The Telehealth Explosion – What’s Happening, and What’s Next?

One of the gems from AngelMD’s Alpha Conference in January was the numerous fireside-style discussions that covered a wide range of subjects. Dr. Wendy Whittington, Medical Director for Telehealth at Dell and NTT Data, and Dr. Steven Hochschuler,  Co-Founder of the Texas Back Institute were joined by AngelMD’s Jens Francis for a talk about the present and future of telehealth.

Dr. Whittington opens the floor by arguing that telehealth is not a single technology or a vendor’s solution. On the contrary, she posits that telehealth is really any one of three different areas of clinical operation:

  • ER cost reduction
  • Acute care
  • Chronic disease management

Dr. Hochschuler’s experience with teleleath spans over four decades. He was integral to the initial setup of Harvard’s WorldCare program. His standpoint on the telehealth explosion is that there is an existing potential for huge ROI and to be a global extender of medical care to underserved areas.

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The Business-Building Power of Focus

Sharon Dye uses her nearly three decades of consulting experience to help Insperity’s clients determine the steps to ensure business success. During her talk at AngelMD’s Alpha Conference 2018, Sharon explained the power of focus when it comes to building a business.

Based upon four quadrants of success, Sharon urges companies to appreciate the impact that their culture can have. This understanding changes every step of the business, from the interview process to the exit.

Good Morning. I was not going to use the word culture, but I don’t know where our last speaker went to sit down, but he opened the door, so I’m going to go right on through it, and through this talk, use that word, and I’ll define it in just a second.

But mostly what I want to talk to you about today, I’ve got about 15 minutes, and I want to talk to you about the power of focus and what happens when focus doesn’t exist.

One of the major things that I, 30 years now, have seen be impactful and help organizations, entrepreneurs, and businesses actually accomplish what they want to accomplish is when they give focus the full weight that it deserves.

But, we should start off with a story that will describe everything I’m going to try to describe better than I’ll be able to describe it.

A dear friend of mine was vacationing with her husband in the Midwest, a small little town, and every morning, she … That is not her, by the way. I wouldn’t betray her by using her actual photo, which you’ll understand that a little more as the story goes on. She would wake up every morning and go jogging, and it would always end in this coffee shop/ice cream shop/store because she was going to get an ice cream cone as the reward for jogging in the morning.

So, she gets to the store every morning, and she says hello to the guy that works there, and over the several days, they developed a nice little friendship. She gets her ice cream cone, and she slowly walks home, enjoying her ice cream cone. Great morning. She goes to the ice cream shop one morning, and she walks in, and there’s one customer inside, sitting off the left, and it’s Paul Newman, and everything solid in her goes to liquid. She is … There he is, and she’s trying really hard not to faint dead away, and she’s swooning and doing all of that, and she decides, “I’m going to be a mature adult woman that is not going to bother this man and let him know that I’m swooning. I’m going to pretend that he doesn’t even exist and carry on and get my ice cream cone.”
Sharon Dye: She goes up. She orders her ice cream cone, pays for it. Puts the change in her purse, and goes to walk out to the car, and is very proud of herself that she maintained decorum, and did not bother Paul Newman.
Sharon Dye: She gets to the car. Goes to get in, and she doesn’t have her ice cream cone. So, she decides, “Fine. I’m going to face the music and go back and get my ice cream cone.” She walks back inside and looks at the counter where the holder is, where you’d put the ice cream cone, and it’s not there.
Sharon Dye: She goes up to the counter. The kid that works there has gone to the back. She’s looking all around. Doesn’t know what to do and decides, “I walk of shame back out to the car. I don’t know what happened.” And as she turns, and she’s going to walk out, of course, she catches his eye, and he smiles and says, “You put it in your purse.” There it was. Upside down, in the purse. That’s the great power of focus when it meets distraction, and Paul Newman being pretty distracting.
Sharon Dye: So, power of focus. Let’s talk a little more about that. It’s a little word that has a massive impact on return on investment, a massive impact. I’ll let you read that for yourself. The point to this slide, the point to all of it is, if you own a business, if you’re thinking of investing in a business and you want to say, “What’s the one thing I should pay attention to everyday, all day, what is it I should use to vet for? Do I invest in this business or this business?” I would proffer to you that you should vet for, and if you’re running a business, you should pay attention to, are we actively, constantly paying attention to what it is we’re focused on doing. Is it the ice cream cone, or have we gotten distracted by Paul Newman? It will make all the difference in the world of how long it takes you to get to your success marker, if you hit your success marker, and what’s kept you from hitting it.
Sharon Dye: All right. So, if I were you, I would be asking the question, “Well, if I’m going to pay attention to focus, what do we focus on?” And I’m going to take 30 seconds and describe you a model that we developed by a gentleman named Dr. William Schneider. Bill lives in Denver. He’s been doing research around the impact of culture to business success. He’s been doing his research for the better part of 40 years now. I won’t go into all the research that’s he’s come up with behind it. I’ll just ask you, just believe that it’s important, and we’ll go on from there.
Sharon Dye: What he developed was a four-quadrant perspective of what to focus on. So we’re going to fill in the four quadrants and go from there.
Sharon Dye: This axis is measuring and is intended to describe what is the organization, what is the enterprise relationship to time? If it’s an actuality relationship, it means that you are doing something that’s more present-oriented. So think months/year. It’s a pretty quick, I’m doing what I’m doing. I’m making a product, or I’m delivering a service, but what we’re doing is more about the present than it is long distant future. Long distance future is if you have a possibility orientation to time.
Sharon Dye: So, we’re doing what we’re doing as a company for the long term future. This is the decades/generations. Is the distinction clear? Good enough? Okay.
Sharon Dye: Now we’re going to add a horizontal axis, and we’re going to talk about what is the organization? What are the enterprises? Where does it go for information? What kind of information does it trust when it wants to make a decision? Does it trust personal information? That would be on Yelp, all of the reviews. Personal. It doesn’t fit on a spreadsheet. It’s anecdotal personal information. Or, does it trust impersonal information? So, that would be the stars on Yelp. 4.5 out of 5. Two very important kinds of information, but distinct from one another. Clear enough? Okay.
Sharon Dye: Okay, so now we have obviously two axes that have created four quadrants, and I want to … The last thing I want to point out here is that the lines are dashed. They’re not solid. This is intended to say, one of these quadrants for your enterprise is where you start your focus, and the other three is going to support that. But make sure that you’re always paying attention to the quadrant where you would start for our enterprise, and let the other three be supportive. The minute you tilt off that, now you’ve diffused focus. Now you’ve introduced Paul Newman into the situation. Okay.
Sharon Dye: All right. So, Bill plotted around those four quadrant’s descriptions of what an enterprise would focus on if we took an actuality time orientation. That’s more present focused, and we said, “You’re probably going to rely personal information to make your decisions.” He described that as an organization that has a focus of what Bill called cenergy.
Sharon Dye: So, you interact with your consumer, your customer, your client. You interact in a way in which you co-create what it is, the solution you need to create. Think about a real estate person. We want to buy this building, and we sit down with a real estate agent, and we’re going to co-come up with, what do we offer for the building. I, as the purchaser, am going to bring my budget. I’m going to bring why I want the building, what I’m going to do with it, all of my own information. Real estate agent is going to bring the comps for neighboring buildings, etc, etc, and together, we’re going to walk through and escrow process and co-create, a long the way, all the solutions and answers that we need to. And that’s what Bill describes as a cenergy focus.
Sharon Dye: If we stay on the top, and we move to the right, Bill called that a certainty focus, and that is saying we’re still in a present orientation of time, but we’re going to rely on impersonal information.
Sharon Dye: So, if we go up to that red quadrant there, we could easily plot in that kind of box Walmart, very commodity-like businesses. We would put military, law enforcement. They’re going to rely on information that sits in a spreadsheet as their first place to go when making a decision, and again, very commodity-like, it’s a present orientation. Not looking to change the world decades from now. We’re just going to keep doing what we do in a present orientation.
Sharon Dye: All right, now let’s go down to the bottom. We’ll stay on the impersonal side, and we’ll go to the blue, and this is an enterprise and organization that has as its focus what Bill called superiority, and that says we do what we do for the longterm future. We could take 10 or 15 years to develop the tool, the model, the service, the whatever we’re doing. We could take 10 or 15 years to do it, but when we get it to the market place, we will reset the standard. Tesla. We’re going to reset what it means to drive a car. That’s what this organization is doing, and again, it could take 10 to 15 years to get it done. That’s fine. They don’t need to be first, but when their product, their service hits the marketplace, it resets the standard, resets the bar. Obviously Apple, etc. would fit there.
Sharon Dye: All right, now let’s go to the last one, and that’s the enrichment focus, and that is an organization and enterprise that says our focus is we are here to change the world. We want to elevate the human spirit. We’re in this for the long haul. We want to make sure that there are no people in the world … There are no children without shoes. Tom’s shoes, for example. Non profits could certainly fit there, but not exclusively, and we exist, our focus, and if you want to join us as an enterprise, our focus is that we’re doing something, whatever our cause is, so that we ultimately eradicate that problem. Mother’s Against Drunk Drivers. On and on. You can plot several of them there.
Sharon Dye: So those were the four that Bill came up with through his research that were four core focuses, and again, going back to what I said at the beginning, the point here is, that you start with one. You have one that is at the very, very center for you, and what is it at the core of your enterprise that you are saying, “If you come do business with us, consumer, this is what we’re promising you.” And the other three become in support of that, of delivering that.
Sharon Dye: Now I’m going to introduce the culture word. Bill defines culture as the way you do everything. Please take the word everything literally, and what we’re describing here is what you’re promising your customer, which is outward focusing, and then inward focus is culture, and once you determine what you’re promising your customer, it tells you how you need to organize yourself internally to make sure that you deliver on that customer promise better than your competition.
Sharon Dye: And one of the things you have to answer is, who is our customer? It’s astonishing to sit in board rooms and executive tables and say, “Who’s your customer?” And I get a list of six people. And it isn’t the six people. You have a customer, and everyone rallies with focus around doing what we need to do to make sure we deliver to that customer what it is we’re promising we’re going to deliver.
Sharon Dye: I had a client who was a retired five-star general in the Marine Corp, so a rather intense fellow, and he had come from the world that was in the upper quadrant, I’m sure you can imagine, and he understood life that way. And he retired, and he decided to take some of his money, and he wanted to own some franchises, and for lots of reasons, he decided to buy, franchise Kinder Care, the preschool chain. So, he bought a few Kinder Care. Natural, natural fit. No problems there whatsoever. None.
Sharon Dye: So it was before I met him, and he decided to buy Kinder Care, and when I met him, it was basically anarchy was going on amongst those that were running the Kinder Cares and him. It was pretty ugly, and really nice preschool women were using language that they never, ever, every thought they would use. No Sunday School teachers were allowed to be present at several of the meetings.
Sharon Dye: So, he came in, and as you can imagine, one of the first things he did, having the focus that he had, which was putting himself as the customer. How does this serve and make sure it does what I want it to do.
Sharon Dye: So, walked in the door, looking at Paul Newman, and not the ice cream. So he walked in to find out where they can be operationally efficient. Of course he would. Right? Yeah. So he finds out what they’re spending on milk and crayons, and he decides that Johnny gets a glass of milk, and if he wants more, that they pour the milk, and then they put water in it so it dilutes. “We don’t buy new boxes of crayons here. You just keep using the broken ones and the nubs.” And then, this is true, then he decided that discipline can’t start too early. So, he decided what would be great is after nap time, if they learned how to fold their blanket and put it neatly in the cubby, and they had drills about how to do that.
Sharon Dye: So it didn’t take too long ’til Mom’s picking up Mary and Johnny, and “How did it go today?” And Johnny’s crying and saying, “Miss Mary is going to leave, and I love Miss Mary, and she’s not going to be here, and I didn’t fold my blanket right today.” So Mom hears this for a couple of days, and she’s thinking, “What’s going on here?” And so she comes back in and stops and sits down and has a little talk with those that are running it, and they start telling her, “So we’ve instilled this program that we do every day after nap time and fold the blanket, etc, etc.” So, Mom has a very easy solution to this problem. She sends Johnny here to be hugged and nurtured and told that he can do and be supported and have an ugly finger painted thing that’s just put up on the wall and framed. That’s why she sent him there. So, it’s a simple solution. They’ve lost focused. She hasn’t. She just goes down the road to the place that has focus. And out go Johnny and Mary and Sally and Suzy. And he can’t figure out why people aren’t going here.
Sharon Dye: So, we had a conversation. He wanted me to fix the people. Fix Miss Mary. I said, “You don’t have a people problem. You have a focus problem. You have a focus problem. You lost sight of what you’re here for. Your reason for existing is all about that lower left. That’s why you’re here. You want to enrich Johnny and Mary and Sally and Suzy. You have a focus problem. If you fix the focus problem, the people problem is done.”
Sharon Dye: And he needed to make sure that costs were contained. Of course he did. But that wasn’t the focus.
Sharon Dye: I loved in JJ’s presentation yesterday, he put up the letter from Stanford, and I quickly read ahead in the first paragraph, and my soul cringed. He has a focus problem that’s about to create a really big people problem, but it won’t happen overnight. It always happens gradually, and all of a sudden, the people he wants to work there won’t work there anymore, and he’ll be left with those that are mediocre and those that are down at the bottom, and that’s who he’ll get, and he’ll say he has a people problem, and he doesn’t have a people problem. He has a focus problem.
Sharon Dye: My friend who went to get an ice cream cone, her problem wasn’t her problem. She had a focus problem. Who wouldn’t? Sorry gentlemen. I don’t … Insert what woman here. It’s Paul Newman for us, but she had a focus problem.
Sharon Dye: So, I started with saying that in all of the research that Bill did, and we’re not doing it justice, I admit right up front, 40 years in 15 minutes isn’t quite doing it justice, but having said that, it really can be boiled down to if you want to know how to organize things internally, [inaudible 00:18:04], first answer what is it at the core your entity is promising your customer. Take as long as you need to figure out who your customer is. You get one. It’s not six people. It’s not the investors. It’s not this. It’s not that. It’s one. Stay focused there, and everything will get organized around that, and you have a decision-making tree you now have organically created because of focus. You know how to interview people. You tell them what you’re focused on, and you watch their body language and their face, and you ask them, “How would you help us deliver this?” Does their last six matters really matter? Not as much as we think.
Sharon Dye: What matters is, here’s what we’re doing. How could you help us do this? What would you bring to the table, and you have an entirely different interview process, and then you stay out of the people problem business ’cause you have a focus-success business, and you have a ecosystem that operates together, singularly-focused on getting the ice cream cone.
Sharon Dye: I have one minute left, and I want to know if there are any questions or thoughts or comments. Yes, please.
Speaker 2: I always thought that in healthcare, we have three customers. We have the patients who is the beneficiary which [inaudible 00:19:23], but we need to have the buy-in of the healthcare professionals, and we need to have the buy-in of the insurance companies. Would you agree that in healthcare we have three customers, not one?
Sharon Dye: No. I think you have one customer, and you have people that you need to be in that ecosystem, helping ensure that the customer you have gets what they need because everybody else upstream and downstream will get what they need as well.
Speaker 2: So you think the patient is the customer?
Sharon Dye: Yes. I do.
Sharon Dye: Anything else? Thank you all very much. Thank you.

