How remote MedTech is revolutionizing modern health care

In this episode of the Decoding Innovation podcast, Daniel Hawkins, CEO and founder of Avail Medsystems, talks about Avail leveraging remote technology to pioneer the evolution of modern health care.

Key takeaways:

Leveraging remote technology to provide the best access to medical care is a game changer in the world of modern health care.
The identification of the need to innovate, combined with leveraging existing technology smartly is key to the success of modern health care startups.
The only way quality user experience can be guaranteed is by fully controlling the quality behind every aspect of that experience.
The biggest challenge in the medical industry to implement remote technology is the status quo and the bias against remote technology in health care.

For your convenience, full text transcript of this podcast is also available.

Announcer

Welcome to the Decoding Innovation podcast series, brought to you by the EY-Nottingham Spirk Innovation Hub, where we explore the innovative technologies, business models and ideas that are shaping the future of industries. During each episode, Mitali Sharma, a principal in the EY-Parthenon Strategy practice, meets with stakeholders at the cutting edge to discuss innovations in their space, challenges they need to overcome and their outlook on the future.

Mitali Sharma

Hello and welcome. I'm your host, Mitali Sharma, and today's topic is telehealth. To talk to us all about it is the CEO and Founder of Avail Medsystems, Daniel Hawkins. Now Avail is a company that's broken some barriers in enabling collaboration between providers live during an operation in an operating room (OR). Daniel, welcome to the show.

Daniel Hawkins

Thanks very much. I appreciate the opportunity to be here and to participate in one of my favorite topics, and that’s talking about innovation.

Sharma

Before we get into Avail and it's particular and unique solution, would you mind sharing with our audience your background and your journey so far?

Hawkins

Absolutely. So, I am the son of a physician. I kind of grew up around both health care and entrepreneurship as a result because he had a private practice that was actually on the first floor of our house for some time period. So it was that kind of a family practice, if you will. Born and raised in Philadelphia, I went to business school undergrad and ended up going to Manhattan in the late 80s, early 90s to work on Wall Street and quickly discovered I wanted to be on the other side of the table. I didn't want to be on the leveraged buyout side, which is what I was on. I wanted to be on the entrepreneur side. I went back to business school and started a career in health care immediately afterward and that ultimately led to being involved in some truly disruptive technologies. I had the opportunity to be one of the first people at Intuitive Surgical, the maker of the da Vinci Surgical robot. I was actually the sixth person. Fred Ball and I set the specs on the da Vinci robot at the time when there was no surgical robotics to be had, and we were setting the specs for a market that didn't exist, which was fun. Along the way, I ended up getting involved in a number of startups and went earlier and earlier stage until ultimately, I was asked to start some on behalf of a couple of venture capital funds. I did that with a couple of partners, engineering partners. I'm not technically trained, I would say I'm technically minded, and three of us invented an insulin delivery patch that was acquired by Johnson & Johnson. Ultimately that was divested to a company called CeQur and ultimately I ended up doing another one. And during that time period, I invented the core technology for a company called Shockwave Medical. I'm actually the founder of Shockwave and ran that for a number of years before leaving to start Avail, to solve the problem that we are designed to solve.

Sharma

Daniel, thanks for that background. What you told us is that you are a serial inventor and by the 160 patents under your name, also a very prolific inventor. Tell us how you think about innovation, especially the difference between invention and the commercialization of that invention.

Hawkins

It's a big topic. There's a lot in that. So, invention itself, I used to think that I needed to be a doctor or an engineer to invent in health care. I am 100% sure that you don't. I'm living proof of that. What you really need to be able to do is connect dots that other people don't necessarily connect. And if one were to cynically look at every one of the inventions that I have, there's a thread that goes through all of them. It's a thread that starts off with a fundamental identification of a need and then a leveraging of existing technology in creative ways to address that need. I don't have the expertise to invent new technology in that way. The invention I'm probably noted the most for is in inventing intravascular lithotripsy. I didn't invent angioplasty balloons. That was Andreas Gruentzig. I did not invent lithotripsy. I just realized if you put the two together and you solved a few technical problems, you could treat patients better in cardiovascular medicine. That was that invention. It was a realization that 1 + 1 = 3. If you pick the right one and you pick the right other one, then you can turn them into three with a little special sauce. That's where the invention was. That's the underpinning of that. What's the difference between invention and innovation, and commercialization is, are you inventing something that addresses a painkiller in the market, so if there's a core pain, a true issue that needs to get solved and you fix that issue - commercialization is an exercise rather than it is an effort. It becomes a pull from the marketplace if your product is the right product. Not to minimize the activities around commercialization. They're very, very real.

