1 – The Rise of Federal Fund Rates I Payers and Providers I Labor and Acuity I AI

Marcus: [00:00:00] Welcome to episode one of health further. Uh, I’m your cohost, Marcus Whitney. And alongside me is my partner. I’m Vic Gatto. And, uh, we are the co founders of jumpstart health investors. And, uh, Vic, what the hell are we doing here?

Vic: I’m excited to get back on the horse and start going again. We haven’t done health further for a long time.

Marcus: So really quickly, we don’t want to belabor the point, but. We’re both healthcare VCs. Uh, we’ve been working together, uh, about 15 years, but in the healthcare space specifically coming up on nine or so years, right. Um, based here in Nashville, Tennessee. Um, a little bit more about your background.

Vic: Yeah, so I did a startup in the nineties, jumped over to be a VC in 2000, and was at a couple other, uh, venture firms before you and I decided to start our own VC [00:01:00] fund.

And it’s been, it’s been a lot of fun. There’s a lot of, uh, change in healthcare right now, so, yeah. Yeah. Fun place to be.

Marcus: And my background, uh, self-taught technologist, uh, built digital marketing companies kind of through the, the early two thousands, uh, made the switch into an entrepreneur around 2007 when we had the big.

Uh, technology, uh, evolution of iPhone, social networks and the cloud. And, uh, then you and I partnered, we did the accelerator version of jumpstart foundry and. We’ve been at it ever since. Um, you know, today I’m, I’m running, uh, one of our funds, uh, jumpstart Nova. That’s investing in black founded and led healthcare companies.

Uh, you’re running jumpstart capital. Right. Um, and

Vic: then together we started our pre seed fund, which now is a, I think of it as a feeder system for our

Marcus: funds. Yeah. Yeah. And has, uh, across our whole platform, we’ve got over 150 companies that we’ve invested in and probably invested in another 40 before the end of the year.

Um, maybe 50 in aggregate with, with the companies you and I are gonna invest in, in, in our funds. [00:02:00] So, um, so a little bit about health further. So we just told you about Jumpstart. Yeah. Right. Um, health Further was a conference that Vic and I started in, uh, 2015. Right, right. Uh, we did the first one here in Nashville, and, uh, it was, we did it because we felt that there was a void in the market.

Um, specifically Nashville, right. As a, as a hub of healthcare. Uh, we thought there was a, there was a void in the market for healthcare innovation conferences. And so we got a bunch of, uh, partners, uh, in terms of like local companies. Paralon was the, was the anchor sponsor. Healthcare council was a, was a big support of what we were doing.

Haley Hobus was the CEO at the time. Um, and, uh, and we threw, we threw a pretty good event and had like 750 people.

Vic: Yeah. And it was, um, yeah. I think it was kind of our way to have an excuse to call our friends and say, come, come join with us. Let’s learn together about, we, we really knew at that point, early stage innovation in healthcare.

[00:03:00] Yeah. But we’re trying to learn about how all of these bigger systems interacted.

Marcus: Yeah. And, and I think one thing that we had as a value kind of right from the very beginning, right, was that we, um, we’re, we’re early stage investors and I didn’t even have a background in healthcare. Right. So, I mean, On one side, I wanted to grow my network and get smarter about healthcare.

But on the other side, we also thought like healthcare is a little insular and, you know, could use. To meet people outside of the industry. And so I think right from the very beginning, we were focused on bringing in people who were not healthcare proper, right, but we’re doing things that were relevant and relatively innovative in the healthcare space.

I remember we closed out with Chris Dancy. I remember like in year one,

Vic: even in inside healthcare, it’s pretty siloed. I mean, you have. Health systems all talking to each other you have payers and even within that you might have a specialty cardiac talks And then I don’t know this different groups But they don’t really [00:04:00] talk to each other or you know heaven forbid talk to anyone on the outside that might have new ideas

Marcus: Yeah, like I I do keynote speaking and It is amazing how many different trade organizations there are in healthcare for all of the different segments, right?

Yeah, exactly. So, so we, right from the very beginning, we wanted to bring in, uh, quote unquote outsiders. So we did the conference for four years and, and by the end, I mean, we had Greg Glassman, who’s the founder of CrossFit as a, as a speaker. Um, you know, we had a whole blockchain segment in, in our last year, um, that was pretty, pretty big.

Um, and we were, and we were always just focused on how do we make a bigger tent, right? For conversations around healthcare. It’s, it’s the biggest industry by GDP. It touches every last one of us. There’s no reason for conversations about the future of healthcare to be just, um, conversations that happen within the industry.

Vic: Yeah, that’s right. And I think that [00:05:00] we have always taken a broader view of, of health. Right, so Greg Glassman’s a good example, I mean, health and wellness includes exercise and includes food and diet, as well as a procedure you might get done with a surgery and an O. R. It’s all, I think it’s all intertwined, and it, it affects each one another, but often healthcare is, is very focused at the delivering care to a patient who, you know, might be, you know, Anesthetize on the table.

Marcus: Yeah. Yeah. And I think also even even from a political perspective like we had I think at the same conference um The national president for a planned parenthood and also art laugher Right and and I think that was always sort of a core value of ours as well is You know Look, America has a variety of views and healthcare is important to all of us.

And we need to try to capture all those views into one conversation.

Vic: Yeah. And I think with those personalities and [00:06:00] it’s a perspective of curiosity and trying to learn, and I can learn something from everyone from what, what side side of the aisle they’re on.

Marcus: Yeah, exactly. So, so then it kind of gets to like why we’re doing this podcast.

Cause we did that conference. That was Fun and also hard for, we did it for, for four years. We stopped in 2018 to really completely focus on our venture business. Um, I never want to serve lunch to 2, 500 guests. Again, no, no, I’m, I’m, I’m done with that health and vibe and all of you all. That’s right. Your lunch.

God bless you. Um, but I think also we recently started just having these feelings based on our. Daily and weekly conversations that, um, the rate of change. And the macro environment are just so dynamic right now. And it just does not feel like the, the current conversation that is largely dictated by some very successful conferences, uh, can [00:07:00] effectively keep up with it,

Vic: you

Marcus: know,

Vic: doing one, two conferences a year is not a pace where you can, you can cover this stuff.

Marcus: No, no, it’s, it’s, it’s happening way too, way too quickly. So I think we both felt that. A podcast would be a good model for how we might have these conversations and doing it on a weekly basis where we can touch on sort of evergreen themes, but also touch on things that are happening that very week and try to connect the dots between those things and also have conversations that we just, quite frankly, do not hear anywhere where we listen to a variety of different Podcasts, most of which are not health care podcasts, to be honest, um, and I’ve

Vic: been searching for this podcast that we’re about to put on.

I

Marcus: agree.

Vic: And I can’t find it. Well, health care. Is somewhat insulated from the rest of the world. It’s not fully insulated. No. And so, one of the things that, that you and I spend a lot of time on [00:08:00] is trying to understand different parts of our world and what’s happening in those areas and how might they affect our business, honestly.

Right. And then how does that affect us? How is that impacted by health care?

