Episode 1: Julie Klapstein (founding CEO of Availity, a16z Board Member)

SPEAKERS

Carol Skenes, Julie Clapstein

Carol Skenes

Hello and welcome to Crystal Clear with Carol Skenes, a podcast about simplifying healthcare, one transparent discussion at a time. I’m your host and healthcare enthusiast, Carol Skenes. My work at Turquoise has me crossing paths with inspiring, innovative minds every week, tucked into all parts of healthcare, whether it’s within provider or payer organizations, employers, or behind the scenes working on policy or health technology. I’ve found people building solutions that will lead to a better, more transparent healthcare experience. Every episode will highlight the people, products, and ideas that are helping transform this industry for the better. Today’s guest is Julie Klapstein, the founding CEO of Availity and current healthcare advisor and board member. Julie’s 35-plus years of experience in the healthcare IT industry includes executive roles at Phycom Incorporated, Revecore, Sunquest Information Systems, GTE Health Systems, and more. Her early career was with AT&T Information Systems, where she spent a decade focusing on the healthcare industry, primarily in sales, marketing, and product management. Julie currently sits on the boards of several healthcare companies. Since late 2023, she’s also served as a partner advisor to Andreessen Horowitz, and she advises several private equity firms and healthcare companies as well. Over her career, she served as a director on numerous public company boards and chaired multiple board committees. Her hard work has earned her notable awards for top business leaders, including the Healthcare Innovators Award, a Lifetime Achievement Award at the annual Healthcare Leaders Conference in 2021. Julie is a prolific healthcare thinker and builder, and her enthusiasm for supporting and encouraging future solutions to improve our shared industry was incredibly motivating. I hope you enjoy the episode. Julie, welcome to the show, and thank you so much for being here today.

Julie Klapstein

You’re welcome. I’m looking forward to it.

Carol Skenes

I am too. I am really excited to hear from you and to dive into this discussion because, you know, I’ve heard you speak about your experience specifically at Availity a few times over the years. And as someone currently working at a startup, I just come back to your story a lot. So I would love to give our listening audience more insight into that. So let’s start with you maybe walking us through Availity’s early days. And I’m curious to know if there were any specific ideas or hypotheses that you were proving out in those first few product iterations.

Julie Klapstein

Absolutely. Well, I started at Availity in 2001. I was the first employee, and of course, the company didn’t even have a name at that point, let alone other employees. I had just attended a Stanford class on entrepreneurship, and it was all about the internet. And I’m going, “What? You know, what is that?” Well, it was clear that after I finished that program, the internet was going to change everything about healthcare, and specifically, finally, possibly we could connect payers and providers. So Availity was formed in Florida with two initial payer owners: Blue Cross Blue Shield of Florida and Humana. And based on the program I’d been through, and just thinking this whole thing through, and it was an idea at the time, I knew we had to reach what we’d call back then the tipping point on the internet to get a network effect in each state that we were in. And of course, at that time, it was Florida. We also needed to move fast, because others, of course, were thinking about doing the same thing, and they’d already had a trial connecting payers and providers. They tried out in California and essentially failed for a variety of reasons. So yes, we had a few hypotheses to prove out, and every one of them, as I think through it, could have been a block to our success. And one thing about me is I love a challenge. So every time someone tries to block something for some reason, I figure out a way around it with my team. So when you combine Florida Blue, they’re called now, and Humana in Florida, we had about 40% market share, and I knew on a tipping point we really should reach beyond that, maybe 50%, to change behavior. And in this case, it was in the practices themselves, at the provider side. However, I figured we could get the commercials to come on board because they were having difficulty getting providers connected the same way these other two payers were. So some of the things we had to look at beyond getting to the 50% plus market share and hitting that tipping point is: would combining payer and provider connectivity really result in real-time information flow on the key transactions that were creating the situation where the front office people and the provider had to get on the phone and wait for hours to get the information they needed, such as checking eligibility, getting benefits information, claim status, and even submit real-time, as well as do referrals to specialists. Now, at the time, that, I mean, sounds so simple now because there are a number of folks doing this—

Carol Skenes

Right?

