Cityblock Co-Founder, Toyin Ajayi: What Happens When You Treat Healthcare as a Right, Not a Transaction?

16:17Tommy Stadlen:Yeah, there's about 70 million people on Medicaid.

16:20Toyin Ajayi:70 million. So this is a huge part of the U.S. population. Correct. Okay.

16:24Tommy Stadlen:Okay. And then think another 70 or so who are on Medicare. So we're talking about 140 million people.

16:30Toyin Ajayi:What strikes me is that that is an enormous societal, importantly, challenge to solve, but also an amazing business opportunity. And it's been completely overlooked, basically, apart from Citiblock as this huge success story. One of our fastest growing startups we backed at Giant is called RX Diet, who provides meal kits, AI-generated meal kits for people often on Medicaid. And their revenue growth is like nothing else. It's absolutely extraordinary. They're creating incredible value for patients and they're building an amazing business. But other than them and their very early stage and city plot, there are very few examples.

17:05Toyin Ajayi:And it feels like the kind of the startup community, the venture community just like totally missed this. But you had this kind of, I guess, experience arbitrage because you and your co-founders, if I'm right, you just were living in this world of treating people in this world and saw something that most people in Silicon Valley just didn't see.

17:22Tommy Stadlen:Yeah. I mean, in sort of VC speak, right? Like this is a massive TAM, right? It's a huge, huge market. And it's quite a stable one, right? Even though we're going through flux with Medicaid and we expect there'll be some shifts to the number of people on Medicaid in the next few years, we're still talking about tens of millions of people whose ultimate payer is the U.S. government or a state in the U.S. that is co-funded by the U.S. government. So you think like, OK, we've got a very, very, very stable, huge potential customer base. We have a very stable payer that's huge and deep pocketed. You know, all of these these sort of these entitlements are enshrined by Congress in the legislature.

18:09Tommy Stadlen:Right. We have to provide these supports to these people. And we have a massive, massive, massive like perceived need on the part of the payer and the managed care of the insurance organizations, because the pace of increase of medical trend of costs is so high. And so it's big. Now, all the reasons to not want to do this is it's hard. It's very hard. These populations are not like the populations that many venture-backed companies build for. I think many big, successful, I would say most big, successful venture-backed companies build for customers like themselves. Right. And so they sort of experience and the empathy gap.

18:48Tommy Stadlen:and the need for real product-driven thinking, which is like listening to customers, researching, testing and iterating, making no assumptions about what will work. That is, it's hard. It's a hard business to build. The margins are thin, right? We're talking about healthcare dollars here. It's a services business. The inputs are costly. They're human beings. And so I understand, and when we were sort of starting out eight years ago now and we were raising our Series A, pitching folks. There were a lot of folks who were just like, absolutely not. This sounds really hard. Um, and so unlike anything they'd done before.

19:23Tommy Stadlen:Um, but, but we, we persevered and we were able to, to, to raise capital from an incredible group of investors who really get the vision and understand this is a, this is a business that as we've proven out can get ginormous. And we're only really just getting started. Um, just given how big the market is and how big the demand is. Give us a sense of just how successful it is. Yeah. So we are, we're at about a billion and a half of revenue annually. We serve about 150 ,000 people across 11 states. We're partnered with all the large Medicaid and Medicare insurers. And as I said, it's just, you know, there's the, the dam is humongous.

20:06Toyin Ajayi:There's so much more to do. Yeah. Let's talk a little bit about the the tension, if there is any, between building a good business and then doing the right thing for patients. Because it is so clearly to me, a much better way of doing this, much better for patients. America needs this, right? But I imagine there must be moments almost every day, there are micro choices by all of the people working for you delivering this care. There must be micro choices every day to say, we could make more margin for Citiblock if we did a pretty good job, but didn't go the extra mile. And so a trade-off, constantly having to make a trade-off between investing more city block resources versus a kind of better long-term patient outcome.

20:47Toyin Ajayi:What's the kind of framework that you've set as the leader to help people make those decisions?

20:52Tommy Stadlen:Such a great question. What you do when you're managing sort of a population of people is you make explicit what has been implicit and you try to create a more just and more data-driven approach to resource allocation, which is to say I've got a population of people. They all have very different needs in any given moment in time. And I have a finite group of resources. I've got so many nurses, so many doctors, so many dollars. Who needs a home visit from a doctor and a community health worker? Who needs six hours of my time figuring out what their psychiatric history is and doing a medication reconciliation in their home versus who needs a phone call.

