Austin doctor who leads equity firm aims to cure U.S. health care

Q. What potential do emerging technologies hold for the future of health care?

Health care spending is approaching 20 percent of GDP, on the order of almost $5 trillion a year. Unfortunately, we waste about 25 to 30 percent of those dollars in a multitude of ways.

The bureaucracy of health care is quite significant. It's an unfortunate statistic, but there are actually more administrators in the health care system than there are providers. There are more middlemen, if you will, than physicians and nurses in the system, pushing the paperwork, understanding reimbursement, getting approvals.

I could say that it's a U.S. phenomenon, but it's also a global phenomenon. There are probably very few health care systems in the world that are considered efficient. We spend a lot more money on health care, but we are not twice as good in terms of results. If you look at longevity, the average age of an American versus the average age in some these other countries, we're not at the top of the list.

Q. What kind of back office innovations in health care might be helpful?

People are looking at AI (artificial intelligence) in every sector, and certainly health care is no different. When you think about a physician who's seeing a patient, normally they talk to the patient, then they put it in the computer. Then they’ve got to write a note, check it, and they’ve got to call and make sure that the next appointment is right. And there’s billing and coding. That all takes time. There are also mistakes.

Now we have new technology, and that's ambient listening. The physician can just speak to the patient. It's recorded. It's converted to text. It's understood. In fact, there are suggestions on what you should do next. The time efficiency is much, much better. Plus, physicians like it a lot more because they didn't go to medical school to learn to type notes.

I'll give you one other example. It turns out that the chemotherapy chair in a hospital is actually one of the most valuable chairs out there because patients are getting very expensive therapy. In scheduling chair times, you don't know if the patient is going to be there for two hours or eight hours because sometimes they need platelets, and sometimes they need red blood cells.

It used to be first come, first served. And all of a sudden you would have these open blocks, but you can't fit people in. Now we're being much smarter about how to actually fit all these different schedules, and the use of that oncology chair is much, much more efficient.

Q. What are the underlying objectives of your business?

Our thesis is pretty simple actually. It's focused on value optimization. Health care values two things. One is better patient outcomes, and the other is better cost benefit. We ask ourselves, “Does that [technology] result in better patient outcomes, and does it save the health care system money?”

Hopefully both. Sometimes that means you innovate with some brand new medical device or therapeutic. You can do something that you’ve never done before. But other times, it's much simpler. It's reminding every physician and nurse to wash their hands before they walk into the patient's room in order to reduce hospital acquired infections. There's no Nobel Prize for washing your hands, but the impact on better patient outcomes and better health economics is very significant.

Q. How open is health care to change?

Historically, medicine has not been the fastest adopter of changes in workflow. But a few things have happened in health care that have forced health care professionals to change. One, of course, is just the fact that there are only so many dollars in the health care system.

So, my father is a cardiologist, my wife's a cardiologist. When my father practiced, Mrs. Jones [a typical patient] would come to him and say, “What should I do, doctor?” And he would say, “This is what you should do.” And Mrs. Jones would say, “Yes.” The insurance company would say, “Yes,” and that was it. And it didn't matter if he was trying to save one week of life or $100,000.

Now, my wife practices. First of all, the patient shows up and has already gone on Google and thinks he knows what he has. She [the doctor] has got to get the payers to agree to let her do it [the procedure]. And because of the focus on value, what you are getting for that dollar that you spend is higher now in health care than it has ever been, and people are forced to adopt things that are more cost effective.

Second, we've had things like COVID happen, and I will tell you that Zoom [teleconferencing] existed pre-COVID. We just didn't use it much. Now we use it. Before COVID, telemedicine existed also. We just didn't use it as much. Now virtual care or telemedicine is much more acceptable.

Another example of this rate of adoption is diagnostic testing. Most people prior to COVID had only ever taken a home diagnostic test for pregnancy. Maybe no at-home diagnostic tests. Today, most people have taken a diagnostic test at home—certainly for COVID—but now it's expanded to many more things. Once these sorts of floodgates break open, I think people are much more willing to take on new technologies.

If you look at gene sequencing, you may recall we did the first human genome in 2000 and it cost us billions of dollars, probably $40 billion in today's dollars to do one sequence. Today, you or I can go get our entire genome done for a few hundred dollars in a few days.