Marcus: Exactly. Exactly. So I sent you this tweet out, let’s see, April 25th, uh, at Jay Parkinson, uh, Jay Parkinson, MD MPH. Uh, he put this tweet out and I was just like, yes, I totally feel this right here. So he says digital health conferences are for geeks like me.

It’s the same folks attending all of them. So if the audience is the same, why are the speakers and panelists all the same? It’s insulting to attendees, and it’s an admission that there’s not enough interestingness in the space.

Vic: That’s right. I mean, the, I mean, we go to the conferences, I’ll keep going to them, but often the networking events are where I actually learn something.

The, he’s, he’s exactly right. The speakers are very predictable, and the format is not right. And I think that’s the main, that’s why I [00:09:00] don’t want to do a conference again. The format is challenging.

Marcus: Yeah. Yeah. And, and I think because we ran a conference, we know like conferences have massive fixed costs.

Like the minute you decide you’re going to do it and you sign the contract with whatever venue you’re in the whole, right. So, you know, you start figuring, how do I get to sell tickets and get sponsored? You guys sell tickets and get sponsors. Right. And. You know, the same speakers that are known entities that have been successful at selling tickets to previous events sound pretty good when you got to, like, make a profit, right?

So we, we understand, and it’s not something, like, we’re mad at because we’ve been there. We’ve done it. It’s really, really hard. But we think a podcast is a really liberating format where there’s no expense here. I mean, literally, like, we invested in the studio and that’s it.

Vic: I mean, we’re in, we’re in your office and it is a couple thousand dollars of fixed costs.

It’s been spent and now we get to talk to each other, debate things, agree on things, bring in guests that might have a different point of view. I think it’s going to be fun.

Marcus: So, all right, let’s, let’s [00:10:00] start with our first topic, which is, it feels like it’s been the topic. In our lives for the last nine months now, which is crazy, but maybe even more than nine months, probably from last July.

Vic: I think it’s more

Marcus: right, which is, um, the fed, uh, and the rising fed fund rate. So March 2nd fed feds, Powell says. Still appropriate to raise interest rates by 25 basis points in March. So this is not really surprising. I think, um, most people knew that there was going to be another increase. We weren’t quite ready to have a full pivot yet.

Um, and 25 basis points is a dropdown from the last step up right after SVB, which was 50 basis points. And the ones previous to that were. Yeah, I don’t know if

Vic: this is the right clip, but, um, just yesterday he raised it again on May, what’s the date today? May whatever. Yeah. And so, uh, he continued to raise it.

Yeah. Um, [00:11:00] and that’s exactly right. It’s, um, we were finished with the need to raise, in my opinion, six months ago. And, uh, the, uh, all the things that I think are forward looking. It’s very clear that the economy has been slowed, and yet they raised again yesterday.

Marcus: Yeah. Yeah. And so we wanted to put this, this chart up on the screen, but for those of you who are listening, uh, we have the, the, the fed fund effective rate chart here from Fred.

And really the only thing to really look at is two things. One that the rate was zero for most of the 2010s, uh, with a little bump up from 2016 went right back down to zero in 2020. And then the rate of change going from zero. North of four, but now we know we’re north of five. Um, this rate of change is almost vertical.

It’s almost a straight line up [00:12:00] and

Vic: can’t move any faster. No, it’s impossible to move any faster.

Marcus: Yeah. Yeah. And, um, and a lot of stuff got broken. I mean, obviously the, the biggest thing has been the regional banking. Circuit, um, we’ve had the second largest, uh, bank failure happened this week, Monday, this week, uh, first Republic.

And that wasn’t really a surprise. I mean, the, the writing was on the wall for first Republic for weeks now, six weeks. I mean, they were next in line after SB S after SVB felt, um, but

Vic: yeah, but the, the fed should not be breaking banks. I think, I don’t know, The exact mandate, but I don’t think that’s in it.

All right. But okay.

Marcus: I’m not sure that the fed was necessarily trying to specifically break banks.

Vic: I agree. Right. They wanted to tame inflation.

Marcus: Yes.

Vic: When they raise the main rate for our entire economy at that pace. Yeah. [00:13:00] Something is likely to break. It happened to be regional banks, but, but. They could not have predict that, but you could have predicted that various things would be under pressure.

Yeah, I mean, they, they’re

Marcus: raising the rate to break things. Yes. They’re specifically trying to break things. Um, the idea that they were going to break the regional banks. I don’t think was what they had in mind.

Vic: That was not their goal. Right. But it was likely when you said they were trying to break things there, they’re trying to break the strength of the economy or cut down the, um, growth rate.

Marcus: Yeah. They’re trying to cut the, trying to cut the growth rate. They’re trying to slow business down. They’re trying to slow the consumer down. They’re trying to get employment to. Something that feels more reasonable, which is kind of the weirdest thing to say in the world, like, you know,

Vic: The participation rate is the problem, not the unemployment rate.

Marcus: Yeah, that’s right, that’s right.

Vic: But the real issue is, Jerome Powell, I mean, I’m sure he’s a nice person. [00:14:00] He has like a big machete and no, no fine tools. Yes. So he only has basically one tool he can cut your leg off. And, um, or he could put the gasoline on it and ramp things up. And unfortunately, you know, he needs better tools.

Marcus: So how did this affect? So first I just want to tell like a little personal story. So, um, the week that SVB happened, I remember it was like Wednesday when the stories started to kind of start to hear

Vic: rumors, right.

Marcus: And I remember sending a story to you and Doug on Slack. Uh, Doug, Doug is our CEO. So, uh, I remember sending like a story to the, both of you on Slack, like, Hey, we, we probably need to like, check into this.

I remember that. Right. And, and by Friday. It was four alarm fire. I mean, uh, world was totally crumbling

Vic: from Wednesday to Friday. They [00:15:00] shuttered the bank. Yeah. You couldn’t get your money out.

Marcus: Yeah. It was, it was insane how fast that, that, yes, that happened. Um, it’s not a typical thing for venture firms to, as part of its due diligence, ask a company where they bank.

Uh, it used to be. Yeah. Didn’t used to be. Exactly. And I didn’t know that. Uh, three out of our nine companies banked at Silicon Valley Bank and so, yeah. From Friday morning to Sunday evening, we were on call, um, you know, trying to figure out what we’re going to do.

Vic: Yeah. I mean, we were lucky out of our eight.

We only had one. We had two, but one was under the 250 level. Okay. And we had one that was over. Um, but our fund itself wasn’t at, right. So Valley Bank, that’s right. VCs that we’re friends with. They had their portfolio there. They had their personal debt there that their, their funds that a couple of guys I know had their mortgage with us.

Sure, sure. And it was [00:16:00] just chaos for the weekend.

Marcus: Yeah. Yeah. It was, it was insane. And then, and then it wasn’t because Yellen and Powell got together and decided there’s going to be a hundred percent backstop, which is actually, that’s a story we’re not going to get into today, but we really should in a future episode talk about the implications.

That whole credit facility that’s been created and how much capital has been placed back to the Fed and that discount window and just what that really means. Um, I mean,

Vic: this is an ongoing story, so we will have, we will come back to credit markets, banking markets, you know, what are regional banks, what is the business model for a regional bank?

