Episode 74

Shilen Patel lives at the entrepreneurial crossroads of passion, talent and capital. It's a nice place for an entrepreneur to hang out and he gets to enjoy it on 'both sides of the transaction'. His startup HealthAxis is already successful and on the road to even bigger wins. His role with the Patel family office means he's seeing and investing in, well, pretty much anything he wants to. In densely packed episode, Shilen shares his insight on the health care industry and the path he sees to transforming it through HealthAxis. We also hear what he looks for before consider investing in a startup and his thoughts on the Tampa Bay brand.

Shilen Patel lives at the entrepreneurial crossroads of passion, talent and capital. It’s a nice place for an entrepreneur to hang out and he gets to enjoy it on “both sides of the transaction.” His startup HealthAxis is already successful and on the road to even bigger wins. His role with the Patel family office means he’s seeing and investing in, well, pretty much anything he wants to.

That’s where I landed with HealthAxis Group is, we’re trying to unlock innovation or unlock the blocking factors to innovation for insurance companies, other types of payers, people who are taking that global risk where a small improvement and how healthy people are can translate into outsize returns or rewards for everybody in the network making that outcome happen."

I think that we, in the Tampa Bay area and really outside of Silicon Valley, this idea of raising money to get to your next round, to get to your next round is not a viable path to survival."

Joining me today on SPx is the CEO and founder of HealthAxis, Shilen Patel welcome.

Thank you, Joe.

A lot of stuff will be fun to dig into. You have a very unique experience in Tampa Bay. Obviously, healthcare is a big part of your life. Being someone who’s technologically oriented, and someone who’s aggressively entrepreneurial, can you sum up what makes healthcare so hard to do? I assume it’s some part regulation, some part aging infrastructure, some part people who want to protect their turf. It feels like a swamp full of – and you’re trying to be a machete to cut through it.

Yeah, it’s been a perpetual challenge. For anybody who’s used to solving problems, it’s really baffling to see what’s going on in healthcare. I’ve grown up around healthcare. So, I’m actually the only person in my family who doesn’t have an MD after their name. But I’ve grown up around doctors, and seen medicine evolve from the practice in the ‘80s to the ‘90s with managed care and into the 2000s. I’ve always had an understanding of how fragmented this system is.

What I always say about healthcare is that I’ve learned that, it’s not necessarily an innovation, and people want to approach it that way a lot. It’s more of an integration problem. There are so many different parties with so many legacy pieces, such as fragmentation. And the competitiveness of US healthcare is a strength, but it also makes it more fragmented than comparable industry in other parts of the world or other industries in our [2:07].

When we want to bring banking into the modern era, you can lean on these really large cohesive institutions that have operational depth. That has all of these things going on. Those are by necessity connected because they need to move around. There’s always that overriding necessity for connectivity and this need to handshake and build standards.

In healthcare, there’s a lot of silos regionally, different payers within a state. Different rules from state to state. You have small practice providers. Now increasingly, you have these large consolidated practices. But there are just too many different actors that have too many different priorities to really ever meet in the middle. There’s no overriding force to make them do so. I’ve seen a lot of Silicon Valley companies and things like that say, “We can build a widget,” or, “We can build an app and we can fix this problem.”

Even if you have 100,000 users, unless those 100,000 users are all in one county, and using the same doctors and connected to the same plans, you’re really too diffused to make a dent in what’s going on. It’s all about improving and penetrating these networks and these tighter loops, which is not something that healthcare outsiders necessarily observe.

I would think in the financial space there seems to be a clearer connection or clearer understanding of the ROI of doing it. There’s sort of a built-in incentive where I feel like, is it safe to say in the medical space people aren’t as connected to it and it all often becomes maybe a risk and a hustle that they’re hoping to do with not a clear-cut ROI?

Yeah, I think if you look back at healthcare and what has improved or, you know, what has changed – I should say – in a short period of time in healthcare, it’s always connected to strong incentive. I first got into healthcare IT right out of college. I was running an electronic medical records company. And I felt that that was the technology that was going to be transformative in healthcare.