Julie Klapstein

And certainly, Availity still is. But back then the big computer systems and the payers were all batch mode, and all of the claims were overnighted. There was no ability to reach multiple payers with the same portal back then, and so that was a huge one. We also set a goal so that the response time—we all got our heads together and said it has to be under five seconds, because longer than that they’ll just start poking on the computer and give up and go back to the phone calls. And so we had to have fast enough response time. Now right now, getting round-trip transactions real-time through in five seconds sounds—that’s way too long, and of course we all know it’s down to subsecond now. But at that time that was pretty darn fast. We also—I knew we had to force a common look and feel, and nowadays we have the regulations of the HIPAA transactions that required commonality on the transactions of the payer side as well as providers, but back then we didn’t have it. And if you think about it, you have folks in the front office changing practices, jobs all the time, and they had to understand what information had to be presented. What are they going to expect back from payers? And we had to make it common across payers. We couldn’t have Cigna responding one day one way, Florida Blue, Humana all responding differently, or it would not work. Right. Payers had to decide that they would brand Availity and connect to us, because back then we only want our own portal. But that’s not how this deal will work. And Availity was all about being Switzerland and tying multiple payers to multiple providers, virtually all of them initially in Florida. So that was a big hypothesis. We had to, and we did get a lot of pushback. Everybody wanted to put their own brand on there, and we know from a training and acceptance of this new capability, it can’t be confusing and have, “Okay, now we have to go on this portal for United, and this one for Availity, and this one for Aetna, and this one,” and so on and so on. So that was a big deal. And then it was how fast could we get them online, because it was a land grab, very much so, across the country, and so we had to move very quickly. And what got in the way—and it’s hard to imagine—but the provider offices all had these old dial-up, clunky modems, and so we decided we were just going to go to every provider office, install high-speed modems, and not charge them because it was worth it. We had to get it done. Yeah, and so we had to also convince the contracted development team that we had borrowed from Blue Cross of Florida eventually to become Availity employees. So we had our own team. We could move quickly. We could prioritize and so forth. And finally, we had to convince the owners once we were highly successful in Florida to move outside of the state of Florida, so that’s a lot. Any one of them could have blocked us and did, and we just had to get through them. And there’s many more.

Carol Skenes

Right. Well, and you and I were talking when we were preparing to record the episode about how much, you know, you take the word “modems” and replace it with something like, you know, old data sets or mismatched data sets or these old systems that you are working with. You know, this is years, decades ago, and yet if you close your eyes and squint, you’re describing something that isn’t so dissimilar from a lot of the hiccups and the challenges that health tech companies now are also still trying to resolve—

Julie Klapstein

Right. I mean, just structured data. I mean, back in—I think it was October of 2003—there was a regulatory change that said that they had to adhere to a structured data set. That’s the HIPAA transactions, amongst other things. And that was a game changer, virtually for everyone. It allowed us to communicate better with the practice management system, so we could make the whole process seamless and get all those partnerships done. And if you think about it right now, that’s one of the problems with data, with transparency, with understanding what you’re going to pay as a patient before the procedure instead of after. And so, you know, now that some of the regulations are supporting standardization, including the prescription drug, then I think it can include the whole episode of care, and that’s really a game changer, and yeah, similar, if you think about it, to what we went through.

Carol Skenes

Yeah, I agree, and it’s interesting too to think about, you know, at this point with the proliferation of the internet. Obviously, it’s truly almost unfathomable to imagine how manual everything was. You know, you mentioned sitting on the phone, all these long hold times, all of this that was happening before EDI was so commonplace, and now obviously it’s the status quo. And I think about this mentality that you just mentioned around price transparency and helping patients understand their costs upfront. Ideally, there’s a before-and-after moment in this space as well. And so, what do you think? You know this industry really well. What do you think it would take for us to get to a similar state as far as our ability to deliver those upfront costs to patients?

