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Google Hopes Nobody Beats This Wiz

By KIM BELLARD

When I saw the Wall Street Journal article about Alphabet being in “advanced talks” to buy cybersecurity firm Wiz for an eye-popping $23b, I must confess that – never having previously heard of the company – my thoughts flashed back to the Seinfeld episode (“The Junk Mail”) where Elaine dates a man whose job turns out to be an outlandish mascot for electronics store The Wiz, whose motto he gleefully repeats: “Nobody beats The Wiz!”  That firm is long gone but this Wiz is alive and well, enough so that the acquisition would be Alphabet’s largest ever.

The Wiz was only founded in 2020, by four ex-Israeli military officers (they reportedly all originally worked together at Israel’s equivalent of the NSA). They had previously founded cloud cybersecurity firm Adallom in 2012, which they sold to Microsoft in 2015 for its Azure cloud computing firm. Wiz also specializes in cloud cybersecurity, and, according to WSJ, its clients include 40% of the Fortune 500 companies as customers, including Barclay’s, Mars, Morgan Stanley, and Slack. Other notable customers include BMW, DocuSign, EA, and Salesforce.

Pretty impressive for a four-year-old start-up.

Alphabet’s cloud business – Google Cloud Platform (GCP) — badly trails leaders AWS (Amazon) and Azure (Microsoft), although last year GCP’s revenue’s rose 26% and it recorded its first operating profit. It’s Q1 2024 revenue was up 28%. By the way, Wiz lists both AWS and Azure as partners, along with GCP, Oracle Cloud Infrastructure, VMware, and Alibaba Cloud. 

Alphabet had bought security company Mandiant two years ago for $5.4b, as well as Siemplify, another Israeli cloud cybersecurity company, that same year, and evidently sees these acquisition as a way to bolster its cloud business.

For some perspective, just this past May Wiz raised $1b in a funding round that gave it a $12b valuation. Its annual recurring revenues are estimated at $500 million, so Alphabet’s offer is a 46 multiplier. By contrast, WSJ notes that competitor CrowdStrike has a market capitalization that is 25 times annual recurring revenues. “This could be one of the largest and fastest returns ever for a private security company in tech history,” Alex Clayton, a general partner at Meritech Capital, told WSJ.

“There are two advantages of Google acquiring Wiz,” Ray Wang, principal analyst and founder of Constellation Research, told CSO. “One, cloud security is hot and allows Google to cut into AWS and Azure clients, and two, having Wiz would give them some consistently large workloads to monetize.”

If you’re wondering why cloud security is hot, I need only mention AT&T, which recently disclosed that the records of “nearly all” of its cellular customers had been breached. Well, those records came from its cloud provider Snowflake — and that was not the first time Snowflake has been attacked and possibly breached. Azure has also suffered some serious breaches, and has been accused of “repeated pattern of negligent cybersecurity practices.” AWS has had its share of data breaches as well.

So, yeah, a cloud service better have good cybersecurity.

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Digital Health: There is No Exit

By MATTHEW HOLT

All of a sudden we are back in 2021.

You digital health fans remember that halcyon time. In 2019 a few digital health companies went public, and then somehow got conflated in the pandemic meme stock boom, with the harbinger event being the August 2020 sale of Livongo to Teladoc that valued it at $19bn and early in 2021 rather more, as Teladoc itself got to a market cap of $44bn in February 2021

Venture money poured into digital health as a fin de siecle for the ZIRP, that had been going for a decade, combined with the idea that Covid meant we would never leave our houses. The vaccine that became generally available at the start of the Biden Administration in 2021 put paid to the idea that telehealth was the majority of the future of care delivery.

Nonetheless between mid 2021 and early 2022 Jess DaMassa and I were reporting on VC funding in a show called Health in 2 Point 00 (later Health Tech Deals) and every week there were several deals for $100m and up going into new health tech companies.

