Portable Personal Health Records. Every individual ought to carry around every doctor’s note, procedure, lab, everything that’s ever happened to them. This should be as easy as handing over a USB stick or forwarding the files from your phone. We’re unnecessarily compartmentalizing this data. If I want my immunization records, I shouldn’t have to consult my pediatrician. And I think individuals can be tasked with maintaining the confidentiality and integrity of their healthcare information just like they’re already trusted with their Social Security card or birth certificate.
As a part of my interview series with leaders in healthcare, I had the pleasure to interview Carl Natenstedt. A graduate of UC Santa Barbara, Carl has more than twenty years’ experience founding businesses that address the challenges of healthcare and its supply chain. The mission of his latest company, Z5 Inventory, is to eliminate medical and surgical product waste. Z5 is headquartered in Austin, TX, where Carl lives with his wife and possibly too many dogs and/or sons.
Thank you so much for doing this with us! Can you tell us a story about what brought you to this specific career path?
I’ve been working in and around healthcare’s supply chain practically my whole career. I started off working for one of the big companies inside the industry, but as soon as I found an opportunity, I created my first startup to address the problems I’d observed. Once I’d built that company up and sold it, I was hooked. And I’ve been doing that ever since.
Can you share the most interesting story that happened to you since you began leading your company?
The purpose of Z5 Inventory is to save hospitals money in their supply chain. One of the ways we do that is to reallocate excess medical and surgical product between hospitals in a health system. We came across an opportunity last year when a customer was forced to close one of their hospitals. Which meant all of the product inside became excess overnight.
We sent a team out there, and after two weeks and a lot of really hard work, we cleaned out all the supplies from the hospital. They went to other hospitals in the system, to our warehouse for liquidation, and to our charitable partners. That was a great opportunity for us and something that we’re looking to do more of now that we know it’s an option.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
In Z5 Inventory’s early days, when we ran a bunch of analytics to point out a healthcare provider’s excess and slow-moving inventory, we would come up with this big number. Shocking, really. We were so proud of the amount we could help save these hospitals, but when we took it to one of our customers, they said, “This is great, but if I show my boss, I’ll be fired.”
That made us refocus. Now we’re not only pointing out healthcare’s problems, but also the specific solutions we can provide. And we learned to put ourselves in the shoes of the people we were presenting to. Your advocate is no good to you if they’re fired.
What do you think makes your company stand out? Can you share a story?
There are plenty of companies who are offering a secondary market for medical and surgical supplies, but no one besides Z5 is helping hospitals use what they’ve already paid for. We’re lowering the cost of healthcare by reducing its waste.
An added benefit of this waste reduction that’s been immensely gratifying is being able to take perfectly good inventory from hospitals that have deemed it “unusable” and transfer it to charities, furthering international healthcare. Helping an organization like Cherish Uganda — who uses these medical supplies to change the lives of children affected by HIV/AIDS — is an outcome we are absolutely dedicated to.
What advice would you give to other healthcare leaders to help their team to thrive?
My number one piece of advice is always to be open to innovative ideas and trying something different. Too often healthcare comes up with reasons something won’t work instead of looking for ways it can. We worry a solution will violate HIPAA instead of seeing what steps we could take to implement it.
Some of our early clients worried about the security of storing inventory data in the cloud. It turned out Z5 Inventory’s cloud was actually more secure than the on-premises systems they had in place.
If we do things the way we always have, we’ll be stuck where we’ve always been.
OK, thank you for that. Let’s jump to the main focus of our interview. According to this study cited by Newsweek, the US healthcare system is ranked as the worst among high income nations. This seems shocking. Can you share with us 3–5 reasons why you think the US is ranked so poorly?
1) One shortcoming is the tendency not to treat patients as a customer. Providers look at insurance or even the employer as the customer, but not the person using their services. That means they have no reason to fix broken systems. There’s no motivation to make things more convenient.
2) Healthcare is made up of too many independent, unaligned entities. As a consumer, you go to the hospital to have surgery. The bills that follow might come from the hospital, surgeon group, anesthesiologists, pharmacy, hospital itself, or all of the above. There’s no coordination within the business aspect of the business. And every siloed department is a point of waste and redundancy that adds no value to the care provided.
3) In general what holds healthcare in this country back is its resistance to change. Because it’s such a big industry and so specialized, we often do things the way other healthcare companies are doing them, but we need to work harder to adopt new ideas from other industries.
There are secondary markets for product in almost every industry you can think of, but we’ve had to work really hard to get healthcare to accept that an unopened, unexpired product is still good even if it was sitting on the hospital down the street’s shelves first.
You are a “healthcare insider”. If you had the power to make a change, can you share 5 changes that need to be made to improve the overall US healthcare system? Please share a story or example for each.
1) Complete And Total Pricing Transparency.
You should know exactly what you and insurance are paying upfront before it’s done to you. You should be able to compare the hospital across the street with the hospital across town just like you can compare going to Whole Foods or Walmart.
Currently there’s no ability to save money as a consumer except avoiding treatment. And that’s not a solution we should find acceptable, as healthcare professionals.
2) Portable Personal Health Records.
Every individual ought to carry around every doctor’s note, procedure, lab, everything that’s ever happened to them. This should be as easy as handing over a USB stick or forwarding the files from your phone. We’re unnecessarily compartmentalizing this data. If I want my immunization records, I shouldn’t have to consult my pediatrician.
And I think individuals can be tasked with maintaining the confidentiality and integrity of their healthcare information just like they’re already trusted with their Social Security card or birth certificate.
3) Insurance Separate From Employment.