Marcus: Yeah,

Vic: we as. A startup funders. We can’t put every company at the four big national banks. No way. We need other, other service providers.

Marcus: Regional banks have been a critical part of our story.

Vic: Yes.

Marcus: Growing like critical from day one. Yeah. [00:17:00] They’ve been partners. They’ve been LPs. They’ve been our treasury management partners.

They’ve been our line of credit partners. I mean, we have

Vic: multiple banks that are LPs of ours and, and not just the big banks. We have great partners at regional banks. That do good work, but they have to have a business model that’s viable.

Marcus: Yeah. Yeah, and so that is now in question which Leads to the next chart.

I want to bring up here So this is a chart from pitch book and the MVC a they always work on a quarterly thing called the venture monitor and it basically You know, tallies up all the capital that has been deployed, that’s been raised, et cetera, et cetera, in the venture capital industry and kind of let you know, like, is the VC industry going up or down basically, and in this chart, for those of you who are not watching, um, There was a huge rise spike in, uh, VC deals that were done quarter over quarter from Q4 to Q1.

This is 2020 to [00:18:00] 2021. So

Vic: basically doubled

Marcus: during the pandemic after all the. Capital was deployed by the Fed in, in stimulus efforts. So it’s PPP. This is idle. This is, that’s the city checks the fed

Vic: pouring gasoline on it.

Marcus: That’s right, that’s right. Um, you know, this is, it’s basically doubled right from Q4 to q from Q4 of 2020 to Q4 of 2021 doubled.

It doubled, right? Like the, the deal count doubled. Yes. Uh,

Vic: 50 billion to a hundred billion. This is per quarter.

Marcus: Per quarter. So of course that was not real. It

Vic: was not real. They were not double the number of, you know, worthy companies. At double the valuation. Yeah. That wasn’t real. Yeah. It was fun,

Marcus: but it wasn’t real.

Well, I, I didn’t find it to be fun because I was like losing deals left and right because term sheets were flying around. Like founders were like, listen, I got three term sheets. So like, bye. You know, it was awful. Um, I raised

Vic: money on Twitter,

Marcus: right? Uh, but now like coming into 2022 and you can really [00:19:00] see Q3.

As the, as the fed starts to turn up the fed fund rate machine, you can see we’re going right back down to the Q4 2020 levels. That’s basically, you could just draw a straight line and see, you know, with all the froth that came in during the pandemic for six straight quarters, it just flatlined and fell right back down to its normal levels.

Vic: Yes, that’s right. And unfortunately. That is going to take a while to unwind.

Marcus: Yes.

Vic: Right, because we have a lot of companies that were financed in 2021. It wasn’t that long ago, right? So if you raised money with a, we raised enough money for two years of operations, and we’re going to come back to market in 2023, you have hit all of your operating metrics.

You’ve hit it out of the park. Maybe you’re ahead on some things. Right. And now you come back to market and there’s, There’s half as much capital.

Marcus: Yeah. And, and you, you, you based your valuation and your exit [00:20:00] expectations and all these other things. On this fairy land, like the last round

Vic: was, was done and now you have to do a down round, even though you’ve outperformed.

Marcus: Yeah. So, so there’s a whole lot of, and, and one other thing we should, we should talk about is how many new funds, first funds were raised like jumpstart Nova, like, let’s keep it real jumpstart Nova closed. The entire fund in Q4 of 2021. So right in the middle at the highest peak of this ridiculousness, that’s when we closed

Vic: actually better to be there than in 2020.

Marcus: I agree. Cause you would have deployed all the money. Yeah. It would have been deployed in this terrible vintage. So. So now it’s, it’s all sort of dropped out and, uh, you know, everyone is looking at it and, and acting as if it’s, it’s like winter, but in reality, it’s just going back to where things were normally from 2018.

Vic: Yeah, that’s right. There’s a steady state of companies that create something [00:21:00] innovative and new that adds value that need to be financed. And that will continue. The problem is that there’s a lot, there’s half the market that is not going to be financed. And there’s a lot of good people in those companies that did, did everything they were supposed to do.

And yet, it’s going to fail.

Marcus: Yep.

Vic: And that is going to be a survival of the fittest, shaking out. I mean, whether it’s fair or not fair, it just is. There’s, you know, so half the companies that come to market this year will not raise money, and those companies will go out of business, or they’ll sell at fire sale rates.

And so it’s going to be really challenging if you are a founder or in a management team of a small venture backed company. It’s twice as hard to raise capital, and there’s so many more other companies that are worthy Competing with you. It’s going to be really, really difficult. [00:22:00]

Marcus: So let’s, let’s, let’s just talk about the survival of the fittest bit.

Uh, because that’s not just for VC back companies or PE back companies. It’s also for the public market. In fact, the public market probably really leads. Yeah, they, they, they lead the way with this. Right. So, uh, you know, hot off the presses today. Uh, Shopify doesn’t really have anything to do with health care, but it’s important because this is, you know, one of the best performing high growth tech stocks, you know, has been heralded as just an excellently operated company, right?

Vic: Great company,

Marcus: great company, great company, right? Um, today they announced. They are letting go 20 percent of their staff and selling their entire logistics business. Now we, and we’ve been seeing like this steady 7 percent number, like that’s been kind of the number, the safe number, you know, I think meta said it, I think Amazon said it, I think Spotify said it, you know, 7 percent

Vic: symbolic thing.

It’s cut some staff to make wall street happy.

Marcus: Yeah. Yeah. And 7 [00:23:00] percent is not nothing, right? I mean, that’s all. 50,

Vic: 000 employees is a lot of people. It’s a

Marcus: lot of jobs, right? Shopify cut 20 percent of their workforce selling off their entire logistics business, which I remember during the pandemic in the e commerce frenzy, when everyone thought it was like, we were never going back into a store.

Yeah, it was valuable. I mean, I remember seeing that, seeing their whole, you know, story and an online conference about this logistics center, right? And how they were like taking on Amazon effectively, right? You know, for the, for the individual e commerce retailer, right? The stock jumped from 47. 50 to 57.

50 on this news.

Vic: Yeah. And to me, it’s about focus. Right. So Flexport is better at logistics than Shopify, period. I mean, they, they were doing, it was an okay service. They did a good job, but they’re not Flexport. And I have been telling this to my portfolio companies, like [00:24:00] every startup, every public company, every company in the world, you have to really understand what are you able to beat every competitor in the world at Shopify is incredible at their core, their core is not logistics.

And so instead of doing the safe, but. Fall of the herd thing of cut 7 percent They cut an entire Uh aspect of their business. I mean this came out an hour ago, right? And so it’s it’s I haven’t looked at all the details, but I think they got rid of the entire Fulfillment logistics operations and gate and sold it to Flexport.

And then in return, Flexport gave them a deal to provide those services. That’s a much more aggressive and smarter and highly focused thing. It allows them the management team to say, we’re going to let Flexport do that. We’re going to be really good at empowering small businesses to sell what they want to sell online.

Cause that’s what Shopify that’s how they win. The, I think about it as like, there are things that you have to do. [00:25:00] at all, then there are things that win the game and operations logistics is You know, you have to deliver that to your customers, but it’s not a differentiator that’s going to really win,

Marcus: right?

