PE Health Checkup with Oliver Moses

Greg Dowling (00:09):

Welcome to the FEG Insight Bridge. This is Greg Dowling, head of research and CIO at FEG. This show spans global markets and institutional investments through conversations with some of the world's leading investments, economic and philanthropic minds, to provide insight on how institutional investors can survive and even thrive in the world of markets and finance. On today's insight bridge, we combine two of the most interesting areas of the markets into one podcast. That is the healthcare industry and the private equity markets. Due to demographics and innovation, healthcare is one of the fastest growing parts of the U.S. economy. However, it is highly regulated, can have reimbursement risks and has faced labor shortages and rising costs. Post Covid private equity has also seen a meteoric rise of its own over the last decade, but is also facing its own recent operating challenges. To help us navigate these topics is Oliver Moses managing partner of the WindRose Health investors. Oliver brings to bear almost 30 years of healthcare investing experience. He will speak to the challenges and opportunities in healthcare, the private markets, and how that all influences the approach of WindRose. We will finish on the potential impacts of AI to improve efficiency and control costs in healthcare. Do not miss your PE health checkup. Oliver, welcome to the FEG Insight Bridge.

Oliver Moses (01:36):

Thank you for having me. It's a pleasure to be chatting with you today.

Greg Dowling (01:40):

All right, Oliver, introduce yourself. Maybe give a little bit of your background.

Oliver Moses (01:43):

Okay. I'm Oliver Moses. I'm a managing partner at WindRose Health Investors. I live in New York City with my wife, two children and one dog, and work here in midtown Manhattan with the rest of the team at WindRose.

Greg Dowling (01:57):

So you've spent gosh, close to almost 30 years in healthcare. How did you get into healthcare?

Oliver Moses (02:03):

Well, how did I end up in my seat today? You know, when I was growing up, I was convinced that I wanted to be a lawyer and, got into college thinking that the natural progression would be law school. And as I was thinking about beginning to apply, my father said to me, you know, before you go down that path, why don't you get on the phone with a few friends of mine who are lawyers? Out of those conversations, I think I realized that perhaps I was more interested in the theory of law than I would be in the practice of law. So I thought to myself, oh geez, what am I going to do now? You know, I don't, I don't want to go out into the real world. There's gotta be some other graduate school I could go to. Perhaps I'll go to business school.

Oliver Moses (02:42):

But then I learned that to go to business school, you're supposed to go get a job and you're supposed to get a job on this place called Wall Street. And so the summer of my junior year, I was fortunate enough to get an internship in the equity research department at Merrill Lynch. I remember showing up there on the first day and there was kind of this bullpen of young equity research professionals. There were two interns but only one seat. And sitting in the seat was the son of a very senior banker at Merrill Lynch. And so the first day on the job, I just kept on my feet and found a way to be useful. But the second day on the job, the other intern decided to go take a tour of the New York Stock Exchange and I sat down in his seat and he came back with an ice cream cone and I was in a seat. And anyway, long story short, I think it worked out for everybody because he seemed more interested in ice cream. I got very interested in finance and kind of really tripped into that world and ended up spending 12 years at Merrill Lynch initially in the equity research department covering healthcare companies and then as an investment banker. So that was really kind of my almost serendipitous tripping into finance and healthcare.

Greg Dowling (03:52):

That's interesting. You're right, there is a lot of chance in this world and luck. Somebody took a tour and you took a seat, but you had no initial interest in healthcare. There's like growing up you're like, gosh, you know, I'm really into healthcare or science. This was just like, Hey, they put you here and this has happened to be what you started to cover and you've kind of grown from there.

Oliver Moses (04:11):

Healthcare would've been kind of the bottom of the list of industries that I thought growing up that I'd be interested in. I really never had that interest in medicine. But then when I started at Merrill Lynch actually started in a generalist pool and in that generalist pool, in those early months on the job, you get exposure to all the different industries that the equity research analysts were covering. And I knew that I wanted to go in and work in one of these industries. And really almost to my surprise, I found myself really drawn to healthcare. Huge industry dynamic. You know, you've got this interplay of demographics, economics, health policy, science, you name it, and approached the senior equity research analyst covering healthcare and honestly seemed fairly unqualified for the position I was looking for, but for some reason she decided to take me on and then went on from there in healthcare. And I can't imagine spending time in any other industry now.