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Ana Dutra – Avoiding the Pitfalls of Startup Leadership

When you’re starting a company, the advice you’ll usually hear is all surrounding the idea and the execution. There are very few words paid toward the leadership, governance, and continued growth of the startup into its eventual goal. As the CEO of The Executives Club, and Director of The CME Group, Ana Dutra has over 30 years of experience in helping companies identify and execute growth strategies. During her talk at AngelMD’s Alpha Conference, she gave some sound advice that is equally as applicable to startups as it is to investors and advisors.

Ana’s direction focused on developing the best potential board of directors for a young company. She walks through tough questions, and points out the challenges that many companies face. As she points out, even the best products can be ruined by having a company whose leadership is unable to predict the traps that will cause them to fail.

First of all, it is an honor to be here. I am extremely humbled because even though I do come from a family of physicians, so I hope that that helps, sisters, brother-in-law, husband, two daughters now in medical school, I come to talk about a different science. Which is a science of governance and leadership. I was lucky enough throughout my career to be able to experience good and bad and different and horrible governance and leadership from a number of different angles, not only by consulting to companies and see them acquiring businesses and divesting them, but also sitting in boards, startups, global public companies, private companies, then also being a CEO myself, and then doing my time as CEO of Korn/Ferry Consulting doing board assessment throughout the world.The one thing that I can tell you, for those of you who are investors or founders or inventors, is that I have seen great products and great companies failing or not having sustainable success because of poor governance and because of poor leadership. In fact, it is the highest factor for failure of companies no matter what size and what stage they are. You can have the best product, you’re going to be successful for a few years, but if you don’t put the right people in the right places at the right time, that is just not sustainable.

The good news is that, in the past and if you think about governance model theories and boards and advisors evolved, that is kind of a hobby, right? Then the regulators started to come in. For example, in 2002 Nasdaq actually said that no company must have dependent directors or executive directors in the nominating committee if they wanted to be listed with Nasdaq so that it’s to institute some independence. Then in 2009, the FCC said well every public company must have a CEO succession plan in a succession for the successors of the CEO to be listed in the public Nasdaq or New York Stock Exchange. Now, you have ISS talking on [inaudible 00:02:38] so there’s more scrutiny around governance around public companies. Then we have the big issues and the big scandals we have for Bane Oxley and then we have all the big scandals that increases scrutiny.

But when it comes down to startups or to private organizations, there’s very little regulation out there. I have to say that it warms my heart that over the last three months, I’ve been asked to speak in VC conferences and startup conferences and incubators three times just in the last couple of months. Which means to me, that eyes are being opened to the fact that if you don’t put in place great governance and great operating structure and great leadership from the beginning, you are dramatically reducing the odds of success for your company.