Sharma

So what you are positing is the fact that if you can understand the true need, and start from there, then the rest of it becomes somewhat more programmatic.

Hawkins

Somewhat, yes and again, I don't want to minimize the challenges around commercialization. The need can be there and you could price them properly. The need could be there and you could tell the wrong story about the product when you launch it. All of those things are real. They're difficult. You need to solve them. But I would take an appropriately designed product for a pain level of need in the marketplace and the challenges of having to then market it over “I know how to market, but the product is a 20% miss to what was necessary.” I would take the 100% on target and challenges for creating a brand-new market out of it, which frankly is what my last company was with Shockwave, and what we're doing at Avail.

Sharma

So, talk to us a little bit how you come up with the need, how do you identify the need? That's the million-dollar question, right?

Hawkins

Yeah, that's the hard part. So, I didn't realize when I started Shockwave, when I started the company before that, that I was running a process that has been somewhat characterized by Stanford in their Biodesign program and that is needs identification. Everything has to start with needs identification. I ended up spending a lot of time advising entrepreneurs that are trying to kick off. I was getting ready to say young, but not necessarily young. They might be first-time entrepreneurs. They're trying to recognize how to take what is an idea and turn that into a product that becomes an opportunity in a marketplace. For every hundred ideas, there's 0.1 useful products. Yeah, I think it takes a thousand ideas to come up with a product. Out of the 1,000 average ideas, there’s going to be one that you can take forward. If you can take that thousand down to 50 through appropriate needs identification, your ratios go way up. I would submit that a disciplined process will actually get it down to maybe 20. So, one in 20 of a series of ideas can actually go forward. You have to know your end game, what you are trying to solve. You have to know the people and what they face every day that you're trying to solve for them. You must know what they prefer, what their limitations are, technique-wise and health care technique-wise, maybe limitations for cost, limitations of compatibility to other products, and all of those things have to get weighed together. That's how we were able to come up with what we did for Shockwave. That's the exact process I used to create what we have at Avail.

Sharma

Very interesting. If I can shift gears and take one step back. Let's start with telehealth. For our audience, if you can describe what actually that word means to you and how telehealth has evolved since you've been in the field.

Hawkins

Sure. So, to me, telehealth is using technology in a health care setting to connect two people that are not in the same place. So, you can take a look at a broad definition of digital health. That's not what I'm referring to. I'm referring specifically to video-audio interactions for two people that are not in the same place. There are two branches of telehealth. One of those is from patient to provider or provider to patient, that relationship. That's the majority of what everybody thinks of telehealth. That's also been summarily called telemedicine. What we do at Avail is a different version that's actually provider to providers, so two physicians, two surgeons collaborating to help treat the patient on the table. In other words, somebody in operating room gets advice from somebody else, or our system also connects surgeons to industry, medical device companies, the makers of stents and knee replacement devices and surgical robotics, that sort of thing. That all together to me, is telehealth.

Sharma

How has it evolved since you started, you know, being part of that whole industry?

Hawkins

When I started Avail, the version of telehealth that in Avail practices we call telepresence, didn't exist. Nobody was doing it. I saw it as a really interesting opportunity. There's a company that can cause the technology that sits in the emergency room primarily to allow a specialist from outside the hospital, particularly in the area of neuroscience, to be able to evaluate a patient in the emergency room that's presenting with neurologic symptoms. Yes, that is a provider to patient relationship, but in every one of those examples, there's another provider standing next to that patient. So, it's actually a provider from outside the hospital working with a provider inside the hospital with the patient next to them. That's very different from the version of telemedicine you might use when you feel like you've got symptoms of a cold and you want to talk to your doctor, you're at home on Zoom or some version of that. That company had created a really neat way of doing that. They tried to bring it into the operating room, and it didn't really work very well. It was not designed for that environment. I saw that as market opportunity. So, going back to the needs identification we talked about before, prior to that time, I'd been 25 years in procedural health care, on the medical company side. I knew exactly what was needed from the medtech company side. And I had enough exposure to hundreds, literally hundreds of physicians and hundreds of clinical teams in operating rooms that I had an opportunity to observe in maybe two dozen clinical specialties that I had, and I felt was a very good sense of what they needed. So going back to needs identification, if I understand what the end users’ limitations are, what they're interested in, what they have time for, what their tolerance level is in terms of messing around with technology to get something done, and I understood the other side of what industry needs to be able to interact with their customers, their provider customers. I can create the right milieu for technology creation. And that's exactly what we did. The evolution has gone from what was only provider to patient in most instances for telehealth to a much broader definition now, where 1,100 care facilities around the country have contracts with my company, and be able to enable provider-to-provider interactions and provider-to-industry interactions. So, there's this whole new branch of telehealth that we call telepresence that is emerging. So that's what's changed in the years since we started Avail.

