🎧🍌 The US Maternity Care Crisis
Why insurance reimbursement drives healthcare, how bundled payments unlock personalization, the importance of picking markets, and the future of in-person, hybrid, and virtual care
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Anu Sharma is the Co-founder and CEO of Millie, building a better maternity care system from the inside out.
Our conversation covers the current state of maternal health (from pregnancy to post-birth), how Millie is reinventing it, and tactics for building a company in healthcare she’s picked up over the past 20 years.
Timestamps to jump in:
03:16 State of US maternity care
13:21 Why insurance reimbursement drives healthcare
16:11 How bundled care unlocks personalization
18:48 From fiction writer to 20 years in healthcare
24:22 Why consumers don’t act like consumers in healthcare
26:09 The reason scale matters
27:43 Bundled payments and new care design
32:16 What make Millie unique
35:58 Importance of picking regional markets in healthcare
37:08 The two paths for insurance reimbursement
41:08 Why distribution is the product in healthcare
44:25 Opportunities in cash pay care
48:28 How Anu fundraised without a product
51:06 The future of in-person, hybrid, and virtual healthcare
52:56 Opening new clinics for $150k
Find Anu on Twitter and LinkedIn
Transcript
Find transcripts of all prior episodes here.
Turner Novak:
Anu, welcome to the show.
Anu Sharma:
Thank you. It's good to be here.
Turner Novak:
I'm excited to have you. I'm really excited about the problem that you're working on. Can you just talk through what it is, the state of everything that's going on, and then we can go from there?
Anu Sharma:
Yeah. I'm the founder of a company called Millie, and Millie is a company in the maternal health space.
The basic problem that we're solving is the fact that maternity care in America is very broken. It is a massive industry. We spend about $50 billion a year on maternal health and when you add in wraparound care and adjacent gynecology care that women get as they move through this journey, it's even bigger. Maybe closer to 60 to $75 billion a year. But the model hasn't changed since World War II, which is mind-blowing. That was over almost 100 years ago.
Turner Novak:
Why hasn't it changed?
Anu Sharma:
It's basically at some point we decided that the right way to do maternal health in general was to just basically create a series of visits that happened at pre-specified points along the way. And the goal of those visits is to make sure everything is going well clinically, and we haven't truly moved from that.
And the innovations that we've seen along the way have really been around how do we help people manage pain during labor. But fundamentally, we haven't really changed what care is about.
And the thing that is crazy is that when you really look at the problem through the lens of a patient, you go through maternity for the first time, it's one of the most significant things that has happened to you in life.
Turner Novak:
It's like a two-year process almost beginning to end and post, and then you're a parent and it's like another 18 or 100 years.
Anu Sharma:
Yeah. Exactly. And so it's a pretty significant life event for all the reasons you mentioned. It's also for most people really their first significant healthcare experience.
Turner Novak:
Really?
Anu Sharma:
Prior to that, maybe you've gone to the doctor, you've maybe had an annual exam, things like that. But really, your first real interaction with the healthcare system, often if you're a woman, tends to be your maternity journey.
And from a patient perspective, what you're really looking for is yes, you want great clinical care, you want to make sure that you're well taken care of, you want to make sure that the baby is born safely and that everyone comes home and is thriving and doing well. But you're also looking for a lot of information and education just in terms of how to take care of yourself, how to prepare for life with a baby. You have questions around nutrition. It's an anxious time, you're looking for mental health.
And then once the baby arrives, maybe you're looking for support around really navigating those early days with a newborn, lactation, things like that. But none of that is really part of the standard maternity care experience. It is very narrowly cast around let's deliver this baby safely and let's send you home. And so it's all about your labs, your scans, and routine monitoring.
And so what happens is that you have this overly medicalized experience in some ways, which is very clinically oriented, and it's completely missing things that people are actually looking for in terms of the education, the emotional support, the wraparound care, and it's crickets once the baby arrives. It's like, "All right, we'll see you in six week once and then send you on your way." And you're like "Hey, this is when I need things."
And so that is, I think from patient experience perspective, very dissatisfying. But the other thing is the way we do maternal health in the US, we leave behind a lot of gaps in care. And so we have some of the worst outcomes of any peer nation.
Turner Novak:
What does that mean an outcome?
Anu Sharma:
What that means is rates of maternal mortality, near misses, preterm births, NICU stays, C-section rates. Pretty bad things happen. And that's pretty crazy.
For a country that spends as much as it does on maternal health to have outcomes like that with the terrible patient experience that I just described, that really does not cater to the mother that's going through this journey and her needs, but is very much about just the narrow clinical care. And even that it doesn't do well.
And so the problem we're really solving at Millie is really rethinking this experience from the ground up. Both in terms of how do we really create an experience that is patient centered, but also how do we do this in a way so that care is more complete, more proactive, more right sized, and we create better outcomes, which ultimately lower the cost of care. So that's really in a nutshell the problem space. It's big. It's significant. It really affects people. And if you can do it well, you can make a real difference.
Turner Novak:
Yeah. And I think you've mentioned before it hasn't really changed, the current system, since basically World War II, almost 100 years ago. How does it usually start? You get pregnant and then just typically if you're not a Millie patient, what usually happens after that, after you find out you're pregnant?
Anu Sharma:
Yeah. So it's like, all right. And people come to pregnancy in a lot of different ways.
For some people they start trying and it's easy and for some people they may go through a long fertility journey. Some people may have miscarriages along the way. And it's not at all uncommon. That's I think one of the more significant things to note. We know about 20 to 30% of pregnancies will end miscarriage. We know 80% of that will happen in the first trimester.
