Cofounder &

CEO

Iora Health

Pretty much everyone has been a patient and also realizes the system is broken.

Interview by Heidi Legg

When we went looking for change agents and disruptors one name kept coming up: Dr. Rushika Fernandopulle is taking on the health care system and giants by focusing on a flat fee primary care model.

Why are you disrupting today’s health care system?

I think one goes into medicine because you want to help people and you want to help them improve their health. And at some point as a Primary Care doctor I realized the system really made it difficult and that if you really wanted to help people, what you need to do is fix the system.

How would you describe the current system?

Pretty much everyone has been a patient and also realizes the system is broken. We make occasional heroic saves, but by and large I think we do a lot of things poorly. Lots of people are trying to do the right thing, but the system is broken and most people just sit around and complain about it.

When did you decide to be a change agent?

Really from the first time I started seeing patients. I was thrown into the wards in the early 1990’s when the Clinton health reforms were starting to go through and managed care was rising its head. There was a lot of disgruntlement among the doctors. I realized there was value in both seeing patients and working on a system change.

How did you start to make a change?

After my third year of medical school I took a leave of absence and went over to the Kennedy School of Government at Harvard because it allowed me to interact with people in a host of different fields. They were struggling with the same sort of system problems in their fields, whether it was education, criminal justice, energy, or transportation. There are tools that you need to have and ideas about how to change the system that cross all fields.

Afterwards I finished my clinical training and did a year of general surgery and went to work for the Advisory Board Company in Washington, DC. There are 2500 health systems in the US and the Advisory Board was trying to figure out who was doing things well, how to replicate it and then teach it to everyone else. Every health system had the same sort of problem: people wait too long in the ER with too many adverse drug effects and on and on.

How is Iora Health different?

With Iora, we’ve decided the lever to fix health care is to get primary care right. If we can get primary care right, we can help patients manage their common conditions: diabetes, hypertension, depression, and then help them navigate the rest of the system. Although primary care is only about 5% of the health care dollar, it’s the lever that can help control the remaining 80%.

Are you tweaking primary care or overhauling it?

Tweaking the existing structure is not disruptive enough. The problem is we’ve been tweaking it for 30 years and tweaking doesn’t work.

And thirty years later it is still a mess?

Or forty. Don Berwick, a pediatrician here in Cambridge, who used to run the Centers for Medicare and Medicaid Services (CMS), started working on how to improve the system decades ago. He created a Cambridge-based think-tank, the Institute for Health Care Improvement with the idea to help existing practices and hospitals change. The problem is the second the grant runs out, the champion leaves, people stop paying attention and it goes right back to the way it was and you haven’t changed anything fundamental. Maybe it’s easier to change everything. We asked what if we just start from scratch?

How does Iora Health work?

It has been an evolution. We started working in existing practices and our first big project was with the Boeing Company in Seattle beginning in 2003. We set out to change the payment model. One of the big problems with primary care and the health care in general in the US, is that we pay per sick visit. There are a lot of things that we need to do for people that are not visits to the doctor and do not have to do with being sick.

In our first model, the doctor still billed for the sick visits and on top of that received what’s called a “case rate.” It’s an amount of money to use to work with patients between visits, such as to do education and reach out to check up on them.

But today you just do a flat fee.

Yes, I decided that these hybrid models don't work well. Right now the way you get paid in health care is a game based on how you code the visit to get higher gains. We said, stop the game. Let’s do three things: pay us a fixed fee for primary care and pay us double what typical primary care makes and let’s do away with co-pay.

If your costs are double, how does that help?

Because primary care is only 5% of the health care dollar. If we actually put more money up front and take care of people better, we’d save by keeping them out of the hospital, out of the ER, and that helps everyone. Another thing we do is get rid of copayments for primary care. We make people pay $20, $30 every time they go to see the doctor and it’s meant to dissuade people from going. Why exactly are we trying to dissuade people from going to a primary care doctor? It makes no sense at all. It’s better if they come see us, than go to the ER or hospital!

What are the latest savings you are seeing?

Our oldest project where we truly started from scratch was in Atlantic City, NJ. We have seen a 48% drop in ER visits, and a 41% drop in hospitalizations. When you look at all the costs, including the extra paid to primary care, we saved conservatively about 12.5%. That isn't dropping the slope of the increases, which is the goal policy makers now discuss, but actually taking money out of the healthcare system and putting it back into people's pockets.

I’m nervous for you. How are you going to take on the lobbyists, insurance companies, and big pharma?

The first thing we learned early on is you have to pick allies. We were these two doctors in our pilots trying to do this rigorous change and we were squashed. That’s why our model now is to go to these sponsors. We have great sponsors - purchasers of care who benefit from better health and lower costs. In Las Vegas our sponsor is the Culinary Fund who is very powerful in town. They provide health care to 130,000 people in Vegas and we have built a practice for some of their sickest patients right on the Strip. Our shared goal is to keep them healthy and out of the hospital and emergency rooms.

Who are your other sponsors?

We are also working with Dartmouth College in Hanover, New Hampshire and we just signed a contract in Brooklyn, New York with a group called The Freelancers Union who provides insurance to 25,000 people like you, who are writers and Broadway producers, actors and musicians. And we were thrilled to announce we are now in Boston. The practice includes two sites, at the Lahey Clinic in Burlington and at the Dorchester headquarters of the New England Regional Council of Carpenters. The 20,000-member union is initially sponsoring the new practice for use by a portion of its members.

What about Boeing in Seattle and the Atlantic City casino group?

They were pilot projects working with existing health systems. I decided, that if we really want to innovate, we have to do this completely independent of existing health systems. Even the ones who are well motivated still have rules and can't get out of their own way, which is why we raised some venture capital money and now we get to build and operate our practices ourselves.

