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Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open ended exploration of markets, ideas, methods, stories and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date. An investor field guide, dotcom. Patrick O'Shaughnessy is the CEO of O'Shannassy Asset Management, all opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shannassy asset management.

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My guest today are Roger Ricci, Nikita Singer and Jason Black of Ahrari Ventures. Ahrari is a New York based VC firm, investing in early stage startups with more than four hundred investments over its 25 year history. Roger, Nikita and Jason focused their time in the world of health care, investing a topic I haven't explored much personally or on this show, we discuss the current landscape for health care, investing, the variety of stakeholders in the health care value chain, the opportunities for founders and investors in the space, what excites them about the future and the impact covid has had shaking up the industry?

I hope you enjoy my conversation with the Ferrari team. So, Roger, Nikita and Jason, I cannot remember the last time I had three people on the line, so this is going to be a lot of fun and we're going to explore a topic that I don't think I've ever explored on the podcast, which is the non biopharma part of health care investing. So I think there's a lot to learn. And this is the perfect time given the situation that we're facing to have this exploration.

Roger, I thought that a neat place to begin would be for you to walk us through how you and your team think about what makes for an attractive market or segment to invest in in the first place. We were talking offline about sort of how you explore areas. And I just love to hear more about that process because I think the market you pick can be so important to outcomes. And obviously I'm curious why health care in the final analysis was so interesting to you and your team.

Generally speaking, Ari's been around for twenty six years and our original thought process was no venture capitalists in New York twenty six years ago. That's going to be a burgeoning ecosystem. And so let's deposit ourselves there. I guess 10 years ago, we decided to supplement our localized strategy with the thesis driven strategy. What we generally do is every partner picks a team. I picked Jason and Nikita here. We'll pick a sector that we think could be exciting and we'll do a bunch of homework in it.

About six or seven years ago, we picked health care as a thesis for us to focus on. We went to a bunch of industry experts. Universities built an overarching thesis around why health care would be valuable. Sometimes we've done this a couple of times where we've come to the conclusion that timing is wrong. Many, many years ago, we picked robotics and battery density. Battery technology as a sector to focus on came to the conclusion that it wasn't a good venture.

But in this case, about half a dozen years ago, we decided did the homework on health care and came to the conclusion that it was a good sector. Our framework is probably four things. Well, the first and foremost, we look at the size of the market, but obviously the sector has got to be a multi-billion or trillion dollar sector, which health care is. The second thing we do is we look at the largest technology discontinuities that have hit our economy.

And those three, frankly, sort of started with Internet 20, 30 years ago in earnest. And then it was followed by mobile and then followed by cloud. And those three tech segments have impacted virtually every industry. And music is a great example. It's an easy one for people to digest. So an Internet sort of was at its onset. We had two startups that were sort of unicorn MySpace and Napster that were sort of enabled by the Internet.

And then when Mobile came out, we had Android and iTunes available, mobile created billion dollar markets for music. And then when Cloud became a repository for not only data but consumption and compute power, Pandora and Spotify were created. Each of those technology discontinuities have impacted music in a big and profound way. So one of the things we do is we look at what sectors haven't been impacted by that. One of the ones we came up with at the time was health care.

We dove into that. Another one, by the way, is real estate, also a massive sector that hasn't been impacted? That was one piece of the framework we looked at. A second piece of the framework we look at is, is the industry have a lot of fragmentation associated with is there an opportunity for standardization and consolidation? And it's absolutely true in health care. The logic in health care is if you see in one hospital system, you've seen one hospital system, they all run uniquely.

They all keep their data in silos. They don't share it. Everything is custom piece of software that's created. There's a lot of opportunity from a fragmentation standpoint. The third thing we look at is, is there excessive waste or cost? And so is there an opportunity to create efficiency in that space? Absolutely true in health care. And we can jump into more of that as we go through this. And then the regulatory framework, is there a regulatory framework that enables entrepreneurship or is there a deregulation on the horizon that is going to enable?

So along with our sort of macro thesis, is this a big enough market? And along with talking to a bunch of industry experts, we look at it from the perspective of this framework. And frankly, health care ticks all the boxes. That's why we jump in.

I love the framework of unaffected by major trends in tech, fragmented, wasteful and regulation. Sort of the great ways to think about a great opportunity are a great area to invest in. I'd love to pick apart a little bit more what the state is today. So six years ago is one thing. I don't know how much has changed through to today and thinking about the current opportunity and landscape, how would you describe health care today along those same four variables?

Maybe over to you, Jason.

Yeah, well, I think just at a broad. Scale, it's helpful to actually put some numbers to this as well. Health care is a three point six trillion dollar industry. One hundred and thirty three million Americans will have at least one chronic condition over their lifetime. It's our nation's largest employer and it's the fastest growing job sector. With 18 million health care workers out there, there are 54000 health care companies with more than 10 employees. And eleven thousand dollars are spent on average per person.

And that's going up over time. And it's also an incredibly wasteful industry. As we kind of touched on as Roger touched on a little bit in our kind of overall framework, there's two hundred and ten billion dollars wasted every year on unnecessary services. One hundred and ninety billion on excessive administrative costs under the 30 billion effectively delivered services. One hundred and five billion on overpriced services that are prices are too high. Seventy five billion in fraud and fifty five billion in missed prevention opportunities.

And just to give you a sense of scale, the entire US market size for CRM software. So think Salesforce, Sugar, CRM, et cetera, on the list is just twenty six billion dollars.

Once again, it's not only that these kind of like four areas of our framework were lit up by health care, but it's shining bright like the sun. I mean, this is a truly massive and effective market.

