Angel Invest Boston is sponsored by Peter Fasse, top life science patent attorney.
Medical records are way less informative to doctors than patients imagine. Electronic health records (EHRs) have failed to deliver on their promise to improve health care for forty years. Ryan Hess, founder of Connective Health, means to change that. I invited digital health founder Martín Aboitiz to co-host this valuable interview with me.
Click here to read full episode transcript.
Highlights:
Sal Daher Introduces Co-Host Martín Aboitiz & Guest Ryan Hess, Founder of Connective Health
Connective Health Aims to Deliver to Primary Care Physicians What Electronic Health Records Have Promised for Forty Years
Ryan Hess Tells Us About What Surescripts Does
Martín Aboitiz Introduces His Startup, Healthjump
The Pillars on Which Ryan Hess’ Work Rests
Connective Health Seeks to Provide the Primary Care Physician with a Complete Picture of Where the Patient Has Been and What Care Has Been Received
“Even the basic information is helpful with behavioral health patients, because those are the ones that typically have been to multiple locations and the patient may not remember every place that they've been to...”
The Potential Uses for Healthjump’s Data Lake of 80 Million Patient Records
Healthjump Is Focused on Discovering Things About Patients in the Aggregate; Connective Health Works to Provide Such Useful Information When It Applies to an Individual Patient Being Seen by a Physician
The Information has to Be in the Doctors Workflow & Has to Be Timely and Relevant
“How do we get them to trust it?”
“What protects you as a startup from just being blown up because somehow your algorithm missed something?"
The Role of Independent Review Boards
How Not to Do It: Practice Fusion Being Paid by Purdue Pharma to Recommend Oxycodone for Back Pain
Healthjump Makes Money by Solving Interoperability Problems Between Electronic Health Record Systems
Connective Health Aims to Get Paid for Lowering the Cost to Payors of Providing Care to Behavioral Health Patients
How Much Volume Connective Health Needs to Break Even
Regulatory and Legal Changes that May Help Connective Health
Martín Aboitiz Believes Industry Over-Estimates the Technological Difficulties of Sharing Data
Ryan Hess Points to Basic Difficulties Such as Identifying a Patient Across EHRs
Institutional Investors Have a Hard Time Understanding Digital Health Due to Dizzying Number of Moving Parts
“If there's been some really very impressive exits for companies in certain areas, all of a sudden, the limited partners are all excited about companies in this space, and venture capitalists are going to be raising funds to invest in companies in this particular space...”
Virtual Health Is a Lot Easier to Understand than EHR-Based Digital Health
Ryan Hess Is Targeting Behavioral Health Because Payors See It Driving One Third of their Total Spend
Transcript of, “Delivering on the Promise of Medical Records”
Guest: Ryan Hess, founder
Sal Daher: This podcast is brought to you by Peter Fasse, Patent Attorney at Fish & Richardson.
Sal Daher Introduces Co-Host Martín Aboitiz & Guest Ryan Hess, Founder of Connective Health
Welcome to Angel Invest Boston, conversations with Boston's most interesting founders and angels. I am Sal Daher, an angel investor, tremendously curious to learn more about how to better build technology startups. Today, we are privileged to have our co-host, Founder, and my brother-in-law, Martín Aboitiz.
Martín Aboitiz: Hello. Thanks, Sal, for inviting us here.
Sal Daher: Martín has been on the podcast at least three times before. One time as a host interviewing me, but this time I brought him in because today we're going to be interviewing Ryan Hess. Welcome, Ryan.
Ryan Hess: Thank you, Sal. Lovely to be here.
Sal Daher: Ryan is a former consultant and founder of a digital health startup, which is very interesting, we're going to get into that. Since Martín is a specialist in the field, he's the founder of Healthjump, which has 80 million health records in its database, they provide data based on these records, I thought it would be interesting to have Martín here to ask more informed questions of Ryan on this interview.
Ryan, tell us a little bit about your background and your startup.
Connective Health Aims to Deliver to Primary Care Physicians What Electronic Health Records Have Promised for Forty Years
Ryan Hess: Great. Thanks, Sal. My startup is called Connective Health, and the goal here is twofold. One, to deliver to primary care providers the support that we've promised them for 40 years, basic information around where their patients have been, what their diagnoses are, what their medications have been in their office, and from every other place that they visit in the healthcare system. That is one thrust of Connective.
At the same time, we layer on some insights and tools to help those primary care providers with their behavioral health patients, which are a third of all patients in the healthcare system and cause quite a bit of the costs in the healthcare system.
Sal Daher: Excellent. You come at this after a senior position at Surescripts, which explain to our listeners what Surescripts does.