Sharma

So that brings me to an interesting conversation around what does Avail do exactly? And even before that, where did the name come from?

Hawkins

Ah, that's a fun one. So, there's lots of ways we could have named the company. In fact, I asked my kids, “What would you name the company for me,” because they actually helped me, my last one. And it was a fun exercise, right? So, I asked them, what would you name the company? And one of my kids is a writer. She writes for one of the business publications that's out there. And at the time, she was in in college and I charged her with it. I said if anybody's going to be linguistically on point, I want you to help me. And she said “Well, tell me about what you're trying to convey”, and I described it to her. I wanted a name that was short, ideally one syllable. I failed. But I wanted it to be four letters ideally, because I want that to be our ticker symbol for when we go public. I failed in that regard as well. Having said that, the most important aspects of the product are conveyed in the name. Avail is short for available, always available. And Avail is also a description of “to benefit from”. So, expertise being outside of the procedure room is always available, and one can avail themselves of that expertise. So it's a double entendre, if you will, on the abbreviation for available and to benefit from. So, that's where the name came from.

Sharma

You talked a little bit about the genesis of the idea. Could you also then talk about what steps you took to get it to market?

Hawkins

There's a lot in that. So, there was a technology that existed prior to me starting Avail that we actually absorbed into what became Avail. A couple of gentlemen did a really nice job creating a base technology. However, it missed the mark, we discovered, to get to a minimum viable, to get to product launch, to ultimately be able to launch, we had to go through a pretty intensive evolution. I tended to be at the end of the day the single voice of customer. Because of all the experience I had along the way with what care teams would need, with what medical device companies would need, I served a lot of a role of upstream, if you will, to learn from my experience and learn from interviews what would otherwise be needed on both sides, and then very much downstream for the early promotion. That lift to create the market for what we do, because quite literally, we needed to create a brand new market. That's hard to do. That's very, very hard to do. I've done it a couple of times in my career and takes a lot to do that. I'll simply say it's not for the meek. It's very challenging.

Sharma

Well, with the rate at which new companies fail, hard is an understatement.

Hawkins

Yes, it is.

Sharma

So, you relied on your personal experience, which was invaluable because you understood the industry, you understood the need as you said, and your only hurdle, it seems, was around the black box of software. So, in terms of pulling the stack together, the hardware, the software and the services around it, how did you think about that minimum viable product?

Hawkins

So, I knew what it needed to do. I didn't know how to get it to do that. That's probably the best way to put it. So, what I started to do was I started working with my investors. My lead and the initial investors are very, very deep in software and in a number of companies in their portfolio. So, they started to put me in front of people who understood, and I began to learn a little bit of the type of people I needed to bring in. The key was bringing in ultimately a leader and that leader, appropriately identified, can start to build out the team. I still don't pretend to know how software works. I couldn't code my way out of a paper cup, but one of the things I do know is what I don't know. And in doing so, we're bringing in the right leaders that can then help create the right engineering environment to deliver the capabilities and I'm just going to have to address that simply by saying it's “If you know what you don't know and you can figure out the right people to put into a spot, then you got to support them and you got to trust them”. And that's how I did it. It's really as fundamental as that.

Sharma

Very interesting. So, if you were to certify, and hindsight is always 20/20, right? If you were to look back and had to redo it and you've done this a bunch of time, right? You said you started companies before, but if you had to do it all over again, what would you do differently?

