Frank Cheung, Cerebrae, on building tools to accelerate participation in value-based care

Vahid Hoshmand
The Pulse by Wharton Digital Health
6 min readMar 17, 2022

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Frank Cheung, CEO and Co-founder of Cerebrae

This episode’s guest is Frank Cheung, CEO and Co-Founder of Cerebrae, a startup that aims to accelerate the adoption of value-based care (VBC) by helping providers and payers measure, forecast, and validate the financial ROI of emerging approaches to patient care. Through this work, they aim to radically simplify the process of commercializing value-based care delivery. They are backed by several investors, including StepStone, Fika, Susa, TenOneTen, AME Cloud Ventures, Knollwood, Route 66, and SaaS Venture Capital.

During this conversation Frank and I covered:

  • Why actuaries exist in healthcare, and why they are critical to the realization of value-based care
  • How Cerebrae’s platform actually works to create a trusted picture of a solution’s financial ROI
  • Cerebrae’s philosophy towards educating its customers on what is needed to succeed in value-based care and how it may approach partnerships in the future

Start to 14:00: The role of actuaries in VBC

  • We opened the conversation with some context setting: actuaries comprise a critical role in healthcare. Actuaries in this industry are typically found in the insurance space where they will take on a range of functions including underwriting, network contracting, new product development, and financial forecasting.
  • Another key role actuaries play is pricing, particularly pricing for premiums, benefit design changes, and, in the context of VBC, provider risk contracts.
  • Unfortunately the tools used for these functions (e.g., Excel) have not kept pace with the increasing complexity of healthcare. This makes it difficult for stakeholders in value-based care to efficiently understand how to structure their contracts, evaluate the downstream impact of such arrangements on their costs, and, in the case of payers, appropriately price members’ premiums.

“Because of the changing landscape of healthcare, where we are moving towards a value-based care arrangement, that means that the existing tools aren’t really sufficient at scale. And that’s the biggest challenge that Cerebrae is looking to solve.”

  • This problem takes on greater importance when we consider the implications on smaller organizations. Generally, having an actuarial department work on VBC contracts only makes sense when they are large in scale, such that they cover broad geographies or otherwise represent multi-million dollar contracts. Smaller provider systems, medical groups, or independent practices may not offer the same economics of scale that justify the cost of investments in analytics to support a VBC contract. Thus, they often get left out of payers’ VBC initiatives.
  • Frank saw this issue emerge frequently throughout his actuarial experiences at Blue Shield of CA and Deloitte. Simultaneously, as a child of the Bay Area, he had been used to seeing how technology could improve outdated processes. He therefore founded Cerebrae with the goal of lowering the costs to include organizations of all sizes in the growing VBC ecosystem.

“Seeing this particular process as a pain point and still not having changed for a better part of 30 years — those were some of the memories from my work experience that really set the stage for me thinking that a solution like Cerebrae needs to exist as healthcare progresses towards more value.”

14:00 to 30:00: Cerebrae’s backend software creates value stories that scalably adapt to its customers’ dynamically changing needs

  • Cerebrae’s product is a software solution targeted primarily towards payers and providers. The company thinks of its value proposition across three phases of partnership:
  1. In the first phase, Cerebrae creates an “impact model” to characterize the financial ROI story of the customer’s offering to its clients. This model includes savings projections that are dynamically tailored towards different demographic profiles.
  2. The next phase is to facilitate value-based pricing and contracting. Providers are able to offer shared risk or savings arrangements. Cerebrae can track relevant metrics of costs, engagement, and outcomes in the backend.
  3. Third, the platform monitors the impact of a VBC contract over time, providing insight into both the contract’s ROI and how the clinical model might be improved.

“Measuring and monitoring total cost of care impact, which is probably one of the most important indicators of long term viability, has been untenable to date, and Cerebrae’s technology changes that.”

  • Across all these stages, Frank notes that Cerebrae is not looking to replace actuary or analytics teams. Rather the specific value proposition of Cerebrae is how its platform can synthesize the different data pieces that inform VBC decision-making and “amplify that story at scale”.
  • As an example, suppose the analytics team of a digital health company was able to show independently that its product resulted in a 50% reduction in emergency room utilization. From there, Cerebrae’s platform could take those results and price the company’s products across different patient demographics or geographies that the company’s prospective customers serve, scalably providing a unique ROI story for each unique market opportunity.
  • For customers that do not have sufficient internal data to perform these types of analytics themselves, Cerebrae’s platform will leverage its own database of adjudicated claims data. Otherwise, Cerebrae can integrate with a customer’s dataset if that is a preferred source of truth.
  • Furthermore, he emphasizes the value in having a single source of truth when it comes to the financial ROI of a VBC initiative within the organization. Without Cerebrae, today there could be a mixed understanding of the value story across departments.

“What Cerebrae’s platform does is codify that source of truth and work with those analytic departments, and it basically aligns the message and the financial value proposition consistently across a commercial org that is oftentimes growing really rapidly.”

30:00 to 40:00: Evaluating a customer’s maturity in VBC is core to Cerebrae’s customer strategy

  • Cerebrae’s customers largely come from the payer and provider space. The way that Frank thinks about segmentation of these customers is around their maturity within the value-based care life cycle. He describes 3 levels of VBC maturity as it relates to their customer strategy:
  1. Early-stage: Organizations that are currently fee-for-service but recognize the need to tell a compelling ROI story.
  2. Mid-stage: Organizations invested in measuring their outcomes over time and identifying ways to improve their performance.
  3. Late-stage: Organizations that are ready to partake in arrangements involving shared risk contracts.
  • Understanding where a customer is across these stages helps Cerebrae tailor its product and support services to better meet those stage-specific needs and, just as importantly, help that customer move to the next stage in their VBC journey.
  • Regarding Cerebrae’s customer pitch, the company emphasizes walking through the journey that an organization would need to take to become successful in a value-based world. In many situations, provider organizations begin to realize that the required investments begin to feel like the operations of an insurance company. Thus, often providers would rather focus on the clinical side and leave the “insurance” piece to Cerebrae.

“We go through the process of here’s what you would need in order to price dynamically at scale or underwrite dynamically at scale. Here’s what you would need in order to measure your performance over time or to recognize revenue… and they start thinking, ‘okay well, what are my options here in terms of being able to do this? I can try to bring this in house. But then, as a provider, I’m really trying to just build an insurance company from scratch. And do I really want to do that?’”

  • Looking forward, Cerebrae hopes its platform can “foster more trust into a system that has turned a lot of people into cynics” when it comes to value-based care. Frank believes that today there is relatively little trust around whether solutions will be able to generate the returns they promise. It is his hope that Cerebrae can serve as a platform that standardizes the ROI story with a transparent approach that stakeholders can trust.
  • Cerebrae also hopes to build partnerships that better integrate its product within clinical and operational workflows. This would optimize such workflows as their financial performance could be tracked more effectively. At the same time, Cerebrae hopes to partner with companies that provide backend claims adjudication services. These companies’ customers are often payers who are also looking to embed actuarial functions within their claims administration operating system.

40:00 to end: Wrap-up

  • Frank encourages people to enter healthcare, though cautions them to realize that this can be a highly complex and relatively slow-moving industry. However, “on the flip side, it makes the wins feel that much more rewarding.”
  • Regarding careers, Cerebrae is hiring across multiple roles. On the business side the company is looking for those who can help shape its go-to-market marketing strategy and educate the market on what is needed to succeed within a VBC ecosystem. They are also looking to hire into actuarial, product, and engineering roles.

To see roles Cerebrae is hiring for, check out their careers site here.

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