Ryan Hess Tells Us About What Surescripts Does
Ryan Hess: Absolutely. Surescripts, America's largest health information network, solely focused on medications, and it does almost everything that a provider needs to manage a patient's medications. As you show up at a doctor's office, we will find out where you have your health insurance, from a PBM perspective, which is the medication health plan for you, we will pull your medication history.
Every medication that has been dispensed by a pharmacy, every medication that you've had your health plan paid for, we'll pull all of that, and we're doing new things like delivering pricing for the medication. As your doctor goes to write your medication, we can tell them what it's going to cost you as you show up at the pharmacy.
Sal Daher: Excellent. Guest host Martín, please give us a brief introduction of your background and what Healthjump does, how it intersects with what Connective Health is doing.
Martín Aboitiz Introduces His Startup, Healthjump
Martín Aboitiz: What Healthjump does is more the classic interoperability sense of taking data from multiple EHRs and making that data available to an application that requires it, and having that application have a single connection to us, and we connect to multiple EHRs or multiple instances of the same EHR, and provide the data in a single format and some single technology, like through an API.
Sal Daher: EHR, electronic health records?
Martín Aboitiz: Electronic health records. Yes, that's right. We manage purely clinical data. Prescription data is also available to us, but in a different form than what Ryan is seeing, because Surescripts purely works on medications, and we work on the full dataset, including the doctor's notes. Generally, our providers require a full dataset. They're not looking at a single patient, but they're looking at the aggregated dataset summaries. That's Healthjump in a nutshell.
I'm extremely interested in what Ryan is doing because that's the other part, we are serving the doctor with the right data and the right intelligence on top of that data. It's still a work in progress, and he's working on one of the parts of that, which is that the data is actually there.
Sal Daher: Outstanding. Martín, you're a co-host. If you have some questions that you want to address to Ryan, I would defer to you, or if I'm talking and you want to cut in, feel free to do that.
Martín Aboitiz: Absolutely. Ryan, how do you see the challenges ahead of us, the state of technology, and the future of the effort to solve the specific problem that you are working?
The Pillars on Which Ryan Hess’ Work Rests
Ryan Hess: We are standing on top of four other pillars of technology that have developed over the past three to four years. One of the pillars being the ability to match and find where a patient has been. That is a new set of technologies that have come up over the past four to five years. Having a unified record set of every place that a patient has been with some demographics that you can match on. Now, historically, that has just not been possible.
That's one pillar. A second pillar would be then being able to get records out of those patients. If I went to my local primary care physician, and they're on eClinicalWorks, and then I had a hospital visit, which was on Epic, being able to extract records from both of those in a similar format is critically important.
Then a third pillar is making sense out of that because a doctor doesn't want to read the full list of everything that happened at that hospital. or the full list of everything that happened at my primary care physician, they just want a synopsis. Being able to create something that is synthesized, and is a one-pager, if you will, is a value to the provider, and that technology is really only started in the past two to three years.
We're standing on top of all of those technologies to deliver something that is really meaningful back to the provider in their supportive care.
Martín Aboitiz: Behavioral health, it seems to be the first use case that you address, what made you choose that?
Connective Health Seeks to Provide the Primary Care Physician with a Complete Picture of Where the Patient Has Been and What Care Has Been Received
Ryan Hess: Great question. We do deliver a record for every patient. For every patient that comes into a primary care provider's office, we will deliver the basics about that patient, for any patient that is likely to have behavioral health issues or has already identified as [having] behavioral health issues, those are patients that primary care providers really struggle with. Those patients are typically more complex, they'll have a number of comorbidities, and this is just not an area that primary care providers have a lot of training. They are pleading for help. Especially during the pandemic, this is now a big portion of their patients, and they need help treating them.
Sal Daher: Ryan, explain to me again, you're saying for every primary care physician who's on your system, you're providing a patient profile snapshot, where the patient has been and so forth, but this is particularly valuable for behavioral health patients.
Ryan Hess: Correct.
Sal Daher: What you're saying is you're going to be going after primary care physicians that are seeing a lot of behavioral health patients first, but your system can be useful for patients for treating people with heart disease and other things as well.
“Even the basic information is helpful with behavioral health patients, because those are the ones that typically have been to multiple locations and the patient may not remember every place that they've been to...”
Ryan Hess: Absolutely. Even the basic information is helpful with behavioral health patients, because those are the ones that typically have been to multiple locations and the patient may not remember every place that they've been to, or may not even want to say every place that they've been to, but it's important for the doctor know that.
On top of that, even being able to identify the likelihood that somebody has a behavioral health condition can be pretty tricky, but if you look at their past medications, if you look at the past number of visits that they've had, there's typically a number of telltale signs and even that is helpful to a primary care provider to say, "Hey, you might want to run a specific depression survey on this patient, because based on their recent history, it looks like they're having some problems".
