28 – Inflation Slowing | Biden on Women’s Health Research | Amazon Advances One Medical | Healthcare AI

Marcus: [00:00:00] All

Vic: right,

Marcus: here

Vic: we are back again,

Marcus: uh, fresh back from Chicago was with, uh, my national board members from HFMA in Chicago to lightning fast days, really long days, um, working on future of the, of the organization alongside the regional, um, Executive committee leads and these expert panels that we have called the National Advisory Committees and so for

Vic: people that aren’t in health care.

It’s all the finance folks and correct and health systems. Correct? Yeah. Yeah. HFMA

Marcus: stands for the Health Care Finance Management Association. I’m in my second year on the national board and um, We have, we have, we have pretty intense quarterly, you know, board meetings where we’re, we’re dealing with obviously things at the organizational level, but you’re talking about the leaders of the health systems on the finance side for, you know, the United States.

And so a lot of, you know, deep discussions about the future of the industry. So my head’s kind of blown. I got to hang out in the, [00:01:00] um, KPMG office, uh, at the top of the Aon center. So I think this is

Vic: nice. I haven’t been up there. It’s

Marcus: amazing. 68th floor, beautiful office, incredible view of the city. And, uh, we did some good innovation work up there, which was awesome.

So, um, shout out to my board members and, uh, yeah, my head is full. But while I was gone You

Vic: saw all the finance problems for healthcare?

Marcus: I mean, what else do you expect, man? You know, you sent me in for the job. No. But while I was away for, 48 hours. I came back and we’re recording on a Wednesday and you’ve basically got two weeks worth of stories for us to cover today.

Vic: Well, it’s, it’s, uh, like, I don’t know, they’re coming out of a shotgun. It’s just like all every day, there’s all kinds of stories and we’re even going through and not sharing all the ones that we could share for

Marcus: sure. Yeah. We, we, we held back about half the list you had for today’s show, but, um, it’s a good show and, uh, let’s dig in.

All right. So we had the

Vic: [00:02:00] CPI report come out. Yep. Much anticipated. Because everyone follows the CPI thinking that the Fed will make a change. And so overall good. The overall was, uh, 3. 2 on an annualized rate, slightly better. I think sort of the consensus was. 3. 3, 3. 4, depending on who you, who you read. So better. And the core was also down for sort of same, as you can see, if people that are watching a video, it’s been trending down basically since the peak, you know, right after the pandemic.

And so great news, the stock market went, went crazy. Everything was up. Um, but I think the story is pretty much the same moderate improvement, but not to the 2 percent the feds looking for. And, uh, Chairman Powell was speaking yesterday afternoon and [00:03:00] was pretty clear in his remarks that, you know, they were going to continue to fight inflation down to two percent.

It didn’t seem that he was getting very dovish to me, but the stock market loved it.

Marcus: Um, so you’ve got a really interesting chart here comparing the shelter component of CPI from the Labor Department perspective versus Zillow, which is much more sort of real time data. But explain a little bit about the difference between the way that shelter is measured in the CPI versus how a real time data feed around what rents are today from Zillow might look like.

Vic: Yeah, so shelter is about 35 to 40 percent of the overall. Total CPI number. It’s a big expense for because it’s a big expense for health. That’s about what

Marcus: that’s what it would be Yeah, I mean, you know how much you spending out of your monthly budget on rent or or mortgage first anything else

Vic: yeah, and so the Labor Department I think has tried to Get an estimate of what like equivalent rent would be whether you rent or own and you pay your mortgage they’re trying [00:04:00] to figure that out

Marcus: right

Vic: and because most leases for renters run a year by year and And I think because they want to sort of smooth the data to not have wild jumps around, they, they smooth out the data over a year’s time.

So if you have a significant decrease in rent or equivalent rent in home prices, that feeds into the numbers over a 12 month period, right? With the. Belief that if you’re in a lease, you can’t negotiate with the landlord until the lease comes up again,

Marcus: right? Makes

Vic: sense. Makes sense. Yep. Um, but then you compare this to Zillow, which is more market based, right?

What is actually what’s happening today? Yeah.

Marcus: Yeah.

Vic: And sort of obviously, but I think it’s interesting to look at Zillow went much higher because the. Labor Torment smoothing this and then it’s come down where today rent is if you were to sign a new lease today It’s essentially flat [00:05:00] to the to the five years before the pandemic.

Yep

Marcus: Even a little down it might be a little it’s a little down from from from pre 2020 numbers, right? Yeah based on Zillow’s count here. It’s interesting

Vic: But the Labor Department peaked later than Zillow because it’s smoothing it, and so it naturally peaks later, it’s much more moderate of a peak, because they’re smoothing it, and it has not declined very much, for all the same reasons.

I think it’s fair to assume that if nothing changes, It will continue on a very slow trajectory down and because it’s significant part of the overall CPI that will drive CPI down right as well, right? So that’s positive. Yeah, it’s positive. It’s going to be, it’s kind of hard to tell, but another. Nine months, another six to nine months.

So it’s positive, but going to be slow.

Marcus: Yeah, and and the key here is that the [00:06:00] the trend where it is right now for rents would need to kind of stay where it is, right? In order for that smoothing to continue to sort of track downwards. Yeah.

Vic: Well, yeah. So if the rents didn’t move, right? I think it would slow down, it would slowly approach the real time,

Marcus: right, which, as you said, because it’s such a significant component of CPI will continue to move it down, which is good for the prospects of maybe getting to the other side of rate hikes.

Right.

Vic: Yeah, that’s right, which would be great. I don’t know. I haven’t done the math. It’s over my head But I don’t know if we can get to 2 percent without coming down. Yeah, so yeah We sort of should not expect it to be 2 percent for six months nine months Unless something else like pulled down the rest of it much more dramatically.

Marcus: Yep. All right, uh, that’s solid. Let’s uh, Let’s move to another story from the white house. Uh, these fact sheets [00:07:00] Are becoming a sort of a weekly occurrence coming out of the white house They’re getting very active and you know, it’s unclear to me how much of this is driven by you know Concerns around uh, the biden administration really just biden.

