“We need to flip the financial incentives in healthcare”- An interview with Board Member Chris Kryder
Chris Kryder, MD, is a leader in healthcare data analytics and information technology. He is the Chairman and Chief Executive Officer of Arches Medical Partners, which builds physician-owned and operated Independent Practice Associations designed for full-risk capitation contracts.
Lown Institute (LI): Tell us a bit about your professional background and how you got into healthcare.
Chris Kryder (CK): I grew up in Buffalo NY, and received my undergraduate degree in history from the University at Buffalo. It took a while. Before attending UB night school at age 21, I had some failed short stints at college, but finally woke up. I matured. Working in hospitals instead of garages and warehouses, I was motivated to get A’s instead of uncaring C’s. With a bit of luck, I was accepted to medical school at Georgetown University in Washington, DC.
I always had an interest in public policy. While I was at Georgetown, a physician executive said to me, “Hey kid, if you’re interested in policy or management, you ought to do your residency in a place that has a bunch of business school choices.” I got lucky again, and was accepted to the Harvard University primary care residency program. My chief of medicine supported my enrollment at MIT’s Sloan School of Management where I received my MBA. For the last 40 years I’ve combined primary care, which I practiced intensely for 25 years, with the business of medicine.
LI: Your career has spanned clinical care, venture capital, information technology, and data analytics. How have you been able to navigate across fields where expertise and leadership have traditionally been siloed from each other?
CK: I’ve never found it daunting to jump from one aspect of the profession to another. I’ve always viewed these moves as opportunities to learn new things, so perhaps my interest in trying to understand how things work—and how innovation is often stifled—has been core to my personal growth. To this point, in the company I’m leading now, Arches Medical Partners, we’re putting large independent primary care groups together, and focused upon risk contracting rather than fee-for-service financing. This is counter to the thirty year healthcare market dominance of hospitals and insurance companies, and more recently private equity.
Over the last 25 years, a huge percentage of primary care physicians have had their practices basically sold from under them to hospital systems, making them mere employees of these systems. Most people go into primary care to have a foundational need for independence and autonomy, so it’s just a total conflict from the start, with hospital systems tacitly saying “we need you to generate this kind of volume.” Docs who’ve sold their practices say, “I just want to take care of patients.” Well it hasn’t worked out that way. It’s been terrible for patients, terrible for doctors, and terrible for primary care doctors in particular. And there’s been an obvious net negative to the healthcare system in terms of access and quality, and certainly cost.
At a time when many feel that the field of primary care is all but circling the drain, I pulled together some of my old colleagues. We came up with a plan to build a business that aggregates primary care physicians and negotiates better insurance contracts for them, because the hospitals have whiffed on contracting for primary care. Our contracts change both financing and delivery. We reward PCPs for working harder to reduce low value care, while keeping their patients out of trouble.
LI: What software or other tools are you employing to reach these goals?
We started building our software—NEMO (New Era Medical Ops)—four or five years ago. Now, with AI, we’ve been able to achieve enormous improvement in consolidating and distilling the huge wealth of clinical knowledge. We give our primary care doctors the equivalent of a 3-by-5 card overview for each of their patients instead of having them peck away to try to find relevant information or medical history buried in the madness of Epic or any one of the electronic medical record systems. We can distill this information into knowledge so that it’s available at the most impactful moment: the point of care. It’s proven to be a huge benefit for our doctors and their patients, and we believe that our model will ultimately scale for the benefit of society. Heady goal, but we are after it.
Hospitals don’t like our model. Our methods call out the reality: the volume-driven business models of hospitals are diametrically opposed to the goals of PCPs to manage their patients’ care proactively, and reduce visits to ERs and hospitals. I always say that hospitals perform miracles every day, and they do. But hospitals shouldn’t be the center of healthcare system.
Hospitals have consolidated and achieved pricing power, but have mostly failed to deliver customer service. I believe—and most patients agree—that the center of care should be in the community and should revolve around the patient-doctor relationship. Private practice doctors are very good at delivering customer service. This has enormous economic and clinical implications.
