Investing in Healthcare in 2020 with Niko Skievaski and Nikita Singareddy
Hey everybody. It's Eric Torbert co-founder Partner village global aid network driven venture firm, and this is metro stories a podcast covering topics related to tech business with world leading experts. Everybody. Welcome to another episode of village. Globals venture stories I'm here today joined by two very special guests Nikitas ready investor are ventures and Nikos. You've ASCII founder and president at. Redux. Nico Nikita welcome to the PODCAST. Happy to be here. So we're here to talk about healthcare and and some of the newest regulations, but also more broadly in the space you really you recently wrote an article as summarizing what's so interesting about the latest new regulations what unpack with we're trying to do in that. Yeah. This is something I think a lot about at someone who invests in healthcare. Aria, as a big healthcare portfolio, but there's a tremendous amount of inertia in healthcare and I think it's more pronounced in healthcare than a number of other spaces I. Think the close corollary is probably Fintech and financial services where you have these really large incumbent players and also as in addition to that deeply fragmented on the customer side So that might look like SME's for the fintech world. And just the sheer number of people that companies that need payment processing, and then in healthcare, it's just the sheer number of provider organization and vendors and everything in between. So when you want to innovate in healthcare there needs to be a number of driving factors that really force it to happen, and we've seen it happen a couple of different times and healthcare but I think really following regulations and easy way to see this materialize one good way I think of framing that says. If. You look at the high tech fell in two, thousand and nine. which was a related to the American recovery reimbursement. act. That was one of the first times that the government said you need to adopt and demonstrate meeting use of your Marzano HR's and it's not like the industry didn't exist before that epic was already one of the biggest players in the space and so is Turner. There wasn't that forcing function from the government to have to do that, and it really solidified all healthcare institutions, not just the big health systems but also that kind of Taylor, on smaller provider groups have to use EHR's as well. But you see this in, you know not not just with electronic medical records you see this happen over and over again with different acts. So some random examples and other ones. To mention the fairness construct the fairness to contact lens consumer APP in two thousand and four that really created one, eight, hundred contacts and Hubble. The affordable care act I think is it obvious? Line two, thousand and ten you got the bright health's on the Oscars. The invisible line patent expired and so you got candid and you've got small direct club and then you have these telemedicine reimbursements and now the. CMS. Interoperability rules and a bunch of other things related to data exchange on the Medicare admission discharge transfer side, as well as social determinants of Health and provider directory, and you can very clearly see the timeframe in which these products to to be rolled out. So I use that as love me follow where this train is going and usually you can see these rules and regulations put out three or four years beforehand. W requests for comments etc, and if you're smart about following those requests basically I think you can do a pretty good job of tracking where the industry's going and investing in those tailwinds. Those forced talents what I think is interesting if I could just add to that is healthcare needed the government to push innovation. So before meaningful use, which was part of the the bailout package in back in two thousand eight. Healthcare organizations weren't on their own adopting TRONC health records, they you were kind of cobbling together their own systems and trying to trying to make it work but just because of the broken nature and miss line incentives within our healthcare ecosystem, there wasn't really an incentive for them to use technology to better themselves and become more efficient on their own and what we saw was elected health records really cross the chasm. You know if you think of the traditional business school crossing the chasm electronic health records were. A highly bespoke customised piece of software, the cost tens of millions of dollars to implement you know two years to implement with the health system, and at the end of the day, it didn't really actually you know it was unclear if they actually provided efficiency gains for their users and what the government did in they had they had outside incentives to do. So with the the last recession going on they put money behind the subsidies to implement these electric health records for hospitals for providers what did was It actually pulled the technology across the chasm. So typically, it takes a ten x improvement of technology to for to be kind of naturally by market forces pulled across the chasm. What we saw instead was the government pulled it across, and because of that, I, think we got almost premature adoption of technology that wasn't really ready for mainstream yet for instance, you know we're talking two thousand, eight year really went to a fact two, thousand nine and you know the years beyond that out for about a decade in. And electronic health records. You know we're implementing things today that were never designed to talk to the cloud or you know designed to work with the Internet and modern edge. So we in some ways by the government interfering in natural progression of technology option, we actually saw technology that wasn't ready to to be adopted by by the masses and I think that puts us into a lot of the position that we're in today with the older school technology you know server system stored technology that's being used by healthcare organizations. Totally, and so is there any sort of forward predicting here in terms of predicting where regulations GonNa go and you to what presents Create as indicated as a healthcare investor, can you look forward or do you really have to look back or or look at the president? I think you have to be two three, even four years ahead because if you're looking at regulations today, right there are already companies that have been built in the space and likely companies already have several rounds of funding and those companies saw these really intractable problem seemingly intractable problems and decided I'm going to go against the grain and built a business here and it's not like reeboks necessarily new or any of these companies that I think are really going to take off with these new rules like red impatient, Ping. Etc. if they knew that there was going to be a rule, but there was a general sense I think that people. Knew something had to happen and probably the government was going to be that push in order for there to be more efficiencies be being generated in healthcare. So you can look back I, think several years and see an are having been the best at this and I think there's plenty of funds I haven't been the best this but I think that that's a guiding force for me. If you look back three years, they were already asking cms