January 14, 2022: Informed connected healthcare consumer. That’s 7wireVentures mantra. How will big tech, private equity and hedge funds engage across digital health this year? Here to talk funding is Co-Founder and Managing Partner, Lee Shapiro. The concept of care is moving outside the four walls of the health system. It's moving into the home. It's moving to rural locations. “Care Everywhere and Access to Care” is a huge funding area that will trend in 2022. What distinguishes the winners from the not so successful players in the digital health space? Where does an M&A strategy make the most sense? And what should we make of Oracle's acquisition of Cerner?
00:00:00 - Intro
00:04:30 - Put consumers in the position of being better able to manage their health. When you do that, everybody wins.
00:11:40 - We’d rather take a great team with an okay idea than a so-so team with a fantastic idea, because we know that that great team is going to turn that good idea, in all likelihood, into a fantastic idea
00:16:55 - What funding trends will we see in 2022?
Digital Health Startups, Interoperability Challenges, and Informed Consumers with 7wireVenture’s Lee Shapiro
Episode 478: Transcript - January 14, 2022
This transcription is provided by artificial intelligence. We believe in technology but understand that even the smartest robots can sometimes get speech recognition wrong.
Bill Russell: [00:00:00] Today on This Week in Health IT.
Lee Shapiro: We saw a significant amount of investment. It was a record year. We'll be well over 30 billion dollars invested in the sector during 2021, which is more than 2020 and 2019 combined. Close to 700 companies have received funding this year. And the amount of capital flowing in to companies, based on the promise that these companies hold in terms of improving health has really been remarkable. [00:00:30]
Bill Russell: Thanks for joining us on this week health Keynote. My name is Bill Russell. I'm a former CIO for a 16 hospital system and creator of This Week in Health IT. A channel dedicated to keeping health it staff current and engaged. Special thanks to our Keynote show sponsors Sirius Healthcare, VMware, Transcarent, Press Ganey, Semperis and Veritas for choosing to invest in developing the next generation of health IT leaders.
Our success as a media channel relies on the [00:01:00] investment and involvement of our community. We are so thankful for the incredible support we have received over the last four years. If you want to continue to help us to grow, please consider sharing with a friend, sending to your team or giving us a review on Apple podcasts We'd love to hear your feedback as well and your comments. So if you got something to share, you can shoot us a note firstname.lastname@example.org.
Today, we are joined by Lee Shapiro, Managing Partner, for 7wireVentures. Lee, welcome to the show
Lee Shapiro: Bill. So good to see you.
Bill Russell: [00:01:30] Gosh, we go way back. I remember. Well, first of all, I was a big Allscripts customer and you have background at Allscripts. Were you the CFO at Allscripts?
Lee Shapiro: So I wore a number of hats, but from 2001, until the end of my tenure there, I was president of the company.
Bill Russell: Wow. Man. We will definitely talk about Cerner. We'll talk some EHR stuff. That's where we met. I remember the first time we shared a stage, you and I were on a panel. at the health Evolution Summit. That was probably one of the more dynamic [00:02:00] panel discussions I've ever been on. You may have been on more dynamic than that but my gosh, Aneesh Chopra was the moderator and he really pulled everybody into the conversation.
And I think we were going to go in one direction and then the audience really took us in another direction. It was really interesting. And they took us in the direction of patient centric interoperability. I think it was the discussion we ended up having.
Lee Shapiro: Well Aneesh has a way of enchanting an audience, and you did a fantastic job in terms of [00:02:30] sharing a provider's perspective, as I recall. And we had a great conversation. And you're right, the audience really participated with us. It was much more of a group conversation.
Bill Russell: Yeah. And if I remember correctly, I was the only one with a suit and tie on at that showing because it really, it really is an entrepreneur kind of event.
It's a phenomenal event down there in my old stomping grounds in Laguna Beach. That was awesome. Tell us about 7wireVentures. What are you doing now? And what's 7wireVentures about?
Lee Shapiro: You know, think of [00:03:00] it this way. All of us want to be healthy. I would dare say that none of us really would volunteer to be a patient today.
And that's something that you think about when you're sick. And so at 7wire what we're trying to do is build companies that help us all address the hassles we face as consumers in healthcare. And our thesis is what we call the intelligent, informed, connected health consumer. And we are [00:03:30] allowing these founders to really pursue their, their goals.