LI: Can you talk a little bit more about private equity and what its increasing presence means for clinicians and patients?
CK: In the same way that I think we should be raising alarms about multi-billion dollar nonprofit hospital systems that are creating less and less societal value, we should be calling out the scandals in private equity.
There have been so many bad stories of private equity buying up hospitals, investing for a while, and then reducing funding operating expenses once they hit the 5-7 year window. Because that’s the moment when PE needs to generate returns for their limited partners.
And like hospital administrations, which typically inhibit PCPs from spending sufficient time with patients, private equity has simply added cost at the macro level.
LI: As a Board member, what do you see as some of the key priorities for the institute in the coming months and years? Should we lean more into health equity, for example?
CK: I think we should get much more aggressive and perhaps be the tip of the spear when it comes to conversations on broader healthcare issues. Nearly everyone is unhappy about the cost and quality of care, and the poor patient experience in these (mostly) nonprofit, multi-billion dollar hospital systems. There’s a big beach ball of an opportunity to expand the bully pulpit that Vikas has developed for Lown.
When I hear the term equity, I think of people of lesser means having lesser outcomes. The biggest problem is that Medicaid is a poor quality system. It’s partly because it just doesn’t have the right reward structure for the providers that Medicaid pays. It too is a volume-based system, and it is very wasteful because care is very very fragmented. Medicaid does have some elements of capitation that vary from state-to-state. These models can be advanced to full-risk capitation. The way to level the outcomes is to improve Medicaid, not just expand as it currently is. There is plenty of money sloshing inside a very inefficient and bureaucratic system. Primary care redesign, which includes incentives tied to better patient outcomes provides, the best pathway to solve for inequities.
LI: What measures should we focus on to assess whether the healthcare system is working?
CK: There’s no single right answer to this question. One measure may be to assess how long it takes to get a primary care appointment at Mass General Brigham compared to private practices in the community. This metric could become part of a multivariable equation that considers full time employee support of primary care in hospital ops vs private practice ops. The administrative overhead in hospitals is ridiculously higher. There is a growing body of evidence that physician-owned and operated Accountable Care Organizations far outperform hospital-owned ACOs. Maybe Lown should dig deeper and publicize this data.
Lown could also do more with comparing and contrasting hospital system 990s and reported incomes of highly paid executives. Last year, the CEO of Atrium Health’s parent company got a 49% pay boost to $25.8 million. It’s sort of antithetical to the Lown mindset to not go after nonprofit hospital systems more aggressively. A lot of patient satisfaction data is also publicly available. My guess is that patient satisfaction may be negatively correlated with executive income.
Also, tying access to community benefit—how much these large nonprofit systems are giving back to their communities while paying no taxes to these same communities—is another powerful element where Lown could go deeper. Investor and corporate-owned hospitals and systems are paying taxes. Maybe their outcomes aren’t better, and maybe the amount of low-value care is the same, but at least they’re anteing up.
LI: As you approach these complex and daunting problems, how do you retain a positive mindset?
CK: I’m innately an optimist but not naive. I’m upbeat because eventually the economics of our opaque third-party payment system become transparent to consumers. When I was in business school, healthcare consumed 7% of GDP. Now it’s at 19% of GDP. Consumer out-of-pocket costs can’t go higher. Lack of affordability is real. In our employer-based system we’ve reached the limit of what companies can afford to take out of their net income to pay for healthcare benefits.
Maybe Lown should interview the CEOs of leading employers in selected communities. Then ask hospital system CEOs in those communities to comment. I’m willing to bet they’d all say the same thing, which is that we need to move away from fee-for-service. Fast. So my optimism stems from the fact that I think we have finally hit the asymptote of the cost curve.
The other reason I’m optimistic is that people don’t care who their insurer is, and don’t care much about network access to hospitals. They do care about access to their doctor, and whether they’re getting good care and being treated with kindness and dignity. At the end of the day, those are the fundamental precepts that apply.
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