Sal Daher: Now, I understand that there is a recommendation engine built into, at least the behavioral world this is beyond the behavioral therapy patients.
Ryan Hess: Yes, this is specific to behavioral health and this is one of the great conversations Martín and I were having just before this call, was that getting to those recommendations, that's really getting into interoperability and that's really, I think, what we're all aspiring to. Is that when that behavioral health patient comes in, and just say this behavioral health patient has been diagnosed, being able to deliver an e-consult even is critically helpful. That's not artificial intelligence, that's actually a psychiatrist looking at a patient's chart, and then proactively offering up some thoughts around how to best treat that patient.
That's the first step of at least we can show another psychiatrist the information, have them come up with some recommendations and thoughts, and deliver that to the primary care provider, that's step one of really meaningful interoperability. Then what Martín was talking about steps two and three would be, we don't necessarily need a psychiatrist to do that every time. That is some of the work that IBM Watson or Google had talked about in terms of doing some really big data analytics.
Sal Daher: What intersections do you find between what Martín's company Healthjump is doing and what Connective Health, your startup, is doing?
The Potential Uses for Healthjump’s Data Lake of 80 Million Patient Records
Ryan Hess: It's a great question. One of the interesting things that we've heard in the conversation is that Martín and Healthjump are trying to create this data lake. The concept of a data lake is you have this long record, long longitudinal record of a patient that tells you quite a bit about them, and then you have it for a big cohort of patients, 80 million.
Then what you can do when you have that is you can look for the trends. You could say, "Hey, I've noticed that 65-year-old men that are on simvastatin and are also on this specific diabetes drug, that is causing some conflicts and I'm seeing a significant drop off in adherence." What it might be is that the way the two drugs are interacting, it is causing an adverse reaction, just say it's causing an increase in pain.
What a company that's noticed that trend wants to do is then get that back to the primary care provider because in that case, the primary care provider is the person that wants to say, "Hey, we put you on to this diabetes drug, and we put you onto this simvastatin", and then the patient's only going to see their primary care provider again but because it's such a unique combination, the primary care provider may see one of out of every thousands of those patients, and they're not going to make the connection in the trend.
Sal Daher: Great. That's the kind of connection that Martín's company, Healthjump, would be making, and then you would be able to take that trend and to reflect that in the patient profile that you're showing to the primary care physician.
Healthjump Is Focused on Discovering Things About Patients in the Aggregate; Connective Health Works to Provide Such Useful Information When It Applies to an Individual Patient Being Seen by a Physician
Martín Aboitiz: There's two problems here. The first problem is, with the one, we are working on is the sense, "Okay, out of all these millions of patients, what combinations of what does what to whom?" The problem that Ryan is working on, is saying, "Okay, how do we offer the provider when they have the patient in front of them? How do we offer them of all these things that we know of the larger population, how it applies to them individually in their particular circumstance at this time, and do it quickly, and do it in a way that it's actually useful to be at?" That it's a very tall order.
Ryan Hess: It's a great description.
Sal Daher: It sounds to me like there is room for a third player to be doing that information, and then providing it to a player like Connective Health, and taking it from you, doing that analysis, and then providing the Connective Health.
Martín Aboitiz: Right, multiple steps to this problem. The curious thing to me is how-- I don't know if you come across this, Ryan, the issue that people believe that we've solved it.
Sal Daher: Listeners should be aware that we had a half-hour conversation before we started recording, and one of the things that Martín was emphasizing is that typical patient, when they go to the doctor's office, they assume that patient records are used for getting intelligence on the general health of patients, and interactions and all these things, much more than actually happened, there's a lot less interoperability or usefulness of data, and this is what these two gentlemen are about.
There they are engaged in an effort to improve that a little bit, a little tiny percentage and I think Martín rightly pointed to the fact that patients have a very exalted idea of how far along that process is.
Martín Aboitiz: That's right. Now, how do we get then the doctor to see from all this information? How do we get the doctor to actually see the information that's important?
The Information has to Be in the Doctors Workflow & Has to Be Timely and Relevant
Ryan Hess: From our perspective, and there's a couple of requirements to it. One, it has to be in their workflow. They will not go out to a portal, nor should they, we have all invested many hundreds of billions of dollars in getting everybody on to--
Sal Daher: The fourth screen problem.
Ryan Hess: Yes. We collectively as a society invested in electronic health records, they are on electronic platforms now, the providers are on electronic platforms. Then you need to put the information into that workflow, and then you need the timing, such that it's relevant, you can't just send it through whenever you discover something. If they're not going to see the patient soon and it's not a crisis, they don't want to know anything else about that patient.