So it's operator driven. We work with a number of strategic limited partners who are fantastic. Wonderful health plans and health systems. And not only do we find companies early stage. We're seed and series A investors. But we also hatch companies. So many companies come from ideas that our partners have or that we have, and we build companies around those ideas and find teams to work on them with us.[00:04:00]
Bill Russell: Fantastic. You said a couple of things there. I want to hone in on. You said you're focused on health probably more than healthcare per se. Is that an accurate characterization?
Lee Shapiro: It is. And distinguish health from wellness. So we're not about tapping into yoga and meditation and nutraceuticals. We're really about helping those who are at risk for the cost of care. Put consumers in the position of being better able to manage their health. And [00:04:30] when you do that, everybody wins. The consumer wins because they're healthy and the less health care services those consumers are buying so to speak with the sponsor's money, the more likely it is that they'll see better outcomes at low costs.
Bill Russell: All right. Now I want to, I'm going to push on your thesis here. Intelligent. I think I got this intelligent informed health consumer. Are those the right 4 terms?
Lee Shapiro: Informed connected healthcare consumer.
Bill Russell: Informed [00:05:00] connected healthcare consumer. Okay. So I'm going to push on that a little bit. Is that a future facing kind of statement where we say, okay, we're going to have informed connected health consumers in the future, or are we saying we're building that out today?
Lee Shapiro: We're building that out today. And think about a situation where one of our great companies Home Thrive is helping seniors live independently at home longer.
So for your parents Bill, for my parents, when they were [00:05:30] alive we wanted them to be in a position to live at home, but that has a number of challenges associated with it. And it might be easy to think about putting them into some type of congregate care facility where they might have more support services.
But seniors want more independence and there are ways to allow them to do that and deliver more health at home. Provide them with more services, allow them to engage in activities of daily living that they want to engage in but still want to do [00:06:00] so from the comfort of their own home. And in light of the Corona virus, a lot of families are really hesitant about putting their loved ones into a facility like that.
So if we can help those seniors be better informed. We can connect to them by providing them with services. Some of them may come from passively connected data and others by active engagement. And then they're a health consumer. They want to be healthy. They're not looking at healthcare consumption, they want to be healthy. And [00:06:30] so we focus on a consumer experience for those are worth exploring ways to improve their health.
Bill Russell: Yeah. You know, we had that baby boom generation moving through the whole healthcare cycle. And we just experienced this personally, having my father-in-law come live with us. Right. So he went from being independent, living on his own, and that really wasn't viable as he got into his late eighties.
Then he came to live with for another number of years. That there has to also, I think be a series of companies coming alongside us as care [00:07:00] providers to help us care for him in the home. Because we don't want to put them in long-term facilities or those kinds of things. We want him to be with us as long as possible as well.
Lee Shapiro: Absolutely. And literally we had a similar experience. You and I can probably compare notes. During the course of the pandemic, we moved my father-in-law who was 95 at the time. Soon to be 97, we hope. Knock on wood. And we moved him in with us. He was living at home with a caretaker, but really was cooped up in [00:07:30] a two bedroom apartment and the caretaker had one room and he had the other. And we moved him into the house where he had a little bit more free reign, but also opportunities to interact with more of the family.
And it was great for him. And he really thrived during that with the social engagement, but we were also able to really help him better manage his health. And we got a lot of support from the outside in doing that. So it was a win-win for everybody involved.
Bill Russell: Yeah. By the way, I love your thesis. Intelligent informed connected health [00:08:00]consumer. I hope, you know, I hope we can get to that point of intelligent, informed. Every time my wife has to call her insurance carrier and whatever she comes over and just yells at me cause I, I haven't influenced the industry enough to change it so that she doesn't have to stay on hold for 45 minutes.
And then I tell her what Glen Tulman's doing. And she's like, well, great. Get that. Let's sign up with Transcarent cause I don't want to call this company again. I was like, I Glen's not ready for us yet. [00:08:30] So it's
Lee Shapiro: We will be soon, but Transcarent's another great example, as you mentioned of improving the consumer experience for healthcare and helping us make decisions. When you think about so many health decisions that are made every day by millions of people, but you're doing it relatively few times for yourself, hopefully, but yet collectively we're doing it so many times. So how do you take the intelligence that comes from understanding one of the best decisions that can be made? [00:09:00] Direct people to the right resources?
Get them the best possible care at an affordable price. And that's what Transcarent and their team are doing.
Bill Russell: Yeah. Fantastic. I want to talk to you about the digital health space. Clearly there's lot going on. How would you characterize, a high level, characterize 2021 with regard to the activity in the digital health space?
