April 22, 2022: Here to transform the healthcare experience from sick care to well care is Stephen Klasko, MD, Executive in Residence at General Catalyst and former President and CEO of Jefferson Health. Health assurance is reducing the cost of healthcare in a way that doesn't leave anyone behind. How much will the current healthcare delivery organizations have to change in order to realize meaningful progress? How do we overcome the inertia that exists within the system? How can we align the economic and consumer centric goals of wellness and care? Will we see meaningful progress in health equities? Are we focused as providers on the right areas of innovation and digital transformation?
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Sick care. We have existed in a model that is a sick care hospital centric model. And that makes zero sense.
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 Health, 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 our mission to develop the next generation of health 📍 leaders.
Keynote we have Dr. Stephen Klasko Executive in Residence at General Catalyst and former President and CEO of Thomas Jefferson University and Jefferson health. Dr. Klasko welcome back to the show.
Thanks. It's it's really great to be on again then, especially now that I'm transitioning into the nether world of a very different type thing than we talked last time.
Yeah, it is. So executive in residence for general catalyst and Hey, Tenasia that the whole group is doing some great work around health assurance. Give us an understanding of what you're doing in that new role and really thesis for.
Yeah, so, well, it really started out with a book that, that Heymont and I wrote called unhealth care, a manifesto for health assurance. And it actually began with one of the Silicon valley entrepreneur to see all 195 year old academic medical center had a baby.
What would that look like? How do you bring the move fast and break things type world of traditional VC world to. To the we improve lives and non-profit much slow world. And we had had some really good work done in my previous roles. And what really hit me about what what Heymont and the team at GC want to do is get away from the we're just going to acquire point solutions the bongos of the world and that kind of thing to unscaled, we're actually going to create an ecosystem that can actually start to transform health care. You know what we're calling responsible innovation and the best way to look at it is. if we knew that during the industrial revolution and the internal combustion engine might cause climate change, we might've made some changes.
If we knew that the social media revolution and mark Zuckerberg, wasn't just so I could see my unbelievably cute grandkids And provenance when I'm not there, but it could affect elections and spew hate. We might be in a very different situation. So what we've really tried to look at is how can we invest our dollars in, in, in entities that are going to turn things like population health, predictive analytics, social determinants From philosophy to the mainstream clinical care and payment model. So if you look at the folks that they brought in people like Robyn, Washington, who had been the CFO of Gilliad myself, Ken Frazier, the former CEO of of Merck woman named Elena buyback in life sciences side. So just one example company I'm going on the, on, on the board of that we acquired is looking at how can we revolutionize clinical trials?
Right now clinical trials are stuck in the nineties. And a lot of times African-American folks and Latino folks don't always get to them. We can now comb through an EMR and say for this particular trial bill Russell is perfect and reach out to you type thing. So, so those are the kinds of things that we're looking at that can start to create this ecosystem, that de-fragments healthcare, hopefully in the United States and beyond.
three things came up in your book and, when I read the press release of you joining the company, they talk about transforming the healthcare experience, sick care to well care reduce the cost of healthcare and do it in a way that doesn't leave anyone behind. So health, equity. and those kinds of things. So is that the framework for the investments and what really brings together health assurance.
Yeah. So, so the whole look, the whole idea of health assurance. Is getting out of this either or model or even talking about things like telehealth right. I mean I remember I'm a distinguished fellow of the world economic forum, and I had a cup of coffee with one of the CEOs of one of the major finance institutions in the world. And he was talking to me, he said 40 years ago, the two sectors that escaped the consumer revolution were banking and healthcare.
And they took a sip of his coffee. He said, now, So the idea behind health assurance is getting away from talking about, ooh, we do telehealth or we we, we did move on, go and we don't get up in the morning that I think on a Telebank it's just a banking went from this model. If you're my age that 30 years ago was. Ridiculously like difficult nine, nine to four on Mondays to Thursdays and 10 to seven on Fridays to one, which is actually really convenient now. Right. And every other sector has gone that way. And there's still banks. So so I always say in, in my traditional role of care, I want it to be target or Walmart.
And what I mean by that is when Amazon disrupted that industry you think about it. Some people say, oh my God, nobody's ever gone to a store. Things, circuit city, and they tried to be all EFL, Sears and petty said, but what a stupid idea people love love of the day after Thanksgiving, parking 10 miles away and fighting over cabbage patch dolls.
That'll never make it well talking to Walmart. So we're damn good at what we do, but we also have to compete in that space. And so I think, I think that the idea behind health assurance is put it in sort of a simple sentence. I want to get away from, those of us in the healthcare industry, thinking about patients, 97% of people in this country do not wake up and say, I'm a patient. They might have congestive heart failure. They might have cancer. They might have diabetes. They might have one of any chronic diseases, but they say actually I'm a person that would love to be able to thrive without health getting in the way.
