Trilogy Search Series Ep.1: Nikita Sunilkumar & Kush Das – Ep.106

Welcome to the first episode in our trilogy search partner series with great entrepreneurs and investors from the traditional search world. Today, I am joined by Nikita Sunilkumar and Kush Das who both search and acquired home healthcare businesses through the traditional search process. Kush acquired Ennoble Care and works as a CEO today. Nikita acquired Crown Health in June 2020 and, in fact, just recently sold in early 2022.

Both Nikita and Kush are fantastically talented entrepreneurs, as well as being friends which will be apparent as you listen to the episode. Their combined experience offers a great lens into what acquiring and operating a healthcare business looks like today and how to succeed.

During our conversation, we talk about search interest in healthcare, different subcategories of health care, value-based trends, challenges and diligence, talent management, changes from COVID, and so much more. Please enjoy this first trilogy search episode.

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Live Oak Bank — Live Oak Bank is a seasoned SMB lender providing SBA and conventional financing for search funds, independent sponsors, private equity firms, and individuals looking to acquire lower middle-market companies. Live Oak has closed billions of dollars in SBA financing and is actively looking to help more small company investors across the country. If you are in the process of acquiring a company or thinking about starting a search, contact Lisa Forrest or Heather Endresen directly to start a conversation or go to www.liveoakbank.com/think.

Hood & Strong, LLP — Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at --@----.com

Oberle Risk Strategies – Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.

If you are under LOI, please reach out to August to learn more about how Oberle can help with insurance due diligence at oberle-risk.com. Or reach out to August directly at --@----.com Transcript:

Alex Bridgeman: Well, thank you both for joining us. This will be a fun way to kick off the trilogy episode series. You guys are both in healthcare and both acquired companies recently. And one of you has even sold so far. So that’s very exciting. I’d love to just kick off with your backgrounds and how you got to decide on launching a search and the companies you’ve acquired. Nikita, do you want to start off?

Nikita Sunilkumar: Sure. So, the very brief story is that I’m an engineer by training, spent the first five years of my career at Boeing working on manufacturing and process engineering, went to business school thinking I was going to come back to Boeing. Within like six weeks, I was like, well, never mind, that plan is shot because there’s a whole world out there that I had absolutely no idea about and kind of accidentally went to the ETA Conference at [inaudible [RD1] 0:42] my first year thinking it was something else entirely and was very inspired, but definitely decided to kind of take a longer view of it and applying to consulting firms and doing the traditional MBA kind of path. But I took the class, an ETA class before I left, and then kind of met some people, started thinking about it over the course of the first year that I was at the consulting firm post-graduation and then was spending enough time on it outside of my already busy consulting life that it was like, okay, if I’m doing this in my spare time for free, I should probably go figure out a way to make it financially viable. So, I raised my fund and then got into search. That’s kind of my story. My path to Crown is different; I guess it is intentional in the sense that I had sort of geriatric care in my thesis, but I certainly had no idea I was going to end up in healthcare and had no background in healthcare. You could say I had no business being in healthcare too, but I found my way there. And just the thesis made so much sense that I was like this is the deal. So, I went down the rabbit hole.

Kush Das: So, my background is actually not from the business school route. I was in healthcare before for a while. I actually worked in college and law school as an EMS provider full-time in college and then more part-time in law school so I didn’t flunk out. And then after law school, I actually became a healthcare lawyer. I did a lot of stuff with providers, so I kind of fell into back then what was the early stages of value-based care and doing ACOs here and there, bundles here and there, which happens to be very important to my life right now. But when I was doing it then, there wasn’t much in terms of like legal infrastructure and business infrastructure for it. So, it became a bit of my expertise in the area that I was focusing on as a lawyer. And then I moved into the business side of it. So, I followed Nikita to the consulting route as well. I did that exact same thing that I was doing as a lawyer as a consultant. So, provider value-based care, lots of transformations from the traditional eat what you kill, fee for service market into the how do you actually improve outcomes and produce cost of care results on top of just the fee for service churn. And then I did that for three or four years before moving over to start the fund. So, my goal actually was always to be a healthcare entrepreneur, and I didn’t know how I was going to do it, whether it was going to be raising venture money and then coming up with an idea and starting from scratch with zero patients and just money in the bank, which made no sense to me, or actually approaching the market, finding providers that were already delivering really high quality care, acquiring those providers, or tech and services companies with the goal of converting them into the kind of hammer meets nail thing that I know, which is value based care. And so that’s what I went in with the search mindset of, super narrow thesis, kind of articulated my fund as that out of the gate. And then we actually ended up doing a few things in the fund process, including getting a proprietary Medicare contract, which has some pros, has some cons, but we are definitely using it as part of our thesis and process now, and then acquired a home-based primary care and hospice operation that really fits that mold. And so, my old background of doing the provider stuff outside of facilities into the legal background into the business background was kind of what got me here with a couple of steps along the way.

Alex Bridgeman: Yeah, and I think you both acquired fairly similar businesses. Do you want to describe Ennoble Care a little bit? And then Nikita, you can share a little bit about Crown.

Kush Das: Yeah, absolutely. So the funny thing is so Nikita, when she was purchasing her business, I was starting my search. And so, it was cool because I got to actually talk to Nikita when she was like in month two, I think, of Crown. Maybe something like that, month one? When I was raising-

Nikita Sunilkumar: I’m pretty sure I took a lot of notes from that first conversation.

