Speaking at Alloy 2024 in Atlanta, I noted there are two types of organizations driving healthcare transformation:

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1. Industry incumbents, like the major health systems, many of which need to start recognizing the investment levers and innovation capabilities at their disposal — such as venture building

2. Early-stage startups that aim to disrupt the status quo and solve persistent healthcare industry issues facing providers, payors, and patients by creating new, novel solutions for those problems

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I was fortunate enough to chat with Microsoft for Startups Worldwide Lead, Health & Life Sciences Sally Ann Frank, Blue Venture Fund Managing Director Dan Phillips, and Elevance Health Director, Food as Medicine Kofi Essel about how both stakeholders above can form strategic partnerships that unlock opportunities for growth in the sector, including the creation of entirely new, venture-backable HealthTech companies.

Key Takeaways

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• Sally detailed how there are too many disconnected platforms that make it difficult for healthcare professionals to work collaboratively, quickly, and efficiently. Providers don’t need any more disparate point solutions. What’s really needed from startups are purpose-built systems that sync directly with healthcare systems’ EMR and don’t force them to have to learn new technologies. Taking their time and attention away from providing care and tackling back-office tasks only leads to more frustration. Talk to healthcare industry members to learn what they want and need in tech tools, then test your solutions with early customers to ensure the software truly streamlines their work.

• Dan explained we all need to have a level of humility when attempting to create solutions tied to the complexities and realities of the healthcare system. For startups, in particular, the prospect of coming in from the outside and trying to disintermediate some large part of the system can be “incredibly daunting, expensive, and time-consuming.” That’s where partnerships are invaluable. Work diligently to learn the nuances around industry issues before innovating. Work alongside ‘traditional’ players, then research your business ideas and models that could address big issues.

• Kofi noted having an outside perspective on healthcare can bring fresh eyes to the industry’s problems, but it also presents barriers to transformative progress. That’s because many startup founders simply lack intimate knowledge of the user (patient) journey. He indicated It can be hard to plant roots in the space without that expertise and experience. That said, working with healthcare organizations that have innovation arms can be a great entry point for entrepreneurs who either want to get their own healthcare-centric ventures off the ground or join an in-progress startup as an entrepreneur in residence to help launch and grow an early-stage company.

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See what other advice Sally, Dan, and Kofi had to share with the Alloy audience by checking out our entire session.

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Sign up for our Wavelength newsletter to access additional Alloy 2024 content, including recaps of our other sessions and keynotes.

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Transcript

Matt Brady: We are here to talk about transformation and innovation in healthcare, and we are so excited to talk about one of our favorite topics.

I’m Matt Brady. I'm a general manager with High Alpha Innovation. I help manage our partnerships with corporations, universities, and municipalities to bring the venture studio model to them.

To date, healthcare has been about half of the business that we've explored or in businesses that we've launched, and so it’s absolutely relevant to the audience relevant to the folks from High Alpha Innovation. And we're really excited to dig into it.

Up here on stage, we've got a bunch of folks who are thinking very new about healthcare.

Just in terms of my own background, before joining High Alpha Innovation, I was a strategy consultant, where I spent most of my time focused on healthcare working with large provider systems, national payors to help them think about growth and ‘the new.’ It was always challenging, unfortunately, for those incumbents to actually pursue the new.

And so that's what we really want to dig into today: different tactics, best practices for large incumbents to help improve the healthcare system. And we absolutely have the right skills and backgrounds up on stage.

So with me, I've got Sally Ann Frank. Sally is the worldwide leader for healthcare startups at Microsoft. She is also the author of the “Startup Protocol,” which is essentially a blueprint for how startups can better access and tap into large customer bases. So for all of my team out there, we're buying a bunch of copies of this book so we can think about how to actually crack into some of these big healthcare systems. Don't say I never did anything for you, by the way. 

Sally, could you tell us a little bit about yourself and your background in your current role? 

