Thomas Vanderheyden, Vice President of the Emerging Business Group at UnitedHealth Group, will join us on stage May 15th at the Health 2.0 Spring Fling: Matchpoint Boston on the Customers Panel. He will discuss UnitedHealth Group’s partnerships, collaborations and other business development strategies. This interview is part of Spring Fling: Matchpoint Boston series.

Indu Subaiya: Thanks for joining us today. Why don’t we start off by you telling us a bit about your role at UnitedHealth Group? We understand that you’re responsible for creating partnerships and other opportunities. So, tell us a bit more about the role.

Thomas: Sure! The group is Emerging Businesses Group. It’s a corporate function, so we spread across all areas of UnitedHealth Group whether that’s on the benefits side or on the health care services side. Our mission is really to create, identify, foster, develop new businesses for us to participate in. So that means most days I spend learning and meeting with generally earlier stage companies.

You’ve probably seen in the press, our participation in the Rock Health incubator and some other related activities, so we got to learn, learn, and learn, and then figure out how those companies and ideas can help us achieve our goals.

Indu Subaiya: It sounds that it’s still in that information gathering stage, but are there some models for how you might partner with some of these startups, and more innovative companies?

Thomas: Yeah. At CES this year, we announced a couple of partnerships which I think are indicative of both our method and our interest. Lose It! is one of them. I think probably a lot of people are familiar, or will be, with the Lose It! app that’s been around for a few years. It’s usually at the top of the health and wellness queue of the App Store. That’s a very interesting example for us as a company in that it was a very early stage, pre-revenue company, but they had demonstrated traction in the market space, millions of downloads.

They had good data, persistency in terms of users, and also the outcomes that the users were having. Lose It! is both an activity and a calorie tracker, leading generally to weight loss. So, the fact that they had really good data about their members, drew our interest, and then lastly which is often what we look at first was the leadership team. The two co-founders of Lose It! had great track record. Lose It! is at least their third startup, and the other two ended very, very successfully for them.

That combination got us interested, and as we announced at CES, we are partnering with them. So the market will soon see some products and services that are coming out under our brand, if you will, carrying the Lose It! functionality and probably the Lose brand. So, that’s one.

CareSpeak is an interesting example; again, early stage pre-revenue company. In this case, it’s a two-way texting platform for medication adherence. This isn’t you or I taking our antibiotics after having some reason to take antibiotics, the Mount Sinai trial that was done in 2009 with this was related to pediatric liver transplant. So these are complex medical conditions where drug adherence is very, very important in the recovery and constituent, of the patient.

Again, it’s early stage but proven, even though it was pre-revenue, the trial proved great results. This is just another example of us looking early stage yet, it’s something that’s been proven has good leadership and something that we could bring to market and help the health outcomes of our members.

Indu Subaiya: So, in both cases was the model for partnership the same or exactly what was the way that you would partner? Would you roll it out to your consumer members? Would you make it available? What was the exact way of working together?

Thomas: I think the models in those two cases are probably similar. So, we’re looking at their technologies and then how we embed those technologies within our products and services. It;s not the case where we’re just offering Lose It! on our portals and telling our members, “you can have the Lose It! app if you want.” We’re probably going to embed it a little more deeply into our programs. A substantial portion of our customers are employers who are looking for better health outcomes for their employees and cost reductions as well. As we create more comprehensive programs around, say weight loss in this case, it’s probably likely you’ll see Lose It! as a component in a broader offering to the market. It’s probably less likely we would take a point solution available on the market even from an early or a late stage company and just turn around and resell it. We’re generally going to add value and embed that into a broader offering.

Indu Subaiya: Sure! Because those applications or tools are pretty available to consumers as it is through platforms like the App Store to begin.

Thomas: Exactly, exactly.

Indu Subaiya:  Matthew and I have been doing this since late 2006, early 2007, and we certainly see hundreds of companies every year applying to Health 2.0. I’m curious, in your tenure at UnitedHealth Group, are you seeing the type of companies you work with changing or evolving as the tech landscape changes, and if so, how?

Thomas: Yeah. I think, so I’ve been involved in mergers and acquisitions twice during my nine years here at UnitedHealth Group. I think our interest and it maybe as a result of the chair that I’m sitting in now for the last two years. But, we’re certainly looking more I think at the earlier stage activities within the innovation side of the industry than I’ve seen or participated in before. Again, I’m one of a hundred thousand employees, so my lens maybe rose-colored, if you will, from the perspective of early stage. But, I sense more interest and energy in that early innovation side of the industry. So that, to me, being in the role that we’re in is pretty exciting. It’s lots of energy and excitement, and being a part of that is pretty cool.

Indu Subaiya: It makes for a fun day job, right? But at the same time your vetting skills have to be superhuman. So I guess another questions is what do you look for in terms of a candidate that at least passes the first couple of gates, if you will, to be considered to be a partner with UnitedHealth Group?

Thomas: These may not be categorical but they’re probably close to categorical. It has to improve health outcomes and it likely have to reduce cost within the health care system broadly. So, the new widget which is going to provide me great information, and add cost to the system is probably not going to be the winner.

Indu Subaiya: That makes all the sense in the world, and yet I think there’s some connective tissue that’s probably missing there, because on the one hand, you have an early stage company who is out there trying to just make sure the product works and may get some preliminary market validation, and then you have an enterprise-level entity, such as UnitedHealth Group, and your requirements for something that works, that scale, that is real, and has real legs is on a whole different level. How does a small company demonstrate that they have outcomes and can reduce cost, do we need to be helping them do that more?

