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Nashville & Austin
Two “IT” Cities & the Race for Healthcare Innovation

Nashville and Austin are two of my favorite cities. I share the love both cities have for live music, good food, and emerging technology startups. The two cities are similar in size, have great tech-focused universities, have an educated workforce, are business friendly, are attracting large corporate headquarters, and are two of the fastest growing cities in the country.

These similarities have always resulted in comparisons and friendly competition. It seems wherever I travel around the world I end up spending time talking about Nashville and I am often asked how Nashville compares to Austin. At SXSW, I’ve participated in side-stage panels focusing on this topic. Even our Epicenter podcast last year began with the “Why Nashville” discussion.

A recent "Building a Health Innovation City" event in Nashville focused on the healthcare innovation competition between Nashville and Austin. Maninder Kahlon, vice dean of health ecosystem at the University of Texas at Austin's Dell Medical Center commented, "[Nashville]'s biggest strength is these huge healthcare organizations. But every strength is a weakness.” 

She went on to say that Austin is “not worried whether healthcare is disrupted, transformed, or disintermediated…I'm surprised that a city with so much concentration of healthcare is not as present as it should be when it comes to thinking about all the things that are top of our mind where healthcare is going."

Kahlon called Nashville out for not being hungry enough to be “the health innovation city.” I began to wonder… is she right?

Nashville as the Healthcare Capital

Nashville’s statistics speak for themselves. According to the Nashville Healthcare Council:

  • The healthcare industry contributes $46.7 billion and more than 270,000 jobs to the local Nashville economy annually.
  • Globally, Nashville’s healthcare industry generates more than $92 billion in revenue and more than 570,000 jobs.
  • More than 500 healthcare companies have operations in Nashville and work on a multistate, national or international basis. Nashville is also home to nearly 400 professional service firms that provide expertise in the healthcare industry.
  • The backbone of Nashville’s healthcare industry is the 17 publicly traded healthcare companies headquartered in the city. HCA’s 2011 return to Wall Street marked the largest-ever U.S. private equity-backed public offering.
  • A survey of Nashville Healthcare Council member CEOs shows great confidence in the Nashville market; 95 percent indicated that a Nashville headquarters location is important to their company’s positive performance.
  • More than $1.6 billion in venture capital was invested in Nashville healthcare companies from 2005-2015.

Nashville’s success comes from its operators. My old employer, HCA, for example, is in my opinion, the best operator of acute care hospitals in the world. Their operational excellence is focused on today’s operating system, which is primarily focused on fee for service healthcare in markets with the right market share and strong payer mix.

To date, being a great operator means mastering the art of the fast follow. Once a new best practice has been identified, fast followers want to be ready to operationalize it better and faster than anyone else. Nashville’s operators want to be ready for change, but not promote or advance anything that upsets the existing methods of care delivery and payment. Nashville’s established companies say they want innovation, but they want it de-risked, under their own terms, and accretive to their existing business. 

Kahlon is correct… Nashville’s success as the “healthcare capital of the US” does not necessarily translate to an advantage in becoming “the healthcare innovation capital.” In some ways it can work against those of us who focus on bringing innovations to life.

Is Texas or Tennessee hungrier for blockchain innovation in healthcare?

In the blockchain innovation space, Nashville is home to leading companies including Hashed Health (Professional Credentials Exchange, Signal Stream, Bramble) and Change Healthcare (claims transparency on Fabric, Payments on DAML), the world’s largest healthcare blockchain conference Distributed Health, as well as leading efforts from our universities, especially Vanderbilt (Doug Schmidt, Dana Zhang, etc) and Lipscomb’s University (Kevin Clauson, Beth Breeden). The Greater Nashville Technology Council has also been an organizing force in bringing together the community through its support for the Nashville Blockchain Meetup which, as a community, has now grown to over 1,000 members locally. These initiatives demonstrate the hunger that exists in Nashville for innovation in the space.

Hashed Health has worked with several of these companies and universities on community building, market development, and development projects. But thus far our city has failed to convene networks that include the “huge healthcare organizations” in Nashville that Kahlon mentions.

After being involved in now three Nashville-based healthcare technology startups, my experience has taught me that innovators need to be careful about assuming too much from our Nashville champions. Their operational excellence is based on what has worked in the past, not what may work in the future. It’s a great city to scale up innovative, proven systems but the Nashville establishment, especially its large provider systems, does not always have the appetite to be the first.

That’s where Texas comes in. What Texas may lack in leading blockchain innovation projects, it makes up for in terms of the hunger to experiment and implement. It seems to have a head start in getting innovations off the ground. Projects founded in Nashville and elsewhere are finding receptive customers in Texas.

A few examples of the projects and companies focusing on the Texas market include:

  • The Professional Credentials Exchange has found a partner in the Texas Hospital Association and looks to have Texas be a primary pilot market for this new way of credentialing physicians.
  • Synaptic Alliance is piloting in Texas for its directory utility solution.
  • According to Aman Quandri, Amchart, “is currently modifying components of Amchart to layer on top of an HIE in Texas to provide value added reports to providers as well as an upcoming patient portal.”
  • HCSC, the largest customer owned health insurer in the US, has operations in Texas and has publicly announced they have joined a new alliance with Aetna and Anthem.

Austin’s healthcare innovation hub agenda, anchored by Dell Medical School, is one part of a larger innovation hub approach that now includes tech giants Amazon, Dell, IBM, Intel, Oracle and Apple. Apple alone employs 6200 in Austin and plans to become the largest private employer in Austin. Nashville’s largest private employers are Vanderbilt / Vanderbilt Medical Center at 26,400 and HCA at 10,180 employees. Dell Medical School, which opened in 2013, is emerging as a leader in the space and seems to be accelerating in the type of regional innovation initiatives that have not materialized around Vanderbilt.

Texas & Tennessee Collaboration

So, if Nashville startups bring the ideas and Austin companies are the early adopters, then perhaps it’s less of a competition and more of a Texas + Tennessee collaboration that is emerging. These sister cities of Austin and Nashville have the potential to join together and leverage each other’s strengths. Austin is hungry and fearless. Nashville knows the healthcare problem space and has a concentration of talent who see how change can happen in healthcare’s workflows and value chains. We know that, in healthcare above any other industry, software and services are linked in a unique way. With the right level of collaboration, the two states together can move the country forward.

Healthcare is changing because it has reached the limits of affordability. As we approach 20% of GDP, everyone understands the current operating model is not sustainable. Irrational markets, rent seeking behaviors, and administrative burden are the drivers of the coming change. As a result, everywhere you look there are attempts to change the flow of patients, the flow of money, and the flow of products and services. These are the projects we focus on in Nashville at Hashed, which may be the reason I seem to write a lot of newsletters on flights to and from Texas.

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