Rachel Woods: So Paul, you work with global health systems. John, you lead our Digital Health Research Team, which means that you end up spending a lot of time talking to vendors. We know that these two stakeholders have to work together, but what do they actually think about each other?

Paul Trigonoplos: Overall, I think there's some mixed feelings, if I'm putting it politely. At the end of last year, I did a project where I interviewed around 25 health system execs and tech vendor execs. When I say tech vendor, I'm mostly talking about software as a service. I'm not talking about EHR stuff, or big enterprise firms.

Honestly, everyone was upset and pretty frustrated with how the partnerships they have with the other side are going, a lot of feelings of pain, a lot of feelings of frustration, of missed opportunity, of "Why did we even go down this road?," etc. These interviews were confidential, so we have some pretty brutally honest takes from each of the sides.

Woods: You don't have to name names, but what were some of the things that you heard?

Trigonoplos: From providers, there was just a general frustration at how opportunistic, we'll say, most tech vendors are. Providers, rightfully so, are sitting here with 11,000+ tech vendor options, and they want to be able to say no without having to deal with 50 sales pitches per week. One person literally told us, they wish that vendors would understand how many valid reasons there are behind saying no to a sales pitch.

They said they felt like they were sitting in on a multi-level marketing sales pitch by the end of the week, it just kept going. There's some other sentiments too. People wanting to just have a good vendor, versus enter in completely from day one into this 10-year transformative partnership. There's a little bit of, "Prove yourself as a good company to begin with," because I think there's some skepticism around what actually are good vendors out there, what's worth their weight, because there are so many?

Woods: But, you said both sides have negative feelings.

Trigonoplos: Yeah.

Woods: What did we hear from the vendors?

Trigonoplos: From vendors, the real takeaway I got was that systems don't do a good enough job at vetting out all of the noise when they pick a product. We can get to this a little bit later, but the vendor market is driven on pursuit of growth. They're never going to say no to someone that wants to buy them. It's up to the health system. They blame a lot of the failures behind, "Well, why did the health system even come here? Why did they get us if they didn't know what problem they were trying to solve?" So, there was a little bit of blame on that side.

Then, there was some frustration on the change management side. "Health systems are a thousand points of no," was one of the quotes that came through. When you're dealing with a rollout, especially at an enterprise level and a multi-regional system for instance, the amount of, this is another phrase, "Shadow IT departments, that you have to jump through, just bureaucratic hoop, one after the other, that was a huge, huge pain point for them.

Woods: Look, there are lots of examples of these finger pointing partnerships in healthcare. I don't want to be brash here, but why is it even important for us to understand how both sides of this particular partnership think? Why is that important for us, as researchers, to share with the industry?

Trigonoplos: There's two things I'll say. One is that technology vendors and health systems are tethered for the foreseeable future, and I don't see that changing. There are competencies that tech vendors have that health systems just are not going to do in-house, especially when you consider how fast technology progress is. When you think about things like AI, and things like telehealth. So, they're tethered.

Then you look at the data on success rates, based on whatever surveys you're looking at, between 50 and 70% of partnerships fail, and that's just in business at large. But, a health system is by no means safeguarded from those risks. So when you combine those, it creates this high risk, often painful partnership environment, because these two sides just don't talk to each other.

On interviews we ask them, "You have all these honest feelings, why don't you just tell the tech vendors you're talking to? Or why don't you tell the health systems you're talking to all this stuff?" They said, "Why would I do that?" One guy who literally said, "Doesn't the Advisory Board do that? Can't you tell the other side for us, so we don't have to?" I think that's indicative of where the postures are right now.

John League: The thing that I hear so much in the market, is folks wanting help with, "How do I actually get value from my investments?" There's a lot of, "Help me figure out what the new thing is. Do I need it? Should I invest in it?" Probably not.

There's a ton of untapped functionality in a lot of the existing systems, and a lot of the needs are extremely basic. There was a class survey at the beginning of 2022 that said that the thing that patients struggled with most, and was the most important thing in the patient experience, was an easy way to communicate with their provider before and after a visit. It just doesn't exist.

