The Exchanges

Q Salar. Okay, what was that, obviously, what did that company do, and how'd you exit that?

A Yeah, so I think the simple example is it was a company that began to replace some of the really mundane sort of paper processes inside of hospitals at the point of service with tablet OS, if you can remember what that was, and then ultimately sort of iPad and iPhone-based solutions to capture information at the bedside between the physician and the patient, and automate a bunch of business backend processes that are necessary to keep a hospital and a physician group running. And I guess the second part of your question, how do you exit Um, you know, the, the, the race to digitize medicine is dominated by electronic medical record vendors and medical transcription vendors, and we sold that company to the nation's second largest medical transcription firm in, uh, for how much? Yeah, it was a, a fifteen million dollar exit. That was a company that had no venture capital. So it was me and my partners and, um, and our employees. It was a, it was actually a nice exit.

AI assessment note: “we sold that company to the nation's second largest medical transcription firm”

Q 20 11. Fifteen million dollar exit there. Good financial event for everyone. No venture capital. What year do you launch health loop in?

A So Health Loop was actually initiated in 2009 by a physician in San Francisco. He's the founder, um, for a few years it was more or less an idea on a piece of paper and a dream. The board found me, um, and I joined in early 2013 to turn it from idea into company. Um, the founder's a brilliant guy, just a creative individual who, um, who had a really simple, um, revelation, which is he had a patient that, uh, was otherwise pretty healthy. She was in her mid-sixties, had pneumonia. He put her on an antibiotic, assumed everything would be fine, because it usually is. Um, then he got a call from the intensive care unit at Cal Pacific Medical Center in San Francisco seven days later, and this woman was almost dead. And she was on a ventilator and respiratory failure. And his first question is why the hell didn't she call me? Right? If, if she wasn't getting better and if this medicine wasn't working, she should have reached out. And then his second really obvious sort of observation was shame on me. Why didn't I call her as her doctor? I should have been touching base and checking in to see how she was doing. And that was really the genesis of health loop. And when I met Jordan Schlain, um, in late twenties, well, he's the guy who originally had the idea. Yeah, he's just, yeah, the physician founder, and he's still active, and a board member, and a wonderful friend. Um, you know, th…

AI assessment note: “Health Loop was actually initiated in 2009... I joined in early 2013”

Q And what do you talk to you about churn? Have you signed up any of these folks and have they canceled and So what's your kind of average annual retention?

A Yeah, we do pretty well. We're, um, about 90% in annual retention. The number one reason for churn is, well, actually two. One is there's, there's not an economic incentive. So in some cases, physicians or medical groups sign up absent those types of, uh, economic incentives, and then it's a nice to have, not a must have. Um, and I think the second one is if an, if an organization, you know, there's an institutional mindset to think about treating patients As they come through the door and optimizing throughput, right? We got to bed patients, treat them and discharge them, bed patients, treat them. And there's a mindset to think about treating patients after they've been discharged and to think operationally about how to do that. And so I think organizations that don't have the mindset that they want to treat patients in this way are never going to set themselves up for success.

AI assessment note: “We're, um, about 90% in annual retention. The number one reason for churn is”

Q Yeah, and there's so much unpredictability there, right? It's like, it makes it even, that can either be a good thing for business unpredictability or a bad thing.

A Yeah, in this case, I think it's a bad thing. You know, the, the Affordable Care Act did, um, I think create a tremendous amount of urgency in this tipping point where the delivery system sort of understood that we were having to move to a value-based model, and organizations were proactively chasing that. The good news is I think we actually got there, that it's, it's out, now it's actually harder to pull back But without certainty on the policy side, you know, people just don't know exactly where they need to be investing, and I think there's a fear that if we pull back coverage for the low-income population, you know, the twenty-three million, you know, whatever budget report you want to believe, right? The fact is, those people still require healthcare services, and they go to the hospital, and the hospital either pays it out of pocket, or they get reimbursed for those services. So I think hospitals need to be very thoughtful about Conserving cash and preparing for a future in which, you know, eight to ten billion dollars is coming off their balance sheet, um, as opposed to, to from federal subsidies.

AI assessment note: “Yeah, in this case, I think it's a bad thing.”

Q I wonder what that sales call sounds like because the doctor's going, look, I mean, they're not going to say this, but I don't want this thing to be solved. Like I need her or him to come back in two months because they had a complication and I just learned about it. Like literally, how do you solve that incentive structure problem? I would hate to be your salesperson.

A Yeah, the short answer is hard. The good news is that we are moving, um, to a delivery system that has much better incentives. It's taking much longer than I think I want, and I think patients deserve. But we're moving, you know, the, the consumer way to think about this is into a warranty program model, where hospitals and physicians have to warrant their services for 60 days or 90 days after a treatment is provided, and it creates sharp economic, um, incentives. The challenge with that is that these are very targeted, so they might be just for heart attack patients or for total joint replacement patients, and so that's why, sort of, our expansion opportunities within health system providers are, sort of, we designed to land within these areas where they're bearing economic risk today and expand with them over time as the incentives shake out, either through the federal government or through commercial insurance carriers.

AI assessment note: “we designed to land within these areas where they're bearing economic risk today”

Q Why not just, why not buy it? So, you know, builds equity.

A Well, I think there's a couple of things, you know, I'm an East coaster, and, and, uh, after we sold our first company, my wife and I moved the family to Silicon Valley, and, um, the transition there was rapid, so we didn't have time to really understand the market, and so we started renting, and I guess over time you get comfortable with where you are and our kids are in school and it just seems like it's the right answer for us. And I guess the second thing is that the real, for those that live in Silicon Valley, they understand the madness of that market. Um, it's just hard to get right with the price escalations there.

AI assessment note: “we didn't have time to really understand the market, and so we started renting”