Soda Health's Tech Forward Approach to Optimizing Benefits Starts With a Smart Platform

“The average benefit value for supplemental benefits was about $155 per member. Five years later, it was over $1,500 per member,” Robby Knight, CEO and cofounder of Soda Health, tells Bloomberg Intelligence in this episode of the Vanguards of Health Care podcast. Knight joins BI analyst Jonathan Palmer for a wide-ranging discussion on the rapid evolution of the supplemental-benefits market and the challenges Soda faced in building in a new platform that creates incentives for members, retail partners and plan sponsors. The conversation touches on why Medicare Advantage plans were in an arms race to offer unsustainable benefits, why the correction is an opportunity for the company and how the future will bring optimized benefits at the member level.

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Episode Transcript

Speaker 1 (00:22):
So, welcome to another episode of Bloomberg Intelligences Vanguards of
Healthcare podcasts, where we speak with leaders at the forefront
of change in the healthcare industry. My name is Jonathan Palmer,
and I'm a healthcare analyst at Boomberg Intelligence, the in
house research arm of Bloomberg. We're very happy to welcome
Robbie Knight, CEO and co founder of Soda Health to
the episode today. Prior to starting Soda he was one

(00:44):
of the key executives who helped build Walmart Health, and
earlier in his career he was in the community as
a social worker, where he also got a master's in
social work at Columbia. Welcome to the podcast, Robbie.

Speaker 2 (00:55):
Thank you so much for having me.

Speaker 1 (00:57):
Well, why don't we kick it off at a very
high level with what Soda Health does and where you
sit in the larger ecosystem.

Speaker 2 (01:03):
Absolutely happy to so As a company. So to Health
is a different kind of name. It is taken after
Social Determinants of Health or most most commonly now known
as SDUH. SO that's where so Health came from. Overall,
our ambition is to help people live healthier lives by
creating an all in one platform to design launch and

(01:25):
skilled benefits programs that truly optimize member level outcomes while
most importantly delighting members. And we believe the best way
to do that is through offering a smart benefits platform
that we partner with our health plan partners, primarily Medicare
Advantage and Medicaid, although we do some commercial work as
well where we administrat betief its programs things like over

(01:48):
the content medication tratfication benefits, food utility assistance. For these
Medicare Advantage of Medicaid plans, they're then accepted at a
number of merchants, including our key high value retail network partnerships.

Speaker 1 (02:02):
So maybe rewinding a little bit for the way person
who maybe is stumbling upon this hot podcast and doesn't
have a very deep background in healthcare, what exactly are
social determinants of health?

Speaker 2 (02:12):
Yes, so as we think about all the things affect
our health and our outcomes, my prior life is a
social work. For what I saw was you go to
the doctor maybe two three times a year if you're
sixty five year old, or it's typically five and a
half times a year, but there's a lot of life
that happens between those doctor visits. That really determines, honestly
what happens during those doctor visits. And so those are

(02:33):
the things that truly determine your health, your outcomes, your happiness,
and your success. We call those things where you live,
where you work, where worship of life happens. Those are
really your social determines, really your social drivers of health.
And so our belief and what we've seen in the
research is about seventy percent of your health outcomes are
determined by those factors. And how well you can matters

(02:56):
that those factors and those stressors in.

Speaker 1 (02:58):
Your life, that's great. And so maybe let's rewind even
further back, where did you get the idea to start
the company? And maybe let's talk about the origin story
of soda.

Speaker 2 (03:08):
Absolutely so prior to Soda actually went back a little
bit further than that. I showed my career as a
social worker, as any you know, entrepreneur does know, right,
so of my career as a social worker. Wanted to
make an impact and I was really frustrated as a
social worker working in behavioral health with the challenges that
we faced every day. I mean, you know, the base

(03:29):
budget things were really difficult to deal with and just
burnout was really challenging there, and so I wanted to
make an impact, and so I ended up going to Walmart,
where I spent about eight years and most recently led
healthy product developments and some other things there doing all
the buzzworthy kind of things. When I was there, one
of the things we had the privilege to see was
the rise of what is now known and helped be

(03:49):
a part of the rise of what is not known
as the flex car space. And so prior to I'll
pull this little visual out of the people, I can't
hear me say, but back in twenty eighteen, uh Center
for Medicare and Medicaid Services so CMS had these things
called ot like allowed for OTC benefits, so seniors could
have a you know, twenty five bucks a quarter or

(04:10):
whatever it was in OTC benefits and said had this catalog,
you would get it in the mail a senior whatever
as a part of my care advantage. You check the
box and what you wanted, and you sent it back
in the mail and health plan a couple of weeks
later would send you the item. Great amazing innovation. It
wasn't mutization was like four percent. This is healthcare, guys, right,
And then they said, you know what, we're going to

(04:31):
be really innovative and at guess what a call center,
not a fax machine, a call center.

Speaker 1 (04:36):
And so utilization that's that's a that's a win No
facts machines is a.

Speaker 2 (04:40):
Win channel, baby, you know. And so then they said, okay,
utilization is now at like six percent. And then CMS
in twenty eighteen said, hey, what we want to do
is drive mutilation of these because we believe that if
on the front side we can have to get better
access to care through vitamins and these kind of benefits
in the front side and planned motivated incentivised to provide these,

(05:01):
then they're going to be less sick down the street, right.
And so they said, these non benefits, instead of counting
under administrative costs, are going to count under medical loss ratio,
which is really important because you know, have to spend
eighty five percent or more of their cost of their
of their expenses on medical claim types of things. Right.
And so that was really the birth of what being
troubled no benefits is now known as sort of the

(05:22):
more modern flex card era, if you will. And so
Anthon came to us and said, hey, guys, would it
be cool if we did something even more modern for members.
And we had this back when I was at Walmart
and said, what if we put this on a card? Now,
EBT foods tab technology doesn't work for a host of reasons, right,
f SHDA doesn't work for a host of reasons. We
want to be able to strict down to the skew

(05:43):
level in real time. So you swipe a card at Walmart,
it works in store on just these five items both
the rest right, would be cool if you do that,
and so great, so we did. We could be figured
out we actually built a tech funny enough for Legos
back in the day. The actual original story was we've
heard Legos saying, hey, grandparents did some research and grandparents