Greg Dowling (05:07):

That's funny. It always seems like in hindsight we're always not qualified for the jobs that we're given back in the day. So let's connect the dots between those early days when you're fighting for your chair at Merrill Lynch and WinRose. So how do you go from point A to point B?

Oliver Moses (05:21):

I spent 12 years at Merrill Lynch and there were 12 great years, you know, really getting to know the industry and getting to know a lot of the companies that in the industry. And you know, I got to the point as an investment banker where again, I enjoyed my job, but I think I was looking for something a little bit more. I often say everybody is selling something and that's great, but you know, as you get more senior as a investment banker, you are really selling the products of Merrill Lynch and I was selling them to very large companies, some of the largest health insurers and hospital systems. And like, but it's really less being a strategic thought partner with a company. And in my earlier days there working with companies, there was much more of that interplay of ideas and kind of strategy with younger healthcare companies. That's what interested me. And so I left Merrill Lynch eventually to make a pivot to private equity where we are working with younger companies and really do feel like we're part of architecting that strategy and hopefully good thought partners to them.

Greg Dowling (06:22):

WindRose is sort of gen two, right? Of your private equity experience. It wasn't always called WindRose.

Oliver Moses (06:29):

Windrose. We actually got our start inside a larger company initially called MTS Health Partners, which is a healthcare focused investment banking boutique. But we really operated independently within the larger organization and over time spun out as an independent business. I think what has really remained consistent through our time together are the people. I'm the managing partner of the firm, but we have four partners. We've been doing this together for on average about 17 years. So as we get into WindRose and what we do and how we do it, this has really been a joint endeavor and kind of a joint discovery of what works for us and how we want to go about doing what we do every day. And it's really been kind of fun to do that as a group.

Greg Dowling (07:17):

Yeah. Maybe before we define what you do, maybe we should talk about why you do it. And you talked a little bit about that earlier about demographics and all the innovation in the space. Why healthcare?

Oliver Moses (07:28):

Honestly, because we're not qualified do anything else.

Greg Dowling (07:31):

Because we can't do anything else. Yeah, I guess that works.

Oliver Moses (07:34):

I left 12 years of healthcare at Merrill Lynch that started an industrials fund someone, and I don't know how many dollars I'd get, but we all have our own genesis story of how we became attracted to healthcare. But what I think you will find at WindRose or a collection of individuals that all at some point in their early careers felt drawn to this industry and they felt drawn to it for different reasons. It is an industry that ultimately at the end of the day is helping people. Some people are coming at it from thinking that perhaps they were going to be pre-med, right? And had that interest in medicine and the healthcare system and then found another way to be involved in it. But one way or another, we are a collection of people that have dedicated their careers to this industry. And we will get into some of the trends in healthcare that I think make it both a great opportunity and an intellectually stimulating place to spend time and energy as an investor. So I think that's all drawn us to this business model. But first and foremost we were people that for one reason or another, felt drawn to this industry and arrived here together. So that's taken us to healthcare. We weren't really starting with a white sheet of paper deciding where we wanted to invest.

Greg Dowling (08:48):

So healthcare is a big tent. So within or under the tent of healthcare, what do you guys focus on?

Oliver Moses (08:54):

It's a massive industry. It is a $4.7 trillion industry in the U.S. It's growing 6% plus a year and under that $4.7 trillion tent is, you know, almost in some ways not one industry, but a series of interconnected industries. And there's, there are different ways that you could invest different places that you could invest and probably be successful. The area where, you know, our style of investing first of all tends to be the majority of what we're doing are cashflow generating businesses where it's more of a buyout model. We're looking for it to take majority control positions and the companies where we invest use a sensible amount of leverage to help with returns. But it's really all about identifying areas where we see sustainable tailwinds of growth and where we think we can help enhance that growth. And you'll see when, when we get into it, a lot of the areas of healthcare we're investing tends to be a lot of technology enabled outsource services. Again, for reasons we'll get into what we're not doing, what you know are things like setting on the next novel medications. We're not taking venture risk, we're not smart enough to be in the science of discovering the next wonderful molecule that's going to transform the marketplace of healthcare medications, right? So it tends to be more frequently in the plumbing of healthcare in companies that are helping healthcare kind of take the next step towards value and efficiency.

