CEO Stories: Navigating the Consumer Health Care Experience
Kara Trott, Founder and CEO of Quantum Health—a first-of-its-kind consumer health-care coordination and navigation company — followed a most unlikely path to entrepreneurship. After studying macroeconomic issues through the lens of Marxist theory, Trott found herself leading market research projects for Fortune 500 companies, graduating law school, and working as a healthcare consultant for a leading Midwest law firm before founding Quantum Health. Managing more than $7 billion a year in claims, Quantum Health helps client companies and their employees save time and money.
Kara Trott, founder and CEO of Columbus, Ohio-based Quantum Health, does well for her clients – employers looking to lower worker healthcare costs – and her clients’ employees, who are trying to navigate the healthcare maze. Care coordinators, known inside Quantum as healthcare warriors, simplify and clarify the healthcare journey for patients. Clients see markedly lower healthcare costs – reductions of around 5% in the first year –and patients have a more positive experience, with lower out-of-pocket expenses.
Marxist Theory and Entrepreneurship
While a degree is Marxist theory might appear to be an unlikely foundation for an entrepreneur, Kara Trott, a firm believer in the free market system, says it helped influence the way she runs her company. She doesn’t believe in command and control management, and says that as president and CEO, she views herself as at the bottom of an inverted pyramid, supporting the rest of the company.
A Different Approach to Healthcare
Her first job out of college was in market research, analyzing consumer behavior to help companies rethink their store layouts, and their marketing, distribution, and merchandising strategies. From there she went to law school, and eventually led the healthcare consulting practice at prestigious law firm Bricker & Eckler. Combining the strategies she learned in market research with her knowledge of healthcare, Trott sought to redefine the consumer’s experience with the healthcare system. She has placed consumers at the center of the map, a contrast to the traditional approach of looking at providers and their inefficiencies and challenges.
Trott believes there’s the opportunity to extract as much as 20% of unnecessary costs in healthcare by reducing duplication and waste. Clients see the potential: Annual client growth has been 30% to 40%. Quantum is one of a handful of companies to land a spot on Inc. Magazine’s list of the fastest-growing small companies for more than 10 consecutive years.
This Is Capitalism: Kara Trott
RH: This is Capitalism, I’m Ray Hoffman. Kara Trott does very well by her clients and very well by her clients’ employees. She’s the founder and CEO of Columbus, Ohio-based Quantum Health.
For companies like Hertz, Dillard’s, and American Honda and hospital systems like Houston Methodist, Quantum offers a remarkably personalized approach to healthcare cost containment. Personalized in the sense that when any of Quantum’s 700,000-plus members encounter a medical problem, Quantum steps in almost immediately to help guide each patient through what Quantum calls the healthcare journey, assisting and often intervening from that point on. By using its care coordinators, known inside the company as healthcare warriors, to simplify and clarify this journey for patients, Quantum delivers markedly lower healthcare costs for clients.
KT: Our clients see an immediate result in the first year where their claim-spend reduces by about five percent from where they were previously spending, which for large companies is hundreds of millions of dollars. And of course, a lot of that cost impact plays out for the individuals who are receiving the healthcare because you know, they are conserving more of their out-of-pocket costs. So it’s a true win-win.
RH: It’s interesting to me how you created this important corner of healthcare from a career in the law. And what strikes me as a dream job out of law school with the most prestigious law firm in Ohio, named after a former governor and senator.
KT: It certainly was a dream job when I got hired by Bricker & Eckler. But actually it’s interesting because my journey in this world, becoming a lawyer, is actually my second career. I started my career after I graduated from undergraduate school. I have a classic liberal arts degree, politics and philosophy, and in particular, Marxist Theory.
KT: Yeah. And I graduated in 1983 equipped to do nothing but think, had zero skills, and I ended up getting a job with a firm that did market research and store design and distribution systems for large national retail and consumer goods and services brands.
RH: The thought comes to me that you were majoring in politics and philosophy and particularly concentrating on Marxist studies. Were you aiming for a job in the foreign service or something as a Soviet-ologist?
KT: No. No, I wasn’t. But I did come of age during the Cold War. So I thought it was fascinating and interesting to study a whole different way to think and look macro economic matters. Yeah, it gave my father a fit because my father was an entrepreneur. [Laughs.]
RH: Little did you know.
KT: You understand things from different points of view so you can be more resonant. And I’m a firm believer in the free market system and capitalism.
RH: Did you become a more firm believer in the free market and in capitalism after this extensive study of Soviet ideology?