How much venture capital money did you raise?

We raised about $6 million in series A in October 2011 from three Boston based venture capital firms. They really have been great partners in helping us grow.

What are you trying to tackle this year?

Our goal this year is manage and grow four practices. We have done two already: Las Vegas and Dartmouth, and Brooklyn is slated to open in October and now Boston will be our fourth.

Why should the world care about what you are doing?

Everyone is going to get sick and I think being able to be taken care of in a humane and effective way is really important. Our current system does it really poorly. I’ll give you an example: diabetes care. There is a new stat that people use for diabetes, it’s called perfect care. If you are diabetic and your blood-sugar is in control, your cholesterol is in control, your blood pressure is in control, you are taking an Aspirin and you don’t smoke we call that perfect care. If we can get people to do those five things, we dramatically reduce complications like blindness and kidney failure. Do you know what percentage of people in this country, even in the best medical centers, get this perfect care? It’s often under 10%. It is embarassing and we need to change that.

I read that you allow patients to come in as often as they’d like.

Absolutely.

How will you manage a repetitive user who shows up all the time?

We want people to come in to our practice. Again we are primary care. Our goal is that people come to us and not to the ER. Hospitalization costs $17,000, while a visit to us costs $60 to $80. You can do the math. Part of our model is getting it away from the doctor having to do everything. Today I think we focus too much on the doctor. If we want to have people improve their health care, we need to wrap a team around them. And the key to that team is what we call a Health Coach.

A Health Coach?

We are looking for people who really care to help people, people who are engaging and ideally who are from the community. Ideally they’ve had some experience with the health care system, either from a personal illness or a family illness, so they get how frustrating it is and they understand personally how they help someone go through it, and that’s it, everything else, we can train.

Do they need to be medically trained?

The only thing that’s important is to have empathy and be able to engage people . Everything else is trainable. I can teach you about diabetes, I can teach what foods to tell people they can eat, and how to track blood sugar. I can teach all that. But I can't teach empathy and engagement. It’s hire for attitude, train for skill.

Is this based on data or your own gut instinct?

The bulk of the problem in health today is chronic disease. Today 70% of the problems in our system are chronic disease, not acute problems. We are pretty good at the acute things: if you have sudden chest pains, we’ll take care of you but if you have diabetes, hypertension, asthma, depression, arthritis, which are the bulk of burden of disease in Western countries right now, our systems are not geared at all for that.

If you want to actually take care of chronic disease you need a team of people, a Health Coach, being able to do things differently, being able to communicate, not just in the visits. It’s 2012, so we do video chat through Skype, we text message, we send e-mails. Our payment model allows for all of it.

We sound really needy in America?

We are - despite all of our great technology and the trillions of dollars we spend on health care. We have serious health issues in America and people need to know that someone is with them. Our attitude is that our patients are our problem, and our job to make sure that they get healthy, whether they come into us or not. In Las Vegas, for instance, we have about 800 patients and those 800 patients are our responsibility. We know exactly who they are and we know who’s getting into trouble.

Will there be many more?

We hope so. For now, we have stopped our marketing until we can ramp up our staffing and our space.

What will happen to health care giants if your model works?

To be honest, it’s not my problem, just the way it wasn’t Henry Ford’s problem that the buggy-whip makers went out of business when people went from horses to cars.

For too long we’ve worried about protecting the people who work in health care and not thought about protecting the patient. Our strategy is very simple, we’re going to build new models of primary care to offer to patients and let them vote with their feet. And that’s the way we are going to change the world.

Who were your mentors on this journey?

I mentioned Don Berwick. Thirty-five years ago, when it was heretical to even think that the way we’re dealing health care was imperfect, he was standing up and saying it’s our responsibility to look at our systems of care and make them better. He was hounded out of office in Medicare because of political reasons, but has been a mentor for a long time.

Another mentor is David Bradley who ran the Advisory Board Company and is now Chairman and Owner of the Atlantic Media Company and Magazine. Everyone disruptor faces a brave moment where they must decide if they’re going to put something on the line. I told myself, “if you really want to do this, you just have to do it yourself and that requires quitting your day job and taking a second mortgage out on the house, and deciding to build a practice and just do it myself.” I went to David Bradley and asked him if there were a chance he would want to support this. We had written this huge fifty page business plan and it was beautiful and bound. I went into his office overlooking the Potomac and he looked at me and pushed the binder right back. He didn’t even open it. He said, “I believe in you. I believe in the idea. How much do you need?” He essentially gave us a personal loan. We actually paid him back four years later, believe it or not. It was a huge thing that he did for me.

What does a day in the life of Dr. Rushika Fernandopulle look like?

It completely varies. No two days are alike, which I think for me is a good thing. I travel a lot, for better or for worse, but for now, I need to go to places where there are sponsors willing to do this.We were excited this August to announce we will now have a practice in Boston.

Typically, about two days a week, I go to Las Vegas and I put the stethoscope on and actually see patients, which is great, because that’s the only way I can see how your system is evolving.

I also have three girls who are ages eight, eleven and thirteen. They’re at the age when they are interesting and still like us. It’s work and family.

Is Cambridge your Headquarters?

Yes, it’s Headquarters. We first worked out of the popular incubator site, One Broadway run by Tim Rowe but have now moved to a larger space on Third street. We call it the nest to keep with the Iora bird theme. We have fifteen people in the nest, seventeen after the next few weeks. We have three doctors in our headquarters, an operations team, and then an IT team. And then we have our practice sites. We are forty-five people in total, with sixteen in Cambridge, and we will be up to around eighty or a hundred people soon. We’re growing fast.

Where do you go for a power lunch?

In Kendall Square my favorite place is Evoo, which is right across the street from us. It’s quiet and right next door.