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I'm Bill Russell, creator of this week Health, where our mission is to transform healthcare one connection at a time. Welcome to Newsday, breaking Down the Health it headlines that matter most. Let's jump into the news.

Jason Rose: Nice to see you, bill. Good to see you Drex.

Bill Russell: forward to the conversation. Drex is going to a rave this weekend, as odd as that is for his age. But he said he will be the oldest guy in the room,

Drex DeFord | This Week Health: I always am.

Bill Russell: usually if you, well, it depends where you hang out. If you're going to hang out there, you're going to be the oldest guy in the room.

Drex DeFord | This Week Health: If I come to Florida and hang out down there with you and

Bill Russell: Oh, you'll never.

Drex DeFord | This Week Health: not, I'm a young guy in that crew, so.

Bill Russell: You know what they say about Southwest Florida, you'll never have the most money. You'll never be the oldest and you'll never have the lowest handicap, and they're right on all three cases. I'll never have any of those

Jason Rose: That's pretty good.

Bill Russell: Hey, Drex, I just wanna, before we get going too far, I wanna hit up the ServiceNow acquisition of Armis.

What is that about? Like, I mean, Armis is tracking devices, ServiceNow is really the engine behind tracking all sorts of things.

Yeah.

Drex DeFord | This Week Health: So I look at this sometimes you know, strictly from the investment perspective, these guys did, Armas did a raise, think last year valued at $6.1 billion. And so this deal would be like a $7 billion deal. You know, they. They have regularly, you hear conversations about Armisgoing public, maybe next year. There are a lot of companies who kind of slowed the role on that.because they don't want to have like a do an IPO and then everybody be underwhelmed by the price or how the price moves after the IPO. So you know, when you've got folks like Goldman Sachs who are making those round investments, they want their money back

You have one of the others that's out there that's prevalent. I mean, do you see these, are these going to change how you think about what you bring into the organization?

Drex DeFord | This Week Health: think, you know, when you, if you're a ServiceNow customer today, in the spirit of a lot of the conversations right now around consolidation and rationalization of all the things that I have, if I don't have something today. Or I have Armis today and ServiceNow, I'm probably rooting for this merger to happen.

Bill Russell: Yeah, this may not be healthcare related. This acquisition, by the way, I mean Armisis the biggest player out outside of healthcare. [00:04:00] They're the, I think the third player in this space.

Drex DeFord | This Week Health: They have pretty significant presence actually in healthcare. I'm kind of surprised more and more I'm talking to folks and they're using A

That was a $4 billion. IPO and it's tough. It's tough being

Bill Russell: say

Jason Rose: going,

Bill Russell: lift, isn't it?

Jason Rose: it's going private to public. And we were in a weird weird, we were an unusual situation. We had no, no venture, no private equity, no funding at all. It was all management owned. Then we went public. It was like a one of the, you know, only few companies have ever done that before.

And we also went out,

Drex DeFord | This Week Health: version of going public, right?

And I've got all my colleagues and peers and you know, his confetti and my CEO who his name is Dr. Keith Dunleavy. He was, you know, he was with Maria Bar, you know, that morning on tv and it was great confetti and Wall Street photos on the buildings. Our spouses were all there. Awesome. 13 banks took us public, but.

At 2:00 PM but we're drinking some mimosas champagne, just the understanding environment. But at 2:00 PM that day, I took a little train over to White Plains and I was in some dumpy little conference room at some a CO trying to sell my stuff and, you know, and they could give a,

Drex DeFord | This Week Health: They

Jason Rose: you know, any, they could care less about what I was doing at 9:00 AM.

And it's also still day one and it's just a little bit easier to do when you're private than when you actually have everybody. And all the analysts every quarter beating you up about what you didn't do in the last quarter. And it turned out great for us. In the long run, in the short run, it was tough.

So I don't blame Armis at all. I don't know Arm, I do, you know, some people at ServiceNow. But I don't blame them at all for avoiding this. And they got a great valuation, you know, at what, 350 million I think is what it says at 7 billion. That's, it's awesome.

It takes some focus off it, potentially lose, loses energy on the product development side and that kinda stuff. I'm not saying that's happening here, but. seen it over the years. The other thing that happens is we see people making decisions in health systems to go with the product, not go with the product and those kinds of things. The you know, the question, I think, you know, Drex as we look at this and Jason, I'm just going to ask you, it's like, look we end up with these apps all over the place. We've gotta cut down on these apps. It's one of my it's not the prediction I will talk about at the end of the show, but it is. One of the things I think we're just going to see further consolidation of the app portfolio next year. It's just going to keep getting tighter. You know, direct as we look at tightening up that app portfolio, I mean, what's going to drive those decisions for tightening up the, that app portfolio.

