“How can we be so underrepresented and expect a big change?” – Interview with Dr. Aja McCutchen
In a data driven world, it’ll become acutely obvious that our system is broken in terms of racial disparity. The drugs we have don’t work for all demographics. GI physician community is quite imbalanced in terms of race. Patients and future physicians will gravitate toward a more inclusive medical practice.
It’s already apparent that social determinants of health (SDH) influence health outcomes. Whether we recognize it or not, diversity and inclusion affects all of gastroenterology. It’ll affect the future of GI. It’ll affect private practice GI — for sure.
One of the most qualified people in our industry to understand this important topic is Dr. Aja McCutchen. She’s a Board Member of United Digestive and Chair of Diversity, Equity and Inclusion at Digestive Health Physicians Association (DHPA).
In this interview, she shares her story – from the suburbs of Cleveland (“crazy Dave” drew her to medicine) to leading the field (GI has only 1% African American women). You’ll clearly understand the importance of paying attention to diversity and inclusion.
COVID-19: The Way Forward for Gastroenterology Practices
COVID-19 is a double whammy of both clinical and business disruption. This ebook will help you explore possible scenarios and be a guide in your plans for the future.
It was interesting to learn that from the PE platform’s perspective there’s plenty of room to grow. We talked about whether PE in GI platforms would go public and how long they see the model to continue in GI.
We went back and forth on a few points – especially on whether the company expects disruption from digital health.
Don’t miss this unique deep dive interview that brings together the GI physician, the CEO and the PE partner.
Praveen Suthrum: Mehul, Jerry and Gabe from US Digestive Health, I am so happy to see all of you again and I want to warmly welcome you to The Scope Forward Show.
Dr. Mehul Lalani: Praveen, I wanted to first thank you for all the work you’ve done in helping educate gastroenterologists, you know via multiple media avenues, including books, conferences and telecasts. It’s been a pleasure learning from you. And I am just grateful for the education that all the gastroenterologists across the country have been able to receive. Secondly, it’s an honour privilege for three of us representing US Digestive to be on your show today.
Praveen Suthrum: I am so glad to hear that. Let me first start by asking you, US Digestive Health was formed in 2019, it’s about a couple of years now. So, what has been the story so far?
Dr. Mehul Lalani:We initially began by combining two groups in the same county in Pennsylvania to form an organization called RGI. This, took a tremendous amount of time and resources to merge together. After we were successful in this merger, we began to think more broadly of how we could consolidate further in the state of Pennsylvania. And that led to discussions with two other larger groups, which were not in our counties about how to best prepare for the future. And we really realized pretty quickly that in order to come together, to thrive in a healthcare market with large consolidated healthcare systems and market dominant payers, we needed a good capital partner with the resources and experience in healthcare to make the merger successful and to grow quickly. And that’s
Praveen Suthrum: What are some recent updates on what’s been happening with US Digestive?
Jerry Tillinger: Since we formed up, we’ve grown pretty dramatically. We’ve got about 60% more physicians in the group; we’ve added six new organizations to US Digestive Health. We have also put a tremendous amount of energy into building a strong management team with deep operational experience and that’s been a strong focus. We’ve developed a lot of consolidated resources, a consolidated pathology lab, for example, that does the pathology for all of our practices on electronic data warehouse that covers all of our EHR’s. So, each practice remains on its native EHR that they use when they came on, but we’re still able to manage it across the network and have immediate access to the data we need to lead the group. So, by investing in all that infrastructure, we’ve really poised the organization for another wave of growth and we see that coming this year. As groups got out of COVID, and we’re able to focus more on the same opportunities that Mehul is describing.
Praveen Suthrum: These partnerships that you have formed with other groups, the six groups, have they all been regional or have they been out of state as well?
Jerry Tillinger: Thus far, they’re all within Pennsylvania. And I know we’re going to talk about strategy later in the discussion, but that plays into that exact view of how we build value for the organization.
Praveen Suthrum: I want to go back to Mehul before getting to Gabe. I’m sure you must have had certain assumptions about private equity. But once you got started as a physician working in private equity led organization, what was it that you did not expect? Was it easier than you thought? Was it harder than you thought? Because a lot of gastroenterologists out there have this very question, they have notions about private equity. So, they would want to know from you. Is it easy to work with private equity companies? or is it hard? or what didn’t you expect from that standpoint?
Dr. Mehul Lalani:I think we did our due diligence when we picked our partner and we picked Amulet. One of the things we liked with Amulet was that they weren’t heavily concentrated on many different investments, we were one of their prime investments. So, we knew that getting involved with them, they would have the resources and time to put into our business. And that was very, very helpful, especially in a time of crisis. We essentially had great communication with them on a regular basis. Emails, zoom calls, they were available really whenever we needed them. So, that was what we expected, growing into the merger, but that’s actually what panned out in reality also.
Gabriel Luft: I just want to say, having gone through the last couple of years with our physician partners, our management team, I could not be more impressed with the group of people that we partnered with. They’ve achieved pretty significant progress. They’ve developed a platform from three separate medical groups initially to a platform with administrative scale, where there’s greater visibility into what’s happening on a daily basis, throughout the organization, including with the providers, and then yet to Jerry and his team, they navigated through a global pandemic. And I think actually, frankly, COVID, one of the shining silver linings uncovered was the trust and the partnership that it allowed us to develop.
We obviously, as you can imagine, in many challenges we had to navigate through, we did it together in a spirit that we all had intended. But you never really know that about GI’s, assessing private equity, it is a big decision, it’s a major transition. I think there are similarities across investors and there are also differences. And so, like Mehul described, one of our core tenants is that we do have a more concentrated fund. So in for our first fund we only invested in four companies, for a second fund will probably be five or six. But that can compare with 10 or 12, for other for the average private equity fund. And so that means that we that all of our investments have to work and that we also can allocate more of our time and resources towards each one.
That said, we also have a physician first approach to our digital practice management investments, and that’s enshrined in our clinical governance agreements. And so, I think that’s another thing I would say that, yeah, if I were to advise, GI is thinking about this, not all those are equal. We think that maintain that bright line around kind of Clinical Decision-Making clinical governance is really important. And I think that’s what’s allowed. Yeah, and that’s what enables really successful partnership, is it allows the doctors to do what’s right for their patients and maintain the autonomy over their clinical practice.
Jerry Tillinger: One of the one of the moments for me, where I realized, what Amulet had really brought to the table was when COVID first started. They were supporting us all through our growth. Obviously, we started with two of us and the MSO. So, we were very much building from scratch, and they were filling in a lot of blanks. As we built our team, Amulet was backstopping us in a lot of ways. But when the wave of COVID started arriving in March, they were the ones that actually said, you guys need to be prepared for a massive shift and potential shutdown. Most of us in healthcare have never seen that. You know, we’ve been through natural disasters where a hurricane might roll through town and shut us down for two or three weeks, or some other disaster might arrive. But we’ve never had systemic blow to the industry the way we did with COVID.
The broader experience that the Amulet team had across multiple industries, had them much more mentally ready for what might happen to us if this pandemic truly panned out. So about 10 days before the shutdown arrived, Gabe and his team were telling us, you need to have a plan ready for that. So, the day the governor of Pennsylvania announced the stay-at-home order in the shutdown, all but urgent and emergent activities. We already had the plan ready to go. We already had our HR team ready; we had our ops plan ready; we had a communication plan ready and we would not have been there without Amulet prodding us.
Praveen Suthrum:Gabe, what was the original thesis when you set forth, when you started looking at gastroenterology and then when you finally partnered with Mehul and team?
Gabriel Luft: I think a little bit of context might be helpful. So, our experience has been across a variety of areas in healthcare, one of which is in managed care, which is pretty unique for a firm our size, particularly given where you have consolidated managed care is today. But we’ve and managed care organizations, I’ve worked in the managed care organizations I’ve worked in on both. If you’ve resource and value-based payment, you’re contracting out from the other side of the table. And so, the way we look at our investments, particularly ones that involve commercially reimbursed healthcare services is really from the industries organization on our local and regional level, and then how you interact with those various players. And so, that was really what underpinned our thesis was can you create a scaled group within a region or however you define, however those local payers and health systems are kind of organized, can you create a skill group in that region so that you have a more even negotiation stance, and actually be a better partner for those organizations. And so far, it’s really worked out. We have been able to successfully grow our business within Pennsylvania, we’ve been able to parlay that into benefits with both the health system level and the managed characterization level. And I think we’ve been able to be a better partner for both of those organizations.
On the thesis, the other piece was really around gastroenterology. We chose GI as one of our first ones for that fund. The things we like about GI is obviously, a specialty that as I said performs procedures and the lowest cost of care. It serves both a procedural endoscopy and a chronic disease component with IBD, which have a nice kind of balancing and from a portfolio perspective. And, on the procedural side, your colonoscopies, are both preventive and curative, which is kind of unique in healthcare. And then on the IBD side, it’s a chronic disease that requires, it’s a sensitive patient population that requires ongoing maintenance. And so, those were kind of the things we liked about GI.
I think, we saw the 70% penetration rate amongst the screening colonoscopies as an opportunity for growth, to be able to serve that additional 30% of people who are not getting required screenings. And we also saw the beginning, when we first did the investment, (there were) beginning signals of the expanding market opportunity, with the guidance around 45- to 49-year-olds. And then on the on the GI side, we’re seeing increasing acceptance for the payers in the 45- to 49-year-olds, and we’re taking a more sophisticated approach to increasing our screening rates.
Praveen Suthrum: So most private equity firms have also a timeline in mind, three to seven years averaging at about five. We saw gastro health recently get the second bite, and it was timed very well, it was exactly five years since they got started. With COVID, how’s that timeline playing out for you? Or do you not worry about it at all for the moment?
Gabriel Luft: I think COVID definitely created additional work and then additional challenges. But as far as growth goes, I think we’ve by and large, hit our plan. I think we are where we would have expected it to be. Like I said, there were definitely things in the interim that we had to kind of get through. But I think we put in a lot of the infrastructure that we expect to put in, we’re in a position to start to scale, and we’re starting to see the real benefits in Pennsylvania. And then we’re also starting to look out into our next date where we can replicate a similar strategy.
So, I think from a timing perspective, I’m not sure that we’re too far off. And sometimes it has been benefited from COVID. I think some of the smaller groups who were independent, who maybe like Jerry said, didn’t act as quickly or as they ramp back up had to kind of push some of their own savings back into the practice to fund working capital, that may have helped facilitate some of the growth of experience. It’s hard to say because you can’t prove factual, but generally speaking, I think we’re not too far off from where we expected.
As far as timing goes, it’s pretty fairly unique for us in our fund documents. We have the ability to hold for a long period of time. On average, we’ve held we underwrite to five years, we’ve I think we’ve exited in about four. But we never want to be in a position where the market is dictating what we have to do for our business or for our partners. We also use very low leverage relative to other private equity firms. And it’s for a similar reason, we want the ability to pursue our growth strategy in any environment. So, I think going into COVID, our portfolio, on average was levered around three times, and there were significantly more. We had simply more access to debt. We just think there’s enough growth opportunity to healthcare that you don’t have to financially engineer returns and it works both ways. If everything’s going great, the mathematics show you make more money. If things aren’t going great, then you have to be you’re doing your lenders, returns, you can have the opposite effect on returns. And sometimes in difficult environments, the best opportunities for growth present themselves. And so that’s just a little bit about our flavor.
Praveen Suthrum:I’m going to get to you Jerry and get to some of the execution aspects of it. I know we spoke around the time of Scope Forward and at that time, you had just joined US Digestive and one of the things that you told me was that it could give you leverage, or it could give the physicians leverage with the regional hospitals with negotiating on insurances and so on. Now two years out, curious to know did it play out?
Jerry Tillinger: I think it did. In fact, it played out even better than we had anticipated when you and I spoke two years ago. Our relationship with the payers and the hospitals have never been stronger. We’ve got agreements, all varieties with the health systems in our communities. In some cases, their call coverage, in some cases, their co management. We have lease agreements to support advanced endoscopy services, we’re releasing physician time to them to make those services available to more patients. All of those are working well. And I think the health systems appreciate the fact that we bring a more robust group to the table.
Praveen Suthrum: I wanted to ask from their point of view. So now in Pennsylvania, they are a large health system very, very consolidated. So why wouldn’t they do this on their own? How are they negotiating with you? What’s in it for them?
Jerry Tillinger:The cost to build a medical group in a health system, particularly with high end specialties, like GI is enormous. And so, when we approach them with a much more modest cost to stabilize management and call coverage for their facilities, they usually end up saving a dramatic amount of money by partnering with a group like ours. And again, it’s almost impossible for them to get that kind of stability in the market.
Even for health systems that cover a wide geography, it’s not really feasible for them to take, say, a gastroenterologist who’s working in downtown Philadelphia, and say, “well now you’re going to go work in Central Pennsylvania for three months”. That’s on paper, that sounds fine. But in reality, that’s not really an option. So, to have strong local groups that are providing services at your medical center and we’re taking on the heavy lift of making sure that the operations run smoothly, that the improvement and replacement process happens without them having to worry through that, this is something they’re generally happy to outsource.
Praveen Suthrum: How about negotiating with insurance companies?
Jerry Tillinger: The payers, and Gabe touched on this really well. Prior to US Digestive Health coming on board, a group of our scale would have required nine different agreements with nine different medical folks. When we negotiate our contracts, they get 140 providers across a wide swath of the state with a single agreement. That’s a tremendous value for them. Just on the operational and administrative side, it brings value to them. Then you look at the next level of what they’re trying to achieve in value contracting, and potentially moving into risk bearing environments. A small group has neither the economic resources nor the expertise to participate in those agreements. And we do, we’ve got the experience from my background, from Gabe’s background and the resources that Amulet has brought to the table, to capitalize us to go into those agreements.
In fact, we’re leading those discussions with the payers, pushing them towards value pathways where we see opportunity to bend the cost curve to the benefit of the patients, the payers and ultimately the medical group. That’s something you just can’t do without scale. If you’re going to assume risk, you have to be able to cover a geographic area effectively, so that the leakage of patients outside the group is minimized. And again, we’re able to do those across wide swaths of the geography in a way that no other GI group in the state of Pennsylvania can. Not even the health systems have the geographic and service scope that we do.
Praveen Suthrum: How do you see these conversations evolve with value-based care?
Jerry Tillinger: What I found, is that the expertise at the payer level is widely variable. We are actually collaborating with them in one case to actually bring in a third party with deeper expertise to work on GI specific pathways together. They have the data across the broader cost spectrum. We know what our patients cost when they come through our door. We don’t necessarily know how much that same patient is spending on a GI related condition when they go to the emergency room, the hospital, other specialists, other treatment modalities.
The payers have that data, but they don’t necessarily have the expertise to manage that cost in a cohesive way. So, we’re coming to the table with them and working towards pathways where we can assume more responsibility, have better direction for patients, move them from high-cost treatment locations into lower cost settings. And even then, the cost curve clinic, there’s more and more information about the way you’ve bend the long-term cost curve with either aggressive early treatment or screening treatments and other conditions. If you can partner with the payers down that pathway with the scale that’s needed to actually affect the whole population, you can bend that cost curve overall and that’s what the payers really need as a partner.
Praveen Suthrum: So, are you hoping to do this in the coming year or are you having these conversations already?
Jerry Tillinger: We are having the conversations now. COVID definitely put a delay on that of all the priorities that were on everybody’s scale, building a new value contract fell behind managing COVID, and getting operational again. So, we put a pause on that for a couple of months. We’re actually in negotiations with one of the largest payers in the state to build that kind of program now. And we’re hoping to take that exact dialog to the other major payers and replicate that across the state.
The nice thing about being so regionally focused is that when we talk to a payer, we can approach it with a wide space in their market. It doesn’t really help that much if Blue Cross Blue Shield of Pennsylvania, one of the big blues carriers here, we’re talking have a big footprint in another state. That doesn’t mean anything for them. They need to focus on the membership that they have in Pennsylvania, and we’re able to do that with them very well.
Praveen Suthrum: Okay. Let’s switch gears and talk about your growth strategy and all your organizational strategy. How’s it different than the other private equity platforms which are out there? And I want to add a little bit to the question here, which is, in the beginning, many platforms talk about doing a regional play, and you are also talking about it now. But then very quickly, they change tact and they moved on to different states, everybody started acquiring practices in different geographies. I’m curious to know, what is your strategy now and what’s it going to be in the coming years?
Jerry Tillinger: I think our strategy is pretty consistent in that we’re focusing on building regional scale to create value, not regional scale for its own virtue. But because it allows us to work with the payers, it allows us to consolidate services to make them more efficient. Our Pennsylvania centralized pathology lab is an example. We brought the cost per unit down by nearly 30% compared to the local labs that most of our groups were running prior. That’s not something that’s that you can necessarily do when you’re scattered across multiple states and multiple regions of the country. So, in any geography where we might expand beyond Pennsylvania, our focus is going to be to replicate the success we’ve had here. We’ve successfully built value for all of our stakeholders by doing that with depth in the market.
So, as we look at potentially a second state footprint, we’re going to look for an opportunity to do the same thing, where we can start with a major group in the market so that we’ve got a good strong base, and take the infrastructure we built within our management team, and use that infrastructure to create the same value for additional groups in the state to join. For smaller groups joining a platform that’s already within the state, they need to see value coming from that. That’s it’s critical that there be creative improvements in the way they perform.
I was actually involved in some of the PPMs back in the 90’s. And saw with crystal clarity that while they built scale, they didn’t build value beneath that scale. And so that has definitely coloured the way we view this investment, that it’s not simply to grow stronger and grow revenue. The revenue growth is great, but I need to grow my actual profitability per unit below that so that my physicians and my investors all see growth in value for the dollars we’re putting out. As a strategy, I think that’s critical for the industry, that is we look at the other platforms around the country, we want them all to be successful and executing on that. Because we see the future of GI, based on these platforms, the ability to execute at an operational level is going to define success for these organizations. There’s still tremendous green space within GI, where it’s somewhere between 10 and 15% of the gastroenterologists in the country are involved in these platforms. That’s a very small number, so there’s still tremendous growth opportunity regionally and nationally. So, we don’t see slowing down in this approach anytime soon.
Gabriel Luft: Just to kind of build on that a little bit, I think what Jerry said is exactly right. I think we want to grow in a way that creates industrial scale that accrues back to your organization. That we’re not looking to grow by acquiring EBITDA in different markets. If we’re going to do that, we want to make sure that we can leverage that scale through to exit in a better place. For our business and also for our physician partners, at least from the investor perspective, I think it’s really positive. And there are somewhat when it signals is that the value proposition is resonating with GI groups, and then there’s ability to transact in a lot of other physician’s specialties, it’s been a much slower pace and so that kind of factors into people’s decisions, when they’re thinking about what can they achieve over their investment horizon.
Sometimes the best entry points into a state are not necessarily the biggest urban markets, it could be a second-tier city, if you have a strong group there and it’s a growing market. There’s a variety of things that kind of go into that. And I think if you look across the country, there’s still very long list of opportunities to go after both for us and other groups.
Praveen Suthrum: Mehul perhaps you can answer this question, for the average GI practice out there, in this region, there’s at least one other private equity platform, one strategic platform, and if you go further out, there is another private equity platform. So, for them with everybody knocking on the doors, how would they tell you apart from the others?
Dr. Mehul Lalani: I think, Jerry and Gabe mentioned some of the traits that our organization has that may be different from some of the other platforms. We went through this process, two years ago and we really had to interview multiple platforms, multiple investors, and try to figure out what the best approach for us was. Our theory was that if we’re able to grow regionally and scale and actually provide services, which we could not provide prior to doing this transaction, we would be successful.
So, all the platforms, I think maybe there is a misconception amongst gastroenterologist across the country, that all of the PE platforms are all the same, and they’re really not the same. There is no one size fits all for a gastroenterologist. I think, the one thing about these platforms that you need to really do is take your time and get the pitch from each of these platforms, understand what they’re trying to accomplish, because they may be trying to accomplish the same thing. But they’re approaching in a different way. And our focus was not to just grow nationally for the sake of growing, we wanted to provide services that we could not otherwise provide in our market to begin with and we defined our market as Pennsylvania. So, I think, every group really needs to understand, obviously, the pros and cons of private equity. But they also need to understand that each of the platforms has its unique characteristics and there is no one size fits all.
Gabriel Luft: I’d also just say kind building on that is a big decision. I think with us, at least, when we enter a market, we really want to deliver for that market. So, it should be I think they should just think about what they want to achieve, and what their existing position is. And we’ve already put a lot of effort into Pennsylvania, so it’d be a lot of bandwidth that we can dedicate to that. And that may resonate with some people, and it’s certainly different than some of the other platforms out there. And there’s other value propositions for the other groups as well. Not to kind of understate that the clinical governance is really important in all these deals that’s been enshrined, right can’t change without physician approval, or consent. And so, I think that’s another thing that these doctors should look at. There are certainly different approaches, some groups have different terms and others they have a different level of involvement in some of these activities and it’s within the kind of practice. I think that’s an area of due diligence it’s just they look at as well.