was already requesting people and requesting institutions give us feedback on how we should be thinking about data exchange gives feedback on how we should be thinking about value based care. Give us feedback on. Things and you can use that as a guide right and you're not always going to be hitting the tail hitting the nail on exactly what the ruling is going to be you. You never really have a full idea that, but you can have a general sense of the space and I think some people have been. Good at that when you look at companies that started my i. read about this. I'm not entirely sure if it's true but if it's apocryphal I heard about the some of the people that built the. INVIS- line, related companies, a lot of them were consultants and people that were generally tracking these regulations and had a sense of what patent expirations were going to happen. So because they knew that there was this idea, you could build a big business in space because it was white space and I think you can be really ahead of the curve as both a builder an investor if you put in the work to track these. Totally, and still where do you think are the biggest disagreements in this phase right now kita in terms of where where things might lead what this could lead to in terms of investment opportunities are in terms of the bill menchaca. Good question I mean as with all things. Derek. Can help you never know if you're actually backing the company can only back you know really great teams solving really great problems and hope that you're catching the right whale based on the information that you're going also i. think there's a sense that some people are thinking not some of these technologies may be commoditised like looking at telemedicine reimbursement rules are good sense of I think people are saying some of these larger. You know let's let's look at a doc or doctor on demand, and then every single tele related telemedicine company that focuses on a specific specialty all the tools that you might need to run those businesses. Some people are saying, you know these things, everyone's GonNa everyone's going to help them, and maybe they're actually going to be available via API. So we don't actually need to be connected to a business to do that and I would decimate some of these businesses. But healthcare move super slowly even if you have a rule change, I'm sure we're going to see people pushing out the deployment of a lot of these technologies and even if you read the rules closely, they give a lot of wiggle room for exceptions and for you to demonstrate that I need six months longer twelve months longer for these types of reasons and if you know anything about cms I, think they actually have a lot of leeway. To a lot of organizations. So I'm not sure I. Say Disagreement I think that that's an interesting interesting way. Of phrasing, it 'cause disagreements to me is just as -fensive. What's your go to market strategy? What's your distribution? Your product strategy I think ultimately comes down to that I. Think just to if we could give some context for what's going on in healthcare right now I, think there's a confluence of a couple really big trends that are happening the the obvious elephant in the room is that we're in the middle of a pandemic and what that's done to our healthcare organizations is still yet to be seen as the long term effects of that it's financially decimated. Many organizations where there are already running on super slim margins. Now, they are running definitely in the red this year, and that might continue for a couple years, and so their technology buying really went from kind of a differentiating activity to something that is now driven off of necessity. How do we actually continue to provide services that we couldn't provide before via virtual care via remote patient monitoring or other remote diagnostic services, all these these ways that they need to adapt to in person care because you know even if you know social distancing works and the swell of new Cova cases goes down people still want to avoid. Because that's where the that's where the pandemic is You want to stay away from those and so there's a very real fear that health systems have around how do we actually keep lights on and working right now so technology adoption has shifted to accommodate that and at the same time we've alluded to it a few times, but there's these new data sharing rules that I think really opens at the landscape for new technologies to exist that didn't exist in the past. And Nikita destroyed that great article on its maybe you WanNa, walk through kind of some of the like what what has changed in the landscape based on these these new roles that were I guess the latest version announced. March we go. Totally I think when you look at hospital margins, right they went from not great to begin with eight percent to two percent less than that in in Kuban times and the spend that was there was always relatively small but it's shrunk and now I feel from my conversations I've had with health leaders. There are things that they were maybe thinking about spending by neon wears they will not be thinking about spending money on that until twenty twenty four at best and then other areas that are top of funnel revenue expanding their thinking about how do I actually have efficiencies in my call centers and the front desk. So I can have more time actually being spent on care and less money spent. On those kind of front desk resources how do I expand and get more potential patients into the funnel? How do I actually think about building a proper healthcare crm that hasn't really existed meaningfully for a lot of these a lot of health provider practices or health systems, and as you were saying, remote patient monitoring if the same thing in its second expansion, a net new revenue opportunity. Alexi of nomad health has said before and I think about this all the time it relates to a lot of businesses but particularly in healthcare and healthcare, you can't really offer people savings like savings doesn't mean much. What does mean a lot as can you actually show me the my revenue is going to be expanded. Versus savings. Totally, it means zoom out just a little bit. More context what Redux does and why it it's it's the having. Yeah absolutely. So I cut my teeth and healthcare working at epic the one of the large electronic health records. So I ended up leaving epic and kind of jumped out into the healthcare entrepreneurial ecosystem and I just assumed that a lot of activity Madison we're is located because the same year I left epic, there were twelve hundred other people left epic. With your typical ten percent of people leaving the company every year. So I looked around the health, the health care technology ecosystem, and really saw consultants and not many people actually creating companies and so that drove a lot of the motivation behind Reebok's because we started looking at. Well, why aren't there more healthcare technology companies and why aren't the ones that are out there actually getting to market and getting in the hands of users? One of the biggest barriers that we saw was that in order for you actually take your product to market a healthcare technology startup has to go through like two years of sale cycle. They have to convince a hundred people at that at a healthcare organization to say, yes, an f. any