Care at Hand Co-Founder & CEO, Dr. Andrey Ostrovsky, and Stanford d.school scholar, Karen Matsuoka, give insight into how entrepreneurs can best tackle the challenge of working with government organizations, particularly when focusing on underserved populations.

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Key takeaways from this episode of StartUp Health NOW can be found here.

Steven Krein: [0:00] Welcome to a special episode of “StartUp Health Now,” the weekly show celebrating the healthcare transformers and change makers that are re‑imagining healthcare. I’m Steven Krein…

Unity Stoakes: [0:12] …And I’m Unity Stoakes.

Steven: [0:13] On today’s episode, we’re going to bring you a conversation with Dr. Andrey Ostrovsky, CEO of Care at Hand, and Karen Matsuoka who is the Guest Scholar at Stanford d.school. We’re going to talk about opportunities for entrepreneurs to tackle the challenges and opportunities in underserved communities.

[0:28] This is going to be a great episode. Stick around.

[0:30] [intro]

Steven: [1:10] Welcome back to “StartUp Health Now.” Today’s episode is supported with a grant from the Robert Wood Johnson Foundation to help entrepreneurs tackle the opportunities in underserved communities. On today’s episode, Dr. Andrey Ostrovsky and Karen Matsuoka. Thank you, guys, for joining us.

Dr. Andrey Ostrovsky: [1:23] Thank you for having us.

Karen Matsuoka: [1:24] Thank you for having us.

Steven: [1:25] It’s great to have you guys here. You guys have such interesting backgrounds. We would love to hear a little bit about both of you, and also how you guys know each other? We’ve got entrepreneurs here, we’ve got scholars here, we’ve got doctors here. We’ll start with you, Andrey.

Dr. Ostrovsky: [1:41] Karen and I met over this past year, because I’m originally from Maryland. I have a bit of a pulse on the Maryland healthcare ecosystem. Maryland has always been doing interesting things in terms of reimbursing care. There is even more interesting things evolving now in terms of how hospitals are being reimbursed.

[2:03] I was really looking to understand more about what those changes mean for community health workers, for community organizations, for hospitals. I reached out to some of my mentors and they directed me to a few folks, and a final common pathway of, I think, two to three people led to Karen Matsuoka. [laughs]

[2:26] That’s how we got connected. I really approached Karen to get a better understanding of how do I as an entrepreneur, identify the problems that consumers that various entities in Maryland are facing, and to try to also understand how are the policy implications shaping the opportunity that emerges.

[2:46] I connected with Karen. She very graciously responded [laughs] to the email. We’ve had a lot of dialogues and really interesting innovation exercises together, which we can chat about. But that’s essentially how we got connected.

Steven: [3:05] You were doing this from the perspective of a clinician, or as an entrepreneur?

Dr. Ostrovsky: [3:09] Purely as an entrepreneur. Maryland, like several other states, is experiencing very rapid changes. Those changes are downstream effects of either the Affordable Care Act or the Affordable Care Act plus some interesting local policy and regulatory changes that were already going on before the Affordable Care Act.

[3:32] When you have the Affordable Care Act layered with local nuances, the regulatory environment is incredibly hard to be expert in. I’m well versed in regulatory environments, but at the state level, I’m not an expert in Maryland. Karen is an expert, and so I wanted to pick her brain to understand where can we solve problems that people are going to pay money to help me solve them?

Steven: [3:58] Karen, so a little bit more about your background.

Karen: [4:00] Sure. As you mentioned, I am a guest scholar at the moment at the Stanford d.school. Prior to that, I was the Director of Health Systems and Infrastructure for the State of Maryland. Then prior to that, I had stints at the federal level at the White House Office in management and budget, as well as on the Hill with US Congress Ways and Means Health Subcommittee.

[4:19] I’ve been thinking for a really long time about policy, and how policies can be used as effective levers for public private, funded public private partnerships. It was in the course of working in Maryland as healthcare reform and implementation has gathered steam, a lot of the movement has been towards getting closer to the ground where the implementation is happening, which is what led me to move from federal level to state level, which is where I had the pleasure of meeting Andrey.

[4:49] Really at this point in time, I’m really looking to help entrepreneurs like Andrey think through the proven approach of Stanford and other organizations I’ve taken to human‑centered design, to design the kinds of models and solutions that really get to what end users ‑‑ in this case, we’re talking about underserved populations ‑‑ really need. It just so happens that policy shifts have created a situation now where, financially, that’s now very viable and very lucrative I would say.

[5:14] A lot of things are coming together at this very critical juncture in time which makes these kinds of conversations really important. I just wanted to thank you for having these series of webinars and for having us be a part of it.

Steve: [5:26] Thank you for being here. It seems you are doing a lot of translating of how the government and entrepreneurs can work together or effectively. Oftentimes, the new policies that are coming out of the government both federal and state, if you talk to entrepreneurs, they talk about it being a treasure trove of opportunities. Yet, the treasures are buried throughout, you don’t know where to find it.

[5:50] How much of your time is really spent translating between the two, between government and entrepreneurs and actually working with other government agencies to do more work with entrepreneurs?

Karen: [6:01] I would say that, and for all the entrepreneurs out there, I would say there’s probably a lot more appetite and desire for folks like me in government to have more direct relationships and interactions with entrepreneurs on the ground, and unfortunately I would say, Andrey is one of the only startups that has reached out to me directly at the state level, and even at the federal level.

[6:24] So, unfortunately, the work of translating hasn’t really happened until I went out to Stanford where there are a lot of startups in Silicon Valley, where there’s a huge need, where I’ve been doing a lot more of this direct translation work.

