Podcast with Drew Schiller, Founder and CEO, Validic
In this episode, Drew Schiller, Founder and CEO of Validic discusses how COVID-19 has impacted and accelerated the demand environment for remote patient monitoring and other virtual care technologies.
Validic is one of the pioneers in the remote patient monitoring space. Drew states that COVID-19 has accelerated the adoption of remote patient monitoring technologies. Due to the pandemic, health systems have realized that virtual care technologies can reduce the cost and burden of care, especially for at-risk populations.
According to Drew, big tech firms entering healthcare is both a challenge and an opportunity from a digital health startup’s perspective. He believes that the VC funding environment is strong but cautions that much of the funding is targeted at late-stage firms that have demonstrated significant traction. He advises the startups to think more creatively and develop unique approaches to the market that focuses on areas not adequately addressed by big tech firms. Take a listen.
PP: Hello again and welcome back to my podcast. This is Paddy and it is my great privilege and honor to introduce my special guest today, Drew Schiller, Founder and CEO of the Validic. Drew; thank you so much for setting aside the time. And welcome to the show.
DS: Absolutely. Thanks for inviting me. Happy to be here.
PP: Awesome. So, Drew for the benefit of our listeners, who may not know Validic, would you like to tell us about the company and the prime needs that your company’s platform addresses?
DS: Absolutely. Thanks. So, Validic is the leader in connecting personal health data from in-home monitoring devices, wearables, health apps on the phone, really anything that you would capture from a device in your daily life. Standardizing and normalizing that information and making it usable for the health care system. Which means we connect with hundreds of disparate sources, everything from blood pressure monitors, glucose weights, continuous glucose, pulse ox, temperature, etc. and all other wearables you’d expect, as well as health apps on the phone. We bring all of those data into a common ontology and we can provide access for that information in a variety of different ways. The two primary use cases we service are health incentives, where we work with a lot of, for example, commercial health plans and organizations that service large, self-insured employers on wellness initiatives and general health initiatives with this type of platform. The other one is disease management. With disease management, we actually power RPM programs for health systems and health plans that are looking to manage patients who are living with chronic disease.
PP: Right. Your company is a pioneer in the remote patient monitoring space, the RPM space that you just referred to. Could you give us a little bit of a breakdown of what the RPM market looks like today? What is the demand? And how has COVID-19 impacted the marketplace in general? Can you give us a high level of an overview of the market?
DS: Absolutely. Before COVID, there was a high degree of interest in remote monitoring. Primarily around health systems and health plans trying to better understand what’s happening in people’s lives and looking to see if there could be new models of care to support things like Medicare Advantage programs as well as other at-risk models of care for folks living with chronic disease. However, this technology is been around for five, ten years, in some instances it is more. There were remote monitoring companies 20 years ago, but it didn’t really reach mass appeal yet, and COVID has changed all of that. So, what happened was when COVID hit and folks who are living with diabetes and hypertension and folks who are being treated for or being discharged of heart failure, things like that. They typically would have followed appointments or regular quarterly appointments to go in and see their cardiologist or endocrinologist etc. But with COVID, those regular checkups actually got pushed, either pushed out or pushed to virtual. And so now you have a whole population of individuals who were under-managed relative to how they had been seen previously. And even when they shifted to video visits, the physicians were actually missing one of the most critical elements to managing these chronic diseases, which is the data and doctors. Doctors need data to practice medicine, especially when they’re managing patients with chronic disease. So, what we’ve seen since COVID, over the last five to six months, the industry has accelerated by probably five to six years. I mean, it’s just a lot of interest in new programs, starting up new clients coming online very rapidly. In fact, to meet the demand, Validic actually launched a new rapid deployment RPM product just last month because we were trying to help our clients and our partners get up to speed and run even faster with these programs, rather than going through a traditional heavy implementation route and trying to fit into IT implementation schedules and things like that. So, it’s really exciting to see where the market is today. And I think it’s really going to be here to stay.