Greg Dowling (10:25):

And you guys are a health specialist as we've kind of covered already, you see different models in private equity. Is it important to be a specialist in healthcare?

Oliver Moses (10:33):

We think it absolutely helps to be a specialist. This is in an industry that we think you can just jump into and having the context of seeing how trends ebb and flow, literally we've witnessed it over decades is really important. And that this is an industry that is moving in a definite direction, but it's getting there in a plotting way. And when you've seen the arc of where it is going over literally decades, I think there are clues in there as to where the tailwinds for growth are going to be more sustainable and the pitfalls that one could fall into. Because while it is a growing market, it's not as easy as just jumping into a rising tide because there's a lot going on under the surface that will create opportunities in some corners of healthcare and real challenges in others. And I think that having the history and the context is what points the way to us as to where we want to be getting our investors money to work.

Greg Dowling (11:39):

Well I don't want to bear the lead anymore, so let's talk about those trends and what you guys are excited about.

Oliver Moses (11:44):

You know, I think first and foremost there are demographics that are just driving immutable ongoing growth in healthcare. So the industry is growing six, 7% of a year. If you even dial back to the great recession, the healthcare industry continued to expand I think 4% to 5%. Now that's a bit of the good news, right, is that we do have these demographic trends that are driving growth. If you look at the population in the U.S. over the age of 65, they're growing at twice the rate of the under 65 population and they use over two times as much healthcare every year. It doesn't take a major, you know, sleuth to understand that do have a growing marketplace. However, the issue is that the dollars that are financing all this growth really can't keep up with that rate of spend and that creates tremendous tension in the marketplace.

Oliver Moses (12:35):

And if we peel that back a little bit and kind of get down to what we're talking about there, you're looking at employers that are paying for health benefits for their employees. You're talking about individuals themselves bearing part of the costs of their healthcare. Particularly as a lot of health insurance plans, deductibles have gone higher and people may be responsible for paying for the first one, two, $5,000 of their healthcare or even government agencies like the Medicaid system or Medicare program. All those major funding sources are struggling to keep up with the rate of spend. They can't keep up with the rate of spend. And so either as individuals or organizations, healthcare is really at this crossroad, there's really only two major levers that we can pull to reconcile the growth with the limited funding. One is we can start making difficult decisions around access to care and what care we are going to be able to receive and have paid for either individually or through our insurance carriers.

Oliver Moses (13:36):

Or we can start thinking about how we can get greater value out of every dollar that is available out there. And there are other countries, for instance, that have been pulling more of lever one, right? If you want to see a specialist in Canada, you're going to wait 26 weeks on average. If you want a hospital procedure in the UK, you're going to be waiting 13, 14 weeks. That's really a way of narrowing the access points to healthcare of ways to live within a budget. We think that the U.S. market culturally across the political spectrum is really much more focused on how can we get greater value and efficiency out of every dollar we have to avoid as much as possible. Because it's not all one or the other.

Greg Dowling (14:18):

We're not patient people.

Oliver Moses (14:20):

No we're not, we're not patient people, we're not, don't want to wait 26 weeks. And so we think there's a lot more focus on how we can get more efficient and that's where we're spending our time.

Oliver Moses (14:31):

And the beauty of this marketplace from our perspective is of this $4.7 trillion that's being spent every year. You can look at a lot of the big consulting studies and they're true 25 cents out of every dollar is pure waste. And we would argue that the other 75%, there's just massive opportunities for better process and greater efficiency in there. So the fun part of it from our perspective is we don't think we're marching off on an impossible task. This is a marketplace with just massive opportunities for improvement with through better process and technology to unlock a lot of that value. And that's where we want to invest.