Kush Das: Actually, even before that, when I was raising my fund, people were telling me about Crown and how it’s like the perfect business for my thesis. And I was like, that’s really cool, let me learn more about it. And a bunch of Nikita’s investors actually asked to me when I was raising the fund, just to like test my problem solving skills, honestly is what they were doing, they were like interviewing me and poking me to test my problem solving skills. They were like, what do you think about this business? Like give me your low down. And so, I did, and I was like, yes, you should absolutely buy this thing right now. It’s the perfect time and the perfect thing to buy. And a couple of them listened and a couple of them didn’t, and I’m sure the ones that didn’t are very unhappy right now, but the ones that did are very happy. And so, all of that to say my business is about, I would say, a third of what Nikita’s business is, which is home-based primary care, and then about two thirds hospice, which is end of life care for almost the same population. The way I think about it is home-based primary care serves people in the last three to five years of life. They’re already very geriatric. They typically have many, many chronic diseases. They typically need a lot of touch points. They are sometimes in assisted living facilities and also at homes with caregivers that are providing pretty frequent support. And then they transition as they get closer to death to hospice where the touch points become much more active and we’re providing much more of a full suite of services before they transition. And so, the whole goal of the business is to provide that full continuum. We have about 225 employees, about five states, and we are also in the value-based care world with this thing called the CMS direct contract, which is a lot of things but really just comes down to kind of a Medicare advantage plus accountable care organization makes a baby and that’s the direct contract. And so, we are transitioning our folks into that world as well as taking on some of the tech enabled focuses with the EMR that we have, which is in-house built, which is a proprietary medical record software, to bring the whole thing together.

Nikita Sunilkumar: Yeah. And Crown, as Chris said, is the one-third of his business that’s home-based primary care, that’s exactly what Crown is, same kind of approach to serving geriatric patients in that stage of life. The two- I think, Chris, you could speak to this more obviously, but the home-based primary care is reimbursed slightly differently than a hospice or home health traditionally. So, they’re part A, we’re part B. And so, it’s just a much more narrow focus on just that component of care for us. And growth in this world is very much just bringing in the right providers, training the right providers, growing their census, kind of developing the relationships with senior housing in that sector, because just half of what I used to do is just logistics. Like how do you get people out in the field and seeing patients at a rate that makes sense, especially in the fee for service world where really productivity is a big concern. That’s going to make or break you. There’s a natural fit with senior housing. So that’s predominantly where we work in Washington State, across the state, both in the west side and out in Spokane. And the founder of this business had been a provider herself, so she had kind of operationalized a lot of things for making that work and actually achieving sort of profitability with that model. And then my kind of role has been to really build out all the support functions, bring some more sort of operational clarity around not just the provider’s job but the back office, how we enroll new patients, how we grow, how do we recruit, all of those pieces, and giving it a chance to scale much faster than it had before.

Alex Bridgeman: Gotcha. And so, I’m only vaguely familiar with value-based care just from our conversations, but can you walk through what value-based care means and what some of the implications were for both your businesses?

Nikita Sunilkumar: Yeah, sure. So, I’m the newbie here. So, I suppose it’s helpful to hear from other newbies. Value-based care is really around taking sort of the approach of you as the provider are really taking on the responsibility of providing care to a patient and actually managing their sort of longevity, their longitudinal care, as opposed to just the one instance where you’re the provider in front of the patient in one visit. So, I might say, okay, how do I think about preventative care for this patient? How do I think about providing services? So that, overall, their total cost of care is lower and not just about how quickly can I get them in and out of my clinic room or whatever. So, the way you do that is by – and Kush, you’ll have to help me out here – is by really managing the data around that patient. How sick are they to begin with? What kind of services do we think they need? Predicting how much we think they will cost really to a plan like Medicare or to any private plan, and then working backwards and saying, okay, well, what can we do preventatively to reduce that expected cost of care for that patient. And you do it over the course of the entire year as opposed to just one touch point. So, it really brings in everything. You’re not just controlling the cost of a provider. You’re not controlling the cost of more acute care, their treatments, or other services that they use. So, you really have to think more logistically about that patient’s life. And so, I mean, it’s a big challenge and hard to do if you’re a small provider, but now there’s these tools and programs that are enabling small providers like ourselves at Crown to be providing that value-based perspective as opposed to just the one-time service.

Kush Das: Yeah, Nikita is way too modest when she says she’s the newbie. But the only thing I’ll add is if you take a 30,000 foot view, value-based care basically allows providers to participate in the payer business model. So if you think about those two business models typically as separate in that insurance companies, payers make money when the amount they budget for a patient, the premium, is less- sorry, is more than the amount that they cost to actually take care of the patient, they get to keep the difference as their margin. Providers, typically, the business model is you do the work, you get paid for that specific work and the cost of you doing that work versus the amount you got paid for that work is your margin and value-based care allows providers to both keep the part of their margin but also participate to the payer side of the margin. And the real value of that is that providers have the real control over that cost of care. They have the real ability to influence how healthy people are and how they do over the course of a year and where they’re going to get their care, which is why providers are actually, from a theoretical and, in many cases, a practical standpoint, in the right position to be participating in the payer side of the business model and be driving value in it. So more and more, payers and providers have gotten together for that. The [inaudible [RD2] 11:16] the prototypical examples, being the Kaisers the world, which were doing it way, way longer ago, and then the Optums and Uniteds of the world, which are doing it much more at scale now. But the real value now is that smaller providers like us can go and negotiate rates directly with insurance companies to take on that risk as well as participate in Medicare models that lets us be essentially the payer on behalf of Medicare.

Alex Bridgeman: So, you mentioned some of the theoretical and practical incentives that value-based care provides. Has that been a fairly effective incentive within your businesses? Like is that working as it’s intended to be working? Or what are some challenges behind running it?