PP: That’s a great break down. I will come back to the demand environment again. But I just want to clarify a couple of things. You mentioned some things accelerated by five years. I hear that a lot about the impact of COVID on digital health programs in general and virtualization of care that you referred to. So, that’s obviously good news for companies like yours. At the same time, what are some of the challenges that now, kind of an acceleration imposes on health systems and folks who are running this digital program? What do they need to do in order to be able to respond to this sudden acceleration in their priorities?
DS: Yeah, absolutely. One of the challenges, I saw before COVID and has continued, is that change management in these organizations is really still a challenge. And while I have seen that RPM in virtual care in general is getting a heavy level of focus and investment, there’s very frequently sort of decision by committee. And that really slows down the selection and innovation process. That’s one of the biggest challenges we still see among health systems, so we can have the business sign off on something, but then there’s a multitude of committees that also need to sign off and getting through that whole process is a pretty hefty list.
The other challenge that we’ve seen is that sometimes these programs are not getting in place fast enough for the individual departments or physician groups. And so, we’re actually seeing pilot programs start in sort of skunkworks situations and it causes vendor conflict and legal conflict internally because there wasn’t a comprehensive strategy for the particular health system. And so, one of the things where we’ve seen a lot of success is when there is a strategy and we are working on a comprehensive enterprise wide solution, we want to definitely solicit everybody’s thoughts as part of this. And we expect that we’ll have something in place that we’ll be able to service everyone’s needs. So, it’s not just endocrinology or cardiology or pulmonology doing this, it’s just that the IT department gets very frustrated because there are too many projects to handle.
PP: And I can tell you from our experience that most health systems are now kind of moving away from this department of siloed, functional decision making and technology decisions. They want these technology decisions to have enterprise level impact. The good news is if you are doing business with a health system, more likely you’ve been considered for an enterprise level program. The bad news, of course, is that it takes longer because enterprise level progress and this is what you refer to. So, my next question for you is, when it comes to these digital programs, which is what I put the RPM solutions in as well. Who is driving these programs today? Is there a specific individual or a function that is driving it or do you see your clients setting up new organizations within their health systems to drive digital? What are you seeing as the org model to accelerate the adoption of these new technologies and accelerate the implementation of these new programs?
DS: Yeah, absolutely. So, we’re seeing a couple of roles emerging that were not around even a few years ago, at least not as much. So, one is a Chief Digital Officer or a Chief Digital Health Officer, something in that vein. And that’s a role that, generally speaking, is somebody who is really dedicated to thinking about digital transformation in the organization, how to bring all of these stakeholders together internally, as well as different vendor solutions together to build a comprehensive digital solution. We’re also seeing the rise of virtual care executives. So, whether this is a VP of virtual care or telehealth. And so, whereas it used to be that this role was, generally speaking, over care management and maybe video visits. That role is actually expanding quite a lot now to encompass a lot of other digital capabilities.
I’ll just say that one of the things we are really excited because of this shift toward a more enterprise focus is that the way the Validic came to market was a little different than how traditional RPM vendor does. So, traditionally with RPM vendors, they want to do remote monitoring for a disease state or maybe a set of disease states, and then they build a solution around that. And so, that solution has patient education around this type of thing. It has maybe some sort of patient engagement app around this very specific solution, it has a subset of devices that are very specific to those disease states that can deploy.
And that solution typically lives outside of the clinical workflow. And so, it’s something separate for folks in the enterprise to log into. And it may or may not support the needs in the workflows of folks across the enterprise. And Validic actually came to RPM almost in a reverse engineered way. When we launched Validic, it was primarily the personal health data platform. And so, what we did first was integrate with hundreds of disparate sources and in-home modern devices, etc. And then once we had that platform, we began to see use cases developing. One of the primary use cases was RPM in health systems and health plans. And so, what we’ve done is we went to them and said, hey, what are the things that you need for RPM? What we frequently heard was, we need it in the clinical workflow. We don’t need patient education because we already have patient education. We don’t need care plan design; we already have care plan design. What we need from your system to interface with all the other things that we’ve invested in to make this a seamless interaction. And it doesn’t feel like something separate, it’s like one more thing for our physicians and in other clinical key members. And so, we feel very fortunate that we are now in this position where things are moving to the enterprise. It’s what we were expecting would happen. And now we’re in a place where we actually have a solution that can scale across the enterprise and support any disease state with any type of device, with any type of data from multiple departments.
