Is digital innovation really happening at traditional healthcare players or are so-called "healthtech" startups really leading the charge? As regulated industries finally undergo digital transformation in a major way, CXOTALK brings back well-known CIO David Chou to the show for an update on what he's seeing take place in the healthcare industry today. The latest CIO topics will be discussed as well, including the need for more IT agility in 2017 plus an updated look at decentralized digital transformation using the change agents model.

David Chou is the Vice President / Chief Information & Digital Officer for Children’s Mercy Kansas City. Children’s Mercy is the only free-standing children's hospital between St. Louis and Denver and provide comprehensive care for patients from birth to 21. They are consistently ranked among the leading children's hospitals in the nation and were the first hospital in Missouri or Kansas to earn the prestigious Magnet designation for excellence in patient care from the American Nurses Credentialing Center.

Transcript

Dion Hinchcliffe: Hello and welcome to CxOTalk, Episode #231. It’s Tuesday, May 9th. Welcome to the show! We have a very special guest, today, a person I've got to know recently, thanks to global travel: David Chou. He is the CIO and now also the CDO, Chief Digital Officer, of Children's Mercy, Kansas City. Welcome, David!

David Chou: Thank you, Dion! Thanks for having me!

Dion Hinchcliffe: You bet! We’ve had you on the show before, so we’re hoping to do kind of a catch-up on all the things that are happening. Digital is changing faster than ever. I’ll be helping to revisit what you’re up to, how things are, your new role as Chief Digital Officer; so, maybe if you can tell us a little bit about … give us an update on Children’s Mercy. You know, get [us] familiar with how big you guys are, any interesting stats, and we’ll take it from there.

David Chou: Yeah. Thank you. So, Children's Mercy is a pediatric standalone hospital in Kansas City. We're a $2 billion organization; we have almost 8,000 employees. [An] interesting stat is we’re an academic medical center. We’re building a huge research arm; a lot of investing there. And we are training facilities for a few surrounding colleges like the University of Kansas, University of Missouri, Kansas City; so, we pride ourselves on being that flagship hospital from a pediatric space, here.

Some interesting stats: We had over 20,000 procedures last year, over 14,000 patients; most importantly, we serve everyone. So, what does that mean when we say that we serve everyone? That means whether you have insurance or not, we provide care. So, we have an estimated total of about $119 million in uncompensated care for the state of Missouri and Kansas. So, that’s one of our missions that we pride ourselves on, is any kid who enters a hospital, they’re going to get the best treatment that we can provide in terms of care. And, that’s one of the many reasons why I joined the organization. When I saw the quality of care that this organization provides…It’s truly exceptional and it’s a place where I would take my kids to. And that speaks a lot when you work in the healthcare space, where I’ve seen organizations where I probably would have second doubts about bringing my own kids to the facility.

Dion Hinchcliffe: Now that's a great mandate and mission that you guys have there, and it probably gets you excited to get up in the morning to use technology to improve things there. Describe your role there now. It's shifted a little bit. You were Chief Information Officer, and now that role has expanded. What are you responsible for and how has that grown over the last few years?

David Chou: Yeah. So, you know, we added the title of Chief Digital Officer, because we’re in a digital world now. If you think about every organization, they are a digital organization. Whether you like it or not, doesn’t matter whether you’re in agriculture or finance or healthcare, you’re a digital company. So, that’s part of the reason why I want to make that stamp on the title, where in addition to leading the core technology in all of the various functions of the CIO, starting to have the organization transform and think about a digital experience. And that could mean a lot of things. But, it really puts that stamp in terms of my role. I would say when I first started here a year ago, a lot of the transformation was in the culture, building a team. They would say I would only be able to spend about 60% of my time focusing on digital and focusing on the business side of the house. Now, I’m at 80%. And, that’s where it needs to really be first to transform the department, the internal organization; that’s going to help us buy the best care for the citizens of Missouri and Kansas.

Dion Hinchcliffe: I’ve actually worked a little bit advising the board of directors of healthcare associations, and I kind of get a pushback. The people who are into healthcare

Dion Hinchcliffe: Hello and welcome to CxOTalk, Episode #231. It’s Tuesday, May 9th. Welcome to the show! We have a very special guest, today, a person I've got to know recently, thanks to global travel: David Chou. He is the CIO and now also the CDO, Chief Digital Officer, of Children's Mercy, Kansas City. Welcome, David!

David Chou: Thank you, Dion! Thanks for having me!

Dion Hinchcliffe: You bet! We’ve had you on the show before, so we’re hoping to do kind of a catch-up on all the things that are happening. Digital is changing faster than ever. I’ll be helping to revisit what you’re up to, how things are, your new role as Chief Digital Officer; so, maybe if you can tell us a little bit about … give us an update on Children’s Mercy. You know, get [us] familiar with how big you guys are, any interesting stats, and we’ll take it from there.

David Chou: Yeah. Thank you. So, Children's Mercy is a pediatric standalone hospital in Kansas City. We're a $2 billion organization; we have almost 8,000 employees. [An] interesting stat is we’re an academic medical center. We’re building a huge research arm; a lot of investing there. And we are training facilities for a few surrounding colleges like the University of Kansas, University of Missouri, Kansas City; so, we pride ourselves on being that flagship hospital from a pediatric space, here.