I have to ask the question now that I probably should have started the conversation with, as I think about it, which is around price and pricing of medical services, we'll call it. This feels like the elephant in the room that again, from the cheap seats that free market forces not saying those exist really in truth anywhere. There's always regulation and lots of stakeholders, but it really seems as though they don't exist in the medical world, that what we're paying is not a clearing price.

It's affected by some other weird set of circumstances and players. And so I'd love if each of you or one of you would be willing to just explain to the audience how you think about pricing in this sector and where it needs to change and whether or not that represents opportunity to build businesses.

I'm happy to chat about that. I mean, health care is really the principal agent problem on steroids. There is no other industry really where I have no idea what something is going to cost when I go in, whether it's get a procedure done or whether it's to fill a prescription, I just have no clue. And part of it is because of the way that the system is set up. Medicare, thank God we have Medicare in many ways because at least you have a sense of how much things cost, because Medicare says these are the price ranges and the way the CMS decides what those price rangers are.

They'll look at the entire ecosystem of pricing and they'll say, OK, this is the general bar for what pricing should be. But after that, when it comes to particularly insurers that, yes, they cover Medicare, but they also cover commercial, they can negotiate rates however they want with providers, with hospitals, et cetera. Those contracts are privileged. They don't have to disclose their rates. A lot of this stuff is built over time, going back again and again.

What Roger has said around sequencing because of more consumerization of health care, people are demanding that they have a better sense of what prices are. That's why we're seeing people shop a lot more for their health care, whether it's people using companies like a wheel or a true pill or an hour to find to get their prescription medication, or it's using different tools to understand how much things like different MRI costs. That was really never the case. You can really do that before you can shop around and look at prices like you can on a good hour.

But there have been recent changes and I think a lot of it has to do with just how expensive health care has gotten with the rise, what's referred to as a deductible plan. I know that Roger has spent a lot of time thinking about this, but deductibles are just thousands of dollars that an individual has to spend before insurance kicks in, and that has only grown over time. So before a deductible, maybe you'd only spend a thousand dollars and then after that, insurance would kick in and pay for stuff.

Now you have deductibles that are two thousand dollars, three thousand dollars if your family can get up to ten thousand dollars. And with care being that expensive and I think now the numbers are individuals and families are spending. Thirty three percent. They used to be spending around eight percent of all of the health care costs and now they're actually spending around thirty three percent. That's a lot more money that they're spending. So consumerization has played a role in them shopping around.

And now the government has also stepped in and said, now you have to disclose prices. And there's this thing called the chargemaster, which is a little bit antiquated, but it's essentially a really long list that every single hospital and provider group has with the kind of benchmark of pricing. Usually prices are much more expensive than that, but they have that benchmark. And the government said you have to disclose that chargemaster. Now everyone gets to see what prices are.

Hospitals sued the government. The hospital said, no, we don't want that to be the case. You can't get us to disclose his private information. That's. Continuing to play out, but I can't even imagine another industry that has sued the government for disclosing prices. So now, thankfully, again, with interoperability playing a role, with more of these mobile devices coming around with the ability to shop and seeing pricing, consumers are really taking health care into their own hands.

And I think there's going to be a bunch of companies we've already seen a few and I named a few earlier that have stepped into that role and said, you can be a consumer in health care, you can shop around for health care, and that can be a really successful company rather than some of the companies that used to when maybe they will kind of shrink as pricing, transparency. And really shopping becomes more of a factor in how people make health care decisions.

Yeah, I'm just going to supplement that a little bit. That was great. Mikita. I think that there's two factors. One, I think there's this prevalence of high deductible plans that Makita mentioned. It's massive. I mean, a lot of people are getting high deductible plans. And we actually made a bet in a space called Bend Financial, which is there's something called a health savings account HSA. And if you get a high deductible plan, you can get this HSA vehicle.

It's a lot like a 401k. You don't have to use it in the year. Typically what happens is you get a high deductible plan and your employer will give you an HSA and they'll give you a thousand dollars each year that they'll contribute in the HSA. And then you can put some of your pre-tax money in there to that. Money doesn't have to be used in a year that you put the money in. And if you leave the employer that money yours, it's like a four one.

Can you take it? And you can invest that money in stocks, you can invest it in mutual funds, or you can have it just sit there and accrue interest. But the stipulation is you have to use it for health care and you can actually give it to your kids if you die. There's a lot of people in America that have eligibility for these plans and all of a sudden high deductible plans. HSA is now people are going to be much more careful about shopping around and figuring out, hey, this is part of my savings.

I'm actually contributing to the health care system. It's not like I just have to take it on the chin. I go to the doctor. Doctor tells me what the bill is. I might get another consult really quickly and find out whether this MRI can be a lot cheaper someplace else. So we're seeing that as a little bit of the crack in the dam. The other big crack in the dam in the health care system is going to be covered.

The reason being a lot of these insurance companies are minting money right now. The employers are sitting there saying, look, you've got this monthly plan, they're contributing money toward it, the employees contributing money to it. But nobody's going to see the doctor other than I might have covid I got to get a test on everybody sitting at home. There's a lot of wealth being created in these insurance companies today. And you better believe the government is going to be looking at that and saying, hey, wait a minute, you just accumulated all of this revenue without incurring any costs.

It's like car insurance companies. I'm sure you're seeing this. I don't know if you have a car insurance company that's refunding you. My company refunded me some money because nobody's driving. There's no accident. So wait a minute.

I'm paying you for monthly insurance for my car and I'm not driving it. And you're just accruing this big balance, will. Same things happening in health care. So I think you're going to see a little bit of a flip where regulatory bodies are going to get involved and say, hey, wait a minute, you minted this money, you didn't give it back to the population. Why didn't you just decrease the amount you're charging? And, oh, by the way, what are you really charging for?

