0:00:03 – Hi, and welcome to the A16Z podcast.
0:00:05 I’m Hannah, and this is another in our series
0:00:06 of all remote podcasts.
0:00:08 We’re at a moment where we’re now seeing medicine
0:00:10 go virtual faster and at a scale
0:00:12 that it has never done before.
0:00:15 So in this conversation with A16Z Bio General Partners,
0:00:17 Vijay Pande and Julie Yu,
0:00:20 who come from the worlds of biotech and care delivery,
0:00:22 we talk about what exactly virtual care
0:00:24 and telemedicine is and what it isn’t,
0:00:27 what it works well for, what doesn’t yet,
0:00:28 and where there’s potential.
0:00:30 And finally, the current pain points,
0:00:33 including regulation and what we’ll learn
0:00:36 from this current moment for the next generation of tools.
0:00:37 Stay tuned for another episode soon
0:00:39 where we’ll also cover the clinical perspective
0:00:42 from the field next.
0:00:43 – I’m gonna tell you guys right now
0:00:46 that there may be some dog barks and kid stuff
0:00:47 in the background.
0:00:49 Okay, so we’re all getting these messages
0:00:53 from all our providers telling us to use virtual chat,
0:00:56 to use all these different telemedicine tools.
0:00:58 So we’re in a moment where medicine
0:01:01 is really going virtual at scale.
0:01:02 Can we start by just talking about
0:01:06 what virtual medicine or telemedicine actually means?
0:01:07 What those different categories are?
0:01:08 Is it all the same thing?
0:01:11 Like, what are we actually talking about here?
0:01:12 – Typically what people think about
0:01:14 when we say virtual care
0:01:17 is probably the traditional sort of video visit
0:01:18 where you have two screens,
0:01:21 the patient and the provider are talking to each other live.
0:01:22 Virtual care I think is much more
0:01:25 of like a broader paradigm around,
0:01:27 how do you sort of overcome
0:01:30 the constraints of the traditional healthcare system
0:01:32 which are largely I would say two things.
0:01:36 One is geography, which is that typically you as a patient,
0:01:38 the demand side of the market only really has access
0:01:41 to the supply side that is within a reasonable radius
0:01:42 of where they physically are.
0:01:44 And then also the physical brick and mortar
0:01:46 component of healthcare.
0:01:49 – So basically a way to get around the fact that you,
0:01:51 at the moment you have a certain doctor
0:01:53 within your geographic range
0:01:55 and a certain provider and a story.
0:01:55 – Yeah.
0:01:57 And it’s more than just video visits as well.
0:01:59 It could be asynchronous messaging.
0:02:01 It could be continuous monitoring.
0:02:03 It could be, you know, sensing.
0:02:05 – Frankly, it could even be a telephone call.
0:02:08 I mean, we can go low tech in addition to higher tech.
0:02:09 And as an alternative,
0:02:11 just everybody goes to the emergency room
0:02:12 ’cause they don’t know what they’re doing.
0:02:14 Just even the triaging of the telephone call
0:02:15 goes a long way.
0:02:18 – In terms of on the biological side,
0:02:21 what works for telemedicine and what doesn’t?
0:02:25 – I can say like, oh, I have a fever and my ear really hurts.
0:02:26 I’m highly suspicious of an earache.
0:02:29 And like probably you could make that diagnosis
0:02:30 based on a lot of stuff
0:02:31 without actually looking in my eardrum,
0:02:34 but like listening to lungs or listening to heart.
0:02:37 Like how, what are the limitations of what works
0:02:39 and what doesn’t for this particular medium?
0:02:41 – For a general practitioner,
0:02:45 you could probably do a vast majority of what is done there.
0:02:46 I mean, certainly not everything.
0:02:48 Let’s say just even in the routing function
0:02:50 where we’re trying to just understand
0:02:52 what are the more serious cases and what has to be done?
0:02:55 You could probably do a lot of triaging
0:02:57 and that might be the most important thing.
0:02:59 And the key thing is especially in a situation
0:03:00 like we have today,
0:03:03 you have routing with the benefit
0:03:06 of not having to bring someone in physically.
0:03:09 And it’s natural thing about what you can’t do,
0:03:11 but just the unique things of what you can do,
0:03:13 reaching people immediately
0:03:16 and also keeping them sort of quarantined
0:03:17 is particularly intriguing.
0:03:20 In many ways, like an ER or a hospital
0:03:23 as well as most dangerous places to be just in general.
0:03:26 – So you’re saying essentially it’s not really about diagnosis,
0:03:28 it’s about triage?
0:03:31 – I think diagnosis goes hand in hand with triage,
0:03:33 but that might be one of the biggest wins
0:03:35 just to know what to escalate and how to handle it.
0:03:38 In some ways that’s what a GP’s job is, you know,
0:03:40 to say, oh, this is something that can be dealt with home care
0:03:42 or this is something that can be escalated,
0:03:43 that needs to be escalated.
0:03:48 The telephone call, the call your kind of pediatric nurse stuff,
0:03:51 right, like there’s been some level of that already.
0:03:54 We’re starting to lean on that a lot more
0:03:55 in this particular moment.
0:03:58 The video chat is definitely one of the things
0:04:00 we’re seeing most, where are we right now
0:04:03 in how much we’re using these tools
0:04:08 and how kind of robust they are in their rollout in the system.
0:04:09 – When you think about like the traditional phone call,
0:04:12 which yes, is a form of virtual care,
0:04:13 one of the challenges of that model
0:04:17 is that every single caller is treated the same
0:04:18 and when they’re waiting in the queue,
0:04:21 there’s no way to understand how to effectively triage
0:04:24 the ones that might have higher risk versus lower risk.
0:04:26 And so there’s a whole slew of companies
0:04:29 that have a virtual agent or like a chat bot
0:04:32 that essentially can ask you questions in a digital form
0:04:35 in a self-service way that, you know,
0:04:38 sort of prioritize the level of risk of a patient
0:04:41 prior to them even engaging with the healthcare system.
0:04:43 That’s one thing that will unlock a bunch of capacity
0:04:45 is, you know, rather than just brute force
0:04:46 putting everyone in a line and waiting
0:04:48 until they human answer the phone
0:04:50 to figure out where they need to go,
0:04:53 these technologies can actually sort of be more intelligent
0:04:55 about how to route people in the right direction upfront.
0:04:58 – And is that happening yet now
0:05:00 when we have this telemedicine conversation,
0:05:02 it feels like I’m in line, I’m waiting
0:05:04 and then the nurse, you know, pops up
0:05:05 and we have a conversation.
0:05:07 I mean, may type a few things in,
0:05:11 but is it actually being sort of prioritized?
0:05:14 – In pockets, so there are a set of larger employers
0:05:16 and a set of larger health plans
0:05:18 that have partnered with these digital health companies
0:05:21 to make those tools available to their members
0:05:22 or to their employees,
0:05:24 which not by any means in the mainstream,
0:05:26 but you are seeing, you know, all over the web,
0:05:28 all these companies are broadcasting the fact
0:05:31 that they have intelligence in those virtual chatbots
0:05:34 that can help people assess what their level of risk is
0:05:36 with regards to COVID specifically,
0:05:38 but also all sorts of other things
0:05:41 and essentially allow them to determine
0:05:43 whether or not they actually need to come in
0:05:44 to a physical brick and mortar clinic.
0:05:46 – You know, compared to what we could be doing,
0:05:48 it’s really intriguing in that
0:05:51 it wouldn’t take much for people to do vitals at home.
0:05:53 If you think about the sort of virtual paradigm
0:05:57 is how can the doctor connect with measuring things?
0:05:59 The fact that now you can measure a lot of things at home
0:06:03 such that maybe even $100 would get you a kit
0:06:07 that your family could use to get basics plus plus,
0:06:10 you know, maybe even includes like a stethoscope
0:06:13 that can send the sounds of your heart
0:06:16 and your lungs and so on to the doctor.
0:06:17 I think there’s a lot more that could be done
0:06:19 than what we’re doing right now.
0:06:21 – When you think about like the tools that we all,
0:06:23 like the vast majority of Americans
0:06:27 at least have like in their household set of things,
0:06:29 like thermometer is definitely one where it’s pretty much,
0:06:30 you can assume that, you know,
0:06:33 most most citizens have a thermometer in their house,
0:06:35 but there’s many, many other categories
0:06:38 of like tests essentially that either aren’t available
0:06:40 to consumers off the shelf at your CVS
0:06:43 and actually require either you to send a sample
0:06:45 into a central lab somewhere and, you know,
0:06:49 wait for the cycle to run to get back the results
0:06:50 or that you still need to come in.
0:06:52 And that’s one of the big challenges right now
0:06:55 that we’re seeing with COVID is that there is no at home test
0:06:58 and you have to actually come into these physical facilities
0:07:00 to, you know, both have the sample taken
0:07:01 and the lab test run.
0:07:03 And that’s like just exacerbating
0:07:06 the supply side problem right now with regards to capacity.
0:07:08 And so I think that’s going to be a big area
0:07:11 where we’re already starting to see tremendous movement.
0:07:13 I think this moment is highlighting the fact
0:07:14 that there is so much more
0:07:16 that we need to be investing in as far as innovation
0:07:20 to bring those tests truly into a package modality
0:07:22 that allows human, that allows consumers
0:07:24 to actually do them in their home.
0:07:25 – But so Julie though, are you thinking
0:07:28 if it is like just a blood or urine sample
0:07:29 that probably could be collected
0:07:31 by a mobile full bottomist as well.
0:07:32 – Correct, yeah.
0:07:35 Where essentially like the sample collection kit
0:07:36 can be sent to your house.
0:07:38 And it’s either a urine sample
0:07:42 or a simple blood prick or a saliva sample.
0:07:44 And that, you know, that kid still needs to be sent
0:07:46 to a central lab to be actually run.
0:07:48 And then again, there’s a latency
0:07:49 to getting the results back.
0:07:51 But you also have other tests.