(06:05):
want to give their grandchildren Legos. But the parents been
in all alcohol because it's not restricted. So like, if
you could restrict it more to be more specific, then
then they'd spend more. And so we built technology to
do that, which is interesting, right, and so we did.
We did the launch and from there the sort of
the rest is history. We saw a remarkable j curve.
Over the course of five years. It became a new

(06:28):
cost of entry and so for color in twenty nineteen,
the average benefit value for these supplemental benefits excluding the
indivision hearing, was about one hundred and fifty five bucks
per member. Five years later it was over fifteen hundred
dollars per member and benefit for you, which is its
sinetis right. And the reason for that is because when
Athe middted the first year, united to Humount and everybody

(06:49):
else lost their shirts and so created this beautiful arms race,
if you will, where plans want to be competitive during
annual enrollment season had to offer not only occ benefit
at retail with this car kind of mechanism, but had
to increase the offer every year. And it wasn't enough
to offer food or OTC. Then you had to offer food,
then transportation, then you to buil assistant, and it kept

(07:12):
going up and up. So that was that was the
genesis of what we saw. The challenge for that though,
is when you see these dollars going up in Walmart.
We went from zero to billions of dollars your revenue
from this massive market and you know now it's over
one hundred and thirty billion dollar market in the space
in terms of loaded dollars, and so but you know,

(07:32):
if if you think about that. The consumer wins because
kind of we'll get that in a minute. Consumer wins
because they get free money. Retailer making billions of dollars
quite literally, So you're winning. If you're the health plan,
you're having to choose between cancer care and vitamin benefits.
So it's a really sort of obscure, strange question like

(07:53):
do you really want to like what do you want
to do here? And what's the right leverage? Because I
do as a health plan often believe what they say
is I believe this some matters, but like what's the
right level of benefit value and trade offs? Because these
are really tangible dollars.

Speaker 1 (08:07):
Right, because it's all folding into the m R at
the end of the.

Speaker 2 (08:09):
Day, exactly exactly, that's right, that's right.

Speaker 1 (08:12):
And so if we think about that evolution, you know, actually,
what thing I want to come back to is why
wouldn't it work under the And this is just for
a neophyte like myself. Why wouldn't it work under the
FSA or those et B cards.

Speaker 2 (08:23):
So the the challenge of that space is is as
you think about the FSA H space, see just primarily
that sort of recovering body there through the federal, the government, right,
the RS retailer, So the card providers in that space
don't actually restrict to the SQU level. What CMS requires
for these supplemental benefits is that you're able to restrict

(08:44):
at this Q level in real time, right, and so
you can say apples are in hard, apple cider is
out order, probiotics around, that's a real example, right, and
so so you can do that middle time. The challenge
in FSA and HCA land is it's actually incumbent on
the individual person to capture receipts and collect receipts for
tax season to you know, they can get audited to

(09:04):
make sure that those items all were eligible because these
provided in the space. They try to do it, but
the technology that exists in this space in general, in
FA say space doesn't allow for true you know level
restriction which is required by CMS. So it's really the
standard is much more strict for CMS than it is
in the IRS or anywhere else.

Speaker 1 (09:24):
So maybe just following on that, you know, when you
thought of the company, the idea, the genesis of the company,
when you went to go pitch into investors, what was
the pitch Because it sounds like this existed in at
least one form already in the marketplace.

Speaker 2 (09:35):
Right, there were three companies at the time that did
something like this. I think some some variant, some small
variant of this in general that we've gotten to build
up pretty well at Walmart. Right in my priyer life.
I think that the challenge here is the age old
story of what is often true in healthcare and other
industries in this space. Specifically, you have the intersection of

(09:57):
healthcare with somethlementle heads, retail employee sale restriction, and financial
services are fintech, right, so this goes over payment rails
or of network that sort of thing. The challenge here
is those three big stodgy industries, as you would expect,
don't play well at all.

Speaker 1 (10:13):
Together and so that you don't see them in the
sandbox very often exactly.

Speaker 2 (10:18):
And so accordingly, you have players that only typically do
one kind of trying to figure out how to use
their existing technology that was purpose built for some other
random educates. Then is now going to be sort of
you know, adjusted a bit and to try to you know,
do some things and duct take together to serve this

(10:38):
use case. Right, And so what happened is you had
players in the EB T or food stap space that
we're saying, Okay, our technology is already its own, sure
network crosses or let's get in here. Well, the challenge
was EBT players today don't actually do unit level restriction.
They'll do the retailers are actually accountable to do restriction
and say this item is in and now for food STAPs,
and like those guys do it, right, And so you're

(11:01):
doing things technology was never intended to do the purpose
that now serves in this space. As you think about
the other players like gift card players, gift cards like,
it's a very different space, right, And so accordingly, what
you're talking about here is a host of players in
this market that are old twenty plus thirty plus years
old that were you know, doing you know, they were

(11:23):
implementing these things that were never built for healthcare, and
so no kidding, it was breaking all the time, right,
And I think that's sort of the technology is fundamentally broken.
I think secondly, the big thing that we really saw
was incentive alignment. And so as you think about this market,
I think as many in healthcare, you'll find the challenge
here is the incentives that exist are often broken and

(11:45):
just fundamentally wrong. And so what's happening is people get
really greedy when a market first gets built and they
do things in a way that doesn't advantage other people
in the ex system the right way that you actually
build or really a sustainable model, and everything then then
kind of followed by the wayside. And like what we
talk about in this space was it was supplemental benefits

(12:06):
was a gold rush that was powered by plastic pickaxes,
right for a host of reasons.

Speaker 1 (12:14):
And so so when you guys got together, you and
your co founders, you know, what did you have to
build first? I mean it sounds like the under you
talked about, the kind of the three buckets. Those ecosystems
were there, but you had to put them together in
I guess a new way. What did you have to
build first?