Vic: And so it’s brilliant. They are going to get to focus their management time energy capital attention on what is really a game changer

Marcus: Yeah, and look I mean in the vc industry, I think as partners we have been trying to encourage our Um, I think we’ve been trying to encourage our companies to follow suit with what they’re seeing in the public markets.

Unfortunately, like, you know, you’ve got to lower the burn because guess what? The capital has dropped in half in the market. So if you were depending on growing and just all your growth was, was going to make up for the fact that you’re burning an unbelievable amount of capital, like that’s over, that’s over, that’s over.

Vic: And. If you are investing money to win in your [00:26:00] core focus area and you actually can be world class in that, then, okay, everything else is on the chopping block and needs to be subject for letting someone else do it. I’ve been trying to get my CEOs to understand this valuation new era that we’re in. And another great company that I’ve been using all the time is Stripe.

So like, you know, we have both have portfolio companies. I love my portfolio companies. They do great work and they ain’t stripe, right? Like the best startup in the history of startups.

Marcus: It’s crazy. It’s

Vic: incredible. It generates huge amounts of cash and their valuation got cut in half.

Marcus: Yes.

Vic: And so XYZ company, I’m not going to name any names, but every company out there, you ain’t Stripe.

Marcus: No.

Vic: And so, your valuation starts at 50%.

Marcus: Yes.

Vic: And then if you are as good as [00:27:00] Stripe, it’s questionable. Your should be a 50 percent of what you were last year.

Marcus: Yes.

Vic: And that’s really hard for people to get emotionally like, okay with. Well,

Marcus: it’s more than that, right? I mean, people, while that capital was being thrown out into the market, people bought in at those two X prices.

So it’s not just their own emotions. It’s the idea that they have to go back to all these other investors and tell them, Hey, you’re, you’re a dollar that you put in my company is now worth 50 cents.

Vic: Right? That’s hard. And, by the way, I need you to put more money in. Yeah, exactly. And, uh, in my experience, which, you know, we’ve been working on this over the last few months, it’s going to continue.

Yeah. The CEO and management teams take a while to come around, but they come around. At the day, They need to raise money, right? And they have their dream they’re trying to build and so they have to figure it out, right? But the investors Are not that way,

Marcus: right?

Vic: They had they’re much [00:28:00] more Egocentric they’re much more proud of their track record and paper results for a long time And it’s not their dream so they can stand in the way and just say well I’m not willing to take a write down and there’s gonna be a lot of companies that could raise money But they don’t because they’re trying to raise money at Ridiculous.

What I think today are ridiculous prices.

Marcus: Yep. Yeah. So, uh, let’s now talk about something maybe a little bit more exciting. Uh, Axios had the scoop on, uh, this company healthy. io that raised 50 million in a series D. Uh, so that’s, that’s good, right?

Vic: They’re one of the winners, right? They came out today, raised a bunch of money.

And successfully.

Marcus: Yeah. So smartphone based kidney and wound testing company. So I like that. That’s like a real digital health business. Yep. Um, it’s a huge, huge market, huge market. Uh, and, and I think, you know, the thing I want to just point out here is that. Um, who, who are the investors? Uh, well, the, the investors [00:29:00] who led this round, Shusterman family investments, who were the, the existing partners, Cigna, Blue Cross of Idaho.

Right. So we’re still seeing, uh, payers leading the way and in the venture space right now, you know, we’re seeing payers continuing to innovate. In the services space in the data collection space in the, in the digital health space broadly.

Vic: Yeah, I mean the payers are leading the way they’re moving into providing care.

This is a good example. Yep. They’re doing it in Ancillary kind of around the edges. They’re not they’re not building ors, but this is a good example of a winner, right? They’re very focused in chronic kidney disease It’s a huge problem. The current treatments are really hard on patients. They’re super expensive and the outcomes are not that good.

Marcus: Yes.

Vic: And so they have a very effective test. It’s a lot to the home and payers are leaning in. And I think they’re going to be rewarded whether this deal is super successful or [00:30:00] not, the idea that payers are leaning in and learning and supporting innovation, collaborating with one another, which I think is critical, and also finding innovations that can make a difference.

That’s really important. And I think they should, they deserve to be rewarded.

Marcus: Vic, did you hear the news about the big payer merger that happened? The big payer merger? No, I don’t think so. Yeah. Kaiser and uh, Geisinger.

Vic: Yes. Right. That’s a good point. So the best health system merger in the last two years is in fact a payer merger.

I like that. Yeah. I mean the, the, the health systems are way behind. So that I don’t, I don’t see health systems investing. At the same pace or really to learn and get exposure and get sort of strategic partnerships lined up Nor do they collaborate with each other in the same way that payers do except for ones that also [00:31:00] Have a big payer system on the back end and we should talk about why that is I’m, not sure I fully understand why that is but they’re gonna I mean, there’s a convergence between health systems and Used to be only providing care and then submitting bills to Either CMS managed by payers or to commercial payers and that is shifting now to where payers are providing care I think united health group employs more docs than anyone else and they also are investing in innovation and leaning into New technology and new new business models And health systems that have experience in the payer world have aligned incentives already are converged They are this is a great merger.

I think uh, whatever the new name is rise

Marcus: Yeah

Vic: is going to be really [00:32:00] important player and they’re they’re going to work on value based care in a way that You know, probably is going to be better than payers, because they understand the delivery of care in a way that they have the OR, so they understand the full continuum where not every payer does, but that’s the minority of health systems.

Most of them haven’t really done much on the payer side.

Marcus: Yeah, no, I, I, I agree with you. Um, I, I actually was lucky enough to get out to, um, Scranton area and, and, uh, and, and see Geisinger and be on the campus. Um, it’s, you know, it’s pretty, uh, it’s a pretty old school, true community hospital in terms of like, The story and the name and the communities that they serve to me.

This is a really big deal. Um, this is a really, really big deal. Geisinger has at least as long as I’ve been in the space, they’ve always been a thought leader around innovation. You know, um, David Feinberg [00:33:00] gets, I think, a lot of the credit for, for that. Um, but man, you know, the idea that they are, uh, They’re merging with Kaiser, you know, a new name is now being, you know, created this to me is it’s a big deal.

It’s a big deal because so much of hospitals, especially community hospitals, um, there’s so much emotion built into it, right? You know, the idea that you would make this kind of change. Is just not insignificant at all. Uh, it feels to me like a sign of things to come. You know, these are two of the most well respected, uh, nonprofit hospitals, I think, because of their value based care, um, you know, execution that they’ve done over the last, you know, 10 years in the case of Geisinger, much longer in the case of Kaiser.

And, um, you know, my experience, even even among the health systems that we work with is the ones that have a health plan. They have a little bit more, um, they’re a little bit more leaned in on innovation, especially as it pertains to things that are going to [00:34:00] lower the cost of care, you know,

Vic: well, they, they see how it can affect their bonuses and their results.

Uh, but I think what I think is interesting that we haven’t touched on yet is we’re, we’re talking now about a West coast dominant, uh, integrated system. Yeah. There’s a payer. Acquiring a Scranton based middle America. I mean, Scranton is, I guess, East coast, but it’s pretty middle America.