Um, you know, biden Yeah, his really just his age, you know, his age and his mental wherewithal, but we are seeing a lot of activity coming out, you know, uh, both in terms of executive actions as well as initiatives that they’re launching. This is an initiative that’s in line with all the health initiatives.

Joe Biden has, you know, really been focused on cancer for a long time, obviously the untimely death of his, of his son. Um, and he’s. He’s, uh, created ARPA H to really embolden the United States government to get back to its leading position for moonshots. You know, previously it was for the internet or for going to the moon.

Now he’s trying to make health kind of the next big frontier. And, uh, here in an effort led by the First Lady, Uh, uh, a strong initiative on women’s health research, which to me makes sense. It’s, it’s kind of like, I don’t know [00:08:00] how you actually have a cancer moonshot. And that’s not to say that all the research here is cancer related, but I don’t know how you have a cancer moonshot without significantly improving the.

The amount of focus and funding that you’re putting into women’s health, uh, because all of the cancers that are directly related to women, um, especially around sort of reproductive organs, uh, there’s been such poor, such a disparity in research there that you’re never going to make meaningful improvements unless you have a specific initiative around increasing, uh, the efforts around women’s health research.

Vic: Yeah, I mean, I think, um, everyone should be in favor of more dollars and more attention going to researching. Women’s health issues and trying to find cures in general. I’m in favor of NIH and other federal groups putting more research into healthcare innovation, healthcare research, discovering new things broadly.

But I think women’s issues have been understudied. So it’s, it’s good.

Marcus: I think it’s categorically [00:09:00] true. Right. Um, and look, this is great because there’s certainly, as we’ve had more diversification in terms of fund managers and more specific focuses, a good friend of mine, uh, Maria Tolar, she is the founder and managing partner of SteelSky Ventures.

They are a women’s, uh, health focused fund, a hundred percent of their focus on women’s health. This is a great tailwind for her. And for, we’ve got several others, I think from FemTech Ventures, they have a partner here, Yini. Yeah. Who’s based here in Nashville. I mean, this is a great tailwind for them and anyone who has women’s health as a focus.

We at jumpstart Nova, we’ve invested in may that’s a company totally focused on women’s health, uh, view health focused on, uh, uh, autoimmune diseases. And obviously that’s a category that really has, uh, Disparities for women. So I think it’s great for innovation. There, there’s so many opportunities. There’s so many founders out there who are really focused on it.

There are fund managers who are focused on it. And I think this is a great, uh, just a great tailwind for all of us. I consider myself to be part of this group and it’s exciting for me.

Vic: I mean, [00:10:00] I didn’t count it, but our portfolio has a significant number of, of women led companies working on women’s health issues.

Yep. And I also think that, um, this is something the executive branch of the government can do, should do, and has complete authority to say, we’re going to put money in this area. It also will be a good election soundbite.

Marcus: Yep. So that’s just a bit of good news. You know, we don’t, we don’t often have good news.

Uh, so a bit of good news. All right. So shifting to the hospital space, um, not something that we talked about in detail while I was in Chicago, uh, with, with my colleagues at HFMA, but certainly was on the table, just the, the issue of cyber attacks, right. And the honeypots that these EMRs sort of represent and the, the nonstop ransomware attacks and, and, you know, the, the actual real losses.

That are coming from this ransomware attacks. So in New York, where there’s always sort of an additional level of, uh, regulatory scrutiny and, and laws that you have to comply with [00:11:00] New York and California, you’re

Vic: always like out in front trying to. Leave the country.

Marcus: That’s right. Yeah, that’s right. So New York has created a new set of cyber rules for hospitals that are going to increase, you know, increase what is required of them in order to protect themselves and also the patients who they are the custodians of data too.

But also the reality of that is it’s going to increase the cost to operate and in a time when they’re already really struggling with the costs.

Vic: Yeah, I mean, this is, I think, a situation of good intent. I don’t know that it’s feasible for every health system in the state of New York to comply, so then some of them won’t be in compliance.

And if they do try to comply, it’s going to be significant spend that they don’t have. And so I think it is good intent, but not going to have the effect they’re hoping it’ll [00:12:00] have.

Marcus: I find that it’s so interesting when regulators push forth initiatives like this, because it feels like either they don’t have a real strong understanding of what’s actually happening within the industry.

Or they’re bullying a certain segment of the industry. Okay. And I don’t mean to be sort of in defense of hospitals. Anyone who’s in healthcare knows how much stress and pressure hospitals are under right now. Okay. And if you’re operating in New York. It’s got to be feast of famine right now. You either are probably like NYU Langone or something like that.

And you’ve got just, uh, you know, great payer mix or something like that. Or, you know, you’re Montefiore and in the Bronx with a significant Medicaid, Medicare. Yeah, you know, um, weighted payer mix and running super thin margins already and, and having real [00:13:00] difficulties with labor. I remember, you know, Montefiore was one of those houses that had a labor strike.

Um, and so you’re dealing with all those things. And now on top of that, you somehow have to become fortified like a bank or something from a cybersecurity perspective with no margins with which to operate from. I mean, it’s just kind of like, I, I, I understand it, but it just seems like such a. These hospitals need help and an additional regulation that creates cost is not really help.

So the question is, how might regulators help hospitals without just a sort of stick model to protect the data? It’s not like they don’t want to protect the data,

Vic: right? That’s what I was going to say is that I think my opinion is every health system in New York is doing. It’s best to prevent cyber attacks.

They get hundreds of millions of attacks every week. I mean, they get millions and millions and millions of attacks. Most of them are not great [00:14:00] quality and easy to stop, but, but there are some that are, that are well done and the bad guys are thinking up new creative ways all the time. Don’t believe that it’s a lack of attempt to stop it.

And so for government to come in and say, we’re now going to regulate this and make sure you are doing everything necessary. I don’t think it’s going to lead to much improvement, but I also understand why the governor of New York. Is pushing on this. I mean, her citizens have had their healthcare data stolen and they’re mad about that and I’m sure they’re calling the governor and saying, you have to do something.