Some interesting stats: We had over 20,000 procedures last year, over 14,000 patients; most importantly, we serve everyone. So, what does that mean when we say that we serve everyone? That means whether you have insurance or not, we provide care. So, we have an estimated total of about $119 million in uncompensated care for the state of Missouri and Kansas. So, that’s one of our missions that we pride ourselves on, is any kid who enters a hospital, they’re going to get the best treatment that we can provide in terms of care. And, that’s one of the many reasons why I joined the organization. When I saw the quality of care that this organization provides…It’s truly exceptional and it’s a place where I would take my kids to. And that speaks a lot when you work in the healthcare space, where I’ve seen organizations where I probably would have second doubts about bringing my own kids to the facility.

Dion Hinchcliffe: Now that's a great mandate and mission that you guys have there, and it probably gets you excited to get up in the morning to use technology to improve things there. Describe your role there now. It's shifted a little bit. You were Chief Information Officer, and now that role has expanded. What are you responsible for and how has that grown over the last few years?

David Chou: Yeah. So, you know, we added the title of Chief Digital Officer, because we’re in a digital world now. If you think about every organization, they are a digital organization. Whether you like it or not, doesn’t matter whether you’re in agriculture or finance or healthcare, you’re a digital company. So, that’s part of the reason why I want to make that stamp on the title, where in addition to leading the core technology in all of the various functions of the CIO, starting to have the organization transform and think about a digital experience. And that could mean a lot of things. But, it really puts that stamp in terms of my role. I would say when I first started here a year ago, a lot of the transformation was in the culture, building a team. They would say I would only be able to spend about 60% of my time focusing on digital and focusing on the business side of the house. Now, I’m at 80%. And, that’s where it needs to really be first to transform the department, the internal organization; that’s going to help us buy the best care for the citizens of Missouri and Kansas.

Dion Hinchcliffe: I’ve actually worked a little bit advising the board of directors of healthcare associations, and I kind of get a pushback. The people who are into healthcare are really caught up in the mission that you just described before, right? Helping sick people get better. Do you tell them that every organization’s becoming a digital organization? Every company’s becoming a technology company, and what do they say about that?

David Chou: It’s still a very new concept. Some folks who may give me their […] as well, come from a technology leader, of course; you want to be the center of attention. But it is true when you think about the biggest and best one that we had as an organization. Our biggest investment has been technology. It's not about the MRI machines; it's not the […] robots; it's actually our spending on the technology portfolio end-to-end. So, if you think about it, you’re spending hundreds of millions of dollars on technology, but [if] you’re not operating as a software provider or even a product vendor, you will never be successful. So, it’s a mind-shift, and you have to change that perspective. And, that’s something some of the things I always talk [about] to with my senior leaders. When I put it into perspective, the amount of money that we’re spending on technology, we have to really change our mindset.

Even more so when we talk about the CDO role – the Chief Digital Officer: lots of organizations have approached me; big healthcare systems where they have great CIOs, and the CEO would say, “You know, David, here’s my dilemma right now. I have a great CIO; world-class, renowned; does a great job of keeping the lights on. But, I feel I’m missing something. I don’t feel that I’m transforming towards the digital era. Do I need to find a Chief Digital Officer? Is that the right play?”

So, I keep hearing a lot of those discussions coming from CEOs across the US from a healthcare perspective where they know they’re missing something. They haven’t figured out what is that gap. And, I think that’s where the role of the CDO comes in. But hopefully, the CIO can also play that role, because that’s my expectation; someone who can lead the technology and conditions…

Dion Hinchcliffe: It's the old "one throw to choke" argument, right? It's ultimately if you don't want technology rolling up to two high-level parts of the organization doing what will end up being two different things, then you've got to figure out how do you create one, unified technology environment? And that's a big challenge. But, it was very interesting what you said that now that you have to manage down, but you need to manage up and help the leaders in the organization navigate to a digital future; how much of your time is spent doing that, and trying to coach the other C-levels in your organization, coach the board, and any other steering members you might have?

David Chou: I would say part of my role … I’m a sales guy. My wife is always asking, "What do you do every day?" because she knows I can't fix computers, and part of my job is education. I sell upwards, downwards, laterally, so yes; definitely educating the board, educating the other peers in the C-Suite is critical. Because, if you think about the world that we live in, everyone has a great retail experience. Everyone would like that same experience in a hospital setting. The convenience factor, the Amazon factor; that's what we're looking towards. You want to personalize the experience. But healthcare's still catching up in terms of creating that experience.

So, at the same time, we, as consumers in other industries have this great experience, but somehow, were not able to transform that when we're buying care. So, that's what we're going to have to move down to, and that's part of the education process where I want to get people thinking about their experience as consumers and try to transform that into how we operationalize.

Dion Hinchcliffe: Yeah, that’s a great insight. And, I think a lot of people wonder about that; they don’t feel like that consumer-quality experience. Yet, as you pointed out, healthcare organizations are very tech-centric. They’re bristling with technology and how they deliver almost everything they do. Why is that? Is it regulatory constraints? So, what are the issues? Why can’t healthcare consumerize as much as other services?