They're also not a consumer either.
Yeah. I don't like to go that way. And, it's interesting you say that because of. I talk a lot about consumer segmentation and it's sort of the wrong word, but, you know, my brain explodes when I see a billboard that says Pleasantville general hospital, we are patient center.
And like, what does that mean to you? Patients that are for somebody like me as a 68 year old with five wearables or a 29 year old Disengaged person or 75 year old that only goes on Facebook to see their kids. I mean so we know our, our patients are not consumers. But we need to think of the way in some respects that some of the consumer companies have as far as how do we get out to them, but they are people.
And I think became an $18.4 billion company, basically doing one. And I don't tell you that diabetes, but saying, look, see, you can only think of them. You can always say, come to my ER, come to my urgent care center, come to my office, come to my hospital. That's not what a diabetic wants to do for the rest of their life.
What they really want is an invisible friend that can be with them that can help them so that they can do their normal lifestyle. That's what they did. And if you think about a lot of these. They're all things that we could do, right. It really frankly upsets me that we've created we've allowed the Oak streets of the world and the Chen meds of the world all and the Lovango is that the world to literally create these huge companies that, that we could have done.
I mean, when I think about tele-health and part of the reason I think some of the tele-health stocks are going down is it's a commodity. Right. I mean, it's my patients, my doctors, and you're going to create a five, 10, $15 billion company being the FaceTime between my patients and my doctors. Why didn't I hire you to do it and great that company. And in some respects, that's what Jefferson did back in 2013. When we created Jeff connect, we said we'll use a miracle, we'll use Teladoc, but we're not going to basically vend that out then. Yeah.
We are patient centric is, is pretty interesting. Cause we, we do compare ourselves as providers, right? So we look at each other and go, well, Jefferson's more advanced than whoever's down the street. Then this also some or whatever. But the reality is when we pigeonhole ourselves and say we're patient centric, we're essentially saying we, care about you from the point you become a patient until the point we discharge you. And all the points in between we wish you well, but really, unless you're coming in and paying us or unless you're coming in and seeing our doctors our relationship is kind of stilted.
Yeah. And, and by the way, it's going to get worse because I mean, there's, what's the one word that comes out of everybody's mouth about the future. Data. Data. We need data, right. Data. And I get tired of hearing that. Okay, well we're up to our patoot and data. It's just actionable data. And what, what folks from CVS and what folks from other other processes say, well, you guys are clueless, Steve, you run 18 hospitals. You only know what happens. Somebody comes into your hospital. If you, if you communicate with your primary care docs, maybe know what happens, then we're CVS. Yeah. We know, we know if the person uses glasses, we know if the person buys condoms we know what you know, that they, buy 10 candy bars a month and now there's other, other folks that are taking the consumer data world and bringing that in. So, so I think you're right. it's that sick care We have existed in a model that is a sick care hospital centric model. And And that, that makes zero sense. when I was the CEO of Jefferson in December, she walked into my office. There was a sign says when, when Elon Musk brings folks from Mars to Philadelphia, And they say where's Jefferson. I hope five years from now. You can't, you can't define that. You mean Jefferson my phone Jefferson on my TV, Jefferson at home Jefferson 12 micro hospitals.
Oh, you mean the place we're really, really, really, really sick people go. I think that still kind of the norm the fact that we are defined by where our sickest patients go The fact That we're defined by an essence. where we fail to keep people healthy is really partly what's wrong with the American healthcare system
So how has your work different from the executive and residence to the CEO chair? contrast of.
Yeah, well, I have a couple of jobs. I'm sort of the ultimate post pandemic worker because I live in Miami and Chicago. My two employers are Palo Alto and Israel. My other employer is I'm the head of global innovation and the north American ambassador for Sheba medical center, which is number 10 hospital in the world based out of I'm based out of Tel Aviv.
And we're building these incubators in Chicago and in Jersey city. So I think, the biggest difference is. No, frankly, I got a little tired of being called a disruptor in the traditional running a traditional health system. And Jefferson did fantastic things. I had spent some time at apple and the pre iPhone era and Steve jobs is talking about the old math. The old math was computers and operating systems. The new math was this thing called a digital lifestyle. I shamelessly stole that when I came to Jefferson 2013, instead our old math has inpatient revenue, outpatient revenue and in-person tuition. and I just funding the new math is going to be strategic partnerships around this healthcare at any address model.