The fact that you get insurance through your job is a messed up system that never needed to exist. Z5 Inventory funds 100% of the monthly cost of insurance for employees, but at companies that don’t, this arrangement makes even less sense. Why should my employees be forced to enroll in the health coverage that I’ve chosen as CEO? It’s created a perverse incentives system that causes discontinuity in coverage and another layer of waste for healthcare.
Insurance salespeople are selling companies rather than the people who are actually receiving coverage. They’re selling me, because I control the purse strings. What ought to be happening is businesses pay everybody more every month and let them pick the prices and programs that fit their families.
4) Honesty Around End-Of-Life Care
This one is going to be controversial. But providers need to allow patients to make informed and rational decisions about end-of-life care. What is the likelihood that treatment is going to extend your life? And how miserable will you be while receiving it? If we knew the relative value treatment would add to our lives, many of us would go quietly into palliative care.
I’ve seen this in both my parents; this is personal observation. A lot of times when you have a terminal disease, healthcare professionals aren’t forthcoming about likelihood of success or what “success” means. It’s costing healthcare providers billions, and it’s causing patients and their loved ones a lot of heartache. Is that extra month of life worth all the pain that comes with it?
5) More Convenient User Interfaces.
If you went to a hospital or insurer website right now, you’re not going to be guided through a smooth user process. It’s not easy to find out service options, let alone prices. Requesting prescription refills and appointment times is a pain. Explanations of benefits are a joke. Patients deserve a simplified, intuitive process. This one should be the easiest of all, but — as I keep saying — healthcare is slow to adapt.
OK, it’s very nice to suggest changes, but what concrete steps would have to be done to actually manifest these changes? What can a) individuals, b) corporations, c) communities and d) leaders do to help?
At an industry-wide level, we need to start charging the actual price of procedures. Which seems obvious, but hospitals are claiming the price of procedures are these outrageous numbers that they never get paid and never expect to get paid. Through insurance or group purchasing or a number of other factors, the negotiated rate is significantly lower.
When I pick up my prescription at the pharmacy, the screen tells me that my insurance “saved” me $1100. But nobody is actually paying that much. The system is created to make me feel better about using it.
Healthcare isn’t alone in this model. When you’re buying a car, you never expect to pay the MSRP. But at least in the automobile industry you have resources like TrueCar where you can find out the true price of what you’re receiving. There’s nothing like that in healthcare.
If providers won’t start being honest about how much care costs, we as consumers need to share our healthcare experiences with each other.
Right now we have two parallel tracks mental/behavioral health and general health. What are your thoughts about this status quo? What would you suggest to improve this?
Mental health tends to lead to physical health and vice versa. The fact that they’re treated as separate disciplines just goes back to that issue of everything being siloed in healthcare. Which is a mistake. The obvious solution is to integrate financing and delivery of mental and general health, but that’s easier said than done.
Hospitals often separate mental health facilities from their other treatment areas because they don’t want the patients who’re seeking mental health treatment causing any trouble for the “regular” patients. Which kind of indicates their priorities. You’d think mental healthcare would be the most compassionate care possible. Unfortunately, many times, it’s not.
How would you define an “excellent healthcare provider”?
The best care is provided by a health system that puts the patient first in every step of the treatment process. Pretty much everybody gets the big things right. So you can measure excellence in the small things.
Before you come in, you’ve been informed where to park and walk in and check in. When you register, all your paperwork is ready. You’re dealt with quickly and receive a proper explanation of what’s going to happen to you. Feedback and instructions are made clear to your caretakers. You’re kept up-to-date throughout your recovery, until you’re treated to a quick and compassionate discharge.
So often, after you’ve gone through a treatment or procedure, the same thing happens at a hospital as happens at a restaurant. The waiter who was so attentive throughout the meal takes a twenty-minute smoke break when it’s time to bring the check. You can be stuck, waiting to be discharged for hours until someone comes to get you.
Getting the small interactions on an individual level right — that’s how you go from a good provider to really great.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
This isn’t quoting anybody in specific, but my overarching life advice would be: “You don’t get what you deserve. You get what you earn.”
You make your own luck by putting yourself out there and meeting people and working hard all the time. One in a million win the lottery. You’ll probably never meet anyone who has. But you’ll meet lots of people who are successful in business. Invariably they put in hard work.
Are you working on any exciting new projects now? How do you think they will help people?
Our main focus right now is the Reallocate portion of Z5 Inventory. We’re applying deep analytics to hospitals’ on-hand inventory, then moving the medical and surgical product from a facility where it’s likely to expire to another where it will be used. We’re trying to help hospital systems use what they’ve already paid for. Seems obvious, right?
There’s no need for the massive amount of excess that’s everywhere in healthcare. We’re reducing the amount of waste — financial and physical — and ultimately helping drive down the cost of healthcare.
What are your favorite books, podcasts, or resources that inspire you to be a better healthcare leader? Can you explain why you like them?
I read articles on Becker’s Hospital Review and its sister sites every day. We were actually just at their annual conference. Knowing what’s happening in the industry is crucial to addressing its problems. There are lots of people who can offer advice on the business side, but if you want to tackle healthcare specifically, you have to understand its trends and quirks and culture.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger.
That’s funny. I don’t always feel like I have great influence in my own household. But if I could sit a bunch of people down and get them to listen to me, I’d convince them of the need to reduce the inefficiency in healthcare. Stop throwing away so much. Stop separating every aspect. Stop making care options intentionally difficult to decipher. Start focusing on providing compassionate, convenient care. That’s not too much to ask, right?
How can our readers follow you on social media?