Lee Shapiro: Well, there was a huge amount of momentum in 2021. A lot of it's spurred by the pandemic and the need for remote carers. We [00:09:30] were talking about work here into the home, but really care wherever anybody is. And what we found is that digital health is a tool for providing safe, reliable care for consumers, as well as easier ways for providers and caregivers, frankly, to reach those consumers.
And so we saw a significant amount of investment in the space. It was a record year. We'll be well over 30 billion dollars invested in the [00:10:00] sector during 2021, which is more than 2020 and 2019 combined. Close to 700 companies have received funding this year. Many of those new, some with later stage rounds. And the amount of capital flowing in to companies, based on the promise that these companies hold in terms of improving health has really been remarkable. So we've seen round sizes dramatically increase. And by that, I mean the amount of capital invested at various stages. [00:10:30]Series A, series B, series C. More capital coming into those stages, which gives these companies more runway and opportunity to grow and meet the needs of more people.
Bill Russell: you know, it's interesting so I invested a little bit early on when I was at St. Joe's, we invested in some companies and I've always wanted to ask someone like yourself, this question, what are the characteristics that distinguish the winners, maybe from the, not so successful players in the digital health space?
I mean, I always looked at the leadership team. I mean, that was like [00:11:00] the number one thing for me. The idea was important, but I knew that whatever the idea was, that could potentially change a little bit. And if you have the right leadership team in place, it would potentially change in the right direction. Whereas an inexperienced leadership team always gave me pause I think.
Lee Shapiro: Bill, you're spot on, at least with the way we think about it. You have to look at the market based on what stage you invest at. So some of the funds invest at later stages at [00:11:30]which point the management team has evolved and has proven themselves.
But the early stage companies that I know you were investing in when you were at Providence St. Joe's and where we invest we're seed in series A investors. So it's all about the team to start. And that's really important in terms of these companies being successful. And as you say, we'd rather take a great team with an okay idea then a so-so team with a fantastic idea, because we know [00:12:00] that that great team is going to turn that good idea in all likelihood into a fantastic idea on a go-forward basis.
But there's three elements that I think make companies successful in the space that, that we focus on in. So it's team, as you mentioned, but when you have that team in place, we think about the three elements as being, first, create a phenomenal consumer experience. Something that people love that they're going to want to use.
And that engagement is really the [00:12:30] magic in the offering. Because if you can get someone to use your offering in all likelihood, that utilization is going to do things that help direct them in the right way, the right type of behaviors to improve their health. The second thing is you need to be able to demonstrate to the sponsor.
That's a health plan. That's a self-insured employer, an at-risk medical group. That you're offering is able to deliver a return on investment. So whatever it is they pay for your [00:13:00] offering, you have to be able to give them at least double back in terms of healthcare savings or better results. And the third piece is that when you do that, you have to do it in a way that is a lot better than what the alternatives are.
Because if what you're offering costs, a lot of money still provides a better return, but requires a significant uplift by either the sponsor or the consumer. This is going to be really hard for them to use [00:13:30] or adapt to. I can't tell you how many companies we've seen that say, well, this is wonderful. Consumers are gonna love to use this. And then they say, but we want doctors to prescribe it. And when we talk about integration into workflow and alignment of incentives, it just haven't given that a thought at all. And the thing that you have to realize is that these companies work within an ecosystem and you have to find a way to fit into the ecosystem or go around that ecosystem if you [00:14:00] want to be successful. So those are some of the critical elements.
Bill Russell: You know, Lee, I can't, I mean, the number of times I've sat across, as my role as a CIO. And now since doing some consulting and whatnot and said, okay, explain to me your value proposition. I mean, those are the words I'll use and they'll say, well, you know, it's this and this.
And I'll just look at them and go that doesn't work in healthcare. They say, well, the consumer's gonna pay for this. I'm like, the consumer's not going to pay for that. They're not, there's not a chance they're going to pay for that. Like, well, you know, the physicians will see the value.
I'm like, [00:14:30] all right, well tell me the value you're going to give the physician. Then they describe it and I'm like, do you have any idea how busy these physicians are right now? Unless you really materially change some aspect, the what's in it for me, for a physician. They're overwhelmed.
So, it has to fit into, as you said, fit into their workflow, or it has to be really simple or dramatically change some outcome that they're being measured on. That's the thing I think they get wrong the most. It's like, what's your value proposition?
And they, they just haven't [00:15:00] spent enough time in healthcare or don't. This is why I think the leadership team makes all the difference in the world. You're looking for that experience, that they understand the economics of healthcare.