From our perspective, what we do is we deliver it within the EHR, we time it with the patient, and then we make it usable for them. It's not a twenty-page Continuity of Care Document, CCDA, is one and a half pages of synthesized information that is boiled down to just what they want to know about that patient. To your point, Martín, that's what makes it useful to them, they make it something that they want.
“How do we get them to trust it?”
Martín Aboitiz: How do we get them to trust it?
Ryan Hess: That is a great point. They are, as they should be, very suspicious of any data that is coming in. It is something that you have to build over time is my experience. Day in day out, patient in and patient out, you have to prove that the data is reliable, you have to show where it's coming from, and then they grow to trust it.
Sal Daher: A laypersons question that I have, "How about the risk you are going through a patient's complete record, and then pulling out information that you believe is relevant? What if you miss something? What's your liability? What protects you as a startup from just being blown up because somehow your algorithm missed something?"
“What protects you as a startup from just being blown up because somehow your algorithm missed something?"
Ryan Hess: It's a great point and it's something we struggle with, Surescripts too. Whereat Surescripts, we delivered billions of files a year, and every one of those files had some amount of judgment included in it, and you just have to be honest with the provider and say, "Here's what we've done to best faith effort", but at the end of the day, it is still resting on your clinical judgment as to what action you're going to take with that patient. It's the same with ours and I believe it's the same with Martín's.
Sal Daher: Right. Because the primary care physician has access to the complete record, and they can scan it or do whatever they want to see if the profile is representative and so forth. Except that the EHR is not going to have things like where the patient has been and that kind of stuff.
Ryan Hess: It sadly happens even within an EHR, even within a health system. If two Ryan has to show up at that health system-- My son is also named Ryan Hess and I've had this happen where they pull up my son's record, and it's just a mismatch, despite all of our best efforts and the matching technology within that EHR is pretty good, they'll sometimes mix my son or mine up. We are all reliant on that provider at the end of the day. We do need that provider to be executing on their judgment. We cannot replace them.
The Role of Independent Review Boards
Martín Aboitiz: Do you see a role for some third-party validation? Something like in clinical research you have these independent review boards that look over something. I'm wondering to what extent there might be a parallel to that, not in research, but in practice.
Ryan Hess: Yes, it is something that I've utilized in the past where you always want somebody taking a look at it. They're never going to be able to look at every record, because you send through millions of records a day, but the synthesis of the record, you absolutely do want clinical input on, and you do want something like a clinical review board weighing in on-- Just take the diagnoses from the past 12 months or strip out these secondary diagnoses, you absolutely want clinical input saying, "Yes, that's the right approach." Every physician on that clinical review board says, "Yes, I agree. We should strip out secondary diagnoses because they're just not important enough".
How Not to Do It: Practice Fusion Being Paid by Purdue Pharma to Recommend Oxycodone for Back Pain
Martín Aboitiz: Earlier we talked about the case of Ascension and Google Health and the fiasco that happened back [then]. But there's another fiasco that I find interesting and more to this point, which was-- you do know how Practice Fusion lost a case for a hundred and forty-five million dollars they pay as a fine, which I think is little because they were providing for clinical decision support to people with back pain. They were offering oxycodone an opioid of Purdue Pharma. We got all the worst here.
They were offering oxycodone for back pain, which is potentially something that makes sense, but it seems like if I go for sexual dysfunction and I get Viagra prescribed, nobody will bat an eye. But if you take some software developers and come up with algorithms to suggest the Viagra, nobody will bat an eye. But if we offer oxycodone for pain and back pain, which is not particularly necessarily such a large problem, then we clearly, we all understand here in this call, that there is a problem here.
The difference if you give it to a machine to think about it, the machine will not see a problem, and apparently neither a Practice Fusion or Purdue Pharma, nor anybody who engaged in this contract, in which Purdue Pharma paid Practice Fusion to offer oxycodone. Nobody saw it. To me, it's mind-blowing in this particular case but there are many, many fine points to this problem. How do you look at those fine points and where the problem lies, and how do you build the system that trusts that there is some oversight?
Ryan Hess: I think it goes back to your previous comment where if it's a clinical review board, if it's a set of providers that are looking at it and saying, "This is our best clinical judgment", then err is human. Then it is okay. If the judgment that they come out with is perhaps incorrect in some situations. If it's Purdue Pharma, which is the case, as you mentioned in Practice Fusion. If it's Purdue Pharma that's come up with the algorithm and says, "Hey, this is all the situations that we want you to put oxycodone as the first treatment", then you've jumped the line there, you've crossed the line in terms of--
Sal Daher: It's corruption, the system is not working. Basically, what you have there is you have a conflict of interest instead of your algorithm going, looking, and seeing how patients respond to oxycodone, how they respond to ibuprofen and how they respond to this and that, and what the long-term implications are for these things and they say, "There are certain cases where oxycodone may be required." All of that has been put aside by, "Hey, if we refer this is part of our revenue model." You cannot have your referrals in a sense of your choice of treatment and so forth, be part of your revenue model.
