In this episode, Mike McSherry, CEO of Xealth, joins Renee at The Table as they explore the opportunity that Xealth brings for clinicians and patients. Together they explore Mike’s entrepreneurial background and what gave him the vision for a healthcare startup, funding for startups, and the effects of technology on healthcare. The conversation closes with Mike sharing a few insights into how he continues to come up with entrepreneurial ideas.
Mike is a successful serial entrepreneur, having started and sold several large mobile and internet companies over the past 20 years. McSherry currently serves as CEO of Xealth, a digital prescribing and analytics platform integrated into healthcare electronic medical records (EMRs). He and his team incubated Xealth at Providence St. Joseph Health while he was an Entrepreneur in Residence.
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Renee DeSilva 0:06
Welcome back to The Academy Table. I’m Renee DeSilva, CEO of The Academy and your host. In this episode, I was joined by Mike McSherry, CEO of Xealth. Xealth is a platform that enables doctors to prescribe the digital tools that facilitate health. Mike is a veteran of the mobile tech space and a serial entrepreneur. He found his way to healthcare through Providence as an entrepreneur in residence and that experience helped to shape the direction of his latest venture. There are two takeaways from my conversation. First, pay attention to how Mike discusses the power of Americans’ trust in their clinicians. A doctor’s recommendation is a key predictor of digital health adoption, but if healthcare and the industry fail to capitalize, that trust could shift elsewhere. Next, Xealth recently closed a Series B funding round that was 100% health system-led. As Mike is a serial entrepreneur, I appreciated his reflections on the value of collaborating with investors who are also key users and partners of the venture. So with that, let’s head to The Table.
Renee DeSilva 1:19
Well, Mike McSherry, CEO of Xealth, we are delighted to have you at The Table today.
Mike McSherry 1:23
Thank you, Renee.
Renee DeSilva 1:24
Mike, your Twitter handle description, which I liked, is “startup guy in Seattle, improving healthcare for doctors and patients.” Maybe before we get into how you’re animating around that, talk to us a little bit about how you arrived at the work that you’re doing today?
Mike McSherry 1:40
Yes. I’ve done several tech startups. Xealth is the sixth startup that I’ve co-founded over the last 25 years. I got started at Microsoft in the ’90s, but then jumped into doing startups from there, mostly in mobile and technology. I sold my last company Nuance, which was coming up with a swipe and touchscreen keyboard that was put on several billion phones and it’s now on every Android and iPhone in the world. I was thinking about what to do next. I had joined the board of a local hospital system in Seattle that merged with Providence. Through that, I met Rod Hochman and Aaron Martin, the CEO and Chief Digital Officer of Providence. They incented me to think about doing a healthcare startup. They drew me into Providence as an entrepreneur in residence and gave me a green light to think about any problem in healthcare, free-range EIR if you will and we came up with the idea of Xealth through that process. I will joke that we cast aside 70 other ideas that were illegal, immoral, wouldn’t work, or nobody would pay for them. We had to get through the litany of how to do something and navigate the labyrinthian healthcare world, but we came up with Xealth through that process.
Renee DeSilva 2:48
That’s great. Entrepreneur in residence beginning in 2015, it sounds like you had a wide swath of where you could focus. Where did you or how did you initially get to the problem definition or figure out where you want to focus in the sea of things that you could have taken on?
Mike McSherry 3:07
Again, we cycled through dozens of different ideas. Quite honestly, they were mostly focused on prevention. I like to live a healthy lifestyle and I’ve seen what mobile and wearable devices and other kinds of consumer-oriented tools can bring to people’s lives. I thought more of that should be embedded into the healthcare processes. We were embedded inside of a provider system so we spent a lot of time on that but then realized that providers aren’t incented to focus on preventative wellness and healthcare and pay for it. That was a rude awakening to us. Specifically to Xealth, we were mobile guys, we saw the patient portal, Epic was opening up their SDK on their patient portal to build a custom branded MyChart experience for a hospital system, and we started there. Quite honestly, back when we first started, systems were saying, “Why would I care about a better mobile patient portal? Is that going to make me money or save me money?” That was kind of a rude awakening because anywhere in the consumer world, you build a better user experience and immediately it’s representative of greater consumer demand and usage and business model evolution and creation. That was quite the “Whoa! Healthcare doesn’t care about user experience? Jeez!” We kept iterating on that and we saw the pilots that Providence was trying to do in bringing forth these third party experiences into patient adoption and recognized how broken that was and it wasn’t embedded into the patient experience in a formulated manner. We also recognized that it’s not embedded in the clinical experience either to recommend or prescribe or then subsequently monitor these tools. We architected to then prescribe and deliver some third-party solution to a patient and then subsequently monitor that patient’s usage of that app or device or content consumption back into the clinical monitoring. We recognized that this is a pretty big idea to have a closed-loop prescribing engine for digital health.
