Consulting for Health Tech Startup CEOs From the Guy Who Knows | Matthew Holt, SMACK Health

By JESSICA DaMASSA, WTF HEALTH

To hear Matthew Holt tear apart a pitch deck—or worse, a demo—one thinks of another Brit with a penchant for criticism and tell-it-like-it-is tough love. Could Matthew Holt be the Simon Cowell of health tech? Or maybe he’s got a point underneath all that gruff? Having co-founded Health 2.0, Matthew helped bring digital health and health tech startups into the mainstream by providing a friendly forum for entrepreneurs and established healthcare incumbents. Along the way, he’s suffered through his fair share of demos and pitches, and watched all corners of the healthcare market as it reacted to (and invested in) tech health solutions. Now bringing that 30 years of wisdom to startups seeking coaching, help with strategy, business model design, fundraising, and, of course, demoing and pitching, Matthew explains how he hopes to help the current class of up-and-coming health startups via his consulting biz, SMACK Health.

Filmed at HLTH 2019 in Las Vegas, October 2019.

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Who’s in Your Supply Chain?

By KIM BELLARD

Tesla is now, by market cap, the second largest auto manufacturer (after Toyota).  Its market cap exceeds U.S. auto makers Ford, G.M., and Fiat/Chrysler — combined.  This despite selling less than 400,000 vehicles in 2019, a figure that is more than the prior two years combined.   

Tesla has made its bet on the future of electric cars.  It didn’t invent them.  It isn’t the only auto manufacturer selling them.  But, as The Wall Street Journal recently said

Investors increasingly see the future of the car as electric—even if most car buyers haven’t yet. And lately, those investors are placing bets on Tesla Inc. to bring about that future versus auto makers with deeper pockets and generations of experience.

 A recent analysis
suggested a big reason why, and its findings should give those in healthcare
some pause.  Tesla’s advantage may come, in large part, from its supply
chain.

Nikkei Business Publications did the analysis, a “teardown” of Tesla’s Model 3, the cheapest car in Tesla’s lineup.   The teardown found that Tesla’s integrated central control unit — aka, its “self driving computer” — had capabilities that were six years ahead of the rest of the industry.  That’s six years ahead of auto manufacturers with long histories, huge research departments, and millions of vehicles sold, not to mention sizeable investments in their own electric vehicles.

Nikkei quoted a
“stunned” engineer from a Japanese rival who examined the computer:
“We cannot do it.”    

Tesla integrated central control unit. Credit: Nikkei xTech

The engineer admitted
that technological hurdles were not the reason for the gap, but, rather, the
automakers’ concern “that computers like Tesla’s will
render obsolete the parts supply chains they have cultivated over
decades.”

Tesla’s computer
required fewer electronic control units (ECUs) than other manufacturers. 
If those manufacturers followed suit, it would drastically impact their
suppliers of those units.  As Nikkei put it: 

So big automakers apparently feel obliged to continue using complicated webs of dozens of ECUs, while we only found a few in the Model 3. Put another way, the supply chains that have helped today’s auto giants grow are now beginning to hamper their ability to innovate.

Tesla developed its
integrated central control unit itself, and Nikkei found that to be part of a
pattern:  

“Most parts inside the Model
3 do not bear the name of a supplier. Instead, many have the Tesla logo…This
suggests the company maintains tight control over the development of almost all
key technologies in the car.”

And, of
course, Tesla updates its software “over the air,” giving existing
models the advantages that traditional auto manufacturers might have required
buyers to purchase a new vehicle to benefit from.  

In other words, no one knows.

Brian Johnson, a Barclay’s analyst, has suggested that the market is acting as though Tesla will be the “sole winner” in the shift to electric vehicles (although he also has warned Tesla may be overvalued).  Another analyst, Adam Jonas of Morgan Stanley, wrote: “If Tesla proves to be profitable…we think this removes one of the biggest impediments for why legacy [auto makers] were hesitant to go ‘all in’ on EVs.”  

Tesla
didn’t have existing vehicle models to build from.  It didn’t have legacy
technologies.  Nor did it have millions of vehicles, hundreds of thousands
of employees, or scores of existing suppliers.  For better and for worse
— and Tesla’s journey has encompassed both — it started essentially from
scratch, and bet big on its sole objective, rather than hedging its bets across
numerous markets using varied technologies.

