Predicting the Next Wave of Healthcare

Predicting the Next Wave of Healthcare

Balancing the hope of moonshots with pragmatism

Investor Bob Kocher, MD, sits down with entrepreneur and author Thomas Goetz at the StartUp Health Festival to dig into the changing healthcare landscape and how to “make healthcare suck less.”

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GUEST: Bob Kocher, MD, Venrock

HOST: Thomas Goetz, Iodine

LOCATION: StartUp Health Festival, San Francisco, CA

IN THIS EPISODE:

The Changing Healthcare Landscape
Investment Strategy
Balancing the Realities of the Healthcare System With the Demands of 10X Returns on Investment

Show Notes and Key Takeaways

(Access the full transcript here.)

The Changing Healthcare Landscape

[2:55] Thomas Goetz: You are a kind of prolific investor, which is not a way you like to be described I’m sure, because when we first met five years ago, you kept your powder dry for a long time and you were just saying it was eighteen months before you first made an investment.
[3:15] Thomas: So, I want to start there. What changed between that time, when you were just kind of getting a survey of the landscape and not doing anything, to now when you guys have made quite a few adroit investments of late
[3:43] Bob Kocher, MD: You actually want to make healthcare work better. By changing how we do it. And that’s what’s changed, is that the market has changed. I mean, we now have the imagination to bring really great healthcare to like 99% of people who get health care.
[3:59] Bob: And, we’ve changed incentives. And, we now all have phones that work. And so we’re at a time where there is product market fit for a bunch of things that there might not have been I don’t think, earlier. That’s the first answer to that question.
[4:10] Bob: The second thing is I think we’re beginning to see receptivity on the part of everybody who needs to have it to adopt. So, there’s no health insurance company in America today that says “Yeah, we’ve nailed the customer experience and member journey.
[4:26] Bob: There is no provider that could possibly say that they have reliable execution faithfully of high quality healthcare all the time. There’s no doctor who happily is saying, “Well fee for service, that’s gonna be great for the next decad
[4:41] Bob: Employers are realizing that they’re getting screwed the most because they pay the highest prices and their workers get the same uneven healthcare that we all get. And so, they’re getting nothing. And then, there’s a whole bunch of engaged consumers who actually are scared enough that they want to get engaged in their healthcare.
[4:57] Bob: And so, it’s a good time to do it. And that time’s getting better. In the last five years there’s been 500 new startups by our count of Series A companies. And 10 billion dollars of new money that’s flown in. And I can’t imagine that in the next five years there’s not 2,000 new companies and 20 billion. I mean it’s too big a sector to let it not change faster. So, that’s sort of why.

Bob’s Investment Strategy

[5:21] Thomas: How would you describe your investment strategy?
[5:24] Bob: By not having one, would be the answer to the question. People ask me all the time, what themes are you interested in, what’s your thesis? I don’t have one; making healthcare suck less is like my thesis. And that’s actually it. It’s like I’m looking for people that are like mutated in ways to make them externally awesome at doing something, who want to apply that awesomeness to health care in an area that we mutually could be interested.
[5:47] Thomas: So your investments are kind of all over the place? But they all have like a CEO that’s crazy in some hopeful delightful way.
[5:53] Bob: Well I also think it’s deeply pragmatic though. I mean it seems always like really, very thoroughly thought out. And somebody better have done their math before they go in and meet with Venrock. First do your math.

Balancing the Realities of the Healthcare System With the Demands of 10X Returns on Investment

[6:19] Thomas: My question then is, so how do you balance that kind of pragmatic, quantitative approach that’s deeply rooted in the realities of the healthcare system that doesn’t assume there’s going to be a better version of healthcare to come along. That the status quo will remain in many ways the status quo. How do you balance that with the demands of 10X returns on investment?
[6:38] Bob: Moonshots, if you will. So, before I took my job at Venrock I was having lunch with Todd Park at the American Indian Museum trying to figure out what I should do next when I was leaving government. And among the things he said was go do venture capital, which seemed as possible as being an astronaut. I literally said back to Todd, “I want to be an astronaut, think I could go to NASA?”
[7:03] Bob: And he said, “No, go do venture capital.” And I’m like, “Well, I don’t know what that is. I’ve never started a company, been an entrepreneur; I’m from government and McKinsey, like that’s kind of the opposite of creative destruction.
[7:15] Bob: He said, “Well, basically, you just need smarter people to think about a problem, because, in a company there’s like ten thousand decisions made a year. And maybe a hundred of them matter. You just have to pray to God that those people make those hundred decisions better than the other people competing against them. And if you just do that, it’s all going to be fine.”
[7:36] Bob: And like everything Todd says it appears to be righter than you think. And so, I spend most my time trying to figure out is that team. Because, as the investor and board member, and as super engaged as I am, I’m probably in there for like five of the hundred decisions, I mean just, they happen without.
[7:51] Bob: And so, you want to make sure the people that are going to iterate faster and make those decisions just a little bit better. This is the main thing that I worry about. But there’s no where in healthcare where I wouldn’t make an investment that it’s all about the people doing the thinking, that makes you want to do it. Because, there’s nothing that works well, is my ingoing premise.

