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Disruption For the Sake of Disruption Is Not Innovation

By MIKE MAGEE

“The technological leaps of the 1900s — microelectronics, antibiotics, chemotherapy, liquid-fueled rockets, Earth-observing satellites, lasers, LED lights, disease-resistant seeds and so forth — derived from science. But these technologies also spent years being improved, tweaked, recombined and modified to make them achieve the scale and impact necessary for innovations.”    Jon Gertner, author of “The Idea Factory.”

The Idea Factory is a history of Bell Labs, spanning six decades from 1920 to 1980. Published a decade ago, the author deliberately focused on the story inside the story. As he laid out his intent, Jon Gertner wrote “…when the drive to invent has become a mantra, Bell Labs offered us a way to enrich our understanding of the challenges and solutions to technological innovation. Here, after all, was where the foundational ideas on the management of innovation were born.”

One of the scholars Gertner likes to reference is Clayton Christensen. As a professor at Harvard Business School, he coined the term “disruptive innovation.” The Economist magazine loved him, labeling him in 2020 “the most influential management thinker of his time.”

A process thinker, Christensen deconstructed innovation, exploring “how waves of technological change can follow predictable patterns.” Others have come along and followed in his steps.

  1. Identify a technologic advance with a potential functional market niche.
  2. Promote its appeal as a “must have” to users.
  3. Drop the cost.
  4. Surreptitiously push aside or disadvantage competitors.
  5. Manage surprises.

Medical innovations often illustrate all five steps, albeit not necessarily in that order. Consider the X-ray. Its discovery is attributed to Friedrich Rontgen (Roentgen), a mechanical engineering chair of Physics at the University of Wurzburg. It was in a lab at his university that he was exploring the properties of electrically generated cathode rays in 1896.

He created a glass tube with an aluminum window at one end. He attached electrodes to a spark coil inside the vacuum tube and generated an electrostatic charge. On the outside of the window opening he placed a barium painted piece of cardboard to detect what he believed to be “invisible rays.” With the charge, he noted a “faint shimmering” on the cardboard. In the next run, he put a lead sheet behind the window and noted that it had blocked the ray-induced shimmering.

Not knowing what to call the rays, he designated them with an “X” – and thus the term “X-ray.” Two weeks later, he convinced his wife to place her hand in the line of fire, and the cardboard behind. The resultant first X-ray image (of her hand) led her to exclaim dramatically, “I have seen my death.” A week later, the image was published under the title “Ueber eine neue Art von Strahlen” (On A New Kind of Rays).

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NYU Langone Super Bowl Ad Claimed “We’re #1,” But Where’s Scorecard?

By MICHAEL MILLENSON

When the Philadelphia Eagles thrashed the Kansas City Chiefs 40-22 in Super Bowl, no one disputed that they sat at the peak of professional football. In contrast, NYU Langone Health’s multi-million-dollar Super Bowl ad claiming “#1 for quality care in the U.S.” gave viewers just 2 seconds to read the very small print at the bottom of the screen providing an obscure justification for that championship status.

It read: “2024 Vizient Quality and Accountability Ranking. Ranked #1 out of 115 participating comprehensive academic medical centers.” Huh?

I’ll discuss in a moment what that attribution – meaningless to even most in health care, much less to any significant slice of the 127 million people watching the game – actually signifies. But perhaps the most salient signal of the misplaced focus of U.S. health care is that online and media reaction focused exclusively on the non-profit system paying an estimated $8 million for the 30-second spot. Yet if the data actually support NYU Langone’s assertion that it’s “the best health system,” as the ad trumpeted, shouldn’t they be praised for competing on the quality of patient care rather than the quality of the pull-on-the-emotions advertising typical of most hospitals?

I reached out multiple times to NYU Langone and Vizient in order to dig more deeply and didn’t hear back from either, so let’s examine the information that’s publicly available.

While many Americans know of the hospital rankings by U.S. News & World Report, Vizient plays an insider game. Its roots are as a group purchasing organization; i.e., a membership group hospitals join to secure volume discounts on supplies and other purchases. However, Vizient has evolved to provide a heavy dose of member consulting services ; it now calls itself “the nation’s leading healthcare performance improvement company.”

