in vaccines and therapeutics and how we manage public health are going to come back pretty quickly, particularly with the data that the FDA shared quite transparently on the vaccines being better than any of us thought it was going to be and also every other country in the world doing it. And so you won’t just have to trust the US you’ll be able to look all around the world and see what’s happening and I think that will give us more confidence too. I think actually after we get through this dark period, people are going to start to feel a lot happier and a lot more confident about CDC and FDA.

John Driscoll (02:09):

I don’t know, Bob. I’m very nervous about how the erosion in expert advice, maybe kind of structural given the politics. I share your hope that the practical results of the vaccine versus being locked down or distanced or restricted will probably drive vaccine trial pretty darn quickly. But I do worry about the long tail of distrust and I think we’re going to have to earn that back over a longer period of time. I don’t know what your perspective is on that.

Bob Kocher (02:45):

Let me share your longterm view. About how we’ve gone from reading peer reviewed articles to now only reading excerpts on Twitter that people’s confidence in science and also the rigor of the work I think, has been eroded over the last several years. And I’m not sure we’re going to go back to a period of 20 years ago where people sort of just bowed their heads and said, “I trust the scientists.” But I think it was important that we have leadership that really listens to it.

And then also beyond COVID that we re-embrace science because we have a lot of problems that science can help us with whether that’s climate change or how to educate ourselves better or how to create a more safe and just society. And with advances in technology of both biologic and computer, we need science to help us. And in some of our predictions later, talk about some of the amazing things happening in science and I think that should give people confidence that actually, if we do turn to experts and benefit from their input, we can actually have things get better faster.

John Driscoll (03:42):

You also claim that virtual care for Medicare is going to continue to rapidly grow and I’m a little bit skeptical about that given the institutional pull of hospitals and doctors to see their patients in person. And historically, there’s been very little flexibility on the part of CMS around telemedicine and there’s been a lot of respect, probably too much respect given to the local jurisdictional limits to doctors practicing across different states. How does your prediction jive with the history of all of the barriers to telemedicine being put up by the incumbents? I share your hopes for telemedicine, I just, I’m not confident that the medical industrial complex won’t snap back.

Bob Kocher (04:33):

Oh this is one that I’m pretty confident in, but first I would remind you that a year ago today, Medicare didn’t cover telemedicine at all. It’s gone from zero to something. The takeoff has at least happened thanks to COVID. And granted Medicare is using for the most part, the emergency authority under COVID to pay for this. But I think the reason why I feel so confident in this is that we had an ageist view of old people, I believe, where there was a belief that Medicare beneficiaries couldn’t use technology and didn’t know how to use phones and wouldn’t want to actually have a doctor check on them in their house, that they liked to go drive to the office and spend a half a day seeing a doctor. And with COVID, it was not only dangerous, but many offices were closed and so many, many people for the first time experienced telemedicine.

And one of the companies that were involved with, doctor and a man launched in Medicare and lo and behold, Medicare beneficiaries had the same net promoter scores as other people when they use telemedicine, which are very high. The care they receive is good. And for Medicare beneficiaries, the other cool thing about telemedicine is that you can check on them much more often. When I have people come see me in the office, we might have you come back once every, once a week, maybe once every three weeks, but not every day. And with telemedicine, I can do a five minute check in on somebody and see how they’re doing. I can get their son or daughter on the screen with me and talk to them too. There’s a bunch of really cool ways you can use telemedicine to make care a lot better.

And now that everybody in the country has tried it, it’s a lot easier to get adoption so that’s going to drive a bunch of people to build this businesses in this area, I think. And while the brick and mortar systems going to want to use their buildings, this is going to be a lot more choice. And even the brick and mortar place that I’m affiliated with Stanford, will I want you to come back, the idea that 10 to 20% of all visits are going to be virtual forever going forward, which is 10, 20% more than they had last year.

