Ian Morrison

I should’ve been in Paris last week on vacation with my wife, instead I listened in to the Policies Techies VCS:  What’s Next For Healthcare conference (I’ll explain why later).  Matthew Holt and Jessica DaMassa did a magnificent job of assembling the Who’s Who of digital health tech to wax lyrical about what the new kids on the block were up to, where it is all headed, and what it will mean for the system. (Full disclosure Matthew and Jess are friends of mine, I hired Matthew from Stanford almost 30 years ago to join the Institute For The Future (IFTF) and have watched proudly as he has become a Health 2.0 impresario.  Jess simply deserves a gold medal for wrangling Holt and all the other tech Bros with wit, charm and intelligence).

This is a tumultuous time for digital health technology because of the pandemic and the related rise of digital solutions not to mention the very frothy investment market and massive deal flow over the last 24 months.   There are a lot of exciting new faces.  But, many of the companies on display have been at this for some.   And for many of the old guard, like Livongo and now Transcarent Founder Glen Tullman, Athena Health and now Zus Founder Jonathan Bush, and Amwell CEO Roy Schoenberg and others this has been a much longer journey.

(Parenthetically, as a young management engineer in Canada, a position, I was not qualified for, I wrote the justification for an all-computerized hospital at the University of British Columbia in 1979!  I still find it just incredibly pathetic that it has taken us 40 years to suddenly “discover” digital health. I wrote The Second Curve which forecast (among other things) the rise of digitally enabled health transformation 25 years ago!  So it is hard for me to get really excited that this is either “new” or “next”.)

So, while a lot of us have been in this movie for a long time, there is something very different about the current crop of offerings.  In particular, technology has advanced considerably and there are clearly new cloud and SaaS tech enabled care solutions.  There is a new cadre of talented and committed investors and entrepreneurs who believe they have the capability and capital to scale meaningful enterprises that will disrupt incumbent healthcare players and better serve consumers and providers.  And the timing seems right as the pandemic forced consumers and the health care system to confront new ways of doing business.

Common Origins

Most of the entrepreneurs on display at the conference had the same origin story. Almost all had a bad experience with healthcare (either themselves or an immediate family member, some tragically and painfully so) and this so motivated them that they committed their life and talent to fixing a healthcare system which they see as profoundly dysfunctional, overly complex, unresponsive, and that currently runs on brain-dead information technology (what I have termed “steam driven legacy systems”). 

(As a Scot I find these entrepreneur origins very interesting.  In Scotland we complain about things all the time, but when we find organizations dysfunctional and unresponsive, what usually happens is we go to the pub and moan to our friends: “That’s terrible, something should be done about that” and then two pints later you just forget about it.   Not so these young (and some not so young) entrepreneurs).

A lot of these new CEOs are engineers.  About 20 years ago I was presenting to hospital leaders at a conference on the future of healthcare organized by McKesson. I gave a talk about where I thought things were headed and urged hospitals to reengineer care for the future.  Another speaker was the father of industrial engineering and he admonished me for my naïveté saying: “Ian, you can’t reengineer healthcare because it was never engineered in the first place!”

This maybe the source of frustration for many entrepreneurs, particularly tech bros who come into healthcare with an engineering background from another industry.  American health care is a $4 trillion enterprise, the fifth biggest economy in the world.  It is twice as large as the entire Italian economy and about as well organized.  It was never engineered.  So when tech entrepreneurs say “I’m going to disrupt American healthcare” it’s a bit like saying I’m going to disrupt Italy….Good luck with that!

Six Core Assumptions:  Don’t Take them For Granted

There was a fantastic array of more than 20 panels and keynotes in the conference almost all of which was populated by “New New Thing” thinking CEOs (not an incumbent in sight, a deliberate choice by the organizers).   Conference participants got a picture of the full range of digital health tech offerings and new service businesses with strong digital backbones.  I won’t even begin to summarize all of the excellent content.  Just go look it up yourself and you can relive it all.  

But I was struck that there were six core assumptions made by almost everyone who presented, assumptions that I think you have to be careful not to take for granted.

Assumption 1: Value Based Care is Inevitable.  