So I think those two factors, the consumer driving that behavior and then the government driving that behavior might create a little bit of fissure in that, then. Yeah, I guess the final thing is just a little bit like why are we even here? We've kind of taken the assumption that things should cost as much as they do. But if you look at the US health care system relative to the others around the world, we're one of the most expensive and obviously the least predictable as we're talking about.

You can have an MRI for two hundred and fifty bucks, so you're going to have one for six thousand. And that's an acceptable range somehow in our health care system. That doesn't even necessarily have to be the case. And originally what's happened is basically the consumer has been completely divorced from the cost. I go in and I have insurance through my employer, which is how most people have, and they're completely shielded from what that deductible might be. I'll pay 30 bucks maybe on my way.

And for some services that don't even necessarily know how much they cost because I don't have to. That was really the result of employer based insurance that was really started during the First World War as an employee benefit that's persisted and basically divorced. The cost of health care services from the people who are actually paying, who are the insurers. And if you actually look at the cost of an employee from the employer perspective, that's where the cost is really caught, where insurance cost is going up for employers.

But I don't see that as my salary. That's just what Ahrari spends on my health care insurance. But I never really get to see that number and most people don't get to see that number. That's really what's created this disconnect. There's a fantastic book if you want to read more about. How kind of employer based insurance is created, we're so famous for having capitalism in the United States kind of above all else, and yet we have health care, one of our largest industries.

Is it really driven by those same principles? In a weird way, it's kind of corrupt. The book is called Catastrophic Care Why Everything We Think We Know About Health Care is Wrong. And the book is by David Goldhill. And it's a fantastic read.

I'm wondering if there's some convenient way to talk about this whole system through the eyes of its major stakeholders. I'm not sure. Again, not knowing a ton about this area, whether it's more useful to don the consumer's point of view, the doctor's point of view, the insurance company's point of view payers, what do you think are the major stakeholders? Are there one or two of those groups that you think it's most convenient for those listening to think about potential innovation in health care?

I think all of them are thinking about innovation. There's actually an interesting book called The Patient Will See You Now by Eric Topol. It was actually one of the things that I did in researching health care before I started investing, I talked about the three biggest trends being Internet, mobile and cloud. But there's a fourth, which is like a program, I call it like three prime, which is consumerization and consumerization is obviously impacted a lot of industries and create a billion dollar market caps, especially consumerization of sort of enterprise companies.

But I think patients are starting to take control of their health care. I'll just start with that and then I'll talk about the five constituents that actually matter in health care. I'll give you an example. So when you get sick or you get a malady or something like the first thing people do is they go on the Internet and they're like, OK, how do I take care of my diabetes? How do I take care of my liver disease? I don't I take care of my kidney disease.

How do I get a high blood pressure? And they usually find an app and it's like, oh, this app is great for managing or controlling. So patient will sort of download the app on their mobile phone. So easy to do. And they'll go to their clinician and say, hey, I want to manage my diabetes using this application. And the clinician will say, oh, you know what? That's a great app. I've heard good things about it, but I don't know if it ties into our electronic health records.

But let me go check so they'll go and talk to their I.T. person. And the I.T. person says inevitably, yeah, we can tie it into the, ah, the two year waiting list. We have two hundred apps ahead of you. So there's frustration at the patient level, frustration at the clinician level, frustration at the right level. And then there's two other individuals in this ecosystem. There's the payer that wants access to the data out of the cars in terms of figuring out how to pay and what they need to pay and whether they're overpaying or underpaying and obviously value based care where they're trying to get great outcomes in the end.

Or the most important piece here. And then the last piece of the equation is these medical application or device companies that are hot shot, Internet people, entrepreneurs. And they created this great app and now they're divesting about seventy five percent of their energy, trying to tie in with the individual charged as opposed to creating a second version of the app. So all of that created this massive frustration. And I think I mentioned this. We think about markets as unlocking sequentially, not in parallel, but sequentially.

So I think the opportunity in health care is one big step and then a lot of little steps. And the big step to solve first is interoperability. How do you help the medical application company or that medical device that the patient really wants to connect in with, the electronic health record that the clinician that's the center of the universe, that's how they prescribe. That's how they do billing. That's how they keep a patient record for long term. And how do you get payers to get access to that medical record?

And then full circle, how do you take that data that sits in the medical record and create better programs to take care of more people? The first step in sort of unlocking health care as a innovative sector is to help create interoperability there. Then once you have interoperability and data exchange can happen on the easy basis, then you can do a whole bunch of stuff. You can do things that are really innovative for one stakeholder, which is a payer.

Now they get access to the data and they can think about how am I overpaying for this type of exam or this type of study? Can I be constructing reimbursement at a level that is more aligned with what works and not create as much waste in the sector? You can do something interesting for medical application device companies because they don't have to spend a lot of time and energy trying to integrate with these one off health care systems. They can just build the app and interoperability will happen.

You can get things like a unified patient record for the patient so that they can go to the best provider. You can anonymize the data. And you can maybe figure out that there's a better cancer treatment for those of Asian Indian descent than of Caucasian descent, and all of that can be done. But sequence one needs to be unlocking the data. I think there's five stakeholders. There's the consumer, there's the clinician. There's the I.T. person that runs the fabric within the hospitals and or the small clinics.

There's the payers. And then ultimately there's these medical application device companies that if they really want to have the ability to innovate. So I think that that's happening. I think that interoperability piece is what that landscape is changing right now. And there's a lot of regulatory shifts that are forcing that, which we're really happy about, not only because we have a good investment in this base, but we think it's the framework by which a lot of other innovation will happen.