But what ended up happening is you go a lot of the independent doctors and they all say, “Well, this all sounds nice, but it sounds like you’re asking me to spend a lot of money. Probably set back my ability to take care of my patients while I go through this learning curve. And ultimately, it’s other parties like the insurance company or some other party that’s really going to benefit from me putting in all of this administrative work.”

That was the environment that was selling into until late in the 2008-2009 when there was this incentive that came out. There’s a 44,000-dollar federal grant, “If you adopt EMR, we will give you this grant.” And all of a sudden, you have people calling us and saying, “Tell us about this technology, how can we integrate it?” so, it was sea change in the acceptance of it, because there was an incentive that was put in place.

Similarly, when you look at HIPPA and things like that, there were a lot of failed implementations of it. Then, as they started to tie and going electronic to payments in a tighter way, all of a sudden, people started move faster. In banking, there is that natural incentive and there’s that natural organization around the business. In healthcare, you don’t need to be connected. You don’t necessarily need to be first into a broader standard to feel like you’re doing what your patients expect of you. It’s harder environment in that sense to sell change into. You really have to make sure that you’re going to the party that’s best incentivized to promote it.

Recap, a couple of the key points there. A, the docs are about giving care, and this pulls them away from the care. B, a lot of times the changes don’t directly hit the patient. As far as the patient is concerned, if those changes aren’t directly touching them, the incentive is a little bit less. Because they can get by essentially with satisfied patients without implementing this. To some extent, because of the scatteredness of the solutions potentially, a bit of overwhelm from information and options and things like that, that all then – but actually even failed efforts throughout history that all lead to a little bit of distrust. And then incentivization, not to be the early adopters but to just wait and see.

Absolutely, I think there is this overriding fact that the doctors and the patients are both too fragmented to push for change, to demand change. So, really you look at where the points of consolidation are. And you have to go upstream to the payer. That’s the insurance company, Medicare, Medicaid because those people are collecting money globally. They’re basically dictating the rules by which patients are accessing care and benefits. They’re dictating the rules by which providers get paid to deliver that care and benefits.

When they decide that it’s time to change, and they can build those incentives into rewards for patients or better tooling for patients to be able to care of themselves preventatively, or into models that share risk with the providers or give doctors the tools to keep populations healthy rather than just taking care of people when they’re sick. When they feel like there’s value in doing that, and when they feel like they have the means to do that, that’s when you can see change. That’s when the doctors can be introduced with different options, better options. That’s when patients can be opened up to better experience.

That’s where I landed with HealthAxis Group is, we’re trying to unlock innovation or unlock the blocking factors to innovation for insurance companies, other types of payers, people who are taking that global risk where a small improvement and how healthy people are can translate into outsize returns or rewards for everybody in the network making that outcome happen.

Then I’m curious how that plays into your business strategy. Obviously, you saw your dad Doctor Kiran Patel do something large in that insurance space. There’s some timing elements to that as well. There are the barriers that we’ve discussed thus far. So, then how does that inform the sweet spot that you’re going for with your consulting work and your solutions?

Well, I think the important thing, and one of the reasons that that business was so successful is because freedom and optimum health, they were ahead of the curve in offering risk sharing agreements to providers. They were experts in collaborating with the primary care doctors that were taking care of these Medicare patients. Being able to map out the conditions of these folks, and then working collaboratively with those doctors to make sure the right things were done to keep healthy people healthy, to keep sick people from getting sicker.

There was a pool of funds, where if long-term health outcomes were better, there was a variable amount of funds that were available to these different doctor groups in order to be able to support that outcome. To me, it showed how powerful the payer can be in influencing outcome. Freedom needed unique tooling that other health plans and health insurance companies weren’t necessarily adopting in order to be able to go down that road.

I saw – just by observing – some of the forward-thinking stuff there, there was an opportunity to, that if you could enable these organizations to deliver these models, then that was really the way to unlock change. You couldn’t change healthcare for 300 million Americans all in one shot, but you can take a network of 50,000 patients or 5000 employees, and the whole ecosystem around them. And you can make that a little bit better.

So, we were looking to create better technology and better tools for people to be able to go down some of these more innovative models of care. And for the payer to be the driver and to be the sponsor of it. Actually, before the company sold, they were actually using our technology, because I think there was a great understanding. And we were able to build something new, because – as you talked about earlier legacy technology and legacy tools and all the enterprise offer is also a big part of this. People can’t pursue these new models with old tools.

