Brutally Honest Interview About Digital Health with Sergei Polevikov

Hello, and welcome to our Digital Health Interviews. As a tradition, we would like to remind everyone to subscribe to the channel for more insights into digital health. In today’s episode, we plan to delve into some complex, often contentious, and less-discussed topics. The ideal person to explore these subjects is today’s guest — Sergei Polevikov.

A Journey Through Numbers and Health

Sergei Polevikov’s journey began with a deep-seated interest in mathematics and statistics, a passion inherited from his father, a professor who instilled in him a curiosity for formulas and mathematical proofs. His formative years in Belarus were marked by formal training in these subjects, which later evolved into a fascination with artificial intelligence and machine learning.

Upon moving to the United States, Polevikov applied his expertise to the fields of economics, finance, and fintech, collaborating with professionals who utilized mathematical models to drive industry advancements. However, it was the healthcare and digital health sectors that captured his entrepreneurial spirit. Alongside a business partner, he co-founded WellAI, a startup dedicated to providing patients and consumers with direct access to medical literature relevant to their daily health concerns.

Initially, WellAI launched a consumer-facing app designed to interactively diagnose health issues based on user input symptoms. “It’s a simple app where I can start talking to it, tell about my symptoms and it treats me through a lot of information,” Polevikov explained.

Despite early challenges in navigating the consumer health space, WellAI pivoted to serving businesses, providers, and clinics. The app, once a standalone product, now integrates with a suite of services including telehealth, scheduling, and administrative automation, transforming WellAI into a comprehensive IT service for the healthcare industry.

Polevikov’s contributions extend beyond his startup; he is also an avid writer, sharing his insights through articles and publications. His story, though long, is uniquely his own, marked by a relentless pursuit of innovation at the intersection of numbers and wellness.

The Vision of Digital Health: Bridging Automation and Care

Sergei Polevikov’s vision for his app was clear: to streamline healthcare processes through automation, offering patients the ability to schedule telehealth sessions, chat with nurses, or book office visits without overwhelming the reception desks. He believed in the power of AI not just to aggregate data, but to alleviate the burden on healthcare professionals and improve patient satisfaction. “Phone calls don’t get answers because it’s in the app, it’s all within the app, it’s automatic,” he stated.

Despite the initial optimism, Polevikov faced the realities of a competitive digital health landscape filled with innovators. He recognized that while AI is not a necessity, it often serves as a valuable tool for automating necessary healthcare processes. His experience in the industry led him to share his insights through articles and social media posts, advocating for the thoughtful integration of AI in healthcare.

Polevikov’s journey in the United States began in 1995, and after 29 years, he has had the opportunity to compare healthcare systems across the globe. He expressed gratitude for the freedoms and opportunities provided by the U.S., yet he couldn’t help but notice the stark contrast in healthcare accessibility and efficiency when compared to other developed nations. This disparity fueled his drive to co-found his startup and launch his newsletter, Brutally Honest Insights on Digital Health.

Reflecting on his personal experiences as a patient, including a recent emergency room visit, Polevikov shared, “I guess I wasn’t like the most serious case, but it’s fun and interesting how great and hardworking the staff is, but then how bureaucratic the system is.” He criticized the bureaucratic hurdles that often impede timely and effective care, such as the prior authorization process, which he believes should not override the clinical judgment of physicians.

Polevikov’s frustration with the bureaucracy is a catalyst for his advocacy work. He actively engages with policymakers, economists, data scientists, and physicians to explore solutions for the healthcare system. “At the end of the day we help the system, we help our healthcare, we help patients — that’s what matters,” he affirmed.

Escalating Costs, Diminishing Returns: The Healthcare Paradox

Our host Alex Koshykov has observed a troubling trend in healthcare expenditures: from approximately $1.4 trillion in 2000, costs have soared to an estimated $4.5 trillion by 2022. Projections by CMS suggest a rise to $7.2 trillion by 2031, with an average annual growth of 5.5 percent. Yet, Polevikov notes, this staggering increase seems disconnected from the quality of care provided.

Reflecting on the past, he recalls a simpler time in the U.S. healthcare system during the 60s and 70s, characterized by direct transactions between patient and provider, minimal waste, and bureaucracy. The complexity began in the early 70s with the advent of health insurance companies and other intermediaries, which have since grown to dominate the industry. “The problem started when they became so big,” Polevikov remarks.

He criticizes the misalignment of incentives between these intermediaries and the needs of patients and doctors. With estimates suggesting that up to 25% of healthcare spending is wasted on unnecessary bureaucracy and paperwork, Polevikov expresses frustration over the hurdles in accessing electronic health records (EHR), which contribute significantly to healthcare costs.

Polevikov laments that despite advancements in AI and technology, healthcare seems to lag behind other industries. He identifies a unique problem in the U.S.: a monopolistic control over the industry that stifles innovation and benefits a few at the expense of many. “You have great people willing to do the work and then you have this bureaucracy, this monopoly that is controlling the industry,” he states.

In his newsletters, postings, and interviews, Polevikov seeks to address this paradox and explore solutions. He doesn’t claim to have all the answers but remains committed to fostering a dialogue that could lead to meaningful change in the healthcare system.

Navigating the EHR Monopoly: A Quest for Innovation

Sergei Polevikov has been vocal about the challenges within the electronic health record industry, particularly concerning the dominance of EPIC EHR systems. He explains that legal requirements for HIPAA compliance and specific parameters for patient data storage have given rise to an oligopoly in the healthcare industry, with EPIC at the forefront.

