Schelhammer of Phytel on Population Health Management

Steve Schelhammer is the CEO of Phytel,  a patient population management software company. Steve, a 25-year healthcare veteran, is responsible for Phytel’s strategic direction and market positioning. He will speak at this year’s annual Health 2.0 Conference in San Francisco on the Three CEOs Panel. This is the first of a series of interviews Health 2.0 News will feature as we gear up for the coming show.

Matthew Holt: Steve, good afternoon! So let’s talk about Phytel. I think many people will know what you guys do right now, but in terms of where you guys are providing sort of combination of registry and management services to medical care, just give me a quick state of the client base of the company as you are at the moment.

Steve Schelhammer:Well, we are growing very, very rapidly. The second half of 2012 will be unprecedented growth for Phytel, and we are getting really exciting uptake from the market in terms of our new products, our population health management product suite, Insight, Coordinate and Transition, on top of our Outreach offering which is automated patient engagement. So that’s all really exciting and I am happy to say we anticipated that. We were ready for it.

As a matter of fact, I don’t know if you saw or you might have seen that we just received our ISO 9001 certification, and we went through a five-day audit process with ISO auditors who looked at every single facet and aspect of the company and when it was all said done they certified us with zero non-conformances of any kind. So it was a big day for our company.

We were recently awarded CMMI [Center for Medicare and Medicaid Innovation] Grant we are implementing Phytel in 16 new markets, new customers in the country under the umbrella of the CMMI Grant over three — well, probably will be in place over a three-year period and we’re in good spot right now. We kind of anticipated that the marketplace was going to shift towards value-based reimbursement, pay for performance, patient-centered medical home, accountable care organizations.

All of those are kind of thinking a lot of them as shades of gray, but all of those structures and models have really informed our product vision and our product roadmap and so as we see more and more momentum on all of those fronts, our product, it just becomes more and more relevant to our customers as they are embracing the initiatives like that are preparing for ACOs.

Holt: It’s very exciting. I’ve always thought of Health 2.0, when you guys first came in 2009, that you over the last three years have made perhaps some of the biggest technological leaps in terms of your own product offering, but actually just the core technology behind your product and what you offer, as well as, perhaps making some of the largest market expense because of your concentration on these large medical groups which obviously is the core of many of these groups.

But you’re always going to make some additions, going to loop in some other players and some other partnerships, which is actually kind of a new thing for you. So do you want to say a little bit about that on a technological and sort of partnership front?

Schelhammer: Well, the CMMI Grant was awarded to — it is really a collaboration between the VHA, Phytel, and TransforMED and we pulled together and submitted our proposal to work together to not only leverage the technology but also best practices at VHA supports and as well as the practice transformation capabilities and services that TransforMED provides. So it’s really an exciting collaboration.

The customer base is not too dissimilar from what has been Phytel’s sweet spot, large multi-specialty group practices, but more down along the lines of integrated health systems. Actually, that’s what’s really – that’s in the last 18 months has really changed in a very good favorable way for Phytel that many of these large integrated systems now, if you know them all, become our customers and are driving a lot of exciting drugs for Phytel.

We are also engaged in serious conversations with a number of the dominant players in the country, the players are all looking for ways and technology solutions to more expansively and consistently help physicians engage with patients, so that those physicians can be more successful in their quality initiatives, quality improvement initiatives, and pay for performance initiatives, for a variety of different reasons. STARs program scores one aspect of that as well as this traditional pay for performance.

I will say this. It is funny, I have been in and out of meetings with customers and meeting with other industry leaders and I am not exaggerating when I say almost every conversation begins with have you ever seen anything like this in terms of this pace at which the marketplace is moving now and a speed at which many of these changes are starting to occur?

I was with one customer who six, seven months ago told us that they really didn’t see the need for technology to support pay for performance and shared risk contracting, and I came back six months later and the CEO said, forget what I told you. I am about ready to sign my third risk contract. So all of what you are building I am interested in and I need it. So really incredible. It’s an incredible time in the marketplace right now.

Holt: You worked obviously at Accordant and Quantum and have a lot of experience in that area.

I guess the question is a lot of that disease management stuff didn’t play out, there were a lot of problems. So I think one of the problems that you identified early on in our conversations is that the physicians and the physician organizations won’t sit in the middle of it and that the patients won’t engage by their own doctors.

You talked about things that are very different in the market and it’s likely to change, is there really a new economy, a new way of doing things, obviously we are going to be disappointed by this latest round of the Accountable Care and stuff or do you think this time it is different?

Schelhammer: Those are kind of two different questions. How  accountable care is going to play out is one question, but maybe another question, subset of that question is, is this focus and the shift on quality and payment reform around quality real? I will say absolutely.

So I don’t think there is any doubt about that. We are going to increasingly see more and more providers increasing percentages of their income is going to be secured by successfully executing on quality improvement arrangements and kind of as proxies for cost savings.

Now accountable care, there are many different flavors of that, and I still don’t feel like I am an expert in all of them. So I am still learning like a lot of people in the marketplace how these different entities are forming and I think what we will see is some of these organizations will form, coalesce around organization and governance models that will allow them to achieve success and to really truly take on risk and succeed in managing that risk and bending the trend and so forth.

I do think we will see that and I think some the models that I am hearing about that have more cumbersome governance and operational structures, less integration and so forth, I don’t know about that. I’ve got a big question working in my mind about whether some of those models are really going to be sustainable.

So we will see on that, but on the quality front, embrace a population of health management as a new model on the new health care delivery model, the embrace of quality and value-based reimbursement is a new model for reimbursement. I really think that there is no way that that’s going to go back and I also really think that if you think about this what was one of the great limiting factors in all health care up to recently in which we didn’t have data digitized so we couldn’t innovate anything from paper.

Now we are seeing — we are going to see an explosion of more data and more accessible data and actually we are going to see a corresponding explosion of innovation as more-and-more entrepreneurs and thinkers and leaders realize they can now do things with the data that they could never do before. So it’s really pretty exciting time.

Holt: Great!

Schelhammer: And by the way I want to add one other thing. There’s actually one disease management — I think there are two issues there that why it didn’t really live up to its promise.

One, it wasn’t delivered through the provider, the brand of the provider was not part of the delivery of that service and I think there is a big problem.

And then secondly, the incentives, the financial incentives for providers to take ownership and leadership of that weren’t there. Well, those two things have changed and that’s why I am much more optimistic that provider organizations ― as they are putting care coordination, care management, disease management capabilities in place ― I am much more optimistic that that’s going to be successful.