I have to tell you a story. About 15 years ago, I was asked to speak to a group of physicians and I told my husband I was so excited about it because it was the first time that I was going to talk to a group of physicians and he said, “oh man, nobody is going to pay attention to you.” And I said, “oh why is that?” He said, “I’ll tell you why. Because one is going to be thinking about the next procedure they have to do, they other one is going to be saying this is not real science, what am I doing here and the third one’s going to be thinking, I’m only sitting in this room cause my boss told me so, how long is this going to last?

What I see now is quite the opposite. What I’d like to do in next 15 minutes is to talk about three things. First of all, we start to talk about evolution and maturity of governance model and boards. Then let’s talk a little bit about size, composition – I know there’s many investors in the room and one thing that I’ll tell you you should be looking at is how is this company organized, how is it governed, who is in the advisory committee, board or student committee or whatever you call? And the last thing, let’s talk a little bit about challenges, traps and how to overcome or at least predict and anticipate them. Is that fair game? And then we’ll have some time for questions.

So, boards started very simply because people were investing money in companies and they wanted to know how they were run so there were no legislators, there were we no organisms regulating how boards should work. As I mentioned over the course of the last few years, not only because of the world financial crisis, or Sarnes Banes Oxley or you take World Comm and other big scandals and the scrutiny increase quite a bit. Investors also became savvier, so stock holders are saying hey, we want to have a say on pay of CEO, we want to understand how much equity is being given to employees at the top. Now you have the ISS with institutional investors saying if we are institutional investors, here are some guidelines that we want to impose on you.

So now there’s so much more responsibility over directors, which changes the role of directors as well, as well as investors. What we even think about in the span of investors? Because so many times the interest of the founder, the inventor, the interest of the current operator and the investors might be at odds, so although, at the end the ultimate goal is to increase value of the company. Whether you’re going to sell it or you’re going to continue to grow it, but you have investors and I work a lot with private equity groups, and when you have many private equity partners on the board, that creates already a tension point. With the CEO who is hired sometimes to replace the founder to take the company to the next level but one wants to accelerate to sell fast, the other one is thinking long term growth and sustainability.

So many times having one, and just one for startups, independent director on the board can make a huge difference. The other question is around who that the independent director is going to be. In the health care space, for those of you who followed what happened with Theranos or Outcome Health, just to site two very recent examples. Theranos did not have one scientist on their board. Didn’t have anybody who was there just to ask the right questions. It’s not to probe. It’s not to confront. It’s not to run the company. It’s just to ask the right questions. Outcome Health, I don’t believe that there was any poor-ill intention, in terms of the data, the big data, that they were analyzing and disseminating. But you know what? It was not right. When investors discovered that, they felt they were being deceived. So that’s why having an organization like NGOMD who is bringing all of you together to actually talk about those issues. Thinking about governance and organizational models in your startups and in the companies that you’re thinking to invest in and what are the right questions to ask, can be incredibly helpful.

Let’s talk a little bit about size, composition and agenda. That’s different for startups, for companies who are at the more mature stage, private companies, public companies, family owned companies, founder led companies. I have to tell you the whole issue of having founder and inventor led companies that grow with a block buster product to a certain size and then is not successful, it’s what enabled people like me throughout my career to then spot those companies and buy them, sometimes, pull the person out and then start to grow the company through digitization or through doing things that the founder, who was great inventor, could not see from a business perspective and understanding when is the time to make that shift and having a board of directors around in place to say, this is the right time, there’s nothing wrong with the person, there’s nothing wrong with the idea to that point, but it’s the time to then think about the next step, is extremely important as well.

As I said, public companies, which is not the focus of our conversation, are going to have that mechanism embedded in the way that boards have to do business. You have to have an executive committee, you have to have an audit committee, you have to have a nom and gov committee. Having said that, why should startups be any different? An audit committee, or a compliance committee, at least should be a part of any foundational board of directors or board of advisors. Which is what’s going to prevent many companies from doing things that they don’t even know are non-compliant from a business perspective or from a tax or from a legislation perspective. They’re just doing it because the mindset of the inventor and of the founder is not necessarily focused on those other issues. So think about that as well.

Board Size. For startups, you have investor, you have the operators so the executive directors or the executive advisors. As I said, as least one or two independent directors should be in place. Think about who you serve. Think about the people who are validating your science or the data behind the company. Think about diversity and the … I was just having a conversation right before we started and just look around this room. I cannot believe that the markets that you’re serving are not low diversity as we see in here. So think about adding, not only people who can add value from a content perspective, but who can also represent known diverse segments in your company. They will help you to get more business. They will help you to see things from different perspectives. They will help you to attract capital from other sources as well.

Let’s talk a little bit about the most common causes of disruptions in boards. The first one is misalignment around the mission of the board and the strategy of the company. That misalignment, of course usually in two ways. It’s either amongst board members, as I said if you have investors, those of who are in the room, the founders, the operators and they’re all looking at the business in the long term from a different perspective. We have a problem, Houston, right? The other one is between the board of advisors and the CEO and the person who’s running the company. Again, I couldn’t be more clear, boards are not meant to run companies. They are meant to ask the right questions. They are meant to advise, but if you have an adversary relationship or if you don’t establish roles clearly enough with the CEO operating the day to day business, we will have problems. This should be a partnership relationship not an adversary relationship.

The other type of misalignment that I’ve seen very commonly is around the future of the company. Are we growing to sell? Are we growing to acquire? Are we growing to IPO? What the heck are we doing here? Until you have that type of alignment, you will have serious discussions in the room that are not necessarily going to touch on alignment, but that are caused by the lack of. So we see very clearly when companies are talking about succession. So who is going to succeed the founder or the CEO? You start to see different board members coming up with different competences or profile requirements for the next leader. When you see people in radically different camps in terms of who they think should be leading that company, I can assure you that the misalignment is not around the individual of the role, it is around the strategy of the company. That’s the difficult conversation you need to have – unprepared directors.

One of the reasons why Nasdaq does not allow non-independent directors on the nominating committees, because we don’t want to have family and friends in the board. That’s what people will do. If they don’t do that deliberately, they will tend to recruit to their board people who, one, either think or act like them, have the same style, they feel comfortable with, or people who they trust and they believe are going to be loyal to them. So, I know this person is not going to cause me trouble, cause you know what, we’ve been friends for several years, we know each other and I can justify him being on the board, but that’s not necessarily the best solution. My recommendation is very early in the process, I don’t care if you’ve been a company for 20 years or just for 20 months, start to think about your skills matrix. What kinds of companies, experiences, skills you need in your advisory board, you need in your board room.

And for you in the room who are investors, demand it. Demand to see if we’re going to form an advisory board, what types of skills do we want to have? Do we need people with technology skills? Do we need people who are scientists or who understand big data or do we need people who are going to help us to raise money for the company?

Which takes us to the third point. Which is misalignment around expectations for directors. The first thing I always ask when I’m being asked to sit on a board is, what do you expect from me? Why are you asking me to be a candidate for this board? Is it because of my experience, technical competence, or is it because I can make connections for you or I can help you to raise money or is it because, in the case of some advisory boards, you expect me to be a little bit more hands on? So, for both sides, investors and board candidates as well as operators in the room, founders in the room, that needs to be abundantly clear.

Dysfunctional dynamics. When I left Korn/Ferry, I was asked to write a book. The publisher’s who came to me said, “would you write a book about leadership? You do all those workshops and all that.” And I said, “nay, I don’t think so.” Just type ‘leadership’ on Amazon. You’re going to find more than 10,000 titles just on that subject matter. So, we read about all those great leaders, these phenomenal biographies, best in class, world class leaders and then I said people get to the market place and I’ve seen this day in and day out and all they find is leader-shit. It is, right? People ask me … I was seen Billy talking about simplicity and he goes, “did you just come up with that?” I said no, I always thought about that maybe it’s because I’m not born and raised in the US and you think about words in a different way. I thought, my goodness, I am here talking to people, coaching about leadership and all I see is leader-shit.

Guess what? So I wrote the book. It’s actually Lessons in Leadershit and it’s based on research about all the toxic behaviors you find in companies in the workplace and how to address them if they are your peers, your boss, your direct report. Guess what? It doesn’t stop in boards. You have the tyrant and bully in boards, you have the unaccountable, you have the lend grabber, you have the manipulator, you have the political animal in the board room. However, for a company to function you need to get that out of the way. And so understanding how your people are going to operate in the board room and how do you make decisions in particular for startups where much, much higher percentage of decisions are actually made in the board room, is extremely important. So that you don’t have either one person dominating the conversation or you don’t have, for those who are familiar with the Syndrome Abilene Paradox, where an entire family ends up driving three hours to have an ice cream, when at the end of the day nobody wanted to but I went because I thought that my brother really wanted to so I’m going with them. And somebody else’s two kids wanting to go … not that you could be their father, but I’m just pointing to people around … and say well maybe we should go and then they get to the ice cream place and they say nobody really wanted to be in the car for two hours to get this ice cream.