Julie Klapstein

I think when I think about it, and I talk through those hypotheses, there are so many roadblocks right now, and I think they have to go through each one individually, of what I believe and what the team believes the major roadblocks are, and then determine exactly what is the best and fastest and most quality way of achieving that. So, you know, there’s so many issues on this, and you think back on Availity, we had a lot, but they are the same in some places and different. I mean, you think about, you have to gain access somehow, in a provider or the patient, in real time, negotiated rates in the insurance contracts, and the industry has been very protective of that information, and so I think some of the regulatory changes will help. You have to understand how much of the patient deductible has been reached during a procedure. Did the medical codes change, you know, beforehand? And there’s just so many things: facilities, doctors, and specialists like anesthesiologists bill independently, and they don’t coordinate. So it’s not that everybody wants to do this. It has evolved this way, and then you think about all the coding and all the expertise, and how it has to be translated into a CPT code, in other words, what was done, and an ICD-9 code. Excuse me, 10. I’m dating myself. Why it was done, and so many errors could happen along the way. So I think you can’t really blame one side or another. And a lot of people think, “Okay, well, eventually there’s going to be value-based care and payment systems,” and that is probably true. But in the meantime, we need to get through these things. And you can say they’re just excuses; they can be handled. Everybody has to have common incentives to want to do it. And I do think—I’m not a huge supporter of more regulation, but in this case, I think the regulation can set some of this off and make the whole thing more transparent when we can get to our ultimate goal of the patient understanding what the costs are before they have the procedure. We’re going to laugh about this one day. I hope. I am very hopeful.

Carol Skenes

I hope so too. The next iteration of this podcast will be that exact moment, right? Us laughing about it was first Availity, then it was this idea of price transparency and upfront costs, and we’ll be on to the next one.

Julie Klapstein

Yes, and they’ll laugh about it, you know—

Carol Skenes

Yeah. And I think you’re right in this case. It is one of those both-and solutions, I think, where we need innovative and technically savvy guardrails around how to actually facilitate a lot of this. But sometimes that is predicated on better legislation or clear requirements or some increased amount of accountability. So I’m with you. I see this as almost a two-pronged approach of sometimes we need the legislation as the kickstart, and other times we need the technology or the solutions as the kickstart.

Julie Klapstein

Right, and back then it was the HIPAA transactions, and so, you know, I think we have our own kind of point in time where it’s going to kind of move over in favor of transparency. Every—you know, more bills and so forth coming out that will support that. And ultimately, we’re all consumers of healthcare, and we want this to work better. And we don’t want to know after the fact what we have to pay.

Carol Skenes

Right. It is such a personal and professional challenge because it’s exactly what you said. We are working in the industry, but also members of our family are using the healthcare system. We are using it, and we are also, as you said, hoping to know the cost of our care as well. So we’re solving it both at a macro level and at a micro level.

Julie Klapstein

Yeah, I just want people to believe that what’s going on on the regulatory side is positive, and I wouldn’t normally say that, but they’re really forcing the major players to really focus on the patient, and I think that’s a huge change. Patients never came into it. I mean, back in the day, the payers go, “Those patients are my patients, but they’re members.” And the providers would say, “No, they’re our patients,” and everyone was arguing over whose data it was, and they would not open it up. And we still have some of those issues going on. But I think these kinds of regulations will force people to open up and do the right thing.

Carol Skenes

Yeah, patients as consumers, so that they can be savvy shoppers.

Julie Klapstein

I mean, retail. We’ve been talking about retail for 10 years. I mean, that’s what we need. A situation of, you know, can you imagine buying anything without understanding what it’s going to cost? And they say, “No, you walk out the door. I’ll send you a bill that’s three times higher than you thought.” You know, it’s like, ridiculous. Yeah.

Carol Skenes

Yeah, agreed. And you know, it’s exciting to see vendors. I mean, a lot of people say, and I agree, it’s going to take a vendor, just like it took Availity, to pull the parts together, and get constituents all aligned, and align incentives, and realize this can work, and nobody’s going to be damaged in the process.

