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Hey everyone. I'm Drex Deford, one of the principles of this Week Health and the 2 29 project here. Our mission is healthcare transformation powered by community. This is Newsday on the UN hacked channel, breaking down the cyber and risk stories that are impacting healthcare. Here's some stuff you might want to know about.

  📍 it's Newsday and we've already been talking for 10 minutes, so we're going to come back and talk a little bit more. We'll do some predictions. We'll talk about different things. Today we're joined by Jason Rose, CEO of Clearsense. Jason, welcome back to the show.

 Nice to see you, bill. Good to see you Drex.

 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,

 I always am.

 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.

 If I come to Florida and hang out down there with you and

Oh, you'll never.

not, I'm a young guy in that crew, so.

 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

That's pretty good.

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.

I mean, I mean, I had seen them sort of stepping into the clinical workflow area. is clearly a step back to their roots. What are your thoughts on this? 

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

 let me put you back CISO Chair, CIO chair. Um, You're a ServiceNow customer. They have pretty good footprint in healthcare. Armis is a client of ours, so I gotta be careful how I say this, but Armis is not the leading player in their space in healthcare. So potentially you have ServiceNow, but you don't have arm.

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? 

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.

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

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

say

going, 

lift, isn't it? 

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,

version of going public, right? 

yes, it was really, but it was going from zero to a thousand in five seconds. And I'll just say the one thing that I really took away from that, number one is it wasn't as exciting as you thought it would be going public. Like the, in the moment, you know, we're on the NASDAQ floor.

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, 

They

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

They cared about whether or not this was going to fit whatever they needed. And of course I never brought it up either because it was like, who cares?because you know what, that was day one and that was, that in reality was we had to actually execute. And that was day one in a very public way when you get acquired of also going through like non IPOs obviously merger acquisition type stuff.

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. 

Here's a softball for you, Jason to let you talk about Clearsense a little bit and directs back to you this as well.because we've talked about this before. These acquisitions leave. First of all, it takes focus off, I mean, because you have to do a road show, you have to do, I mean, there's so much energy that goes behind.

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.

ServiceNow is betting on. Some kind of integration with Armis that is special. Some special sauce that comes together with the two of them, or I can't imagine it's a play for more clients.because they're probably in the same accounts. . 

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. 

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

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

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

dude, I've

I like Zoom versus teams. I hear everything

Oh my gosh.

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. 

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.

You know, for example Sunquest Labs or, you know, on base, on and on and on. It's just, It's just a go out of applications. And so, I do think, I mean, I, and I think I know factually that these health systems, it's elevated within, it's beyond the CIO. Drex made a really great point. It's not necessarily like the CIO would like to, or would not like to clean up their application portfolio.

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. 

I'm taking that. 

I learned that at the health leadership academy a couple weeks ago. But uh, yeah, O OB three. So OB three is really creates so much downward pressure with the, like I call it.

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

I like that.

$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.

And they've gotta look at this more holistically. And it's a governance, it's a alignment, and it's really a financial mandate. Plus the cyber risk, which is just absurdly  pervasive throughout the entire healthcare system.  The amount of risk that we have and we're enduring with ransomware.

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

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. 

if you're running it on premise, it's still, you know, you still have to drive subscription costs and everything else. Even if it's not, on premise, you sometimes still need analysts to kinda run the thing. It's, there are so many places I think that we could do better. And a lot of this is the. I was talking to somebody the other night. They used this really good analogy. I liked it. Formula One racing AI is the race car that we're building that goes really fast in corners like it's on rails. The problem is we haven't developed the drivers yet to drive the cars really well, and we have a lot of work to do in the training and the education in the helping our leaders understand how to.

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 

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.

It's not just archiving. There's so many other things beyond just archiving and writing reports. There's the governance of alignment and prioritization of which of the apps and finding those political battles and getting alignment. There's the. Project management of ensuring that all the end users are aware you're going to read only all those types of things.

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.

And so it, it really is a strategic initiative. Versus just a IT project that needs to get done because they happen to be rolling out this new EHR system probably named Epic. 

