Eric Larsen, president of TowerBrook Advisors, discusses where healthcare incumbents stand in the current AI-focused environment and the potential they have to accelerate adoption to improve outcomes.See www.mckinsey.com/privacy-policy for privacy information
Chapter 1: What is the significance of AI in the current healthcare landscape?
You're listening to McKinsey on Healthcare, a podcast exploring the ideas and innovations shaping the future of the industry. I'm Jess Lam, a partner in McKinsey's Healthcare Practice and within McKinsey's AI consulting arm, Quantum Black. Today, I'm joined by Eric Larson, president of Towerbrook Advisors and a venture partner at Thrive Capital and SignalFire.
He's also president emeritus at the Advisory Board Company and a leading healthcare strategist, author, and advisor. He recently launched his own podcast, Incumbents and Insurgents in Healthcare, which brings together AI pioneers and healthcare leaders.
In today's episode, we'll be discussing the rise of generative AI, what makes this moment different from other waves of tech hype, and how leaders can prepare their organizations for the future. So, Eric, welcome.
We've been talking a lot about how there's almost two different languages when it comes to the incumbents of the healthcare industry and then the new players, like the tech companies, the AI natives, or the insurgents, as I think you like to call them. So your new podcast takes an interesting view of bringing these incumbents and insurgents together.
Chapter 2: How do incumbents and insurgents in healthcare differ?
And I'm going to talk a little bit about that. outside of that podcast recording studio. How are you seeing these interactions going today? Like what's driving the gap between these two entities?
Yeah, Jess, I love your framing and kind of that juxtaposition of incumbents and insurgents. And when I launched the podcast, I kind of diagrammed out the reasoning and I said the conjunction here between incumbents and insurgents is super important. It's not incumbents versus insurgents or incumbents or insurgents. It's incumbents and insurgents. And You know, the notion is that U.S.
Chapter 3: What are the barriers to AI adoption in healthcare?
healthcare has been super impenetrable to just about every tech phase shift of the past generation. I mean, internet, mobile, social, cloud, big data and analytics, enterprise SaaS, blockchain. And technology has transformed every other vertical in the U.S. economy. And what I'm trying to do, and I know what you're trying to do, is really bring the incumbents and insurgents into dialogue.
And I think about incumbency as not some invariant law of nature. I think about it as a head start. And depending on your sector within the economy, you have either a little bit of time or a lot of time or no time to adapt. And, you know, one of the things I imagine Jess will talk about is this notion of functional verifiability. Is there something in healthcare that has a right, wrong answer?
Chapter 4: How can healthcare leaders prepare for AI integration?
Correct, incorrect, a ground truth. It could be revenue cycle management. And I imagine we'll talk about that. You get that claim right or it's wrong. Things with objective function, things with functional verifiability where you can prove the answer are going to go so fast. And, you know, there are areas in healthcare that have adjacency to that.
And again, revenue cycle management is sort of preeminent. And, you know, we at Towerbrook, along with CD&R, have R1, our RCM company. We're seeing this sprint ahead there. So incumbents versus insurgents, I think, is the right mental model.
Chapter 5: What role does data play in AI's impact on healthcare?
And how much time do the incumbents have? And I think it's a depreciating asset.
That makes sense. And by nature of me being a consultant in the healthcare industry, I naturally spend the bulk of my time with the incumbents. You're getting to spend an increasing amount of your time with some of the luminaries in the tech world. How do you see them approaching kind of these strategic decisions and actually just the healthcare industry broadly?
Totally orthogonally. They're like two armed encampments that have no understanding of the other. I sort of charitably call it like a mutual incomprehension between what's happening in Silicon Valley and what's happening in the establishment U.S. healthcare.
Chapter 6: How will AI change the dynamics of healthcare employment?
And U.S. healthcare has been, you know, I kind of irreverently say super oligopolistic healthcare. super incumbent dominated, super personality guided. And on the other hand, you've got the insurgency. And these are the Silicon Valley startups. We saw 13,000 digital health startups during the pandemic. We're seeing a whole new generation of AI and agentic native startups.
These are the hyperscalers, right? These are the multi-trillion dollar Mag7. These are the ones that are nation state sized in their...
Chapter 7: What lessons can we learn from past industrial revolutions?
market capitalizations and in their investable capital. Like the hyperscalers alone are spending $371 billion on CapEx this year. I mean, these are sovereign countries. So what is the difference between the two? And I'm going to be a little bit mischievous. I'm going to say there's two inverted vanities, right? One vanity is in institutional healthcare.
I'm $100 billion or I'm 150,000 staff, right? That institutional vanity of size and heft and permanence is inverted in Silicon Valley. And we're seeing this phenomenon of tiny teams.
Chapter 8: What is the future potential of AI in democratizing healthcare?
By my count, there are about 17 companies in Silicon Valley that have fewer than 50 employees and more than 100 million ARR. So the distance between the two, you can sort of explore it from a number of different dimensions. But one is about employment and heft and durability, and the other is about arson. It's almost like the Navy versus the pirates. Right.
And Steve Jobs always said it's much more fun to be part of the pirates than the Navy. And I do think a lot about that in health care. And the question is, will the oligopoly figure out how to assimilate and metabolize the most powerful technology in history before the startups, the entrepreneurs, the arsonists in the best sense? figure it out. And, you know, I vacillate on that, Jess.
And I imagine, you know, depending on the week that you and I talk, we may have a different sort of flavor for where we're landing.
Along those lines, one of the things I love about our conversations, Eric, is that you are somehow simultaneously a deep expert in two things that I consider to be near opposites, technology and history. So it kind of brings a very unique view. What should we be learning from previous industrial revolutions? Kind of The margin is clearly moving and shifting in the industry. Where is it landing?
Who's going to see that GDP boost this time? And what does that mean for the buy versus build equation, which is kind of top of mind for every executive?
It's so funny. You phrased it in a really thoughtful, provocative way, which is, you know, juxtaposition between technology and history, right? And the two can be instrued as orthogonal. Technology is about discontinuities, advancing in a discontinuous way.
History, at least in our retrospective sort of attempt to understand it, sort of looks log-linear, looks like a straight line, but if you sort of decompose it, it's pretty, pretty jagged. And then you had three industrial revolutions. Mechanization, electrification and computerization, right?
And across those three industrial revolutions in 250 years, you saw technology uplift humanity by every dimension that we care about. Sanitation, literacy, safety, democracy, and technology, especially over the last quarter millennium, has marked the upward surge of human flourishing.
If I look over the first three industrial revolutions, I think that there is a huge misconception and that the historians have extracted the wrong lesson. The primary narrative is that the originator of the technology, the inventor, is the winner, right?
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