Speaker 2 (12:30):
Yeah, then the picture investors. The thing they all sort
of stuffle out whenever we first meet is honestly, the
things that we're doing now, people in payments have been
trying to do for twenty years. And the reason no
one's done it, like truly is from zero to one,
not starting from some other business and kind of going
into the space. The reason nobody's done it from zero

(12:50):
one truly is you kind of have to be crazy
to do it right objectively, that's true, right, And so
what does that mean? Why? Right, as you think about
foundationally what you have to build if you want to
do this the right way, you have to build first
this skew level restriction infrastructure at points. So when I
swipe my card, I get a list of ten items

(13:11):
in the basket. I am able to say in real time,
these three items are approved. The rest of these seven
items are denied. For these you know, three or four
purses or benefit pools that you have. That's the first
sort of thing. Sounds really simple, it's not for color.
Instacart and twenty twenty had about five million SKUs they
were that they had on their platform. Five million insta

(13:33):
Cart twenty twenty. Today we're at twelve million. Now we're
nowhere near the scale of INSTACRT. Right, and whenever you
swipe your cards we do the adjudication here in fifty
six milliseconds. We have up to two thousand million seconds
to do it right. And so like the speed and
paste at which you need to do it, and the
precision is really really important to get this right. So
one You need to have the understanding and nuance and

(13:56):
awareness of retail and payments to understand what to build
and actually build it the right way to execution there.
Once you finally build that, then you have to convince
the supply side, which is retailers, to integrate with you
at point of sale, which is really hard. In my
power life. What's sort of common here is we wouldn't
even have conversations with any process from the space unless

(14:17):
they need to show us guaranteed at least one hundred
million dollars of guaranteed incomementtal retail sales in the first
twelve months.

Speaker 1 (14:24):
Wow is a big number.

Speaker 2 (14:26):
It's massive, right, And the crazy thing on top of
that is it's not enough to just get Walmart or
Walgreens or whatever retailer of Kroger or Alberson's right, you
need to get a critical mass of like ten giant retailers.
And as you think about that at the same time,
and as you think about that typical go to market
you talk about like zero networks, you're starting from scratch.

(14:47):
That doesn't work here because you need all the whale
retailers all at once. And so somehow if you build
the tech and you convince these giant retailers to work
with you, then you're not a digital health company. You're
more kin to a PBM mod where you now have
to convince health plan not to be one of many
pilots that you're working with, but to be the single
benefits program administrator for supplemental benefits for OTC and food

(15:10):
others that are, by the way, often one of the
top three grievance areas for these health plans. So it's
quite sensitive to go across their entire membership. And so
somehow if.

Speaker 3 (15:21):
You're able to build a paper set, convince retailers and
do it all in time, and are able to then
convince these big health plans to work with you, right,
then you can do the really sexy stuff in their quotes,
which is understanding and sort of building with the discipline
in the way that you optimize member level roy to
then drive real value.

Speaker 2 (15:41):
Better outcomes, f reach and bet a better value for all, right,
to optimize member level ROI for health plans and generate
savings them reinvest. And so that was the task to
be done on how we kind of thought about things.
It's kind of a crazy ass bet to make I
think that's the beauty of it is if you're able
to have this signal and action, this things on itself,

(16:02):
and you're able to create something truly special that that
that that is a self feeding flag wheel.

Speaker 1 (16:08):
So which needle was the hardest thread? Was it signing
up the retailers or or selling the platform once you
had it up and running to the managed care side.

Speaker 2 (16:19):
I think the the thing I've been the most grateful
for so far is the level of retail partnership that
we've had in this space. Objectively, it shouldn't be possible
to do what we've done. Really, it's kind of crazy
to think about it now, you know, four years later,
almost as I think about that, the bet that they
took on me and our founders as leadership team and

(16:41):
and have been so supportive, it's it's truly nothing sort
of remarkable. And we as a company will always be
in debted to to those those retailers. So we first
launched with Albertson's, and then it was CBS, and then
Kroger and then Hyvy, and now it's recently the Walgreens
and so like, and and you know others that will
we will we will soon announce publicly, but the best

(17:02):
that we made there with those players was certainly harder
and was truly special. What's been really interesting, though, is
a part of the way we operate, one of the
sort of core tents that we have, is we will
only take an action if it benefits our flywheel node partners,
and so our flywheel in our case is the health plan,

(17:22):
the member and the retailer, and so if it doesn't
benefit all three of the players in the ecosystem, we
won't do it, which means that we are constantly obessing
about finding ways to generate value for every play in
our ecosystem in ways that other people just aren't because
there's not a need to. For us, we don't. It's
an existential threat for our survival, which means we have
to obtest about finding ways to help Kroger be better

(17:45):
off fonentially and be happy Albertsons and all these other
retailers as well.

Speaker 1 (17:50):
So he started the company in twenty twenty one, correct,
I mean that's in the midst of the pandemic. What
was that experience like? And I have to imagine retailers
would been pretty skittich at that point in time, or
maybe they were looking for volume. I don't know, you
tell me.

Speaker 2 (18:06):
Some of them both, right, So I think that it
was the that was two years into this new flex
card air, I guess up a bit bit if it's heyday,
if you will, benefits were going up into the right.
I would also say that the same thing that we
saw in our prior life was we were for two
years looking for other players that could actually do this
in an incentive aligned way, the proper way. We just

(18:28):
couldn't find them because again, people were financial services players.
They weren't healthcare people hanging and they had no intention
of ever being healthcare people, which is the great irony
of this. Right. So our view is, if you're engaging
people at fifty six, you know sixty, you know, seventy
percent monthly active users, it's unprecedent. I mean, typically in
healthcare you have you know, three or four percent people

(18:48):
engage once a year. We're talking about seventy percent monthly
active users here, right. So our view is, if you
do this the right way, you can truly profoundly impact
the way people navigate their benefits understand what they have. Right. So, yeah,
it's just like this really wild sort of experience.

Speaker 1 (19:04):
But Yeah, And if you think about that bride, you know,
what were the key milestones, whether it's from a customer
base or a plan perspective, was there one anchor sign
up that that really got you you know, almost was
like we've talked about You've talked quite a bit about flywheels,
but you know that really got that flywheel going with
with some of the other retailers or management plan customers.

