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Ali Diab, Collective Health — Founder Story

Startups are fun. You push a button and something happens because there’s not a lot of bureaucracy and it’s a very tight feedback loop. The ability to be able to say, ‘Okay, let’s do this or let’s write this function or add this feature’ and you just go do it — that is very gratifying.

When entrepreneurs recount their inspiration for a startup, their stories usually don’t begin on death’s door.

But that was where Ali Diab was in 2013 when he was rushed to the emergency room with a life-threatening condition. Diab’s intestines had twisted up, cutting off the blood supply and putting him in critical condition. Luckily, Diab had life-saving surgery and recovered.

Then came the really bad news.

Diab’s health insurer refused to pay most of the cost for a procedure that it deemed to be experimental. In time — and with an enormous amount of research and appeals — Diab convinced the insurer to cover a portion of his medical expenses. But the experience sparked an idea: What about creating a simpler way to understand, navigate, and pay for employer-provided health benefits? It is often a convoluted process, full of unpleasant surprises for both the employer and the employee, so Diab set out to create an infrastructure that actually empowered healthier lives.

That was the genesis for Collective Health, which Diab started the following year with his co-founder Rajaie Batniji as they created an integrated platform to help employers better administer their benefits plans and offer improved access to care for employees. It was an idea that resonated: Collective Health currently has ~300,000 members — and the numbers continue to grow. Collective Health has seen 10x member growth in the last few years, with a member satisfaction rate of more than 90 percent. The company also recently announced a $280 million Series F round.

Diab, who grew up in Palo Alto before attending Stanford University, and later University of Oxford, didn’t follow the usual entrepreneurial path. He originally thought he’d wind up in academia, following in the footsteps of his parents, who had their own remarkable backstory.

Q: We’re all byproducts of our upbringing and you were born to Syrian refugees who share an incredible story.

My parents were political refugees. My dad was a student activist in Syria in the early 1960s whose pro-democracy views didn’t go over very well with the ruling military elite of the country. But my dad was not someone who cowered in fear at challenges and threats. Despite being imprisoned numerous times, he felt his beliefs were worth fighting for. And, ultimately, the ruling powers sentenced him to death.

At his sentencing, as luck would have it, the presiding judge of the tribunal was one of his kindergarten classmates and a friend from the neighborhood.

The judge couldn’t bring himself to send his childhood friend to the firing squad. So, he called my dad back to his chambers and told him they were going to feign an altercation. He asked my dad, who was a big guy, to punch him as hard as he could to knock him out. That’s what my dad did. Then he jumped out the window and escaped on foot. He kept going until he arrived near Mount Herman, which is on the border with Lebanon and Israel. Eventually, my dad was granted political asylum in the UK. As for my mom — it was like an East German spy movie; she was smuggled out of Syria in the base pan of a bus.

Q: Your mother studied to be a surgeon when she lived in Damascus. From what I gather, a lot of people had a hard time understanding why she would bother to do something like that.

She came from an upper middle-class background and people expected her to get married and have a family. She’s a fiercely independent feminist who wanted her own career and became one of the youngest surgeons in the country’s history. Her career ambitions and work ethic allowed her to financially support my dad through his post-doctoral work and our whole household during other important times.

Q: How do you think that example rubbed off on you?

That was a very formative influence. My parents were both achievement-oriented professionals and good models to follow. They stressed how knowledge, learning, and understanding were the keys to overcoming everything from poverty to human conflict. And I agree. Once we understand things, we tend to be much more sympathetic as to why things are the way they are.

Q: You ultimately got degrees from Stanford and Oxford. But as you grew up, what tugged at you? Was it entrepreneurship? Was it technology?

My mom became a professor of medicine and my dad a professor of law — and then my brother ended up becoming a professor of medicine — so I always thought I was also destined to be an academic.

Q: Then why the detour?

I can’t say there was one specific thing but when I was studying economics, I saw that a lot of my classmates from Stanford were starting companies and that sounded really interesting. I was home for the holidays while in grad school and chatting with my friends, comparing our lives. I remember telling one of them, “I’m so jealous of you. You get to work on pushing out code that millions of people use. It’s so immediate and tangible.” Those kinds of interactions eventually led me to think that maybe I didn’t want to be an academic and instead should work in the private sector.

Q: I’m sure you were watching what was happening back in California with the internet. What convinced you to make the leap?

It was one of those serendipitous things where I met with a few friends to chat about what we were doing and this crazy internet bubble we were witnessing. We felt it was a once-in-a-lifetime-opportunity we should capitalize on, so we all quit our jobs and decided to start a company. We didn’t really have a great idea of what we wanted to do but figured that it would have to involve the internet somehow.

At the time, there was a lot of focus on the consumer side of the internet, so we looked into how we might apply the internet to the enterprise. We thought we could actually connect supply chains to build online marketplaces where buyers and suppliers could transact directly using the internet. That was kind of the germination of my first startup idea.

Q: All told, you’ve now started three companies, so obviously there’s something about the experience that’s really worked for you.

Startups are fun. You push a button and something happens because there’s not a lot of bureaucracy and it’s a very tight feedback loop. Even though my first startup wasn’t a success story by any means, that ability to be able to say, ‘Okay, let’s do this or let’s write this function or add this feature’ and you just go do it — that was very gratifying.

Q: So Collective Health is now in its growth phase and it’s clear the company has staying power. Why do you think the health insurance and benefits industry has had such challenges?