So I see both sides of it, but I don’t think it’s going to really have much positive effect and it will have some negative because of the extra spend.

Marcus: Yeah. I mean, I think that’s the, that’s the problem, right? It’s if you understand that we’re already in a space of haves and have nots, and unfortunately the have nots are the [00:15:00] ones taking care of the most vulnerable Segments of the population and then you roll out a, uh, a new regulation that is going to increase the burden at the end of the day.

It’s like, you’re, what do you think the outcome is going to be? You know what I mean? Like I, I, I think people don’t think these hospitals can go outta business. I think that’s the, that’s the thing. No one is actually willing to consider these hospitals can actually go outta business. I mean, I think they gonna, we won’t, we won’t, we won’t name names, but as I’ve, as I’ve told you.

Um, there is likely to become more pressure on the muni bond market.

Vic: Yeah. We’re so let’s talk about that for a minute. I just really quickly, there was a discussion about, um, the muni bond market, which is really the source of financing for all the nonprofits. And that is shifting, but you were there, but yeah, [00:16:00]

Marcus: yeah.

I mean, like, like I said, I’m not going to mention the names of the banks, but as there’s

Vic: very, there’s only less than 10 providers of this. Would that help you issue a bond?

Marcus: Yeah. As we talk about banks, right. And, and banks are having to reshuffle their decks for lots of reasons. It’s all fed fund rate related.

Um, underwrite. Okay. And these muni bonds on one of the things they’re looking to You know, recalibrate. And if there are less, uh, providers available for these muni bonds, that’s, you know, and, and again, it’s a have and have nots kind of thing. If you’re, you know, look, if you’re a 5 billion and above, you’re probably fine.

You know what I mean? But you get into that,

Vic: like that marginal hospital that what, if there are 10 providers of issuance of bonds. They’ll get it done, but if you cut it back, then now there’s not capacity for them anymore.

Marcus: Exactly, exactly. And, you know, when we talk about New York, people [00:17:00] immediately think about New York state.

There’s a lot of rural parts of New York, you know, and that’s, that’s what I worry about. I worry about a hospital that’s 250, 500 million. In revenue in some rural part of upstate New York or something like that. It’s like, yeah, I know, I know

Vic: of a central New York system and he it’s super spread out. He has systems all over the place.

He’s having to travel around. It’s hard to operate in that virus. Yeah. You think of New York city, but New York’s a big state. It’s a big state. Yeah. It’s

Marcus: Buffalo, right. Right. Is, is in New York state. Right. So anyway, I just think, um, I, I understand what you’re saying. Why the regulators are doing this the cyber attacks we’ve talked about it on on on previous shows the cyber attacks are relentless And quite frankly, it doesn’t appear that there’s a whole lot that anyone has been able to do thus far to stop them Yes, so should something be done to better fortify our our hospitals that have become honeypots of information a thousand percent Look, my data is at hospitals.

Your [00:18:00] data is at hospitals I want the data better protected But i’m not sure that i’m more worried about that Then I am the viability of the hospital to continue to provide care for the community. I just, that’s, you know, we have to kind of stack the existential crises against each other, right?

Vic: Yes. What, what’s going to cause the most harm to patients and people, my data getting stolen for the fourth time.

Well, you know, it’s been stolen before it’ll be stolen again. I get these notices. I’m on the dark web all the time or, um, a hospital not having the financial resources to keep an emergency room open or a facility open. I mean, it’s a trade off. Like, neither is good. And I think the politicians act with.

What their constituents are yelling about, right? But then when a hospital closes, they’ll be yelling about that.

Marcus: Yeah, exactly. It’ll be too late. It’ll be too late then. Yeah. Then you can yell into the ether. [00:19:00] All right. So we’re going to move it to Amazon’s big week in healthcare. So, uh, they finally have rolled out a bunch of stuff.

Yeah. Well, well, they’ve, they’ve integrated one. Uh, one medical into prime that’s, that’s, that’s, that’s the story. They’ve integrated it into prime. We knew that was coming. Um, but it’s now part of prime. So 99 a year, 9 a month. And in the cities where one medical is available, uh, if you’re a prime member, I think it’s unlimited telehealth for nine bucks a month.

Yeah, you, you, you can have, and I don’t know anyone who’s a one medical customer who doesn’t love it. Not a single person I know who’s on one medical who doesn’t say, it’s awesome.

Vic: Yeah, I mean, Amazon knows customer service.

Marcus: Yes. I mean,

Vic: there’s a lot of things that are frustrating about Amazon, but they are good at customer service.

Marcus: That was the big story for a while. And then I think most people didn’t track this because they don’t have modern health care. Um, but then modern [00:20:00] health care reported that Hackensack Meridian is partnering with Amazon to roll out clinics in partnership. And that to me is, that’s a really big deal.

Because now you’re starting to see a model whereby health systems have, I think, a pretty formidable partner, um, that can help relieve them of a burden that they’re never going to be that good at, right? They’re never going to be that good at the customer facing, uh, primary care. Model, they can partner with Amazon.

Amazon is going to do a hell of a better job than they ever would do from a data perspective. Most of these shops, I mean, Epic is now an 80 percent of the shop. So let’s just assume Amazon, you know, works on a really strong integration with Epic, which of course they can and would, um, especially if their health system clients ask for it, you know, Epic is very customer focused.

And now, you know, you, you have a real primary care option in [00:21:00] partnership with health systems that I think can strengthen them in an area where they’ve just been chronically weak and defend, give them some defense mechanism against, uh, sort of the pay buyer and the, and the, the, the, the CVS and the kind of model.

So this, I think is a very big deal when you think about the diamond dynamics of the industry and just the payer. Provider paradigm, uh, if this, if this is Amazon’s approach to actually how to scan, uh, scale, one medical is in partnership with really, really strong regional health systems. We could see one medicals open up in markets all over the country.

Very, very quickly.

Vic: I agree with that. And I think there is a, I mean, listen, the Hackers Hack Meridian team. Is really good. They’re good. That’s a strong, it’s a strong system. It’s a well run system. They have, you know, deep financial strength. And so again, it’s a have and have not like they are forward looking.