Q. Does a single-payer system, similar to what operates in the United Kingdom or Canada, offer a solution?

It has different problems. On one hand, the information flow is a lot smoother. On the other hand, the free markets are not as obvious because you have a single payer in a single system. To get a very standard procedure done—get your appendix taken out—you can probably get that done anywhere. And it's probably cheaper to not do it in the United States.

But if you want to get a complex procedure done or a best-in-class therapy, the U.S. is by far the best place because there is a sort of competition among providers and payers. And to be fair, the U.S. mentality is, “Hey, we deserve and want the best health care.”

To have a single-payer system and what comes with it, citizens in the United States would also have to be willing to wait nine months for the hip replacement and, you know, get in line for other things as opposed to getting the nearest best possible intervention.

Q. What game-changing opportunities does artificial intelligence offer medicine?

We're involved with a company that has developed an AI algorithm looking at chest X-ray screenings, mammograms, digital pathology slides. They have cross-trained their algorithms by looking at more than one modality. It’s similar to a professional basketball player who may also train playing volleyball to become a better basketball player.

When looking at a screening mammogram in the United States, it requires one radiologist to call it clear before you’re considered cancer free. In Europe, it requires two radiologists to say that. In Europe, they ran a study with 55,000 women. They showed that one radiologist plus AI is actually better than two radiologists. The even scarier or exciting part is that AI is actually better than a [single] radiologist.

I'll give you one other, real-life example. In the intensive care unit, patients are really sick, and they have a lot of things connected to them. They [doctors] are not just looking at their blood pressure and heart rate and temperature and respiratory rate, but they might have an EKG [electrocardiogram] and also be monitoring urine output. In intensive care, there's a lot of data coming from these patients that is interconnected.

A human being can only take in so many variables to predict if a patient is going to decompensate. And of course, what you want to do is not react after they have decompensated, but to prevent them from crashing on you. A lot of health systems now are using AI because they can take in all this data and predict, “Hey, the patient in room five is going to crash, [but] hasn't crashed yet.” Then you can go there and actually push the medicine before the patient crashes. And you're in a much better spot in terms of saving that patient.

There are going to be a lot of opportunities for AI to both make it more efficient but also actually produce better results.

I used to think AI was going to be the perfect human physician. It just never makes a mistake. It remembers everything. But it actually turns out that the AI is better than the perfect human physician because the AI can see things in the X-ray that the human eye cannot. AI can process 500 variables at the same time.

Q. What kinds of challenges do recent federal budget cuts pose?

The United States has a leading position in science, research and medicine, in part because of NIH [National Institutes of Health] funding and other funding that comes from the government. You know, this kind of basic science research that's really a breakthrough can't really be funded by commercial interests. If the government reduces funding for this kind of work, the ramification is probably not going to be felt tomorrow.

But certainly, what's coming down the pipeline in three years and five years and seven years will be meaningfully hampered. The other thing is you cannot put it right back in the bottle. You know, the minute these researchers leave, and these centers are not together, all this collaboration is not happening. When they disappear and go, you can't just put it right back together.

Even if you said, “Oh, we're only going to inhibit the NIH funding for two years,” it's going to take a lot longer than two years for it to come back. Plus, all those researchers who are coming to the United States from other countries, they're going to go somewhere else.

Q. How do you assess the environment for innovation in Austin?

Austin has a really unique ecosystem in the sense that a lot of the people who come here are innovators and entrepreneurs. On the health care side, to be fair, it's a little more nascent. If you just look at UT [the University of Texas], they didn't have a health system [in Austin], and now they're going to spend billions to bring in a hospital.

That's a significant investment. There are not that many places that could actually pull that off. I came from the [San Francisco] Bay area, and I enjoyed the Bay area. Austin feels like the Bay area 25 years ago, when people were really excited.

Q. What made you personally choose to locate in Austin?

To be fair, my wife and I were fairly systematic about the whole thing. We met in North Carolina. We were both at Duke [University], and then we were in the Bay Area for a number of years as we considered what other innovation hubs would make sense. We actually looked at a lot of places. We looked at Nashville, we looked at Dallas, Houston and Austin.

We looked at Seattle, we looked at Tampa. It was a pretty objective grid of what are the most supportive environments for innovation and entrepreneurship. The central time zone is a great place from which to do business. If you live in San Francisco, everybody thinks of Chicago as the Midwest. Chicago is two-thirds or three-quarters of the way over to the other side. Everything here is two or three hours [flying time] if you go west or east.

This is an edited and abridged version of a conversation available on the Southwest Economy Podcast.