Greg Dowling (15:09):

Yeah, I mean I don't like to wait two minutes for coffee. I can't imagine 26 weeks to see a specialist. So I think you're right. Like that is the place that we need to go. It's interesting you talk about the inefficiency and no, I'm not a healthcare expert, but having kids and you know, kids get hurt or get sick, you spend time in ERs and doctor's offices and it always blows me away and that's just one part of overall health chain. But it's like going back in time when you see them actually work on their computers and put stuff in like the enterprise software, it seems very similar to the very archaic stuff that you see when you go to a rental car place. Like you're like, what is this? Is this like some old version of you know, MS Doss or something?

Oliver Moses (15:51):

Yeah. And you see you stand in line waiting for your rental car or you're waiting to check out at the doctor's office as as they go through one thing after another and your blood pressure's going up, you saying there's got to be a better way. Right. And you're right and I mean I think you put your finger on it. I often say that healthcare is this massive antiquated industry finally getting dragged into the 21st century. When I started in it in the nineties, it was still largely a paper-based industry and communications well into the early two thousands being dominated between healthcare organizations by fax machines, right?

Greg Dowling (16:23):

There's probably some listeners to this podcast who don't even know what a fax machine is, right? And they're still using them a year or two ago.

Oliver Moses (16:29):

Yeah. Well that, that'll be another podcast.

Greg Dowling (16:33):

Help me understand, I mean it feels like so many other companies have embraced innovation and healthcare in a lot of different areas, hasn't, is it because of regulation? What have been the barriers to change?

Oliver Moses (16:45):

I actually don't think it's been regulation. I think it's just been the size and the structure of the industry historically. But that is changing because the reality was it is a massive industry. It is unbelievably fragmented and has been, and there was so much data and information in it, financial, clinical. It became so siloed and regionally organized. The barrier to people investing in technology and systems that could speak to each other was high. And then I think what happened is we reached a tipping point where greater challenge for people was clearly going to be surviving in a financially constrained industry without making the leap and the initial investments. Listen, we're not where we are in a lot of other industries right now, but we are on the way and healthcare is much more plugged in now than it has been in the past. And that March continues.

Greg Dowling (17:50):

It's interesting, we at FEG deal with a lot of healthcare clients including a lot of hospitals and it's not true for all, but it is true for a lot that it's been a real struggle post covid both with labor shortages initially and then just costs not only labor but just everything that is out there. Has the market changed for a lot of healthcare companies post covid?

Oliver Moses (18:16):

I think that covid in many ways highlighted some of the underlying challenges or healthcare organizations and I think the biggest piece of it is exactly what you put your finger on, which is the labor side effects. You know, if you look at doctors and nurses which make up, you know, kind of the backbone of care delivery, I think they're structural issues that we are wrestling with. Number one, they're not enough of them to go around to meet the needs of the population under the model where healthcare is delivered today. And two is that even if there were enough of them to go around the hospitals and healthcare system more broadly can't afford them. So I think that what we saw in covid was kind of a highlighting of that issue. It was the labor issue on steroids, right? Because you had both wage inflation coupled with a lot of healthcare provider fatigue, number of them, a lot of them dropping out of the healthcare workforce. So you just had huge workforce issues and you had major cost of services issues for hospitals and they can't just turn around and pass that cost along in terms of higher pricing because the people that are paying the hospital bills, because we started this conversation, don't have the money just to, you know, raise prices 10%.

Greg Dowling (19:43):

You know, we're talking at such a big 30,000 foot level. I wanted to kind of take it down a level and talk about what you guys do, maybe a couple of past investments or just give some ideas of all the different things that you can invest in. It's not just the big hospitals, although you've done that. There are a lot of kind of interesting things there too. So maybe give us a couple examples of how you take all this and apply it at WindRose.

Oliver Moses (20:08):

I think the vast majority of what we're doing is really not investing behind the big providers of care. There are times where we think that how they are delivering care, there is a model there that is unlocking value for the healthcare system. And that might be interesting to us as an investment, but we are much more focused on how we bring tools to those big end markets to help them survive. Just, and we were just talking about the hospital system, right? Like healthcare is delivered has definitely evolved, but hospitals are still kind of the core of healthcare delivery and they are fighting for survival. And so we are typically more interested in how we can help those big end markets survive. Whether it's hospital companies, health insurers, life sciences businesses, how we can help them survive and thrive than actually investing in them. I think a great example is how we've looked at this issue of labor and the hospital, you know, and the healthcare provider and market as you pointed out, it became very top of mind through covid because it, it was a blinking red light.