[6:36] But there’s a huge appetite within government to figure out ‑‑ to Andrey’s point ‑‑ there are all sorts of rules and regulations, and the end‑goal is always to try to create the kind of marketplace for innovations to thrive, and sometimes government officials have a hard time figuring out how to get that right.

[6:54] That environment layered on top of all of the opportunities that the Affordable Care Act brings, I think the more we can get entrepreneurs talking to people in government and having them share insights and best practices, the better it will be for government, for the entrepreneurs, and then ultimately the patients that we’re trying to reach.

Steven: [7:15] It seems like there are parallel paths here. The entrepreneurs need help, the government needs help, and there’s an opportunity here to clearly accelerate innovation by getting them to work better together.

Karen: [7:24] Yes.

Dr. Ostrovsky: [7:25] Along those lines, just so all of the state, federal, and local officials don’t get bombarded by every single entrepreneur with an email, a cold email, there is an emerging science behind how you get to someone like Karen.

[7:40] It wasn’t accidental that I got to Karen. There are essentially best practices of utilizing a network to identify who in the regulatory setting you need to approach ‑‑ or not who, what type of person. Once you’ve triangulated that, then you need to source your network to see who can appropriately make the introduction.

[8:02] I literally had three people email intro me to Karen. I probably could have cold emailed Karen, she probably would have been a sweet person and responded, but that’s usually not the case.

[8:13] Understanding how to identify the folks in the regulatory setting, what are the specific asks of those folks, and then leveraging whatever your network is.

[8:26] Folks in incubators have that advantage because there’s already a built in network. Advisory boards are really excellent for serving that network function, but then once you identify the type of person, once you actually identify the specific person that you can get access to, the interaction between entrepreneur and the person in government isn’t like a typical interaction we would have with someone that we’re trying to sell something to.

[8:56] It’s not a, “Hey, let me understand what your 3‑year objectives are, and let me understand what your biggest fears are, and biggest…”

[9:03] It’s different. You actually have to come in there and say, “How can I help you?” I came in taking that approach, and I learned quickly that like most governments, and I have worked in governments before…

Unity: [9:16] Were you going in trying to figure out how to help the state government?

Dr. Ostrovsky: [9:19] I was going in with a very specific intent. My goal is, if Maryland had an opportunity to utilize non‑clinical workers to prevent readmissions, they should be using my software, period.

[9:32] Now, I didn’t go in and open with that, but that’s ultimately my goal. In order for me to do that, I need to understand the ecosystem. I need to understand who are the entities that could be using my software, and I need to know when they would even be ready, so that’s what I need to learn from Karen.

Unity: [9:46] Could you both actually frame the opportunity here, because I think one of the things not enough entrepreneurs know about now, is really what the opportunity is. What problems the government’s trying to solve.

Dr. Ostrovsky: [10:01] I think Karen has got some really good insights to that. The big opportunity I saw, why I smelled out Maryland, is that Maryland as a state has a very unique reimbursement of their hospitals, and Karen can speak in much greater detail to that. I learned about this and I realized that the timing was probably appropriate for me to start planting seeds.

[10:26] To finish that thought about what entrepreneurs have to bring to that table, you got to bring something. That might be insights from the field, or educating about not just your solution but other solutions.

[10:38] I came to Karen saying, “Here are multiple ways, multiple technologies that may be useful, how can I help you connect with those?”

Steven: [10:45] Yours was included in that.

Dr. Ostrovsky: [10:46] Mine happened to be one of them.

Steven: [10:48] Right, and by the way for the listeners, because you didn’t explain Care at Hand other than you [indecipherable 0:10:51] readmissions which is expensive, and can you explain Care at Hand at all, and I’ll give a little more context and solutions you brought to the table?

Dr. Ostrovsky: [11:00] Very simply, it’s a technology that, it’s smart surveys that accurately predict 30‑day hospitalizations, using the observations of non‑clinical workers. People like community health workers, homecare workers, van drivers, Meals on Wheels providers…

Steven: [11:12] Lay caregivers.

Dr. Ostrovsky: [11:13] Lay caregivers, not doctors.

Steven: [11:15] Predictably preventing…

Dr. Ostrovsky: [11:16] Predicting and predicting, with literature to support.

Steven: [11:20] You brought them a suite of solutions, suggestions for them.

Dr. Ostrovsky: [11:23] Yeah, ours happened to be one type. There’s other solutions that could be utilized by clinicians. There’s other solutions that could be utilized by the health system, by consumers themselves. Within our network here in StartUp Health alone, between us and SIGNS Health, and IDEOTAG.

[11:41] There are so many ways to drive down readmissions, it’s a matter of, “Here’s your menu of options. What are your needs? I trust these people, so I can bring them to the table.”

Unity: [11:53] You went in with a solution, but you wanted to understand the needs here. What are the opportunities, from your perspective, that entrepreneurs should be paying attention to, perhaps?

Karen: [12:05] I mentioned before that there’s sort of a convergence of things that are happening right at this critical juncture, where underserved populations actually just almost by definition are the ones where there are oftentimes the highest needs.

[12:18] Now, part of the larger global trend of which the way that Maryland pays hospitals is sort of an example of what we’re going to start seeing, I think, rolling out nationwide, is a transition from the way that our healthcare system pays for healthcare services, away from just inputs, maybe it’s slowly starting toward outputs, but ultimately towards outcomes.

[12:41] What’s happening in Maryland is, whereas hospitals used to be very revenue driven, in terms of the volume of care that they delivered in the hospital setting, what Maryland is doing is putting a global budget on every hospital, within the next five years. That creates a whole different set of incentives for healthcare providers working within the hospital setting.