Yet knowing that and also knowing that we have things like ectopic pregnancies and other things, which can be very significant and even fatal, care really begins at the earliest at eight weeks. And that's because it's the earliest you can really confirm a pregnancy on an ultrasound with a fetal heartbeat and so the general assumption is prior to that, people don't need care. And so I'm like, actually they do, because a lot of this stuff could be happening in terms of managing miscarriages or solving for things like ectopic pregnancy.
Turner Novak:
So if I'm four weeks pregnant and I call or go to the hospital, they're like, "Okay, cool, but come back in four weeks."?
Anu Sharma:
Basically, yes.
Turner Novak:
Wow.
Anu Sharma:
Yeah. No one's really going to you see you. And because we've had significant provider shortages and access issues, people can often ... I wasn't seen until week 12 and week 13 is the end of your first trimester. And I'm like, oh, god.
Turner Novak:
That's crazy.
Anu Sharma:
And I'd gone through a pretty long fertility journey and was very anxious. I was like, "Oh my god, is everything okay? Is this going to work out or not?" And I was 39, so this wasn't like I had all of time to do this over again. So care begins at eight weeks at the earliest. Usually people don't get an appointment until several weeks after that.
Turner Novak:
You're a third of the way through the pregnancy.
Anu Sharma:
You're a third of the way through the pregnancy. And so that's when it begins, and just the gaps that are left in that early period and then thereafter it's like, okay, we're just going to march you through the series of visits that we've got pre-planned in your first and second and your third trimester. And then it's like, okay, you have a baby.
Turner Novak:
And it's like every couple weeks, and it gets a little quicker as you get closer, but it's still not that much.
Anu Sharma:
Yeah. The American College of OBGYNs recommends somewhere between 12 and 14 visits, but in reality, people can have anything from eight to 14. It depends on when their care began and how often their provider decided to see them.
So it's relatively few touchpoints. And the crazy thing is all of these touchpoints really happened during pregnancy for the most part. So you'll be seeing whatever ... If you follow the 12 to 14 week cadence, most of those visits really happen during pregnancy.
And you are generally seen once at the six-week postpartum point after the baby arrives. Which is mind-blowing, because when you really look at the statistics in terms of when bad things happen, more than half of maternal deaths actually take place after the baby is born.
Turner Novak:
Really?
Anu Sharma:
In the first six weeks postpartum and continuing into a year. And so to see people once at the six-week point is completely insufficient.
And about 30% of maternal mortality events happen during pregnancy, which in a weird way makes labor and delivery the safest part of the entire experience. And that's the thing that most people are generally freaking about.
Turner Novak:
Yeah. That's true. When I think about maybe a horror story of worst case scenario, that's it. It's a complication during that process.
Anu Sharma:
Yeah. Exactly. So what that translates into is on the one hand, we don't have enough care because you just have these big gaping holes between visits, which is when most pregnancy is really happening over that 46 week journey. From when you first conceive to when you're last seen your six-week postpartum visit.
And there's just gaps in care that can happen between visits and you have uninformed patients who may have never been through this before and who can't quite tell the difference between is this clinically significant or is this not. They're counting on their doctor to be able to make sure that they're getting seen when they need to be seen.
And then that postpartum period, which is when things really go wrong, you have a single visit. And so it is pretty, I would say ... We already talked about how one dimensional care is and relatively incomplete in terms of what people are looking for, but this discontinuous and reactive approach does create the outcomes that we talked about.
Turner Novak:
Yeah. Do you know why it hasn't really changed?
When I learned ... Our experience having a kid, it was like every month in the beginning we'd go see someone, we'd sit in the waiting room for 30 minutes and we'd see the doctor for 10. And it was ... I don't know. I'd almost say it was inhumane. I don't know if that's the right word, but it was not the best experience when you're going through a massive life event. For a lot of parents, it's one of the most significant processes or moments in their entire life.
So do you know why it just never really changed?
Anu Sharma:
It hasn't really changed for a couple of reasons.
I think one, everything we do in America when it comes to healthcare is driven by reimbursement. Which is like, okay, what does insurance pay for? And insurance pays for X number of visits. And that rubric really hasn't evolved.
And so in more recent years, research is being done around the fact that... Let's actually objectively look at what's going on in terms of pregnancy and what people actually need.
And so if you really look at it on two axes, on the one hand just objectively what people need from a clinical care perspective, what you'll find is about 70 or 80% of pregnancies are actually objectively low risk. And maybe another 10 to 15% are moderate risk and 5%, maybe up to 7% are high risk, which means people do need different levels of clinical care in terms of the cadence of their visits and what the content of those visits should be, as well as the level of monitoring that they actually require.
So a one size fits all approach really doesn't make any sense objectively from a clinical standpoint.
Turner Novak:
But it's probably the most cost-efficient way of doing it.
Anu Sharma:
It's the simplest way from a reimbursement perspective. It's like on the average, people need X number of visits, they happen at these points, this should catch 80% of everything. And so a lot of American healthcare is built on these averages as opposed to really the personalization.
And maternity is not just the case in point. If you look at cancer care for instance, there's a general recommendation, you're 40 now, you need a mammogram or X, Y, Z. That's based on average distribution of risk.
But if you really look at individual family histories and things like that, some people will probably never get cancer. Some people will probably have a higher disposition towards getting cancer. And so they need a different level of screening and frequency.
So in general, I would say there's a lot of one size fits all care in America, and it's driven by how reimbursement is generally structured. That's one piece.