Lee Shapiro: And Bill, you, you may have even taught me this, but there's really two flows that we think about companies in the digital health space having to fit into. One is the life flow for the consumer. And the other is the workflow to the extent that you're relying on providers or other parties that are going to be helping you to implement that offering. When we [00:15:30] worked with you, when we were at Allscripts, we weren't in the software business, we were in the change management business.
We were trying to move people from paper records and literally writing some billing illegibly on a script pad and handing it to the consumer to the patient, say right, go take this to the pharmacy. And to get them to write a prescription electronically. Yes, it was safer. Yes it was better informed. But it took more time for the provider and there were no incentives for them to do it.
And so we had to find a way to make it [00:16:00] so easy for doctors to do that. We actually coined a phrase at the time it was called I Do. If docs don't use it, nothing else matters. And we could have said actually the same thing about nurses, because if the nurses didn't like it, it didn't matter if the doctors loved it, the nurses were gonna kill it.
So you really had to make sure that all the stakeholders were involved in the process. Were involved in that. And we see a number of great offerings that don't rely on a doctor to prescribe it or to interact with the [00:16:30] provider. But boy, I can tell you that when you do get that provider engagement as well, you really get a virtuous circle where you can improve outcomes.
And there's a real benefit in terms of being able to share information with providers and to get them to act on it and see where the value is for them as well.
Bill Russell: Lee, I'm going to ask you to look into 2022. We have a lot of players moving into the digital health space and it's a pretty complex space. I mean, people move in in different ways. What funding trends do you think we're going to see in [00:17:00] 2022 in terms of which players will continue to make moves in this space?
Lee Shapiro: So I do think that there's this notion of care everywhere. And the idea that when care is delivered, you have to think about multimodal, multi-screen you might say, in your world Bill,of of being able to deliver care on the consumer's terms. So there are studies. Jamia just came out with one that said over 65% of consumers [00:17:30] want video visits in the future.
Now, when out-of-pocket costs, aren't a factor, people still, you know, would like to have an in-person visit. So the question is how do you leverage the technology in order to provide a great healthcare experience? I think what we'll see is use of in-person visits or the ability to meet a doctor or a caregiver of some kind in some type of face-to-face environment that [00:18:00] might be video.
But then to also utilize other technologies to kind of stay in touch and to leverage what you started with that trusted relationship. So Bill, if you were my doctor and you said, here's the things I want you to do, these are the steps I want you to take. And here's the things I want you to follow up with me on.
I might be able to follow up with you by email, by text, and I might get some responses back from you in ways that allow you to deal with me in an asynchronous fashion. Yet creates scale and leverage to the [00:18:30] offering. So these hybrid models are going to allow for the ability to deliver more care to more people without necessarily always having to rely on in-person or face-to-face visits.
But we see a lot of promise in terms of being able to extend the reach of care by use of technologies that allow for use of machine learning and other types of technologies to provide guidance to consumers when they need it. And use that technology as a transformational [00:19:00] tool to supplement what can occur in a face-to-face visit .
Bill Russell: Are there trends you're looking at in the industry. So for example staffing is a huge issue. We're seeing the statistics that are being projected for a nursing shortage and clinician shortage. And even in IT. I'm talking to CIOs who are saying, look, I'm getting poached. My people are getting poached all the time because now they could just, you know, today, they're working in front of this screen and tomorrow they're working in front of this screen, but [00:19:30] they just got a pay increase and now they're working for the health system, you know, three states away.
And so are you looking at that kind of trend where you go, Hey, look, there's going to be less caregivers and more people requiring care with the baby boom generation. Are those the kinds of things that you keep an eye on as an investor?
Lee Shapiro: Absolutely. And part of this is how do you make caregivers better informed? So that they can almost get some guidance that self-help, that they need in order to take better care of themselves or the [00:20:00] seniors that they're caring for the baby boom generation that you referred to. You know, I, I think that this talks about another aspect, which is around access to care. And many areas of the country, rural populations, underserved urban areas have had problems with getting access. Digital health really provides opportunities to reach into those communities and to provide access to care, meet people, you know, using modalities that they're used to [00:20:30] using. So, you know, we all carry a computer in our pockets and we're in a position to utilize that. We can now reach people in ways that we weren't able to do before. And I think that that does help address some of the challenges. As you said, with regard to staffing shortages, when you can utilize some of the technology to stay in touch, allow our caregivers to practice at the top of their license.
And to utilize care coaches, to utilize [00:21:00] nurses, you mentioned a nursing shortage, other care professionals that may be able to supplement their needs in ways that we wouldn't be able to do without the technology. And I think there's some promise held there for helping to address those shortages by using the tools that are available through these modalities.