But I think there's also point solutions that are going to get created in a variety of different sectors. Some of them are going to be focused on each of the different participants. The clinician stuff might be things that help the clinician get control of his or her time because they are overwhelmed. I mean, they are absolutely overwhelmed. Typical doctor only spends a third of their time actually seeing patients and two thirds of their time doing administrative tasks.

Crazy, absolutely nuts. And there's doctor burnout all over the place. So are there tools and things that can help facilitate that? You've got these medical application companies that are one and done because then they get sort of, oh, crap, how am I going to tie in with this particular hospital? And this hospital's got a different system and yadda, yadda, yadda. The patient man. We are looking at some really interesting tech in that space, but I think it's still a long way to go, which I mean, if you've ever filed a claim with your medical insurer, you don't know how much you're going to pay.

You don't know how much they're going to reimburse. You don't know ultimately when you're going to get paid back. And then there's just no transparency in that process. There's no efficiency in sort of submitting. There's no efficiency in terms of seeing where things are in the funnel. I mean, we're looking at a bunch of spaces, but I think that there's massive opportunity to unlock health care. But as I said, the first step is really democratizing the data.

There are so many things to ask about in sequence. Follow your theme and follow up, because I guess first and most importantly is I love this idea that I've been playing with, which is that covid is this inertia killer, that there's so much inertia institutions, generally speaking, definitely in the medical system where oftentimes as a consumer, it just feels like it's so complicated and screwy that there's just no understanding. And it's like Stockholm syndrome. You accept the circumstance and move on, even though it seems ridiculous.

Say a bit about the ways in which covid is creating the necessary shake up around the data layer, the interoperability layer, and whether we think that really is a game changer.

It's a game changer. It's a game changer. You can't put the genie back in the bottle. You can't put it back in the bottle. I will tell you, it's really fascinating. There's going to be books about the impact of covid on health care, but prie covid lots of regulation. People love it. The people Hatikva. And I don't know if you know what it is. It's a privacy law. And it was created initially to prevent lots of inequalities from happening.

If you had an illness and your employer could find out about the illness and might not give you the job, they just said, look, it's all private, but it's created a firewall that has really prevented a lot of innovation in the space. Then there was other regulatory stuff, which is doctors saying, hey, if you really want quality health care, you got to come in the office, come in the office. We're not going to do any analysis when you're at home.

And then there was laws around credentialling. If you're a nurse and you want to work in New Jersey versus New York versus Connecticut, you better be credentialed in each of those states.

And there's different credentials, frankly, ninety nine point nine percent of it's the same. But you just have to go through the effort and the cost associated with it to all of this regulatory overhead. Just sat there and then it happened. And I will tell you, it's a tale of two cities in health care. When Cauvin happened, a bunch of doctors and hospitals were overwhelmed, people who were doing sort of primary care and dealing with specialty care. And then you had a bunch of optional surgeries and elective surgeries.

These hospitals and these doctors are slowly going out of business because people say, if I have an elective surgery, I might catch covid going out and I've got to be quarantined or I got to stay put. Nobody's getting any business. The government said, well, listen, we've got this regulation that prevents telemedicine. And frankly, it's a lot of the doctors were the ones demanding that you come in their office because they could deal a lot more so the government can do a bunch of stuff.

They allowed credentialing to occur across states easier. So you could actually work across state and you could go nurses could go where the demand was greatest. They started reimbursing telehealth at the same level. As in face, doctors visit, that was profound all of a sudden doctors were like, hey, I got to make some money, otherwise I'm going to go out of business. I'll do this face time consult or I'll do some kind of virtual consult. And I get paid just as much as if you came into the building and the doctors loved it and the patients loved it.

Genie out of the bottle, credentialling genie out of the bottle, HEPA rules being relaxed, genie out of the bottle. Now, I don't think it stays exactly this way. I think that there are certain things the government's going to say. I think pendulum's going to swing far in one direction and people are going to be like, well, no, you really can't do like a heart condition analysis without going. And there's no way we can reimburse just as much for telecom sold as it coming in, because, frankly, there's an efficacy issue.

Are you actually getting a good consult for certain things over virtual? So I think some of it's going to flip back, but not all of it. I think Virtual is here to stay. I think credentialling and the easing of restriction around credentialling is here to stay. I think that the desire for telecom insults from both the patient and the doctor level is here to stay. So I think we've moved forward like 10 to 20 years because of covered in health care.

I think it's profound. I think it's a really, really profound.

Can one of you say a bit about this idea you've mentioned you kind of hinted at a few times of and this goes back to the consumer experience, this idea of remote patient monitoring. And you just have to imagine I love Josh Wolf's term, the directional arrow of progress like these things just keep advancing. I would love to hear from someone on what is the cutting edge here, like what is the cutting edge of remote patient monitoring and what might we as consumers see in the next couple of years?

I think one of the ways that I've been thinking about what has Kobad really brought to light exactly what Roger was saying, you don't have to be in the doctor's office to be able to not just diagnose, but manage and understand your own care with all the tools that are now available to us. I think that's become so much easier for the consumer to play a much more active role in that. So one of the ways I like to think about it is because we're now more in control as individuals.

The doctor does not have to be the first point of care. You can use mobile, as Roger was saying, you can even bring diagnostics into the home. So we're seeing that with people who are able to purchase tests online, not just covid tests, but all kinds of other tests, whether it's for identifying whether you might have indications of a kidney disease early or something like being able to diagnose whether we have a UTI, et cetera. There are companies like a title care that merge both a video call with a clinician as well as being able to check some of your vitals.