But we were able to see that change, and by observing that company and how they were able to be successful we said, “Well, we can create the means for other people to do these things, because that’s what we feel is holding back healthcare in a lot of ways.

Certainly, you mentioned mastering the incentives in that was a big part of the success, should be noted. I look at solutions and I look at consulting in this traditional sense. Given that you’re running a family office that’s in the nine figures, when I track suppose that’s what I think of as traditional selling, project fees and hours and things like that. It doesn’t seem like the highest leverage use of your time, but it sounds like you’re trying to insert yourself into solutions that can take hold in small places or in the micro, and then grow into the macro. Is that a fair assessment?

Yeah, absolutely. First of all, I think the family office we’ve got a great team over there. I’m just part of the effort over there. I don’t want to present myself as the front person by any means. But that being said, I think the reason that I put my time into this, my passion has been here, precedes the establishment of the family office. I started this company in 2011. It was a business and a concept and a model of transformation that I’ve been thinking about since 2009, in terms of unlocking the ability for the payer, and the insurance company, or whoever’s at the top of these little loops, to be the leader. To be the driver of change.

I had an opportunity. I actually had a company called Patient 2.0, because the whole idea of the concept was to bring all of the information into the middle to be a better aggregator by tapping the payers who have all this information by necessity. And trying to build a better picture in order for the ultimate outcome to be people are healthier, people are doing better. Then I was able to find a company out in Texas which had been around at that point for over 45 years actually. We always consider ourselves to be this very old startup. But we’re able to acquire that legacy business. They had certainly, the know-how, the competencies. Their technology, their platform was very old, but they had the relationships. They had some of the history. So, I was able to buy operational maturity, and a capable team to build the vision forward on.

Then we took that, and that’s where the HealthAxis brand actually came from. That company was called HealthAxis. So, we rolled it in, and we took that. It’s hard to find anything that’s not trademarked with the word health in it these days, by the way. It was a good find just from a branding standpoint. I think it also conveyed this idea that we wanted to be at the intersection of all of these decisions, all of this information. We wanted to represent a better nexus for all of this stuff. To unlock everything that people feel healthcare should be.

In your vision then, how does that ultimately express itself? If we look forward to 10 years from now, and aspirationally what does HealthAxis look like? Is it just a giant pile of projects? Is it products and sub-companies and things like that that you own? Where is it headed?

We have kind of a defined solutions platform. So, we have a set of software products and enterprise software that we implemented and saw that basically, any job that’s done in an insurance company, people can sit in front of a keyboard and use our system to do that job. We have this core number-crunching piece of the business, but that’s what makes us sticky at the very heart of all of this information, all of this processing. Alongside that, we’ve also built up an analytics practice.

So, the idea is once all of this data that we’re crunching and using for different things, we can find ways to make it more organized, more actionable. We can bring other data into it. And ultimately, carry these models of healthcare forward. Then the third piece that we have is actually, like a back-office business process outsourcing function. If you feel like you don’t have the operational sophistication to use these tools, we can stand up a team to do most of what’s necessary. So, software driven services, basically.

We do have years’ long engagements with these insurance companies where we are basically the admission critical software. My goal is, use that position as their most important IT stakeholder to push innovation. To open them up to change. To be able to build years’ long plans to move into better models of care. To be competitive in different ways that maybe they weren’t able to, using the system that they bought in 1995. That’s our long-term proposition.

To me there’s certainly a business outcome with HealthAxis. I want it to become a very successful, very valuable company. But I think what’s always been very exciting to me about this company is, the position that it places itself in, in an organization over many years to be an advocate for modernization improvement, process optimization outcomes, better health outcomes, those types of things.

I really love the seat at the table that it provides. My hope is over the years – as we broaden our client base – that we’re considered to be one of these catalytic forces wherever we go for people who want to bring real digital healthcare to the table.

Let’s dig into that a little bit. Obviously, you’d mentioned that everybody in your family had an MD next to their name. So, health runs in the family. That’s a beautiful thing as far as all the early burn in that you get with that, you get a running start into it with all the things you’ve got to see both on the medical side and on the business side. But to some extent, it can also be dictating your destiny a little bit. So, what’s your relationship with healthcare? And as a tech and operations person, how connected are you to being driven by the actual health of individual patients and the community and things like that?