Hawkins

So, one of the things that happens all the time in startups is, folks join an organization. They get involved in what you're doing. You make a lot of progress and at some point or another some people either are not a right fit for the organization. The organization decides that the folks want something different from a career than what they're otherwise getting there. And we ended up changing leadership as a result of the latter in at Avail. Our engineering leader moved on and that left me with a new opportunity to redefine what we would actually want in a leadership role. And I lucked out. I lucked out in bringing in a truly fantastic CTO with an extraordinary amount of relevant experience. About 2020, I don't know that I would necessarily would have started off differently but knowing where I am now and the benefits of where I am now, I would definitely like to start off that way. The second thing I would suggest is about our commercial leadership team today. I wish I started with them from the beginning, and as much as their skill sets and capabilities, we have come to realize, are more of what we needed than we thought when we first built the team. Most significantly, I would say my President joining when he did. He and I worked together extraordinarily well and that changed the trajectory of how we are approaching the market and allowed through our partnership an entirely different way for us to approach customer bases, and that's been transformational. So, if I could go back two years rather than the one that he's been on board, and the folks he brought into the organization along with him, I would make that adjustment at that time.

Sharma

When was the company launched again?

Hawkins

So that's an interesting question. There's a story there. So, I was hoping to launch somewhere around August of 2020. The pandemic forced our hand. Yes, there's the story. So, our MVP was to launch in August. We had a website that just had her name. It had a little dialogue box, a little input box that said “Put your e-mail in a question here if you have a question for us”. No phone number, no information, nothing, because we were getting ready. We weren't ready yet. When the pandemic hit, medical device companies immediately were struck with this concept of “I can't get into hospitals to help my surgeon customers with procedures”. Most people don't realize depending on the procedural category, there could be one out of five, meaning 20% of procedures all the way up to 100% of procedures have an industry representative in the room during the procedure. So in angioplasty, like coronary angioplasty, it's kind of one in five, maybe 20% of the time there's somebody from industry in the room. Some hospitals it's near zero, some other hospitals it is considerably higher. But as an overall industry category, it is about 20%. But for defibrillator implantation, it's 90+%. For hips and knee replacement, it's 75%–80% of the time. So, you have somebody from a medical device company in a room. Imagine what that whole industry, meaning the medical device industry, felt when hospitals locked down and nobody could go in. So, what we ended up with on our landing page, that little billboard website is between 10 and 15 industry inbound hits every day. And then that little box I described where you can put a question, “Are you available at XYZ Hospital? Are you available here? Are you in neurology yet? Are you in cardiology yet?” All of these questions, we started to catalog them. It became so much that we simply had to rip the band-aid off and launch. So, we did. We were finishing up a website behind that billboard. We had a full website we were building, and we weren't quite done but we ripped the band-aid off and put it up front. I had already hired a few salespeople, I had a sales leader, and we just started getting loud. So, we went from maybe 35 people or so to well over 100 very quickly, almost all hired virtually including the leadership. I met for the first time a couple of my vice president-level folks. I met for the first time in person months and months later, because the pandemic didn't allow us safely to meet otherwise. The only people we absolutely met in person were folks that would be interfacing with customers. And we did that at airports, in common areas, 10 feet away wearing masks. That's how we did it. And we interviewed people 10 feet away, because there was no other way to evaluate how they would be in front of customers.

Sharma

Daniel, can you talk a little bit about how you thought about your hardware-software stack, whether you wanted to make it open source, which seems like the norm in today's world or have you gone the proprietary route and in either case, why?

