CEO and President
There is next to no entrepreneurship in health care delivery. It's virtually illegal.
Interview by Heidi Legg
What are you trying to change?
I think that maybe all of us have very small real reasons that we get started in our careers and then as we get older, we start to think of more grand and acceptable reasons. My small reason was I wanted to, you know, be important. I wanted to save someone's life and be the guy driving an ambulance. (which he was earlier in his career)
Today, I feel like the whole reason that God, Buddha, whomever it was, sent me down this path is because in this country healthcare is the biggest hole in our humanity.
We all touch the health care system and we all feel robbed of some of our humanity. At the hospital, the staff gives you a clipboard and you haven't seen a clipboard since 1982, and you're like, 'What are they doing with the clipboard and will they lose this?' Then, they give you tests that you don't need. They scare you into doing things to try to cure your cancer that everybody knows full well will not cure your cancer. You do a birth plan to have your baby and you arrive and they laugh at your birth plan.
This type of experience resonated with me because I had some big cousins, siblings and larger than life people around all the time and I wasn't. I was shy and quiet and un-athletic and not very good in school. For me, the idea of being unnoticed or unprocessed as yourself is just a terrible feeling. The fact that health care is massively expensive, more than we could actually afford, is the least of the problems. What I have a problem with is that it's humiliating -- that the money is taken by force, and care is given by force. It's either too much or too little and you have no real sense of authorship.
Betty Goot was the lady who ran the pick-your-own farm in Kennebunkport, Maine where my mom and her sisters-in-law were trying to out-Martha Stewart one another. ‘Of course, I won't take the ones that are already picked. I will be there on my knees picking the ones for the blueberry pie out there in the field with Betty Goot.’ I'm wandering around trying to smell the tractor grease and Betty gets up, bends her back and starts whacking her elbow on the post. I’m thinking what are you doing? And she says, ‘Well, I got that arthritis and the doctor costs a fortune and I won't be no left-handed… So, I just give it a good whack and it’ll work again for a couple more hours.’
You remember that as a child?
Today, vividly. I only vaguely remembered the experience until one day I’m at some consulting firm and a partner starts talking about getting a new shoulder for hundreds of thousands of dollars because he thought it would improve his tennis.
What would be your advice to an entrepreneur today?
Start with a lot of pathos. Keep trying to channel it into something productive. Resist drugs because they're better but they don't make you create things. With Athena Women's Health (the first incarnation of athenahealth today; a Women's Obstetrics practice that Jonathan founded with Todd Park) we’d see the research and the equipment was shown to do more harm than good but everyone still plugs them in. Doctors come in and do episiotomies even though it’s shown they are bad. Doctors weren't present for any of the labor and when they came in, women's heart rates shot up because the doctor was there. Women would say, ‘Don't just fix it. Just hear me.’ I was twenty-five years old. And I was fixing it. That was the genesis of athenahealth.
Now you have close to a 3.7 billion dollar market cap. Has your focus changed?
Now I have a huge can of ‘FIX IT’ at work but it’s the same question. Why couldn't the experience of having a baby actually be something that would be lovely? I mean, the baby is lovely and yet the fact that you were abused, disrespected, left behind, kept cold, ignored, was like, okay, well who cares, I have the baby. And that it cost you twenty thousand dollars, even though you didn't see the bill. But what if all was wonderful and it only cost ten thousand dollars? If somebody did that, could they keep an extra two thousand in profit and would that be a business?
Did your midwife business make much money?
It went out of business.
But I do believe it's the right business model for society. If I was starting over today, I would do the exact same business model but I would use Athena Net - athenahealth's suite of cloud-based services which includes an electronic medical record, practice management and care coordination services. The reason it didn't work is that there wasn't enough information liquidity. It was so complicated. You couldn’t pull all the threads and expense and care together and see them in one place as a doctor or a businessperson and today that's possible and fifteen years ago it just wasn't.
I read that a VC offered you $11 million for Athena Net. Was that the catalyst for athenahealth?
That was the catalyst for closing out of the birth center. We had the largest free-standing-birth center in the United States and he made me that offer and I quickly realized that was where we were going next.
What did you do?
I burned our business plan and began the process of convincing my partner who was the source of all of our real intellectual capital, Todd Park. I had to talk him into this new idea that was just as important, just as beautiful and just as significant, just as worthy of our focus and that there had to be an Athena Net in the world in order for there to be Athena Women's Health in the world.
It was clear that the reason we weren't succeeding was that we were dying the death of a thousand paper cuts. It was just the coefficient of drag. It was this numbing exhausting sort of bureaucratic paper chase.