PP: So you mentioned that there’s the emergence of all these new roles, Chief Digital Officer and VP of Telehealth and so on. So, has your client profile therefore changed significantly? In a broader sense, has the ownership for digital programs in general shifted away from, let’s say, the CIO to an entirely new role? Is that a broad trend you’re seeing or is that still not a big enough percentage of the overall population of health systems out there?
DS: Yeah, I would say it is a broad trend we’re seeing with a little bit of an asterisk. So. the asterisk is that all of these programs ultimately roll up to the CIO, but there’s quite frequently a new executive, whether that’s VP, SVP, C-level, that reports to the CIO, who takes this on. Four or five years ago, if you are talking to the CIO, you are talking to the right person. And now there are so many other things that CIO’s have to manage, that is much more of a data and comprehensive platform strategy management role as opposed to do on digital initiatives. Now for talking to a CIO, the first question I ask is, who should I be talking to on your team? Who’s running this? That’s usually the very first question I ask because their purview has expanded and that’s really been a big evolution. I’m sure you’ve seen it in your work. It’s been a big evolution over the last five years or so.
PP: Yeah, I know, since you mentioned. We pay a lot of attention to this question because it’s important for my own business. We also want to understand how the market is changing, how the roads are changing. We do see the emergence of a Chief Digital Officer that you mention. There’s a lot of variation in the org models. In many cases, the CDO’s are peers to the CIO. Maybe they both report up to the CIO. In other cases, the CDO role is combined with some other role, which could be a clinical role, a patient experience role, could be an innovation role or a marketing role. So, there are different org models, some of which the CDO role is standalone. In others, it is combined with some other operational or clinical role. The most common model that we see is that the digital function sits with the CIO. But of course, that doesn’t mean that the CIO is driving every single program. To your point, there are different individuals that have discrete responsibilities for, let’s say, telehealth, on the one hand, RPM on the other population health management and so on, so forth. So, it is still evolving, but that is a good discussion. I want to switch tracks a little bit. I just came out with my second book, as you know, and you’re the only person who is in both my books. You’re in my first book and you are in this book. And of course, the walls change a little bit in the interim. But I wanted you to bring your attention to a comment that you made to me when I interviewed you for this book, which was just before the pandemic. And one of the things that you told me was very insightful, and it is in the book, too. So, what you said was startups are building the solutions to deliver clinical outcomes. But they’re not necessarily focusing on financial outcomes. So, there’s a lot of subtext to it. One, I believe you would have framed in some way to the reimbursement environment. You’re referring to the need for demonstrating a financial ROI for the ultimate customers of these solutions. So, can you comment on how the pandemic has changed that equation for digital health startups? Has the reimbursement environment become better? Have systems lowered their thresholds or otherwise because they see this as a strategic priority? What do you see?
DS: Yeah, absolutely. First, let me say I am flattered that I’m the only person in both your books. Thank you for that. I’m honored. What I’m seeing when I’m talking with other founders and other companies is a couple of things that have happened since COVID. The first is that if you have a solution that has something to do with virtual care, this could be some broad virtual care, this could be video visits, could be consumer engagement through an AI chat bot, this could be RPM anything like that. What I have personally witnessed, as well as anecdotally heard from my peers in the industry is that things are taking off like wildfire. The big difference is that, nothing has changed except from a reimbursement perspective, health systems realize how far behind they are in implementing these technologies. And they’ve been kicking these ideas around for the last two, three, four and five years. And now they needed to implement them in two, three, four or five months. And so, that really jumpstarted things. The other thing that, had it been shifted, this is more of a theory that I’ve been developing, but it’s not new that many health systems have some small portion, whether it’s 20, 25 percent or 30 percent of their patient population in some sort of at-risk contract. That’s pretty standard. But in order to service those at-risk contracts in a pre-COVID world, there are so many administrative things that you could cut out. And there’s just so much overhead that you can get rid of to make servicing those clients more cost effective. Here we saw a lot of the attention being placed. But once COVID hit, all of the virtual tools that could have been available to them, could have really reduced the cost of care and the burden of care for their team members weren’t in place. And so now those systems are saying we have to get this in place now. At the very minimum for our at-risk population, because if there’s another lockdown, if there’s another pandemic or whatever, virtual tools are the way that we’re going to come ahead on our at-risk population, which is absolutely critical if the fee-for-service goes away. So, it’s being used as more of a catalyst than what I had seen in the past and that’s where a lot of the conversations head on.