Hawkins

So, we've 100% gone proprietary on the software side, and as for the hardware, some stuff is our own. Some key components are our own. Some other things are outsourced. We're not going to be making the very best cameras for this type of a setting. So, we sourced those. That sourcing activity was an intensive one, as you might imagine. Having spent as much time as I did in surgical robotics, I appreciate the value of high-resolution imagery. A system that can be used in the cath lab doesn't need really high-resolution cameras. You need high-resolution cameras when you're in open surgery because whoever's remote needs to be able to see details. I'll describe it as tissue-level details, see nerve fibers, small vessels and whatnot from potentially 2,000 miles away over the internet. So that image quality needs to be pristine. So, we ended up looking at dozens and dozens and dozens of cameras and based on my own experience, candidly, and here's where I was the voice of customer, I rejected 95% of them almost immediately. Then we got down to a couple and, ultimately, I picked the one we ended up using based on prior experience. Same is true for the screens, same is true for some other elements. There are a few proprietary elements in our hardware, but a lot of the core components have sourcing available that we can source.
Our software is 100% proprietary. And I did that. I had my team build the two of those together in a symbiotic way. That's terribly, terribly important. It was a big bet I made when I started the company in 2017 that we needed to have both hardware and software, and they needed to work together, and they needed to be closed from the perspective of outside influence, if you will. I needed to control the user experience. The only way I can guarantee the user experience on our platform to be the same is by fully controlling every aspect of that experience. All our cameras are the same, our screens are the same, our speaker microphone arrays are the same. All our software is the same, so regardless of what piece of hardware you log in on, wherever you are on the planet when you log in, it should be the same. I know that is true. I know that's important because I know that health care doesn't tolerate variability. Health care does not tolerate inconsistency. There's just a dependability requirement and I know that to be a base threshold. Over and above that, there's something really cool that happens when you've got the same hardware everywhere. We'll get into this, I imagine you might have a question or two about how we run the business, but we don't sell our hardware. We actually place our hardware that sits on our balance sheet. We do that for two reasons. One, it gets it into the hospital faster, candidly, they don't have to pay for anything. And two, because we get to control the rev on the hardware. We get to control the computing power that's on the inside. And if we've got some software upgrades, we need to do that needs more computing power, we can go in at our own expense, right? We can go in without getting customer purchase orders. We can go in and change all of those to upgrade the hardware so that we can add on more intensive software. That's a very important component and it also allows us some other things. Ultimately, one of my goals is to create a digital hub in the operating room and we can chat about that if that's of interest, but once you control the hardware and you control the software, you're able to do that. So, we are in fact 100% proprietary in software and there are proprietary components in our hardware as well.

Sharma

What has been your biggest challenge in putting this platform and making it operational?

Hawkins

Ah, interesting. The biggest challenge, and I would say our greatest competitor, is the status quo. Medical device industry has been around what, 60 years or something at this point? The industry, providers, hospitals are all used to people being in the operating room. It's viewed as such a natural way to everything from engineering, identifying needs, much like we talked about a bit earlier, clinical studies enrolled, products launched, training, all of that is inside the operating room. And everybody's mindset in the industry is driven to be in the operating room. There are structural reasons why you can't do that all the time, everywhere. Fundamentally, when I started my career, there were about 5,500 hospitals and less than 1,000 ambulatory surgery centers. Now, there are about 5,000 or 6,000 hospitals, and maybe 9,000 to 10,000 ambulatory surgery centers. So, your number of sites of service has dramatically increased. There's no possible way you can be in all the places you need to at the times you need to. Fundamentally, expertise is needed far, far, far more often than it's actually available. But that's been the status quo. So, when we first launched, we'd show somebody this piece of equipment and their first reaction is, “Wait, what is that? I don't understand. And you want to put cameras in my operating room? Oh, no. No, no, no, no, no, no. That's not going to happen. There's HIPAA concerns. And no, you're going to record things, and I don't trust you.” And so, we had to overcome all of that. That's a big deal. Since that time, we've assured the industry about security. We've got very, very high levels of security. Military grade encryption, we packetized everything, we reassemble in real time, all secure with keys we can't even get access to. And so, all of this security is locked down. But we still have that fundamental issue of “This is not how we do it. I've always done it with people in the room. What do you mean remote?” So, what we had to do is prove in clinical specialties all over the industry in different settings, teaching hospitals, acute care that is urban, remote acute care, ambulatory surgery centers, in cardiology, peripheral vascular, structural heart, spine, neuro, pediatrics, urology, women's health, every category you can think of, we had to prove it. That's a lift. That's a lot of work. And my team, my broad team from all through the company have done an unbelievable job proving to the industry not only is this OK, it's actually better. It's better for a whole host of reasons. That's been the main challenge, is overcoming that and getting to that place. Now the cool part is, about nine months ago was the first time we heard it, and we've been hearing it successively since then, that we're hearing from our industry partners, medical device companies, the large medical device companies that they're getting asked by their hospital customers. They might be chains, large chains, or they might be small chains, “What is your remote strategy? How are you going to support us through remote access?” That's an amazing thing to hear because when I launched the company 4 and a half years prior to the first time we heard that, they said “Remote what?” So, that's a big lift, right? We've come a long way to get to that place. I would say there's a realization at this point. Remote is here to stay. It's literally not going to go anywhere and in fact, it's going to dramatically increase in its usage, and we're hearing that from our medical device company partners as well some of which are being very aggressive about how they think about leveraging remote to change their businesses.