And, [00:22:00] and I think you’re exactly right. They want the referral. They don’t want the primary care business. They’re happy to let, uh, one medical take that Amazon take that. What I think is interesting is to think out two or three years. Right? Like I think Amazon is a little bit of a scary partner in a two, four, six year time horizon because they’re going to have partnerships with Haggisack Meridian and then let’s say 20 other health systems in different regions.

Yeah, different regions. And what Amazon does is over time, they sort of, They’re your partner, but then they start offering other things and kind of move up the value chain. And so, Hacksnack Meridian just needs to think that through. I’m sure they have thought it through, but there’s nothing else to do.

Like, you just have to be cautious with it.

Marcus: I mean, let me offer a counterpoint, though. I think hospitals got into the consumer facing primary care business out of necessity, not out [00:23:00] of competency, right? I’m just sort of asserting something. I think what they’re really, really great at is acute and patient.

Okay. And ED operations. I think that’s what they’re really, really good at. And I think this type of partnership along with a really solid Epic integration allows them to stick to their knitting and get really focused and sharp operationally in a way that like. Today they’re splitting their focus, trying these, their own primary care models that are not very good.

And there hasn’t really been, I think, a partner at the quality level of Amazon slash one medical that they could ever consider partnering with. So to me, this is a different quality partner. And I just don’t think Amazon has any interest in doing strong inpatient acuity or ed business. Like I don’t think, I don’t think

Vic: they’re going to do that.

Marcus: Right. So, so, so that’s what I think health systems are good at, right. You know, Cancer care, uh, you know, high acuity, uh, inpatient stays [00:24:00] and ed, you know, and, and, and surgeries like that’s this, that’s the high margin stuff that they can do, and they can do well, and they can do better than anyone else. And I

Vic: think, well, the better than anyone else is where I, I don’t agree with you.

I think that a center of excellence. We could have eight centers of excellence, excellent cancer care across the country. And Amazon might shift those referrals to wherever on the East coast, the best can maybe hack attack. Bernie would be it, but I think there there’s a, there’s a, okay, there’s just a, there’s a, a vulnerability there to the referral business over time.

Marcus: So let me, let me, let me maybe say this a little bit differently. Um, I, You can’t stop the potential for competition. What I would say is I think this gives them the best fighting chance to focus on what they do really well and compete effectively.

Vic: Yeah. So I love that.

Marcus: That’s that’s, and that’s [00:25:00] all you can ask for.

I mean, I don’t know what else you could possibly want, like, you know, a total defensible moat. Of course, this is not going to be that.

Vic: Well, yeah. So, so I think that means Hackensack Meridian needs to figure out what can they be top 10 in the country and really build that up. And then if Amazon doesn’t take the strategic move, then I’m wrong.

And then they keep doing everything, but they have to have some one, two, three, four things that they’re really good at, that they could defend themselves and say, we’ll take everything on the East coast for this heart surgery, cancer, whatever.

Marcus: For the many health systems out there who are for a variety of reasons, Not a great candidate to become payviders.

They have to become centers of excellence. Yes. And they have to become operational machines. Yeah. And part of how you do that is partner with someone much better than you in things that are kind of necessary and stop doing the things you’re not good at. Stop doing the things you’re not good at.

Vic: Yeah.

Marcus: Right. And so, yeah, I agree with that. That’s, I, I think that’s kind of the view that I’m seeing this from.

Vic: [00:26:00] Yeah, that makes sense.

Marcus: Alright. And a couple of stories about, uh, drugs and PBMs. So, you know, I, I do wanna point out you have said. Isn’t it interesting that there is a story in the Wall Street Journal every single week?

Vic: I didn’t know why.

Marcus: Every single week, there’s been a story about drug pricing. Yeah,

Vic: we’ve covered it several

Marcus: times. Yes,

Vic: and in the Wall Street Journal, I mean, so this is not like It’s big money. To be PR, PR costs money to get placement. And the wall street journal is one of the most expensive places to influence.

Marcus: And they’re doing these stories and it’s kind of the same story. Yeah, it’s the same. It’s not even like a not breaking

Vic: news.

Marcus: No, no. I’m reading it and I’m like, isn’t it the same story?

Vic: Same drug, two prices. It’s the same story. We all know, like your commercial plan, you get through your employer, you get, you go get a medication and it costs four times as much as if you just walked into the drug store and said, I don’t have [00:27:00] coverage at all.

Right. Which doesn’t make sense. And yet we did it live one show, it just is the way it is. So they did a, they did an article about this. Again, um, and that is interesting. Nothing really new, but at the same time, a whole bunch of little startup, uh, upstart PBMs came out a story that you, you found. So, um, I don’t know if we need to cover this anymore.

Marcus: Yeah, no, no. I mean,

Vic: same thing again.

Marcus: Yeah. So the story of modern healthcare, the title of the story is, uh, upstart PBMs aim to shake up the market. And I was telling Vic that. I was very, it basically breaks down two different, uh, approaches and strategies that, that, that startup PBMs are taking where they’re actually gaining, gaining traction.

Um, and, and we had looked, we, we, and we probably still will be looking in this space. You know, we were, we were in deep conversations with one PBM and we just didn’t quite get there, but we, we really like what [00:28:00] they’re doing and we’re going to continue to follow them. Um, but there, there’s two things they’re doing.

One. They’re, they’re selling, uh, they’re making a deep value proposition on transparency, as well as focusing on very specific segments of employers where you can tighten up the formulary around certain specific aspects of the profile of the workforce. Right. So, which

Vic: positions directly against the traditional PBMs, which are super large, generic, very complicated.

It’s hard to understand and they know the structure way better than you do. And because it’s

Marcus: complicated, it’s hard to be transparent.

Vic: Yeah. Yeah, right.

Marcus: Right.

Vic: They’re intentionally not transparent.

Marcus: Right. So instead, you know, the, these little startups are saying, we’re not, we’re not actually trying to compete with the large PBMs.