Trying to negotiate with the health plans was just so humiliating and horrible to sit there and talk to these IPAs and health plan people about what we were doing and how we were spending five times as much time with women. But while it was generating huge expenses it also generated huge savings on the other side. We’d hear lines liked: 'Oh, yeah, we sympathize but… or we signed an agreement so we can’t...’ There was just no entrepreneurial energy on the side of the payer, at all.
The episodic model we designed for birthing applies to pretty much everything that we do that's got any expense in health care. In fact the Obama administration probably thinks that Todd Park, my former co-founder of athenahealth and now CTO of the U.S., is whispering in people's ears. The government announced that Medicare was going to start a program paying for ‘episodes of care’ in a global budget just as we prescribed in our first business. So, instead of paying for the anesthesiologist and the obstetrician and the hospital, you could just pay episodes: While the OB gets $2,000, the pregnancy costs twenty thousand, fully loaded, on average. Now what they're saying is, if you want to sign up and take the risk, we'll just give you the twenty. Now, it's Medicare so it's not going to be births. It's going to be hip replacements, cancer and other episodes of care.
You think it's a good thing?
It's absolutely essential. What US society lacks is shopping in healthcare. It’s the reason that health care is the biggest hole in our humanity. The conditions necessary for innovation are many buyers rubbing up against many shoppers. The sellers shop for the buyers.
Your Formaggio dude, he does not want most shoppers. If everybody from Star Market came running over to his shop, he'd be like, 'We're closed. Get outta here.' They'd be eating all the chocolate nibs from the front desk. As a seller, you want to be able to pick your customer. He sells unique sheep cheese to buyers that want that. It works.
If it was the law to make sheep cheese available for all Americans and if there was this essential sheep cheese repository and everyone had a certain amount of their income put into a pot and you had to prove that this person really needed sheep cheese each time they needed it, his business would look nothing like it does today. And instead he's innovated and innovated and innovated on that little theme to where it's ecstasy for a very small number of people to buy that sheep cheese at $26 a pound. As is Pea Pod which delivers very vanilla cheese, Velveeta, to your house and puts it in your fridge and for someone who works and doesn't give a shit whether it's sheep or cow, that's perfect, right?
You believe in having many shoppers with many buyers?
Yes, we must have it.
What the government's done is basically monopolized 50% of the market into one buyer. So the government is one buyer and it's 50% of all the dollars in the nation and patients are not going, 'I love the way you did that. That smile was incredible. I'm going to come back here more and I'm going to stop seeing the annoying person at Boston City Hospital.' That's not happening. There are no smiles. There's compliance. Minimizing the scenario of maximum regret is the total behavior pattern of health care.
Explain this for me.
Minimizing the scenario of maximum regret. The audit. The lawsuit. The death. It’s the classic legislative manifesto. Betty's Law. Let's make sure that this never happens again, this horrible thing that happened to Betty, whatever it is, so let's all be required to wear seat belts or let's all not have guns or let's all have access to in vitro fertilization. Really? Like 'in vitro for the people'? That's a thing. It's a law in Massachusetts. What I'm trying to do with athenahealth is figure out how to reintroduce shopping.
Why should the public care about what you’re doing?
We should care because healthcare today is expensive, of course, but's that's the generic answer. The real reason is that it's humiliating and lame at any price and we all know it. Occasionally we run into a doctor that we like and so in that moment, when you're in a moment of humanity, it's okay but the entire exposure that most of us have to the system is not. None of us would say, 'Boy, that system was built for me. I feel like I just got what I wanted', right? Yet we have that in all other aspects of our life in America.
No doctor knows how much anything that they refer you to actually costs. For example, Mass General will do a tonsillectomy for $8,200. Saint Elizabeth's will do the same tonsillectomy for $2,600. It's the same frickin' thing.
athenahealth is building an information backbone that connects to you, the patient, whether you're at Mass General or whether you're at Saint Elizabeth.
Are we going to start paying to use your data?
The first step is wholesale shopping. It’s the law of the pocket and Obama Care made it mostly irrelevant to us. The law forbids health insurance products that make the consumer pay more than $2,000 and as soon as you smell a hospital, you're over $2,000. It forbids you from buying a health care product where you the consumer could personally pay out of pocket more than $2,000. So, we've largely neutered shopping at the retail level for now, but doctors can shop.
Define the health care episode.
So, if you say, look, I'm not into health, I don't want a hip replacement, I just want help if I get hit by a car but otherwise I want to be a natural person. You're not allowed to buy a product that you would want. You couldn't say, look, I've got $10,000 in my 401K and I’m not going to use the health care system. So, if it's under $10,000, I just want to pay for it myself. You're not allowed to buy that.
