Michael Meng, Stellar Health, on bridging the incentive gap through value-based care
StellarHealth is an early stage startup working to bridge the incentive gap between insurers and providers by offering its technology solution to guide providers engaged in value-based arrangements. StellarHealth was founded by healthcare veterans and alums of Wharton’s MBA program with deep experience across healthcare. We are joined by Michael Meng, Co-Founder and CFO of StellarHealth. In this podcast you’ll learn about StellarHealth’s founding story, achievements to date, and near-term goals for the company’s future.
New Podcast Host (START–1:30)
· Scott Lever is a rising 2nd year MBA student in the Health Care Management program at Wharton. Before coming to Wharton, Scott spent six years at the Marwood Group, a healthcare-focused consulting firm that works with private equity investors and healthcare companies by advising them on the key reimbursement, regulatory and legislative catalysts impacting the healthcare sector.
Mike’s Career Path Before and After Wharton Prior to Starting StellarHealth (1:30–3:30)
● Healthcare investment banking for two years prior to joining Apax Partners. After two years in healthcare private equity, Mike came to Wharton where he was a member of the Healthcare Management Program (HCM). After graduation, Mike returned to Apax Partners full-time where he remained until resigning to start StellarHealth in 2018.
● Having spent ten years investing across healthcare, Mike had a front-row seat to the plethora of problems the industry is facing.
What Were Some of the Problems and Trends that Led to StellarHealth’s Creation, and how did Stellar Ultimately Come Together (3:30–11:10)
● Healthcare is an incumbents’ game. Large systems and insurers tend to want to keep healthcare the way it is, as it’s set up to benefit their bottom lines.
● Budgetary pressures make the current cost environment unsustainable given the way healthcare costs eat away at programs impacting other parts of the economy.
● Value-based care (VBC), in concept, is one of the few bipartisan ideas with broad support from both sides. The problem is that the implementation of the VBC concept has been much more difficult. Payors and providers are really struggling to change their behavior. This is what StellarHealth is aiming to address.
● At the end of 2017, after identifying the problem they knew they could help address, Ben Kraus (CEO of StellarHealth and a Wharton classmate of Mike’s) and Mike resigned from their previous positions to launch StellarHealth together.
● StellarHealth then found its star engineer, from Google, who could help power the technology solution that StellarHealth now offers. Additionally, StellarHealth added its Chief Operating Officer and Chief Medical Officer to have a clinical leader who could round out the founding team.
What is the StellarHealth Platform and What Does it Do (11:10–15:53)
● The real problem: payors were structuring risk-based models to align their incentives with providers, but couldn’t understand why providers were unable to change their behaviors.
● One key opportunity: help these providers capitalize on new incentive opportunities by integrating them within existing workflows.
● StellarHealth takes in all healthcare data (claims, billing, EHR, pharmacy, etc), crunches in it in the background, and provides a simple cheat sheet to the provider before they see a patient.
● The platform prompts providers to address not only the primary reason a patient came in to see the doc, but potential other areas that a doctor can address while they have the patient in their office (congestive heart failure, diabetes checks, etc).
● Stellar pairs its prompts with an incentive payment called a Stellar Value Unit (SVU). This puts the payment in a format that providers understand given their experience with RVUs.
How Does the Platform Integrate with Physician and Care Team Workflows (15:53–20:10)
● Stellar aimed to minimize the amount of time a doctor would spend on administrative tasks, Stellar gets other members of the support staff to do the bulk of the interaction with the Stellar platform.
● In fact, Stellar even provides extra incentives for support staff to encourage them to change their behaviors and incentivize them to do everything needed for the physician to do the highest margin level of work.
How do you overcome some of the traditional challenges associated with selling into physician practices (20:10–22:18)
● From provider side: StellarHealth’s technology is free and the providers actually get paid for using the program (rather than paying for the solution). This has helped Stellar penetrate physician groups.
● Providers are jaded, they don’t trust the insurers or other tech vendors given their experiences.
● Breaking through for StellarHealth requires starting slow and empowering early wins. By starting small they are able to build momentum with the group.
What’s next for StellarHealth (22:18- 24:20)
● Currently work with a few thousand lives, but growing rapidly through regional and national contracts with payors.
● One side of the growth strategy: continue building out to add more lives and more providers to the program.
● The other side of the strategy: engage more payors who are part of the value-based system to the platform. When they have multiple payors running through the platform, it turns StellarHealth into a singular location for them to turn to for all things VBC across all of their patient population and lines of business.
● StellarHealth is payor-agnostic.
What do the new Direct Primary Care Initiatives recently announced by CMS mean for StellarHealth (24:20–27:30)
● Stellar is very excited by the announcement, although they were expecting these new models to be announced given the success CMS has had through other programs such as Medicare Advantage.
● These new models should open up risk-taking and ACO-like opportunities to primary care groups, which Mike believes is the exact direction CMS needed to go.
● The new models are a clear tailwind and extreme positive for StellarHealth and the US healthcare system.
● These new models also force everyone who is part of an ACO to take on value-based care work and taking on risk.
● “No longer can groups hide behind upside-only arrangements.” — Mike
Potential Opportunities for MBAs at StellarHealth (27:30–30:01)
● Opportunities for MBAs across the company, specifically in Operations, Technology and Finance and FP&A (financial planning and analysis)
● StellarHealth is currently hiring: reach out to Michael.meng@stellar.health
Any Advice for MBAs (30:01-END)
● One thing Mike struggled with: what to do with your career in the long-term.
● Many MBAs tend to follow structured paths. Mike himself had to decide between traveling the well-developed path of private equity, but balance that with what he really wanted to contribute to or have an impact on in.
● Mike challenges all MBAs to pose this introspective question to themselves as they think about their next steps. While Mike loved his time in private equity, he is as happy as ever at the helm of StellarHealth.