KT: Yes, well, and in particular, you know, as you saw how it played out over the years. I did go through stints with my ex-husband when we were young, he ended up working in Russia right after Russia opened up. So he was one of the first Americans to go into Russia in 1992, part of the USA ID Grant program that was funded from Reagan. And he and his partners formed a food distribution system in Russia. And then five years later, he and I adopted a little boy from there. I was able to be on kind of the front lines of seeing the Soviet Union demise.
RH: And an economy which was only able to build missiles.
KT: The essence of what I would say, and it’s actually interesting ’cause it sort of ties into the structure we have in our company, is that I do not believe that command and control works effectively. I don’t believe that a small number of people can understand the complexity of systems and decisions and be able to forecast and make good decisions for a large block of people.
You’re always so much better to free the intellectual capacity of people and help them to have some kind of foundation, some groundings to make decisions, and then to empower them with the freedom to be able to explore and do that and the discretion to do that within the context of a well defined value system. You’re always much better off to free the creative energy of population, whether that be inside your company or wherever.
What happened to the people in the Soviet Union with that, it’s going to take generations before they find the kind of spirit that we have here in the U.S.
RH: Now I can understand how you found your way into marketing research.
KT: Yes, finding interesting problems to study and identify solutions. And I led strategic projects to help companies like Citibank and Ford, Walmart, Kmart, Coca-Cola, companies like that, understand how…not what people said they would do but what they actually did and how they experienced a journey, and drawing from insights in that to help those companies rethink their marketing, distribution strategies, the store layouts and merchandising strategies, etcetera.
So I led those projects but at the end of the day, I kind of felt like helping retailers sell more blouses wasn’t making the kind of difference that I wanted to make. So I went to Ohio State Law School and started at Bricker. And when Bill Clinton got elected, the healthcare practice at Bricker really…it had already been really strong but the demand for more corporate type of transactions and work increased. I was asked I would start supporting that.
And then they created a consulting subsidiary because they wanted to be able to advise provider organizations they represented, and they asked if I would help lead that practice to do strategic consulting with those organizations. When I started working with them, I didn’t know anything about healthcare. In fact, when Bricker sent me my pre-employment form and asked me what areas I was interested in, and what areas I wasn’t interested in, I said, I’ll do anything but healthcare. [Laughs.]
So suddenly I found myself helping to lead this consulting practice and I didn’t know anything about healthcare. I didn’t know how things worked or, quite frankly, didn’t work. But I was spending a lot of time with physicians and hospital administrators, listening to all their frustrations and their woes. And they were doing a lot of complaining and experiencing a lot of challenges with the patients coming in and having already done a lot of crazy stuff, and not really listening, not really following through.
And as I listened to it, it seemed to me that this was a pretty classic consumer pathway problem that I had seen solved in many other industries, both through time and through physical location and everything. And I said, I think that this is a solvable problem. I think that the strategies that we used elsewhere would apply equally here and that we could understand. If we could take the time to really understand the consumer journey and how things really unfold for them, we could figure out where those critical intercept points are and be able to support people along this journey.
And if we did it right, when we’d done it in retailing goods and services, every time we did it, we were getting a 20 to 30 percent bump in market share or same-store sales or whatever the relevant measure was. And I figured if we did it right in healthcare, you would get an extraction of maybe as much as 20 percent of the unnecessary costs because everything I was hearing these doctors say was pretty clear there’s a lot of opportunity to reduce duplication and waste and whatnot in the system.
RH: So what did you do to make it right?
KT: I proposed a research study. And it was going to be a two-year research study where we would track people who might be entering the healthcare journey for a variety of different reasons and force a nationally valid survey and really study that. And we had at the time eight of the health systems that we were working with were interested in participating. So we would be able to triangulate the consumer’s journey with what the interactions were with the physicians and involve the physicians in the journey and then look at a whole lot of secondary data and everything.
And my intent was to understand how the journey unfolded, figure out what kind of support was needed, at what point, where would you house it, where were the natural. You know, if you were talking about a retail store, you know when people show up because they’re there at the door, but where’s the virtual door and where is all the data flow and all the information flow in healthcare so that you could see this and where do you have the authority to impact things?
So I actually had proposed it back to the firm, and the firm didn’t want to do it because it wasn’t going to lead legal fees and we couldn’t leverage lawyers to do the work. So at that point I had to make a decision as to how interesting did I think this problem was to solve and was I willing to put my livelihood at stake for it? That was when I split from the firm. And I spent two years doing that research before starting the company.