Sally Ann Frank: And thank you for having me today, and for the book plug. So yes, I've always been in technology. My first primary programming class was in high school. But fast forwarding a bit, I've been in the Microsoft ecosystem for about 20 years and worked for a startup that was a Microsoft partner. And we went through a variety of permutations as startups are likely to do. But once I left there, I went into Microsoft directly.

Prior to taking this role as the global lead for health and life sciences at Microsoft for Startups, I did a lot with IOT and healthcare. So remote patient monitoring connected supply chain, connected factory, connected product, medical devices, that type of thing.

In my current role, what I do is I work with high potential startups that are in our program to help them grow and scale using our technology and leveraging our customer network.

So, literally, walking hand in hand with these enterprise ready startups to organizations like, I don't know, Elevance and also working with VC companies like Blue Ventures to identify those startups that want to be in our program.

And just a quick note: Microsoft for Startups is open to anyone with an idea — from inception, all the way through to product market fit. And then, from there, we select a few. I've got about 35 in my direct portfolio where we do the deep go to market work. 

Matt Brady: Wonderful. Thank you so much for being here.

Next, we have Dan Phillips. Dan is a managing director at the Blue Venture Fund. Dan, tell us a little bit about that fund with its unique structure. 

Dan Phillips: Sure. Thanks, Matt. I'm excited to be here as well. Thanks for having me. So I started my career in consulting and have been with the Blue Venture Fund for the last dozen years or so.

We invest primarily in healthcare services and healthcare technology companies. It's a collaboration of the Blue Cross Blue Shield Association, 30-plus Blue Cross Blue Shield companies, and an investment firm called Sandbox. We're on Blue Venture Fund 5 now.

We've been at it for about 15 years. Fund 5 is a $365 million fund, so we can do a whole bunch of different types of transactions from early-stage, new company formation all the way through, through kind of growth stage and even buyout in some cases.

So we are looking for solutions and technologies that are relevant to payers, as they focus on, you know, quality, cost, member engagement, et cetera. 

Matt Brady: Great. And last, we have Kofi Essel, the Director of Food as Medicine program at Elevance Health. Kofi, tell us a little bit about your background. 

Kofi Essel: Hi, everybody. So my name is Kofi Essel. I'm a community pediatrician by training.

For the last 10-plus years, I've been in academic medicine teaching, doing research, advocacy, seeing patients on a day-to-day basis. About a year ago, I made a big decision, left the academic world and transitioned over to an insurer. The insurer's name is Elevance Health, previously known as Anthem.

For those who don't know, we serve over 47 million members around the country, over 100 million lives touched around the country. The opportunities to leave the academic spaces and in the safe bubbles and then be able to really innovate, to challenge to try new things in this space, where we're working with commercial insurance medicaid and medicare was something that I couldn't turn down.

So it's an exciting transition, and I've been here for about a year and really loved it.

Matt Brady: Great. Thank you.

So I want to dive in at first to a little bit of what might be holding healthcare back and I want to start, unfortunately, with a little bit of cynicism. Those who know me know that it's my most endearing quality to be a little bit cynical about certain topics, and healthcare, unfortunately, sometimes gets my ire.

Back in 2017, I was actually here in Atlanta working with a very large company, helping them develop an investment thesis for healthcare. I was in a lab with a bunch of experts and we've been researching healthcare and we came up with the answer.

The answer is that healthcare is very complicated and this was not knowable until we took the case on. And now that we know that it's very complicated, we're going to come with a lot of very exciting solutions. And I know I'm sure you, you all were very comforted by the fact that there were gonna be all these great new solutions coming.

Not much came, unfortunately. Similarly, every few years, a large, non-traditional player will enter the fray and says, ‘It's okay. I'm gonna take over. The adults are in the room.’

So we've got the Berkshires of the world, the Amazons of the world, JP Morgan. They're going to crack healthcare. They go into their own labs, and then a couple of years later, they kind of sheepishly say, ‘Never mind. That was maybe a mistake.’

So my question is, what is it about healthcare that's holding it back? Why is it that non-traditional players feel the need to jump in? And why is it that they ultimately kind of flounder and fail?

Sally, might be a good one for you.