Praveen Suthrum: Let’s switch gears again, and I want to talk about some of the recent announcements, not private equity announcements, but digital health announcements in gastroenterology which might impact the current way of doing business in GI. Let’s take an example from today, I saw an announcement from Mahana Therapeutics, that has a digital therapeutics platform for chronic conditions like IBS, so they’ve raised $61 million. And last week, there was an announcement Artificial Intelligence company in gastroenterology raise $30 million to do a better polyp detection. Today again, it was interesting that Google put a paper out there, it could be very recent. But the whole point of that was the AI algorithm is now able to detect accurately, if it is correct 97% accuracy in detecting a polyp and so on.
Then you have companies like exact sciences doing several acquisitions, getting very heavily into the aspect of using tool desks, beyond genetic tests to screen populations with many others that are working in the space of liquid biopsy, not just for one cancer, but multiple cancers. A final comment that I heard, though I don’t see the announcement about it, but Blue Cross apparently cut the colonoscopy reimbursements by 20% down south in one of the states.
So, when I look at all this together, I want to ask all of you if this thesis does not hold or pave, the industry makes a shift. What is the plan B? What happens to the EBITDA assumptions, which have been made on number of procedures and physicians coming on board expected to do certain number of procedures in the future? But what if the procedure itself takes a turn and GI as an industry goes to its next level? What happens then?
Jerry Tillinger: I’ll take first stab at that one. We’ve always believed that there’s a role for digital health and these new technologies within gastroenterology. Frankly, anything that improves the screening rate of 60 to 70% that we see across the country would be a tremendous benefit is we are looking at these technologies and modalities. We are trying to integrate them into the practice in a way that brings the best service to the patients and meets them where they want to be met. We’ve already started on our program to integrate AI into our colonoscopy procedures. We see that as a huge advance in the industry. Anything that raises our detection rate and number of polyps located is going to continue to advance the way colonoscopy remains the gold standard in the industry.
As Gabe mentioned before, it’s one of the only treatments in all of healthcare that is both diagnostic and provides treatment at the same time, none of the other modalities can provide that kind of treatment to the patients. And even in an environment where we might see in advance, some of those other detection models. The patients who have positive results in those still need to come in and have those polyps removed. So, while we see these things changing the industry, we also see them as a collaboration in the industry. We still think that at this point, none of those technologies are ready for primetime. We don’t see that the liquid biopsy and stool-based tests are at a level they need that it competes with the quality and performance of colonoscopy. And if AI continues to raise our detection rate, I think that’s going to raise the bar even higher.
So, in the near and medium term, we don’t see that changing the way we work. As we look at the way the industry is evolving back, it’s moving in the other direction, we’ve now added millions of people to the screening population in the 45 to 49 demographics. We think that’s a huge advance and frankly, I believe that number is going to continue to go down. We’ve had too many people in the 35 to 45 range, who have come down with colorectal cancer that could have been prevented. And we see over time as we advanced the technology that that number is going to continue to grow. So even if there’s an adjustment in the way people are using those other technologies for screening, I don’t see it moving the needle in terms of demand for high quality gastroenterologists performing colonoscopy services.
Gabriel Luft: Jerry really well said. The only additional thing I’d add just on us is as I mentioned before, our approach in general is to have more conservative balance sheet. And so, for this or for any kind of risk, it allows us to have flexibility. I am in 100% agreement with Jerry, I think that really as it relates to colonoscopy, we’re very excited about the outcomes from the use of artificial intelligence. I think colonoscopy is going continue to get better. And I do think that if there are opportunities to add additional solutions to the mix allows us to bridge that gap from 70% screening to closer to 100 and ultimately deliver better care to our community. That that’s our mission.
Dr. Mehul Lalani: Praveen, I would just add that technology is always going to advance, right? Whether it’s healthcare or non-healthcare, there’s always going to be advancements in technology. You’re always going to have to embrace technology and change and adapt as much as you can going forward, that’s going to be a necessity to survive. The one thing that you can’t take away in health care is the cognitive ability of physicians, right? You can’t take that away with technology. So, there’s always going to be a demand for service for gastroenterologists across the country. There’s only what, 14,000 to 15,000 gastroenterologists across the country. The cognitive ability there, that’s always going to be a need. So whatever advances in technology, it’s still not going to diminish from the demand of gastroenterologists and other Physicians across the country.
Praveen Suthrum: So, for the gastroenterologist to apply the cognitive ability, they need time, but they’re very busy inside of the endoscopy room, largely doing colonoscopies. That’s why I’m asking what is the plan B? Doctors are busy, and while maybe the industry is shifting a little bit from underneath their feet, so if that happens, then how do we tap into the cognitive abilities of the gastroenterologist? I have these conversations weekly. And what I see the tendencies that I see for the average GI practice out there is to find more number of ways to do more cleaning, because that’s easy, or it’s established. And that’s the way the business of GI has evolved in the last 15 years. My question is, what if you know, this is disrupted and it changes now, then what?
Dr. Mehul Lalani: Well, I think there’s always going to be disruption, right? I mean, you had stool fit testing that came into the market, they said that was going to disrupt things. You had virtual colonoscopy, you said that’s going to disrupt things, there’s always going to be disruption in healthcare. So, right now colonoscopy is the gold standard, one day, it won’t be the gold standard, right? We just don’t know exactly when that’s going to happen. But I mentioned, cognitive service is not going to go away, chronic disease management is not going to go away. You’re still going to need to have a physicians use their brains to navigate these kinds of situations.
And if colonoscopy goes away, there may be other technologies that gastroenterologists are going to have to employ. But we don’t see colonoscopy going away for a long time. I mean, it’s still remain the gold standard. So obviously, there are new modalities that are coming up that are improving, we expect that they’re going to improve. But the demand for gastroenterology services, whether it’s procedural or non-procedural is not going to go away.
Praveen Suthrum: So, I want to further our conversation and ask you about your vision for the future of GI. Where do you see all this go for the next five years?
Jerry Tillinger: I think for the gastroenterology industry, we’re going to see consolidation continue to happen. That the advantages of being in a group like this where you’ve got shared resources, and the ability to leverage size and strength to improve operations is only going to grow. I think the platforms that are developing now have real legs, and you will not see them breaking apart. That the ones certainly the way we’re approaching this, the value creation that’s happening with the doctors, the ability to bring higher quality care, and a more efficient operation. And the ability to let them still practice in an environment that suits them personally, respecting the local culture is a key tenant of what we do. So when we bring groups on board, we do not have homogenize them into a single, this is how you have to do it, because this is our guidebook. We leave a lot of individual freedom within the local practice environment, whether that’s scheduling or other decision making, not only because we think it’s more efficient, it’s about quality of life for the doctors.
The physicians, in smaller practices and medium practices, part of the reason they chose that life, instead of joining a health system is that they wanted the freedom to be entrepreneurial, to have some level of control over their lives. And keeping that there is critical for us to attract the best talent and the best doctors as successors to those current members. And by embracing that we’ve really got a very well satisfied physician group. They’re happy with the way they work. And if you interview deeper into our organization, what most of them will say is that the USDH MSO does not mess with them, so to speak, we don’t come in and tell them, hover over them and tell them how to operate. We bring a lot of expertise to the table. And in the background, we’re making things very efficient. But on the day to day lives, the way they see patient’s environment in which they work, they still exercise a lot of control in that space. And I see that as the secret sauce for this wave of consolidation. It’s not just about the numbers, it’s also got to be about the quality of life for the providers and the quality of care for the patients.
Praveen Suthrum: I want to ask Gabe a question from a private equity standpoint. Do you see five years from now, PE funds investing in GI groups or do you expect the market to saturate by then? And would PE funds start putting together GI groups with other specialties? What would happen? What is your view?
Gabriel Luft: I think they’ll continue to be consolidation. I think there’s any runway well beyond five years. I mean, Jerry mentioned 10 to 15%. I think if you exclude the ASC businesses, it’s still closer to 10% of the gastroenterologist who are involved in in groups like this, I think there’ll be consolidation. I hope that consolidation we hear less about that example you gave the group Blue Cross plan he tried to you know, I guess push around whatever groups were in that state, I don’t think that would happen in Pennsylvania. And I’m sure it wouldn’t happen in a variety of other states that didn’t have large consolidators.
I think that, our groups are going to continue to professionalize or invest in technology, I hope that the screening rates improve in the next five years. Remember people were dying from colon cancer each year, continue reduce based on that, I think that you were going to see, going into kind of a multispecialty environment. I think, I’m not sure that that’s exactly where things are going to go. It just depends on how ultimately, who the owners of these businesses are. You do see some of the platforms moving downstream, so I know that some of larger platforms have their colorectal surgeons, for instance. I think for each group it’s going to be a kind of market-by-market determination. The Imperialist release they know the kind of their health system partners and others, that where you have kind of bolt on market contact.
Praveen Suthrum: Do you see any groups going public?
Gabriel Luft: My opinion today is different than it was a couple of years ago. I think there have been some recent vision practice management IPOs that have traded, that are trading at a pretty incredible valuation. Businesses like Life Stance, which is really a traditional practice management business focused on on-site training at a high revenue multiple, so that may entice people into doing it on the GI side and or on other kind of vision specialties. I’m not sure that it’s necessarily the best platform for the upper GI. But I’m very interested to see how that ultimately plays out.
Praveen Suthrum: Any final words of wisdom, from one gastroenterologist to the others who are listening in Mehul?
Dr. Mehul Lalani: I think, GI groups will need to continue to embrace change in healthcare. You know, the groups that are the most adaptable will be the most successful. You know, telemedicine has and will continue to evolve to a place in every practice. We’re going to see continued growth in GI nurse practitioners and physician assistants at every level of GI practice.
Our colleagues across the country, as you know, Praveen are very cordial, and opening to sharing ideas. So, if you’re interested in private equity, talk to them they’ll inform you of some pros and cons, make the best decision for your group. Obviously, first and foremost, you have to keep patient care as your priority and continue to do what’s best for your patients. But then after that, you have to do what’s best for your practice. Whether it’s you and that should include your younger and older partners, because you want it to be fair, if you’re not fair to your younger partners it won’t be successful.
Praveen Suthrum: Anything else before we close that you wanted to talk about?
Jerry Tillinger: Follow on to what Mehul was saying. I think the younger partner factor is really important. This can’t simply be a retirement vehicle for the senior Doc’s. I would also advise groups to look a little bit further ahead. Some of the groups that have approached us about joining have done so because they felt they were under threat. Either the payers were assaulting their ability to maintain a revenue stream appropriate to what they needed to keep the practice running, or their health system was threatening them saying join us or else kind of approach. When you reach that point, you are at a sort of a desperation moment. And in those cases, those groups were their timing was perfect, because we were in the market and able to step in, and really help protect them from that kind of assault on their integrity.
The smarter move is to look a little bit further down the line and find a platform where that security is already a part of your practice before those threats materialized. There’s no wiser move they can make them to join the right platform in their area that brings them that strength and support. So, they have it in their back pocket if it’s ever needed.
Praveen Suthrum: Excellent. Thank you so much Gentlemen. This was fantastic, I thoroughly enjoyed this conversation. And thanks for encouraging the segways of our conversation. It was totally fun for me, and I look forward to chatting with you all again.
COVID-19: The Way Forward for Gastroenterology Practices
COVID-19 is a double whammy of both clinical and business disruption. This ebook will help you explore possible scenarios and be a guide in your plans for the future.
Elena Mustatea is the CEO and founder of Bold Health, a digital GI company that delivers digital therapeutics for the treatment of various GI conditions such as IBS. Their first app Zemedy is available in 190 countries. Now, they are hiring GIs and expanding in the US.
While private practice GIs are occupied with private equity, the world of digital health has been expanding. In Q1 2021, digital health attracted $9 billion in investments.
In this first-of-its-kind interview, learn more about Bold Health and the world of digital therapeutics, CBT, integrative medicine and the advent of digital health in GI. Elena talks about their business and operational models. She delves into getting paid by insurances.
Digital GI is a practical reality today. This train too is leaving the station.
Invest in your future by listening to this interview (25+min).
Praveen Suthrum: Elena Mustatea, welcome to The Scope Forward Show. Thank you so much for joining me today, you’re the CEO and founder of Bold Health, a digital GI Company. Really warm welcome.
Elena Mustatea: Thank you so much really delighted to be here and I thank the audience for being here with us today as well.
Praveen Suthrum: You know when I actually saw your profile it seemed like a Mission Impossible movie cutting across different countries. So, you grew up in Romania, then I saw Italy pop up and then Germany and then you founded Bold Health in the UK, and then you were in New York. Now you’re extending Bold Health to the US. Then, of course, you’re part of the Forbes 30 under 30 list. So, congratulations on that. Please tell us the back-story here and what led up to the founding of Bold Health?
Elena Mustatea: Sure. Thank you so much for taking the time to research my background. Indeed I spent time in many countries. I studied in like five different countries and I took that with me in building companies and I always see myself kind of building global companies that make an impact around the world. And I think it’s important to have that international view of things and understanding different systems, different social implications. So, yes I grew up in Romania and I actually remember just growing up with a bunch of digestive symptoms. Lots of abdominal pain, various others and I thought that was normal because most people in my family had IBS, had ulcers. My dad; we almost lost him to an intestinal obstruction was in the emergency room and we were really afraid for him.
And yeah I would see people with all sorts of digestive issues, maybe it was because we didn’t have such a great water system in Romania and so forth at the time. But it took a while for the medical system to have a simple blood test… to tell you have that and then you get antibiotics and it’s gone. So, I’ve seen the benefits of standard medicine in improving gut disease. And later as I was working, I worked in management consulting and investment banking, venture capital, I had a pretty intense, very demanding job, poor lifestyle, working across time zones, taking many flights, working late, you know, eating if I could… I developed IBS – Irritable Bowel Syndrome that really impacted my ability to work productively to enjoy life, to go out, socialize, eat and drink whatever I wanted, it even affected my intimacy. So, I saw this very significant impact on gut symptoms on overall you know quality of life and also on my mental health.
So, really Bold Health was born out of the desire to help other people like me and my family but in general, people suffering from underserved conditions or even mystery conditions that we might not diagnose early enough. We might not know how to treat or they require a more integrative approach. Maybe it’s food as medicine, there’s medication, maybe it’s a psychologist that helps you work through the behavioral aspects, which frankly you know standard medicine doesn’t do today. So, I got together with my co-founder who is a doctor, very passionate doctor about technological innovation in healthcare. He’s run a number of digital health startups. He comes from Nigeria, a very international background as well. We knew there wasn’t much digital health helping GI patients while this being one of the largest condition categories both by spend but also by prevalence. We know 70 percent of American adults will have a recurring GI symptom and about 30 percent will have a diagnosable illness, right? So, very vast condition, are poorly served we believe at the moment and we see that anecdotally from our patients and then very little digitized. So, of course, building a digital health startup in this space felt a no-brainer.
Praveen Suthrum: Elena you talk often about the mind-gut connection. You’ve written about it and that seems to form a foundation for Bold Health as well. Can you share a little bit more?
Elena Mustatea: Sure. So, in the recent years, we’ve been learning a lot more about the gut-brain link connection and dysfunctions of this gut-brain connection. And what it is… it’s a direct link between the central nervous system of our brain and the enteric nervous system of our gut. We don’t know exactly how they’re linked. Some say via the Vagus nerve, there might be other nerve endings that connect the two brains. People say our gut is actually our second brain and evolutionarily, it was our very first brain – around digestion, life-giving digestion, right? And what we know it’s a bi-directional link that the gut affects the brain and the other way around. So, that’s the main insight we leverage in our work… that because our digestive system is responsive to psychological and behavioral factors, we can treat it leveraging behavioral medicine what we call behavioral medicine, and techniques within that are Cognitive Behavioral Therapy and Hypnotherapy. These have the best evidence-based development over the past 20 to 30 years that CBT and Hypnotherapy can improve digestive systems dramatically and actually in conditions like IBS which is the poster child gut-brain dysfunction affecting 15 to 20 percent of people, CBT and hypnotherapy are by far the most effective at around 70 percent efficacy rates. That’s more than prescription drugs, more than diets, more than probiotics, and others.
So, anecdotally a story – one of our collaborators at the University of Pennsylvania, she was telling us that every week she has a patient flying in from Toronto to Philadelphia to get their one-hour CBT with this therapist. And so, it’s a very under-served patient population and through our work, actually, we make these therapies accessible digitally. We aim to deliver the most effective and convenient digital care for GI conditions providing both a virtual care team an integrated virtual care team composed of GI doctors, dietitians, clinical psychologists, and health coaches as well as highly effective digital therapeutics for the self-management of the condition.
Praveen Suthrum: What you said made me wonder, you know it’s such a powerful insight regarding the gut-brain connection. So, my question is how come we don’t see as many solutions? What must be the reason?
Elena Mustatea: Well, first of all, we weren’t around to commercialize these solutions. They were being studied and researched for a very long time and even when we speak to clinicians all around the world. Really they’re like okay I recognize that CBT and Hypnotherapy are highly effective, I’d love to give them to my patients but it’s not really part of the standard of care we don’t have that type of service, you know we barely offer people 10 minutes consultations and a quick prescription. So, simply I think the system hasn’t really provided so far integrative medicine. So, we’re big fans of the emerging model in GI care where we look at the patient as a whole with both mental health, physical health, and a lot of other factors that I mentioned affecting their GI health and overall well-being. So, first of all, you have to innovate by bringing integrative care to people that does recognize the gut-brain link does recognize the importance of lifestyle and good nutrition, and brings in these pillars into care. But we know right now the standard of care, you go to the doctor, you get a medical prescription, and then go home and hope for the best!
So, that’s the innovation integrative care and when you look really at the behavioral interventions, it’s a bit counter-intuitive, right? That you would treat the very physical illness you know people have their deep abdominal, pain diarrhea for days or constipation, huge bloating, they are insensitive to anything they eat and so that’s a bit counterintuitive that by giving them Cognitive Behavioral Therapy and teaching them how to reposition, how they relate to the condition that would significantly reduce symptoms. But what we always did so that it doesn’t sound too alternative is to base everything in science so we collaborate with people at the University of Pennsylvania needing IBS centers in the UK or with Stanford University where there’s existing evidence, where there’s proven protocols and some of the best experts in the field.
Praveen Suthrum: So your first solution was Zemedy which is an app and that was launched just in the UK or is it available outside of the UK too?
Elena Mustatea: So, Zemedy is available in over 190 countries. What we wanted to do with our first solution and Zemedy is a digital care program for IBS – Irritable Bowel Syndrome, what we wanted to do initially is to serve the area of most acute needs which we identified IBS to be that. We saw the largest number of people affected 15- 20 percent of the population. Complete lack of effective treatment. Standard medicine doesn’t work very much in IBS because it’s a disorder of the gut-brain link and it’s a functional condition and not an organic one. So, we wanted to create a program fully digital initially that people can access by a digital app to get therapies that we know work with CBT and Hypnotherapy. They can access it at their fingertips, they can play guided exercises, they can go through patient education, and so forth and really self-manage, and use this app to improve their symptoms at home. So, with that in mind, we launched the app around the world. We recently are more focused on the UK and in the United States for commercialization but we want to make our apps available widely so that underserved patients can easily access them. So, this rollout of Zemedy that’s across so many countries.
Praveen Suthrum: What are the outcomes that you’re seeing?
Elena Mustatea: Absolutely. So, we see incredible clinical outcomes from Zemedy. At the moment it’s a fully digital intervention for IBS based on CBT and Hypnotherapy as I mentioned and we already knew from the evidence that the effects we can see are improvement in GI symptoms, improvement in mental health scores like – anxiety, depression, and stress, quality of life and a few others like visceral anxiety, fear of food, generally improved health. So, we’ve actually just published a paper in JMIR (Journal of Medical Internet Research) our first randomized controlled trial with the University of Pennsylvania, where we had 120 patients in two arms – the intervention arm on Zemedy and the waitlist where we saw clinically significant improvement across all of the secondary and primary outcomes of disease. Over 66 percent of patients in the clinical trial saw clinically significant improvement in their GI symptoms. For example in their quality of life and not only that we looked at three months follow-up and we saw that those courses were maintained. So, the benefits of an intervention behavioral psycho-behavioral intervention are magnificent because not only do you get that immediate impact or after a few weeks on the program, but that will be maintained over months and even years.
Praveen Suthrum: So, a common question that comes up in the GI circles you know when it comes to Cognitive Behavioral Therapy or anything that’s outside of the mainstream insurance domain is who will pay for it? In other words, what is your business model?
Elena Mustatea: Sure. Before that, I’d say you know where we start fundamentally is that we believe in value-based care that delivers the best outcomes for the patient and puts the patient at the center of care. So that’s very important for us not only to get reimbursement for our solutions but also to make it free or covered for the patients while they can be sure that they’re getting the best treatment and the best care they can. So, our model is actually hybrid so we provide a virtual care team telehealth access to different clinicians and then the digital therapeutic for the chronic self-management of the illness so we can get paid for those altogether or separately. For example for the digital therapeutic in some instances ultimately our model is B2B we seek to have coverage and reimbursement by self-insured employers or by health plans and insurers.