Last fall, Nathan Furr, a professor at INSEAD, called Tesla’s strategy “brilliant.”  He pointed out:

…a long research tradition underscores that when incumbents face a new technology architecture, they struggle to understand and adapt…

Although incumbents may imitate the new architecture, they have a hard time overcoming the way they have done things in the past and to match the superior performance of the new, purpose-built architecture…

It’s always the little things that get in the way – such as the fact that most vehicles built by other manufacturers have up to five separate software systems rather than a single integrated system like a Tesla, which gives a performance advantage.

Professor
Furr believes Tesla is competing at a high risk, high reward, system level, not
a product level:

The truth is that consumers don’t want products,
they want solutions. Most car makers deliver products. But Tesla tries to
deliver a complete experience: car, upgrades, charging, insurance – the whole
bundle.

Meanwhile, of course,
healthcare is the industry that still relies on the fax and CD long after most
other industries have moved on, that views sharing data as anti-competitive,
that finds disclosing prices (or quality results) too difficult, and that
literally uses a still-in-use 200 year-old technology (the stethoscope) as its
symbol.  

And yet…

In healthcare,
hospitals, doctors, and pharmaceutical companies account for essentially the
same shares of spending that they’ve had for at least fifty years, old school
vendors Epic and Cerner dominate the EHR market, and healthcare is patting
itself on the back for efforts to “reinvent” primary care and to
deliver “digital health.”  

It’s always the little
things that get in the way…  

Health care is
different, pundits claim.  Health care depends on the doctor-patient
relationship, they preach. Health care is maddeningly complex, full of
visible and invisible middlemen, they complain.  Health care must
“first, do no harm,” making innovation both harder and for higher
stakes, they warn.  

Maybe.  

But healthcare also
seems to rely on doing more things to more people for more money, without
necessarily ensuring that the results are worth it.  Lots of people are
making money in healthcare, and they like it that way.  There is ongoing
debate about what portion of our spending is unnecessary, how much of our care
is ineffective at best and harmful at worst, or how many of us suffer or even
die from medical errors.  But whatever the exact numbers, most people
would agree that each is too high.  

Who in healthcare is six
years ahead of the rest of the industry, in anything?  Who in healthcare
is less concerned about disrupting its existing supply chains of healthcare
professionals, facilities, and manufacturers, and more concerned about
patients’ experiences and outcomes?  Who is inventing and delivering
“new, purpose-built architecture”?  

Tesla may be
wrong.  We may never go fully to electric vehicles.  Self-driving
vehicles may be a pipe dream.  Its build-it-here approach may blow up or
might never prove profitable.  But, gosh, you have to love the chutzpah,
and how it is moving the huge auto industry.  

Where’s healthcare’s Tesla?  

Kim Bellard is editor of Tincture and thoughtfully challenges the status quo, with a constant focus on what would be best for people’s health.

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Consumer Health Tech Market Outlook for 2020 | Robert Garber, 7Wire Ventures

By JESSICA DaMASSA, WTF HEALTH

7Wire Ventures is a venture fund that invests in early-stage healthcare companies that are focused on connecting with the healthcare consumer — kind of like one of the most successful companies in its portfolio, Livongo, which went public in 2019. Robert Garber, a partner with the firm, stops by to share his point-of-view on where the consumer health tech market will be headed in 2020, if we’ll see more exits, and whether or not consumer health will be able to gain traction with healthcare’s established players like payers and health systems.

Filmed at J.P. Morgan Healthcare Conference in San Francisco, January 2020

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Out of Network? Cigna, RICO and where’s the line?

By MATTHEW HOLT

Sometimes you wonder where the line is in health care. And perhaps more importantly, whether anyone in the system cares.

The last few months have been dominated by the issue of costs in health care, particularly the costs paid by consumers who thought they had coverage. It turns out that “surprise billing” isn’t that much of a surprise. Over the past few years several large medical groups, notably Team Health owned by Blackstone, have been aggressively opting out of insurers networks. They’ve figured out, probably by reading Elizabeth Rosenthal’s great story about the 2013 $117,000 assistant surgery bill that Aetna actually paid, that if they stay out of network and bill away, the chances are they’ll make more money.