Renee DeSilva 5:16
Interesting. It is always funny to me the surprises that emerge when entrepreneurial folks, maybe folks who have a technology background enter into the healthcare context. For you, some of the bigger surprises it sounds like were business models sometimes preventing getting to the innovation that you were trying to drive at, a little bit around, taking us to that time and probably still today, healthcare just not being quite as consumer-centric. In many ways, that is where you had to go to begin to accelerate that. Once you have that view, I wonder from a physician perspective, because I think so much of what you’re trying to do, too, was anchored around improving healthcare with doctors as an enabler of that. What did you learn from physicians who wanted to use digital health therapies in some of your early roundings when you were serving in this capacity?
Mike McSherry 6:12
Great question. Let’s face it, physicians were some of the smartest people in school. They’re polymaths. You meet people who have their medical doctorate, they have an MBA, they have a Ph.D. in a different discipline, and they play world-class piano. I mean, do you enjoy a beer on a weekend? They’re brilliant. They want to deliver the best care for patients. They want to dabble in things, some of them code, and they want to engage these digital experiences. Frankly, it’s the business economics of provider systems that often hold them back from adopting some of these digital tools and engagements with patients. We found ourselves talking to clinicians. We’d set up a meeting with the chief oncologist of Providence and he would pull in five of his other oncologists and we’d sit and brainstorm for 60-90 minutes and realize, “I know nothing about this.” Unless one of these people is willing to quit their jobs and go on a journey with us to create some startup, I’m wasting everyone’s time. That led us to think more about software and core roots and how we could improve some of their lives using software tools versus trying to build a disease-specific solution. That’s where we needed to find using our consumer-oriented experience, building engaging experiences, but also building into a need for someone on the other end, be it the patient or the clinician. We found a really sweet spot of improving clinician’s lives in terms of efficiency in engaging patients the way that they think is necessary, but also providing an easier, seamless, engaging, convenient manner of digital adoption for the patients. Hopefully, this trend is going to continue and we’ve built a sweet spot of the Triple Aim — reduce costs, better clinical experience, and better patient experience and outcomes.
Renee DeSilva 8:16
I love that. Getting back to core roots as the way to drive it forward is a powerful sentiment. Let’s go from the consumer lens. I think we’ve all noted that perhaps we’ve seen less adoption around healthcare digital tools than we have in other segments. Does this ring true for you or do you have a different perspective on that? Any parallels that you’ve observed from consumer adoption of digital health that you saw outside of healthcare that we should think about in the realm of the healthcare ecosystem?
Mike McSherry 8:48
I referenced being involved in the mobile industry earlier. I co-founded Boost Mobile, which is now DISH’s nationwide, prepaid network. I was there at the advent of the app store. Digital health right now is probably akin to the early days of the app store where most digital health is consumer adopted, direct to consumer. Someone goes to the app store and downloads an app because they’re worried about their weight, they’re worried about their anxiety, they’re worried about their stress, they’re worried about their hypertension. That is consumer-directed. What you’re now starting to see is the evolution of changed business models that go along with that app store. That’s the advent of Uber or Facebook or Airbnb where these massive, third-party companies build on top of the core infrastructure enabled by those app stores if you will. When you bring all of that forward, you’ve got payers, employers, and consumers adopting digital health all because they care about the capitation, the risk, as well as their journey in improved health and wellness. You’ve got the hospital systems, largely due to the business model holding them back from broader adoption. I’d also say there are some paternalistic viewpoints towards it. The consensus or the business models of you should come back and see me in six months. It’s all driven around an RVU driven, patient visit, face-to-face environment. That’s what’s going to crack open. A lot of that can be done asynchronously, more on a daily monitoring basis against an app or device or some other RPM tool or patient experience. That’s going to radically transform the healthcare business model over the coming years, I’d say.