And that's a really interesting movement that has not really taken place for the last five to 10 years. This is really in this moment right now, people feeling comfortable doing health care at home.

And we're also seeing more health systems and more insurance companies looking towards the home as being a locus where you can have parity of care. I think there's about a third of all procedures and care that takes place in the hospital that can be done in a home setting. So that might mean there is a clinician that can come to your home and do things like taking your vitals or doing a lab test, etc. or it might be me and just doing it a diagnostics test.

And this is where remote patient monitoring can play a role and passively having a sense of this is what my heart rate is. This is what my blood glucose A1 see as if I have pre diabetes or may have indicators of diabetes. If I went to the hospital for an acute acounter related to my heart, I want to get a sense of what my BPM is. That's something that remote patient monitoring can play a role in and why it's also additionally important for health systems as covid hit a bunch of hospitals and took away a ton of revenue that was coming from elective surgeries or even other types of procedures.

Hospitals and health systems really care about revenue expansion. They care a lot less about saving money. And that's because margins are really, really small for a lot of health care companies. One way to revenue expand is to create more ways of capturing revenue like remote monitoring is one way you can do that. It's a space that we've been looking into. There's a lot of companies who've already been building remote patient monitoring companies for the last three or four years.

But one thing that has been a theme here as well is just because a company is being built doesn't mean the market is there. And stroke of the pen innovation with regulations has actually allowed for reimbursements to happen. So we're seeing hospitals stand up, entire departments, dedicated remote patient monitoring so they can have a sense of what happened when this patient left the hospital and is in the home for the next 30 days. Can you track their vital signs? Can you use that to make the hospital even more efficient?

And to add on to that a little bit, it's broadly what we're talking about here when we talk about. Remote patient monitoring, that's actually a specific term, and it's in regulations about reimbursement codes for monitoring patients that have chronic conditions and tend to be a higher cost to the health system, which obviously insurers are more interested in. But I think more broadly, when we're talking about the Apple Watch and these at home tests, et cetera, the ultimate goal of this kind of health care system, reduce the ton of costs is really preventative care.

And that's what we see when we talk about used to be fee for service, where you get paid kind of by the drink. Doctors get paid for each surgery that they perform and therefore kind of incentivized to perform surgeries even though they might not be necessary. We've had regulation that's come in and really driven forward and create incentives for value based care, which kind of gets to this preventative measure. So as we see more Iot devices enter the home that are starting to get clinical grade, we have now an EKG on the wrist, a clinical grade blood pressure monitor at home.

All of a sudden, all those things you can take action as your individual consumer, take ownership over your health and actually get notified earlier on when you can actually prevent things. Now, we have these devices that can notify people that they might have covid. You can take steps and measures to actually have better health outcomes, even just as a consumer without the necessary steps of entering what is one of the most expensive health care systems on the planet.

I think you can actually categorize it in two spaces, Patrick. One is just wellness, and I don't think that's remote patient monitoring at all. I think that's just patient driven. If I decide to buy the Apple Watch or I decide to buy a Fitbit or I decide to buy a particular device to measure, that's from my own sort of edification. Even a thermometer, frankly, is not connected to the doctor. I think those are going to proliferate.

You'll see more of them because it's cheaper to create a device, cheaper to get an app certified in the store. And you're going to see all sorts of interesting stuff. Remote patient monitoring, which is actually going to your clinician and your doctor, I think is going to be relegated to two spaces. One is chronic issues where you actually can have something be actionable, like there's no sense sending your doctor your blood pressure every week.

Nobody cares if you don't really have really high blood pressure and you're not risk of a heart attack or anything like that, that is going to ignore the data.

Just don't time the too busy. But somebody with a chronic issue which has a heart condition or kidney disease or diabetes, those types of remote patient monitoring will proliferate. There are codes for that. The devices are getting cheaper, the connectivity is getting easier. And I mentioned the consumerization of health care. That's an important piece because with aging America, these devices need to be simple to set up and used. Not everybody is Internet savvy and or mobile phone savvy and app savvy.

You just got to make it really, really easy to set it up for those chronic cases. I think remote patient monitor is going to happen for them. And then there's going to be a separate category for remote patient monitoring, which is actually driven by the insurers. There's a law that says if you had a chronic issue and you're let out of the hospital, if in 30 days you're readmitted to that hospital for that same issue at the hospital and the care team has to have it, that cost, that's a massive burden on the hospital system.

That's what affects their margins and everything. Absolutely. They're going to send you home with a remote patient monitoring tool kit to make sure that nothing's going awry, that they can address any issues that are coming up within those 30 days. So I think from a monitoring perspective, we're somebody else at a clinical level is monitoring you. I think the next year or two. Those are the categories, chronic issues where it's actionable, like if you get a reading out of whack, you need to send somebody to the home because they've got kidney disease or diabetes or a heart condition.

And then it's going to be those people that are discharged from the hospital. And for the next 30 days, they need to be monitored. Most of the other stuff is going to be voluntary. At the consumer level. You really can't burden your doctor with a whole bunch of data on how many steps you've taken or what your oxygen level is or your heart rate or blood pressure is, unless it's actionable, unless it's really pertinent that the doctor get it on a daily basis.

And even then, I think we're going to apply a machine learning layer on top of that to rise some of that data to the surface of the clinician. This is not one of those markets where you can make infinite headway all at once.