Nikita Sunilkumar: I mean, I can tell you from our perspective, we’re not even there yet. The journey to shift from the kind of eat what you kill kind of thing, that term you used, Kush, to actually being a fully-fledged functioning value-based care team, it’s a very long journey and was really taking up a good part of our time last year to think through how do we even get there, because you’re now looking at so much more data on each individual patient. Plus, you’re looking at your whole patient population as a whole to see cumulatively, are you taking on too much risk or are you prepared to handle all of the various factors that they could encounter as a group, not just as individual patients? I think financially, it pencils out, but really there’s a significant period of investment upfront to make that shift and to build out all the tools that you need to be fully functioning. So, I can’t say that- I mean, we only made it through, I think the first sort of initial planning phases of that before we ended up having this exit opportunity and part of the consideration around the exit was really around who do we partner with to get some of those higher-level resources? Because it is a bigger lift then I think we would’ve been able to do quickly.

Kush Das: Yeah. And I mean, I think on my end, we just closed the business in the fall. Luckily, we had the contract before that, so we did put 10% of our population into value-based care this year. So as of January 1st, 2022, we have 10% of our primary care population in there. I’ll let you know how it goes in July of next year. Between now and then, there’s a lot of things that we’re really focused on operationally. I mean, there’s three pillars to succeeding in value-based care. Number one is risk adjustment. Number two is having a lot of visibility on your patient population. And then number three is actually influencing [inaudible [RD3] 13:50] the patient population. That’s basically what you have to do with the 30,000 foot view and then diving into the details of each of those is not- So we did a risk adjustment sprint in December to make sure our patients were coded appropriately. We then dove in now to how do we get the visibility on that patient population, including with like crazy things like having a community EMT that responds to your home and takes care of you after hours. And then eventually, we’ll get to a place where we can do that stuff at scale, but we’re very much, I would say, in the pilot stages. So, give me a couple of years and then maybe I’ll write a paper about it, but at the moment, it’s just getting off the ground, I would say. And obviously, Nikita’s partner that she mentioned, people put a lot of capital and a lot of scale behind this stuff where I think obviously a slightly different position from a business profile and from like a risk tolerance point of view. And so, we’re taking a little bit of a slower approach to get to that same place.

Alex Bridgeman: And Nikita, you mentioned that it’s harder at a smaller scale to do some of these things and some of that scale from your exit is going to help with some of these transitions. What are some challenges of trying to run this model without that larger scale behind you?

Nikita Sunilkumar: I mean, it’s like an infrastructure problem. Like you’re working with CMS, which is actually an innovative agency. They think a lot about the future and they’re rolling out programs like DC and all that’s great, but they’re still working with data that is typically six months to a year behind. And when you’re trying to do something that influences your business today and you don’t have data that’s current, it’s very difficult to navigate. And so, there’s workarounds for it. There’re organizations that can build out very comprehensive like digital infrastructure to help guide what their clinicians do, what their patients do, what their support teams do, and really start making those incremental changes in people’s behavior that ultimately leads to the cost savings. But as a small organization, you’re not building out those gigantic platforms. They just don’t have the bandwidth or the capital to do that. So, you’re trying to find the next best approximation to tell you what you need to know about your patients and your population. So that’s one challenge. The second is also sort of the functions that are required in value-based care are slightly different. You have a lot more people trying to plug the gaps, I guess, in care. Or you have people trying to help you understand risk in a much more detailed fashion. And those are roles that we typically wouldn’t have in a fee for service practice. There’s just not enough overhead sort of allocated to those things. So, for us, it was trying to find the right people for the right seats. Some of those challenges, too, that would have taken longer had we not decided to say, okay, let’s bring in someone with more expertise.

Alex Bridgeman: Yeah. You mentioned the kind of right people, right seat issue. One thing I was excited to chat with you both about is just talent management, so making sure you have the right people but also the right providers in your programs. What is the team management dynamic like in both of your businesses?

Kush Das: For us, the way I think about our teams is there’s the teams that were at the company before we got in there, and then there’s the teams that we built on top of it, and then there’s like the integration of those two and how to kind of build the right org structure going forward. It’s a perpetual work in progress. Like I’ve not had it for very long and I know that it’s going to be a perpetual work in progress. But talent and delegation is really important. And then from like a how do you define the talent gaps perspective, there’s both experience but also personality and what people want and want to do and how they approach problems and how they solve problems and how they implement things. And I think the biggest thing that I have found is, no matter what, the hardest challenge is finding the people who can both ideate and then also implement, who can take that whole continuum of thinking through a problem, figuring out a potential hypothesis driven solution, actually going and testing that hypothesis, figuring out what went wrong, what went right, and then scaling it, those people are worth their weight in gold. So that’s perpetually what I’m looking for is people that fit to that specific mold.

Nikita Sunilkumar: Yeah, and I think I spent a lot of time also thinking about the clinical teams, which are different in this world than in a traditional brick and mortar kind of healthcare operation, which it’s hard enough for them. Like 2021 will probably go down in history as like the worst time to be hiring anybody ever. And just so much upheaval, so much sort of craziness. But on top of that, the healthcare labor market went absolutely bananas. So, for us, there was a lot of thinking about we’re not offering necessarily the benefits packages and the terms that a larger healthcare employer could, so what could we do to kind of be creative about bringing in more talent? People who are genuinely excited about this demographic, people who would thrive well in the kind of setting of kind of being out on your own, seeing patients and dealing with all these issues, and yeah, that kind of unique mix of people who are both doers but also thoughtful doers, I guess you could say. And so, that was really- I honestly probably spent, I mean, it’s kind of crazy to say this, but I spent very little time thinking about growth or about our customer. I mean, we had a great clinical team, so they were taking care of the “customer.” I was thinking about our employees. I mean, 90% of my time was spent on where do we find great clinicians? How do we train them? How do we prepare them for hopefully a long career with us, or at least in this home-based care space? How do we get them ready to make this pivot to value? Things like that. So, yeah, it’s a people business in every regard, everywhere you look.