Renee DeSilva 10:49
I’d agree with that. Do you think that as an industry we are beginning to see proof points of if I am more engaged as a patient that my outcomes are better? I know that you’re amassing significant amounts of data. You must have access to some of the more interesting metrics or data. I wonder if there’s any early data on that that would make us all feel optimistic?
Mike McSherry 11:12
We have tons of data. Let me backup. Xealth’s business model is that we let clinicians or hospital systems prescribe digital health tools to patients. The patient engages with that app, that device, the consumption of that content, answers that questionnaire, whatever. Then we bring that data back to the clinicians to monitor and intervene if some of that data is trending in a negative kind of capacity where the clinician needs to intervene for greater acuity levels of engaging that patient. That’s our core business. We’ve integrated 60 different vendors into that workflow on behalf of our customers. We say that we manage the digital health formulary for our provider systems. Behavioral Health SilverCloud is a behavioral health app that we’ve prescribed to thousands, tens of thousands of patients across different systems. Generally speaking, of the prescribed app to a patient, about two-thirds of the patients enroll on that app — actually download, register, and use that app. Of those two-thirds, almost 75% have improved PHQ-9’s, so their depression screenings of how they’re doing. We’re correlating that. We’re doing the same thing in diabetes management with several A1C readings and tools. It’s not just a specific disease state. Ten times the number of advanced directives on file to the EHR. We’ve improved the smoking cessation rates at Duke by 20 times from what they were doing before. This is a crazy improvement in numbers all because of digital automation and recommendations to patients against disease state management or things that you want them to do. One of the things you want them to do is come into surgery better prepared, better informed, which leads to improvements and the readmits and the satisfaction rates, etc, along those lines. It’s not for us to define the problem or the use case or what the clinician or clinical service line is trying to do with the patient, but we digitally facilitate that entire end-to-end experience.
Renee DeSilva 13:33
What’s so lovely about that, back to the core root as you said, is that if you think about where most of the trust rests within the broader economy, it is patients with their physicians. The ability for you to take the friction out of that and innovate from the, “I’m going to write a prescription on my paper for you to take to the pharmacy,” I loved what you said about the digital health formulary for the future. In some ways, it’s a powerfully simple concept that has the potential to move wellness in a way that is exciting to see. I am excited to continue to track that. I wonder, is there anything counterintuitive that you’ve seen from some of this work from a consumer perspective? You mentioned 60 different vendors with whom you currently engage. Is there anything noteworthy, counterintuitive, a big surprise for you or your team?
Mike McSherry 14:24
Let me go back to an earlier comment then I’ll touch on this. You said the digital formulary. Surescripts is an e-prescribing platform for meds. Twenty years ago, or even 10 years ago, doctors largely used to handwrite a medication prescription on a piece of paper that someone would physically take into a pharmacy. That’s largely how digital health or wellness recommendations are being offered today. “You should go join a gym” or, “There’s an app in the app store, you should probably try and find one and download it to see which one works for you.” It’s sort of this verbal communication in this world of digital health. We say that we digitally facilitate health. The reason I say digitally facilitate health is because we’ve done transportation for patients. We’ve done meal delivery services. We did Kroger quarantine kits for COVID-positive patients. These aren’t digital health services per se, but we digitally facilitate that. The more that hospital systems accept capitation exposure, the more that these health and wellness and preventative services will play a broader role in some of the activity of things that a clinician might refer, prescribe, or recommend. Back to why I jumped into healthcare, I wanted to see more prevention and the business models focused around preventative services. I think that’ll go towards eliminating a lot of the cost on the repercussions of that lack of prevention upfront, wellness versus sickness management if you will. Now, you also asked a question about counterintuitive things. I did not know the level of trust of the doctor. Digital health has largely been adopted by payers and employers and consumers. We’ve got several data points showing 4-20 times higher adoption rate against a comparable app or service when it is the doctor or the clinician recommending that to the patient. When the clinician is recommending that tool or program for the patient, 4-20 times higher adoption than member marketing or employer directed or whatnot. People trust their doctors. We generally prescribe something for the patient — we send an email, we send an SMS with, “Hey, the doctor wants you to do X.” We get upwards of 80% open rates on a lot of those emails. It’s a message from your doctor. No direct-mail campaign gets that. I did not recognize or realize the power, the trust of that doctor’s recommendation. Pharma has loved the doctor recommendation for decades now. In the world of digital health, patients are clamoring for more information. They use Dr. Google, they’re downloading apps in the app store. It’s an abdication of responsibility to some degree that clinicians aren’t stepping in with more digital recommendations to engage patients because patients are clamoring for it and the capitated business models are liking the reduced cost and increased convenience associated with that. Clinicians need to do more of it. The systems need to do more of it to meet patient expectations otherwise patients are going to take that trust and convenience expectation to new entrants or the payers or other kinds of care providers.