I can't help but ask a kind of sci fi question, which is, do you think the natural end state of this at the end of the sequencing is some sort of ongoing passive programmatic diagnostic tool so that I notice my local town is monitoring the sewers to predict the levels of covid, for example, can imagine that in a single house and all these other sort of passive instruments that give you information. And then you don't have to do anything and the doctor doesn't have to do anything unless some threshold is.

Maybe that's where the mail comes in. Am I imagining that any state in the right way that we'll sort of all be connected to blood and insulin and glucose and all these are the things that a doctor would use anyway, upstream of doing a diagnosis and talked about sequencing.

But let's say you get full interoperability and then you could anonymize the data. Imagine every single medical test and or piece of medical data in the world is automatically exposed. I think the next part of that chain, if you got full interoperability, would be maybe a universal record. Everybody would have a medical record and it would be in the cloud or on your phone. You could switch doctors pretty easily or you go to another doctor and they could get all the data that they need.

That's an interesting benefit, but not the be all end all the be all end all is when that stuff can actually be leveraged for really interesting diagnoses, which is imagine genetics is in there. So imagine you had your your gene sequence in there and they figured out anonymized and completely anonymized that there's five different drugs associated with cancer treatment, like liver cancer, whatever kind of cancer that's out there. And they found out, OK, people in Connecticut and have European descent respond better to this drug.

And that's going to really change things up. And that's where I think it gets interesting. And I think A.I. and machine learning is going to create a layer of that. I don't know if we ever get to this Gattaca world where decide what sex your baby is. And I mean, it's not in our lifetime probably. And you're going to have perfect information about disease proliferation. Your town's doing the sewer test. There is connected thermometers out there where you can actually see what the temperature of pockets of the country are trending toward.

And you can see sort of disease proliferation as a result of that. It's going to be interesting. I just don't think we're in a position where all of that data is ready the end. It's an interesting thing to think about. I just don't think it comes in the next 10 or 15 years.

One of the great themes that you've mentioned a few times, each of you now in the conversation, is this idea of efficiency that so much of the opportunity here on the non biopharma side is eliminating inefficiencies and waste from the system. I think clinical trials is something high on everybody's mind right now, because obviously you want things that you're going to take or ingest or whatever in your body to be put through the proper motions. But of course, everyone wants a vaccine for covid or whatever therapeutics as fast as possible in a scary environment.

Say a bit about what you've learned of the clinical trial world. How does this whole process actually work and other companies to be built that might both make the process better, but also build great businesses?

I think there's a handful of things associated with the clinical trials that is broken today. One of the things that's broken is the way clinical trials work is on a volunteer basis. Doesn't make any sense at all. If I've got a new drug and I'm trying to test it out and I want to get a bunch of patients in the door to test it, if I get a bunch of twenty two year old 18 year old college students taking it because they need extra money, that doesn't necessarily give me the data.

Pharmaceutical companies commissioned this with Caros, which is contract organizations that will find patients that are willing to do the drug and all of its paper driven and all of that. They basically ask questions once a week or once a month or depending on the frequency they need. And that data gets rolled up into a spreadsheet and sent to the pharmaceutical company. And then they decide if we pass phase one and phase two. Part of the problem is how do we do perfect patient selection?

I think that there's a real opportunity to do that in a different way. And that's one part of clinical trials that it would be great if a pharmaceutical company, this says this drug is targeted toward a wide swath of the demographic of this country. And we want 10 people in this sort of psychographic and 10 people in this psychopathic tendencies. And we could snap our fingers and get that. I think unlocking that there's a few startups that are going to help get patients from the various specific demographics to happen to put some color on that.

We talked to one of the university hospitals and they had over five hundred clinical trial clinical trials kind of going on, whether we're recruiting patients in. And each one of those clinical trials can have anywhere between a dozen and four dozen individual and very specific parameters about demographics, treatment plans, etc. And there needs to be an intervention into a clinical trial before any other medicine was actually administered. So you don't have people shifting off a particular drug onto a clinical trial drug.

So it's a point in time and it's not a human scale problem. And that's really what we're talking a. Out in terms of recruiting and selection, that's a machine skill problem that we're looking for opportunities. And frankly, if you had genetic code, you could actually pick out certain gene sequences that you would want those people to participate in the code.

So I think that's another layer of this that is going to play a factor in recruitment. The second piece of this is just a workflow. The workflow is really antiquated. It's not online, it's not clarified. So the data gets to the sort of pharmaceutical company or the person administering the clinical trial in a non sort of optimal way. I think that's something that's going to change with clinical trials as well. I think we're going to get into a modern era.

You're going to be able to spot right away if an issue is occurring or whether you want to double click and get more patients in a particular geography or type of psychographic where more females, more males, more people of certain ethnic descent in there. I think that is also going to happen with workflow improvements. And sort of the third sector is can you do something with data? Is there a way to actually store enough data so that you could expedite a clinical trial?

There's a company called Nebbiolo Genomics, and what he's trying to do is pay people to do it. Very rich gene sequencing. And then the patient owns the data on the block chain. The first pharmaceutical company will pay to have the data created and the gene sequence to be done. Very expensive first step. And they get to use the data for their drug development or whatever purposes they're using it for. Then the patient can actually enable other folks to leverage the data for a fee, almost like the ADTECH universe.

Where do you own the data to Facebook or just Google on the data? And shouldn't you get a kickback if Google is leveraging it to make a lot of money? The same thing can be done with your medical data or genetic data. So I think that's going to be an interesting piece of all of this as well. Anyway, those are the areas I do believe because of covid.

I think people are volunteering for the trials. I think they're expediting a lot of these tests. I cannot postulate whether that's good or bad. I think it's good that we're greasing the skids for all of this to happen faster. I don't know if we're going to miss something. I just don't know. Maybe it'll all turn out good. Maybe it won't. But this is an experiment. I mean, frankly, 20/20 is a giant experiment, so we'll see what happens.