Guess what? That happens in boards more than you would imagine. That’s how sometimes acquisitions are pursued, diversity are pursued. Hives of key people are pursued because nobody actually speaks up or because only one person speaks up. How do you solve for that? Most important, and I have one minute to give the solutions on that.

First of all, let’s be abundantly clear, on advisors and board members and any players, expectations, time commitments, what do you want from them, what they can expect from you. There’s a big agent turn limit debate which is less relevant to you in this room, but instead of saying that somebody has to step out of the board when he or she reaches a certain age, do board assessments. Even if you ask an external consultant or the HR person to do an assessment. Then you will understand who is actually contributing value to the board or to the business in a meaningful way and who is not.

Minimize the opportunities for conflicts of interest. I always tell this story and by the way, you probably have some of that in the health care industry, when a friend of mine who has run a company very successfully, an HR company said to me, you know I think it’s time now for me to get on a couple of corporate boards, can you help me? And I said, sure Kevin, what kinds of boards do you think you would qualify for? And he said, “well I have done most of my company work with pharmaceutical companies so I think I should qualify for boards of pharmaceutical companies.” I said, “OK, let’s think about it. So are you going to close your business?” He said, “no, no, no, no, no absolutely not.” So let me tell you what. If you get one of those boards of a pharma company, first thing is you cannot do business with them. Second thing is, you cannot do business with any of their current competitors or anybody who could become a competitor. And he looks at me and says, “I don’t think that’s a good idea, then.”

So, help people to think about potential conflicts of interest, right? If they are going to do fundraisers, can they actually be on the board without compromising themselves. Think about diversity inclusion in boards. That’s for me has been a life passion, a career passion is to put more women, people of color, people with global experience in boards that can only enhance perspective.

And finally, and that the most trivial one, is meeting agenda cleanliness and effectiveness. I am sick and tired of going to board meetings where people are discussing irrelevant things when the company is actually on the board of sinking. When there are new trends and technologists coming into the market place that may break their business, but we’re just not talking about that. We’re talking about dress code. Seriously? So, think about what really matters. What should and what should not be in the agenda? What is operator’s role versus board role? I can assure you that you’re companies are going to be successful and last longer and longer. So I’m happy to take questions. I know I’ve past my time a little bit, but it’s been an honor to be here.

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Dr. Rasu Shrestha – Innovation as a Strategic Imperative

As the Chief Innovation Officer of the University of Pittsburgh Medical Center, Dr. Rasu Shrestha plays the lead role in driving UPMC’s innovation strategy. During his talk at AngelMD’s Alpha Conference, Dr. Shrestha described UPMC’s approach, which he posits can best be described as “innovation as a strategic imperative.” The idea being that, innovation within today’s market needs to happen at a core level, instead of as an afterthought.

Dr. Shrestha said that UPMC first had to identify what it meant to innovate. The center operates as a hybrid model with 80,000 employees, 39 hospitals, 3.5 million health plan members, and annual revenues over $17 billion. As such, any sort of innovation is no small task for the company, so Dr. Shrestha’s idea to “challenge anything that stands as the status quo” is decidedly huge.

The big takeaway from Dr Shrestha’s talk is the idea of old ways versus new ways: Designing for regulations becomes designing for empowerment. Preventing burnout becomes enabling joy. Rather than adding bureaucracy, UPMC’s new goal is to enable meritocracy. By looking at the ways in which the status quo is building walls between physicians and patients, we can better understand how to innovate in ways that are meaningful.

My name is Rashu Shrest, I’m the Chief Innovation Officer at UPMC. How many of you have heard of UPMC? All right. Excellent. Go Steelers, right? Yeah. Yeah! Exactly. UPMC is a fairly large, Payer-Provider, this yin and yang of the payer and the provider. Keep that in mind, because we vehemently believe that, that really is the basis of the formulary within which we’re inventing the future of health care. My discussion today really is titled ‘Innovation as a Strategic Imperative’.

For us at UPMC, we’ve been doing this for a while, there are a lot, of provider organizations and health systems that encouragingly are actually getting into the innovation space. There are others that are also trying to invest and start company’s and working with accelerators and incubators. We’ve been doing this for a while. We’ve matured our processes quite a bit. Learned from our successes and from our failures. We’ve come to a place. I’ll paint the picture with, regards to what our priorities are. How we’re looking at innovation as a strategic imperative. We’re putting all of our chips right in this bucket. We’re saying this is the future of UPMC. For this $17 billion annual revenue company, 80,000 employees. That’s UPMC today. This is the future.

What I’m going to do is really talk about, where we are as an industry. That red dot that you’re seeing there, ‘Strategic Infliction Point’. That’s where we are as an industry. Whether you’re a small company, whether you’re an entrepreneur, or you’re a large organization or us as an industry, that’s where we are. We have a seed to growth. We’re talking about seed funding. We have a seed to growth. And there’s some level of growth that you enjoy over time, if you make the right, decisions, and you have perhaps the right partnerships. You have the right [IT inaudible 00:02:11]. You make the right progress. Then when you reach that strategic infliction point, which is, I argue, where we are right now. There are a bunch of decisions that need to be made.

Based on those decisions that get made, you either enjoy this exponential growth, or you see a catastrophic decline. There are many a company’s that have gone down the path of catastrophic decline. What I’m going to be talking about today is how we’re viewing innovation as a strategic imperative. What it means for us from a Payer-Provider perspective to really challenge the status quo. I’ll tell you the UPMC story. I’ll tell you about how we’re organized and our focus areas, when we’re co-creating and co-investing and really trying to accelerate the pace of innovation. I’ll step back and talk about ‘Old World’ in terms of health care as we’ve known it, versus ‘New World’. This re-imagined health care that we hope to be building together with the entrepreneurial community that you’re all about. Then I’m going to end with data as the basis for re-inventing the future of health care.

As we look at technology and innovation, as we’re being inundated with data and there’s been lots of discussion about that throughout the two days. How do we make sure that data becomes the basis of humanizing health care. I vehemently believe that innovation if done right, makes technology invisible. Think about that. Today technology is this barrier that sits between us and the patient. I’ll talk a little, bit more about how perhaps we need to re-think this entire paradigm. As, I’m going through this, the task at hand for you, as you’re anticipating the coffee break, do you agree with the things that I’m putting in front of you? What’s your model? Don’t just listen to the lectures to learn. I think there’s a lot of unlearning that we all need to be doing in health care today. What are your priorities? How do we build more bridges?

Let’s jump straight into this. ‘Challenging the Status Quo’. I vehemently believe, again, that complacency is really your worst enemy. Right? Even for an organization like ours, fairly large. We’ve continued to grow. We’ve continued to enjoy the fruits of a lot of the right decisions that we’ve made and lessons learned, and the things that we’ve put in place. We believe that complacency, is really your worst enemy. How do we make sure that we’re innovating fast enough and in the right direction to put ourselves out of business, before someone else comes and puts us out of business. That’s really important. Think about that, even in the things that you’re doing specifically.

A couple of quick examples. How many of you know what this is? This is a five Megabit hard drive being transported by IBM in 1956. Five Megabits. That’s right. Megabytes, excuse me. The evolution of storage. Right? Again, the storage industry didn’t accept complacency. If you look at one Gigabyte of storage, not five Megabyte, but one Gigabyte of storage, in 1984, it cost $50,000, 2012 it was ten cents for one Gigabyte. And today you get 15 Gigabytes, when you sign up for a Google drive account. Revolutionary. Right? It’s not just evolution, but revolution.

Here’s the second example. That was in the storage industry. This is not this evolution, but revolution in a city. This is Pittsburgh, or was Pittsburgh. This was where steel and coal, right? This was the epicenter in many ways of the industrial revolution that basically built the America that we know today. The new Pittsburgh is nothing like that. Right? Self driving cars, massive advancements in AI and machine learning. Working with Carnegie Mellon University, with the likes of Google and Facebook that’s in town, they acquired Oculus Rift and made their headquarters in Pittsburgh. Uber came into town and acquired 40 of the engineers that Carnegie Mellon had been building painstakingly this program around autonomous self driving cars and overnight they said “All right, Pittsburgh is going to be our headquarters for self driving car technologies”. Argo AI, yet another AI based company that’s building self driving technologies also headquartered in Pittsburgh.

The new Pittsburgh, really, is not one that’s exporting steel and coal, our new export commodity is eds, meds and tech. Right? Education, medications or medicine and technology. A little about UPMC. There’re 40 hospitals or so at UPMC. Three of the ones that you see on the top are our specialty hospitals that are based in Pittsburgh. The three others that I’ve painted right at the bottom are the three new hospitals that we just recently announced. We made a really big announcement. I don’t know if you saw some, of the announcement. I put it up on LinkedIn, and I’ve been sharing it on Twitter as well. We recently made a really big announcement that we’re going to be investing $2 billion in building three additional specialty hospitals in the city of Pittsburgh. There aren’t too many, cities globally that will have six specialty hospitals all in one city.