Speaker 2 (19:25):
It all starts with Albertson. All starts to Alberson's. Yeah,
alberson Is including all the manas Alberson, Safeway, Tom, Tom,
Dulasco and all. Because when you do this, it isn't
just a you know, two store tends store pilot. It's
when you're live chain wide. You're live chain wide, right,
And so Alberton's was the one that started at all, honestly,
and so once you guys started there, we're like, oh, oh shoot,

(19:46):
this is this is real. We must and we will
execute our tailsoft now. And then a fast follow behind
that were CBS and Kroger and and then you know
Hip beyond that. I think that the really special thing
that we saw was as a part of this, we
had every incentive on our side to be as and

(20:07):
still very much due to this day, as good as
partners as we possibly can. So whatever we do, we'll
be no backwards for our partners there to be helpful
because we we we acknowledge ourselves interment. Actually we exist
because of our partners, right, and so as a part
of that, what we also see is if you go
more deeply with us and do points sale integration, also

(20:28):
clinical services integration, these other things that we do, they're
unique to us. What we can do here is we'll
get you a higher market show we'll go more deeply
with you, and if we go together to the market
to these health plans, that's actually a really interesting sort
of signal to these health plans that wow, this is
actually something very different. And so it's not just so

(20:48):
to health is this small series a SAE startup comming
to sell it's it's Albert since it's kroob or it's CBS,
it's it's high V. There is a much more well
established brand and we're lending and you know, drafting on
their credibility, right, and then we just have to execute.
So I think that was really the key for us
at the beginning. It's convincing these giants that we're gonna
help them to kind of build the future here. And

(21:11):
I think that what we were able to show successfully
with our retail partners was here's how substantial the market is,
and today you're only participating in a very small part
of what's possible. Think and that's because, like we helped
to create the market at Walmart, so of course they're
gonna have outside share, right go figure in. So we
think about this with them, like, here's all the ways
we can grow your business. And in a crazy environment

(21:34):
of COVID, these retailers were looking for ways to continue
to maintain that momentum right. So it was right place,
right time, and right level of need when these benefits
are really taking off. And our view was we can
help you get your fair share of dollars here and
build this into something truly truly special for you. And
you're extremely fortunate to have our retail partners be amazing

(21:54):
to us and continue to be and help us to
have health plans to sign up and then go above
and beyond to help us be successful.

Speaker 1 (22:02):
So we've been spending a lot of time on the
Smart Benefits platform. You know, I want to touch on
the two other solutions. You guys sometimes talk about, or
you do talk about the care gap closure and the optimization.
Can we dive into those a little bit more? You know?
Does how has that evolved over time?

Speaker 2 (22:18):
Yeah? So, as I think about the overall business that
we're in, the health plans to me are simple in
some dimensions, right, at least one dimension. And since it's
zero sum, right, so regardless of what you may want
to be true, the reality is as human being, right,

(22:38):
the reality is you only have finite dollars to deliver
it care. And so our view of this was we
really started this company if you will, as a big short.

Speaker 1 (22:46):
That sounds crazy, but I like that analogy.

Speaker 2 (22:49):
Yeah, right, and think about this market. It's gone from
one hundred and fifty five benefit dollars per member to
fifteen hundred over the course of five years. That's crazy.

Speaker 1 (23:00):
Well, Where's where's it going to go over the next
five years? As an analyst, I have to ask that question.

Speaker 2 (23:03):
It's going down. It's already starting to be bound. It
has to go down, which is why we started a
company because as need by like MLR is one crazy
and the average utilization when we first started was about
thirty five percent now for t see now it's closer
to sixty seven percent. It's not only have benefit values
gone up ten x, right, you're also talking about utilization.
Those benefits have doubled. The math is wildly upside down here, right,

(23:27):
And so if you think about that sort of you
know environment that the question is we'll shoot. Plans are
hurting now, this is truly a next situal threat for
their survival, and so what can you do? Like, what
do you believe is going to happen? And my my
core belief when we started this company was that, well,
like this math doesn't pencil, and so ultimately plans need
to do a few things. They want to acquire membership

(23:49):
at their right ROI and then generate savings they can
reinvest elsewhere and so great, so what do we do?
So my fundamental belief in ours a company was upfront,
do you actually need to offer this crazy rich value
for OTC? The pretty irony is we administr TC other programs.
Seventy percent of the plans we talk to. Our feedback
is you are spending too much on OTC, which you

(24:11):
would think is counterproductive. Right, But the incremental value of
offering extra dollar is limited in many places. And so
today what happens is plans provide benefit designs that are
you know, copy paste across the boards. You knowally sometimes
they do it on a contract level, but for the
most part, it's it's a really qualitative approach, you know exercise.

(24:33):
Our view is, upfront, let's tell you optimized benefit plan
design upfront, very quantitatively optimize what benefits you should be
offering by contract, by sort of geography across the board,
so you can generate savings. You can then reinvest on
an individual member basis to drive the right outcomes great.
And then as you go along the journey, what are
those pieces of value that you can extract? I think,

(24:55):
as first we on the benefits optimization piece, a portion
of that arbitraged opportunity to import this short, if you will,
is where can you find other value that plans aren't
paying for but members abscribe value to them for. Right.
What we also see as number is that forty percent
members they're eligible for food stamps, aren't actually enrolled throughund

(25:15):
Medicare and Medicaid. That's remarkable, right, And so our view
is that doesn't actually cost the health plane of dime
to get them enrolled doesn't cost the health plane of
dime to get them at minimum one hundred fifty bucks
a month, and food stamp benefits on a per member basis,
but they get credit for it if you can help that
member enroll in that. So, how can we identify these

(25:36):
other profit RULs, these other dollars are available, help make
that available to those members, make that really easy for
them time. The next piece is of part of that
is what other assets do our partners have in their
in their arsenal to be able to help generate cost
savings as well. And so my favorite anlogy our team
gives me, you know a lot to trap about this,
but is medication reconciliation. He just measures CO six baby,

(25:58):
you know that's the one. The average cost to see.

Speaker 1 (26:01):
A value We're going very deep here.