That’s right, and in our industry, and this is probably true for other industries as well, but in healthcare in particular, to tie that back onto what you were just saying, a lot of people look at the challenges that you just laid out and have more of a, “That’s probably why this isn’t going to work,” reaction, or see it as, you know, perhaps a potential amount of problems that aren’t solvable. But I want to know, in your work with Availity or in any of your other professional experiences, you come across as a true believer in the potential for positive transformation in our industry, and I wonder what has made you so optimistic that this administrative side of healthcare can be improved.

Julie Klapstein

Well, one of the things is we have so many people out of college that are mission driven and want to be in. I remember going to, like, an American hospital show, and there really wasn’t a HIMSS or anything else back then, you know. And they put the IT people, at the time I was with AT&T, next to the bedside devices.

Carol Skenes

Okay.

Julie Klapstein

It was so funny, because everyone goes, “Oh, healthcare IT. Well, that’s just sending claims in, isn’t it?” You know, so it was boring and not exciting. And then I saw so much change. So when I think about all the different parts of the industry, I’ve been on the payer side, I’ve been on the provider side, and they’re both motivated. We just have to get through these roadblocks, and I don’t think one side or the other is trying to do wrong. You know, it will help. I mean, you even think about things like coordination of benefits. I remember back in the Availity days, the payers asking us, “Please figure this out for us. It’s a mess.” And you know, if it’s a mess for them, it’s certainly a mess for employers, and it’s a mess for the government, and it’s certainly a mess for patients. So I’ve just seen so many things that people said can’t be done that were done. Now we’ve got this huge change with AI, and as you pointed out, with the respective guardrails in place, we can make a difference because the complexity is going to go away. We will be able to have agents go out and get this information, and hopefully the regulatory side will help us out and make the whole thing more transparent. I think there’s a lot of challenges, but that’s why we have these really smart people with new companies that are going to do this. I mean, we’ll see this soon.

Carol Skenes

That’s right. Yeah, and it’s funny. I have to believe that now with the advent of AI and all this additional technology, if you were to go back to that same conference, and there was some sort of a health IT, you know, at the patient bedside element, that, you know, maybe it’s just the world I’m living in, but I’d like to think that’d be pretty popular these days.

Julie Klapstein

Yeah, I mean, when we first—we were trying to develop an EMR at AT&T back in the day, and we had massive computer power needed at every bedside. I mean, there’s no way you could do it. So we would put these massive computers and use up, you know, storage space, etc., trying to get these all linked. And it just seems so old, but it wasn’t that long ago. And so I’m around to see accelerated change with this new tech, and I think people will embrace it when they see the good that it can do, from the clinical side to the administration side. And of course, my goal in life is to continue improving the entire revenue cycle management.

Carol Skenes

Yeah.

Julie Klapstein

Across them all the time, and I get all excited. I can only do so many things at once. I mean, I’m on public boards as well as private boards, and the really fun part is the advisory side, because that’s where you’re dealing with change and so many different AI systems and capabilities coming to healthcare that, you know, just were never around before, and it’s like the light goes on. I go, “Julie, you can’t do this now. Not one more thing.” But it’s so exciting to see that happen. And so, it’s the excitement. It’s the belief that the team can learn or has already done similar things in the past. You know, who’s the leader? That makes a huge difference. They have to be on the correct technology platform, and that may be a combination of AI and human in the loop. So, you know, I look for that. I look for solutions that reduce or eliminate the barriers and conflict between payers and providers, because that’s so much of what we’ve set up in the healthcare system we have today, and ultimately give patients what they want, which is transparency.

Carol Skenes

Yeah, yeah, and we talk a lot about this idea of being solutions-oriented, which isn’t always necessarily the first approach to tackling problems in healthcare. I’m not sure why that is. If it’s just, you know, historically been an industry that’s reticent to major change, or what element of it, but I like to hear that is a high priority for you as well, because, you know, even if it is an incremental improvement, I think sometimes those smaller incremental improvements end up adding up in meaningful ways that maybe we don’t even anticipate when an idea first comes to mind.