one of those people says, no then the deal is done and so that huge gauntlet was was a massive barrier to entry for new. Technology and for innovative technology that should exist in the in the healthcare space because you know, we still literally have pagers and fax machines and clipboards use at Houston healthcare, and it's like the only place I've ever seen a pager being used in my adult lifetime. So one of the biggest barriers to entry for these technologies is is getting through it and the challenges of interoperability with the existing technologies in electronic health records, those organizations. And, so this is this is kind of you know a lot of the context around why this new regulation this new inoperability will make sense as well. But this was six years ago now and we saw this problem we saw the writing on the wall, and so we started a company a middle layer actually pulled it out of health systems to standardize it in the cloud naked available over consistent API and give that to. Software developers who are building applications for these organizations So that's that's what the company does. What we started the first couple years of that I. You know we didn't make much money. 'cause we were trying to figure out chicken egg problem, and so as Nikki dimensioned one of my side hustles was a book that created called ten illustrated and crowdsourced artists to create to create artworks based on icy ten codes which are. Billing codes that doctors have to send to insurance companies to tell them you know how people get injured. If you imagine the hundred, twenty thousand ways, people couldn't get injured and the different codes associated with that. There were a lot of funny ones. So we got artist to kind of pick the funniest ones like Bernard, water skis on fire or sucked into jet engine I guess that's not that funny but it's You know it. It creates good illustrations, and so we made a book and I ended up selling ten thousand copies of that book as the as the country was moving from I version nine version ten, and that's that's Kinda how I kept afloat while we were in the early startup days Reebok's LE. Let's pretend US three were starting a venture fund focused exclusively on on on healthcare before getting into sort of specific. verticals and saying what what do you think about Nikita? What do you think is the mistake that most VC's misconceptions most VC's have on on the category whether they're specialized or whether the journalists trying to trying to the way what do you think they don't either secretly earlier don't appreciate it as much as they should. Healthcare is one of these industries where you have to have a Rolodex and even having a Rolodex the whole it. Doesn't mean you're necessarily going to be successful. Most of the people that we like to back at R. E. N. I think folks that have generally had success in healthcare and again not it's doesn't mean that you're going to have success but I think is a very important piece of it as you've worked in healthcare before people in healthcare tend to trust other people who've worked in healthcare if you're an upstart. That someone who's never really been in healthcare before it's just that much harder particularly when you think about who you're selling to, it's less of an issue if you're selling direct to consumer I, think. But if you have anything that will start touching clinical trials, pairs and health plans, pharmaceutical companies, anything you ha- after really have folks on your team that have done that before. So that, you know how to sell into and have access to these types of pie paying customers. So sometimes I think that can be a little bit overlooked because even when you go and listen to some of the biggest success stories, like let's say kink one medical for example, or even Glance Lubango these folks had a tremendous amount of healthcare background and even for them. It was not just a cakewalk for this company for the companies to be successful, and then if you take these kinds of chew outlier of founders and founding and companies, and then look at everybody else who's tried to build a healthcare company that has a healthcare background, and then you look at the folks who tried to go to our company, I, have no healthcare background. To me the success one of the most successful variables is that kind of how having that material healthcare background and having folks on your team that that happened background. What you just said makes pretty sad because what that means is. You know it's like the status quo we depending on the status quo to fix an industry that desperately needs disruption but I think it's true. You know I like I I'm a hypocrite here in that I came from epic I came from that world of understanding how healthcare technology works and we're able to kind of solve that chicken and egg problem and get through it but you know I'm, I'm not an investor. So not putting my money where my mouth is but a lot of the companies that I see that get investment that I kind. Of Roll my eyes at our the it's it's really easy to have a huge vision in healthcare of about the way the world should work because as an entrepreneur, you can see a million different ways that healthcare should use technology to be better, and so it's as founder you can paint this vision in say like this is this is how textured work and this is how the world should conform around this vision and the execution of that vision is a whole nother story and I see a lot of companies with a very big vision and They can't get past one or two customers. There's a lot of health healthcare technology companies that have like one or two or three or four or five customers, but there's not a lot to have twenty or thirty or fifty and there's a big. There's a big gap between those that do and don't and it's often that the ones that succeed have a way you know a foot in the door they have whether that's that's connections like Nikita was talking about but more often I think it's a very specific value proposition that. As a buyer that can say, yes to that that isn't too expensive that they don't have to wait for the next budget cycle to figure out how to pay for in. They can start small on the kind of grow from there and I. Think those focused companies we've seen them grow faster in. You know it's it's hard to do the whole ended expanding in healthcare where it's like, okay we're starting in diabetes hour expanding to of heart failure not. You know all the other places where there's a lot of good to be had. But I think starting focused is is where we allow more companies be successful. Nichols leary era is said in in in that as well. Was You understood the challenge working at epic? You deeply understood what the problems of data exchange. was going rebel was the issue with EHR's as they were a epic built them. But also as competitors, the Turner's the Athena's with the world. Yen One of the things you also just said was around deeply understanding the challenges of data exchange and interoperability as they relate tm Mars because he worked at epic and because you hadn't understanding of this is what the competitors look like for Turner Athena's walls all these like Taillon are ours like web pt for physical therapy, etc.. That is the same thing and healthcare and building great healthcare company. As you were saying, don't properly have a sense of the