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Why Kaiser and Mayo Clinic are investing $100 million in Medically Home

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Raphael Rakowski, Executive Chairman of Medically Home, joined Yahoo Finance to discuss Kaiser and Mayo Clinic investing $100 million in Medically Home.

Video Transcript

SEANA SMITH: Speaking of healthcare, let's talk about a recent investment in this space and potential changes that we could see to healthcare down the road. And for that, we have the Mayo Clinic and Kaiser. They are investing in Medically Home. And this is a company that wants to take the hospital experience and move that into your home. So for more on that, we want to bring in Raphael Rakowski. He's executive chairman of Medically Home. And Raphael, it's great to have you here on Yahoo Finance.

RAPHAEL RAKOWSKI: Same here, thank you.

SEANA SMITH: I guess, first, just talk to us about this partnership, what it entails and why this is a huge opportunity for your business.

RAPHAEL RAKOWSKI: Well, over the last probably three years, there's been a significant transformation in understanding the limitations of healthcare delivery. And COVID actually brought that to a head. The imbalance of beds and clinicians to handle COVID was just on the news every single day, combined with patients' fears growing about actually using the hospital during the peaks of COVID and staying home. And significantly negative things happen. So there was a growing recognition that there are fundamental flaws in the healthcare system, which have been, for years, has been organized around providers, hospitals, and payers.

And there's been a conversation around, why don't we organize around the patient for years? But Mayo and Kaiser made a bold decision to actually focus on that and drive a transformation of care and lead the way for other providers to do the same. And the heart of the idea was let's decentralize the care and bring it to patients where, for years, actually decades, we've been making patients come to it. So the goal was to take 30% of the patients that are currently hospitalized and create flexible capacity in patients' homes for the use of high dense acute care in the patients' home.

So think of serious and complex care currently being available only in the hospital, coming to the home. So for Medically Home, I've been at this for 12 years. And the propellant of COVID and now health equity and the sensitivity around providing care to underserved patients has really boosted and amplified the way in which people look at healthcare delivery. So--

ADAM SHAPIRO: Raphael--

RAPHAEL RAKOWSKI: --we're in the midst of a fairly significant transformation. Yes.

ADAM SHAPIRO: And so, what does that look like in the real world? Some of us have elderly parents. I've been very fortunate they had very good hospital stays and recovered. But when you point out that we spend $3.6 trillion on healthcare in the country, of which $1 trillion is for hospital stays, I think in the notes that you provided, something like 30% of that was, I think, it was referred to as a brick and mortar tax. Would, for instance, in the real world example, would it be better to have these people at home anyway for recuperation?

RAPHAEL RAKOWSKI: Yeah, [INAUDIBLE] bricks and mortar tax is 65%. That's the cost of overhead for a typical hospital, say, leaving about 35% for clinical care of patients. So the idea is to arbitrage out those fixed costs for the brick and mortar to provide more care literally at a longer period of time for patients at home, which patients prefer the home as a set of care. So basically arbitraging the bricks and mortar fixed asset tax and moving more care over a longer period of time at home in a way that's convenient for patients. We've become accustomed to getting Amazon packages to our home and groceries in our home. And now expectations are going to shift where patients sort of expect to get care at home.

SEANA SMITH: Raphael, is this a tough sell for hospitals? Because they're in the business. They don't want to see sick patients, but they also need to fill their hospital beds. So how are you getting them on board?

RAPHAEL RAKOWSKI: Well, for the first probably nine years was more than a tough sell. It was impossible, given the model and the regulatory framework, reimbursement constraints. So the market wasn't ready, but today, again, COVID turbo charged an understanding that we have a fixed capacity of care capability. And we needed to make that flexible. And now it's not a tough sell-- quite the contrary.

And with Mayo and Kaiser driving this change around patients and around also access, the hospitals are calling. I mean, we had probably an average year, I had about two or three inbound calls. We're having about 10 a day now. Obviously, since the announcement last week that went out, the level of interest is sky high, mostly because of a combination of COVID and health equity. So on that front, rural patients, who have difficulty getting access to care, this model allows us to reach patients anywhere in the United States with the level of capabilities that we can deliver in the hospital, which is new and unusual.

SEANA SMITH: Raphael Rakowski, executive chairman of Medically Home, thanks so much for taking the time to join us today.