Julie Klapstein

Yes, you’re absolutely right. And there’s a lot of times, one of the things I like to do is link different vendors together with another vendor to solve this, the whole solution that they can’t do on their own quickly enough to make an immediate impact. So I love to do that, and a lot of the teams are very open, even working with potential competitors. When you think about Availity, we had to, after getting through the first several hundred providers and so forth in Florida, we moved nationally, kind of payer by payer by payer, on the Blue side, particularly, so we could get major market share within each state. And so, you know, there’s just so many steps that I learned from. I learned about creating an environment with joint incentives to fix some of the healthcare problems, and I believe they can, if there’s a will, there’s a way, and the smart people working on it with the right technology and not giving up on the challenges.

Carol Skenes

Yeah, yeah, and I think you touched on that briefly, but this is a nice segue into parting words from you on these topics. Where there’s a will, there’s a way, and if it’s that, or if it’s something else, is there something that you personally feel confident in, you know, day in and day out, that gives you this belief that we, as an industry, will in fact be able to make the healthcare transaction transparent?

Julie Klapstein

Yeah, it’s because I can watch the steps, you know, from where I was. I mean, new people to healthcare, they’re going, “How would this be so broken? You know, it makes no sense. And is this the state of it? How can we ever fix it?” And I don’t want to go back in time and history, but I have to tell them, “Hey, we have come a long way, baby.” And it can be corrected, and it takes the right people that want to, the right incentives, and people that have worked the payer side and provider side and really understand the motivations on both, let alone the patient, I think, have a big advantage, and that’s where I went into Availity, having been a CEO or a senior person on the vendor team in both environments, and they’re all saying the same thing: we want to save money, we want better quality, you know. And I think the vendors that just understand the motivation of one side and blame the other side, they’re kind of getting into, you know, the problems with healthcare is we’re all pointing fingers at each other to make it better, and we have to work together. I mean, I remember when the hospitals, in the early days of Availity in Florida, wanted no part of any payer system, and they wanted to own it themselves. And so we ran around the state not only providing free modems, but signing up all the providers for free. So when they had meetings with me in Florida early on, and hospitals said, “We’re not going to participate with those stupid, you know, the bad provider payers; we’re going to do this themselves.” And I said, “Well, that would be nice, but we’ve already signed you all up. So why don’t you call your people and see if they like it?” And they didn’t. That was all we heard from them.

Carol Skenes

Yeah, unbelievable. Yeah. Well, I have one more question for you that I’m sure is a burning question for many folks listening as well. Do you have one of the original modems in the Availity Museum?

Julie Klapstein

I should have Russ get one. The thing I’m most proud about is Russ Thomas, who’s amazing, and he came on. He was with me for probably six or eight years. I could have gotten that wrong, before he became the CEO, and I moved back to the West Coast, and he’s doing such a great job, you know, and especially when Availity came through with the cybersecurity attack on Change, and they were able to, you know, basically save many providers because they were in financial trouble and could not send their claims in and get eligibility checks and all of that. So it’s really exciting to see that change. And I think I lost my—when I got all excited about what Availity’s been able to accomplish after I left, I lost your question.

Carol Skenes

Oh, just that I’m excited to see a picture of the modem that we’ll be able to upload.

Julie Klapstein

No, Russ named the main boardroom of his new office—it’s not so new now, I suppose—after me, and I go, “How exciting is that?” But I’m going to have to see if anybody has one of those old modems. It’s probably in the phone company’s museum. There you go.

Carol Skenes

That’s right. Right next to an old phone book to really be indicative of the times.

Julie Klapstein

Well, but what would really be fun is listening to one of those devices. They were screeching in the offices. I mean, nobody can imagine that today.

Carol Skenes

That’s right. That’s right. The brain-scrambling approach just to get the information through from one provider to one payer.

Julie Klapstein

Exactly. Exactly.

Carol Skenes

Well, Julie, thank you so much for all the thoughtful answers that you gave and sharing your experiences. This has been such a conversation to record.

Julie Klapstein

Oh, thanks, Carol. I’ve really enjoyed it, and it’s going to be fun the next few years. So much excitement in healthcare and so many opportunities.

Carol Skenes

That’s right. We’ll look back on this and laugh, just like you said.

Julie Klapstein

Okay. Thank you.

Carol Skenes

Thanks, Julie.

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