And I think that The fact is that, the pandemic just prove that, I mean, just today they were talking about our largest insurer, Philadelphia quadrupled, their net operating income, something like $813 million. They didn't do anything amazing. They just basically had convinced the employer.
It's not their fault, but that that this is, this is how much money we'd expend on effective stuff. And interestingly, where they made their most money, it was from that. So, so basically think about this, this, Team is going to get their top bonus. Cause people in Medicaid didn't go and get mammograms and, and procedures that they would have to pay for.
Now that if you need a better example of how messed up our system. that the hospital industry probably lost several hundred billion dollars in the insurance industry. And by the way, it's not their fault. That's the model, the MLR model, by the way, they would say 10 years ago, you used to hold us hostage by saying if you don't give me 5% more to become 10% more efficient we won't put you in our panel.
So it just doesn't make any sense. I mean, the fact is, let me give you one other thing. One of my mentors with a book, a guy named bill Kissick at Wharton. When I went to Wharton called medicine's dilemmas, infinite needs finite reasons. Okay. He said he was the first guy talking about the iron triangle of access, quality and costs increased one Anglia decrease another.
He said 40 years ago, anybody, in terms of the increase access, increased quality, decreased costs, it's not going to be painful and destroy. They're not telling the truth. So if you think about health policy bill in this last 12 years, president Obama said the news, the ACA will increase access, increase quality, and decrease costs. And it won't be painful. President Trump said mine will be fantastic. Perfect. Unbelievable. Real huge. And it was none of the four. So the fact is that. it's all a lot, and if you think about the ACA, it's say God, we've got to bring it down on a quarter to a dollar to give more people access.
What's the first stocks you would have bought if you followed other sectors. You would have sold things like United, you would have sold things like supply chains, like J and J and Merck. And the fact is that would have been a huge mistake because other than apple, maybe the best stocks since the ACA was United.
Now, how can a middleman stock go up that much if you're trying to decrease costs? So some of this stuff is just logic and the fact that it was viewed as either transformative, revolutionary, disruptive, depending on whether or not you liked it. It's just really just looking at. With a mirror
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The only word I can come up with is inertia, right? there's a ton of inertia in the system. And so now you're looking at general catalyst is disrupting let's. Let's not say from the outside. I mean, cause there's some, there's some strong when you look at some of the investments, there's some people who've been in the industry for awhile. Really understand it. They're just coming at it from. Different perspectives and different different models than we've done in the past. how do we overcome the inertia that exists within the system? is it policy, is it is it leadership. What is it?
I look at it a lot, like the new Orleans of that levees before hurricane Katrina, like for 20 years, everybody knew that that was going to break and did and while nobody was surprised, I was, oh my God, look what happened. I think we're really in that point in American health care, we don't take care of behavioral health. WE're, we're spending more money for okay outcomes where the best healthcare system for 15% of the population, that kind of thing.
So I think, look, I think GC, certainly isn't going to. So Albert, but I think the difference in the GC model and and I think other, other VCs and founders are coming up with the same kind of thing is how do we democratize this? How, how do we one of the companies I'm really excited about that we've invested in is called Eleanor health.
Then it's basically suited substance use. Like instead of ignoring, and instead of saying, that's not my issue, I'm I run a hospital. It's how do we get at the root cause of substance use issues? How can we take a combination of tech and humans to, really help, help solve this before that person gets under the bridge and is injecting themselves with heroin or getting killed.
And so I think, I think that the fact is that. I really do believe that we'll start to have the bowel break. We can't keep spending more and more and more and more money. We're a $4 trillion industry that I used to say, that's the entire economy of Russia, but I guess that's probably it's probably a lot more than the economy Russia today, but, but the fact is we're fortunately in dollar industry and we have to get over this myth that we have the best healthcare system in the world.
Right. I mean, I'm an obstetrician bill. And we spend about three or four times more per obstetric patient than any other country in the world. And you say, oh, well, our outcomes must be the best. And our outcomes are somewhere between like Serbia and Croatia. I mean 19 or 20, why my daughter got pregnant during the pandemic.
And she said She had to go three times a week to get a non-stress test. She said that I had to spend $35 to park three times a week. I had to go to a place with a lot of sick people. Somebody put a monitor on me so I could stare at the ceiling. I thought you were the digital dude. Can't we take care of that?
Well, the fact is that was on the board of a remote obstetric monitoring company out of Israel, but it hasn't happened in the United States yet. Why? Because hospitals get paid a lot of money to have people come to the hospital. So it's hard to get somebody to do something when their salary depends upon them not doing it. And then we have this ridiculous malpractice situation where the first obsessional patient I monitor home. That's 17 years from now. It doesn't get into Princeton. I'm going to get sued. So some of the things that work in other countries can't work here because we have this almost impossible system that just promotes.
