In this episode, Aaron Martin discusses his role and responsibilities as the Chief Digital Officer of Providence St. Joseph Health, and covers a wide range of topics including patient engagement, the innovation model they follow, and the portfolio of digital health startups that he manages as the head of Providence Ventures.
For Providence St. Joseph Health, digital is all about moving consumers from an offline to an online relationship. The focus of digital health innovation is about prioritizing problems and identifying “needle-moving” solutions that can have a big impact. He believes that entities that deliver convenience, access, and personalization will win and keep patients in future.
He advises startups to have a “small story” which addresses the here and now of delivering returns to investors, as well as a “big story” which addresses the larger impact of the solution over time. More in the podcast.
Welcome to the big unlock podcast where we discuss digital transformation and emerging technologies in healthcare. Here are some of the most innovative thinkers and leaders in healthcare and technology talk about how they are driving change in their organizations.
Paddy: Hello everyone and welcome back to my podcast. This is Paddy and it is my great privilege and honor to have as my special guest today Aaron Martin, Executive Vice President and Chief Digital Officer of Providence Health. Aaron welcome to the show.
Aaron: Thank you so much Paddy. It’s great to be here.
Paddy: You’re welcome. So, let’s start with this. You have a fairly unique position within Providence Health and actually indeed within the healthcare sector. So maybe you want to tell us a little bit about the scope of your responsibilities as Chief Digital Officer and how that’s different from the current industry organization models.
Aaron: Sure. It’s fairly standard outside of healthcare. How I know that I’m a member of an organization that convenes 50 Chief Digital Officers from across different industries twice a year and it’s fairly standardized. And industries like retail banking, financial services, hospitality, places like that. Healthcare is of course a little bit behind. In my role again is pretty typical outside of health care but not too much inside of health care although that is changing. What rolls up to me is any consumer patient facing digital stack our digital interfaces reported to me. So that’s the digital part of what I do. We also have an incubator that creates new businesses and I’ll talk about that later in our discussion, as part of the digital part of what I do. So, I have responsibility over marketing. So that includes Brand, CRM, and the web sites or apps et cetera. And then the third part of what I do is I oversee Providence Ventures which has a $300 million venture fund basically that has 16 portfolio companies in it and is cooking on gas right now. So that’s kind of the scope of my responsibilities and I am happy to kind of talk more about that.
Paddy: Absolutely. And we will talk about all of those aspects. So, let’s start with digital and the definition of digital. In our work with all the health systems that I talk to the definition of digital varies from health system to health system. How do you define digital and how is digital let’s say different from traditional IT?
Aaron: Yeah well, I mean one way to think about is how we’re organized so. So again, my responsibility as anything is consumer facing digital tech stack, so you know again our web sites or apps anything the consumer sees, the patient sees. And then my counterpart B.J. Moore who comes from Microsoft. He’s the CIO, and he owns anything that’s caregiver facing so we call our employees caregivers anything that he owns basically our data lake and he also owns our enterprise systems relationships. So, you know Epic and Microsoft and those types of things. And so, if you think about it also kind of goes to what the mission of each part of those two different organizations are. Our mission is to move our relationships with consumers from an offline relationship to an online relationship. So, and that’s incredibly important to us in particular in health care because health care is a cross subsidized business on the provider side and so we make all of our money on the commercial side of the business. On a great day we kind of break even on Medicare and we lose money on Medicaid. And so, to sustain our mission into supporting the poor and vulnerable we have to do an exceptionally good job in digital engaging with the commercial population who is highly digitally engaged. And then also that part of our business is also at risk of being disrupted because if you look at all the disruptors in the marketplace whether it be startups, tech companies, or existing health care companies that are changing their models. They’re not going after the Medicaid population generally they’re going after the commercial population which is the high margin portion of our business and they’re going after it with better you know convenience and tools on BJ’s side of the net. He is really focusing on the caregiver productivity what is the experience like working for Providence St. Joseph. How do we leverage our data in new and interesting ways to improve the way that we deliver care? And then also our relationships with some of these big tech vendors in terms of how they’re going to support us.