Drex DeFord | This Week Health: There's probably some overlap. There's some Venn diagram about accounts and being able to get into accounts where you're not in today. I don't know which side that benefits more or less, but that's probably at least part of the value that they're hoping that comes from from a merger.

Bill Russell: Where are you looking next year to get rid of apps?

Drex DeFord | This Week Health: I mean, I'm looking at overlap. I'm always looking at overlap. Where do I have apps that, you know, I have four apps and they all do the same thing. It's, you know, murder politically inside of an organization sometimes because Dr. X loves this app, because this is what I used when I went to Yale, and Dr.

Y loves this app because this is the app I used when I went

to Harvard

Bill Russell: Yeah, and the conversations are so gentle too. It's like you're an idiot. You use that thing.

Drex DeFord | This Week Health: dude, I've

Jason Rose: I like Zoom versus teams. I hear everything

it's not the easiest going conversations, but I mean, I think we're just at this point where you gotta force it. You've got to force the app consolidation for security, for financial reasons, for just good standard clinical, you know, or business work.

Jason Rose: We do both clinical and financial operational apps. We don't really care. Where it's coming from, a database, the database is kind of what we say internally here. And so I think it's like something like 60% of the applications that we archive are actually operational or financial and not clinical in nature.

But yet, you know, the number, the names of the organizations that you commonly think about. That are being consolidated are the uh, Cerner and the, the Allscripts and the green waste and the next gens, et cetera. But there's plenty of Lawson and PeopleSoft out there too that have been around for decades and being replaced by Workday.

They've gotta have a mandate internally that's supported by the entire C-suite for the redundancies, the consolidation of being on the same enterprise platform, getting rid of just tech debt. And they need resources. Uh, They need uh, time and, and investment. But the takeout is rapid and very, very, very large.

And I think the pressures with the one big beautiful bill act. I call it OB three now, but faster Say it o OB three. It's easier to say it that way.

Bill Russell: I'm taking that.

I'll give you another one. Bill, the trillion dollar gut punch I'm going to take that one I made up myself, but.

Drex DeFord | This Week Health: I like that.

Jason Rose: $800 billion of Medicaid funding and 200 billion in ECA is a, is a, is a trillion dollar gut punch plus NIH funding caps on academic medical centers just to, it's the, it's surreal in terms of how much pressure is on these health systems to find ways to reduce costs, and they're just historically have gone slow, methodical, and opportunistic project based on these application archiving.

67% of the health systems have successful attacks last year. So it's just a, it's just an opportunity.

Bill Russell: I feel like that father who talks about his kids, but the you know, in internally as we've grown, application portfolio has grown pretty significantly, and we have just consolidated pretty dramatically. A third of our IT software costs are gone. we just, we got rid of them completely.

And you know how we did that was essentially we did. I say that AI is one of those ways that you can hire a hundred PhD level interns to do work. so we decided to put it to work and we developed our own e, our our own EHR. I keep saying that our own CRM internally, and it tracks all the things that we do, and as you know, and it's custom tailored to who we are.

And part of it is what you guys just talked about, the overlap of the applications.because every application requires. A database, a server, power space, cooling. It requires a team to maintain it, a team to patch it. It requires, you know, it just goes. It goes on and on.

Think like that because of them come from healthcare and the way they think is what I do today is what good looks like. I've figured out how to make this as efficient as possible, but they haven't made the next leap

Jason Rose: I agree with you Drex. So, one of the things that I think is unique to what Clearsense does is, and we, you know, obviously it got written up with Gartner and the Trinity case study back in July where we saved a hundred million dollars of opex cost with them. Is it's, it is really what we're offering is really more of a managed service provider contract.

Procurement being involved, the vendors being aware, the digital last am planet music, city health system then you have the data extraction, then you have the archiving, and then the report writing all those and moving the technology. And then you have the actual decommissioning.because really, you know, there's another third to half.

Apps that don't need to be archived, you still gotta decommission them. It's a huge amount of cost on that too. And so, it's really, to me it's like a whole turnkey assembly line is what we call it here because it's not just archiving.because otherwise you're left at devices of does the staff or the leadership, they've done this before or probably not at massive scale, and they want to get this done in months, not years.

Bill Russell: So what are we going to see in 26? 26 predictions? You know, it's that time of the year you gotta do it. Who wants to go first?