And then I think the other side of it is studies also show people need different levels of support. Supportive care. Supportive care is things like mental health, or nutrition care, or social support, or whatever. There's a lot of conversation around social determinants of health, and that's just not part of the healthcare equation. We look at healthcare very much in terms of the sick care side of healthcare as opposed to what do we really need to make sure that someone is well taken care of in terms of their overall well-being as they move through this journey.
And so I think that's the other side of how reimbursement is structured. It's not designed to be holistic or preventative. It's really designed to make sure that we're doing whatever the clinical management of something needs to be from a care management perspective to prevent bad things from happening and we do it in the most one sized fits all way possible.
Turner Novak:
Yeah. It's almost like anytime we need an intervention or some medical moment or intervention, that that's the thing that really drives it all versus being preventative. With preventative it's like, oh, this person drinks water and runs a lot and does all these healthy behaviors and it doesn't matter. They don't get any benefit from that.
Anu Sharma:
They don't. And they could be somebody that does all of those things but has a family history of cancer, and so they're probably still going to be screwed. So they need still a higher level of monitoring even if they have a healthy lifestyle. And so that personalization for what is it that somebody really needs to be in optimal health is just not part of how we think about American healthcare.
And the nice thing is in the maternal health space... As you know, I've been in healthcare a long time. It's been almost 20 years. I've seen a lot along the way. But it's really the first time in the maternal health space that I was drawn to this problem because we moved to effectively a bundle payment model for reimbursements, which is basically here's what you're going to get in terms of dollars. So long as you meet certain check boxes, you can design care inside of that the way that you want.
And so it gives us the freedom to basically clean sheet this and really think about, okay, how do we create a healthcare experience which is designed with the patient and their needs in mind? And really right size care based on what their level of risk and level of need is in terms of the care team composition, and then personalize that further in terms of the frequency of monitoring, the type of monitoring, the information we want to put in their hands to be able to help them navigate that journey alongside us. And to just really approach it in much more of a personalized and right-sized way.
Turner Novak:
Yeah. It'd be an interesting segue then to more nuance around what Millie is and how you're personalizing. How you're giving the exact care team that someone needs. Can you just talk about ... And maybe we start actually at the very beginning.
What was the founding story when you first decided this is what I'm going to do?
Anu Sharma:
Yeah. Oh my god. I had quite a saga. There's some people who look at their life and they're like, the things I want to do in my life are. I was not one of those people. I was basically one of those people that had a very non-linear path to everything that I've ever done.
Turner Novak:
But it wasn't like you were meandering. I know you only had a couple roles that you did, but they were very long. You spent a lot of time working on the problems that you were working on.
Anu Sharma:
Yes. That is true. My original goal in life, however, was to be a fiction writer, which my parents shut down very quickly.
Turner Novak:
What? Okay. I did not know that.
Anu Sharma:
They were like, "No. That can be a hobby."
Turner Novak:
Was there any discussion? What kind of fiction did you want to do?
Anu Sharma:
I love travel. My ideal job would've been ... Okay, so even before that, I would've loved to have been a natural historian.
I was very inspired when I was a kid by the stories of a guy called Gerald Durrell who was the British conservationist who had a very non-traditional family life. And his mother moved him and his siblings to a small Greek island, and he free roamed and collected zoological samples all over the place. And then found himself a guy who was a quirky dude who lived on the island, who then taught him a lot about nature and biology. And I was like, oh, that sounds like a pretty awesome way to live.
Turner Novak:
Island biologist. Just roam around. Yeah.
Anu Sharma:
Yeah. No. Totally. And I was like, that sounds pretty fun. And so I was actively thinking about doing natural history and learning about conservation, the environment and such. And then that opened up just generally the idea around just travel. And I traveled fairly extensively and was lucky enough to have those experiences. And I was like, I love writing and really thinking about travel and context of writing. It was a very evolving path.
But my parents were like, "No, you need to get yourself a real job." And so I got a degree in economics and then fast followed by an MBA, and before I knew it, I was a management consultant.
Turner Novak:
I feel like that's a common path for people though.
Anu Sharma:
It is a common path.
Turner Novak:
It's like, hey, you need a job.
Anu Sharma:
Yeah. Exactly. And it's an ideal job for someone who doesn't really know what they want to do because you can work on an assortment of problems. And I did.
Turner Novak:
You did it for eight years too.
Anu Sharma:
Yeah, I did. And I worked on a really wide variety of things before I fell into healthcare. And healthcare just became a very endlessly fascinating place because it's a massive industry. It's the biggest piece of the US GDP.
Turner Novak:
Yeah. It's like 20% of GDP, something like that.
Anu Sharma:
And it's not one industry. You've got the health insurance side of the industry, you've got the care delivery side of the industry, you've got pharmacies and PBMs and drug development and life sciences and that whole thing. You've got devices and there is a whole bunch of stuff that's happening in consumer health around wellness and prevention, which is a crossover thing.
And then you look at just how broken American healthcare is and all the different ways in which you can innovate at every level. And so for somebody who doesn't really know what they want to do, you have a lot of problems that you can solve and that was my original draw into it.
And then I basically was doing a lot of that work in the years leading up to the Affordable Care Act and then the other side of it, which was a time of change in the industry. And so I worked on the early exchanges and how to expand access to more people, so whatever we all remember as Obamacare and opening up access. I did a lot of work around value-based care and payments and different ways in which we can pay for healthcare and who owns that risk and how do we create better alignment and did a lot of work in M&A. And that was my background.
