It’s Time to Build in Healthcare

0:01Here are some facts for you. Half of medications that are prescribed are never taken. 88 % of Americans are metabolically unhealthy. It's 20 % of our GDP, which is like double that of any other developed country. Perhaps none of this is as surprised to you. In fact, we've done several episodes on this topic, which we'll link in the show notes. But what we haven't quite touched on is why it's time for technologists to step into the healthcare rate. Because solving medicine is not enough. If you cure all cancer, you extend American lifespan by three years. So in today's episode, we explore why. Perhaps, kind of intuitively, we need technologists to be solving the equally real problem of making healthcare a delightful consumer -focused industry.

0:44And indeed, we are seeing that trend with founders from companies like Spotify and Coinbase taking their aim. But are these the right people for the job? And can they really disentangle the regulated and complex industry? Listen in to find out as we explore with A16Z by on health general partner Richard Konday and investing partner Daisy Wolf. So tech what do you say are you ready to build in healthcare? 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 A16Z fund.

1:23Please Please note that A16z 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 A16z .com slash Disclosures.

1:40You too predicted in 2022 that the biggest company in the world will be a consumer health tech company. That's quite the prediction, so I'd love to just start out by setting the tone, where are we today, where do we sit in terms of that prediction? I think when we wrote the piece, we had high conviction. But, you know, Ventures had a humbly business where you can have great ideas in the market or tell you what the market tells you. I think that parts have been exciting for me is that we've had a huge influx of excitement about that thesis. So, so far so good. And I think we've seen a lot of companies that are, I think, very much vying to be that trillion dollar or biggest company in the world.

2:15But obviously we're not there yet. This is just early stages. Yeah. And maybe it'd be helpful to actually clarify what you mean by a consumer company. because when I think consumer company, I might think Snapchat, I might think a sneaker company. Yes, oftentimes when people think consumer health, they think of these large consumer health companies like Roe or Hims that often prescribe drugs or provide telemedicine on the internet. And when we talk about consumer health, we actually mean something much broader. We think a consumer health company doesn't have to be direct to consumer. It can be distributed through B2B.

2:46It doesn't have to be cash pay. It could be something that's free for consumers because it's totally covered by insurance and it doesn't even have to be a services company. So like providing doctors appointments or prescribing a medication, it could be pure technology. But we think what defines a consumer health company is the ability to have amazing consumer experiences, which is something traditional healthcare has done a very bad job of. Totally. And in fact, most healthcare companies today are the opposite of that. And actually some people might describe healthcare today as intimidating, regulated, and complex.

3:20and in fact, YouTube both have referred to it somewhat in that fashion. And so, what do you think the tech industry in particular is set to do in a way that others haven't in the past to address this unique combination? Yeah. People often say healthcare is intimidating, which is often a euphemism for healthcare is really big, which is, in venture, a good thing. It's great to go after big markets. US healthcare is five times the size of the global advertising industry, which is what companies like Meta and Google make all their money from. And it's highly regulated, but tons of huge companies have been built in highly regulated markets.

4:00If you look at Airbnb or Lyft or even companies that have been built in unregulated markets, like Google and Facebook eventually become regulated. So we think regulation is kind of a marker of success and you run into it regardless. less than it's a good thing in healthcare. And healthcare is complex, but every industry is complex when you dig under the surface of things. And everyone thinks healthcare don't I need a PhD? I don't know how to cure cancer. And the PhDs who are working to cure cancer are doing extremely important work. But the reality is if you cure all cancer, you extend American's lifespan by three years.

4:35And we're still lagging behind other developed countries. And so you need technologists to come and do two things. One is like healthcare is a logistics, a data, an operations problem, and technologists are very good at that. And then the second is healthcare is really a consumer engagement problem. Even for really highly motivated people, it's super hard to navigate the healthcare system. If you're trying your best and want all the testing, it's really hard to know how to do it. And then we need people to help us kind of change our behaviors. 88 % of Americans are metabolically unhealthy. Half of people don't go to the PCP, half of medications that are prescribed are never taken.