Renee DeSilva 18:02
That’s incredibly well said. Let me change gears a bit and congratulate you as Xealth just completed a Series B raise, I think it was $24 million, 100% health system led which is an atypical structure. Tell us a little bit about why that structure was important to you and how that came to be.
Mike McSherry 18:22
Thank you very much for acknowledging it. It’s $25 million — there’s another system, a very large IDN coming in that will be announced shortly. We’re pleased with that. That’s 15 provider systems as investors plus I have five other strategic investors — Cerner, McKesson, Philips, ResMed, and Novartis. I would use all of the strategics to say that the entire industry wants to see a platform developed to take the fragmentation out of digital health and remote patient monitoring and build a standardized solution. This was a huge vote of competence for Xealth as that standardized solution for the provider industry with all the strategics backing it. Twenty strategic investors, that’s a lot. I’ve referenced this as my sixth startup. Every single one of them was a joint venture from day one or the first money in was strategic. My last company Swipe, Nokia and Samsung were my first two investors in the company.
Renee DeSilva 19:31
Is that your mindset? Is that your playbook, do you approach it as back to core roots, principles first, that’s naturally where you go?
Mike McSherry 19:42
Yes. Boost, which I referenced earlier, is a joint venture with Nextel. I solve problems and the people I solve those problems for, I would rather have their dollars invested in me than random venture capital money. Venture capital plays a huge, huge role and helps scale and growth. I do have a great VC lead in the company, but I’ll call them governance around my strategic. When I say governance, it is financial governance, no favoritism to any of these strategics. It’s neutral governance around a sea of strategics. I’ve built my career on solving problems for enterprises so much so that they want to invest in my success and my team’s success. I would rather their dollars, along with the conviction of that organization that we’re going to be their standardized solution, play a role in how I create these businesses. Back to Nokia and Samsung, we’re the number one and two phone manufacturers in the world. When they invested in us and deployed my software on all their phones, the rest of the entire industry adopted that. I want to be the ubiquitous solution. I want to have the ubiquitous digital health prescribing and monitoring platform across the US provider base. On that monitoring, ultimately, I think we’re going to have the benchmark of digital health effectiveness. The recommendation of an app isn’t going to be on a subjective basis; it’s going to be on a quantitative basis based upon all of the data that we’re collecting, on the improved outcomes of apps against patient demographics, psychographics, comorbidities, etc. Something needs to standardize all of that data into an improvement on recommendation algorithms and outcomes and cost containment. We’re going to be the solution that fills that role.
Renee DeSilva 21:40
What I love about your most recent round, and I will admit my own bias here, is that the providers have such a power to move market share. We talked about the trust that they have and in many ways, they serve as the de facto public health entity for their communities. They have such an ability to shift how this plays out. A lot of the work that we do at the Academy is around this, having them come together to figure out how they can coalesce as an industry to move and accelerate the pace of change more quickly, in this case, what we’re talking about. I love that story. It’s interesting to me to see how there are more and more examples of this, whether it’s Civica, Truveta, and now Xealth. There’s this notion of providers shifting market share in a way that drives better outcomes for patients which lands well for us at The Academy.