Bill Russell: So when we talk about areas that you think are going to continue to receive funding in 2022. Care everywhere. The concept of care is moving outside the four walls of the [00:21:30] health system. It's moving into the home. It's moving to rural locations and those kinds of things, access to care continues to be an important factor as well.
It's interesting. We used to think telehealth was a great medium for people who had to travel large distances, but we found that in New York City, you know, tons of people prefer to do telehealth in their location or even from their place of work and see a doctor when it's convenient to them and quickly and easily. So care everywhere, access to care. Are there [00:22:00] any other areas you think are going to see an influx of funding in 2022?
Lee Shapiro: Mental health. And we saw growth in mental health in 2020, 2021, but that will continue. There are multiple studies that have come out just in the past week. I'm sure you saw highlighted in the press. Some of the real challenges that the pandemic has caused around depression, anxiety. Some of the isolation induced mental health challenges that exist. Frankly, remote [00:22:30]care is something that mental health can really be served by. People can get that in the privacy of their own home. They don't have to overcome the challenge of just getting themselves out of bed, getting themselves out of the house. If they can have that consultation from their couch, that's a lot better than having to drive someplace, wait, and then being on the couch in the doctor's office.
So I think that there's a lot of [00:23:00] learnings that are coming about how best to engage people. Even in, in group sessions using mental health tools. One of the companies that we've worked with that has done a terrific job, helping people with severe anxiety and depression, obsessive compulsive disorder is No CD and they're in network with many plans that they're helping people with obsessive compulsive disorder become diagnosed more quickly. As well as delivering [00:23:30] them services that they can access on their own terms. Self-help tools, some ability to speak with care coaches as well as to get online appointments, if they need stepped up care or live appointments, if we need to schedule them.
So it provides that wraparound set of tools to help those individuals keep their condition in control and in check, which is really beneficial for them, as well as those who are sponsoring your care.
Bill Russell: Talk to me a little bit about M and A. When you talk about [00:24:00] mental health, I think of a couple of companies that were purchased this year or
Lee Shapiro: Ginger and Headspace as an example.
Bill Russell: Yeah. And so obviously, I mean, Livongo was a big deal in 2021 and whatnot. Talk to me about M and A activity in this space. Are we going to continue to see companies come together? At what stage does it make sense for them to come together? At what stage are they essentially the this is a bad analogy, but you know, the minor leagues for big players. You [00:24:30] know, the Cubs are sitting there waiting to see if this company is going to grow up and have a value proposition, and then they just say, okay, that's now part of our overall offering. I mean, how do you think about M and A for companies in this digital space?
Lee Shapiro: Bill they'll certainly be even more M and A. There was a lot of M and A this year in the digital health sector. It's about getting to scale. Look, there's a conundrum that exists in digital health. As a company, you and I were talking about early stage companies, a short while ago, [00:25:00] you need to prove value.
You can't be everything to everyone. Otherwise you're going to diffuse your efforts to the point where you're not able to deliver a return on investment. Well, we saw Livongo is an example was we had a maniacal focus on diabetes. We were really interested in making sure that individuals with diabetes received phenomenal care and we showed great results doing that. That gives us the license to expand in other areas. We had built the trust with the [00:25:30] member. We'd built the trust with the sponsor. And so we moved into weight management, prediabetes, and hypertension, and we're looking at other areas as well. And sometimes we did that through acquisitions, as we did with mental health and weight loss.
In other cases, we built some offerings in house. We were working on things in cholesterol, man. I think that what you'll see is companies come together as they're meeting the demands of the market. Clients want one throat to [00:26:00] choke. They want an opportunity to go to one source and say, look, you need to handle multiple offerings for my members because we aren't set up to manage 70 different offerings.
We don't want as many point solutions. We want one place that we can go to do that. We've seen some of that occur with regard to the digital formularies that some of the health plans and PBMs have set up so that they take on responsibility for those multiple vendors. But I think as a counter [00:26:30]weight to what some of the plans are doing, companies are getting larger.
They're making progress on their own. They're going to continue to bulk up with other offerings so they can go directly to some of those sponsors and to be able to sell to them without going through some of the intermediaries.
Bill Russell: All right, I want to veer off digital health for a little bit, because you have a pretty vast background. I'm going to go back to our Health Evolution Summit conversation. And I want to talk about data a little bit. And when you look at a [00:27:00] startup. When you look at a company you're thinking about investing in, does it cause you concern when they say, well, we're going to get access to the health system data or to the healthcare delivery organization data?