Alex Bridgeman: What are some ways you’ve tried to find those folks who fit that mold for your companies? Obviously, you didn’t have experience prior to 2020 or 2019 when you didn’t own your companies at that point. But what does it take today to find those really great people and plug them into your company?

Nikita Sunilkumar: For us, one thing that’s helped is really getting the right person involved in the decision-making process. Part of what I try to do is get out of the way in terms of building a process that really fits the role we were trying to fill. So, if it’s clinical, then the clinical team needs to be driving it. I’m there to provide the tools and remove the obstacles and try to make sure everything is streamlined, but I’m not inserting myself into that process. And folks that are on the ground that are actually doing the job everyday should have the most input into how they grow their teams. And so, that worked really well for us because, one, it just builds trust in the organization, and two, our applicants respond to it. If they’re talking to another clinician right off the bat then they know that this person is telling me things from personal experience and not from anything else. And then the other thing that we did was, it’s kind of out of necessity, we took a lot of chances on folks that were very new to the industry, so new grads, folks that are just coming in from other types of roles, and got creative about like what are those feeders that make sense for our industry? So, a lot of former home health nurses and folks that have worked in nursing backgrounds that are now graduated into being mid-level providers are great because they know the ins and outs of who they’re dealing with and they’re just coming at it with a slightly different approach, folks that have worked in institutions, long-term care prisons even, folks that really know that working with a large population comes with different challenges than that one-on-one relationship have been really successful with us. So yeah, just some creative thinking around those aspects really helped.

Kush Das: Yeah. I mean, the only thing I’d add is that there’s almost no substitute to kind of constant tenacity on this stuff. There’s that and a mixture of just seeing around corners a little bit in terms of when you will need something and thinking about that way ahead of when we need something. So almost like that proactiveness to it. There’re good people out there, and there’s good people who will want to fit in the roles that we’re looking for. They’re there, but finding them is hard and takes both a mixture of time and persistence. And so, I know Nikita did a lot of this. We have a recruiter who does a ton of screening. We have very clear criteria in terms of what we’re looking for in our various stacks because we’re a little bit of a diversified business, we have everything from physicians all the way down to $15 to $18 an hour hospice aids, and literally every step in between those roles. So there’s very different profiles of people we’re looking for in very different places, getting them very different incentive structures, very different things that they want in their job. And so, it’s almost like figuring out all those fits and then also communicating those fits almost constantly to the market, which is a perpetual challenge. I mean, we’ve had, since starting, the hiring thing has just been a big problem and area of focus for us. And I don’t think I have gotten to a place where I’m very comfortable that we have like a really good hiring path and a path to visibility of candidates in the next like three to six months.

Alex Bridgeman: Yeah, my wife worked as a hospice aid and getting experience prior to getting into PT school. So, it definitely takes a special person to be able to do that kind of work and they can be hard to find. One thing that became really interesting during COVID is remote patient monitoring became a lot more common, and I’d love to hear a little bit about how you saw that transformation happen and just what are some affects or challenges within having more remote patient monitoring within your businesses?

Nikita Sunilkumar: I think, Kush, you told me you were the instigator of this for Crown in our early conversation. Like hey, there’s this thing, RPM, you should look into it, which we did. So, I can share a little bit about kind of our journey with it, just because it was an interesting- so there’s a ton of vendors. Like RPM is new, hot, it’s very much a way to play in healthcare without so much of the overhead. So, a lot of players, a lot of tools, a lot of platforms built around it now that are trying to integrate it with EMRs and with existing tools. But it’s funny because, and we’ve encountered this in many different ways, the technology kind of industry and how they think about bringing something to market in our demographic and the stuff that gets missed just because you wouldn’t think of it if you were a developer of this type of tool. So, I’ll give you an example. When we were trying to first deploy these, you need to have consents, obviously, from the patient that they want the device and that they’re going to use it and that they know how to use it. Many of our patients do not provide their own consent. They have guardians or they have powers of attorney, their children or folks that are involved in their care. And yet I have yet to find a platform that’s designed to communicate as seamlessly with those folks as they are with us or with the patient. When in reality, that stakeholder is as big of an influence in our sort of decision-making as the patient themselves. And so, if you’re designing an RPM platform and you’re not thinking about this demographic and their unique needs, you’re kind of missing a big chunk of that, like how do you actually deploy this successfully? So, we interviewed a lot of vendors. We kind of had them talk us through their platform and their process and their tools. And what we found is that you still need the people who know it. You still need the support team to actually deploy this much more so than you need a great device. The devices aren’t rocket science. It’s a basic cuff or a basic whatever that happens to have maybe a cell enabled transmitter to send a piece of data back to you. But what you need is the person calling ahead and saying, “I’m sending you this, please use it, and don’t throw it away. And don’t stick it on a shelf and don’t use it on your sister and send us false readings,” stuff like that that is the make or break. And so, it’s just been a fun – fun is an interesting word – but it’s just been a process, building out operations that actually work in reality for us. And so, we do have a program now and it works, but it’s not- it’s a cobbled together kind of effort between us and our vendor.