Most presenters seem to believe value-based care is the inevitable norm for American healthcare.   Along with many others, I have been pitching and preaching this idea for 30 years. Yet if you look at the facts on the ground there are still precious few capitation dollars flowing through the system relative to the dominant model of fee-for-service supported by the high prices paid by self-insured employers, who seem incapable of massifying their firepower to any great effect to change the existing financial hydraulics.

To presume that value value-based care is the inevitable American future is perhaps to bet against history. 

One great hope may be Glen Tullman’s new venture, Transcarent.  Glen seems convinced that a critical mass of employers will provide full at-risk dollars to build end to end care solutions for a wide range of health conditions beyond the care of pre-diabetics.  Currently most of the more activated self-insured employers I know are swamped with a dizzying menu of disconnected point solutions.  Let’s hope Glen is right and we start to see broad, large scale, at-risk offerings being embraced by major employers across the country.

Where value-based reimbursement models are a more realistic assumption is in public programs especially Medicare Advantage, Managed Medicaid and programs for Dual Eligibles.  But even there we see health plans hoarding risk perhaps because they feel they have the tools and technologies to manage care without delegating to new (or even old) at-risk models of care.

There are some obvious bright lights in value-based care for public programs from Iora to Oak Street Health to City Block.  We wish them all well and hope they scale rapidly with the financial fuel they have taken on board.

Assumption 2: Pandemic Effect on Digital Health is Massive and Permanent 

It is undeniable that because of Covid there was a rapid, massive digital shift that occurred temporarily to enable the continued functioning of hospitals and health systems across the country.  But to assume that that shift is somehow both massive and permanent belies the experience we are seeing of the reactivation of in person care.  While I do believe that we have learned many lessons, and that digital health is certainly not going away, the evidence on the ground again is that we are seeing a return to some kind of normalcy and reactivation of in-person care across the care spectrum.  (Behavioral health services being the stellar positive outlier where the shift to digital seems both massive and permanent).

Some of this bounce back in physical care is inevitable because surgery and other forms of intervention require the physical proximity of the patient and not everything can be done with an iPhone or at home (although you can bring a care team to the home, even ICU level care and monitoring, more of which below).  

But I have always argued that the challenge for digital health is not to simply “pave the cowpath” in other words simply automating existing processes or virtualizing visits or moving the same activities to the home.  What is needed is a fundamental redesign of all clinical care processes to be more digital in their mix and to use appropriate digital tools and technologies to amplify the efficiency of caring for patients, prevent disease and motivate constructive behavior change and improve overall patient, member and consumer experience.

Assumption 3:  Primary Care and Prevention Eliminates Tertiary Care

An assumption I heard over and over again is the primary care done right, and better prevention and behavior modification would in and of itself inevitably lead to a reduction or elimination of all or most utilization of complex downstream medical care.   One young CEO with a high net worth and a perfect head of hair went so far as saying that 80% of all care would be digital to which I muttered “bullshit”.

As the 70 plus years of experience of Kaiser Permanente has shown, even when you are relentless in pursuit of preventive measures using digital platforms and an aligned at-risk business model intent on keeping people out of the hospital, you are not going to entirely eliminate morbidity and disease burden that requires more complex interventions.

A related phenomenon is the fallacy of composition which is because I saved 20% on the care of the diabetic or prediabetic population I was accountable for, are those savings permanent and systemic across the system.   As my old mentor Bob Evans taught us you must look at the countervailing action by the providers whose care (and incomes) were eliminated to really fully understand whether or not you had a systemic effect on total costs.  Rajeev Singh CEO of Accolade talked about the “leaky bucket problem”, the difficulty of attributing true savings of multiple interventions and possible double counting of savings.  I have worried for a long time that the cost of the sum of the point solutions exceeds the previous costs baseline.  Most health systems around the world utilize what I term Balloon in a Box policy solutions.  They recognize that pushing on one part of the healthcare balloon may cause it to pop out somewhere else, so instead they put the healthcare balloon in a box, and they sit on the box.  Global budgeting from the top-down works. Competition from end-to-end at risk solutions in an open ended healthcare system where providers are free to respond creatively to being economically disrupted is yet unproven as national policy.