I was just trucking along and then I was like, "I don't really want to spend four days of my life traveling every week." And I took a sabbatical year, came to Stanford, spent time just really immersing in the world of data and technology and all the ways that we could apply some of that banking into healthcare to create better care experiences for people.
Turner Novak:
Yeah. What was your biggest takeaway?
Anu Sharma:
I think the biggest takeaway I had at that time was there were a lot of people in tech who were trying to hack healthcare.
Turner Novak:
Hack healthcare. Okay.
Anu Sharma:
And I was like, no.
Turner Novak:
It sounds like -
Anu Sharma:
It doesn't work like that. It's a very complicated industry and you have to be very surgical in how you think about innovation in that industry because you will get beaten up.
And so you have to really think about, okay, how does this industry work? Where are the incentives? And then how do I build something that's actually going to fit and is the moment right?
Turner Novak:
So that was the biggest takeaways from -
Anu Sharma:
That really was the biggest takeaway from watching just so many early digital health companies just fall into the graveyard. It was just like, okay, that was a mistake.
Yes, technology and data have a lot of application and healthcare. But you have to be very intentional about where you apply it. And just really be very thoughtful about where the spaces are right for innovation. So that was my big takeaway from the consulting years.
And I spent time building a company alongside the former CEO of Safeway in the employer health space, which was pretty hot at that time. And I learned a lot there over six years around how do you really build things from the ground up in healthcare and get them adopted by members and paid for by the mainstream system? And we worked through a lot of different spaces of healthcare.
And so I learned about this innovation within pharmacy and drug costs and how do we move care into the right settings? How do we really incentivize consumers who act like consumers when it comes to healthcare and really use their benefit plan?
Turner Novak:
Do consumers not act like consumers usually?
Anu Sharma:
No. Consumers do not act like consumers in healthcare.
Turner Novak:
Really? How do they act?
Anu Sharma:
Well, the way that you pay for healthcare is you basically have some theoretical number, which is what something actually costs. The thing that you pay for is your deductible and your copay. You are flying blind in terms of is this a high quality provider or is this where I'm going to get the best bang for my buck? You don't really have that information the way that you have it.
It's generally like, okay, well I have a problem. What's the closest place I can go that has an appointment? And then you just do the calculus. Okay, is this in network with my insurance and then fine, it's in network and I'm just going to go there.
Turner Novak:
Yeah. You just take whatever the rails are that your employer or whoever the health insurance that you're using. Yeah.
Anu Sharma:
Yeah. And it may be shocking to know that if you got a basic lab draw at Quest or Labcorp versus going to a hospital, there is a tenfold cost difference there. Most people don't think about that.
And so we're not used to thinking like consumers in healthcare and really shopping for where you're going to get the best experience at the best value. You just go.
And so there is actually a lot of interesting work that was done to really help people think about preventative care, and really apply that type of consumer thinking around taking care of themselves and also getting care in places that made sense for them and the employer.
So I learned a lot, I would say in the Burd Health years around how do you really innovate in healthcare, and we made a number of mistakes around places that you should probably not innovate because you're just going to get beaten up.
Turner Novak:
What were the biggest mistakes there? Biggest learnings?
Anu Sharma:
I think the biggest thing was healthcare can often be a game of scale. Either you pick white spaces where you can actually go build something and the conditions are ripe and you can actually create something of scale, or you have to have scale in order to go get the healthcare system to bend in a direction you wanted to.
And I think one of the bigger learnings of Safeway was that Safeway had 300,000 covered lives between the members and dependents that were on their plans. And they could work with their insurance carrier, in this case Cigna, to do a lot of things because Cigna cared about that business. But if you're a small company with 500 people, they're not going to change anything for you, right?
Turner Novak:
Yeah. They're like get lost.
Anu Sharma:
Yeah. Exactly. So scale matters in healthcare if you aren't innovating in some spaces that are already pre-built to innovate. So picking your surface area is possibly the single most important thing in terms of your determinant of success
Turner Novak:
Really. You talked about there's areas that are better to do that in. What are some examples of good spaces? And hopefully Millie is one of those as an investor in the company. What do you think through?
Anu Sharma:
Yes. Back to what we were really chatting about. I think what drew me, given all my battle scars in healthcare and the work that I've done learning about what not to do and the things you can do and probably get away with, was that I noticed in the maternal health space we've moved to bundle payments. And so now suddenly you have a lot more freedom to design a care model and a patient experience to go along with that care model because you have a finite and predictable amount of dollars that you're going to get.
Turner Novak:
So bundled care, that is basically when you have a certain medical insurance code, there's a certain thing that's attached to that you have to provide to someone but by putting multiple codes together. Am I on the right track with that?
Anu Sharma:
The right track. But basically there's two ways in which healthcare gets paid for.
One is you go to a visit and the doctor gets paid to do that visit. That's called fee for service. You get services, you get paid in fees.
So bundle payment is like you look across an entire episode of care and you say this is a flat amount you're going to get. So at that point you're still paying your copays and deductibles. But as a provider I have certainty of what is the reimbursement I'm going to get, and I can design the care and the experience, and whatever you want to do to improve the efficiencies of how you do that in terms of the design of your technology enablement and whatnot that sits underneath that.
Turner Novak:
But then you also know what costs you can afford to have because you have the defined revenue that comes in.
Anu Sharma:
Exactly. So it's like, here are some fixed dollars, now make it happen, which is a very different thing than I have to follow this path in order to get the total reimbursement that I am expecting because I'm now wedded to the sequence of visits.
And so that's what used to happen. And so you couldn't break out of that. It's X number of visits that make up maternity care, and now you have to do those visits because you have no choice, because that's how reimbursement works.