The new thing about this in the theme of innovation and what we’re talking about today around value based care, and the strategic imperative towards innovation is that with the building of the three new hospitals, there will be no new beds. These are digital hospitals. No new net beds, right? These are digital hospitals that will really be leveraging the capabilities that we’re innovating towards in terms of science and medicine and hopefully the art as was discussed early in the balance of trying to put all of this together. I’m going to quickly show you a video that talks about our bold ambitions as we’re making some of these bets.

Video announcer: There are days for dreaming. Days for wishing. Today we build. Not just walls and halls of medicine, but whole new ways of delivering patient centered care. Inspiring new collaborations and things yet unimagined. Today at UPMC we build the future and make life changing medicine happen.

Rashu Shrest: That’s essentially what we’re trying to do is our tagline, ‘Life Changing Medicine’. How do we make life changing medicine happen? How do we innovate to make sure that we’re able to re-invent that future and create the future that actually resonates not just with the current definition of health care, but the newer definition of health care moving forward. I mentioned earlier, where this large yin and yang of a pair provider organization. In addition to the close to 40 hospitals that we have, and the 80,000 employees, we have a health plan that actually has 3.5 million lives that we cover. It’s really interesting, this yin and yang of the Payer-Provider system. It’s not just a patient centric approach to care that we’re caring about, that we’re [inaudible 00:26:13] and we’re building into our solutions and the company’s that we’re creating. Or a member centric approach to care, which is what health plans typically look at. But, more of a person centric approach to care. Think about this.

Cause that person, consumer, could be a patient at any given point in time. Most likely as a health plan member, has some insurance coverage. As, you’re looking at the shift in risk, primarily it was being born the payers, it’s now moving toward the providers, and soon it’s moving towards the consumers. The consumers are going to be bearing the brunt of the risk in many ways in the coming years. How do we make sure that we manage and mitigate those risks? How do we make sure that we have enough data and transparency and the right tools and the innovations to actually manage that Payer-Provider yin and yang.

What we’ve done at UPMC, is we’ve focused on a number of different areas. The way that we’re organized is we’ve got the Insurance Offices Division, we have the Provider Services Division, with the hospitals, physicians, nurses. There’s the International Division and then there’s, the Enterprises Division, which is really where I park my car every morning. In addition to being the Innovation Officer across UPMC, I’m also the EVP for UPMC enterprises. And enterprises really is our innovation and entrepreneurship arm at UPMC. It was mentioned yesterday that the innovation center in, I think, Texas was a Nabisco factory, old Nabisco factory. We, too, are also located in a Nabisco factory. There has to be something about a Nabisco factory. It’s the new garage, I guess, right? Bakery Square is the name of the building that we set shop in some years back. This is also the building, where today Google is headquartered in Pittsburgh. And Google has hundreds of employees upstairs.

What’s really interesting for us, as we’re continuing to innovate, we’re continuing to look at and put our money where our mouth is. We’re also active investors. We’re founding company’s. We’re venture capital funding. We do angel investing. We’re all, of the above and none of the above. Meaning, we’re not just a strategic buyer or founder or angel investor. We’re really a strategic, if you look at it. Because we co-invest and co-create. Obviously we sign checks. We put our money where our mouth is. But, in addition to that, we bring data. We have 27 Petabytes worth of data at UPMC. That’s doubling every 18 months, across this Payer-Provider, patient enter data, all types of data. But, then we also bring in our expertise. We bring in the living lab, that’s UPMC, and say “All right, how do we increase the chances of success for that innovation? How do we increase the chances of success with the work that we’re doing with that entrepreneur, with that start up?”
There are four areas of focus for us at UPMC Enterprises. Very quickly and all of this information is also available on our website, upmcenterprises.com or you can follow me on Twitter or look at #UPMCinnovates. Transitional Science, we just commit to a $200 million investment over the next five years in Transnational Science. Improving Outcomes. Clinical tools and population health really coming together, again, with the mindset of this Payer-Provider yin and yang that I referenced earlier. Consumer. Not just the next cool App that we’ll upload into the App store, into the Cloud, but really if health care is moving away from those hospitals that I talked about earlier, into the bricks, into patients homes and their Smartphones in their pockets, what does that look like? What do those business models really look like? How do we create those, company’s that actually sustain the future of this bold new world?
Then Infrastructure and Efficiencies, you heard quite a bit earlier about some, of the wastes that exist in health care. The inefficiencies that exist in health care. Whether it’s around supply chain or revenue cycle management or all of the waste that exists in the back end offices in health care, we’re trying to bring in AI and machine learning capabilities and finesse to really address those challenges. What’s also interesting is that we’re capitalizing on the fact that we’re a large strong academic medical hub. One of the largest medical training programs in the country. We’re affiliated with the University of Pittsburgh, which is top five in the NHI rankings, when it comes to research funding. Then we have Carnegie Mellon right in our neighborhood here, where we’re able to capitalize on the machine learning AI specialists across the board.

It’s interesting. Google is upstairs in the Bakery Square Building. And we’re competing with data scientists. We’re competing with data analysts and product managers and engineering folks. My innovation team today is 250 individuals. We have about 70 or 75% of them are IT focused, designers and product managers on top of that as well. That’s the culture that we’ve created at UPMC Enterprises. I’m a big believer in culture. It’s really important for you to make sure that you’re able to create an environment where the walls are much lower. You’re able to collaborate. You’re able to ask questions. You’re able to call bullshit on solutions that you think are questionable or not in the right direction. And you’re able to learn from your failures. We’ve talked about fail fast. But, that’s a culture that we’ve actually embraced at UPMC Enterprises. Agile [inaudible 00:15:10] methodologies, human centered design. These are principles that we’ve really embraced. As a result of that, the solutions that we’ve created are fairly tremendous.

A quick snapshot of some, of the portfolio company’s that we’ve either birthed out of UPMC or we’ve invested into. In all cases, we’re co-creating and co-investing. We’re building these solutions. We’re implementing these solutions at UPMC. We’re then taking these to market with the right level of partnerships, really across the board.

I’m going to take a step and really contrast the old world to the new world and give you the perspective of how we view innovation as a strategic imperative. How we’re actually looking at the design of these solutions that we’re building moving forward. A lot of you I’m sure have seen the Hype Cycle. This is the Hype Cycle for Emerging Technologies. The more recent version from Gartner 2017. There’s, all sorts of hype out there. Smart Dust is right at the start of the hype cycle there. It’s 4D printing. I know a lot of you have heard of 3D printing. I had. I thought ‘What’s 4D printing?’ Right? What’s the fourth dimension in that printing thing that you’re doing with your printer? Newer Morphic Hardware, quantum computing is coming up. Connected Home. Now, that’s becoming more of a reality. In fact a number of things that we’re innovating around in that space. Cognitive expert advisors.

My point in putting this slide up there is that there’s a lot of hype out there. But, what’s really important as we’re investing, as we’re innovating, as we’re creating these solutions is to balance that hype and the hope that exists in health care with the reality of what academic and scientific rigor can really bring to the table. With the reality of what the living lab, like one that we have at UPMC, and UPMC Enterprises can really validate and prove, because, you don’t want to be blinded by these buzz words. Right? That’s the last thing you want to invest around is a buzz word. It’s really important to make sure that you’re going in with eyes wide open.

I mentioned this briefly earlier. That’s the new reality of what we’ve created with all, of the digitization of health care that we’ve been so successful in doing in the last 20, 30 years. We’ve erected this large big wall that sits between the patients and us as clinicians. Many times … and I know the AMA agrees with me on this as well. Technology tends to be an impediment to care. How do we make sure that technology can really be an enabler of better care. Those are some, of the concepts that we’re putting into pictures.

Really quickly, I’m going to run through this, contrasting old world, with new world. In the old world, we’ve been designing for regulations. Nothing wrong with HIPAA. Admittedly, there’s a lot of HIPAA-noia in our community here. Right? Nothing wrong with ICD-10. This billing is important and coding is important. But, how do we not design for regulations, but really design for empowerment? Patient empowerment. Clinician empowerment. Designing for empowerment. Burnout. There’s a lot of mention of burnout, earlier. How do we make sure that we’re not building solutions that create burnout, but really joy. When was the last time your clinician went in or you went in as clinicians and said I’m so joyous, we’re going live with the solution today. Never. Right? Never.

Innovation today is about adding solutions. It’s about adding bells and whistles and product features. You read the release notes or you look at the new features that get added on. It should really be about simplifying. It should be about subtracting. It should be about taking things away, making things less complex. Today health care in large part is about bureaucracy. How do we get to meritocracy. How do we reward merit? As opposed to be inundated with bureaucracy? These are the things that we’re trying to think about as we’re innovating, as we’re making our bet’s, as we’re putting our investments forward.
Today health care is very application centric. Is it [inaudible 00:19:08] driven? Or risk driven? I’m a radiologist by background, right? Is it this App? Is it this EMR? It should really be patient centric. Today health care is very [inaudible 00:19:18] centric. You’re going in and you’re trying to make that diagnosis. Was it calcification, was it a nodule, was it a tumor? What stage is it? Again, that’s important. But, it shouldn’t just be about the interpretation. It should be about outcomes.
Then last but not least, today every investment that we’ve been making … the millions, billions, that we’ve been spending on Epic and sonar and enterprise data warehouses and Cloud and infrastructure, it’s been about doing digital. It shouldn’t just be about doing digital, it should really be about being digital, thinking digitally. Not just replicating analog work flows in a digital format and creating Efiles and eFolders and hanging protocols. We don’t hand film anymore. It’s not film anymore. We talk about wet read’s. Right? It’s a wet read, a quick wet read that we’re providing to the ED Physician. There’s nothing wet about that film that is not a film, that we’re not hanging. Okay? How do we make sure that we’re not just doing digital, but being digital, thinking digitally, representing data in ways that we could never have represented in the [inaudible 00:20:20] world. Think about that.

