The insider who knows why startups die

All right, welcome to the corridor. I'm Angel Leon. everyone's wants to fix healthcare. Almost nobody understands it from from the inside. My guest today, I think she does, Martha Mercogliano spent more than twenty years inside this machine, most recently scaling digital solutions across markets and lines of business at Elevance Health, which is basically one of the largest healthcare companies in the country.

Today she runs Mercogliano Advisors, helping startups navigate the maze, right, of Medicaid, Medicare regulation, and the payers and providers who actually decide what gets adopted in the market. and she does something else that I wanted to, you know, basically get into. She's also an angel investor. so she sees these companies from both sides as the insider who knows why most of them fail, and as the investor deciding which ones

basically are worth backing. So with that, Martha, thank you for being here and welcome to the corridor.

Angel, thank you so much for having me. This is it's such a such an honor to be on on on your on your podcast. And I'm I'm just so honored to be here and to talk about this topic which is it it which is I'm very passionate about.

Thank you, Martha. I appreciate that. So you you spent basically two decades or so right inside healthcare, scaling technology at Elevance again, one of the biggest players in the country. So take take us through that, right? How did those years on the inside shape the way you now see the founders trying to break in from the outside?

No, absolutely. So I came to healthcare because my background is technology. I'm a computer scientist, so I was I was a developer. And as a developer, then I was a consultant. And as a consultant, I came to healthcare. And so what I was doing is at Elevance Health, I was working with them, implementing internally solutions, right? So Elevance Health is a very, very big company.

So, some solutions that we would implement for one of the business units when we wanted to implement it in another business unit, I would see the struggles of not having all the different stakeholders at the table that that you needed, especially in a regulated regulated market. So I bring my background from technology consulting and healthcare to see what needs to happen for those solutions to be implemented correctly. So what I'm

Talking about the stakeholders at the table, for example, solutions that we would implement on the commercial side, when we wanted to implement them for Medicaid, we needed additional stakeholders. We needed regulatory compliance and other players that we needed there from the beginning for them to tell us what were the steps that we needed to follow in addition to what we had done on the commercial side.

And you you've said that deploying and scaling technology in healthcare, you know, basically can be or can feel impossible, even for you know, for generally groundbreaking products, right? So tell us the why you think that that is the case and what is it about the industry, the regulation, the pay, the incentives that that kill startups, right, that would have thrived anywhere else.

Yeah, yeah. I I love I love our our my my industry of healthcare. It's it saves lives, it keeps us healthy, but our US healthcare industry is probably the most complex healthcare industry in the world. I do believe that we have unnecessarily complexities in it, and it is just innate of how we do things here in the US and and those of us who are coming from abroad.

understand understand it how it's different in other places and how here it might be a lot more complex. And a lot of that complexity comes from payment, right? Who pays for your care. And what happens is that that those complexities make it so that just getting care is not just a matter of calling the doctor's office, making an appointment and going. What happens behind the scenes can take weeks and the processes are

very onerous, especially for for for the patient, sometimes it looks like why why are they not giving me the appointment? Why are they not paying the claim? Why do I have to pay for these things? What's the copay? But for the providers, they're not getting paid, the claim is being submitted, it gets it gets complex. And all those complexities for somebody who is coming in from the outside, and that could be the outside as a as it it Latin American

company who's an innovator who's creating a solution and not aware of how things work in the US. And even those US companies who who are homegrown but they have not interacted, thankfully had not had the need to interact with all the aspects of of the US healthcare might not know all the all these complexities. So I help I help these innovators understand how complex it is behind the scenes and and what it takes to

to make it happen because those complexities take time, take effort and take capital.

Right. So if a startup comes to you, right, maybe they have a great technology but no idea how to actually get it adopted, right? what do you actually do for them, right? So walk me through how you help a founder go from a good product to something a payer or a government program will actually buy.