[13:00] Not just reducing the readmissions, but even starting to think about, for our highest cost patients. If you think about the way a global budget works, if you have a budget, and the more that you can be efficient and come within that budget, or below the budget, you get to at least share in some of that savings, the delta.

[13:16] If you start thinking about who the highest‑cost patients are, they’re often the most medically underserved, and that creates a huge opportunity. That is now happening on the ground, right now, in Maryland. You’re also starting to see it, or you have seen it for a while, in other systems, like Kaiser, or the VA, that operate according to a global budget, as well.

Steven: [13:37] Sure. You were operating to get savings out of the system, and actually find opportunities to create big gaps in between, where right now, no one’s paying attention to the money.

Karen: [13:48] Exactly. I know that the Affordable Care Act is 2,000 pages long, literally, and it can be very confusing to start thinking about which provisions are the ones to pay attention to. I would say that it boils down, and can kind of look very different in different states, different communities, but what it really boils down to is, what is the difference between the cost of whatever the intervention is that entrepreneurs are trying to design, relative to the opportunity cost of the status quo.

[14:13] Where that difference is the greatest is where the biggest value is to be gained, both for the patient, as well as for the entrepreneur, and then ultimately for the payer, because they get to share in the savings, as well.

Steven: [14:23] When you got a call from Andrey, or an entrepreneur, from your perspective, or the state’s perspective, is that a good thing? Are you guys out hunting for solutions, now that the Affordable Care Act is here, and this treasure trove of opportunities? What’s the perspective of a state like Maryland when an entrepreneur comes calling?

Karen: [14:46] I can only speak for myself, and I do give a lot of credit to Secretary Joshua Sharfstein for setting up the administration that I was heading up, the Health Systems and Infrastructure Administration, because I think he really did set it up almost to be a change agent, and an integrating function within Maryland State Government.

[15:03] I don’t know the extent to which that model has been replicated in other states, but certainly I was brought in to help think through what this transition looked like, and I personally, because I’ve always been interested in the intersection of private and public partnerships, have always been interested in innovation, and what entrepreneurs bring to that.

[15:20] I personally was very excited to hear from Andrey. I will say, just to piggyback on what Andrey said, what made the partnership so viable to me, is in addition to not kind of doing the hard sell about the technology, I feel like what made Andrey really effective, and what I would say about any entrepreneur that I’ve ever been approached by while I was working in the federal government, for example, is the ability to engage, not on the financial level of financial transactions and how I can essentially get money from you, but also to act as a thought partner.

[15:52] Andrey was able to do that in so many different ways, in terms of thinking through holding these design workshops that Andrey mentioned, to even just helping us think through…One of the challenges that we have, when we’re thinking about super utilizers, is these social determinants of health. It’s no longer enough, to really provide good care for these really vulnerable populations, to think about what happens with the clinical space alone. What happens in their home environments are very important, what happens in the school setting is very important.

[16:20] All these things that are non‑clinical need to be brought into play when we’re talking about what is ultimately going to be effective in keeping one of these patients out of the hospital.

[16:28] These community organizations who increasingly need to come into the game oftentimes do not have an entrepreneurial mindset. One of the things that as a state government we are struggling with is how to bring these partners on board, but also infuse in them the kinds of entrepreneurial approaches and mindset that Andrey brings.

Steven: [16:52] This sounds like a very fluid discussion that you’re having with Andrey. Throughout how long of a period of time is this taking place? It started out very simple, as a conversation you guys were having, but it now has evolved into something much more collaborative.

[17:08] How long of a period of time elapsed between when your first call occurred until when you actually, really began working together in earnest?

Dr. Ostrovsky: [17:16] I think nine months. I think that timeframe, from the initial introduction, follow up, up to visiting in person, and ongoing. Yeah, nine months is the time period.

Steven: [17:28] You came in to solve some problems, ask a lot of questions. It sounds like you did more asking questions than talking.

Dr. Ostrovsky: [17:37] Which always should be the case for entrepreneurs, ask more than talk.

Steven: [17:40] Difficult challenge for entrepreneurs.

Dr. Ostrovsky: [17:42] Yes.

Steven: [17:44] You found someone both listening to you, but also asking good questions.

Karen: [17:47] And offering…This was sort of maybe a happy coincidence, but the products that Andrey was developing were very much aligned with the kinds of problems that we were trying to solve.

Dr. Ostrovsky: [17:59] That’s where advisers can be very good. I have a particular informal adviser in Maryland that understands the ecosystem very well, and he knew what value we could create, and then he also understood the local context, so he could make the right introduction.

[18:18] There are other people in Maryland Government I could have approached that I could have taken the exact same approach as I did with Karen, and offered to help, and offered to share what I’m seeing on the ground, and offered to lead a workshop. They may not have perceived that need like Karen did. It really comes down to doing your homework as an entrepreneur.

Steven: [18:38] If we were going to give entrepreneurs a little bit of a guidebook here about how to crack open the opportunities to work with the government, whether federal or local, let’s start with…You mentioned the outreach piece, you mentioned going at it with trying to figure out who to talk to and what type of person, then finding someone.

[18:57] Let’s dig into a couple of very practical things that an entrepreneur needs to think about as they approach opportunities with the government.

[19:02] Specifically, public payers is a lot of opportunities, but it seems it can be seem overwhelming someone who doesn’t have to navigate it.

Dr. Ostrovsky: [19:10] I think the key is understanding what are going to be…Treating it kind of like a customer. What are the pain points?

Unity: [19:19] Is it the same model?

Dr. Ostrovsky: [19:21] It’s always a value discovery model. I mean talking to my mom, convincing her to make me some gefilte fish, we’re still going to sell it, but I have to understand what are her pain points

Steven: [19:31] You have to convince your mom to make gefilte fish?