Those are the imperatives that we’re trying to really push forward with. Data has … I’m going to be really quick about this, cause I’m running out of time. How do we make technology an enabler of better care. You all know this. There is data everywhere. Data is telling stories about you and your loved ones, about your kid, about that last blood pressure exam that you had, the radiology exam that you had, your cholesterol level. Data is everywhere. But, what’s really interesting is that the data that we have to access to today. The debates that we have going on in the policy world in D.C. and in other areas around inner operability. It’s really just the tip of the iceberg. It’s the data that we have within our EMR solutions and our Enterprise Data warehouses and our data centers.

But, the data that we’re really concerned about aren’t just the data within the EMR solutions, it’s the data that’s outside of the hospital systems as well. Right? The social determinants of health care data, for example. Data around economic status, about the environment that you live in. The behavior and the behavior change that you want to try to bring in to that person, not just the patient that you’ve admitted into your hospital, but the person that you’re trying to really treat. How do we make sure that we’re able to get access to all of that data? Because today 90% of the data in the world, has just been generated in the last two years. Right? 2.5 quintillion Terabytes of data are generated every day. That’s ridiculous. Across the board, not just in health care or in my radiology practice, but really across the board. That is amazing. The tsunami of data that’s hitting us is remarkable.

It’s not just about the data though, right? Cause we talk a lot about data and we emphasize data as a basis of innovation, but it’s about information, knowledge and converting that knowledge into insights. Then marrying those insights with evidence based guidelines and best practices and clinical protocols and trying to get to behavior change. Cause that’s what it’s really about. How you get to behavior change is through nudges. How do you create those innovations that create those nudges for clinicians, for patients, for our consumers, for our administrators. That’s what it’s really about. That’s the mindset that we’re actually trying to bring to the table.

A quick example. This is one of the innovations that we’ve been pushing forward at UPMC. What we’re doing is we’re risk stratifying our patient population. And our chronically ill patients when we discharge them from our hospitals. We’re discharging them with not just a bag of pills, and a discharge summary or discharge instruction. We’re discharging them with technology. We’re remotely monitoring these patients with their permission, leveraging these capabilities, these technologies that we’re discharging them with and their risk stratified fully managed kits with the highest risk. We’ve got mobile Apps and tools and web inter-phases, where they’re actually inputting data for the rest of the population.

We’re able to send all of this data into this intelligent hub that goes in on the back end. Before the patient then falls off the guardrails and ends up back in our ED’s, we know that they’re about to fall off the guardrails. We’re then able to intervene, actively, right? Those nudges that I talked about earlier. We’re able to use those nudges to get the patients, those consumers back towards the circle of wellness, which is where we really want them to be. It’s amazing the results have been absolutely tremendous. Patients have been feeding back that I did everything that I wanted to. They’re specific preferences and what they wanted to do.

We think that health care shouldn’t just be about curing disease. It shouldn’t just be about surviving. Health care should be about thriving. Right? We believe … It’s not just about adding years to life, but really about life to years. A lot of focus on the Silver Tsunami that we’re calling, this senior long term care, post acute care, as well. We believe, despite everything I talked earlier about and announcements with the $2 billion investments that we’re putting into three new specialty hospitals. We believe that in the future, if our beds are filled, means that we failed. Those are the types of innovations that we’re actually creating at UPMC. To make sure that we’re able to really re-imagine a future that brings forward the very best of what we need for our patients across the board.

At the end of the day, it really is about building bridges, right? Pittsburgh is the city of bridges. 440 bridges in Pittsburgh, more than even Venice. It’s about building bridges between the old world to the new world, as I painted earlier. It’s about building bridges to how we’ve known health care to be. The definition of health care as we know it today, to the newer definition of health care, where we’re talking about, not the survival, but thrival. We’re talking about health care that’s well beyond the walls of the hospital. About taking in data elements that are well beyond the specifics of the data elements that we’re struggling with today. It’s about bridging the likes of innovators and entrepreneurs and those that are financing these innovations to the realities of the needs of patients and the Payer-Provider yin and yang that exist out there, whether, or not we get to a single payer reality. The reality is that providers need to work more cohesively with payers, whether it’s through accountable care organizations or value based models that are out there. It’s really about building those bridges.

With that, I know I’m out of time. Please follow me on Twitter. Engage with me, continue to have discussions with us. If there’s anything that we can do, from a UPMC perspective, even as we explore partnership opportunities with you, please let us know. Thank you.

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Dr. John Simpson – The Road to Medical Device Innovation

Dr. John Simpson is a medical device innovator that you know, even if you don’t recognize his name. In 1978 he developed the first balloon angioplasty catether to use a guide wire system. His invention is credited as pioneering the field of interventional cardiology as we know it today.

Dr. Simpson has built and sold a number of companies over his career, to names like Eli Lilly, Boston Scientific, Abbott, and many more. These days he serves as the Executive Chairmain of the Board for Avinger, a company that bills itself as “radically changing the way vascular disease is treated.”

We were honored to have Dr. Simpson join us at AngelMD’s first Alpha Conference in Napa, California. During his talk on medical device innovation, Dr. Simpson discussed the history of his life of innovation, and the lessons that he has learned.

Make sure to watch for the surprise story featuring Paul Newman.

John Simpson: Wow, it’s pretty cool actually and I’m glad I came here because the first thing I’m gonna do when I leave is I’m gonna apply for a job with Billy Cohen. Wow! What he’s doing, what I’ve done pales in comparison to Billy, but you have to see his magic tricks, I don’t know if you’ve seen any of those yet. His magic tricks are just as compelling and convincing as his talk was today.

So, it’s a privilege for me, I’m gonna talk about navigating the maze of medical device development, if you believe I know anything about that I’m sorry you’re really kind of mistaken, maybe you came to the wrong talk, it’s too complex.
I can tell you about, oh great thanks, I can tell you about at least an approach to working your way through medical device development. I do need to clear up one thing though, I did not flunk out of Texas Tech, we need to get that, I think now’s the time to get that addressed. I transferred the day before I got my academic ineligibility to Ohio State, so just want to set the record straight that I’m a Red Raider let’s say, but I did not actually flunk out.

So, I think we all need to know that as we navigate through this maze that there will be surprises, and you have to stay alert and there will be things that will happen to you that will be shocking, unanticipated and as Billy said, “Our obligation is really to work through those.”

So, I just think we need to put everything in perspective, Donald Rumsfeld, you may remember him from the past, but he was kind of an intellectual kind of a guy, and he said, “Reports that say something hasn’t happened are always interesting to me because as we know there are no knowns, things we know we know.”

We also know there are known unknowns things we say we know that there’s somethings that we do not know, but most interesting of course, for sure, also they’re the unknown unknowns, the ones we don’t know we don’t know.

So, I am an example of the unknown unknowns, but I think what has separated me from some of my other colleagues is that I’m willing to do what Billy has said earlier today, “I’m willing to take a chance.” Particularly to try to meet unmet clinical needs and that’s really been sort of maybe I don’t know if that’s been my strength, but it’s something that I’ve been let’s say sort of obsessed with.

But we have a lot of doctors, I guess here in the audience, so everybody who’s a physician here raise your hand, so I can identify, who are gonna be the victims of this question. Well, so this is the histology from an autopsy and this patient that died had a normal cholesterol, had a normal blood pressure, was a non-smoker, did not have diabetes, had some plus, minus family history for vascular disease, but the histology that has been taken here would be taken from the three most important coronary arteries on the top of this patients’ heart.

Does this have a pointer here or not? Well the big one in the center on the left, all of that artery has been filled up with plaque and the little bitty hole down in the bottom right and that’s where the blood goes, so there’s no really room for very much blood.

And same thing on the that’s called a diagonal branch over on the other side, no room for blood there, and so I think we could all agree, particularly the physicians I think here would agree that this probably came from an elderly patient. Are we kind of agreeing on that? Yeah, or if not an elderly patient, than a young patient would have to had, high cholesterol, high blood pressure, would have to have a lot of risk factors for vascular disease to end up in this situation.

But I think what we can for sure agree on, universally out here, is that this could not have come from an Olympic athlete, probably somebody very sedentary in terms of their lifestyle right? Suckered you into it, really easily there, that wasn’t even very hard for the doctors here.

