Medsider: Learn from Medtech and Healthtech Founders and CEOs - Pioneering AI in Patient Diagnosis: Interview with Digital Diagnostics CEO John Bertrand

Episode Date: December 20, 2023

In this episode of Medsider Radio, we sat down with John Bertrand, the CEO of Digital Diagnostics, a company that is pioneering AI healthcare systems. Its flagship product, LumineticsCore, is an algorithm that autonomously diagnoses patients with diabetic retinopathy. John's career started at Epic Systems, where he rapidly advanced through various roles, focusing on product and business development. His expertise in digital healthcare, honed at Epic, led to his role at 8VC, a Silicon Valley venture capital firm, where he concentrated on artificial intelligence in medical imaging. Eventually joining Digital Diagnostics as CEO, John combined his extensive industry experience with a passion for innovative healthcare technology solutions.In this interview, John shares his insights on aligning products with real-world needs, the importance of stakeholder engagement for adoption and long-term success, and strategies for navigating the extended sales cycles in healthcare technology. Before we dive into the discussion, I wanted to mention a few things:First, if you’re into learning from medical device and health technology founders and CEOs, and want to know when new interviews are live, head over to Medsider.com and sign up for our free newsletter.Second, if you want to peek behind the curtain of the world's most successful startups, you should consider a Medsider premium membership. You’ll learn the strategies and tactics that founders and CEOs use to build and grow companies like Silk Road Medical, AliveCor, Shockwave Medical, and hundreds more!We recently introduced some fantastic additions exclusively for Medsider premium members, including playbooks, which are curated collections of our top Medsider interviews on key topics like capital fundraising and risk mitigation, and a curated investor database to help you discover your next medical device or health technology investor!In addition to the entire back catalog of Medsider interviews over the past decade, premium members also get a copy of every volume of Medsider Mentors at no additional cost, including the recently launched Medsider Mentors Volume IV. If you’re interested, go to medsider.com/subscribe to learn more.Lastly, if you'd rather read than listen, here's a link to the full interview with John Bertrand.

Well, because we created that buy-in, because we created that understanding, every time we want to do something new, bring something new from a product-respective market, it's just that much easier because we have the reputation of working with folks rather than around them in the system. Welcome to MedSider, where you can learn from the brightest founders and CEOs in medical devices and health technology. Join tens of thousands of ambitious doers as we unpack the insights, tactics, and secrets behind the most successful life science startups in the world.

Now, here's your host, Scott Nelson. Hey, everyone, it's Scott. In this episode of MedSider, I sat down with John Bertrand, whose career started at Epic Systems, where he rapidly advanced through various roles focusing on product and business development. His expertise in digital healthcare led to his role at 8BC, a Silicon Valley Venture Capital firm,

where he concentrated on artificial intelligence and medical imaging. Eventually joining digital diagnostics as CEO, John combines his extensive industry experience with a passion for innovative healthcare technology solutions. Here for you the key things that we discussed in this conversation. First, understand and align your product with real customer needs to find a meaningful place for it in the healthcare system. Engage directly within users, observe products in their natural habitats, and integrate feedback into development. Second, be intentional about working within the system rather than simply ticking off checkboxes. Also, keep your stakeholders close and strive to build a reputation as a reliable

partner within the industry. Third, plan for a long sales cycle and manage your financial runway carefully. Align your product with real patient value and avoid premature investments in R&D. After some initial sales wins, shift focus to securing larger, more strategic deals rather than numerous small ones. Before we jump into this episode, I wanted to let you know that the latest edition of Medsider mentors is now live. Volume 4 summarizes the key learnings from the most popular Medsider interviews over the last several months with folks like Rob Ball, CEO of Shoulder Innovations, Kate Rumroll, CEO of Abolative Solutions, Dr. Christian Ramdo, CEO of Tempe Health, and other leaders of some of the hottest startups in the space. Look, it's tough to listen