Dr. Ostrovsky: [19:32] She doesn’t like making it. [laughs] It’s always a similar approach and my approach to Karen and any other association of my customers or any other regulatory body or a non‑customer, it’s always a similar approach as I take to a customer. In the case of Karen or folks in Maryland, I had a sense ‑‑ and this is what ultimately I think it was from our conversations ‑‑ that they have a very complex system and that complex system could be digested into much more simple terms and that a great process to apply to that is design thinking.

[20:17] I am well versed in design thinking. I teach it to my team. I teach it in a clinical setting to fellow physicians. I propose would it be helpful if I let a design thinking workshop for your colleagues to help you think through some of the complexities that you’re working with…

Steven: [20:34] For free?

Dr. Ostrovsky: [20:34] Of course, for free.

[20:35] [crosstalk]

Unity: [20:36] A thought partner in the beginning.

Dr. Ostrovsky: [20:38] The goal here is always is if I can educate either a group of my customers or educate people that set regulations, ultimately, it makes a customer base that’s more informed and it’s more customers that will even know to say yes or no to purchase my software. It’s OK if I get more people that realize I don’t need that software, but there will also be more people that finally realize, “Oh wow. This is why I need the software to reduce readmissions and lower costs .” So, it’s a capacity building exercise and really that’s the strategy behind a lot of approach to folks and government.

Steven: [21:15] Karen, that thought partnership model, was that effective, and do you have any other recommendations for entrepreneurs on what they should or could be doing to build those partnerships?

Karen: [21:27] I think that the angle that Andrey took to really build a relationship through being a thought partner, I think, lend him extreme credibility and told me that there was an integrity to the kinds of services and value that he can provide with state like Maryland.

[21:44] I also want to say that although funds especially we’re talking about the Medicaid population. If we’re talking of then the underserved population, although funds might start from a public source, they’re not always going to be the entity through which financial transactions happened with an entrepreneur.

[22:02] In the case of Andrey, there was a possibility perhaps, with state innovation model funding that Andrey referenced, where we might have use our grant dollars to actually procure Andrey’s software, but what happens more often than not is that the funds start from public source, but then go somewhere else.

[22:22] In the case of Medicaid, often times, the funds are in part federal, in part state, they end up going to managed care organization that then manage that fund on behalf of the state and the government. Who then pay a fee to hospitals and healthcare providers to provide care to the Medicaid population.

[22:37] At any one of those points, there’s a different but important value proposition potentially to be made, and I would think that the angle on which you approach a hospital or healthcare provider versus a managed care organization would be different, but the principles remain the same, but you want to understand what their goals are, what their pain points are, and then how your technology can make it less easier to do what they want to do.

Steven: [23:03] Sure. You’re weaving in and out a strategies here, because at the end of the day, every other sector, you go to the decision maker, the customer, and the user are all the same thing. In healthcare, we’re talking about multiple players here. So, what I would sum up what we’ve just discussed is really you need a strategy to figure out where the money flows, to figure out how the solution solves real problems, but at the end of the day, when you do reach out to the person and the government to talk to, you’re not necessarily going to find the customer, the user, and the person that approves it all on the same place. So, you really seems like you help find the money for Andrey a little bit here in terms of navigating to the real customer.

Dr. Ostrovsky: [23:43] Something that entrepreneurs need to recognize in terms of how much time to dedicate to this type of strategy is that, I now have a very trusted partner in Karen and even if she were still at the Maryland Health Department, any kind of funding flowing through the state or federal level will be open to a competitive process.

[24:03] Although I am a trusted thought partner for several people in the state of Maryland, I will be in the exact same boat of applicants when an RFP goes out. I think the opportunity for entrepreneurs and it’s not…I don’t think any entrepreneur just can come in and say, “Hey. I want to be a thought partner,” you have to contribute something. I’m expert in quality improvement and design thinking and the marriage of rapid cycle testing. Those are much needed skills to come in and contribute.

[24:33] State governments pay consultants a lot of money for that. I’m offering it for free. So, when I offer it, I shape it always through the lens of “This is my competitive advantage.” I shape it through the lens of, “Hey, guys. Keep in mind that non‑clinical worker,” because oftentimes those exercises will usually think about hospitals or payers and they ignore the marketplace that I’m trying to curate, so that’s the play. I add value, because I’m a free consultant..

Steven: [24:58] And you’re making sure your…?

Dr. Ostrovsky: [25:00] I’m making sure I’m advocating for my marketplace and its advocacy.

Steven: [25:04] Everybody wins?

Dr. Ostrovsky: [25:04] Everybody wins.

Steven: [25:06] What are the biggest challenges? If you think about this unique opportunity, because I think a lot of entrepreneurs neglect or don’t focus on the opportunities in underserved communities and working with the government and other things.

Unity: [25:19] They might not be aware of them?

Steven: [25:19] Most sectors, you want to ignore the government, right? They think about why would you want to work with…not only the government, but big companies, but in the healthcare, obviously, you have to. It’s much more collaborative and the public payers among the biggest players in the world, so you have this notion of opportunities within it.

[25:37] But what are the challenges to doing so, because it seems like it could be either a rabbit holes you never come out of or a slippery slope to nowhere? How do you avoid that and what do you do?

Dr. Ostrovsky: [25:49] Great example, today is election day, right?

Steven: [25:51] It is.

Dr. Ostrovsky: [25:52] Guess what’s happening with a lot of administrations and all of the contacts that I have made may or may not be the same, so it is incredibly risky, especially like preceding year to now to this election day, making those types of investments, because the higher level the person, the more subject they are to switching of administration changes. That’s clearly visible with Maryland, because you have people like Joshua Sharfstein, who’s the health director, incredibly talented person. There will be an administration change so people are preempting, top‑tier people like Karen. I recognize OK. Time to see…

Steven: [26:36] Turn over challenge.