David Chou: It’s a very risk-averse industry. It’s also very traditional, where if you look a – I’ll be very frank – look a some of the leaders and decision makers in healthcare; this may be their last gig. Or, they may want to set up one more big gig after this. So, when you have that environment, where people are risk-averse, and they may not take the big gamble on making the big decision of change, the whole industry doesn’t change. That’s number one.

Secondly, a lot of these major enterprise healthcare software platforms; they’re built on legacy code. So, mounts, Cobalt, these are what's driving these enterprise multimillion-dollar, billion-dollar systems. So, when you have that core infrastructure on legacy technology, how do you transform? How are you going to create APIs? How do you get to that point of scale and where the other industries are? I would say, those are the biggest two parts, in my opinion, which is forcing healthcare to not adapt as quickly. But the reality is, we have come a long way in the past eight years. We have to come a long way towards being electronic …. There's a key mandate of getting to electronic records. But, that's just a starting point. We have not got to the other …

Dion Hinchcliffe: And then where does that investment come from? When I talk to most CIOs, one of the things they’re asking is, how much are your budgets put into keeping all of your legacy infrastructure running? All the apps and all the services you have now? And, it's usually between 80 and 90%, leaving about 10-20% to innovate and to build out that digital future. Is adding that CDO role giving you more of a budget? You know, how are you able to start growing that, because, legacy mount, as we call it, is really pulling back a lot of CIOs that I’ve talked to.

David Chou: Yeah. And I think that’s a great point. You think about most CDOs coming in, they don’t have the operating budget, and they may be one man shop, or maybe they have another member of the team, but they don’t have the spending authority. Part of the reason why I made the first to get the CDO title, I still had the spending authority as the CIO. The same budget, I didn’t ask for anything more, but now, I could transform and shift the technology spending to maybe more digitally central and centric, versus focusing on core technology.

Getting all things to the cloud, getting out of the datacenter business; moving everything into a mobile-first platform. That’s what we’re moving towards. So, because I have the budget of the CIO, I’m able to transform and get to the digital experience a lot faster with the spending authority.

Dion Hinchcliffe: Yeah. That's very interesting. Now, the CIO tends to have, you know, the experience […] their budget. We just got a question that came in on Twitter. For those of you that are watching the show, you can always post your questions with the #cxotalk hashtag, and we’ll try and get to them. We have a question from Scott Weitzman: “How are patients responding to the digital transformation of their care? Do they actually like this? Do they want to use mobile apps on their phone?" I can imagine some, maybe not. What has your experience been so far?

David Chou: You know what’s surprising? The biggest adopters of digital technology are the elders; folks over 60 years old. Well, obviously now I’m in the pediatric space, but when I had orientations that had both adults and kids, our biggest adopters of technology were the ones that were over 60. And, they should have an excuse that they're people that don't know how to use technology. Those are the days of the past. Everyone knows how to skype; everyone knows how to use technology to communicate with their grandkids or their kids. So, it's everywhere around us. So, the adoption rate is high, especially in the pediatric world, where most of our consumers, the kids' parents, they're millennials. They grew up with this technology. They want it more than ever. They want to be able to text. They want to be able to have a web chat versus calling in, versus having a face-to-face conversation.

So, for us, especially in the pediatric world, it’s in high demand, and we’re seeing some good adoption. Not there yet, because the technology portfolio is not where it needs to be in terms of maturity models yet, bet we will get a lot of adoption from folks who are craving that digital experience.

Me personally, I would prefer to use that virtual care model where I could create an appointment, I could get a doctor [setting aside] thirty minutes for my kid. Then I could get a prescription at the local pharmacy; retail pharmacy; all within that one hour. I will pay the additional dollars, which is not covered under my insurance, to get that convenience, that I would bet most folks would pay that premium for.

Dion Hinchcliffe: Well, I have health insurance, but since I travel all the time, I have a mobile app where I can see a doctor for fifty dollars. I have to say I use that more than I use my regular healthcare provider. So, what’s interesting is that convenience, and kind of the urgency, because it’s a health issue, trumps concerns about privacy or the fact that it’s unfamiliar to most people, still?

David Chou: I would say so. If you think about the world that we live in, right? All of us are social individuals and social creatures, Dion. They know where we are as we speak. So, in terms of privacy, we give up a lot of privacy for the convenience factor. I would say, that trend is going to continue as we evolve, where privacy might not be as big of a concern. But yes, this is still a lot [to deal with] for folks concerned with privacy, but the reality is the convenience really outweighs that privacy concern. That’s the trend that we’re moving towards.

Dion Hinchcliffe: Yeah. Excellent. So, before we take the next question, can you give us an update on your digital transformation journey, since we last spoke with you? What are the major parts of it? So, you know, what did you encounter? What’s up next?

David Chou: Yeah. So the start of any digital transformation is a journey. It’s a cultural transformation that needs to start and we’re very early in that maturity model. So, I would want an organization that did not have a digital strategy, let along a technology strategy. It may seem a lot that the core components have been so … The first year coming in was putting together a roadmap. Getting together the right leaders and shifting our mindset to be more digitally-focused, and that’s why we’re headed on that journey. It’s almost similar to any organization that has gone through a lean transformation where the start to the culture […] is not an easy button I could buy to solve this problem. But, the easy part is actually the technology. I could buy the greatest technology out there that could solve the problem, but without the adoption rate internally and externally, I couldn’t get it done.

