HTN
An Overview of Nice Healthcare
First off, thank you to Thompson Aderinkomi for his time, candor, and constantly challenging the status quo.
A Summary of Nice:
Nice Healthcare has built a nurse practitioner led virtual first + in-home care model with fully capitated pricing for smaller employers that is currently in 18 cities. One of the unique aspects of the model is that they’re not targeting your typical major metro areas that many startups are going after, instead they’re targeting smaller cities that have been largely ignored by startup models, but still have enough density to support a model like this. The in-home care play has created a nice set of capabilities in primary care delivery while targeting a relatively untapped employer and geographic market segment that provides Nice with significant opportunity to grow into new markets. Nice will be able to leverage its recent funding round to improve upon its supply chain technology and become more efficient across its virtual and in-home supply and demand matching execution.
We’ll go much deeper below on the Nice model as well. Here's a video of the session if you want to watch it:
Our Takeaways:
This is a nice (pun intended) model with a lot of runway
Nice serves as a good reminder for all of us how nascent innovation still is in the primary care landscape across this country. While we all get enamored with the big name startups that are either serving consumer populations in the major metros (NY, SF, LA, etc) or taking government contracts in Florida, Texas, and California, there is still a broad swath of this country that doesn’t have access to any of that. Thompson talks about how he doesn’t have any real competition at the moment, and it’s one of the rare instances where that’s entirely believable. That isn’t to say there are no other NP-led home healthcare companies, but it is to say I can’t imagine Thompson is encountering much competition other than the status quo when he is talking to small employers in smaller markets. We’re still in the early innings of changing healthcare, and there are a lot of opportunities out there.
Nice will win by aggregating labor in markets
Given clinician staffing shortage challenges, particularly in smaller communities, it seems natural that we’re going to see more NP-led models with individuals practicing at “top of license” in the longer term. Thompson shared that Nice identifies its core goal / value prop to investors as market share gain play via market expansion strategy. Ultimately, we think Nice’s core asset is a pool of high quality nurse practitioners that deliver care in markets where that care is otherwise hard to find. By doing so, Nice creates value to patients (by delivering high quality care), to employers (both as a benefit to offer employees and by managing costs), and to its investors (by creating an acquirable asset). Nice’s ability to continue growing a high-quality clinical workforce in new markets, presumably while more competition enters the space will be one of the keys for this model moving forward.
How will tension of scaled investor returns impact the model?
Nice has a laudable goal of redistributing the value it creates back to the patient rather than fully capturing that value, as most for profit entities in healthcare seek to. And while it’s a laudable goal, there’s a reason why everyone else seeks to capture as much value as they possibly can. Perhaps with the exception of being a non-profit, although as health systems have shown us even that isn’t necessarily the answer, there is always the incentive to capture more value, as it supports driving scale. Nice is not a non-profit, and presumably its venture investors have LPs with an IRR expectation, which usually at some point dictates a requirement to drive more scale. Thompson seems focused on avoiding the outcome that some other startups are struggling with in terms of scaling too quickly at the expense of any real development of a clinician to patient relationship. It will be interesting to watch how Thompson and Nice balance the desire to change the system with the potential for increased financial returns over time.
Keep an eye out for an eventual business model shift
Nice’s current business model, which is to charge employers $30 - $36 PEPM, lives outside the core insurance an employer is paying via self-funded claims or fully-insured premiums. Eventually, as Nice grows, Nice is going to be pushed by employers to be part of the insurance offering, so employers can see the benefit of lowered rates. Nice is fitting a lot of offerings into that $30 - $36 PEPM at the moment, and Thompson has no plans to raise prices (beyond accounting for standard inflation and additional services offered). This is where that value capture versus financial returns challenge is likely to appear over time, and it would seem the easiest way to resolve that for both sides is to attempt to move towards a model that looks like global capitation.
Nice Healthcare’s Clinical Model
Patient experience: Nice operates with no brick and mortar clinics. Instead, every interaction starts with a virtual interaction with a nurse practitioner then deploying a different NP to the patients home, if necessary. From a patient perspective, they log into an app, select a condition then choose a chat or video visit. After that consultation the in-home visit call is made, which Nice says happens the same day 99% of the time. Outside of the convenience of receiving care in-home, the key benefit to the patient is that all the care they receive through Nice is at no cost to them. Nice’s business model is to have the employer pick up 100% of the tab for the patient (more on this in the GTM section).
Care capabilities: Nice optimizes for allowing the patient to get done whatever they would normally get done in a clinic in the comfort of their own home. What this actually means is they will do physical exams, blood draws, and even x-rays. They also have a ”formulary” of 550 drugs that a patient has access to under that same $0 cost share. Nice has recently added on mental health and MSK into its services suite as well. Nice evaluates adding potential new services by looking at both the frequency and cost of the need for patients. Thompson believes high frequency, low cost events shouldn’t necessarily be insured because treatment is like maintenance (think oil change in a car). Those make sense to include as part of the Nice model. Nice will also evaluate including lower frequency conditions that can be treated upstream at relatively low cost that make sense to treat in the context of overall primary care and also have high potential downstream impacts, such as Type 2 Diabetes.