Jason Rose: this is kind of state captain obvious here, but there's so much pressure within the health system environment. It's, something's going to have to give, there's opportunities for, we started this conversation with mergers and acquisitions and there's going to be a tremendous amount of M and A activity not in the smaller nature of these community hospitals.

They're going to get much, much bigger than they are today. And I think it's going to be a whirlwind of M and A activity.

Bill Russell: The big get bigger. I mean, have we seen that work? I mean, is that working per se?

Jason Rose: Already happening in payer land, right? Yeah,

Bill Russell: in

Jason Rose: it,

Bill Russell: That's crazy.

Jason Rose: it's there. It's there, right. And it's been there a long time. So, what and you know, the, on a spreadsheet it's going to show synergies and those synergies are going to be very significant. And so, so I think it's going to be inevitable.

Drex DeFord | This Week Health: Jason in your prediction then the small freestanding rural hospitals that are out there just trying to make it, are they going to get swept up in this or are they going

I mean, who knows? I mean, there's so many, and then you just got just general efficiencies talent. Just, you know, how do you navigate from a leadership standpoint, how are you navigating these very complex issues and not be off on your own? So I think that, you know, obviously you'll have, you know, partnerships and things like that's been happening for a long time, but.

I think there's going to be a lot of M and A and, you know, the current political environment is going to be inviting that too from an FTC perspective. So, I think all the mixtures there is to have a, a, a big amount of M and A.

Jason Rose: They just gave $50 billion to the rural health community.

Bill Russell: Yeah. What's I think

Jason Rose: yeah.

Bill Russell: the pot. There's going to be a benefit for a large player to pick up some of those. And if they're not going to, then then quite frankly, they're not going to get as much government help. I don't know. We'll see. This is going to be, it's already a crazy, it's already a crazy environment.

It's definitely an environment. with a lot of uncertainty for sure. Drex, what do you got? Prediction.

Drex DeFord | This Week Health: you know, so I'm just going to go on the other side of the fence and I'm going to say that there's going to be a bunch of M and A that's going to continue and it's going to become even more intense. But on the vendor partner side of the house, it seems like there's a lot of early stage companies out there who are doing really good.

So.

Bill Russell: So, if they get bought by another company, that's one thing. If they get bought by private equity, that's the one that everyone gets a little antsy about.because because we've had the um, and actually we had both, I mean, we had the Citrix thing and then we had the VMware thing. The VMware thing wasn't private equity. But it still played like private equity.

Drex DeFord | This Week Health: It does change everything, right? I kind of want to hear from Jason on this one too, but it does kind of change everything when private when you're running it yourself in your own, you own all the stuff, and then you bring in pe. It's a whole different list of demands, and then when you go public, it's another whole amount of overhead that you never imagined that you would have to deal with.

So

Jason Rose: been.

Drex DeFord | This Week Health: to be private as long as you can, and never take

Today I'll leave it at that uh, prior today, maybe not as much, but meaning a prior company. But but it's so important to have a really good relationship with your board. And when I, when I joined this company, Clearsense. That was my number one interview question to the board. My investors and I'll, you know, shout out to Health West Capital and Health Catalyst Capital and UPMC enterprises, just fantastic board, fantastic investors.

But it's not always the case where you have the right investors and they're always the smartest people in the room. So having one where you're aligned at the leadership level with the. Is so critically important, otherwise it just can go in unhealthy directions.

Bill Russell: Well, you know, we'll close out on this and I'm just going to [00:23:00] shock all of you and say, I think AI is going to be big. I think it is. Really.

Jason Rose: Ai, what does that stand for?

Drex DeFord | This Week Health: deal.

Bill Russell: so, yeah. So let me talk. No, it's it's, it, it has been hyped this year. I think it goes to. Implementation next year. And I think it has been predominantly hyped this year, to be honest with you.

I mean, it's except in the ambient space ambient space and imaging, I think has been very real. There's some predictive models that have been very real. But outside of that and by the way, I mean the imaging stuff has been in development for. 10 years. I mean,

Jason Rose: Yeah,

Bill Russell: it's not

Jason Rose: proven.

Bill Russell: Yeah. They haven't like, brought it out last year and all of a sudden it's the ambient listening though really took off. But again, people don't recognize a bridge has been around for eight years. They're like, oh, where did a bridge come from? It's, well, it's an eight year. You know, success. It's not a, it's not like they didn't start their AI stuff three years ago with chat GBT, and now all of a sudden they're huge.

This is making my life better. and so those three areas are proven. I think we'll see those continue to evolve. You know, we're seeing I shared a story with the two of you on Stanford. Stanford's going all in. They're you know, conversations with with people over at Stanford.