real challenges and live. This thing doesn't work if you haven't seen in a very intimate way, this is how that aspect of healthcare. would. It actually looks like this is what it looks like if you are a social worker thinking about social determinants of health. So some social deter of health company or if you haven't worked in it, you don't have a sense of these or what middleware companies may look like or how you actually work with enders on the same thing anyone that's trying to sell into a pair or a health plan having sat on the other side of that for myself at Oscar in the intimacies of insurance operations. And how it works how internally within the company things get done in prioritizing not prioritizing is the same for any industry I don't want to over to overstate that healthcare is super special in that way but there is something quite unique to the way. Healthcare is still operating. It's the early two thousands. Julie. There's some big farms who choose not to get get into healthcare abuse. Maybe they just don't think you can have the type of big outcomes that big firms need. What do you see differently about the potential to be sort of? Decca corn plus potential in healthcare companies that maybe some of these other firms are are missing and maybe that's why they don't. You don't enter them as often use a deck of corn but what does that? Plus. Don't bring it up then we'll bring it up at the next board meeting. Great. I think that there's obviously a native even obviously there is a list of ideal buyers for any kind of healthcare company or any company right that you're trying trying to sell your product into and I think that there are certain spaces in healthcare that are just much much harder than the others because of fragmentation or because of overconcentration. Too. Easy buyers of this as trying to sell into provider groups of which there are tens of thousands. And then trying to sell it to win insurance company. Of which there aren't really that many I mean most people know the big five health insurance companies and so when you're thinking of how? To Sell. It's going to be a challenge if you're going through something super super fragmented or saw an area that's really really concentrated on the buyer. So. When it comes to thinking about investing in healthcare but you WANNA maximize for both the maximum efficiency and maximize speed and success. Right so when I think about why we? Invested in a company Reebok's I think that the reliever maximizing the amounts of sellers on like this kind of the intention of what a middleware could do to bring in a lot of people into an ecosystem makes it much easier. I think sell than something that's you're trying to sell to every single tens of thousands of provider groups. It's just more of a challenge. So I think that that can be something that can be really hard for the average investor particularly don't have a background in healthcare to get over also, healthcare is really confusing i. I I don't think I really knew what a co pay or deductible was before I worked at Oscar and thank God. It never came up interview because I probably would not have been able to answer that question and that's the average person. That's our I'm not trying to say that the not average or whatever but it doesn't. You're not ever going to be an expert on every space, and I think that there are some spaces we're really requires you to be much more of an expert so you can get to the meat of the business. So I think I think healthcare is one of those spaces if I could add an maybe this is too alimentary but if you look at healthcare in the industry at large, it's So inefficient and we spend so much money on it. You know nearing twenty percent of GDP that something has to give like at what point in that number's been climbing every year climbs up a little bit more like at what point does that totally cripple our economy is a twenty five percent is a forty percent like where does it break and if you just look at that and say you know something's gotTa give here and then also the consumer experience in healthcare is terrible like as. A patient we know that there should be so much opportunity for improvement and there are huge incumbents and the status quo strong and there's a complex system. So it's it's held off for so long but something has got to give and maybe what we're seeing right now because I've been saying the same thing for for years. But maybe what we're seeing right now with the pandemic is giving because we've taken this old crappy car and now we Florida with with this pandemic and the wheels are. Falling off and we need we need to replace it and a lot of ways, and so I'm really optimistic about new new types of healthcare delivery models to start to take hold especially as patients are now open to to seeing seeing doctors in different ways, they're not going to do the same old like drive across town wait the waiting room and see a doctor for three minutes just to go over a blood stray like there's so much opportunity to change that, and that's why I'm. Extremely excited about where healthcare is going and why as an investor I would I would be looking at what are the ways of that's going to unfold and so that's a really high level. Obviously but I think there's got to be something there and there's got to be what did you call stacks of corn I I forgot? There's gotta be those opportunities here. Why I totally agree and talking about the consumer aspect I think that's something I've been thinking a lot about because some of the players I mentioned earlier, they have deep pockets. Consumer the average consumer, the average patient does not and we know for that insurance. Even if you have good quote unquote good insurance doesn't work that wall and you can still get slammed with a bill that will put you in some serious medical debt If you look at some studies think instead which is owned by J. P. Morgan. It's A. Payments Company focused on healthcare. They put out this really interesting stat that even in like two thousand and seven patients, lush consumers were only paying for about eight percent overall of their healthcare bells. Now, it's up to thirty three, thirty, three percent isn't that crazy of space if you already have insurance or even people that don't have insurance that's a lot is a. Hyper, engine a lot of money to be spending and so when I think about investing in healthcare and I think there's this this bill big seduction around consumer digital health businesses, and that's why when you look at a lot of the best healthcare companies, they have multiple revenue streams and multiple types of buyers even a digital health company often times they'll be. Working with medical device companies, they'll be work with pharmaceutical companies as alternative streams of revenue. Even some of these diagnostic companies that send you know testing sticks to your home. They're also looking at alternative revenue streams never WANNA be chew focused right in one area just in case it dries up and healthcare I. think There's a very good reason to be working with. Lots of different types of players I never want the consumer who's already. So buckled under a tremendous amount of financial pressures in many many different directions to spend even more than they should be in healthcare that that consumers and points is a really good trend to touch on. You