or read every Medsider interview that comes out, even the best ones. But there are so many valuable lessons you can glean from the founders and CEOs that join our program. So that's why we decided to create Medsider Mentors. It's the easiest way for you to learn from the world's best medical device and health technology entrepreneurs in one central place. If you're interested in learning more, head over to MedsiderRadio.com forward slash mentors. Premium members get free access to all past and future volumes. And if you're not a premium member yet, you should definitely consider signing up. In addition to every volume of Medsider mentors, you'll get full access to the entire library of interviews dating back to 2010. You'll also be able to see all of our playbooks,

handpicked collections of the most insightful interviews with the brightest founders and CEOs. Whether you're looking to master capital fundraising, navigate early stage development, tackle regulatory challenges, understand reimbursement, or position your venture for a meaningful exit, MedSider Playbooks have you covered. And last, considering that fundraising can be one of the most daunting tasks for any startup, we created a meticulous database of investors right at your fingertips. Explore a wealth of VC funds, private equity firms, angel groups, and more, all eager to invest in medical device and health technology startups.

Access to this database is a premium member exclusive, so don't miss out. Learn more about Medsider Mentors and our premium memberships by visiting Medsiderradio.com forward slash mentors. Again, that's MedsiderRadio.com forward slash mentors. All right, without further ado, let's jump right into the interview. All right, John, welcome to Medsider Radio. Appreciate it coming on, man. Thanks for having me, Scott.

Looking forward to the discussion, especially considering, I know not all of your operations anymore are based in Iowa. But I always like to see, you know, healthcare startups, right, with some sort of roots in the Midwest. So with that said, I recorded a brief bio at the outset of this episode, but we'd love to start. Can I hear it from you first? Give us maybe an elevator pitch for your professional background

leading up to running digital diagnostics as the CEO. So I started in healthcare in 2006, right out of undergrad, actually. I grew up in a healthcare household. Both my parents are in MedTech. So I grew up hearing about the digitization of medical imaging in the radiology field and when it was my time to start looking for work after my bachelor's. My assumption was I was going to go work in healthcare. Got introduced to a small company at the time in the middle of the cornfield of Wisconsin

called Epic. I thought, all right, I've seen what happens when medical images are digitized. What happens when the charts digitized? That's going to be cool. It feels like the next wave. So it took an entry-level position doing professional services, implementations, that epic and pretty quickly worked myself into product, business development, commercial facing roles, really kind of just did anything that really wasn't programming over my 13 years there.

Frankly, I was a blast of ride. We went from a small company people that sort of heard up to the market dominant player. I got to have a front row seat for what was the last big wave in healthcare from an innovation perspective. After a little bit of time, that started getting a little bit old. I ran into a couple of buddies that were on the West Coast doing some cool new stuff with computer vision. One thing led to another.

I met Joe Lonsdale as he was getting into healthcare investing for his firm APC. And he said, hey, why don't you come work with us, you know, catch the next big wave of medical imaging AI. It's like, I can't pass this up. I can see how the chart was digitized. I know from growing up how medical imaging intersects the patient and where that's out and it's technical arc. So it was just kind of a no-brainer to join.

And that's eventually how I met digital diagnostics and joined the board after leading the investment with the managing director of APC here. And after some time, the founder was like, I need help commercially. And that's how I got introduced to the role of CEO. That's great. And I'm sure, yeah, you mentioned your ride at Epic was epic, right? Punfully intended. But yeah, not too many people have that experience where you can kind of start sort of

on the ground floor and catch that wave. And I'm sure most of the people listening or at least somewhat loosely familiar with Epic, even though this is kind of a med tech-centric podcast. I think everyone in healthcare probably knows the brand or at least a little bit about it. So I'm sure that those experiences were pretty incredible. But when it comes to digital diagnostic, we'll have the chance to kind of go back in time and learn a little bit more about sort of the evolution of the company. But without getting two part of the weeds, give us a sense kind of for like what the core