Mike McSherry 22:34
This is where I give props to The Academy. You were hugely influential in this fundraising round for Xealth. You’ve been an esteemed organization, you have the trust of the providers, you bring together cohorts around different disciplines, be it financial, or medical, or academic elements of care delivery with providers as your member organizations. With that, we were incubated inside Providence and we spun out four years ago. We had several systems invest in us earlier — Providence UPMC, Cleveland Clinic, Atrium, etc. The Academy successfully helped launch Truveta and galvanize and coalesce several provider systems around it. It also identified that there’s a lot of fragmentation in the world of digital health and RPM. Provider systems should centralize around that notion as well. In conjunction with The Academy, you guys helped bring a number of these new systems as investors and commercial partners brought Xealth to the table. I like the role that The Academy is playing — identifying open needs from provider systems and how providers need to modernize or coalesce into standardized solution sets to better compete with the payer dynamics on a national scale. We were the beneficiary of some of your learnings in that need for standardization in the world of digital health.
Renee DeSilva 24:04
Thank you for that. I also think your comment earlier around if we don’t approach it this way, the greater fragmentation will certainly be present. That puts us all as an industry at risk for just greater disparity in health outcomes if you are not finding a way to stitch this together in a common patient experience. As you talk about digitally facilitating health and that having an impact on transportation or food or are other things that are a key factor in health, I love how all of this is coming together. I am excited to continue to watch your journey here.
Mike McSherry 24:37
Your members are our members. We are a provider-oriented software solution. The greater success we have, the greater success that your members are going to have. You mentioned that provider systems are in public health. They’re part of the social safety net; they can’t just go away. They need to modernize on patient experiences otherwise they’d become just the high-acuity and ER visit kind of oriented stops for patient care because patients and the folks underwriting the insurance market in the US are going to seek quality care at low-cost delivery. If these expensive, inpatient, service delivery providers can’t modernize to meet the low cost, quality, convenient facility, they’re at risk of losing a large part of their commercial market share.
Renee DeSilva 25:31
That’s right. One thing that we haven’t talked about and I’d like to touch on before we wrap up, are you trying to activate anything similar from a government perspective? If you think back to radically getting to greater adoption, 40% if not upwards of that of most reimbursement comes from government payers for the average health system. Are you at all trying to start to have that conversation around getting better reimbursement for these tools from government payers?
Mike McSherry 25:59
It’s a great question. We’re probably too small to sit in the government lobbying realm. But my provider systems, my customers, frankly, should be. I think there’s a huge disservice in this country right now. There’s a huge inequality exposed right now because every employer, every insurer has digital health tools. They’ve got an app for behavioral health, diabetes management, hypertension, COPD. Yet, if you’re on Medicaid or Medicare, you’re still expected to go in for that face-to-face visit. I’m sorry, nothing’s covered for you, why don’t you come in and schedule a face-to-face visit with me in three months. The lack of quality, digital-convenient tools that are providing effective results is a huge challenge and disservice to those who are especially the most disenfranchised in the country. That’s oversight for CMS to not underwrite more digital health activity. You’re seeing it in Europe — Germany, Scotland, part of the NHS — the government pays for digital health tools for all of their covered lives in those countries whereas in the US, CMS has been laggard in the adoption of that. I would like to see that change for better patient improvement across all patient populations, not just the commercially insured.
Renee DeSilva 27:23
Let me ask you one final wrap-up question that I tend to ask all of my guests. A big part of the impetus for creating this platform and calling it The Table was the power of conversations to move thinking. I think it’s one of the things that we’ve all missed in COVID times; it has been harder to gather together although that is beginning to shift. My question for you is, if you were curating your ideal table and could invite any two people for a conversation, who would you invite and why?