Your data should be informing you impartially and your revenue model should be tied to something else entirely, which brings me to-- Let's compare revenue models here, Martín, how do you make money at Healthjump? And then I'm going to come back to Ryan and say, "Ryan, how do you plan to make money at Connective Health?
Healthjump Makes Money by Solving Interoperability Problems Between Electronic Health Record Systems
Martín Aboitiz: Our revenue comes from solving interoperability problems. Our revenue today comes from health IT. When a technology company wants to sell the service to a provider and that service is based on data, they need access to data. Models of this are plentiful in other industries, and this one it's purely a pipeline business.
I compare, in oil you have upstream, you have downstream, and you got transport which is generally considered part of downstream. Anyway, transport in oil is a specific x. I see we are a data pipeline company and we get paid for that. However, along the way, we have a data asset. That data asset can be used for research in multiple ways. It can also be used for identifying patients with clinical trials.
All of these can be revenue generating, but our interoperability case is completely within what we are already doing. We’ve got HIPAA that takes care of it, and we got HITRUST. We got protections, we got security, we got all these pieces that have been developed and are there and thankfully we can exploit this. It's a technically a complicated business, but conceptually, our business is very simple.
Then on the other side, which is, how do you properly use this data asset? We think, down the road, the data asset is a larger value of our company, but we have to be extremely careful as to how that they data asset is used and how-- We ask these questions all the time. We have independent review boards that have been developed as a standard, and this all came out of disasters back in the Tuskegee Syphilis Study and such, that said what is ethics in treatment of individual patients, but there is no actual real code yet, it hasn't really been developed. What is the ethics of large-scale de-identified data use? I wonder, if you have some ideas in this regard, because that's what keeps me up at night, how do you do this properly?
Sal Daher: I don't want to hear about the things that keep you up at night, Martín, because they scare me. I'm an investor in your company. If they keep you up at night, they're really going to keep me up at night. I should say to listeners that I'm considering becoming an investor in Ryan's company, and Ryan's company is being considered by Walnut Ventures to pitch at the September meeting. I'll be looking very closely at his company. Ryan, can you tell us a little bit about your revenue model?
Connective Health Aims to Get Paid for Lowering the Cost to Payors of Providing Care to Behavioral Health Patients
Ryan Hess: Ours is relatively straight forward in that in helping providers deliver better care, we lower the total cost of care, and we turn to the health plans and say, "For the patients that you've identified, for the patients that we've interacted with, you pay us for the lower total cost of care".
Sal Daher: Right. A certain amount, which is a small fraction of the savings that you're occasioning them. Are you going to set up proof of concept pilot programs with them, for them to get an idea of how much you're going to save them and then negotiate the price? How would you expect that to go?
Ryan Hess: That's exactly correct. For each of the health plans we offer six-month pilots. There's certain measures we look at, percentage of the patients that have been diagnosed correctly with behavioral health conditions, number of ER visits, number of acute visits, those sorts of metrics in the early days, which they know and we all know how to translate that into the total cost of care. It's after that, then we charge on a per member per year basis for patients that we interact with.
Sal Daher: Do you expect those to be paid pilots that they're going to cover the cost of you setting up?
Ryan Hess: Yes, there's a nominal fee for the first fixed six months. The cost of connection is very low. Really all the health plan needs to do is load patients that they want to track. That's the extent of it there is no heavy lifting on their part. We have similar things to do to get the right providers into the network to make sure that enough of their patients are getting the information, but we keep the cost in that initial stage fairly low.
How Much Volume Connective Health Needs to Break Even
Sal Daher: What you anticipate needs to be the number of patient records that you are addressing in order for your company to be profitable. Martín's company by now has 80 million records. I'm sure you need a very small fraction of that. It's not strictly comparable, of course, to become profitable. You have a hunch as to that what that number would be? Or you can just say, "I'd rather not guess." You're entirely free to say, "I'd rather not guess".
Ryan Hess: To be honest that is in an Excel model somewhere on my desktop, so this is going to be from memory. It's not quite a guess but the memories are hazy on exactly where the crossing point is. I believe it's around 10 million total patients and we need to interact with maybe half a million of those, is where we are. That's the cross in terms of profitability.