Marcus: It’s Northeast, but it’s also like it’s.

It’s, you know, I, I struggle to call it rural, but it’s out there. I mean, like you land on a plane and it’s not, it’s not, it’s not

Vic: Philly. No, it’s not Philly.

Marcus: It’s definitely not Philly.

Vic: So when we, we’re in Nashville, I, so forever, I’ve thought that middle America, it’s where, it’s where all the sick people are.

It’s where all the chronic diseases, it’s where a lot of innovation bubbles up from middle America, unlike the tech industry, where innovation happens at research institutions, like on the coast. Middle America is where all the really chronically sick [00:35:00] folks are. And the idea that Kaiser is now combining with Geisinger, who really understands that, They’re not completely wrong, but they understand Middle America.

They understand that ethos of, You know, I had my, my grandfather was born in this hospital, then my, I was born here, then my son was born here. We’ve been coming to Geisinger forever and to, to change the brand is a huge thing.

Marcus: That’s a huge thing.

Vic: But I think they also will, I mean, we don’t know how they’re going to do it, but I believe they understand that ethos and like caring for the community.

It’s hard to believe that California sort of ethos will be the same. So that’s why the combination I think was really interesting.

Marcus: All right. Let’s keep talking about, um, providers and maybe not so much of the, the value based care variety, but maybe just more of the fee for service variety. You, you, you pulled together some really cool, uh, you know, data points right on the heels of a very good quarter for HCA, which I think really made people look up and [00:36:00] realize, Hey, maybe the labor issues aren’t as durable as we thought, maybe, you know, they’re starting to all turn the corner.

So you pulled together some good data.

Vic: Yeah. Yeah. So, I mean, I think we, we started off with the fed and financial markets. Negative impact broadly they’re having on the economy, right? So that is hard for a lot of sectors But for the for the health care system for the for the providers They have had a challenge in finding staff finding workers The rates to pay people have been going growing incredibly fast.

And of course their reimbursement rates are locked in Largely regulated and so they were kind of stuck the incredible amount of demand And And so it’s, it’s just a different business model. Most businesses like Shopify, they’re trying to find customers and they can easily service it.

Marcus: Right.

Vic: Health systems largely have been the opposite.

A lot of people need help, but they can’t find nurses. They can’t find nurse assistants. [00:37:00] They can’t find transport people. They can’t find environmental services. There is a shortage of doctors, but when you go down the licensure level, it’s been really hard. And so the, the struggling economy and the workforce.

Uh, people losing jobs has an inverse relationship to health systems So hca is a perfect example that they’re one of the best operated health systems in the country

Marcus: without a question I

Vic: wish they would lean into innovation a little more but they run their health health systems incredibly well And so they have already turned the corner and are able to attract workers And and get back to positive earnings growth, which is you’ve seen in the stock market But we have a slide from kaufman hall Um, you know, it’s kind of a depressing slide, right?

So you see from april 22 until march 23 Negative operating margins across the board, right? This is due to the the very expensive labor force It’s about 80 of the [00:38:00] total cost is labor and then but the interesting thing is just recently the last data point It has gone to zero so across of course hca is better than that But across the average of health systems nationwide, Kauffman Hall does a good job collecting information from health systems all over, all different sizes, integrate all of them together.

Some run incredibly well, some run not so well. Now, the operating margin has gone to zero, which is, which is at least viable. Right, like when the entire industry is at negative 3%, negative 1%, negative 1. 5%, You’re losing money overall, that’s not sustainable. Zero as an average is, I mean, you’d like it to be making a little money but, but an average across all the ones that are, some are not well run, some are well run, the average probably is close to zero.

So I, I was excited to see the health systems kind of come back, mostly because I’d like them to stop hiding under the [00:39:00] bed and crying about how they can’t survive. And maybe lean into innovation, find a way to deliver the same care with less people or, you know, gosh, maybe deliver better care with less people.

And this seems like maybe we’re on the right trajectory.

Marcus: Yeah. I mean, it’s, it’s certainly tough to think about innovation when you’re operating margin is negative 3%, right? I mean, you know, it’s, it’s just very, very hard. And, and, and I know, um, you know, it was, it was public. So it’s not just something that, that, uh, that we have access to, but, uh, You know, the losses that landed, um, the back half of, of 22 were huge.

They

Vic: were massive billions of dollars in losses at, at many health systems and,

Marcus: and, and at some of the biggest nonprofits. Right. And, and so, you know, this is, this is welcome news because I mean, I think it means. There can be a little bit of a reset and we can start to get to that [00:40:00] innovation. Um, you know, I, I believe that the leaders of these, of these health systems, you know, know that innovation is an imperative, right?

I mean, given everything that’s going on in the world right now, I don’t, I don’t see how you could say we’re out of that negative 3 percent operating margin. We’re good. Now we can just, yeah, we can coast. I don’t believe that’s the case, you know, but. But yeah, I mean, wow, that’s, uh, what a chart.

Vic: Yeah. So it’s, it’s welcome news that they are hopefully on the road to recovery.

And listen. Every person can’t go to an H. D. hospital. So we need the overall market to be viable as a society. No

Marcus: question.

Vic: And I don’t think there’s any money in Congress to sort of throw money at health systems. And so they have to be able to work with the reimbursement they have.

Marcus: Yes.

Vic: And as we talked about earlier, they have to catch up to the payers.

Marcus: Yep, agree. All right, let’s, let’s go through a couple more. Where is this coming

Vic: from? So, There’s a lot of pent up demand from COVID. So this slide is, is, uh, kind of a [00:41:00] proxy for cancer. Um,

Marcus: from our friends at Hedgeye.

Vic: Yeah. From our right Hedgeye gives us incredible insight into the macro economy and the healthcare economy.

Marcus: Yeah. I mean, this episode, we don’t really have like, uh, uh, any sponsors though, although we will in the future, but. You know, a little plug. You should definitely go buy, like, Health Policy Pro. If you want to, like, know what’s actually going on, it’s not that expensive. Just go to HedgeEye. com.

Vic: Yeah.

Marcus: It’s awesome.

It’s

Vic: incredible. It’s awesome. This is one of, I think, 120 slides that they put out weekly.

Marcus: Yeah.

Vic: And so, it’s a proxy for cancer patients coming into health systems nationwide. So, Matera is the leading genetic testing cancer service. And so, if we had cancer, we’d show up at a health system. One of the first things they do is do a genetic screen on your tumor to, to, to be able to inform the chemotherapy treatment or the radiotherapy, they want to understand how to treat it.

And so you see the, after COVID, it’s just been [00:42:00] through the roof as far as people now getting screened and then the more screenings that happen, the more you realize that gosh, I have cancer. And so there is huge pent up demand for health systems. If they can find the employees at reasonable rates, so let’s go to the next one.

Okay, because this is from Hedgeye as well It’s the year over year kind of change in earnings. And, you know, we want our healthcare workers to have an appropriate kind of inflation adjusted standard of living. So they should get 2%, 3 percent a year. 8%, 7, 8 percent is just not, not going to work.

Reimbursement is growing at 2 to 3%. Yeah. And

Marcus: so you

Vic: can’t grow that fast.