RH: And can you take me a little deeper into the methodology and ideology behind the survey?
KT: It’s what you’d call a mapping study, a behavioral mapping study. When we had done it in retail stores, like when we did it with Kmart, we would actually have the person do their shopping trip and then come out and plot where they went so you could see pretty clearly, you know, I went from A to B, this aisle, this aisle, this aisle and you could sort it out. So this was essentially the same thing. So we actually had people report back to us just the way that we had done when people were in retail stores.
RH: Well, were there other, I have to assume there were, were there other companies at that time that tried in one way or another to understand the functions and dysfunctions of this healthcare journey?
KT: Nobody was looking at it from the consumer standpoint. And in fact, even today I still don’t see anybody looking at it from the consumer standpoint. Everything that’s done out there is focused on providers and provider inefficiencies or challenges. It’s focused on deep clinical factors or on insurance factors. So even today it seems that the healthcare industry simply doesn’t understand the consumer.
RH: Today, you have how many employees and how many did you have at the start? I’m assuming you were employee one and it was a while before you had employee two?
KT: I can’t do a single job that we have here at the company. So it started with five employees and probably had ten within a year. So bankrolled that, yes. We now have close to 800 employees and we’ll be adding, between August and November, we’ll be adding a couple hundred more. So the company is really much, much larger. If you were to measure the amounts of claim volume that we manage, it’s about $7 billion in claims. And we serve over a million people.
RH: And I want to go back to what you did in terms of putting this company on your shoulders. To employ five people in 1999, I would imagine that would have cost you somewhere, out of your own pocket or out of your own savings, somewhere on the order of a half-million dollars.
KT: Yeah, for the first year we were losing about $40,000 a month, so, yeah, it was substantial. Because we’re talking skilled people, nurses, which are not inexpensive.
RH: The element of risk again.
RH: You have a number of videos on your Quantum Health website, and on one of them, one of your client managers walks into a room, I think it’s a little kitchen or lunch area, and on the back wall in large letters, it says, “I am your healthcare warrior.” That’s a great affirmative statement but can you take me deeper into the meaning of warrior as you define it?
KT: If we can only get our people to remember one thing it’s that you are warrior for these folks who are going through what is for most people one of the most difficult times of their life. When people reach out to us, they’re seeking sanctuary, a safe place to just be able to explore whatever is on their mind. They don’t want somebody who gets them on and off the phone in a minute and 32 seconds. And so they’re seeking this safe place and if you open up that conversation, you turn it over to them, you have know idea where that call or that conversation is going to go. So we need to be prepared to deliver immediate expertise.
We have the expertise to be able among all the different parties because normally, when somebody’s stuck, there’s multiple points of failure. And we will take those issues on and say to the person, you don’t need to worry about that, we will do this coordination, we will make this happen for you. So being a warrior is a big part of our culture. We actually have a warrior creed that’s up on our wall. That’s probably what you saw when it said, “I am your healthcare warrior.”
RH: Yeah, I’ve seen the various pictures and the YouTube videos that show the words around your Columbus, Ohio headquarters, words like “real” and “genuine.” Now how do you institutionalize something like that? How easy is it to forge this kind of corporate attitude?
KT: So it takes intent to hardwire that into a culture. The brand values are actually the things that we hire on. You can’t get a job at Quantum Health without doing three different tests to even get an interview.
RH: What kind of tests?
KT: One test is an intellectual test, so an IQ test, called Wonderlic. Another test is kind of what feeds and starves you, which is a predictive index test is what we use. Some people use like DISC or Myers-Briggs, it’s something similar to those. And then the third test is an empathy test, particularly for folks who are going to be on the front line.
So you do those things and then we look at your background. We don’t hire much from more traditional call centers or insurance companies. We hire from people who have looked you in the eye and had to resolve things. So a lot of people from service occupations, food service, retail, hospitality, library sciences.
RH: One on one.
KT: Yes, one on one. And then we’ve translated all the “I care” values into attributes and competencies that form the basis for our leadership development and team development. Eighty-four percent of our people who are in management positions and above, managers, the directors, VP’s, etcetera are promoted from within. So we have a very strong leadership development program at Quantum Health as well.
It’s an intentional effort. And the organization structure is aligned around that to make sure that, you know, we’re kind of an inverse pyramid where I and my president are at the bottom of the pyramid supporting the rest of the organization. And it’s very much of a servant-leader organization.