Mike McSherry 27:54
Wow. I’m going to bring two people in from different realms here. I have a foot in the past with pure technology and the disruptive nature of technology and then a foot in the traditional, paternalistic world of healthcare wanting to move care delivery forward. With that said, I would love to see a dinner conversation between Jeff Bezos and Atul Gawande. I’ve met Jeff. I haven’t met Atul. But I say that Jeff and Amazon would bring siege warfare to healthcare. They’ve got PillPack; they’ve got Echo devices in people’s homes; they now have wearables; they’ve got Prime; they’ve got home care delivery. I mean, they’re just bringing 20-odd different business units to the table on bringing care quality to the US healthcare system. With that, there is their relentless focus on cost, quality, and patient experience. Cost, quality, and convenience will trump everything. That’s their point of view. Whereas someone like Atul Gawande would say, “Well, where’s the human empathy? What has the doctor prescribed? Where’s the recommendation?” So is the face-to-face, paternalistic, empathetic care delivery going to win out versus a more mechanized cost, convenient, quality trumps everything? That would be a fascinating debate. Healthcare is not one side or the other. It’s going to be a meeting in the middle. Certainly, you have to come at it from a point of view and we’ll see where healthcare gets delivered in the future against those two different domains.
Renee DeSilva 29:38
I think that would be a fascinating conversation. We should ask Jeff to pick up the tab if that were to indeed happen, for sure.
Mike McSherry 29:44
I saw that William Shatner went to space today on Blue Origin. Congrats to his dimensions of exploration in all dimensions of the world now.
Renee DeSilva 29:53
Indeed, indeed. Although I said that’s going to be my last question, I have to ask you one other thing just given how prolific of an entrepreneur you’ve been. I’m curious how people who can conceptualize de novo, white sheets, six new concepts, and at least a few that you told me about several of them were incredibly successful. Is there anything about your system, your process, how you get at that, or is your mind constantly ideating and things just come to you? Is it a process or is it a little bit just in your DNA, sort of how your mind works?
Mike McSherry 30:29
I’ll go back. Four were great, successful outcomes for the company. One, we raised $400 million and went bankrupt. It was in telco and they did huge swings and bets and that one didn’t work out. Now Xealth is on a presumed path to success. Five out of six isn’t bad.
Renee DeSilva 30:47
Not bad. I would take those odds.
Mike McSherry 30:48
I am not constantly iterating and tinkering on new thoughts and ideas. Once I get into one of these startups and companies, I’m all in. I’m not thinking about other industries at this point. I’m solving healthcare delivery problems right now. To come up with that idea in the very first place takes months, if not years of exploration around an idea or concept. I had the luxury of Providence hiring a team and I, my swipe-executive team, four of us, we were a product team with an engineering capability. We could build prototypes and we built prototypes on a dozen of these different ideas. We chopped the prototype around to the clinicians or the payer side of providers or talk to external third parties. You just need to tinker and tinker and tinker. It’s all iterative development. Again, we started building a mobile app, but I didn’t want to be an app developer. What more could I add to that experience? Then we became sort of this middleware solution of prescribing, then monitoring third-party apps and tools. It’s an iterative, tinkering process that is born of curiosity. I’m just fascinated. I’ve read dozens of books on healthcare and care delivery and the business economics of care delivery now because I’m all in on care. I’ve had some success and I want to give back. The biggest challenge to the ongoing prosperity of America is the care delivery and the inequity associated with that. Technology can help solve a lot of those problems or at least, the rising tide lifts all boats and at least brings up some of those who don’t have access to care quality right now. That’s what I’m trying to solve. Hopefully, Xealth is on a path towards achieving that here in the industry.
Renee DeSilva 32:48
That’s fantastic. Mike, thank you so much for your time. I’m delighted that you were able to join us today.
Mike McSherry 32:51
Thank you very much, Renee. I appreciate it. Thank you to The Academy for all that you’ve done in helping themselves get a leg up in this industry.
Renee DeSilva 32:59
It’s been our pleasure. Thanks again for joining me at The Table. The Table is a podcast produced by the Health Management Academy. Make sure you catch future episodes by visiting our website, theacademytable.com, or by subscribing on the podcast platform of your choice. If you have suggestions for topics or guests, I’d love to hear from you. Please drop me a note at email@example.com. I look forward to talking with you soon.