Martín Aboitiz: You need three or four large health systems to sign up?
Ryan Hess: Yes, although we don't need to go by health systems because there's no limitation on the care provider side either. They could be a 20-doc practice with eClinicalWorks, and that's just fine by us.
Martín Aboitiz: Okay. What would be your sales channel?
Ryan Hess: It's a medley. Health systems would be more direct sales versus signing up a 20-person primary care provider practice. We're testing out inside sales, we may do a sales rep in the region and have them go through. Since there's zero cost to the primary care provider and zero implementation we found it to be not an easy sale, but an easier sale since, so there's no cost then. All they need to do is sign a BAA effectively saying that we can gather this data on their behalf.
Martín Aboitiz: You feel you have all the technology pieces and the market? That the environment has the technology pieces that you need.
Ryan Hess: It does, at least the majority of them so we've done this when I was at Surescripts as a service that utilizes much of the same technology for specialty medications. Different purpose, slightly different technology, but it proved that enough of the pillars have been developed and have matured that this can be done at scale for the majority of patients that walk into a primary care provider's office.
Regulatory and Legal Changes that May Help Connective Health
Martín Aboitiz: Have you been looking at the TEFCA? You see TEFCA as being a--?
Ryan Hess: TEFCA should provide a nice tailwind.
Sal Daher: What is TEFCA? I'm speaking up here as the layperson in the audience.
Martín Aboitiz: The Trusted Exchange Framework and Common Agreement.
Ryan Hess: It is the latest push by the ONC to move interoperability forward. Let's put it that way.
Sal Daher: What is ONC?
Ryan Hess: Office of National Coordinator.
Sal Daher: This is a government office that coordinates policy with regards to healthcare, health records and so forth. The question is what's the potential of this new initiative from the Federal government? How would it impact your businesses?
Ryan Hess: The goal of TEFCA is to set up a few different entities. Could be one, could be three, could be five entities that do that location of patient, that do that extraction of a patient's record. I don't believe they're not going to maintain a central longitudinal patient record, but they'll enable anybody in real-time to go gather that information and pull it together and use it for clinical purposes.
Martín Aboitiz: It's basically a common agreement where we agree on the principles of how we would do it and establish a few QHIN, which are Qualified Health Information Networks that we'll follow standard policies in order to do already things that Ryan is doing, but doing under a standard framework. We've been waiting on TEFCA for a while and we haven't done some of the things that that Ryan is doing in part because fundamentally it's not our use case. We need the full data set of a provider rather than an individual data set for a patient, and we don't actually really care for the data for that patient coming from other systems at this point we only-- for the one particular provider that's hiring us. In Ryan's case, the difficulty of not just getting the data from each one, but finding out where the data lies.
Sal Daher: Do you think there's potential for that to be easier?
Martín Aboitiz Believes Industry Over-Estimates the Technological Difficulties of Sharing Data
Martín Aboitiz: Right, we will make it easier, but I don't know if you agree with me that the industry thinks that the technology problem is the more difficult. We as technologists understand that the technology problem is actually really very simple. The problem is the agreement's infrastructure and everything, and the understanding and the policies. Everything that goes on top of that so that people trust that you are serving them, that you're not violating people's privacy, that you're serving the right, that some rock star's health record doesn't get published in the internet. The policy and privacy problem, and the technology problem. The technology problem is simple. Do you agree with that?
Ryan Hess Points to Basic Difficulties Such as Identifying a Patient Across EHRs
Ryan Hess: I agree with you that the privacy problem is a big problem. The technology for what we're trying to do, it ends up being that there's knots everywhere. They're not complex knots, I suppose I would agree with that, but there's knots. Even going back to matching the patient. If they show up at eClinicalWorks system, the patient record number from that primary care eClinicalWorks system doesn't match what’s at Epic. Now you've got to match the patient on something else, then you've got to match them with demographics.
That gets quite complicated because you have to, with 99.99% certainty say, "This is the same patient." Even matching is complex once you look underneath. Then once you work out the knot, that it's okay, then you can identify the patient in an Epic system, in a Cerner system, and then go get the records with a high degree of confidence, but there's all these little knots along the way that you got to untangle to make it really useful. Then the last piece is you have to make it meaningful.
You can't just throw a bunch of data at a doc and say, "Hey, I found all these records. Here's 80 pages of reading. Good luck. They would never use it. Making it meaningful is the one that I would say is a third big problem that we all have to work through, which is you have to come to insights. You got to come to the really simplified data that the doctor can trust and that is useful for them.
