Devoting Your Life to Reinventing a Broken System

0:00I don't care how smart you are, okay? You cannot navigate yourself through American Health Care. My dad had saved $50 ,000, which was all the money he had in the world to send us to grad school. And we're like, we have this idea to start a company. And we need about $50 ,000. So, could we have it? And he's like, heck no. And frankly, when you think about healthcare, I don't think we have a minute to waste. So part of this is that if you actually produce a net -better service, it doesn't mean that you're going to get paid for it. That was actually the really sort of incredibly painful lesson we were in from the first time that we built Athena.

0:36They were really built to react to catastrophe. So they're great at acute care when the fit hits the champ, right? They're massively under -invested and under -supported in preventing catastrophe. So why is that a tech problem? Like where does tech fit into this? At A16Z's recent LP Summit, we brought together hundreds of our limited partners and portfolio founders back together again in Las Vegas. The event was truly overflowing with stories of how founders are challenging the status quo and harnessing technology to make the world a better place. However, there are two industries where there is no question that lives are literally on the line, public safety and healthcare.

1:20Yet these are also two arenas for technological innovation that despite being so critical, are also often equally misunderstood. And that is why we've chosen to open up two of the summit sessions to the public to really show what a better version of the future can look like. Even in industries where technology is not always celebrated. So in our continued coverage of the event, today we discuss a company that is truly rewriting the rules of healthcare. And why two brothers thought that this was required in order to disrupt the industry. We've said it before and we'll say it again, the US healthcare system represents 22 % of the country's economy.

2:03If viewed as a separate entity, it would rank among the top four economies in the world. So in this episode, you'll hear from the founders of Devoted Health, Ed Park and Todd Park. Todd, by the way, previously served as the Chief Technology Officer of the United States, And together, they chat alongside A16Z General Partner, BJ Ponday. The two brothers bond over their deep -seated commitment to rectify a quote, broken healthcare system because, as Todd says, It's a combination of incredibly important and unbelievably screwed up. And in today's episode, you'll hear why building their own system from scratch may have been the only way why healthcare is a tech problem and how AI can reshape the system.

2:48But first, a story about the American Dream. As a reminder, the content here is for informational purposes only. Should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16C fund. Please note that A16C and its affiliates may also maintain investments in the company's discussed in this podcast. For more details including a link to our investments, please see A16C .com slash discotures.

3:22I have the distinct pleasure of sharing the stage here with two true OGs in the space of tech and healthcare, Edentod Park, co -founders of devoted health. So Edentod need no introduction, but I'm going to give you one anyways. When I think about what we've seen here over the last two days, we've seen these beautiful examples of how tech is going to really fundamentally improve our lives and change the world. And I can't think of a better standard bearer for this mantra than Todd Ned. And they're playing it to healthcare. And frankly, when you think about healthcare, I don't think we have a minute to waste.

3:55Our US healthcare system is finally broken. And what they're doing is putting together a team of experts with big hearts and brilliant minds to go after what I think is probably one of the biggest problems that our country's facing. How we're going to pay for care and improve access and improve quality. So naturally, this is not their first rodeo. They're serial entrepreneurs co -founded, Kasselite Health and Athena Health, and it's our pleasure to be able to partner with you as you build the Vodet. Honored to be here. So thank you. So to kick it off, Ed, why don't you first tell us a little bit about your founder's story?

4:29How'd you get here? So, Tan and I started the Vodet six years ago together, but the story of the Vodet goes back much further than that. Goes back to our parents, who came over from Korea in 1969 at the tail end of the Civil Rights Movement in the Umoor. They came to the US and searched for the American dream, life will be in the pursuit of happiness, better life for themselves and for their kids. So my dad came over, he studied chemical engineering at the University of Utah, where in a moment of oversharing, he basically said that he and my mom, as newlyweds grad students, had Todd as an accident.