21:29Tommy Stadlen:And before that would be determined by, well, did you have the good luck to show up and see this doctor today? Or outside of the Medicaid population, do you have enough money to have a concierge doctor? Can you afford the supplements and the out-of-pocket costs and insurance coverage and all the other things that are sort of the ways that our traditional system used to sort of rationalize who gets care? In a value-based care model, we try to use data to determine how we leverage resources and tools. And what that's led to has been pre-AI, I would say, a better but not perfect approach to this, which is to say, if you are a frail senior living at home, like this gentleman that we were talking about, you know, in the basement of a home who's visually impaired and may not be able to get out on his own, we're going to send somebody to you.

22:24Tommy Stadlen:And we're going to probably send someone to you multiple times a month. And that person's going to be quite highly skilled and quite expensive. If you are a 22 year old and you are on Medicaid because you're pregnant and you have sickle cell disease, but actually you get out and about pretty well and you're pretty good with your smartphone, we may not send a nurse practitioner to your home. We may send a nurse at a specific period of time when it seems like you're most vulnerable. But otherwise, we're going to text you and we'll call you. And we get it right most of the time because we've invested a lot in our data and our analytics and our machine learning models to help us figure out who's at highest risk.

23:01Tommy Stadlen:With AI, I think we're sort of embarking on this really amazing moment, which my enthusiasm for this is sort of boundless at this point. And because we finally, I think, are approaching a place in which the marginal cost of every interaction is getting as close to zero as I've ever seen it, which means that I don't actually have to apply quite as rigorous. I mean, we'll do it with the data, but the cutoff is much lower, right? We can make a phone call to every single person every single day if we wanted to. If we thought that was going to be useful, we'd do it using AI, right? We can be even more surgically precise about where we need a human for what.

23:44Tommy Stadlen:And we're enabling them with tools that allow their moment in front of the patient to be even more impactful. And so it's changing entirely the unit economics of our business, both in terms of how we think about resource allocation writ large, but also about how we think about what is possible for a population of people and where it is possible for us to touch them and engage with them in ways that are really productive. The premise with which we sort of founded the business is that we have more than enough resources, actually. This is not a resource problem. It's not a, I mean, we're spending in the United States more money per capita on healthcare than any other country on the planet.

24:19Tommy Stadlen:So it is not that we do not have enough money or that we don't have enough resources. It's that we've misallocated them like woefully. And so our work has been to reallocate those resources effectively so that everybody gets what they need when they need it. And net, net, what that means for our population is they're all getting more than they would have gotten in a fee-for-service system. How much more is dependent on their need? What we're able to do now is scale that even further. Yeah. And that is like so exciting to me.

24:48Toyin Ajayi:With AI and healthcare, what we're seeing a giant is at one end of the spectrum, right at the beginning of the healthcare journey, in some ways, AI for drug discovery. We have back some companies who are doing unbelievable things, predicting how proteins interact. It is really clear that drug discovery is about to go to a whole new level. So that's really exciting. And then in the actual kind of healthcare infrastructure and the hospital systems, the health systems. At the moment, it's slightly depressing to me that AI is mostly being used for sort of back office optimization and particularly for basically extracting more value for the healthcare systems, the commercial healthcare systems, rather than really helping, you know, front office people getting better healthcare.

25:27Toyin Ajayi:How do you think you can change that with CityBlocked?

25:31Tommy Stadlen:100%. I mean, I think this is where like the incentives really matter. And So we started talking about value-based care and that framework matters so much because I think AI doesn't, it just makes us more effective at doing the things we were doing before, right? It's not going to change fundamentally who we are and what we are and what we do. And so if you have a healthcare system that is predicated on getting paid as much money as possible for every unit of care that is delivered, agnostic to whether or not it delivers an outcome, then you apply AI to that. And the most important and most potent use cases will be to do that.

26:08Tommy Stadlen:And so what you're saying is exactly true. I'm like very distressed by this, right? Like we're seeing the majority of healthcare AI dollars put behind inflationary like forces in our healthcare system at a time when we can least afford it. None of them are really, really tied to value creation for patients or for the healthcare system at large. So getting paid more money for doing the same procedure I did last week or last year, because I'm more effective at billing for it, does not make patients healthier. And it does not make our healthcare system more affordable. It just means more revenue for the healthcare providers.