So, this autopsy came from Sergei Grinkov, who’s the Olympic skater who died on the ice, warming up for the what was 1996 maybe Olympics, I’ve kind of forgotten today. He was having chest pain during the warm up, and you can see why he would have chest pain, because all these arteries are almost closed, and he got shots in his shoulder because the pain radiated to his shoulder, so he was getting Lidocaine injections and steroid injections in his shoulder after each practice.

Steroid injections are not an effective therapy for coronary artery disease that have closed off all of your arteries, I mean it’s just sort of on a basic medical principle. He is a victim though of sort of accepting I don’t know kind of the standard of course, he can’t have coronary disease and I think that’s why we all need to keep sort of imagining you know, to have better solutions for these problems and he should have had a treadmill test or something, there’s a lot of ways to find out what he really was having, which those were actually ignored.

So, we’ll do what Billy did a little bit, I just want to kind of tell my story and then you can think about this, half is a little bit crazy. So, I’m at the bottom on the bottom left slide there, I’m the guy with the really white teeth and so I’ve been to the dentist. We did just get back from the tanning salon too, so we really do all look pretty good.

So, the guy on the far back corner holding his head thinking, “Oh my god,” that’s Andreas Gruentzig, and I don’t know if many of you might know the name of Andreas Gruentzig, but he’s really the father of all of vascular curcutaneous intervention in a way, so he was the first person ever to put a ballon catheter in a coronary artery in a patient and open up a coronary artery and help that patient avoid bypass surgery.

So, I had the opportunity to go to this particular conference in Zurich that time, we had a little bit of wine, which also explains maybe the red face. I thought showing the wine picture would be good, because we’re in the wine country, you see the, oh geez.

Audience: Brilliant.

John Simpson: Brilliant, yeah I thought you’d say brilliant, so Chianti, I don’t know if they do that kind of wine around here, but we formed this group and it was called the International del Tasting Society and it lasted for about a year and on January the 11th, 1978, Andreas Gruentzig signed the top of the cork with AG, I’m a cardiology fellow at Stanford at the time, so I’m pretty low on the totem pole, but he signs the top of the cork as AG as the CHBD, that would be chairman of the board, and then I signed the bottom of the cork, JBS and they didn’t know what to do with me so he has assigned me the title of keeper of the cork.

Not a particularly prestigious position and I have misplaced the cork, but I still have these pictures, so I just want you to know that I’m living up to my expectation. When I came back, I wanted to do that again, kind of what Billy said, “When I came back from this conference, I wanted to build a catheter and I wanted to test the catheter,” and we had seen Gruenzig perform one of these early balloon angioplasty procedures where you open up a coronary artery and now the patient doesn’t have to have bypass surgery, so it’s really magical.

And I don’t have any equipment, actually I don’t have a Home Depot nearby too, so that would be the thing I would really look for from now on, when you locate yourselves you need to be close to a Home Depot, I think according to Billy.

Some of the names on this, my little black book, then this would be in June of 1978, a name there is Norm Shumway, that Billy knows Norm. Norm did the first heart transplants at Stanford, not the first ones in the world. Shumway was a very supported person and the cardiac surgeon at Stanford, very supportive of my efforts to develop an angioplasty system and then I went to the Rakiem Corporation for my material.

And they did just like Billy said, he got his out of a Windex, I’m so much more sophisticated than that, Windex I mean really? I would go to Rakiem and I said, I need some tubing about this size and they said, “Well, we’re in a run now, we’re extruding all the tubing to wrap the Alaska Pipeline,” and so to divert that extrusion for what you, how many, I said, “Well I need about ten feet.” And they said, “Well, probably couldn’t really do a special extrusion for that, but why don’t we see if we have material back in our warehouse that would help you about the right size.”

So, they go back there, they find the tubing that is about the right size and we use that to make this catheter up on the top right hand side of the slide here, and that’s the first balloon angioplasty catheter which went over a guide wire that we ever used, not that one, we didn’t use that one, but that design’s the first one that we designed to be used in patients.

Now, that material, that plastic tubing came there was really cool, because it was actually the electrical insulation out of the F4 Phantom, so it happened to be just about the right size, it had been irradiated, we could blow a ballon in it, but it also had flame retardant in it, because the F4 Phantom needs that in case of a crash, but patients don’t need flame retardants in their coronary arteries so all that so it had to be taken out.

So, then we have to get the … we passed all the what do you call it biocompatibility testing, you know the flame retardants do not pass biocompatibility tests, just in case you don’t, that’s why I’m really giving you all the insights that you really need here. No flame retardants in your products.

The catheter was tested in a baboon at the NASA AMES facility down at Moffett Field. The baboon had a 40 pack year smoking history, just died of peanut butter, the baboon fibrillated while we were working on him and because the way this catheter worked and the defibrillator at NASA, did not, well it was a small defibrillator used for mostly for dogs, and it did not provide enough energy to cardiovert the baboon, the baboon died.

And the NASA really took not a very positive view about me, based on what had happened to the baboon, but we did an autopsy on the baboon and you can imagine 40 pack year smoking history and died of peanut butter continuously and that baboon had zero vascular disease.

There was not a narrowed artery anywhere in sight, so our goal was to test this and to test this concept and put the ballon in and blow it up and show how that all worked in a narrowed artery, a diseased artery, because we were sure the baboon would have them and that was not the case, a surprise right?

Also, a big surprise for NASA that the baboon did not survive, that particular now, the secret sauce in this particular catheter it moves over a guide wire, and so the guide wire is the thing that we were able to position inside an artery and the catheter then goes in over the guide wire, think of the guide wire as kind of the railroad track and the catheter would come in over that.

And I know it looks, it is, this was pretty … it grew into really elegant devices and then that company sold and then back in the 80’s, it’s called Advanced Cardiovascular Systems, sold to Eli Lilly, sold for a 110 million dollars and sort of back in the 1980 dollar range, that was pretty good.

But, after that device gets perfected then I used it in patients, a much better design of that. And here’s an example of what we could expect with balloon angioplasty. So this patient, John Smith, admitted to our hospital, Sequoia Hospital in Menlo Park, California and where the arrow is on the left panel, I feel like I’m … everybody understand? I’m used to having a pointer and I feel embarrassed that I didn’t bring a pointer, somebody must have a pointer here, JJ come on, so it’s his fault.

So, then over on the left side, that’s a narrowed coronary artery, oh look at you.

Audience: Jack of all trades.

John Simpson: My god, oh I’m going to be so smart now, see this is going to be … okay, so this is a narrowed left anterior descending, yes, who did that? Yes.

Audience: Billy.

John Simpson: Billy, you’re the man. Can I get a job? Did you decide on that yet or not?

Audience: We’ll talk later.

John Simpson: Okay, so it’s a narrow left anterior descending coronary artery and this patient developed chest pain, when his race car got up to 180 miles an hour. He was seen at Yale University and they said, you have coronary spasm and that’s a thing where you don’t have a narrowed artery, it just squeezes down on itself every now and then.

They gave him Nitroglycerin and he still got chest pain at 180 miles an hour, so he went to UCLA. UCLA said, they did a treadmill test, he dropped his blood pressure, treadmill test is a pretty common test if you’re looking for coronary disease and they said, you’re so sick you can not have an angiogram, we have to go directly to bypass surgery.

Billy I don’t know if you would go for a bypass surgery for a single vessel, LA did, this was ideal, surgeons love this kind of a patient at that time. So, he signed out of UCLA Medical Center, went to Hope Memorial Hospital down in Southern California and had an angiogram. This is the angiogram that shows this narrowed artery over here on this side.

I knew the doctor at the time, Joel Manchester and he called me up that night and said he wanted to send a patient up to have angioplasty and he didn’t want to use his name over the phone because he’s kind of a VIP. And so I said okay, I’m thinking John Smith, alright, that’s great. And anyways he said his wife will be coming wit him and he’s married and his wife will be coming and her name is Joann Woodward.

And so, I said, see some people know that, you’d be surprised at how many people do not know, the Joann Woodward connection. So, I tell my wife this, she said who was that call about last night? I said, “Well somebody, I’m gonna treat a patient tomorrow morning, Mr. Woodward,” and she said, “Who is Mr. Woodward?” And I said, “I don’t know, he’s married to Joann Woodward,” and she says, “You are a dumb shit.”

And my wife, that’s not usually the way she talks actually, but on this particular occasion, so this was two balloon inflation’s takes this artery from this to this, to this and it never recurred, without a drug, without a stint, without any of the things that we talk about, that we’re developing all the time now right?

So, I just point this out that if that’s what happened every time, then the whole industry would not have developed the way it is, but it’s really rare, because most of the time when you put a balloon in this, make it look like this it recurs, over anywhere from three to six months, maybe after a couple years.

John Smith though did come into the hospital under his name John Smith, and the scrub tech who was doing the prep and the drape, did look at Mr. Smith and say, “Hmm, wow you look like my favorite actor,” and so he said, “Well, who would that be?” I’m glad she didn’t say Robert Redford that would have been a bad … she said Paul Newman and he said, “I am,” and she I think had a cardiac arrest on site.