All this may explain why we are seeing all of these companies claiming 20% savings and yet total health-care costs keep continue to rise.   Part of this is supplier induced demand.   As one wag put it: “good health is a state of incomplete diagnosis”.   If you look hard enough you can find stuff to operate on.   Another much more troubling problem is that even well-intentioned preventive efforts such as on-site wellness programs have shown remarkably little ability to reduce total cost of care or improve health endpoints when properly accounted for in well- designed systematic double-blind trials.  I call it “faith-based wellness”, it ought to work it just doesn’t. 

Assumption 4:  Technology is a Force for Good

A theme that ran through most of the presentation is that technology will triumph over all obstacles, and, even further, that technology is somehow imbued with a moral authority superior to the motives of the current incumbent actors.  My doctoral dissertation challenged technological determinism and I have been a curmudgeon and skeptic ever since. Technology is powerful, it is an amplifier, it is a tool, but it doesn’t have a conscience.   It isn’t a force for good, or evil for that matter.  It can be used by people to do a lot of different things.   Just as Facebook enabled the Arab Spring, it also enabled the election of Donald Trump and more recently, the disinformation campaign that systematically undermined science and expertise that led us to vaccine hesitancy.  I am always leery when my venture capitalist friends and entrepreneurs claim that technology will solve everything.   It depends on the decisions, actions and behavior of individuals and organizations particularly those with economic and political power. 

Almost all of these young entrepreneurs had highfalutin mission statements, but they are privately funded enterprises whose primary duty is to their shareholders and investors. They are therefore unlike most of the not-for-profit organizations that dominate the healthcare delivery landscape and that have a broader mission to serve the community.  It was instructive that Pauline Lapin, leader of the Seamless Care Models Group from CMMI pointed to the vigilance that the Biden Administration will have in judging issues such as health equity and questioning who profits and benefits financially from new models of care.

Assumption 5:  Incumbents are Losers

A theme through the conference (perhaps deliberate) is that incumbents are stupid, bloated losers who deserve to be displaced. (Some presenter CEOs didn’t go down this road recognizing that the stupid, bloated, losers were their customers).  

Look I’ve made a living tweaking the noses of the incumbents for 40 years, and I’m reasonably good at it, but in the final analysis you have to really be out of your mind to believe that we are not as a society going to need care delivered that is complex, requiring multiple professionals being coordinated in the same place, and requiring unbelievable amounts of capital and labor to deliver very complex procedures.  We need to honor and support the people and institutions that do this, not gleefully drive them out of business. 

As an illustration, one reason my wife and I didn’t go on vacation to Paris last week was because I was recovering from surgery at Stanford having had a massive volvulus (look it up) removed.  I had 4 feet of twisted, bloated colon removed surgically and repaired through a small 4 inch incision in my belly.  Try doing that at home on a freaking iPhone.

In a week, I’ve enjoyed a spectacular recovery, a return to normalcy and feel that I got my life back.   I am deeply grateful to Stanford, my surgeon, and all the care team.  I received exemplary care with incredible professionalism and compassion. 

My GI workup was at the Palo Alto Clinic (PAMF) which is a Sutter facility and and even though they are old strategic rivals, my care was coordinated, I had full access to the much-maligned Epic system and the apps on my phone, in both institutions.  They could access each other’s chart on me. And even though I am a boring old fee-for-service Medicare patient, my physicians at both PAMF and Stanford were completely responsive over online messaging and Open Notes through Epic.  Both institutions were flexible and able to adjust workflows and schedules for CT scans, sigmoidoscopies, x-rays, diagnostic tests and so forth.  Nothing was unnecessarily duplicated.  Professionalism and compassion triumphed over incentives.

So, given my long history working with incumbents and my most recent experience, I found myself throughout the conference bristling at the derision with which most presenters treated existing incumbent health systems.   If the quality of your life has been saved and a return to normalcy achieved by surgical genius, you’re a little bit less picky about the net promoter score the institution may have for its website or that they are using an I-Phone 5 with old code as their mobile care platform.