0:07:52 Like, I mean, the pregnancy test
0:07:53 is the most canonical example of this
0:07:57 where you can run the entire end to end test in your home
0:07:58 and get immediate results.
0:08:01 And so I think that’s what we should aspire to
0:08:05 is that a larger portion of sort of what we call
0:08:07 standard blood tests should be available
0:08:09 in that kind of packaging.
0:08:11 – Yeah, no, it’d be great if it was done at home,
0:08:13 but I think even like sending to a central lab
0:08:15 isn’t really that different than what a GP would do.
0:08:18 – Well, what is, I mean, what are the limits?
0:08:19 Because I hear you pointing out a lot of different things
0:08:21 that we could theoretically be doing even right now,
0:08:24 but where are the limits right now of like,
0:08:27 no, this is really the opportunity
0:08:28 for virtual medicine does end here.
0:08:31 You need human to human care delivery.
0:08:34 – The obvious one is if you need a procedure done,
0:08:36 like a surgery, then clearly today,
0:08:38 that is something that does require coming
0:08:41 to a physical operating room type setting,
0:08:42 like a facility that can actually handle
0:08:44 that kind of high-risk procedure.
0:08:46 – But that seems so far out on the spectrum.
0:08:47 Like, is that–
0:08:48 – Yeah, I know.
0:08:50 It’s kind of a while until everyone has like,
0:08:53 a DaVinci robot in their home that a surgeon
0:08:56 can control remotely, but hey, we can all dream.
0:08:58 But that portion of the market has been
0:09:00 unbundling as well in terms of it used to be the case
0:09:01 that you had to go to a hospital.
0:09:03 Now we have these ambulatory surgery centers
0:09:06 that specialize just on outpatient surgical procedures.
0:09:09 So, I mean, there are certain components of that
0:09:10 that you could predict ultimately make it out
0:09:11 to the community.
0:09:13 So that’s kind of one category.
0:09:14 The other thing that that’s worth mentioning
0:09:16 is when we talk about virtual care,
0:09:20 we typically think about the patient-to-provider interaction
0:09:22 as the component that needs to be virtualized,
0:09:24 but there’s a whole backend,
0:09:26 like provider-to-provider communications
0:09:29 still are not virtualized either.
0:09:31 Like a lot of what you are seeing out there
0:09:33 on social media and physicians sort of speaking out
0:09:35 about what’s happening with coronas
0:09:37 is that they themselves don’t have the means
0:09:40 to communicate with each other in a real-time fashion.
0:09:42 – So at the moment, where does that break down?
0:09:45 So even if you have like a fantastic virtual visit
0:09:48 with your doctor, you don’t have to go in,
0:09:49 your doctor can call you antibiotics,
0:09:51 or like, where does the system start failing
0:09:53 in that data sharing behind the scenes,
0:09:54 provider-to-provider?
0:09:57 – Yeah, I would say like the best case scenario
0:09:59 is that it just slows things down,
0:10:03 where you have to have more manual processes in place
0:10:06 to aggregate information that the next provider who you see
0:10:09 needs to be able to make the right decision.
0:10:11 Worst case scenario is that you actually
0:10:12 don’t have access to that data
0:10:14 and you either are blind to that
0:10:17 and therefore make an incorrect or inaccurate decision
0:10:20 or that you have to repeat whatever was done to you before,
0:10:22 which obviously adds cost to the system.
0:10:26 So I think those are a couple of the examples that we see.
0:10:29 That’s rampant today in terms of where a lot
0:10:31 of the unnecessary costs in the system are,
0:10:33 is simply because we don’t have data liquidity
0:10:36 and therefore there’s a lot of repeat testing
0:10:37 and assessment that needs to be done
0:10:39 to get a holistic view of every patient
0:10:41 at every individual encounter.
0:10:44 It’s kind of a weird juxtaposition of kind of the good
0:10:46 and the bad that’s happening right now,
0:10:49 but CMS and ONC just polish their interoperability rules
0:10:53 that mandate the adoption of certain interoperability
0:10:56 standards and technologies for hospitals
0:10:58 to exchange medical information.
0:11:01 And, you know, until that is in place,
0:11:03 I think one of the biggest constraints
0:11:06 to actually virtualizing care models
0:11:08 is the exchange of data that enables all
0:11:11 of the decentralized players to have access
0:11:13 to the same information.
0:11:15 – You know, it’s fun to connect to what Julie’s talking
0:11:18 about about virtual care being not just sort of a GP
0:11:21 to a patient at home in that you could imagine
0:11:22 having a sort of virtual care
0:11:26 where you have a specialist consult done virtually.
0:11:27 – Exactly.
0:11:29 – Because right now, often the patient has to reschedule
0:11:33 a whole nother meeting and having that done
0:11:36 briefly, virtually would be particularly intriguing.
0:11:38 And then another topic that this connects to
0:11:40 that’s I think a proud brother of stuff
0:11:42 that we’ve spoken about in the past
0:11:44 is sort of the unblundling of the hospital.
0:11:47 It’s interesting just to think how far you can unblundle it
0:11:49 with the goal of keeping people out of hospitals
0:11:50 as much as we can.
0:11:53 Keep them at home and do as much as you can do at home.
0:11:55 Do it in local centers as much as you can do there
0:11:57 and only escalate to a hospital.
0:11:59 If, you know, if you’re having like a triple bypass,
0:12:01 I don’t think that’s ever gonna be done at home.
0:12:02 Certainly not a damn soon.
0:12:04 – But like, I kind of want to know like,
0:12:06 what’s the farthest you can imagine it, you know,
0:12:08 right now with what we’ve got right now,
0:12:10 short of a triple bypass.
0:12:11 – I think all the reading,
0:12:12 you could do a lot of reading at home
0:12:13 because you could do the blood tests,
0:12:15 you could do urine tests,
0:12:16 you could do various measurements,
0:12:20 but like the writing where you do anything to a person,
0:12:23 I think probably that might be just way too far.
0:12:24 – Although I have to say,
0:12:28 I had like a weird foot thing, you know, last year
0:12:31 and my doctor prescribed a virtual physical therapist to me
0:12:33 who like, you know, we had an appointment,
0:12:37 we did exercises and it was much easier than going somewhere.
0:12:39 – Exactly, physical therapy is probably one of the places
0:12:41 where it’s an intervention that traditionally
0:12:43 has required going to a clinic,
0:12:45 but that is one of the big areas
0:12:48 where you start to see kind of at-home innovation.
0:12:49 – Yeah, that’s a great point too,
0:12:51 especially since, you know, for physical therapy,
0:12:55 but for medicine in general, compliance is such an issue.
0:12:57 And if this just helps with compliance,
0:13:00 I mean, to some extreme, just having someone watch you
0:13:01 to make sure you take your meds
0:13:05 and so I’m like having a parent or something like that
0:13:06 or a buddy.
0:13:08 So PT often says about compliance,
0:13:10 there’s all this compliance stuff
0:13:12 that probably could be improved with sort of virtual care.
0:13:14 Part of the problems that were in many ways,
0:13:15 we’re not even trying.
0:13:19 I think that there’s a lot more that we could be doing,
0:13:22 but it means sort of a capital outlay
0:13:26 to get the programs going and then to get rolling.
0:13:29 But that, you know, so that’s on the provider side.
0:13:31 On the patient side, you could argue too
0:13:33 that there are a lot of people that don’t take advantage
0:13:35 of even what we could do now.
0:13:40 And that part of what is powerful about the doctor’s visit
0:13:42 is just sitting there with the doctor
0:13:47 and how much that is a form of medicine and so on, right?
0:13:49 I think, you know, they’ve done these interesting tests
0:13:53 where they have sort of these different variants
0:13:56 of the doctor visit and just the doctor giving attention
0:14:01 has a huge sort of placebo effect or sort of positive effect.
0:14:04 And so we wouldn’t want that human connection part
0:14:07 to be lost and how to do that is tricky.
0:14:10 On the other hand, maybe even just cultural things change
0:14:12 and it just becomes much more of a norm
0:14:14 to connect to people virtually.
0:14:16 That may change, that may change a lot.
0:14:18 I remember even like when the history of the telephone
0:14:21 people originally thought the telephone would be seen
0:14:24 as such an impersonal kind of like,
0:14:25 no one would ever want to use that
0:14:28 versus, you know, connecting in person.
0:14:30 I think we sort of just got over that and got used to that.
0:14:33 I mean, ironically, we’re doing this remotely
0:14:34 where none of us are in the same room right now,
0:14:37 but it’s kind of, I feel like it’d be just like,
0:14:38 it would be the same as we were.
0:14:41 – Right, yeah, almost the same, yeah.
0:14:44 If we can just get over it and get used to it,
0:14:46 that may actually still incur a lot of those benefits.
0:14:48 – What else in terms of stress points?
0:14:49 Because we’re starting to see, you know,
0:14:53 this is gonna be like a fast, big, hard rollout
0:14:55 of a whole bunch of stuff for a bunch of people
0:14:57 that have never used telemedicine
0:14:59 in immediate use all over the place.
0:15:03 So what are some of the other stress points
0:15:05 that you think we’re gonna start see popping up
0:15:07 that like, well, you know, next generation
0:15:10 of virtual medicine tools we’ll learn from?
0:15:12 – Well, two structural things that we should definitely
0:15:15 mention are on the regulatory and like the payment side
0:15:18 where if I’m a doctor and I see what’s going on
0:15:20 and I have a motivation to spin up
0:15:22 my own virtual care practice,
0:15:24 it’s very non-trivial to do that on the fly
0:15:28 because of regulation around licensure.
0:15:31 So it is not the case that I can treat virtually
0:15:33 every patient across all 50 states
0:15:36 unless I am appropriately licensed in the states
0:15:38 where the patients are located.
0:15:39 It’s definitely a source of friction
0:15:41 that prevents a lot of companies
0:15:44 from actually like turning this on from day one.