Speaker 2 (26:06):
That that heut is measure on average is about one
hundred and thirty one dollars per member. Is is what
the government pays for that right or health plans pay
for them. Retail pharmacy, the average is about sixty to
sixty five bucks. Now we take cut on top because
we're not nonprofit, but the health plan still saves fifty
percent every single time. That goes through retail pharmacy. The

(26:29):
beauty there without n schools anything crazy, you know, issuing
sort of like doing traditional pharmacy services or pharmacy, you know,
administering pills or like doing the traditional pharmacy things. There's
not a lot of money in that. Increasingly pharmacies make
the majority of their money increasingly on pharmacy services, especially
with prebium pressures. The beauty here is talking about helping pharmacies.

(26:52):
So you're helping the health plan save money every time
this guy is closed. In retail pharmacy, you're generating a
creative profit, driving clinical services value to pharmacy. Right. You're
also driving script suare improvements when you do this as well.
For these pharmacies, you're taking taking the full basket over
and you're actually, I would argue, serving members at the
place that they're visiting ten to twelve times a year anyway,

(27:14):
right in terms of their pharmacy, where they're shopping twice
a week. So it's a better experience all the way around,
and it generates on average, across the heatous measures that
pharmacies can affect our retail partners about thirty percent cost
savings across the board for plans, and to argue is
let's find aggressively these places we can generate savings and

(27:35):
then be really smart and intentional about finding places to
reinvest those MLR dollars to generate the right ROLI. Ultimately
here that the challenge in this space, one of many,
is that people get rich off of overcharging and engaging
members on occ catalog stuff about moyl of time law
is thirty bucks. It's egregious, right, because we're making all

(27:56):
this money here. Ultimately, what should be happening is you
should be paid on outcomes during true value for everybody
here in the equation. And so our our view is,
let's operate a different supplan design upfront. Let's obsessed about
the payment experience, so when you swape it it works
every single time the right way. And then as members engage,
let's identify other value points along the equation that we

(28:19):
can provide to that member that generates savings for everybody's system,
that creates a really interesting experience. So that's how all
these things.

Speaker 1 (28:27):
Kind of head. Yeah, it fits together like a puzzle.
You talked about the that you're a per for profit company.
Maybe can just touch a little bit on you know,
in these three buckets, how to soda, you know, generate revenue?
Is it on a per transaction basis? You know, how
does it work for it? How does it work for
each of the buckets?

Speaker 2 (28:46):
Yeah, so we make money from a few pop we
ain't really from our retail partners, right, So on trying
to act basis, we certainly do that we make money
from our and to other pieces as well. Retail partner
certainly helped to subside in some cases of some of
our our numbers for share. We also have on the
other side, we have from our health plan partners a
subscription fee right call center, into other kinds of services

(29:09):
as well that we offer. And then the primary piece
we're really leading into is a performance basis.

Speaker 1 (29:15):
Right, So you're going to start taking risk at some point, that's.

Speaker 2 (29:18):
Right, And so for risk for us, it's a different
kind of a model. So it's it's perform at risk.
And then more broadly, I think where we want to
go is to truly invent a new retail based risk model.
Back at Walmart, another retail health has been sort of
an interesting landscape over the last year. One of my
co founders and I were helpful part of the original
a couple of the original architects of many for Walmart Health.

(29:42):
And we talk about risk a lot there, but the retailers,
it's really tough to do healthcare right. And the beauty
here is what we're doing is buying and telling things
at retail, which is core clinical services. It's core. It's
not medical care. It's not something that's truly fancy and
crazy for retail. That's very Uh, it's different, right, And

(30:05):
so our view here is, in a world where you
want to align incentives, let's take risk individual HUESE measures
our retail partners. Let's kind of do some of those
activities in a way that allows our retail partners to
have the overall top line risk is rate revenue. That
way be able to own that member population and to
most efficiently drive towards Okay, if I can't close this gap,

(30:26):
then this other retail partner that has the patient, actually
they can close it. But at least that way, again,
you're putting the power back in the community other people
that actually have it versus others that don't engagees off.
Does that that make sense?

Speaker 1 (30:39):
No, it makes sense. Maybe you could you just walk
me through a simplistic example of how you would you
would affect that, you know, at taking that retail risk.

Speaker 2 (30:46):
Yeah, so I'd say I don't want to get two
into details on those.

Speaker 1 (30:51):
Right right now understood for competitive purposes of course, right now.

Speaker 2 (30:55):
Where where we're starting, where we're starting on the on
the risk pieces are really performed spaces risk where we
only get paid once we so we will get paid
for clinical service only when we close that gap in care.

Speaker 1 (31:07):
So, you know, if we think about the market at large,
you know, what's your view on what's happened in m
A over the last year plus. I mean we've talked,
you've alluded to the costs going up from you know,
the mlrs being elevated. How is that affected to the
tenor of the conversations you've had with the planned sponsors.

Speaker 2 (31:26):
I think there's a rightful level of anxiety and desperation
to get this right. I mean everyone that we speak
to at these health plans, and there's a lot of
sort of mixed emotional on healthlad everyone that we speak
to anyway is like truly got into healthcare to actually
help people. Truly. People say like truly in this case,

(31:47):
I can't recall a single incent where that's not actually true.

Speaker 1 (31:50):
The general public would be surprised, but that's actually how
it works, and.

Speaker 2 (31:54):
That's truly the people that we've engaged with have been
wonderful human beings that are truly might trying to make
an impact for the better. That's what they got into this, right.
There's a lot better ways to make a lot more
money than being a health plan and then all the
bureacract process stuff right, And so I think that for
them though, that the challenge is you see all these
changes coming and it's a bit of a game theory

(32:16):
thing that's happening right now, where you're not sure if
there's these other health plans in your markets, you're going
to move or Bob or Weaver what they're going to do.
And so it's your you know, these health plans, trying
to wait and see what others doing. Really now, with
what happened early last year, now you're seeing benefit values
go down pretty dramatically here this year from last year
because there's an increased focus on profitability in the human loss.

(32:37):
What the earnings released this time last year five hundred
million in q OR twenty twenty three and had the
big miss of nine hundred million dollars. When you have
those kinds of losses, the only answers you have to
focus on on must more on segment profitability and.

Speaker 1 (32:53):
To focus on everything everything truly right.