So, for us at Children’s Mercy, we’re Year Two of the transformation; of this digital experience. And the end-goal is to try and create…We want to create that retail-like experience for healthcare.

Dion Hinchcliffe: Yeah, so talked to a lot of programs. Now I hear about them being in Year Two, and the stakeholders, they don’t see all of the plumbing in the infrastructure; the opening up of the data. You know, all of that takes an enormous amount of effort to do that before you can even show any results. So, are you running into challenges like that? Saying, you know, “Year Two, you should have all this stuff out?” And you’re like, “No. I’m just trying to build my infrastructure to make the art of the possible happen?”

David Chou: Fortunately for me, I’ve had great support here. People have understood what has transpired. I walked into an organization where my predecessor was here for 25-plus years, so they knew there’s a lot of legacy, there’s a lot of things that were done they way it has been mentality. The change doesn't happen overnight. Fortunately for me, I had a lot of support in terms of getting this transformation started, but like you said, the plumbing and the pipes, the foundational element; there's a lot to it that needs to be fixed. And, my biggest challenge is going to be right now – it is right now. How do I transform while keeping things going? But most importantly, I'm trying to think about how do we leapfrog? We think about developing countries versus developed countries. The developing countries may have an advantage where they can leapfrog and bypass some of that traditional infrastructure. So, that's where I think we may have an advantage. […] That’s the mentality in mind for the organization.

Let’s just leapfrog. Let’s just forget about going through that traditional path building the same infrastructure. Let’s just get the latest and greatest and make that leap. So, fortunately …

Dion Hinchcliffe: You know, I hear that more and more now. Instead of taking three steps to transform, saying, “Why can’t we just hit the target,” right? In the next change, instead of just saying …

So, for those of you just joining us, we have a very special guest, David Chou, one of the top CIOs in the world. He makes the top of the social CIO list on the internet, and somebody I recently met myself in person.

We have a question from Twitter, from Arsalan Khan: “Do you think doctors should be taught in school to get involved in technology even before a start as doctors?”

David Chou: Definitely. If you look at what’s been happening right now, the choice for … Let’s use residents. Residents get trained at […] organization who has System A. I’ve heard that they’re signed where they may make a choice as far as where they want to work based upon the technology portfolio. Now, how is your portfolio? If someone has System B versus System A, and they were trained in System A, they may decide to work in the organization that has System A. So, this technology portfolio has to be a competitive advantage in terms of recruiting.

So, I definitely do agree that we do need to train. The other reality is this. I see lots of positions and medical staff who, because they were not trained appropriately, they’re spending a lot of time documenting and using the system. Going electronic was not … The sales pitch was not the expense to make it faster. There are a lot of benefits to being electronic. Being able to do things quicker is definitely not the reason why we want to go electronic.

So, what’s been happening is we have positions who are going home, spending late night hours finishing their documentation, and part of the reason they may not have […] appropriately, maybe have not set their system appropriately, just based on their expertise. Therefore, they spend a lot of time. So, I definitely do encourage them to think they need to put technology training or some sort of core training as part of that core curriculum because we are a technology world, you know? People grew up learning how to type, and that worked for us and that's a core component.

Dion Hinchcliffe: Computer illiteracy has been such a big deal.

David Chou: Yeah.

Dion Hinchcliffe: But should your doctors and nurses need to learn to code?

David Chou: Code? No. I don't believe so, but there are a lot who love to code, and they do it as a hobby. I would say if you think about where the …

Dion Hinchcliffe: But that’s not teaching the digital mindset about what’s possible, but how the stuff actually works. I’m not saying that they shouldn’t continue coding, but should they learn to code?

David Chou: They may; just the logic. I think learning the logic of coding for healthcare; even just one curriculum, just to understand the logic of how the system works, because you get a lot of questions. How come you just can’t do this, Well, they could understand the logic of why the computer software works. That may help them defer some of the questions that they may have.

Dion Hinchcliffe: Yeah. Well, I think that’s the issue, see, is people get into healthcare feeling very passionate about caregiving, and they’re not technology first. They’re caregiving first. And so, it’s just a matter of priority.

So, you said something important about adoption. And so, how do we do this? How do we change the technology that if we do that, we also have to figure out how to get the people to change, too. So, how do you go about doing that? What ways do you think about making that dual-hand-in-hand technology people-change?

David Chou: Yeah, the simple answer is we have to communicate. You have to go back to the traditional path of communicating. You have to go down to the traditional path of, "May I have a handhold?" and walk people through this change. Unfortunately, there's no easy button. People like to use computer-based training for some of this. Sometimes it doesn't work. So, it is very grueling and brutal, but you just have to do a lot of the traditional communication. Over-communicate! One of the things that I have learned upon any enterprise that uses EMR orientation … I could have the greatest build that only trained them about 20% of the effort, and the output would be a very lackadaisical, even bad install where I can have a terrible build by training users 40% more, 50% more how to use a system. That’s a bad install. That isn’t working right now. But the end-result, “Hey! That’s the greatest install ever!” Why? We were training appropriately. We spent the time training them, educating, the teaching them about the workaround. So, it’s a growing effort, and it all comes down to communication. Unfortunately, in my opinion, I don’t see any technology solution that’s going to be able to solve this adoption and logistical…

