Massively Better Healthcare (Star Investor Halle Tecco)

0:00Halle Tecco:So you can imagine getting your competitors to sign off on you opening up a new clinic in a certain area. They have to determine and say, actually, there is a need or there's not a need. And those are your competitors that are determining that. Hello, and welcome to Giant Ideas with me, Cameron McLean, and me, Tommy Stadlin. We're co-founders of Giant Ventures, which builds and backs purpose-driven companies. At Giant, we're lucky to meet extraordinary people with Giant Ideas that are changing the world. This podcast brings you behind-the-scenes access to those ideas and the inspiring stories of the people behind them.

0:35We explore how one giant idea can kickstart a billion-dollar company, shape culture, and transform life as we know it. Today on the podcast, we're excited to be joined by Hallie Techo, an entrepreneur and investor passionate about fixing the healthcare system. Hallie is the co-founder of CoFertility, a company rewriting the egg freezing and egg donation experience. She's also the founder of Natalist and Rock Health, one of the pioneering digital health early stage venture funds. Now as course director at Harvard Medical School and adjunct professor at Columbia Business School, Hallie supports future healthcare leaders through teaching.

1:08She's also the creator of the Heart of Healthcare podcast, the number one podcast in health tech, and is about to release a book, Massively Better Healthcare, the innovator's guide to tackling healthcare's biggest challenges. Hallie and I were first introduced by Linda Avey, one of the co-founders of 23andMe. It's been a pleasure getting to know Hallie, bouncing ideas about all things healthcare. Welcome, Hallie.

1:28Halle Tecco:Thanks, guys. Good to be here. Good to be here. Great to have you with us. So, Hallie, we're here to discuss your giant idea of massively improving healthcare. Let's start with the US. The US spends more on healthcare than I think any other high-income country. Correct. And scores very low on a number of factors, access, comorbidities, lifespan. What is the core systemic issue with the US healthcare system? Oh, my gosh. I don't know if I could distill it to one core issue, maybe inefficiency if I had to choose one word, but not just inefficiency in terms of the delivery of care, but the way that we've structured all the stakeholders within health care.

2:06Halle Tecco:And we've added so many layers of middlemen. And as you know, a lot of times middlemen create a lot of waste and a lot of inefficiency. And so I would say that's a huge part of it. And then the incentive structure. So we have a very reactive care system that incentivizes care versus any preventive measures. So kind of those two things I would say are the main reasons why we just haven't been able to achieve the same sort of outcomes that you would expect for paying as much as we pay per capita. Can you break that down just a little bit more for some of our listeners? Some never have had the pleasure of receiving that letter in the mail from an insurance company in the US that says you owe$5 ,000.

2:46So maybe just break down why, how that happens for people and, you know, what the incentive structures are.

2:51Halle Tecco:Yeah. Well, the first thing to know is that in the U.S., most Americans are given insurance through their employers. So more people are on employer based care than anything else. That being said, we still have about 18 percent of people on Medicare and 18 percent of people on Medicaid. So a good chunk are on a version of socialized medicine. But most of us are given health care by our employers, and we don't have much say in what that health care looks like. We might have two or three options within that, but generally, like the employer shapes that experience. And today, people are with their employers for, can you guess how long?

3:24Not long.

3:25Halle Tecco:Two years, three years? So when you think about investing in someone's health, you really need to see that ROI in a quite short time frame. We enroll in health care every single year. And then if you're an employer for two or three years, investing in something that you won't see the ROI for five to 10 years doesn't really make sense. So that we call the time horizon problem within health care. So I guess the people receiving the actual health care, i.e., you know, the people living in America, there's not really a strong incentive for the end deliverer of the health care, the insurance companies, to either optimize the delivery, optimize the cost or optimize the quality of the care.

4:03Halle Tecco:Yeah, we say it's they're just passing the buck until someone goes on Medicare. Okay. Which is the public plan. Can we just just just go into that a little bit? It's sort of people might be confused why the insurance companies would not want to force cost down because ultimately they've got to pay for a lot of it. Why do the insurance companies not go and force cost down? Great question. So one of the big pieces of legislation that changed health care in the US was Obamacare or the Affordable Care Act. And in a lot of ways, it moved health care forward. And one of the things it did was it didn't allow health plans to deny someone for pre-existing conditions.