Kush Das: I do remember that conversation, Nikita, early on. It was like a month or two in, and I was telling you about all these random ancillaries that Medicare has started to cover. So, I think, I mean, RPM is that. Whenever Medicare builds a revenue model for something, the whole world jumps on it, that’s just how it works. Vendors come out of the woodwork, technology companies decide it matters. At the end of the day, it’s still the providers that are taking care of the patients. And so, you have to have like the bridge to communicate what the value is to clinicians and then what the value is to patients and families. And so, we’ve rolled it out, too, for our folks. I think the value of it from a clinical standpoint is going to be made better once the devices have gotten better than what they are right now. One of the kind of threshold problems of RPM is that you have to have an FDA approved device. It’s kind of annoying, frankly, because there’s some devices that would be very good for RPM that are not yet FDA approved but eventually will be. And so just as an example, certain kinds of watches which are in the FDA the approval process right now that allow you to do a mix of things, including geolocation, basic heart rate, respiratory tracking, as well as a really, really simple blood pressure. And you can do those things with one device that only gets charged once a week versus a device that you’re charging all the time and you have to actively take readings on. So, I think there’s a lot of clinical room for RPM to grow as the technology gets better from a hardware standpoint, which is going to make the value that much better. Because from a value-based care perspective, what I want to know is did my patient leave the facility? Did they enter a radius within 25 yards of a hospital, ER? Those are the alerts I want as much as I want the one blood pressure every couple of days, and I can’t get it yet. So that’s the thing we eventually want to aspire to.

Alex Bridgeman: There’s a few things that you’ve kind of alluded to within RPM and remote patient monitoring. What are some of the kind of benefits maybe a year or two down the line where that data that you’re starting to work on collecting now starts to become really valuable and helpful?

Kush Das: Yeah, it’s an interesting question. So, lab trending is one example that eventually can go into vital sign trending. I think there’s a lot of correlative data in value-based care in particular that hasn’t been used yet. And that’s because value-based care has often relied on what’s traditionally called claims data. And claims data is literally the- It’s those codes being dropped that tells you what service is being done rather than what happened at the service with the patient, and it was just the clinical data component. So, five years ago when I was doing my first analytical project on value-based care, we were using claims data that’s telling us some great macro things, like diagnoses and what happened, but it’s not telling us the more micro things like what were their vital signs that really resulted in the exacerbation that brought them to the hospital? What was the lab value that we should be watching out for that will have this be a repeatable event? And I think that’s where remote monitoring can go, where it actually helps us predict and understand decisions before the decisions are too late to be made. And I don’t think it’s gotten quite there yet. I think first of all, someone has to do the work of that data analytics. There’re not many people in the country or world that can do that. And then on top of that, you have to figure out how to operationalize that. At the clinical level, there’s even fewer people in the country and world that can do that. So, I think that’s the holy grail that we’d all definitely want to get to.

Nikita Sunilkumar: Yeah, I think that’s exactly right. And I mean, this is just, we’ve barely scratched the surface. I would agree with that. I think there’s one component, too, about the social determinants of health is this big topic that comes up all the time about how these nonclinical aspects of someone’s life really affect their outcomes and their likelihood of having these adverse events. All we have now is really just the providers’ instincts or their sort of anecdotal experience to really factor that in. And there’s probably a way to fold that data in to paint a much better picture of how a patient is going to do. And we’ve just barely opened that box of information.

Alex Bridgeman: I want to turn it to the business side just a little bit and hear about more- One thing we talked about before with both of you was revenue cycle management with a lot of your revenue being deferred for 30, 60, 90 days after you have your costs incurred. I’d be curious, how have you both managed that process? Especially if you’re buying the business and it’s a new acquisition and you might not have a whole lot of working capital there, like what are you having to do to manage that process and get your business to a point where it feels less like you’re playing catch up all the time?

Nikita Sunilkumar: What did I actually do? Just panicked all the time.

Kush Das: I was going to say, what else is the solution?

Nikita Sunilkumar: Yeah, I don’t know that that was helpful, but I did it anyway. Yeah, I don’t- This is like, it’s not even a cottage industry. It’s just a full-on industry, like helping healthcare organizations manage their rev cycle. It’s immense. And we just did the basic playbook, sort of streamline your claims process and have really close monitoring of your key KPIs and have a robust process for following up on things like denied claims and delayed claims and things like that. It’s really, I don’t think we ever got past the sort of eat your vegetables and do your exercise stage of just cleaning up what we had internally and just doing it every day and trying to get better and better each quarter. I think that’s as far as we got, honestly. I don’t have a magic bullet answer to that one.

Kush Das: Yeah. Which means that I have an even less magic bullet answer to that one. No, I mean, I think there’s always the perpetual bank account balance being looked at, which is the mix between revenue cycle and payroll. It’s a people heavy business, so you’ve got to pay people on time and that’s everything. That’s your biggest cash out. At the same time, the revenue cycle delays are essentially the 30-day delay because the people are being paid for providing a service and we are paying them to provide that service, but we’re not collecting the money for the service that they provided until 30 plus days out. And so that’s the perpetual cycle. There’s a lot of different ways to think about do you have enough working capital? Did you have access to a revolver? Are you thinking well about call [inaudible [RD4] 32:52] capital potentially as needed? That are just good stop gaps. Nikita gave me the advice to raise more capital than I thought I needed. I don’t think I took that advice nearly seriously enough. And so here we are, in retrospect, probably could have done even better. But other than that preparation, blocking and tackling well once you’re in the business. There’s really no rocket science to it I don’t think.

Nikita Sunilkumar: Yeah. I mean, I think that’s a searcher tradition. People advise you, like you’re going to need more than you think [inaudible [RD5] 33:26].

Alex Bridgeman: Wrong, need more That’s awesome. I want to step back and take a look at this world from the search perspective. So, I would love to hear a little bit more about how you’ve seen the healthcare in search either become more or less popular over time, and then even healthcare on its own is just such a broad bucket. Healthcare could be software. It could be patient work like you guys are doing. It could be ambulance fleet management. There’s just so many different models within healthcare. What are some broad buckets that companies fall into within the healthcare universe? And then what’s been the interest in the search world in healthcare over the last couple of years?