We also offer at the moment, until there’s broad coverage around the nation, patients can also buy directly from us. But ultimately we are focused on securing reimbursement across all 50 states. And we function both as a medical provider, so we can charge on claims as well as a technology company. So, for example, we can sell the software – the digital therapeutic on its own. So, then the operational implications is that we’re set up as a provider that can hire a clinical team, licensed clinicians, like dietitians or therapists and GI doctors and nurses while we also have a tech team, we have an R&D team under the parent tech company. So that’s a very interesting challenge to have – to coordinate this type of team and really two organizations that comes under one but it’s necessary so that we’re able to deliver care digitally.
Praveen Suthrum: With this type of model would you be continuing to focus on IBS or would you expand to other GI conditions in the US?
Elena Mustatea: Absolutely. So, we are a diversified GI provider. So, we seek to cover all GI conditions that you might want to see a doctor for. And IBS was our first proof of concept. Digital therapeutics condition area, we built the evidence, we’re building a portfolio of digital therapeutics across other conditions like inflammatory bowel disease and Crohn’s Colitis. We have another product for children with functional abdominal pain. So, not only do we cover multiple conditions, we also cover the whole family, both the pediatric population and adults. And then really we seek to be end-to-end GI care. So, from diagnostics to consultation to ongoing care support to digital therapies but also you know medication, prescriptions, and adherence, and so forth. So, being kind of one point of entry for all GI needs wherever possible in a digital or digitally-enabled format.
Praveen Suthrum:You know when a patient wants to be seen by you or when I say you, I mean either Bold Health or Zemedy or one of the solutions, would they be seen by a digital interface? An algorithm? Or a physician? Or all of it?
Elena Mustatea: All of it! So, we’re creating the most efficient care as well so the most convenient and delightful for the patient, the most effective, right? We’re all trying to improve GI care here. And the most cost-effective GI solutions in care. So, the way to do that… you want to leverage technology and digital as much as possible. So, you mentioned triage, right? Or even having AI algorithms that get the patient data either from here. Or they fill out an assessment and then get triage to the right clinician or the right treatment for them. And then we want to leverage technology at every step of the way and data. And of course with digital therapeutics, we even delivered therapies digitally.
But yeah, to answer more specifically we do an assessment upfront where we get the patient data their symptoms, and so forth, and then we empower the clinician that will see them with that data. So, it’s very effective they already have everything upfront and they can spend time providing quality care to the patient. And what’s interesting is we offer a care navigator, that at the moment would be a GI nurse that understands both GI conditions very well and all the different components of integrative care. And all the different clinicians that we might offer within the team and might serve the patient and after doing this assessment, the care navigator, the GI nurse will decide – does this patient need to see the GI doctor? Or maybe they should be put on Zemedy, on the digital therapeutic alongside seeing a dietitian.
So not everybody gets the same it’s a personalized care journey-based on data on the patient and what makes most sense for them and it’s a very high touch concierge type of service and even though this sounds like this cannot be cost-effective, because you give access to a full integrative team and you build whole technology infrastructure, we know from evidence that actually integrative care will be the most cost-effective because you prevent a lot of costs down the line when the patient gets much better or even enters remission closer upfront or in the first year or immediately after diagnosis.
Praveen Suthrum: So, let’s say a patient is seen virtually and the doctor determines that this patient has to go through a physical exam needs to be seen in person, or has to go through a colonoscopy what happens at that time do you refer the case to somebody else or would you also employ GI doctors to see them in person?
Elena Mustatea: Absolutely, so that’s a brilliant question and it’s very important, right? We recognize that in GI care many patients do have to get their colonoscopies on a recurring basis for example people with Inflammatory Bowel Disease that need to be monitored and there will be instances to do these invasive tests or see a GI doctor face-to-face. So, what we’re developing is a network of premium partners for in-network referrals so that around the country and in various in-networks of each health plan. For example, we can identify those clinicians that are high-performing that have good reviews, that we know are compatible with this integrative model of care, and see things in a let’s say progressive way and can refer patients into them so we see ourselves augmenting in-person medicine and standard care and supporting patients for this chronic journey. Because ultimately care is what happens you know after you’ve seen the doctor. And often you know standard care pathways won’t include a dietitian or won’t include a GI psychologist that we can offer to really augment and make better what patients might get from their primary care doctor or their main GI doctor.
Praveen Suthrum: I take it you would move in the direction of FDA approval?
Elena Mustatea: That’s not correct. So, at the moment we don’t have plans to go through FDA approval. We are a Chronic Care Management platform for gastrointestinal conditions we provide digital care pathways and for the digital therapy that we digitize, we position it as a self-management program ultimately CBT therapists or Hypnotherapists are not FDA approved so almost in that vein our intervention doesn’t need to be FDA approved.
Praveen Suthrum: Okay, that’s helpful. So, I’ve learned that Oshi Health is also positioning itself as a digital GI platform or digital telemedicine platform. How does Bold Health differ from what they’re doing? Or is it similar and more broadly who do you see as competition for what you do?
Elena Mustatea: Absolutely, so to clarify we’re the only end-to-end GI care digital platform. I would say and the two components are the virtual care integrative team – let’s say telemedicine for GI and then the portfolio of digital therapies for self-management for self-care that we give our patients access to. So, in that sense players like Oshi Health and GI-on-demand as well I think, are building a similar platform to Oshi that is virtual care, telemedicine/telehealth giving access to the integrative care team, which is fantastic! We believe in that and we’re very happy that multiple digital providers are emerging.
And then on digital therapeutics you know we mentioned Mahana, they do that. And now have the IBS product, they might go into other condition areas. The other competitor I would like to mention is Vivante Health. So, they’re also in the B2B space they’re selling into employers and insurers with a bit of a hybrid model where they have a care team with dietitian and health coach and then they offer an app and there’s information psycho-education and so forth. So, they’re a bit of a hybrid between the two but I’d say we’re the only ones set up both as a provider and offering the digital therapeutics.
Praveen Suthrum: Okay excellent, Elena let me ask you what is your vision for GI as a space and maybe healthcare as a whole?
Elena Mustatea: Absolutely. So, we believe in the world where people live free of the burden of chronic conditions more generally and when you do have chronic conditions you can get the right care immediately excessively and you can feel much better so that you can have a full life and limitless life as we call it at Bold Health. So, that’s a division of the world. In terms of GI care, we believe things can be made a lot better where patients can get a diagnosis faster. We know today they have to often wait over four years to get an IBS or IBD diagnosis. We find that unacceptable. Also in the world today, people don’t get access to effective therapies like CBT or Hypnotherapy even when they’re the most effective therapies. So, we believe in that world where you get access to the right treatment as soon as you get diagnosed, as soon as you have that need, and healthcare becomes not only very convenient but delightful, right? Where you know you’re being taken care of, you have a care team that you can have a relationship with, you feel supported.
And that’s something what we’ve seen with our app for example, in the feedback, some people tell us “I feel like this is my best friend, it understands what I go through, it knows my condition in and out and it can give me advice, it just tells the story that I’m living.” So, it’s really interesting how patients are coming at the center of care. We see the consumerization of healthcare where we expect you know really good service, really high-quality products which would be the care and the therapies and treatments we get and ultimately much better outcomes. So, I believe in GI we can produce better outcomes, faster with reduced costs. Ultimately, I’d say the world I see for GI is really integrative care in GI where we look at the patient as a whole, we understand the gut-brain link, we leverage it to treat people better and provide dietary support, psychological, support GI medication for the most optimal outcome. And we hope we’re part of creating that world I would say, all those different aspects of that vision where our platform builds towards that.
Praveen Suthrum: Wonderful Elena, thank you so much for sharing your views and sharing this vision. Were there any final comments that you’d like to share?
Elena Mustatea: No, I would just want to really thank you for the invite. I’m super happy that I was able to share our work at Bold Health and our vision for better GI care and thank everyone for your attention.
COVID-19: The Way Forward for Gastroenterology Practices
COVID-19 is a double whammy of both clinical and business disruption. This ebook will help you explore possible scenarios and be a guide in your plans for the future.
In a world of private equity, MNGI has firmly decided to stay independent. Dr. Ketover shares why they don’t need to and what their growth strategy is. Our conversation explores many topics. Especially insightful are his views on how GIs must build programs for the entire GI tract and not just focus on endoscopies. He reflects on what he took away about the future during the pandemic.
Invest in your future by listening to this interview (29+min). Sometimes just one idea is enough to change our trajectory.
Praveen Suthrum: Dr. Scott Ketover, President and CEO of MNGI (Minnesota Gastroenterology), I’m so honored to have you on the Scope Forward show. I want to first warmly welcome you.
Dr. Scott Ketover: Thank you Praveen I’m happy to be here. You and I have known each other for a while and have crossed paths and along with several others to talk about the future of GI and where we think the practice of GI medicine is going. So, I’m very happy to participate and answer your questions. And as much as information as I can provide, I’m also interested in… I watch a lot of the videos that you produce so that I can learn something new along the way.
Praveen Suthrum: I’m looking forward to this conversation. Since the last time we did an interview which was for the Scope Forward book, the GI landscape has changed dramatically. So, I want to ask you what do you think?
Dr. Scott Ketover: Sure. Well, no one could have predicted COVID or a pandemic or the lockdowns or what happened since we talked, pre-COVID. And that has had a dramatic impact in a couple of areas. One, it proved for gastroenterologists particularly those in independent practice, how vulnerable we are in terms of our revenue. You know, a year ago at the height of the lockdowns, there was essentially very little ambulatory endoscopy going on which is at least from a financial viewpoint the lifeblood of today’s current GI practices. And so, it was a quick awakening. They think that revenue could be down significantly for the year which in the independent world drops right to the personal incomes of the physicians. For physicians in an employed setting, I’m sure they were challenged because their entire institution was challenged. So, COVID was a rude awakening but it also caused us to step back and say… so, our vulnerabilities which we have talked about theoretically in the past are not real. If we can’t see patients face to face, what do we do? How do we provide care? How we take care of our patients? How do we take care of our employees? How do we take care of ourselves?
Praveen Suthrum: And we’ll talk more about that because pre-COVID, you had mentioned that you’ve got to diversify from colonoscopy and you have to focus on the entire GI tract. I’ll come to that in a bit. But first, I want to talk about private equity in gastroenterology. The last I’ve heard, and this is as of this week, that almost 50% of the DHPA or the Digestive Health Physicians Association members are in some form of PE umbrella. Is that accurate? Did you expect to see this rate of acceleration?
Dr. Scott Ketover: I actually did expect it and that’s because it’s a very attractive model for both small and large practices. Large practices of course have the advantage of being the platform to which you can add on other practices and grow that Medical Services Organization. So, I’m not surprised by the attractiveness of these relationships. And I see certainly reasons why many practices would do it.
Praveen Suthrum: Going back to pre-COVID, you told me that you had hired Delloite and MNGI evaluated private equity and decided not to go for it. Now, given the market changes are you staying with your decision, or are you reconsidering that position?
Dr. Scott Ketover: First of all, we are staying with our decision but I’m not sure that the change in the market had a big influence on the decision one way or the other. I thought for a long time that there are essentially three reasons why a practice would want a private equity partner. Now one is certainly to have the business acumen of those who are not clinicians but know how to help develop run and grow businesses and I think that’s an important asset for a lot of practices. If they don’t have it internally or don’t have it through other means then private equity can provide that. Also, I think it’s a great opportunity for practices that want an infusion of capital to spur their growth whether it’s in hard assets or growing their geographic footprint, and their importance in their communities.
And lastly, I think the reason is for physicians who are in independent practice, we recognize that our asset is us and so when we stop practice and walk away, that asset vaporizes and unlike a lot of private businesses where you can build a business for decades and then when it’s time to retire you have an asset that you could transfer to somebody else, you can’t transfer your professional work to someone else when you stop working. And so, for a lot of physicians, private equity is an opportunity to take that sort of illiquid asset of themselves and turn part of it into a liquid asset and take money off the table to invest in other things in their life. So, I think when practices look at private equity, they should really be thinking about… you know… what motivates them? Is it the dollars? Is it the business acumen? Is it the MSO and its impact on the community? And ultimately how it affects patient care.
Praveen Suthrum: So, from a growth perspective what is the growth strategy for MNGI from this point?
Dr. Scott Ketover: I’m glad you asked that question because our strategic plan includes growing geographically as well as in-service lines. And we’re looking at opportunities right now expanding outside of the Twin Cities Metro area in terms of both developing facilities and hiring physicians to be MNGI physicians working in places that are not within the umbrella of commuting distance to Minneapolis and Saint Paul. It’s an interesting question for us to ask ourselves ‘why?’. How important is it to do that to expand that footprint? Does it solidify our place in our current marketplace? Does it give us more leverage with payors? Or does it help us defend against hospitals who might think that they should hire their own GI-employed physicians? And we’re wrestling with that now because it’s not easy to duplicate what you have. Let’s say 90 or 120 miles away from where you sit, where it’s not a place that is affiliated or easy to get to.
Praveen Suthrum: Coming to a couple of key areas. Why people consolidate or practices or businesses consolidate in healthcare or in private practice? Is it the leverage that you get with insurance companies and then that with health systems or local hospitals? How have you managed to negotiate with the insurance and the health systems in your region?
Dr. Scott Ketover: Yeah. Good point. So, that type of leverage I’ve come to accept is what I would think of as negative leverage. And the provider groups the leverage really is saying, ‘we won’t join that network’ or ‘we’ll leave that network’ ‘we will leave that hospital system unless we negotiate a contract that we think is favorable to us.’ But it’s sort of a binary decision, right? You’re either in the network or in the hospital system environment or you’re not. If you leave, you certainly don’t do anything to enhance the care within those systems you’re trying to negotiate with. However; it’s been really the biggest and major lever that independent practice has when negotiating payors.
I’m starting to appreciate that given at our size with 85 gastroenterologists and 900 employees, nine locations, etc. As big as we are, we’re dwarfed by the payors and hospital systems. And even the PE-backed MSO’s – 300 or 500 or 1000 physicians? Yes, that’s a lot of leverage in staying in a network or leaving a network but it doesn’t yet prove with the positive side of that leverage is. And I think that’s really the future of where we’re going – is to see how do we make our leverage-positive. I mean we’re bringing more value for those we have relationships with and we’re steering what happens in value-based care rather than reacting to it.
Praveen Suthrum:Do you think our dependence on insurance systems will reduce overtime or stay the same or increase?
Dr. Scott Ketover: GI still remains a largely referral-based practice. In most areas, gastroenterologists depend upon primary care referrals for patients. We have a strategy trying to increase our self-referred or independent patients and families that come to see us but I think insurance and third-party payors will still have a large role. There’s some talk now you know about expanding Medicare down to age 60 or potentially age 55. What impact that would have? It would certainly increase the percentage of government patients that we see and change the payor mix. But I don’t think we’re going to do away with commercial insurance companies in the near future and certainly not in my career.
Praveen Suthrum: My next question is if you consider digital help about 20 billion-plus dollars were raised during the COVID period in 2020 and over 600 plus deals. The way I look at it is these companies seem to be servicing the same station or you know the same consumer that GI and other specialties are servicing but in a completely different model. So, they seem to be figuring out newer business models while GI and other practices seem to want to do more of what they’ve done in the past. Am I thinking this correctly? Or am I completely wrong?
Dr. Scott Ketover: No. I think you’re on the right track. I think that we’ve been very fortunate for two decades that endoscopy procedures have driven the revenue side of independent GI practice so procedures themselves need to be done obviously face to face or in person. But there are threats to that model. And certainly, as technology improves different screening methods as opposed to screening colonoscopy there will likely be more and more screening methods that help stratify risk for individual patients and families and that will have a negative impact on screening colonoscopy volume. I often talk with my partners about the fact that if you look at just what we are compensated for in our professional services it’s way less than half of our total compensation.
So, from a financial viewpoint, the work of the gastroenterologist is compensated by the ancillaries that the professional services generate. What I’m talking about is the cognitive work that we do in seeing patients, right? That generates procedures, it generates the pathology, it generates anesthesia, generates radiology, generates pharmacy, it generates infusions. It’s almost like a pyramid. And what we’re faced with going forward is what happens when there’s less need for an endoscopy. A lot of those ancillaries start to contract. And so, for the gastroenterologist today the opportunity cost to move away from screening colonoscopy is still too high and what I’m trying to help my practice plan for is… let’s not wait until that opportunity cost drops significantly to spur us into other areas. Let’s think about how we can develop the future anticipating that… that opportunity cost will come down.
Praveen Suthrum:You’ve mentioned in the past that gastroenterologists must own the GI tract. So, you must come up with programs that service the entire GI tract and we must move away from colonoscopy. Can you share more?
Dr. Scott Ketover: Yeah. I started to think about this… years ago actually when I started to do capsule endoscopy and the Given Imaging PillCam, the original commercial name was M2A. And what that stood for was mouth to anus and shortly after they came on the market, they realized that was not a consumer-friendly name to have on their product. So, they switched away from M2A. But it has often made me think that you know the GI tract… really it starts at the tongue and so when you swallow something that’s in the purview of the GI tract, and we should look at what we are treating from swallowing a bolus to the exit of unused portions of what we’ve swallowed and see that GI tract is really our entire domain.
But again, the opportunity costs to move resources away from procedures is still too high for most people to invest. We’ve tried in our practice and I think have been successful in looking at creating centers of excellence around non-colonoscopy issues – advanced esophageal disease, inflammatory bowel disease, liver disease, functional and motility disorders, celiac disease… these are treating more of the patient than just the endoscopic portion. And I think we really need to look at that, we really need to figure out ways that we can interface better with EMT or pulmonary medicine or even urology and colorectal surgery when we’re looking at pelvic floor issues. But again, I think what is delaying that movement is the opportunity cost to move away from the highly reimbursed endoscopy procedures.
Praveen Suthrum: So, how is that shift going to happen Dr. Ketover? Because there’s so much dependence on the reimbursement and we don’t see it quickly going away… It’s steadily going away. So, there is no drive to take immediate action. Everyone keeps thinking that it is on the horizon and the horizon is really far away, maybe it is not at all. When do you think this shift will happen? To doing these other aspects of GI care which obviously comes at an opportunity cost.
Dr. Scott Ketover: Sure, and you know the counter-argument is, on a population basis where there are too few gastroenterologists in the nation, right? We need more gastroenterologists than we have today. And so, you would think that gives us more leverage, right? There’s more cancer screening to be done, there is more endoscopic treatment you can do, there are more infusible drugs. So, you would think we would be sitting in the pretty good seat in terms of leverage of our clinical skill but we’re competing with behemoths that have billions of dollars of assets and are really looking at… well they talk a lot about looking at quality and outcomes. And they are really looking at the cost. How do we deliver what is assumed to be reasonably high-quality care nationwide? How do we just deliver that to the population?
So, I said to get gastroenterologists there, we have to come up with a new way for us to practice our cognitive skills of patient care that separates it from the fee-for-service piecemeal revenue production. And so, my personal thought on this is that the winner in all of this is data. Data is coming and we see this happening even practically today. There are now 17 companies around the world that are creating COVID-19 vaccination passports, and apps for your smartphone. The explosion of electronic and digital data is also happening in medicine. But clinicians haven’t felt it yet and I think that there’s an opportunity for gastroenterologists. Whether they’re already in MSOs or are private equity-backed practices, this still integrates in another fashion around data, around having a huge comment database that is controlled by the gastroenterologists and their entities that can look into clinical questions and really prove where cost-effectiveness can be achieved and where the clinical benefit is really present.
Praveen Suthrum: Do you have any digital health initiatives going on at MNGI?
Dr. Scott Ketover: Well, certainly we’re getting involved with telehealth. We have used our EHR for two decades but I see that this is really going to come from the outside. I don’t think the EHR vendors are going to move into the database management of clinical issues quick enough. I do think there will be third parties that come together and if gastroenterologists don’t pool their resources to do this then I fear that the vacuum will be filled by the large companies that already exist in the tech space and then we will just become another sort of a cog in that wheel. We are generating the data, we are doing the patient care, and yet that data is locked currently in our EHRs. We can’t really mine it to help patients and move the ball forward. And we need to find a way to do it ourselves. So, when you ask if MNGI is currently doing that… we’re very much looking into the opportunity to do that and talking to those who can do that. But it’s not going to be just MNGI. It has to be MNGI and 10s of other GI practices whether they’re with private equity or not. Independent, private equity, even hospital systems. We have to put together the network that allows one database around GI conditions to lead this change.
Praveen Suthrum: I want to ask another question on digital health. Let’s say you have IBS patients now you are treating them in a certain way right now and one of the things that I’ve heard you say earlier is that the way you can address IBS is maybe in partnership with someone with Sleep Medicine or psychotherapy or like cognitive behavior therapy and addressing the condition differently. So, that’s on one side with you as a GI practice but on the other side are several startups, that are helping the very same patients through digital means. So, there is really no physician, it is through an app and there is another artificial intelligence algorithm probably going on. And there are people… yes, maybe there are clinicians sitting in some part of the world and they are creating this… so, the solution is one-to-many. Have you thought out of how this is competition for you and how you will evolve in this light? Or do you not worry about that at all in the current state?