So anyways, the concept of making a little bitty balloon to go in to fix somebody’s coronary arteries as the way that was all worked out, is because of the unmet clinical need and that is so important for anybody at any … any angel investor and by the way all of these companies so the first company ACS and this company PerClose, we sold to Abbott Labs, made a vessel closure device here. It’s kind of a cruet here on this particular slide, but they all started with angel investors.

For really good reasons right? What kind of investor is going to be crazy enough to do this stuff, I mean you’re going to invest in a balloon, that somebody’s going to put … have they been putting balloons in coronary arteries before? No, not really, in humans, mm-hmm (affirmative), what’s gonna happen when you blow the balloon up? Patient’s gonna get a lot better.

Yeah, always, well, most of the time and it turned out that three percent of the time, we induced heart attacks in that era and we ever could’ve even evaluated that kind of technology in this current era right?

But, the need was so dramatic because the patients were having the bypass surgery, not everybody could have bypass surgery in that era, and it really contributed something that is very, very special, the problem with that technology is we’ve had to use some pretty big catheters in the groin and so they would bleed.

The puncture site would bleed and so we developed this device that sold to Abbott Labs because we needed to close off the puncture site and the pro-glide device here or the PerClose device also is used in {taver} patients, patients getting valves, percutaneous valves, so this was sort of … the advantages of this device were totally unanticipated, nobody believed that this device would be used to help patients get percutaneous valves placed.

Just to say that somebody actually developed a device and the original intent of that device maybe it’s not what’s really gonna make the difference. So, two other devices and these are all for Billy, he wanted to see really crude prototypes last night and so these are really crude prototypes.

So this device eventually the subsequent iteration of this, which actually doesn’t look like this at all, sold to EV3 for 740 million dollars and this device was predated that when it was a device that sold to Eli Lily for 120 million, these have cutters on them, so they shave out and clean up vessels and we do that in the heart and we do that also in the legs.

So, I’ll show you some examples, just to, this is almost unimaginable but the device, the foxtail device that was there on top as crude as it was, peaked out in daily sales of around 700,000 dollars a day, we had a few two million dollar sales days for that company, but that device was used primarily in the peripheralvascular space and it is a device that is shown in this, functions as a clean out device if you will, maybe call it Roto-Rooter.

So, here’s an artery that’s completely blocked off here, no flow, we fix it, below the knew, we fix it, and blood flow is really good, see I don’t know if you guys get it. So, here’s what happens with no blood flow, so this is a venous stasis ulcer and an ischemic gangrenous region in a patient that had hypertension, cholesterol, had a small stroke, atrial fibrillation, was not a diabetic but she’s 91 years old and she was bedridden on continuous IV narcotics and she was diagnosed as having profound dementia and would have to have an amputation of her leg, so we said, “No, we don’t think so, we can open it with these other technologies with these catheters,” and so we opened ’em all up, and this is after she had blood flow reestablished using the catheters and you can see all of this stuff heals.

In addition to that, her morphine drip gets terminated right? And she’s not demented at all, she is totally alert and she’s thrilled. So, she lived three years after or four years after this, was fully ambulatory and I promise you had she had an amputation, these patients don’t get the DuPont hyperflex prosthesis, they get one they never put it on, they go to bed and they die. So, it’s effectively like kind of a death sentence.

So, this is fixing a leg artery, this is fixing a coronary artery, where we clean out this spot up here at the top, then we balloon it, we kind of mess it up a little bit down here and here’s what happens to it later. It narrows down again where the balloon has been used, but where the clean out device and effectomy catheter was used it looks really pretty good, so this is really a way to look at what’s the best way to work on an artery? Clean it out or squish stuff around with the balloon, so there’s the balloon there so my position always has been, it’s better to clean it out.

However, to clean it out, you’d need better visualization that we have had historically and we can’t just rely on X-ray fluoroscopy to do that, so we decided to put on the catheter and this was the development effort that went on for a really long time, like seven or eight years to put a you could call it a camera if you wanted to. A camera on the cutter, so you could see what you were cutting and that way you would make a safer intervention.

So, this is a normal artery and this is what the OCT, optical coherence tomography is the way to image these blood vessels, you can see they have layered structure here that look very much like you’d see them on histology.

If you’re working on an artery you want to stay away from the layered structures, so I’m training you now to be an interventionist and then we’re gonna give you the tool that will allow you to do that. So, here’s the tool, this is from Avenger and that work? It’s the animation, so this device has worked 100% of the time in the animation, now you’re paying attention, so I knew you’d wake up eventually.

Alright, so here’s the device here it’s got a cutter on it, it’s got a little balloon that supports it, it’s got an imaging fiber matted inside the cutter and you can look through the wall and this is the imagine that you get to see out here. I’ll show you what it looks like here and how we use it and imagine that this imaging element the OCT element, Castle, Germany huh, that OCT imaging element encouraged a physician in Muenster, Germany to work with us, and so we go to working with him and while we’re there I want to take a picture of this sign, Castle, Germany.

Someone else in this room can tell you the story behind that, but my private driver because you need a private driver in that kind of a situation in Muenster, so my private driver is a subsequent speaker in this conference, you have to figure out who it is, he’ll probably tell you.

But these are arteries that we cleaned out using the penthatheros device and then here are all the specimens that we took out, so clean these arteries out and you get really great flow, and this is the great flow, it’s the thing that helps these patients avoid amputation or become ambulatory again as we’ve basically described.

So, let’s look and see how one of these works, and also we do have I know we have a lot of doctors here, so this is good. This is an angiogram of a below the knee, he’s the knee joint right here, below the angiogram is right here and it’s looking down here and this artery is filled up with junk. It’s a tentacle, technical term there. And you can imagine that if you go down in there and work on that artery and you wanna clean it out or do anything to it, the cleaner device, the first pass can be aimed at anything because it’s so filled up.

Oh, the doctors here would sure agree, that’s just, you can cut in any direction, when you get there right? Alright, you didn’t bite on that one, so this is what it looks like before and this is what it looks like after we clean it out and so this patient profound, we call it Critical Limb Ischemia for the non-physician group, so this patient at rest was having pain in their legs, could not sleep, and now we’re gonna show the video loop, now can we stop the video loop anywhere along the way on the next slide is that possible? Let’s see if it works, okay, stop it there.

Ah, oh good, alright great. So, this is the catheter that’s gonna work on that, that’s the one that has worked every time in the animation, it has the balloon on the back side, it’s got a cutter mounted in here and it’s gonna shave out any plaque that’s inside the artery and when you turn it on and this is the image that you get, which you only get this with OCT, this is normal artery.

So, in spite of what the angiogram showed, the interventionist, the angiogram lied, it said it’s everywhere and it’s not everywhere, it’s only on the backside, so we’re going to turn this device around, we’re gonna aim it over here, we’re gonna shave the plaque out until we get down and we see this then we’re gonna stop, so now we can just let it play.

So, here’s this in the patient, so this all normal, the cutter’s sitting right here, you don’t want to cut that, so we’re gonna turn it and aim it over here to the other side, so the layers go away so this is all just atherosclerotic disease, down here a little bit of balloon, now we advance that, we cut, we cut, cut, cut, cut, here’s the normal artery we stop, maybe stopped a hair sooner, but that’s normal.

Now, that you’ve effectively treated the patient almost like you’ve taken them back to when they were much younger. And so, what this also does, it allows us to give real tissue that the Merck and the people that do gene expression analyses and things like that, will be able to do that on a very pure atherosclerotic plaque without any normal tissue, we had a deal with Merck at one time at Fox Hollow, where we gave them a lot of tissue and the tissue actually was about half normal and half disease.

Well, this is all disease now because we know by the OCT images that we do not have any normal artery in there and that’s probably not all true here to be fair, but what the gene expression analysis, you extract messenger RNA and you put it on this chip, undulant chip, and you run it and here’s what you get, amazing huh?

Wow, that is so cool, that’s meaningless right? They say after you do some data processing, when you do the data processing, you get these heat maps and what it shows is the diabetic patients here, all the red genes are the ones that are up regulated, these are mostly the inflammatory genes that are pretty well known. The ones that are down regulated are green and those are not the inflammatory genes and there are few diabetics that have no elevation of their inflammatory profiles and there are few non-diabetics that actually do.

So, this would allow us to study this whole process and just make a whole lot more sense out of it. Okay, so the next slide is my scorecard, this is always the embarrassing slide, I hate to show it off, I think I probably get by it pretty quickly. So this is really John Simpson, totally working all by himself, he’s never had any help from anybody, it’s amazing what this guy Simpson can do, really, really talented.

So, these are the companies Advanced CardioVascular Systems, Devices for Vascular Intervention, Perclose, LuMend, FoxHollow and Avinger and these are the companies, this is what the ended up selling for, I take credit for doing this exclusively, I’m just, back to my amazing guy here, but if you add up all the numbers it turns out to close to 1.8 billion dollars in shareholder value.

All starts off with angels, eventually you outgrow the ability of the angels to do this, but Ray Williams, is my primary angel and then also my ultimate angel is my wife, Lynn Simpson, she has endured a lot, and I tell that she’s just so lucky and she says, “Nah, not really,” so thank you.

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