Speaker 2 (32:56):
And it forces a reset to say, what are the
really benefits here? And the market then provides an opportunity
to have that from that correction. And so I think
the conversations have evolved and then we've actually thought they
would where it's number one, when a member swipes their card,
it has to work fundamentally, that's the first word of thing.
It has to work the right way actually, so you know,

(33:16):
working is a sort of a different thing that we've
got into in a minute. Number two. Now it's also
a question of I got to be competitive, I got
to make sure I'm requirement getting members of acobition. But
it's the right it's doing it in a way that
drives truly ROLI. Maybe if you think about v bid,
you know the policy change that happened here, it was
no last month. I think what was interesting on that
front and that going away that was to me, it

(33:39):
is fascinating because there's a bunch of things that you
have nuanced about what happened, but ultimately v BID was
originally set up by CMS as seem I as a
mechanism to drive really ROI gen writing activities right and
so more higher stecmentation and driving truly member level outcomes.
What was fired really to be competitive in the market.

(34:01):
What we saw more and more is health plans were
using this instead of offering membership to say, if you have
diabetes and have a loan income, upsity status and these
other sort of attributes that indicate need, then and only
then are we going to offer these extra services at
a high higher rates. Were to offer you one thousand
dollars in healthy food benefits a year versus two hundred

(34:22):
based on this thing, instead of doing it that way,
what we found intend What we saw was plans were
in an arms race to the bottom where they had
to use this policy mechanism to offer everybody more things,
which is mathematically unsustainable. And so it's like this really
interesting world now where okay, that's going away. Starting in
twent twenty six, I think there's going to be what

(34:42):
we view here at SODA is a right sizing and
sort of an age of cost containment. Right now, you're
going to have to focus on sort of the core
principles that a lot of these plans wanted to. But
you know, you don't want to lose your shirted membership
the next year because Etna does something crazy and offering
golf club membership or something that was the market. That's
that's one of the reasons that they lost so much

(35:04):
last year was because.

Speaker 1 (35:05):
The they were very generous.

Speaker 2 (35:06):
That's right, right, But then utilization goes crazy either selections.

Speaker 1 (35:12):
So I guess that leads me back to another question
as you were chatting there, is that you know, what,
as I think, when you sign up a new new
plan sponsor, what does implementation look like? What do you
have to do on the back end to get somebody
stood up?

Speaker 2 (35:25):
So so many things.

Speaker 1 (35:28):
Things at a high level.

Speaker 2 (35:30):
Prior to starting SODA, I acknowledge my level of privilege
that I thought healthcare alone was complicated and like the
most complicated thing ever until I got at the intersection
with our company of healthcare and financial services. Good god, right.
I think that the thing that we've seen here is
that the like the regulation on what it's e'spirience, it's necessary,

(35:54):
like you want to make sure there's a fraud and
you want to make sure. There's other sort of pieces
are there too, but like the know your you know
your business or your customer kind of paying, financial services
policies you have to follow and through guidelines for compliance.
There's quite a lot of long tail those pieces in play.
We start with health plans, identifying what members have, what population,
and then going through the financial services sort of compliance

(36:14):
pieces with them, and then you know, going down, you know,
at the starting level it's what member profiles help, what
kinds of benefits. Increasingly what we're doing is going much
much further than that, which is, here's the starting point
of what members help, what benefits. And then as you
progress over time, what are the trigger the catalysts for
adding new benefits or new things based on need and

(36:34):
how do that based on member experience? And so we
establish those primers upfront, and then we get all the
cards out in December, so the members on one one
have that new card in their hand, all the information
they need and are ready to go starting one.

Speaker 1 (36:47):
This might be an naive question, but how much of
them a market today is you know, operating either at
your your through your four walls, or somebody else's under
this smart principle like our platform that you guys are espousing.

Speaker 2 (37:02):
Yes, not many. I'd say in general, it's such a
new thing that there's there's two challenges here. Number one,
what I would say is that of medicare avant and
supplemental benefits, about eighty six to ninety percent of those
members have one of these core supplemental benefits that are
eligible for what we call flex cards right or in
our case we know smart cards specifically. I think that's

(37:24):
sort of the first order filter. So it's a lot
of members, right. Once we get beyond that thirty million,
I think there's this other core here members of Health
plans to say, Okay, we know we have to do
more with these benefits, but what is more and how
does that work? How do we engage members and do
things that are truly valuable for them to drive really
the right level of outcomes here, and what's necessary to

(37:45):
do that. I think that a lot of plans are
still on their existing contract and they're trying to figure
out how to do this, and increasing you know, increasingly
we're seeing plans move over to our more modern payment
stack because the things we can do are very different.

Speaker 1 (38:00):
Yeah, So I guess the question I was asking is
how much white space is there? And it sounds like there's.

Speaker 2 (38:04):
Quite a bit, quite a bit, quite a bit.

Speaker 1 (38:05):
Yes, So if we think about that, when you think
about the future, is there another leg to the stool
that you have to add? Can the model evolve even further?
And you know, I know you want to be sensitive
to you know, where you're going within the marketplace, but
you know, just broadly speaking, how do you think about
the evolution of the market.

Speaker 2 (38:25):
As we think about the over And that's part of
the value that when we talk to our investors and
the digital investors they get so excited about, is as
you think about the restriction technology that we have in place. Again,
going back to the beginning, we talk about, you know,
with with EBT, so Snap and Wick, a singular item

(38:45):
list with with all the other a singular item list
right at Walmart before we left it about one thousand
distinctive proof product lists, one thousand wild right. It's because
the level of restrictionness and the things we're doing right.
The beauty here is because of the way we've built
this thing up, it allows for so much more optionality
downstreaming and so ultimately our perspective here is that we're

(39:10):
creating the overall benefits operating system for government benefits as
a whole right. And so whether regardless of whether e'xceptlement
of benefits or Medicaid benefits or rewards and incentives for
Medicare and Medicaid, or it's EBT so a wick or snap,
you're still talking about dollars that are federally funded. Are
trying to optimize or find some ways to get the

(39:31):
most out of. And so the beauty here as I
think about a weekly as a company, is that we're
building the chassis. No matter what we're doing here, we're
trying to optimize towards the human that we're serving, doing
so in a way that alignes incentives across the merchants
and retailers accept the payments that benefits them, right and
in an outside way outside way also benefits the end

(39:56):
pay or slash sponsor, whether that's the government or a
health plan. Right. And so I think as we think
about the overall opportunity, our wedget is truly medicure some
little benefits, but I think that the market is so
much beyond that because of the thing that we've built
and the flexibility that provides.