Dr. Scott Ketover: Well, it is a concern. With respect to IBS, I’m actually an investor in a company that provides food meals or I’d been asked to guide them through the FODMAP map diet and to get the patients to a better place. But that’s still a one on one, right? It’s a company and a patient, like the prescription model. But I think you’re right with artificial intelligence and databases of what works clinically, patients will seek that out. Long before western medicine accepted things like acupuncture, patients were already there. They went for acupuncture, they went for hypnosis therapy, they went for different kinds of massage therapy, and things were years ago we used to consider on the sort of the loose edge of actual clinical help but patients found relief and that will continue to happen.
I think the question you’re focusing on is… well there are entities out there that can develop electronic means to bring that help into the patient’s hand into their smartphone and bypass the physicians altogether and how will GI practice cope with that? It will likely mean that we will focus more on the disease entities that require more of a direct relationship with the patient-driven through evidence-based medicine.
Praveen Suthrum: You know this whole COVID period has been a very reflective time for many and especially in healthcare. And again, I heard you say many times about that healthcare is a higher calling. And I’m sure you know like a lot of doctors in this space… you must have thought and reflected on why this is upon us and how medicine could’ve been different and how a physician’s role must evolve or will evolve? But overall, I want to ask you did your thoughts around the future of GI take a different shape during this period? And again, maybe at the personal level your own role in going forward on what you’d like to do based on how GI care might evolve?
Dr. Scott Ketover: Yes, first of all, it has changed. My thinking and feeling have changed but… Pre-pandemic if you turned on Netflix and watch the movie Contagion… it was science fiction and yet there were people in the medical and scientific field who believed that that could happen. And most of us went about our lives thinking not in my lifetime… that won’t happen. That’s something that’s happened in the past and we can protect against that. What the pandemic taught us was that in our connected world which Tom Friedman talked about well over a decade… that something that happens literally on the other side of the world can be in your community in less than 24 hours!
And so, the rapidity with which these things happen is phenomenal. And we should as we come through this pandemic and hopefully you know sometime this year begin to enjoy our social lives and our get out of our homes, and out of our masks, etc. not think that we’re done. I now believe are that there will be another one and another one and another one particularly as to we become closer and closer individuals around the planet. That has shifted my thinking somewhat about patient care to try and think more broadly about populations and how we improve disease management with populations which still filters down to the individual one-on-one relationship. But how do we structure our healthcare delivery so that we can improve the health and well-being of populations at the same time?
Praveen Suthrum: Yeah. What does the future of GI look like from this point?
Dr. Scott Ketover: Short-term looks quite good, I think. But there is still a lot of reason for physicians, practices, hospitals, to invest in endoscopic units into procedures. I think that we are on the cusp of seeing really good therapeutics for diseases we haven’t had anything in the past now we’re looking at you know treating NASG and fibrotic liver disease with drugs whether they be infusibles or oral drugs. So, as the practice of GI keeps moving forward in the short-term, I think there will remain a large emphasis on procedures and I think that’s appropriate. But I also think we have to step back and say, ‘how do we do our cognitive work better?’ ‘How do we devote time to developing the programs that really enhance somebody’s life as opposed to just treat them endoscopically from a surgical perspective?’ Those are tough questions but think the future of GI remains right because as I said if it goes in your mouth, it’s in our domain. And we should accept that and look for ways to keep people healthy.
Praveen Suthrum: With that future in mind, what actions must gastroenterologists take today? What is the foundation that must be laid today in order to make such a future happen where GI care can mean much more than endoscopies – everything from the mouth to the end?
Dr. Scott Ketover: So, we’re still in a siloed world – my practice, your practice, this hospital, this system, right? We still have a great deal of silos in the delivery of GI care. We’ve been traditionally concerned and afraid to share our data with other silos because it either weakens us or strengthens them. I think we need to get beyond that I think we need to look at the individual silos and say, ‘how do we create a network of these silos that makes all of them better?’ I’m really focused on data. I think there will be… and it is coming soon… the opportunity to network practices – whether they’re independent, employed, backed by private equity. The network, the data collection, the aggregation, the analysis, and the clinical use of data in a way that benefits everybody all of the practices, all of the systems, and most importantly the patients.
Praveen Suthrum: Thank you very much Dr. Ketover. Is there anything else that you wanted to share that I did not ask?
Dr. Scott Ketover: No, not specifically that you didn’t ask but I will say that I think you’re doing a phenomenal job with you know certainly the follow-up to your book as well as all of these interviews and keeping us informed. I think I learned way more than I gave but this is one of those areas where you’ve helped me be a taker as much as a giver.
Praveen Suthrum: Thank you, I’m so glad to hear that. Thank you so much for saying so, Dr. Ketover. This has been amazing and I’m sure the GI community will learn a lot from this interview. Again, thank you very much for doing this interview.
COVID-19: The Way Forward for Gastroenterology Practices
COVID-19 is a double whammy of both clinical and business disruption. This ebook will help you explore possible scenarios and be a guide in your plans for the future.
This is a historic, one-of-a-kind interview. It lays out the digital future for GI from the lens of virtual reality (VR). Dr. Spiegel and his team have seen 3,000 patients via VR. The technology is no more new. FDA is approving solutions. Medicare is due to pay for VR.
The challenge of private practice GI is to diversify from colonoscopy. Could VR be a new ancillary stream? Find out.
Praveen Suthrum: Dr. Brennan Spiegel, author of “VRx: How Virtual Therapeutics Will Revolutionize Medicine” thank you so much for coming on The Scope Forward Show. I want to first warmly welcome you.
Dr. Brennan Spiegel: Thanks for having me.
Praveen Suthrum: Brennan, I want first start by asking you about your author photo. WhenI see your author picture on the book it’s the same as the one that shows up on the website of the Cedar Sinai website for VR and I’msure something happened that day you know, with that patient and that must mean something to you so I wanted to ask you about that.
Dr. Brennan Spiegel: Well,no one has ever asked that question before!Yeah, so, that was taken several years ago when we were first starting to test virtual reality and with patients.You know, for listeners here they may first of all wonder what we’re even talking about?And you knowmost people think about VR for gaming or entertainment but about six years ago we were beginning to test virtual reality with our patients in the hospital mainly to see if it could help them with their pain management.Andthat particular day we were using virtual reality with a young woman who had severe recurrent abdominal pain, and had been in the hospital many times… actually six times in one year.Andhad been on a number of medications– opioids, ketamines, and shewas pretty frustrated and so we tried virtual reality.Andthe moment that that photograph was taken of me…was me responding to her responding to the VR.Andshe went from being understandably frustrated, upset,and disappointed that the therapies she had been receiving were not working to being kind of swept away into this virtual world reaching out to blue whales that were swimming across her visual field in the middle of a hospital room and laughing and enjoying herself and just seemingly having fun.So, I couldn’t help but smile in response.Andit just so happens that moment we had a photographer who was apart of this this event and yeah I’ve used that as my headshot sort of ever since because I think it’s just a genuine reaction to a patient responding to VR.
Praveen Suthrum: Yeah,and that actually comes through you know in that photograph. I want to ask you Brennan, why did you choose to use VR that day?Youknow this is the first patient… I’m sure around that time you must have come across many people with abdominal pain. Why that day? Why her? What prompted it?
Dr. Brennan Spiegel: Well, we all learningastroenterology about the brain–gut axis.Weknow that the brain and the gut are connected and whywouldn’t they be?That’s just for starters.There’s this old notion that really comes from René Descartes from the mid 1600s –a very old idea of dualism that the brain and the body are separate and distinct andthey operate independently.Butwe know that’s completely false.Thatthe brain is tied in and completely with the gut and the rest of the body and vice versa and they’re connected through all sorts of neurohormonal avenues.So, with that background we’ve always known that cognitive behavioral therapy, psychotherapy, hypnotherapy, talk therapy, and other non–pharmacological treatments that go back thousands of years from the earliest transcendental meditative traditions, can help people with IBS.Notthat it’s always the cure.Notthat it is in place of traditional medical therapies.Butit can support people with IBS.
So, with that background when I learned about virtual reality and recognized the ability it has to nudge the human mind in different directions including positive directions, I thought why don’t we try this with people with IBS specially those who are in the hospital where you know the most severe patients have been admitted and our treatments are so lacking, so wanting.And when I started to see responses that’s when I realized I think we’re on to something here and this is something we need to study and learn more.Aboutand six years later we’ve used VR in over 3000 people at Cedars Sinai and we’ve learned an awful lot.Wecould talk more about that today.
Praveen Suthrum: Let’s go there then.Youknow from these 3000 people on whom you’ve used VR what would be you know, three or five takeaways?
Dr. Brennan Spiegel: I’ll start with what is VR doing and how is it working –as you know clinicians want to understand what is sort of the mechanism of action whenever we’re recommending a new treatment.Whetherit’s a drug or a non-pharmacological therapy.Thefirst takeaway,I spent quite a bit of time and in the book, I talk about this in VRx – what we think is the mechanism particularly for pain.So, I’ll just address pain for the moment.So, listeners know virtual reality has been used for many conditions not just for pain.It’s been used for eating disorders, for anorexia, for obesity, it has been used for managing dementia, schizophrenia, anxiety, depression, stroke rehabilitation, autism,cerebral palsy, multiple sclerosis, I mean the list is about 50 or 60 conditions at this point where there’s evidence with over 5000 studies!So, that’s one takeaway unto itself.Butfor pain one question is – how would it help somebody with pain?Andso, there’s different mechanisms and one is purely just distraction for starters neuroscientists called that ‘inattentional blindness.’And the idea is… it’s difficult… we’re not able as humans to concentrate on many things at once although we might think we multitask…But there’s just no way that person is listening to these words, and counting their heartbeats, and thinking about the pressure of the floor on their feet or the pressure of the seat on their bottom.It’s just not something you can do without getting distracted.That’s because we have a spotlight of attention sort of psychologically speaking and neuroscientifically.Andso, what virtual reality does is it can draw attention away from neuro–susceptive experiences like pain.So, that’s one but it also seems that it might be able to help the brain fight back.
One reason why people seek calm, and go on a vacation, and meditate is that the brain when it’s in a calm condition can inhibit pain signals through your descending inhibitory pathways. And we think virtual reality probably works by putting the brain in a state of mind, so to speak that rejects pain. In other words, it will inhibit pain using this old ‘gate control’ theory with along the spinal cord. The brain can sort of send inhibitory signals down to close these gates along the spinal cord to disallow the arising pain. And we think that’s how VR is working. And then finally there’s cognitive restructuring – giving people ways to think about their pain in a different way. And this is important not just for acute pain but for chronic pain especially visceral pain like irritable bowel syndrome, functional abdominal pain, functional dyspepsia, where you know our pills fall short. And often we need to allow patients to rethink and re understand their pain and the relationship between their pain, and their body, and their minds and that’s the whole point of cognitive behavioral therapy. So, VR could do all those things.
Praveen Suthrum: Great! I want to ask you what happens to the story of these patients after the first few visits? Like someone has IBS, there is a new sensory experience that going through with dolphins swimming or surreal trip you know from the app Tripp or in any of these experiences. Now, that’s new for the first time but then the mind might get used to that. And I wonder does their reliance on drugs reduce overtime? What happens to this story in three months, six months, one year, two or three years down the line?
Dr. Brennan Spiegel: Yes, so, we’re just now starting to see studies with longer term follow-ups.Notyet in GI, although we intend to begin doing those studies.Butoutside of GI… for example there was a recent study for people with chronic lower back pain. Inthat study randomized controlled trial of virtual reality using an 8–week skills–based CBT treatment in VR was compared to what they called ‘sham VR’where the other group did wear a VR headset but they only watched sort of neutral two-dimensional scenes that do not have any apparent benefit.Andthey followed those patients for eight weeks.So, you know we don’t have 12 week or one year data for pain but we do have at least 8-week data.Andthey showed not only a separation pain initially but the separation grew over the course of the eight weeks treatment.So that, by the end the patients in the VR group had considerably, statistically, and clinically meaningful reductions in pain over 8 weeks.It did not show evidence of them getting used to it or sort of a tachyphylaxis, where the therapy starts to wear off like you can see with certain medicines.Thatwas not seen in that study.
Andthe whole point is of these studies is not toask people to use VRmore and more but actually just usingVR less and less.Ifpeople learn something about their mind, about their body, learn new skills in VR that they can then take with them outside of VR an enjoy real reality RReven more than they might have otherwise without relying upon virtual reality.So, when we use VR it’s not as an addictive substance like a video game, it is to teach people skills that they can use in their real life and so that’s the really the goal.Butwe do need more data in in GI and so we’re creating a comprehensive IBS VR program right now and we certainly intend to test it over longer periods to see if this bears out with our patients in GI.
Praveen Suthrum: Excellent.So, in in the bookVRx Brennan, I remember the story where you went to see this patient with abdominal pain andshe experienced VR and they had tried everything else but nothing worked and then in that moment sherealizes that her abdominal pain is linked to her brother’s death due tostomach cancer.Canyou talk about some of these examples? I’m sure the GI community keeps seeing similar patients but somehow you know we may not be making these connections like you did in that story.
Dr. Brennan Spiegel: Yes…that is a powerful story and I often tell it. Indeed, there was a patient with recurrent severe abdominal pain of unknown origin. She was in the hospital and had been fully worked up.She had an upper endoscopy, colonoscopy,abdominalimaging, CT scan, laboratory tests for everything, for inflammatory bowel disease, celiac disease, etc.Andwe’ve all seen patients like this, we were scratchingour head, we were perplexed.Whatare we missing?Youknow, is this porphyria?Isthis Familial Mediterranean fever?Oryou know what could this possibly be?Well, this woman was in the hospital with this pain and I really was starting to scratch my head.Andthey asked us to come in and I decided to use virtual reality.So, I used the headset and put her in a scene where she was swimming with Dolphins.Andit’s a scene that we often use because it turns out to beverypleasant.Peopleenjoy Dolphins and they like watching them, listening to their squeaks, and all this sort of thing.
Andso, she found herself all of a sudden underwater swimming with Dolphinsall around her, and there was some music playing, then she became silent and after about four minutes she started to cry and we’ve seen this a lot with VR and you have to imagine if you’re patient who is just in one moment in a hospital room feeling vulnerable and the next moment your brain accepts that you’re swimming with dolphins,the contrast is so striking that it can lead to sort of emotional responses. Andshe started crying, I said,“Are you okay?” and she said,“Yeah I am. I think I know why I have this pain.”I said,“Really?Why? Tell me more” she said,“I think it’s my brother” I said,“Your brother? Whatabout your brother?” and she said,“Well my brother died of stomach cancer and I think I’m going to also” and I said,“You know we’ve been in your stomach though and we haven’t seen cancer.Therewas no sign of cancer”she said,“I know that, you guys keep telling me that, but I haven’t been willing to accept it.Butthese dolphins…they’re telling me I need to accept this explanation. I need to move on with my life andI’vegot to tell you, my stomach pain is better too! I just don’t have any pain right now” and she said, “I could have been on the couch for a year and I wouldn’t have figured this out but I‘m ready to go home.”
And so, it was just like an incredible experience because I thought to myself, man I’m a gastroenterologist not a psychiatrist!Butsomehow, she had had this you know incredible turn around.Andit’s not like it works like this every single time.So, I don’t want to overstate that this is some kind of miracle but for her it was just the right thing to kind of reboot her brain.Andif I had a brain scanner… we actually know a little bit about what’s going on in the brain when people use virtual reality because we’ve had MRI studies, it would have seen that the part of the brain the default mode network that kind of controls our inner voice will power down in the setting of virtual reality allowing the rest of the brain to have lateral thinking.It’s the same thing that meditation does, it’s the same thing that psychedelics do.Theyall work in the same way.It’s not like… the brain has many different functions or it does but it’s not like it has brand new ways of dealing with this.It‘s the same function in all three cases.So,it’s almost like we gave her a micro dose of psychedelics and then she was ready to go.So, we call this a cyber–delic, instead of a psychedelic. I didn’t make that term up by the way, somebody else did.
Praveen Suthrum:A few years back I was in Peru you know with the native shaman, and I went through this whole ayahuasca ceremony and it was semi psychedelic first-hand experience.Andthen when I look at some of these apps like… there’s something called Tripp, there’s one called ayahuasca, if I remembercorrectly or a video that I came across.Theyare trying to replicate some of these experiences and it’s very interesting.So, to me on the outside it appears that because we’re calling VR as a tech tool or a technology tool and we’re doing all these clinical studies it almost seems to give credibility to all these ancient healing modalities which we have maybe before poo-pooedon and said you know that’s BS and that’s not medicine or that’s not healing and so on.Butnow we seem to or the health care system seems to be more open to this. I’m curious you know about your comments on this.
Dr. Brennan Spiegel: Oh yeah, I have so much to say I’ll trynot to spend the rest of the podcast on just this topic.You’re absolutely right.Particularly in western medicine historically there’s no doubt that there was a bias against behavioral medicine, historically.And this I think still stems from that Descartian notion of dualism.That there’s sort of the mind and that’s what we call super territorial you know, which in medicine is referring to the everything above… basically the brain.Andthat’s sort of for the psychiatrist.Then there’s the rest of the body… that’s where the real scientists work you know, like where we haveenzymes, and we have you know physiologic processes, and we have targets for pharmacotherapies. Butyou know that’s nonsense. The brain and the body have always been connected and I talked about that at the top.Andso, these traditional approaches of meditation, and so–called mind body interventions undoubtedly have effects on the body is just no question about it.Neurohormonal effects of long–term and short–term benefits. So, this is not a new idea whatsoever I think all virtual reality is doing which is which you point out is leveraging those innate abilities we have whether it’s to deploy our own endocannabinoid system, our own endorphins, and intrinsic opioid system whether it’s to trigger changes in cortisol, all the mechanisms that have been identified in that literature.
VR is just making it a little easier to do that.If you think about what it takes to become an expert at meditation… you know Buddhist monks average 30 to 40,000 hours meditating to get to the point where they can basically turn off their default mode network in their brain and that’s what’s happening neurologically.So, what VR is doing is… it’s leveling the playing field a little bit so that you know people like me who have not lived in a cave practicing meditation for 30,000 hours can suddenly get that ability.Especially, if you start adding biosensors to this.So, we can add an EEG and for example is one company called Healium– where you it’s monitoring your brain waves and it’s looking for a particular pattern of asymmetric beta waves over the prefrontal cortex that’s associated with the flow state.Andwhen you achieve that, you’re rewarded in the VR headset.
So, for example use your mind to fly out of the Yosemite Valley,and you can use your brainpower to move yourself around space and just imagine all the other things that you could do when you start connecting brain computer interfaces to wearables and then connect that to the virtual reality headset. So, VR is a way to leverage all of those known benefits.Andmedicine finally is slowly coming back to recognizing all of that after being in low desert for most of the 1900s from around 1950 to 2000. I have looked historically and actually traced this history in the book and I talk about the sort of pendulum – how it’s gone back and forth.Andwe’re now at a point where this type of therapy is considered to be reasonable as a mainstream therapy whereas 20 years ago when I was training or 30 years ago, it wouldn’t have been accepted as it is now. So, things have changed now.
Praveen Suthrum: Yeah, I think it’s also got to do with societal shifts in this direction.There are apps for medication. So, I think the market or people or consumers are primed to adapt to something like this and there much more open andbecause consumers are open, I think the physicians follow. So that’s something that I took away.
Dr. Brennan Spiegel: I would add to that because there’s so much consumer interest it’s very easy to create non-evidence–based kind of stitch in a snake oil and sell it.And I think it’s very important for those of us in digital health to recognize that we’re held by the same scientific standards as any other traditional treatment.Andso, that’s why you know we’re funded by the NIH right now to do clinical trials using virtual reality.That‘s why we’ve published randomized controlled trials.Andthat’s why in the book VRxI’ve cited…Oh God, I don’t even know… well over 300 studies in that book. I know because it took me months just to write the reference section.BecauseI felt it was very important when I wrote this book that it should not feel like sort of like a snake oil thing but rather it should feel like a real evidence based scientific endeavor.AndI’m really pleased that the FDA on the basis of the work that we’re doing and many other people are doing has now recognized this field and is now calling it MXR which stands for medical extended reality.Andso, we’re going to see more and more treatments coming through FDA through the regulatory pathway. that’s already happening right now and we’ve started to really truly see this this field expand as a legitimate treatment approach.
Praveen Suthrum:I want to get back to GI and ask you what advice do you have for the private practice gastroenterology that’s largely busy maybe in the procedure room so to take time away from colonoscopy and focusing on something like this…If you could tell them howthey could use it and if you can connect it to business benefit.
Dr. Brennan Spiegel: Yeah, absolutely I think this is actually a perfect solution for the busy endoscopist because let’s face it like most of us went into GI because we really liked surgery but maybe we didn’t want to get up in the morning quite that early or wear scrubs all day but we liked using our hands, we like doing procedures, we like stopping a bleeding peptic ulcer, we like clipping a vessel, and screening for colon cancer but yet we found out that the most common condition we manage – irritable bowel syndrome – it’s like we have to sort of be honorary psychologists for part of the day and that’s not what we signed up for.So, I think for some GI doctors there’s this almost like tension between this hands–on, manual, mechanical approach to handling patients and is very cognitive non–procedural approach to managing these very common patients. Andthen you throw in the fact that the treatments that we have for IBS although many are very effective it’s hard to predict when they’re going to work.