Marcus: And also like only gets negotiated once a year. Right. So, you know, when you have this kind of step change in the year over year, you know, average hourly earnings can’t catch up. Yeah. I mean, within half year windows, like this is, [00:43:00] that’s just not, that’s not viable.

Vic: 80 percent of your cost structure. It’s double the revenue rate, right? That doesn’t work, right? That’s why they had losses. So, so anyway, it’s good to see this coming down. I think these things combined, um, Kaufman is so backward looking that these are, these are trending data. And so it makes me comfortable that it’s not a one off something happened randomly.

It’s, it’s, it’s going to be.

Marcus: Yeah, yeah, that is, that is good news. All right. Uh, we’re going to wrap up the, the healthcare segment and I guess get into our technology segment. It’s impossible to not talk about AI, uh, right now. Um, it’s just, it’s. You know, I was a technologist for about 10 years and I remember, uh, I spent most of my career building web applications and like building out servers, taking them to the data center and all that kind of stuff.

And I remember 2007 being the year when I had to make the [00:44:00] decision, am I going to basically relearn everything I know? Or am I just going to shift into management and entrepreneurship? And I decided to shift into management entrepreneurship because between the iPhone coming out, social media, remember I was in the email marketing company.

So social media coming out and the cloud, like every, yeah, every key skill that I had. Well, I had the lamp skill, but you know, the open source software skill, but every key skill that I had, except for open source software was like obliterated in 12 months. Right? So, so I’ve already been through this kind of like value destruction cycle as a technologist.

Vic: And you mentioned it in the intro, but that’s when jumpstart started. Yeah. But when, when you decided I want to lean into learn about entrepreneurship and how do I put these things together and how do I sort of bring in teams of people, that’s. That’s why JumpStart started. Because that opportunity, you saw that opportunity.

Maybe at South by or somewhere. And came back to Nashville, like ready to go.

Marcus: Yeah. It was, it was 2007 South by, yeah. Right. [00:45:00] I’ll, I’ll never forget it. So, you know, for me, because I saw that upfront, there honestly has not been a lot of like, truly exciting stuff that I’ve seen, or, or things that I’ve felt like, wow, this is really gonna change everything As a, as a former technologist.

Right. Uh, obviously until, until now. Until now. Yes. Uh, this is, this is, uh. Uh, so incredibly disruptive and the rate of change is happening so fast.

Vic: Yeah.

Marcus: Um, that. It’s, it’s too fast to wrap a narrative around it, which means, which means it’s not going to go well for, for many, many humans, right? Because we, we learn through storytelling and you can’t really wrap a story around something moving this quickly.

Um, so it’s, it’s a big, big deal. And I, and I, you and

Vic: I are both, uh, kind of information, education, junkies, tons of podcasts and things,

Marcus: right?

Vic: It’s changing daily.

Marcus: Totally. It’s changing so [00:46:00] much that, uh, whereas before, I feel like, you know, you and I would basically be At the same place when we were listening to podcasts, but now it’s almost like we need to split the duty.

Like you need to listen to certain ones and I need to listen to certain ones because the rate of change is happening so quick. I don’t think we can individually keep up with it. I really, I don’t feel like I can keep up with it anymore.

Vic: Yeah. And I’m a tech opt, an optimist in general. So I’m a tech optimist.

When all of those changes with the iPhone came off, I was super excited. So, like, when you were interested in it, I was interested in it, I mean, we, we bonded over, like, this is gonna change everything. But it was slow. But it was slow moving. It was slow in the terms of, like, between 07 and 2014. You know, there, there were, there were impactful things, but, but the basic economy, people’s, Careers didn’t change and it’s not like that [00:47:00] now.

So I’m still optimistic, but it’s, um, it’s 80 percent optimistic and 20%. Like it’s, it’s going really quickly. So

Marcus: one of the things that, that I said to you earlier was that as we were talking about, you know, different jobs, economic dislocation of AI and all that kind of stuff, one of the things I mentioned is that right now, Chad, GPT is better than an MBA intern.

Yes, right now with all of its warts, all of its issues, the data sets only from 2021. So it’s got a ton of limitations. Uh, you know, it, it lies pretty often actually. Like if it doesn’t actually have the answer, it won’t tell you. It doesn’t have the answer. You know, it doesn’t distinguish. It doesn’t distinguish.

It doesn’t know how to do that. I

Vic: don’t think it distinguishes between past events that are historical fact and future events that it’s predicting.

Marcus: Yeah.

Vic: Can’t distinguish that. Right,

Marcus: right. So, so it’s got all these limitations,

Vic: right? But despite that, it is. It’s better than an MBA fresh grad joining our company.

It’s insane. And it’s better at [00:48:00] every domain. Yes. Simultaneously. Yes. And so an MBA would be good at business, finance, maybe they specialize in marketing or something, but they’d have one of those. Right.

Marcus: Right.

Vic: And now it’s, it’s MBA level at everything.

Marcus: Yeah.

Vic: Now it’s not, um, I mean, I’m 52. I’ve been a venture capitalist for 23 years.

It’s not as good at writing a term sheet and thinking about the structure as I am, but it’s as good as I was when I got out of business school. Yeah.

Marcus: Yeah.

Vic: And it is, um, changing quickly. Right. So the difference from GPT three to three and a half to four was an exponential difference. Right. And the really interesting thing is, um, they, they added more data, but they started having humans train it.

And the pace at which. It learns is, is incredible.

Marcus: So a couple of things. So one, um, [00:49:00] I think there’s going to be a massive change in how health care innovation is delivered, right? And the cost at which you deliver healthcare innovation, um, you know, there was a company during the frothy times, the 2021 frothy times.

Uh, that raised a billion dollars, uh, over the course of that year for AI. And this was all pre, you know, sort of the generative AI reveal, right? Pre transformers. Pre transformers. Yeah, it was pre transformers. And so, you know, when they That business today. Would be, uh, well, yeah, except like you wouldn’t, you wouldn’t need a million dollars.

I mean, I think, I think that’s kind of the point, right? Yeah. I think that’s kind of the point is, is at that, I mean, that’s just how fast this has gone. It was reasonable to a group of very, very good venture capitalists and private equity farms. It was reasonable to put a billion dollars into the idea that you were going to be able to develop AI.

You would never [00:50:00] do that. In May of 2023, you couldn’t spend the money. No, where would you spend the money? Right? I mean, it’s crazy. We’ve already seen Stanford take, you know, open AI create a llama. Basically, you know, totally clone it for like almost no money. So we already know like. This code is open source, anyone can grab it, anyone can do anything with it, and we don’t have, we don’t have any regulatory environment to kind of tell us what the limits are on it, but you know you don’t need a billion dollars to do it, you know that.

Vic: Yeah, the regulators cannot keep up. There’s no, there’s no chance. I can’t keep up with it. But I think we should They couldn’t keep up with social media. Right, right. Yeah, there’s not a chance they’re going to be able to keep up with it. And, um, but I want to take a minute to talk about the difference between what ChatGPT has today.

Marcus: Yep.

Vic: And then what it will be when it starts taking action in the world. So the difference between an oracle and an agent.