PP: Clearly, the lockdown and the inability of patients to come into the clinic and the reduced foot traffic, has certainly accelerated the investments of virtual care platforms. And I do believe that the financial models to look at these investments have therefore necessarily changed. You cannot go through your traditional financial model where you do a pilot and you demonstrate the results on a limited scale and then you scale it up and then you do it in a gradual and incremental way. But COVID-19 is the ultimate black swan, right? That is what made this big shift in thinking around technology implementations, technology strategy, and, of course, the investments and the whole notion of what is overkilling today and what is necessary for survival and relevance in the future. So, we are seeing the same thing that you’re seeing, and this is what our research is telling us as well.
DS: To answer the second part of your question. We’re also seeing is organizations that have an efficiency ROI. Initially prior to COVID, it was really tough sell anything with efficiency ROI. And now, like only in the last maybe couple of months since August. All of a sudden, the efficiency ROI is actually something from what I understand health systems are paying a lot more attention to. And it’s because they’ve had to reduce so many team members, they are facing big furloughs, they’re facing staffing shortages. They were self-imposed because of the fiscal realities of COVID. All of a sudden, whereas before it was like some efficiency would be nice, efficiency ROI is actually really critical. That’s the other big thing that we’re seeing for organizations, that it’s not just the clinical ROI, they have efficiency ROI and that’s really helping them.
PP: [00:21:19] That’s very insightful. Thank you for that. I’m going to shift gears one more time. So, let’s talk about the startup environment. And I want to talk about the broader technology solution provider environment as well. So firstly, we’re in the midst of an IPO boom. It looks like to me every other week there’s some tech IPO and several digital health IPO’s have already occurred. And some big M&A referring to the Livongo-Teladoc one. But I have to believe that it’s more like they are coming down the pie. What do you make of this trend and what do you foresee in the next 12 months or so? As you know, digital platforms start taking advantage of the COVID opportunity and grow to some degree of skill. Do you see more IPOs, more M&A? Do you think there’s some risk that there’ll be a shakeout as well? What are you seeing? What is your assessment?
DS: Yeah, I think that we will definitely see more tech IPO and M&A in healthcare. And the reason is, like I said, the industry accelerated forward so fast and the same realization that we at Validic had when the pandemic hit and lockdown hit and we saw, oh, my gosh, what does this mean? And then we realized, oh, we’re a health care technology company. We can do something to help the markets and realize that.
The public investors have very clearly recognized that digital health is a way forward for healthcare, which is extremely exciting. As well as on the M&A front, what we’re seeing is that, the Teladoc-Livongo merger kind of woke a lot of folks up to this. But we’re seeing that the chips are being laid on the table today in terms of which organizations are going to own and dominate the virtual care space over the next two to three to five years. And so, I think it’s going to take six to 12 months really to kind of fully shake out with all of the IPO’s and the M&A. But I do think that we will see a very different, maybe slightly consolidated landscape of really strong players over the next of the next decade.
PP: So obviously that brings the question of what are the big tech firms going to do about this? The dominant position of the electronic health record vendor is well known. And they’re obviously trying to kind of transform themselves into big players in the emerging digital health landscape. But then the big tech firms like Microsoft, Amazon, Apple, they’re launching new products that are getting deeper and deeper into the health care delivery space. And Microsoft, for instance, their Teams platform is now the new video consult platform. You can launch it through the Epic EHR, its first-of-a-kind deal. Apple is getting into the fitness space and Amazon launched their wearable Halo. And they launched the virtual care service for their employees and so on. Where do you see them headed? Do you see them getting deeper and deeper into healthcare services? And in that context, what happens to the smaller digital health companies that are also playing in this fix?