On the surface this doesn’t make a lot of sense. Wouldn’t it be in the interests of the insurers to clamp down on this stuff and never pay up? Well not really. Veteran health insurance observer Robert Laszewski recently wrote that profits in health insurance and hospitals have never been better. Instead, the insurer, which is usually just handling the claims on behalf of the actual buyer, makes more money over time as the cost goes up.

The data is clear. Health care costs overall are going up because the speed at which providers, pharma et al. are increasing prices exceeds the reduction in volume that’s being seen in the use of most health services. Lots more on that is available from HCCI or any random tweet you read about the price of insulin. But the overall message is that as 90% of American health care is still a fee-for-service game, as the CEO of BCBS Arizona said at last year’s HLTH conference, the point of the game is generating as much revenue as possible. My old boss Ian Morrison used to joke about every hospital being in the race for the $1m hysterectomy, but in a world of falling volumes, it isn’t such a joke any more.

But it’s not as if this is a new issue. Back in 2009 I was writing about Ingenix’s (now called Optum/UHG) problems with trying to figure out what usual customary and reasonable (UCR) prices to pay for medical procedures. Essentially UCR prices (the ones baked into but not defined by Medicare) were made up, and the whole American health system’s cost structure follows along.

It wasn’t supposed to be this way, or at least not by now. The theory, taught to brave young health policy types like me decades ago, was that intelligent buyers would give integrated plan and delivery systems a fixed amount of money per head, and that those organizations (basically Kaiser & Geisinger) would be so much more cost effective that they’d force every other hospital system to become like them. Two decades of M&A later and it’s clear that the alphabet soup of HPO, IDN, ACO et al. has meant little. In practice, local monopoly or oligopoly provider systems have bought up the referring physicians and worked hard to feed the beast—the expensive inpatient procedural services where they make their money. And of course because of their oligopoly status they have been price setters not price takers. The recent $575 settlement for overcharging by Sutter Health is exhibit A of typical health system behavior. But it was presaged two decades ago by similar settlements by Tenet and HCA. The reward for that bad behavior? You get to be Governor/Senator of the great state of Florida!

The casual observer might notice that while the odd case of outright fraud by the little guys gets trumpeted by the DOJ there are no real punishments for the HCA/Sutter level of pricing extortion. No one goes to jail and the cost of the fine is never enough to put the miscreants out of business.

Which gets us back to the present debacle around surprise billing. While everyone can pretend to be appalled, the insurer doesn’t pay directly—the patient or their employer does. Meanwhile the providers are able to stop any real action in Congress. The provider defenders, like Anish Koka writing on THCB last year, say they want a baseball-style arbitration system, and that anyway the problem isn’t as bad as the extreme cases bandied about in the press. They may be right, but they’re just fighting their corner, and they don’t seem to be on opposite sides from insurers in the long run.

But we now have a real doozy. As reported by the folks at consulting company AVYM, one of the BUCAs, in this case Cigna, is being accused of playing both sides off against the middle in an out-of-network billing case.

 The lawsuit alleges that CIGNA accepts the out-of-network provider’s claims at the full billed charges and requests the same amount from the self-insured health plan. However, instead of paying the medical provider or member, CIGNA hires a Repricing Company to try and negotiate a reduction. If the provider refuses to negotiate, CIGNA pays the claim at an exorbitantly low level but appears to keep the difference between what was removed from the self-insured health plan and what was paid to the medical providers. In an attempt to conceal this from the patient and self-insured health plan, CIGNA issued Electronic Remittance Advice or paper Explanation of Benefits forms (collectively, the “EOB”) misrepresent the balance as “Discount” to the members, certifying the member is not responsible for the balance, while simultaneously representing the balance to the Plaintiffs as member liability or “Amount Not Covered”. Astonishingly, the complaint alleges that CIGNA, after being advised of these anomalies, not only refused to correct the issues but instructed the medical provider plaintiffs to sue to rectify the situation! 