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George Boghos, Imagine Pediatrics

George Boghos is CEO of Imagine Pediatrics, a company founded out of former CMS Innovation head Adam Boehler’s Rubicon Partners fund. Imagine is a wraparound tech-based service helping some of the sickest kids in America–think kids on feeding tubes, cancer, mental health conditions, autism and more. They provide telehealth and on the ground services (like EMTs) that supplement typical pediatrics offices. the goal is to improve the kids’ and parents’ experience and of course save money on emergency admissions, and hospital admissions. It’s a new idea but one that certainly is having a moment as we need to support families and improve care for kids. And hopefully do it for less money. George told me how it all works. Not simple!–Matthew Holt

Man and Machine: A New Age for Medicine

By MIKE MAGEE

“As machines become more intelligent and can performance more sophisticated functions, a new relationship between human and automation is dawning. This relationship is moving from master-servant to teammates…” NASA Langley Research Center/2019

“DeepSeek’s Breakthrough Sparks National Pride in China,” screamed the Wall Street Journal headline last week. In the age of Trump’s promise that crippling tariffs would “put China in its place,” the shot across the bow of Silicon Valley’s AI hubris sent Nividia and its allies (and even the reemerging Nuclear power industry whose investors were convinced that AI’s ceaseless thirst for electric power would shift the public’s risk/benefit of nuclear energy in their favor) into the red this past week.

For Nividia, it was a tough way to start the week. As Forbes reported last Monday, “Nvidia lost $589 billion in market capitalization Monday, which is by far the single greatest one-day value wipeout of any company in history…” Of course, it rebounded 8.8% the following day, and by week’s end was near record highs.

As the industry struggles to define just how much of a threat China’s Open-Source cut-rate AI effort is, there is no disagreement on the coming impact of AI on nearly every sector of society, not the least of which is health care. As the NASA report from 2019 suggested, human “master” control of machines is increasingly tenuous, and to succeed we must embrace AI technologic applications as fully enfranchised “teammates.”

Medicine has historically embraced, and even championed their machines, as superhuman extensions of themselves, and featuring them as intricate to “doctoring.” Consider the ubiquitous image of doctor with stethoscope hanging from the neck. It arrived on the scene roughly two centuries ago, in France in 1816. Its creation is attributed to Rene’ Laennec, and was little more than a wooden tube he incorporated as a hearing device after experimented with rolled paper tubes. He likely got the idea after observing the effectiveness of “ear trumpets”, the hearing aid of its time. But it was modesty, according to some historians, that pushed the French doctor to action. He was apparently uncomfortable putting his ear on a woman’s heaving bosom to listen to her heart sounds. The device, an assist, offering better auscultation at the required distance.

Of course, we’ve come a long way since then. But if anything, health care professionals are more reliant than ever on machines. Consider AI-assisted Surgery. Technology, tools, machines and equipment have long been a presence in modern day operating suites. Computers, Metaverse imaging, headlamps, laparoscopes, and operative microscopes are commonplace. But today’s AI-assisted surgical technology has moved aggressively into “decision-support.”

Surgeon Christopher Tignanelli from the University of Minnesota says, “AI will analyze surgeries as they’re being done and potentially provide decision support to surgeons as they’re operating.”

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VC returns: Well, it’s stock trading…

By MATTHEW HOLT

There’s been a lot of discussion lately about whether digital health is a legitimate place for venture capital. There have been lots of huge failures, very few notable successes (and certainly no “biggest companies in the world” yet), while some real giants (Walmart/Walgreens/Amazon) have come in and then got out of health care.

I don’t have to tell you again that most of the publicly traded digital health companies are trading at pennies on the dollar to their initial valuations. But I will. Look at that chart below.

Heck even Doximity– which prints money (45% net margins!)–is trading at well under its post IPO high. My quick overview is that there are not very many publicly traded companies at unicorn status. With really only Doximity, HIMS and Oscar being very successful. (We can have a separate argument as to whether Tempus and Waystar are “digital health”). And there are many, many that are well off the price they IPOed at. All that at a time when the regular stock market is hitting record highs.

Which makes it interesting to say the least that Define Ventures just came out with a report saying that in general digital health has done well as a venture investment and that it was likely to do even better, soon.

The report isn’t that long and is well worth a read but their basic argument compares digital health venture investments to those in fintech and consumer tech. Essentially it took digital health a lot longer to get to 10% of total venture investment than fintech or consumer tech, but it got there after 2020. Now more than 10% of all VC backed unicorns out there are health tech companies. Yes there was a retrenchment in 2022-3 but health tech investment fell less than other sectors in 2022-3 and is basically back in 2024.