Things don’t look so pretty now. Even while venture money was flooding into digital health, those public companies, as exemplified by Teladoc, started to see their stock price fall. While it was actually a good year for the stock market overall, in 2021 the digital health sector fell by around 60%. It kept going down. 2022 was worse and although one or two individual companies have recovered (Hi Oscar!), nearly two years later the market cap of the entire sector remains in the toilet.

Of the list that I’ve been following for years there’s only 11 broadly defined digital health companies with a market cap of more than $1 billion–that is only 11 public unicorns

What’s worse is that only one company on that list is decently profitable, and that’s Doximity. It made over $170m profit on revenue of less than $500m last year and trades at 10 x revenue. But Doximity always was profitable, going way back to 2014 (long before its IPO), and although it’s doing cool stuff with AI and telehealth, it’s basically an advertising platform for pharma.

There is no such thing as a profitable public digital health company in the mainstream of care delivery or even insurance–unless of course you count Optum. Which means there’s almost certainly no profitable VC-backed private company either.

Which leads me to this month. You remember those huge rounds that Jess & I used to report on and make fun of? They’re back.

I get it. The stock market is hot and all those pension funds are trying to put their winnings from Nvidia somewhere. VC looks a reasonable bet and there have been a few tech IPOs. If you squint really hard, as STAT’s Mario Aguilar did, you can pretend that Waystar & Tempus are health tech IPOs, although a payments/RCM company and a diagnostics company which are both losing a ton of money wouldn’t give me confidence as an investor.

But the amounts being thrown around must give anyone pause. Let’s take a few examples from the last month. Now these aren’t a knock on these companies, which I’m sure are doing great work, but let’s look at the math.

Digital front door chatbot K-Health raised at a $900m valuation. This round was a $50m top-up but it has raised nearly $400m. It says it’ll be profitable in 2025, and has Elevance as its biggest client. Harmonycares is a housecall medical group, presumably pursuing the strategy that Signify and others followed. It raised $200m, so presumably has a $500m+ valuation–Centene bought an earlier version of the company for $200m a decade ago and sold it to some investors two years back. Headway is a mental health provider network that uses tools to get providers on their system and markets them to insurers. It raised $200m at a reported $2.3bn valuation.

You can look at that list of public companies, including ones taken private like Sharecare, and see that there are lots of telehealth chatbots, medical groups and mental health companies on the list. Any of which probably have similar technology buried inside them. I’m sure if you shook Sharecare hard enough all those technologies would fall out given the number of companies it acquired over its decade plus of expansion.

But let’s take mental health.

Amwell acquired a mental health company called Silvercloud, and a chatbot called Conversa. Its market cap is bouncing around between $250m & $350m and it has more than that in cash–which means the company itself is worth nothing! The VCs who put money into K-Health and Headway could literally could have bought Amwell for about what they invested for a fraction of those companies. Is Headway doing more than the $250m a year in revenue Amwell is putting up? Headway’s value is nearly 6 x the value of Talkspace which is bringing in about $150m a year in revenue. And if you consider BetterHelp to be 50% of Teladoc — which it roughly is — Headway is 3 x the value of BetterHelp which is doing $1bn a year in revenue. Is there any chance that Headway is doing close to those numbers? Maybe somone who saw the latest pitch deck can let me know, but I highly doubt it.

Now of course these new investments could be creating new technology or new business models which the previous generation of digital health companies couldn’t figure out. They might also have figured out how to grow profitably–although as far as I know Doximity stands alone as a profitable company that took VC funding it never needed and never used.

But isn’t it more likely that they are in the market competing with the public companies and those private companies that got funding in 2020-22, have similar pitches, similar tech and are similarly losing money?

I am a long time proponent of digital health and really hope that technology can change the sclerotic health care sector. I want all these companies to do well and change the world. Maybe those VCs investing in those mega rounds are more sensible than they were in 2022. But given the state of the digital health sector on the current stock market–which is otherwise at all time highs–I just don’t know what the exit can be, and it pains me to say it.

