How Health Tech Startups Can Win at Managed Care Contracting: Insider Strategies for Scalable Payer Partnerships.
This episode dives deep into the essentials of navigating managed care contracts as a health tech startup.
Whether you're a founder, operator, or policy strategist, you'll walk away with a clear understanding of how to position your company for payer partnerships, structure risk-based contracts, and avoid common pitfalls in the healthcare financing space. We explore real-world examples and discuss how to align your innovation with payer priorities, compliance standards, and long-term sustainability.
Perfect for early-stage startups, digital health innovators, and anyone looking to scale within the complex world of managed care.
Key Themes:
- Understanding managed care mechanics (HMOs, PPOs, ACOs)
- Value-based care vs. fee-for-service
- Contracting tips for Series A and B stage startups
- Risk corridors, capitation, and performance metrics
- How to speak the payer language and win trust
Target Audience:
Health tech entrepreneurs, product and ops leads, VCs in digital health, provider networks, and healthcare consultants.
Takeaways:
- Understanding managed care contracting is essential for health tech startups to succeed.
- Health tech entrepreneurs must align their innovations with payer priorities and compliance standards.
- Effective negotiation strategies are crucial for securing favorable managed care contracts.
- Startups should utilize data transparency to build credibility and foster trust with payers.
- Establishing a structured contracting process is vital to avoid unfavorable agreements and ensure sustainability.
- Learning from real-world case studies can provide invaluable insights into successful managed care strategies.
Companies mentioned in this episode:
- Innovate Health
- MedTech Solutions
- Health Wave
- United
- Humana
- Aetna
Episode Transcript
Welcome back to the VBCApodcast. I'm Alex Yarijanian and
today we're going deep into atopic that's make or break for health
tech founders. And way toooften this very same topic is totally
misunderstood. And that'smanaged care contracting. Yeah, I
know. Not sexy, definitely nottrending on X. But if you're building
in health tech and you don'tunderstand how payer contracts work,
(00:20):
you're building on sand. Let'sbe real. You can have the best clinical
AI, the slickest ui, theperfect patient experience, all of
it good. But if thereimbursement model doesn't support
it, you're just giving demosand sending PDFs no one reads. Today's
episode is a blueprint. Thisblueprint is for founders, operators,
(00:43):
and even some health planfolks who are trying to figure out
how to actually work withinnovation. Instead of slow rolling
it to death. We're going tobreak it down into three parts. 1,
what makes managed carecontracting so brutal for startups?
2. Strategies to not justsurvive it, but win in managed care
(01:05):
contracting. 3. Some realworld startup case studies that code.
Let'sgetintoit.Let'sstartwiththeobvious.You'reahealthtech startup.
You're comingintothisworldwithaboutasmuchleverageasahighschoolinternatapharmaconference. Nooneknowswho
youare.You'vegotnovolume,andunlessyouhaveACO leveldata,noone
(01:32):
believesyouroutcomes.Yet.Pointblankpayersarerisk averseandyourcompanyis,well,risk.
You'renowsteppingintoaregulatoryminefield. Thereis hipaa,stateregs,priorauthorization,
utilizationmanagement.It'sliketryingtodoparkourwhilereadingalegalbrief.Andall you'vegotis
onelawyerretainer anda COOwhohasn'tsleptsincethe lastSOC 2 audit.Thenthere'sdata,oractuallythelackofit.Healthplanshavearmiesofactuaries.You'vegota
(02:03):
coupledashboardsandaclutchanalyst who's alsodubbing asyourproductmanager.So
whathappens?Youeithergetstuckin pilothellorworse.Yousignabaddealjust
togetintothedoorandnowyou'relockedintoacontractthat'sbleeding yououtandapair
willnotcometothetable.Letmetellyou something.You
(02:27):
donotneedtobemassive towin.Youjustneedto besmart.Structured,surgical.
Let'sbreakdownafewplays.Play1.Usetech topunchaboveyourweight.Contractmanagementplatforms.Yeah,I'mtalkingabout
toolsthatbringorderto thechaoscanhelplevel theplayingfield.Fromcontroltoaudittrailstostructuredreviewprocesses,having
(02:49):
cleanoperationalinfrastructurebuildscredibilityandsavestime.Now,allof thesethings
thatI said, fromcontroltoaudit trails,et cetera,processes,youmightbethinking,let'sjustgetstarted.
Butremember,whenyoustart,youneedtohave adirectionyoudon'tget,usuallyinanairplaneandjusttellthepilotto
takeoff.Youtypicallyhavetohavealocation, youhave
(03:12):
tohaveadestinationtogoto,otherwisetheplanewouldlikelynottakeoff. Allofthat
tosay,don'tshowuptonegotiationswithvagueintentions.Showupwithdatatransparencyandthe operationalmaturitytoscale.Whenyoufirstsignacontract,you'renotdoneright?Youhaveaneffectivedate,youhavea
(03:34):
contractinplace.Askyourself,doIhaveaplanforrenegotiatingthis?Folksoftenthinkrenegotiationscomelater.Yeah,they do
comelater.Butguesswhat?Ifyoustart thinkingaboutwhatyournegotiationstrategy
is,whatsomeofthethresholdandkindofcriteriatotriggerthis negotiation,what
(03:54):
you'retryingtogetoutofthenegotiation,what outcomesareyouseeking?