4:40Halle Tecco:So we saw an increase in the number of insured people and a decrease in people who are uninsured. So that was great. But another thing it did was it capped the profits of insurers to 15%. And we call that the medical loss ratio. And so you'd think that was a good thing. And I think overall, that is a good thing. But can you guess what happens when you cap profits to 15 %? How can insurance companies make money? There's one way to make money. Increase prices. Yeah. They have to grow the pie. And so that's really what we saw happen is that they actually benefit from prices and premiums going up because their profit is capped.

5:15Okay. Slight digression. Let's talk about the people in the US who are worst off in this system. So we talked about Obamacare. Probably I was on the 2008 campaign. and the thing that gave me the most pride from that was was a very significant proportion of people who didn't have any insurance suddenly got some insurance yeah but it gets 30 million it was like 30 or 40 million even yeah i think 40 how how many people now in the u.s just don't have

5:38Halle Tecco:any insurance because that's gone backwards hasn't it yeah um i think it's still pretty low obviously right now uh we're facing a lot of medicaid cuts sure and so with that i think we'll probably see an increase in the uninsured yeah um but it's still quite low okay it's been quite effective Okay, but that's people who have no insurance. There's the number of people who have insurance, but incredibly high deductible. So do pay for most of their health care out of pocket. Absolutely, yes. So the rate of people who can't afford health care is much greater than the rate of people who are uninsured.

6:06Halle Tecco:Okay. For exactly that reason. And we're starting to see folks who actually are choosing these high deductible plans and just kind of avoiding care and using health insurance more as a catastrophic plan. Right. So it's the cheapest on a monthly basis. And when I say cheap, it's still not cheap, right? It's hundreds of dollars a month. But they're saying, I'm just going to avoid any care beyond. There are preventive services that are required by the ACA. So you have certain things that will be 100 % covered by your health plan. So people will do that. And then they will basically stay out of the health care system.

6:40Halle Tecco:They will avoid having to take medication and use the insurance as kind of this backup plan because they can't afford anything else. They can't afford what they call the Cadillac plans. And this is not good, right? I mean, you've got a whole bunch of people who should be accessing healthcare who are just simply not doing it. Correct. And so what we're seeing now is a rise of companies in the longevity space that are attracting a certain demographic of higher income folks who are not being well served by the healthcare system, who are willing to pay out of pocket. And they're starting to say, well, actually, the sort of healthcare that I want is very different from what's offered right now.

7:13Halle Tecco:And my health plan is never going to cover a thousand biomarker test or a non-indicated full body MRI scan. But I want to take health care into my own hands. And so it's exciting to see because as we know, these early adopters, while they're willing to pay high prices, hopefully that group of individuals grows as the price goes down and we kind of normalize proactive care and make it accessible to more people. So we've diagnosed the problem probably at its core. It's about perverse incentives, right? and not having good alignment of incentives between the insurers, the companies and the consumers of the healthcare.

7:49If you were to reorganize US healthcare today, you had a blank page, what is the single kind of organizing principle you would use?

7:57Halle Tecco:So one of the things that I am a proponent of is portable insurance. So you can sign up instead of signing up in one year increments, you can sign up on 10 year increments. And if you can imagine a health plan that is going to be with you for 10 years, they have different sort of incentives. So I think that is one principle that I would continue seeing. I'm also I'm a capitalist. And I also think that competition amongst providers is really important. And so I think I would do more to even encourage competition because we know that in areas with fewer providers, the prices are actually higher.

8:28Halle Tecco:They're not competing. And so when you look at services in places like New York City, sometimes it's actually less expensive, even though general cost of living is higher because they have more competition. So I'm all about competition there. I'm also about competition in health plans. Like, why can't your employer give you a set amount of money and you go shop for that health plan? So then all of a sudden health plans are competing for your business versus competing for Janet in HR's business, who's choosing on behalf of thousands of employees. So consumer choice, competition, these are things that I think are really important.