Sally Ann Frank: How much time do you have?

Matt Brady: As much time as you need.

‍Sally Ann Frank: So, yeah, I mean, I think you alluded to the fact that if you know, JPMorgan, Walmart, you know, all these organizations are experimenting and then seeing experiments fail on getting out, it's hard.

But I think, from a startup perspective, the things that make it hard for startups is that there's no track record. You're trying something that's new and innovative, hopefully. And you don't have in some cases clinical validation and that can be really hard to overcome.

But I also think there are things that you can do as a startup that will facilitate a working relationship with customers who will help you get over those hurdles.

And let's not even start with the regulatory side of things. But one of the things I think about is that I've spoken to many clinicians, and Kofi would probably weigh in well here as well, is that we don't need more point solutions.

Okay, I have a CIO friend at one of the major healthcare systems and he says, ‘I have 3,000 applications that my clinicians are supposed to use. In reality, about 25 get used, and only 15 get used on a regular basis.’ His quest is, ‘Show me a startup that will get rid of 10 of those systems, bring them into one so that I don't have to leave my EMR to use.’

That's what we're looking for, and that's what startups need to pay attention to. So, it's about the journey of the end user.

And so, whether you're an insurance company, or you're a provider, or a life sciences company, they all have lots to do already. So, take your solution and look at it from the perspective of what the user has to do to use it. And how does it seamlessly, seamlessly fit in with the work that they're already doing, as opposed to making them do something new?

And I think that is part of the issue that we are up against, that people come up with this really great idea, and a lot of them are, but there's no way to actually Weave it into the fabric of that user's daily life. The other thing I caution startups about in healthcare, because our payment systems are convoluted to figure out who's going to pay for it.

Is it going to be reimbursable? And if so, how hard is it going to be to get that reimbursement? Is the patient going to pay for it? You know, I go to the doctor, and there's this one test. I go to the eye doctor. There's one test that insurance doesn't cover. So I have to pay $39. I'm okay with that. Other people wouldn't be. So look who is going to pay for it.

And then thirdly, and most importantly, understand your regulatory journey. I have startups that start as wellness tools, no, no regulatory, no regulatory approval required while they're working on FDA or CE marks. I also have organizations that focus on clinical decision support, an AI model that generates an answer that a clinician has to adjudicate.

Before acting on that finding, these are all things that will help you kind of overcome a lot of those Regulatory and other issues when dealing with enterprise 

Kofi Essel: I love that journey of the end user. I love that concept that you're talking about. I couldn't stand going out of my EMR and looking and getting other applications, getting it back in.

It just slows the process down all day. So that integration is key. a few things that I think about in particular I do think that this journey is really hard, right? And we all know it's hard. As a provider who was seeing patients on a day to day basis, really knowing what's happening on the ground, I had no idea what was going on behind the scenes.

No idea what was going on behind the scenes. And it was very surprising when I got into this payer space and started to really see, okay, this is how everything is actually made. And it made me so much more powerful and influential when I started to understand the systems at hand. I can't say the same for a lot of the startups that I'm working with.

A lot of the vendors that come in, they don't necessarily know the system very well, and it makes it really challenging for them to come in and to really sort of plant roots in our spaces. And we can kind of, you know, understand that really early on, and it doesn't really give them a fair chance at times.

There are a few things that we're doing at Elevance Health to really try to support new startups and vendors.

We have an entrepreneur-in-residence program where we bring in new startups that come in. They work with us for a period of time that learn the ins and outs of working within healthcare, within our healthcare payer space, HIPAAs and all those kinds of things that jargon, the language they're learning these things and then able to implement and have a much better chance of success.

We also have sort of a payment innovation team as well, helping them sort of develop new payment structures, new ways of thinking about how to get paid for these services and how to make sure that we're really understanding the right return on investment, how we can build that out. You're also seeing a lot of us.

I'm not going to say a lot, but some of the payors are starting to build out their own innovation labs. So some of the new ideas are coming from within, and these can be competitive, right, at the same time, but it also just continues to push the envelope. Some of my team members are here today, and a lot of the things that we're thinking a lot through now, we're getting it.