Paddy: You know my firm did some research recently on the different organization models in the current state of digital transformation. More often than not the model we see is that the Chief Digital Officer role kind of folds into the CIO role. And it seems like at Providence Health these are two distinct roles and as you describe your role focuses more on the patient acquisition, patient engagement side of things. But the CIO is focused more on the enterprise side of things including caregiver enablement, caregiver productivity and so on. And of course, the innovation piece which in most organizations is actually a standalone unit as we see it through our research. It’s an interesting model and as you pointed out different other sectors of banking, retailing, and so on they have more of the kind of model that you just described.
Aaron: Yeah, I think it I think it has to do with the skill sets involved so. So, if you look at my background it’s e-commerce. So, working with Amazon for nine years you know how you engage with consumers online using digital tools. How do you enable transactions? How do you keep engagement etc? If you look outside of health care usually there is an individual who has that kind of background paired either with somebody who has a deep marketing background and brand background or vice versa. So, it’s either the Chief Marketing Officer has the Chief Digital Officer reporting to him or her or vice versa outside of health care. Inside of health care you’re right I think you see that much more you know the CDO and CIO kind of combined. But I think as health systems and insurers start to understand that these are very different problems to solve. You’ll start to see the Chief Digital Officer and Chief Marketing Officers you know those reporting relationships start to protocolize and get separated from the CIO which is a very different set of skills around you know how do you deliver a technology at massive scale. You know serving your employees, how do you deal with massive amounts of enterprise data and then how do you manage very complex relationships with technology partners, vendor partners who are helping with those two other issues. So that’s kind of how it nets out outside of health care we’ll see what healthcare does with it.
Paddy: Right. So actually, that’s a good segway to what I was going to ask you about next. You mentioned you came from outside the industry. What do you see as an outsider looking in as the biggest opportunities and the biggest barriers to technology-led innovation and maybe you can talk a little bit about your innovation model as well?
Aaron: Yeah I mean I think there’s many opportunities and the problem is been prioritization and so one of the first problems that we’ve fixed within our organization and fixed is a stretch. I mean I think we’re on a journey around this is how do you prioritize the problems into what we call needle movers and how we’ve done that is I work with our head of our digital strategy Sara Vaezy who leads a team that, think of it as an internal consulting team, what they do is they work with our clinical and operations leaders from across our hundred sixteen thousand person organization to identify and then scope, and size, and prioritize these needle movers. And so, we do that in a big way every three years and so we’re going through a refresh of that now and then we do it incrementally every single year obviously. And to give you an idea we’ve identified literally a hundred problems that hit our radar from these discussions and we’re boiling it down to kind of the top thirty-five and we’re actually putting a value against them. So, you know if we solve this problem what is it worth to us. That could be in terms of economic value, it could be in terms of clinical value, in terms of mission. But you know we’re putting some sort of value metric on it. And then what we do is we start to engage the organization around how are we gonna solve that problem. Does it have a digital, if not solution a digital, approach to it that might be helpful and then we go through our innovation models kind of starting from there and I’m happy to kind of walk you through that if that would be helpful.
Paddy: Oh, absolutely I think for the benefit of our listeners we would definitely love to hear about your innovation model. You used an interesting term needle mover. Maybe you can talk about a couple of the big needle moving problems that you try to address and maybe talk to us in terms of how you apply your innovation model to those topics.