Marcus: Yeah. So

Vic: today it’s an oracle, meaning [00:51:00] it has Read everything on the internet and transformed it into something that no human understands, but it understands. To be able to give reasonably good answers to any question you ask it.

Marcus: Hold on just really quickly. If, if you’re wondering why oracles and agents feels familiar and you’ve seen the matrix, that’s why, because there’s an oracle and there’s a bunch of agents and the matrix, because that’s where this is headed people. Okay. Back, back to you, Vic.

Vic: Yes. And I want to point out that.

Technology, including Oracle and agents can be used for good or evil. That’s right. So, so just like in the matrix. Yes. Yes. There happened to be a good Oracle. And good agents. Yes. Okay. So, um, we have oracles today.

Marcus: Yes.

Vic: The chat GPT is the best known, but there’s five or six and I think they’re going to be commodities.[00:52:00]

Marcus: And by the way, let’s just say chat GPT is an oracle, you know, based on GPT for or whatever, but Google has an oracle. Yes. Amazon has an oracle.

Vic: Yes.

Marcus: So, both. Anthropic. Stability. Stability. Right. Exactly. There’s at

Vic: least five or six that we could name today. Right. And you only need that many. Yes. They’re all gonna be pretty good.

Yes. It’s gonna, I think it’s gonna be like Coke and Pepsi. Like, maybe there are differences, but they’re all really good. And they can, they’ll get better. And so right now, they’re as good as a grad student coming out of grad school. And that’s true for an MBA. It’s also true for a medical doctor. It’s also true for a psychiatrist.

It’s also true for a, um, I don’t know, European history master’s person. Anything that you could get a graduate degree in, it can do that today. But it doesn’t take action in the world, which, which is an agent. We have [00:53:00] seen the first two or three attempts at that, and they’re really damn good. Even though they’re like cobbled together and, you know, a guy in his basement put it together, The difference between an Oracle agent is it then takes instructions and it’ll go out to a website and buy something on Amazon.

It’ll do actions for you.

Marcus: It’s well, it’s it’s it’s more than I mean, when you say instructions, I think that could be misinterpreted. It takes a an order takes a takes an order a goal, right? You know, you tell it to do something and the how it gets done. You don’t worry about. Yeah, it just goes off and does that thing

Vic: and it doesn’t care about that.

It will try with a lot of dead ends. It’ll try lots of things. But what’s going to be interested in health care is. It, it can, like, I’m, I could stand to lose 10 pounds, I could have an agent helping me [00:54:00] lose 10 pounds, and it will try all different ways to get me to eat healthier, to exercise more, and it will keep trying until it figures out what works, and that will be brilliant, cause I, you know, I don’t know what works, it’s hard, and that has just started, and it’s gonna be, A game changer.

It’s going to be really powerful. I’m, um, I’m, I mean, let’s talk about health, GPT. Yesterday. Yeah. So,

Marcus: so first of all, it’s, uh, it’s, it’s a project that’s come out of Stanford. So the Stanford bio design for digital health, you can, uh, find them on GitHub, uh, which is a repository where coders from around the world host their code in community where people can access it.

They can read about it. They can clone it and do their own work on it, et cetera, et cetera. So that’s part of the reason

Vic: this is going so quickly because it’s like, That’s at Stanford. [00:55:00] Someone at MIT can take this, without talking to anyone at Stanford, clone it, now they can build on it themselves, modify it.

And then they put it back on Git. And then someone at, I don’t know, Texas Austin, adds on it, then someone in Afghanistan takes it. That’s right. Someone in China takes it. There’s no limits. It’s global, it’s 24 7. There’s no limits. Completely open source. Yep. And

Marcus: incredible. Yep. So, so, uh, they created, Uh, health GPT.

Um, so we already talked about how Stanford was able to, uh, you know, clone a large language model based on open AI. And so we know that they’ve, they’ve got strong capabilities and Stanford is known forever as being just an incredible computer science. Institution, uh, but, but Vic, like say a little bit about health GPT and, and sort of what it is, what the upside of it is, what the potential downside of it might [00:56:00] be.

Vic: Yeah. So it is, uh, it’s the first instance where you can see the, the potential upside and the scariness of it. Right. So it, it plugs into, um, Cardinals, all Cardinals health packages and the Apple iWatch health kit, right? And builds on that and you can share with it your health goals and it will ask you for Your health records what you have experience in the health care system and the more you tell it the more it is effective at Helping you achieve your goals And it’s really damn good And that’s pretty interesting And also you are giving your data your personal health data, but more You’re what motivates you and what you [00:57:00] believe in.

So are you religious? Do you get motivated by competition or rewards? You’re giving that to open AI, and that is a lot of power. And so I’m not willing to give all of my health records to open AI. Not that I think. They’re going to do anything malicious with it, although they could. It’s, it’s because it’s going to create lock in.

If I start training, teaching open AI, I’m going to invest time, resources, data, teach it a bunch of things about Vic Gatto and what I care about, what I want to achieve. They have the ability then to increase prices almost unlimited and I haven’t trained BARD, which is Google’s, or Anthropic, which is an independent one, or Stability, which is an open source one.

And so I’m trying to [00:58:00] get together a non profit to sort of just stand in the way and give me switching possibilities. I don’t mind OpenAI having my data, but I want to be able to take my data with me if. If I find a better solution,

Marcus: right? It’s kind of like blue button, right?

Vic: Yes. Yeah. I mean, I want to be able to get my data and quickly, but I don’t want to get locked in.

And this is going to lock you into open AI slash Microsoft. And it’s a great tool. It was released three days ago.

Marcus: Hold on. So released three days ago has 1, 300 stars. So that means that many developers Basically, I favorited it and are now getting updates on it. They’re getting updates. Well, it doesn’t mean that they’re using it, but like they’re getting sort of updates on it.

But I think the interesting thing is 112 forks. So people are just grabbing the code and starting to do what they want to do with it, right?

Vic: Yeah. And [00:59:00] what that means to me is there’s going to be a Cambrian explosion of thousands of other things like this. And I want to be able to have portability.

Marcus: Yeah.

Vic: Right. Like, so I don’t want to be locked in with one of the six. Right. But right now you don’t have that flexibility. So that, that’s, I, I’m not worried about necessarily AI destroying the planet and killing every human. I mean, there are people that are saying that. I’m not so scared about that. As I am, um, one early mover, like OpenAI, getting too much power, and now I have to spend another year, and all this, I’m gonna, I mean, cause it’s a chat based thing, it asks you, like, has anyone in your family had cancer?

And, for me, I would say, yes, my dad had skin cancer. And so, Okay, now I’m going to go through all of that same interview process again, even though I’ve already done it. Yeah, that’s going to be a pain [01:00:00] in the ass. Well, it’s just

Marcus: like the healthcare industry today. It’s like,

Vic: yeah, the damn clipboard. It’s like an electronic clipboard.

Yeah. Every time you go to the same

Marcus: doctor.

Vic: Yes. You have to fill out. Just make sure you haven’t changed your social security number. But write it down. Yeah.

Marcus: Because that’s secure. Yes. Um. Yeah. So look, this, this thing is, is moving a thousand miles an hour. It’s not a hundred miles an hour. Um, this is just one of the.