technology is and the problems that you're solving. and maybe coach me up on what this is, as if I'm a freshman in high school. So digital diagnostics is really known in the AI space for its FDA breakthrough and de novo clinical study and approval for what's now called luminetics, which is the first and still only in de novo algorithm that diagnoses a patient without the physician in the loop. So unlike other AI use cases in healthcare, there's no relaying this to a doctor to double check the computer. This is literally low-school, low-skill, high-school-educated operator, runs the test, goes into the GPU, and out comes a diagnostic report that maps to ICD-10 codes.

We created a C-PT code. So you're really doing diagnostic work purely with a computer here. Our primary use case is the diabetic eye exam, the leading cause of blindness. It's a very, very well-known test that if you catch the disease early and take intervention, you can prevent blindness and all the downstream pain and suffering for the patient. as well as cost for the overall health system. So that's really what we're out in market most prominently known for today, you know, in over 1,000 clinics, scaling internationally. We, of course, have a large R&D pipeline.

I'm happy to talk about later. But right now, if you were to say, hey, why would I be interested in talking to digital diagnostics? It's to close that care gap around the diabetic eye exam and make sure that you can offer that test in more convenient locations. Because, again, with it being automated, I don't have to go to a specialist to have care provided. I can move this test to meet the patient where they're at

and expand access in an equitable manner to patients. Got it, got it. That's helpful. And are you actually supplying the hardware too to facilitate the test? We're not a hardware vendor. We don't make hardware. Got it, okay. So the way I would think about us is we're an AI platform that's secure in the cloud, HIPAA, soft, too, all that compliant.

But we work with hardware vendors that have off-the-shelf hardware. Our primary modality right now is what's called fundoscopy or fundus camera. It's been around for about 100 years. It's been digitized for a while. You take that hardware, connect it to our secure system. You're able to send us images and we provide you back that diagnostic result. And then from there, the provider can build, close the care gap, route the patient to specialty intervention if they're positive, all the things that I mentioned a moment ago.

Got it. Got it. Okay. That's super helpful. And if you're listening and don't get a chance to get to the full. summary article on MedSider, the company is, the company's URL is digital diagnostics.com, just as it sounds, digital diagnostics.com. You can learn a little bit more about the technology, as well as the story, which we'll get into here over the course of the next, you know, 40 minutes or so.

But give us a sense, John, we're recording this in Q4 of 2023. It looks like, based on your LinkedIn profile, you've been in with digital diagnostics for almost half a decade or so, or close to it anyway, gives us a sense for kind of where the company's at. I mean, you were brought in to really kind of flex your commercial chops, it sounds like. But yeah, give us an idea of kind of where you're at in terms of Glenn, reg, and really broader commercialization. Sure. So I first met the company in 18 right after they received their de novo approval from

the FDA and joined the board and really worked with Michael, Dr. Abramoth, our founder on early adopter strategy as well as reimbursement. That kind of consumed 18, 19, into 20, right? Building your book of validation that it works in clinical workflow, that the outcomes and actual clinical settings match what happened in the trial and with studies that are maybe more laboratory-based in terms of their like set up and approach. And as we expanded that body of evidence,

we're able to convince CMS to create the CPT code 9229, set reimbursement for the product. The following year they gave us national coverage. And that kind of reimbursement coverage moment was our first big commercial value inflection point. You know, up to that point, it's very exciting technology that early doctors are really interested in digging into because it's new, it's innovative.

They're looking for where the hockey puck is going and trying to skate to that space. For the vast majority of healthcare, though, it's helped me practically understand why I should be doing this with my patients beyond the obvious patient outcome-related, you know, outcomes. And when reimbursement was set, that's really when we started seeing us going from Stanford Hopkins, May all using the product to like, you're more, say, you know, basic IDNs without the academic components. Like OSF is a great example,

uses us in over 30 of their clinics right now. That was a big addition for us right around the 2021 mark. And we continue to see that momentum continue in terms of health systems, value-based care organizations, using us as like a testing program across their entire enterprise. Right now, again, as I mentioned earlier, we're tracking on 1,000 clinics in the U.S. alone. We're in 17 countries.