We’re going after a very much smaller slice of the market, which will still be a great venture return. Yeah. Right. Uh, for everybody, but because we’re going after a small slice of the market, we can Commit to transparency. So what’s interesting about that model is as you’re looking to sort [00:29:00] of, uh, you know, break up the large PBMs into a bunch of smaller PBMs that creates an opportunity for coalition, which is not something you often see amongst startup companies, right?

But the second, you know, Strategy that they’re deploying, which is not so much the transparency, uh, niche employer focus is a political plan. So literally a bunch of startups have gotten together with, you know, some, some, uh, government relations organization and, and probably some, some capital, you know, partners and they’ve created a trade org.

Yeah. It’s

Vic: like a lobbying

Marcus: group. Yeah. They’ve created a lobbying group that is counter to the big. PBM lobbying group. So the big PBM lobbying group is called the Pharmaceutical Care Management Association. And, uh, now we have TransparencyRx, which is all the little PBMs have created their own lobbying group, which is a

Vic: And they have a friendlier story to the, to the little voters and to politicians that, that, They don’t understand the PBMs.

And so they just get frustrated with them,

Marcus: right? So, so, uh, [00:30:00] transparency dash Rx. com is where you can go check them out and write on, right on the, the, the homepage says a catalyst for lower costs, a competitive market of marketplace and sound drug policy and a trusted nonpartisan not for profit coalition of industry experts and stakeholders led by licensed, transparent.

Pharmacy benefit managers. I mean, this is I have not really seen this, this playbook, but I think it’s really, really smart

Vic: and a lobbying group, a coalition with this kind of mandate. It’s gonna be hard for the big PBM group to fight.

Marcus: Yeah. Especially if they are contributing to the drumbeat of stories we keep reading in the Wall Street Journal every week.

Vic: Yes.

Marcus: I mean, this might be the capstone story of this story. And we may have to drop this ’cause we, we keep seeing the stories. We know, we know what’s going on. Yeah. We, we know what’s really driving it. Um, but you but I, I just, I, I wanna give you credit. ’cause two shows ago you said. What I find interesting is that [00:31:00] these stories keep showing up.

Yeah. And it’s the same story. I mean, I get it. You know, the drugs cost too much. We can go to Mark Cuban’s website and we can find it for cheaper. I get it. Right. But why are the stories showing up every week? Yeah.

Vic: That doesn’t happen without PR. No. But we couldn’t figure out where it was coming from.

Marcus: That’s right.

Vic: And now there’s at least a third.

Marcus: Yeah, we’ve got some breadcrumbs, so

Vic: probably, but I’m supportive of it. I mean, everyone, I don’t know who wouldn’t be supportive unless you’re working for a PBM.

Marcus: Well, look from our perspective as investors, remember like our, not you, but listener, uh, our perspective is we’re investors.

We’re looking for the opportunities and the bright spots where. You know, capital, along with great founders, can actually make an impact and making the health care ecosystem better and obviously drug costs is an issue. It’s an issue for patients. It’s an issue for employers. It’s an issue. And the idea that startups can actually collaborate and work together and create a coalition and play sort of big company games.

I just think that’s cool. I just think that’s cool. Yeah. Right. [00:32:00] Um, all right, cool. This is perfect. Time for startups. Yeah. Yeah. Uh, perfect time for us to take a break and, uh, let Doug share as he always does a little bit about jumpstart foundry. And we’ll be right back to talk about AI again.

Doug Edwards: Thanks guys.

For the opportunity to talk about our pre seed fund jumpstart foundry. My name is Doug Edwards, CEO of jumpstart health investors, the parent company of jumpstart foundry. We’re so excited to be able to talk about, uh, early stage venture investing. Certainly the need for us to change the crazy world of healthcare in the United States.

We are spending 20 percent of our GDP north of 4 trillion a year on health care with suboptimal outcomes. Jumpstart Foundry exists to help us find and identify and invest in innovative companies that are going to make a difference in health care in our country. Every year, Jumpstart Foundry invests a fund, raises a fund, and deploys that across 30, 40, 50 assets every year, allowing ease of access for our limited partners.[00:33:00]

to invest to help us make something better in healthcare. Some of the benefits of Jumpstart Foundry is there’s no management fees. We deploy all the capital that’s raised every year in the fund. We find the best and brightest typically around single digit percentage of companies that apply for funding from Jumpstart, and we invest in the most incredible, robust, innovative solutions and founders in the United States over the last nine years, jumpstart Foundries invested in nearly 200 early stage pre-seed stage companies in the country.

Through those most innovative solutions that Jumpstart Foundry invests in, we also provide great returns and a great experience for our limited partners. We partner with AngelList to administer the fund, making that ease of access, not only with low minimums, but the ease of investing in venture much better.

We all know that healthcare is broken. Everyone deserves better. Come alongside us with Jumpstart Foundry, invest in making the future of healthcare better and make something better in healthcare. [00:34:00] Thank you guys. Now back to the show.

Marcus: All right, we’re back. Um, big shout out to my guy, Amber Bhattacharya. Who is an Aspen institute health innovator fellow with me.

He is a GP at Maverick ventures, and he, along with a couple of colleagues, uh, not guys at Maverick, but, um, folks that he is sort of, uh, doing thought leadership around generative AI in healthcare, I think broadly AI in healthcare, but generative AI is obviously the, the, the headline story. Um, uh, Justin Norton.

Uh, who I think is the, the actual owner of the AI checkup, uh, substack here. And then, uh, John Wang. So the three of these guys, Justin, John, and, and, and Ambar, uh, have written an incredible story, but it’s an old story. I just found out about this story a week ago. Um, and it’s not even a story. It’s kind of like a, like a substack white paper that they put together.

They, they published this June of 2023 and we wanted to amplify it because we read it over the weekend [00:35:00] and found it incredibly, incredibly powerful. Helpful.

Vic: Yeah, we’ll link to it. It’s long, it’s

Marcus: long,

Vic: but there’s a lot of great information.

Marcus: Yeah, it’s fantastic. It’s a great primer. I think it’s gonna advance all the conversations we’re gonna be having around healthcare and ai.