Assumption 6:  We are Not a Health Company we are a Tech Company

It became a bit of a cliché at the meeting….we are not a health services company we are a tech company.  You can understand why:  valuations are higher, multiples are higher, scalability of cloud computing and SaaS …yadda, yadda, yadda. Of course, you want to be Netflix not Blockbuster.  Clicks not bricks and so on.  But it is very difficult to build healthcare business at scale in pure technology form without all the attendant economics of service businesses. 

It took the great Lisa Suennen @venturevalkyrie on the fourth day of the conference to call the bluff on the conceit that health services businesses with a digital backbone want to call themselves technology companies.

She responded: “I call myself tall.”  (Spoiler alert, she’s not).  Genius.

Eventually these businesses will be judged as all businesses are on growth, profitability, customer satisfaction and contribution.    

What Did I Learn?

What did I learn?  There were a number of very helpful perspectives to be gained from digesting the full content of the conference.

First, there are many very promising innovations enabling a digital front door to health with primary care/ virtual health and behavior modification tied to dedicated at risk payment models.  These models show great potential to emulate the essence of Kaiser and the capitated medical groups of Southern California in the 1990s. I applaud and have applauded such efforts for 30 years…….so let’s grow them.

Second, is the use of artificial intelligence and machine learning as an amplifier and productivity enhancer in healthcare within clinical decision-making, in consumer outreach and behavior modification and perhaps most importantly in internal administrative simplification. American healthcare is the most Byzantine administrative system in the world, with armies of people faxing things to each other.  But by the same token these are good jobs with good wages as healthcare is the last unionized industry in America.  Companies like Olive and others are building solutions for hospitals to dramatically improve their technology stack for administrative functions.

A third promising insight is the recognition that care can happen anywhere, anytime and anyplace especially enabled by mobile digital technology.  The home is rapidly becoming the clinical setting of the future with all the logistic, technology, infrastructure and inequity challenges that creates.  We should welcome home based care options particularly that allow us seniors to safely age in place.

A fourth insight is that mental health must be integrated with physical health into seamless offerings.  For too long we have had policy, reimbursement and delivery siloed approaches to mental health with the related dearth of meaningful improvement in health outcomes.

Fifth there is the need to liberate patient data and eliminate all the legal and organizational barriers to utilizing the data. In the words of the ever-eloquent Jonathan Bush, consumers will demand their data be made available:

“Bitches, give me my shit”

Sixth, there was a lot of talk about new platforms being built including Jonathan Bush’s Zus vision off providing plug and play repeatable module offerings to enable all the companies in the startup ecosystem to rapidly deploy similar solutions such as patient registration.   This platform talk is consistent with the grand vision that was eloquently described by venture capitalist Julie Yoo who presented a cogent alternate vision of how new platforms could be enabled for the emerging healthcare ecosystem.

Seventh, I was heartened to see presentations from regulators and government officials on the program from CMMI, ONC and FDA all of whom were very thoughtful in encouraging all forms of digital innovation and showed willingness to work with the emerging forces in the industry to meet policy goals.  They will rightly focus on health equity and seem committed to encouraging creative and innovative approaches through both payment reform and regulatory changes. 

And finally, I was struck by the time clock of change between tech and healthcare.  The two year sell cycle of approaching incumbent health systems versus selling Viagra direct to millennials on the web.  Part of the reason that Jonathon Bush’s Zus can succeed is satisfying tech and investors need for speed.  “Just get the crazy people.”

Overall, I was encouraged by the conference that we have a lot of very smart people armed with a lot of private investment aimed at doing important things to improve the healthcare experience for American consumers, and hopefully for providers. 

Some of the companies had lofty ambitions that are unlikely be realized.  Some worthy players and toolmakers will be absorbed into larger more aggregated offerings.   And some will be bought by United Healthcare.

But I do believe we may see the emergence of a few successful platform plays combining the elements described throughout the conference.

The final thing I strongly believe is that the greatest value to be extracted from the digital health ecosystem, enough with the disruption, people, let’s try and harness the power of these technologies to make sophisticated medical institutions like Mayo, Stanford, UCSF and Cedars as well as community-based systems of care stronger, higher performing, efficient and responsive to the communities they serve.