Dr. Ostrovsky: [26:37] Usually, they’re entrenched, which is nice, because you have an advocate there for a long time and they’re doing their job right. They’re moving to move up. There’s no more moving up for someone like Karen and there’s an administration change, so that becomes a real risk.

Steven: [26:55] That’s a big one and that happens in big organizations, but obviously, there’s no election days in organizations, so that’s a little bit different. What are the other big challenges, Karen?

Karen: [27:02] I think Andrey alluded to earlier about the procurement. There are rules for better or for worst about how and with whom and government can do business with the private sector and…

Unity: [27:16] Usually an open process?

Dr. Ostrovsky: [laughs] It’s supposed to be.

Karen: [27:20] It’s supposed to be. There are exceptions if your product is the only thing out there and you can do a sole source kind of procurement, but those are few and far between. Most of the time there are these open beds. These beds are often…because it’s government, there’s a lot of need to be good stewards of the taxpayers money. Often times, those requirements are very prescriptive, which can be very hampering to an entrepreneur who’s trying to develop a new product and maybe refine as you go along.

Unity: [27:48] Does it take really understanding how to basically manage the process or work with bureaucracy and go through that cycle.

Karen: [27:59] Yes, and I would say that at least now and until the procurement rules and processes change, and getting back to this notion of a thought partner. A government’s relationship to healthcare often isn’t setting the rules of the game. When you can start to build good partnerships with people in the field, on the ground, or the people who are affected by the policies that a government official is making, that helps to the long run, enable the policy makers to craft the kinds of RFPs and the kinds of regulations and the kinds of policies that will ultimately enable innovation to thrive more generally and then help entrepreneurs individually.

[28:38] The other piece of that, I think, is just like the whole notion of following the money. If it’s very difficult to do financial business with the government, that money does flow ultimately to other parties for whom financial transactions can be done more quickly. I would say the further away from government you go the easier that that gets . Local government is a little bit easier than state government, state government is a little bit easier than federal government, I would say, and then when you go out to the private sector, even easier still.

Steven: [29:07] We talked a lot about Maryland, does that apply in most states in the US?

Karen: [29:14] Yes.

Steven: [29:15] Does it apply up to federal?

Dr. Ostrovsky: [29:17] For sure, and each state has its own nuances, but the Affordable Care Act has created so many vehicles for utilizing dollars in interesting ways and we can talk about some of those vehicles like SIM money or BIP money or…

Steven: [29:35] Let’s talk about that, kind of back up, because I want to understand other government backed initiatives that entrepreneurs can take advantage of that you’re aware of and that perhaps we can talk and lead entrepreneurs to identifying opportunities they can take advantage of.

Dr. Ostrovsky: [29:47] For sure, at the federal level, going to the CMMI, the Center for Medicare & Medicaid Innovation, website. Pretty much any entrepreneur can go down that list of their initiatives. Each one of them is a business opportunity. Some of them are more viable than others, and it’s really important to keep in mind that a lot of these initiatives are in demonstration mode. They have a five‑year timeframe or three‑year timeframe after which according to the Affordable Care Act, they can be made into a regulation that’s longstanding without Congressional approval, which is brand new.

[30:28] This has really never happened before, and you know this better than I do. It really never happened before from the policy instrument perspective, which is brilliant. It’s less subject to the whims of politics. The challenge there is, as an entrepreneur, basing your business model and convincing investors…

[30:45] [crosstalk]

Steven: [30:46] That are better to know that way.

Dr. Ostrovsky: [30:46] Look, trust me. This section of 3026, it will continue after the next three years, and that adds further complexity to an entrepreneur trying to discover a business model that, right now, you have to sell, which is hard enough, and by the way, you have to make sure and hope and be savvy enough to understand this is likely going to continue. Just going to that website alone, you’ll identify programs like the readmission reduction program, value based purchasing program, bundled payments, and moving into more interesting capitated or larger scale model.

Steven: [31:21] We have links to all of this, by the way, in Robert Wood Johnson Foundation site that we’ve set up for underserved communities for entrepreneurs, which is at startuphealth.com.

Dr. Ostrovsky: [31:31] Perfect. I like that. One thing I would point out though is there are demonstration programs, or there are levers right now that really hone in on Medicare and look at really more of a penalty approach. There are other policy instruments, which are really Medicaid focused and have a lot longer sustainability, and I love, Karen, if you could elaborate a little bit, in Maryland, for example, with the SIM experience or the BIP experience because those two are…

Steven: [32:05] Explain the acronyms and then explain the programs.

Dr. Ostrovsky: [32:07] State Innovation Models, SIM. BIP, Balanced Improvement Program. Karen, it would be great, because you’ve educated me a little bit about this, but the dollar amounts are enormous.

Steven: [32:19] Can you talk about that, Karen, and, obviously, extrapolate that out a little bit to other state opportunities you are aware of.

Karen: [32:25] The State Innovation Models Initiative, it comes out of this innovation center, out of the Center for Medicare & Medicaid Innovation, and it was essentially given a 10 billion dollar authorization of funds over a ten‑year timeframe to really think through alternative innovative care and payment delivery models that will ultimately further the Triple Aim of improving the care experience, lowering per capita cost, and improving population health.

[32:53] There are so many different programs that CMMI is currently funding, but one of the bigger ones is called the State Innovation Models Initiatives or SIM.

Unity: [33:01] There are $10 billion over the next 10 years?

Karen: [33:06] Yes.

Unity: [33:07] That’s an extraordinary number that entrepreneurs would be thinking about.