Dion Hinchcliffe: Well, it’s just not a technology problem, right? Digital transformation requires an investment in people, then. That is what I’m hearing. Yeah, I don’t think that’s always clear to everyone that’s involved in that process. There’s a lot of focus on technology and the digital possibilities, and not “How are we going to get our people to do that?” And that takes us to, before we get to our next question, takes us to the … What models do we see emerging? Now I know you’ve been kind of involved in those discussions online: the whole concept around empowering change agents, saying, “Let’s not spend too much time with the people that aren’t ready to change. Let’s go and find the people that are super excited to change, that are energized to do it, and empower them to give them tools and resources, support, and education. What are your thoughts on … Is that the kind of thing that we’re going to see in the future?

David Chou: That has been my model. So, I've had the luxury of building a new team. The people that I have hired and brought on are change agents themselves. So, imagine if I bring two leaders who are change agents out of a total of six, direct reports, there's going to be a lot of just peer pressure to transform themselves to be able to keep up. So, I think that's the greatest model, if you're able to create that peer influence, create a group of change agents into an organization, influence their peers to adopt change; that’s the best effort, because you don’t want to be that peer that’s left behind while everyone is moving ahead.

In lots of organizations, the other challenge that I have seen is when they bring too many change agents, but they’re not changing the process themselves. The organizational process … So, it’s a tough balance. How do you bring the right change agents with the right fit? Someone that knows how to culturally navigate an organization; that’s one of these unspoken things that is not brought to as big of attention as I would like to see is this “cultural fit.” You see them during our […] chat that political savviness of driving change is …

Dion Hinchcliffe: Yeah. Great change agents have to be mentioned or look bad, right? You know, folks like yourself, you know… I think it's great to hear that you said all that because I've seen what makes you that visionary CIO is that ability to see that we can't do it all ourselves anymore. We helped with the entire organization, so how do we tap into them, and how do we teach them the things they didn't know yet, so they can be effective in helping us with digital transformation?

David Chou: Yeah. One of the keys that I personally believe is I’m trying to hire all my […] have the ability to take over my job. That makes my job a lot easier. That’s a very …

Dion Hinchcliffe: That’s a great point.

David Chou: Right, I want them to be able to do my job so that I could transform myself individually because it also goes back to me. I need to transform myself. I need to change myself on a daily basis. When I get too comfortable, there’s something wrong. So, there’s a lot of that self-reflection that needs to happen. It’s not about having other change agents in the organization, I personally have to change on a regular basis.

Dion Hinchcliffe: Yes, is there company indicator that you use to know you’re heading in the right direction as you feel pulled a little bit out of your comfort zone?

David Chou: Exactly. I mean, there are days when I say, “You know, I’ve been pretty comfortable the last three months.” I sort of went on, I won’t say “cruise control,” but autopilot. I know exactly what’s coming down. I like to predict things. We probably are not transforming ourselves individually, let’s go back to the drawing board. Let’s talk about what needs to happen. That way, you always keep ahead.

Dion Hinchcliffe: Yup. Great. So let’s go ahead and take our next question. This is from Paul Turner. The question is, and I think this is a good one, “What digital transformation in healthcare technology is most closely linked to moving to a value-based care model?” Maybe you can give us a little sound byte on what value-based care is, and then maybe your thoughts on that.

David Chou: Yes, so let me tell about value-based care. Let’s look at health care in general. This is the only industry where you do not get paid what you charge. I go to a grocery store, I buy a chocolate bar, I buy a milk, and there’s a price for that. What they charge is what I pay. Healthcare’s different. We have this whole reimbursement model where I could charge you a hundred dollars, but I may only get paid at the facility of a hospital thirty dollars, even though I charge a hundred bucks. So, this whole shift of value is now, instead of having the fee-for-service model where if I provide a hundred tests, I get paid for a percent of those hundred tests; now, it’s going to be focused on how healthy is this patient? What is the outcome of that procedure? Are they doing better than before, or do they have to come back and get retreated again, or possibly second procedures? So, that’s where it’s going with the reimbursement model, where they’ve got to measure the value outcome.

The technology that I really see that needs to happen in healthcare: we need to have some sort of CRM model. If you think about every industry, they know everything about me as a buyer, but healthcare, what does that leave the hospital? They have no idea what goes on with David Chou. But, there within the hospital with the care, you know, the electronic medical record knows exactly what they’re going to do, exactly the kind of procedures I’m going to have, the type of food I’ve been given, the type of medication in clinical notes, great stuff within those four walls. But what does that leave? It just disappeared. You had no idea. So, our CRM-like model conceptually, where we know a lot about David Chou outside the hospital is going to be that success factor for our population health, because of the prime example is, let’s just say I’m on a low-sodium diet, but I’m going to drive through Burger King. What needs to happen during that time when I’m going to order my Whoppers, “Hey, David! You’re not supposed to be eating this! Order a chicken salad sandwich! Or better yet, order a salad!” Find I way to change my behavior, and that’s where we need to move down towards.

Dion Hinchcliffe: It’s kind of like the difference between productivity and effectiveness. Just because you can do a hundred tests doesn’t mean you should, and it’s not really focused on the outcome, right? I would make David Chou healthy, that’s the value that we’re going after. Is that a good way of summarizing it?