And so instead, if you clean sheet that and say, here is a total number of dollars that are available to you for providing care over this episode, suddenly it's like, okay, well I can work with that and see what to do.
Turner Novak:
And I'm just guessing here, the way that works with Millie is I think you've mentioned certain people need more care and some people need less. You can flex the capacity utilization of the care you're providing.
Anu Sharma:
And who's providing that care.
And so we know that 70 to 80% of pregnancies are low risk, and we know 10 to 15% are going to be moderate risk, and we know the rest are going to be high risk.
You can say, okay, I'm going to bill for the 90% of pregnancies that are low to moderate risk and say, okay, if that's what I'm going to do, I'm going to lead with midwifery care because midwives have been proven to create better outcomes for low risk pregnancies compared to an OBGYN. And so you can right size the care team to fit the risk of the patients that you're actually taking care of. So that is one piece.
The other thing you can do is to say, okay, if I center the patient in this journey and really think about all of their needs, how do I take the insurance dollars? The HSA and FSA dollars and other dollars that are available? And then knit them together into one unbroken experience for the patient to create something that actually makes fundamentally more sense?
That has been missing all along in terms of really helping people with information that they need at different stages along the way to take better care of themselves and to make the decisions they need to make as they move through time. To be able to look out for risks that they may be exposed to at different points along the journey that are stage relevant and personalized to them, and to communicate with their care team so that we can do early detection and better management risk between visits during that episode.
And then how do we design postpartum care so that we can actually take advantage of the fact that we now don't have to be wedded to a certain schedule of visits? So, we can do a home visit and we can go and see patients and babies a,nd see how people are doing and make the appropriate care pathways. As opposed to, I'll see you once at the six-week point. So you can design care in a way that is different and you can power that with technology and you can pull pieces together so that it is more complete, more proactive and more right-sized in the end and also more personalized.
And so those are the things that we do at Millie to create a very different care experience than what people are used to. And then we do some things which are unique to us. We know people need care sometimes before that first eight-week visit, and so make ourselves available at that time.
Turner Novak:
Yeah. You do within the first 24 hours, next day.
Anu Sharma:
Yeah. Or within 48 hours or whatever. So we always have the ability to create care pathways for patients who may need to be seen earlier. And so I think it's a fun thing to be doing.
And back to your original question in terms of why maternity care? Okay, first of all, it hasn't changed in 75 years, but second of all, back to what I said, the conditions are right in the healthcare industry for innovation to actually happen here. Unlocked in large part by reimbursement changes because we can now flexibly design care, but also because we're in a maternal health crisis in the country.
Turner Novak:
Really.
Anu Sharma:
And payers care - payers meaning insurance companies - care a lot about that we have significant OBGYN shortages. They're looking for newer, better models which incorporate midwives and other types of professionals. Every other country does this. Canada, the UK, France, than Nordic countries, Germany. For some reason, we just don't do it here in the US. And we're like, why don't we do this?
So we're solving for creating expanded access in the face of just significant provider shortages. We're looking at ways in which we can create better outcomes and better actuarial value, implement value-based care from health systems perspective.
Similarly, they're having a hard time staffing and keeping things financially afloat in the service line. They're looking to managed care quality. They want to partner with innovative companies so that they don't necessarily have to be in the service line themselves. And then patients have changed. 80% of parents are millennials. They have seen things like One Medical or a Kindbody or other sorts of things.
Turner Novak:
These premium consumer grade healthcare places.
Anu Sharma:
Yeah. Or just less friction in care. And they experience that in every other part of their life as consumers. And they've seen that it's possible in healthcare with companies like that and now it's become the new thing that they expect.
And also, I would say it's worth noting 42% of births in the country are actually paid for by Medicaid.
Turner Novak:
Interesting. Medicaid is income threshold level?
Anu Sharma:
It is income threshold level. But in maternal health, they are a very progressive payer. They pay for things that commercial insurance don't.
Turner Novak:
Really?
Anu Sharma:
Like doula coverage, prenatal education, the dyadic management of the mom and baby in that postpartum period. Community health workers that can come to your home.
So there's a real opportunity, even in the Medicaid space to really take a different, better innovative care model and really knit it together with the reimbursement structures that are there. It's a space we actively look at and we do take care of Medicaid patients even today.
I think just in general, there's I think a lot of white space for innovation and everyone wants it and the conditions are well aligned and we have the reimbursement structures to do it.
Turner Novak:
So all the different parties, if you think about it as a three, four, five-sided marketplace - I don't know how many sides are sides on this thing - but everyone is incentivized to provide better care in this situation and be open to even letting that happen. Because it sounds like historically maybe no one would... certain sides of the marketplace would just say, absolutely not.
Anu Sharma:
Yep. Exactly.
Turner Novak:
This is the way it goes.
Anu Sharma:
So I think those conditions are right, and I think the other thing is we spend a lot of time thinking about which markets to be in and which markets not to be in. And so healthcare-
Turner Novak:
You're saying cities as in markets?
Anu Sharma:
Cities. And I think that's an important thing in healthcare. People think of healthcare as like, oh, it's a massive industry. It's one big national thing. It's not. It's actually a series of regional markets each with their own peer provider dynamics, and it's their own little universes.
Turner Novak:
Like a Monopoly almost.
Anu Sharma:
Yeah. It's a weird thing. It's like if you're any other consumer company, you can be anywhere in the country that you decide to be based on demographics or whatever it is that you're doing in healthcare. That's not true.