Nikita Sunilkumar: Certainly, it seems to be a lot more appetite for kind of diving in. And I mean, Kush, you probably were one of the first few folks to have a very focused thesis around search in healthcare. I’ve seen other searchers come up with that kind of that have reached out to me recently with that kind of focus as well, which is cool. I don’t know that I think about them as buckets. I think about it as a spectrum of how close are you to the patient, and therefore, how close are you to the regulatory and compliance challenges that come with being close to the patient. The further out you are, the more sort of you are either a service provider to other health care businesses or things like that, the less you have to deal with that scrutiny and that challenge. So, I mean, I look back now and it’s kind of crazy that we dove into Crown with a lot of that very upfront kind of challenge of you are patient facing, you are dealing with a lot of regulatory and compliance challenges, it’s a very highly scrutinized kind of space. And I was very lucky in that my board was very open to kind of learning with me and just diving in and kind of building that body of knowledge that was necessary to survive in that world. And now obviously there’s a ton more investors that have that background because they’d been through it once, and you’re not having to relearn that whole piece of it. And once you have that under your belt, it kind of eases the way for future searchers, certainly, to say, okay, I’m not trying to bring an investor into something that’s like a hornet’s nest that they have no idea. It is a hornet’s nest, but you know what you’re dealing with a little bit better with each successive deal. So, yeah, I think the trend is sort of positive for healthcare certainly. I don’t know beyond that, having not really engaged with the search sort of ecosystem as closely recently, if that’s changed.

Kush Das: I don’t think it has changed. Just generally speaking, I think there’s a lot of funds now that explicitly talk about healthcare as the specific asset class that they’re looking for searchers to focus on. And thus, there’s a lot of searchers that are subsequently focusing on it. I think an interesting thing that happened in the search world is that people jumped into healthcare like headfirst in the last few years in a very active way, which is great. I think there’s still a lot of a sentiment of people just don’t know yet what they don’t know in the healthcare world, which is, again, just something that’ll kind of prove out over time. And I think part of what I see a lot of is just the need for the education. It’s like you’ve got to- as you build your board, you build your investor community, it’s really important to constantly be educating ahead of time and to tell people the risks and the rewards and the 2, 3, 4, 5, 6, 10 years from now kind of concepts that are very difficult to digest if you haven’t spent a ton of time in it. And so, I think that’s like the- When I think about search in healthcare, I think being farther and farther away from the patient is much easier from a path of entry perspective, because it looks a lot more like another tech and services business. And the closer and closer you get to a patient, the harder it is, to use Nikita’s continuum, to actually be fully aware of the pitfalls and challenges of running one of those businesses. So, I think as we learn and as there’s a couple of great wins and a couple of great flops, I think the search community is going to get better at understanding it.

Alex Bridgeman: Yeah. In one way, it sounds like the community will get better is in the diligence side. It’s when you have an investor base that is learning just alongside you about the healthcare space, I imagine it’s pretty difficult to find helpful advisors who can help you, point you in the right direction within some of these companies as you do diligence on them. What are some challenges or mistakes that you both made or you’ve seen other searchers like yourselves make in diligence in these healthcare businesses?

Nikita Sunilkumar: In my case, I don’t know, I can’t say it was a mistake, it was just a lack of knowledge. You don’t know what you don’t know. And there was so much I did not know. And I think other searchers too, you’re only going to find, I think- and every aspect of these businesses are so interconnected that if you kind of say, okay, I’m good with eight out of the nine things, but the ninth sort of aspect of this business is kind of fatally flawed, you have to have a way to fix that without the ripple effects kind of affecting the eight other aspects of the business too. So, there’s just some challenges around that, the interconnectedness of it, that you may not know as someone who’s looking at it from the outside in to a business and kind of anticipating how it’s going to affect things. So, I’ll give you an example, a few months into our time with Crown, we said, okay, we really need to do a rehaul of our training for our providers around documentation and maintaining good records and making sure that everything is compliant. So, we said, okay, fine, we’ll do that. Well, we need to have time for everyone to go through their training and start changing their behavior. So, okay, we’re going to take a couple of weeks out of our schedule to do that, like pull everyone out of the field. You’re not seeing patients, you’re sitting in class learning about how to do documentation. Well, okay, our patients are the kind of demographic where things happen in two weeks. Like people need to be watching. There needs to be sort of a hand on the wheel. So, there’s stuff piling up at that time where the team is kind of getting back logged and having trouble keeping up. That means that our back office is slammed. It kind of has this ripple effect throughout the entire business. And then you’re back at the point where you have providers saying I have no time to do my documentation because you just took me out of the field for two weeks, and you’re like, okay, well unintended consequences. I mean, I think we knew it was going to happen. I have a great clinical partner helping me run this business, she’s a nurse practitioner herself, and she was seeing patients throughout this whole time. And so, she had a kind of bird’s eye view and an immediate view into what was happening on the ground. So, she’s helping guide her team to say, okay, this is how we get back on track, this is how we manage all the different things that are pulling us in different directions. So, just that piece of it, I think talking to other searchers obviously helps, spending as much time on the ground with the people doing the work is a huge part of it, and if you can get that pre-transition or pre-closing or whatever, because it’s hard to glean that from just a report or a slide or whatever it is, you really need to be on the ground for it.