know fundamentally in the healthcare market one, one of the things that's really broken is. Consumers don't have a direct demand for healthcare like you know you have a demand for any other sort of consumer products in healthcare. We have drive demand in that we want to be healthy, and we hope that buying healthcare will make us healthy and because we don't have an understanding of how healthcare can provide health, we depend on experts to help facilitate that. s your doctors and healthcare systems in pairs who tom you to get your annual checkup and all that sort of stuff in. So that is a fundamental market failure that prevents healthcare from operating like most markets where a consumer can just you know pay the one hundred percent of the of the fee and actually rationally save and and act as a consumer on their own. But what that means is that technology has an amazing role to play in fixing that market. So yeah, you could argue that the market should be replaced and this is what a lot of industrial countries have done is instead of instead of fixing their healthcare markets, they replaced it by a government run program that pays for everything and you know has as guidelines around what people should do from our behavior standpoint, but you could also. Look at opportunity to fix the market by providing more transparency into that production function, how does how does healthcare translate into health and that's where things like I should have huge potential That's where where you know all the consumer heuristic in technologies that come from the consumer space as they move into healthcare I'm hoping that they are able to engage patients in figuring out how does that their actual behavior change their long term health and? As as an Akita mentioned as consumers pay a bigger and bigger portion of their healthcare, they actually have an an incentive to close at information gap and figure out you know if I go and get an MRI down the street and said about the academic medical, center is that going to be way cheaper and you know aligning those incentives around things that can actually drive costs down I think is you know hopefully the the? Merican way to save our health care system otherwise I think we will have to replace it because the government run systems are are much more efficient in every regard as far as Costco's on you know there's other other problems here there. But from a cost perspective, you know the United States is off the chart I don't WanNa get political or anything. So we don't have to go down the rabbit hole. I'M NOT GONNA go down that route. Or. We could be on. We would end up being like a two to three hour broadcast. But I did like you know some of the things you were mentioning about shop ability and another aspect of how I've been thinking about how as an investor. You can bring some easy tooling that has existed in other areas and just bring it to healthcare and it's not about revolutionary, but it could be huge. It's kind of interesting right? Like, why is there? No make make things hip compliant. Construct. That around everything I'm saying. Less. The Cms God's come down on me. Why is there no slack for health or healthcare? Why is there no Trello for healthcare? Why is there? No? Like Amazon really for certain types of. Durable medical equipment I think we're now seeing, but he's not space, but it's pretty crazy to me that you could take these existing business models. Jigger them a little bit and bring them to healthcare and I think that they would actually see a tremendous amount of success. This goes to I think the challenge that Nichols brought up where he said. We want to see you know it's unfortunate that people that successful that are successful when they start a healthcare startup people who've been in the business for a long time but. It doesn't always have to be true I think there are people who've built these kinds of companies that have worked as developer productivity tools are just business applications at any business has and just bring not to healthcare and take A. Of Empathy for all the people that are in the healthcare system whether it's the patient and their family, it's a caregiver it's a provider it's someone in insurance operations. It's one who's just on the phone I think of you can do that. You can also unlock some really nominal billion dollar opportunities and it doesn't have to be something that is the biggest uphill battle in the world because some of the constructs of the success of a business like this have existed in other places you WanNa go off of interesting to see from your perspective. You probably you know read our Salvia has had a sense of this is what the rules were. Aiming for, but you didn't know what they were going to be until recently. So I mean I've had a sense of this kind of over remainder, but I'm curious. And you don't have to obviously go into internal mckinney. The Rocks Business Hud. As you were figuring out okay. This is what we're doing business having a general sense of what not what the industry wants. But also like where we think the regulations are going to end up, this is where the regulations are now. And where does Reebok's fit in relative to that? Yeah. Yeah. So right right now, current state and healthcare data is exchanged a ton everyday. So data goes from south ware providers to healthcare organizations and they're trying to health records for providers to to look at. If, you see a telehealth visit data goes from the doctor you're seeing telehealth to pharmacy goes through all these these back in networks and they happen through through agreements that are kind of done behind closed doors in large largely, these are called business associated agreements where. Two parties will say, Hey, we are now business associates taking care of this patient, and therefore we can share data with each other. The kind of the foundation of the new inoperability paradigm is that we are giving the right the right for that data to move based on where the patient wants it to move. So the patient is has become the forefront. Of the foundation of of these new rules and what that means that instead of instead of data flowing between your doctor and your scheduling system that you can access on your phone as a patient to schedule your next appointment. Instead of that happening behind closed doors, we want that all to come to the forefront and it's almost kind of like a GDP are esque move in that patients will have the right to see where the data goes. Have the right to stop it. And all all of that sort of stuff and it's this groundwork is being laid. This infrastructure is being put out so that we can encourage more innovation to happen with. Healthcare. Data. And and what I mean by that is that if a patient can say I want my data to go to any application they want then hopefully, applications will exist that will will serve any sort of each patient need that might be out there from the perfectly healthy young invincibles like those of us on the call right now like what sort of absolute we want with our health health data versus the person WHO's dealing with? A end of life Palette of care like what sort of APPs would they want built on top of their healthcare data and the bet that the government is taking a saying that if we mandate that this infrastructure exists that we mandate a single API that healthcare providers