8:59On consumer choice and competition, I remember a few years ago being pitched a startup to brilliant U.S. healthcare founders who as founders I would back for sure. They were obviously brilliant. Why didn't you back them? Well, because their idea was to provide transparency on healthcare pricing in New York. So their idea was to basically make it, you know, on a website, very publicly transparent, what the different prices were in different hospitals for various medications and healthcare procedures. And when we did the kind of network diligence on it and spoke to experts, they just said very clearly, there is no way the incumbents are going to allow this to happen.

9:30They are not going to allow price transparency to get out there. They will crush these guys. And I said, well, how are they going to do it? You know, this is America. It's the land of competition. And they said, and they just said they will crush them with, with, with nuisance lawsuits. They will go after them through regulatory channels. Give us a sense and our listeners a sense of the, the sort of the death nail of competition because of these incumbents who are so powerful, so well organized, so well funded. And you've, you've spent your career in some ways trying to break down that system.

9:59Halle Tecco:Yeah. Tell us how they, how they play dirty, how they stop this, stop this stuff happening. Well, hospitals today are actually required to publish their charge masters. So they are required to provide transparency around the cash pay prices. Most people don't pay cash pay. Cash pay is generally higher, right, to go into a hospital and pay on your own. You're a single person negotiating. A health plan can go and negotiate lower rates. So any health plan option is going to be lower. However, we now have more data than we've ever had before on the price of procedures. And founders are starting to use this to give consumers more choice and say.

10:35Halle Tecco:I think actually I'm on the board of a company called Collective Health. And we actually do this within the employer realm because we know that employers are the ones that are delivering most of the health plans. So we allow employees to select based on price and quality within the network that they're able to go to. So that's kind of the, in that place, kind of the right workflow in my mind. For a direct-to-consumer option, you'd be limited to those cash pay patients who are probably less tech savvy. Okay, so that's some of the solutions. But just to push on, is my characterization of the incumbents unfair or are they very resistant to change and well-organized and preventing it?

11:12Halle Tecco:Yeah, I mean, I talk about this a lot in my book, but we have an issue with the incumbent blockade, as I call it. And there's a lot of regulatory capture in the US. And the incumbents have a tremendous amount of power and not just within the market, but they've bent regulatory in their favor. How do they do that? Yeah, maybe a bit of a history. How did that happen? I mean, do we have lobbyists in the UK? We do, yes. Not quite as powerful as yours. I mean, healthcare lobbyists are the biggest lobbyists in D.C. They have a tremendous amount of influence. There are a lot of little examples within pharma, within health plans, even providers have people on the ground in D.C.

11:51Halle Tecco:that are shaping policy in their favor. And what do they do? Here's one example. So there's something called con laws. And these are actually at a state level, not federal level, that require any new provider delivering care to get approval of other providers in that area before they can open up new brick and mortar practices. So you can imagine getting your competitors to sign off on you opening up a new clinic in a certain area. They have to determine, say, actually, there is a need or there's not a need. And those are your competitors that are determining that. So, you know, that's not really fair.

12:25Halle Tecco:That's not really pro-competition and pro - that they can kind of stop and block their competitors in that way. And maybe just to give people a sense of the scale of this industry and these companies, UHC is worth$100 billion,$200 billion. Oh, yeah. At least. If you look at even just like the top 20 biggest companies, most of them are healthcare. And they're names that you might not even know if you're not a healthcare person, like McKesson and Cardinal. And United Healthcare. Yeah, United Healthcare. I mean, hopefully people know United Healthcare because they're so well-known now. But yeah, a lot of these companies are just massive and they want to keep their protective market.