Literally the sick care high fixed costs model. So until, until literally we start to change that now one way to change that as what we did at Jefferson, where we acquired a Medicaid, Medicare advantage insurance company. So now all of a sudden $2 billion of my. Income is based on that first dollar premium and getting out to that patient's home at hiring a handyman to fix the mold in her house, made a lot more sense than having to come to the ER every three months with asthma.
When you start to look at it that way and bringing in those kinds of people into my cabinet. The other thing we do. We actually brought somebody from GC into a company that we co owned and that person was on my cabinet. So all of a sudden, my cabinet, I was no longer a bunch of hospital people. it's a Medicaid and Medicare insurance person. it's a basically a tech person that's used to moving things out to the home and you get a very different discussion.
let's talk the the focusing in, on one of those things. Let's talk costs of healthcare. So still the greatest source of bankruptcy in America is, healthcare related costs. Now we have I guess as of yesterday, 80 and a half percent inflation on top of that, and the average American is looking for relief in a lot of different areas, not the least of which is at the gas pump and everywhere else. are they going to find it from healthcare providers or is it going to be a new kind of model? Or are they just going to continue to defer care because they just can't afford it?
here's, what I think will happen. I really do believe that, that so first of all, the average CEO of a place that I was CEO of five to $10 billion large health system is 67, 68. I'm 68. Okay.
Unlike me, the average CEO is sort of just trying to hang on to the limb of how things were done before, until they reached their LTR. So one of the things that you're going to, you're going to find is this whole group of new CEOs that I think will be more diverse, I think might come from different industries.
And I think they'll, they'll look at this and say, oh my God like, like why are we here? So I think that's my optimistic point of view where folks will say, well, this can't be second thing. I think that'll happen is you will have to have payer provider. It doesn't mean that every provider will own a payer or vice versa, but I think you're going to start to see more strategic partnerships between maybe a single or two payers and an it provider that then start to create some of those.
Some of those synergies, the third thing I think is going to happen is that you're going to have. Well, we don't like the word consumer, but you know, the people are going to have their own mad as hell. I'm not going to take it anymore moment. Let me give you just one real example. I started a company that's doing a match.com between obstetricians.
So, but we used to be when I was in private practice 30 years ago of 28 year old woman would be late for a period. She go to a 65 year old male, primary care doctors. They congratulations. Mrs. Jones, you're pregnant. I'm sending you to my obstetrician, Dr. Klasko. She said. Now if you have any 28 year old children or whatever the chances of the 28 year old would now say sure, 65 year old guy for the most important point thing in my life, I will definitely go to the person you play golf with or happens to be in your system or whatever other reason you're sending me to them.
No, I think I'll go and talk to my friends and go on the metaverse and Do virtual reality stuff and that kind of thing. So now we'll, we'll what we've looked at is okay. I'm Mrs. Jones. I have a Bryn Mawr, Pennsylvania. We'll give her a predominantly female group within 15 miles of me. I'd like them to accept my doula.
I work at Comcast. I can only get off on Fridays. I bet in the gold. I don't want to pay more than a thousand dollars deductible. Oh. And I'll send you my HIPAA compliant records owned by the. I don't, I'd like to get your C-section rate any quality data. And by the way, you don't have to send that to me.
I met my wife on match.com. You don't have to put your picture on, but there's usually an assumption of you didn't put your picture on. There was a reason and I'll assume you didn't, you didn't want to give me your data. Okay. Now when I, when I go around the country and talk about that, I get there's nobody in the middle.
I either get doctor saying, oh my God, This is the end of healthcare. As we know it, you are truly, truly, you came from the netherworld to kill healthcare. And again, another group of obstetricians say, wow, this is really great. Where do I join? And there's a huge age and gender difference between a. So what gives me optimism is that the folks that are going to become the new doctors, nurses, and healthcare workers, some cases, employers that grew up in a world that was very sort of why can't I do this at home?
And why can't it be more efficient or not going to tolerate? That piece and what are, where I think we'll get smart is wait, why are we allowing the Oak streets and the Chen meds and the low bongos and the teledocs to become 10, 20, $30 billion companies. They lay in my new world. It's laughable the Jefferson views, their competitors.
And but by the way, if if I was starting to come to the yeah, yeah, you're right. That you have to hate them. Don't, there's nothing to see here with Oak street taking all the patients that can pay or, or gen med or Oscar or no, don't worry about them, but you, you go after Penn or Penn, you go after Jefferson, right?
