Julie Yoo is a staunch advocate for companies at the intersection of healthcare and finance. And as a general partner and leader of health tech investment at Andreessen Horowitz, she’s well-situated to fuel companies looking to ameliorate payment problems in healthcare.

Yoo joined Andreessen Horowitz, otherwise known as a16z, in 2019 after co-founding patient access startup Kyruus — an experience Yoo says gave her a front seat to the financial challenges faced by both healthcare companies and patients.

Andreessen Horowitz — the biggest venture-capital firm by assets under management —  has been an active digital health investor after the COVID-19 pandemic spurred record fundraising in the sector, according to Pitchbook data. The VC recently inked a broad thesis outlining where it sees attractive investment opportunities in the healthcare fintech landscape.

Yoo shared that investment thesis in a wide-ranging interview with Industry Dive that also touched on her advice for founders going up against entrenched behemoths and why the industry is at a tipping point for fintech adoption.

HEALTHCARE DIVE: Why is fintech in healthcare such an area of interest for you?

JULIE YOO: While at Kyruus, I got fascinated about the financial flow of payments, which drives all the things that work and, more importantly and more frequently, the things that don’t work in our system.

In addition, if you think of insurance as fintech, those are clearly the biggest companies in the space. We’ve done a lot of work to understand and unbundle those business models. What are the components of giants like UnitedHealth Group? How do they tick? Where are opportunities for startups to compete head-to-head to provide a 10 times better experience or 10 times better competency? And where are the white spaces where UnitedHealth doesn’t have a good footprint that startups can go after? We’ve made a number of investments based on that thesis.

What are the biggest opportunities you’ve identified for fintech startups in healthcare?

YOO: The simplest is administrative bloat. The majority of waste in our industry is administrative overhead of unnecessary or redundant tasks that are done through inefficient human labor that can absolutely be automated. We have a number of companies in our portfolio that represent that thesis, of how do you use cutting-edge technologies to do some of the simplest tasks across the revenue cycle.

We have companies doing that on the reimbursed revenue side, like Akasa, and companies doing that on the patient side, like Cedar. I show these products to my colleagues in our consumer and enterprise practices and they’re kind of like, what’s special about that? And I’m like, it’s special in healthcare.

The second bucket is the actual payment model, and how we can create technology solutions that actually contemplate value-based payment models versus fee-for-service. We have a company in our portfolio called Pearl Health that provides software to provider groups to help them bear risk, creating a recurring revenue model that’s far more resilient for these practices. We’re getting a lot of interest from providers who want to stay independent.

How do you advise your startups that are going head-to-head with larger companies to carve out market share?

YOO: A lot of investors are averse to starting with a wedge. Some people look at the segment of the universe that’s attainable to Pearl today and say oh, that’s too small, it’s not worth our while.

Pearl is going to that underserved long tail of practices that no one else cares about, including other risk-assumption companies like Optum or Agilon or Aledade — because they’re big and have growth targets, there’s just a certain floor of what they can go after. But we believe every niche in healthcare can be $10 billion over time.

We are taking a bet that value-based, risk-bearing primary care is the future and the industry is going to continue to move in that direction. But if it does, then the seemingly small segment that Pearl is able to go after today will be 100 times what it was.

Where else do you see opportunity besides value-based care?

YOO: It’s all about finding the severely underserved pockets of the market. On the employer benefits side, direct purchasing from employers is to me a signal of where they aren’t being served by their health plan. All of the point solutions in these areas — employers aren’t getting what they need from their payers.

From a fintech lens, we’ve invested in a couple of companies here, like Thatch. They’ve created a single card — you can swipe your medical expenses on that card, and they’ve built a software layer that allows for real-time adjudication of whether that expense is a covered benefit. And they have a marketplace of health plan products you can buy, too.

Turquoise is another company that’s operating in the payer-provider interface. They’re digitizing payer-provider contracts, and becoming a system of record for that. They can forecast out — using price transparency data — how much a provider’s revenue would change if you were to negotiate this one term in a contract. That allows you to scenario plan.

We’ve been very surprised by the upside on how many people are buying Turquoise’s data. Payers and providers are using it for competitive intelligence, because now they can see everyone in their markets and what they’ve contracted for. They also can use it to get their own house in order. We’ve also had some hedge funds reach out to us who wanted visibility into the publicly traded providers and payers to inform their market research.

Are we at an inflection point for fintech adoption?

YOO: I do think we’re at a tipping point. With value-based care, we’ve demonstrated scale, specifically in the primary care and Medicare Advantage world. The CVS-Oak Street acquisition was a nice crucible moment where people recognized now the big players are paying attention — this is a viable strategy.

We believe that will be replicated in different forms across the commercial market. We have an investment called Firefly Health that’s a payvider focused entirely on value-based models for employer markets. We have a company called Waymark that’s doing this in Medicaid.

On the employer side, companies will go bankrupt if they don’t figure out their healthcare benefits financing strategy.

And on the administrative layer piece, hospitals are finally waking up and realizing they need to transform their operating model to survive. They’re losing staff left and right. That’s where we’re seeing a lot of movement on automation.

Are there roadblocks?

YOO: So many. Any time you’re selling to enterprises, there’s just general inertia, and conservatism of doing new things. It’s the paradox of, you’re bleeding money, and this solution can make you more money, but you have to make the investment to get the new solution in place.

Then there’s the, we’re going to build it ourselves. So large companies like United — their bias is we’re going to do this ourselves. Why would we waste our time working with startups? But that can be a benefit. Their competitors, the underdogs, want any kind of competitive edge they can get.

Digital health funding is waning. How would you characterize the current state of the market?

YOO: I keep telling my founders, even in this downturn it is 10 times better today than it was in 2010. This is a very normal, healthy environment, frankly, where people care about your economics and efficiency. That’s how it was before the pandemic.

We’re just so early. We’re in the 1999 of the internet era in digital health. We truly have not even gotten started with respect to these tech-oriented models. These companies just haven’t grown up yet. It’s still going to be another five to 10 years before we see the real scale of potential outcomes in this domain.

For that to occur, we need more funding in growth stages. I think there’s a tremendous investment opportunity coming in the next couple of years.