5:14And so people might look at that and say, we have a societal problem, but the best company has changed the behaviors of billions of people, and there's no reason to think that couldn't occur in healthcare. I want to get into maybe some of the pushback because I feel like for some listeners, they might be thinking, all that makes sense, Daisy, but actually technologists are not the people we need. But interestingly, whether people believe they're the right people to provide a solution, we are seeing them start to take part. In fact, both of you wrote another article that said, hey, tech, it's time to build in healthcare.

5:45We're seeing founders from Instacart, Spotify and Coinbase, probably among many others, that have started to build healthcare companies. Why do you think that is? What's the why now of these people participating? Yeah, I think there are a couple of different elements. One of the primary ones is that much of healthcare and life sciences is starting to become much more of an engineering discipline. I think that's what really attracts us to tech. I mean, think about computer science is that it's almost like the ultimate engineering discipline and software It's just easy to engineer, but I think as we can engineer these other areas it attracts that mindset But also I think they see the huge tam that Daisy was just talking about But then finally I think it's more than just the means and money I think the mission actually also is very appealing and Daisy you shared this article Which was again a call to technologist to participate and there was I think you guys shared it in several places but just one of the posts had over 3 ,000 likes of 250 comments.

6:38So clearly people cared, right? That, at the very least, was clear. Just would love to get your personal take. Why do you think there was such a response, both good and bad? I think part of it is it was controversial. We work in an industry venture capital where a lot of firms have written off health care and they've said, look, people have tried and failed. but the reality is of the hundred largest public software companies, one is a healthcare and life science company and as consumers we feel the pain of that every day. Every time we go to the doctor's office and are asked to fill out forms we've filled out 150 times in the course of our lives.

7:20Every time we have a loved one that dies because of something we could have caught but our system wasn't set up correctly. And so I think one, the take was controversial, that this is the next frontier because a lot of people in our industry have written this off. But I also think it's something that everyone can identify with. There's no American out there who is like, we have a great health care system. We spend, you know, it's 20 % of our GDP, which is like double that of any other developed country. And we have worse outcomes. And we're all suffering. Let's talk about some of that pushback.

7:51And we'd love to hear your direct response to some of these people who, by the way, I think, have the same goals as the three of us sitting here, just to share a few. So Tom says he still sees that there are flurry of issues from entrenched vendors, integrations, backroom deals, and funding. Yeah, I mean, the healthcare system is huge, right? So I think part of you're not going to fix the whole thing in one go. And so there's a couple of different approaches you can take. One approach is to work, let's say, in rebuilding something full stack. And so companies like Devoted Health do that by being a Medicare Advantage company and and building payer and provider, basically doing everything.

8:26So that's really hard to do, but actually if you can do that, you can dress those issues directly because you're not as sort of victim to any of those issues because you are the full system. Working within the system is a lot harder, and that takes a really special person. Somebody that knows tech and knows, let's say AI, and knows all that stuff very deeply, but also knows a healthcare system deeply. There aren't too many people like that, but actually the number is growing very rapidly. Absolutely, let's talk about another piece of pushback. So a few kind of touched on this issue of the unique incentives that exist in the United States.

8:58So Dave, for example, is saying he's still not seeing the killer argument for why now. Susan has said that tech has been addressing healthcare for quite some time and we are seeing technology evolving something like an MRI, but when it comes to more of the system, it's still breaking down. And then I'll just read out Dave's comment directly. He says, the US is an outlier in terms of health spend as a percentage of GDP in terms of a measure of that service life expectancy in the US is worse What technology has the rest of the world kept from the US? Why is technology necessary? So let's take that into part so terms of technology I think there is technology in healthcare but it's largely in a user interface So like MRI is really the same MRI from like the 50s just now on a computer display And so that's not really tech.