It's like Sears going after pennies. We're not worried about target Walmart or Amazon. We're going to beat pennies and that's what we do. So I think, I think that. I think that, that, that the external environment will converge. There will be some places. And I wasn't the only one why I call it a consortium of the willing I'm finding more and more folks when I was CEO of Jefferson that were looking at these strategic partnerships differently.
So I think you'll start to see that the one thing we have to change in this country is we have to let health systems. Bad health systems that are expensive need to fail. we're not a market driven economy. And, and it's one thing if you're in a rural area, totally different ballgame, but you know, we have 43 hospitals in Philadelphia.
we have two that have gone bankrupt each one it was like, they it's like a fish out of water. They could throw it back in the water they needed to go back and there's probably a couple others that need to go bankrupt that are lowly frauds. And once you get into that market driven world, now I know that that, that the new head of DHHS does not like consolidation.
And there's been some, some negative things of consolidation as far as pricing. But I would argue that Jefferson going from a $2 billion to a $9 billion entity from a, a one hospital to an 18 hospital entity with the hospitals that we brought in. Yeah, they've all gone up in quality. I did not believe our cost is increased. So I think we have to re-look at consolidation a little bit different.
So, gosh, I could go in a bunch of different directions. I do want to talk about the modern healthcare providers, CEO role. I do want to talk about education towards the end of this. I want to get to your current soundtrack for healthcare today. But let's start with the healthcare provider, the CEO. Do they have to be fluent in digital technology, do they have to be fluent in VC and those kinds of transactions and what will the next generation of healthcare providers, CEOs.
I think the first thing is it needs to be almost 180 degrees from what it was, right. The concept of I build an academic career, I have a hundred page CV, so I'm going to be a good CEO is just. Similarly, I've got an MHA, so I can open up the spreadsheets is similarly asinine. So we're the only sector where you have to have like been an NIH funded research for a great clinician to be the CEO. Right. I mean I mean, Right. The head of GM doesn't necessarily have to build cars or in, in, in his, or her experience. So, so I think the key is no, I don't think that somebody has to be in an NIH funded research. I don't believe they had to have been a, a chair. And I also don't believe they have to totally understand the guts of the FHI, our layer, and you know why that might get us out of the tyranny of the legacy EMRs.
I think what they do need to be is a person that can radically communicate radically collaborate. And then in some respects, be radically creative about transforming a system. And the best advice I ever got from my head of leadership at Wharton was Steve. You should always have five people under you that think they can do a better job than you and three And so people would be amazed if like you're the CEO of his nine doing organization, but you don't go to the internal budget meetings or the, because I had a head of my 18 hospitals. There was a much better. Head of hospitals than I was. And I had a provost of our two campus university. I've been a provost, but it was much better provost than I was now. I had a head of innovation that that's what I do. I'm a tech crunch guy, but he was better than I was at that. And I had a head of philanthropy I'm really good at that. But again, she was the best at it.
So, so the ability of having those four people and allow me to be the orchestra conduct. And lead what's going to be obvious 10 years from now and how can jeopardy get there today and go out and do my world economic forum thing and go out and do my Silicon valley thing and and, and get new investments as the Jefferson is, is what I think a good part of the new CEO will be at least of complex organizations.
Now, if you're running a single hostile very different ball game. You need to be a great operator. But, but for the, that are right when we talk about the major academic medical centers as the major health systems, it just, you need to be a good leader. That's what every other sector, whatever the other sector has is, is what's, who's somebody that can lead us.
Understand the industry enough to, to lead us into a very difficult time, whether that's in hospitality or whether that's in automotive or frankly, whether that's in healthcare.
I do want to touch on Walmart and Amazon and there their plays in this space and CVS for that matter. And some other CVS is a little different because they have the payer relationship as well, built into that. But I think the question is from an access standpoint, they have a speed hands-down right there. They're within a couple of miles of, so much of the population in the, United States. Are they going to be able to start to really discern intermediate the providers? Getting in the middle of, of people seeking care and then helping them to direct that care. Do you think?
Yeah, it's a great question. And, when Haven started, okay. Think about is Amazon JP Morgan, bro. And every, every healthcare stock went down 20%. And I remember I was given a tough for like the American college and I was good executives like a week later. And the first question from the audiences, well, like Dr. Klasko aren't you scared? Like, why are you even going to work? I mean, clearly in his, in his spare time after cause remember he was still going to be a neurosurgeon.
He was still, still going to write for the new Yorker. Tuesday's from five to midnight and Thursday mornings, he was going to transform healthcare system and people believe that. And I said something that ended up getting tweeted, but I said, well, frankly to me, it's like the Lochness monster. If I ever saw it, I'd probably be scared.