In healthcare you do have to think pretty hard about not just demographics, but also the payer landscape and the reimbursement structures. You have to think about health system partners and the viability of who's there, and whether you can partner with them and things like that. So there are other factors you do have to consider in market selection, and you can get it very wrong by being in the wrong markets.
Turner Novak:
Just from how you work with the insurance companies?
Anu Sharma:
Yeah.
Turner Novak:
Okay. How would you recommend someone who's trying to figure out, I know I need to work with insurance, I'm starting from zero. How do I figure this out? What would you tell them to work through?
Anu Sharma:
So there is I think two basic avenues. The one avenue is, okay, like maternity, it's always been a reimbursed thing. It is just not been great.
Turner Novak:
Okay. Not been great. The experience, you mean or?
Anu Sharma:
The experience and the outcomes. So we're not fighting for new codes to exist. The codes do exist-
Turner Novak:
And it's a very large number too. A dollar amount that you can get reimbursed on. Okay.
Anu Sharma:
Yes. It is.
Turner Novak:
So there's a business opportunity just because the revenue, the amounts are there. Yeah.
Anu Sharma:
Yes. So just thinking purely in terms of VC terms, the LTV is very significant. And so it's like, okay, great. You've got this massive market, $50 billion a year plus upside. And you've got underserved patients.
You've got the conditions that are right on the healthcare ecosystem side for payers and health systems. Medicaid itself is a massive huge opportunity to tap into, which you can do alongside or different. And the LTV is significant.
And if you can find a way to innovate and come up with something that is a better model that can work on the unit economics and can work in terms of better outcomes and create good experiences while making all of that work, yeah, you've got a significant business. Which is I think pretty nice to contemplate in this space.
But not every part of healthcare is like that. Primary care, for instance, which has been in the news a lot lately. A lot of people assume that, oh my god, primary care! Everybody needs primary care. It must be a massive market.
Turner Novak:
Everyone needs it.
Anu Sharma:
Yeah. So theoretically, if you were looking at it just without knowing anything about the healthcare industry-
Turner Novak:
You'd assume that's the biggest TAM.
Anu Sharma:
Yeah. It's a massive TAM. Everybody needs this and we have primary care shortages in the country. There must be tons of latent demand. What people often forget is your reimbursement is $150 a visit. People might need two visits a year if even.
Turner Novak:
Yeah.
Anu Sharma:
People are not terribly compliant.
Turner Novak:
Actively don't go to the doctor. Maybe that's not a good thing to admit.
Anu Sharma:
But it's a very different equation. So you're counting on basically people coming to you over a very long period of time to make that LTV work.
Turner Novak:
So you're figuring out the churn or the retention. Do we have them for two years? Five years? 20 years? It could be any of those things.
Anu Sharma:
It could be anything. And so the economics of a business that are very different.
And so there was this theory where just like, okay, we saw a lot of primary care companies pop up led by One Medical back in the day, and then many more followed. I think One Medical built the scale advantage. They're everywhere. They're ubiquitous. They're not immune from some of the issues in the healthcare industry. But they built scale, and that made them attractive to employers who want to actively contract. Carbon Health has done that as well.
Now, different issues around capital efficiency and things like that in these spaces, but the economics are very different. So yes, on the one hand there is a lot of need and consumers want it. But you have to find that distribution channel which is going to make it work for you, which in this case happens to be employers. But there are relatively few places where you can have this large LTV, which is concentrated in a single episode in healthcare.
Turner Novak:
And I think you've phrased it before. Maybe it was actually someone else who told me this, but I think it's super, super relevant. You almost have to think about your distribution in healthcare before you even think about your product. Is that a fair way to think about it?
Anu Sharma:
Yes. That is very true.
Turner Novak:
How would you do that? Is it simply is the employer, your distribution is insurance the distribution in this case?
Anu Sharma:
Yeah. So insurance is the thing that pays for it alongside the consumer. So it's like, okay, some combination of your insurance company and the consumer are paying for the thing that you're selling, right?
Turner Novak:
Yep.
Anu Sharma:
Many employers are self-insured, which make them both a distribution channel as well as the insurance company.
Turner Novak:
Yeah, true.
Anu Sharma:
They're a weird one.
Turner Novak:
Are those good people to partner with in this case or does that make it harder?
Anu Sharma:
I think to partner with employers, you have to have scale. If I'm like, I don't know, let's make it up big company.
Turner Novak:
Amazon.
Anu Sharma:
Amazon. Amazon is in the business themselves. But sure if you were-
Turner Novak:
People pretend they're not.
Anu Sharma:
People pretend they're not in the business.
Turner Novak:
Maybe that's why they acquired One Medical because it just made so much sense.
Anu Sharma:
That's a whole other thing. We can talk about that too. But basically if you look at any company which has national footprint, they're like, "I don't really want to create different benefits in different parts of the country that I happen to be in. I want one seamless thing."
And so when you look at, for example, One Medical, they have that national footprint and it makes sense for them to partner with employers. And so you have to think about, is employers a distribution channel I'm going after? If so, then yes, I need to build a national footprint. And so it's like, okay, they basically said, we solved for primary care, now we're going to add pediatrics. We're going to add other layers of care and just really serve our end customer in this case, basically an employer as deeply as we can, and as many places as they happen to be. And so that's how they've thought about distribution.
If you look at Kindbody for instance, they basically had to build a national network. They I think have over a 140 partnered sites. I think they own 30 of them, something like that. And so they're expanding. But they have a lot of partner locations, but they had to build that national network to serve the customer that we're going after, which is employers too.