It seems like the risk perhaps is that doctors get lost in all this. You said something earlier which was stunning, which is that they spend two thirds of their time on administrative tasks on average, which just seems like ridiculous and unacceptable, especially in this period, the stress they've been under. Can you speak a little bit to the world of the doctor and why and where there might be opportunities for companies, new companies, startups to improve the experience of the job and life for doctors specifically, there's always a yin and yang to everything the government does.

Nikita said many years ago, created this interoperability carrot. They said, like, if you're a hospital system, we're going to give you a lot of money. If you get an electronic health record and you move away from paper. All these companies were created. Billion dollar companies were created almost overnight because the hospital system was like, oh, free money from the government. Yeah, we'll buy epic system and we'll get all of the medical data to be electronic.

The burden it put on doctors and nurses with profound. You couldn't just write out a chart, ten pieces of this or whatever it is, go see the doctor.

And when the doctor got done, they had to endure all of these call notes and e prescriptions and everything. And what was a relegated task almost became a massive, massive burden. We've looked at companies that are allowing speech recognition to allow them to enter data. That's an example of one sector that can actually alleviate a lot of tension in the doctors, because rather than just sort of meeting with the patient and then afterwards spending 15, 20, 30 minutes entering the data into the electronic health record that can be done through speech, or there's companies that are actually using Google Glass type of tech to observe each interaction with a patient.

And then there's a third party that goes and creates the call notes associated with that visit. That's an example of something that can alleviate a lot of the burden for the doctors robotic process automation, where rather than the small clinicians, which they're doing more than simply visiting patients, they're actually running a practice, which is being a small business owner and a doctor. Sometimes robotic process automation automatically check insurance and check codes and figure out if insurance is going to pay for X, Y and Z and shoot it out.

So there's a large part of the tech stack that can alleviate a lot of the tension. And I think it absolutely has to happen. It hundred percent has to happen because people aren't going into the field as much anymore. Used to be a really lucrative valuable. This should be a doctor, it's not as lucrative as it was before. There's a lot of malpractice insurance and an incredible cost to your life of being on call all the time and then having to work extra hours just entering the data.

And we have to alleviate that tension for this to be an industry that people want to go back into. I think there are a lot of just kind of day to day realities. As Roger mentioned, these people are also business owners. They're in a very competitive market. They've got to advertise for themselves. They've got to bring a new business. They've got plenty of patients to see. There are actually business owners. I mentioned fifty four thousand health care organizations.

Some of them are quite large institutions where they have different pressures. Margins are incredibly thin, their work very hard. They need to be producing money. They obviously want to help people, but they're also there to make money and fame for the institution. So there's a lot of overhead and revenue in billing and just the basics for operating business. But these businesses aren't necessarily like your standard small business, like a bodega or what have you. There's actually a lot of regulation that they need to stay on top of and credentialing that they need to do.

And there's just tons of overhead and friction in the system that is required in order to operate these businesses. At the same time, there's just significant pressures on people to use a bunch of computer systems they hate. We've seen the bring their own device. The iPhone kind of was the initial bring your own device. And then we saw a massive amount of consumerization and just general employees at large businesses now where you can bring in FLAC and these other kind of consumer sized applications.

That is not happened in health care because of the regulation. And there hasn't been the same focus on the actual end user ethic. And Cerner and all these big applications are really looking to get that big ticket item they can sell five year contracts for. There are for a billion dollars. I mean, these are huge amounts of money that hospital systems will pay for these large charge, but they're being bought by the head of I.T. and not the individual doctor or physician.

They've really been largely ignored. And we've even seen companies basically come in and just provide a new fresh interface on what is essentially a super old UI. I mean, it looks like a UI from the nineties. These doctors are going in and having to work with and even just simplifying that UI, bringing data, the most pertinent data to the fore for that type of practitioner, for that type of patient. And we've seen companies reduce the time spent on a charge by like thirty three to forty percent in that broad range.

When you think about two thirds of time can be spent in overhead, an administrative task, that's actually a huge amount of time and actually can alleviate some of that pressure on physicians which are getting burnout and overworked over time.

I have two closing questions for each of you.

The first is to ask each what on the horizon in this space is the most exciting to you? I'm especially interested by Raja. You mentioned that covid has pulled forward progress by maybe a decade. It's amazing to consider the ways in which there are silver linings to this otherwise obviously terrible global pandemic. I would love to hear from each first. What is most exciting to you that's on the horizon that you think we might all get to see?

From my standpoint, I think optimal drug use for my ailment is something that I think will be able to see in our lifetimes. I can't give you a date. I wish I could. I think the interoperability is if you look at what Flatiron Health did, they were thinking about this from an oncologist standpoint. Are there particular cancer drugs that can treat specific types of people better? I think we're on the horizon of seeing some of that for a variety of different treatments.

Let's just pick an easy one, like high blood pressure or something like that and say, man, if you could have data around what treatments work best for different individuals of different sort of ethnic origin, and then you were able to layer on some genetic code on top of that and get even more granular around it. I think we're going to see some of that in our lifetimes.

I think we're going to be able to say, like your doctor is going to say, hey, let me do a blood sample and a gene analysis and prescribe you with a more appropriate drug for you. I think that's terribly exciting. If interoperability can unlock that capability, we've made progress.

I'll also jump in on the interoperability front. We're obviously super excited here. And the way that I sometimes think about interoperability is we've kind of had this overhead. It's the tax on the entire health care system. We've figured out that information and data is when it's shared. We've had this massive proliferation of prosperity and new companies that are built on top and shifting that. And basically we're in the era right now similar to kind of like the compute parallel is the on prem compute.