Speaker 1 (40:15):
No, very well said. I was just sitting there thinking,
you know, when you were a social worker years ago,
did you ever foresee a day where you'd become an entrepreneur? God,
I mean maybe maybe the experience at Walmart building Walmart Health,
you know what did your appetite for it? But I
guess you know, how has it been, you know, being
a new entrepreneur, this is your first venture. You know,

(40:38):
what are some of the lessons learned in the first
couple of years here as a as a new CEO.

Speaker 2 (40:43):
It's been a It's been a hell of a ride.
It's been It's been much I could have ever anticipated. Honestly,
I think when I was a social worker, I was
really frustrated because I wanted to have impact. I want
to make a difference issue. The odds are truly stacked
against you in medicare right, just like to be able
to affect outside outcomes.

Speaker 1 (41:03):
And do like you you're playing with part of the system.

Speaker 2 (41:06):
It's tough, right. And then what was interesting was when
I went to Walmart, they said, we love actually hiring
social workers here because it's very pure, Like if the
math doesn't work, you don't need as an organization, and
like when you hire investment bankers or you know, or consultants,
they used to these crazy budgets and so like like

(41:26):
people all how to operate in the context of every
little cost and a retail basis, right, and so it
was really empowering to see that. But it was still
like within the larger ecosystem of a big company. You're
still in a big company. Yeah, and so I still
never even, you know, a year before I left it
imagine doing this at all. It was really you know,
driven by me and kind of being inspired by my

(41:49):
twin brother. So my twin brother was as an entrepreneur.
He was formerly an entrepreneur residence at Klina Perkins Company
around twenty three, had some success there, and so I
got to see his entrepreneur journey himself and saw the
success he'd had and like the good and the bad
that comes with that, and so that that gave me
the confidence to do this myself. So and I think ultimately,

(42:15):
you know, the beating your aheads against the wall, and
the moment for me was sid and I'll get into
you know what's been less and sense, But the moment
for me when I realized I had to do something
was I went to go send up my dad for medicare,
and who's a first national amigrant from Lebanon, And I
myself wore craziness, right, Like, I lived through three these

(42:36):
invasions in the middle least there. And when you come
from that, when you grow up into projects, you come
from that and you finally do something for yourself and
your family, and you go and you help your dad
enroll in medicare, and you find him cutting pills in
half to make ends. Me no matter what you do,
like build a multi billion dollar business, it's amazing, but
in the day you kind of see that it's sobering, right,

(42:57):
it was incredibly sobering. It was this you know, you
sort of lie to yourself on what impact you're actually having,
and they like you have to sort of say to me,
the sort of decision I made was just because the
sort of the realization or insct that I had was
just because you you stop looking at the hard problems
you choose to focus on the other ones. Doesn't mean
the hard problems top existing and you're choosing to focus

(43:18):
on either problems to solve. And so in that moment,
I had to be accountable for what I had and
most importantly had it done with the opportunity that I've
been given and now have have the opportunity to do right.
I have you know, credibility now with the things I've
done at Walmart and beforehand analysis responsibility to go build something,
and so I had the privilege to go to go

(43:40):
do that with the connections that I had to go
build something. And so I think like that that's been
the interesting, you know experience there. I think in terms
of the biggest surprise, there's there's two since being an entrepreneurship.
The first one is, my god, did I undervalue at Walmart?
The impact inertia has you know, you think you're creating
a of a fortune one like you're going from zero one. No,

(44:02):
you're going from like a million to five million. You're
born on third base, is what you are.

Speaker 1 (44:08):
Right.

Speaker 2 (44:08):
It's really hard, but you're still born on third base
to be honest about that, right, it was really hard
to do what we did right in a capital can
trade environment. But it's very different when you're starting your
own business from zero to one, like truly that that's
a whole different animal. But I would also say is
when you do that, it's it's truly beautiful, right, And

(44:28):
I didn't expect to have such joy that comes along
with them. And I think that the second thing that
I didn't expect was how special it would be to
build with a group full of people, both in internal
employees here with my co founders and our partners, something
truly special to hopefully actually like this is say, but

(44:51):
hopefully actually truly make the world a better place, right, Like,
there's really something special about that, And and the relationships
that have since formed that I never would have imagined.
That is that I'm always gonna be grateful for, right,
And I think like that those things, to me are
the things that I didn't expect how significant those would be.

(45:13):
But my gosh, I can't imagine anything else.

Speaker 1 (45:18):
So, you know, you mentioned the funding and investors trusting
you you guys just did around last at the end
of last year. What does that enable you guys to do?

Speaker 2 (45:27):
Yeah, So we've been incredibly blessed, unfortunate to have amazing, thoughtful,
patient investors who share the same vision we do and
have yet you know, Kno, coln Wood have not had
a challenge of ever really, I mean, I think the
longest we've ever been in market to raise cash within
six weeks, honestly, which is kind of wild world.

Speaker 1 (45:48):
Well, now it's that they make it sound easy. It's crazy.

Speaker 2 (45:52):
I think I think that the like it's the raising
that cash is the easy part. The work that leads
to that easy part is exactly right, right, So it's
the execution, it's the bending over backwards. It's necessary to
get the things in place that show the progress. It's
necessary to achieve this crazy vision emission that we have, right,
and so ultimately at this point we have a critical

(46:13):
mass for retail partners and some of our core health
plan partners. Now what we really want to do is
to double down on this, on the analytical pieces and
I understanding how we can help each player in our ecosystem,
you know, better outcomes for each, better value for all, right,
truly drive value for everybody, and obsessed about those pieces
and so how can identify those pain are those points

(46:34):
where we can identify places to identify more to create
more value and then deliver that. And then separately, one
of those pieces is our care gat closure programs, which
is not an example of you know, on average what
I mentioned just about thirty percent cheaper than anything today
that that health clients are paying for right through our
retail partnerships. And so I think those are the primary
pieces that we want to be really optimizing for for

(46:56):
our Series B, and then just growing the team, scaling
like crazy the supporting nations we have. One of the
piece of feedback I've had, you know, earlier from from
our health client partners is you know, we have our
founders and our early employees are a mix of you know,
Walmart and optim rallies or old optim and Walmart just execution,
like people that love execution. I think it's true that

(47:19):
just about execution, we obsess about making sure everything deal
is right every single time, and we pride ourselves on that.
And so with that comes a lot of cost and
investment that needs to be made to make sure we
maintain that level of excellence that that is our standard now.