Kush Das: Yeah. I mean, I completely agree. I think the biggest- there’s almost no way, from a diligence standpoint, to get the level of knowledge about a business that you get in the first couple months of running the business. And so, I wish there was some way of fixing that a little bit in terms of pulling back and saying how do you get to almost to be running the business before you’re running the business. I think that would be a great way of trying to approach some of these deals, especially like the on the ground healthcare deals, they’re very, very operationally heavy, which means the operating aspects of it are not things that you can track on a spreadsheet. They’re not NPS scores or the kind of percentages or ARR fluctuations over time, but rather they’re very much like, okay, well, is there a clean process for this one thing? For example, flu vaccination rollout, like are we tracking who needs them and when they’re going out and when we’re billing for it and we’re reflecting for it. It’s little things like that. I wish I did a much, much better job at that operating diligence before, just to even know like the 15 things I’d have to do in my first couple of months on the job. Instead, I got into the job and had to learn of those 15 things and then had to solve for those 15 things, which obviously I’m still solving for. It’s not a solved for – I don’t know why I used past tense there, but it’s like a perpetual solving. But I think the hardest thing in my case also was the long gestation period for the deal. We had a change of ownership application process that we had to go through for one of our states, which made it a six-month deal time period, which is long. And what happens there is that there’s a mix of different people taking their priorities off the business and focusing on the deal for too long and enough time where the deal is actually changing and growing as you are going through that process. And so, there’s a lot that changes fundamentally about a business in six months. And so that’s part of the challenge of when you start the LOI period versus when you finish the LOI period. So, I think if there’s two things that I could fix, it would be that.

Nikita Sunilkumar: Also, avoid global pandemics, if you can. That’s also nice.

Alex Bridgeman: Yeah, pandemics are definitely helpful to avoid. What were some changes from the pandemic that you both noticed in your companies?

Kush Das: Nikita should definitely go first here because- so let me just- just to tee this up for Nikia here. She bought the business and then like a week or two later, it was the global pandemic, like day one. So it wasn’t even like- I had a completely privileged life of going through the global pandemic and buying knowing that we were in a global pandemic, when Nikita had the opposite. She didn’t know it when she bought it and then it happened to her.

Nikita Sunilkumar: Did not know it. I was not reading the news as diligently as I should have been the week before closing. Yeah, no, it was- at this point, I don’t know, honestly, to be perfectly frank, what about this business has not been touched by the pandemic. And if it has been because of the pandemic, I can’t tell you like what percentage. Like it is just so intertwined in the DNA of everything. Like every process flow that we built, every change that we made, every kind of piece of growth or opportunity that came our way. Because it ended up, obviously, a huge portion of our patients were impacted. We lost a significant amount of the population to COVID in that first year. I actually didn’t even know what the scope of it was fully because our data was not good enough, honestly, in that first year to look back and say this is the number of patients we lost to COVID. And so, we found out later looking back at some of those claims information. We went to telemedicine. That was a whole kind of new thing for the business that had never been done before, building that whole process flow out, getting our people used to it, getting our patients used to it, showing them how they could interact with us through not just video and audio but like email and like stuff that just wasn’t a thing. Like this was a fax and like maybe a phone call and then a visit kind of business before COVID. Just how our team works and just building the culture around remote work and remote teams and the whole kind of industry accelerated probably by – Kush, you’ll have to kind of give your opinion on this – but in 2019, I was at a healthcare conference where people were talking about like population health management and ACOs as though it was like the cutting edge. It was like, oh my God, you’re in an ACO? That’s amazing. COVID happens, and by late 2020, we’re talking about things like the DCE, like value-based care as though it’s happening tomorrow. Like that was probably 10 years away pre COVID. It’s sort of like a mass acceleration of these industry trends that just got compressed into the last couple of years. So, everything from big sort of impacts, industry impacts to everyday changes to how we work. It’s just so incredibly intertwined. The labor market, as I mentioned before, the chip shortage – I can’t get monitoring devices for my people because of the chip shortage. I can’t get laptops to my providers because of the chip shortage. Like stuff that you wouldn’t think about, but like everywhere you look, the impacts are there. And I have not at all teased them out to be quite frank. So, it probably will take two more years to do that, understand the impacts.

Kush Das: Sounds about right. I was raising my fund before COVID. I had gotten all of the verbal confirmations on it. And then in the first, I think it was like- maybe it was like the week after COVID was when I was supposed to close. I sped it up by about two weeks as soon as I started to see the writing on the wall to close. I thought the world was going to run out of money at that time, which obviously was not the case at all, the opposite happened. But the interesting thing was my thesis was very specific. I talked about home-based care, I talked about value-based care in my search fund thesis. When I was doing it, people would be like what the heck is value-based care? But when we think about what the heck is value-based care, that conversation I am not having any more. And I think that has largely to do with COVID. And the acceleration that Nikita is talking about is so real. To put into perspective, when we applied for direct contracting, which was in the first stages in the end of 2019, early 2020, no one knew about it. No one talked about it. It wasn’t like a hot topic. Congress, if you put the words in front of Congress, they would have no idea what it was. Now, it is a very hot topic. Everyone’s talking about it. Multiple centers are on either side of the issue. I can’t even believe there are sides of the issue. Honestly, that’s just astonishing to me. And that’s what’s changed. Like there’s multiple home-based care bills that are going through Congress right now, multiple value-based care bills that are going through. There’re people who have opinions on the matter that never had opinions on the matter before. And so, when we started to get through this deal to running the business, just I was expecting a lot kind of quieter aspects of value-based care and being one of the few people that even knew it was a thing to care about, and now it’s the opposite, which I don’t know if it’s a good thing or a bad thing. Honestly, it’s probably a little bit of both. But the market has fundamentally changed.

Alex Bridgeman: Yeah, it’s certainly so much different than when you started your search. Going into some closing questions. What kind of college class would you each teach if it could be about any subject you wanted? Who wants to go first?

Kush Das: Definitely not me. Nikita?