It takes us a while in healthcare to get it, but we're starting to really push human-centered design and innovation and really thinking outside the box and understand the user journey a little bit better. But we need to be able to work alongside experts like you all to move some of these efforts forward.

So those are some of the things I think about just to highlight very, very challenging, very, very difficult, especially behind the scenes. And sometimes we don't give you a fair chance to understand what's going on as well. 

Dan Phillips: I think also what. What Kofi said about kind of the need to understand the system applies to large companies that have sought to enter healthcare from outside the system.

it's, it's not hard in the healthcare space to identify challenges. Everyone in this room has interacted with the healthcare system. I'd be willing to bet that. Everyone here has has had a frustrating experience with the healthcare system. and it's 20 percent of our economy. So it's not surprising that a lot of companies large and small seek to enter healthcare.

But I think it does require coming at it with with some level of humility around the complexities and the realities of the system kind of regardless of how we got here. and so the prospect of coming in from the outside and trying to disintermediate some large part of the system can be incredibly daunting and expensive and time consuming.

So I think a lot of companies have Have found that to be the case which really underscores the need to come at it from a partnership mindset with the various stakeholders So it's 

Matt Brady: Such a great point. 

Sally Ann Frank: Yeah, I was just gonna say and let's not forget, you know, human nature is resistant to change so I think one of the things that we can look forward to is the fact that as our current medical community ages And we have newer younger people coming in who are digital natives Is That may give us an edge to those that want to be a little bit more innovative and look for opportunities to Provide healthcare like they bank and like they get their cars and hotels and all that stuff So there there are lots of points of hope.

That's just one of them. 

Matt Brady: I Completely agree and in Dan's great point about partnership. I think clearly Incumbents should be leading the way and I think that they should be You Cross pollinating to some extent to find better solutions for a consumer. I think it can be a little bit confusing at times because you hear about all these advancements, new medicines, new technologies, all these fantastic ways that we're improving health.

Then when you go to your doctor's office, you don't necessarily. Feel any of that your experience is the same, if not, if not worse at times than than than ever. And so I want to talk a little bit about some of the failure modes that we're seeing with with some of the big players. Sally, as we were walking back last night, you were talking about.

We seem to be in a little bit of a cycle right now. Our provider systems are. Moving away from their innovation teams and doubling down on the core. Just if you could talk a little bit about what you're seeing with some of the big players and some of those, those classic failure modes that we, we might be experiencing.

Sally Ann Frank: Yeah. So, you know, that was one of them. We've seen the innovation teams decimated both on the Provider side, and in some cases on the life sciences side, and that is a return to the core business. That's about trying to in some cases on the provider side where they're operating in the red and they just need to get patient care.

The other thing that's really interesting is that we have all of these trends that we've all heard about where we've got, you know, an aging population, fewer providers. we've got issues with access to care across, you know, all demographics, all geographies globally. And so, our, our failure modes are all about really trying to figure that out and realizing that it's such a hard problem.

Wall to climb that one organization, one person, one startup, one company can't fix it. And so when we look at health information exchanges when we look at some of these new organizations consortiums like chai or train trustworthy Responsible AI network. these are the places that bring together the providers, the payers, life sciences companies, and the technologists and the regulators.

And it's through that ecosystem work that I think will. Overcome a lot of these failure modes.

Matt Brady: Dan, I wanted to ask you from your experiences, what does it take to get mindshare for leadership teams? You've got a portfolio of startups you want to deploy them in, in certain geographies with, with certain plans.

For example. What does it take to get them to, to shift and think differently about these new offerings, these new solutions, the potential, and to get them to, to pay attention and, and, and make sure that they're actually. Trying to change the system.

Dan Phillips: Yeah, I think there needs to be a few things.

One is a a sufficient focus on the problem that you're attempting to solve — something that's meaningful for the company that you're seeking to sell into, and ideally something that can be isolated in some way.