Speaker 1 (47:34):
So maybe just putting my analyst tap back on. We
talked a little bit about the revenue model from a
profitability perspective. You know, what are what are some of
the key leavers. Is it just more volume, is it
is it scaling up some of that infrastructure, you know,
where where's the leverage in the model. Ultimately, Ultimately it's volume.

Speaker 2 (47:50):
Ultimately it's volume. I mean, if you look at if
you look at the large publicly traded financial services companies,
this company operates more like a financial services company and
data companies. Okay, are our members here, but look at
vis are a MasterCard. I think their last Ebidad margins
were like crazy sixty sixty seven percent Ebada margins, which
is very different than healthcare companies. Right, But the beauty

(48:12):
of that is that once you build the fly whel,
you get the network going, you get those sort of
synergies in a critical mass, then it allows the cost
unit coomics to be leveraged quite significantly.

Speaker 1 (48:24):
That's great. And so if we think out three to
five years, you know where, where will the market be,
Where will you guys be in the marketplace.

Speaker 2 (48:32):
The market in three to five years will will look
very different. I think that the most most simply stated today,
my mom and my dad, who lived in two different
places in the country, get the same benefits from Medicare.
That doesn't make sense. My dad has four serious health conditions,
my mom has none, and like fundamentally that method doesn't
work for them to have the same benefits. The cost

(48:54):
equation is is like inviable there if I'm being honest,
and so ultimately I think in three years we'll start
to see it really significantly. Out By five years we'll
start to see and this is kind of a dirty
phrase to stay out loud, but it's necessary to bear
with me, a focus on member level profitability and generate

(49:14):
savings to then reinvest back into members that truly need
it and drive the right outcomes, better value for age,
better outcomes for all. I keep going back to that
because it's really important because it's again you're choosing between
cancer cure and vitamins. And so the way to do
that is to have smart benefits that are optimized to
what human beings need and truly deliver value versus buying membership.

(49:37):
And I think in five years for now, that will
be the standard that we will create. So for sally,
in three years from now and start to see a
pretty big deviation from where things are right now and
start to see that really take hold in place.

Speaker 1 (49:50):
So it would it be fair to say it's going
to optimize for the member versus the population.

Speaker 2 (49:55):
Yeah, for the member, because you have to Like what's
been interesting to me is we're taking lot of the
same principles that we saw at Walmart and Sam's Club
are very common cap optimization to a cost acquisition optimizing
principles that haven't yet made their way into mainstream healthcare yet.
That you know, if you look at Netflix, you look
at sam Club, you look at membership organizations, they have

(50:16):
to do this healthcare organizations because of the regulation and
everything else is associated with being healthcare entity today, they
haven't yet made it there. I think the policied landscape
is going to increasingly force that change, which, to be clear,
all of them want because you help people, right at
least that I have met personally, and so there's going

(50:37):
to be a sort of an increased sort of evolution
pretty rapidly towards that end.

Speaker 1 (50:43):
That's fascinating. I like that. I like that analogy. I'm
gonna I might have to borrow that. Please. Well, So
we've we've been on for quite a while, Robbie. In
one of the ways I like to wrap up these conversations,
and we touched upon this a little bit earlier, is
on focusing on a life lesson that the speaker holds
really here to them, that drives them in their day
to day. So I know we talked about this a
little bit already, But Robbie, is there something that you

(51:05):
highlight from either your personal life or your business career
that you share with your team that kind of drives
your mission on the day to day.

Speaker 2 (51:13):
I think there's there's a couple For me ultimately, we
I've enjoyed quite a bit of privilege to be the
spot where I'm at today, right, and to be where
I'm at today and then live the life that I lead.
You have a level of responsibility that comes along with that,

(51:33):
and so why not try to do whatever you can
to create something that that's truly special by the time
that we have your owner?

Speaker 1 (51:38):
Right?

Speaker 2 (51:40):
And so I like that that to me is like
an underlying and I have personally, and that everything else
kind of flows out of the people that surround myself
with as well. Right, I mean, so I have three
invasions of the least group in the projects, like I
should not objectively, I should not be here like truly,
And so with the life that you're given and the
privilege that now I'm enjoying, make it count. Number one?

(52:01):
Number two is okay? Cool? Then how do you do that?
I think the thing that I learned as a social worker,
which sounds kind of crazy and perverse. You look at
the fact ways when I say this except other social workers,
actually is that the only way to make scale is
you have to make the math work. And the way
you make the math work is by making everybody in
the value chain excuse no language, big ass bags of money,

(52:24):
because nothing works unless you make returns for everybody else.
So if we don't make money for our plans, for members,
for retailers, and everybody else in the equation, like this
thing falls apart because then you're not aligning incentives to
get anybody to help you, and so that it works.
If you're talking about a really small scale business, if
you want to create something truly that has an outsized
impact and can fundamentally change people's lives, the responsibility there,

(52:49):
in my mind, is to do that in a way
that makes everybody else better off. Because the more advocates
that you can have and true partnership that make you
that are better off because of you, the more profound
of an impact you can have. And those are truly
my two sort of ways of working your principles that
I think about what often is that people are our
company also think about a lot.

Speaker 1 (53:10):
That's great. Thank you for sharing those two north Stars.
I like the last one of the big ass bags
of money that helps. That's Robbie Knight, CEO and co
founder of Soda Health. Thank you so much for joining
us on our latest episode. Please make sure to click
the follow button on your favorite podcast app or site
so you never miss a discussion with the leaders in

(53:31):
healthcare innovation. I'm Jonathan Palmer, and you've been listening to
the Vanguards of Healthcare podcast by Bloomberg Intelligence. Until next time,
take care.

Speaker 2 (54:01):
Answer users, assas