Care Team: All of Nice’s employees (including care team) are W-2 employees. Thompson called out are two primary reasons for this:
- To ensure a great customer experience and a great clinician experience you need to have people W-2 to align incentives
- The gig economy is good for some aspects of the economy but healthcare is not one of them. He notes that it can make sense in a setting like urgent care but when you’re talking about where you want to establish your care and keep your record, having a contractor is not the best way to do this.
While the clinicians are W-2’d, the model is geared toward patients developing a relationship with Nice as a primary care company, rather than to a specific NP - the patients do not get to choose the NP that they see for in home visits. Rather, Nice uses a mix of sending the most qualified clinician for the indicated condition coupled with logistical factors (proximity & availability). Patients have the opportunity to select the same clinician for virtual visits.
This is an interesting nuance in the Nice model in that it raises the question of whether this is truly a primary care relationship or more of an urgent care model. To address this, Thompson noted that Nice employs a team-based approach including care navigators that help patients through their journey from virtual visit to in-home care to any necessary referrals. In terms of referrals, Nice currently works in the local geographies with local specialist networks within the employers health insurance network, rather than e-consult companies.
Competitive Advantage: Thompson identified Nice’s competitive advantage as the set of activities Nice delivers rather than any specific capability, along with the notion that the bar for care delivery today is just so low. He described this as follows:
- “Are our nurse practitioners clinically better than others? I don’t think so”
- “Is our video or chat technology better? I don’t think so”
- “Are we faster drivers with fewer accidents? No”
- “Are there other clinics using nurse practitioners instead of MD’s? Yes”
- “Are we differentiated in how we pay our clinicians? I doubt it”
“But putting all of those things together with the home visit at the core of it, there’s no one right now in the market that has a nurse practitioner leading a primary care clinic with virtual first plus home visit on a capitated basis with unlimited access to x-ray imaging, labs, drugs and physical exams at a price point achieved.”
Thompson did hit on three points through the discussion that start to get at the distinct capabilities Nice is building:
- Operating Model: The Nice team has been operating in in-home primary care for years now, both with Nice and its predecessor startup Retrace Health. This gives them a good baseline for operational processes, such as establishing a target for what percentage of virtual visits should be expected to translate into home visit (Thompson wouldn’t share this number, as Nice views it as proprietary).
- Supply chain: Understanding how to match supply and demand for home visits. While the concept of last mile delivery is not new, incorporating condition urgency, seasonal health trends, density mapping, weather impact, etc into the NP capacity and drive planning is core to the model
- Tech stack: Nice strategically views its technology as primarily for clinicians, not patients, stating that the patient’s desired experience actually has nothing to do with technology but rather getting to an outcome of feeling better. The technology is a tool to make the clinicians job easier, and help the patient feel good about the care the NP is providing. Based on this, Nice has chosen to build its tech stack internally to tie the experience together from care delivery, to the logistics of the home visit, to running labs, to partnering with x-ray providers. That said, Nice did not start with the build approach. Instead they cobbled together off-the-shelf tech with API’s to determine what they needed before they began to build.
Business Model & GTM strategy
Customer Segmentation: Nice has purposefully targeted smaller employers in tier 2 cities. The strategy was based on the idea that every VC backed care delivery company selling to employers already tries going to large employers and densely populated, tier 1 cities in order to drive scale faster. This approach means less competition and easier sale for Nice. There are a number of companies going after employer primary care via on-site / near-site clinics, but those are primarily aimed at large employers. Solutions targeted at smaller employers are the point solutions that brokers are layering on top of existing local care delivery models.
Operating in this segment has lots of room to grow given the number of small businesses that exist. This means the core growth strategy is via market expansion which becomes, as Thompson describes it, a market share growth play. This means Nice views its primary competition as the long tail of local primary care clinics operating in a FFS environment.
The distribution strategy for Nice centers around brokers serving the mid-market employer segment that Nice targets. It has approached the broker community with both exclusive and non-exclusive partnerships, finding that they land on an approach of partnering with brokers that are more mission aligned than anything. On the other hand, brokers that want to increase prices (because they can) and capture more in commissions are not groups that Nice partners with. Nice now targets brokers that have invested time and understanding in primary care and are willing to experiment with clients.
Pricing Model: Nice’s employer clients currently pay between $30-$36 PEPM, which includes all of the services they are offering. This is on top of whatever the employer is paying whether that is claims as a self-insured employer or premium to an insurer as a fully insured employer. Over time prices will adjust based primarily on 1) inflation and 2) the services added to the model. Adding mental health and x-rays increased the rates from when it was only physical exams, adding 400+ additional covered drugs added cost.
