Introducing “Digital Health Business”
Introducing “Digital Health Business”
Dr. David Shulkin - The Ninth Secretary of the US Department of Veterans Affairs
Arguably the most important setting stone for a great digital health company is identifying a true unmet business need and crafting an efficient solution to solve it.
Israel has such an abundance of tech talent and technology can be a true differentiator, but without the business (and clinical) angle there is a good chance it will become a hammer looking for a nail.
Under that notion, we at Arkin Digital health decided to launch a miniseries of interviews with industry leaders, coming from different parts of the US healthcare ecosystem, hopefully to provide insights on the business side of digital health.
You can follow and listen to these interviews via
But if reading is your thing, we will publish the curated transcripts of the episodes also here!
For the opening interview we had the true pleasure of having the honorable Dr. David Shulkin, the ninth Secretary of the US Department of Veterans Affairs in the Trump Administration and VA’s Under Secretary of Health in the Obama Administration and a seasoned executive leader for many providers organization.
The conversation with Dr. Shulkin touched the complexities of working with the US government and the VA, how to better interact with large provider organizations and why we should all stop using the word “pilot”.
Nadav: I wanted to start perhaps with the government angle. I mean, not so many people have the opportunity to see how things are from the inside. So perhaps you can share some thoughts about working with the government. When an entrepreneur or a company think about working with the VA, for example, or a CMS, what sort of considerations should one have in mind?
Dr. Shulkin: Well, as you have mentioned, I have had the chance to lead the Department of Veterans Affairs, which is the second largest government agency in the United States government. And even after doing it, as long as I have under two different presidents, I'm not sure I fully understand how to work with the government. At times. It is a big place. It is full of very peculiar rules for how you purchase products. And what I say to young companies who want to try to go and to offer their services and products, that this is not an environment that they should do on their own. Now, every now and then, you have a unicorn where you hear a story where the government finds a small company and it's able to get in and and it's got a great success story. So it can happen. But it certainly is not the norm. It is a place that you need to have somebody who can shepherd you with the right type of strategies, the right type of operational issues to make sure that you don't make a mistake. Because in government, if you do something that doesn't follow the exact way of doing it, they're not likely to tell you that. They're just likely to just say, I'm sorry, it's not a fit for us.
Nadav: Perhaps as a follow up question, what do you think perhaps is the biggest or are two biggest differences between working with the government and working with a non governmental health plan / BUCAS (Blues, United, Cigna, Anthem / Aetna)?
Dr. Shulkin: Well, I do think that government makes decisions differently than private businesses. They're not as focused specifically on return to investment, but rather on the fit with what they're trying to get done and with the mission of their government agency. It is often more challenging for a small company to get into government. But once a company gets into a government contract, if it's performing well, it also is more stable. What a private sector company may do is it may start with a company and learn what it likes about it and then develop its own strategy. That is not likely to happen in government. Government isn't looking to develop and replace products or services. They're looking for what works for them. And if something's working, that tends to be a very long term, stable relationship.
Nadav: Sounds very sticky. So essentially, yes, can be an uphill battle, but once you're there, perhaps you will be there for a long time.
Dr. Shulkin: Right. And there are there are shortcuts in working to get into government, in finding the right contract vehicles. That means contracts that already exists that you can add on to rather than the start on your own. And knowing how to look for when government is seeking proposals and knowing what those characteristics are, the government is looking for so that you can move quicker in the process, particularly in the Department of Veteran Affairs, that often means knowing how to work with a service disabled veteran own small business because VA has a legislative requirement to offer procurements to veteran owned organizations if that company can provide a service. So these are very unique circumstances that a company needs to understand how to maneuver, how to how to execute, how to be competitive in a government procurement process.
Nadav: And what about health systems who are not part of the VA? You have also been part of hospitals and health systems, both as a chief medical officer and a chief executive officer. Are there any ideas about how to gear up go to market? What are the right places to start?
Dr. Shulkin: So in health care, of course, timing is everything and you have to find the right type of health system in this case that is looking for what you're providing at the right time. And if you have a really good product, but it happens to be the wrong time for that health system, it's going to be very hard to get them to want to move forward with a relationship with you. The second thing is, is that you have to look at the leadership of that health system. In health care in general, but particularly in the US, there is a lot of market inertia. If a system is doing okay, many leaders are fine, sort of not rocking the boat. So particularly if you're developing a product or service that is new or innovative, you have to find the right type of leadership at that organization that's willing to take the risk or unsatisfied with the status quo and wants to really make improvements.
You also have to find a customer that's willing to work with a young (and a foreign company). Many young companies just don't have strong brands or economies of scale. There's often a joke among hospital CEOs that that when you're looking for an accountant, nobody's going to blame you if you pick one of the big top four accounting firms because it's a safe bet. But when you go with a younger company or one that people haven't heard of, there's a risk in it. So you have to have a customer that feels comfortable with that. When you pick a partner, you really need to get all those characteristics of timing, of leadership, of comfort. If you can get all those lined up, I think that then that's a good partner for you.