I don't think I was in my lifetime. So I think that that just because you're apple or just because your Google, I mean, think about it Google health. Well, I mean, they can call whenever they want, but it failed. Why? Because people didn't trust Google to give me all your records. I mean that was a bridge too far for folks you can trust me.
So, so number one is trust is more important than technology and, and I think it's going to be very hard for people to want to hand over everything about themselves, their genomics and everything else to an Amazon, a Google or apple second. I think people underestimate the complexity of healthcare and frankly, the bizarreness of healthcare.
Right. there was a company I was looking at and said, Hey, this is really good news. I can turn credentialing from a six month process for, for insurers to like 24 hours, make it really efficient. I said, great. You will fail because Harvard. Well when I acquire a hospital, don't want all those people in that hospital get credentialed in 24 hours.
They want to pay them less and take longer. So, you assume that that healthcare is sort of this consumer sport and, and has the logic system of everything else you've done now, where I think the group that gets it is that. I think Amazon care post Haven has really said, well, you know what you said, we think we can do what we do best, which is really work with the employer work with the employee.
If your kid has an earache. And we can send somebody out to the house and know, take care of that. So you can go to work and maybe even send a home health person that's what we do really well. And I think that direct to employer piece, whether it's Amazon care or transparent, which is actually one of the companies that our GCs invested in that Glen told me at his founding those are the kind of of, of disruptors, disruptors that they could make.
Look, Walmart can never be underestimated. I mean I was on a panel with their CEO and look, I mean the amount of people that walk into a Walmart once a week is just unbelievable. There's just no other, there's no other place in the world, probably like that, that they can say here's 50 60, 70, a hundred million people that walk into my place once a week and spend an out.
Okay. Well how you think about that in a health piece and, Walmart at home, and Walmart is one of those places that has done a good job of competing with Amazon. You the best company that work at like, well, they went from almost being bankrupt to getting it was.
Right, right. What about best buy for 23 cents? Cause they're, they're Sears and Penney's and they said, wait a second, we have this brand and why can't we do best buy at any address? In fact, that's probably where I got into the healthcare at any address Jefferson and any address, so, so I look, I think that, I think. The key will be, not every one of those will make it. But I think Walmart will be a player. CVS will be a player. Amazon will be a player. It's hard to think that Google and apple won't find some, some niche in healthcare, but the key will be how do you as a provider or a traditional healthcare CEO partner with those folks instead, because they're going to need you and the folks that are willing to get into that early, I think we'll do pretty well in a true partnership.
So talk a little bit about the partnership model. And so we spoke with with Rob D Michelle, former CFO for UPMC, and he talked about the death of the traditional provider. We could say, been overstated as one of the, he believes it's going to come about as death by a thousand cuts. it's not that Amazon cares going to come in and take so much of your population, but Amazon care is going to come in. Walmart is gonna come in. CVS is going to come in. Sir surgery centers are gonna come in so forth and so on till this, this low margin business just gets, it gets hammered. And when you're a traditional provider CEO, how do you bridge that gap? How do you bridge that financial gap and say, okay, it's partnerships at this point. because the old, Hey, we'll just keep doing what we're doing, appears to be getting closer to a losing strategy,
Right. Oh, you used the word inertia early, early on in this discussion. I call it risk aversion. And I go around the country telling people you want the riskiest thing, you can do. Nothing. I tell boards the riskiest thing you can do. You want to jump out of a plane without a parachute yet you just keep working on your inpatient revenue and trying to get 1% market share from your quote dinosaur competitor that's a really.
Great strategy for jumping out of a plane without a parachute. Anything else you do as far as partnering with Walmart or whatever is, is less risky? So, so look, I, I'm not as pessimistic as he is because I think again, it'll be the death of. Traditional providers that'll have to consolidate oh, Jefferson. When I got here in 2013 we were we were just nowhere where we were, we were two hospitals with three different boards. We were strategically we were a great place to give care. That was never a question.
One of those fragmented markets in the country.
Penn was laughing at us and everybody's saying, who's going to buy Jefferson you fast forward we're 20% larger than Penn. We're 18 hospitals, nine and a half billion dollar company. And I had a board that when I first, the first thing I did, the first thing I did was get out of our 25 year relationship with mainline health, that every one of our insurance products and our $365 million worth of bonding, we're all owned by that. I think our thrills is $5 million. I've been there for three months and put into a home equity line. Cause we had never been rated and I had to get all new insurance things. I'm literally the prediction of the, at that time, JJ, just focus, it was like they did their presentation because they were all going to be at a jobs in front of my board.
It was like, Austin Powers. You listened to Classico, you will lose a billion dollars. The fact is that I recognized, and again, a lot of it was through my work with apple. That of all I was going to do is go from being really, really in bad shape, to incrementally in less bad shape. That was a really lousy.
