Editor’s Note: There are few people who have their fingers on the pulse of the connected healthcare industry, and particularly new technologies, as does Rick Valencia, President of Qualcomm Life. His company has a dual mission: to develop new connected healthcare technologies and to invest in promising new connected healthcare companies. We were able to spend an hour with Rick covering a broad range of topics from new technologies to the outlook for the industry under the new administration.
Tech50+: What’s new at Qualcomm Life?
Rick Valencia: We’re continuing to build out the internet of medical things and to enable what we call intelligent care everywhere, so the ability to maintain your health and of course manage your health conditions in the event that you’re not healthy wherever you happen to be. So instead of focusing just on the traditional care settings, getting activity wherever a patient may be and making that work in a very seamless way so that the patient doesn’t have to engage in the technology it just works. I said patient, it’s a consumer in some cases of course if you’re well and that’s one of the new things that we’ve been up to that you might have heard about. It’s a program we’re doing with United Healthcare.
Tech50+: I did the trial at CES.
Rick Valencia: In fact my management team right now is doing a challenge with the motion device and we’re doing the challenge, not in terms of total steps, we’re doing it around the point system the fit point system right and so I’m in the lead by the way. We announced at CES this last year that Fitbit was part of the program so we’ve opened it up to BYOD (Bring Your Own Device) and other devices you will be hearing other news eventually.
We’re in a crazy ramp stage right now with people who just came on to the program at the beginning of the year – that’s how the insurance works of course with annual renewals, getting them on board. We’re also on the acute side of things, or the hospital side of things, where we’re working with a number of institutions doing some research around the data that is coming off of patients in that setting through a capsule program to see if we can identify ways to get patients well faster and get them discharged faster. One example of that is that inside the device we’re doing with United Healthcare there is a gait analysis that associates this device to you pretty quickly after you wear it and of course you need to do that in an environment where an insurance company’s offering a lot of money because you’re going to have a little cheating with that but what that technology enables us to do is get a pretty fine understanding of an individual’s typical gait when they’re healthy.
Tech50+: This sounds like a huge breakthrough. The gait stuff is incredible in terms of its predictive capabilities.
Rick Valencia: We have something though that’s really unique that is going on here beyond the gait and that is we have a partner with United Healthcare through this program where if you think about it, it’s a pretty rare case unless you’re a closed end to end system you don’t have both health information and claims data so it’s pretty rare unless it’s within those systems that you have the ability to pull that data in. So through our partnership with United Healthcare we’re getting not only the information that comes from EMR (electronic medical records) and that comes from the medical devices but we’re pulling their claims data and we’re able to map that together.
We know exactly what conditions are high cost and we know the exact average number of bed days for different types of procedures and conditions and we also know a lot about the individual that’s being monitored and other conditions that they might have so we can build a physiological profile with a patch. We’ve taken this technology we’ve reduced it to a patch. In fact, I would have shown you yesterday because I’ve been wearing it for a week but I just took it off to see if it hurt if I took it off but it didn’t. So we have this patch and the patch does temperature it does heart rate, respiration, and the gait analysis.
Tech50+: How long is the patch good for?
Rick Valencia: We’re doing various versions of it to have different durations. 3 days, 7 days, and 14 days are the numbers that we’re probably going to focus on. It’s in the research stage. We’ve got them done but we haven’t taken them through FDA yet and we’re not going to be in the patch business but we’re designing this stuff.
Tech50+: I assume Qualcomm is not going to be the manufacturer of record unless it’s the chip.
Rick Valencia: That’s our model in healthcare, we’re just going to license the design.
Teh50+: Do you have a name for this yet?
Rick Valencia: No not yet. We have a part of the business that we call 2net design, where we work with companies to embed technologies into patches, injectors, inhalers, and so on and so this patch that we’re building has those capabilities so it can develop a very good physiological profile pre-op for an individual. They go in for the surgery and then immediately after surgery you put another patch on and wear it for a few days and it immediately establishes a delta and so they can optimize therapy around that delta to get that back to normal and discharged as soon as possible and then when they’re at home we can put patches on them again and of course we have 2net at home and connected to make sure they’re trending in the right direction or they can get an intervention before it becomes a critical issue. What’s unique about this is that we’re not doing this in a vacuum – just in a hospital with the EMR data – we’re doing it with the biggest health insurance company in the world, United Healthcare, and we’re doing it with access to that claims data so we’re really excited about the results that that’s going to generate.