Aaron: So, a good example of one that we’re furthest along with is we call it convenience access and personalization. So, the problem we’re trying to solve is healthcare is generally none of those things so it’s not being yet there’s low levels of access and it’s definitely not personalized. And so, what we’re trying to do is change those to you know from kind of bugs until to features. This the kind of way that we kind of went through that and the economic value around that is again you know especially in the commercial market the thesis is that the entity that gets there first and kind of delivering that on those three areas will win and engage not only win the most new customers especially in the commercial market that will win the most new patients and turn and keep them because of this engagement model. And so, what we did again to kind of we took the 100 problems or so narrowed them down you know _____ [unclear] and personalization was a big part of the problem. We then further broke that down and obviously went through a sizing and prioritization of what is this worth to us. And then we went through a very kind of deliberate set of steps. And so, step one is we call it the tech cascade and it involves kind of three steps. The first one is do we already own a solution to that problem. So, if Epic or Microsoft or one of our enterprise solutions that BJ oversees our CIO can solve the problem great let’s use that. Because we’re already paying for the technology why you know go and get something different just for the sake of difference. And so that’s step one. If not, then we go to step two. And then that’s where Providence Venture Fund comes from and what they do is they go out and they scan the market for what we call best of breed solutions and so they’ll go out and look for just incredible companies that just really solve that problem. So the example I always like to use because we’re investors and I’m on their board is coming called Kyruus what they do is they have really solve the problem of physician search match and book where they’ve created a platform that maintains and integrates at source of truth down to the credentialing levels and the source systems all the way up to call centers and on the web site. So that you have an accurate provider directory and you can book with those providers online and to really solve that problem. That’s an example of a company that we went out there and found and we actually worked with them for 18 months before and then we decide to invest after that right. So again, so going back to the tech cascade do you have it already, can you find it. So, in the case of finding it we found Kyruus for the physician’s search, match, and book part of the convenience personalization and access problem. And then what we did is as we know if we don’t have, can’t find it, then we will actually build it. And so, what’s unique about our health system as I mentioned is, we’ve got about 85 software engineers and product folks from places like Amazon and Microsoft based here in Seattle. I’m sitting on the same floor as my team here in Seattle. And what they do is they create new companies where we find white space or existing solutions, we believe aren’t going to solve the problem. And so, they basically go through that very deliberate process. There where they’ll first setup and create the technology determine if it works or not. And then the second thing we’ll do is once we run it for a while and determined it works, we can scale it then we’ll actually sell that technology to another health system. And then once we saw that ____ [unclear] another health system we will recruit a management team. Even though Providence Ventures will lead deals outside of companies that we incubate, we typically try to avoid leading deals with companies that we do incubate. So, what happens is you know these incubated companies are going through a series of very you know arm’s length in a validation. The first one is does it work. The second is you know is it valuable enough for not only us to use it but for another health system actually write a check for it. This is a huge validation step. Third validation step is it valuable enough as a business so that a very experienced senior management team will come in and run it as a business. We’ll be excited about running it as a business. And then if it’s kind of beyond that if it’s those two hurdles are cleared will an uninterested or a third-party venture firm come in and actually revalidate as a potential business and tell us what the equity of this company is worth. So that again got an unbiased third-party kind of weighing in on it. And so, the example I know you spoke to the CEO of Xealth, Mike McSherry built a technology, hired them as a senior management team. UPMC was the second customer and then DFJ came in and financed it. So that’s the kind of model we’ve got there. So just to kind of summarize like if we had it great, we’ll start stop there and we’ll let Epic solve the problem or Microsoft or whoever. If not, then we’ll get Province Ventures go out and look for a solution. If they can’t find a best of breed solution then as a last resort, we’ll build it, but we’ll build it with the idea that we’re going to spin it out. And the reason is because we’re not Microsoft, or not Amazon, we’re not Google. We don’t have unlimited development resources and we can’t prosecute a roadmap indefinitely. And so, what we have to do is leverage the venture community and other customers of this technology to extend that roadmap and get more people working on it. So, as a data point when Mike and team first start off with Xealth, I think that four or five people working on the team now they’ve got over 40.