Pamela Stahl, Avalon Healthcare Solutions

Pamela Stahl is the President of Avalon Healthcare Solutions. You’ve heard of pharmacy benefits managers (PBMs) but Avalon is a labs benefits management company. Working on behalf of health insurers Avalon ensures that patients are getting the right labs at the right price, . Why are they needed? There are 14 billion lab tests and they drive a lot of health care decisions (70%+!). As you might guess there’s a ton of variation in test price, lots of test are ordered in error, many are repeated, and many are unnecessary. Avalon’s job is to figure that all out!–Matthew Holt 

Health Care Needs a 21st Century Infrastructure

By KIM BELLARD

Matthew Holt is going to tell me I’ve been thinking about infrastructure too much lately (e.g., cybersecurity of them, backup plans for them), but if you don’t have infrastructure right, you don’t have anything right.

And healthcare most definitely does not have its infrastructure right.

We’re spending between 15-30% of our healthcare dollar on administration, and no one views our healthcare system as efficient or even particularly effective. We have numerous intermediaries like PBMs, billing services, revenue cycle management vendors, and all sorts of digital health solutions. There are layers upon layers upon layers, each adding its costs and complications.

In some ways, healthcare’s infrastructure has changed remarkably in the last two to three decades. Most transactions – e.g., claims or eligibility – are sent, and often processed, electronically. Most physicians, hospitals, and other health care clinicians/organizations have electronic health records. You can find out the expected cost for prescription drugs at point-of-sale. You can do a virtual visit with your doctor. There are vast amounts of health information available online. AI is coming to health care, and, in some cases, is already here.

But: we’re still sending faxes. We’re still filling out paper forms, repeatedly. We still make innumerable phone calls, usually spending long waits in queue. Everyone hates provider directories, which are never up-to-date and often inaccurate. Talk of interoperability notwithstanding, there are far too many data silos, leading to at best us lugging around disks with our downloaded records to at worst physicians acting with incomplete information for us. Healthcare has had far too many data breaches, and cyberattacks have held patient data hostage (e.g., Ascension) or put a halt to those electronic transaction (e.g., Change Healthcare). And we’re not at all sure how to govern AI.

The amount of medical literature has been growing exponentially for decades, and the volume of health care data is growing much, much faster. Physicians once guarded health information like the guild they are, but the Internet has democratized health information – while doing the same for misinformation. If anything, we have too much information; we just can’t use it as effectively as we should (e.g., it can take 17 years for evidence to change physician practice).

This is not an infrastructure that is not coping well with the 21st century.

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Batteries All Around

By KIM BELLARD

Quick question: how many batteries do you have? Chances are, the answer is way bigger than you think. They’re in your devices (e.g., smartphones, tablets, laptops, ear buds), they’re throughout your house (e.g., clocks, smoke detectors), they’re in your car (even if you don’t have an EV), and they may even be in you. We usually only think about them when they need recharging, or when they catch fire. They can be an environmental nightmare if not recycled, and recycling lithium-ion batteries is still problematic.  

So I was intrigued to read about some efforts to rethink what a battery is.

Let’s start with some work done by Swedish tech company Sinonus, a spinout of Chalmers University of Technology and KTH Royal Institute of Technology. The company is all about carbon fiber; more specifically, integrating structural strength and storing energy.

It seeks to make things multipurpose: “Just think of your smartphone, today it seems farfetched to use a single purpose phone, camera and mp3 player when you can have them all in one. In the same way we can transform single purpose materials, such as structure materials and batteries, through our multipurpose carbon fiber composite solution.” 

Or, as TechRadar put it, “how the laptop could become the battery.”

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Artificial Intelligence Plus Data Democratization Requires New Health Care Framework

By MICHAEL MILLENSON

The latest draft government strategic plan for health information technology pledges to support health information sharing among individuals, health care providers and others “so that they can make informed decisions and create better health outcomes.”