0:15:46 – So in other words, even though it’s virtual,
0:15:48 it’s still very local.
0:15:50 – It’s still very local, exactly.
0:15:52 There’s actually an interesting study that came out
0:15:55 that showed that there are literally no two states
0:15:58 in the US that have the same policies.
0:16:00 And even within the states, some of the policies conflict
0:16:03 between like state law and Medicaid law
0:16:05 and it’s very convoluted.
0:16:09 So that whole sort of jungle of policy is one big thing
0:16:11 that there’s been talk of change.
0:16:13 And I wonder, given the current situation,
0:16:16 how much that will rise to the top
0:16:18 as a potential regulatory change
0:16:19 that might be put on the table.
0:16:21 – What sort of change do you think could happen?
0:16:23 – Well, just to relax the constraints on licensure
0:16:26 so that there’s essentially, imagine like a common app
0:16:29 type construct where you could apply once
0:16:32 and have coverage across multiple states.
0:16:33 And then the reimbursement one is interesting
0:16:37 because we just saw that the White House signed
0:16:40 an emergency bill that relaxed the constraints
0:16:42 on reimbursement for telehealth services
0:16:44 for the Medicare population.
0:16:46 ‘Cause historically that’s been another huge constraint
0:16:48 that it was only reimbursable
0:16:50 under very specific circumstances.
0:16:53 For instance, like if patients were located in rural areas
0:16:57 that were deemed sort of low access,
0:16:59 those were the only situations where you could get reimbursed
0:17:01 but now they’ve taken that off the table.
0:17:03 We already see positive tailwinds there
0:17:05 but that historically has also been a big challenge
0:17:08 is just getting paid for doing the service.
0:17:09 – Interesting.
0:17:10 – How about scalability?
0:17:12 One of the things I’m very curious about
0:17:14 is how this could help scaling.
0:17:16 And there’s different variations of scaling.
0:17:21 One of the real challenges is just how do you schedule
0:17:24 and sort of do the people matching problem?
0:17:29 And if you had just a bank of virtual doctors or RNs
0:17:31 that could then be much more easily routed
0:17:33 to anyone throughout the country,
0:17:35 you could do load balancing between regions and so on.
0:17:39 In a way where everyone would be at very high capacity
0:17:43 and in situations where there is just extreme need,
0:17:47 you could have a five minute virtual visit
0:17:48 that maybe gets the basics done
0:17:52 in a way that just really wouldn’t be possible to do
0:17:56 in person where you’re just with the rooms packed
0:17:59 and the parking packed and the roads packed.
0:18:01 There’s just things that you could do at scale
0:18:03 that you couldn’t do in other ways.
0:18:05 – And I think that gets to a broader point of like
0:18:08 when healthcare goes virtual,
0:18:09 you don’t think about just like taking the way
0:18:11 that things work in the physical world
0:18:12 and then just like translating it
0:18:13 to a virtual version of that,
0:18:16 but you can sort of like reinvent from the ground up
0:18:19 the actual operating model of how that works.
0:18:23 Today’s healthcare system is the patient has to,
0:18:26 like everything is optimized for the provider’s schedule.
0:18:28 Even the notion of like pre-booking an appointment
0:18:29 and making it work for us,
0:18:32 us meeting patients going out of our way
0:18:36 to accommodate the schedules on the supply side.
0:18:38 Like you could entirely flip that on its head,
0:18:40 especially if you think about a world
0:18:42 in which you’re continuously monitoring patients.
0:18:44 It’s not the patient sort of determining
0:18:46 that he or she needs to go see a doctor,
0:18:48 but rather the data saying,
0:18:51 hey, this patient needs intervention
0:18:52 and actually having the provider’s side of the market,
0:18:54 you know, reach out to the consumer side.
0:18:56 So I think there’s like lots of opportunity there
0:18:58 to make it much more patient centric
0:19:01 as well as much more proactive so that it’s not,
0:19:03 again, the burden is not on the patient
0:19:06 to have to figure out when it’s appropriate to go in.
0:19:08 – So it’s not just you reaching out to your doctor
0:19:09 to get virtual care,
0:19:11 it’s the virtual care reaching out to you
0:19:13 when you need it and you may not even realize it?
0:19:16 – Yeah, then the whole notion of like provider networks
0:19:18 and even like what is a provider
0:19:20 sort of changes fundamentally
0:19:24 where this is also potentially a cultural shift
0:19:29 where in order to do like really intelligent load balancing,
0:19:30 it might be the case that you’re not necessarily
0:19:33 gonna have an established long-term relationship
0:19:34 with like a single human being,
0:19:36 but kind of more of a care team.
0:19:38 And this is a model that’s been talked about, you know,
0:19:40 for a while, this notion of like the medical home
0:19:42 or medical neighborhoods where you have
0:19:43 more of a care team model
0:19:45 and therefore you’re not constrained
0:19:47 by any one individual player in the system,
0:19:50 but rather can tap into multiple resources.
0:19:53 And that’s, I think that’ll be a big cultural change,
0:19:55 at least here in the US.
0:19:57 – It’s funny because, you know, we do, I, you know,
0:20:00 I have a dermatologist and I have like,
0:20:02 I don’t know, dentist and I have a PCP,
0:20:05 but it does seem that the way you develop a relationship
0:20:08 with one PCP and you sort of assume they know you
0:20:11 and they’re looking out for the 360 degrees of you,
0:20:13 whether or not that’s actually true,
0:20:16 that is like a very, that does feel like an important cultural
0:20:19 and emotional thing in this particular culture.
0:20:23 Is there a way to do both in the virtual?
0:20:26 – I mean, we’ve seen this in other aspects of our lives, right?
0:20:31 Like you can still have a phenomenal customer experience
0:20:33 when you have like really good CRM
0:20:38 and just really good 360 data on who you are as a consumer
0:20:41 and like retail and, you know, like every time I interact
0:20:43 with an airline, like they know my whole history
0:20:44 and all that kind of stuff.
0:20:47 I mean, we’ve seen this in OB, you know,
0:20:50 I think these days most, at least the larger hospitals
0:20:53 and larger OB clinics,
0:20:55 knowing that it might not be your OB
0:20:57 who’s actually delivering you based on, you know,
0:21:00 when you go into labor, they try to actually introduce you
0:21:04 to the entire care team as part of the prenatal experience
0:21:06 so that no matter who ends up being there,
0:21:10 like during game time, so to speak,
0:21:12 you’re gonna have at least some established relationship
0:21:13 with them.
0:21:14 I think it’s more about like,
0:21:16 how are you setting expectations to the patient upfront
0:21:20 and giving them the room to actually meet everyone
0:21:23 in a low risk way such that when stuff hits the fan,
0:21:25 you have that preexisting relationship.
0:21:27 – But it does, and even in your example with the OBs,
0:21:30 it sort of reminds me of like, okay, so yeah,
0:21:32 I sort of knew all along that whoever I got at the hospital
0:21:34 was gonna be the person I got at the hospital.
0:21:37 And in a way that was a totally separate event
0:21:41 from my pregnancy and like tracking me through the pregnancy
0:21:43 and understanding what was going on with me, you know,
0:21:47 in a way it’s almost unbundling the experience, right?
0:21:48 – Yeah, you could take this virtual idea,
0:21:49 you know, one step further,
0:21:52 whether it’s like a really good chatbot,
0:21:55 a chatbot that could answer a sort of standard question
0:21:59 to the chatbot that knows your history and connect to that
0:22:01 and naturally would and could escalate
0:22:04 to the human being and beyond.
0:22:06 That gets really interesting in terms of scale.
0:22:11 And the question is in my mind, can that type of service,
0:22:14 you know, what fraction of what a doctor does
0:22:15 could be serviced by something like that?
0:22:17 Obviously there’s a lot that couldn’t,
0:22:19 but in terms of just having that with you at any time
0:22:22 that you could just asynchronously connect with,
0:22:23 ask any sort of health question
0:22:26 and with the sort of knowledge
0:22:29 that the answers are completely accurate and so on,
0:22:31 which is a very high bar to make sure the way we reach,
0:22:33 that’s a whole nother direction.
0:22:35 And you could see how that just gets smarter
0:22:36 and smarter as time goes on.
0:22:38 – You guys have heard me talk about Baymax
0:22:40 from the movie “Big Hairy Sex”,
0:22:42 like we’re all gonna have a Baymax at some point.
0:22:43 Japan is like way ahead on this.
0:22:45 So if you actually look at like the landscape
0:22:47 of companion robots in Japan,
0:22:50 they actually have like pet robots, right?
0:22:53 And in some ways, like a lot of why the promise
0:22:56 of like humanoid robots has kind of fallen short
0:22:58 is like we have such high expectations
0:23:00 for the level of intelligence
0:23:02 that those quote unquote human robots have.
0:23:05 Whereas like if it’s a pet, you know, your bar goes down,
0:23:07 but there’s still like a tremendous amount
0:23:10 of therapeutic benefit to having that kind of companion.
0:23:12 And so like, especially with the silver tsunami
0:23:14 and the elderly population and what have you,
0:23:16 there’s like a pretty meaty set of things
0:23:19 that you could do in a very basic form
0:23:20 that are not clinical in nature,
0:23:21 that don’t require clinical judgment,
0:23:24 that would still hugely benefit the system,
0:23:26 both in terms of just like reducing anxiety, right?
0:23:27 That they had a basic level.
0:23:29 – Yeah, wasn’t there some kind of study
0:23:33 where they had baby seal robots in the elder care facility?
0:23:34 – That sounds about right.
0:23:38 – For the, no they did, for the empathy and the comfort
0:23:42 as a particular clinical need in that setting.
0:23:43 So if we’re at the tipping point,
0:23:46 if this moment is sort of the tipping point
0:23:49 for virtual medicine, two questions.
0:23:53 One, why did it take a pandemic to get here?