That is not a generative AI solution, where we've got to be on the bleeding edge of technology. What they really need is to be able to get value out of the most basic investments that they have to make, and they're not doing it. That's why this is a problem. This is not just a vibe. This is not just Paul out there trying to stir the pot and trying to figure out, "How do we fill in the missing piece or give the secret bit of intel to the other side?"

If the things we're going to say today sound incredibly basic, they are. But I think that is where we have missed, especially with technology, when we think about chasing shiny things and, "How do we keep up?" And fear of missing out. That is true, both on the health system side and on the vendor side.

Woods: Yeah. I feel like there's this acknowledgement that, to Paul's point, a good chunk of these partnerships fail. Even the ones that don't completely fail aren't necessarily getting enough value out of them, like you said, John. But we also have to keep in mind that we can't just blame the product. You said this to me at one point, John, that technology keeps getting better, faster, cheaper, and yet we still aren't able to actually get what we want out of these technologies.

At some point it has to come back to the partnership. I feel like we're going to have a little bit of a therapy session here. If the solution is to understand each perspective of the partner here, the health system needs to understand where the tech vendors are coming from, and vice versa. At a basic level, are these parties even operating on the same definitions of success?

League: No, not at all. As Paul alluded to, tech vendors are, I don't want to say entirely but I feel like I have to, entirely focused on near term growth, because that is the way their incentives work. Growth is oxygen for many of these companies, especially ones that are not huge incumbents. So they need as much revenue, certainly in the near term.

They also need to try to get these long-term contracts that Paul was talking about, to demonstrate to investors that there is runway in front of them for their service down the line. Those incentives will not change. That is true whether it is a publicly traded company, or a VC-backed company.

All of those things are true, and it is a matter of existential importance to them. It is about survival in a way that even very challenging initiatives are not existential for health systems. The hospital will continue to stay open even if this technology rollout is not successful.

Woods: So then what are health systems focused on? What's their definition of success here?

Trigonoplos: At a broad level, it's growth. But I think, when you drill down to why a health system is seeking out a potential tech partner, we want to assume positive intent, and assume that they are doing all the necessary due diligence to identify the core problem at hand that's stopping them from doing whatever version of success they're chasing. Finding that problem, and then trying to fill it with a tech vendor. We want to assume that they're doing that.

Woods: Give me some examples of some specific problems that we would want health systems to focus on. Not the shiny object that John was talking about, but some specific challenges.

Trigonoplos: Sure. You can think about core, age-old business problems, network leakage. Do we have technologies that give a better understanding of where the opportunities are. Primary care access, top of funnel. Where the cost centers are, if you're trying to standardize care across a few facilities. This is not revelatory, it's core operations.

I say assume positive intent because, in reality, I think a lot of systems are making decisions on which tech products to partner with, based out of FOMO, reactively, because another system that they compete with did it, because they're trying to play catch up. So there's a fallibility to a lot of the decisions out there. The other goal that health systems are pursuing here is just a focus on minimizing risk.

When I say risk, risk of failure in the partnership, that could lead to financial loss, loss of resources and time, political problems, like lowercase p political problems — pissing off people in your system because you botched a rollout. They are really risk averse, and I think that's part of the reason why you see health systems skew towards short-term discreet projects, as opposed to these giant transformative things, because the risk involved with that is really high.

League: When you think about the limited resources that most of these health systems have, a high functioning, high performing good market organization, if they have a 1% margin, that is outstanding. But keep in mind that, if you're talking about a 1% margin, that is what you have to reinvest in the entire business. So never mind the fact that, if that investment does not go well, that is money wasted.

But to Paul's point, it is also an enormous expenditure of internal political capital and goodwill. You picked this instead of this other priority, it failed, and now there's a question of leadership, and hurt feelings, and all of that, that snowballs. The risks are not just about the technology and the implementation.