This (allegation) is pretty brazen. Cigna gets the huge bill. It then takes that money from its employer client’s account. But instead of giving it to the provider, it keeps it, covers that up, and tells the provider to sue the employer for the difference that it has already taken.

Uncle Billy gives Potter the Building & Loan’s cash by mistake

Any similarity to the scene in It’s a Wonderful Life where old man Potter keeps the money Uncle Billy accidentally gave him and tries to later bankrupt the Building & Loan seems to be completely intentional.

You have to ask, who here is working in the patient or end buyer’s interest? And the answer seems to be, no one. The lesson of previous decades has been that health care companies can push the line as far as they like, even to beyond what looks like outright fraud, and nothing much will change.

What’s amazing is that the people paying the tab—the employers, the government and the patients themselves—seem to have no understanding that this is going on, and have few weapons to deal with it. Dave Chase and his Health Rosetta movement continue to point out a few cases where employers have figured out the game, but those best practices remain rare exceptions.

One might assume that a rational nation would look at this and agree on a single or multi-payer fee schedule, as exists in most other fee-for-service based systems like France, Canada, Germany & Japan. Or it’s time to put in a real version of global budgets either by government fiat or managed competition as I was taught years ago. But given the state of American politics, even though the Medicare For All cries are getting louder, no one seems to seriously believe that any rational policy is going to happen.

Instead the logical outcome is that in the pursuit of profit, every participant in the system will keep pushing up to and over that imaginary line. Perhaps there is no line. But unless the buyers completely revolt, not much will change

Matthew Holt is the publisher of THCB.

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Behind the Big Deal: Teladoc Health’s Acquisition of InTouch Health | Joe DeVivo, InTouch Health

By JESSICA DaMASSA, WTF HEALTH

It was a seminal moment in virtual care as Teladoc Health acquired Intouch Health for $600 million, effectively taking its mostly direct-to-consumer telehealth platform directly into more than 2,500 care providers — or, as they say, “from hospital to home.” We caught up with InTouch Health’s CEO, Joe DeVivo, to hear his thoughts on the deal, including what it means for the further advancement of virtual care and for the digital health industry at-large.

Filmed at J.P. Morgan Healthcare Conference in San Francisco, January 2020

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The Legacy of Forced Sterilizations

Brooke Warren
Phuoc Le

By PHUOC LE, MD and BROOKE WARREN

In the 1970s, Jean Whitehorse, a member of the Navajo Nation, went to a hospital in New Mexico for acute appendicitis. Years later, she found out the procedure performed was not just an appendectomy – she had been sterilized via tubal ligation. Around the same time, a Northern Cheyenne woman was told by a doctor that a hysterectomy would cure her headaches. After the procedure, her headaches persisted. Later, she found out a brain tumor was causing her pain, not a uterine problem. Like Whitehorse and the Northern Cheyenne woman, thousands of Native American women have suffered irreversible changes to their bodies and psychological trauma that continues to this day. Most medical providers are unaware of our own profession’s role in implementing these racists policies that have direct links to the Eugenics movement.

Eugenics was a “movement that is aimed at improving the genetic composition of the human race” through breeding. From its origin in 1883, eugenics became the driving rationale behind using sterilization as a tool to breed out unwanted members of society in the United States. With the 1927 Supreme Court case Buck v. Bell permitting eugenic sterilization, 32 states followed suit and passed eugenic-sterilization laws. Although the outward use of sterilization declined after World War II because of its association with Nazi practices, sterilization rates in poor communities of color remained high throughout the United States.

Map showing the 32 states that created laws permitting eugenic sterilization.

The 1970s marked a period when Native American women were
explicitly targeted by forced and coercive sterilization practices. Native women, as young as 15, were threatened, lied to, and
manipulated into receiving these procedures. This continued the United
States’ legacy of tribal assimilation and
extermination
. It is estimated that
between 1970 and 1976, 25 to 50 percent of Native American women were sterilized.

For every 7 Native American babies born, one Native American woman was sterilized.

In 1975, Senator James Abourezk of South Dakota asked the General Accountability Office (GAO) to conduct a study on Indian Health Service (IHS) facilities in response to increasing reports of women being sterilized without proper consent. The report found that from 1973 to 1976, 3,406 Native American women were sterilized. Of these women, 3,001 were of child-bearing age (15-44). Additionally, hospitals did not meet the IHS requirements for giving their patients informed consent.