So you do have to think about distribution first because it will heavily affect the thing that you're building. And so in our case, for example for Millie, yes, we're direct to consumer and we are taking care of patients in the end. But we're also very thoughtful about the fact that we want to be building in conjunction with health systems solving a piece of the problem that health systems are facing through some level of line integration.
And we're also interested in Medicaid MCO. And so for us, if that's what we're ultimately solving for. Then it's like, choose the markets where those conditions are right and then build density. And so I'm sure we can opportunistically layer in virtual care and do things like that. That's certainly an opportunity for us. But you have to think about that.
And when you do that, you have to think about, okay, what are the economics of that business? What is the reimbursement that I need to solve for or the partners that I need to solve for? And therefore where do I be and how do I design the care model and all the clinical and technical underpinnings of that model to be able to make the economics work for those segments that I'm going after? And so that's important if you are working in the reimbursed spaces. Because that is a gating factor. If you're not working in the reimbursed spaces-
Turner Novak:
So that means no insurance. It's pure cash pay.
Anu Sharma:
It's just pure cash pay. It doesn't matter. You be where you want to be. You be as close to the customer as you want to be. It's just like consumer.
But for anyone who's thinking with an eye towards insurance in the future, it is important to think about, okay, it's not just like I'm going to build this, they're going to be early adopters on whom I'm going to prove this out. Then one day I'm going to become in-network with an insurance company because they will see the light of day and say yes, this should have been covered by insurance.
Turner Novak:
And we'll just switch. We'll just make the-
Anu Sharma:
We'll just give you these codes and then off you go. That's much harder to do and a much, much harder hill to climb. And even if you did it, you could do it for one insurance company, but there's a cast of hundreds in the country, so you do one thing at a time. And so that is a much harder road to take for companies that are building something that does not have existing codes for.
Turner Novak:
So you would recommend just generally working with insurance to make sure there's reimbursable codes that are commonly used and make sure you just follow all the guidelines on hitting everything for reimbursement for those codes?
Anu Sharma:
Yes. And I think you can certainly build a cash pay business in healthcare. There's-
Turner Novak:
Plenty of people have done that.
Anu Sharma:
Plenty of people have done that. But the biggest piece of the US health care system is reimbursed care. And so you're going to be chasing after a much smaller market for people who can afford to pay large sums of money out of pocket. Maybe there's concierge medicine, people care about experience, they care about on demand access and convenience and things like that. But that is a relatively small portion of the market.
There is an interesting movement in primary care, which is direct primary care, where it's a whole other thing where doctors are like, you know what? We just aren't done with the reimbursement system. We're just going to go off build our own practices, and we're just going to basically work directly with patients and they're going to pay us a membership fee and we're just going to take care of them. And that's predictable for us and it's a better experience for patients. And I think there is a growing movement around that, and I think it's quite interesting.
But I think the tricky thing about it really is that the way that insurance is recognized, you're still considered to be in the deductible phase for your plan when you're in the deductible phase of your plan. And direct primary care is not seen the same way as going to another in-network provider.
Turner Novak:
So it doesn't count for your deductible. As a consumer if you use an out of network primary care, you run the risk of just your healthcare costs-
Anu Sharma:
So you just don't have the parity. So it's like is this recognized as in insured care or not?
Turner Novak:
Yeah. That's tricky.
Anu Sharma:
That's a little tricky. So there is a lot of back and forth in Washington DC around how do we get direct primary care models recognized as a legitimate, not out of network, but in a different type of reimbursement thing?
So there's a lot you have to think about when it comes to distribution. Is this for insurance? Is this not for insurance? And if it is for insurance, okay, is it employers? Is it more broadly other payers? And then accordingly, you have to build your economics backwards and then build a product and everything accordingly.
Turner Novak:
So one thing that always thought was impressive, and maybe I was part of it. So you raised a decent amount of money for Millie before you had a product or distribution. You had to with the type of company you were building.
Anu Sharma:
Yes.
Turner Novak:
How did you do it?
Anu Sharma:
Oh, god. Yes. We did raise a significant amount of money on basically a deck and a team. That is true.
I think what helped us was, it was a great team. So I think there was a lot of credibility that this team could make it happen.
And I think we'd done some of the foundational work. We had a good sense for the care model that we wanted to execute on. We had a good sense for its clinical underpinnings and the fact that there was enough clinical proof out there for this model to demonstrate the outcomes. And so really from an investor's perspective, it was execution risk.
Turner Novak:
Yeah. That's what I felt like too. It felt like you'd solved for a lot of the things other than actually building it, which was a wild card, right?
Anu Sharma:
Yeah. I was like, can they do it?
Turner Novak:
Yeah. But I do remember you were pretty close. I just remember you did launch the clinic very quickly after raising the money.
Anu Sharma:
We did. And so we'd done all of the foundational work, and I think that was basically how we did it, and how I would recommend anyone do it. I think the things that helped us were having a very strong team that had all the component parts.
We understood the business of healthcare, we understood technology, we understood clinical. We had basically put the definition around the care model. We knew that clinically it was sound, and we had identified the market we were going to be in. We had to find the health system partner we were going to work with, and we had line of sight to the insurance contracts.
So a lot of, I think the foundational pieces were there and then yeah, we got the money in less three months. Which yes, even by traditional standards was pretty impressive. And we did it very cost efficiently, which was also pretty impressive.
And so I do think there's general assumption that, oh my gosh, healthcare services is just stay out of it. It's too complicated, especially if it has four walls. And I think it's just not true. It's a massive opportunity. There's lots of white spaces in it. You can certainly build something of huge scale, get it paid for by insurance and do it fast and do it capital efficiently. You just have to pick those spaces and not overbuild.