Paddy: Right. You know Xealth is a fascinating story. And Mike was on my podcast episodes ago and one of the things he said which stuck with me was that. For digital health solutions to be successful he said they have to be “doctor prescribed”. What he was trying to say is that unless you have the clinician on board, you’re going to struggle to gain an option. So, can you talk a little bit about your own views on what drives digital health adoption and what kind of structural issues do you see impacting the success of companies like Kyruus and Xealth.
Aaron: So yeah, I think Kyruus and Xealth are really good examples of two different ways that digital adoption occurs. I totally agree with Mike around his comment and that’s the reason why we built and partnered with Mike and team to build what Xealth is. We were looking as a health system the adoption of some of the technologies we’re putting out there by patients. And it was reasonable but still kind of a bit low. And then we looked at we have our own health plan and was far far worse. And so, with health plans you know if you look at how they kind of work with their members, the members aren’t really that well engaged. You know they kind of not see them if they’re healthy you know a few times a year. You know the thing I always tell people is when I was at Amazon, I probably visited our benefits web site once in nine years right. So, I could even for sure unless I pulled my card out tell you who I was covered by and it’s because you know out of sight out of mind. And so, the struggle that health plans have is getting engagement with their members so that you know their members they can improve their members health and then same thing happens with health systems who are also trying to improve the health of their patients. And so the problem what Xealth serves for is you know and Mike and I and the rest of the team were kind of thinking through the problem you know it sounds obvious when you say it out loud but you know it took us a while to get there which is if you abstract everything you know what is the most effective way that technology is adopted in health care and it’s by the physician’s pen. So if you know if you think of biopharmaceutical is nothing more than just technology to help people or medical devices that’s all prescribed and then we thought about it well you know then the problem seems to be that channels is very narrow and very specific to biopharmaceuticals, is why can’t it be expanded to digital therapeutics, apps, content, left right, social determinants and in and anything that can be prescribed through your URL. So that was a huge breakthrough and it’s the reason why we’re so excited about Xealth and the reason why they’re getting so much traction with health systems and then now have a lot of. I was just on a call this morning with a very very large payer who is very familiar with Xealth and they recognized immediately the challenge that they’ve got and how Xealth can be helpful. Right. So, it’s you know its kind of SureScripts for everything else right. Then on the flip side you know Kyruus this is a different situation in that. You know patients are coming to us today trying to book appointments what Kyruus this does not really increase the volume of that adoption. I mean it happens today and you know we have you know millions of patients a year come in to see us. You know it’s really increasing the effectiveness of matching them with the right provider. Right. And so that’s what they’re doing is increasing the efficiency of that because what happens in that space is they drive up what you know Amazon would call it conversion rate which is you know how many people hit the website and actually find what they’re looking for and by. While in our case its patients searching for a physician. And how likely is it for them to get matched with the cardiologists that they want to see. So that’s what Kyruus does. There’re slightly different use cases. In one case Xealth is actually creating a new channel that didn’t exist before and Kyruus is improving on one of the oldest channels there are in terms of getting help and assistance.
Paddy: Right fascinating story is you know I just wanted to make one quick comment. Sometime back one of my guests on this podcast was the Chief Analytics Officer of Premera and Premera of course is the big health plan in your part of the country. They kind of referred to the same issues in terms of the demographic makeup of the Pacific Northwest. You know young invincible they don’t feel the need to go to a doctor. How do you engage with folks who don’t feel the need to engage because they are healthy and active and so on? So, it’s very interesting. You know I heard the flip side of the coin from your comments as well which is very interesting and I imagine that depending on the demographics of the region in which the solutions are being rolled out you would have a different adoption rates. Just because of all the differences in the demographics. Is that a fair statement?
Aaron: Yeah, I think it is. I think you know that said I think the problem is pretty pervasive and then you’re also going to see this happen and Medicare advantage in that as well. So, you know don’t forget the biggest part of the Medicare population is now growing at a ten thousand per person rate. People kind of crossing 65 right now per day. All those folks are highly digitally engaged right like those folks you know my dad’s seventy five and he’s on his phone more than I am and I think what’s different is the popularity of Medicare advantage has really driven the ability for these plans to again provide other helpful services to that population. And the problem is they’re not aware of it and they are not going to go to their plan to go find out they’re going to go visit their physician to go find out what they need to go to use.