Martín Aboitiz: Yes, there I agree with you, that technologically, that perhaps is a bigger technological challenge because then you have to be able to understand the data and be able to serve, have to figure out what is important here and what isn't, and presenting it under the user interface. That could be the secret sauce there. I'm curious on the capital market. I've been talking to investors all week, I was at HIMSS last week?
Sal Daher: Would you please unpack HIMSS?
Institutional Investors Have a Hard Time Understanding Digital Health Due to Dizzying Number of Moving Parts
Martín Aboitiz: HIMSS is the Healthcare Information and Management Systems Society Conference. This is the Mecca for health IT, so the investors come in and they start looking at companies. I find it interesting how this spread of investors frankly had been underwhelmed by all of investors to analyze our companies and see where the future lies and see where the value lies, and to accept the fact that this is not a one, two, three, five-year problem. This is a 10-year problem. It's a 20-year problem. We know that historically, but investors are looking for the magic bullet that solves a problem in a year or two, and it's not going to be done. It's going to take us 10 years, at least.
Sal Daher: I assume, Martín, that you're talking about later-stage investors, not the early-stage angel investors that got you to the point where you have a profitable company?
Martín Aboitiz: Of course, I'm not talking about Sal Daher. No, I'm not talking--
[laughter]
Sal Daher: That's the clue. I should be honest. When I heard Martín talking about this the first time, I thought, "Oh, majnun." That's Arabic for crazy. What is this guy going to be doing? He's from another country. He doesn't understand the healthcare system here, which is incredibly complicated. It's unbelievable, like seven years later, he actually got this thing done by connecting with the right partners.
Martín Aboitiz: That's the thing. It's seven years later. Seven years later, we are where we are and we are a young adult company. If I had told any of my original investors that in seven years we'd be a young adult, they would have said, "Oh, thank you. This is really interesting." That's in seven years, and we're a young adult company, we haven't reached the middle age. We haven't yet reached our most productive state after seven years.
Sal Daher: Yes. You're still fast-growing, is a very fast-growing company.
Martín Aboitiz: Right. How can we get the investor community to see and to be ready to invest? Maybe that's a question for you Sal Daher. How do we get the investor community to believe that in the long term? I had in my first Healthjump, I wrote a presentation that was, "I'm looking for knights to join me in the search for their Holy Grail", and it wasn't well-received.
Sal Daher: Yes, the Holy Grail. Let's talk about angel investors, angels are very difficult to categorize, because there's a very broad spread of angels. Angels have a very personal interest in something. If something interests them, they'll invest in it, but if they make a connection with the person, the individual they’ll invest in it. Venture capitalists are much more methodical in their decision-making. They have certain-- they're called mandates, this is what you're supposed to be investing in. These mandates are based on perception of their limited partners, these are the people who are putting money into the venture funds of what they want to see in the portfolio, the stuff they want to see in the portfolio.
“If there's been some really very impressive exits for companies in certain areas, all of a sudden, the limited partners are all excited about companies in this space, and venture capitalists are going to be raising funds to invest in companies in this particular space...”
If there's been some really very impressive exits for companies in certain areas, all of a sudden, the limited partners are all excited about companies in this space, and venture capitalists are going to be raising funds to invest in companies in this particular space like Airbnb and so forth, it drives a whole bunch of other Airbnbs. What I think needs to happen is in your space you need to have some major company just break out and become massively successful, and create this fear of missing out among the limited partners in the venture funds, who prod the venture, the general partners to be looking at companies like yours.
Until that happens, it's tough to get the attention of venture capitalists, because you don't fit their screen, they have a very particular screen, so you're limited to angel investors who have a very personal-- They will listen to a personal appeal. If you make a good personal connection with an angel investor, don't invest in your venture, if it makes sense to them. You're not alone in this, in a wet lab side of the life sciences of health investing. This is a much tougher question because it's much harder to explain some of the things that are going on.
When biology is involved, that's really opaque. Even the angels have a hard time. The reality is that in the life sciences, there's a small number of companies that are the charmed companies, they get all the money, and everybody else is struggling to get funded. There's the smalle charmed circle, and then there's everybody else. It doesn't make sense, markets are not rational. There's this Pareto function here, 20% getting 80% of the funding, or 3% getting 97% of the funding. What do you think, Ryan?
Ryan Hess: I agree with both thoughts, one of which is, this is a really complex space.
Sal Daher: It is.
Martín Aboitiz: It takes some really specialized investors. I think we're starting to see that. I think people are starting to realize that our healthcare system is so massively inefficient, and so poorly performing, in general, that there's an amazing amount of opportunity, but you really have to understand it to be able to have confidence in the opportunity that you're investing in. I think we're starting to see some venture capital funds that are really specializing in healthcare and really start to understand the nuts and bolts to the degree that they get the confidence that they're willing to make an investment.