Those good intentions notwithstanding, the current health data landscape is dramatically different from when the organizational author of the plan, the Office of the National Coordinator for Health IT, formed two decades ago. As Price and Cohen have pointed out, entities subject to federal Health Insurance Portability and Accountability Act (HIPAA) requirements represent just the tip of the informational iceberg. Looming larger are health information generated by non-HIPAA-covered entities, user-generated health information, and non-health information being used to generate inferences about treatment and health improvement.

Meanwhile, the content of health information, its capabilities, and, crucially, the loci of control are all undergoing radical shifts due to the combined effects of data democratization and artificial intelligence. The increasing sophistication of consumer-facing AI tools such as biometric monitoring and web-based analytics are being seen as a harbinger of “fundamental changes” in interactions between health care professionals and patients.

In that context, a framework of information sharing I’ve called “collaborative health” could help proactively create a therapeutic alliance designed to respond to the emerging new realities of the AI age.

The term (not be confused with the interprofessional coordination known as “collaborative care”) describes a shifting constellation of relationships for health maintenance and sickness care shaped by individuals based on their life circumstances. At a time when people can increasingly find, create, control, and act upon an unprecedented breadth and depth of personalized information, the traditional care system will often remain a part of these relationships, but not always. For example, a review of breast cancer apps found that about one-third now use individualized, patient-reported health data obtained outside traditional care settings.

Collaborative health has three core principles: shared information, shared engagement, and shared accountability. They are meant to enable a framework of mutual trust and obligation with which to address the clinical, ethical, and legal issues AI and data democratization are bringing to the fore. As the white paper AI Rights for Patients noted, digital technologies can be vital tools, but they can also expose patients to privacy breaches, illegal data sharing and other “cyber harms.” Involving patients “is not just a moral imperative; it is foundational to the responsible and effective deployment of AI in health and in care.” (While “responsible” is not defined, one plausible definition might be “defensible to a jury.”)

Below is a brief description of how collaborative health principles might apply in practice.

Shared information

While the OurNotes initiative represents a model for co-creation of information with clinicians, important non-traditional inputs that should be shared are still generally absent from the record. These might include not just patient-provided data from vetted wearables and sensors, but also information from important non-traditional providers, such as the online fertility companies often accessed through an employee benefit. Whatever is in the record, the 21st Century Cures Act and subsequent regulations addressing interoperability through mechanisms such as Fast Healthcare Interoperability Resources more commonly known as FHIR have made much of that information available for patients to access and share electronically with whomever they choose.

Provider sharing of non-traditional information that comes from outside the EHR could be more problematic. So-called “commercially available information,” not protected by HIPAA, is being used to generate inferences about health improvement interventions. Individually identified data can include shopping habits, online searches, living arrangements and many other variables analyzed by proprietary AI algorithms that have undergone no public scrutiny for accuracy or bias. Since use by providers is often motivated by value-based payment incentives, voluntary disclosure will distance clinicians from a questionable form of surveillance capitalism.

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Innovators: Avoid Health Care

By KIM BELLARD

NVIDIA founder and CEO Jensen Huang has become quite the media darling lately, due to NVIDIA’s skyrocketing market value the past two years ($3.3 trillion now, thank you very much. A year ago it first hit $1 trillion). His company is now the world’s third largest company by market capitalization. Last week he gave the commencement speech at Caltech, and offered those graduates some interesting insights.

Which, of course, I’ll try to apply to healthcare.

Mr. Jensen founded NVIDIA in 1993, and took the company public in 1999, but for much of its existence it struggled to find its niche. Mr. Huang figured NVIDIA needed to go to a market where there were no customers yet – “because where there are no customers, there are no competitors.” He likes to call this “zero billion dollar markets” (a phrase I gather he did not invent).

About a decade ago the company bet on deep learning and A.I. “No one knew how far deep learning could scale, and if we didn’t build it, we’d never know,” Mr. Huang told the graduates. “Our logic is: If we don’t build it, they can’t come.”

NVIDIA did build it, and, boy, they did come.

He believes we all should try to do things that haven’t been done before, things that “are insanely hard to do,” because if you succeed you can make a real contribution to the world.  Going into zero billion dollar markets allows a company to be a “market maker, not a market-taker.” He’s not interested in market share; he’s interested in developing new markets.

