Allen Karp

of the six largest hospital systems in New Jersey, as well as about a thousand physicians who are under an episode of care model, which is a total cost of care model built specifically for those specialties.

The episode of care model would be more focused on a particular group of specialties and using data and the relationships we have with the specialist to drive towards the best outcomes, lowest cost.

For the hospitals, it's more total cost of care budget.

So this is what we're spending for these patients and providing the insights for the health system and particularly the physicians who lead those health system physician groups to understand where opportunities lie.

I think the changes in the ecosystem are driving a lot of the interest in changing the model and understanding the value-based care model.

For instance,

We have competitors who are acquiring physicians and acquiring outpatient capacity, acquiring surgery centers with the intent of providing more of that care in that setting versus the hospital setting.

So that has real implications if you think about the existing fee-for-service models that are in place.

However, if you move to a value-based care model,

It behooves the health systems and the physicians to invest their capital in population health management and people, processes, and technology that support that.

The future marketplace and what's happening right now is that the lines between payers and providers are blurred.

So some of the functions that payers perform today

If the marketplace moves towards a value-based economic model, the payer's strength will be to bring analytic capability, operational capability, technology, and customer relationships to the table, but the care will be delivered and managed at the physician level, at that point of service.

as opposed to in an administrative office.

So I think the changes in the marketplace are driving health system CEOs and physician leaders to understand that they've got to make more investment in technology to be able to support the new models and the new way care will be delivered than building buildings or adding beds.

That's exactly right.

I think historically hospitals have been focused, as have physicians, on revenue.

not necessarily margin and the cost for a provider in a value-based model and the margins they can make in that model if they perform is substantially higher than in a clinical model because you don't have to hire more people i said earlier that labor is the biggest cost within the healthcare delivery system

You don't have to fill more beds.

You don't have to build more buildings.