Givingan antibiotic to a patient with IBS is not like giving an antibiotic to somebody within the mode.Youknow, the relationship you had with your patient and their understanding of the treatment you’re giving, will modify the effectiveness of an antibiotic or any medicine that we give.Weknow this.So, patients like to go to doctors who feel like they’re giving them something more than just pills, they’re giving them their time but also giving them insights that they may not have had.Andso, that’s why we’re creating this IBS VR program right now which takes all the science that goes back years about CBT, the mindful meditation, that packages it all up into a program that patients can use at home.So, they have this ability to build skills and the GI doctor may not even know how to do that, but we’re packaging it up in a VR headset.So, it’s like you have a CBT psychologist with you at home – you can do hypnotherapy,you could do CBT therapy, andyou can do mindful meditation around gut health.Andall the GI doctor really needs to do is tell the patient about it and send them on their way rather thanlearn how to do CBT or always send them to another person who may or may not be all that helpful.So, I think that there’s a lot of benefits to private practitioners to learn about this. I think patients are increasingly… I wouldn’t say demanding yet, but are very receptive to it and seeing really positive benefits so it’s something we’re thinking about.
Praveen Suthrum: So, the obvious question is who pays for all this?
Dr. Brennan Spiegel: Yeah so, that’s a great question and it’s one that insurance companies are actively exploring right now.For the most part, insurance companies are not covering VR as a procedure or as a treatment but there are some models emerging.So, at Cedar Sinai where I work, we are soon going to announce… and this is I guess like a little teaser… a clinical VR program that is going to be run by clinical team for both inpatients and out-patients.So, not just a research program like we have right now but a full-fledgedconsulting service.I mentioned that because the person running that is a psychiatrist who’s trained in virtual reality.Andso, he gets paid just like he would in any other day of the week.He’s getting paid to use VR.Because he’s getting paid for delivering psychological treatments it just so happens that it is VR, he doesn’tget paid separately. Butsome psychiatrists are billing for VR for exposure therapy for example for phobias that’s a very effective use of virtual reality andone in which many doctors are getting paid.
There are some codes being developed for VR for physical therapy.Butwe’re now at the point with FDA starting to look at these treatments that soon Medicare may actually have to cover VR.This is really interesting.There is a company in LA called Applied VR and Applied VR by the way, came through Cedars Sinai’s accelerator program many years ago and they they’ve been working towards FDA clearance for their chronic pain treatment program and it received what’s called “breakthrough” designation by the FDA.Andthat’s sort of a rare designation that once approved, requires some level of coverage from CMS.So, CMSmay actually have to cover breakthrough VR therapies just from a statutory standpoint.Butother insurance companies like – travelers insurance has funded our research. Blue Cross Blue Shield have been looking at this with other groups and are seriously considering supporting it.Butin the meantime, patients can also download the stuff.Theycould just buy a headset for $200 or $300 and download programs for free or for $15 to $20 and off they go.So, we don’t necessarily need insurance to cover this right now.But certainly, for people who can’t afford these headsets it would be great if we had other ways to cover it.
Praveen Suthrum: How have you seen VR being applied in obesity? I’ve read what you wrote in your book but I’m sure things have evolved now. Just your take on weight loss and virtual reality.
Dr. Brennan Spiegel: Rightand this idea as you mentioned we have discussed in the book. We haven’t yet seen this go mainstream, but I’ll tell you I before the pandemic I was at one of these VR centers in a local mall here in Los Angeles called Dreamscape.Andit’s really amazing if you haven’t been in one of these things.Youget in a body pack, and you wear headset, and you look down and you see that you become a different person and, in this case, we were like some Navy seals or something underwater and it was really amazing and immersive.So, I mention it because one of the people in our group was obese, she was overweight and she herself said this, as we were getting on our outfits for this VR experience.Butwhat was amazing to me is when she looked down and she said,“Oh my God, I’m thin!”It was sort of a tongue in cheek joke, I guess, she said it sort of facetiously.But when you look down you see this really fit avatar and you’re embodying that avatar.
So, what she was experiencing at that moment has actually been studied and I talk about that in the book.There’s a guy in northern Italy who’s worked on this program and he’s shown in a randomized control trial over a one year follow up… so we talked about long term follow-up… not over a day or a week or month – a year later people who use VR compared to cognitive behavioral therapy without VR had durable and significant weight loss that was sustained.So,I think there’s an opportunity here probably for private practitioners, for weight loss centers, to actually learn this paradigm to figure out how it works and start applying it as part of a multi componentCBT approach.Wethink about patients with non-alcoholic fatty liver disease and NASH, you know that’s an obvious case. I know you’re interested ingastroenterology where the VR treatments may be affective to help changecognitions about the body.
Praveen Suthrum: How far are we from a timeline standpoint on when all this goes mainstream? You might say it already is but maybe you know it’s not mainstream. I want your outlook on you know the future of VR three to five years from now.
Dr. Brennan Spiegel: Yeah,it’s going to depend upon certain things.Asyou say VR is not quite mainstream yet but it’s certainly VR in general has become pretty mainstream.Youknow not in healthcare but in general.Youknow, two years ago if I said VR most people would know what that means.Nowwe just say VR, we don’t say virtual reality.So, it’s just… there’s a familiarity with the technology.Andyou know it’s becoming more mainstream for gaming and entertainment.Thequestion is in healthcare in the next five years, what will be the catalysts?Oneof them will be insurance coverage, and payment models which we’ve discussed.Theother will be more evidence around novel therapeutics and acceptance amongst clinicians that these are worthwhile, I believe that that’s already happening.Andit’s going to be you know a bit by bit progressive realization and up some point will hit this sort of threshold of dissemination where enough people know about it and see the benefits that they’re willing to use it as a matter of routine.
InGI I think we’re going to start seeing more effective therapies and there will be a demand from patients to have access to those therapies whenthey will start to talk about it on social media and talk to one another and I think that’s going to happen. I think we’re going to really see a particularly in IBS and disorders of brain-gut interactions in particular.So, you know, we’ll see. I don’t have a magic ball… just seeing what’s happened over the last two years it’s really been moving quickly and I think if we continue this trajectory, we’re going to see it really penetrating.
Praveen Suthrum: Youknow this has been fantastic I’ve been greatly inspired by your book.So, Dr. Brennan Spiegel, thank you so much for coming on The Scope Forward Show.Anyfinal words before we go?
Dr. Brennan Spiegel: No, I appreciate the time.Ifanyone’s left interested the book is called the VRx: How virtual therapy will revolutionize medicine and I just happen to have a copy sitting here on my desk.
Praveen Suthrum: I have one too and I highly recommend it.
Dr. Brennan Spiegel: Forthose that are listening the book is about VR but it’s really about what is VR teach us about our consciousness about our connection between mind and body what does it teach us about the boundaries of neuroscience and the intersection between neuroscience and psychology, technology, and clinical medicine so it was a blast to write it and to explore all these fields in a way that would be accessible to non-scientists also who are just interested in science in general so hope you take a look and enjoy the book.
COVID-19: The Way Forward for Gastroenterology Practices
COVID-19 is a double whammy of both clinical and business disruption. This ebook will help you explore possible scenarios and be a guide in your plans for the future.
Praveen Suthrum: Rock Rockett thank you so much for coming on The Scope Forward Show. It’s not every day that I get to talk to somebody who has founded a company on his own name. So, you are the principal of Rockett Healthcare Strategies and you have worked for a long time with gastroenterologists and in the GI space. So, I’m really looking forward to our conversation today.
Rock Rockett: Great! It’s a pleasure to be here Praveen. I’ve admired your company and the growth of your organization over the last few years and have listened to your talks from time to time but it’s been great getting acquainted with you.
Praveen Suthrum: Rock you’ve been in the GI space for a long time. How did you get involved with gastroenterology?
Rock Rockett: I’ve been involved with a gastroenterologist for about 15 or 20 years. I initially became involved through a small company that I was running that was doing accreditation consulting. We had a relationship with the accreditation agencies with the joint commission. So, I was approached by the joint commission and they said Blue Cross has some concerns about office-based procedures and they asked me – would you be able to talk to them? And so, I started talking with Blue Cross and out of that developed a negotiated arrangement so that the gastroenterologists could be reimbursed at a higher rate for doing procedures in their offices provided that they became accredited. So, I provided the accreditation consulting, Blue Cross provided the incentive. It was a nice little package deal, a win-win for the members, for Rockett Healthcare, and for the gastroenterologists. So, that was really what kicked things off for me.
Praveen Suthrum: How has GI changed over these last couple of decades from your lens?
Rock Rockett: What I’ve seen over the last 15 to 20 years is… you know number one is consolidation. I see that they’re also being able to look at different revenue sources because you know while the consolidation is going on there’s also the downward pressure on their charges and on their reimbursement. And so, with that downward pressure then they have to come up with more creative solutions. And so developing additional revenue strategies is something I’ve been very much involved with and I’ve helped the gastroenterologists in that regard.
Praveen Suthrum: What do you think of this wave of consolidation that has swept gastroenterology as a space?
Rock Rockett: You know, I guess ultimately I’m not a big fan of it. But the consolidation obviously leads to bigger and bigger organizations. And bigger organizations are tougher to deal with, more difficult for patients to navigate, and so you start losing some of that age-old you know physician-patient relationship. You know it’s a fact of life, it’s here to stay, it’s not going away, and it will sweep up large segments and large chunks of the entire healthcare industry but not the whole thing. So, that’s my view.
Praveen Suthrum: So, when you say not the whole thing… let’s talk about the segment that does not want to consolidate and wants to stay small and independent. So, I want to start by asking you – is that even possible? You know given this massive pressure coming in from the health system side because the health systems are consolidating and they’re locking in referral networks and then the other practices may be in a region they’ve taken PE or joining a PE platform or plan to… they might be consolidating or hospitals are acquiring physician practices… that trend is happening. And again like you said the insurance reimbursement is on the decline. So, given all these changes is it still possible? And I’m sure many in the audience are interested in this question – Is it possible to stay small and independent in this environment and if the answer is yes, I already have a follow-up of… how?
Rock Rockett: For sure! Well, definitely the answer is yes. But it’s a qualified yes, okay? So, it’s a qualified yes. You can stay small, you can stay independent, you can be in control of not only your own destiny but be in control of your own practice patterns, and your own approach to patients and patient care, and so forth. And in some situations with these consolidated and larger groups, they get very focused on production and productivity and so forth. They kind of get obsessed with that.
I’ve had clients of mine who just rebelled against that and say, ‘I want to practice the way I want to practice’, ‘I want to do as many procedures as I want to do’, ‘I want to have that control that a physician should have.’ And it depends upon your market, depends upon where your group is, and it depends upon your relationships within that market, your referral network, and so forth. Some others have come to me and said, ‘well, if I go off and do this and set up office endoscopy suite the hospital is going to crush me!’ and I say, ‘well, that’s certainly possible and maybe this is not for you!’ So, it’s not for everybody but it definitely is a strong and viable solution.
Praveen Suthrum: So, who is it for? In what kind of environments is such a model possible? And when you say that… again, I’m saying this in my own words but helping physicians or gastroenterologists diversify and add revenue streams, how can they do that? What are those strategies that they can deploy?
Rock Rockett: Well, so the strategies are the strategies that the consolidated groups employ as well. So, there are arrangements where the gastroenterologists can share in the pathology revenue that are you know totally legal totally within the constraints of the regulations. And there’s one model is called the TCPC model there are other kinds of arrangements where a group can work with a local path lab or a path lab anywhere in the country for that matter. And they can you know participate in the pathology revenue likewise on the anesthesia piece. The anesthesia piece can be part of the revenue solution because you know you hire your own MD anesthesiologist, hire your own CRNAs, bill and collect for them. There are other models where the mobile anesthesia group will come into your office and you will do the work with them and then they will provide the nursing services, they’ll provide the recovery room nurse or say if a recovery room nurse charges 80,000 a year for instance that’s a pretty significant chunk. So, I would say to anybody interested in being on their own or going out on their own or having a small group and on an independent basis – you look at the professional fees that’s coming to you for your practice, you look at other revenue sources and principally those are anesthesia and pathology. There are some other smaller items like colon prep and so forth. But yeah, kind of in a nutshell that’s how it can work.
Praveen Suthrum: Doesn’t some of this require investments or money? And some doctors may ask where would that come from?
Rock Rockett: Exactly! You’ve got to have money to make money, right? So, it does require an investment. So, what I would do with a gastroenterology group, they can come to me or they can go to an accountant or someone to say, ‘hey how much is this going to cost and how much am I going to get from it?’ So you kind of develop a Performa much like the surgery center management companies would develop. And so, you look at those costs of the build-out, the design of the build-out, the equipment, the staff, the cost of getting it accredited and put all of that together and that’s the cost and over how many years can we amortize those costs? Can we lease equipment to do certain things? The first component is the expense side the second side is – what is the reimbursement going to be? Are the payors going to reimburse me more for doing the procedure in the office?
And there is a certain trend in that regard that’s a very positive trend. I had a conversation just yesterday afternoon with the Vice President of a leading Blue Cross organization just as of this past January, two months ago, increased the reimbursement for office-based procedures by 15%. Well, if you’re a gastroenterologist and you’re already getting seven or eight hundred dollars for an office-based procedure then that’s another 15% on top of that… you could be a podiatrist, you can be a urologist, there are several different specialties that it applies to. The payor organizations and principally Blue Cross are seeing that they have to do something to counter the consolidation efforts because they’re losing leverage. When the payor is still the same size the payor is but the providers get larger and larger then the payors are losing leverage. So, they have to do something to strengthen their position. There are regulations, right? The certificate of need regulations which dampen or prohibit the development of surgery centers in roughly half of the states of the US – Illinois is one, Massachusetts, North Carolina, lots of east coast states, and a couple of west coast states. So, the payors are looking at different strategies. In some cases, the payor will pay the gastroenterologist equivalent to a facility fee. They will say, ‘We’ll pay you as if you’re a licensed surgery center. We know you can’t be because of the regulations in our state.’
Praveen Suthrum: What I keep learning is that the insurances are getting so big that even some of the largest physician groups are finding it difficult to negotiate with them and improve contracts. So, if that is the case for these large groups then if somebody decides to stay small could they ever expect to get better reimbursements or negotiate with these insurances? Will they even come to the negotiating table?
Rock Rockett: Yeah a very good point Praveen. A small group negotiating with a Blue Cross? Yeah! Forget it! That’s not really going to be too effective. I think what you have to be aware of is – what are the reimbursement trends being invoked by the payors and it’s literally on a state-by-state basis. The Blue Cross of Illinois pays for roughly 200,000 endoscopy procedures per year and then you know if they’re paying a surgery center or a hospital outpatient department an average of 1500 to 2,000 dollars then it’s hundreds of millions… it’s like 300 million dollars a year. And so it’s not heart surgery, and it’s not knee replacement. It’s not big-ticket items but it’s the high volume of a relatively low-cost procedure and so Blue Cross is incentivized now.
They are motivated to address that issue and how they can impact it. And I think the pandemic is probably inspiring that as well or contributing to that. So, you know nobody wants to go to a hospital now unless they absolutely have to. So, to have a colonoscopy done in a hospital this doesn’t make much sense it needs to be done in a surgery center… ‘Oh our state is a certificate of need state. We don’t have many surgery centers!’ Okay… you got to come up with another solution… And that’s where this office-based solution is effective. So, there are favorable market conditions for office-based procedures and for independent practices to maintain and grow and sustain themselves, and then there are certainly unfavorable market conditions that people have to be aware of. And that’s something that I try to keep my finger on the pulse of so that’s part of the value that I bring to the table.
Praveen Suthrum: You know the gastroenterologists who are deciding to stay small and independent, how are they working out their relationships with the regional or local hospital or health system? Do they have any control at all? If so how?
Rock Rockett: You know let’s take Chicago for an example. Let’s take the Advocate Health system for example. So, you know within a very large organization like Advocate, 14 or more hospitals, thousands of physicians, many of those physicians are employees, right? They’re employees of that organization, kind of an equal number… a couple of thousand physicians are what they call Advocate physician partners. So, they are contracted through their arrangements with the carriers. They are contracted through the Advocate system and the Advocate umbrella but they’re not constrained by that. They’re not employees of that so they still have this independence and that can work.
And there are age-old examples from I don’t know 20 or more years ago in Virginia with Dr. Irving Pike negotiating an arrangement with the system there to say, look this is what we’re going to do – our group is going to do office-based procedures that doesn’t mean we’re going to cut out the hospital entirely because we’re still going to you know do make referrals to the hospital there are still the higher-level cases the cancer cases that are going to get referred to the hospital so you know it’s not a total sum game. There are arrangements where everybody can share in a piece of the pie. Maybe it’s not as big a piece of the pie as they used to have but they still get a piece of the pie.
Praveen Suthrum: What’s your view on gastroenterology for the next five years, 10 years maybe even longer? How do you see the space from a business standpoint evolve?
Rock Rockett: So, I think technology is going to erode the position of gastroenterologists. I said something to a prominent gastroenterologist in Chicago a couple of years ago about doing a colonoscopy and he looked at me and he said, “A monkey can do a colonoscopy. So, just don’t get worried about the difficulty involved in doing a colonoscopy.” So, that may be somewhat of an exaggeration but nevertheless that there are those issues. So, technology is a big driver, and then there is consolidation. It’s interesting to me because I see the pros and cons of consolidation and once consolidated, do the doctors stay in those groups? And there are some indications that there definitely is a segment of people who once they’ve gone through that whole consolidation process, say, ‘you know what? This is not what I thought it was going to be and I’m out, I’m going to exit!’ And maybe it’s the more affluent who will be able to preserve their independent physician practice. You know, they’ll still have that relationship with their independent, small physician practices and you know it’s unequal but it’s a reality.
Praveen Suthrum: Rock, thank you so much for this conversation. Any final words before we close?
Rock Rockett: I very much appreciate your time today and spending this time with you Praveen. It has been a good experience and I hope I can contribute something to help the gastroenterology specialty and the individual physicians who are looking for what’s the right career fit for them within their specialty.
COVID-19: The Way Forward for Gastroenterology Practices
COVID-19 is a double whammy of both clinical and business disruption. This ebook will help you explore possible scenarios and be a guide in your plans for the future.
New Jersey-based Allied Digestive Health recently became the 8th private equity platform in gastroenterology. In this interview, Dr. Robert Gialanella, CEO/President and Dr. Nadeem Baig, Vice President of Allied Digestive Health talk about their journey – from being competitors to partners to choosing private equity and more.
Learn about how they consolidated without private equity first, building the largest GI group in New Jersey. They talk about the “generational divide” between the senior and junior partners and reflected on how they tackled this situation at Allied. They also shared their views on consolidations, disruptions, and EBITDA assumptions. Finally, they laid out four trends as gastroenterology moves to the future.
Watch this direct and lucid interview in full to understand the evolving landscape of GI.
Praveen Suthrum: Dr. Nadeem Baig and Dr. Robert Gialanella welcome to The Scope Forward Show. Thank you so much for being here and again I’m excited to have this conversation with you.
Dr. Robert Gialanella: Thank you Praveen, much appreciated.
Dr. Nadeem Baig: Praveen it’s an honor and pleasure to be on this podcast with you today with my partner in arms, Bob Gialanella. We’re really thrilled and honored you know to be part of this great service you’re providing to the GI community beyond. I just wish I had something like this in my training days where someone was actually collating and curating all the best and emerging practices in the business and practice side of GI and medicine. It’s just a wonderful resource for physicians like us in the community.
Praveen Suthrum: Thank you so much for saying so. I want to first start right from the beginning and ask you how did Allied get started way before the PE days?
Dr. Robert Gialanella: Sure. We formed Allied Digestive…it was a sort of a brainchild of I and Nadeems’ in 2014 or so. We were five competing groups in the same geographic area and we had multiple meetings and explored other possibilities with large multi-specialty integrated groups and decided that we really wanted to be single-specialty and in early 2015 we all took the leap of faith and merged five groups that had previously competed with each other and we decided that we would be much better together than apart. And at that point our cultures were very similar, our quality also very similar which was very important. And then we took on the task of integrating operations tracking quality metrics, creating a central business office to handle all the operational needs of the practices. And that’s how we basically did it.
It wasn’t easy in the beginning you know, loans, a few stumbling blocks in the first year or so but we pulled it together and you know we all kept rowing in the right direction. You know when we look back on it people say to us we can’t believe what you’ve done in such a short period of time but it wasn’t for people like Nadeem and our other board members and the overwhelming need for this type of consolidation looking to the future and the present market in GI, we wouldn’t have done it but here we are and very happy to be here and talk to you about our journey.
Praveen Suthrum: So, Bob what is the difference between this MSO and the MSO that is now forming together with your private equity partner because based on what you’re saying you pretty much did what different platforms have done in partnership with a private equity company… you were doing it already. How does this change the game?
Dr. Robert Gialanella: Three years ago again it was a board initiative to create an MSO this was in anticipation of either a private equity partnership or maybe becoming multi-specialty and you need an MSO to handle multiple specialties. So, we were a bit ahead of the game and that’s what made us so attractive to our private equity partners… is that we already had an MSO in place and it was licensed, and it was operating. So, it was very easy for them to partner with us because we didn’t have to create a new company. The MSO is basically our previous CBO sort of on steroids. It just works more efficiently, we become much more attractive to very high-level executives because now not only do they get paid well they have equity in our company and that to me that’s alignment and retention when you’re all basically partners in the same organization.
Dr. Nadeem Baig: Praveen may I just add also that you know partnering with our private equity company now I think as Bob alluded to, allows us to invest more in the company. Traditionally as you know Praveen, medical practices and physicians who are part of medical practices tend to want to take every dollar out of profits… for themselves, they feel it as the income they’ve hard-earned, we’ve seen patients, we’re doing procedures… so, they want to take that home. And you know they invest some in the company but you know especially with these emerging changes that are currently going on in the healthcare climate place, a good company really invests in itself. And it’s not just investing in new technologies or new modalities but it’s investing probably the best resource of all – human capital. We learned that a couple of years ago when we went out and hired a healthcare executive with expertise and hospital management and also from Kaiser Permanente in the value-based care world, in a sense, it was enormous value and benefits for the organization and be able to grow and get to where we are now but it cost money to pay for that high-level executive employee and before we formed Allied I don’t think anyone else would have even thought or considered it the possibility of hiring someone of that caliber and scale and you know the cost that comes with that service.
Dr. Robert Gialanella: Yeah, you know Nadeem is absolutely right. We all worked on sort of this flow-through type of economics, right? As opposed to capital investment. In our particular case, the important thing was we were looking at a strategic financial partnership that allowed care center autonomy and clinical autonomy you may not find that with a large multi-specialty group or a healthcare system and we looked at all three models and by far this one allowed us the clinical autonomy and operational autonomy and did not disrupt our care center culture at all. So, our care centers operate just as they did prior to ADH. Their compensation agreements stay the same, their clinical staff stays the same all clinical decision-making is unchanged that was very important to find a partner that would invest in us but allow us those freedoms and we did.
You know the process that we went through… I always thought and Nadeem felt the same way you know we always talk to our board like “we’re going have to spend capital to get the best” so we looked around and Nadeem through DHPA, our national advocacy pack, he has been in contact with other three thousand gastroenterologists like-minded independent practitioners around the country and that’s how we found Nexus Healthcare Capital, Canton our law firm who had been involved with the largest GI platforms in the country really knew how to do this. So, we immediately partnered with them as well and that was sort of the process that started us. They were just phenomenal I mean they educated our membership especially our younger membership you know there’s always the… I call it generational divide and when you go through something like this, the younger people see things a little bit differently than the older partners so we had to close that gap, and really we did it. Our investment bankers… I thank them again they spent day and night educating our junior membership and after it was all said and done they realized that this direction was the best one for them as well as us.
Praveen Suthrum: So, I wanted to touch upon that whole aspect of junior partners versus senior partners because a lot of people struggle with it. How did you make the case to the junior partners who think that all the senior partners want is an early retirement fund or an exit quickly from private equity? How did you make that case?
Dr. Nadeem Baig: When Bob and I first formed Allied, I think I told Bob and my other board members as well that… you know I helped to drive and form this company not so much for the senior partners but really for the junior partners and the junior associates. It was to provide financial stability and practice quality, practice management, and care for the long term not just the next five to ten years. And we achieved in that in great measure over the last five years with Allied. That strategic goal and the objective did not change when we partnered with private equity. I felt the same way now as I did six years ago when we formed Allied that this is just as much a means to provide financial stability and security and quality of practice management for the junior partners as it was back then. It’s just meeting and arriving at a strategic goal which was set out… we formed Allied to grow the company from day one to lockstep and pace with the other major stakeholders whether it’s you know healthcare systems, payors, biotech companies, pharmaceutical companies, pharmacy, etc. We just want to keep lock and pace with them and this helps to ensure that. And that was a driving message we made to the junior partners you know in forming this new partnership.
Dr. Robert Gialanella: Also if you look at the economics of it…in a model like this the longer you’re in it the better off you are. I think if our junior partners got… as you said before Praveen, two or three bites of the apple they would see the benefit in this type of corporation. So, we were you know very mindful of taking care of them with equity in the MSO, with you know changing partnership tracks within their care centers we decided it was important that the care centers sort of do away with their legacy buy-sell agreements and we standardized all that. So, no one care center looked more attractive than another to a new recruit.
Praveen Suthrum: How was valuation done in your transaction?
Dr. Robert Gialanella: Valuation as you know is all based on EBITDA. You go through an extensive due diligence process – legal and economic. It took months and then there was back and forth with Nexus Healthcare Capital to get us some extra share. But it was a very laborious process, especially from the legal standpoint. I think Nadeem and I were on a couple of calls with regulatory lawyers, I felt like I was on the witness stand but we were happy to know that at the end of the day our company was perfect in that sense. You know we were always mindful of those type of things as we put Allied together of you know abiding by all the stark laws and local laws as well we’re very fortunate in New Jersey to have an excellent corporate practice of medicine laws too which really defined our relationship with our private equity partners and gave us a lot of comfort in the fact that you know there was a clear separation between the practice and the MSO. And our and our partners were very happy about that too because there was no gray zone. So, we all knew what our roles were we all knew how our care centers would operate and it gave a lot of comfort to us as well so.
Praveen Suthrum: I want to get into this valuation and EBITDA a little bit more and as we know the way currently evaluations are done it’s based on future physician productivity and that future physician productivity is based on the number of procedures that are done and for GI a good part of those procedures pertain to colonoscopies and screening colonoscopies and each of those is connected to other ancillaries like you know pathology is connected, anesthesia is connected and so on. So, if something disruptive happens to that primary revenue stream then it is possible that everything else gets affected so I’m curious to know what happens in that case to EBITDA assumptions and what is like a plan B when you know in your discussions with your PE partner.
Dr. Robert Gialanella: So, I look at it as two different types of EBITDA right there are mergers and acquisition EBITDA groups that you add okay and then internal EBITDA it’s how the existing physicians and Allied increase their revenue stream. Now when you talk about disruptive technologies that may drive down the necessity for screening colonoscopies I think we have to look at it in terms of income diversity. You know if screening colonoscopies go down because of some disruptive technology then we concentrate more on treating chronic illness like – liver diseases, like inflammatory bowel disease and irritable bowel syndrome. There are many diseases that are not procedurally oriented so we expand those service lines.
Dr. Nadeem Baig: When you know Allied first formed, I was a bit of a data nerd and you know my second life I thought I should have become a mathematician or an accountant because you know math was second nature to me. So, early on I would through our EHR and I was able to like to dig into financial data of the organization it came across came across a pretty startling fact which Praveen you have highlighted both in your books and in other conversations with other thought leaders in this area… Over 70% of our revenue in the organization was being derived through four CPT codes you know it was either one EGD code and three colonoscopy codes and you know I said to Bob and myself that we’re way over-leveraged you know in these few lines of service. So, you know we felt that we had to start diversifying and you know it takes time to work that out and you know part of it of course is… you know the limitations are our you know previous working cultures and environments and just the mindset of physicians who are just attuned to practicing medicine a certain way because that’s the way they’ve seen it happen for 20, 30, or 40 years. You know, once we’re done with the COVID pandemic, we have to go back and start focusing upon the original pandemic of the 21st century which is obesity. You know and that’s still an area that’s not being adequately met by physicians and practices and other healthcare providers across the country. As you see Praveen there’s a lot of already a lot of good innovative solutions out there from Michigan like Modify Health and other new platforms out there. I think it’s the right time for us to get more engaged.
Praveen Suthrum: How long do you think before you know all this happens for GI as an industry? The shift from reliance on procedures, those four CPT codes… because it’s true and it’s true for every almost every practice out there you know before that shift happens from that reliance on those codes to these newer diversified revenue streams?
Dr. Robert Gialanella: Shift will occur when there’s financial hardship and I think it will happen pretty quickly as we see maybe the need for screening colonoscopy going down. But I also look at it another way you know if you have a non-invasive test we may be picking out more higher-risk individuals and they will be coming our way
Dr. Nadeem Baig: I think we have to have a sense of honesty humorous about this. You know every so often there have been threats to colonoscopy. 10 to 15 years ago we were dealing with the CT colonography program. In fact, one of our member practices, before they joined us they invested heavily in a CT scan machine expecting that this is the future, colonoscopy is going to go down, CT is going to take over. Guess what happened? Medicare never covered it, private payors never really covered it and that practice literally went under because of that bad investment. So, you know it’s one thing I think to appreciate the future trends and in some way do we do expect colonoscopy decline we also must recognize that colonoscopy for screening has been extremely effective and there’s a high bar for other technologies to meet that threshold. I mean we’ve seen a 50% reduction in colon cancer incidence and death in the past 20 years with the use of colonoscopy screening and they’re going to be still a lot of patients I think they are going to still choose colonoscopy over other modalities whether it’s Cologuard or other types of stool-based DNA testing or liquid biopsy.
So, the most important thing we can recognize that there’s still patient choice that will play a factor. Nonetheless, we do expect it to go down and as Bob said one of the ways to be reactive just to see our decline revenue and then try to adjust but that’s not the job of good leadership and the leadership that I think we have in our organization and our partners you know with our private equity side you know we recognize that we do have to look ahead and look forward at finding new other areas to be involved with that with the goal of number one you know providing good quality care for our patients. I think I’ve heard some other thought leaders say it, we want to say it here again – you always want to put patients before profits. And if you focus your goal and objective on that you will succeed in healthcare and practice. And the one thing in Jersey is that we have a great advantage of payors that recognize and want to engage in alternative payment models one to engage with you know patient-centered medical homes you know new ways of managing chronic diseases that reduce the overall cost to care while improving that site through the triple aim scores. So, you know that’s where I think we see an opportunity to start to work with our payors in a new role where we’re their partners, not their adversaries.
Praveen Suthrum: If you read any of the news articles that are scathing about the whole private equity space you know there was one in Bloomberg, I mean you pick some of the new magazines and there are some articles talking about it. The issue happens when PE seems to dictate the clinical aspects like of maybe pushing not physicians but maybe APPs instead of physicians for certain procedures or pushing certain procedures which are not needed and especially you know you would read this in the case of dermatology. Now my question is given that… that background does exist, how are you ensuring as a platform that you’re keeping the business interests and the clinical interests separate?
Dr. Robert Gialanella: Yeah, as I said we have separated it pretty well. You know all of our licensed practitioners are employees of Allied Digestive Health the practice and others are employed by the MSO so there is a sort of a firewall there between the people that operate the company and the clinicians. I think in our situation, we figured that out. Now, you could say as the platforms get larger and they get multi-state and you can lose that local control and I think that’s what happened to dermatology out in California. They lost that local control and maybe you can make an argument for that… it also happened to emergency room doctors where they had no idea where the MSO was and who the executives were. And it became such a foreign entity to them that they became just labor and were treated like labor. So, COVID happens there are layoffs you know which is really devastating to a physician. So, I think you know a majority of the states in this country don’t have good corporate practice and medicine laws. We’re very fortunate in New York and New Jersey.
So, you know and I think also our second partner has to be chosen very carefully and our partners at Assured have also let us know that will be a very long conversation with all the clinical practitioners and the clinical side of Allied Digestive as well as the MSO side so, I think the next partner we choose will be like-minded probably another large GI platform that is structured just as we are and I think that helps a lot. You know the problem is I think when private equity gets too big and these companies are bought out by people not in the medical space whether it be insurance companies or other corporations that’s where you start to lose that control because they just look at you know they just look at your P&L. You know and we are a patient-centered practice, a compassionate patient-centered practice and we’re going to keep it that way.
Dr. Nadeem Baig: You know it’s our job as clinicians to make sure that we’re always focused upon the patients. Currently, our private equity partners appreciate the need of providing good quality care. One of the reasons why they really liked us over other potential GI groups that they were looking at was because we provide high-quality care. They said, “You have the highest ADR rates we’ve seen in any GI group and we really like that” so I think they also acutely recognize, especially in this emerging value-based care world which they embrace and any good private equity platform that works with any medical practice should also embrace that quality is a key element of value-based care… if you don’t provide good quality you will not be a valued partner you know with the other key stakeholders whether it’s healthcare systems and most importantly patients, payors, and employers because ultimately that’s what they care about.
Praveen Suthrum: Thank you. So, I want to comment back on one of your points Bob which was you know… and again I’m saying it in my own words that as of now yes it’s restricted to private practice medicine and perhaps in your case very regional very local but as you go to the future and that actually takes us to my final question which is you know where is all this consolidation going in your view? And what do you see happen over the next five years? But connecting the dots a little bit… it is going to take us in some ways in the direction of going beyond private practice too, right? So, there are limited partners, who own private equity players, there are insurance companies that are also interested in the provider side, there are large health systems that are also connected to private equity and beyond and they’re investing in physician practices. So, it is going beyond the hands of physicians so how much control will physicians have it’s a multi-pronged question so I’ll leave it up to you to answer.
Dr. Robert Gialanella: You know that’s a great question. I think there surely will be a lot of consolidation in the next five years. There are nine GI platforms in our country so I would like those platforms to get together and hopefully not sell out to a health care system and you know grow this autonomous sort of model that we have that that may be a little far-reaching. But I agree with you, I think the next partner that we have, the second bite of the apple more to say is the most crucial move we will make as far as what our company looks like in 10 years from now. And I wouldn’t be surprised if in five to ten years from now they’re probably either one big GI platform across the country or two it may get to that. But you know I think that’s where we have to have a real discussion with our private equity partners about who our next partner is. It’s extremely important and you know for the longevity of Allied Digestive Health and the happiness of his of its physicians right now we’re young… I mean GI is young in this space. We really don’t know what’s going to happen.
Dr. Nadeem Baig: Yeah, you know Praveen, let me just add my two cents on this. First, when Bob and I started this company along with others several years ago one thing we’re focused upon is trying to maintain our autonomy. And keep physicians in the driver’s seat in managing the care of our patients. You know I was tired of remaining and staying a pawn in the healthcare chessboard and clearly as we consolidate with other stakeholders doing the same thing… we have no intentions of remaining or ever going back to being a pawn on that chessboard. You know I don’t think we’re a queen but maybe we’re a knight, or a bishop, or a rook, I’m hoping in that board. But beyond the consolidation part you know… which was what everyone’s been out gaming for it’s the challenge for really the successful groups is to what do you make of that consolidation? What do you do when you finally merge all these you know hospitals or pharmacies systems?… I think is Jim Weber said it really well in a conference you know… Jim from GI Alliance… he’s the president/CEO there, he said, “You don’t get bigger to get bigger, but you get bigger to get better” and that’s where we’re going to focus on an in Allied.
You know those four trends they look at beyond consolidation – one is you know is adapting to payment reform from you know both the government and the private payors who are definitely pushing us to fee for service to value-based care and also using the new tools that the government just provided us with the stark, anti-kickback reforms that CMS just enacted a couple of months ago. You know another big trend would be you’re very attuned to this… it is digitization. You know healthcare is the last group of people to ever adapt to newly evolving trends in the digital space. I mean you know people can like you know book appointments online for their airline, their car, lodging, but it’s so hard to book an appointment online to see a doctor. But we’re getting there and it’s not just like you know that customer relations tools through our EHRs, or through telemedicine, it’s you know finding better ways of connecting with the patient in their space at a way they feel comfortable and they feel they have still maintained their privacy. The third big trying to look at as a utility to us is like adapting to an innovation you know not just in like new ways of testing diagnostic modalities but also new service lines and being prepared for those disruptive technologies of innovation.
The last one I want to focus upon is you know is going from a reactive posture to a proactive posture in care management. You know medicine has really progressed through the ages from reactive healthcare, from when the patient comes in the office so they’re sick, waiting to come to the hospital ER to like meet us to be more proactive and you know various people come to see us across. And of course not moving to even preventive care with the whole idea of cancer screening and prevention of cancer which obviously colonoscopy has been a vanguard in that space but it’s now in that the same line of thought is taking a proactive stance in managing chronic diseases in the GI space which we’re not really attuned to. And alongside with that is also the idea of improving quality not just from what you learn in your training and applying that and learning it from like your practice management conferences or practice management courses you would go annually with the AGA or ACG but it’s applying quality improvement at a systemic level. This is something that obviously industries like Toyota and other companies like that have really obviously adapted well – six sigma protocols and lean models and other methodologies like that. But how to take those methodologies and apply them in large-scale groups like ours so we can improve quality performance and outcomes across the board not just you know based upon what you learn at the latest AGA conference, ACG conference.
Dr. Robert Gialanella: And to add to that you know the patient experience… it’s very important from a compliance standpoint to track patient satisfaction very carefully and as Nadeem said, be proactive. If patients view their experience as not the best there are tools that we can use as Nadeem said to engage them early in chronic illness but also to get some feedback from them as to what their experience has been so that we can then improve on it.
Praveen Suthrum: Yeah, fantastic I love the direction that our conversation took. I want to thank both of you, Dr. Nadeem Baig and Dr. Bob Gialanella for sharing your insights and being open to going with the flow of our conversation today. Were there any final thoughts that you would like to leave us with?
Dr. Robert Gialanella: Well again Praveen I want to thank you very much for allowing us the opportunity today to talk about our very exciting journey through Allied Digestive Health and more importantly our goals for quality, compassionate patient care and you know this is a forum for all gastroenterologists across the country, not just platforms I’m sure we can reach many more practitioners than we could have without you. So, we really much appreciate it.
Praveen Suthrum: Thank you.
Dr. Nadeem Baig: Yeah the same for me it’s been a great opportunity for us to have a nice, pleasant, warm, conversation to share ideas, thoughts, both of our experiences, and what we think going forward but also really learning from you. I mean I’ve been getting through that book Scope Forward and I’m looking forward to finishing it in the coming weeks.
Praveen Suthrum: Thank you so much this has been a real pleasure and thank you once again.
COVID-19: The Way Forward for Gastroenterology Practices
COVID-19 is a double whammy of both clinical and business disruption. This ebook will help you explore possible scenarios and be a guide in your plans for the future.
Dr. Bergein F. Overholt needs no introduction. He founded the Gastrointestinal Associates in Knoxville and led the group for four decades. He is also the past president of the American Society for Gastrointestinal Endoscopy and American Association of Ambulatory Surgery Centers.
Dr. Overholt helped develop the flexible fibersigmoidoscope-colonscope, for which he earned many awards. In 1986, his efforts resulted in the establishment of the nation’s first GI single specialty Ambulatory Surgery Center. Dr. Overholt has also taught many of today’s GI practice leaders how to develop and manage their own GI-ASCs.
In this one-of-a-kind interview, Dr. Overholt walks us through his four-decade-long journey, reflects on the new technologies, private equity, and shares his views on alignment among physicians. And finally, he shares timely and relevant advice for gastroenterologists.
At a time when gastroenterology is at crossroads, Dr. Overholt says what needs to be said. Watch on. Don’t miss the story of how the country’s first GI ASC started.
Praveen Suthrum: Dr. Bergein Overholt, thank you so much for joining me today and people always refer to you as a legend in GI so it’s a distinct privilege and honor for me to interview you and I first want to welcome you warmly to the Scope Forward Show.
Dr. Bergein Overholt: Well, thank you. The word legend can be interpreted in two ways. It can be positive or negative so, thank you for your comments and I hope they were positive!
Praveen Suthrum: Very much so and you paved the way for the field of GI for not one or two but many decades. And on the clinical side, you’ve received prestigious honors for your work in flexible sigmoidoscopy, and on the business side, you were the first one to start a licensed and accredited GI-ASC. So, that’s quite a span and you’ve always innovated and more importantly, you’ve shared your ideas freely with everybody who was interested to learn. So, when I did some of these interviews people always would refer back to you and that’s what prompted me to you know to reach back. But I want to start all the way you know to the beginning I want to go to the beginning Dr. Overholt and my question is why did you become a doctor and why gastroenterology?
Dr. Bergein Overholt: Both are easy to answer. In the third grade, I was asked to write a little book booklet and it was what do you want to do and why… and I wrote that I wanted to be a doctor and take care of people and help people like my dad did. And my father was a physician he was a beloved individual in the medical community and he was, of course, my father and he led me in all directions and I wanted to be just like him. Later on in medical school in the third year, I was in classes with a very interesting and motivating physician who was actually an internist but he lectured on gastroenterology and that’s that just lit me up. So, I decided in the third year that I wanted to be a gastroenterologist.
Praveen Suthrum: When you reflect back on your career what are some of the big shifts in gastroenterology that you observed?
Dr. Bergein Overholt: The biggest shifts of course have been in the science of medicine, and in gastroenterology, and in technology development. Gastroenterology was in a fortunate position to be able to use both knowledge and technology and we were there at the right time. I started practice in 1969, and that was not many years after the introduction of Medicare and so as I was starting practice most patients began to have insurance that would cover their healthcare. So, economics was not the problem. That was good and there’s, of course, the downside to that but nonetheless, that was a major change back then.
Praveen Suthrum: Now… you have innovated both in clinical on the clinical side of medicine as well as the business side of medicine. How did you manage to do that? It is quite a spread.