We have distribution with Baxter kicking off here. in the next 12 months for automation of the same kind on their established platform that's in about 10,000 clinics. So we are continuing to scale, have another big inflection point coming next year. We're at a point where we're starting to see ourselves test over 1% of the diabetics in the United States here, which is pretty exciting for a product that is this new, innovative, and has only had a couple of years of reimbursement under its belt. Got it. And that's super helpful. And just to kind of circle back around and reimbursement, which we may get into a little bit later.

It sounds like when you first joined a CEO, as you mentioned, the de novo was in place, but that was a clear gap. There was no reimbursement at all. I mean, if someone wanted to use this, it would be like cash pay or like, I mean? We had a bridging code that didn't cover the costs of deploying. So you had to have like an academic impetus for interacting with it to make it work as a project, right? So I came in. We didn't have reimbursement.

Bridge we had was not sufficient to cover it. We know business model. We know standard contracts. It literally was inbound calls from other MD PhD types in and around healthcare that saw the news and are like, we agree this is where healthcare needs to go. How can we get our hands on this and start learning and give you guys feedback? I really didn't, in my opinion, become a fully commercial product until about 2021. You know, some improvements to the product made in the interim to make it more generally usable

by the broader, less, say, academic medical center type of staff. You need the reimbursement to justify, you know, making the investment. We had ourselves set up as a value-based care care gap closure mechanism within CQA, which is a big requirement. One of the things that I'm obvious to you after I say this, but I was caught completely love guard, is how many places in HealthGrit says the provider? Because when you create a device that doesn't require a provider, every rule in reg as you work through deploying the product for the first time, you run into says the word the provider. And that becomes an issue when there isn't a provider involved.

So we have changed something like I stopped counting about 12 or 13 rules or regulations, standards related items like American Diabetes Association had to add us as a standard of care, acceptable test. They had to add it could be an autonomous device that was standard of care. So that's one great example. You know, AMA's had to go out and make several statements about their view of the safety and efficacy. see I mentioned NCQA, which is related to he dismisses Macro.

We had to go have conversations with those folks. And look, I've been overwhelmed by the support we've received by all of these various stakeholders, but it was, one, a conscious choice to work within the system, right? This is not the Uber approach where we're like, hey, we believe this is safe. We're just going to ram this down everyone's throat and just, you know, dang the consequences with the regulatory compliance folks. We sat down with each of them and got buy-in and feedback and worked through that process. which is why I feel like we've been able to get to this point of commercial success.

Yeah, I could have probably gotten some folks to adopt the product by just lowering our shoulder and plowing through things without paying any attention to the different stakeholders. But because we created that buy-in, because we created that understanding, every time we want to do something new, bring something new from a product-respective market, it's just that much easier because, you know, we have the reputation of working with folks rather than around them in the system. Yeah, no, it's a good point. It reminds me of a conversation.

I had with Misha Dugan, I believe is how you pronounce her last name. She runs another Midwest startup in the epigenetic space. And she came, it was a technology, I think, that was spun out of the University of Iowa. But she mentioned something very similar. Like, they had the option. There's a consumer sort of bias, right, towards their test because it's sort of, you could make it like almost direct to consumer, really, if you wanted to, you wanted to make that play.

But she was like, you know, it's been incredibly helpful that they've worked within the system, as you mentioned. And that's really allowed them to build. establish a lot of trust, right, and build relationships with, you know, with key stakeholders, right, that are, I think are, they're realizing the fruit of that now, right, by making that conscious choice to kind of work within the system versus the Uber, the Travis Calacanic approach, you know, with Uber. So I think it's a good point.