So if you're bringing some new care management solution that you think is going to be applicable across an entire member population or an entire patient population, that's not something that can really be chewed off easily and requires an incredible amount of, of trust and data and track record to get to that point as a vendor.

So finding some area and there's so many spaces like this in the healthcare industry that are kind of niche specialty areas that are poorly managed, incredibly high-cost. We've seen success with companies that are attacking those types of areas saying your health plan or health system don't necessarily have the in house specialized expertise for this specific thing.

But let's say startup company are focused on just that and and managing that population and engaging them in some way. We found success with those types of businesses that can can carve out some specific area, define what their proposed outcomes and goals are, and then and then show data to support it. 

Matt Brady: I want to get into some of the tactics of what startups can do to make sure that they're they're clearly resonating with the leadership team and what their value proposition is. But Kofi, you've you've transitioned recently from academia to provider to massive company.

Tell us a little bit about the dance that you've been going through and how to get leadership, you know, kind of stacking hands around a new opportunity to do something differently. 

Kofi Essel: Yeah. so Matt mentioned, I have this title, the food is medicine. Program director. What is food is medicine program director?

You must be saying so traditionally the, the payer space, healthcare space has not been as intrigued by this concept of food is medicine. The way we define food is medicine. These are strategies, strategies or interventions that work alongside healthcare that give access to high quality foods focused primarily on three things.

How do we prevent, how do we manage, and then how do we treat disease? How do we use food as a tool, as an authentic tool to help to prevent, manage, and treat disease? We're not saying eliminate medications. We're not saying eliminate other things in healthcare. We're saying, how can we use it as an adjunct, recognizing that our members are interested in using food as a tool.

Our clients, our employers want to use food as a tool to be able to do that. When I came into this organization, I think the exciting thing was There was already a space for this, right? There was already ways in which we are already engaging using food, primarily around addressing some of the social drivers of health.

One of the things we often talk about is food insecurity, right? For lack of better words, hunger.

We were seeing high rates of hunger throughout the country. We know that hunger sort of worsens diet related chronic conditions as well. Households that experience hunger or food insecurity have much higher rates of a list of different chronic conditions as well. So we knew we can't ignore it. We have to address it as a company.

We think about this concept called 'whole health,' where we think about all these other concepts outside of what's happening in the clinical exam room, not just what I'm doing with my patient one on one, but what What's happening in that environmental circumstance and situation as well.

So we started working on this concept of hunger and started providing food in different ways and and saw that, hey, there were things that were occurring as a result of that. We said, Can we go a step further? A step further was using food to prevent to manage and treat disease. How do we do that? How do we optimize what we're giving to our patients and families?

So the goal was to bring in some subject matter expertise to be able to do that. And then they said, Hey, You know, and, and, you know, I came into this position and it's been, it's been great. Has everybody been so excited about it? Not necessarily at first, but when they hear the data behind it, right. When they hear the leverage points that we can use, when they hear the return on investment that could occur.

There's been incredible buy in from our company across the board and especially from a lot of our national accounts as well. So for our private insurance, for a lot of our clients around the country, when they start to hear about the data around some of these concepts and not just Return on investment around dollars, but engagement, satisfaction, meeting members where they are.

There's so many other factors that we think about to be able to tell that story, to build a narrative storytelling has been huge. And it's been something that's gotten a lot of people to buy into this concept of food is medicine, not to mention there's huge national investment in this as well. Right? So center for Medicaid, Medicare services, you're seeing to invest putting pieces in place for this.

You're seeing a lot of. Sort of momentum across the board. The White House had a huge conference a few years ago on hunger, nutrition and health. The time is right now. The time is exciting for this. It's about getting people signed up and on board. And the key has been storytelling.

It's been about, 'How do we tell the right story? How do we build that narrative? And how do we sort of do this in an innovative way?'

Matt Brady: A couple threads to pull here. Storytelling. Absolutely critical. especially if you're, you know, a founder of a startup, you have to be able to tell your story clearly to someone who might be purchasing it. Data, right?