My exposure to medicine, I think it gave me visibility into a problem to solve, but my interest has always been more in technology, in systems and in business. Certainly, what never was far from my view were the unsolved problems in healthcare. From that standpoint, I think that my view into healthcare, I was necessarily predestined to go into healthcare. At one point when I graduated from college, I was considering two totally different paths. One, moving up to the northwest to start a digital marketing company, because people still thought the internet was just another Yellow Pages. I thought that that was an interesting opportunity.

Then the other was this technology business that I was going to be able to take on, and get into healthcare. I had always felt that maybe I’d do that for two-three years, flip it and then move on to some other more interesting things. I had always joked that if I didn’t get out of healthcare in five years, I might end up being a lifer. That business took about nine years to build and grow. But once you’ve worked in that space, the opportunity to fix things and the sheer number of things unfixed, and the unique perspective you need that somebody just parachuting into healthcare doesn’t have, all of those things really stick with me.

I think that as much as the other things that I do as an investor on the family office side, they allow me to very diverse in business. I think that there’s always a relationship that I’m going to have until I feel good about how I left my relationship with the problem of healthcare. I do feel like HealthAxis could be my best opportunity to make an impact in that world.

Along with medicine, another big theme in your family is entrepreneurship. You mentioned, the things that you tried after college they were all essentially starting your own business. So, it seems entrepreneurship with HealthAxis, that’s just what you do. Then you expand that out into the investment side as well. It should be mentioned that you’re working with TIE, over a three million-dollar fund that you stood up to invest in regionally. I think it’s a good transition to dig into how your investment philosophy when you look at startups, what are you looking for? And how does that play into overall, regional economic development?

I’m so grateful that I grew up in this area. I think it’s been fascinating to see what’s happened here. We got here in about 1982. I was two years old. So, this is home for me, but seeing the transformation in this area, with the scale of the community, being able to see and appreciate the people behind the transformation. And you really get a sense for what’s possible. At the same time – within our family and within our Indian community – we had a huge stream of people coming from India, from other parts of the US, coming here to make a living, start a business whether it was a medical practice, a real estate business, a hotel.

So, all around me, I just saw people making bets on themselves, understanding that they were taking a risk. Having the vision to see that risk through and being rewarded for it. To me, there’s really never been anything scary about that mode. I thank where I grew up and I thank who I grew up with for that, because it’s not something that everybody just gets to wake up and say, “Oh well, should I start this business?” or, “Should I start that business?” I think that I had the opportunity to see it modeled, not always to go well, but I saw success. And I saw people fall short of success and try again.

I think to me, there was really only one thing that I felt I could do. I didn’t think I would be a very good employee anyways. To me this idea of having an idea, putting yourself into it, I appreciate that journey. I think as an entrepreneur and then also an investor, I definitely appreciate that journey. Investment, it starts with people. It starts with the people and their relationship to the idea. It’s a red flag for me, if somebody has just – as I said before – parachuted into an idea, they see it is a gold mine or something that’s the thing of the moment. And now, they’re in front of you pitching it, because there’s a short window and this is hot, or because they were just looking for something that had a certain profile.

To me, I’m looking for people who have lived in the problem. Who have a relationship to the problem, and where I can intuitively understand both the problem and what they think should be done about the problem. I think that that’s important is, who are the individuals involved? What’s their history? What is their mentality? What is their relationship to the problem? I think, while we have some investments, to take a lot of hope and take some time to get to the outcome that they want, by and large especially with early-stage businesses, I’m trying to understand a path to traction.

I think that we, in the Tampa Bay area and really outside of Silicon Valley, this idea of raising money to get to your next round, to get to your next round is not a viable path to survival. For companies in this market, you have to understand where your traction is going to come from, where your validation is going to come from. Not that you cannot take additional investment money, but you have to understand what your business looks like if investment capital is not available. Where do you get to a sustainable point? What triggers can you pull if you need to wait another eight months for that validation?