Sharma

So, talk to me about who were the early adopters in your experience.

Hawkins

So, by category, since my last company was in the vascular space, I knew a lot of people. So, the conversations were a lot quicker from a trust standpoint, if you will. I was able to go to a number of the physicians and provider facilities that I worked with when I was running my last company, Shockwave Medical. And in doing so, I was able to kind of get it started, right. It was a little easier to get started in that environment. So, they were the, I'll describe it as first adopters because it's the first place we went. Then we started to get nibbles here and there around medical education. We went with a strategy. In medical devices, one of the things you try to do is get the key opinion leaders. The industry calls them KOLs. You want to get to KOLs by specialty because that's the fastest way to get everybody else, all the other providers to pay attention. What we would do is get permission from the patient, from the provider, from the physician to broadcast their procedure on the internet by invitation to folks, and we would have hundreds of people watching somebody's live surgery broadcast on our system through the Avail network, and then that started to feed itself a little bit. So yes, it was brilliant, it was really fantastic. We went first to KOLs that ultimately became interest inside the medical device companies. I knew it would. So that started to push into the medical device companies. We're now at 54 that are on the platform. A handful of which have recognized that there's a strategic capability that they have in leveraging remote access across the entire spectrum of product development through customer support and commercialization. And that strategic intent has turned into very different, very aggressive engagements with the Avail to change their businesses by leveraging remote.

Sharma

When you were talking about how you own the hardware and software stack a 100%, and that enables you to update consistently and or as needed, internally, how are you thinking about the generational aspect of your solution? Is it as needed updates, or do you have a time factor involved? How are you thinking about it?

Hawkins

So, the updates on the hardware will be as needed and those needs will come from potential obsolescence of a component that we're using because it's reached end of life. So, as we realize an end of life is getting ready to come to us, we begin sourcing and realizing we can use this one or that component and so. More importantly is if technology needs it. So, if there's a computing power variance that is meaningful enough, we would go out and replace the guts of the computer that is inside of our consoles. Right now, there's excess capacity that we've built in on purpose so that we can host third-party software in the marketplace model that I referred to. Some of those might need some specialty listening or viewing from cameras or speaker microphone arrays that we can't accommodate yet that would allow us ultimately stochastically as needed to change some of those components. So, there's no particular schedule there. On the software side, there's no particular schedule there either. You know, unlike some of the large consumer tech companies that release every year a new something, we're pushing features extremely aggressively. I don't think this company could be done anywhere else on the planet other than Silicon Valley. We've benefited from pulling engineers from FANG. And the team is extraordinary. I don't know how else to put it. They just create magic, and it's beautiful. So, when apart from bugs fixing, if you will, we might have a little tweak somewhere, we'll push a release. They tend to be feature-milestone-based and those don't necessarily match a predetermined calendar.

Sharma

In so many ways, you are the pioneers for what you're doing. How do you make sure that you protect your intellectual property and your method of doing it?