Oliver Moses (21:18):

But the reality is this issue around the cost and availability of clinical labor and healthcare has been a trend we've been applying for almost 20 years. And so I think what you'll see in WindRose investing style is there are certain of these core trends that this arc of healthcare that we talked about a moment ago earlier that we're playing over and over again. But what of course changes year to year is what is new and where the best tailwinds are going to be in advancing them. So for instance, in labor efficiency, if you look back 20 years ago we were investing in a company called Senior Home Care, which was focused on providing home care to people outside of a hospital's walls with the mindset that we can't treat everybody inside of hospitals. It's capital intensive, it's human capital intensive. How do we find the people that are better cared for in the home, get them out of the hospital into the home, lower cost actually higher quality, less dangerous place to be than in a hospital.

Oliver Moses (22:16):

And we are investing in home care. Fast forward 10 years, we are investing in a company called My Nexus. And at that point we're saying well now this home care thing has become a little bit more commoditized. Pricing is starting to come down, we don't want to be investing in that anymore, but what's next right? And what was next is we saw through a lot of our health insurance relationships, the utilization of home care was now excessive, right? As prices had come down, a lot of home care agencies just started doing more visits to make up for the lower unit price. And so what My Nexus was doing, it was using a lot of data and algorithms to, at the end of the day hold home care providers following best practices in ways that we could show actuarially we're reducing the cost of home care using net less nurses, but actually doing it in a way that was improving quality.

Oliver Moses (23:02):

So lower readmission risks and so forth. And, we took risk around providing that to the health insurance marketplace. Fast forward five years, we were investing in sheer water that we've got 5,000 nurses working in the Philippines that are U.S. trained and taking all that clerical work off the plate of the clinicians in the U.S. so we can get them where they're needed bedside because they're not enough of them. And doing it at a lower price point all the way more recently to us investing in a company that's actually a large language model nurse called Eleanor who's having telephonic phone conversations with patients as a way to broaden outreach of care. All those are plays on just what we were talking about labor, right? And how can we be finding what is new and next in solving the labor issue in the U.S. healthcare industry, which is a big one.

Greg Dowling (23:52):

That's fascinating. Now all those things sound wonderful but at the same time there's been a lot of maybe some negative press on private equity in healthcare driving up prices. Horrible profiteering is, is any of this stuff true?

Oliver Moses (24:07):

I know there have been articles and there's been stories recently which no one wants to see. I'm not deep enough into any one of those stories to opine on how true or not it is. I would say a couple things. I do not believe that broadly private equity folks investing in healthcare, whether they're specialists or generalists are doing it with a business model and value creation plan driving up costs. I do not believe that. At the same time I think you have to assume as a private equity backed healthcare business, let's assume you're going to be subject to twice the scrutiny. And so in our mind we want to be on the side of the angels of value and we think that value and quality are actually not competing interests. They often travel together. It's just another reason that would point us to the types of areas where we want to spend time and energy. Provider models, again, they're interesting to us when they can be unlocking value but you know when you start balancing the risk and reward of managing the labor and having that type of headline risk, it just really makes us pleased to be spending time where we tend to be spending time.

Greg Dowling (25:24):

I'm going to ask a couple of questions just related to the private equity business and then maybe have you comment on how if it is at all different when we talk about healthcare in particular, it's really been a difficult environment for exits at different levels of private equity. Maybe speak to that and also comment if it's at all different within healthcare.

Oliver Moses (25:47):

I think there has been a dearth of exits across private equity and I don't think that healthcare has been immune to that. I think the principle issue driving kind of the slower exits are probably a mismatch in seller hopes and buyer aggressiveness. A lot of people have kind of spent a year and a half convinced that their company was worth 14 and a half times EBITDA. They talk about it in their investment committee and with their investors and it's not easy to backtrack and say maybe we're a 13 and a half times business

Greg Dowling (26:20):

Or seven.