Tech50+: Because you’re not guessing anymore.
Rick Valencia: Let’s go back to the gait analysis just on the wearable here on insurance plans. If they can offer the type of money they offer for people to get active just an average person, what about a type II diabetic – what could they offer if they’re managing their weight and testing regularly and taking their medication and also being active. They can offer a lot more than $1500 a year. In the hospital setting what’s also interesting about that is that for the most part, the hospital is a black box to the insurance company. They only know what’s going on in the hospital until 2 or 3 months later or 2 or 3 weeks later when the claim comes in. Then they have to fight the claim if they don’t agree with it but they couldn’t do anything to have insight into what decisions were being made and whether or not there was a better way to go about it.
Tech50+: I recently had the opportunity to take part in a trial study that allowed me to do clinical visits using an iPad, but the doctors who are involved tell me that while they can theoretically see more patients, they really don’t have the additional staff or infrastructure to handle it.
Rick Valencia: The opportunity with technology to intervene in a way that you’re not having people sitting around making phone calls – it’s not going to happen overnight because again the workflow and the process and procedure that need to be developed in the system on the health system side is going to take a while for that to happen. But we’re making sure that the technology is available and ready and we are though I couldn’t agree more that we’re really going to have to start thinking about how we’re going to help accelerate this transformation by helping the system learn to use it because it’s not a technology problem. It’s all there, it’s an integration program. There’s a lot of stuff that could be put to use today to reduce costs substantially and they just don’t know how to consume it.
Tech50+: A friend of mine has a Medtronic heart monitors that continuosly tracks her heart, and puts out data every 30 days. But there’s way way to intervene if there’s a real time incident because there is no management by exception. How stupid because the capability is there today. In the same way, why don’t I have a capability on my glucose monitor to send the data to my doctor in real time?
Rick Valencia: By the way there are some that will argue that the human body is different and you can’t just put AI (artificial intelligence) in the middle you need a real person. We’re flying planes with hundreds of people over millions of population down on the ground and those are data driven airplanes. Pilots don’t fly those things, they fly themselves.
Tech50+: I had a bumpy flight into JFK in foggy conditions one night and the pilot announced that the plane landed itself, “we didn’t touch it.”
Rick Valencia: And how do they do that? It’s a data-driven machine that reacts to thousands of sensors every second it’s reacting to all of this stuff as to how to find its way. Over the last 40 years, we’ve gone to 1 airplane accident in a million flights to 1 in 16 million flights. Think about how much better it is because of that AI in the middle.
Tech50+: Let’s talk about the investment portfolio.
Rick Valencia: Really exciting things going on in the investment portfolio. We’ve made three investments so far through DRX Capital, that’s our joint investment fund with Novartis. We’d hoped to make more investments by now but it’s not for lack of trying we just have 2 big companies that are still learning about how to work with one another and what’s important to both parties. The great thing about being partnered with Novartis here is anything pharmaceutical related they have so many resources over there and they look at it as sort of a new toy anything we bring in something new and they love digging in and making recommendations back to us. We made a couple of investments there. One of the most interesting ones is Science37 and what they’re doing is clinical trials using mobile technology for recruitment and what it is a much easier more automated way to manage the participants in the trial so they’re accelerating recruitment dramatically and they’re providing the connectivity tools to the patient in a way that retention is much greater as well because they don’t have to worry about going into the clinic or making phone calls the devices are capturing and sending the data. It’s something we’ve been talking about for a while, it’s an obvious area that can really improve clinical trials but the pharmaceutical companies are going to take forever, the CROs (contract research organizations) aren’t motivated to do it because they get paid a lot of money to send people around to do a lot of manual work and so these new startups are going to be very disruptive. And Science37 – remember that name – they’re going to be big.