Nikita Sunilkumar: I don’t know that- I don’t want to say teach because that implies I know something to share, but like- and I mean, I do, this experience has taught me a lot. But I would love to just develop some content around risk and decision-making, I guess is the way I’d put it. Because it’s interesting to talk to searchers who are very early in the process and they’re weighing the risk and trade-offs of doing search in the broader context of their life. And then you get to the point where you’re looking at businesses and you’re deciding how to take the plunge and like how to weigh the risk of that. And then you get to operating, and in my case, you make approximately one decision every seven minutes. Like you are so quickly in the path of just do, do, do, and process as much information as you can as quickly as possible. And I honestly don’t know if it’s made me a better decision maker or a worse one, having had to do that because you almost don’t have time to process all the data that you need to in order to necessarily say, oh, I’ve done everything I was taught in school about the data analysis and the processing and the weighing of pros and cons and all that. So, it is just a very weird phenomenon and it’s kind of a weird place to be in where I’m looking back on that experience and thinking like what other tools should I have factored in before I launched this whole episode? Would I do things differently? What did I do? Like how many decisions did I actually make? Like some of it honestly is a blur. So, I would love to kind of go back and think through that and actually have like some academic sort of understanding of what your brain goes through when you do that. So that would be my choice.

Kush Das: I would totally take that class. Actually, it’s funny, I perpetually struggle with like the risk aversion question. And it’s interesting, I think for searchers just generally, like that would be an interesting way of approaching it. What is risk aversion? What is tolerable risk? What is not so tolerable risk? How do you make decisions keeping all of that risk in mind? That’d be very interesting. Mine, I guess it would be a history class, but it would be a history class that is- it would almost be like a how history repeats itself class. And so instead of thinking about history in like chunks of time periods, it would be history across time periods and across like themes. I think one of the things that I really, really believe in is that things are somewhat repeatable and predictable. And I think if we were all better students of history, which I struggle with all the time, then we’d be able to make those decisions better to understand how things went. And a lot of that is like pattern recognition and the same things you get after you’ve run a business like Nikita has for a couple of years where those decisions become easier in seven minutes. I think that pattern recognition from history would be cool. So, I wouldn’t- I don’t know if I would teach it. Maybe I would moderate it or proctor it, but it’d be a cool one to also sit in.

Alex Bridgeman: What’s a strongly held belief you’ve both changed your mind on?

Nikita Sunilkumar: I think mine would have to be- Maybe this is just sort of the hubris that comes with being an engineer, but you always think that there’s a better tool for the job, better technology that you can apply to make something faster, better, more efficient, whatever. And I think- I mean, it’s not a belief that I’ve changed necessarily, but this business has given me such an appreciation for the people aspects of doing things and accomplishing tasks and launching initiatives. And I think this is probably universal for most searchers, you’ve never been probably this up close and personal with team dynamics and sort of the people issues of a business until you’re in the seat. And by now, I’ve just started my journey with it. I haven’t done this long enough to really have all the insights, of course, but it’s just given me such an appreciation for that. It’s like, oh yeah, you could have the best solution in the world, you could have the best technology in the world, but the team can make or break it, a hundred percent. And I think I’m curious to see it now in other contexts, in other areas where it’s- certainly in healthcare, but in other industries, whether that holds true, or if you can overcome sort of the challenges of big groups of people coming together to work on something with technology, can that be- not overcome, I’m not saying it’s like a battle between people and technology. But can you design for the average user of something and still not have the people aspects of it’s going to derail your progress or whatever it may be? That was not well-worded. I’m sorry. But that’s the best I can do right now.

Kush Das: These are tough ones, Alex. The strongly held belief one, that’s a killer. That’s a killer.

Alex Bridgeman: It’s definitely one of my most fun ones to hear about people. Everyone has something. What’s the best business you’ve ever seen?

Nikita Sunilkumar: When I was searching, I had a conversation with a guy who was an operator of like low flying aircraft and drones. And he would just fly around and collect data on like farmland and a bunch of other things. I think it was for crop dusting and things like that. And I’m just looking for now like stuff to do with climate and preparing for this next aspect of our planet’s life. And it just seems like a great business to just like go fly around all day and get data and then sell it to the highest bidder because we’re going to need so much of it. It’s bananas.

Kush Das: I’m going to steal my answer from one of my investors who told me about this, and then I researched it and was like, wow, this is so true. I think the best businesses – and it’s not the best business, but the best businesses – are possibly port-a-potty businesses. And I say that because they’re highly necessary. Once you build it, you can keep reusing it as long as you keep it clean. And there’s very little competition and little people entering the market. And so, it is relatively one of those that I think no one ever thinks about. And the reason I’m bringing it up is because search investors love businesses that are the ones that no one else is ever thinking about actually. And so that’s why, that was the context in which you brought it up. And I don’t know if it’s the best business I’ve ever seen, but he talked about it like it’s the best business around, and it was interesting.

Alex Bridgeman: That is interesting. Nikita, on the data one, there’s a company called Planet that’s trying to take- that has all these satellites, they have like 400 satellites or something. There was some recent Invest with the Best episode, but they’re taking pictures that are fairly high resolution of fields. And I didn’t realize how many different pieces of data you could gather from just pictures daily of the earth. And I mean, you have like crops, are they ready to be harvested? Do they need to add fertilizer? All these other things, what are yields going to be? But even stuff like where are the ships going? Or like what’s traffic in these different areas? Beyond just like Google maps, but there’s so many applications for that sort of stuff. So, I’d love to find a business like that though. Because I love planes and data. So I think combining the two sounds awesome.

Nikita Sunilkumar: Yeah, those were my criteria too. I was like what would actually be fun to do? I don’t really care about the financials right now. No, I think there’s something, sort of that point at which we have many, many tools to manipulate data and present it and work with it and all of that, but actually going back to the root of collecting good data, which actually even in healthcare, that’s where the magic is made for sure.

Alex Bridgeman: Yeah, certainly. Well, thank you both for coming on the podcast. It’s been super fun to have you both and chat more about healthcare more in depth. So, thank you both for sharing a little bit of your time. And travel safe, Nikita, as well. And I’m excited to see you guys here in a little bit.

Nikita Sunilkumar: Thank you very much.