Kao Corp.

Naver Corp and Kakao Corp, two of South Korea's biggest IT companies, have shared innovative uses of AI in healthcare. In the HIMSS24 APAC panel session, " Tech Titans in Health: Naver and Kakao’s Role in Transforming Healthcare," Kakao Healthcare CEO Dr Hwang Hee and Dr Dongchul Cha, head of the Medical Innovation Centre at NAVER Healthcare Lab, shared their organisation’s respective contributions in advancing digital health in South Korea. Dr Hwang discussed potential solutions aimed at clinical data optimisation. "There are so many options to choose from, but from the perspective of the technology, I think, federated learning is a very promising and optimistic solution to address [data] hurdles." Given the unstructured nature of patient data, federated learning and training AI models for generating structured clinical data may hold key, Dr Hwang suggested. "We can use conventional [natural language processing] NLP combined with [large language models] LLM for the model training set. Kakao Healthcare developed and deployed automapping for standardising code for international [data management] standards." This process, he continued, could reduce human and economic resources by up to 70%-80%. Dr Cha shared a similar process at Naver Healthcare Lab. "[Naver] recently launched a symptom checker where users can view health symptoms and make reservations with the doctors. The patient’s medical history would be integrated with the EMR, and both parties can save time," he explained. "Records will be automatically transformed [into] clinically arranged doctors' notes. I, as a doctor, can move on to physical examination after gaining the notes, reducing my cognitive burden." Dr Cha stressed the value of additional physician and specialist input in combating potential "AI hallucinations." "We recruited a group of physicians and specialists to verify all answers [on the platform]. There are two benefits to using this approach: users get verifiable answers, and irrelevant AI questions can be replaced with valuable questions phrased by specialist clinicians." Such innovation, Dr Cha said, serves as a "doctor friend" that will always be there for the patients, all while helping virtually raise medical capacities.

Alignment Health says focusing on trying to provide concierge-type care to Medicare Ad-vantage enrollees helped grow its membership. The top brass at Alignment Health expects the company to turn a profit this year in part because it now offers Medicare Advantage plans in Merced County, Calif., a move made on Jan. 1 that increased the insurtech’s membership by 44%, to about 155,000 enrollees. If that happens, Alignment would be the first MA-focused insurtech to turn a profit, according to Ari Gottlieb, principal at A2 Strategy Group and a nationally known expert on the insurtech industry.  “This reflects Alignment’s continued solid growth and progress toward building a profitable MA plan,” Gottlieb told Fierce Healthcare in an email. “The company is building on its successful legacy in California and entering new markets and has figured out how to do that while being financially sustainable.” John Kao, Alignment’s CEO and founder, told Fierce Healthcare that there are several factors contributing to the company's success. For one, Alignment did not increase benefits for established members, he said, and new members will not be a cost drain. Plus, Alignment’s growth gives it operating leverage in terms of sales and administrative costs. “Operating profits will be profitable this year,” Kao predicted. Alignment also expects to attain adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA. Kao said the company wants to have between 162,000 and 164,000 members by the end of this year, which would be a 38% increase over Alignment’s 2023 year-end membership prediction. “All these additional members have what we refer to as a cohort curve, which means they come in at a higher cost in the year in which we enroll them, but over the four to five years that they stay with us, the costs typically go down, because they get more familiar with our care model,” Kao said. A report by the financial services company William Blair noted that MA plans have scaled back investments this year by not offering more ancillary and supplemental benefits because of a desire to maintain medical margins in light of regulatory changes to MA’s risk-adjustment model, and lower star ratings. “Our bias was that Alignment, given the company’s consistent clinical performance and its proven ability to manage medical loss ratios, would be able to sustain investment in these ancillary offerings and remain an attractive plan for members, and we believe this strong membership performance suggests this proved to be the case,” the Blair report states. Alignment's geographic footprint reaches 8.5 million Medicare-eligible adults across 53 markets in Arizona, California, Florida, Nevada, North Carolina, and Texas. The Centers for Medicare and Medicaid Services (CMS) gave Alignment a four-star rating for its California HMO, and U.S. News & World Report ranked its MA plan in North Carolina one of the best in the nation. Kao cites good CMS star ratings as another reason the company’s poised to turn a profit in 2024. He notes that while for the most part consumers don’t pay close attention to star ratings for health plans, brokers and providers do. “And what’s really important is the higher your star rating, the more money CMS pays you,” Kao said. “If we have 4 stars or 4.5 stars out of a possible 5-star rating and somebody else has a 3- or 3.5-star rating, we have a pricing advantage over them.” Alignment strives to deliver concierge-type benefits for MA enrollees such as transportation to providers, at-home care, and better access to food. “We have a care model that uses data to tell us who the really sick people are and then we take care of them with our teams for free at home. It’s a very capital-efficient and focused care model. That lowers costs.” Alignment’s partnership with Instacart, unveiled last October, also began Jan. 1 and involves the delivery of nutritious foods in 13 counties that the insurtech serves. Alignment also is partnering with Walgreens in select counties. “Alignment’s leadership has extensive experience in the health plan space, which likely differentiates the company from other emerging competitors that have chased growth at the expense of profitability,” Gottlieb said. “Alignment’s core California business is heavily delegated to risk-bearing providers so the performance should be relatively consistent; it is worth looking at the other states to see how Alignment performs as it seeks to expand beyond California to more of a scaled player.” The Blair report applauds Alignment’s decision to not expand into new states this year, choosing instead to focus on its existing market share and strengthening ties with “external stakeholders.” Kao told Fierce Healthcare that Alignment’s talking to some major provider networks, though he declined to disclose who. “Health systems have reached out to us and really want our help,” Kao said. “We’re going to be expanding with them as a kind of a preferred strategic partner, if you will, and that will help accelerate our growth. I can’t name names yet.”