David Williams (06:30):

I think you’re number three and four were interesting. I kind of put them together. Four was about the Affordable Care Act, we’re finally going to hear about it. We’re not going to hear about it being repealed or attacked and it’s just going to be there. With number three was about having $0 out of pocket for most people and it’s interesting because that’s another way of looking at it sort of effectively on Medicare and Medicaid for all or universal coverage if people have sort of $0 out of pocket, you see that becoming a new way of looking at things as opposed to kind of ACA, Medicare for all, free market? Is it just looking at it through the lens of what’s the real friction? If you go to the point of care and you don’t have to pay anything, that’s a sort of universal coverage, if everybody has that.

Bob Kocher (07:11):

Yeah, I think that these semantic arguments we have about who finances healthcare and whether you call it Medicare for all or the current system that we have, people think about healthcare really from what they pay and they pay for it most directly in what they pay when they go see a doctor and pick up a medicine. They don’t really understand the combination of taxes and premiums and other things that they’re paying. I actually think COVID was a turbocharger to the whole Mike Chernew, Mark Fendrick for 30 years idea of value based benefit design, that some things are so important you need to make them free and then maybe even give you incentives to do them. In public health, COVID’s one way to make it free, which is in the country right now, testing’s free, vaccines are free and antibody treatments are likely going to be free.

And I think you’ll see that happen for things like telemedicine going forward, that people will want you to talk to a nurse or doctor before you show up in an emergency room. I think you’ll see it for even virtual specialty care, because it will end up being a lot more efficient and cheaper. And I think Biden will end up in his ACA kind of bolstering efforts to say, “Sure, we need to bend the cost curve down. We have to address the Medicare trust fund someday. But right now we’re in a recession with 10.4 million people unemployed. We’re trying to stimulate the economy. And the last thing I want to do is make it a barrier to get healthcare, to clean a pandemic.”

And so I think you’ll see additional subsidy dollars also put in to help people with premiums and cost sharing on the ACA. Medicare Advantage is booming, and that’s going to lead the MA plans also to give it and even maybe even part B givebacks. And so that will be another way in which people get lower cost healthcare.

John Driscoll (08:46):

Well, one of the things that sounds like we agree on is how nursing home care can go virtual and care to the home is obviously what CareCentrix spends a lot of time enabling and supporting. But I guess the question I have is you’re sort of saying they’re going out of business. Aren’t there some cases that still need to go to some form of a nursing home?

Bob Kocher (09:10):

Absolutely. It could have been number four. When I was a med student and a resident, one of the things that would happen every night I’d be on call as we would get patients coming in from nursing homes who were really sick and needed to come back into the hospital, they would then go back to the nursing homes and sadly they’d come back again. And there are some patients who are really sick and can’t be safe at home and I think they will continue to need to go to facilities with really skilled care. The challenge is that there’s a lot of other patients to go to those facilities and could go home already. With really advances in remote patient monitoring and telemedicine you can beam into their houses, all kinds of clinicians to help oversee their care. You can monitor the vital signs in the same way as they are in nursing homes. And that will make the home, I think, much more feasible for a broader set of people.

The home has benefits. There’s a lower risk of infection there. There’s a lower risk of delirium in the home that is terrifically, that’s better for patients. The food is often the foods you’re familiar with so that actually also could be additional recovery perspective. And I think what we’re seeing is that nursing homes are having a really hard time creating the safety that you would want your loved one to experience in their care. And so that’s going to push a lot of desire on the part of patients and plans to have patients get care in the home. And so I think that actually we will have nursing homes, some will fail, but the ones who can deliver high acuity care skillfully, I think will do okay. But many nursing homes not serving that higher acuity niche and those patients I think would be safer treated in their homes and better off.

David Williams (10:43):

I think we’re finding number five is your lucky number because last week we were talking about the top 10 things from 2020 and I kind of sneaked in number five is drug pricing because I know that was a hot button issue for you. And I have a feeling that Bob put this one as number five for you, because he knew you would enjoy talking about it.

John Driscoll (11:01):

Strong agreement from me.

David Williams (11:04):

Oh sure.