A lack of technology is a big part of why the traditional system is difficult to navigate and nearly impossible to understand. Most health systems run their own HR and don’t necessarily integrate with third parties. They don’t provide user-digestible, user-accessible information. Incumbents in the healthcare space are also built on technology from a completely different era. They run on claims systems written in programming languages that even I, as an undergrad in the nineties, didn’t code in, like COBOL, that aren’t designed to interoperate.

Q: What’s the impact when patients don’t receive full reimbursements or are forced to shoulder a large portion of the treatment bill?

When (Sen.) Elizabeth Warren was at Harvard Law School, she published research that found two out of every three personal bankruptcies are due to insufficient health insurance coverage. Rajaie Batniji, my co-founder who was a professor of medicine at Stanford, would tell me that he had to spend more time with insurance issues than he did diagnosing his patients. Healthcare is one of the only sectors where we consume or utilize a good/service without knowing the cost at the time of the transaction.

The transparency about everything around healthcare — understanding why things cost what they do, trying to obtain your medical records, trying to understand how to appeal a denial, or even trying to access a system — is not good. The burden is placed on the patient to understand and navigate care to a level of detail that’s completely unrealistic. The end result is either a financial burden, a lack of care altogether, or just a horrible user experience, and people deserve better.

Q: I think you’re spot-on in observing that a lot of health insurers run IT systems that are outdated. Is that why it’s so hard for employers to get data they need to understand their healthcare costs?

It’s a very big part of it. Most insurers run on a claim system that was developed in the 1970s that was really designed to do one thing — which was to process the transaction and then move on to the next one with no notion of metadata or annotation, or even just post-processing that data in a way that makes analytics capable or useful. That leads to a lot of downstream effects where all the data that you might want access to in order to understand why things cost what they do is not there or not readily available to analyze and make any sense out of.

And these claims systems cost literally billions of dollars just to upgrade every year. Even if there is a desire and a willingness to want to fix the system, a lot of insurers just say, “You know what? It’s just too costly, so why even bother?” It makes a lot more sense for big insurance companies to run on modern technology platforms and infrastructure like Collective Health than it does for them to have their own idiosyncratic implementation of a claim system.

Q: I dislike the term, which is almost cliche’ nowadays, but do you consider yourselves to be disruptive?

I’d say we’re innovative. I also don’t love the term disruptive because it means you have to displace or tear down stuff. I think we’ve demonstrated that you can actually grow quite successfully as a technology organization through partnership versus creating your own insurance. It’s one of the reasons why we actually didn’t create an insurance company to begin with because we wanted to be a technology platform and enabler for the industry.

There was no widely adopted, modern infrastructure in healthcare. By providing a powerful, flexible platform that helps deliver a streamlined, intuitive healthcare experience and brings a robust ecosystem of partners — networks, PBMs, virtual care solutions — Collective Health is uniquely poised to power the future healthcare industry and empower healthier lives.

In short, health insurance needed a backbone. So we built one.

Q: You think about the role of call centers in a different way. It’s not how most companies have thought about the function. Can you talk more about how you approach this?

Absolutely. We don’t call it a call center; it’s a customer experience center. Due to its complexity, healthcare often demands human touch, but that human touch can’t just simply be a nice person answering the phone. You have to be a person on the other end of that phone who is truly empowered with the right information and resources at your fingertips. Our member advocates use those insights to answer that caller’s question fully. It’s the technology that underpins all of our systems that makes it possible to deliver on that kind of customer experience. It’s not just a transaction or an interaction but rather truly understanding what you are trying to accomplish and then navigating alongside the member to deliver a quality experience.

Q: What do you like about being a CEO?

I enjoy being on a team of mission-driven individuals with really strong competencies. We have expertise across various facets — technology, healthcare, customer experience, customer service, and design. I see myself as playing in an orchestra where I’m a member of a leadership team — enabling and facilitating progress within the organization. I’m not the head honcho; I don’t look at myself that way.

Q: Entrepreneurship is not for everyone. What about it do you find appealing?

I’d agree that entrepreneurship is not for everyone. There is a certain appetite for risk that you have to have. There are a lot of peaks and a lot of valleys, and you start asking yourself a lot of questions, like, “Am I really cut out for this? Is this for me?” Obviously, I have a very personal desire to see the healthcare industry change.

Despite the challenges, I’m motivated to keep going because there are others relying on me. I grew up playing soccer, and when there are ten other people on the field depending on you, it forces you to step up your game. As an entrepreneur, when there are hundreds of people relying on you, you have a responsibility to show up every day and do your very best. It’s also about showing up for the hundreds of thousands of members we have. We need to fulfill our vision because that’s why they use us and that’s what they expect.

Q: What is one thing about yourself that would surprise your colleagues?

I would probably say the fact that I speak several languages. [Editor’s Note: He speaks six.]

Q: Do you have a favorite book?

I like the classics. Anything by Albert Camus Paul Sartre, Aldous Huxley, or George Orwell — those are at the top of the list. I recently read a fantastic book by David Reich, a geneticist at Harvard, called “Who We Are and How We Got Here.” It’s a super-interesting review of the human genome and its influence on how societies merge and cultures emerge.

Q: What is your favorite movie?

That’s a tough one. I’d have to say “The Breakfast Club” just because it was a formative movie in my youth.

Q: Is there a particular motto that resonates with you?

There’s one that my wife shared with me that I really like, which is that no one knows enough to be a pessimist. Meaning you should always leave the door open for something good to happen in your life. Take every difficult experience as an opportunity to grow and learn or discover something about yourself and the world around you.

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