And the least risky path was to think about what would be obvious 10 years from now and be that leader not try to not try to compete with panel pens. So my first faculty meeting bill, I went and said, get me, tell me something really exciting about it. Like, like that I wanna invest $150 million and somebody raised their hand said, well, we're number two to Penn, but we're better than temple and Drexel.
I said, first of all, opposite of exciting. Second of all, I have no idea if any of that's true by what parameters and then somebody else raised their hand said president Classico, if you give us more money for a NIH funding and a proton beam, we can get closer to Penn and us news and world report and NIH funding.
And my first comment as president of faculty meeting was, look, if you want me to get closer to Penn on Penn station, That'd be like if the search committee said height and hair were our two most important criteria, I probably would not have applied for this job. And that's when I came up with that model.
What if we think totally different, we're 195 year old academic medical center thinking like a startup company and and go, go where that's going. So I I think that that, to me, that's where my optimism comes. All of us have the brands. If you're a doctor, your patient's going to see.
you If you're unwilling to beat, to be with the future, if you're unwilling to do any of those things, then your patient won't be with you. But the, what your patient ideally would like is that she could stay with you. And that you're doing that you're out you're closer to home. She can access you in a, in a better way. I always always say we have, when I think about how I can deliver a baby. We had star wars technology for individual patients. In a Fred Flintstone healthcare delivery system. That part hasn't changed.
Yeah. Last two questions. I want to give you a chance to talk about some of the things you're seeing. Cause you're, hanging out with some really interesting people, some really fascinating forward-thinking companies. So what are you seeing? That's going to be potentially the most impactful or disruptive work that's being done in healthcare.
Yeah. I think what I love is some of the, gen Z and maybe a little older founders that are not afraid to look at the intractable problems. So the companies that I've gotten most excited about are ones that are going right at behavioral health going right at substance use. Companies like city block, they're going right at the health equity and the most underserved folks, the 5% of people that use 50%.
Those things used to be considered dead zones so when you think about behavioral health, that's been a car out. I just can't deal with that as a hospital system. So all of a sudden and I look at the companies I'm looking at at GC, it's these, these really cool young founders that are saying no a combination of tech and humans that can really start to get at those issues.
I think the concept of making sure that the tech and the company that I'm creating, isn't just making the wealthy healthier I think more and more things look at social determinants, predictive analytics, natural language processing, getting out to folks homes. So that, that, that's what gives me a lot of optimism that that both those, those folks are founding companies and places like GC and others are saying this is a company I want to invest in because that's the right.
Right. Place to be. there's just a lot of optimism. I mean, the really cool part you mentioned that you'll ask guests. I mean, everybody that, I, first of all, I'm like when I'm in a meeting at GC, if you took the five people around me and you added them up, I'm over, then, then the combination of those things. So so it's nice to be around really smart, creative people that look at me. I get a little tired of being you're like the grandfather of tech and health healthcare. I say, go with father maybe, or, or older brother, but you
know, what's funny about that picture is you represent the old stodgy healthcare's perspective. That that's what they're looking to. You say, Hey, can you explain how old stodgy healthcare thinks and the rest of the healthcare is looking at you saying. Yeah, you're, you're so far out of the bounds, but to them you're like, Hey, tell us how they think.
Yes. So, I mean, look, that's, what's fun. Ken Frazier moved over to GC also, and he and I talked then he was, he grew up in an underserved area, came a lawyer. Then he became CEO of Merck. Now he's working in this environment, same thing with me, I do over 2,500 babies in Allentown, Pennsylvania became the Dean of three different medical schools, a couple of CEOs and it's it and now. Interface between this and deejaying at my assisted living facility.
So the ability to really just take a no limits approach I mean, that's, that's really cool bill. You and I talked about this a little bit before the podcast that the ability to be at this point in my career where I can take a no limits approach and say yes to somebody or notice somebody.
Based on whether or not I think it's going to have an impact or whether or not I can have an impact is real. It's really a nice place to be without the constraints of the ankle weights that are traditional healthcare ecosystem. But Sonia
Fantastic. We're going to go to the DJ thing. I just want to, so I was born in Eastern hospital, so you didn't deliver any babies at Eastern hospital did do.
I'm going to tell you one real interesting anecdote that is in the hospital. So one of my last thoughts, the medical students was. right before I left and I I'm wait for meeting. And this medical student comes running out and says, president Classico, my mom says, I have to talk to you. You know what I'm saying? Look, if it's about tuition that's my house. No, you delivered me 31 years ago at sacred heart hospital in Allentown, Pennsylvania. And what's so weird about it is actually remembered this. This is why the mom had gone. I was patient at Eastern health. 31 years ago, there weren't a lot of Nick use the word.