5:02I'm like, thanks dad, I need to know that. And then he went out and got his first real job with the Dal Chemical Company, then make her a surround rap and scrubbing bubbles. I remember those promise because they were a really big part of my childhood, and became one of the most decorated engineers at Dao Kemalki, created more patents than almost any other inventor. And where he had me in Middle of Michigan as he'd grabbed again in the movement of the overturing, playing the baby. So good, thanks again, Dad. We grew up in Central Ohio. He was shipped off to a research facility in Granville, Ohio.

5:31And that's where we grew up among the corn fields and apple trees of Central Ohio. And we looked up to people like John Glenn, who we both got to meet, Dave Thomas founder of Wendy's. And we grew up with this idea, right? at this conception of America as a shining city on a hill, in a place where you could do anything. So after we grew up there, we both went off to Audi's to Harvard. Todd was the good one. He studied economics. I studied computer science. And I still remember my advisor saying, computer science, that's totally waste of time. Of course. You shouldn't do that. You shouldn't do it that.

5:59But after college, we decided that we were going to pursue the stream together, this idea of creating a company together. This was much to the sugar in our parents. So my parents, as you might guess, were Asian. And they're like, well, one of you should be a doctor and one should be a lawyer. By the way, Sarah, which is which, but one of you should be a doctor and one of you should be a lawyer. And in fact, my dad had saved $50 ,000, which was all the money he had in the world. To send us to grad school. And we're like, we have this idea to start a company. And we need about $50 ,000. So could we have it?

6:30And he's like, heck no, right? He didn't say that because that's not the way he speaks. But he basically said no. But we were quite persistent and said, could we please have it? And we still remember what he said. He said, yes, I'll give you the money because I love you guys. But I hope you feel fast because you're only two kids. And now both of our eggs are in one basket. So we started this company and we've always been obsessed with the idea of how do you create value by doing good? And for us, it's always been about the right care at the right place at the right time. So our first company was Athena Health, which started off as a women's health company.

6:59The idea was that if you so better care of underserved moms during their pregnancy, you could reduce the number of nico -days on the back end. And here's the thing, the clinical model was successful, but it turns out that the business model was not for, it would take many years to go through exactly why, but it has to do with the Byzantine nature of the US health care system. In the process of building that, we actually built a set of internet -based technologies to help power that network of women's health practices. And that was an electronic health record and revenue cycle management system back off the systems.

7:29That was super successful. We scaled that incredibly quickly. took that company public in 2007. It was the time IP only the NASDAQ of that year. It was about the time that my dad, like, looked at us and said, it's okay that you didn't become a doctor as a lawyer. And we went on, I see it on board as a public company executive for the next decade, while my brother Todd went to DC to serve in the White House. But that's how we got started. During that time, we learned a whole lot more about exactly what's broken with US healthcare. And we developed a lot of theories about how to fix it and devotes the result.

8:01Yeah, well, we'll get to that in a second, but Todd, I'd love to double click on one thing. So YouTube could have gone into so many different areas of tech. I mean, you're CTO at the White House in Obama. It's like, why healthcare? Because it's a combination of incredibly important and unbelievably screwed up, right? Which for an entrepreneur, it's like catnip. Because what that means is if you can actually go in there and build a solution that's helpful, you can actually create massive impact and massive value. And it's where you can both create some of those valuable companies ever, right? And in the process of doing so, and really as your core outputs, it's literally save lives, like literally save lives, dramatically improve lives, end pain, end suffering, protect lives, extend life.

8:47And it's just the most exciting kind of mission to be on. Yeah. So Ed, you alluded to this. Could you tell us a little more, especially for the non -healthcare people with all these, what works and what doesn't work in healthcare? I think one of the reasons that we looked at this, right, is that the way that you hear about startups in Silicon Valley, the standard device is find an ancient scratcher, right? Go out there, find a little problem, get sort of a little bit of a beachhead and expand from there. And it turns out that doesn't work because the fundamental economics of healthcare make it such that if you try going that way, at some point, someone's going to kill you.