David Chou: It is. And that’s where the industry is moving towards when we talk about value-based development. Value based is really about keeping the patient out of the hospital, and we’re getting paid to keep the patient out; because when you come in, that’s when we know you really need to get treated, and you need attention, and [we] make sure you get treated in the most cost-effective way.

Dion Hinchcliffe: Yeah, and now, are you being pushed to help the organization shift towards value-based care? Is there a mandate coming down the pipe? Help us understand the imperative there and how that’s going to affect digital transformation in healthcare.

David Chou: The reimbursement rate is declining from CMS, which are the providers of Medicare and Medicaid. As that reimbursement starts declining, you're going to be judged based on the quality of care, that's where digital transformation has to occur. In the pediatric world. It still has not […] to the adult world. The adult world is doing this on a regular basis where pediatric will start to catch up. And a lot of these standalone pediatric hospitals have a big market share, so … It's a very tough balance when you think about an organization that [has] 85% market share. How do you transform? How do you say, "Hey, I need to move towards this value-based care model; value-based health model. But, I may lose five million dollars next year because if I'm doing the right thing for the patient…" So the very top asks for senior leaders to figure out when to play that card, and stretch into a pediatric world where the margins are very well right now and there's not a lot of pressure yet. But, it's coming.

Dion Hinchcliffe: So what is the enabling technology? Is it analytics against electronic medical records? Or, what’s making that happen and then feeding that to the doctors or to managers; or, how does that work?

David Chou: Analytics is definitely key, and ERP is huge as well because you need to figure out the cost of providing care. I would bet that most healthcare organizations can’t even […] the actual cost of providing care for one patient. We may give you a good formula, and on average, round it out for a formula calculation, but we don't have the true cost of providing that care. So, that's where data's going to come in; your ERP data; your supply chain. That's all going to come in, in addition to the EMR data. So, that’s the puzzle that everyone’s trying to figure out: how do we become a data-driven company? How do we get this mapping for all 40,000 tables in the EMR to be emigrated? So, the big ask is touching on [something] that we’re all facing now.

Dion Hinchcliffe: Yeah. It's a fascinating subject and it's going to change our lives. So, we're going to talk about population health in just a moment, since you brought that up. But first, we're going to take a question from Sal Raza, who asks, "Can you see VPN or Facebook-type communications to include the voices of patients' families and their caregivers so they can connect the clinical data to provide better care?"

David Chou: Uh, so we’re doing that right now internally. So I’m trying to make; just within my department; a social department. So, we’re using a Facebook-like technology where we’re using the Microsoft Yammer platform just so the last thing to have; a [single] message out to all. But yes, I definitely do see that interaction. The first organization that really gets that right, who has that Facebook social interaction, who… They're going to create the greatest experience. Most organizations are still very risk-averse as they […], where they view privacy concerns, HIPAA concerns, so, therefore, it has not taken off. But, we're seeing these one-off startups that have provided this technology, but it's upgraded very slow.

Dion Hinchcliffe: Yeah. And this is where we see health tech startups kind of giving the old guard guys a run for their money. So, tell us a little bit about… You mentioned population health. I know that it’s an exciting topic in healthcare but I’m not an expert, and I think you know a lot more. Give us a little overview of what that is and why it’s important to your digital transformation efforts.

David Chou: Right. Good, let’s go back to my previous message. The future of healthcare is not about how many patients you're going to see. Traditional healthcare is, "Let's fill my beds up," similar to airlines. How many seats can I fill? The new model of healthcare is, "How can I keep my hospital empty, but how can I make sure that the people who come in are the ones that are required to be treated?" So now, you need to figure out how you provide wellness, and how you provide care outside the hospital. And that's the game of population health. We're trying to gather a pool of patients, and then this pool, keeping them healthier, making sure they do not come into the hospital; making sure that they exercise regularly; making sure they're eating the right meals that are appropriate in terms of sodium, calorie level.

So now, we’re moving to this journey of, “We need to get engaged with them outside the hospital.” You need to figure out proactively, twenty-four by seven, how do you change someone’s behavior. And it’s a tough thing to do, there’s not a simple technology that’s going to do that, but we’re seeing lots of other …

Dion Hinchcliffe: If you provide tools to bring in their caregivers, their family, their friends, you know, there is different things you can do. But it sounds like there's some big data involved to measure all this, there are operations in the healthcare provider to actually engage with these patients, and then there are digital experiences out in the field that patients are connecting to that gives them the support they need that […] help to their lives. Is that […] what it looks like?

David Chou: That's what it's going to look like. The same way that retail [does]. When you walk into Nordstrom, they know exactly their purchases. And they can probably predict whether you're going to walk to the right or left based on your pattern. That's what we're moving towards in healthcare. Amazon knows exactly when I'm going to reorder my laundry detergent, just because they know my tracking; my history behind it. Healthcare has not got to that stage yet when we’re predicting what make of test may happen. And that’s when the data piece is going to come in; all the social data; that’s what we’re going to have to move towards…

Dion Hinchcliffe: Now, is the big business of healthcare really going to find that acceptable? It sounds like you’re actually going to create a solution that's going to create healthy, less sick people, and is going to create fewer patients and less business. How does that work?