Tech50+: What else is going on in the portfolio?
Rick Valencia: The newer stuff has been slower than we’ve expected and we’ve only got 3 investments in DRX Capital and we’ve followed up on deals that we’ve done in the last year and a half so not a lot of exciting stuff there. We should this year be really picking it up because Novartis and our team we’re going to be hiring another individual working on it so we expect to pick the pace up. So maybe the next time we talk I should have more interesting news on that front.
Tech50+: Let me turn to politics. You’ve got billions of dollars of investment out there, you’ve got to be worried about what this current administration means to not only the ACA (Affordable Care Act) but the whole issue of connected healthcare and where the money’s going to come from. What’s your take on it?
Rick Valencia: Let’s start with the connected healthcare piece of it and the devices and the application as a device that would go through the FDA. That to me the signs are very good there. It feels to me like there’s a better chance for less regulation or at least more flexible regulation, streamlined processes. If anything that we’ve heard from our new administration there’s going to be less regulation, less big government in our lives. That portends to something interesting and better. I have to say the FDA has not been problematic, they’ve been reasonably good partners in this.
Tech50+: They’ve gotten a lot better at recognizing that this is not their old model.
Rick Valencia: In terms of more on the ACA, I suspect that the mandate is going to go away. I expect that exchanges aren’t going to exist in the form that they exist today and certainly the insurance companies won’t be participating in the way that they have been because they’re getting killed because sick people are signing up and young people who are well are not and insurance just can’t work that way. I suspect that’s going to go away but it’s going to have to be replaced by something because we’ve put 20 million new people on the insurance rolls and I don’t think any administration wants to say for the better of the country you’re not going to have insurance anymore. It’s just not going to happen.
Tech50+: If we were in a totally rational environment we might turn around a say well the only solution to answer your point about getting the healthy people on it is the single payer system but not in this administration.
Rick Valencia: Regardless of what happens there, my suspicion is we’re going to have to keep the same number of people insured and we’re likely going to be trying to insure more people. How they do that, that’s for other people to figure out. I don’t know. What that’s going to lead to, more people who are insured in the system, if we continue doing what we’re doing now, it’s just going to continue to drive costs up and we know it’s unsustainable as it is today. To me what that means is that this move towards outcomes-based payment and value-based care you can’t stop that. That is a horse that’s left the barn that is never coming around back to it. In fact, I was at another small investment banking conference and I met with a number of CEOs from some of the biggest pharma companies, insurance, medical device companies, and some mid-tier health technology companies. I can tell you that every conversation that I’ve had, also by the way with providers, there’s not a single executive that has said to me oh it’s over with the value-based care thing. It’s over for risk-based payments. Not a single person has told me that. The assumption is that we’ll continue down that road and if anything we’ll accelerate because how else do you end up paying for just for what we’re doing today much less for the people on the insurance roll. That bodes well for the industry because in a world where the system is paid in a more rational way where you’re paid for doing good work as opposed to getting paid for – this isn’t my quote someone else said this and I can’t recall who, but who in the world would pay a sales team for the number of calls they made? You pay salespeople for the number of deals they close. For results, not effort and in healthcare we pay for effort and not results. I see that trend continuing under Trump or any other administration and I think that bodes very well for what we’re doing and for new technology and healthcare in general because you’re going to need to know more about your patient on a regular basis, you’re going to need to keep them out of the emergency room.
Tech50+: It mitigates in favor of the results we’ve seen over the past 5 years of monitoring of chronic populations, predictive interventions instead of waiting for readmissions and so on.
Rick Valencia: What we’re building is the connective tissue that puts the doctor and the patient together no matter where that patient is with informed data that allows a doctor to make a decision to tell that patient what to do next and eventually allows the patient themselves to know exactly what they should be doing next. In some cases because the doctor’s informing them in other cases because AI is smarter than all of us and is telling them what to do.
Tech50+: I’ll begin with the premise that we have most of the technologies we need, but we seem to be lagging by years with the ability to manage and act on the information that this technology is generating. How do we overcome that gap?