Now, youdon'tjustsuddenlydecide,okay,I'mgoingtonegotiatethiscontract,sowhatdata doIneed?Sure,youcandothat,butit'sbest
thatyouthinkaboutwhatoutcomesdo Iwantfrom anegotiation?
(04:15):
Playtoo.Toomanyfounderstrytofigurethisoutastheygo.Don't find
someone who'sdonethisbefore,formerpayerexecutive,ahealthsystemlead,someonewho'sbeenthroughthreeMedicaid car
routesandstillshowsuptowork.Hey,therulesare notwrittenanywhere.
They'relearnedintheroomsyouhaven't evenbeeninvitedtoyet.Sofind
(04:38):
someonewho'sbeeninthoserooms.Playthree.Sell financialimpact.Do
not sellfeatures.That'saflag,redflag.Noone'sbuyingbetterux,they'rebuying results.Frame
yourlanguageintheirlanguage.Loweringutilization,fewerEDvisits,improved adherence,operationallift.Ifyou
(05:05):
don'ttieyourvaluetocostcontainment orqualityimprovement,you're
justalineitemtheydon'twant tofund.Now,becarefulabout this.In somemarkets,suchasCalifornia,youcantalkaboutER
and EDandhospitalvisitsasmuchas youwant,right?Butfolks,eyeswill
glazeover.That'sifyougetameeting.Why?Becausethepayersimplypays thehospitaladrgand
(05:29):
it'suptothehospitaltofiguretherestout. They'renotgoingtopayanything
morethanthey'repaying.SobecarefulhowyouFrameyourvalue,butmakesure youframeit
intheirlanguage.Startupwarstories,who actuallygotitright.Let'swalkthrough
threecasestudiesreallyquickly.Thesearerealstartupswithreal challenges
(05:52):
and, hey,realprogresstoshowforit.Caseone is InnovateHealth.Theywerebuilding.I
chuckle only becausethesevaguenamesandeverythinghasawordhealth andeverything
has careinit,butitissoInnovateHealth.They werebuildingremote
monitoringtechnology.Clinicallysolid,butnonetwork access.
(06:14):
Youcanbeas clinicallysolidasyouwant, butifthere'snonetworktoaccessyourclinicallysolidproduct,thenhey,it'snotgoing
tobeout there.Butwhatworked?Ihavethreebulletpoints Iwant
youto thinkabout.One,theybrought inaformerhealthplancontractingleadearly.Now,watchoutwiththis.
IfyougoandpoachsomeonefromaUnitedorHumanaor anAetna,
(06:37):
anyoneofthesemajorcorporations,make surethat
theyunderstandthestartupcultureright.Thesefolksaretypicallynotused tothemovingfast,breakingthings,a
rapiditerationandthebusinessneedsofastartup.Thesefolksareused to
simplybeinginacorporation,alarge organization,andit
(06:58):
operatesverydifferentlythanastartup.Somakesurethatyouconsiderthat.Sodon'tjustquicklypausethispodcastandgo findsomeonefromUnitedand
bringthemin,butmakesureyouaskthemthe right
questions.Makesure that youwatch forcuesthatareoutsideofjusttheinterviewtomakesurethat
personunderstandsthatthey'recomingintostartupandunderstandsthatsomethingthatissettoday,astrategyof today,couldchangetomorrow,
(07:26):
couldchangeagainthedayafter,and itcouldchangeagain Mondaywhenyoucometowork.Somakesurethatyou'renotjustspending
moneyonsomepersonyou gotfromahealthplan.Thatwon'tbea goodfit.Mightseemlikean
obviousthingtosay.That'swhyIdidn'twantto sayorganizational
fit,culturalfit,butspecificallyahealthplan corporate
(07:50):
personneedstofitintothefastpacedenvironmentof astartupandtheyneedtobeokay,right?
Withthingschangingeveryday,everyotherday.Two,structurethe contractingprocessfromthejump.SowhatInnovateHealthdidwasthattheystructuredthetotalityoftheircontractingflow
(08:10):
andprocessfromtheverybeginning.Andthree,buildanoutcomesdashboard.That'swhattheydid.Theybuilt anoutcomedashboard
to show realvalueandtheydidthisbeforethe pitch,notafter
meetingwiththehealthplanandsaying,hey,yeah, we'llsendyousomedata.Andthenscramblingtobuild
adashboard.Yeah, sothatisveryimportant.Theywalked inwith Proof,notpotential.Landed
(08:36):
threeregionalpayeragreementswithin oneyear.And
thesearen'tjustyourbasickindofagreements.Right.Theseareactually,I'mgoingtoput in
airquotesforthelisteningaudience,enterpriseagreements.Sotheseare actualcontractsthatcouldbringinsome
tremendousvalue.Iwanttotalktoyouabout casenumbertwo.That'sMedTechSolutions.