13:05Halle Tecco:Yeah, they absolutely do. And they're, in many ways, hated entities now. I mean, most famously recently, the kind of horrific murder of the UnitedHealthcare CEO, I think, and the sort of surprising actually support for that, right? Amongst not just people you would view as extremist. Treating a murderer as an idol for a lot of folks, I think, is terrible, but it's also symbolic of where we are. And there is absolutely a consumer uprising that I'm seeing that's really bubbling up. And that is an extreme example. But we also saw, so I think it was Blue Cross, one of the Blues plans actually stated that they're going to put a cap on the amount of anesthesia they would pay for a patient.

13:50Halle Tecco:And you don't know how long you're going to be under beforehand, but they were going to cap it. And if you went over, you'd have to pay for it. And they did this, I think, last October. And people were outraged. So this was like a month or two before Brian Thompson was killed. Right. And people were so upset. And even like the anesthesiologists were really upset about this because why capping anesthesia? Like trust the anesthesiologist not to keep someone on for too long. Like why would they try to control that? And actually they reversed their decision about a month later because of that uprising.

14:20Halle Tecco:So people are starting to pay attention. The other thing that's happening that's new is that a lot of employees are starting to sue their employers for mismanaging the funds. Because technically, if you think about your health plan that's paid for by your employer, you think it's paid for by your employer, you're actually paying for that, right? You would have had higher wages had you not had to put so much into that health plan. And so now a lot of employees are starting to say, wait a minute, you chose this plan. You chose to work with this PBM. But this PBM actually, we think, is overcharging us.

14:54Halle Tecco:And so we're starting to see a level of sophistication from patients and consumers that are starting to hold their employers accountable. And to me, that's very exciting. So it sounds like any entrepreneur trying to reinvent the healthcare system in the US has some serious mountains to climb. Yes. But, you know, those that have succeeded, those that are kind of changing the game, what are they doing? How are they navigating this quagmire of incumbents and status quo, oligopolists and all the rest of it? Yeah, I think timing is a big piece of it. I've been in this industry long enough that ideas that didn't work 10 years ago are like the timing is right.

15:29Halle Tecco:And so I think sometimes it's just really paying attention to what the market is ready for versus what's a good idea. Can you give us a few examples? Yeah. Well, I mean, I think all of these biomarker companies that we're seeing like Function Health that, you know, there was one called Wellness FX that I did in San Francisco probably 15 years ago now. And I thought it was really cool. They sent a phlebotomist to your home. They took your blood work. They followed up with anything that was a regular. And you got to be on a plan to do that every six months that you could kind of proactively manage your health care.

15:57Halle Tecco:That company didn't work out. You don't know about it now, but now there are dozens of companies that are offering really seamless, you know, at home or, you know, at your local clinic to get a quick blood test that can give you so much data about yourself. So I think that there's now a lot more appetite from consumers that are willing to pay now that weren't willing to pay, willing and able to pay now. So that's a one area. but in terms of how they're those that are succeeding are doing and I think so part of it is timing and knowing like what the market is ready for and understanding where you can break the system without breaking yourself where you can kind of move actually move things and make a difference and then I think another is just like really smart business models because a lot of folks come to health care and don't realize how much of the mission that's going to matter in terms of your outcomes there are a lot of ways to make money in health care where the mission and the margin are not aligned.

16:54Halle Tecco:So you end up making more money by not actually fulfilling the mission of patient health and longevity or whatever that mission is. And so I think founders who get really smart about their business model and think about how they can align those two things are going to be in a much better position to make a difference and create an enduring company. What I've seen too from our investments at Giant is kind of two types of companies. One, that's definitely trying to build something outside the system from the ground up, by companies like sesame which is a direct uh yeah you know a cash pay marketplace for people who want to you know find health care outside of the insurance system and that kind of um supply and demand effect is actually really lowering the cost of health care on the marketplace in sesame which is pretty cool to see but another one we backed called rx diet is a food as medicine company helping um deliver affordable nutritious food to members on insurance plans and the insurance companies are actually paying them to do that so it seems like there's both models like you can build outside of it or you can kind of work within it to improve in that, that can also be very powerful in delivering better health outcomes and building very high growth companies.