Karen: [33:11] Yes. [indecipherable 0:33:12] and to Andrey’s point, the other real innovative thing that happened through this innovation center is this pathway for demonstration projects to become permanent. If any of these projects that are receiving Innovation Center funding can demonstrate improve quality of care, improve outcomes, lower cost, there is the potential, right now, for those demonstration projects to become part and parcel of how Medicare and Medicaid, just as business in general moving forward.

[33:42] This is the opportunity. Among the different kinds of innovation initiatives are things that are targeted specifically to states like the State Innovation Models Initiative, where CMMI is really looking at states.

[33:58] If you think about all the different kinds of payers in the healthcare market, there are private payers, there’s Medicare, there’s Medicaid, there’s a lot of innovation happening within each of these different payment streams. You have this potential problem where one innovation is going one way, the other innovation is going the other way, when really what we want is for all boats to row in the same direction to create the biggest impact that we can have.

[34:21] CMMI is looking to invest in states, because often it’s the states where a lot of this integration happens and where policies that are crafted at the federal level get implemented through state.

Steven: [34:32] So, the money flows down to the states and, therefore, the opportunities resided both the federal and the state level in each one of these examples.

Karen: [34:39] Exactly, and in the case of the State Innovation Models Initiative, at least in round one, there were two different kinds of grounds that states could apply for it. The really large implementation grounds, called model testing grounds, that went out to six states to the tune of around $45 million over a three‑to‑four‑year timeframe.

Steven: [34:56] You know which six states they were?

Karen: [34:59] I normally get this wrong. Massachusetts, Washington, Arkansas, Vermont, I’m missing one.

Dr. Ostrovsky: [35:09] We can Google.

[35:11] [laughter]

Steven: [35:11] That’s in our resource center. But I wanted to make sure we zeroed in on those states that had that. Go ahead.

Karen: [35:15] They’re fast and furious. They’re now in, I want to say, year two or three of their three‑to‑four‑year grant, and so they’re kind of hit the ground running.

[35:27] Then there are 17 states that receive what were called Model Design Grants.

Steven: [35:30] I will not ask you for the 17 states, [laughs] but we will have a link to it on our website.

Karen: [35:35] Yes. I think if you’re an entrepreneur, the 17 states are the really interesting ones to watch, because in round one, they applied for what are called Model Design Grants. They received somewhere around one to two million dollars to think through what an innovative model might look like.

[35:52] Maryland is one of those model design states. We got $2.4 million and we design what we ended up calling the Community Integrated Medical Home. Then, the 17 states along with anyone else that didn’t get that first part of big money have now recently applied for that bigger part of money to actually implement the model that they designed with their design grants.

[36:12] This 17 states plus anyone who missed the first round for the big testing grounds are now looking an opportunity of anywhere from twenty to a hundred million dollars in funding from the Innovation Center that will then flow through the states, and then from the states, potentially, to entrepreneurs like Andrey.

[36:30] We’re trying to figure out how do we provide more efficient care to these critically underserved communities where the value proposition is really the greatest, because of the delta between how much they cost and what could be gained if we can get a handle on bringing those costs down through better healthcare.

Dr. Ostrovsky: [36:50] One thing to put it on as a correction, it’s not Washington, it’s Oregon, and so you were right on…Yep, just want to point that out. [laughs] It’s my mistake.

Steven: [36:59] No worries. We’ll have all these issues. First of all, incredibly helpful. The punch line is treasure trove of opportunity, lots of money flowing, underserved communities, underscored here as lots of money flowing to help figure out how to do everything from serving them, keeping them out of the hospital, and connect entrepreneurs and start‑ups to these opportunities. Because I think at the end of the day, traditionally, start‑ups have not been a part of the game where money flow to from the government and it was much larger businesses and companies and organizations that’s changing.

Unity: [37:35] Are you starting to see more entrepreneurs pay attention to these opportunities?

Karen: [37:41] It might be a better question for you.

[37:42] [crosstalk]

Dr. Ostrovsky: [37:42] It’s starting to happen. There are some major barriers. Some are surmountable, some are less so to getting more entrepreneurs contributing, because we need more opportunities, not to create more competitors for me, but it’s really not a competition. The more people like me are in the game the more regulators are educated and the more they can say, “Aha, this is the ecosystem and here’s specifically what each of them do.” It’s just…

Steven: [38:18] A more concerted effort to educate everybody about innovation and innovative solutions that entrepreneurs are creating. Because I want to tie back to you the working group that you’re part of, because you’ve done some great work there and it seems like there are entrepreneurs gathering in these working groups with you. Can you talk a little bit about your work with that, and maybe that ties into how entrepreneurs can actually get involved and put themselves around this conversation?

Dr. Ostrovsky: [38:44] I absolutely can. One barrier, I want to address, is digital health is hyper focused on consumers right now, wearables, self‑monitoring. That requires a consumer, a patient, a person to buy something. The populations that we’re helping, that really need the most help, don’t have purchasing power to go buy an app, because they need to go buy food, because they are impoverished.

[39:15] That is a major limitation to innovation entering the space, because so much innovation is focused on, right now, things that just can’t be bought. So, money has to flow from somewhere, and that’s a consideration for the companies that you may need to modify your business models. Even if you have a wearable, you have to explore. Maybe that wearable won’t be paid for…

[39:39] [crosstalk]

Steven: [39:40] Rather than direct to consumer, maybe there’s another business model.

Dr. Ostrovsky: [39:41] Exactly. Another major limitation is, even though the thrust of all of these initiatives is achieving the Triple Aim, producing costs, improving outcomes, letting outcomes drive reimbursement, the infrastructure of reimbursement is…

Steve: [39:55] Dissect the triple costing for the listeners.