David Chou: That’s a challenge […]. How do you go to the board and the CEO says, “You know, I’m going to lose X million dollars this year, but I’m doing the greatest thing to keep this population healthier.” But that’s really the divide right now. Even though we talk of population, it’s very tough to act upon, because.

Dion Hinchcliffe: Is it as a service? This is where we're having a Chief Digital Officer that deeply understands digital and the business of things like healthcare. You could say, "Well, but population health might be a service we can charge for because we're keeping people healthier." I don't know. This is the challenge you're facing, David. How do you make all that work?

David Chou: Yeah. The other challenge, how do you tie in the insurance carriers to the BL line?

Dion Hinchcliffe: Right.

David Chou: You know, there’s two different lines of business, two different lines of incentives where now you have to bring those folks into play. So, data is like … There’s something that came out yesterday where data’s the new oil. Data’s the new currency, and that’s really what we have to move towards in terms of getting data, but most importantly, it's not about the number of data points you have, you've got to filter out the right data. That's the tough part; filter out the right data to make the right decisions. But, you can't get to that […] until you figure out where's your strategy? How are you going to transform […] care? Are you going to make the big focus on virtual care outside of your hospital? Or, do you want to keep it in your full four walls? So, these are tough decisions that healthcare leaders are going through, which is why you're seeing the trend of megamergers. Healthcare is consolidating. The number of hospitals is shrinking. They’re getting bigger and bigger.

Dion Hinchcliffe: You know, that’s interesting. And so, data is clearly destiny in the digital age, and it’s the new Golden Rule, “He who has the data makes the rules,” right? So there’s a big land grab that’s taking place and trying to get all that.

So, we have another question, and please, we really appreciate the contributions. We have time for a couple more questions, please post them on Twitter with the hashtag #cxotalk. We have a question from Kalim Sharik: “What IT frameworks and methodologies are inevitable for digital transformation in the healthcare enterprise?” I’ll throw a couple – while you think about that, David – on the pile. One is DevOps. I think that’s absolutely essential for the fast feedback loops that we need to have to create rapidly evolving digital solutions in today’s fast-moving markets. Another one I’d put in there is growth hacking, which is how do we create something initially, and then move that over into what it needs to be to be successful as quickly and effectively as possible? I think those are two important frameworks. What do you think?

David Chou: We’ve got Agile. That’s something we’re practicing right now in terms of using the Agile methodology just to … for something as simple as driving down the number of outstanding reports that we need to provide out to our customers. We’re starting out with over 900 reports out; 900 requested reports now. I wouldn’t say we finished all 900, but we cut down half based on the Agile methodology.

Now, I will also add the traditional IT/ITO that’s really customer service-centric. You still have to have that service-oriented mentality when you run an IT shop. So, the combination of Agile, DevOps that you had mentioned, ITO, these are all necessary frameworks. The key is not to be so hung up on perfecting these concepts, you know? Go with the Agile-lite, DevOps-lite just to get things moving. If you’re hung up on that 100% perfection, it may take you forever to get there, and you may never get there; therefore, defeating the whole purpose of trying to go down this path of […] platform.

Dion Hinchcliffe: Although, I’m still thinking of a challenge of we have a risk-averse and a regulated audience as you said, and they’re going to want everything to be perfect, right? That’s your cross to bear.

We have a question from Katie Goss and Scott Weitzman again. They want to know about the role of artificial intelligence, that’s a buzzword we’re seeing in the press all the time now, in healthcare. And also, what are the security concerns about that? Where do you see the role of AI in healthcare?

David Chou: That's going to be weird. I mean, the ability to predict what may potentially happen: huge. Even bots. I mean, a personal example is I've been using a bot as my personal assistant in addition to my regular EA. I've been using them simultaneously. And it has to […] some people. Some people respond to the bot as if it's a normal person. We can also use bots for interacting with patients to see if they have some questions regarding a common cold. That may be able to come in and just create a different level of engagement while satisfying the consumer. So, AI is huge, but unfortunately, healthcare is still…They're thinking about it, but I don't see it really there yet. People talk about it, but I would say we’re still five to seven years away from having anything real in terms of AI. But I definitely see the benefits, especially the ability to predict what may potentially happen in terms of someone’s health. That’s huge, right? If I knew I was going to…

Dion Hinchcliffe: It might play a big role in population health, right? The best demo I ever saw, which I don’t think was real, but it made a convincing scenario, which is: The doctor is in that Facebook-like chat with the patient trying to work through some symptoms that they’re having. And in the background, the AI bot is watching the conversation between the doctor and the patient, and pulling up all the relevant medical records, all the relevant symptom analysis in real-time and presenting all of this additional information to support the doctor’s decision in their healthcare process, during that collaborative session with the patient. And they got something that bots, with AI, can really support caregivers and take that load off them, and do a lot of legwork. So, I think there are interesting things happening there.

David Chou: Yeah. Here's one extra thought just to think about. You think about why it may not happen that quickly. Think about your medical profession. You're a doctor. You went to school for eight years of your life because someone's training you on how you're going to come out with your medical judgment. Now, here, you have a bot coming in saying, "Hey! My judgment's better than yours. I didn’t go to school for eight years. I’m just a robot!” How do you feel as a professional? Going to school spending an entire career getting to that point, and now getting a bot coming in and predicting what you think the test […] to predict.