DS: Yeah, it’s really a great question. I do see the big tech firms getting deeper into the healthcare space and within healthcare services. I think that each one is going to play to their respective strengths. I think, Amazon for example, came out with a consumer wearable device. They are a very, very consumer focused company and they have a lot of unique assets in that area. And I think they’re going to really head into health consumer, which could mean a lot of different things. That could still mean partnerships with healthcare organizations. I think it’ll be very consumer focused, and they take very similar to how Apple has really doubled down on the consumer focus with their solutions. Microsoft, for example, especially Satya Nadella has really invested heavily in enterprise platforms. That’s been the nature of the big acquisitions like LinkedIn and GitHub and what we’re seeing with the announcement of the Azure health cloud is that Microsoft is really going to double down on the enterprise side of health care in some pretty interesting ways.
I definitely think that there will be more. From a startup perspective, I think it’s a challenge and an opportunity. The challenge is that when you have these big players entering the market, and especially when you know the larger market dynamics where a lot of chips are being laid on the table today that are going to kind of lead the market forward over the next several years. That takes a lot of opportunity away from startups in terms of being able to really have a seat at the table. So that’s a big challenge.
However, the opportunity is that, for these big firms when they go to scale something, it takes them a lot of time and a lot of resources because they’re doing it at such scale and volume. And as you know, nothing moves fast in healthcare from a legal and implementation perspective. And so, there is a massive opportunity to look five years out or 10 years out for these startups today to say what is going to be needed that these companies are not going to be thinking about. And clinically we found ourselves in a very fortunate position seven years ago when we did market launch. There wasn’t anything like what we were doing and then all of a sudden there was. But we were able to kind of continue to rise to the top and continue to be the best in class for what we do. And I think there’s still that opportunity today. It’s just, entrepreneurs will have to think a little bit more creatively about where they could uniquely approach the market. And maybe it might be a blind spot for one of these big tech firms.
PP: Right. So obviously, that brings the question of how that last long. We’re talking about five or seven-year opportunity of these cycles. I agree with you. I think that there’s a huge opportunity opening up at very, very early stages. But that is here and now. And that is how you get from here to the next phase that requires scaling and remaining invested in the market, that requires dealing with long sales cycles and ultimately, it all boils down to your financial ability to ride this out and see it through the end so everybody can benefit from it. Which means that the VC environment has to be supportive for this outlook in the market. What are you seeing in the VC funding environment, especially in the post-COVID scenario? I’ve seen startups getting funded more or less, we are seeing funding drying up. What are some of the dynamics that you see?
DS: Yeah. So, there is just as much if not more capital today than it was a couple of years ago and that’s been a continual trend in this space. The challenge is, and unfortunately COVID does not change this, the companies that continued to get funded are the companies that are leaders at more growth stage, venture companies where they already achieved some level of scale. And that the bet is a little bit short. We’ve seen some really, really big funding announcements recently from some of the growth-oriented startups in the space. And it’s exciting and great for the industry. But the challenge is that there’s really a gap for early-stage companies between a pre-seed round and a Series B, because it’s really hard to get enough traction to get a full seed round or let alone get a full series A at a strong valuation. It’s just very difficult, especially if you’re targeting health systems or health plans. And so typically, when I’m talking with entrepreneurs of early stage companies, my counsel to them is to actually see where they can solve the problem they’re trying to solve but for a different stakeholder than a health system or a different stakeholder than a payer. It could mean that they could solve that problem for a health IT vendor to sell that to a health system, solve a problem for a nursing home or for senior living facility or could be for a direct to consumer, But try to find a path to scale that doesn’t initially require you to scale through health systems. It’s so hard to get initial traction there. I mean, our story of Validic was very similar to that. We looked into it as opposed to having a particular strategy. But we actually scaled initially through primarily, through wellness IT, and health IT vendors. They were selling consumer health solutions or sort of fully baked solutions for health systems. But we were an enabling function for them to have more capabilities in the space. And then we were able to leverage their scale to actually grow our business. And so it was a very fortunate circumstance that we found ourselves in. And I don’t think we’d be here today if we if we weren’t able to find that.