Dr. Ostrovsky: [39:56] Triple Aim.

Steve: [39:57] I’m sorry, Triple Aim.

Dr. Ostrovsky: [39:58] Triple Aim originally published in Health Affairs by Don Berwick and a few other folks. It’s reducing per capita cost, improving outcomes, and improving patient experience, like the biggest no‑brainer.

[40:12] [laughter]

Dr. Ostrovsky: [40:13] Actually, it’s very insightful to be able to simplify what should the healthcare system aim to achieve for our consumers, our patients. The problem is that almost all of healthcare is designed in a fee‑for‑service model especially in Medicaid. All these innovation dollars, billions of dollars going in, that are aimed at striving to achieve the Triple Aim.

[40:36] They’re going to be hugely hampered by culture and reimbursement infrastructure, a fee‑for‑service. A lot of the initiatives I’m seeing now that are byproducts of innovation dollars are still fee‑for‑service. How do you reimburse fee‑for‑service and try to incentivize outcomes? There are two…

Steven: [40:57] You probably have a few years here where there’s going to be crossover and everything, paid and running in parallel. I want to come back to the working group, because the Office of the National Coordinator, you’re involved with a working group?

Dr. Ostrovsky: [41:10] That’s right. There’s yet another interesting source of funding. There’s TEFT Funding, T‑E‑F‑T. You have to look it up to know what it stands for. Essentially, it’s funding that’s going to catalyze interoperability efforts, but not necessarily interoperability efforts the way we hear about them now with meaningful uses one, two, or three.

[41:32] It’s not just interoperability between a hospital EMR and a physician’s office EMR. This is interoperability in the long term care space. Actually, traditionally, Medicaid funded long term care space. We’re talking about how can you get an organization that delivers meals on wheels to someone in their home, to be able to perhaps identify that that someone is functionally compromised enough to be at risk to go to the hospital, and have the information highway to relay that information to a clinician.

[42:05] How do we merge the world of doctors, which has interoperability piping? Because if we use with the world of long‑term supports and services, which has no piping whatsoever.

[42:17] The tapped money, $42 or so million that went out, is trying to create that interoperability in the long term supports and services space. That money is going to eight states to help create use cases. Eight states really doing it.

[42:36] Also, there’s a group called the eLTSS, the electronic long‑term services and supports workgroup, which over the next three years, is going to curate these experiences from the field and say, “Here are some interesting best practices of what is a business case for interoperability in long‑term supports and services.”

[42:57] Because right now, meals on wheels doesn’t really have that much of a business case. How are they going to sell their value driven service to a payer, for example?

Steven: [43:06] You’re involved with a working group.

Dr. Ostrovsky: [43:07] I’m the community lead for that working group…

[43:09] [crosstalk]

Steven: [43:10] I’m asking the third time.

Dr. Ostrovsky: [43:11] Yeah.

Steven: [43:11] The work group. [laughs]

Dr. Ostrovsky: [43:12] The workgroup is the eLTSS workgroup.

Steven: [43:13] Are there a lot of these workgroups that are put together?

Dr. Ostrovsky: [43:17] There are several other workgroups that work on different aspects of office and national coordinator priorities. The eLTSS workgroup is dedicated to the space ‑‑ long‑term services and supports space.

[43:29] The workgroup will be meeting on a weekly basis starting tomorrow for the next three years. The whole goal of the workgroup is bring the experiences from the community, and let’s identify best practices, so a great opportunity, perhaps, for entrepreneurs to come in and highlight.

[43:45] [crosstalk]

Unity: [43:46] Where can other entrepreneurs find out how to get involved with this, or learn more about it?

Dr. Ostrovsky: [43:51] For sure. We can post a link in our apps to the workgroup on the StartUp Health website. A little bit ambiguous how to get to the website, but they can find it on our website, on the careathand.com, or post to yours, but basically the eLTSS workgroup…

Steven: [44:10] We have, on startuphealth.com. There’s a dropdown on the right side with resources that lead to the underserved community resource center, and if you go to startuphealth.com/now, this episode will be there with links in that episode as well.

Dr. Ostrovsky: [44:22] Perfect.

Unity: [44:24] Just some final thoughts on advice for entrepreneurs based on your lessons learned. I feel like we’re still early in this big transformation, with the Affordable Care Act, and all sorts of new opportunities that are emerging. What are your biggest lessons learned? What are the biggest advice for other innovators, other entrepreneurs and things they should be paying attention to, and doing now?

Karen: [44:49] Maybe just to piggy back on some of the things that came up, and what Andrey was just saying. Just to recap, there’s a huge opportunity here for entrepreneurs to be financially sustainable and lucrative looking at this population that many entrepreneurs may not have thought about before. That’s one.

[45:09] Second thing is, it is a different population. Thinking through what the needs are, is critically important, and the same things that may have worked for a direct consumer is not necessarily going to work for this population.

Unity: [45:21] Think about your business models and the population in a different way.

Karen: [45:26] I’d say business model as well as design, and this is where the human‑centered design approach…

[45:31] [crosstalk]

Steven: [45:31] Yeah, we could do a whole episode on the human‑centered design.

Karen: [45:33] Yes, and importantly to that, and it ties in with what Andrey was just saying about this long‑term social support, and getting interoperated between healthcare and that sector.

[45:45] Key to understanding the needs of this patient population is like it’s not just within the clinical center alone. It’s going to have to involve the healthcare, being able to communicate with, and coordinate services with entities outside of the traditional healthcare space, like long‑term support services, like meals on wheels, like housing. I think entrepreneurs who can figure that out, there’s huge opportunity, and a lot of profit, I think, to be gained. A huge win‑win opportunity for everyone.