Is that still a significant barrier? And you say, well, okay, how are you going to get that data? Do you know how you're getting at that data? There's multiple EHRs. There's multiple, you know, I mean, does that cause you concern or are we moving beyond the interoperability challenge for startups?
Lee Shapiro: Well, Bill, let me put the question back to you because I don't [00:27:30] think that many of the listeners will understand that this isn't just about the EHR. So how many different systems did you have collecting patient data other than the electronic health record? How many systems would you guess?
Bill Russell: Oh, hundreds. I mean, yeah, hundreds and multiple instances of that. You know, just Allscripts alone, we had multiple instances of Allscripts for heaven sake. Yeah, we, we identified over a couple hundred systems that had a [00:28:00] field in it called patient name. Patient first name, patient last name. And I thought that's interesting in and of itself. Wouldn't you want them all to share that same single thing?
Well, that's, that's why I asked the question because it seems to me that the startup has to make a decision. Do I really need this data? And if I don't need this data I'm probably in a better position than if I do need this data, because now I have to delve into that world of is this clean data?
What am I looking at? Am I getting it from the right [00:28:30] systems? Do I have to go through all the hoops that you have to go through to get access to that data and then provide the security, especially with security, the way it is today. You know, I would imagine those steps even gotten harder to get through for these startups.
Lee Shapiro: So the reason why I raised this is because when you think about pharmacy management systems, lab information systems, surgical information systems, supply related systems, there is a vast number of systems that sit inside the [00:29:00] walls of a given hospital. Maybe less so in a provider office, but even there, there may be multiple systems.
You don't necessarily always have a unified scheduling and billing system to electronic health record that has gotten better. So is it easier to access data today than it was when we met on our panel? Five plus years ago. Yes. But in many respects you still have to understand what you're going to do with that [00:29:30] data.
And what's the currency of the data. And how important is it to your offering when you're making that decision as an early stage company? I think the next real challenge is not around. The data, but what you do with that data, how do you interpret it? What are you learning from the data? And how can you act on it and to do that, as you said, in a secure way, because having lots of open-ended points is not going to [00:30:00] happen in an environment that is now fraught with ransomware and other huge challenges to healthcare organizations. I think it's going to be harder to access data going into 2022 than it was coming into 2021.
Bill Russell: I think that's true. I want to throw this in front of you. You can say bill your nuts or whatever. But I truly believe that patient centric interoperability, when I have access to my entire medical record, that's going to open up a whole new host of, and it's going to [00:30:30] create a whole new ecosystem of players who are going to say, look, every patient in the country now has their own records. I mean, digitally has their own record. And I would think that that the entrepreneurial community is going to look at that and say, okay, now that they have their medical record and I don't have to go through the health system, I can go directly to patients.
We can create a whole host of new offerings around that to keep people healthy, to make them intelligent. I mean, going back to your value proposition to make them informed, to make them more intelligent on their health, to [00:31:00] connect them people with, with similar conditions and whatnot, and to get them focused on health at an earlier age.
And maybe this is just the digital wonk in me, that's saying, you know, we can do this if we could just free that data. But I mean, that's my theory. I mean, shoot holes in it. Don't don't.
Lee Shapiro: No no. So an early, an early example of that is a company called Care Bot. What they've done is they work with consumers. Everybody has a login into [00:31:30] their follow my health from Allscripts or their Cerner personal health record or their MChart from Epic. And what they do is they work with those consumers and they pull in the information from all their multiple providers that they may work with and put them into one longitudinal personal health record.
But what they're using that for is to help clinical research organizations, some that are inside health systems, others that are outside third parties that are [00:32:00] working with life sciences and biotech companies, to look at that information and understand who might be eligible for a clinical trial. They're working with a number of organizations that are disease focused like on MS or cancers and the like to help them locate individuals who might be candidates for different clinical trials.
So it's an example of what you say in terms of being able to have new solutions built on top of that data [00:32:30] that allow others to use it in ways that was really challenging before to get out and try and recruit people for trials. Now it's basically as simple as saying, well, we have a pool of X million individuals that we have data on.
Let's look at those individuals, see who meets the criteria and then talk to them about whether or not, they'd be interested in joining this trial. And it's speeding up that process and helping us get a new drugs to market more quickly. And that's just one example of things that I [00:33:00] think will happen with this type of data going forward, blue button kind of the fire standards will make some of that easier, but it will only be easier Bill we're able to get, not just the EHR, but all the various systems interconnected in one way.
And you've seen, and we'd love your perspective on this, some of the large health systems come together to say we're going to pool our data and allow that to be used for research. We're going to find ways to make it more accessible [00:33:30] because we can't wait for the industry to do it. We're going to do it together and set some standards and make that accessible. And to do that in a secure way. How do you see that as helping to accelerate this?