The implementations of it, but, you know, there are so many, uh, I think labor oriented considerations and not so much on the clinical side, because obviously there’s a million regulatory roadblocks that will, will slow that it’s me. It’s more on the administrative side, right? It’s, it’s how many things, whether it’s coding or anything, revenue cycle management, you know, related, or, you know, anything that has to deal with procurement, right?

I’m just thinking about all of the. The administrative aspects of healthcare that currently, you know, people don’t often think about the fact that healthcare is [01:01:00] really collectively the largest employer. Uh, you know, in the country and it’s not always a clinician, right? There’s all these additional jobs that people are doing and it’s not the plumbers or the janitors who are going to be in trouble from this.

It’s anyone who is a quote unquote knowledge worker. Um, and does things that really, when you, when you extract what they’re really doing, it’s pattern based operation of software. I mean, you have no, it’s like, yeah, it’s super replaceable. It’s super replaceable.

Vic: Sorry. But you know, I write a monthly blog thing and I titled it Hope, uh, came out yesterday, I think, or two days ago.

Things move too quickly, but, um, I think that healthcare has been, um, you know, it’s been picked on. It’s been a hard place forever, uh, because it’s, it’s hard work and yet with AI coming, it’s the safest place to be, I think, because, you know, you have to put hands on the [01:02:00] human eventually. Yep. And then I don’t think AI is going to be good at empathy for a long time.

And so the doctor sitting down with me and sort of talking through my cancer journey and listening to me, that’s what humans need. And that, that sort of, um, empathetic care from someone who has seen lots of people go through this, that’s what I need as a human. Yep. The, the data of like all the clinical trials, all the therapeutic options, all the information, the doctor will never keep up with that.

The AI will be much better. And that’s what I, that’s what I want. But that frees the doctor now to, you know, not be keen into the medical record, not having to read thousands of research papers every night, because that’s not sustainable. And they can focus their care on, um, Actually caring for my fears, understand, like helping me navigate [01:03:00] this.

What do I tell my kids? What do I tell my family? How should we do this? I think healthcare people have been called to medicine to really help people with this journey. And if we can leverage it in the right way, AI will empower that. Yeah. And it could be, it could be great. I agree with that. There are other industries that I’m not sure that there’s much empathy.

In being a financial trader on wall street

Marcus: No, and so none

Vic: there they need to find some other way to add value But I think there are other entire industries that will be replaced faster than health care And so we’ve been worried about the labor force And I think it is going to be huge numbers of people now that come into health care Yeah Because they can make an impact and help people and it could be really impactful.

Marcus: Yeah, but I think you’re talking about the clinical workforce again, right? You’re talking about people caring for people. And I guess what I’m saying is. As we approach this cliff [01:04:00] of Medicare running out of money, you know, as we approach it just this year, you know, the debt ceiling conversation, you know, as we approach some real serious, hard conversations about the deficit and us really needing to get our house in order as that, as, as it pertains to that.

And as we’re talking about these operating margins that just do not make sense, right. But you know, you, you can’t make any money without the clinical workforce. The, there’s a lot of. Quote unquote fat in the system that’s on the administrative side. There’s no question about this. There has to be a lot of fat that’s there.

And to me, I think there’s going to be a lot of alignment around. It’s going to make sense to use AI to lower the total cost of care. And I’m not talking about paying clinicians less, right? I’m talking about making it less expensive to operate healthcare businesses, period. And the story, right? Um, and so true, but every, so every industry, every industry, yes,

Vic: you can cut half the [01:05:00] expense line,

Marcus: but not every industry is paid for half by the government, right?

With, with a cliff that we’ve been talking about every single year that we have no idea how we’re going to get out of it. Right. So this to me feels like one of the first clues to how we might actually get out of that cliff. And it’s hard to talk about because we’re talking about a lot of people’s jobs.

But there’s a cost issue here. I mean,

Vic: I mean, it’s a lot of people with jobs, but they could do something that’s more enjoyable, right? So I I don’t know a lot of people that love to sort of fight through the revenue cycle billing process They do that in order to make money to have a life on the outside And I think we coming back to the payers the payers are gonna be faster at adopting this And if the health system and providers don’t get their act together on the administrative side, they’re gonna, they’re gonna get killed on all the administrative side.

And so it’s coming, and I think that the thing I’m hopeful about is [01:06:00] the, the brand. The reason for, I need to learn the new name, Geisinger and Kaiser to be Rizent. Yeah, Rizent. The reason for Rizent to exist as an entity in the world still is in place, right? There’s a lot of other brands. That I don’t think exists in five years.

Yeah. Ten years. So, so there’s hope that we can, we can actually attract people, even if they’re not clinicians. You need a lot of people just I think we need a person for each patient helping them navigate the emotional journey that they have

Marcus: there’s a doctor but it’s not a one to one I mean like like the one person if they can leverage AI and and if the patient is much more empowered through AI right you know you can have one person supporting how many individual patients I mean probably probably a pretty big number I mean you know the panel could be maybe even twice the size of it today probably a Big number.

Yeah. But I think

Vic: we’re going to have excess people [01:07:00] in society. Oh, I get your point. So like, I get your point. If they’re going to do nothing. Yeah, if they’re going to do nothing, right. We might as well have them help people. Take care of somebody. At the lowest point in their life. Take care of somebody.

Take care of someone and hold their hand. Help them call their daughter. I mean, there are things that humans can do because they’re human.

Marcus: Yeah.

Vic: That I think is going to be hard to scale into AI. Um, and so I’m, I’m less worried about. AI killing all of us, but I’m very worried about, um, health systems and, and payers and everyone ignoring this, right?

And then there’s going to be in this, this group of probably four people at Stanford that put it together. There’s going to be other countries. The United States has to sort of lean into this, but we’re not going to be led by our politicians and our regulators. We’re going to have to figure out how to do it ourselves.

So hopefully in this podcast, over the next little while, we can try to figure out, like, where is [01:08:00] the opportunity and how can we navigate this so it’s fair to everyone.

Marcus: All right. So that wraps up episode one of the health further podcast. And, uh, if you’re watching this on YouTube, do the whole like, subscribe, share, uh, with a friend thing.

If you are listening to it on iTunes, uh, give us five stars and uh, pass it along to a friend. Risk and disclaimers. None of this has been investment advice. Um, this is just a good conversation between two friends who happen to work in adventure industry. And, make your own decisions. Everything when it comes to investment is risky, uh, buyer beware and all that good stuff.

Um, and I think next week we’re hoping to bring a conversation with Emily Evans, our friend from Hedgeye, uh, who runs health policy. She’s, uh, she makes us smarter every single week. So excited to have her with us. And sometimes like we’ll be in the office. Sometimes we’ll won’t be in the same place, so we’ll have to do it all sort of remotely.

Uh, but we are going to strive to do this every week, right? We’re committed to try to do this every single week. Yes.

Vic: Cause things are moving fast. Yeah. It’ll be. It’ll be fun [01:09:00] to see how our perspectives change over time.

Marcus: All right. Awesome. Uh, until next time, we’ll see

you.