0:23:57 And then two, what do you think is the most,
0:23:59 the sort of most immediate near term things
0:24:03 that we’re gonna see start rolling out right now
0:24:05 as you know, not just video chat,
0:24:07 but are there other things we’re gonna start seeing today,
0:24:09 tomorrow with COVID going on
0:24:11 that we’re gonna all be getting more familiar with?
0:24:14 – It’s unfortunate that this had to be the forcing event
0:24:16 to sort of bring all of this to light,
0:24:19 but there are a number of tailwinds
0:24:23 that have been in motion that enabled us to actually respond
0:24:26 in a way that’s reasonable in light of this kind of crisis,
0:24:28 which definitely would not have been the case,
0:24:30 I would say, five or six years ago,
0:24:32 like just like the very visceral understanding
0:24:34 that costs are spiraling out of control
0:24:36 in the way that we deliver medicine
0:24:39 in the physical world today is just not sustainable
0:24:41 to patients just being at their wit’s end
0:24:44 with regards to access and convenience
0:24:47 and therefore being willing to adopt
0:24:49 these types of novel technologies,
0:24:51 combined with what we talked about earlier,
0:24:53 where in other parts of our lives,
0:24:55 we are now getting much more comfortable
0:24:58 with the notion of either asynchronous communication
0:25:00 or video based communication.
0:25:03 And then now like the actual virtual care platform technology
0:25:07 is mature enough to actually be delivered at scale.
0:25:08 I was like one of the very early adopters
0:25:10 of some of the early telehealth solutions
0:25:13 and it was super choppy, like the video quality was bad
0:25:16 and it was just not a smooth experience,
0:25:18 but if you do it today, it’s very streamlined.
0:25:20 So I think the confluence of all those things
0:25:22 like had to be in place such that we could respond
0:25:24 in a situation like this in the way that we are.
0:25:26 – But do you think that we would be doing it without
0:25:28 something like this to push us over into it?
0:25:30 Do you think it would just have taken longer?
0:25:31 – I think it would have just taken longer.
0:25:34 I think the forcing function is not just like adoption,
0:25:38 but it’s also again, like there’s top down regulatory change
0:25:39 that’s enabling reimbursement.
0:25:43 There’s, I hope more relaxing of the regulation
0:25:45 around like medical licensure.
0:25:48 And I think we will see like in the next year,
0:25:50 a tremendous uptick in adoption
0:25:53 by at least the enterprise side of the market
0:25:55 for access to virtual care services,
0:25:58 which has always been like an emerging area.
0:26:01 It’s definitely gotten a lot of early uptake,
0:26:03 but this could be the thing that pushes it
0:26:04 into the mainstream.
0:26:07 – The UIs for these things are kind of clunky,
0:26:09 especially in a world where people have like Google
0:26:11 and Facebook and things where these consumer products
0:26:13 have really elegant UIs.
0:26:17 And it’s clear the utility,
0:26:19 if we can get people to use them, be comfortable with it.
0:26:22 I’m just imagining while we’re talking like a Facebook
0:26:24 like feed where I’m chatting with, you know,
0:26:27 my various doctors and everything’s in there
0:26:28 and like my records are there
0:26:30 and these are coming up as posts
0:26:32 and I can just look through it.
0:26:34 Maybe I can even look through my kids’ feeds
0:26:36 to see how their medicine’s going.
0:26:39 That really wouldn’t be that hard to do in principle
0:26:42 and practice, you know, UIs are an art and so on.
0:26:46 But I think if we can force the tools to sort of come up
0:26:49 to speed with what people’s expectations are,
0:26:51 I have a feeling the engagement could be comparable
0:26:54 to engagement in other sort of consumer-like products.
0:26:56 – And it’s interesting ’cause it seems to me like right now,
0:26:59 you know, the sort of incentive to do so
0:27:01 is aligned on both sides, right?
0:27:02 Like nobody actually wants to go
0:27:04 into their doctor’s office right now.
0:27:05 Doctors also don’t want you to go
0:27:07 into the doctor’s office right now.
0:27:10 Like it’s unusual for everybody to be aligned in that way
0:27:12 where we’re all incentivized to use something like this
0:27:14 at the same time.
0:27:15 – Well, I’ll add one more thing,
0:27:18 which is that these difficult times
0:27:21 often create some of the most exciting startups
0:27:23 and that we have this combination now
0:27:26 for sort of the fire to do that,
0:27:29 combine with all of these things just in our face.
0:27:30 You don’t need a world pandemic
0:27:32 for it to be an individual crisis.
0:27:36 And what can we do to handle my crisis in the future?
0:27:38 Hopefully this will give us a model for that.
0:27:39 – Hold this out of tools.
0:27:41 – Virtual care is actually in some ways
0:27:43 like the perfect solution at a time
0:27:46 when we need lower cost ways to deliver care
0:27:48 because the actual way by which you can just eliminate
0:27:50 so much of the cost structure
0:27:53 of the traditional healthcare system.
0:27:54 – Thank you so much for joining us
0:27:58 both on the A16Z podcast goes remote.
0:27:59 – Thank you, stay healthy.
0:28:09 [BLANK_AUDIO]

0:00:02 – Hi, and welcome to the A16Z podcast.
0:00:03 I’m Hannah.
0:00:05 A lot’s going on in the world of healthcare right now,
0:00:07 and one topic that’s especially relevant
0:00:10 is how diagnostic labs work.
0:00:11 The conversation that follows,
0:00:12 which was actually recorded
0:00:15 at our A16Z Innovation Summit in November,
0:00:18 covers everything from the evolution of the modern lab
0:00:20 over the past 50 years,
0:00:23 especially as new technologies and new tests are added,
0:00:25 how tests go from being specialized
0:00:27 to mainstream and widely available,
0:00:31 to who pays, how, and how reimbursement works.
0:00:34 We also discuss where information from the lab flows
0:00:36 in electronic health records or elsewhere
0:00:37 in the healthcare system,
0:00:40 a topic we’ve covered before on this podcast,
0:00:42 so be sure to check out those past episodes
0:00:43 with General Partner Julie Yu,
0:00:47 and touch on what the lab of the future might be like.
0:00:48 Joining this conversation with me
0:00:51 and General Partner Jorge Conde is Dave King,
0:00:55 Executive Chairman and previous CEO and President at LabCorp,
0:00:57 one of the largest clinical laboratory networks
0:00:59 in the world.
0:01:00 – So where should we begin
0:01:03 when we talk about the evolution of the modern lab?
0:01:05 What’s the history and what do you think of as the timeline
0:01:07 of where we began to what brought us
0:01:08 to the modern lab today?
0:01:10 – Our original founder, Dr. Jim Powell,
0:01:13 was talking about why he came up with the idea
0:01:16 of a reference lab, and he’s a pathologist,
0:01:17 and one of the things he pointed out
0:01:21 is that in the day in 1969,
0:01:23 when a test was sent to a laboratory,
0:01:25 sometimes it would be five, six days
0:01:26 before a response came back
0:01:28 and the patient either had progressed
0:01:30 or as he said, progressed, released or died.
0:01:31 – Too slow.
0:01:35 – Too slow, not super reliable or reproducible
0:01:37 in terms of overall quality.
0:01:40 A lot of work was done in hospitals or small laboratories.
0:01:44 Jim’s idea was, let’s put the instruments in one place
0:01:45 and bring the specimens,
0:01:47 instead of sending the specimen somewhere
0:01:49 and waiting for the answer to come back.
0:01:52 And obviously that’s evolved over the course of time
0:01:55 into reference laboratories that look like warehouses.
0:01:57 I mean, look, manufacturing facilities.
0:02:00 You know, large numbers of very high throughput instruments,
0:02:04 very IT and tech connected.
0:02:06 We have a robotic sorting machine
0:02:07 that we’re putting into all of our laboratories,
0:02:10 which basically replaces all of what we used to do
0:02:12 at the front end manually, you know,
0:02:14 uncapping, shaking, pouring off.
0:02:17 And so the business has not changed a lot
0:02:19 over the 50 years, what we do,
0:02:21 but the way in which we do it and the quality
0:02:23 and the scope and the, you know,
0:02:26 the breadth of our business has changed quite dramatically.
0:02:27 – What is the sort of, like,
0:02:29 the spectrum of diagnostics for each lab?
0:02:31 How do you specialize in different labs or not?
0:02:33 Like, what does that look like, that lay of the land?
0:02:37 – So we perform about 4,400 different tests.
0:02:39 Not all labs have a menu as big as ours.
0:02:41 There are also some highly specialized labs
0:02:43 that do, for example, oncology testing
0:02:46 or do coagulation testing for blood cancers
0:02:48 or do thyroid testing.
0:02:50 We think of an SHR test as anything
0:02:53 that is performed by a sort of non-standard methodology.
0:02:56 So if you come to our laboratories,
0:02:59 there’s a huge set of chemistry instruments
0:03:00 that just, they run chemistry tests,
0:03:02 all day long, glucose, potassium.
0:03:05 There’s a huge set of hematology instruments
0:03:06 that run CBCs.
0:03:08 We look for infections in high white blood cell counts.
0:03:11 And then there are DNA tests,
0:03:13 which are in the SHR category.
0:03:15 There are specialized thyroid testing.
0:03:16 There’s allergy.
0:03:19 All things kind of outside what we would consider
0:03:21 the norm of basic wellness testing.
0:03:23 – And so over time, you would imagine
0:03:27 the definition of a test will move from esoteric
0:03:31 to non-esoteric as it becomes more commonly used.
0:03:32 – Absolutely, yeah.
0:03:34 There’s definitely an arc when you introduce,
0:03:39 you know, when ACOG dictated that within their guidelines
0:03:43 all pregnant couples should be tested for cystic fibrosis.
0:03:45 I mean, we had offered cystic fibrosis for years.
0:03:46 Nobody ever ordered it.
0:03:47 Now all of a sudden it exploded.
0:03:49 And so it really went from being
0:03:53 a pretty esoteric test that was not commonly ordered
0:03:57 to very much a routine part of prenatal screening and care.
0:03:59 And there are many examples like that over time.