Everybody has to manage their own servers and they've got this huge overhead costs and it costs them a ton of money and they're just kind of wasting it, just running servers. And if you think in health care, all these new health care companies that are trying to be built, they have to kind of build it much slower than they would otherwise be able to if they didn't have to manage this interoperability piece. And once we get to kind of that future state, where if you think about the cost curve for medical record retrievals, we're on a pretty dramatic decline right now.

And as that starts to near zero, we should get to the pennies and then fractions of a penny. That's where we can really unify all this data. And that's where you can see this huge Cambrian explosion of health care companies that are built not just in these kind of vertical silos, which we're looking at today. Like we've talked about a number of companies that are building in a very specific vertical, but they're still eating that overhead interoperability cost and maybe even still buying a lot of data from third parties, which are manually scraped in from health care organizations and faxed and handwritten.

But once we get to the point where we've digitized all those records and see that kind of future explosion, we're going to get to hyper specific health care. And I think there's huge opportunities and just general preventative measures. You talked a little bit about the future, where you have this kind of universal medical device that would be able to kind of predict future outcomes. I don't think that's as far off. But we definitely need to get to the point where we have the tremendous amount of data which is now locked and siloed in each one of these individual institutions.

I think one of these is that I've had and covid has brought it to light to as really testing, testing and diagnostics is an area that I'm really excited about. You asked earlier, Patrick, around whether we're going to see a variety of devices that are side by ask.

And I love The Andromeda Strain by Michael Crichton. This is a book where they have a basically a virus that comes from space to earth and kills a whole town. And obviously it's terrible. But one of the more interesting aspects of the book, its feature facing they have this diagnostic tool is basically an electronic body analyzer that was built under a government contract and was a full body scan for astronauts in space. And then they had made it and commercialized it for people on Earth.

And I kind of love that device because the way it's written in the book, you just stand there. It scans your whole body and it tells you here are all the problems that you have now here, all the vital signs that are totally fine. Here are the things you could have wrong with you in the future. I hope we get to a point where we have a device like that, like, why not? We're slowly getting to a world where you can actually test way more.

You can test way more because it's cheaper, it's rapid and it's accurate, especially for folks who have chronic conditions or people who have medical histories in their family. It should be affordable to test and it shouldn't cost you thousands and thousands of dollars. And as we brought more things into the home and tests into the home, that is a real possibility. Our health care system typically rewards managing a condition. But I want to see more of a health care system where we reward meaningfully preventing you from ever getting to that point.

And I think testing more is a paradigm that's OK, as long as it's really affordable and can actually affect people's wellness and their health in a way before they actually have a condition. We're seeing a ton more companies like that.

That's awesome. So interesting. All three. I hope you see it all. I hope it comes soon. I hope covid continues to accelerate everything. I've learned so much from you guys today. I have to turn to my traditional closing question, and it's fun to get three answers on this one, which is to ask each of you in turn what the kindest thing that anyone's ever done for you is.

I was born in India and I lived in a town called Challender is a tiny little town. You get raised by village. I had wandered off, so I moved here when I was roughly four or five years old. But right before I came, my mom said she was frantically searching for me because I had gone from our home and walked, I guess, a mile or two away on my own into the center of the village, which is kind of bustling.

It's like a big town. There's a lot it's like a bizarre IT merchant there recognize me because I like to come with my mom periodically and buy grains or fruits or whatever. And he entertained me basically for an hour, bought me all sorts of fruits and candies and walked me back to my house. When my mom told me about it and said, this gentleman just closed up his shop, entertained me for half a day and brought me back home so that my mom, who was frantically searching for me, wouldn't completely lose it by then.

I was pretty content.

I was trying to think through my past and so many people have been kind to me the most kind, what is the most kind? But I will say I just got injured in a cycling accident. I broke my left. And displays my right shoulder. So it's basically kind of harmless, as it were, very difficult to do things on my own, and I was living by myself in Boulder and I was really struggling. I will say tough to really carry groceries or do things when you've got both arms that are injured.

And I called up my sister and she lives in Indianapolis and I just said, man, I'm really struggling. How far is Indianapolis from here? And she said, I'll look into flights right now and we can drive you back. And it's like a 16 hour drive. And it actually ended up being my brother in law. And my sister couldn't make it because she had a few appointments here and she just jumped to the plane. No questions asked, just bought a plane ticket, got an SUV, helped me pack my broken bike in my bike box, all my luggage, helping me with open jars and all sorts of stuff, and drove me 16 hours back to Indianapolis and they're hosting me at their homes.

I know it's family, but my brother in law just kind of jumped in and did it with a smile. And it really touched me. So very thankful for that.

I got my driver's license. Finally, recently, I failed my first driver's test and I had the same person who was seeing me again for my second driver's test. And I probably made some mistakes and that where I maybe got close to not passing again. And he looked at me and he was like, I know you worked hard for this.

I'm going to see. So that was a very small act of kindness from the guy at the DMV. And I really appreciate that he did that because I was standing in line from five forty five a.m. and he saw me at 10 a.m. So he knows I was just standing in line and hoping to get it through the process. That's maybe like a little silly one, but there are really small acts of kindness like that that happen all the time.

I really appreciate that guys. I feel like you've kind of each pulled me up a learning curve here today that I've really enjoyed and learned a lot from. So first and foremost, thank you so much for all your time and look forward to staying in touch in the future.

But we really appreciate you taking your time out of your day to do this and look forward to keeping in touch.

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