Bill Russell: We've seen Mayo do that. Now. We've seen Providence and a whole host of other primarily faith-based systems come together around Truveta to do that. And it's interesting. Here's my take on that. As long as the security is set up correctly, and as long as we take [00:34:00] patient privacy, if we keep that at the forefront of whatever models, whatever architecture we're putting together, I think we're going to be, that is going to be a phenomenal move forward.
I fear what we're actually doing. I'm not sure I fear this in some cases. In others I do. When we bring people in from outside of healthcare, they may not understand privacy and security as well as they should. And I'm keeping a close eye on that. That's my, that's my greatest concern.
Otherwise, all we're doing is building a repository [00:34:30] that is easier for people to hack and take the data out. So that's one aspect of it. The second is, my data is in those repositories and I understand that I don't own my record, that they own my record. Because they created the record. That's how that's how ownership works.
But I wasn't asked to put my data in into that system. And so I, sorta, I have pause there. Now on the flip side, the potential on bringing that much data together, Cosmos, Truveta, is just, for the good of mankind is [00:35:00] significant. I just don't want people making that choice for me and saying, well, of course you want to put your data.
I probably do want to put my data in, but I'd like to choose which one of those three, I want to put my data and not necessarily. just throw it into all three, just because I happen to visit one of their hospitals. I, I don't know if that answers your question, but that's sort of how I'm thinking about it.
Lee Shapiro: Look and I do think that given the opportunity to opt in people will be willing to use or allow their data to be used for the common good. And so we'll see, [00:35:30] hopefully better controls around who has access to that data, but at the end of the day, I am hopeful that we'll see a lot of that data being used in ways that can be very, very helpful in terms of new research, as well as pandemic response and the like. So, so important right now.
Bill Russell: Yep. I would be remiss. We only have a couple minutes left. I'd be remiss if we didn't talk about Cerner. And this is an interesting one to me. I mean, there's a couple of things. One people will talk about the valuation. I think it doesn't tip over at 30 [00:36:00] billion. It's a little less than that. Maybe 28 billion. But from a valuation standpoint, if you look at Athena health was valued earlier this year with like a fraction of the revenue. At a lot more than what this would indicate that Cerner was worth. But on the flip side, this is a complex deal, isn't it? I mean, what do you think? First of all, what do you think of the valuation? And then what do you, what do you think overall, it's going to take for this to be successful from Oracle standpoint?
Lee Shapiro: Well first, you know, the [00:36:30] great thing about having efficient public markets is that this is a premium to where Cerner was trading and certainly Cerner's traded down over the years in light of some of the challenges that they faced.
But I think that this is beneficial for Cerner in terms of allowing it to have the opportunity to leverage the resources and some of the technology tools. Oracle brings operating [00:37:00] as a independent, almost like what Microsoft did with Nuance to allow them to operate somewhat independently, keep the leadership team in place and to grow inside Oracle. Oracle brings some technologies to help Cerner move into the cloud. You probably know that ser had a large hosting business called Cerner works. And that can be moved into the cloud, a lot of health data in the cloud, allowing that [00:37:30]fluidity that you were just describing to exist in a secure way.
And I think that Oracle's AI and ERP experience can be helpful, especially if they're able to think about ways to look at connecting their services across the enterprise. So being able to let ERP and healthcare data to be able to provide a better experience. Larry Ellison the company's chairman had said that he's hopeful that what this will [00:38:00] harken is easier to use digital tools.
Better access for information is talked about voice interfaces that will make it easier for providers. I think what he'll learn, maybe the second part of your question is everything in healthcare takes longer than what those outside think it'll take. And so it's going to be a while before they can retrofit those Cerner applications and start focusing on those new digital tools.
But I'm great grateful that they want to start [00:38:30] someplace. And if they're willing to commit to doing that it's going to be a bit of a haul, but it would be great if they can get there.
Bill Russell: Yeah, that was, that was one of my learnings coming into healthcare. I set out these plans and I had the old team and I would say, you know, we'll do this in the first year.
We'll do this in the second year .We'll do this the third year. And they just look at me and say, multiply that times three. I'd be like, no, it's not going to take us three years to do that. And nine years to do that. They were closer to right than I was closer to right. There's an awful lot of complexity. You know, as, as I look at this [00:39:00] thing,, it's a fascinating deal. It's not a bad deal for Oracle. Even at that valuation, if they're able to do a couple of things. One is they were struggling to get into the cloud market. And healthcare cloud is one of the fastest growing cloud segments in the industry. And so they, they just took a significant client away from AWS.