Paddy: Right. OK so one of the things that I do on my podcast is something called a lightning round with my guests. In the lightning I ask you for your top of mind thoughts on a handful of emerging technologies. After all we’re talking about technology led digital health innovations. So just a few here. So, the first one on my list is artificial intelligence and machine learning.
Aaron: Yeah, I think the two areas my team is very focused on are actually three is basically digital bots on the front end to help with navigation, disease prediction, and to a lesser extent kind of helping the patient be treated more efficiently. So, we’re definitely looking at that space and we’ve experimented with our own bot we call it Grace and it’s a bot that helps with navigation on our website. My thinking about that is you’re going to see that technology become pervasive and it’s also going to be contextually aware over time which will be awesome. And it will have the same it’ll have a personalized personality for you over time. And so you know our hope is Grace is present when we first kind of make contact with you when you’re trying to figure out where to go within our health system all the way through treatment, through kind of follow up, and that kind of thing and you get to work with Grace and it is helpful to kind of help navigate through all day. As we simplify the health system that will navigate you through that complexity all along the way. An extension of those types of technologies, technologies that are already in the home, so we were one of the first health care organizations to work with Amazon on their HIPAA enabled Alexa. And that was super fun and the reason why we were able to do it so fast is because of all the infrastructure and technology we put in place prior that made it easier to develop for that technology and so you can see a lot more of those types of things happen. And then the third area that we’re doing a lot of investigation around is in clinic AI in which you know the physician is able to you know passively talk without having to invoke a bot and then that bot basically effectively acts as a virtual scribe or a digital scribe and takes that note. Eventually it will take the order and then the physician kind of goes through it and checks that everything’s appropriate and push on so that they’re having to deal with the EMR ______ [unclear].
Paddy: It’s a fascinating news because I actually wrote about chatbots in healthcare in one of my recent blogs and I actually called out Grace as a great example. I am happy to share that with you. So, you know symptom triage is one of the most basic things where anyone has an urgent care need. What’s the first thing they do they go on Dr. Google right. Google is not exactly the recommended standard of care but like it or not that’s what people do. And so yes, it’s a great opportunity for health systems and clinicians to really make these tools available to people at the time of need. And at least you know even if you can’t go too deep into the triage especially with a complex case and so on. But at least for the vast majority of routine care need you can at least guide your patients or your consumer. So, I thought this a fascinating use and the possibilities for machine learning to really make the engine smarter and smarter over time. It opens up endless possibilities and of course let’s not forget that there is an acute crisis in terms of shortage of skilled clinical staff. The chatbots solves for that problem as well.
Aaron: You know on that last piece I’ll just kind of amplify what you just said. I was on a panel and the audience was full of physicians and so I think one of the questions that I was asked was you know do you think that AI would be involved in not only triage and disease prediction but also in diagnosis and treatments. While other fellow panelists were being a little bit more deferential than I was and they were kind of saying well not sure if that’s going to go all the way and whatever and my response was God I hope so. And people were kind of shocked to that statement. I said look if you just do the math on the number of patients that are going to need care and number of physicians, nurses, MAs etc. that we’ll be able to provide care. It doesn’t pencil out so you’re going to have to figure out a way of you know kind of with these kind of low risk, low acuity, urgent care types of scenarios where a bot can do those types of very basic things. If we don’t figure that out, we’ve got a huge supply demand mismatch and they’ll be rationing of healthcare which I’m super not in favor of.
Paddy: Right. You know we’ve covered two of the items on my list of the lightning round. I have one more which is also related to this topic that I wanted to get your thoughts on – voice recognition.