17:55Halle Tecco:And we see a lot of companies go from one direction to the other. So they might start cash pay and then start adding on insurance because it takes a long time to go state by state and plan by plan and becoming a network. But then we also see the other way around of people who start selling to employers or health plans and then they're like, actually, let's turn on a conjecture consumer model. But the through line is more money still keeps getting spent on healthcare yes yeah yes more money and not necessarily better outcomes so i mean the thing that i was reflecting on the way on the way to this interview was that our day job is makes you an optimist right we're constantly meeting as you are amazing founders are using technology to go solve healthcare problems and you know it makes you very optimistic to people doing amazing stuff we back companies using molecular glues to drug undruggable proteins and obviously the explosion of ai for drug discovery and so we have this intelligence we're almost at super intelligence level as a society, as a human race.

18:48And you would think therefore things are going to get a lot better. But if you actually kind of step back, life expectancy has plateaued over the last 10 to 15 years. It obviously went down with COVID. And you look at it, why COVID, but also opioids, you know, clearly obesity is a big one. And so you kind of, you look at the optimism that we have, a kind of techno optimism around medicine and AI and how it's going to solve these things. but ultimately you know i guess if you step back the food we're eating the society we live in the stress levels the way we're living as human beings has to also clearly improve there doesn't seem to be much focus on that yeah i would say what's your take on that yeah i agree i mean i don't think we

19:26Halle Tecco:we categorize that as health care unfortunately and i have a degree in public health so in my mind i do think of the what we call the social determinants of health which is your everyday environment it's are you walking to work or are you sitting in a car for 45 minutes are you sitting in traffic? Is that adding stress to your life? Does that mean you're getting home late and you're eating like a granola bar and cereal for dinner? And so all of these things, as you said, like really do play a part in our outcomes that are outside of what we consider healthcare. And so I do think that it's really important that we think about kind of public health messaging, even though public health is under fire right now, but how can innovators kind of take that public health lens to encourage and make it easier to live a healthy life.

20:11Halle Tecco:Because at the end of the day, we can, in the U.S. especially, we have this idea that it's like individualism and your outcomes are because of your actions. But when you live in the United States and you have to drive everywhere because we don't have good public transit in most cities and we have food deserts in a lot of areas and we don't have access and so many people are disenfranchised from the medical system, you have to really wonder, like, is that an individual problem or is that a system problem? And so these are things that like a lot of that's going to take a lot of things outside of the entrepreneurial ecosystem to solve.

20:45Halle Tecco:But I'm very bullish that we can work together with regulators, with public health officials to kind of move together in the right direction. What do we collectively do? Do we think that despite the public health issues and the obesity crisis and what do we think the power of AI is just going to going to blitz through that? and through medication and personalized medicine? Is she going to override all these problems? Yes, I am so, so bullish on AI and healthcare. Like one area that I spent a lot of time thinking about is just chronic disease management. And there are a lot of ways that, so the example I give is I have asthma, but I have two medications.

21:24Halle Tecco:I have a preventive inhaler and I have a rescue inhaler. And if I don't take my preventive inhaler, then I could have an asthma. attack. But if I do take it, then I have some symptoms like I'm a little bit jittery. I don't sleep well. And so I actually don't like to take it unless I know that I'm going to have a trigger. So certain seasons I'll be taking it if I know I'm going to be exposed to some of my allergy induced asthma triggers. But I'm kind of like self-managing throughout the year. And then I take the lung function test once a year. And depending on the time of year that is, if it's during like my allergy season, I do worse.

21:57Halle Tecco:And if it's like in the winter, I'll do better. but I'm really self-managing and I'm a pretty savvy consumer so I can do that. But imagine if I actually had a tool that connected my triggers and basic data of the environment and told me today would be a good day to take your inhaler. Have you taken your inhaler today? And then what if I also had an at-home sparameter that I could just blow into once a month, once a week, whatever it is, that I could know my lung function to know if I need to be taking my preventive inhaler. Because if I have to get to the point of taking my rescue inhaler and go to the hospital, that's going to be a lot more money than an ambient tool that I'm like texting with every day that's checking in with me.