As a bunch of tech startups get massive funding to reshape the future of healthcare, the American Medical Association is not sitting idly by. Instead, it’s investing in and building up companies that align with its agenda. The latest is Zing Health, a new insurer focused on Medicare recipients.
In 2015, the AMA launched Health2047, a for-profit incubator that builds health tech companies. In the years since, it’s launched three such startups: a data platform called Akiri, a company focused on managing and reversing pre-diabetes called First Mile Care, and now Zing Health. Zing’s plan will give seniors access to a network of clinics in Cook County, Illinois, starting in January. The company hopes to expand to three states by 2022. It’s a managed care plan, which means the Centers for Medicare and Medicaid Services (CMS) will pay a single monthly fee per member in exchange for a more holistic approach to nurturing patient health. Zing is working with a network of community health centers, including Oak Street Health, which recently raised $65 million for its senior-focused facilities.
“This is the hottest space within Medicare,” says Zing Health CEO Eric Whitaker, whose company has raised $3 million in seed funding. “The federal government would love if we were all Medicaid managed care. From a policy perspective, they would know how much to write a check for every year. With fee-for-service Medicare, it’s an open-ended checkbook.”
Whitaker is a primary care doctor by training—he ran the Illinois Department of Health between 2003-2007–but he’s also an entrepreneur and the founder of investment firm TWG Partners. His goal with Zing is to coax community health centers to expand into tele-health and more specialized medicine in addition to basic primary care. He also wants Zing to play an active role in managing patient health, ensuring that information is handed off to doctors appropriately. For example, if patients go to the hospital, Zing will make sure their primary care doctor is informed.
The company will also assist patients with some of the minutiae of getting healthier. This includes coordinating travel to and from doctors’ appointments, providing access to healthy foods, and making sure patients are taking their medications.
The profit motive
Medicare’s managed care plans, also known as Medicare Advantage plans, are so hot right now for an understandable reason: They’re very profitable. Analysis from the Henry Kaiser Family Foundation found that insurer margins for a person on a Medicare Advantage were double that of a person on an individual or group plan. Under this payment plan, if an insurer keeps a patient healthy, it can pocket the difference between the monthly fee it receives from CMS and the services a patient uses.
There is also an upside for patients. Managed care programs untether doctors from the fee-for-service model, allowing them to develop a preventative and more holistic healthcare practice. However, there are also downsides. If the fee that CMS pays out doesn’t cover a patient’s annual healthcare costs, the insurer loses money.
“The things we would be interested in and would be hesitant about in some [Medicare Advantage] programs are things like . . . where the plan uses prior authorization as a means to inhibit therapies and save money,” says James Madara, CEO of the AMA. In the past, insurers have aggressively forced patients to get pre-approval to ensure a procedure or treatment is medically necessary in order to control costs. This not only limited patients’ ability to get the care they needed, it also prevented doctors from earning money from pricey treatments.
Managing care for patients, especially when accounting for social barriers that prohibit them from staying healthy, is expensive when it’s done well. “Everyone’s been trying to bend the cost curve, which has actually been bending a bit lately,” says Linda Green, faculty director of the Healthcare and Pharmaceutical Management Program at Columbia University. The most recent experiments, she says, have involved using care coordinators or health coaches who aren’t licensed or certified—and therefore get paid less—to manage matters such as patients’ doctors’ appointments and nutrition. Zing has plans to put staff in the community health centers it works with to perform just this function.
As for why the American Medical Association is involving itself in insurance, the organization is keen to have an insurer in the market that prioritizes doctors. Another reason, says Green, “I think they’ve been seen as a fussy old organization.”
In recent years, the AMA has had internal struggles over whether to embrace more patient-first health paradigms such as integrated medical care (a less siloed approach to treating patients) and single-payer health systems like Medicare for All. At its heart, the AMA is a physician organization, and many of its policies reinforce a doctor’s ability to get paid. But younger generations are pressuring it to think more progressively about patient healthcare. Although the AMA still does not officially support a single-payer system—because of a perception that doctors would be paid less under government-run healthcare—its policy-making board is nearly split on the issue.
By backing an insurer that allows for more patient-forward medical practices, the AMA may be attempting to show it is not a regressive organization. “Perhaps by moving in this way they can be seen as more cutting-edge,” says Green.