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?

 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.

I think there's going to continue to happen too for all the right reasons, I think to protect the safety net hospitals and. The rural communities, those will continue to happen. But I think we're going to start seeing more and more, two and three billion acquisitions with the bigger top 25 players to where the health systems are going to be run really effectively by, you know, the top 25, 30 health systems in the United States.

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. 

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

Already happening in payer land, right? Yeah,

in

it,

That's crazy.

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.

 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 think they, they're going to have to, they, how do they survive? With the pressures that they have. I mean, you name it, they've got. Inflation labor shortages reimbursement issues uh, three 40 B, like, I don't know what's going to happen with that anymore.

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.  

Yeah, well they've only got a couple years to make that happen potentially, so it'll be interesting to watch. I don't think the small, rural are going to get swept up in it unless. The government sweetens the pot, you know, like we have carbon credits and that kinda stuff. I think if there's enough attached to small rural health systems that it benefits the large systems to buy 'em up and get like those credits and that kinda stuff. I think you're going to see, especially this administration, go away from giving money to Providence and Common Spirit and whatever, 

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

Yeah. What's I think

yeah.

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. 

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.

Work, but they're only so big and they can only go so fast. And there's folks who have some cash sitting on the sidelines and some of these big companies, they're going to scoop some of those baby companies up. That could be good. It could be bad. We've definitely seen app acquisitions where the really beautiful stuff about the small company disappears when they're acquired by the bigger company.

So. 

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. 

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

been.

to be private as long as you can, and never take

I agree with that.  I guess eight years ago, I really didn't have a whole lot of PE experience at all. But the last two companies were all PE backed and I've got great PE partners.

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. 

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

Ai, what does that stand for?

deal. 

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,

Yeah,

it's not

proven.

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.

I mean, it has been an eight year journey. I think it takes that for maturity in the space to find the right use case to really develop it, and then to develop the trust within, and that's the key word in healthcare, right? Develop the trust within healthcare of people who are going to use it and say, Hey, this is actually working.

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.

bunch of massive idea, like it's not giant super cool ideas either. It's a lot of little things that are just

Lot of small things.

a

Yeah.

that they've brought in the AI agent to do that. Work.

I mean, that's the play right now, 

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.

The L threes are the experts and you wanna let the ground level work be done at just 24 7 massive volume. So the L twos and the L threes can actually be more effective and it's going to, it's going to just. I think just changed the way companies run. I was in AI workshop for CEOs a few months ago, and I was talking to a I'll just say a very large PE organization.

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.

That was also a hype and blockchain. And like you, I'm not saying all these things were a robust need use, but like AI is real. It's absolutely real. And it's going to, it's going to is already helping transform this environment that is much needed to make advances. I think healthcare is going to move faster than other industries because we're so far behind. 

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.

Yeah.

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

  I saw Elon Musk talking about launching satellites and having a network across the entire planet, but data centers out there. I thought that was like a interesting point of view. 

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

Yeah.

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. 

and it's the kind of thing that, you know, we hear about it today, how many times in the last 15 years have we heard about something and said, that's ridiculous. And then it turns out that's how we run today. So,  

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. 

dial up sound here. That would

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

Yeah, I mean,

do on the internet. 

I was on a a catamaran trip in I think it was April or so, full internet access. It was no problem with Sterling, no issues. It was like, like I was at home. It was amazing. The middle of nowhere, middle of the middle of. Middle of the BBI, it's like shocking.

Well, the.

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

 My

everyone went up,

will still be working a lot like that even on your vacation, Jason 

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. 

This is why we don't have phone call. You're the reason we don't have phone calls on airplanes right now.because

Yeah.

be

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

me. 

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

 Yeah, you too. Happy new to both of you.

That's Newsday on UNH. Hack with Drex De Ford. Get daily security insights delivered to your inbox because every healthcare leader needs a community to lean on and learn from. Sign up at this week, health.com/subscribe and stay safe out there. I'll see you around campus.