I think it's important you work within the system in healthcare. I think the unique perspective that I was able to bring, I shouldn't even say unique, but the perspective I was able to bring, having been in the environment, you know, since early members of childhood is that at the end of the day, your customer is actually the patient. And how your product performs and the impact it has on them is a serious ethical and moral consideration you need to have every time you were thinking through product decisions. And it's faked in how we do things here. But I think someone coming from a pure tech background without that experience, sitting down

providers, building things in the past and learning from them about the rules of first, you know harm, right, which is a key tenant of our kind of guiding principles within our business and how we think about making decisions, you have to kind of have that experience, that exposure. If I would have said, Benna Fang and just, I'm like, I know a bunch about AI, let's just start playing with it in healthcare. I think we might have chosen a different path and we might have had a lot more serious downside consequences

as it comes to patients at the end of the day. Yeah, that's really good point. Well, I think that sets the stage for maybe the next half hour or so where we go back in time, learn a little bit more about your journey as well as the last, you know, half decade with digital diagnostics. And I'd like to start with just kind of like early stage product and development, right? You've been, obviously, you see a lot of startups, right?

Within your kind of your role at 8 VC, you've been on the boards of several different companies, obviously your journey kind of the wave at Epic. When you think about how to maximize capital, right, in the earliest stages, right? Because it's usually pretty limited. And you're trying to move quick as an entrepreneur to get from, you know, prototype concept to maybe concept freeze, to maybe, you know, beta builds, et cetera. where do you see most kind of life science, digital health, med tech entrepreneurs make the biggest mistakes in those earliest stages? Well, that's a really great question. I think it's going to

break down into two, maybe three areas. One would be misjudging the difference between what happens in a laboratory and how real clinical care is delivered in workflow. There are numerous cases in the ICare AI space alone, and that's before you get to the broader market, where someone's and a bench test, a wonderful innovation. Google is famous for having first gotten to the diabetic retinopathy problem, which is our first product addresses that. They still have a cleared product. And the reason for that is the way they built and designed it

was literally in a South San Francisco building, not in a clinic, not thinking through, how does the patient move through the clinic? What skill level of the operator have? How is the physician want to interact with the support when it's done? And that was something that we deliberately thought of from the beginning. I think it's because our founder, Dr. Abramoff, is a physician by training, but also computer scientists and spent a lot of time working on HIT, in fact, was actually one of the epic early adopters

of their ophthalmology EMR. It's like, he's been through this process a few times before. That's actually how we jelled originally was riffing on things and being like, yeah, nobody gets, it's how it gets into the workforce part that's hard, right? Like solving the technical, you know, biology problem actually is probably easier than getting a health system to integrate it, to train people, to start. support it to do ongoing utilization and monitoring. So I think that's one big thing that people often make a mistake on. It's a really cool things where you're like, great, tell me where it's

in live use and what you learned. And in crossing over that chasm to get into live use often kills a lot of companies. The second would be lack of appreciation for healthcare sales cycles. This was one of my first aha moments starting to work in the venture world several years ago at this point, sitting down with really excited entrepreneurs about an innovation. And maybe it's in work flow, one or two places. So we've checked the first box. And they're asking for capital for a raise. And they're asking for 18 months, two years of runway. And I'm like, hey, guys, average sales, second health care, 18 months minimum. And that's if we're doing really well. And if your runway is done in 24, you have six months to, you have no time to raise. You essentially are raising into a dead zone

for yourself where you won't have enough commercial early adopter data points to be able to to validate your thesis to move on to the next tranche of funding. So I think how you go to market, sales cycles, distribution versus direct, all of those are things that are heavily nuanced depending on the product, of course, but you really need to be thinking through cash balance, runway, how you're going to market, what's the capital efficiency of the various options that you have in the likelihood of success. It's a great industry healthcare that is for the best product not winning. and you've got to understand that and appreciate that coming in.