So the price point will adjust over time and the question becomes, how broad does Nice go in becoming an Advanced Primary Care model taking on more risk? Do they ever seek to take global capitation contracts? Thompson acknowledged that question is on his mind, but it is not something they need to answer at Nice now. Their focus is on market growth within the current model.
Nice’s philosophy on increasing prices though is to do so not to capture more value but pass that value created down to the consumer or patient. In Thompson’s perfect world, the Federal Government takes over all of the actual insurable medical events (high cost, low frequency) and levels the playing field for those to compete on who can provide the best care at the lowest cost.
Value Prop: Related to the needs of the customer segment Nice is targeting (smaller employers in Tier 2 geographies), Thompson notes that the primary motivation of this segment is to help employees that are being crushed by current health insurance plan designs and restricted network access. So even though it is an added cost to the employer given the employer assumes 100% of the cost for the employee and it is not yet impacting insurer premium rates, the play is completely around attracting and retaining talent, at least in the fully insured space.
In the self-funded employer space, there is the ability to incorporate cost benefits via claims analysis. That said, Thompson notes target utilization occurs 9-18 months after implementation at a client so given length of time to prove savings and initial buying behavior, it’s likely true that the primary motivation is around improving employee experience for attraction and retention (we’d add productivity given speed to care) in the self-insured market as well.
The cost savings does make intuitive sense - you lower barriers to care with no cost sharing, and downstream impacts will occur through better upstream utilization. However, Thompson calls out that he’s not a fan of the downstream impact argument, even though he acknowledges that is where big dollars exist. He calls out a key goal of Nice to reduce health care costs today - not slow the trend but decrease it immediately.This does start to look like a lot of other models that end up citing lower ED and UC admissions, etc. Given this stance, those are likely the core metrics that Nice and its partner brokers are focused on in evaluation of the success on a cost basis with employer clients.
At the highest level, if you put yourself in the shoes of the buyer at a small employer (be that CEO, CFO or HR leader), you have a feel good story to tell your employees about their healthcare coverage - being able to tell people at open enrollment that they will pay $0 for unlimited access to in-home primary care visits, video visits, ~550 drugs, blood draw/labs, X rays, EKG and they do video visits. It sounds like a nice benefit to help with recruiting / retention for employees.
Venture Scale:
Thoughts on “Value Based Care” buzz: Thompson does not appear to be a fan of the term Value Based Care. He describes it as simply a catchphrase people say that carries little meaning. Nice still operates with a model many would call VBC, getting paid on a capitated basis, but when selling to clients Nice doesn’t ever talk about VBC. Instead, Nice talks about providing care that employers can see the value in because it’s not confusing where the value comes from. This is a difference from some of the other value based care models such as MA, where the “value” is being paid for by taxpayers who don’t have a choice in paying for that value, and it's not easily understood. Additionally, Nice perceives most value based care models as being built on fee-for-service rails, so it’s not clear how much these models are changing from the FFS status quo.
Navigating the conflicts of raising capital and the impact on value creation and capture: The core reason for Nice’s recent $30 million capital raise is to fund the losses associated with market expansion, as Nice loses money initially each time it enters new markets. Thompson does not really see a conflict for Nice in raising capital and their ability to continue to both create value and distribute that value back to patients rather than capture more of it, primarily for two reasons:
- The most critical step in doing this is partnering with the right people (investors in this case). Thompson indicated that Nice has tried to align with partners who have long term patient outcomes ingrained in their DNA, with a core goal of changing healthcare with the consumer in mind. Thompson stated that Nice wants to capture value to funnel that value back down to the consumer. He uses his dislike for risk sharing as an example where he does not need to take upside and downside risk (as many care delivery providers entering value-based care contracts do), but is willing to enter into contracts where Nice shares only in the downside risk (assuming the upside is being shared back to the employees). This is a bold idea in a space where most folks want the benefit of upside without the risk of downside. The idea is to find investors that are aligned to that view point.
- The primary goal of Nice’s current strategy is to gain market share in various markets. Which presumably flips the conversation from additional value capture from consumers to a volume based play driving to economic maturity across lots of markets. With this strategy, Nice believes it can focus on scaling within markets and driving additional value to consumers, while also driving value for their investors.
As it relates to the broader venture-backed healthcare environment, Thompson’s view is that no healthcare company is scalable from a pure economic sense. While there are some micro economies of scale within specific geographies and from a purchasing power perspective, no healthcare company has pure economies of scale outside of the software platforms they use. But those software platforms are also not really healthcare companies, they are software/tech companies with healthcare buyers.
That’s all for our conversation with Thompson. If you’re interested in learning more about Nice, check out their website here: