Innovation in the Health Startup World: Venrock Partner Dr. Bob Kocher on New Ventures Driving Health Transformation

20190715Kocher

Margaret Flinter : Welcome to Conversations on Healthcare with Mark Masselli and
Margaret Flinter. A show where we speak to the top thought leaders in
health innovation, health policy, health technology and the great minds who
are shaping the healthcare of the future .

This week we speak with Dr. Bob Kocher, a partner at Venrock, a venture
capital entity focused on health tech and health services startups. He is also a
former economic advisor to the Obama Administration on health policy a nd
talks about the i mportance of a public / private health system to foster real
innovation in healthcare.

Lori Robertson also checks in, the Managing Editor of FactCheck.org looks at
misstatements spoken about health policy in the public domain, separating
the fake from the fa cts. W e end with a bright idea, that’s improving health
and wellbeing in everyday lives.

If you have comments, please email us at [email protected] or find
us on Facebook or Twitter, we love hearing from you . You can find the show
on www.chcradio.com or wherever you listen to podcast as well. And you can
ask Alexa to play the program Conversations on Healthcare. Now stay tuned
for our interview with Dr. Bob Kocher of Ve nrock , here on Conversations on
Healthcare.

Mark Masselli: We are speaking today with Dr. Bob Kocher , partner at Venrock venture
capital firm specializing in healthcare IT and health service startups. He is an
adjunct Professor of Medicine at Stanford Med ical School and a Senior Fellow
at the Leonard Scha e ffer Center for Health Policy & Economics at USC, Dr.
Kocher served the National Economic Council as Special Assistant to the
President for Healthcare and Economic Policy in the Obama Administration.
He e arned his medical degree from George Washington University and
completed his residency in internal medicine at Beth Israel Deaconess and
the Harvard Medical School. Dr. Kocher, welcome to Conversations on
Healthcare.

Bob Kocher : Thank you so much for havin g me.

Mark Maselli: You ha ve such a distinguish career , y ou help ed guide the Obama
Administration in the development of the Affordable Care Act and you and
our good friend Donald Berwick also authored an article in HealthAffairs blog,
on How to Improve the ACA. But you also recently stated that we should
tr ead carefully in marching towards Medicare for A ll. And I am wondering if
you could tell our listeners, why you believe the public / private partnership is
so essential to the continued transformation of he althcare in America?

Bob Kocher : To me there is three central problems that we try to address simultaneously.
But first is healthcare cost s way too much. Patients when they go to the
doctor at the hospital, you know are astonished by the price and nearly
a lways it’s the most expensive thing that they would do. W e have to first be
guardians of the money and do everything we can to make healthcare more

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affordable for patients. Medicare for All is one way to do that, but there is
other ways to do it too, which is redesigning benefits to have lower cost
sharing, provid e more subsidies, there are lots of ways we can tackle that
problem.

(2) Is we need to make the experience [inaudible] [00:03:04] lot less. Being a
patient is terrible , t hings get forgotten, you n eed a caregiver to make sure
people wash their hands when they walk in your rooms, the bureaucratic
paperwork has been infuriating. W e have to make the system itself, we
designed a lot more like everything else that we experience in life, which is
enabled by tech and made much, much less friction filled.

(3) We need to make quality better; it’s astonishing that medical errors are
the leading cause of death. And so I believe the way to do that is to actually
challenge America to do it, private sector, entre preneurs, the experiments
you get, I believe outweigh the complexity that we have by having lots of
people playing as payers and providers. I am hopeful that we will actually by
changing the incentives which the ACA did and MACRA push forward about
how we pay for healthcare will enable a whole generation of innovators to
come and just show us better approaches.

We also with electronic health records created a bunch of more information
that might allow people to design better systems of care. My premise is it will
happen faster, if we allow both the government and the market to do it
together. I am psych ed that we see Medicare actually being often the first
curator of payment model and then we see them copy by the private sector.
Conversely, I am super excit ed by what we are seeing in the private sector in
Medicare advantage around buildings things like hospital and a home and
care teams that really are capitated in ways that allow them to do a lot of
social determinants. I think it’s that combination that ca n work fast est and
most effectively.

Margaret Flinter: Well, Bob you recently not ed that many startup entities are seeking
relationships with the large insurance companies, who you know would have
the resources to fund some good ideas, new ideas. I wonder if you would
elaborate on some of these sort of failing fast scenario of trying things out,
seeing if they are work and m oving on, is really characterizing kind of a new
age in innovation in healthcare and can get it both the issues of cost, but also
that customer experience.

Bob Kocher : W e are seeing a lot more appetite by large health plans to try new things. W e
have also seen startups get more excited about the health plans because they
actually have a couple of things at their disposal which is benefit design. I f
you are trying to build a new way to take care of diabetes or behavioral
healthcare, what’s interesting about a health plan is that they can make the
health insurance benefit, reward or incentivize or enable somebody to do
that. A giant problem if you have a better approach to diabetes treatment or
mental healthcare etc. you know a large employer may only have a few
people who have that problem ; a health plan h as thousands of people often

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with a disease that you want to target. Y ou have a chance to actually reach a
lot more patients, more quickly through a health plan a nd then the health
plan has more incentive than often employers do, because they keep all the
savings.

N ow historically health plans have not been great at this, many people don’t
have a log in to he alth plan p ortal because the health plan portals on the
internet were so ba d you would leave them. One of the things that the ACA
did was create free preventative care, for all Americans and yet people still
don’t get that. And part of th at’s an awareness problem that you think you
are going to get a bill afterwards. H ealth plans need to improve on their
marketing capabilities for sure, but I would also say we are seeing large
employers get the teak by you know, historical you know behind all these
things that they wraparound the health benefit of having employees that are
not using them. So health plans I think are going to be the plac e that you see
a lot of innovation.

Mark Maselli: You know I want to pull the thread a little on that, emp loyers are shouldering
a huge cost burden in healthcare system . W e have had conversations with
the folks who a re doing the Amazon, Berkshire - Hathaway, J.P Morgan Chase
Initiative forming alliances to bypass large payers and streamline their
healthcare cost . I a m wondering if you could talk to our listeners about the
potential for these new alliances . W hat other entities are poised to have a
similar impact ?

Bob Kocher: Well, I think they already have an impact , well a lot of reason why payers are
becoming mo re receptive and excited about partnering with s tartups is the
fact that they are seeing employers question whether or not payers exists by
asserting that we can make new better ones like what is happening with say
Amazon, Berkshire - Hathaway, J.P Morgan In itiative. F irst, it is shaking things
up which I think is really positive for patients and promising that well hope
for bring ing some better things to of us through our health plans.

(2) Pretty hard, I think on cost to make a big dent . But I think it will be easy on
the experience . I am very bullish that innovators will make the user
experience of acc essing healthcare a lot better, because they will bring to
bear awesome technologists, great engineers, and the mindset that kind of
products company would ha ve to wards that to make healthcare work to. On
the cost side, I think there is nobody more talented and thinking about cost
than Dr. Atul Gawande. I think certainly, they will identify opportunities. The
hard part is going to be in negotiating with the hos pitals. When you are a
large employer, you have a lot of people that you cover, but they are
scattered all across the country. I n any given hospital you might only have 1 %
to 2% of the patients who are in hospital and they are largely there for paper
and d elivery.

Y ou don’t really have that much market share that you can likely, I think get
hospitals to change how they work. You are not going to attack a lot of the
things that drive a lot of healthcare cost which are end - of - life care, cancer

20190715Kocher

care, in the v ery frail, vulnerable populations that we see in the Medicare
population. I think it’s easier to go after cost when you have a Medicare
population than a commercial population.

Walmart has been a real leader for many years on o ffering healthcare
benefits to their employees on lower cost, generic drugs, even store primary
care. Now Comcast is another employers who has had a really interesting
approach to offering health benefits to their employees , they actually offer
much lower cost sharing of a large empl oyers and have seen flat cost grow th ,
because they are quite good at negating patients in primary care.

T hen there are some n otable health plans like what North Carolina Blue is
doing, around bringing primary care to the market and changing the payment
mo dels, is really exciting. So I think Haimen and Park kicked off a way of
innovation and creativity, in response to large employers signaling that they
may actually not be willing to accept the status quo.

Margaret Flinter: Well, Bob, I wanted to talk about something near and dear to our
model of healthcare delivery and something, it sounds like you have also
identified as critical and that’s really bringing behavioral health services or
mental health services into the healthcare settings. It doesn’t happen by
waiving a magic wand. It takes a lot of redesign , maybe s hare with us a little
bit about how you came to the conclusion that that was one of the essential
things that needed to change if we are really going to improve healthcare.

Bob Kocher: It’s just s o obvious. In America’s healthcare system, we over utilize virtually
everything in healthcare except for a mental healthcare. And that’s just a
disaster, because if a patient is depressed or anxious, I can’t imagine how
that cost were going to comply with my advice for how to better treat the
diabetes and heart disease. T he only way we are going to bend the
healthcare cost is to actually spend more on behavioral healthcare s o that we
can really treat these conditions well. What ’s wonderful is that, for
beha vioral healthcare conditions the treatments that we can offer patients
are, every bit as effective as the pills we offer people for their ot her
conditions, like we have treatments that work. It’s just not been a priority of
the [inaudible] [00:10:13] healt hcare system because investing in behavioral
healthcare, lowers healthcare cost and lowers revenue to hospital.

W e need to actually create more access and train more people to do these
things and takeaway the barriers , to streaming the barriers to treat, because
the ROI is enormous on this, not to mention the quality of life that would get
people. I a m shocked by the fact that in behavioral healthcare , insurance
companies get away with having people in the network that don’t practice ,
e vidence - based techni ques , in the sort of credential that t hey trying to go see
them, so that’s frustrating, and we need to fix that. We need to pay the
providers enough. Now that’s (2) and then (3) We need to actually do a
better job at screening.

Mark Masselli: We are speaki ng today with Dr. Bob Kocher, partner at Venrock, venture

20190715Kocher

capital firm specializing in healthcare IT and healthcare startups. Dr. Kocher
served on the National Economic Council as Special Assistant to President
Obama for healthcare in an economic policy. Y ou know I want to go back to
that article that you wrote. You and Don were bo th sort of saying, it would be
too much of a shock to our system , to try to get Medicare for All through ,
that it obviously doesn't seem possible with the Republican Senate . But y ou
were really looking tactically at how we can improve the Affordable Care Act .
J ust on the tactical side you really think , this Congress who have not been
able to im prove the legislation of Affordable Care Act can really get some of
these low hanging fru its accomplished.

Bob Kocher: I think it's amazing how we l l the Affordable Care Act has work despite every
effort by -- ; under mined the way it is administered , I mean to chip away by
either incompetence or aggressive desires to undermine the law . W e see
ac tually more people enrolled in healthcare today than we did 8 years ago.
And so, A ) I have to say the imperfect vehicle is working more perfectly that
one would expect given the leadership that’s being delivered to it today.

I don't think that current Con gress is going to do anything because the
presidential election that’s looming on horizon , maybe politically too scary
for the -- ; anything that actually make s healthcare better. I think you will see
the D emocratic candidates continue to campaign vigorousl y and in the fact
that they will be much better stewards of our healthcare than Republicans
they are the law and -- ; support a lawsuit that actually would eliminate the
law immediately and make people other insured.

I was pleased to see Joe Biden’s campai gn , actually pick up on many of the
ideas that Dr. Burroughs connected forward. W e suggested that one of the
most important things we can do today is to make the subsidies more
affordable, maybe more generous for people so the cost sharing , once you
get in surance , doesn't keep you from going to the doctor. And the Biden
proposal also eliminate d the phase - out point of 400% of federal poverty. So
many more people will get subsidies with their plan. Now the third thing they
do which I think is clever is for st ates that chose not to send Medicaid, they
will offer private insurance, a 100% subsidize. I think that’s a great way to
show, how often the foundation of the ACA , you can do a bunch, make
healthcare more accessible, more affordable.

The most important t h ing to keep doing is to then start working on
fundamental ly the cost problem and that’s pushing forward more payment
models that will work doctors for more productive , higher quality, lower cost
care , i t’s the prices that are a problem and hospital prices are super high as
are [inaudible] [00:13:23] prices. W e have to look at both of those things and
I hope that you will see D emocratic candidates come up with more proposals
on those topics.

Margaret Flinter: Well, Bob, one area we haven't touched on that yo u identified decade
ago, as something that really had to change if we are going to have major
systemic reform and how we organize and deliver care in the outcomes that

20190715Kocher

we get was medical education. Tell us, what you see change and what you
think really rem ains out there as major, not yet delivered upon needs in
terms of the way we recruit, we educate, we train the next generation?

Bob Kocher: Well, first, I continued to be inspired by medical students that I get to work
with and residents that I meet . They were drawn to healthcare because it's a
privilege to get to help people with illnesses live better. I think we need to do
more to actually expand the opportunity to people who can choose to
become a doctor or a physician's assistant or nurse practitioner o r across
healthcare professions to make sure th at cost is not a problem. I propose d
about a decade ago that we should have medical school free, if you choose to
go into a primary care profession , because we need more primary care
providers and we need more diversity in that population. I would like to make
debt not an issue for people who choose that path.

S econdly I proposed that we should have tax if you choose to become a
specialists , because specialist s today make disproportionately more than
primary c are providers and that doesn't seem like the right incentive if we
want to have primary care providers be the stewards of value - based care ,
and care coordination. I think we need to do a lot to actually kind of change
the way, different medical professions are characterize d t o young student to
take the stigma away from choosing things like psychiatry, homecare and
physiatry , and hospice, and geriatrics . Because in many medical school s you
know the neurosurgeons, C T surgeons and the surgical specialists are sort of
viewed as like the most important faculty and the most important
professions in this, we need to reset that, because that’s simply not true in
real life.

The payment models that we have , shared savings payment models and
capitation models , y ou are seeing m any primary care doctors actually earn as
much as specialist when they are successful, and I think that will also help
sort of draw more people towards those professions. But I think first we
should take away the cost barrier.

Mark Masselli: Well that’s great, and I think we could not agree, we do more about
expanding the capacity of the primary care provider. One of our startups here
is called Confirm Med where we do e - consults all over the country , in 41
specialty areas . We published in the Decem ber HealthAffairs , showing the
economic model that we worked with our Medicaid department on 60% of
the referrals going f rom primary care providers to specialist can be managed
locally . But I do want to shift to the work that you a re doing at Venrock , and
really try and maybe share with our listeners about of the opportunities that
you a re given there. You are able to work with some of our friends Farzad
Mostashari, Todd Park . But walk us through the lens that you have put on ,
about healthcare startups. Wha t sort of makes them successful and what's on
the horizon a s you look at opportunities that might be a force multiplier ?

Bob Kocher: Well, the most important thing i s inspirational leaders a nd so I a m blessed to
work , some wonderful folks like Dr. Mostasha ri and Todd Park that you

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mentioned. You wake up every day and try to make healthcare better. I t’s a
pleasure to get to help them think ahead to figure out how do we w ork our
way through barriers and how do we create scalable businesses . Second
thing that’ s really important is to blend healthcare expertise with non -
healthcare expertise . W hat makes many startups really go, is that we are able
to hire some product designers and engineers who can bring kind of a clean
sheet of paper , to help us think through h ow to redesign th ings to actually
work a lot better and you compliment that with people who know all the
rules and sort of which patients are going to be affect ed in which ways, and
that’s how, that’s the magic, it’s that combination. I think a lot about h ow do
we create that environment for learning and for creation of products and
companies that will be hard for incumbents to make because they live
everyday sort of mired in the spaghetti which is healthcare, simple one.

As of where opportunity exist s , he althcare has been such a giant jobs
program in America and been the largest source of job in the recovery . It also
means that we a re not getting as efficient as we might expect a nd so there is
a whole lot of people doing administrative things in healthcare , whether
that’s coding or collections or revenue recycle or marketing. There i s a lot of
ways one could have streamline d the administrative bureaucracies here, I
think -- ; how can I make it work better and faster and cheaper. (2) We do a
whole lot of care in th ese giant buildings that had a fusing layouts, called
hospitals and health systems. I t’s much better to do care in the home or in
the primary care doctor ’ s office and so I think we will see a lot of innovation
on how we can do hospital level care in your home, if you come and see at
PCP in their office and you need to be given h eavy medication than sending
to an ER hospitals th ey can send it to your home and have a nurse and
general medicine help set these things up for you. I think we will see home
u sed a lot more often, there is a lot less infections that happen in your home,
the food is a lot better, you bed is more comfortable you know people say all
the time. Patients do better. I think we will see a lot more innovation in your
home, we will see a lot more done through asynchronous engagement with
your primary care doctor over text. You will see Medicaid [inaudible]
[00:18:39] more quickly.

Unfortunately most patients start a medicine and the n don’t see the doctor
for several weeks then start, you know until it takes a year, to get you full y
effectively dosed. You see a lot of innovation in the medicine space . And I
think you are going to see some really great things done with Artificial
Intelligence , helping us be much better at identifying patien ts who are at
great risk and intervening sooner toward complications.

Margaret Flinter: We have speaking today with Dr. Bob Kocher, a partner a t Venrock
and Senior Fellow at the Leonard S chaeffer Center for Health Policy and
Economics at USC. You can learn more about his work by going to
www.venrock.com or follow him on Twitter @venrock or @bobkocher. Bob,
we really want to thank you , for all your contributions to healthcare , for your
contributions to transforming heal thcare and for joining us today on

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Conversations on Healthcare .

Bob Kocher: Thank you very much.

Mark Masselli: At Conversations on Healthcare, we want our audience to be truly in the
know, when it comes to the facts about healthcare reform and policy, Lor i
Robertson is an award - winning journalist and Managing Editor of
FactCheck.org, a non - partisan, nonprofit consumer advocate for voters that
aim to reduce the level of deception in U.S. politics. Lori, what have you got
for us this week?

Lori Robertson: We re detainees in border patrol facilities told by guard to drink water
from toilets, that’s what at least four democratic law makers claimed after
visiting Customs and Border Protection Detention Facilities in Texas for
migrants apprehended trying to cross the border. But it’s unclear whether
the reference to toilets was to a sink - toilet combination unit and the tap
water from the sink part. From a fact - checking perspective, this claim is a kin
to hearsay in court, we can’t say what unidentified guards told u nidentified
detainees or what th ose detainees then told lawmakers . But we can lay out
what we do k now.
st
On July 1 a fter the visit to detention facilit ies Representative Alexandria
Ocasio - Cortez said on Twitter , “ Officers were keeping women in cells with no
water , and had told them to drink out of the toilet .” Two lawmakers from
Texas and another from California al so made that claim . The U . S . political
editor with the Daily Mail question ed on Twitter , whether the toilet had s ink s
w ith faucets on top of them as he showed in a picture from a different
facility . Ocasio - Cortez responded to that tweet saying “ It was indeed a toilet
like that , but there was “ just one and the sink portion was not functioning. ”
She said , so the women were told they could drink out o f the b owl.

Clara Long, t he Deputy Washington Director of Human Rights Watch told
MSNBC that asking people to drink from the tap that sits on top of the toilet
is common practice across the border , but it's not drinking out of the b owl.
Customs and Border Protection issued a statement that said it " Take s
allegations of mistreatment of individuals in our facilit ies s eriously . Anyone
violating the CBP standards would be held accountable ” it said. Buzz Feed
News noted that there have been complaints about deta inees being told to
drink from toilet tanks before, a 2014 complaint filed by immigrant legal
groups on behalf of a 1 16 children held in custody , included a complaint from
a child who said her only drinking water came from a toilet tank . And that ’s
my fact check for this week. I a m Lori Robertson, Managing Editor of
FactCheck.org.

Margarent Flinter: FactCheck.org is committed to factual accuracy from the country’s
major political players and is a project of the Annenberg Public Policy Center
at the Universit y of Pennsylvania. If you have a fact that you would like
checked, email us at www.chcradio.com , we will have FactCheck.org’s , Lori
Robertson, check it out for you, here on Conversations on Healthcare.

20190715Kocher

[Music]

Mark M asselli: Each week C onversations highlights a bright idea about how to make
wellness a part of our communities into everyday lives. Tinnitus is vaccine
condition that afflicts millions of Americans, a condition for which there is
really no viable treatment to date. But a University of Michigan researcher
may have found a solution. Lead researcher Dr. Susan Shore says, Tinnitus
mark ed by a constant ringing in the ears, is really the results of misfiring brain
signals. Her team has developed a device aimed at getting to the root cause
of Tinnitus neurons in the region of the brain stem called the cochlear
nucleus. When those cells become hyperactive, they create a signal that is
transmitted to the part of the brain w here hearing perception occurs and the
const ant ringing can wreck havoc on sufferers lives.

Susan Shore: What you are doing a s you are tricking the brain into altering it’s circuitry to
go back to normal.

Mark Masselli: The device and works on two fronts, it uses both weak electrical impulses
target to the brain stem and also sends time, sound to interrupt the auditory
sensation.

Susan Shore: We develop ed this treatment for a particular class of Tinnitus, in which the
person who has the Tinnitus is a ble to modulate, either the pitch o r the
loudness o f their Tinnitus by pushing on their face or pushing on their
forehead or clinching their jaw.

Mark Masselli: The study group has been relatively small so far, but the results have been
quite promising. Dr. Shore says that the severity of the Tinnitus was greatly
reduced in most of the participants and some got to the point where it no
longer interfered with their daily lives.

Susan Shore: We need a good solution for Tinnitus as its affecting millions of people.

Mark Masselli: And relatively simple, targete d device that could potentially help millions of
Tinnitus sufferers, allowing them to diminish or even ignore what is often a
debilitating condition now that’s a bright idea.

[Music]

Mark Masselli: You have been listening to Conversations on Healthcare, I am Mark Masselli.

Margaret Flinter: And I am Margaret Flinter.

Mark Masselli: Peace and health.

Moderator: Conversations on Healthcare is recorded at WESU at Wesleyan University,
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