26:48Tommy Stadlen:Until or unless we apply those tools, these powerful, powerful tools on business models that are actually designed to deliver better outcomes at a lower cost, we're not going to see them. that sort of materialized, right? And so that's partly why I feel so bullish about kind of where we sit in the healthcare ecosystem is like, we've been, we've spent the last eight years operating in a business model that is designed to improve quality, improve outcomes and improve experience for patients. And we can measure all three of those things. And we've demonstrated our ability to do all those things. And we are fully incentivized behind them.

27:22Tommy Stadlen:And now you just like poor AI on that. And we can do all those things better and faster. Like, yes, more, please. Yes. And until or unless I think others understand that, that the way that AI is going to meaningfully change healthcare services. So I agree with you on drug discovery. Yeah. Cause that's their incentive to just bring more things to the market that like actually work. Yeah. Right. Like the incentives actually work around that. Yes. You know, we have a, we have an affordability problem, which we need to solve elsewhere. But, but for the perspective of the drug manufacturers, like their incentives are entirely aligned to make us potentially much, much, much healthier.

27:58Tommy Stadlen:and give us the tools to be much healthier. I'm so excited about that. The services infrastructure is still not built on the right chassis by and large. And these folks, like we have to move. And it's almost more imperative now because the tools are so powerful. We can do a lot of damage in our existing system if we apply the same tools to that system.

28:18Toyin Ajayi:So we got to move. For listeners who are not in US healthcare, I cannot emphasize enough just how much the odds are stacked against you, our friend David Goldhill with Sesame Care, Hallie with the work she's done, Hallie Tekko we had on the show we work with, and you are just up against immovable forces. And it's kind of amazing the scale you've got to. I'm wondering whether what your long-term vision is and your kind of legacy might be, what you do with value-based care works so well with the population you serve, but there's no reason that this couldn't be the model for all of US healthcare.

28:51Toyin Ajayi:This should be the model, right? Value-based care. Is that the long-term goal? Yes.

28:55Tommy Stadlen:Yes. In some ways. I mean, look, when we first started, we were, I think, really an N of one, right? Like the first like meaningful venture backed company to say we're taking on Medicaid and we're taking like real capital and amazing investors. We're not, you know, social impact investors per se, like people. We can prove that there's a real hard ROI to doing this. Since then, there've been dozens of companies now seeking to sort of follow in our footsteps. And that feels like a huge part of our legacy, right? Like there's enough for all of us. I'm so excited to see, you know, we, there's conferences now, whole healthcare conferences that are about Medicaid and value-based care.

29:31Tommy Stadlen:I'm like, Oh my God, this is incredible. Um, and so that's part of the legacy is to say, let's, let's spawn more and more and more innovators, including people who used to be city blockers, right. Going out to build their own businesses. Like I couldn't be more proud of them and the legacy that we've spawned there. But I do think that, um, that the system is so unstable in the United States right now. And, you know, I think like what, never waste a good crisis, right? We're in crisis right now. Like where we are. Big cuts coming as well. Big cuts coming. Cost trends are completely unsustainable.

30:03Tommy Stadlen:Consumers are pissed. And the affordability problem outside of Medicaid, where there are no co-pays really, in the commercial market, the exchanges market, we're seeing, I mean, the average family is like, insurance bill is$45 ,000. I mean, it's insane. So we are, I think there's just like enough here to catalyze what I hope is like a real meaningful shift. And there's been consistent policy tailwinds here too. Doesn't matter what the administration is. I'd say over the last decade, every single administration has said, we must push more value-based care. We must push more outcomes-based care.

30:45Tommy Stadlen:Alignment around incentives and outcomes is the way that we have to go. And so I think we're seeing more and more of that. We're seeing states do the same. This is not a stable situation to be in for the long term.

30:59Toyin Ajayi:Let's talk a little bit about the leader behind the idea. I think I'm right in saying that you were born in the US, but then your family moved to Africa and to Nairobi and your parents were working in sort of the medical world to do with AIDS, right? I saw something somewhere that the way they raised you and spoke to you as a kid with your siblings kind of made you a leader in some ways. Is that right?

31:25Tommy Stadlen:Yeah, I think so. I mean, I didn't sort of appreciate it quite so clearly then because it was just your kid. It's all normal. But, you know, growing up in Kenya in the 80s and 90s at that sort of height of the AIDS epidemic, you know, poverty was everywhere. Death was everywhere. Right. There's a real fear, I think, about for many people, about just daily needs for their existence. And my sisters and I were raised in a upper middle class household. My parents are both, you know, masters, trained professionals. My father's a physician, worked for an international nonprofit organizations. We went into private schools.