and health it companies have to contribute to the exact same way. Then this ecosystem of patient facing applications should exist. And that's kind of the you know the foundation of of the A, lot of the new inoperability regulations if there's a whole bunch of details around that but. That's at the center of I think that's what's what's fundamentally different here is that we're putting the power in patients hands to hopefully drive a consumer like revolution around healthcare technology. That was its summary. What am I think? I'll leave. The thing I find really interesting about this. You know. So coming from the. World. Electronic. Health. Records. The there's almost this sense of net neutrality comes along with the spirit of the regulation in that. So at first electron health records that they are the application that doctors used. So WanNA is sitting there typing into the computer with his back to you instead of. Paying attention to you in the exam, they're typing into Toronto Health Record So they are the application layer, but the government mandated those those HR's to be in place and therefore they've become application layer but they've also become the data source of truth for any healthcare organization you go to healthcare transition and ask them about their patients like they're looking in their electronic health record system as their database for all of these patients and what a lot of the especially the information blocking rules state is that we actually have to have a separation between the application layer and the database layer, and what that means is that electronic. Health record system and he hr cannot discriminate against the type of applications that can be built on top of their database and into that really calls for a decoupling of those two things and it's difficult because you know if you put yourself in the shoes of an electronic health record vendor, you kind of earned that position and I know like a lot of investors think about platforms, they earned the position to be the platform that has all the data, the source of truth like like salesforce for instance, the because of their market share, they earned the ability to have a marketplace on top of salesforce with all sorts of applications. What the government is saying to electronic health records yet you earned that but we also kind of gave it to you through subsidies. And therefore now that you're in place now that you have this unique position as controlling the pipes to the data, you have to make those pipes have them open neutrally to any technology provider that's out there. You know much like comcast running a cable line to your house can't control what you can, what what shows come in clear. How faster Internet is for certain pages based on their own interests has to be a very neutral perspective and treat. Everyone fairly built on top of that infrastructure and so That's a really interesting position and you know as a very controversial position that the government took but really kind of going on the basis of net neutrality presumption I really liked the framing I hadn't even. Fully, conceptualized it that way, but it's really spot on and it does still allow for. Multiple sides that are attracting and using and leveraging this API network to also still have kind of decision making about not just the kinds of information that they're giving. But they're still rules around. You're still given some independence to make certain decisions about it. For example, you are allowed to charge fees it doesn't have to be uniform, but you can do that in certain ways elise the way that I read through the regulations those also ways you can limit the amount of content that's given. There is a floor so basics that you have to provide, but if they're pulling or requesting other additional types of information. You don't have to provide it as the entity so I still think that it's Trying to give some freedom and independence to and some kind of sovereignty right to these organizations but. In the same way that you pay for cable the cables free, you still have to do that, but they're giving more uniform accessibility as Nico. Really eloquently, put it and Nico I. Now want to go back into my sub stack post and put your quote in there about net neutrality because I thought it was spot on. Will I have to give credit where credit's due that? That came from a description that any show who was the first CTO of the United States Obama? How how he described it 'cause he he was instrumental during the actual net neutrality debate and he's like this is the same thing. It's you know these organizations because of. Cable companies it's a natural monopoly in that it doesn't make sense for every cable company to have cable line you go into every neighborhood in with HR is like. When in the HR is implemented a health system, they're not going to take out for ten years like that. That's how long it's going to be there just because of the organizational inertia and sunk cost that went into that investment like they're just not gonNA turn around and replace it, and therefore that unique position of having a super sticky platform at these organizations gives it a unique market position where they can have anticompetitive behavior in. That's the for this regulation saying. We need to level the playing field to make it neutral. There's a fuzzy line though I think between like what is he hr functionality versus what is like digital health functionality because you know is is a scheduling system. You know that's traditionally part of a practice. Management system is part of any HR or does the HR have to let any scheduling system be built on top of the records and have really open market for a provider or hospital to choose whatever scheduling system they want most based on the unique needs? And that's I think that's an interesting players that that line in the sand was not defined by the regulations saying you know which digital technologies are are fair game in which funds art and and may maybe it's just all fair game. But if you think about it as an electronic health record company, they have all sorts of modules have population health modules, they have telehealth modules have. Every specialty during Matali Radiology list goes on and on they have modules for those things and a lot of the selling point for electronic health record systems is at all those modules seamlessly together and now the government is saying well, heck now you have to open it up for any any you know dermatology application to be to work seamlessly with with your underlying database system, and it really opens up the market for competition to more easily enter. Hopefully that's the that's the spirit of the regulations that have been put in place We're starting to see the beginnings of how he hr vendors are implementing this but With the pandemic out of the deadlines have been pushed back So we're still you know a couple of years out from it but I think that's where a lot of the bets investors are making right now are is I the infrastructure that will enable this to happen so companies like reeboks but then secondly, infrastructure actually exists and is usable. There's GonNa. Be So many more companies out there that can take advantage of it and get to market faster and You know hopefully, change change. The way that healthcare is delivered to become way more efficient