The conversation was essentially, look, it's free labor. Like, why wouldn't we use AI agents? Why wouldn't we use AI to monitor our security logs? Why wouldn't we use AI to, you know, just all the things you would normally have to hire a bunch of people do really mundane work. It's like, why wouldn't we take advantage of this?

And so they're.

Drex DeFord | This Week Health: bunch of massive idea, like it's not giant super cool ideas either. It's a lot of little things that are just

Jason Rose: Lot of small things.

Drex DeFord | This Week Health: a

Jason Rose: Yeah.

Drex DeFord | This Week Health: that they've brought in the AI agent to do that. Work.

Jason Rose: you think about just from an AI perspective, you just keep this simple. You got L ones who are the entry level. You got L twos who are like the supervisory work, and you got L threes, which are the experts. And so what AI is really doing is that you take each of these L ones, you can go across anything.

You can take a, a junior accountant. And you know, putting journal entries for invoices coming in from email and posting it to the journal, you can automate that. And you can eliminate or reduce significantly those L ones across any, almost any idea you have. Including what Stanford talked about, and then you, the next kind of step is at the L two level, which is how do I start to have oversight and reduce the number of L twos.

And you know, from a vendor point of view if you're, if you're not fully embracing ai, and I don't mean the hype, you gotta make sure it works and it's a good investment. There's a business case for what you're trying to do if you're not really fully embracing ai. You're really uninvestible. That was the words he used, quote unquote.

You are uninvestible as a management team because you had, you are going to be left behind if you haven't already started this. So I, it's such a critical aspect. I'm excited to see healthcare after 30 years personally in healthcare of all the different hypes that we've had. You know, I'm going to go all the way back to Y 2K.

Bill Russell: This is going to be a fun time, and this is going to be a time where CIOs can differentiate themselves by identifying those, identify those plays that make sense. And bringing AI to bear, as I have said many times, it's, you know, it's the ability to have a hundred PhD level interns at your fingertips who are going to work 7 24 365, and do what they need to do now.

We'll start talking about water and power next year about a lot more than we have in the past.

Drex DeFord | This Week Health: Yeah.

Bill Russell: because you know, we're going to hire these these entities and right now we have to pay them cash. You know, when we hire people. And so we have cashflow issues. In the future, we're going to have power and water issues.

'cause that's what we're paying AI in. Is power. Power and

Bill Russell: quite frankly. I think that is the future. I mean, they're talking about, he's essentially building the internet in outer space. And when you

Jason Rose: Yeah.

Bill Russell: cooling becomes a non-issue. the only thing that becomes an issue is latency. But in data center to data center, if you put all the data centers up there or the key ones up there and they're just talking to themselves and then you're just transmitting stuff down, like, we've solved a bunch of these problems before.

I mean, that's how we run Epic is, you know, we don't do thick clients anymore. We do thin clients and we, you know, we just trans transferred screenshots and the machine's actually running up in that data center. So we have solutions for some of this stuff. And I think I read a similar article, which is like, I'm like, why is SpaceX doing a fundraise? That's the reason they're doing a fundraise. That's what they wanna build with the fundraise.

Bill Russell: I was driving down the street the other day with a friend and, he he needed internet access and he had, and you have this too drex, he had the starlink in his back window he just fired up the starlink. And we're tooling around in our car with, you know, mega high speed access. I'm sitting there going, I, you know, I remember living in a house that the best I could do was a 56 K to the internet, and I would've killed for this thing. And now I'm driving.

Drex DeFord | This Week Health: dial up sound here. That would

Bill Russell: Exactly. Hey, you've got mail. It's like the

Jason Rose: Yeah, I mean,

Bill Russell: do on the internet.

Bill Russell: Well, the.

Jason Rose: I was on the internet working, I don't know, but that's a whole nother subject.

I was doing it at seven, 6:00 AM but

Drex DeFord | This Week Health: My

Jason Rose: everyone went up,

Drex DeFord | This Week Health: will still be working a lot like that even on your vacation, Jason

Jason Rose: I used to take, I used to take cruises for the sole reason that I would just not be able to be, you know, I, sorry, I can't get on the, I can't get an email now. That's gone so.

Drex DeFord | This Week Health: This is why we don't have phone call. You're the reason we don't have phone calls on airplanes right now.because

Jason Rose: Yeah.

Drex DeFord | This Week Health: be

Bill Russell: Oh, really? That's the reason right there.

Jason Rose: me.

Bill Russell: Well, gentlemen thanks a lot and this was great discussion. I appreciate it. And you guys have a great new year

Jason Rose: Yeah, you too. Happy new to both of you.