Soit'satelehealthplatform.Signed,they signedtwo earlycontractsthatnearlytankedthem.AndI'veseenthishappeninmanydifferentpointsofmy
(09:06):
career.I'mtemptedtonamenamesbutIwon'tdothat here.Essentiallydon'tjusteagerlysignacontractthatyou
don'tunderstand.Sothesepeopledidthat,theysignedtwoearlycontractsandthatverythinmarginsand waytoo
muchrisk.I'veseen thishappenwhenIwasatHumana andessentiallycertainprovidertookontremendous
(09:30):
amountofrisk.Soglobalrisk,partA,Medicare,partA,BandD.Soa hospital,B,physician,D,
drugs.Theytookallofthatriskforacertainpercentageofpremiumthat didnotallowthemtobreathe.Theywereatthe
door,knockingatthedoor,essentiallyneedingtorenegotiate,let'ssaythat. Sowhat
(09:56):
Medtechdidwastheyretooledandtheycollectedgranulardatafroma smallpilot.
They builtavaluepropositionaroundavoidablecostreductionandnegotiatedbetter termswithsharedsavingstriggersandtheyaddedstoplosslimits.Sothatwasmissing
fromtheirinitialagreements.Nowthey're in
(10:17):
five stateslivegrowinginmultiyearagreements.Okay, thelastoneI'mgoingtobringupisHealthWave.Everyallofthesehaveaword
healthinit.Sothat'sanAIdiagnostic tool.
Incrediblescience.I'msuretheirprogram isworking.They weretotallyunpreparedfor
compliancereviews.Whattheydidwaspauseexternalnegotiationsto tieuptheirinternalprocess.Itdependsonyourteamsize.Youdon'talwayshavetodothat.Theyrebuilt
(10:47):
theircontractworkflowsandapprovalcheckpointsto makesurethatessentially
thingsweren'tjustgoingso fastthattheywereflyingundertheradarand theyengagedaregulatoryconsultanttohardentheirdealstructure.Nowagain,depends
ontype of organizationyou'rerunning.You don'tneed aregulatory
consultantforyourkindofbehavioralhealthteletherapyplatformandthesetypesof things.But
(11:12):
it isimportantthatyoumakesuretobring inthepro periodexpertsearlyonin
theprocess. Otherwiseyou'rewastingtimeandmoney.Right,and timeismoneyandmoneyistime.Soyou'rewastingyourresources.AndasastartupIdon'tneedtotellyou,you
(11:32):
knowyourselfprettywellthatallyouhaveisyourtimeandthat'syourmostvaluableasset. Sooncethehouse
wasinorder,HealthWavelanded.CommercialandMedicaid contracts.
Andtheydidthiswithin sixmonths. Here aresomefinalthoughts.And8.Thisisnotoptional.Let'swrapitup
(11:55):
here.Managedcarecontractingisn't aline item.It'syourbusinessmodel.Youhave
to takeit seriously.Ifyou'reastartupin thisspaceandyoudon't understandhowyourproductfitsinto
ahealthplan'sactuarialmodel,their quality strategyorcostsavinggoals,youarenotready.
Thisisn'taboutbeingliked.Theylikeyou.It'sabout beingcontractable.And
(12:18):
that'saword.Andbeingcontractable meansyoucanspeakthepayer'slanguage,youcanprove
yourimpact,andyou'vegottheinfrastructuretodeliverwhatyoupromise.Becausehey,iftheysignthatdealwith youandyoudon'tdeliver,guesswhat?Youdon't
have that dealanymore.Ifyou'reseriousaboutscaling, getseriousaboutcontractsinclosing.
(12:46):
Startupsseemtothinkiftheyjustthrowthesethreewords,valuebasedcare,intosomePowerPointora GoogleSlidepresentation,exportitasaPDF
andemailitout,investorswillsimply throwmoneyatthem.The
restwilltakecareof itself.Health planswillrushtocontractthem.It'slikesayingyouwantto
beaworldclasschef,butforgettingthatyouactuallyneedtobuysomefood, that'saproblem.
(13:10):
Andwhatyou need todoismakesurethatyou'renotoneofthesestartups.Becauseguesswhat?Suchstartupsexist.Sototheextent towhichyou're
notoneofthesestartups,you'realreadystickingoutasacompetitiveadvantage,right? SoIwantyoutothinkthroughthisandif
you haveanegotiationnightmareora contractingquestionyouwantunpacked,senditin,let
(13:34):
meknow.WemightcoveritinafutureepisodeandImightaddressitdirectly. Ilikedoingthat.ThisistheVBCAPodcast.I'm
AlexYarajanian.Nofluff,notheory, just
whatittakestobuildhealthcareand dosoforreal.Catchyounexttime.Y
ar ijania n
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