9:44I would call it the absence of tech. And a lot of the tech that doctors use are things like electronic medical records. Which again, it's a record keeper. It's not sort of the high technology that we're talking about right now. We have this huge revolution in our official intelligence that actually can do amazing things with data that actually we could never really even dream about. And so that's a huge difference in terms of why now. Now in terms of what's actually different about the rest of the world is well those non -US healthcare systems don't have to deal with Americans. And American cultures are different, right?

10:14So it's apples and oranges to say, well, we have country A's healthcare system dealing with country B's people. And so the issue of Americans have our different. And we have issues in terms of diet, in terms of lifestyle. And those things are independent of technology or not. We actually love doing clinical trials. The real thing to do would be to apply one system to another for sure you can't do that. I think the reality is that what makes technology really powerful is the ability to actually affect behavioral change. And that's the thing that's really where tech maybe have some of the quickest impacts in America.

10:44I think one thing that makes the American system relatively unique is that most Americans get healthcare through their employer, which means they change healthcare insurance companies every two and a half years. I think that's on average how long people stay in a job. And what that's meant in effect is insurance companies don't feel incentivized to cover preventative care because they think some other insurance company will reap the benefits of that when you switch jobs in two and half years, which is a really unfortunate situation. But I think a few things are happening. One is there has been a rise of high deductible health plans, which means your health insurance doesn't kick in until you've already spent X amount of dollars of your own before insurance will cover a dime, which is a relatively unfortunate trend, but the silver lining of that is you start to see some more free market dynamics in healthcare.

11:36When people are paying for their healthcare out of their own dollars, they start thinking about quality and shopping and what they really want to understand about their bodies. And the other kind of why -now thing that's emerged is I think, Vigil will probably agree with me, that we wrote this article two years ago. In the last year, something has started to change, And it's partially driven by like a lot of amazing founders who are building these oftentimes diagnostic companies that are offering hundreds of blood tests and full body MRIs and there's just been this wave of consumers who really want to understand what's happening in their body.

12:13And it's not just biohackers and people in the Bay Area. It's people who have chronic health issues, who have gone to five doctors who can't figure out what's going on. But there's been this real movement toward wanting to understand what's happening in your body. And I think it's kind of a delayed thing that has come out of COVID. Where COVID reminded everyone of their own mortality, we all realize that like health is the foundation on which you can build a really happy fulfilling life. And if you don't have your health, it's a whole lot harder. And it just feels like we're seeing this real consummorship.

12:48Yeah, I have a strong gut feeling it's COVID as well. And I think it's not just understanding our body, but having real agency with it. What can I do? And I think COVID put that in the forefront of our minds, like what actions can I take for myself and my family, and so on. And now the question is, what data do I have to make those actions? And that leads to, I think, this whole new crop of companies. Yeah, so what I'm hearing is basically, the system is so entrenched and the incentives that exist between the provider and the insurer, historically has not been there to actually create this consumer incentive.

13:19And now you're saying that things have changed. There's almost like this groundswell of people who are raising their hand who are saying, I want to improve my health and I want to have a part in this and that itself is creating a market. So on that note, you basically said that the most impactful thing that we can do to fix healthcare is to improve the consumer experience. So I'd love to just hear your take on where you would even start there and maybe elaborate on what that means. Yeah, so I think first and foremost, you have to imagine like you're using the product or that your parents or grandparents are using the product.

13:50And so I want something that is frictionless where you know what is so exciting about using an ATIC product is that I don't have to click like a thousand different buttons or wait two days or something happens quickly. So I'd love it to be frictionless. I'd love it to be something where it's actionable where it gives me that level of agency. And then finally I think as funny as it is I want it to actually have just a great experience. So why do people buy Apple products or Google UI? It has that whole experience of something that is seamless and it shifts it from this burden to like Oh, I got a sim that line that the DMV to get healthcare done to this is actually something that is a streamlined and really Designed to make my life easier rather than to make someone else's life easier whether it be the payer or the provider One question VJ posed to me a couple years ago now And we've been debating ever since is what does healthcare look like 30 years from now?