Nadav: Which I guess begs a follow up question. Assume someone got in and found his or her champion. You're starting to work on your pilot and everything is really nice and going very well. But then there is always the question of what’s next? Given that you found your first champion, your first site, how can you think about things like scale or not, like death by pilot, which we hear a lot?
Dr. Shulkin: I generally dislike the term pilot because it means we're not sure. So we're going to we're going to test it so that what you really want to do when you enter the market, you want to look at that first customer as it is essential that that be successful. And success means not only having a happy customer, but having them to want to expand it in their environment. And if you find the right first customer, they become your biggest champion and they tell their friends and they talk in the industry about what it is that you've done. I know Israel is a very small market where people tend to know each other, but the US health care market is the same way. There's a relatively small group of top level decision makers and we all know each other and we all talk. And so if you can really find a great success with that first customer and they happen to be one of these thought leaders, opinion leaders that other people listen to, they're going to take a lot of that burden of being able to help you get your next customer away from you.
Nadav: Hospital care in the US is more than $1,000,000,000,000 (industry) and essentially I guess 90% of that is driven by 100 hospitals. So essentially 100 CEOs are responsible for almost $1,000,000,000,000 in revenues. If you can tap into one of them, that might be helpful.
Dr. Shulkin: Right. And I think that that's important to remember that in the way that that can help you with with success of that first customer, who then can talk about that to those other 99 people. You, in the same way have the challenge that if you're not ready or you don't perform or execute in a good way, that can also backfire on you.
Nadav: Maybe that could serve us well as a segue way to speak about Israeli companies. You have been working with a lot of Israeli companies, I guess the most advanced, the most innovative. What have you learned about Israeli companies?
Dr. Shulkin: I think Israeli companies have so many advantages. They tend to be very innovative. They do focus on execution. They're very driven. They move quickly. I think all of those are incredible advantages. And what I find about Israeli companies is, is that in general, they're not afraid to tackle hard problems or to take on challenges. And let's face it, Israelis are used to being underdogs. In fact, they're not only used to it, they actually embrace it. And if you tell an Israeli they can't do something, they're likely to want to work hard to prove you wrong. And I think that's a huge advantage, particularly when it comes to health care, because health care is filled with tough problems that frankly, a lot of places companies, don't want to tackle the really tough problems. They want to figure out where the market is now and take advantage of it. So I think what Israeli companies have it as an advantage is looking for those opportunities that are unappealing to the big guys, to the Giants and are willing to sort of thread the needle to go in there and to prove that these challenges can be overcome. And I think that's exciting. I think that's a unique spot that many Israeli companies have, and it's clearly an advantage.
Nadav: That’s terrific but I would assume there is there is also a flip side? You know, seeing the problem and charging full, full steam ahead, perhaps I would be curious to know what are the downsides? What are the things sometimes Israeli companies tend to miss?
Dr. Shulkin: Well, I think, number one, Israeli companies often need to learn a little bit of patience. This this same drive and sort of willingness and desire to fix the problem sometimes can bump heads with the American culture that often doesn't want to move quite as quickly. And so therefore, Israeli companies have to be prepared for sometimes taking longer than they want. And that means that they have to have greater amount of resources than necessarily what you would have if you were entering a smaller market or one that moved quickly. And of course, there always is exceptions to this. There are exceptions where the first phone call you make is a partner that wants to move quickly and everything works well. But too often I think the Israeli companies underestimate the inertia that I've talked about in the US market. I also think that understanding the mindset of the health care executive in the United States, what they're driven by, what their boards are looking for, what may get them fired from their jobs often is avoiding risk, and that isn't necessarily the mindset of some Israeli companies. So getting sort of that little tiny misread of cultural difference. Can often be a big deal when entering a new market.
Nadav: perhaps as a final question, what are the areas where entrepreneurs should shy away from given this current market environment? Where should they focus?
Dr. Shulkin: I think that asking hospitals and health systems and health plans to make long term investments is going to get more challenging. So I think that you want to have your eye on short and intermediate term wins. And by wins I mean both things that improve clinical care and the financial return of an organization. And one of the things I've learned throughout my career is that just having one is not enough. If you have something that's good for patient care clinically, but there is not an economic incentive to get that that solution implemented. It tends to be very slow or sometimes not happen. And on the other hand, if you just have something that's purely an economically viable product or service, but it doesn't do anything to help improve patient care or improve the mission of the organization, those two can be slow, so you want to look for the alignment of clinical and economic incentives. And I think that if you're doing things that are just improving the patient experience but doesn't touch one of the other areas, it's going to be more challenging. Also it's going to be challenging if you're working in an area that requires large capital investment up front without a clear return on the other side.
You know, I don't want people to walk away saying this is depressing because I do believe that health care has no shortage of big issues and problems and it's not going away. This is not we're not in the luxury good business. We're in the necessity and when people don't have their health, nothing is more important. And so, therefore, when you go back and you think about the advantages of the Israeli companies, the advantages are that they are looking to tackle those tough problems. And they're often in areas that no other companies have yet really found good solutions. And so therefore, there's going to be a strong need for what the Israeli companies bring to the world market in this new environment. But that doesn't mean that you won't have to change, adapt, evolve to be able to make sure that it's fitting in well.