PP: Well, final question on that. So, obviously, you talk about the funding environment and it’s unfortunate that the funding is getting concentrated in late-stage companies, that it really creates a drought of the early-stage level, the consequences of which are going to be visible in a few years down the road. But the flip side of that equation is obviously the level of risk that clients so willing to take on unproven early-stage companies, albeit to innovative companies. Health systems has always been risk averse. Have they become more risk averse during COVID 19 and have that therefore complicated the landscape even further for early-stage companies and complicated their chances of securing funding? Is that what is happening?
DS: I don’t think it’s necessarily specifically because of COVID-19, but I, definitely think that over the last 18 to 24 months, they’ve become much less risk averse. And internally, I kind of label this theranos effect, which was like so many people believe in this really innovative technology and it turns out that it just wasn’t possible. So, the level of the burden of proof is so much higher. And it’s not just because of theranos, but that didn’t help. The burden of proof today is so much higher and even if you’re able to show some level of proof and some level of traction and adoption, you still have to convince the health system or the health plan etc. to take a little bit of a flier. That really comes down to personal relationships and the fact of the matter is that the way these organizations are structured now, you can have an innovation officer, a digital officer or something who believes in what you do and wants to shepherd that through. But there’s really huge firewall of procurement now that analyzes things very, very deeply. And they have extremely deep tech and security reviews. And that’s all great.
It’s necessary because we definitely don’t want to have our health records stolen and we don’t have security breaches. But it makes it much more difficult for an early stage company to get through that whole process than a company that’s later stage like ours, where we have dedicated practice and security folks and dedicated legal people. And the one who can actually navigate that whole thing and that’s the real challenge to get a champion. But it’s become harder for that champion to actually bring shepherd the company through.
PP: Well, to be continued, I guess we’re going to have to leave it there. We went way over time, and that is just an indication of how fascinating this conversation has been. I really want to appreciate your insights. Thank you for taking the time to talk to me today and be on the podcast. This is going to be one. I can tell you right now there’s going to be one of the more downloaded podcast just because of the quality of the conversations that we’ve had. And once again, all the very best to you and your dream. Congratulations on your recent successes and everything.
DS: We’ll be in touch. Thanks, Paddy. Really appreciate it.
Disclaimer: This Q&A has been derived from the podcast transcript and has been edited for readability and clarity
About our guest
Drew Schiller co-founded and serves as the Chief Executive Officer and Board Director at Validic, the industry’s leading health data platform and remote patient monitoring technology. A patented technologist, Drew believes that technology will humanize the healthcare experience for patients and care providers. He regularly speaks and writes on a variety of topics, including the future of virtual care and the ROI and personal stories from remote monitoring programs.
Drew’s vision, and the mission of his company Validic, is to improve the quality of human life by building technology that makes personal data actionable. Beyond Validic and in pursuit of that mission, Drew serves on the boards of several advocacy and policy groups, including the Consumer Technology Association, the eHealth Initiative, and the Council for Entrepreneurial Development (CED) in North Carolina.
About the host
Paddy is the co-author of Healthcare Digital Transformation – How Consumerism, Technology and Pandemic are Accelerating the Future (Taylor & Francis, Aug 2020), along with Edward W. Marx. Paddy is also the author of the best-selling book The Big Unlock – Harnessing Data and Growing Digital Health Businesses in a Value-based Care Era (Archway Publishing, 2017). He is the host of the highly subscribed The Big Unlock podcast on digital transformation in healthcare featuring C-level executives from the healthcare and technology sectors. He is widely published and has a by-lined column in CIO Magazine and other respected industry publications.