Turner Novak:
Yeah. So I think one last topic we want to hit on was this telehealth in-person hybrid. There's a couple of different approaches people have taken over the years and trying to solve some of these problems in healthcare. How do you think through in-person, hybrid entirely online virtual?
Anu Sharma:
Yeah. I think you have to really think about the thing that you're ultimately building for. I think there's a few things where a purely virtual model makes perfect sense.
Turner Novak:
What would that be?
Anu Sharma:
Mental health for instance. It's like, yes, you can establish a long-term relationship with a provider and you can be seen virtually. There's not a whole lot that you have to be seen in person for.
Turner Novak:
Yeah. It's all just talking basically.
Anu Sharma:
Yeah. And that makes sense. And I would say certain parts of primary care where it's like you can do an assessment virtually and then prescribe medications or whatever it is. There's a certain category of primary care that fits within that.
The value of virtual is convenience, maybe experience, maybe highly specialized understanding of that particular patient population. FOLX Health, for example, is a great example. They understand the LGBTQIA population and they've built some solutions which are very focused on that population. Works perfectly.
And then there are some things where it's like you have to be seen in person. You can't really deliver a baby through an app.
Turner Novak:
You've got them holding the phone out while she's delivering.
Anu Sharma:
Oh my God.
So in-person care is important.
Turner Novak:
Yeah. True.
Anu Sharma:
And so I think in that instance it's like, but does all care have to be in person? No. We do about 50% of our visits virtually. And you can do that. You can give people connected cuffs and do it via telehealth. So that helps with access and convenience.
But at the same time, when they need to be seen in person, they've got somewhere to go. And you can do that.
Turner Novak:
It's technically more capital efficient. It's lower cost to deliver virtual care. Just looking at a spreadsheet.
Anu Sharma:
Yes. It can be. Assuming you have a large enough market and large enough LTV.
I think people over index and overthink that, oh my gosh, if it's capital efficient, it must be more scalable and that's not always true.
And so I think you can legitimately have hybrid models. In spaces like maternal health where people do need to be seen in person, they do build these long-term relationships with their provider. There's a lot more LTV. There's a lot of LTV in that episode. There's a lot of LTV in continuing care and where you can build something very capital efficiently. It does not have to be a high street retail build, which takes you a year and a million dollars. You just don't have to do that.
Turner Novak:
Yeah. How did you get around that with Millie?
Anu Sharma:
We locate ourselves in what we call these jewel box clinics in medical office buildings. We can create a very elevated experience, but we can also launch in three months at $150k.
Turner Novak:
Yeah. That's pretty good.
Anu Sharma:
Yeah. And I'm like, okay, well, in that case, if it can be done, and if you're picking markets where there's latent demand and you've got fundamentally sound unit economics and you're in network with payers and you've got the right health system partners, you can absolutely do this.
Turner Novak:
But then also competition too. If it's just perfect economics, really high margin and everyone does it, you spend money elsewhere.
Anu Sharma:
You do. And I think that's happened. I think in a lot of the virtual care models, particularly primary care virtual care models, it's undifferentiated. Anybody can do it.
And so you can build bigger moats and things like that with these hybrid models where yeah, it may be a little harder to build, but it certainly can be done. And if you can do it, you can build massive businesses where you've got a lot of white space and all the stars aligned in the healthcare industry.
Turner Novak:
And when you even look at some of just the largest companies in the world, just go down the list, Amazon, Apple, ExxonMobil, all the oil companies, even Facebook has massive data centers that they're spending tens of billions, approaching hundreds of billions on a year. These all require real world moving atoms and moving physical things, not just digital.
Anu Sharma:
I'm very blown away by when you're raising capital for something like Millie, you talk to healthcare investors, they totally get it. You talk to consumer investors and they get it, but they're like, "Oh, healthcare is confusing." But there's enough that are crossover.
And then you talk to tech investors and you spend tons of money building some companies that have gone nowhere. But I think people have comfort in different things that they have done before.
So I do think when you think about building something like Millie, you have to think about your cap table. And that cap table build out does include people who understand technology enabled services, businesses, people who understand consumer and brand and experience, people who understand the state of women's anything in the country and want to do something about it and then people who understand healthcare. I think you have to build a little bit more of a syndicate, which balances those variables out, versus you just go to your typical Silicon Valley, Sand, Hill road VC and-
Turner Novak:
Yeah. You just show up and they're like, what's the LTV? What's the TAM?
Anu Sharma:
Yeah. It's a little bit-
Turner Novak:
Who else is investing?
Anu Sharma:
Yeah, exactly. So it's a different conversation with different investors, but I think the biggest thing I would leave people with is do not be afraid of healthcare and do not be afraid of things that have walls. Healthcare is massive. There's lots of room to innovate. You just have to pick the right spots. And the walls can be on wheels, the walls don't have to be in high street retail with massive CapEx build outs.
Turner Novak:
And they also don't have to be closed walls. There can be internet connections going out through the walls to bring people in to this. Inside the walls at some point too.
Anu Sharma:
Exactly. So it can be a combination where it's like the walls extend to the home. We do home visits. We do 50% of the care virtually. Literally, we're a virtual care meets in-person care, but we have built a format which is extremely efficient to do what we do.
Turner Novak:
Yeah. Well, this was an amazing conversation. Thank you so much for coming on.
Anu Sharma:
Yeah. Fun to do it. And thanks for coming out to San Francisco to do it in person.
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