way more consumer oriented and know just a better experience overall. I think the exciting thing about being in healthcare in this moment is I have not felt the excited about health care in a long time because there were rules like that. Putting is lack of rules around this that Lilly Stein eat a lot of innovation and the ability to take something from zero to wall on because you couldn't even do something as basic as. Integrating with epic unless you're using reeboks or something like that without being actual meaningful to you had to make that a part of your business and right now if you will get. Most coyote companies that exist in the world that are not related to reeboks that aren't of Click or exchange platform. They are a core competency of business. It's one of those things where you don't actually want to spend time doing this because it takes away from your. Time spent on your value proposition and now that you have this. Up and hopefully as Niko said, meaningful competition being enabled by these technologies that have to exist for every one. We're going to see a heck of a lot of companies just be built and that kind of manifestation in healthcare had seen that for for a long time and people. Now I believe that they can build a company that's no longer a huge challenge. We. We see it really as the sort of continual abstraction of technical issues much like back in the ninety S. if you wanted to build a website, not that I was hoping websites in the nineties. But if you did, you have to literally have a server under your desk running in. That's where your your website was right and then we saw aws. Another cloud providers come about in in really open it up and lower barriers to entry for new technologies, and nowadays you know you don't even need to know html to build a website it's all been abstracted away. And made so much easier and therefore you know you can stand up in ecommerce site on tropical in ten minutes and I think that's the direction that we're hopefully heading in healthcare technology in that five years ago. If you want to start a health tech company, you probably had to have a hundred people on your team just to like make yourself hip compliant to handle all the infrastructure requirements of immigration. To have a, you know a huge enterprise sales team to go and knock on doors of health systems, and that's that's just to have accompanying get your your product to market. Hopefully in the future, it can be much more like other startups where it could be like two or three people building it out and all all of that complexity should be abstracted away. So you you've spent some time you a best time in the space that's based hasn't gone as well as many investors have thought it would what. You sort of give a little bit of historical overview for why that's the case if you accept that premise and wetter the learnings from sort of the last decade or more VC's investing in. A STARTUPS? Yes. Certainly. I. Think this touches on what I, what I mentioned earlier about the government mandate. So so yeah, the government created a market for EHR's. But what they did it was it was very heavy handed in. All of the requirements that the HR had to meet in order to actually. Satisfy that mandate and for their customers to receive subsidies for it. So that was the meaningful use requirements and electronic health records. Essentially, I think from thousand eight two to now they really lost their innovation muscle and they took they took eighty percent of their products are and resources and turn them towards meeting regulatory requirements. Instead of what most that companies should be doing, which listening to the customers innovating iterating all that sorta stuff that kind of went away because everyone was focused on how do you actually meet the requirements provided? By the government and and that was the last decade of EHR's and so yeah, it did make some some kings in the in the space and we went from not that much HR option to like ninety eight percent of the market is using any hr now. So so the government I think with with the regulations kind of put HR's in a tough spot to to meet the needs of the customers, which is why you can't find a doctor who likes there you hr today they all you know speak terribly of them. and. They call like epic is the best of the worst. So I think that was a that was a tough spot to be in and nowadays because of the regular regulation that surrounding electronic health records, you definitely don't want to start a new e HR company like I don't think you can. You can start like disrupt epic and sterner like you don't want to start that business because. It would take it would take years to meet the regulatory requirements, and then because of how sticky they are once implemented health systems aren't going to turn over and buy a new new one. So I think the new approach is going to be that Uh ours over time, we'll be relegated into the database and they're gonNA compete on the application layer, of course, but they're going to compete with a whole market of people building APPs assuming that the database is the HR and hopefully there's a middle layer between that connect them, and that's this government mandated fire based Middle Air. That's kind of how I'm thinking about the technology market but you know you, you don't see startup EHR's I think Dr Cronin was probably like the last one that that came made a splash, but they're really selling to the to the edges of the market to. Private practices and small practices and specialties that didn't need to top the charts to begin with. Yeah. I think Nico Right about that I don't WanNa. Stay I. DON'T WANNA see any new HR business fan belts because I'd like to I think that. Arts are Ed like there to be some. But you're right trying to unseat epochs sterner. Some of these companies that have fifty percent collectively fifty to sixty percent of the market is really hard and just from the you would be shocked how Big like hundreds of millions of dollars these longer health system contracts are with the MR companies. It's insane. And when you think about as Nico saying just the sheer amount of time it takes to train thousands of people that work in an organization to know how to use an e HR. It's going to be a really hard sell for larger health system but I think that there's opportunity I. Think this is why Dr Krono went after this kind of tail. End. For Released Specialty Amar's we see this in. I think the dental world like there's a company called dead right that has a substantial amount of dentistry Mr Market you have web PT. That has a lot of the physical therapy market. I do think that there's opportunities still there because it's much easier sell to a small provider group particularly certain specialties like they really stick together like the physical. Therapist world. They're just with each other and from what I've heard much. He's sell to kind of specialty group like that. So I think that there is maybe opportunity there, but I would like it as Nico said to get relegated to more of it kind of a deeper technical stack so that you can see more applications, I, WanNa see marketplace for healthcare. In the same way you have the slack marketplace the same way you have the aws marketplace, etc etc. I think that's when you know that healthcare is a really good place where there's actual competition