Hawkins

That's a fun one for me. So, one of the things I did at Shockwave Medical when I started off is all of the inventions were in individuals’ names. And we waited till the very last minute to a point where we would be getting penalized by the PTO for not putting them in an entity name. And then we put an entity name like a minute before then. Why did we do that? Because we didn't want everybody to know what we were doing. One of the strategies that I deployed to make sure we stayed at the forefront of IT in Shockwave, and I did even more so here in Avail, is get a group of wickedly smart engineers in a room, and task them with one simple thing. Turn off your phones. We're going to order food in. Please tell your spouse you're going to be late home because we're going to do this today. We're going to break our own patterns. Let's break them. Pretend that you're a tiger team to shatter the patents that you actually have your name on. And that forces a new way of thinking. So, what we do by doing that is create what I like to call concentric circles. So, there's an idea in the middle and you draw a circle around it with IT. If you've broken that circle, you draw another circle around it. And another one. And another one. And by the end, anybody who wants to break into that, needs to go through all the layers of the onion to get to the core idea. So, we did that, we did that at Shockwave. We've done that at Avail. The next exercise I ran to in Avail that I didn't do at Shockwave because it's not quite as relevant, is I got that same group plus another couple of folks into a room and I gave them a separate task. The rules are the same. Leave your computers behind. Turn off your phone. We're ordering in food. This is an 8 to 8 exercise. It's a 12-hour sprint. We're going to push. And the exercise was simple. Imagine we have 10,000 consoles in 10,000 different procedure rooms. What would you want to do with that? What could we gather data-wise? What could we do if that were our installed base and, now, we have a watershed of data coming in? We've got a half a million users. We just went to whiteboards, and we drew all of this forward-going stuff. In the middle of all of that, I spent probably about an hour of it in different segments describing the medical advice industry. Here's how decisions are made inside of large medtech companies. Here's how innovation happens. Here's a limitation here. Here's another limitation here. Meanwhile, I had some ideas. They were not complete. They were starting to form, but I left the engineering team run. So, what we ended up doing is forward patenting three, maybe four years into the future of what we might want to do, and we just redid the exercise. So, I think we're probably five to seven years ahead right now.

Sharma

Fascinating. Truly is. Let's shift gears a little bit and talk about your monetization model.

Hawkins

Sure, sure. So I described that we place consoles in procedure rooms. We don't charge hospitals for them. So, the natural question is, my goodness, Daniel, how do you make any money? Try to think of that as a really big cell phone, and we charge the remote person US$7 a minute to use the cell phone. Fundamentally, this is hardware-enabled SaaS. Think of it that way. We're selling the service of access. Now there's a couple of different ways. We went to market initially with a very plain model and that is, “Hey, there's a console here in this hospital in cardiology, and as a sales rep or a clinical specialist, you can't make to the hospital in time for a case, so after you use it, we'll charge you in arrears by the minute.” That's about as easy an entry point as you're possibly going to get in. I'll use it if I need to. It's like having a cell phone in your pocket just for emergencies. I'll use it when I need it. That was to get everybody some experience. Over time, that quickly turned into, “Wait a minute, I think I love this. Can you put one in this location that is an hour and a half away from where I live, because I never want to go there?” So, we got a list of those, maybe 200–300 of those, and then we had multiple vendors, medical device manufacturers wanting access to that same location. There's a location in Arizona that is really hard to get to. It's covered out of Phoenix and it's two and a half hours away from pretty much every industry sales rep. So as soon as we put a unit there, we had a dozen-plus medical device companies that wanted access to that unit. So we started to then bubble up that way. Then we had a couple of medical device companies that pretty quickly said “I like this per-minute thing, but I don't like that my competition gets to use it quite as much. So I'd love to have some preferred access to one of these consoles. Can I help put it into a location and maybe there's some preferred access opportunities?” Now it's really interesting, right? So there's been a lot of interest coming to us to have a preferred relationship for an entire clinical category. That's turning into a very different model than you know, US$7 a minute paid in arrears. That is substantial commitments to leverage remote and do so in a preferred relationship with Avail because we have such a large footprint. Our commercialization allows us to do that. We now have the largest contract footprint of anyone in the industry that we've created. We have contracts for over 1,100 facilities across the country, and that represents between our estimation 8,000–9000 procedure rooms. So, from our perspective, if the manufacturer wants access to one of those procedure rooms under the committed revenue model that we are now at. We were at just per minute and now we're forward-looking committed revenue, much like your cell phone is a minimum per month, think of it that way. Now we have an opportunity to commercialize in a very different way from our perspective, but most importantly, we're serving our medical device customers in a very strategically relevant, proprietary way, right? So, they have a preferred access to a set of consoles they help us install. That all makes sense?

Sharma

It makes total sense. So, your primary customer is the medical device company, not the provider.