Accordingly, he told the Caltech graduates:

I hope you believe in something. Something unconventional, something unexplored. But let it be informed, and let it be reasoned, and dedicate yourself to making that happen. You may find your GPU. You may find your CUDA. You may find your generative AI. You may find your NVIDIA.

And in that group, some may very well.

He didn’t promise it would be easy, citing his company’s own experience, and stressing the need for resilience. “One setback after another, we shook it off and skated to the next opportunity. Each time, we gain skills and strengthen our character,” Mr. Huang said. “No setback that comes our way doesn’t look like an opportunity these days… The world can be unfair and deal you with tough cards. Swiftly shake it off. There’s another opportunity out there — or create one.”

He was quite pleased with the Taylor Swift reference; the crowd seemed somewhat less impressed.

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Josh Reischer, Health Note

Health Note takes the patient history from the patient and includes it in the EMR. It’s another piece of the puzzle in trying to fix the patient/physician encounter. Health note also does the basic information for intake that companies like Phreesia does but it also gets the patient to answer questions about their health so that the physician has more time in the encounter to focus on what to do about it. But they also add their history into Epic in a very specific and complex way. CEO Josh Reischer showed me a detailed demo about what the patient and provider experience is. Quite the advance on asking and typing as happens in 95% of visits today!–Matthew Holt

Welldoc–Anand Iyer & Marina Dorotheo demo the latest!

Welldoc is a consumer facing tool that has been around a long, long time in the diabetes management space. It was the first company to be certified by the FDA as Software as a Medical Device, and it has moved into wide range of diseases as the consumer front-end for many organizations. Welldoc itself is hiding behind the scenes in most of these relationships but it has grown steadily and not had to raise money since 2016. A few weeks back I grabbed Anand Iyer, Chief Analytics Officer and & Marina Dorotheo, Chief Marketing Officer who also runs strategy. We had a long chat about the state of the market, the company and they showed me an extensive demo (9.40-32.00). If you haven’t caught up with this sector lately, this is well worth a detailed look.

Who Needs Humans, Anyway?

By KIM BELLARD

Imagine my excitement when I saw the headline: “Robot doctors at world’s first AI hospital can treat 3,000 a day.” Finally, I thought – now we’re getting somewhere. I must admit that my enthusiasm was somewhat tempered to find that the patients were virtual. But, still.

The article was in Interesting Engineering, and it largely covered the source story in Global Times, which interviewed the research team leader Yang Liu, a professor at China’s Tsinghua University, where he is executive dean of Institute for AI Industry Research (AIR) and associate dean of the Department of Computer Science and Technology. The professor and his team just published a paper detailing their efforts.  

The paper describes what they did: “we introduce a simulacrum of hospital called Agent Hospital that simulates the entire process of treating illness. All patients, nurses, and doctors are autonomous agents powered by large language models (LLMs).” They modestly note: “To the best of our knowledge, this is the first simulacrum of hospital, which comprehensively reflects the entire medical process with excellent scalability, making it a valuable platform for the study of medical LLMs/agents.”

In essence, “Resident Agents” randomly contract a disease, seek care at the Agent Hospital, where they are triaged and treated by Medical Professional Agents, who include 14 doctors and 4 nurses (that’s how you can tell this is only a simulacrum; in the real world, you’d be lucky to have 4 doctors and 14 nurses). The goal “is to enable a doctor agent to learn how to treat illness within the simulacrum.”

The Agent Hospital has been compared to the AI town developed at Stanford last year, which had 25 virtual residents living and socializing with each other. “We’ve demonstrated the ability to create general computational agents that can behave like humans in an open setting,” said Joon Sung Park, one of the creators. The Tsinghua researchers have created a “hospital town.”

Gosh, a healthcare system with no humans involved. It can’t be any worse than the human one. Then, again, let me know when the researchers include AI insurance company agents in the simulacrum; I want to see what bickering ensues.

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