Bob Kocher (11:05):

US healthcare is characterized by over utilization. In general, we use more of everything and not many barriers up to get care for reasons that don’t make a heck of a lot of sense. Mental healthcare actually, you kind of can’t get when you want it and need it. And health plans are made really hard to get and we’ve all seen in society, the negative ramifications of poorly treated and untreated mental healthcare conditions and obviously it leads to a bunch of bad things. It leads to homelessness, people losing their jobs, people who have jobs making the most effective in their jobs, people who are sick not being able to comply with whatever their proper treatment regimens will be. And the other thing that’s really hard to imagine is that in mental health, we accept a much broader definition of what is acceptable treatment and in the rest of healthcare there’s evidence based care and clinical guidelines and lots of peer review and oversight. In behavioral healthcare, honestly, almost anything goes. And that leads to a handful of people who are getting care to get care that’s not effective. And we wouldn’t tolerate that in any other medical.

And so what I have hope and excitement about is the fact that we’re going to see a lot more attention to mental healthcare and its importance. That will lead to a lot more oversight on the part of health plans and patients and people who refer them to make sure the care that they’re getting is really effective, to make sure that we get the ROI that you’d like to get. And not surprisingly when people get mental healthcare treatment, everything gets better in their lives, their jobs go better, their relationships go better, their other healthcare conditions go better. And the interventions we have for mental healthcare, the evidence based ones are actually as effective as small molecule medicines for a lot of other chronic diseases.

We have treatments that really work here. And what we’ve seen over the last year is a year that obvious that we just have to actually take this seriously and provide access between a pandemic, a recession, social justice riots and an election, we’ve had a year of stress. That’s exacerbated all these conditions and thankfully we’ve seen virtual care startups grow, health plans actually begin saying, “We’re going to make this an important part of our benefit design.” I’ve had a couple CEOs of large blue plans say this is their top board priority for their health plans is actually to improve mental healthcare. And so I’m actually quite hopeful that we’ll kind of reverse the Reagan era sort of decline of mental healthcare and sort of begin to actually build it back in. Certainly if you’re a risk based primary care doctor, you already know that mental healthcare is essential and you see Chinmed hiring geriatric psychologist in all their offices. I think that we’re on the right path actually here.

David Williams (13:53):

Well, I was going to say, John, I actually spoke with our censor and he said, “If we talk about SPAC, the whole thing is probably going to get censored.” I’m going to skip right past the SPAC topic and onto seven about the mental health revolution. And Bob, you’ve noted that there’s a mental health revolution underway and it’s going to continue. Now this on the one hand is great, because if you solve these, address these mental health issues, which are often the root cause of why people would go into the doctor having other issues, it’s going to be positive overall. But the more pessimistic part of me thinks that, well, maybe it’s just going to have more and more demand and spending on mental health and we really won’t get the ROI broadly. It’ll just be an added expense, but that doesn’t seem to be what you think.

John Driscoll (14:37):

But I think at least for me, Bob, I see that as more evolution than revolution. And I still think we have a strong challenge around stigma. I see it with my own team of 2,000 people. It’s still very hard for people to put up their hand and get help. And I think until we actually get the demand side right, I think it’s going to be hard to get this even as we optimize supply to get it right. And I look at all of the challenges of my fellow ex-veterans who are really having a hard time. We’ve got this epidemic of loneliness. I think this is an evolution, not a revolution. I agree that there’s good news on the horizon on the supply side and on the thinking and rationally thinking through what people need, but we are far away from where people are really very comfortable entering the system unless they’re in crisis.

Bob Kocher (15:31):

John, I’m a little more optimistic than you. There’s a company called Lyra Health that I co-founded several years ago with David Ebersman and Bryan Roberts, and we provide mental healthcare services to large employers. And it’s the only company that I’ve ever worked with where when we launched at an employer, we always exceed the engagement expectations of the employer. And normally are two to 10X more utilization than they had the prior year when people are offered easy access to terrific care. And so now granted these are employed population, so it’s not everybody. And many of these companies have younger. Think that stigma is a lot less pronounced now than it was even two or three years ago. I agree with you. We should keep working on it.