How likely is shopping to happen?
I think the first wave of shoppers will be doctors because health care is so complicated with all of its federally mandated codes for procedures and diagnoses and diseases, that you have to actually spend a lot of time doing it to understand it well enough to shop for it. The other reason is that it's now possible for doctors to engage in payment models that reward savings. The administration has created this idea of a global risk contract called episode-based payment. There's also something called an accountable-care organization where if the total cost of a population of people you care for goes down, you get half the savings. So, now it's like, wow. The doctors can make some money by shopping for this care. But how can they shop? How much does stuff cost? How will they know?
Our vision at athenahealth is that we're going to build a national health information backbone. So, when a bus in Montreal hits you, they'll see your wallet or your bracelet and they'll punch it and they'll see your chart wherever you've been in the country.
When will we see this?
We're working on it. I think we've got forty million patient records today but we've only got about 4% of the doctors. We need to have about 20% of the doctors for it to be relevant.
Are all your doctors Massachusetts based?
No, we're nationwide, with the exception of Hawaii. The idea is to create the first germination of shopping, which will be by doctors among doctors and hospitals. They'll be wholesale shoppers. The sellers will start to shop for buyers. They'll start to shrink their offerings into better understood, better priced packages.
I was talking to the CEO of Naples Hospital in Florida. His hospital is 90% full three months of the year, 75% full four months of the year but empty the rest. By the way, so is the Ritz. I asked him if he lays-off doctors. No, he pays them all year round! He’s got an orthopedic surgeon who's in Naples all summer long, golfing. He said he’s more of a snorkeler, but yeah. So, I said, if there was a shopping network, if a doctor in Cambridge saw that you needed a hip replacement and Mount Auburn was going to charge $62,000, what if it popped up on Athena Net… Well, listen, Heidi, it's July. I can get you two tickets on Jet Blue, five nights at the Ritz Carlton and a hip replacement.
If you're the CEO of Naples Community Hospital, wouldn't you do this? The Ritz is empty. They're not doing anything. The hotel, they're watering it. They're air conditioning it and it's sitting there. They're doing Cub Scout conventions at the Ritz because it's empty and the doctor is available.
Was it more interesting to be in a startup in your basement than riding a booming 2.7 million-market-cap company?
I don't feel remotely less engaged than I did then. The motivation there was survival. Not biological death but the death of athenahealth. I would hire someone and I’d say, ‘Here's how it's going to work. We're going to pay you enough to cover your Visa, so you don’t roll over your Visa. We're going to give you stock and if it works, you're going to be rich and if it doesn't, you're going to have a great resume item and a great story for what you were doing for the last three years.’ I did a startup. I tried to revolutionize birth.
Today I rarely think about whether athenahealth will go under but what I think about all the time is will it matter? Will we get enough steam built up and is our nose hard enough that we can make a dent in this amorphous, numb sort of Orwellian system? And that's motivating because it's so much bigger than us. I mean, we're big compared to where we were but compared to health care, we're like if ticks could get ticks.
What's missing in our country today to encourage innovation?
Culture is a function of underlying assumptions. It's the unspoken reality and I heard a beautiful moment from President Barack Obama during the election when he was talking about taxes and capital gains taxes and someone said, what about these CEOs who start these businesses? What do you think this will do to them? And he says, there's nobody who starts businesses. And I was like, oh my God; he genuinely believes that we're not a nation of people that start businesses.
I believe it’s biodiversity that allows for sustainability. In a pond, in an economy, in a family, in a school, it's biodiversity. Probably the most important leading indicator of our economy and our national strength would be an economic biodiversity index and I've never seen anyone track it but it's the most important number.
You have the established players that are sort of ironically the very regulation that keeps entrepreneurs out and keeps the established players in. And I'm sitting here crossing through that. I'm experiencing this journey from one side of the looking glass to the other where I go to Washington and people actually ask me what laws I'd like and I have the opportunity to make laws that make it impossible for other companies to come do what I do. It's this weirdest thing and I'm looking at all the laws that have been created and I'm like, how did this happen? There have been a million athenahealth that came before me that were some congressmen or legislator or executive branch guys trying to respond to some event that's happened that's bad and all these guys with access snuggle up to them and say, I have a way of protecting the interest of the people. Then they propose some new law that's going to be curated and maintained and chased down for decades to come.
How do you feel about that?
It makes me miserable.