Um, Obar agreed to come on the show in 2024. We just gotta line it up on the calendar, so look forward to that episode. Um, but, but Vic, tell me sort of what were the things that stuck out to you when you read this, this, uh, this substack sort of white paper.

Vic: Um. Maybe three things. The first one, this chart that we’re showing right on the front page is sort of the relative performance of.

AI systems compared to human performance. So if you set like the average human performance as the benchmark, where are the AI systems relative to the average human? And as you’d expect for 20, 30 years, it’s been sort of a slow build. First it was handwriting recognition, then speech recognition. Then there [00:36:00] was images in 2029.

Um, but then 2019, well, image first came out in 2009, I think. And then it sort of started getting better. You

Marcus: said 2029. That’s why I was stopping you.

Vic: Well, okay. 2009.

Marcus: Yeah.

Vic: Um, but what was really shocking and the audience knows we have been covering AI. I’ve been interested in it. The growth of reading comprehension and language understanding.

It’s it’s basically vertical it they started working on it and it got to human intelligence in that one narrow domain they’ll being able to read a passage and understand it very quickly and that’s impressive and it’s only going to get more so it’s it’s an exponential curve it might be faster than exponential so even though I’m in the middle of it still was surprising to see how fast.[00:37:00]

The technology sort of learned to understand language.

Marcus: Yeah. I mean, it’s, it’s one of the most powerful charts you can look at to really understand why we crossed the chasm in 2020, right? That, that is the point where not only had all of these different capabilities and just to, you know, re index them for, for the listeners, handwriting, recognition, speech, recognition, image recognition.

Reading comprehension and language understanding, which is obviously that’s the language understanding is the one that has driven us into LLMs. But when you see 2020 is not just the point when all of them, um, performed better than humans, but they really started to break away from humans. Like, you know, the baseline of human performance versus the AI, the Delta is getting significant.

Um, and that’s in 2020, we are now in 2023. Okay. So. You only have to assume that the AIs are much better than us at all of these things now. Um, and that’s, [00:38:00] that, that capability check, that capability gut check, I think is the point at which you have to admit AI is the technology of our era, and it is going to impact every single industry.

And we now have to take how it’s going to impact healthcare. Unbelievably seriously, right?

Vic: Yeah. And that’s, that’s the second takeaway is that I was sort of of the opinion before I read this, that there was few experiments. We’ve covered a few experiments, but, um, healthcare is, is kind of messy that you have to, you have to, you have to treat a patient and there’s a lot of nuance in how to diagnose something.

And I had this You know, naive impression that healthcare was going to be a slow market to adopt it. Um, and then I looked at their chart of all of the companies using AI. And so that was the second takeaway. Just the number of, um, AI companies in [00:39:00] healthcare that are working. I think we have a chart for it.

The landscape. Oh,

Marcus: yeah. Yeah. Yeah. So this is another awesome thing that, that

Vic: there’s in there. It’s in the article. I pulled it out. Um, just so we could show it. Larger, but they break it up in a great, uh, kind of categorization where you have sort of life sciences, you have patient facing clinician facing, you have analytics.

And then administrative, like back office and the number, I didn’t count it, but there’s a large number of AI tools. These are all in healthcare. And we’re in the middle of this and there aren’t many names that I know. They’re all growing all, uh, it’s almost every aspect of healthcare. If you think about life sciences, patient facing, doc, facing analytics and back office.

It’s kind of everything.

Marcus: Yep.

Vic: Um, and it’s [00:40:00] all coming quickly.

Marcus: Yep. All coming very, very quickly. Uh, and you know, they, they’ve done a good job here of like framing up how much has been raised, which, you know, by the way, I think all these numbers have probably gone up by at least a third. Yeah. And this was in June.

So I think even in the short times from June to November, these numbers have probably gone up by a third just because the vast Majority of venture capital is going into AI. It’s all going into AI right now. Um, but this, this is a very good framing and look, you know, while you said that, that, uh, we, you know, a lot of these companies, we don’t know, you know, some of these companies we do know, right?

So we can look in recruiting and we can see window. That’s our buddy, right? Ray Guzman, who’s right here in Nashville. He just had an exit with that company, right? So yeah. So, uh, you know, we, Wobot, which is what we were talking about just last week with, with, with Virtua, um, uh, Virtua health. So there are things up here that we, and then there’s also, you know, in the revenue cycle operations, there’s all of, and all of us gone.

So, so, you know, you get sort of a good sense of a, there’s a lot of [00:41:00] stuff here. I didn’t know about that. I should look into. B, there are some things here that I do know of, and, and, you know, they’re, they’re doing well, right. And then C there’s some stuff here that’s already dead. Right. And so it’s just kind of like everything else, right.

It, you know, it’s a, it’s a, it’s a meaningful segment of the venture space that more people need to dig into. Uh, I will give Ambar the credit that, you know, when I very first, when I first met him at our first seminar, uh, with, with Aspen, he, and we were all sort of going around the room and saying, you know, who we are, what we were interested in, uh, Ambar said back then, and this was last year, October.

So October before che Yeah, yeah, yeah. Last year, October. He was like, AI and healthcare is, you know, almost my entire focus and I just think it’s gonna be this ridiculous breakthrough. Obar was ahead of everybody on this. Yeah. Um, so I, I, I always love to give credit where, where it’s due. Yeah. ’cause people, people will tend to forget as the wave, you know, goes really, really quickly.

Um, hats off to you on bar, but I’m on your tail, buddy. I got it now. I’m reading everything [00:42:00] you’re putting out and, and, and we’re going to be, you know, good students of, of your work.

Vic: Yeah. And we pointed out all of failing. Uh, you know, I think in the venture space, that’s the natural selection process. Like there’s going to be more and more capital for this.

It’s a huge market, you know, three and a half, 4 trillion a year. There’s plenty of opportunity and VCs are going to keep, keep working on it.

Marcus: Yep, absolutely. And then, um, you, you pointed out,

Vic: this was the third thing I thought was really valuable out of their, their white paper, which is it’s a two by two matrix sort of on the horizontal axis is, um, you know, Is it what’s the adoption like, right?