Oliver Moses (26:21):

Yeah or seven, right? I mean there are some corners of healthcare right now we can go back to to some of the provider roll-ups where there is no market period. But I think you kind of get through that in one of two ways. You either grow into a value that is getting you to the return threshold that you are underwriting to or one eventually capitulates. I think in the last 18 months we haven't reached capitulation and we haven't had the narrowing of the value gap between buyers and sellers. That being said, as we look forward, I think a couple of things can change and are likely to change. Number one, the advent of actually entering a lowering interest rate environment, both practically from how buyers are underwriting and thinking about cost of capital. I would say almost psychologically there's a flip that switches a little bit. Even if the interest rates aren't dramatically lower today there, it just is going into a different type of environment where maybe they can even underwrite to refinancing two years down the road at a lower cost of capital. And so I think we're entering a lower interest rate environment and two eventually sellers are going have to sell. And my suspicion is that 25 is going to be a much more active year than 24. Even a lot of 23.

Greg Dowling (27:37):

Yeah, I've heard the phrase stay alive to 25 and then you only put off price discovery for so long so hopefully that's a period where it opens it up. You've mentioned about rates. I know you're more of a operational alpha firm, that financial engineering firm just maybe speak to rates. Does it come down always had our first Fed rate cut? Like how does the flow through happen? Is it quick, is it slow or is it just as you pointed out, more of a mentality?

Oliver Moses (28:04):

I think in the beginning it's more psychology than practical. I mean it was, we're just starting to look at how as rates come down, we've got some companies that have just produced a lot of cash flow. Their leverage levels are very low as you know, we're not big leverage junkies to begin with and we're saying I can't believe this is a high quality asset. We're like under three times levered and we're paying x percent. Like this is crazy. And then you think about where we could refinance or even project out a couple quarters and yes there are pickups in cash flow and interest rate savings but it's not, it's not dramatic. Right? And we're actually having the conversation, is it even worth the breakage cost to refinance at that rate given timing to an exit? And it's not always clear, it's to me it's just as much psychology as it is practical but honestly it's an element of both. And when private equity funds like us are doing our underwriting and looking to make a particular return as a buyer, the cost of capital is going to factor into how high you think you can jump to get to our three times return under X scenario.

Greg Dowling (29:08):

That's right. At the end of the day it is, it is math. Yeah. I wanted to to pivot a little bit, kind of go back and talk a little bit more about technology. You do a lot in this space and again it's to that cost equation trying to get cost down or being more efficient. So where are you seeing the applications of artificial intelligence in some of your portfolio companies?

Oliver Moses (29:29):

The short answer is throughout, you know, I think how we get there or our way of approaching AI is really a continuation of just how we have approached the ongoing modernization of healthcare over a long period of time. Which is, you know, we want to stay a step ahead of how business models are evolving and we talked about it in labor a minute ago and keeping that step ahead. So we don't come at it from the standpoint of tech gurus, but I think what we have is a pretty good understanding of the end markets our companies are serving, what their pain points are, what they are ready to buy, and thinking about what types of innovation can bring better process, better outcomes to that. And tech is continually feeding into that and AI is just the last step of that. We really come at it from more of an end market.

Oliver Moses (30:27):

How do you unlock value dollars and cents today mindset versus what new shiny tech bobble is out there that we think is going to transform the world. And we are marrying our mindset with, you know, we have an operating partner for instance named Adam Berger who, I mean he was 30 years ago, he was a Carnegie Mellon, you know, majoring machine learning before anyone knew what that was. So we're making sure we have that capability riding shotgun with us, but we're thinking about how that capability is going to be applied across the healthcare landscape. And we can get into that a little bit more.

Greg Dowling (31:05):

I'd love if you could maybe do a deeper dive on that, maybe use a case studies. I know you have one. Is it, Mind You, is that the, am I pronouncing it the right way?

Oliver Moses (31:13):

I would say that is our most tech forward investment. You know tech is woven through pretty much everything we're doing as an enabling factor. Mind You is a large language model nurse, her name is Eleanor.