9:20So for example, if you have a working diabetes management program, somewhere along the way, I've talked to Hospital CFO, Sue Basley, said, I can't fund our diabetes management program because it's actually successful in keeping people out of the hospital. I'm actually reducing hospitalizations, but why would I pay for that when it's actually reducing my core revenue source? Yeah, you're taking money away from someone. You're taking money away from someone at any given point. And so part of this is that if you actually produce a net -better service, it doesn't mean that you're going to get paid for it.

9:48That was actually the really sort of incredibly painful lesson we were in from the first time that we built Athena. So what does work? So what works is that you actually have to find a way to get paid by delivering better care. And as we have talked about a ton, better care, if you actually deliver consistently at scale, results in lower costs. But it's actually better care. No one wants to go to the hospital. No one wants invasive surgeries. No one wants a lot of things. Sometimes the better care will cost more, but an aggregate it will cost less. And so what does work is if you're able to take the total cost of care, and then do everything you can to make sure that you take care of folks.

10:24If you do that well and they use some of those expensive services class, then you get the profit from it and that does work. Yeah. So why is that a tech problem? Like where does tech fit into this? In order to understand what the best care in the world is, you have to do over the right care, the right place, at the right time. And that is an unbelievably complex and logistical exercise. Healthcare represents 22 % of the U .S. economy. as a global economy, US healthcare alone is in top four economy in the world if you look from a country basis, right? Because the US, China, right? Germany, and then you have US healthcare as its own economy.

10:58It's an unbelievably complex logistical exercise. And the coordination that's required to make sure that people get the right care at the right place at the right time is a sort of logistical and technical exercise on the order of the most complex logistics things that you've ever seen. The problem is that it's not set up that way. And so from our perspective, what was really important is to look at it as a fully integrated vertical thing that you could optimize against. And so the question we asked ourselves was, what would be required to build some sort of system to make that work? It sounded like basically you had to create your own system.

11:32Yeah, so yeah, you have to build it off from scratch. Yeah, so Todd, how do you build something like that, especially integrating all these different pieces? And pieces sometimes don't really go together, like tech and healthcare sometimes. Yeah, no, that's right. It really helps to be a middle -aged entrepreneur. When you do that, it's taken Ed and I, about 25 years to figure out how to do it, and to actually have enough credibility to assemble the dream team and the partners and the resources to do something as ambitious, which is, it really is we basically built from scratch an alternate universe full -stack tech -enabled American health care system as a service.

12:05Because it turns out that's what you need to do if you want to deliver at scale what Ed just talked about, right? at the right care and the right place at the right time, that basically both drives radical improvements outcomes and simultaneously lowers cost to tonn because as grandma says, a stitching time save is not. If you get people right here up front, they stay as well as possible, and they stay out in the real expense of hospital. And I realized at the beginning of the vote journey that in order to actually deliver on to vote's mission, which is to dramatically prove health and wellbeing, I've older Americans to start, eventually everybody, by caring for everyone like family, and because what you want for your family is to get them the best care in the world, and that's the right time.

12:42We realized, basically, after 25 years of learning mostly hard way, that you had to build this complete alternate universe health care system and service in order to actually hyper scale that set of results everywhere, right? And so what does that look like? What does that really mean? Basically, we have built, people call it a virtual tech enabled Kaiser Permanente, a tech enabled pay -value or it's a combination of parent provider. We call that all -in -one health care solution. And it consists of you pop the written thing of five ingredients, all of which we deeply massacistically. We built an entire health insurance company.

13:19But you also, because you had to, right? You have to. And so basically, and I'll kind of describe the half to each layer, right? So five layers, right? Layer number one is we built an entire health insurance company from scratch, right? Because if you're dependent upon the legacy health insurance, you're F'd. Right? They're just not going to help you not work with you, you're just not aligned to really support getting best care in the world to your patients. And so we built our own health insurance companies so we can control the funding, the data, the operations, the service to orient all the muscles of a health insurance company to basically do one thing.