Thomas: Well, in the case of both Lose It! and CareSpeak, while they are both pre-revenue with small number of employees, they both proved it.  I don’t think it is as difficult as it sounds, but certainly you’re right. We do have within our lens things like scalability, and of course privacy and security is very, very high in the list. So those are things we’re concerned with.

Like you, I have the fortune to see hundreds of companies, and if someone has got a really good idea, and it looks like it’s going to reduce cost, and improve outcomes, if they could get just a small start with any kind of proof whatsoever, we’re probably going to be interested in learning more.

Indu Subaiya: It’s really exciting. Like I said we wouldn’t, I don’t think, have imagined having conversations with UnitedHealth Group 5-7 years ago to be talking about early stage companies this way.

One thing that’s kind of funny is that we use to describe the two competing platforms in health IT, at least for this ecosystem, as being Google and Microsoft. Would you be building to the Google platform or Microsoft? Of course now that’s changed, and we’re seeing folks like you, GE, AT&T, Verizon, Aetna, even some of the EMR groups like Allscripts, opening up their platforms and saying, “we want application developers to come build new apps to these platforms, and come work with us.” So, are we about to enter the platform for 2012 or will all of these systems be able to coexist in harmony?

Thomas: We announced at HIMSS this year an impending release of our Health Care Cloud and related SDK. So the only way this system is going to do what it needs to do and I mean the health care system more broadly is to reduce cost very, very broadly and improve outcomes very, very broadly. The only way that’s going to happen is to connect, and your connective tissue comment is dead on.

We see ourselves as a very central player in that connective tissue, which relates to what we announced at HIMSS about the cloud. And then, the fun work that I get to do and our team gets to do is to look at all of the point solutions, such as Lose It!, CareSpeak and others. How do we embed them more systemically and add pieces of data that are really going to enhance to value realized by our members. So that’s how we’re envisioning the marketplace and that’s how we’re behaving and participating.

Indu Subaiya: Great! We noticed that in your background you’ve done work globally with UnitedHealth Group as well. We just had our conference in India which was really exciting and I just wondered if you had some thoughts to share with entrepreneurs in health IT about how their perspective should be shape by global opportunities?

Thomas: I had the fortune of living in India and really getting to know the health care system there. And the fun thing about India is that its health care system is changing at least as quickly, if not more quickly, as the US health care system.

I think the opportunity for innovation whether it’s India or China or some markets in the Middle East is at least as great as it is here in the US. And in many cases, there are fewer restrictions to be innovative. The privacy and security policies we have here are a little bit more restrictive than they have been in the past in some of those places, and so earlier stage companies I think have distinct advantage of moving quickly and trying some things in those markets.

A challenge within those markets however, is the price point. So, as you create a service in the U.S. that you could sell for a dollar, that service in India is likely going to have to be sold for a fraction of a dollar. So that’s going to push the U.S.-based entrepreneur or other entrepreneurs to figure out cost models, scalability models that they haven’t yet been pushed to consider.

Indu Subaiya: I think the other interesting direction of movement might be entrepreneurs from those regions selling it to the US. We had our first developer Code-a-thon where people were building apps in India that might have global impact as well.

Thomas: Yeah. I attended HIMSS about a year ago and, there were a number of firms from outside the U.S. who were presenting their services there and solutions at the conference, and it was extremely impressive. And some of them are already of scale, and they could step right in, and in fact some of them have stepped into the US. So it’s absolutely an opportunity for those creative people. In fact, they may have a leg up if they’ve developed a product or service at a cost structure and a delivery model that’s extremely advantageous to what a US developer might develop at. Absolutely the door is open here.

A caveat that I would offer though is one that’s similar to what we see in early stage companies even here in the U.S. And that is an understanding of the complexity of the health care system within the country. As we see some tech entrepreneurs who are flipping out of tech and into health, they’re bringing fantastic creativity and energy, and ideas in business models. However, in some cases, they need to get up to speed quickly and more thoroughly in terms of the complexities with the space as well, whether that’s security or privacy or the level of connectedness that’s going to be required to create real value. That’s one of the challenges for those who are outside of the US bringing solutions here as well.

Indu Subaiya: I think that’s a point well taken. The amount of education that companies are going to need about how to operate at scale I think is going to — there’s a big increase for that.

Lastly, among the entrepreneur community, clearly one of the big things in the news lately has been Aetna’s acquisition of iTriage and it’s been one of the stories that people have said well, finally there’s an exit for a company in the space coming up this way. Do you see more events like this? Is there a concern at all about a bubble in the space? I know that conversation has come up a little bit among people I’ve spoken with, there’s so much new money, there’s so many new funding models. On the one hand, it’s terrific, this is finally perhaps heating up in the right way for entrepreneurs, but is it heating up at the right level, is it too much heat?

Thomas: My sense is that within our space the number of companies who are creating lots of energy and perhaps less revenue, in some cases aren’t over-invested in yet. I think the venture community has done a decent job at putting some caps on explosive growth. So, there are still tremendous ideas out there, lots of early stage. If you flashback 10 years, getting cloud infrastructure today precludes a lot of investment that had to happen 10 years ago just from a start up standpoint. You can test ideas with two employees and very few dollars that you couldn’t do back then which is why I think having lived through prior bubbles, the characteristics of this opportunity phase as I see it in our industry is just different at the fundamental level than before. There is capital out there, but I think it’s being deployed more judiciously.

Indu Subaiya: Fantastic! We’re really excited to have you join us in Boston and thanks for sharing your perspective with us today.

Thomas: My pleasure! Thank you guys! I look forward to seeing you in a few weeks.