Thomas Goetz … From Science Journalist to Entrepreneur

[8:41] Bob: I was told that I get to interview you too. So, I’m going to now flip it. Flip the tables for a second. Thomas Goetz is a bad ass. I met him eight or nine years ago where he was the world’s expert on personalized medicine, genomic things. And he’d written ‘The Decision Tree’ which is awesome. But then he wrote another book called ‘The Remedy’ which is better. You should read that one.
[9:07] Bob: And he was editor at “Wired,” writing really good stuff. And smart. And doing really well; he’s successful. And he quit his really respectable day job, that my parents wish I had, to go start a company. Why did you do that?
[9:21] Thomas: Because I saw the same opportunity you did. But I particularly saw it from the consumer point of view.
[9:37] Thomas: So I saw a profound absence of all these, all this change that was happening that we were, that we were seeing, and that has really become quite powerful.
[9:48] Thomas: Very little of it has been focused on the consumer experience. Sometimes it’s focused on the patient experience which is a different thing. But like people who experienced healthcare in the real lives. I think I read some place it’s 99% of people’s decisions are made in the absence of healthcare infrastructure.
[10:06] Thomas: Thinking about those decisions and building the tools and resources that help optimize them was what to me was a huge opportunity in something that wasn’t happening fast enough.

Commandment Two: “Sickness Does Not Equal Engagement”

[10:32] Thomas: But, that is very much of consumer forced orientation. And the idea then is to monetize it with people who recognize what we’ve built. Now, this violates one of your commandments. One of your commandments for the realities of healthcare. So, our whole approach, the whole catalyst for me to forsake that wonderful, glorious career according to you is willfully misguided.
[10:58] Thomas: What am I violating? I’m violating commandment two.
[11:00] Bob: Yeah, that’s a big commandment.
[11:02] Thomas: Yeah. Sickness does not equal engagement.
[11:48] Bob: First, I’m glad that you read the commandments. If you understand them you can live better. At the end of the day, if you’re going to make healthcare better there’s somebody who has a healthcare need who will have to do something different than they would have been without you. I mean it’s not that complicated. Like, if you smoke you should stop. How do I motivate you to do that? If you have cancer you could do the right treatment plan with the right provider in a system that’s not going to suck.
[12:09] Bob: But it’s fundamentally changing some action or behavior choice that was made to make value. And everything else is kind of around the edges. But it’s like each of you need to do something different if you’re going to change your healthcare outcome. And most people attacking it are doing it either in a way that’s too narrow or not useful enough to get you to get over the inertia of doing Words With Friends and Candy Crush and watching Netflix and using the Starbucks app to buy more lattes. Healthcare competes for your mindshare with everything else. And the rest of the world has done a great job at engaging you.
[12:40] Bob: And so, if you’re a healthcare company you’re competing at that. And so you have to be just as good. And just as useful. And I feel like most of the healthcare things I see, I need, are too episodic so you’ll never remember to use it even if they’re awesome. Or they’re not useful enough. It’s not a problem that’s the most important, like above number 22 on your list. And so, that’s the hard part, is how do you create something useful enough? Better than Netflix, so that you’ll want to spend time with it.
[13:08] Bob: And, that’s sort of been the challenge: engagement for all healthcare companies that I’ve ever seen, including the ones I invest in, is a never-ending problem of how do you get people to remember, like you can have a great application but if you’re not sick you don’t use it very much.

Bob on Investment Opportunities: Telehealth and Telemedicine

[13:40] Thomas: So, you’re very big on telehealth and telemedicine. So, explain that proposition.
[13:45] Bob: It sucks to go to the doctor. I’m a doctor. Shoot, I don’t wait as long as you do.
[13:55] Bob: You go, and it takes you half a day. You park; there’s no good place to get a latte. They are always late; they know they’re late but they don’t tell you before you show up. And then you get there, and the nurse asks you, and they ask you all the same questions again. Then they type the whole time with their back to you. And then you have to go wait in line at CVS, it’s horrible. It’s horrible.
[14:12] Bob: And then they charge you $185.00 for that. Which is more than I will pay for dinner this month for sure, anywhere with my family.
[14:33] Bob: With a phone and a camera, you can actually do a doctor visit for one-third of the doctor visit you can do that way. And I as a doctor, can look at your eyes, and your rashes, and I can see your throat, and I can have you push on your knee. You can do most everything by phone and even more if we connected the devices and all that stuff.
[14:49] Bob: And it’s 40 bucks. So, 40, this is math that you all can do. $185.00, 40 bucks. 30 minute waiting time, three hours of your day, plus $2.00 parking; it’s easy, of course you’re going to do it that way.

Surprises for Bob Along the Way

[21:48] Bob: I’ve been surprised at how accepting everybody is of health systems, hospitals in particular, that don’t adopt modern approaches. And how accepting employers have been to let their employees keep going to places that continue to harm patients without plans to solve that.
[22:08] Bob: I’ve been surprised at how capable payors have been at continuing to not fix the member experience. I mean they’ve consolidated instead of fixing themselves which is sort of confusing to me.
[22:21] Bob: I’ve been surprised that every doctor is not sort of in risk, because they can do so much better in risk. There’s still a fair amount of testing the water; I think that the water’s sort of clear, you can do better in that.
[22:32] Bob: I’ve been surprised that consumer engagement has been slower, back to my commandment than I would have predicted five years ago, maybe. I don’t know, everything surprises me.

Resources, Websites and Tools Mentioned:

[0:43] StartUp Health
[0:43] Venrock
[1:03] Iodine
[1:03] ‘Wired’ Magazine
[1:03] “The Decision Tree: How to Make Better Choices and Take Control of Your Health” by Thomas Goetz
[1:45] Datapalooza
[1:58] ACA (The Affordable Care Act)
[3:27] J.P. Morgan
[6:38] Todd Park
[6:38] American Indian Museum
[6:38] NASA (National Aeronautics and Space Administration)
[7:03] McKinsey & Company
[8:41] “The Remedy: Robert Koch, Arthur Conan Doyle, and the Quest to Cure Tuberculosis” by Thomas Goetz
[10:15] Matt Mohebbi
[10:15] Google
[12:09] Candy Crush
[12:09] Netflix
[12:09] Starbucks App
[13:55] CVS
[17:32] Walmart
[17:32] 5 or 6 Sigma system
[17:57] Amazon

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