David Williams (16:14):

John, number eight is about IPOs and M and A, and I know that gets your juices flowing in particular, your saliva. I can actually hear you salivating into the microphone. Why don’t you cover that one?

Bob Kocher (16:27):

Sure. Well, Teladoc Livongo showed people what’s possible and created for the first time, a very large newish company in this area. And also now Teladoc with the breadth of their product offering is causing everybody else to say, “Wait a minute, should I get bigger now? Do I need to combine to have an offering that’s not a point solution? And the public markets couldn’t be more receptive right now and so do I need to go public tomorrow? And may I need to combine with somebody to have the revenue and predictability that I need to go public?” And so I think you’re going to see lots and lots of activity and there’s just a lot of capital right now looking for private companies. And so I think you’re going to see just a lot of financings, mergers, acquisitions, IPOs combinations over the next many months.

David Williams (17:23):

Bob, I know it’s a top 10 list, but I think by the time you’re getting to number nine, you’re running out of steam because for number nine, you predicted nothing and specifically no action on drug pricing.

Bob Kocher (17:33):

I think that while Biden has campaigned a great deal on his desire to lower drug prices and President Trump has been outspoken about drug prices and hoping to do most favored nation. I think people are going to be so joyous about the fact science has worked and we have created several seemingly super effective COVID vaccines this year, that people won’t have the desire to go after drug companies at to de-reference pricing. There actually is action happening kind of behind the scenes. We’re seeing companies when they launch drugs, actually have lower price disparities between the US and the rest of the world and in Europe in particular, because I think they’re expecting if that there could be most favored nation or reference pricing type methodologies, but I think actually people are going to sort of give pharma pass this year. Ouch.

John Driscoll (18:23):

What do you think the impact will be of Amazon Pharmacy, Bob? What’s the perspective of Silicon Valley?

Bob Kocher (18:34):

First, every year we basically say that Facebook, Google and Amazon and Microsoft are not going to be effective in their healthcare businesses. And we were last year predicting that Haven was going to have a rough year and they did. The first thing I’ve seen in many years that these giant tech companies have done that’s at least interesting and I think well conceived is the Amazon pharmacy. I have tried it. The onboarding experience was really intuitive and terrific. Amazon has a lot of trust that they’ve built in their users and confidence from being their Prime delivery system. They began teaching us at Whole Foods, how to use our Prime codes for discounts and actually for their pharmacy they’re using Prime to get discounts and reach too. I think actually people are going to like it and that it is going to grow. I think it’s going to be better for people who have simple chronic disease meds, not biologics with lots of prior authorization steps, but I actually think this one’s going to actually be an example of a big tech company building something that people like.

David Williams (19:40):

Now Bob, I have my Amazon Halo band and I waved it in front of my Alexa the other day and a whole crate of drugs showed up. I think maybe the prediction’s already even a little bit ahead. It’s already being realized now.

John Driscoll (19:53):

It’s got to be bad news for the CVS and the Walgreens of the world. The terrestrial pharmacy experience couldn’t be less interesting and it’s going to be fascinating to see whether the Amazon can just teach them something about that customer experience, because it is dramatically different. Although when they bought Whole Foods, all of the grocers took a hit, but they seem to have recovered quite nicely. It’s going to be fascinating to watch.

Bob Kocher (20:18):

I think it will make all of our experiences better because if you’re the terrestrial pharmacy, you’re going to have to actually improve the experience and not have it be the usual one, which is you arrive and pick up your medicine and they say we haven’t started filling it yet. I think it’s going to be better.

David Williams (20:34):

Well Bob, we’ve really enjoyed going through your predictions here. One, because they’re good and two, because it saved John and me the trouble of actually having to create our own predictions so that was very timely and appreciated. I’m glad that we didn’t have time to predict a new plague or anything like that coming along. I think we’re going to quit while we’re ahead here and I’m going to say, thank you for listening to another edition of CareTalk. I’m David Williams, president of Health Business Group.

John Driscoll (20:58):

And I’m John Driscoll, the CEO of CareCentrix. Thanks, Bob.