Activate Healthcare Co-Founder On Finding Large Unsolved Problems
By Gabriel Perna - January 11, 2019
Peter Dunn, principal and co-founder of Activate Healthcare, which works with employers to set up and run primary-care clinics, says his career was shaped by a unique food product that you can find in every grocery store.
Dunn was part of the team that invented Oscar Mayer’s ready-to-eat lunch combinations in the late 1980s, found in elementary schools across the country.
“From that experience, I learned the importance of finding large, unsolved problems and the power that exists in addressing those issues,” Dunn recalls. “There’s an old expression that says that the [Chinese] symbol for a problem is also the same symbol as opportunity, and that idea has always made a lot of sense to me.”
Over his career, Dunn rose through the ranks at various consumer packaged goods before moving over to the service industry as the President and CEO of Steak ‘n Shake, a casual restaurant chain in the Midwest. But Dunn’s hunger wasn’t satiated by the restaurant industry and after spending five years at Steak ‘n Shake, he left to try his hand in the healthcare industry.
Healthcare’s biggest problem
Dunn conducted some research and discovered there was an unsolved problem in healthcare. He found out that most healthcare costs are driven by chronic conditions, which could be managed and improved with a proactive, integrated approach to primary care. The problem was that the players in the system (providers and payers) weren’t motivated to prevent care because they are paid on an episodic basis.
That’s when he had an idea: “Employers are funding most of the system, at least for working people. Maybe we should go directly to employers and have them provide this kind of service directly.”
Dunn ended up teaming up with Debra Geihlser, who had been CEO/President of Harvard Vanguard Medical Group and Atrius Health System, to create a solution to the problem. They developed the idea of promoting the on-site employer clinics as a service. They found three employers in Indiana who were willing to pilot the program in its first year.
“At the end of that year, all three of them had collectively, each individually and collectively had lowered total healthcare cost, including the cost of the clinic, by somewhere between 10% and 25%, and they were delighted.”
That’s how Activate Healthcare came to be. Today, the company has 60 employer clinics (each with their own Activate-employed medical team) serving roughly 140,000 members. When employers don’t have enough people capital to form their own clinic, they will combine with others in the area. Over its eight-year history, Activate has seen between 40% and 100% growth annually.
The company’s success built on itself, says Dunn. In order to convince CEOs to make a proactive investment, Activate can show employers they’ll get roughly $1.60 back for every dollar they invest, he claims. “Some get more, some will get a little bit less, but we were really surprised at how quickly the return comes in….we knew it would occur over time, but it actually occurs much faster than we expected.”
The markets with the biggest adoption are government, manufacturing and education—where employers are spending a ton of capital on healthcare-related expenses. But they also have a presence in the hospitality and resort industry as well, he notes.
Lessons from different industries
Despite the obvious differences, Dunn has taken many lessons from his years in the CPG and restaurant world into his healthcare endeavor. For one, there is the notion of finding large, unsolved problems. To him, this is the most important lesson he’s kept with him throughout his career. Another important one is having a strong unit leader when you have disparate locations.
“When you put a really good general manager in any store, the store will do well even if it’s not in a great location,” Dunn says. “For Activate Healthcare, the key position in a primary-care clinic is the primary-care physician.”
He also stresses low employee turnover, something he got from his time at Steak ‘n Shake. He said at the 20,000 employee restaurant chain, there was an incredible correlation between high employee turnover and less profitable stores, as well as low turnover with highly profitable stores and revenue growth.
“It’s just true that if people on the front line are energized by the people guiding them, they will take much better care of their patients or clients, and that turns into a successful enterprise,” Dunn says. “It’s kind of an inherent truth in that kind of business that you need to take exceptional care of the people who are on the front lines, and they, in turn, will take exceptional care of the people who are taking care of your guests or patients.”