0:04:00 – So how does that happen?
0:04:03 How does a new test get integrated into this system?
0:04:05 Is it partially about whether you have the tools available
0:04:07 or whether the demand for the test is there?
0:04:08 What is the driving factor?
0:04:10 – We always start with what’s the unmet clinical need.
0:04:12 I mean, obviously market size matters
0:04:14 ’cause there has to be enough market demand
0:04:16 to justify bringing up a test.
0:04:18 But, you know, what is an unmet clinical need?
0:04:21 So if you look at non-invasive prenatal testing,
0:04:24 for example, the unmet medical need was
0:04:29 that invasive prenatal testing, whether Amnio or CVS,
0:04:32 you know, pose risk to both mother and the fetus.
0:04:35 And as the technology improved
0:04:37 to where this could be done through blood testing,
0:04:38 it clearly made sense to integrate that
0:04:41 into the sort of the more standard test menu.
0:04:43 When you do it through blood,
0:04:45 it’s a simple, relatively painless process.
0:04:49 There’s literally no risk to the mother or the fetus.
0:04:50 The results come back faster
0:04:52 and the reliability is very much concordant
0:04:54 with the more invasive procedure.
0:04:55 So that’s a good example
0:04:57 of where there was a clear clinical need
0:05:01 for a better way of doing what we’re doing.
0:05:03 Other tests like companion diagnostics,
0:05:06 where a drug comes out and we’re able to demonstrate
0:05:08 either in the clinical trial
0:05:10 or through use in the marketplace,
0:05:13 that there’s a diagnostic test that can tell you
0:05:16 whether this drug is gonna be efficacious
0:05:17 for this patient with this condition.
0:05:20 There, the clinical need is almost always very compelling
0:05:23 because you’re talking about potentially
0:05:26 a very expensive drug and you wanna know,
0:05:27 is it gonna work for this patient
0:05:29 or is it just gonna be, you know,
0:05:32 more healthcare resources that are not gonna be well spent?
0:05:34 – So how about the information flow?
0:05:36 In some ways, the lab is sort of the ground truth, you know,
0:05:38 and that it doesn’t mean anything
0:05:41 if that information doesn’t go somewhere and have an effect.
0:05:42 So can you describe to us,
0:05:44 is it more complicated than we think
0:05:46 or is it just lab to provider?
0:05:48 What is the kind of information flow at the moment?
0:05:50 How does that work in the system?
0:05:52 – That’s one of the big changes that’s occurred
0:05:54 when I started a lab core.
0:05:57 We still used to drive around with paper reports
0:05:59 in the courier vans and drop them off
0:06:00 at the doctor’s offices.
0:06:03 In most cases, you know, we drop them the next day
0:06:05 and those were the days when the doctor would have
0:06:08 the folder out, a test would go in the chart and the, you know,
0:06:12 so now I think upwards of 85% of what we return
0:06:14 is returned in some electronic fashion
0:06:17 and it may flow directly back into the doctor’s medical record,
0:06:19 you know, electronic health record.
0:06:21 It may go back in some other electronic fashion
0:06:23 where it goes to the doctor’s office
0:06:26 but it doesn’t directly integrate into the health record.
0:06:29 And this, in my opinion, is actually one of the big obstacles
0:06:34 to a more seamless coordination of care system for patients
0:06:36 because I agree with you, the lab is the ground truth.
0:06:40 I mean, you know, 70% of clinical diagnoses
0:06:42 start with a laboratory result
0:06:45 and doctors always, you come into the doctor
0:06:46 and you say, I’m not feeling well.
0:06:47 The first question is, well, you know,
0:06:49 let’s look at the labs and see what they say.
0:06:51 Do you have an infection?
0:06:53 If you’re overtired, is it your thyroid?
0:06:56 The problem is we have many participants in the system
0:06:59 who don’t facilitate the exchange of information.
0:07:02 And so, you know, we have local hospitals
0:07:04 near our headquarters that won’t allow us
0:07:06 to return information electronically
0:07:07 into the medical record.
0:07:08 – Is that still happening?
0:07:11 – Oh yeah, and if the doctor wants to order from LabCorp,
0:07:13 like my physician works at a local hospital,
0:07:16 you know, he receives the reports back as a PDF.
0:07:19 – Those hospitals want to use their own labs, essentially.
0:07:21 – Very much so, because this is where the interest
0:07:23 in the system are not well aligned.
0:07:25 The hospital labs are able to command
0:07:28 much higher pricing from the payers than we are,
0:07:30 so they have a vested interest in using their own labs.
0:07:33 And, you know, I think this will evolve
0:07:35 as we, two things happen.
0:07:37 One, we move into the value-based care environment
0:07:41 where the dollar cost of services is less relevant
0:07:45 than the overall kind of bundle of care and outcomes.
0:07:49 And number two, healthcare is a truly unique ecosystem
0:07:52 because we don’t have pricing transparency.
0:07:53 You don’t know what it’s gonna cost you
0:07:55 to have a service done.
0:07:57 We have our phones, we can tell exactly what we’re gonna pay
0:07:59 for this service or for this product,
0:08:01 we can comparison shop.
0:08:02 We don’t have that in healthcare,
0:08:04 and all of the pricing transparency work
0:08:07 that’s being done now is more about list price
0:08:10 than it is what is gonna cost the patients.
0:08:11 You know, the consumer is smart.
0:08:15 They can make sound, both economic and quality decisions
0:08:16 about their lab services.
0:08:19 – But it does feel like, I hate when I get a test result
0:08:21 back directly through my medical chart, you know,
0:08:24 without it having been seen by the doctor
0:08:28 because it feels like so often there’s this context
0:08:29 that I don’t have.
0:08:31 So like, something will come up and I’ll like Google,
0:08:33 okay, there’s some range here and this looks a little weird,
0:08:35 you know, and then the doctor will be like, well, X, Y,
0:08:36 and Z, that’s why it’s totally fine.
0:08:39 You know, in that information flow,
0:08:40 how do you think about both the translation
0:08:43 and the context when it’s going direct to consumer like that?
0:08:45 – I think some test results are binary, right?
0:08:47 I mean, you tell the consumer you have or you don’t have
0:08:49 and that’s fairly simple.
0:08:51 Things that are much more nuanced, you know,
0:08:53 thyroid stimulating hormone.
0:08:57 The difference between 0.3 and 0.4 is probably
0:09:00 pretty much irrelevant, but the difference between, you know,
0:09:02 0.3 and 1.3 can be quite relevant.
0:09:04 And I think two things are critical there.
0:09:08 One is, you know, as we move more into direct consumer,
0:09:12 we need to figure out in a more comprehensive way
0:09:13 how we provide context.
0:09:16 So one of the things I’ve always thought is,
0:09:19 it would be great to be able to provide a link
0:09:21 on the report that goes to the patient kind of.
0:09:23 – So I don’t just go to Dr. Google,
0:09:25 who’s terrifying always.
0:09:27 – Everybody goes to Google and when you’ll find a lot
0:09:29 of chat groups where people say, oh yeah, you know,
0:09:32 I had a 1.3 and the next thing I knew I was in the hospital
0:09:35 for two months, oh, so I think that’s really important.
0:09:37 And again, part of that runs up against the current
0:09:40 regulatory environment and what you can do in terms of claims
0:09:43 for the testing or how you can interpret the testing
0:09:45 when you’re not a physician in the practice of medicine.
0:09:48 But it’s an area that we need to get our arms around
0:09:51 because it’s only gonna grow and consumers are only getting
0:09:52 more and more interested in.
0:09:53 – Yeah, that’s the direction.
0:09:54 – Absolutely.
0:09:57 – One of the things you mentioned was physicians themselves
0:10:00 being well positioned to interpret tests.
0:10:03 When you look at something like genetic testing,
0:10:06 the vast majority of physicians can’t go very, very deep
0:10:08 on interpreting those results.
0:10:12 And so as a result, there’s a need for genetic counselors
0:10:13 and the like.
0:10:15 So actually on the topic of the consumer,
0:10:19 what’s your view in terms of what consumers should be able
0:10:20 to order directly?
0:10:22 ‘Cause there’s been a rise of direct to consumer diagnostics
0:10:26 type services and you know, the pro argument is
0:10:29 consumers should have control over their own information.
0:10:30 It is their healthcare data.
0:10:32 They are the ultimate decision makers.
0:10:35 The con argument is that consumers may not be equipped
0:10:39 to fully comprehend what a diagnostic test is telling them.
0:10:41 Where would you come out on that?
0:10:45 – I am not a believer in the sort of paternalistic
0:10:47 healthcare system of, you know, everything has to go
0:10:50 through some learned third party who’s gonna interpret it.
0:10:55 The truth is with the explosion of genetic information,
0:10:58 for example, there are many physicians who practice
0:11:01 in the community who are not fully informed about
0:11:03 what these tests mean or how they should be ordered
0:11:04 or interpreted.
0:11:07 So it’s really in my view a little short-sighted to say,
0:11:10 well, the consumers, you know, quote unquote,
0:11:12 doesn’t have the information to be responsible
0:11:14 for the consequences of the testing.
0:11:17 The other side of that, which I, you know, fully respect
0:11:20 the regulators position is consumers need to understand
0:11:22 and we need to help the consumer understand.
0:11:26 Like a lot of these tests are complicated.
0:11:30 And so if you get a result that says that you have
0:11:33 sensitivity, for example, to warfarin or you’re a
0:11:37 fast metabolizer, gosh, the consumer can’t go out
0:11:39 and adjust their own dose with that information.
0:11:43 And so there’s a fine balance, health and wellness,
0:11:45 sexually transmitted diseases, things that I would say
0:11:49 are more kind of in the mainstream of what the consumer
0:11:50 would be able to understand.
0:11:52 But you have to respect the fact that, you know,
0:11:54 consumers want more information and the broader flow
0:11:58 of information is a positive for decision-making
0:11:59 and for our system.