Greg Dowling (31:29):

It is that Eleanor that you mentioned earlier. Tell us more about that. That's fascinating.

Oliver Moses (31:34):

Eleanor picks up the phone metaphorically speaking and she dials out to various populations wherever you point her and she ends up having conversations with either plan members or patients around various topics. It can be making sure that they are showing up for their appointment and are ready. It can be saying I know that you recently were discharged from the hospital and want to check in with you, see how you're doing, is your medications arrived? And the reality is, as we talked a moment ago, one of the things that we've been focused on is this labor thing and the word population health gets thrown around a lot and it is the case and it's really looking at people's holistic healthcare picture to get out ahead of healthcare problems that are putting people in hospitals and costing a lot of money. And so the reality is you can't have nurses on the phone all day long talking to people indiscriminately to see where there might be a problem. But Eleanor is infinitely scalable

Greg Dowling (32:35):

In my mind. I'm envisioning like a voice like Hal from like Space Odyssey and like Oliver, did you take your medicine today? Will you know it's a machine or does it actually sound like someone whose name is Eleanor?

Oliver Moses (32:48):

It's a good question and a funny question because one we wrestled with would listen to Eleanor initially you could tell it wasn't a person but it certainly didn't sound like Hal. And we were asking about that and it's actually something that's being debated today. Should a listener have it be readily apparent that it's not a actual person they're talking to. Because when you listen to these phone conversations, what really struck us is they are interacting with her, thanking her, you know, as if they were talking to a person, the capability to make it much more sound like you and I talking right here is available. And I think we might be gravitating in that direction, but there was some debate whether it was better for people to always be cognizant of the fact that they were not talking to a live person.

Greg Dowling (33:33):

Wow, that's fascinating. Kind of the moral argument on that.

Oliver Moses (33:36):

But it's not Hal right and, and I think because it is not Hal you listen to these phone conversations. They last on average like five minutes, which is actually fairly long and they're very conversational and talking about how you're feeling and what you know. We listen to one, a guy discharged from the hospital, he's home. It looks like, you know, if you look at the charts, looks like he's got his medication. But in the conversation with Eleanor it comes up, oh my refrigerator's broken, my medications are actually not in the refrigerator where they need to be. So this gentleman is not going to take his medications, he's going to end up with a reinfection and back in the hospital. That's the type of risk that Eleanor is able to screen out and make sure we're getting a live nurse on the phone with that gentleman and we're going to avoid a hospital readmission.

Greg Dowling (34:21):

Wow, hey I want to be transparent here. I am real Oliver, I'm real.

Greg Dowling (34:27):

I'm not a machine. Hey I love that. And that's kind of space age. Give me maybe another more mundane application. AI is a lot of things. Sometimes it's really crazy things that it can do, but sometimes it's just little things like what are some little things that technology is able to do?

Oliver Moses (34:41):

One of the things that when you look at WindRose, we want to be cognizant of the fact that a lot of these things like AI in our mind are not companies. They are capabilities. And I think where a lot of people make mistakes with interesting new technology and we've seen it time and again in healthcare is confusing. What is a capability or maybe even a feature versus a company? Because when you look at the end market, whether you are a large hospital, a medium sized hospital, a health insurer, whoever you are, they can't implement every possible feature and you know, shiny capability, they're looking for companies to help them with areas where they need help. And so where you see a lot of people fail is getting very focused on a novel feature and confusing it with a company but then not getting, and it might be the best gadget out there, but they're not going to be able to sell it because the market is not buying the best feature.

Oliver Moses (35:39):

They're buying solution sets, right? So when you look at typically how we are integrating things like AI in our investment approach, it's not going out and buying a lot of businesses that look like the one we just talked about. It's really more how do you integrate this feature to create a competitive advantage both from an internal cost structure and a capability set to the marketplace. And that's really the vast majority of how we're integrating AI into what we're doing. You know, for instance, we have a company that's focused on revenue cycle services, particularly around the radiology industry and what they are doing is integrating AI into their workflow. You think of what AI is great at, right? AI is great at taking massive amounts of unstructured data and making sense of them making that data usable and actionable. There is no greater mess that I can think of anywhere in the world than billing information that goes into the billing collecting industry in healthcare, right?