13:47Folks and getting you the right care app for them to keep you as healthy as possible. And we number two is we built a navigator service called the Vood Health Guide, which is a tech enabled concierge that navigates you through the liquid ball of roiling chaos that is American health care, right? Why do we do that? Because I don't care how smart you are, okay? You cannot navigate yourself through American health care. No, anyone who hears ever been a patient or care for an aging parent can testify this. It is bullying. Oh my god, we have a concierge, a tech -enabled guardian angel that navigates you through that ecosystem.

14:16Green number three is we partner with great local doctors and hospitals and we love them all. But there's one very deep problem in the legacy network of doctors and hospitals, which is that for a whole bunch of historical reasons, they were really built to react to catastrophe. So they're great at acute care when the fit hits the chain, right? They're massively under invested in, under supported and preventing catastrophe. So that's a problem. So then we built number four, which is our own full -scale in -house medical group. The first truly great virtual care provider for seniors, that doesn't replace their doctor because you generally don't want that.

14:49But rather, compliments your doctor by delivering 17 additional major care services to whoever needs them, and 95 % telemetically the rest at home in person. They're collectively preventive care stitches in time and save nine. and concierge like high tech, high touch care that basically keep us well and health is possible. And then finally, last but definitely not least, and the key to the entire thing is software. Software eats the world, right? So we're number five is Oranoko, a software platform that we built, like everything else from scratch, it's the first ultra modern software platform capable of running both a health and a share and a care provider in one end to end system, right?

15:26And on top of that, more fundamentally, it's a right, care right, place right, time machine. From thousands of different sources, is its billion -complete picture of you, both clinical and nonclinical, and then analyzing you and then computing what you'd need next. And then the software platform owns its own health insurance plan. It owns its own navigator service. It owns its own virtual care provider and just orders those levers to then do all the things and often really complicate logistical coordination exercises, right? To make something very simple happen for you, which is the next right thing.

15:55And the next right thing, including a bunch of stuff that you never thought you needed, but are collectively the most interesting time that saved nine and keep you as well as possible and out of the hospital. So we were the first ever to be crazy enough to even try to build what I just said. We started in 2017, we built the thing and we can't quite believe what's now doing. I feel like we split the atom. It's like a thing that's not out of control in a really good way. So it delivers a net promoter score for members of 77. Wow. So that's Apple level higher than Apple. Higher than Starbucks. higher than Netflix, higher than Amazon, higher than USAID, companies we worship by the way, right?

16:30Way higher than healthcare, right? Secondly, five -star quality on clinical outcomes. Clinical outcomes that our own clinicians can't believe, actually best in the world at managing chronic illness, best in the world in intensive home care, best in the world at so many things. And then it cuts the cost of Medicare. And if you actually look a little bit deeper into that, what happens is we actually do more, what's called primary care for people, preventive care, then what happens in the US House of Small Raw. And that's a situation that saves on hospital costs, and the specialist costs, and an answering cost.

17:01And then we actually give some of those savings back to America, the American government. We take some of the savings and we actually invest in better benefits in Medicare at the health plan level and better service. And we keep some as product. And actually the combination of the superior benefits of peer service, all entering my spirit care, has made us the fastest growing health insurance plan and a monthly provider for seniors by a factor of 10 in America. We started eight counties in Florida with 2 ,300 members in 2019, and we now serve across 13 American states 140 ,000 members, by the way, in our initial target segment, which is called the Medicare Vanche Market, which is basically outsourced Medicare, delivered by private -side companies for seniors.

17:45You know, that's a $425 billion market. Yes. It's still early. So that's actually protected to grow because the US population ages to 1 .5 billion by 2035. And then the other thing I'll just say is that, look, I mean, we're starting with seniors, but everyone deserves the best healthcare in the world. And also have begun. Again, this is all a little surreal enemy to get calls from other countries. Yes, wow. Saying, can you come here and basically power my healthcare system, be my tech enabled healthcare system as a service? Because they're not going to build or not go. They're not going to be able to build this.