They moved it into the Oracle cloud. And if they're able to grab some of the Cerner clients and move some of their cloud business over there as well, they're going to get monthly recurring revenue off of that. And that's phenomenal for them. And if they can do some integration with some of their [00:39:30] other tools with Cerner you know, maybe you can create a a more integrated package.
But again, anytime we talk about development or those kinds of things and changing how things work in healthcare that's challenging. It does take longer than what we think. So I'm not sure that the valuation is, as you say, the market speaking after hours, you know, the things trading down. Oracle is trading down 5 or 6%. Not that that's not normal based on an acquisition of that size. It takes [00:40:00] the time for the market to sort of digest it and say, you know, where are they going to get the return on it? But I can see a return on this. I don't think it's based on Cerner, all of a sudden overtaking Epic or anyone else.
I think it's based on a strategy of maintaining the Cerner clients they have until they can really, really move forward. So this this'll be interesting, but I think as you tried to point out earlier, healthcare, I agree with this. I think healthcare is overly focused on the EHR. I mean, [00:40:30] we get so focused in on that one piece of the puzzle.
And there, are a lot of other pieces to really focus in on in terms of the data piece and in terms of the operability. And in terms of specifically the experience for both the clinician and the patients. There's a lot of other tools that play into that and you know we'll see what that happens.
Lee Shapiro: One other thing to note and I have not had an opportunity to read a majority of the analyst reports that have come out on the Cerner transaction, but Oracle has a [00:41:00] business called Oracle Clinicals. You might recall a company called PForward that Oracle acquired some years ago and they do a lot of work for life sciences companies in clinical research. To the extent that they're able to find synergies between the clinical practice research side of Oracle and what they have with Cerner there could be other synergies that they can create there as well.
So I agree with you. It can be beneficial their cloud business, but also their clinicals [00:41:30]business. So it gives them another book to point their are shareholders to, to say why they would justify this being the largest acquisition that Oracle has ever made.
Bill Russell: And Cerner was making some moves with New York life and others. And so they were doing integration agreements with some of those players. And I know Epic does.
Lee Shapiro: For underwriting. Using healthcare data for underwriting.
Bill Russell: Yep. Again, these industries get so connected that I think Oracle has a broader picture than we have today. Two days after the [00:42:00] announcement which is why this valuation probably makes sense in terms of, and may even be a deal in the long run, depending on how they're able to knit all these things together. Be interesting.
Lee Shapiro: I'll ask you for one prediction.
Bill Russell: Sure.
Lee Shapiro: Does this mean that that Epic might merge with someone in the future or will remain independent as Judy looks to retire in the future?
Bill Russell: Never. Epic will never merge and she will write it into her will that they will never [00:42:30] merge with another player. I had an interesting conversation, so we finally started getting back together. Over beers we were sitting around and talking about the future of Epic and we all agree that Epic is missing a boat on becoming a platform for healthcare. They're slow to adapt to interoperability.
They're slow to adapt to this. I mean, they could be a phenomenal partner for every innovator in the industry. If they decided to say it doesn't all have to be [00:43:00] built in Madison, Wisconsin. Now you may not be able to comment on this, but as we were sort of talking, we thought they really could be the platform that enables so much innovation into the future that it really does cement them for the next decade or two in the place they're at. But if they continue to, I don't know, try to hold the reins and put up toll booths every time an innovator wants to access the data that that'll keep causing people to look for, is there a different way to do this?
Can we do this in [00:43:30] another way? And eventually they're going to find another way. I think. I don't know. Just some closing thoughts on that.
Lee Shapiro: Well, Bill I think that you certainly see some potential there that maybe they'll catch on too, but I agree with you an open strategy is certainly better than closed.
We had an open strategy at Allscripts. I know that Athena had more disruption pleas and bought about ways they would open up their platform. And that's why companies like [00:44:00] Commure exists to build around the electronic health record. And they're doing a very interesting job with some leading institutions kind of creating some of those capabilities.
So we think that this is an industry that's still super important. I mean, healthcare is you know, 20% of our GDP in terms of spending. Maybe more last year with pandemic. And so finding ways to leverage technology to improve all of our health is really important, which is why we're so excited about what we do every day at 7wire.[00:44:30]
Bill Russell: Lee. Thank you again for your time. Hopefully we'll catch up with each other sometime after we get through some of the next stages of this pandemic. Thank you again for your time and sharing your wisdom and experience with the community.
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