The Define forecast forecast is interesting (it’s the chart below). Define posits that it took 4-5 years after the fintech and consumer tech sectors became 10% of VC dollars for them to start pumping out exits and IPOs. There are 30-50 each in those sectors now, but health tech was ahead of that with 18 exits already in the first 5 years after getting to 10% of VC dollars, and those exits were on average double the size of the fintech/consumer tech exits. (Although to be fair the health tech exits were when the market was higher after 2020)

In fact their analysis is that capital returned was about 10x investment.  You might say, but hey Matthew didn’t you just show me a chart that most of those 18 companies were public market dogs? And you’d be right.

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THCBGang Revisited: Ian Morrison

Ian Morrison died yesterday. 4 years ago in one of the early THCB Gang’s, we had a rash of late cancellations. So I talked to Ian solo about his journey, and his views about health care. I re-listened to it this morning and thought you might enjoy it

Ian Morrison

I got the very sad news today that Ian Morrison died peacefully at home yesterday. He had been sick and in hospice for some time but a few months back he told me that he was going for Jimmy Carter’s record. Ian was my first boss in American health care when I worked for him at Institute for the Future and he was as kind and lovely as he was funny and knowledgeable. I was very glad that when I started THCBGang during the pandemic that he was a regular member.

Ian spent decades working with everyone across health care in American and internationally, but as he used to say essentially was paid to insult people. That he did it so humorously and usefully was the reason he kept being invited back. Any Ian Morrison keynote at a big health care conference was both a chance to learn something and laugh hysterically.

He also never ignored the chance to help those trying to make health care fairer and more equitable, serving on the boards of Martin Luther King Jr hospital, the California Healthcare Foundation and many others. He remained a jovial Glaswegian socialist at heart.

Ian liked to say that he went from Scotland where death was imminent, to Canada where death was inevitable, to California where death was optional. Sadly that last crack wasn’t quite true.

My heart goes out to his wife Nora and their children and grandchildren. There’ll be a more formal obituary and a celebration of his life in the days and weeks to come–Matthew Holt

Jonathan Bush, Zus Health

It’s always fun to chat with Jonathan Bush. You kids today may not remember that he was the first CEO to take a cloud-based (Health 2.0!) company public back in 2007! Athenahealth didn’t end up challenging Epic because a cosmically evil hedge fund took it (and him) down as it was on its way to try to do that, but Jonathan has moved on and is now building a clinical data integration company called Zus Health. We talked Zus, digital health, whether there will ever be value-based care and more. 20 mins of digital health gold right here–Matthew Holt

DEI Is Now a Four Letter Word

By KIM BELLARD

I’d love to be writing about something fun. Something that makes us think about things in a new way, or something exciting that will take us into the future. There are lots of such things happening, but there’s too many Orwellian actions happening that I can’t be silent about.

Diversity, we’re told, is actually a pretext for racism – against white people. Equity is foolhardy at best and pernicious at worst. Inclusion only matters if you are the “right” kind of person. “Meritocracy” is the new buzzword; we want only the “best and brightest,” with none of the lowering of standards that we’re being told comes with trying to ensure that everyone has a fair chance to prove their merits.

The Trump Administration has declared war on DEI. It has fired scores of workers whose jobs involve DEI, has asked other workers to inform on people they think may be involved in DEI, and is searching out even workers who attended diversity training (mandated or not). All that would be horrifying enough but it isn’t ending there.

Federal websites are being cleansed of any references to anything that might be construed as DEI. Pages are being edited, or taken down entirely. The NIH has ground to a halt until the appropriate authorities can ensure that no grants are being even to anything that might possibly be related to DEI. The CDC has been forced to pull papers from its researchers that are up for publication for similar review.

The Atlantic reports: “the government was, as of yesterday evening, intending to target and replace, at a minimum, several “suggested keywords”—including “pregnant people, transgender, binary, non-binary, gender, assigned at birth, binary [sic], non-binary [sic], cisgender, queer, gender identity, gender minority, anything with pronouns”—in CDC content.”

Thousands of pages of data from the CDC and Census Bureau have “disappeared,” and the same from other agencies. Health data is prominent among the missing. Angela Rasmussen, a virologist at the University of Saskatchewan, told Science: ““I knew it was going to be bad, but I didn’t know it was going to be this bad. It’s like a data apocalypse.”

Elon Musk, who has no official power yet seems to have control over government IT and the data it contains, is shutting down U.S.A.I.D., who provides almost $40b annually in health services, disaster relief, anti-poverty, and other social mission programs. Previously the Administration had shutdown, then reinstated, PEPFAR, a vital international HIV program that has been credited with saving millions of lives.

The President and his team even tried to blame last week’s Washington D.C. plane-helicopter collision on DEI.  That’s just “common sense, ok,” according to President Trump.

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