0:12:02 – But what does it look like the push towards value-based
0:12:04 or outcome-based care in the healthcare system overall,
0:12:07 where we’re all trying to maybe shift towards valuing
0:12:11 those outcomes instead of paying per price, per service?
0:12:14 – In my view, the fundamental challenge with providing
0:12:17 well-coordinated care was the total lack of alignment
0:12:18 between the interests of the parties
0:12:19 in our healthcare system.
0:12:22 We have the largest cohort of genetic counselors
0:12:23 in the United States as a result of the
0:12:27 GenSIME Genetics acquisition, and we do not get reimbursed
0:12:29 for genetic counseling services for the most part.
0:12:30 – That’s still the case, wow.
0:12:31 – Because most of the genetic counselors
0:12:34 are advanced doctorates, they have a doctorate degree
0:12:36 or they have an advanced degree, but they’re not physicians.
0:12:38 So they can’t get paid off the physician fee schedule
0:12:41 and there’s no code on the clinical fee schedule
0:12:43 to pay people for the test interpretation.
0:12:45 This is really a vexing problem because, you know,
0:12:49 again, our system categorizes people as you’re a doctor
0:12:51 so you can get paid for this or you’re a lab
0:12:52 so you can get paid for that.
0:12:53 And, you know, the genetic counselor provides
0:12:56 just as much interpretation to the physician
0:12:58 as they do directly to the patient,
0:12:59 but you can’t get paid because you’re kind of
0:13:00 in that never, never land.
0:13:02 It should be in the interest of the payers
0:13:04 to pay for genetic counseling.
0:13:06 We’ve had a lot of pushback from the payers about,
0:13:08 well, the genetic counselors have a conflict of interest
0:13:09 ’cause they work for you.
0:13:12 We’ve done a study that shows that there are more instances
0:13:14 in which our genetic counselors recommend
0:13:17 against a genetic test than when outside
0:13:20 genetic counselors are used by the payers.
0:13:21 – What do you attribute that to?
0:13:23 – Because our genetic counselors,
0:13:27 their sole responsibility in their view is to the patient.
0:13:29 The outside genetic counselor is in a much more
0:13:32 difficult position because if they recommend
0:13:34 against the test, hey, you work for Blue Cross,
0:13:37 you work for United, you’re recommending against my test,
0:13:38 you know, the physician gets angry,
0:13:40 the patient gets angry, so there’s much more of a default
0:13:42 of, you know, let’s just go with it
0:13:43 even though it might not be valuable.
0:13:45 And in my personal experience, you know,
0:13:48 I’ve had an instance in which a physician ordered a test
0:13:52 for a family member that really exactly replicated
0:13:54 a different test that had been done.
0:13:57 Genetic tests, you know, from a snip microarray
0:14:00 to a gene sequence, and nobody other than, you know,
0:14:02 once we sent it to our laboratories,
0:14:03 they’re like, you’ve already done this test.
0:14:04 There’s no point doing it again.
0:14:07 So yes, genetic counseling, I still think
0:14:09 it’s vastly underutilized and it will be more
0:14:12 and more important as people get deeper into genetics
0:14:14 and more is known about the genome
0:14:16 and how it’s interpreted.
0:14:19 You mentioned you have a menu of 4,400 tests.
0:14:23 What tests do you think are underutilized,
0:14:24 generally speaking, that would help physicians
0:14:26 make better decisions, right?
0:14:28 ‘Cause the old axiom is the only reason
0:14:30 you would order a diagnostic is if it’s going
0:14:32 to somehow change a decision that your physician
0:14:34 would make in terms of your care.
0:14:37 So the opposite is probably also true
0:14:39 that there are probably tests out there
0:14:41 that the physicians would order would change
0:14:44 the direction in which they manage your care.
0:14:45 – Is there sort of an underutilized category
0:14:46 of tests in your mind?
0:14:48 – You know, again, if you think about
0:14:51 the payer’s interest, it’s pretty simple.
0:14:53 You know, we want you to provide more services
0:14:54 for less price.
0:14:57 From the patient’s perspective, you have the sick,
0:14:59 the chronically sick, you have the worried well,
0:15:01 so, you know, what should be the balance
0:15:03 between what’s ordered and what’s paid for.
0:15:05 And from the provider perspective,
0:15:08 you have a whole array of new tests
0:15:10 that come to market all the time
0:15:12 and what’s the right way to introduce them
0:15:14 and to educate doctors and patients about their use.
0:15:17 I think the most underutilized tests
0:15:20 are actually probably the most common tests.
0:15:24 So I think thyroid testing is very much underused
0:15:27 and not well understood by most primary care physicians.
0:15:29 I think Hemoglobin A1C for management of,
0:15:32 you know, patients with chronic diabetes,
0:15:34 which of course, when you have diabetes,
0:15:37 most patients have two or three other comorbidities.
0:15:38 I think the whole menu of tests
0:15:41 around chronic kidney disease is vastly underutilized
0:15:44 because we know that most patients,
0:15:46 most consumers with chronic kidney disease
0:15:48 don’t even find out about it
0:15:49 until they’re beyond stage two
0:15:51 and, you know, potentially into stage three
0:15:52 of their kidney disease.
0:15:55 And yet the simple EGFR tests, you know,
0:15:58 indicates when your kidney is not performing adequately.
0:16:03 So there’s a whole range of what you and I would characterize
0:16:05 as kind of, quote unquote, routine core tests
0:16:07 that could be much better used
0:16:09 if we had a willingness on the payer’s part
0:16:10 to make that investment.
0:16:12 So can we stay on that for a second?
0:16:14 You talked about price, value.
0:16:15 There’s one thing that I think characterizes
0:16:19 the diagnostics industry, at least historically,
0:16:22 is that reimbursement has always been under pressure
0:16:24 and in many cases declining.
0:16:26 The ability to capture value
0:16:30 has been somewhat challenging or limited.
0:16:32 If you look from the companion diagnostic side,
0:16:34 at least historically, and this is changing,
0:16:36 you know, pharmaceutical companies
0:16:38 actually had little interest or limited interest
0:16:40 in having companion diagnostics
0:16:43 that would exclude patients from undertaking a therapy,
0:16:45 although I think that is shifting.
0:16:47 So when you take all of that together
0:16:48 and you combine that with the fact
0:16:50 that you in some ways have a frenemy in the hospitals,
0:16:52 right, because they have their own labs,
0:16:54 so they wanna keep as much of the testing
0:16:55 that they can themselves
0:16:56 and they will send stuff out to you
0:16:58 when they have to or need to,
0:17:01 what do you think the future of this industry looks like?
0:17:04 – Look, one of the things that I’ve observed
0:17:07 in my career in healthcare and in the lab industry is,
0:17:10 our industry hasn’t changed much
0:17:11 in terms of what we really do.
0:17:13 And yes, it’s changing how we deliver,
0:17:15 it’s changing the throughput of the instruments,
0:17:17 but basically the industry hasn’t changed much.
0:17:18 Why is that?
0:17:20 It’s because we are, you know,
0:17:23 the foundation of diagnosis and care.
0:17:26 And so you can see a healthcare system
0:17:30 in which there are way fewer hospitals
0:17:31 and much more is done in the home
0:17:33 or is done in outpatient centers
0:17:35 and the hospitals are facing that reality.
0:17:39 You can see a system in which there are, you know,
0:17:40 way fewer independent physicians
0:17:43 and they work for somebody or you can see a system,
0:17:46 but I just can’t envision a system in which there’s no lab.
0:17:49 So our position in the infrastructure is essential.
0:17:51 – Let’s talk about reimbursement pressure.
0:17:53 How do you get paid today?
0:17:55 What do you get paid for?
0:17:56 Who pays you?
0:17:58 – There’s always gonna be reimbursement pressure
0:17:59 in healthcare.
0:18:01 I mean, we were engaged in a discussion recently
0:18:02 with an analyst who said,
0:18:03 “Well, I don’t understand why you can’t get
0:18:05 “three to 4% price increases a year
0:18:07 “because, you know, you’re the low-cost provider
0:18:08 “and you bring high value.”
0:18:11 And, you know, it’s just not a realistic way
0:18:14 to look at healthcare and say people are gonna get
0:18:15 three or 4% price increases.
0:18:17 And we know that, you know,
0:18:19 the drug companies are under pressure about their pricing
0:18:21 and the hospitals are under pressure about their pricing.
0:18:24 And so we have to assume that prices
0:18:26 will continue to be under pressure
0:18:29 and that new innovative things
0:18:33 that have a decent price set will erode over time.
0:18:35 Government is actually the largest payer
0:18:37 and the payer of default in our system today.
0:18:39 I don’t think a lot of people realize that,
0:18:42 but Medicare Advantage, which is a government-run program
0:18:44 that’s administered by private companies,
0:18:47 Medicaid, which is a traditional fee-for-service program,
0:18:48 and then Manage Medicaid, which, again,
0:18:50 is a government-funded program
0:18:51 that’s administered by private companies.
0:18:54 Then you add in federal employee benefits,
0:18:56 railroad retirement, you know, I mean, there’s just enough.
0:18:57 So there’s–
0:18:57 – It sounds pretty straightforward.
0:18:59 – Yeah, exactly.
0:19:00 Just send out a bunch of bills
0:19:02 and hope somebody pays them.
0:19:03 So the government is the largest payer
0:19:05 and then Manage Care is the second-largest payer,
0:19:07 the large managed care plans.
0:19:09 We have our CFO, who’s now been with the company
0:19:12 for five years, came from the industrials world.
0:19:13 And he’s a terrific CFO,
0:19:15 but we were talking about the billing system
0:19:16 and he said, “Well, I don’t understand why
0:19:18 “we just don’t go out to Oracle or something,
0:19:19 “just buy one and put it in.
0:19:20 “It just can’t be that complicated.
0:19:21 “You send a bill, they pay.”
0:19:24 I said, “Oh no, it’s a little more, you send a bill.
0:19:26 “They adjudicate it.