Is it only like the super visionary, um, early adopters or are people actually using it in a clinic or in a healthcare setting? That’s interesting framing. And then on the vertical is how complex the technology is. Is it like super complicated? [00:43:00] The status quo tech, uh, versus really simple.

Marcus: Yep. Yep.

Vic: And that, that gives you a really good framing of what could we do very quickly.

So coding, note taking, we’ve talked about, um, note taking is several trials. Care navigation. I’ve looked at investing in that. There are lots of care navigation companies. It’s hard to protect your margins there because it’s very competitive, but it’s also going to be really good, I think. Um, and then you have more complicated things like personalized medicine that.

You know, it’s probably an opportunity, but pretty early.

Marcus: Yeah. Well, uh, one, one of the, the, the lead content people at HFMA, Nick Hutt, uh, yesterday asked me about, um, you know, personalized medicine and he asked me if I was doing any investment and I said, honestly, no. Um, you know, it’s, it’s coming, we all know it’s coming.

Everyone wants it, but you do not see a whole lot out there. So it was, it was really great to then look at this two by two and see, [00:44:00] okay. Yeah. Like I’m, I’m pretty much right on. It’s, it’s, it’s, it’s in the far corner of visionary and super complex and very complex. That’s right. And very complex. Um, I do want to say one thing before we get into the final note for the, for the show, which is, um, this is incredible work that Ambar and his colleagues are doing here.

Um, and. Honestly, Vic, it just makes me sort of reflect a little bit on the work that we’re doing here at Health Further, um, and a lot of the conversations that I had, uh, over the last couple of days at HFMA, um, I, I think that venture capitalists are really going to be almost a The only people that are going to be capable of being the analysts for this, for this change, because, um, the amount of things you need to understand about both the industry, but also the technology and then about the early stage innovation space.

Yeah,

Vic: I don’t even think in the regulatory environment, reimbursement, the speed at which is happening.

Marcus: I don’t think like [00:45:00] your traditional analysts, like your gardener and your Forester can even do it. I, I, I, I really don’t. They can’t, and their business model’s not aligned. And here’s the problem with that.

The problem with that is large companies Only know how to buy analyst stuff from those organizations. They only know how to do consulting work with BCG and McKenzie and all these folks. And it’s like, dude, there’s no way those organizations are as on top of it as VCs are right now. Like, no way, no way.

It can’t. Not possible.

Vic: I mean, we’re working on a new framework. Um, that I’m super excited about, and it’s also complicated and hard. And we’ve been working on it

Marcus: for a year and a half.

Vic: Right. But the reason we started that is that the existing frameworks just don’t work. That’s right. So you can’t pile on the existing framework because, because we have swept the table clean and we have [00:46:00] to build a new system.

And I think our incentive model is we’re trying to be right and learn and be in front of it so we can then invest our capital. And that’s how we. Get paid with the caring interest is that we raise a new fund. The incentives are very aligned about us being right and Some of the other groups it’s too diffuse.

I mean they want to be right, but that’s not exactly how they get paid So anyway, I think it’s Healthy, but we have a lot of work to do.

Marcus: All right. So the final thing, uh, you share a little bit about your conversation at Vanderbilt and then we’ll go into the last

Vic: note. With a bunch of the, um, CS professors yesterday and just trying to understand from their point of view, they’ve been doing research and computer science and data science for a long time, teaching, PhD students.

Um, and so I like to try to learn from other people. And so I was over there just trying to, where’s this going, what’s, what’s going to happen. And their prediction was that I was sort of asking about the interface, like what’s going to be the [00:47:00] interface. That really drives adoption. Like, is it chat GPT? Is it going to be like some variation of the search bar or what is it an email?

What, how are we going to interface? And, and the guy’s response was there’s no interface. And what he said is that the interface, the user interface. Was created for computer scientists to structure data and really kind of keep the user behaving in the way that they could process the information and manage

Marcus: it

Vic: and the technology is powerful enough that you don’t need that anymore.

He said it’s going to be voice just talk to your phone and ask it for whatever you want and if you want to say I want to drive productivity in this department. Just ask for what you want, and then it will serve you up charts, and [00:48:00] information, and reports. And you say, well, I’d like to see that over a longer time frame, or a different scale.

And it’ll just do that in real time. And so my thought was, okay, that’s, that’s powerful. What, what’s the time frame? And I thought he was going to say, like, 2030, 2035. And he said, next Thanksgiving. Now, he’s a professor of, of artificial intelligence and computer science, but he’s really damn smart, and even if he’s wrong by double, it’s coming like super fast, where you just speak to your phone or your computer and it, it, it gets what you want, and then it iterates like in partnership with you.

Marcus: Yep.

Vic: And so I was talking to you about this and saying how I thought it was exciting, but maybe, you know, you know, maybe a little bit optimistic. And you had seen this thing that we’re gonna show right now, which is Exciting and scary.

Marcus: Yeah. So, [00:49:00] um, a friend of mine and it’s just crazy how the world works, but, uh, a friend of mine, Q Harris and Terry, who I met at health further the conference, because he was like the main community head of marketing for Redux, the big EMR integration company.

Um, Q Harris, Q Harrison, after it was probably 2016, 20, yeah. Yeah. It did. So, so after that, I’m just gonna call him Q because everyone calls him Q after that Q left, um, Redox went out on his own and he basically does a bunch of experimental futuristic stuff and also works very closely with Mark Cuban on, on, on all sorts of special projects.

Okay. And so I can always just kind of count on Q to be about two steps ahead of everybody else on this stuff. So. I was on the plane and just scrolling through X Twitter, whatever. And I was like, Oh, what’s Q doing? And we’re going to put this link in the show notes. So Q is [00:50:00] on his meta quest and he is talking to an AI avatar that is powered by chat GPT.

And in this video, you will see him having a conversation. You

Vic: sort of see his view, his perspective inside, um, inside the metaverse. He’s in the metaverse meta metaverse.

Marcus: Yes. And he’s talking to an avatar and the avatar is. Mouthing all of the words that are being generated by chat GPT and his prompts are him talking.