A lot of high-risk obstetricians, especially not in Catholic hospitals. So we was a nice community hospital and she was small enough as a baby. That that was going to be considered a non-viable pre. And the mom says, I happen to know there's a Catholic hospital in Allentown that has a NICU and a high-risk ops, obstetric service please send me there. So literally I didn't remember exactly it, but I remembered, I remembered like, well, yeah, I think I do remember that because at that time I was like one of the smallest babies I delivered. And she said, well, you look like you're getting pretty emotional. I says, is that because of the story?
I said, no. So it's like working you, you're 31 years old. I feel really old. And I knew that I probably deliver babies and they weren't five anymore. But when I'm confronting you it's like, wow. So yes, I do know Eastern hospital.
All right. So former DJ you have been known to put together soundtracks and I guess we call them playlist today. You might still call them soundtracks. What's on the playlist for healthcare today. Do you think.
Yeah. So it's interesting. Cause my new book would be my sixth book is coming out in November. It's called tool to rock and roll too young to die and I'm taking basically 12 songs and and using them as the next. For basically for, health care. And so like, I'll just give you a couple of songs there. Courage to change is a 2020 song by SIA and the whole idea is do we have the courage to change? So that's a chapter. There's a chapter on a song well, pretty much what we were talking about by Simon and Garfunkel called keep the customer satisfied. Just a little bit about a consumer, it was on the bridge over troubled water album. I've been slandered liable. I've heard words I'd never heard in the Bible. that was that song.
Chapter four is called Mr. Robot. By sticks and and the alerts that are, I'm not a robot without emotions. I'm not what you see, come to help you with your problems. So we can be free. I'm not a hero, I'm not a savior. So the concept of wait a second, we spent 50 years trying to get doctors and nurses to work together.
Now we're going to have to have doctors and robots. Chapter five is actually this great song from dream girls. The Jennifer Hudson did called I am changing look at me, I'm changing, trying every way I can about how hard it is for, for, for healthcare organizations to change.
So every Friday I would do a playlist bill for my 50,000 employees. And it really helped during the remember, I, I wrote a two campus university as president. I ran. So during the George foil time it was a great way of. Discussion with my 50,000 very diverse employees, things like choice of colors by Curtis Mayfield and music creates an opportunity to have a non angry discussion, but I would also do it in a sort of when, when we got through the lockdowns.
One of the songs that I highlighted was by river Roberta flack, first time ever, I saw your face where people had to do all their zoom dating. With maths and now they're actually getting together. Oh, that's what you look like. So it really gave people a chance. And so it started to happen.
Is that through a really tough time, I would probably get 50 suggestions for the Friday playlist from everybody from wire metal service workers to chair north surgery that created this. Fun fun piece. We ended up on Ellen because they had this the level up challenge for a song and we want it because our nurses were out dancing to level up. So that music is the message. Really helped me when I, when I started my career as a DJ back in 1978, as somebody, as one of the people from GC reminded me is 25. I'll see you start as. That was when DJs made less than doctors, right? Yeah. Yeah. Pre Pitbull era.
Wow. so will you be deejaying the company Christmas party or anything to that effect?
I still do a lot of DJ. I did get the entire Oliver Wyman health. Last year virtually I've, DJ'ed some stuff for companies like innovator. So it's funny because there's a lot of controversy because the Goldman Sachs CEO is DJ at Lauer Palooza. He's a DJ and. And they said the DJs are saying he's allows the DJ and it, so I don't ever try to say have a great DJ. I said, I'm a really good DJ for a gynecologist. And everybody agrees with that.
That's fantastic. Dr. Klasko Stephen, thank you for your time. I really appreciate it. Love the work that you're doing and look forward to it. Keeping in touch. Cause we really, we didn't touch on education and how that's going to change this next generation, I don't think that it's going to change just because they're digital natives. It's probably the whole process needs to change. So there's still a lot of stuff that.
We do it with one anecdote bill. When I started at Jefferson 2013, I gave a talk and the guy before me was Austin Goolsbee, who was a president Obama's council of economic advisors. And I was built as the second talk is a futurist in health. And he says, look the way the economy is going, the two things you don't want to be running for the next 10 years versus 2013 are academics and healthcare because they're so coolest. And to be totally disrupted. The next bit I go, well, obviously don't listen to anything I say for the next 45 minutes, cause I just took a job in academic healthcare in Philadelphia. So obviously I'm a really lousy future if the court in Austin denied it for another podcast.
Fantastic. Well, Hey, thank you again for your time. Really appreciate it.
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