Dr. Bergein Overholt: My dad ran his internal medicine practice and I watched him and I became interested in the management side of medicine. And that always carried forward into my practice so when ideas came, I had training on-site to running the practice to move the practice forward into new areas and that’s really how that occurred. You go to national meetings, you talk with other leaders around the country, you see what’s happening, and you get ideas. And then if you have the right kind of background and the right people working with you in the right situation, you can implement new ideas into your practice and that’s basically what we did in Knoxville and it was a wonderful experience. Exciting and challenging, and I was able to take those ideas perfect them to a degree, and then share that with other physicians and you could just see this begin to move around the country. So, it was a unique time and a unique opportunity.
Praveen Suthrum: What triggered the idea of starting an endoscopic ASC in the first place? What is that story? How did it happen and how did you go about it?
Dr. Bergein Overholt: So, we started office endoscopy in the early 80s and we focused on quality and we built some rather nice office endoscopy units. And about that time, across the country, there were maybe half a dozen ambulatory surgery centers. These are general… they were plastics and general surgery and I was involved in some groups that bumped up against those things. And I began to think about it and said why can’t we do that in GI? So, I met all the criteria and I went to our state and said, “I’d like to license this as an endoscopic ambulatory surgery center” and they looked at me and said, “You’re crazy! What are you talking about?” and I said, “I’ve set up endoscopic ambulatory surgery center and I want you to come and license it” He said, “Well we don’t know how to do that and thank you very much.”
And I went through that about three different times over three years. I would do it once a year and in that process, I began to work with a lady who was the head of Medicaid in Tennessee and she and I became friends and I kept sort of telling her about how we were doing endoscopy in the office and that I needed to get licensed. I did not think that she would be able to help me. Well, one day she showed up at my office and she said, “Okay show this to me” and we had a very nice three-room… well three cubicle facility and six recovery areas – staffed and equipped, and so forth. Well, I had just performed an upper endoscopy on a poor, remote county farmer. He had a deep gastric ulcer he was really uncomfortable. And as he was recovering she walks in. I take her over and I said, “Here’s what we’ve done, here’s the picture.” And she looked at me and she said, “Who’s going to pay for this?” And I was startled by the question and I said, “I’m sorry I do not know.” And she looked at the patient and she said, “How are you going to pay for this?” And the patient looked at her and said, “I don’t know, I can’t!”
And she said, “Okay” and she spent a few more minutes with me and then she left. A week later the licensure arrived on my front step. And so she was the Medicaid director and as long as we were providing care, that in this case was free, to the poor people she was going to be on our side. And that’s how that occurred. Very shortly thereafter I began to teach other doctors how to do that and it went from one endoscopic ASC to now there’s well over 800 I’ve been told may be more than that across the country. So, it was an exciting opportunity and exciting time to be able to develop and teach that.
Praveen Suthrum: And that one action has resulted in… yes the number of ASCs, but it’s like an entire mini-industry into its own. The jobs that it has created, the industries that it has spun, and everything else surrounding it… it’s amazing. So, I want to congratulate you on that. How do you feel reflecting on something like that today?
Dr. Bergein Overholt: Well of course, back when we did the first one I had no concept that this would spread across the country like it has. I enjoyed greatly sharing the information with other physicians and it was exciting to see them start up and then come back and say this is one of the best things that we have done in our practice. So, that spread across the country and it really has changed the way endoscopy has been practiced and I’m just very proud of being involved in the early stages of that but there were many others who have contributed equally or more so than I did in that evolution of office endoscopic ASCs. I don’t take the credit.
Praveen Suthrum: But thank you for sharing that story. I want to shift gears and ask about your views on Scope Forward. You read the book, what do you think about the themes that evolved from the book on the future of GI?
Dr. Bergein Overholt: I will go back and say that for gastroenterologists that are coming out one of the decisions that they need to make is – Whom to join? And what kind of a group? And where’s that group going? The groups today seem to be moving into private equity arrangements where they join a larger national group of practices and carry forth them there. I think the story is still out on that. One of the big reasons that we all went into practice was because we wanted to control our future. When somebody buys you and owns even as little as 30% and it’s not little, but it owns 30% of your practice… you lose the opportunity to have absolute control over your future. And to me, that’s a big issue in medicine.
That’s one of the reasons I went into medicine because I could control it… control my future. As a member of a group that owns part of you… you lose a great deal of that control on the other hand joining up with other practices in that way gives you tremendous strength in negotiations. So, that’s a powerful tool and I am not sure yet which is the best way to go – stay independent or to join up. For me, and Knoxville what the group is doing is well… they are becoming… they are locally dominant and if they are dominant why do they need to join a national group which takes revenue and control away from you when you’ve got that under your own control locally. So, I think the story’s still out. I’m favorable for some groups to join into larger groups but for some, they don’t need to. That story is unfolding.
Praveen Suthrum: Got it and I want your comments on the aspects of advanced technology such as stool DNA testing or artificial intelligence in the endoscopy room. So, there’s all these exponential technologies or advanced technologies that are coming to medicine and also to gastroenterology I wanted your thoughts and reflections on that. What do you think about that?
Dr. Bergein Overholt: Well the technology is always going to advance, it’s always going to improve, and it’s always going to impact what we do. And physicians need to adopt and adapt to that new technology. I think it will enhance our ability to take care of patients in terms of diagnosis and treatment but it will further separate us from what physicians need to be about and that is one-on-one with the patient. So, I have concerns that technology is going to isolate us away from patients but on the other hand, it’s going to improve our ability to take care of them. So, it’s a mixed bag. I’ve always been one to move toward new technology at the very first. I’ve always liked it. The challenge, the risk, the advances that you can do it but as long as you put the patient first and you still can work one-on-one with that patient… the adaptation of your practice to new technology is an awesome opportunity.
Praveen Suthrum: So, I want to ask you if you were running a GI group today what would you do? How would you make your bigger decisions?
Dr. Bergein Overholt: One of the ways that helped me when I was active in all this was going to meetings and listening, reading what the literature says, and understanding that, and then assimilating all of that information into where is the future going. You don’t have to be a visionary you can go to the meetings, talk to others, read the literature, and it will tell you what’s going to happen. And then you make the decision whether you want to move in that direction. That’s basically the way and the way I did a lot of that.
Once you make that decision yourself then the work begins because you have to convince X number of other physicians to move in that. And most physicians do not like change. It’s quite difficult to move a group in a direction for something new such as a new building to allow you to provide better care or an endoscopic ASC… “oh my how are we going to pay? But what about insurance? What about the risk? What about the lawyers?” So, you’ve got to have good leadership within the practice. You’ve got to have good leadership within the management staff and they have to be helping you lead the practice in the direction you want to take it. So, it’s a challenge and it takes time but the reward at the end of the day is good in terms of patient care and economics.
Praveen Suthrum: How did you get alignment with other physicians how did you make sure that everybody goes in the direction of the vision of the organization or even beyond and you can ask that question even at an industry level?
Dr. Bergein Overholt: That’s a very difficult thing to do. If you have a group of 10 physicians there’ll be two or maybe three in that group that are willing to move with change and understand that you need to make a change to keep up and stay ahead of the future. You use those physicians. You convince them of the idea and then collectively together you change the rest of them. And it usually comes down to if you have 10… an eight to two vote in favor of change and you drag the others kicking into the change and then about a year later they say, “What a great idea we all had!” That’s a difficult thing to do… to convince physicians and think in a different direction.
Praveen Suthrum: What advice do you have for early-stage gastroenterologists who might be entering the field today?
Dr. Bergein Overholt: I would step back a few years earlier and it’s very important that a doctor gets the very best training that they can. Then you enter into a practice that has physicians and staff that put the patient first. Always put the patient first. Honor your spouse and take time for your family you must do those things… those things are your life and they’ll be with you for your life and you need to be sure that you spend a good time with them.
One of the most important things is when you enter into practice the physicians you associate with will determine great part the direction that you and your practice will take. The second and probably certainly the second most important thing is the quality of the staff. You want to have the very best staff that you can because second to your training and your practice the single most important thing to your success is the quality of your staff. Put the time, and put the money into developing that. Those people… they will make you or break you and you want the best that you can get.
Praveen Suthrum: I want to get to my final question, Dr. Overholt. So, if you reflect back on the time when your father was in medicine and when you entered medicine and look at the healthcare system then and compare it to what we have today. I’m wondering are we better off or worse off and in what ways?
Dr. Bergein Overholt: Praveen, in some ways we’re better off in some ways we’re not. There’s too much attention on making money, there is too much of leaving the decisions up to technology and testing. We used to be able to sit down with the patient and talk to them for a few minutes and listen, truly listen. And 80% of the time you come up with a diagnosis by just listening to the patient. They’ll tell you what their diagnosis is. Now, it’s a few words and order to test and we rely too much on testing. Now, there are a number of reasons for that. Some of it’s the pressure time, for some of us it’s the legal pressure, and some of it is income pressure.
We’re better off in that we can provide a higher level of diagnostic and therapeutic care to patients. So, there are improvements that have occurred. I mean we can do things now that weren’t even thought about back when I started practice but we have tended to lose the one-on-one with the patient. My dad taught me, and I used it my entire career and I think it was the right thing to do. He said, “Wear a positive attitude and walk into that patient’s room with a little smile on your face. Sit down and talk and listen to the patient and while you’re in there, always appropriately, always put your hand on the patient. An encouraging hand on the shoulder, an examination of the abdomen, those are very comforting things to do with patients that they know and they feel that you are focusing on them and taking care of them.” So, to answer your question, there are pluses and minuses. We’re better off in certain areas we can provide more advanced care but we’re not better off in terms of personal care. I think there’s too much reliance on technology.
Praveen Suthrum: Thank you, Dr. Overholt. This was fantastic and thanks for sharing uh the history and your views on where GI practices can go from here both were tremendously insightful. Were there any final thoughts that you wish to share before we close?
Dr. Bergein Overholt: Yes and there are a few for the new physicians and one of the words of advice is always do the right thing and the right thing is what’s best for the patient. That should be right in the front of your mind every time you’re thinking about a decision for a patient. So, thank you for the opportunity. I have been retired for three years I miss the practice of medicine primarily the aspect of dealing with patients one-on-one. I don’t miss the rest of it.
Praveen Suthrum: Thank you so much Dr. Overholt it was very nice talking to you, thank you.
COVID-19: The Way Forward for Gastroenterology Practices
COVID-19 is a double whammy of both clinical and business disruption. This ebook will help you explore possible scenarios and be a guide in your plans for the future.
Recently, Medtronic released a video showing how Pillcam (in partnership with Amazon) will enable home-based colonoscopy screening. Watch Giovanni Di Napoli, President of Medtronic GI sharing that vision.
Naturally, I was curious to find out more and interviewed Giovanni few days ago. In this interview, he walks us through how Pillcam and GI Genius will evolve in the coming years. GI Genius is already approved in Europe and helps endoscopists use AI in detecting polyps. Further, he reflects on whether he sees Cologuard as competition or not and if insurances would mandate payment on adenoma detection rate (ADR).
We also talked about how these developments will change the role of gastroenterologists. Do not miss this one (18+ mins) – get a glimpse into the near-future of GI.
◘ Giovanni’s journey: From a basketball coach to senior executive at a Fortune 500 med-tech company
Praveen Suthrum: Giovanni Di Napoli, president of Medtronic Gastrointestinal. Thank you so much for coming on board today. I look forward to our conversation, but first, I want to welcome you.
Giovanni Di Napoli: Thank you very much for having me. I’m looking forward to this conversation as well Praveen.
Praveen Suthrum: Great. Giovanni, you’ve recently been named the president of Medtronic Gastrointestinal, and congratulations on that. So, I wanted to first walk back on your career. I’ve learned that you were a basketball coach once upon a time. So, I wanted to understand how that journey has been? From that point of time to being a senior executive at a Fortune 500 medical devices company.
Giovanni Di Napoli: Yeah, thank you for the question. Actually, I’m very passionate about sports in general, but with a particular interest in basketball. That was my place to be since I was four years old. And I kept playing and playing until I was 15 or 16. And then I started to coach. At the same time, I was finishing my economics degree and the moment I finished my economics degree, I just wanted to check out and see what this would mean for me in terms of a business opportunity, just because I was curious. And I clicked on a link of J&J Medical Ethicon Endo-surgery. I applied for a job in Rome, and they called me. I went for the interview and I fell in love with the vision of the company and what they were doing. Also, my dad is a nurse and so I actually appreciate his work in helping patients throughout my young age. So I felt like, “you know what? I think I like this job and I want to try to give the shot”. I was not looking for a job at all. It just was a coincidence and also my father’s background that pushed me to apply for this. And I’m here now.
Praveen Suthrum: That’s awesome. And let’s talk about that some more. So what is Medtronic up to in gastroenterology?
Giovanni Di Napoli: So a little bit of history here. Covidien, which is the company that Medtronic acquired three years ago, bought a company called Barrx, I’m sure you know this radiofrequency technology to prevent esophageal cancer. And I was working for this company actually at that time. And so, I was acquired by Covidien from Barrx. And clearly, Covidien was going to invest a lot in GI as a space where procedures that could go earlier in the care continuum from surgery. And Barrx was the first acquisition. A couple of years after we acquired Given Imaging. So we acquired scale across the globe because at that time PillCam was already well-established technology in the US and also beyond the US.
With Barrx and the combination of this new technology, we were able to get out from just being one device company at that time with Barrx to become a little bit more present in endoscopy and GI markets. So the long story short is that we kept moving into BD, acquisitions… EndoFlip (Crospon) for example, one more. And now I mean, we are also in a position with this new portfolio that I’m sure today we will touch base upon the video…to be a really strong leader, not only in GI but in endoscopy in general because that’s the goal of the company.
Praveen Suthrum: Excellent. So, Giovanni, let’s talk about that video that you just referred to and that prompted this whole interview. It’s amazing. The vision for PillCam is quite amazing… you talked about a patient receiving or buying it online and receiving it at home maybe and swallowing it like a vitamin capsule. And by the end of the day, getting a notification on a mobile app about whether she has polyps or not. That’s an amazing vision for how screening for polyps can happen compared to what we do today. Can you talk about this a little bit more? And then I have follow-up questions.
Giovanni Di Napoli: So the idea was how can we disrupt this market? One of the things that I always remember when we acquired Given Imaging at the time of the Covidien was the future of PillCam COLON and how this technology could reach millions of patients that today don’t want to go through a colonoscopy and they are not compliant. So we started from there and we understood that the technology as it is today, is not ready for prime time, is not patient-friendly. And it doesn’t allow the GI to be able to really leverage this innovational technology to accelerate diagnoses and also potentially even diagnose more patients in the future. And one of these partnerships that we were able to establish with the teams in Seattle, where we spent a couple of weeks, two and a half years ago, we sat down together with them.
We painted a picture of the perfect world, which is what you saw in the video. I’m home, I’m 45. Alexa is going to remind you that you are 45, Happy Birthday but you should also go for a CRC screening because CRC is the most preventable cancer, but still, the least prevented. So and then we thought why not ship the device at home and just go through this technology like would take a normal capsule, a vitamin pill, and then through AI and through also additional innovation that we are bringing to market it connects this with a gastroenterologist and in case of any positive finding, have the opportunity in the same day to also perform a therapy. So we want to go from start to finish. And that’s the reason why we believe this technology can really impact our patients across the globe. I mean, it’s one more weapon that we have on top of the other screening tests.
So we are currently in development and we are willing to start a pivotal trial early in 2022 where I’m pretty sure we need to go through to get FDA approval. But I would say the work we have done in the last 18 months tells us and tells me also that we are on the right track to stick with the timeline and also with the promises we have with this technology.
Praveen Suthrum: So in this vision, what is the role of the physician?
Giovanni Di Napoli: Oh, it’s critical because AI is going to support decisions, but it won’t be making decisions. So AI is going to provide the most meaningful images and videos to the GI to make a sound decision about that patient eventually the GI is also going to decide whether the patient needs to come for a colonoscopy, a follow-up, or doesn’t need to come for a follow-up. We actually believe this technology is going to enable them to see more patients in the endoscopy suite and treat them earlier in this stage of cancer development.
Praveen Suthrum: So let me ask you a different kind of question here and bring up liquid biopsy and other alternative ways of detecting cancer, which are coming up. So from that standpoint, let’s assume that the vision for liquid biopsy, which is taking a blood test and screening for cancer, does come true. And as we know, the holy grail, there is not to detect just one, but 15 different types of cancers with one sample. So let’s say that does come true then of what your vision is for PillCam would it go along with that or would it compete? Any thoughts that you have there?
Giovanni Di Napoli: I think our position is going to be different than liquid biopsy. Liquid biopsy, as far as I know now can detect cancer or Cologuard can detect cancer. But you know, PillCam Genius is going to detect early cancer or precancerous lesion. So which is where actually the most impactful therapy can be made. So polyps and adenomas. So if liquid biopsy won’t be able to have a high level of sensitivity for these precancerous lesions, I think is going to be positioned in a very different way. Also, if you think about it PillCam Genius would be the only test that can visualize the lesion, could be the only test that can localize the lesion. It could be the only test that can size also the lesion. And I think for endoscopy, being able to see visualize, size, and localize the region is critical if you need to have a follow-up colonoscopy to remove that lesion, I think that our value proposition is going to be different than liquid biopsy.
We respect what they’re doing. I know there is a lot of investment there. I think is going to add that one more component in the armamentarium of tests available for those patients who need to get screened. And I think now with the age going from 50 to 45 eligible for screening, even more patients will need to get screened. So even in terms of capacity, I think we can also be one of the options. Plus, I believe our technology is going to be attractive on the technology side and I think is going to be very patient-friendly and that these also will be, in our opinion, a good plus to have into our technology.
Praveen Suthrum: Very good. Let’s talk about GI Genius now. It has been approved in Europe, and from what I understand, you are going through FDA approval in the US. Can you share a little bit more about GI Genius as a product and what stage is it in right now?
Giovanni Di Napoli: Yes, so we are very proud of GI Genius. We were the first to be in the market with artificial intelligence to have detection during colonoscopy. And the partnership with Cosmo Pharmaceutical in Italy is working really well. So the European approval came last year just before UGW, and we were very happy to be able to showcase our technology. And the technology is ticking off. We have many units already placed in different markets. Clearly, it is not as fast as we were expecting because COVID-19 had a very huge impact. As you know, the number of colonoscopies and patients going to the hospital from last February, especially in Europe, went really down. And this also impacted many opportunities that we were working with our team in Europe.
So I can tell that before the second wave, which happened just a month ago in Europe, things were getting much better. So we are patient, we are focusing on clinical outcomes and we are focusing on a center that actually can also support education. And I don’t know if you know, but also we have partnered with the ESGE, which is the European society in Europe, and we provide a very important grant for clinical investment on the AI during colonoscopy, I think is about 1.5 million dollars investment. And also we are going to provide the technology to generate this data, especially these days because going for a colonoscopy is very important, can prevent cancer. So we hope this will accelerate the recovery of the backlog.
Praveen Suthrum: So let’s talk a little bit about the gastroenterologist’s private practice standpoint. So they rely on reimbursement from insurance, now with the technology like AI in the endoscopy room coming, their ability or people using the technology, their ability to detect polyps goes up because the AI is going to help them do that. But there are several people out there who may not adapt soon enough and then maybe using old technology. So do you see at some point insurances mandating a certain base level of Adenoma Detection Rate so that endoscopists do not have a choice but to advance in the use of technology? Do these conversations come up in your discussions internally?
Giovanni Di Napoli: Yeah, I think you got the point. I mean, GI Genius and AI in general for colonoscopy is going to have gastroenterologists to be somehow more precise where it actually is not possible to be precise. You know, I always make this analogy. Do you want to be patient number one of 15 that day or you want to be the last one to be seen by the gastroenterologist? I’m sure, you know, fatigue plays an important role in detection. If you have AI technology helping you throughout the day, you can keep your level of performance the same. And I think this is also shown by multiple studies. And I think this has to be taken into account also for payors as well as from society.
I know there is a task force looking at the ADR, and if this is going to be possible to be over a certain percentage. I think with AI it is going to be possible. If the insurance is going to pay on top of what they are already paying, I don’t know yet. I think I also see a future where also patients can have ask. And not because I don’t trust the gastroenterologist because he or she will make the final decision. But again, performance is going to be critical. And you want to get the performance anywhere in the US in any place you go for a colonoscopy. And I think these technologies will help to get there.
Praveen Suthrum: If you examine how technology moves, let’s take the example of Google Maps as an app, or let’s take the example of Siri or Netflix. At the early stages of these technologies, I remember clearly when I used to drive before how much I used to the member streets and how less I remember now or my need to remember streets has steadily declined. So I’m wondering if all of this will get to the point where the endoscopist will be completely guided by the AI? You know, if we advance forward enough, will we reach a point where the AI is going to do pretty much handhold and guide the endoscopists on what he or she needs to do?
Giovanni Di Napoli: You know, I actually see this on the opposite side, If I’m a gastroenterologist supported by artificial intelligence, GI Genius in this case, during my procedure, I’m actually going to pay more attention to somehow beat the machine or be as fast as the machine to identify the lesion. And I was in a couple of cases in the UK last year when we launched the device, and I could tell that the feedback was, “Oh my God, I want to be faster. This is going to give so much training opportunity for our GI fellows because they will learn quicker.” So I think if you know how to utilize it, the technology is going to improve your performance and keep it stable.