32:02Tommy Stadlen:We were expected to achieve academically, for sure. but they continually reminded us that we just got lucky. And my parents were quite like, they did not pull their punches. You know, they said like, you've done nothing to deserve three meals a day. You look around everywhere you see and there are children begging on the streets. That could have been you. You were fortunate. And therefore you have an obligation as we all do to do something to help make the world better for other people. That was very interwoven in my upbringing.

32:33Toyin Ajayi:Did they also speak to you like you were, you and your sisters were adults at a very young age? Yeah, yeah.

32:38Tommy Stadlen:Yeah, very much so. Very much so. There was, it's hard to sort of shield children, I think, particularly in that environment, right? You know, there were, you know, kids sniffing glue and petrol to just stave away hunger pangs, people starving on the streets, orphans everywhere. And I remember, actually, I was old enough to watch TV. We had this tiny little black and white TV. and I happened to catch a debate at the UN about how to make when antiretroviral drugs were first available, how to make them available to developing countries. Because at some point in my childhood, the statistics were probably around one in six adults had AIDS.

33:20Tommy Stadlen:And there was a big debate about this. And I heard somebody come up to the podium and say, well, they can't tell time and their lives are so bad anyway. It doesn't make financial sense to try to make these drugs available to them. Wow. And I remember being like, well, that's me. These are, this is what we can say this about people. Um, but when you, when you sort of as a physician unpack what is happening, especially in the United States, we are saying implicitly the same thing about people on Medicaid. We're saying they don't deserve the very best healthcare there is because it's too expensive because their lives are complicated, because they have mental health challenges, because they have disabilities, because whatever.

34:08Tommy Stadlen:For every moment that we don't sort of force the application of best practices in the form of not just clinical best practices, but we know that if you are a person struggling with mental health challenges, that actually getting you housed is the most important next step to getting you healthy from a mental health perspective. We know that. We know that if you're a senior with diabetes and hypertension and heart failure and you're hungry, that feeding you is going to be the next most important intervention to making sure you don't go to the hospital. We know this. If we fail to create structures, business models and clinical models that solve these problems, we are saying implicitly they don't deserve it.

34:55Tommy Stadlen:Right. Right. It's too expensive. It's too hard. It's too complicated. And like, I, I will never forget the outrage I felt then. I feel it the same. It's like the fire in my belly. It's the thing that keeps me going. It's the thing that like makes me indignant when people say you can't build a business that is successful and scalable and effective in Medicaid. Um, like this is what venture is about actually is taking bets on things. So wait, they don't deserve a bet. Like you're not going to bet on us that we could figure this out, we have to.

35:22Toyin Ajayi:You traveled a lot as a kid, right? I mean, so you grew up in the US, you saw this extreme poverty and kind of healthcare administration in Nairobi. You trained in the NHS in London. You've seen a lot of different healthcare systems, see it work and not work all around the world. Do you think that outsider's perspective is pretty fundamental to having the boldness to come into a very broken US healthcare system and say, hey, that there is another way of doing it.

35:47Tommy Stadlen:Yeah. You know, I think that there are, um, many of us actually who do this kind of work have spent time internationally. I think there's so much value to that. Um, I think, I think I've been able to take the best of all of the different systems that I've seen and worked in and try to bring that to city block and to trying to bring that to the U S. And so, you know, growing up, going to medical school in the UK was like, what an incredible experience. you know, this is I know the NHS has its challenges. I certainly am not the best person to opine on them. But but the principle behind making health care available and accessible to folks at the point of need, irrespective of their ability to pay and the sort of passion with which I think British people still to this day hold that principle, I think is really inspiring.

36:33Tommy Stadlen:And it and it engendered a different kind of care model. You know, I did home visits as a medical student to postpartum women. You know, the idea that you should have a baby and then a week later, like bundle yourself up and your little newborn and take them to the clinics. Why are we doing that? Yeah. You know, basic things, again, that we know work or just sort of how things are done here in Africa and in India. I spent time with community health workers who are not clinically trained folks who are from the communities they serve, have a lot of trust inbuilt and a lot of cultural understanding.

37:06Tommy Stadlen:And I saw them go door to door and get people to tell them things that they wouldn't have told their doctors. I watched them diagnose actually. And in many parts of the world, community health workers are actually able to diagnose simple things like a pneumonia and prescribe for them, malaria and prescribe for them. They're much cheaper and actually much more effective. And so coming to the US and saying, well, hang on a second, we still have this operating model for health care that is, you know, it's an ivory tower. It's the doctor in the white coat behind the desk. And you come to us and we purvey, you know, a few minutes of insight and maybe a prescription.