RH: And I need to know a little about the technology side of Quantum Health. I’m assuming with newer and newer technology, you’ll be able to intercede even more and more quickly on behalf of patients?
KT: Yes, so we have our own technology system which we created because the information that we operate on to be able to see longitudinally the journey, and to be able to mine the information to see what we need to do right away and be able to have the expertise available to us, didn’t exist when we started the company.
So we built our own system and it aggregates data from all different sources, it’s open system that can pull in any data. So we’re mining data. I think the biggest thing that we do differently than other companies is not only do we have all the claim information etcetera, but we actually mine data directly from the providers in real time when they’re seeing those patients and they’re doing benefit and eligibility inquiries, pre-authorization inquiries, things like that.
And then we train the system. And we have an expert routing approach that is able to, you know, somebody is talking to one of our PSR’s who’s kind of the front-line, care coordinator, customer service person, and they start talking about, “you know, that I have cancer, we just came from my doctor’s office, we have this cancer,” they can immediately get an expert on the phone to do that.
And then we have…we use things like natural language processing and things like that to be able to kind of mine and create, create a consistent record of everything that somebody’s doing so that we have a complete 360 view of the patient’s entire journey, all of the things that they’re experience from their financial situation, their home situation, their clinical situation, all the providers they’re seeing and all the benefit assets that they’re accessing, and to be able to queue up and identify opportunities and ways to assist them.
RH: And in terms of growing this company and growing the opportunity, you’ve been on the Inc. 5000 list of the fastest-growing small companies, how many times?
KT: I know we’ve been on it 10 years in a row. I think we might have been in the Inc. 5000 11 years? Yes, 11 years in a row.
RH: I don’t think I’ve ever seen a company stay on that long.
KT: No, there is actually only less than 50 companies that were on it for 10 years. So we’re probably in a very small group of people that’s on it for 11years, yes.
RH: So that speaks a lot to your revenue growth certainly. More and more clients every year?
KT: That’s correct. Thirty to forty percent growth annually.
RH: I notice on your website there’s the phrase, “refined through experience.” So five years from now, how much more refined through experience will this company or can this company be?
KT: You know, we’re always incorporating new tools and ways of doing things into the experience that the consumer has. So, we’ve just formed a relationship with City of Hope to be able to take expertise that’s right now resident in only a few centers in the U.S. out to the physicians who are actually treating patients in communities who don’t have access to that kind of front-line research.
So those are the kinds of things that we’re doing. There are big changes happening with behavioral health and the support of folks who are having challenges there, substance abuse challenges. And there’s new methodologies with muscular-skeletal care. And clients are ever seeking to make their benefits simpler for employees.
So we have a lot of opportunity to roll in and make sure that not only is what we’re doing making sense but that we’re also able to guide patients to other benefits, such as their leave of absence services and short and long-term disability benefits. Not that we’re doing the same thing with those benefits but making sure that the patient has a comprehensive solution. So those are all things that we’re working on.
And it’s a very small industry in terms of the companies that serve large, self-funded employers. It’s not a lot of companies out there that touch on this area or do things. And we’re certainly the leader in this space but you only have a few carriers that are serving the market etcetera.
However, it’s a huge market. The clients that we serve, while they’re only less than one percent of all employers in the U.S., they cover over a 100 million people. They cover over 60 percent of the people who get their benefits through employer-sponsored plans.
So it’s expected to grow dramatically over the next five years just because it’s being noticed as a way to create a much better experience and really support people in a way that has a win-win and that, not only does it support people and help them through their journeys but it produces a powerful economic result for the client and for the individuals in conserving their out-of pocket expenses.
RH: Just an entrepreneur solving a problem, right?
KT: That’s right, exactly.
RH: Kara Trott, this is capitalism, I’m Ray Hoffman.
About the Series: Featured stories from the intersection of the free market and entrepreneurial success. Here we speak with leading CEOs, academics, philanthropists and up and comers on their contributions and perspectives on the American economy.
About Ray Hoffman: Ray Hoffman, a veteran business journalist, is highly-regarded for his news and analysis features and insightful CEO interviews. Representing BusinessWeek on air for twenty-one years, Mr. Hoffman was the morning business news voice on the ABC Radio Networks from 1995 to 2006. Mr. Hoffman also represented The Wall Street Journal, on air, for eleven years. His daily WCBS CEO Radio feature was recognized by the New York Press Club as best radio business news report in both 2012 and 2015. In this podcast, Mr. Hoffman invites some of America’s most dynamic CEOs to share their stories as business builders and perspectives on free enterprise.