What banking crisis? John Kao, the CEO of the startup Medicare Advantage plan, Alignment Health, says that his approach to serving beneficiaries, and rejecting the growth-at-all-cost mentality keeps his company financially robust. John Kao said he isn’t at all worried these days. The CEO and founder of the insurtech Alignment Health said that the collapse of Silicon Valley Bank and concern about the U.S. banking system, in general, doesn’t concern him in the least because he doesn’t do business with SVB. He also said he believes that the business model for Alignment Health, a startup Medicare Advantage plan, will attract new beneficiaries and keep the approximately 109,000 members currently enrolled on board. “I was the bank,” Kao told Fierce Healthcare about where the seed money came from. “I started Alignment Health back in 2013, 10 years ago.” Alignment Health then raised $125 million in capital through the growth equity company General Atlantic, which had been sold on Kao’s mission to improve the healthcare outcomes for the elderly by offering the sort of concierge care that huge legacy Medicare Advantage insurers like UnitedHealthcare and Humana don't. Kao likened Alignment Health to Amazon and its “maniacal” attention to the customer experience. “Everything is customer, customer, customer with Amazon,” said Kao. “In our case, it’s senior, senior, senior. Treating them like they’re your mom and dad. That’s what’s gotten us here.” “Here” equals $1.43 billion in total revenue last year, and a projected $2 billion in total revenue by 2024. Alignment Health did experience some growing pains as it entered new markets in Texas and Florida. Those led to a 2022 fourth-quarter net loss of $57 million. In addition, the company reported a loss of $149.6 million in revenue for 2022, compared to more than $195 million in all of 2021. Kao said his company took a “contrarian view” when it came to fiscal management, unlike many insurtech and biotech startups that may now find themselves struggling because they tried to make too much money too quickly. Kao maintained his slower-is-better approach even when the company went public in 2021. “We were fiscally conservative,” said Kao. The company strived for a 20% growth rate, he said. “And we said that we’re going to move toward being cashflow positive by 2024. And part of the reason we did that was because of the issue everybody’s talking about these days: capital. Capital is precious. We raised the capital, but we’ve been very discerning about how we deploy capital. We did not take a growth-at-all-cost mentality which frankly was very in vogue two and a half years ago," Kao said. Alignment Health grew at three times the industry average. “But it wasn’t 10 times the industry average,” said Kao. “And because of that, we were very mindful of moving toward profitability. And we were very mindful of maintaining a very strong balance sheet. We have no exposure to any of the banking issues or problems that exist out there.” Kao attributed Alignment Health’s growth to the personalized care that the health plan offers. “If you’re 85 years old and you have three or four chronic conditions, we’re going to send nurses to your home to make sure you’re OK,” said Kao. “We realize that providing lifestyle benefits as supplemental benefits to seniors to address the social determinants of health is something that’s really important.” Kao said that the issue hit home for him when years ago he tried to get the healthcare system to respond to his mother's health needs after she suffered a heart attack.  The problem was that the doctors who treated his mother at the hospital didn’t communicate with her primary care physician and other providers. Kao’s mother is now 90 years old and an Alignment Health beneficiary. She takes advantage of the health plan’s additional benefits, such as Papa's Pals, who assist with day-to-day activities and provide companionship to seniors. “It’s a person who comes to my Mom’s residence, picks her up, and takes her to the Chinese grocery store for an hour,” said Kao. “She gets the stuff she needs and then she’s taken back home.” Sounds simple, but Kao said such a service gives a beneficiary a chance to get out the house and socialize with people. “It’s an opportunity to have and maintain her dignity and independence and freedom,” said Kao. “It’s really important for someone’s mental state to have that.” Alignment Health also offers pet care; someone to look after a member’s pets if the individual goes to the doctor or hospital. Another benefit involves a flashcard worth $50 to $100 for groceries. Kao takes his inspiration from Amazon’s focus on the customer. However, some have pointed out that Amazon became Amazon by driving smaller competitors out of business because it could underprice items. What’s to keep the huge legacy Medicare Advantage plans from mimicking what Alignment Health does and driving it out of business? For one, said Kao, his beneficiaries say that they “love” what Alignment Health does—a word not usually associated with health insurers. “I would suggest that most people would not think that way about the large health insurers,” said Kao. “I think they would say that they’re big and they’re powerful. But their services are not so good. Their net promoter scores are not so good. This whole idea of having a little company like ours actually compete in this land of the giants and win the hearts and minds of over 100,000 seniors—which to your point is still very small—but still 100,000 people. And I would say that 85% of that growth has come from seniors that have switched from large insurers. It’s a better mousetrap.”