37:43Tommy Stadlen:We lay hands and we go and no one else really has a role to play here. And certainly we're not leaving our ivory tower to go see people. It was really, really antithetical to how I had seen health care work, even in countries that had fewer resources. There was so much to learn and so much good to take from that.

38:01Toyin Ajayi:When you were talking about the NHS, the UK NHS there, I saw a warm glow in your eyes. This could be a very long discussion, but in a nutshell, if you had to choose the very broken UK healthcare system as is today, or the very broken US healthcare system as is today, which would you go for?

38:19Tommy Stadlen:Oh, yeah. That is a tricky one. um choose it for what purpose for myself as a patient or for you know it would like for what

38:27Toyin Ajayi:purpose with society like choose on behalf of all britons or all americans oh my god which would

38:34Tommy Stadlen:you give them again i have to ask a clarifying question because if you have resources in america yeah there's no better place to be yeah right like if you can pay you can buy the best health care on the planet right um if you cannot i'd much rather be in the uk okay yeah yeah that's

38:53Toyin Ajayi:great answer so pick your poison i would go i would i would give exactly the same answer it's it's not a fair one right um we ask all of our guests uh to sort of choose three photographs that were kind of define the wisdom they've picked up along the way you've given us one in a way which was this video uh that you saw this tv thing you saw of this kind of outrageous statement by the UN about, you know, why bother giving Africans treatment for, for, for AIDS. So that can be one, we can, we can take that one. What would the other two be?

39:23Tommy Stadlen:You know, we actually do, we do member stories, which is our sort of way of reminding ourselves of what we're doing. Um, every all hands. So we do monthly sort of all company, all hands. And, um, and we interview patients talking about their experience with CityBlock and we talk to their care team members and we sort of produce it and share it internally. Um, and there was one recently of a, of a, of a woman talking about her experience actually postpartum. Um, she, she, well, she was pregnant. She got connected to us. We were her care provider. We connected her to food resources because they didn't have sufficient, um, food.

40:04Tommy Stadlen:We supported her through the pregnancy and postpartum when she developed symptoms that, as it turned out, would become preeclampsia, which is quite a, it's a life-threatening condition for women in pregnancy. She developed leg swelling and had some symptoms and she called us and we immediately recognized that she needed to go to the hospital. And ultimately the care she received there saved her life. But that one really stuck with me because there's an element underneath the experience for Medicaid patients and particularly for sort of underserved patients of not being heard. And when you look at the literature around maternal deaths, and the United States, again, has some of the highest rates of maternal mortality for a developed country.

40:49Tommy Stadlen:Often the stories you hear from families are, she said she wasn't feeling well. And she called in and they told her it was okay. And she was dismissed or she was sent away. Um, and, and so the ability to say that we can provide care at scale that is tech driven, like deeply tech driven, high quality, lower cost, but also has that really human element of, of listening and being held and cared for. To me, that's what I strive for every day. Right. And so that, that story really, really, um, warmed something inside me and, um, and just like renews my passion for what we do.

41:27Toyin Ajayi:I love that final one in 30 seconds.

41:30Tommy Stadlen:Oh my gosh. Um, I'm so busy thinking about this one. I think probably dinner table and as a kid, you know, like I think that, um, uh, at the time, as I said, it was, it was unremarkable. It's how I grew up, but we had these very, very spirited dinner table conversations in my household. Yeah. Um, uh, that were about mission and purpose and who we want to be in the world. And And many of those, I think, shaped who I am today.

41:53Toyin Ajayi:I think that's so great because when we look at entrepreneurs at Giant, often we're looking for kind of what drove them in childhood to go on and be this obsessive founder who never gives up. And often it can be these quite traumatic things that have, you know, something went wrong in childhood. That means they're always trying to show the world or whatever. This is an example of childhood reshaping an amazing entrepreneur, but just a wonderfully positive way, I think. So fantastic. Wonderful place to end. Toyin, thank you so much for sharing your Giant idea.

42:18Tommy Stadlen:Thank you so much. Thanks for having me. This was really fun.

42:20Toyin Ajayi:If you liked that episode, you might enjoy our conversation with Hallie Teko, where we talked more about the broken US healthcare system and how to fix it.