I think that those things are important. Certainly, a business in this area can have a longer runway than a business in some of those other areas. So, you can afford to think that way, but I am not necessarily looking to sign on to a company, because I think that the next round is going to yield a bigger number and those types of things. We tend to want to be on a journey with people who can get to a place of self-sustaining success and figure out what they want to do with their success and with their platform from there.

So, that being said, does that lead you to feel most inclined to jump in at a certain stage? That sounds like there’s early-stage, the seed stuff, friends and family stuff sounds like wants to have some traction, and to have some sort of peripheral concept, but aren’t quite at the stage where they’re ready to scale. That’s where you like to come in and say, “The concept’s proved, and really it’s just about scaling.”

We’ve done deals at every stage. I think it just depends on what we’re looking at. I think that we have a large set of positions in what I would call growth equity stage businesses, where we understand we’re investing into a mature business. We understand what the proceeds are expected to bring back. And we have a certain thought on what ROI looks like. We also do things that are pre-revenue and even pre-product and we have. Mainly when we feel like it’s more than our money that we’re bringing to the table.

If we can bring an early-adopter client. If we can bring some sort of subject matter expertise, those types of things might influence us to do it. But I think that when we get to anything angel and pre, there’s not necessarily an expectation that it’s going to be this huge transformative outcome. It’s important for us to be engaged at that level, because that’s where growth equity stage businesses come from. That’s where you’re going to start creating an ecosystem here in Tampa Bay where people understand that they can get capital. If they need $1 million that they can go to different places to get it.

You certainly invest with the mindset that you want those things to 10x, but you understand the reality of the risk profile of these businesses, and you’re going to have a whole spectrum of outcomes. But I think it’s important to be in at that level. It’s important to be winning at that level, because I think that that enriches the entire investment environment. Then, hopefully people are successful enough that they want to go from writing hundreds of thousands of dollars’ cheques to being capable of writing several million-dollar cheques.

You want to have an environment here locally that’s bringing those companies, that’s bringing a channel of those companies or has a top of the funnel of a lot of companies that are capable of becoming that company. And they have a lot of ways to go. In a lot of ways, when you look at VC, Seed and those types of things, there’s a financial incentive, but I think it’s really thinking about how to keep the ecosystem healthy. And how to keep a strong food chain of companies for investors to participate in based on their appetite, their portfolio and all of those things.

Let’s look at that food chain. You’ve been here forever. I would say that some of the low-hanging fruit that you see in the inefficiencies of healthcare that in our region… I wouldn’t say inefficiency is the right word, but we definitely had some low hanging fruit right there. Some of the stuff that was just normal infrastructure in other cities, we didn’t have here. We’ve seen some incubators and some mentoring groups and some funds stand up. What are the things that – at this stage 2021 – you think are the biggest gaps we need to fill to propel us into a place where that food chain is healthy?

There is timing challenge that unfortunately, not everybody has control over. I’ll give you an example. The first deal that I did directly and personally from the local community here, was a deal that came through TIE in its first year through the TIE Tampa Bay Chapter. It was a company called Feathr. They were out of Gainesville actually, but they ended up getting their backing out of here. They had built a meetings app which is now pivoted into an AdTech company. They’re writing out the Coronavirus right now, but I’m nine years into that investment now.

They are there. They’re proceeding, but the exit event is something that I’m not sure what their relationship is to an exit event. It could happen very soon. It could happen 10 years from now. I think that some of these exits, some of these companies that have been entered into by the Florida Funders or the Viniks or our family or all of the other incubators around here that came out of [24:56]. There is a maturation process, and you really need some of those companies to hit, for the people who bet on those companies to be rewarded. And for them to put that back in, not just the capital but also that momentum.

If you look at a lot of these startup hubs and things out there, there has been a couple of defining successes in that community, and that city that have been locally backed. And that’s triggered a wave of entrepreneurs, a wave of investors. I think that we still need those waves to hit the shore. In some ways, it’s a waiting game, but ultimately, I think that the more that we can do to see some of these companies, and the more time that passes, and the more of these companies that… I feel like there is a lot of great companies out here. It’s just a question of how do they get to exit. How do they get to maturity? And how do people release their money from those, with excitement about what the next wave of companies is going to bring?

That makes a lot of sense. All the marketing and all the infrastructure in the world, a couple of unicorns is what stirs the pot, right?