0:19:28 “It may go to the patient’s deductible,
0:19:30 “back to the patient.
0:19:33 “It may be that the service is not a coverage service.
0:19:34 “It may be that there’s a coverage policy
0:19:35 “that hasn’t been met.
0:19:38 “It may be that they pay part of it
0:19:40 “and you have to send part of it.”
0:19:43 So billing is a huge and complex area for us
0:19:45 and we have over 2,000 people
0:19:47 who just manage the billing side
0:19:49 of our provision of services.
0:19:50 – And lengthy.
0:19:53 I mean, it sounds like much, much time passing.
0:19:56 – Which is super frustrating for the patient
0:19:57 because by the time they get a bill,
0:19:59 it may be months after they had the service.
0:20:02 And I can’t tell you how many complaints we get about,
0:20:03 I don’t even know who LabCorp is.
0:20:05 My doctor drew some blood
0:20:06 and the next thing I know, I’m getting a bill from you.
0:20:09 So it’s a very complex billing system.
0:20:11 So to your earlier question, Jorge,
0:20:13 about what we do about margins.
0:20:17 I mean, our laboratories are only a small part
0:20:18 of our infrastructure.
0:20:21 We have several thousand cars and couriers
0:20:22 that pick up specimens.
0:20:24 We have our own aircraft.
0:20:26 There’s a whole logistics piece that underlies it.
0:20:30 We have 1,700, 1,800 patient service centers
0:20:31 where people can come and get their blood drawn.
0:20:33 We have people sitting in doctor’s offices.
0:20:36 All of that has to be coordinated underneath the testing.
0:20:40 We’re working on how do we make that more automated,
0:20:43 more digitized, how do we take paper out of the process
0:20:46 so that we can actually deliver the customer
0:20:47 a better experience.
0:20:52 We moved from, you used to go to LabCorp and get there
0:20:54 and it was a laborious process.
0:20:56 You had your requisition for your lab test.
0:20:58 You had to get a driver’s license, your insurance card.
0:20:59 We scanned it.
0:21:01 You fill that information.
0:21:03 Now we have check-in kiosks.
0:21:04 You can check-in online.
0:21:06 I went and had my blood drawn not long ago.
0:21:09 I checked-in online for my testing.
0:21:12 When I got to the patient service center,
0:21:14 I had a QR code if that’s what they’re called on my phone.
0:21:15 I scanned it at the kiosk.
0:21:17 I was checked in, that’s it.
0:21:18 And, you know, five minutes later,
0:21:20 I’m called, testing’s done and I’m through.
0:21:23 So these are ways in which we’re working on
0:21:25 preserving our margin and at the same time
0:21:28 providing a better experience for the consumer.
0:21:30 And I know it’s 4,400 tests.
0:21:31 It’s a pretty broad range.
0:21:34 So it’s going to be an over-generalization,
0:21:37 but on average, what do you get paid per test?
0:21:40 And on average, what is the sort of collections rate?
0:21:42 ‘Cause that’s one of the things that I think is so shocking
0:21:44 to people outside of the healthcare system
0:21:48 that a significant number of percentage of bills
0:21:49 just go unpaid.
0:21:54 – Yeah, so our average encounter price is about $45.
0:21:57 We do about two million patient encounters a week.
0:22:01 And so it’s a big, high-scale, high-throughput business.
0:22:04 We see about 110 million patient encounters a year.
0:22:07 In terms of the bills, you know, our bad debt rate,
0:22:10 our non-collected rate is in the range of 4%.
0:22:11 But when you think about that, first of all,
0:22:13 it’s a very substantial amount and almost all of it
0:22:16 comes from the patient side of the equation.
0:22:19 But what that doesn’t speak to is the amount
0:22:22 of service that we provide that physicians order
0:22:25 that patients need that doesn’t get paid for to begin with.
0:22:27 ‘Cause that doesn’t actually get down to the bottom line.
0:22:29 That all gets adjusted out at the sales level.
0:22:34 So payer policies, we only cover a vitamin D test
0:22:36 with these diagnoses.
0:22:40 Or we have a payer that only covers prenatal screening
0:22:45 for women if the putative father appears at the appointment.
0:22:47 Which when you think about the Medicaid population
0:22:49 or the underserved population,
0:22:51 the chances of getting the putative father
0:22:53 at the appointment are pretty small.
0:22:57 And yet, we know that it’s important for that patient
0:23:00 to have the genetic screening that the physician has ordered.
0:23:04 So there’s a lot of leakage in the system of, you know,
0:23:07 where we’re, and look, you know, we’re a public company,
0:23:09 we’re a for-profit organization.
0:23:10 We have to try to maximize what we can do
0:23:13 for our shareholders, but we also have a real sense
0:23:16 of the mission of improving patients’ health and lives.
0:23:18 And so we do a lot of things that do benefit patients,
0:23:20 even though we get frustrated with the payers
0:23:23 that they have restrictive policies.
0:23:25 – So in this model where the test is ordered,
0:23:27 it’s paid for, and then the information goes on,
0:23:29 there’s lots of leakage in the system, as you say,
0:23:30 and there’s problems with this model,
0:23:32 but it is a very entrenched model.
0:23:35 How do we move towards this value-based
0:23:38 or outcomes-based shift where we’re trying to value
0:23:41 what happens as a result of all these things in the future?
0:23:43 What would that look like in the lab?
0:23:46 – So to me, what that looks like is the hospitals
0:23:48 think about their laboratory, and instead of saying,
0:23:52 well, gee, I can run a thyroid panel in my hospital lab
0:23:54 and get paid $300 for it,
0:23:57 and maybe the patient gets a bill for $16.
0:24:00 To the doctor, it looks like I have a bundle of dollars here
0:24:02 to spend on this patient.
0:24:05 I’m at risk if I spend more than is allocated,
0:24:06 but I also have potential upside
0:24:08 if I spend less than allocated.
0:24:11 So I’m completely good
0:24:14 with sending the test to LabCorp for $40
0:24:16 and using the hospital lab in a different way,
0:24:19 which is supporting the emergency room,
0:24:23 supporting the operating theaters with pathology.
0:24:26 I’m actually optimistic that as we move to value-based care,
0:24:27 there’ll be a much more rational approach
0:24:31 to how we think about where the site of service
0:24:32 should be for everything, right?
0:24:36 I mean, we do way too many non-acute things
0:24:38 in the hospital today.
0:24:41 You should be paid the same price by Medicare
0:24:43 for doing the same service at every site.
0:24:45 The hospital shouldn’t make more
0:24:46 for doing a colonoscopy in the hospital
0:24:48 than they get from doing it
0:24:49 at an ambulatory surgery center.
0:24:52 The doctor should not be getting paid more
0:24:54 for doing chemotherapy in the office
0:24:55 than it can be done at a remote cancer center.
0:24:57 – Yeah, that does feel appropriate.
0:25:00 – And certainly, the hospital should not be getting paid more
0:25:02 for doing chemotherapy in the hospital setting,
0:25:04 which is the worst setting for the patients
0:25:06 to get chemotherapy in than for doing it
0:25:08 in a less acute environment.
0:25:12 So in my mind, it will bring real economic rationality.
0:25:14 It has the potential to bring, if done right,
0:25:15 real economic rationality
0:25:17 to the ancillary services part of the system.
0:25:19 – So you touched on something really interesting,
0:25:23 that healthcare delivery is being pushed out
0:25:26 of the four walls of the monolithic hospital
0:25:27 out into the periphery.
0:25:30 The consumer is increasingly becoming more empowered,
0:25:32 or at least it’s demanding more of healthcare system
0:25:35 as they, in turn, are being demanded to pay more
0:25:37 for their own healthcare employers as well.
0:25:39 What do you think the coming decades look like
0:25:41 from a technology standpoint
0:25:43 for the laboratory diagnostics industry?
0:25:45 I can see how technology will make coordination of care
0:25:49 easier, I can see how it would make logistics more efficient.
0:25:52 I can also imagine how technology will enable us
0:25:55 to test for things that we can’t test for today,
0:25:58 to derive insights that we don’t have today.
0:26:00 But I can also imagine that at some level,
0:26:02 as technology gets better,
0:26:05 it will make less sense to send a sample to the diagnostic
0:26:07 and it’ll become increasingly feasible
0:26:10 to send a diagnostic to the sample.
0:26:14 So is sort of point of care diagnostics technology,
0:26:15 is that an existential threat,
0:26:19 or will there always be things that have to be done
0:26:21 in a centralized lab setting,
0:26:23 even if there are more things over time
0:26:26 that can be done in a sort of point of care setting?
0:26:27 – So are you asking essentially,
0:26:29 will the lab be unbundled too?
0:26:31 – Yeah, my question is will the lab disappear?
0:26:33 – There will always be some tests
0:26:34 that need a venous blood draw,
0:26:37 that need a relatively significant amount of specimen,
0:26:38 and that can only be done in the lab environment.
0:26:40 And particularly, you know,
0:26:43 the complex and esoteric testing will, in my mind,
0:26:46 there will always be a central laboratory.
0:26:47 – So you’re not worried about genome sequencing
0:26:48 on the iPhone?
0:26:50 – Not today.
0:26:52 It’s funny, years ago I was at a personalized
0:26:53 medicine conference and one of the panelists
0:26:55 was talking about, oh, you know, within three years,
0:26:57 you’re just gonna put your saliva on the iPhone
0:26:58 and it’s gonna measure all your vital signs,
0:27:01 and you know, including all your laboratory values.
0:27:02 But it didn’t come to pass,
0:27:05 so many things in healthcare, it’s way slower
0:27:06 than people think.
0:27:10 But I’m a big believer in, you know,
0:27:12 laboratory testing needs to be democratized.
0:27:16 I mean, part of the reason that we don’t have
0:27:19 as much of an impact on patient care as we should is,
0:27:21 when you think about the way the system works,
0:27:23 so you go to the doctor,
0:27:26 now my doctor actually is, I was actually very impressed,
0:27:29 he sent me the lab that slipped before my appointment
0:27:32 to have the blood drawn, so he could have the results.