They’re not his prompts are not him typing it in his prompts are him talking. And so basically everything that the comp side folks at Vanderbilt were telling Vic today was going to be here by Thanksgiving. We have this example for you

Vic: of it

Marcus: happening today.

Vic: And [00:51:00] it’s. Incredible, shocking and incredible because it’s a live conversation in real time generating video and what he’s going to say and speaking it while also listening.

That’s hard for humans to do.

Marcus: Yes,

Vic: and it’s doing it very fluidly.

Marcus: Yeah, it’s so anyway. I mean, I think. This is the wave we are. We are in it. It’s here. It’s going to move so fast. And, um, I’m excited because we’re going to have a guest, hopefully, uh, that’ll be part of our next episode. And we’re not going to say who it is, but we will say that it is a person that was part of a storyline.

On the side of things that we’ve talked about in the last episode, um, so maybe you can fish back through that episode and figure it out, but you’ll definitely want to tune in because it’s going to be, I think, one of the pioneers in the, in the space, uh, in terms of, in terms of deploying AI. Uh, in the real [00:52:00] world and kind of getting their take on, you know, why they’re doing it, what they’re, what they’re learning from it, um, why they think it’s critical to do so and, uh, just more detail on the technology itself.

So we’re really looking forward to that conversation.

Vic: Yeah. And, um, yeah, this is. A wave that’s like on us right now, I think what I’m trying to do is just like, stay, you know, not get swamped by it as part of that. I did my clone that we were talking about last week and it needs a little more work, but it’s halfway there.

It’s already.

Marcus: No, let’s just talk about the fact that you talked about getting it done last week. Yeah. Last episode, I

Vic: didn’t know what it was going to be. I reached out to the company, talked to the founder. He’s a great. I mean, there’s two founders, I talked to one of them, he built a clone for me by Saturday, so that was Friday I talked to him, I think.

By Saturday I had it, and it’s really good. Now it’s not, clone is I think a misnomer. [00:53:00] Yeah. So I think we need to have, I think we need a new name. I sort of think it’s like an aspect of my person. It doesn’t know my wife’s name. It doesn’t know, like, what I like to eat. It’s only

Marcus: as smart as the data it’s trained on.

It only

Vic: knows the data I put in, which is healthcare policy, healthcare innovation, founders, startup, and VC investing. And it’s not perfect at that, but it’s pretty good. And, um, I need to give it some more training. I need to feed it more.

Marcus: Let’s let’s just end on a crazy note, but let’s take the furthest corner of the two by two what happens when you actually start connecting all this stuff with our genome.

Vic: I mean, it’s going to be incredibly I’m an optimist, so I think it’s going to be incredibly positive for human health for our ability to do. Much more [00:54:00] engaging, intellectually, interesting work. And I think we’ll have a lot, I mean, listen, every technology that has come out since the steam engine has increased the standard of living and also increased leisure time, but is it fair to say

Marcus: nothing has ever been like this?

I mean, we’re tapping into something that’s far more than just efficiency here. This is not just efficiency technology.

Vic: The pace of change and the breadth of which it will affect things. I don’t think we’ve seen before, and so that’s going to be wonderful, and it’s also going to replace a whole bunch of jobs that just people don’t need to do anymore, and yeah, we’re gonna mean, that’s why I think we need to really start thinking about, um, like the basic income.

What’s that called? Like, um,

Marcus: universal basic income.

Vic: Where like everyone gets some income and they can [00:55:00] go do something they’re passionate about and it may make a little money, but it’s not what they’re living on because we’re going to displace people that will have huge productivity growth and I’m really optimistic about how productive, you know, my, My clone can be sending emails and talking to entrepreneurs that I haven’t invested in, I tell

Marcus: you what, overlaying that with our mental health crisis, we’re going to have a crisis of purpose.

I mean, we are, we already have a crisis of purpose and I don’t think this is going to be that helpful for that. So

Vic: humans don’t change that quick. No, no, the pace of this and how many industries it’s touching is just, it’s just unprecedented. Like the steam engine rolled out over. I don’t know how many years, 50 years.

The telephone rode out over that time. The internet was faster, the iPhone faster, but It didn’t displace jobs in the same way. I don’t think we could put the genie back in the bottle. So that’s what I mean. Like the wave is here. I’m trying to [00:56:00] just stay like up enough so that I can see what’s going on, but it’s going to affect the venture business.

I mean, it’s going to affect everything.

Marcus: I, I, at dinner last night, I said, listen, I’m not fear mongering to you guys about, you know, the health system industry. Why do you think I’m going back to coding school? This is going to impact VC for

Vic: sure. 1000%. Like, so I, so I said to the Vandy guys, so we have this algorithm that you and I started and other people have taken it on and I’m really proud of it.

It’s, it’s great at kind of helping our humans focus on the best companies. We don’t do the little decision, but. Um, and I wanted their help of like, how, how can we utilize technology to sort of make faster improvements on this? And their response was, uh, a little bit scary, which is, you don’t, you don’t need the algorithm.

Just tell ChatGPT to make the selection, and it’ll just, [00:57:00] it’ll know which one to do. Is scary because then what am I doing? A capital allocator, some institutional investor doesn’t need me. If I don’t have value to add.

Marcus: I mean, governance and, and execution and post

Vic: investment

Marcus: that’s yeah.

Vic: But, but my value is.

Now,

Marcus: let me ask you another question. Who’s a scarier for the VC or the founder who’s on the other side of a chat GPT decision?

Vic: I don’t know. I mean, I think, uh,

Marcus: I mean, cause chat GPT would likely give a whole bunch of VCs, the same answer, which then makes all the VCs compete for the same small number of deals.

And leaves a lot of nose that today, you know, might not be nose.

Vic: Yeah.

Marcus: Right. So look, I mean, that’s right. It’s just, there’s a lot to consider here, right? There’s a lot to consider as we turn more and more and more over to the machine. There’s a lot to consider. [00:58:00] All right. I’m going to, I’m going to stop

Vic: there because we’ll never, yeah, that’s right.

Marcus: I’m going to stop there. Um, but looking forward to next week and, uh, again, thank you for putting together a great show.