Being able to connect it back to a business case within their, within their organization is absolutely critical. There are a bunch of different tactics you all have observed. And in fact, your, your book is largely a list of best practices. Could you tell us some other? You know, other ways that that you've seen traction be gained by some founders, Sally, other best practices for a startup to get their toe in the door of a large corporation.

Sally Ann Frank: Yes, there is. so one of the things that I go back to your storytelling is that most of the founders that I work with in health and life sciences, which makes it really unique, is that they have a compelling story about why they started the company, whether it's A loved one or themselves that had some kind of really critical health event.

And so I think telling that story is also very meaningful because it gives you credibility, but driving ROI, even if you don't have it yet, anticipate it, estimate it, talk about it. One of the things that I recommend in, in my book and with the startups that I talked to is when you're early in your journey, Find proxy customers.

This is a term that I developed in terms of looking at people who are not going to buy because you've got nothing to sell, but are your ideal persona that you want to sell to. And if you get them on your journey early, they will help you every step of the way out of the goodness of their heart, because they're bought into your mission.

And so then they become early pilot, early adopters and pilot project folks and all of that as well. But the idea about finding someone that it becomes your champion or a group of champions at an enterprise that understands what the mission is and wants to buy into it, that's key. The other thing I think about, and I share with.

The startups is understand what your business model is going to be, even if you don't have it yet, but start building it. You need to understand who's going to pay for it, who's likely to buy it and and where that money is going to come from. And it can't be from the innovation team, because that will only take you so far.

So on Dan's comment about it. You know, not trying to be this behemoth, start with something small that is a bit more tactical, but has the potential to grow. So if you're doing patient engagement, start with one chronic condition, for example, and then you can move to others. So there's a whole variety of things that we could talk about, but those are just a couple that kind of pop up.

Dan Phillips: And I might add to that. There's also when you get to like, let's say the partnership or pilot phase. you need to make sure that there's alignment on how success is being defined. and so that goes to what is the actual objective? And then also, how are you going to measure that? And we find misalignment oftentimes between startups and large companies where they get to the end point and find that they are measuring and defining success in a different way from their prospective customer which is harder than it sounds because a lot, oftentimes take a payer, for example.

They might be working with a dozen different vendors across some patient population, and just the simple task of attribution of some solution to a given patient population to measure, well, let's say cost or quality or whatever it may be, is incredibly challenging.

So if you don't have that defined at the outset about how you're actually going to do that can cause a lot of problems when you when you get towards the end and are trying to expand with that partner. 

Matt Brady: I want to protect some time for Q&A, but I do have one one final question. I've got more, but one final question. Take some of those tactics and flip them. what are some of the things that BigCo can do, a large provider system, a payer, to make it easier to work with them?

What are some of the things that they could help navigate or things that founders should be aware of to help navigate wearing the big company hat What are some of those tactics to make it easier to embrace the new sally? 

Sally Ann Frank: So I think, from an enterprise perspective, the greatest gift you can give a startup is saying no soon. I have this thing about 'see-mores.' Like, you're trying to sell something, and they go, 'Oh, but can I see that?'

And I want to see that. And I want to see that. And they're just churning your time. So number one is say no soon. That's super helpful.

The other thing is, you know, Dan's point about what is the goal and what are the measures of success critical? I think communication between what you're trying to accomplish, what the startup can provide and where the gaps are is critical.

I also think that. Helping the startup, if you really want them in, help them navigate the organization. A startup doesn't sell to one person. You probably have a clinical champion or some kind of clinician. You have to go to procurement, you have to go to IT if you're digital, you know, all these things.

Help them navigate and be their champion. Where if you believe in what they're doing, be their champion and give them the back stories so that they can be successful. And then as a startup, bring that person along. And when you do your first case study, bring that person along so that they get the personal props that they deserve as well.

Matt Brady: Thank you so much. We've lived that quite a few times. And so just even navigating the organization, having a sherpa, someone on the inside that can go around with the startup and make sure that they're opening the right doors and telling the right stories is absolutely critical. So thank you for that.

Well, thank you all very much. And thanks again to Sally, Dan, and Kofi for joining.