Polevikov acknowledges that opinions on EPIC vary, especially among those who have partnered with the company. He notes that interoperability seems to work well within the EPIC ecosystem but falls short when interacting with external systems, leading to significant fragmentation in U.S. healthcare.

The crux of the issue, according to Polevikov, is EPIC’s monopoly power, which disincentivizes innovation and technological advancement. “There’s no incentive for them to make their systems friendlier for providers,” he asserts.

Despite the challenges, Polevikov remains committed to innovation, particularly through the integration of AI in healthcare. He points out that while companies like ChenMed have developed their own EHR systems, breaking into the market dominated by EPIC is daunting. The influence of lobbying, particularly by major players like EPIC and United Health, shapes legislation in a way that preserves their market power. The path to adoption in the U.S. is complex, requiring not just innovation but also strategic navigation of the industry’s political landscape.

The Primary Care Conundrum and Telehealth’s Evolution

Sergei Polevikov has shed light on the persistent challenges and misconceptions surrounding primary care. He observes that companies repeatedly underestimate the complexity of primary care, lured by the false notion that success in other sectors can be easily replicated in healthcare. Polevikov points out that corporate structures and investor pressures often push companies to venture into primary care without fully understanding its intricacies.

He explains that primary care is not just about financial outcomes; it encompasses emotional, community, and social aspects. This multifaceted nature makes it difficult for corporations to succeed, especially when they approach it with a one-dimensional mindset. Despite the repeated failures, Polevikov anticipates that companies will continue to enter the primary care space, driven by the allure of financial gain and the example set by industry giants.

In discussing telehealth, Polevikov distinguishes between the faltering standalone telehealth services and the thriving integrated telehealth platforms. He credits the latter’s success to their ability to adapt and integrate telehealth as a tool within existing systems used by medical professionals. Companies like Doximity and Hims&Hers, which have incorporated telehealth into their platforms, are leading the way in this new era of healthcare delivery.

Polevikov emphasizes the convenience of telehealth, particularly for certain patient demographics who prefer virtual consultations over in-person visits. He predicts that EHR companies will play a significant role in the future of telehealth due to the seamless integration and ease of use they offer to healthcare providers.

The Venture Capital Mirage: A Critical Examination

Sergei Polevikov stands out as a vocal critic of venture capitalists (VCs) and their controversial ‘pump and dump’ strategy. He traces the origins of venture capital and private equity back 40 years, noting a shift from a focus on sustainable profitability to what he deems financial trickery.

Polevikov explains that the strategy begins with VCs providing capital to founders not necessarily based on the viability of their idea but on its marketability. This leads to an artificial inflation of the company’s valuation, often disconnected from its actual financial health. As startups proceed through financing rounds, valuations typically increase, driven by a small group of VCs rather than the broader market.

He highlights a concerning trend in digital health, where a significant percentage of companies are unprofitable, marking a reversal from the past when profitability was a benchmark for success. Polevikov describes a cycle where VCs fund startups, which then ‘buy’ customers to inflate revenue, creating an attractive facade for further investment without genuine organic growth.

The ultimate goal for VCs, according to Polevikov, is the exit — usually an initial public offering (IPO). He criticizes the practice of using inflated private valuations to set even higher public valuations, a process he compares to the ‘pump and dump’ schemes seen in public markets, where prices are artificially raised before being sold off, often to the detriment of retail and angel investors.

Polevikov’s stance is clear: he believes this practice is not only unethical but potentially illegal, and he calls for regulatory scrutiny. His perspective sheds light on the darker side of venture capital, urging a reevaluation of strategies that prioritize short-term gains over the long-term viability and integrity of startups, particularly in the digital health sector.

AI: The New Frontier or a Bubble in the Making?

Sergei Polevikov’s expertise in AI has led him to a nuanced view of the current hype surrounding the technology. He acknowledges the excitement and investment pouring into AI startups but maintains a critical perspective on whether this constitutes a bubble.

Polevikov distinguishes the dot-com bubble of the 1990s and today’s AI landscape. While the dotcom era was marked by companies with no profits seeing their stock prices soar merely by associating with the internet, the AI field today is more complex. He points out that established tech companies like Nvidia are indeed profitable and making good margins on their AI models, suggesting that their success is not unfounded.

However, he expresses concern about AI startups that have rapidly inflated valuations without a solid financial foundation. Polevikov notes that many of these companies experience a decline in stock prices from the outset, indicating that the market may be skeptical of their long-term viability.

The comparison with Cisco during the dot-com bubble serves as a cautionary tale. Despite Nvidia’s current profitability, the rapid appreciation of its stock price could be a sign of overvaluation. Polevikov believes that a true bubble is characterized by irrational exuberance, where investors buy into the hype without due diligence.

His insights suggest that while AI is undoubtedly transforming industries, the investment frenzy may lead to a correction if companies cannot substantiate their valuations with real-world profitability and growth. Polevikov’s analysis calls for a balanced approach to AI investment, one that recognizes potential but remains grounded in financial reality.

The Key to Startup Success

Sergei Polevikov’s advice to digital health startup founders is uncompromising and direct. “Be brutally honest with yourself,” he urges, echoing the candid tone of his newsletter. In a landscape where venture capitalists loom large, he encourages founders to stand firm. “Be consistent with your vision. Believe in your vision and don’t let anybody, including venture capitalists, change your vision,” Polevikov asserts. It’s a reminder that amidst the noise and pressures of the startup world, a clear and steadfast vision can be the difference between success and compromise.

Our previous episode was with Lisa Voronkova: Insights on Medical Device Development