and where the best kinds of products are winning because they answer the needs of payers and providers and patients to. The where you're excited to be investing in healthcare more broadly that we have discussed or touchable. Yeah. I think you know what I was alluding to before. I think taking just business applications that exist outside of healthcare. Jigger, rejigging them for healthcare world and applying it I would love to see an actual Google for healthcare I would love to see a Youtube Ralph care that surgeons in healthcare providers can use I'd love to see a Trello for healthcare slack for healthcare. You name it I think a lot of these things can be applied to the healthcare world and. I haven't seen too many of them, but there's certainly an opportunity there. Another thing I'd like to see is a really great I path for healthcare. RPA tool. We're seeing a couple of companies in the space, not nearly as many as I would like to see for the number of use cases that exist. And I think that no moving onto another kind of area to look at, of course, home health is huge and only becoming huger as we see, the fragility of hospitals and a lot of them are looking to more outpatient like home health opportunities. Because it isn't again another expansion of revenue while allowing the hospital to be cleared up and taking more patients there. So there's a whole bunch of companies that I think could be built in the home health space. Honor as an example of something on the caregiver side, what have we what if we actually applied to honor model to many different areas of healthcare I think that would be really interesting ones that have a lot of. Clinical on and caregiving staff, but are not necessarily related to seniors. You can see this in the disability space, there's a whole host of. Clinicians and providers and just caregivers for patients like that and for their families. So I think that could be an interesting angle that we've been thinking about. I think another area is looking into certain interesting aspects of Medicare and seeing how we could build a business around this NICI thing. So there's an example and the Medicare world called pace. Pace stands for programs of all inclusive care for the elderly and it's really a all. But what it's focusing on how do you actually bring a whole host of community needs? Into providing Medicare and there aren't that many companies being built in this space. There's like Commonwealth which is a health plan and I think there's there's another company out in Pennsylvania New Jersey that's building but I really haven't seen just given how many dollars like billions of dollars that are focused on pace I just haven't seen too many. Companies that do that and I was speaking to a friend at flair. That's also thinking about this base and I and I think that they're spot on about this. End To end digital health is another thing I've been thinking about It's great to draw on a lot of different tools. So this has nothing to do with tools, but more to do with digital health is mostly seen as an add on right like there's an aspect of the digital outside, and then as you need it, you can go in and visit provider in person, etc. But there is this concept. I think of there could be just an end to end digital how digital halls companies for certain areas and I'd like to see a couple of more companies thinking about it that way. I think another interesting. I've been thinking about beyond just healthcare payments which I think is still huge. There are a number of companies being built here. I think Papaya pay is an interesting one. There is no real fraud and risk analytics company that focused on healthcare and I think you can take really interesting fraud and risk models from other industries like let's say you worked in the payments base. If you're an a company like stripe if we're going to like paypal, you are an expert in detecting fraud and risk on the KYC am etcetera level. I think a lot of those similar concepts apply to healthcare and to claims data and I would love to see a great company being built in that space. So those are just some of the things I've been thinking about. But if you're building in the healthcare space, I would love to have a conversation with you. I take as many conversations as I can with folks in healthcare from every new every single kind of. Actor whether you're someone who's a patient enter your someone who's worked in the payer world or we're GONNA provide organization or vendor or start up i. think the more that we can share knowledge and information with each other the better, and maybe built some great companies out of it. One of the things focusing on right now, I'm writing a piece on how inspired lenny who has this whole series for how consumer and B. to B. Companies got their first customers I'm trying to do the same thing in healthcare and I got some time with some really really great and. Founders and CO founders in the healthcare world. But that's another thing that I've been thinking about deeply is like how do we democratize a lot of these acquisitions strategies on some of the things that Nico and I talked about, which is like almost the curse of the Rolodex like can we actually make it? So you can be on the technology side, which hopefully companies like reeboks exchange are going to help enable but can we give these multitudinous acquisition strategies to a bigger people? So we hopefully see more healthcare companies down the line. I love that. Are there any early learning from the research of our I mean I will say that people have such creative story just I mean it's not like they intended the story to be creative but. Building. Any company as hard imagined building healthcare companies and just the many many different directions. At some of these companies built in three examples of these companies at the beginning when they were just a project, even we're not hip compliant but some you know someone who's using them to figure it out to see if this is something that we should actually build and turn into a real business. Companies that you would not expect to be. Having a large line of business that lets it's a consumer health company to have a large line of business in the life sciences world their companies doing dot, and it's actually like more core, some of their first customers versus. which you may have expected or just stories about companies that started off a certain way, and they had an anchor customer that was pulling them in all the wrong directions right and they had to dip to had to adapt and change. It's like it's going to be a really good post. I. Am excited. I've heard some like really crazy honestly stories like. Stuff that I'm like, wow I did not I did not know that or I would not have expected that for the software company and it's really nice. People have been willing to participate I was worried that you know I kind of put out this request and no, one would be willing to chat about things and. It's like you can't give away all your secret sauce but I think high level. There are a lot of things we could be doing to provide more strategies more knowledge excetera and I hope that this series is a small part of that. Awesome. Great Place to wrap. At Nico and Bikita I think so much for the. Are. Fewer and early stage entrepreneur we'd love to hear from you. Check us. Out. Village. Global. Dot. BC.