0:27:34 – But there’s a good chance he knows who you are.
0:27:38 – Yeah, he’s probably, that’s right, he does know who I am.
0:27:41 But most of the time you go to the doctor,
0:27:42 you get your blood drawn,
0:27:44 you get the results back three days later,
0:27:46 now it’s like, well, now I gotta call the doctor,
0:27:47 I gotta figure out the interpretation,
0:27:50 or you get the lab slip, you went to the doctor,
0:27:52 you weren’t feeling so great on a Friday,
0:27:54 you woke up Sunday morning, you felt okay,
0:27:57 and the lab slip just kind of, you know, goes in the trash.
0:28:01 – A shocking number of drug prescriptions never get filled,
0:28:04 and obviously the drug you don’t take cannot work.
0:28:08 Do you have a sense of what percentage of diagnostic tests
0:28:12 that are ordered by a physician are actually done?
0:28:16 – I don’t, and it’s a major point of frustration for me
0:28:20 that most physicians and health systems
0:28:24 have a follow-up system for ancillary services,
0:28:26 like if you go to the doctor and they say get an MRI
0:28:27 and you don’t show up for the MRI,
0:28:29 you’re gonna get pestered, you know,
0:28:30 or you get a referral for physical therapy,
0:28:32 you’re gonna get pestered.
0:28:34 If they give you a lab slip and you don’t do the labs,
0:28:36 you probably never hear anything about it.
0:28:40 There’s, you know, kind of urban lore about, oh, you know,
0:28:41 10, 15% never get performed.
0:28:44 There was a study done years ago at Harvard Medical School,
0:28:47 even there, there was a relatively high non-compliance rate,
0:28:49 as I remember, you know, 15, 20%.
0:28:53 And so I think that being able to move care
0:28:57 closer to the patient, if, this is a big if,
0:28:59 if the technology is good enough
0:29:03 that it is clinically relevant, that it’s reproducible,
0:29:04 and that the quality is there,
0:29:06 that’s a good thing for patients,
0:29:07 and it’s a good thing for our industry.
0:29:09 We can collect testing in the home,
0:29:12 and as long as it’s performed in our main laboratory,
0:29:16 we can integrate that into the patient’s health record.
0:29:18 So one of the big issues with point of care testing
0:29:20 has always been, you know, you do it,
0:29:23 and then you get a printout,
0:29:24 and, you know, unless you literally staple it
0:29:27 to the patient’s forehead and they go to the doctor’s office,
0:29:28 half the time it never gets to a place
0:29:30 where it’s gonna be well-interpreted.
0:29:31 – So the information flow gets messed up.
0:29:33 – And I don’t think there’s gonna be sort of, you know,
0:29:35 the quote-unquote killer app
0:29:38 that’s gonna just completely turn the business upside down,
0:29:40 ’cause believe me, enough people have tried to find it
0:29:42 in the last 10 years, and, you know, so far we’re not there,
0:29:45 but the technology will change.
0:29:48 Bringing lab testing closer to the patient is an imperative,
0:29:50 just to make lab testing more effective
0:29:51 and more valuable in the system,
0:29:53 and in the value-based care model,
0:29:56 when we’re engaged with patients in their homes
0:29:58 around not only your actual health,
0:30:01 but, you know, your social determinants of health,
0:30:03 and then we’re gonna have much more opportunity
0:30:04 to bring those tools to the patient
0:30:06 and actually, you know, help them manage their care.
0:30:08 – So when we think about the lab
0:30:09 and the way it’s changed over time,
0:30:12 from, you know, pipettes and beakers to microarrays,
0:30:15 what do you see coming next as the big new tools
0:30:16 or the new innovations
0:30:17 that you’re trying to think about how to integrate?
0:30:20 – So from a technological standpoint,
0:30:23 obviously the increasing miniaturization of instruments,
0:30:25 the tabletop instruments,
0:30:26 which, again, goes back to what we talked about
0:30:29 with democratizing the range of services.
0:30:31 Sequencing as a tool for diagnostics,
0:30:34 you know, the cost of sequencing is rapidly coming down.
0:30:37 The competitive landscape is becoming much more competitive
0:30:38 than it has been historically,
0:30:42 and so genetic testing that we have traditionally done,
0:30:43 you know, again, I remember when we started
0:30:46 with cystic fibrosis, you know, we looked at 30 markers,
0:30:48 and then it was 60 markers, then it was 90 markers,
0:30:51 and now we just sequenced the cystic fibrosis gene,
0:30:53 and there’s way more information in there,
0:30:55 which has pluses and minuses.
0:30:57 The pluses, there’s way more information in there.
0:30:59 The minuses, a lot of it is not well understood,
0:31:01 and so, you know, that takes me to what I think
0:31:03 is really gonna be what’s revolutionary
0:31:06 in the next 10 years is the understanding of the data
0:31:08 and the integration of the data
0:31:11 that comes from laboratory medicine.
0:31:15 That’s gonna be the huge transformation in our business.
0:31:17 It’s not gonna be the underlying technology.
0:31:19 People think, oh, you know, sequencing,
0:31:20 that’s a great new thing.
0:31:22 Sequencing is just another methodology
0:31:24 to do many of the things we already do today.
0:31:26 It’s a more efficient methodology,
0:31:28 but what comes out of the sequence
0:31:29 is a wealth of information
0:31:32 that we haven’t been getting historically,
0:31:34 and integrating that information into the coordination
0:31:37 and the arc of patient care is gonna be where
0:31:39 we’re really gonna see diagnostic shine
0:31:40 in the next five, 10 years.
0:31:43 – So as we look five, 10 years into the horizon,
0:31:46 if I’m an entrepreneur starting out,
0:31:48 and I have an idea or a technology
0:31:51 that I think is applicable as a diagnostics
0:31:54 or applicable to the diagnostics industry,
0:31:56 what do you think are the opportunities
0:32:00 or the blue sky opportunities for entrepreneurs
0:32:01 coming into this industry today?
0:32:04 – I mean, there are so many areas of diagnostics
0:32:07 that we just, fertility is an area
0:32:10 that we just don’t have really good tools.
0:32:13 And so, an entrepreneur who could bring to the market
0:32:18 something that would increase the rate of success in IVF.
0:32:19 Great area.
0:32:21 – What are some of the other ones?
0:32:23 – I think that emerging infectious disease
0:32:25 is an area of real concern.
0:32:28 I mean, the public health services
0:32:30 were overwhelmed with Zika testing,
0:32:32 so they ended up sending it to the commercial labs
0:32:34 without going through full regulatory processes,
0:32:35 the tests that they were doing,
0:32:38 ’cause they just couldn’t handle the specimens.
0:32:41 Anything that addresses new and emerging disease states,
0:32:44 in my mind, is a real area of opportunity.
0:32:48 The caution is, one, the history of the diagnostics industry
0:32:52 is littered with the small laboratory
0:32:54 that offered one test
0:32:56 and had a great arc at the beginning
0:32:59 and then ran up against the reality,
0:33:02 which is that the doctors want to order everything
0:33:04 from one place.
0:33:06 So, go back to non-invasive prenatal testing.
0:33:07 There were three companies
0:33:10 that did non-invasive prenatal testing,
0:33:11 all of them were independent,
0:33:14 and now one of them is independent,
0:33:15 one of them was bought by Roshan,
0:33:16 one of them was bought by us.
0:33:19 Why? Because the OBGYNs,
0:33:21 who were doing the non-invasive prenatal testing,
0:33:25 didn’t want to have to put a box over here,
0:33:27 a specimen over here to go to that company
0:33:29 and everything else from my office goes to Quest
0:33:30 or everything goes to LabCorp.
0:33:34 So, the distribution channel is really, really critical.
0:33:37 And the second thing that’s really critical is reimbursement.
0:33:39 You can’t imagine how many people come
0:33:43 with a really cool test and great data,
0:33:44 but the payers just, you know,
0:33:46 they’re just not going to pay for things
0:33:48 that even if they should, you know,
0:33:51 broad-based screening for whatever disease it is
0:33:53 of the asymptomatic population,
0:33:54 payers don’t want to pay for it
0:33:56 because there’ll be too many false positive,
0:33:58 too much treatment and while saving the long run
0:34:02 for screening the whole asymptomatic population,
0:34:03 I’m not going to do well.
0:34:05 But in a value-based care model,
0:34:07 in which the reward is for early detection
0:34:08 and early treatment,
0:34:11 then payers should be enthusiastic
0:34:12 to pay for early detection and early screening.
0:34:15 So, the reimbursement piece and the distribution channel
0:34:16 are really critical for the entrepreneur
0:34:18 who comes up with a great idea.
0:34:19 – And so, in that spirit,
0:34:22 how does an entrepreneur work with LabCorp?
0:34:24 Do I knock on your front door?
0:34:25 – So, there’s two ways.
0:34:28 One is we invest in ideas that we think are interesting
0:34:31 and often those are ideas that are,
0:34:33 well, the whole goal of it is invest in ideas
0:34:35 that are disruptors, invest in ideas
0:34:36 that are potentially competitive
0:34:38 so we can see what’s going on and understand the lens,
0:34:39 because that’s one way.
0:34:42 The other way is, we’re not a research company,
0:34:43 we’re a development company,
0:34:45 so we take other people’s good ideas
0:34:47 and we scale them so we can run them
0:34:49 100 million times a week if we need to
0:34:52 and that’s why we welcome the idea of entrepreneurs
0:34:55 doing things that will enhance the value
0:34:57 of diagnostics in general.
0:34:59 – So, yes, essentially, come knock on your front door.
0:35:00 – Knock on our front door.
0:35:01 Knock on the side door, we got plenty of doors.
0:35:02 We welcome it.
0:35:05 – Thank you so much for joining us on the A16Z podcast.
0:35:06 – Thank you, it’s been great being with you.