Aaron: Yeah, I think that’s kind of related to kind of in our world it’s going to be related to digital scribing. So, in our world that is going to be a big part of it as well as you know kind of the bots at home. So again, you know we’re kind of as in the Amazon. Amazon would say we’re kind of at day one and all this technology is super early. So like right now we’ve trained Alexa in a HIPAA compliant way to find the nearest retail healthcare location to the individual and book an appointment right like the super basic. But you kind of see where that could go in the future and you can also see how the Alexa team has done some pretty amazing things with other partners around delivering content in specific ways and et cetera, et cetera. So, I think what you want to have is more access, that’s more convenient, and then it’s pervasive and engaging. You know I think the biggest part of the problem with healthcare right now at least from taking it from a tech angle is you know people especially the poor and vulnerable and the Medicaid population these kinds of vulnerable populations have limited access. It’s super inconvenient and one of things I always talk about in a big part of my passion is I always talk about how inconvenience hurts the vulnerable populations way more than it does middle and upper income. And the reason is you just kind of sit down and think about it. If you’re a working mother with one possibly even two jobs and one of your kids get sick, it’s a huge economic problem for you because you’re taking off. Best case scenario half a day’s work you have to travel to and fro a clinic which is probably not conveniently located, get seen by the physician and so on. So, you’re out whatever your co-pay is you’re out. The time you know that it took, and you know in terms of wages you could’ve earned it’s massively bad. So, it’s not surprising that people pick the most rational choice which is to go and go to the ED after hours. Which is the most expensive care venue. And so, you know a good example of what we’re doing around low acuity is trying to make it so convenient that you know why I would ever go to the ED for something minor right. Even if I have that situation right.
Paddy: Yeah. You know you alluded to this earlier access and convenience these are possibly among the top two challenges for health systems today. You look at it both from the clinician standpoint as well as from the healthcare consumer standpoint. These emerging technologies can only alleviate the situation and improve the situation. But I hope that man and machine together can actually address this massive problem that we have when it comes to access. So let’s switch topics we’re coming up to the end here. But I do want to touch on a couple of things. You mentioned big tech in healthcare, and I know that Providence Health just announced a big contract with Microsoft around digital transformation. All the big names like Apple, Google, Microsoft, Amazon they all have big ambitions for healthcare, but they all have slightly different approaches to the market. Of course, none of them is building the last mile solution. The innovative solutions that your portfolio companies are investing and building like Xealth and Kyruus. And we need dozens of dozens of those. That’s a whole separate issue in terms of mortality rates or whatever and we’ll talk about that separately. But what is your general sense of how big tech is coming along in healthcare and where do you see them in the sort of a steady state scenario of digital transformation in healthcare.
Aaron: Yeah, I mean if you not talking about any of them in particular but just kind of lumping them all together. You know what I’ll say is you know the fundamental they will all to a greater or lesser extent dabble in care provision would be my guess. Just basically for the purposes I think of learning healthcare and not necessarily being in the business of healthcare delivery. And the reason is this I just always I jokingly tell people I don’t know how that meeting with Jeff Bezos would go where you’re like OK I got this great idea. Why don’t we go into a kind of a 1 percent NOI business that has all these kind of legal and regulatory issues, huge amount of risk, it is hard to scale. You know I just can’t imagine what that conversation would be, or you know Tim Cook or whoever. I think rather they’re going to continue to do the things they already do which is at a high level bring more information to the party, make it more scalable to deliver care and then also shift demand around and get paid for it. Which is basically what all of them kind of do right and help consumers make better choices. And that’s the reason why a consumer would want to pay them to do that right effectively. So, I think you know if you look at all their different business models that’s what they do. And I think they will be partners. Every single one of them in various different ways with health systems and less competitors over time on a steady state basis. So, I had an interesting conversation with the leader of one of those organizations and they laid out a really great vision of how they would go after say chronic disease management or something like that. And I said that’s great. It sounds like though what we’ve got to be ready as an industry is, we need to be transaction ready and this person was like what do you mean by that and I said well. We have to collectively as a health system build infrastructure by which we can send receive and book any resource that we have. And then also be able to provide information around. The quality and the pricing of that transaction. And this person said yeah, you’re exactly right. And so, I can’t imagine them. And so I think one of the discussions we’ve been having as it is as an organization with other health systems is let’s get that part ready because even if you know that future is not true where Google with its very high browser market share and it’s you know it’s very high share of the search business or Amazon of its very high search sheriff