Hawkins

Primary customer is the medical device company from a revenue balance standpoint. Having said that, it's very, very important to appreciate that we have quite a number of providers that use our system all by themselves, and some of whom don't even want industry medical device companies to use it. So, kind of think of a hub and spoke model where the hub's main campus has a console in a particular specialty. I'll pick on it and call it cardiology. Then there are spokes. The hub is where maybe the chief of the department is, the most experienced physician and he or she needs to overwatch procedures that are done at the tips of the spoke. In each one of those spokes, we have a console. So now that head of a department can open up a laptop or log on to a computer and get access to spoke number four because they're doing a really complicated acute STEMI — total occlusion. That's a hard case, very, very difficult case to do and they might want to provide a little guidance to the operator, to the interventional cardiologist at the tip of the spoke. Rather than drive and lose a whole day of clinical practice, they can flip open a laptop, log on, interact, give guidance, close the laptop, go down the hall and treat their own patients. That makes sense?

Sharma

Yeah, it does. Just a clarification here, are there regulations, interstate commerce issues that you face when physicians from one state are advising a patient which might be in another state, if you can talk about that?

Hawkins

What’s terribly important here is, the remote person on our platform is not practicing medicine. What they're doing is being an advisor to a decision that's made locally. In other words, the treating physician is 100%, all the time, making the clinical decisions. They might be asking a colleague, “Hey, what do you think, in this instance I was considering using ...”, and then list of technique or a device and that person on the remote side could suggest, “Yes, that is an absolutely a way to do that. You might also want to think about this one. Up to you.” That decision is still made locally. Rather than the traditional telehealth model where a patient might live in in one state and the physician is in another state, you have very different issues there. That's a cross-state border reimbursement and all sorts of issues, legal issues, and everything. We don't have that same milieu.

Sharma

That explains a lot. And is there a legal necessity for the medical device company representative to be in each of these procedures in the room?

Hawkins

There isn't in most cases, and the reason why I qualify it that way is there are some FDA-regulated procedures, mandates for technologies where there needs to be a certain skill set in the room. That tends to be extremely rare. It's more that the industry in the last 50 or 60 years has trained surgeons to expect industry in the room to help with technical questions about whatever the device is, and industry, by way of example, is in 98% I’m going to guess, of defibrillator implants, because they're actually the ones along with the electrophysiologist make the decisions on how to program the pacemaker. There's a box there called a programmer. The industry representative is the one pressing the buttons on the box.

Sharma

OK, so your specialized knowledge of these intricate procedures has been critical in trying to figure out what business model would work for you.

Hawkins

A 100% true.

Sharma

Not for the faint of heart.

Hawkins

Not for the faint of heart.

Sharma

You have a great vision, and this has been a fascinating conversation, Daniel.

Hawkins

Thank you. It has been fun.

Sharma

To round it up, what keeps you up at night today?

Hawkins

What keeps me up at night? I'd say it is the number one thing we still need to do, and that is compete against the status quo. The richness and speed of doing that will determine the near term in the next two to five years’ worth of time for what's going to happen to the industry we've created. So, it is changing the mindset that remote is not only not scary, but it’s also actually way better to have as a tool for probably 20% to 50% of the interactions that you might otherwise have, because it speeds things up. It enables expertise to get distributed to geographic locations and populations of patients that might not otherwise have that opportunity. It broadens the opportunity not only for clinical care, but for the medical device industry to be able to reach more patients with their products. I've got a core impatience that I want to be able to wave a wand and change the industry. But changing the US$800 billion industry doesn't happen overnight, so if there's anything that keeps me up, it would be that.

Sharma

It sure doesn't, that's fantastic. One more question. If you had one or two pieces of advice for an entrepreneur and inventor sitting on an idea, what would that be?

Hawkins

I'm going to call it two. Characterize your need extraordinarily well, in a 360-degree kind of a way. Don't look at it just as the inventor. Look at it from the perspective of the user, the people around the user, and how they interact with whatever they use today to address the problem you're solving. That's piece of advice number one. The second one is that once you have all that data, dispassionately evaluate that.

Sharma

With that, we'll wrap up. Thank you so much for a most informative and interesting hour.

Hawkins

Thanks very much for the chance today. It was great to chat with you.
The Decoding Innovation podcast series is a limited production of the EY-Nottingham Spirk Innovation hub based in Cleveland, Ohio. For more information, visit our website at ey.com/decoding innovation. If you enjoyed this podcast, please subscribe, leave a review wherever you get your podcasts and be sure to spread the word.

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Presenters

Mitali Sharma
Former host, Decoding Innovation podcast

Daniel Hawkins
CEO and Founder, Avail Medsystems

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Episode 6

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53m 34s

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EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

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