Rick Valencia: There’s one critical step that has to happen first that will force everything else to happen, and that’s pay to perform. They have to be told the only way you’re going to get paid for this is if you create a good outcome and by good outcome that means that you are aware of how your patient is doing and you’re providing your care at an affordable price and it becomes affordable not so much because it’s cheap but because you’re communicating with everybody in the care team and you’re making sure that you’re in sync, interoperable and managing that patient on a continuous basis. When you tell the system that will only get paid if it does a good job taking care of that patient these things will fall in place because they’ll have to. If you tell them it’s good for the patient you know they always want to do what’s good for the patient but there’s someone at the hospital that’s going to tell them at the same time, I’ve sat with hospital CEOs that are capitative primarily but also have fee for service payments and they will tell you point blank, “I will tell you I manage those patients completely differently. Completely differently. This fee for service guy – I want him to keep filling up my rooms. This guy the capatitive guy I need to get them out.” Why do they do it that way? That’s how they get paid.
That will be the fuel that powers the engine of change in the system.
Tech50+: It seems to me that there’s still a big distance between where that needs to go and the whole issue of generating the data in instituting management by exception.
Rick Valencia: That’s a separate issue. The first order of business is someone’s got to want to do something and the way they want to do it is that if a hospital CEO tells me that he manages his patients differently based on how he gets paid that tells me that if we tell him if he’s only going to get paid a certain way, then he’s going to find the tools. We’ve already agreed that most of the technologies exist today. What it comes down to is that he needs the motivation to implement it. There’s still a lot of work that we need to do with healthcare once they become motivated to help them change, to help them absorb this data and help them realize – in any industry that’s digitized, that’s taken the data from an assembly line that used to be a dumb assembly line with a bunch of people on it and they then put computers in and then started using that data to become automated and then that automation gets perfected on a daily basis because that automation continues to learn from itself, the machine learning the AI that’s going on there. But in healthcare when you say we’re going to digitize this we’re going to have all this data, everyone asks the same question – who’s going to read all that data? Nobody. In what industry that you’ve digitized have you ever looked at the data? You don’t look at the data it’s a machine in the middle that looks at the data, it’s AI that looks at the data.
Tech50+: Clearly my doctors don’t have the capacity to monitor it.
Rick Valencia: The capabilities exist but we’re going to have to help healthcare learn how to use it. The consultants are going to make a lot of money over the next couple of years.
Tech50+: Does somebody like IBM’s Watson have a commanding position to accomplish the big data and the management by exception systems that are going to be required to do this?
Rick Valencia: I think they’ve got opportunity here but they have a lot of work to do to do that. If you think about what they possess, they possess a lot of historical data. An image is something that was taken a while ago. They don’t possess a pipe of streaming data around how you’re trending right now. They don’t do to my knowledge do remote patient monitoring they don’t do any monitoring in the hospital so the real currency in my view in this new world is what’s going on with my patient right now. Not what happened to him a few months ago so that I can develop protocols around population health so I can make sure that those trendlines that I can look at with AI that go cost wise like this and healthwise like this that I can change those curves once I have a good understanding of them. That’s helpful of course because you can create new protocols and keep people on a better trendline but that’s population, that’s broad population, it doesn’t tell me anything about the individual.
Tech50+: That’s why I keep asking why aren’t they doing more to implement the management by exception systems?
Rick Valencia: They’re going to be critically important. The realtime data around how a patient is trending today is I think going to be the crude oil of the future in healthcare.
Tech50+: It must be frustrating because you see where we should be with this and we’re not there yet.
Rick Valencia: It’s horribly frustrating for me who comes from tech. In tech when you have stuff you deploy it you get it working and things get better and better and better. In healthcare, it just doesn’t work that way. It’s actually been one of my biggest challenges and for my senior management as well. How come this thing isn’t going faster? It’s healthcare. That actually goes to your main point around management in these big hospitals isn’t ready for it, they don’t know how to consume it they don’t know how to retrain their staff. But like I say they don’t have the motivation to do that. They will create structure when they are highly motivated to do so. When they are faced with death or change they will accept change but until then they probably aren’t going to.