ecommerce, or Apple of phones, or Microsoft enterprise software. Even if none of that comes _____ [unclear] which I can’t imagine it wouldn’t but let’s say it doesn’t. At least you’ve got a better experience for your consumer right. But then what will happen is there will be these different new models that they’ll need to collaborate with existing health systems in various different ways. And they will you know one of the important variables that they will pick is who’s ready. And the reason why I know that is you know back when I was at Amazon and we were my team was responsible for getting selection onto the Kindle in North America. You know a big variable was which publisher had their books ready to be put on Kindle. So, we’ve been really kind of because we’re not competitive with most of our counterparts across the health system. You know in other regions just give you a statistic. We’ve met with you know now over 100 health systems in the past 24 months have come to Seattle on that with us. And it’s an interesting discussion about how to get ready as an industry. For these changes that are coming. It boils down to at least on the front end side of things you’ve got to get really good at I mean one of the key things that are emerging at least for me have been you know you have to do an exceptional job at your core business which is you know delivering high quality care at a reasonable cost i.e. value. You have to learn to manage risk like population health/ insurance risk. That’s the second thing you have to do. The third thing you have to do is you have to have an awesome brand. And then the fourth thing you have to do is you have to be digitally ready to partner because there’s gonna be a whole bunch of different partnership opportunities. And what I don’t want to have happen is have four or five six seven different platforms that we have to integrate to. I would much prefer health systems to create a set of standards by which these different partners in the future can kind of integrate. So that the complexity on our side doesn’t grow.
Paddy: Right. In many ways it seems to me Aaron that this is we are right now at a stage where the battle is for the attention of the consumer in a primary care setting. Where does the consumer go first when there is ______[unclear]. And so, I feel like there’s a lot of activity around trying to gain control over that primary care experience. So, it’s not just the big tech firms and you look at all the non-traditional players CVS, Walgreens. They are also getting into this space. You know Walmart potentially.
Aaron: So yeah, I am more concerned about CVS/Aetna than I am about an Amazon. And the reason is because they’re actually in the business of providing care. Amazon is not. And so, it would be much more plausible for them to do a great job of competing with us on the full spectrum to your point.
Paddy: Right. Well the flip side to the big tech question is obviously digital health startups and that’s the world you live in at least the part of your daily life going up and working with them. So, you know 10 billion in VC money every year give or take literally hundreds of digital health startups. Many of the you know don’t make it. So, what’s your state of the union comment on the whole digital health startup environment?
Aaron: I think it’s very healthy assuming you know I mean I’ll give you kind of like the things I tell health tech CEOs based on my experience so far in health tech which is you know if you kind of follow these rules and this mainly has to do with the health techs solutions that are selling on the provider side. That’s the context for these comments. Well first thing I say is you’ve got to have a what I call a small story and a big story. So, this small story is how are you going to deliver value in the next 6-18 months to whoever you’re selling to. If you don’t have that nailed down to where there’s actually like a financial payback then matter. I mean you’re not going to get anywhere at scale. That’s one comment. The second comment is then the big story is got to be like all right this is much more for the VCs and you know the Chief Digital Officers of where this is going. If you saw that first problem that small story whereas the big story you know convinced me that this doesn’t just become an interesting kind of point solution that becomes a bigger solution over time that you’ve earned the right to kind of you know build based on your success with the small story. So that’s the first thing you know I would say to exact. And then the second thing is making sure the problem you’re working on is like on the top 10 or 15 agenda of a health system. That’s what we call a needle mover. The problem you can run into in healthcare is it’s the land of opportunity. And you know there is a ton of smaller problems that you know your solution will have an NPV positive effect on, but it won’t get traction within the health system or insurer or whoever because it’s not top of mind at the CEO level. Right. And so, it’s got to be one of these needle movers in my opinion because otherwise you know it’s just not going to get the attention. You know the third area is don’t overbuild your company a lot of these technologies come from outside of health care where they’re super freaked out about. You know because they’ve been trained in this you know outside of healthcare like wow this is a perishable opportunity if we don’t get our share super quick. You know it’s gonna go away et cetera et cetera. And then I see a lot of overbuilding companies from a product standpoint as well as a sales force standpoint. Most health systems will not be able to consume the amount of future development that you’re able to deliver with the product team. And then on the flip side you know the sales cycles are very very long. So, they’re 12 to 18 months. And so, if you don’t need a 50-person sales force to cover the top two hundred sales health systems. You need probably four or five right to do it effectively because there’s not that much activity between calls.