So, I think that cultural transformation needs to happen, but that’s also a big reason why it has not taken off as much because traditional healthcare, you go to school, you go to medical school, and by the time you graduate, you’re supposed to be that expert versus having someone automate that or most important, having a machine or robot …

Dion Hinchcliffe: This is going to be our big challenge; it’s that. And we’re continuing to get great questions from Twitter, so thank you for those. We have one from Megan Jamis from Textra Health, and the question is: Do you see value in patient-generated data? Do you agree patients might trade that data for better patient experiences?

David Chou: Definitely. We trade our data right now to retailers. I give up that privacy for convenience. But, the challenge is going to be let’s just say we have patient-generated data. Let’s use wearables. I have all this data about myself on my wearable and I transmit it to a doctor. What if the doctor doesn’t trust the data? And that’s going to happen. That’s probably the key barrier right now. A physician or a medical professional may not trust that data even though it’s generated by you as a patient. They may discard it.

Then, you’ve got coming in, “Do the test again,” or do whatever diagnostic it is to get that data again. How does that work? Are we duplicating that effort even though we’re trying to streamline? I think that’s the cultural barrier, and I think that’s the biggest challenge. But I do see patient-generated data as valuable. But, it’s only valuable to us. What about the other side that’s going to …

Dion Hinchcliffe: Now, this is the whole "Not invented here!" discussion. You know, the same problem in healthcare is that "If it's not ours, then how can it be any good?" I think that in digital, we talked about ecosystems, right? We understand that collectively, we're much smarter and better and more valuable when we work together, and so we can partner with our patients, we can partner with other clinics and healthcare organizations, and we can pull our data, and we can do much better that way. And yeah, it's that cultural shift. How do you make that happen? And so, how … We get this all the time: "Culture eats strategy for lunch." How do you overcome that and is that a major barrier for you?

David Chou: It is, and I would say for the entire healthcare industry it is. So, you’re seeing lots of little niches and pockets of innovation happening, but in the grand scheme of things, it’s not there yet. So, how does that happen? There’s no magical answer. You’ve got to have these change agents like you said who are going to be the decision makers. Until we get that, it’s a very slow-moving progress. But, there’s progress where you look at some of these niche players who are taking market share. It is happening, but it’s not at the scale that we have seen like the taxi companies, like some of these others; AirBnB. It has not happened at that scale yet. There’s still small pockets here and there. Unfortunately, it’s not big enough to really disrupt the industry.

Dion Hinchcliffe: Yeah. So, I think probably the most significant challenge that the average organization faces is not so much the people behavior, it's the mindset, it's the natural inclinations. And, I think we will see as Millennials come in, as you mentioned, they have very different expectations. You have probably new nurses and doctors who say, "I want to work with healthcare providers that are making the investments in technology because that's part of our mission. The better our technology is, the better I serve my patients."

So, let’s wrap up with one question, then we’re going to take one more question on Twitter as well before we round out this episode. How do you view customer experience in the content of the latest technology advances? And this also goes in with a question that Paul Turner asked a little while back on Twitter. A lot of healthcare imaging is still on CDs. Yet now we’re looking at, in terms of customer experience … We know that augmented reality, virtual reality, holographic displays; all of this stuff is right around the corner and is about to be in everybody’s homes. The PlayStation VR. It is going in everybody’s homes right now. You know, how do you close that gap?

David Chou: Yeah. You’re starting to see the adoption pick up. Let’s just use AR and VR: instead of just thinking about how it could be used for patients, think about how powerful that technology can be for you to train your employees? Workers’ comp injuries are huge in hospitals. Teaching the clinical staff how to bend at a right angle; how to pick up a patient at the right angle using AR and VR; these are some of the simple things that we can use the technology for. So, I see that adoption rate growing as we speak more and more. I just do not … I don’t see enough focus in […] firm, healthcare organizations thinking about how they can use it rather than hearing the buzzwords. Now, these are some very simple use-cases of AR and VR. But, rather than think about how it can be applied to a patient, think about how it can be used in operations, training. So, there is still a lot of education that needs to happen; still a lot of traditional CIOs who are not thinking that around. They're focusing on keeping the lights on. Let's make sure my poor infrastructure's in place.

Dion Hinchcliffe: Yup.

David Chou: Make sure my EMR’s in place. Because you spent $100 million on EMR, you’d better make sure that’s in place. And then you forget about everything else. So, unfortunately, that’s where the state of healthcare is.

There was a survey that was put out there that was put out there where 30% of the hospitals are still going through EMR organization. That’s huge! I could have thought that was probably an overwork, but I didn’t think that was still 30% of healthcare organizations.

Dion Hinchcliffe: Yeah.

David Chou: That’s still the trend that we’re at.

Dion Hinchcliffe: Well still, it’s a very exciting industry that you find yourself in at a momentous time in history. And so, we appreciate you coming in and taking the time to visit us on CxOTalk. And for everyone out there watching the show, I would really appreciate it. CxOTalk.com has a list of all the upcoming guests, and we’re looking forward to having David come back on the show sometime again, soon!