Mm-hm.

That being said, the farm that we’re waiting to harvest can be directly impacted by infrastructure, and to some extent even branding of a region. That’s one thing that I hear consistently in all the groups that I circulate amongst is that, there isn’t necessarily a cohesive brand or position. When you think of an Austin or you think of a Silicon Valley. And again, a lot of those had a brand that was unintentional that came out of the success, but it doesn’t mean you try. Maybe a better way to ask the question is, do you see the seeds or the beginnings of a brand or a position that you think might be with the flavor of Tampa Bayers in five years?

It’s hard to say that there is a singular thing emerging or even a couple of things. I think that it’s fair to say that yeah, there’s a lot of – I don’t want to call it noise, because that’s pejorative but there’s a lot of paths being walked right now. And it’s not clear which one that people outside of the area are meant to pay the most attention to. But I do see some themes emerging that are exciting to me. Certainly, I think healthcare, when you look at the aging population here, you look at large healthcare companies, and not just health but back office and administrative operations, there’s a great healthcare infrastructure here. A good workforce for healthcare.

I think that healthcare is certainly a lane I’ve been really excited to see the success of cyber security companies here. I think that that’s one of those areas where success can beget success. We might get a great ecosystem around that. That’s one that was unexpected. To your point, I think just an outcome of what people were working on that was unplanned by – a masterplan.

And the military presence doesn’t hurt either.

Yeah, absolutely. Then I think that also, selfishly thinking about the world through a lot of the businesses that I’m engaged in, but hospitality tech around that. Being a heavy tourist area, what can we do to be a forward-thinking tourist area? What can we be doing that sets the tone business wise, experience wise through new technology, through new services that will help us stand out on that front and make other people want to come here to pilot things?

Then I think sustainability. If you look around, the agriculture, the marine that we have I think there’s certainly sustainability. I’ve recently become more exposed to USF St. Pete and certainly what’s going on over there with the marine lab and things like that. There’s assets around this area – natural assets that I think can also come into play, because that is a problem and an opportunity that is not going away. I think that we’ve got some great tools with the university infrastructure, with the natural resources and the natural lay of where we are in that area as well.

Wonderful, and speaking of yourself, congratulations. You were appointed to the board of trustees there. Well done.

Thank you.

And have fun with that.

Yeah, it’s always great to sign up for a government job voluntarily.

Yeah. Wonderful, I’ve enjoyed the conversation. A lot of great insights. The work you’re doing is really important like you said. It’s to have that unique insight that you’ve had, mixed with the technology and innovation, character that you have. To mix those together, you are positioned well to do something substantial and that worthy in space. That will only benefit the region obviously, as well as you. We finish each show with a shout-out basically, someone who’s doing something under the radar that you’d like to give them more attention to, anybody come to mind.

I think there’s an effort that selfishly is an organization that I’m involved with, but the Community Enrichment Lab is an organization that’s working up in the university area. There is a goal of making that an innovation hub which is a whole other conversation that I think is important. With all of the assets up there, the university, the VA, Moffit and some space to fill, but we’re working over there on a social mission. So, we want to make sure that if good things happen there, the good things are happening for everybody, and not at the expense of a community that’s been there and had challenges for a long time.

Our goal is to challenge people, whether it’s the institutions or the innovators that are taking up residence there to say, “If you’re problem solvers and you’re world changers and difference-makers, we have opportunities to solve problems and make a difference right here all around us.” So, we want to try to connect the institutions and innovators with the community. And we’re trying to come up with a series of unique programs that allow people to engage as problem solvers and to create opportunities for people in that area.

We had to pivot a little bit this year, because of the pandemic. We actually started a food program where we began sourcing food from the restaurants which have all been struggling down Fowler and Fletcher with all the dining restrictions. Very diverse restaurants, very family-owned restaurants things like that. We’ve been sourcing food from them in order to provide food relief in other areas. We’ve been trying to help them keep some revenue stream going in order to be able to keep their employees employed and keep the business afloat.

I look forward to doing more in that area. I think that that university area uptown is going to be a story that’s going to be growing over the next few years. We want to make sure it’s not just a business story. That’s the Community Enrichment Lab.

Thank you.