Steven: [46:14] They can find you at, because I want to make sure you are not only this guest scholar at Stanford d.school, but you’re a consultant to startups as well. I think this is such an area of mystery for so many entrepreneurs. I know you’re a resource for many of them. I want to make sure that people can get a hold of you.

Karen: [46:32] Absolutely. I’m happy to give you my email address, and anyone who is out there…

Unity: [46:36] We’ll feature you on the resource center as well, so people can connect with you.

Karen: [46:39] Great. I’m happy to learn how I can help.

Steven: [46:43] Fantastic. Andrey?

Dr. Ostrovsky: [46:44] One of the most productive exercises that entrepreneurs can take, which caters to their core competency, is executing piloting really well. Because closing deals directly with health systems that themselves are new to the reimbursement ecosystem, they’re already very conservative about investing in anything outside of what they know. Adding into the picture a new reimbursement mechanism makes them extra conservative. Enabling entrepreneurs can de‑risk or make it easier for their end‑customers to pilot by doing a couple of very specific things.

[47:21] Ultimately, what it comes down to is get skin in the game from the customer, really trying to get them to pay but maybe nominal, only a couple of thousand bucks. I’ve wrote an article about this on our blog that I give a one page proof of concept document that I give to my customers. This is generated the fastest revenue growth for my company over the past few months because that one document is the process, but that document, that essentially is the contract. It’s not whatever normal…

Steven: [47:50] We’re going to post that on the website, too, which is the…

Unity: [47:53] For template.

Dr. Ostrovsky: [47:54] Yeah, it really is.

[47:56] [crosstalk]

Steven: [47:57] That’s fantastic.

Dr. Ostrovsky: [47:57] What underlies that template is another name for what we entrepreneurs do in a daily basis. Entrepreneurs adhere to Lean Startup or innovation accounting or business models canvas. Whatever we want to name that suite of tools or all of them together, we do rapid cycle testing every day. That is how we survive. That’s how we discover business models.

[48:18] Another way to use the exact same skill set, just with the slightly different outcome, not to close a deal but to improve local outcomes, quality improvement, literally the same science. Entrepreneurs are pretty much experts in quality improvement, if you just re‑frame it a little bit.

Steve: [48:35] Same thing, different name.

Dr. Ostrovsky: [48:36] Same thing, different name with slightly different intent, but very, very comparable.

Steve: [48:39] Government doesn’t practice Lean Startup.

Dr. Ostrovsky: [48:41] Healthcare systems…Well, this is an exercise we did . It’s first set for a conversation.

[48:45] [laughter]

Dr. Ostrovsky: [48:46] With customers though, healthcare systems, payers, hospitals, anything that has or is currently Medicare funded, they know the language of quality improvement. If entrepreneurs come into a pilot and say, “Here’s the aim of what we’re trying to do. We’re trying to reduce your 30‑day readmissions by 10 percent over a six‑month period. What are the drivers or impediments to that aim?”

[49:11] Say, “Well, the driver is…the current workforce is really expensive because nurses cost a lot, community health workers don’t.” Change strategy is let’s use non‑clinical workers, that people you already pay for, like van drivers or home PCAs, and use them to drive down costs. Set a fixed timeframe, no more than two or three months, make it dirt cheap. They’re not going to beg their CFO. They can just say whatever, “Here’s some budget. Here’s 3,000 bucks.”

Steve: [49:37] A token amount.

Dr. Ostrovsky: [49:38] Token amount, but token amount so that when their boss is…their boss is going to keep them accountable if they spend any money. If they don’t spend money, they’re not going to account for it.

[49:47] Then, it creates a very concrete metrics of what does success mean. Then, some other best practices of piloting like if you hit a certain threshold and milestone, then you build into your contract that you scale up, et cetera.

[49:58] Taking this approach has been incredibly productive for us. Entrepreneurs don’t have to be experts necessarily in quality improvement. They can read my blog. They’re going to be expert enough in just reframing what we already do, which is Lean Startup. These health systems are much more comfortable with a 2,000‑dollar three‑month pilot than another EMR play, which is a five‑year billion‑dollar investment.

Steve: [50:27] But then, they’ll have the segue to full customer or that’s a whole different conversation?

Dr. Ostrovsky: [50:30] If you validate and if they see for themselves the value, they’re going to come to you. My anchor clients came to me and said, “Can I have a longer term…”

Steve: [50:38] Because it’s working and…

Dr. Ostrovsky: [50:39] Because it’s working. Then, with the threat of the pilot ending, they didn’t want it to end, so they come to you.

Unity: [50:46] This has been a tremendous conversation packed with a lot of value. It’s clear…

Steve: [50:51] A lot of links that we know how to go.

Unity: [50:53] A lot of links. But there’s just such an opportunity, it seems, for entrepreneurs and so many valuable strategies and tactic shared. Just to wrap up, one word close about how you guys are each feeling about where things are going.

Dr. Ostrovsky: [51:13] Sleep‑deprived optimism.

Unity: [51:15] There we go.

Dr. Ostrovsky: [51:16] Said as a new dad.

Karen: [51:17] I too. I’m also very optimistic. Every challenge is also an opportunity on the other side of the coin. This is the time. The number of force that have come to play to make it possible, it’s really exciting.

Steven: [51:36] Andrey, Karen, thank you so much for spending the time. I want to take Robert Wood Johnson Foundation for continuing to support these video series on underserved communities and the opportunities for entrepreneurs to really bring innovation to this incredibly important segment of the market.

[51:51] Thank you both. Thank you, Robert Wood Johnson. Thank you for listening. You can find this and all episodes of “StartUp Health Now” at startuphealth.com/now. Thank you for listening.