18:17It looked, I'm very confident that someone else can build what we built, because A, it's so incredibly hard. B, you need to have built at a very particular point in history where you can leverage all the learnings of the decades, but where things are still early enough, right, that you have a ton of run -by. Right? Just thirdly, just to be perfectly honest, right, because at the end of the day, what you just learn about entrepreneurship is that people are everything, right? No one else has my brother, right? I mean, no one else is my brother. I'm not aware of any of the human being like my brother, until he'll never say it's about himself, but he's like the Wolfgang Amadeus Mozart of healthcare software, right?

18:56He's both one of the best engineers on the planet. And secondly, he spent his entire life professionally in the guts of the American Art System. And so that intersection of the two, like nothing's a mystery. Well, let me double click on that, because actually what's amazing is the ed, you were basically the first architect and coater for Oranilco, the software. Yeah, yeah. It was kind of amazing. I don't know how to use it. Yeah, that's the same. I can do that. And actually, I was so jealous when you mentioned recently that you're starting to code AI with your own hands and play with these tools.

19:23I play with everything. I have horrible back boxes. And so I love just opening them up and looking at things. But I mean, good thing. I love my brother as well. Actually, like when we were growing up, and the eighth grade, I still remember Ty coming up to me and saying, hey, all my other friends treat their little siblings like crap. I promised you I'm going to be the best big brother I possibly can. He's kept his word. He's been the best big brother ever. It was a little bit tough. When we built a theme, Todd literally locked me in a closet and said, don't come out until you build software. And I'm like, okay.

19:51All great brothers do. All great big brothers do. It's a two story, okay? So, it's basically, Jonathan Bush and I started a theme. Yeah. And we get into really big trouble. And so, I decided to call my brother, who's like a hot shot, like internet consultant at the time, making six figures out of college. Right? And we're in deep, deep, deep, do do here. Can you come help? And so, he quits his job and comes to work for $18 ,000 a year. and a theme of stock, which then worked out for him. But we need to build software to run what we're doing. So he literally works in the equivalent of a closet.

20:21He literally gets up the morning, starts coding, goes back to sleep, gets him in the morning, starts coding, right? So he writes 250 ,000 lines of code himself. At a key stretch, the Cordy Keyboard, designed in the early 20th century to actually slow typing down, because it brought out the machines. So there's actually a format called Vorak, which is much faster. Literally the rate at which he could type What's the rate -leaming step on this bill? He creates software so he can literally reconfigure his keeper to do Doraque, right? And built Tony Stark and the cave in Afghanistan on the movie Iron Man, right?

20:50And a closet and a women's health practice in San Diego, he wrote the first web base that was called the time, right, software platform run doctor substances, right? It was just ridiculous. And he still codes, by the way. Yeah, I know. Well, I wanna get to that. What are you doing with AI? So AI is amazing. So number one, I actually think that One of the interesting things about AI and about technology in general is its leverage capabilities. I probably wrote 100 ,000 lines of code so far, devoted person. And so when AI comes along, I'm looking at the stuff, and you don't know, there's a bunch of hype, etc.

21:21So I go into it, and I'm like, oh, MG, right? And I say this as someone who is incredibly practical in the coming to technology. AI is actually the biggest advance, I think, to technological productivity in terms of the things that you do on a practical day -to -day basis. since work actually invented. And so when you look at it, I think of AI in two major buckets, right, as it replies to what we do. Yeah. The first major bucket is administrative. So somewhere between 15 and 30 % of total healthcare cost is waste, shuffling paper around. And so one of the first places we're looking at is how can we use AI to reduce a lot of that waste so that people can actually take, every day we have a choice between do we actually spend this money on care or do we spend it on shuffling papers?

22:06I'd rather spend more money on care. Right, so the first area that we look at is how much we do on that side. The other area that I'm excited about AI is in its ability to help make better clinical decisions. If there's a way to make sure that you surface the right decisions at the point of care, by the way, this works better in value -based care where you get paid for making better decisions that you created to value -based rails. Yeah, exactly. So if you're in the value -based rail, right, then you're in the situation where the AI which allows you to make better decisions will actually pay back in the space.