And I think that go-to-market is a big place for that to really be seen by folks. Yeah, yeah, it's a really good point. And I see a lot of like first-time entrepreneurs or, you know, their first-time CEOs, they're leading early-stage companies kind of miss out on that timeline, you know, kind of aspect, right, and don't have that really dialed in and can't speak to it. And can't talk, talk about like why, you know, why they're asking for this, you know, capital infusion and how far that's going to get them. They just haven't really spent the time or I don't fully understand how to effectively talk to that. But John, just circle back around to your

point about, you know, one of the bigger mistakes, you know, which is the first point you mentioned around, not really being, not really fully grasping how this like really cool idea, right, that maybe comes out of a lab or an academic center, how that translates into the world world. It seems like that's a common trend that often comes up. Like the best, the best like med tech entrepreneurs that have had on the program, like they're in the weeds with their customers, like fully understanding, like, and asking quite like very detailed questions around, oh, why did you just do that? Or why are you doing it that way, right? I was, I was joking around with another, another group earlier this week. And we talked about this, this rock problem where it was

with a, I was explaining the story around how these users were, we're placing this rock on a button, right, by just default. That's how they had learned. And it was, it wasn't a rock. I'm kind of paraphrasing the story. But it was like, this really, like, bizarre way of like solving for this problem. And, you know, the, the, the entrepreneurs were like, why are you doing that? Like, why are you putting that weight on that thing? They're like, oh, so we don't have to touch the button constantly. It's like, oh, okay. Like, we can, we can probably solve for that, right?

But, but it's just a good story, right? It's like a good picture of like being in the work, like under, to your point, understanding the workflow, like how patients are interacting with this thing, how physicians are going to are going to be using it or how are they going to want to, want to ideally use it, et cetera. So really, really good point around, uh, uh, around early stage, early stage iteration. I mean, I remember getting exposed to that in my early days doing implementations at Epic

before, you know, before they had their foundation system and like a standard way of doing things. Everything was very whiteboard. What would you like this to be? Very much more startup kind of scrum mentality and approach. Very thankful I got there at that time, just similar experiences. But my favorite phrase I heard on my first implementation in Morgan, Thomas, Virginia, constantly when I'd say, hey, why do you do it this way?

I don't know. We just always done it that way. That's how I was told to do it. And then you peel back layers of the onion and you find out two systems ago that they were using for this function. There was this requirement to do it this way. The last system or two since then hadn't had the requirement, but that carried past where the technology was at because the people were just used to this is how things are done around here. And even the way can be challenging sometimes when you're looking at things. At least the rock button makes sense. It's totally on the button. You ask that question and they're like, you know, I don't even really know why I do this. It's a very interesting environment, and I agree with you. You've got to be at the elbow with your customers, with your end users. I mean, our engineers do immersion trips a couple times a year where they go in and observe everybody using it. And you'll be shocked the aha moments that you get out of folks, just little stuff that actually when you tweak it, tighten the screw, tighten the workflow, you produce a significant

impact for people at the end of the day. Yeah, yeah, and that's really good stuff. Let's transition to kind of the reg plan. kind of function. And you mentioned earlier, as you thought about how to how to best lead digital diagnostics after this de novo approval from FDA, it sounds like you had to sort of substantiate, you know, the technology in a number of different ways, especially around reimbursement. So when you think about, when you think about just that Clinton reg process in general, a lot of, a lot of first time life science entrepreneurs are not even first time.

Like just in general, that function can be pretty daunting, right? There's a lot of requirements. the hurdles are typically pretty high, although some aspects of it can be objective, a lot of it's subjective and nuanced. So when you think about how to effectively navigate that landscape, are there a few things that come to mind that have been especially helpful for you in your kind of journey through over the last decade plus in healthcare? Hey there, it's Scott, and thanks for listening in so far. The rest of this conversation is only available via our private podcast for MedSider premium

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