Paddy: Yeah, you know this is fascinating because what you talked back a little bit. You don’t want many of these digital start startups started as B2C business. They wanted bypass the clinician patient relationship. They figured out that’s not going to work. So, they’ve now pivoted to B2B but B2B moves more slowly and helped it is not a winner take all market, this is what John Sculley the former CEO of Apple said, he was on my podcast recently. This is not the winner-take-all-the-market and most startups think they’re the next Uber or Facebook or whoever they’re used to they are wined of this whole thinking process of hey it’s a winner take all market if you’re not the winner you’re not going to take any part of the market.
Aaron: And I think it is a winner-take-all. So, we have one portfolio coming up we’ll tell you who has one and they’ve said they’re taking all but it’s not because it’s a winner-take-all-market it’s because their competitors just couldn’t survive that chasm. And so, these guys were very very _____[unclear] in terms of you know not overbuilding focusing on you know kind of the areas that we were. We’ve been talking about and just you know just being around when the segment of the software that they’re working on gets defined and you know people say oh this is a thing now I need to buy it. They ended up being a winner take all just because they were around, but you had these other CEOs kind of you know headed down this path of like all right. We are probably be two three major competitors in this market. It’s a big market so.
Paddy: Right. Well Aaron we’ve pretty much come up to the end of our time here. And this has been a truly fascinating conversation and thank you so much for sharing your thoughts, sharing so much information about the work that you’re doing. It seems like really exciting stuff. I wish you and everyone in your team all the very best and I look forward to staying in touch.
Aaron: Thank you so much for the opportunity I really appreciate it.
About our guest
Aaron is Executive Vice President, Chief Digital Officer, Providence St. Joseph Health (PSJH), and Managing General Partner, Providence Ventures (PV). Providence St. Joseph Health is a not-for-profit health system that combines Providence Health & Services and St. Joseph Health. Both organizations have served the Western U.S. for more than a century and together comprise 106,000 caregivers who serve in 50 hospitals, 829 clinics and hundreds of programs and services. Aaron is responsible for digital and marketing for PSJH. His team is also responsible for driving innovative new programs across PSJH that improve convenience, lower cost and improve quality. Aaron is also responsible for Providence Venture’s $150M fund which invests in early to mid-stage health care technology companies. Aaron serves as on the boards of PV portfolio companies AVIA, Kyruus, Wildflower Health and Xealth. Aaron is a current board member of Presbyterian Healthcare Services, an integrated not-for-profit health system based in Albuquerque, NM.
Prior to PHS, Aaron worked for Amazon, McKinsey & Company, and was a founder of two early-stage technology companies funded by New Enterprise Associates and Mayfield. While at Amazon, Aaron was general manager of Amazon’s self-publishing and print on demand business. Aaron went on to lead the Kindle North American Trade publisher business helping major publishing partners like Random House, Simon & Schuster and Harper Collins transition their businesses to ebooks on Kindle.
About the host