Sal Daher: I think, for example, the excitement that there is around these virtual health care companies recently, because of COVID, those companies have come into vogue. I think maybe there's a little bit of a wash off on some of the other digital health companies because digital health companies, they can be very capital efficient compared to traditional health companies where there's a lot of investment over a long time and it may not pay off. With digital health, if you put enough resources in it, you can make it work. In the end, it's all about software. In a way, it's easier but you have more competition.
Virtual Health Is a Lot Easier to Understand than EHR-Based Digital Health
Ryan Hess: It's harder to understand. I've seen the most go into places like Iora or Blockcity [City Block] where it's I understand I'm investing in person providing care. That is much more intuitive. Look, I understand, "I'm going to invest here and I'm going to get a result here." When you invest in digital health, it's, "I'm going to invest here, this person has to influence here." Then in my case and others, then that person has to deliver better care for the patient. Then this other entity on the other side is going to be the one that pays. That concept, that's just a really complex concept for people to put their minds to, but that's the way our healthcare system works.
Then you've got a provider delivering care for a health plan that's paying for it. Then you got a patient that's net-net in between both of those. Digital health is about making all of that work better. That's a really hard concept for people to get, that you're going to rely on multiple people making changes and how they work every day so that the outcomes are better so you can deliver off the economics of it. It's just a hard concept for people to get.
Martín Aboitiz: I don't know much about the mental health space, but it's bundled payments and pay for performance models out of Medicare and Medicaid, out of Medicaid, mostly. Is that in your space?
Ryan Hess Is Targeting Behavioral Health Because Payors See It Driving One Third of their Total Spend
Ryan Hess: A little bit. Behavioral health is a really hot topic in health plans. This is another reason why we started there first, is that health plans figured out it's a third of patients. Behavioral health spend in of itself is not that much, meaning psychiatry, psychologists, Adderall spend is not that big, but the medical costs of those patients is enormous. Over the past four or five years health plans have figured this out and you've got the likes of Cigna and Optum that are saying, "Hey, this is a top-three priority for us." Because it's really large, it's a third of the total spend, that's what those patients comprise and it's growing really fast, in part due to the pandemic.
You've got this wave of interest that they're behind it. They're looking for solutions, which is great, so you have a ready market. That's to your point, Sal, you need a little bit of that. They have to be looking for things. They have to see it as a real opportunity for you to get through some of that complexity of digital health, to get people excited about investing in it.
Sal Daher: Unless you guys have any other thoughts, we can wrap here. I would like to say first, we have had Ryan Hess, who is the founder of Connective Health, a startup that is seeking to lower the cost of primary care physicians providing care for their patients and helping them provide better care, particularly in the area of behavioral health, which is tremendously expensive in terms of medical costs to the payors. This is a problem that has the attention of the insurers, of the payors of Medicare and these groups because it eats a big chunk out of their pockets.
Ryan is working in a very, very important area. He comes with a tremendously strong background in having done similar things, more limited things at Surescripts and having also worked as a management consultant before.
Martín Aboitiz, my co-host in this, my brother-in-law and founder of Healthjump in which I'm an investor, his company is providing interoperability between electronic health records systems. Cerner, the names mentioned here, Epic, the other one that I can never remember, and all these things. Basically helping extract data out of these tremendously complex systems of records that we have created. I'm very grateful, Martín, for you taking the time to be on here with us. I know you're very busy traveling. Thanks a lot for being on.
Martín Aboitiz: My pleasure, Sal. It's been lots of fun. We can talk all day, I'm sure.
Sal Daher: We can go on all day. Yes, we have to resume the formula.
Martín Aboitiz: That's right.
Sal Daher: Especially if I have some wine with us, we'd really get going. Ryan, I thank you very much.
Ryan Hess: Thank you for having us. I love talking about this as well, so I appreciate the opportunity to share some thoughts.
Sal Daher: Yes, and our audience should know that these are two startups about which we're certainly going to be hearing a lot more in the future because they're working out really, really important problems. This is Angel Invest Boston. I'm Sal Daher. Thank you for listening.
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Sal Daher: This podcast is brought to you by Peter Fasse, patent attorney at Fish & Richardson. The biggest assets of a startup are its team and its intellectual property, so make the most out of the great efforts of your team by getting the best advice on building your intellectual property portfolio. I urge you to check out Peter Fasse patent attorney at Fish & Richardson. Fish & Richardson is the foremost patent law firm and you should not skimp on patent advice.
I'm glad you were able to join us. Our engineer is Raul Rosa. Our theme was composed by John McKusick. Our graphic design is by Katharine Woodman-Maynard. Our host is coached by Grace Daher.