I don’t think AI going to replace the need for a gastroenterologist and an endoscopist to perform colonoscopy. Not at all. But yes, for sure there would be performance metrics that you want to hit. And if the performance metric is to find a certain amount of polyps in 10 patients, you want to be at that standard. It’s almost like a benchmark. And so I think it’s going to give you more motivation to stay attentive, to stay focused during the procedure together with the machine. So that’s the way we see AI working, especially in colonoscopy.
Praveen Suthrum: Do you work with the insurance industry at all related to the financial aspects of the technology that you launch?
Giovanni Di Napoli: Yes, we do. And our leader is working very close to them to understand also needs and opportunities.
Praveen Suthrum: Giovanni, my final question, trying to connect all these dots is do you see PillCam talking to GI Genius internally? And if you have to fast forward five years or even beyond, what are we going to see? What is the vision for GI?
Giovanni Di Napoli: So we have technologies in our portfolio that can be genius powered, which means we’re going to offer more and more solutions to our customers with artificial intelligence. GI Genius is the first of this solution. You mentioned, are we going to be able to connect the dots with GI Genius and PillCam? I would say the answer is yes. There are multiple solutions. Think about EndoFlip for Motility disorders. Think about Manometry. Think about pH impedance and all of these technologies that can be Genius powered. And we have a huge investment in place with over 30 plus engineers in Israel. And also the partnership with Cosmo is really strategic and important. So we believe that we can go faster and we can bring disruptive innovation, genius powered into the Endo-suite.
Praveen Suthrum: And from the lens of an endoscopist or a gastroenterologist, how would that vision play out? What would they be doing differently five years from now?
Giovanni Di Napoli: I would say data is going to support the decisions. And I also would say that we’ve simplified the workload of our customers in order to be able to perform more procedures on the same day and see more patients and prevent more cancer.
Praveen Suthrum: Giovanni, thank you so much for spending time today and sharing what Medtronic is up to in the space of GI. Was there anything else that you wanted to share before we close?
Giovanni Di Napoli: No, thank you very much. And I’m very happy to be in this business. I promise Medtronic is in GI to stay and also to invest. And you will see more and more coming from our company.
COVID-19: The Way Forward for Gastroenterology Practices
COVID-19 is a double whammy of both clinical and business disruption. This ebook will help you explore possible scenarios and be a guide in your plans for the future.
Dr. Lawrence Kosinski is the Founder and Chief Medical Officer at SonarMD. In this exclusive interview, Dr. Kosinski said what needs to be said. It’s an urgent wake-up call to the GI industry. The topics we cover range from starting up a GI-tech venture to private equity, valuation concerns and what in the end has value in life.
If you have time for just one insight, let it be this one: risks of basing PE valuations on vulnerable assets. The right thing to do would be to make time to watch the entire interview. Each minute of this interview has insights that would save the industry enormous time and money.
Praveen Suthrum: Dr. Larry Kosinski, thank you so much for coming to this conversation and having this chat with me. I want to welcome you first.
Dr. Lawrence Kosinski: Thank you very much for asking me to be part of this interview. I look forward to it.
Praveen Suthrum: So, Dr. Kosinski I want to start by asking you how your life has been in a full-time or near full-time in a digital health startup as the Chief Medical Officer of SonarMD and how does that differ from being in private practice GI?
Dr. Lawrence Kosinski: Night and day! It’s a totally different experience. I love being a gastroenterologist. I spent my entire adult career as a practicing gastroenterologist. I loved the patient interaction I loved the interaction with all my colleagues. I felt so good that I was doing something meaningful for people and helping people in their everyday lives. But I always had this burning desire to do something more. I’ve always been a problem solver so it was an easy transition into this. But my transition from clinical practice to Chief Medical Officer of a startup company was a very easy one for me to take. That move was not difficult at all and I transitioned through it over the course of a few years. And last year when I finally ceased practicing, it was almost anticlimactic. I finished my last procedure which had 15 polyps! Supposed to be an easy procedure but the last procedure I did as a gastroenterologist had 15 polyps! And since then I’ve been extremely happy in my role. I’m still helping people except I’m not helping one person at a time; I’m helping a lot of people at the same time.
Praveen Suthrum: So, I want to ask you to go back a little bit in the history of SonarMD. Why did you start the company? What was the trigger?
Dr. Lawrence Kosinski: Well, I have been starting companies for 30 years, but this one specifically has a unique story. I was involved heavily at the AGA and have been involved since… Oh god! For 15 years now! And I had sat on the practice management and economics committee for three years and they asked me to chair the committee. So, I came on as chairman of the practice management and economics committee for the AGA back in the fall of 2011. And something that I had always struggled with in GI is the lack of diversity in revenue streams of gastroenterology. So much of it comes from CPT codes that surround colonoscopy and so when I took over the committee I said, you know, I want to do something more than just put in my three years. I’d like to accomplish something. And if I could help my colleagues diversify their revenue stream and build new lines of business, I would accomplish something. And since value-based care is something that’s in vogue, I said okay, “What are the most significant illnesses we take care of as gastroenterologists? It’s inflammatory bowel disease those are our sickest patients, our most expensive patients, the ones that wind up having the most morbidity. So, I went to Blue Cross Blue Shield, Illinois, and used every chip I possibly could to get in the door. Because all I wanted from them was – What does it cost to take care of Crohn’s disease? That was my question.
So, it took a few meetings of begging before they realized this guy’s crazy. He doesn’t want more money, he just wants data. So, they gave me an enormous data set – every claim on 21,000 patients with Crohn’s disease for two years. It was an enormous file! Excel crashed, I had to build a SQL database out of it which took some time. And we analyzed it and in the analysis, I got my first ‘aha’ moment for SonarMD. Because there was a 17% hospitalization rate in this patient population which is consistent. We’re seeing around 14% in our BHI database analysis today. So, 17% and the doctor may say, “Well geez! What could have been done to avoid those hospital admissions?” And so, I went into the 30-day period before each of these hospital admissions, created a query so we could see what CPT codes came out in those 30 days, and in over two-thirds of the patients there wasn’t a CPT code. That was my first ‘aha’ moment because I thought these are symptomatic patients that have relationships with their doctors and they go over the cliff without realizing it.
And then the light bulb went on in my head and I thought… it’s true! I’ve stood next to the bedside of patients for years in the emergency room and I would ask them, “Why didn’t you call me? And what the patients will tell you is…” ah doc I have this all the time” “oh I thought I had the flu” “oh I thought I ate something wrong” or they’ll tell you that “I’m busy with my kids or my job or my family” whatever. The bottom line is patients with Inflammatory Bowel Disease… we look upon them as Crohn’s patients or Ulcerative Colitis patients. They’re human beings who have lives and this illness is just one component of their life. So, I said I’m going to see if I can do something to help people present earlier in their deterioration. And I was home that night and I was watching the Hunt for Red October. And as Sean Connery says, “Send him one ping, captain” I said I need a Sonar system! I need a way to ping these people in between their face-to-face visits. So, a medical professional can decide when they need an intervention that was the beginning of SonarMD. After our first year success where we showed we could lower hospitalization costs by over 50% and lower emergency room costs by over 70% Blue Cross then said, can you put this in other practices? And that’s when I needed to form a company and that’s when I formed SonarMD so that was in 2016.
Praveen Suthrum: That’s an amazing journey. I’m curious whether Blue Cross paid you that first year? Or did they want you to show success before?
Dr. Lawrence Kosinski: No. I have to give Blue Cross Blue Shield, Illinois a lot of credit. They paid us they gave us upfront per member per month, we had to bill it, and they created a code. The Blue Venture Fund which is the investment fund of all of the Blue Cross plants… they pool their money together and they gave it to a company that at the time was called Sandbox industries in the Fulton Market district here in Chicago. And so, Sandbox came in… to Matter and did a Shark Tank. And so I said, “I can do this!” So, I was the oldest person there. The only one in a suit and tie and I pitched SonarMD. They liked it especially because I had revenue, I had a contract, I was a business, and I wasn’t just a concept, I was a business that was generating money and building and it was in their space. So, they agreed to invest. March 1st, 2018 when we closed on this thing, I think it was March 6th; I was the only employee of SonarMD. I had the investment money, I was the sole employee of this company, and we had to build it and now we have 20 employees and we’ve gone through Series A and you know we’re rolling.
Praveen Suthrum: Yeah. Congratulations on the success so far. It beats me why more GI doctors aren’t starting entrepreneurial ventures like you have?
Dr. Lawrence Kosinski: It is myopia and blindness, we get myopic. If you talk to gastroenterologists, and I love my colleagues and I was doing this myself, you get pigeonholed into colonoscopy. You’ve got your endocenters; you’ve got all your revenue streams coming out of the endocenters; you live and die over those cases. You have myopia. You have blinders. You can only see this… you can’t do this.
Praveen Suthrum: In your interview in the book Scope Forward, you had referred to GI practices as “colonoscopy factories” and some thought it was harsh, but for some… you know, it woke them up. And I know for a fact that it changed people’s mindset… that single interview. So, I want to ask you, what you were referring to when you said that? And I want to tie it also to your recent article where you call for a dramatic change in gastroenterology?
Dr. Lawrence Kosinski: Well, it referred to the same myopia I just spoke about. It’s wonderful to be able to go to your endocenter that you own, work with employees that you employ, and basically do the same thing over and over and over again and you get really good at it, and everybody tells you how good you are at it and it brings you a wonderful income. So, then there’s this crazy guy, Larry Kosinski, telling you that you know, you should be doing something else. Well, it’s like buying a stock. The day you buy a stock… that decision can be made but when do you sell it? Or it’s like with retirement. When do you retire? When do you bring in a new product line? Do you wait till the product you currently have has fallen apart? Or do you take the profits that you have from your successful product and reinvest them to expand so that by the time your current product starts declining you already have one to take over or two or three but you’ve diversified yourself.
So, the reason I said that, is because we have created factories! We make widgets! We do the same thing over and over and over and over again. My point is I think we should invest some of the money that we’re profiting from on making these widgets to do something else that the market needs. And the market is screaming for solutions, patients are screaming for solutions. And why don’t we give them to them why don’t we use this intelligence we have and why don’t we create them? And so you know the entrepreneurial side of me is always looking for something else. It’s just this itch. But from a business point of view, no one would build a business, be a one-trick pony and ride that pony till it turned into a nag. We have to invest so we can diversify.
Praveen Suthrum: But wouldn’t your colleagues argue saying that it is the gold standard and there are so many people out there who still aren’t screen and you know there’s only more need for GI care so you know why shouldn’t we be serving all of these millions of people who need GI care, stomach cancer or GI-related cancers are on the rise so shouldn’t we be doing, in fact, more colonoscopy? And you’re suggesting to do less, why?
Dr. Lawrence Kosinski: I’m not suggesting to do less. That’s not what I was saying what I was saying was diversifying and build. But take a look at cancer registries I’ve done this. I looked at the cancer registry data in Illinois from 2006 and compared it to the cancer registry data from 2016. Now what this cancer registry data tells you is what stage patients are presenting with colon cancer. It hasn’t changed despite the thousands and thousands of colonoscopies done in Illinois in the 10 years between 2006 and 2016. The Illinois cancer registry data is unchanged. So, yes it would be great if every human being came in for a colonoscopy, that would be great but human nature is not that. Human nature is telling us that at least a third if not more of our patient population doesn’t want to have anything to do with a colonoscopy and has their head in the sand and those people are getting colon cancer. And like my Crohn’s patients in SonarMD, they’re not presenting early.
So, what we can do if we really did care about our patient population we would be looking at what other mechanisms we can use to screen patients. And the big fear everybody has… “Oh well if we have them do FIT or something like that then they’re not going to have colonoscopies and we’re not going to make money and it’s going to be bad for our business.” I would contend you’re actually going to build your business because and I’ve run spreadsheets that show that if you could get that 32 to 35% of the population that isn’t being screened to come in for a screening of any kind you will capture the patients in there that have the positive screening tests and they’re not only going to be screening colonoscopies they’re going to be surveillance colonoscopies that you’re going to be able to survey over the years. So, let’s not be pennywise in dollar-foolish here, and let’s do things for the right reason. If our passion is that we want to eliminate colon cancer then let’s figure out more ways to do it. You know that’s the way I look at it.
Praveen Suthrum: Excellent! I want to switch gears and move to private equity. Now you successfully transitioned your practice to a PE platform and then you retired from private practice, you moved on, and during the course of our interview, this was last year in 2019, I asked you – What are your concerns about private equity? And you said, “LOTS!” and that ‘lots’ was in caps in the book. And you started with culture. So, now fast forward to almost the end of 2020, we have seven GI platforms and maybe one more I hear before the end of the year. So, how have these concerns played out?
Dr. Lawrence Kosinski: Well, you have this little thing called COVID-19 that was overlaid on top of it, and probably the worst thing any of these platforms could have feared to happen to them was to initiate and then get slapped with a pandemic that cut the revenue stream out of that one procedure they do and 80% of their revenue depends on and it’s an elective procedure that people don’t necessarily have to come in and get. So, this has been challenging for the private-equity-owned practices and most of my colleagues have done their best, they’ve really worked diligently to try to maintain their staffs, the viability of their endocenters, to continue to get a return on their assets, and the investors are equally probably suffering as well. We’ll see…we’ll see how they come out. I think that’s yet to be determined. Now, there may be seven platforms but they’re not all the same.
And I like some of the newer models that are being deployed. My big problem with private equity… and I was part of the process that caused IGG to sell to the GI alliance and you know we went through this laborious process where we interviewed 20 different companies. We had multiple rounds of interviews, and we chose the GI alliance and I would do the same thing again with the way the process went through I’m not second-guessing what we did. But as a senior guy in the leadership of IGG who stayed on an extra year of practice just to help them do this, I was going to retire from practice in 2018, I put off my retirement to 2019 so that I can help the group make the final decision and go through all the legal ramifications it took. And just for the record, I retired ahead of the closure. I received no funds from that purchase. I retired with zero from that. I had altruistic reasons for why I helped my partners with the process but I was not doing it for any personal gain because I knew I was destined to run SonarMD.
So, anyway, my biggest challenge in the current private equity structure is that this is an LBO buying perpetuity. They’re using other people’s money largely to purchase the assets of the practices in hopes that they can build that business and then get out in several years. The practice, on the other hand, you could be a 40-year-old doctor; you are giving up a percentage of your income forever. That’s been my struggle is that you’ve got a short-term investor using somebody else’s money, buying perpetuity of your income forever and the only way it turns out as a positive for the doctors is if it allows them to continue to practice as doctor putting the patient number one in their focus and that’s a challenge. And secondly, they continue to get payouts from the transfer of this ownership to other entities, over the years. It’s not been done before in GI. There are no second bites of the apples yet in GI. We don’t know how that’s going to turn out. That’s the thing I struggle with – Can you maintain that culture? Can you maintain the fact that you are still a doctor and that your major focus is helping patients and generating an income in the process but you’re a doctor taking care of patients? Can that be preserved? Or is all the other noise involved in the financial aspects of this investment going to interfere with your ability to do that? That’s what I was referring to when I said culture. That’s the culture I hope we don’t lose.
Praveen Suthrum: Yeah. So, there’s a PE question that I’ve always wondered and I’ve asked this to a bunch of people and I want to ask you the same. Now all the valuations have been based on adjusted EBITDA and the adjusted EBITDA is based off of physician productivity or rather future physician productivity, normalized compensation of physicians, and so on. Now that future productivity and I’m connecting the dots to your earlier point today which is that productivity currently is tied largely to certain procedures and going back to that point on procedures…that procedure itself or the revenues from that is a vulnerability rather than an asset. So, if I have to connect those two dots, we’re actually basing a valuation on a vulnerable asset and I’m probably making broad assumptions and connecting the dots here but you know this question I do have. So, you know, what happens when those EBITDA assumptions don’t come true? Am I thinking correctly?
Dr. Lawrence Kosinski: You are. You are thinking exactly the way I’m thinking because it would be better I mean if I was an investor I’d look at that and say, “Oh it’s a single revenue stream, and oh that colonoscopy reference revenue streams driving the pathology revenue stream, it’s driving the ASC revenue stream, it’s driving the anesthesia revenue stream.” So, if something happens to that colonoscopy procedure the other revenue streams fall off too and it’s vulnerable, it’s a significant vulnerability plus it’s an elective procedure it’s not like people are clamoring to get in. We have to send them their reminders and you know I’ve looked at the data across the country and a lot of the practices and I don’t know that some of the best practices are getting 50% of their patients to actually come back for the repeat colonoscopies.
So, it is vulnerable and I’m concerned about what’s going to happen a few years down the line here. We saw a five percent cut in colonoscopy professional revenue this year with the new Medicare fee schedule. It has cut five percent! So, you know I don’t think we’re going to see that stop. I think that’s going to continue over time. And it’s clear that the Robin Hood concept that’s happening inside CMS taking from the rich and giving it to the poor… they’re taking money out of procedural services and moving it into cognitive services and I don’t see that stopping. I also don’t see the payors stopping to find less expensive ways so that they can maintain their star ratings for screenings without overpaying for certain procedures. We’re not practicing on an island. You can’t build a wall around colonoscopy. Colonoscopy has to be able to handle the competition that’s coming from Exact Sciences, other technologies, we now have the liquid biopsy, and we have all this technology that’s being developed to identify who is at risk for colon cancer. And so that goes back to my initial thought – you’ve got to have a diversified revenue stream
Praveen Suthrum: Yeah. If you were to get a bunch of practices together or a bunch of doctors together and start over and build a future-oriented GI practice what would that look like?
Dr. Lawrence Kosinski: I’ve given this a lot of thought. I do believe that we are at a point in time where we can virtually integrate GI practices based upon acceptance of risk and provision of value. If we’re given the data from the payors, if we have that data, we can change…that’s mandatory. We can’t do it without the data. I have learned so much over the course of the last five or six years about where the costs of care lie. I have access to claims data all the time and claims data that my colleagues do not have access to and I can tell where the drivers are for the cost of care and look at the levers that can be moved. So, well-run gastroenterology practices that are factories, that’s a good thing, okay? They’ve got the process down. I think there’s value-based care revenue streams that are there for the taking if we construct it the appropriate way. Just think about this in a medical practice, not just a GI practice but any practice patients call with symptoms, with needs, and you have a human being taking care of that. Means answering the phone if they can’t deal with it, it gets sent to a billing person, if that can’t be done it gets sent to a clinical person, if it’s really serious it gets to a nurse, and if it’s really bad it gets to the doctor. It’s repetitive, there are hundreds of calls coming in every day in a practice… those are automatable processes. Those are places where you build an automation platform and you allow AI to refine it and make it better.
Praveen Suthrum: Yeah. I want to conclude our conversation with the final question, Dr. Kosinski. A couple of weeks ago I was in a conversation with somebody and then you came into the conversation and I think the context was being successful in gastroenterology and you know doing investments or building technology and so on. And this individual said you are one of the most successful gastroenterologists in the world and he meant every bit of it. And it was amazing. So, my question is you know let’s roll back the clock a little bit at the same time bring it to the present. If you were starting over today as a young gastroenterologist seeing everything that’s happening, and seeing the risks, seeing the opportunities, what would you do? And I would translate also that to what advice would you give the younger GI community that is coming out to practice in this field?
Dr. Lawrence Kosinski: Well that’s a complicated question, multiple moving parts to that. Given where I was in the development of technology for the course of my career I don’t know if I could have done it much differently. I embraced technology at every stage it was presented to me. I think, first… embrace technology. Number two, follow your passions. Don’t give up your passions but the only way this works is if you master what you are doing. So, you better learn to do that colonoscopy, learn to do it really well. Maybe you don’t need to do an ERCP, maybe you don’t need to be the guy that’s doing barracks master something and master maybe more than one thing but master it so that you can now say, “I know that… I’m going to go follow my passion for this.”
Build yourself time to be able to follow your passions and stay ahead of the rapidly advancing core of knowledge that becomes so challenging for all of us. Keep your personal life in order, okay? Don’t get divorced. I mean, keep your personal life in order. Keep everything in line so that you have the time, the intellectual space, and the energy to pursue things. You know, a career is a long thing. I’m 68 years old I’ll be 69 in February and every stage of my career has given me something that the previous stage didn’t give me and I lose something in each one. So, be willing to change, adapt to change, embrace technology, follow your passions. I’m not the wealthiest gastroenterologist. So, whoever gave you this praise of me…. The one thing I can tell you… I’m doing exactly what I want to do at this stage of my life and that has value.
Praveen Suthrum: Awesome. Dr. Kosinski, thank you so much for sharing your wisdom. I’ve really benefited, I’m sure people listening or watching would tremendously benefit from this. Were there any final words or anything that you wanted to say?
Dr. Lawrence Kosinski: Stay well. We’re almost there. This is like a marathon. We’ve hit the wall at mile 21 we just got to get to the end!
COVID-19: The Way Forward for Gastroenterology Practices
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