Well, because it deafens our humanity. To survive we need to be able to express ourselves in a wide range of ways. Humanity comes from being able to fly your freak flag or being able to struggle with whether you want to go at it on your own and do it your own way.
That Washington is protecting people buy protecting some minority and in turn forbidding a giant majority from acting on their own…it’s the fundamental debate of government. It's the Nietzsche...the bird of prey versus the lambs.
What is needed for entrepreneurialism to stay alive in America?
You have to act locally. But I think what we need to do is foment our own destruction voluntarily and figure out a way to benefit from that.
I've devoted a chunk of my time and athenahealth's time toward a thing called MDP - More Disruption Please - and it's a support group for entrepreneurial ventures in health care.
There is next to no entrepreneurship in health care delivery. It's virtually illegal. Corporate practice of medicine is illegal. In many states, it's illegal to build a clinic, hospital or a health care delivering institution without a certificate of need from the governor.
athenahealth should sponsor new ventures, disruptive ventures entering health care, and offer access to our sales channel, access to our regulatory team. We want a group that represents the interests of new entrants in health care because only the established players in health care are represented in Washington.
Is there someone who gave you a break when you needed a chance?
Fred Frigoletto. Then chairman of OBGYN at Mass General called me back when I was a business school student and helped me work on my midwife model. I wasn't even a med student...that was cool. And Mitch Besser and Bill Schwartz and Cindy Dickinson in San Diego who basically joint ventured on the first women's center. That was huge.
The other one would be my uncle George. We had all these elaborate models that showed how the midwifery thing would work and I met with his financial advisor, a guy named Tony Duke from Bessemer, and uncle George called me and he wanted to know one thing. ‘What I couldn't tell from all this excellent work is do you believe in it? In your heart, do you really believe in this thing?’ And I said I really believe in it. And he said, ‘I think that's the most important thing and Bar and I are in. Goodbye! Love you.' That was it.
You come from a very powerful American family. How does that affect you on your path as an entrepreneur?
I think my party line is that the wind is sometimes at my back as a result of that name and sometimes in my face as a result of that name and that it averages out. I have so many cousins and uncles and grandparents who have established themselves and have done really good work at games that were already well played, that I was scared away from even trying to play the familiar.
I had a lot of love and a lot of unconditional positive regard from my parents which clashed dramatically with the practical reality of the battlefield which is that every job, investment bank, political sphere, golf, tennis had been done way better than I could ever do it and so how did I reconcile. I think that forced me further out into the ecosystem. I had to be an outlier.
Does the word change agent, disruptor, outlier resonate?
Outlier. I think if I'm always one of a kind or always an outlier and if I keep pulling athenahealth out that way, then it will have time to germinate. Good things take longer than the mainstream channels allow and so the only way you can grow something and perfect it is by finding a way to allow yourself to grow up long enough to be good at something new. I think the answer is try to do something that no one else has started on and that no one will start on for a very long time.
Describe a typical day.
It depends on the day of the week but on a day like today, I wake up at six. I do my breathing for fifteen minutes. I am here now in this. 'I' on the inhale, 'am' on the exhale. And then read a couple pages of The Presence Process. Michael Brown recommended it. I wake the first kids, get them started and then the second kids at 7:00. I leave at 7:25 with the two kids that need to go far and the other two kids walk. My fifth child is in college. Today is admin day so I work until 3:00 when I pick up my youngest. I try to get one on one with each kid in some way. It’s my chance to be a father.
Today is one of two days each week committed to administration of the company: writing for the internal audience, meeting one on one with members of my team and helping them with their journeys. It's meeting with my wife, Mandy. On Monday or Friday, we have lunch and we go through our calendar. Fridays I spend three hours with my team and we go through everything that they're working on, a day a month on PR, a day a quarter on investor relations, a day a week on client and operations experience. We have town meetings at different offices. We have six offices. (India to Belfast, Maine to Head Office in Watertown and over 900 employees.)
You’re so organized.
I'm not organized but I seek out organized people.
What websites do you frequent the most?
I have not read anything in years. My mother-in-law gave me The Atlantic and I read it, have an app, but I haven't been able to download it.
You have five kids so where is your favorite place to take them in Cambridge?
I love the Cambridge Skating and Tennis Club and with one daughter, we do gymnastics every Sunday. That's like a highlight of my week.
What's your favorite power lunch spot?
Well in Cambridge, the power lunch is the power breakfast - Henrietta’s. For lunch it’s athenahealth's Nourish, our organic cafe here in the Watertown office, which is unbelievable. Sixty foot ceilings. Amazing Chef.
Is there a quote you live by?
Blank or die trying. Doesn't matter what.