14:40And what about 20 years from now? and what about 10 years from now? Because our job as Vendra Capitalist is to predict the future and try to invest in the future we think should exist. And we think healthcare probably looks like you have wearable devices that are monitoring your health at all times. Some of them are like the wearable devices we know today, some little things that penetrate your skin that are monitoring all sorts of things that are happening in your blood. And these wearable devices are going to predict that you're getting sick before you even start feeling symptoms. And you already do some rings already do this.

15:14Exactly. We saw this during COVID. A lot of these devices could predict. Right. It's like, exactly COVID coming on. And all of your data is going to be in one place every health record you've ever had. It's crazy. We don't have this today yet, by the way. But all of the data from these wearable devices is going to be married with all of your health records from every doctor you've ever seen. And 90 % of health care is going to be delivered probably from your phone and in your home. So you're going to be able to chat on your phone with a world -class AI doctor, the best cardiologist in the world or human doctor if it escalates to that.

15:47And we'll have at -home blood collection devices, we'll have at -home delivery of medication, and then you'll probably go to hospitals for a few surgeries. But that's kind of the forward version of what we think healthcare will look like in 30 years, and that's the amazing consumer experience. And then what we're trying to do is predict, okay, what do we have to invest in now? how to start making this a reality? Well, also, I think this is a bit of a mindset shift because that really also makes healthcare a logistics problem as well. And that's something that we think about tech all the time. You think about Amazon doesn't really sell things.

16:20It's a logistics company that makes it possible for all the stuff to get to us in the same form Walmart. And healthcare is really the right care at the right place at the right time. And doing that, actually, we need all the information that he's talked about, but then we need it to be able to be actionable with that together. He'll feel like all the other experiences that we sort of love in our life, that we have right now from technology. Yeah, and maybe one follow -up question there in that future that you just painted. All those devices or those trackers that we're seeing the early emergence of now, today those options are very consumer driven.

16:53I'm buying my eight -sleep, I'm buying my orange ring. Do you think that all of those devices, the holistic healthcare system outside of maybe the hospital where you get your serious surgery? Are those all consumer driven where I'm purchasing those or how do you see the overall large and incumbent model evolve to that picture. Yeah. So one thing that's helpful is actually health care is a term that's applied to a lot of different things. And so in the most extreme case, it's I need surgery because I hit my head and my brain is hemorrhaging or something like that. That's like this extreme kind of thing.

17:24That's not what we're talking about. Then the second one is, oh, I've gotten ill with something and I need some sort of treatment. In both of those cases, those are examples of sick care where those are procedures that just have to be done. There's a third area that actually isn't always associated with healthcare, which is the preventive side. And that's something that technology has a very natural role. With preventive, you can avoid getting into that second or to that third bucket. And when you start to think of healthcare that way, just even from a financial point of view, the most extreme thing is kind of like if you are a car, that's collision insurance or something like that.

17:54And then the middle bucket is, well, I'm going to just do routine maintenance and stuff like that. But the first bucket is, I'm not going to be a crazy driver. I'm not going to slam into things. I'm not going to go super fast. I'm going to do all that stuff. And I think healthcare is going to be that combination of all those three. But people basically ignore that first bucket and how we think about payment of these things will reflect those. And I think the answer you're question had on today most of these products are consumer purchased. And I think there's totally a world where insurance starts to cover a lot of wearable devices and things today that we think of as consumer products.

18:27And we definitely see that. It's funny when we look at these consumer health companies, we've invested and see a whole bucket of them that are trying to rebuild the healthcare system from the ground up and are basically saying like what you have over there, that's crap, we're starting over. And then we're seeing a ton that are trying to plug into the healthcare system. And a key way they plug in is they say traditional healthcare has the worst consumer experience in the world of any industry. And that really affects them. They can't get their customers to change their behaviors. And so they're building these consumer companies that layer on top of traditional healthcare and make the experience better.