From the GAO report, Senator Abourezk stipulated that the number of Native American women sterilized at these four hospitals from 1973 to 1976 was comparable to 452,000 non-Native sterilizations.

Image of an infographic created by the Department of Health, Education, and Welfare to convince Native American women to be sterilized.

Forced and coercive sterilizations were carried out by doctors threatening to have patients’ children put into the foster care system if they did not have the procedure, telling patients that hysterectomies were reversible, doing the surgery without approval, convincing patients that their welfare benefits would be taken away, and saying they would die if they did not have the procedure.

Dr. Connie Pinkerton-Uri (Cherokee/Choctaw) found further
evidence supporting that most sterilizations were unjustified by studying the
notes on 132 sterilizations done on Native American women in Oklahoma. The
doctors classified 100% of the sterilizations as non-therapeutic, meaning they
were done with the full purpose of preventing further pregnancy—not to treat
medical conditions.

With Native American women’s reproductive rights controlled by physicians during the 1970s, the number of Native American women capable of bearing children dropped below 100,000 in the United States.

Women of All Red Nations (WARN) was a group that spoke about the forced sterilization of Native American women.

The legal system coupled with clinician paternalism is what allowed for forced sterilizations to occur on a large-scale. President Richard Nixon’s Family Planning Services and Population Research Act of 1970 provided federal funding for sterilization as a family planning service for IHS and Medicaid patients. This gave physicians with paternalistic and racist agendas the means to carry out thousands of unnecessary sterilizations in poor communities and women of color. In five years, sterilization of women had increased 350% with 1 million women sterilized each year.

Physicians were given the power to impose their “middle class
attitude” onto their patients and be
supported by the government for doing so, instead of learning to be culturally
sensitive. The middle-class attitude carried the assumption that single mothers should not
reproduce, poor families should not have children, and families should not
exceed two children.

50 years later, we are still trying to understand the extent and
impact of what happened to Native American women during this era in the United
States. Native American women lost loved ones, could not carry on tradition,
and ended their lives—all because of biases and manipulation in healthcare that
resulted in their sterility.

For many Native American women like Jean Whitehorse, having children and taking care of a family are two of the most important roles one can hold in a lifetime. Taking away her ability to reproduce disconnected her from her Navajo traditions and family.

Although an unjust legal system allowed and incentivized
sterilizations during the 1970s, it is doctors who enabled the system to be
successful in its racist agenda.

Today, healthcare professionals must find ways to combat
policies and systems that are still inherently racist. One strategy is
practicing trauma-informed care as we discussed in one of our recent blogs. We can learn more about the communities we are serving and
provide medicine that acknowledges what patients are experiencing both in and
out of the healthcare setting. From organizations like  White Coats For Black Lives supporting #BlackLivesMatter to individual efforts like
Dr. Connie Pinkerton-Uri who demanded research into forced sterilization of
Native American women, clinicians have a responsibility to shed light on
injustices in the system, and ultimately aid in the dismantling of racist
structures that have a legacy of impacting countless vulnerable communities of
color.

Internist, Pediatrician, and Associate Professor at UCSF, Dr. Le is also the co-founder of two health equity organizations, the HEAL Initiative and Arc Health. 

Brooke Warren is a Native American Studies major and recent graduate of UC Davis. She is currently an intern at Arc Health.

This post originally appeared on Arc Health here.

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What’s Ahead for Livongo & the Health Tech Market in 2020? | Glen Tullman, Livongo

By JESSICA DaMASSA, WTF HEALTH

What does Glen Tullman, Chairman of Livongo, expect from the health tech market in 2020? Livongo may have started a “race for the exits” in digital health with its 2019 IPO, and Glen says he “wants a healthy, consumer-facing digital health market” to help his own business thrive. Does that mean he anticipates more IPOs from the health tech sector this year? We get Glen’s predictions after we catch up on Livongo’s recent moves to partner with DexCom and test a new pathway to reimbursement via Express Scripts’ Digital Health Formulary.

Filmed at J.P. Morgan Healthcare Conference in San Francisco, January 2020.

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