Oliver Moses (36:39):

And we could spend two hours talking about that. So what we are doing to differentiate this revenue cycle company's capabilities, integrating AI into how it recognizes, you know, how to get the information in the bill in the appropriate way with less human intervention. And there are two outcomes of that. One, we end up with a company that has a completely different cost structure than our competitors because we can do it with a fraction of the people. And two, the end product that the consumer is experiencing is actually getting them paid faster and a lower cost. That's an example. It doesn't sound as you know, world changing, but that's the majority of how AI is going to integrate into healthcare. Your doctor is not going anywhere anytime soon. They're not being replaced by an AI bot, but hopefully their back office and how they go about their day and their workflow is going to be improved dramatically.

Greg Dowling (37:34):

That's exactly where I was hoping you take it because it is about costs and efficiency and a lot of AI is really good at doing that. It can do some crazy stuff too, right? But like it's not the Olympics, there's no points given for difficulty. You're just trying to find ways to add value to these companies who then add value to the overall health system by bringing down costs and things like that.

Oliver Moses (37:58):

Exactly. If we can bring down the cost structure of our revenue cycle company, they're going to end up passing that savings along to that physician office or that hospital and everyone is benefiting down the line.

Greg Dowling (38:09):

Before we let you go, I did want to ask you to share a little bit about Haven Care. I know that's something that's kind of near and dear to your heart, especially from someone who didn't originally start out with any sort of idea about being in the healthcare industry, that it even goes not just past your professional life but in your personal life.

Oliver Moses (38:30):

I've never shy to talk about it. It's something that's been a lot of fun to be a part of. So Haven Care is a children's health center that's based in Liberia and provides free healthcare, really focused on maternal health and children and I'm sure many of you know, I think Liberia is, you know, is measured in, you know, GDP per capita about the poorest country in the world. We as a family wanted to do something that felt a little bit more grassrootsy, philanthropically. Living in New York City, there's a lot of wonderful institutions that you can give to and they're all already pretty well endowed. But we wanted to do something where we felt a little bit of a closer connection to the impact. Healthcare made sense because of what I do vocationally and we have really a passion for helping children. But as we kind of came to how, you know, what next or how, what do you do?

Oliver Moses (39:21):

You know, I think in the back of my mind was this notion that we bring to our investing strategy, which is value. And if we are going to invest a dollar in healthcare for children, how can we do it in a, in a place where that dollar goes the farthest and it doesn't really matter where it is. As I was flailing around trying to think about how you actually could do this in a place that desperately needed it, I was almost serendipitously connected to a gentleman who's Liberian, who had started a school there was deep in a community and we fell into conversation. Long story short, he is my local partner there, you know, together we've stood up this health center, which is again providing free healthcare to children. I think we're seeing about 30,000 kids a year.

Greg Dowling (40:07):

30,000. Wow.

Oliver Moses (40:09):

It's been fun.

Greg Dowling (40:10):

Oh my gosh, how rewarding. And again, just shows you how one guy went out for ice cream, butterfly flaps, its wings, and now you're helping 30,000 kids in Liberia. That's awesome. Thank you for sharing that.

Oliver Moses (40:20):

Oh, it's been fun to see. I think that how we're doing it has resonated with some of the other folks around WindRose. They've been looking to find a way to get involved. The end of October, we have six of us going over there together. We just built out a new, much larger campus over there that we're about to move into. And just like healthcare companies in the U.S. you know, we're thinking about how can we scale this and we need, you know, discipline around operating metrics and reporting. So I think as a team, we're going to go over there and be meeting with the operational leadership and really start thinking about how we can help support the ongoing growth and mission of Haven Care in the same way that we provide assistance to our portfolio companies. And that's going to be a lot of fun.

Greg Dowling (41:03):

That's awesome. Hey, thanks for sharing that. This has just been fantastic. We really appreciate your time today. Thank you for the PE health checkup.

Oliver Moses (41:12):

Thank you, Greg. It's been a, a pleasure chatting with you. We appreciate you sharing our story with your listeners.

Greg Dowling (41:19):

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