19:03and you can envision a world where variable devices start to play in that territory. Yeah, and maybe to address something you said earlier, VJ about the kind of experience that we can imagine, right? Why haven't we had good UX or this delightful experience in healthcare? One thing that comes to mind for me is if I go to the app store on my phone, I have infinite possibilities, and again, it's consumer choice among those possibilities. When I think of my healthcare options, It's through my employer and I have two options maybe even from the same company high deductible plan or not right so Do you see that changing as well because I'm just thinking again from that place of incentives?

19:46I think it's incentives and I think it also helps to see who actually is gonna pay for it Yeah, so if someone's being out of pocket then it feels like a consumer app and that's something where you probably see it first And then those types of businesses may start to compete with the ones you're talking about and then in competition I think you'll see that the incumbents feel like they have to move in that direction. We've seen this in other businesses. Yeah. And just a layer on there, I think a key reason consumer experience has been so horrible in healthcare is help providers. So hospital systems, doctors, offices don't really see patients as their end customers because patients generally aren't paying for their care.

20:22The insurance company is. And so they're optimizing for the insurance company instead of the patient, which is a really sad existence. But what we think everyone has gotten wrong is that if you have amazing patient and consumer experiences, you can actually start to encourage behavior change, getting people to show up to the doctor if it's less of a horrible experience, filling their medication if it's easier, taking their medication if it's easier, affording the doctors if there's a financing option. And so we think everyone's gotten that wrong historically and there is a ton of opportunity. But part of it might be too, like who needs to come into actual with the right mentality.

20:57So with like Motorola have created the iPhone or something like that. Probably not, right? It takes someone that has a very different mindset. You know, when you look at companies that really change industries, often these are companies that come from the outside that work with the inside. So like in streaming music, it's something like Spotify and they didn't create new artists and create new labels, but they work with artists and labels, but they also came from outside for music system. And I think that brings up the point around these technologies and it's like what are technologies uniquely good at?

21:25And I'm thinking about some of these consumer engagement strategies like retention or gamification. So I'd love to hear from both of you. Where do you see some of these engagement strategies that maybe tech has previously flourished being applied to healthcare that seems like an obvious potential fit? I think it's going to be all of it. I mean, you mentioned too in terms of retention gamification. I think it starts with just even there's the product. And that's the gamification and other types of things and then there's the mindset for how to run the business Often to these is an earlier point when we're not paying people don't worry about retention They don't worry about because you want your health care or don't want your health care, right?

22:02I think those are not really choices and so when you actually have choices then people actually have to worry about retention And that will actually feed into product So it's that whole ecosystem shifting where we are much more in the driver's seat in terms of choice will lead to better products, as we've seen in many cases. Yeah, the best consumer talent in the world work in technology. It's crazy that today we all use apps for hours a day that didn't exist 10 or 15 years ago, and they've been so good at getting our attention and changing our behavior and changing the way we go about the world.

22:37If you go to a concert now, everyone's filming, so everyone can post it on Instagram. And your ticket was probably on an app. Exactly. And so the talent in tech for building amazing consumer experiences that change the way we go about our lives is insane And that talent just doesn't exist at all in healthcare and it's partially because what we were talking about earlier No one sees consumers as the end customer and therefore doesn't optimize and no one has bred that talent in the industry But I think when you marry people who understand health care and people who understand consumer tech really magical things can happen and in your article that we referenced at the very outset, this idea of becoming the biggest company in the world, especially when you're addressing an industry that feels so lofty and there's so many incumbents, I'd like to just hear your take on how that might actually happen.

23:23Like, how does a technologist potentially come into this huge industry? Is there really a path there? Yeah. We mentioned the beginning, this was kind of a controversial take because the consumer health companies in the public markets today are relatively small, but I said if you think about it from a first principle, perspective, healthcare is 20 % of the American economy. There's no reason this can't exist. And we basically laid out two ways we think a company could get to be the biggest company in the world via consumer health. The first is becoming a pay -vider. And pay -vider basically is an industry shorthand term for being both the insurance company and the provider of care.