Yes, yes. usually I work with with founders who have already gotten to to ICP to I mean product market fit and they have they already know their ideal ideal client profile. So they have created something that is of value. I usually don't work before you know at the idea at the idea phase. They have already developed the idea, they have already developed

something that is of value but now they want to commercialize it and and create a business model for it basically so I help them get paid so how does that work and there are there are a lot there are a lot of requirements that are needed here in the US and here we've heard about them HIPAA SOC2 a lot of requirements like that HIPAA is data privacy SOC2 security data security and all those things for

for a solution to be to be able to be a sold out for vendors to talk to you you have to have a minimum a minimum of those requirements so you have to be HIPAA compliant and some of those some some of the some of the vendor sorry some some of the innovators are aware of HIPAA but they might not have

implemented HIPAA into their solutions from the get-go because you know things when you you get going you sometimes want to create a solution and then backtrack the you know the other the other requirements so that's one of the first things that that I tell them if you want to go talk to the hospital the hospital the first thing it's gonna ask you is are you HIPAA compliant? No thank you very much that's it right so first we start with those minimum minimum requirements

And and then once those are are are fulfilled, then we start talking about the rest of the of the requirements that they're gonna need, and that will depend on the roadmap. And the roadmap will depend on the solution and the basically the population that their solution is going to help.

In a regulated market, a solution only works when every stakeholder is at the table.

Now the other side of your table is that you're also an angel investor. So you're evaluating the same kind of companies you advise to invest in them as well. So when you when you look at a healthcare startup as an investor, what actually right makes you lean in? And on the flip side, what's the thing you see over and over that tells you a founder doesn't understand the industry they're trying to disrupt?

Yeah, yeah. so I I I I love being an early an angel investor because I I work with startups that are at a very early stage. And you can see some of them are are diamonds in the rough and and you you know they're gonna go places, so that's really exciting. And how do you but how do you differentiate them, right? Who's who's going to make it and who's gonna be having a little bit more more problems?

The team is critical. And the team doesn't necessarily have to have a pedigree. Some some investors look for for the founders being an exit founders, meaning that they have already created a startup before and maybe had an IPO or or had an acquisition of that that startup. I I value that. I think that's important, but it doesn't it it just gives them additional priority points. I don't I don't

I don't value that much their their like academic where they came from where they went to school and all that. That doesn't mean that that that's not gonna make them a better startup. What's gonna make them a better startup is the networks that come with that academic institution. So a founder who didn't go to Harvard, for example, needs to work extra hard to create those networks.

That the founder that comes from Harvard already has, just naturally and easily from having attended Harvard or an Ivy League school. So I I look for those networks, I look for resiliency, and I look for openness for for for receiving feedback. Sometimes I talk to founders and they they have a good idea, right? But they have a good idea and they are pursuing that idea and they have not seen that.

there might be a problem down the line. For example, we talked to we we talked to a founder who they're they were creating a a a company, a healthcare company, and they were providing GLP1 drugs, compound drugs. And right now, I mean right now they're exploding in in everyone is buying them. So they were creating that for the Latino market. That's amazing.

and their revenue was through the roof, that's really great. The problem is that GLP one drugs, compounded GLP one drugs, and they there was a temporary thing that's about to expire. So if as an investor, if you invest in that with the revenue that exponential revenue that they're showing you, that's going to have an end. I'm not saying that they shouldn't ride the wave of GLP one

But they also need to be aware that there's an end to it. So sure, enjoy it while it lasts. But those compounded pharmacies that sell you GLP ones are gonna come to an end. And it's supposed to be soon, we'll see. But that's what those are the signals that we're getting. and if they if the if if the founder is close to that and saying, no, no, no, we're gonna be, you know, selling ten billion dollars in two years, like you're not.

Not from GLP one. You know, if you diversify maybe, but you do need to be open to to the feedback, to the signals, so that you're successful. So that's one other thing that I that I look.

Right. And most investors evaluating, you know, healthcare startups right now, I feel that and at least on the Latino side, have never worked necessarily inside a payer like Elevance like you did, right? how does that change what you can see that other investors maybe can't? Right. And are there companies you've backed or passed on precisely because you knew something about how the system really works, right? That obvious that that wasn't obvious from the pitch.

Yeah, yeah. we've talked about disruption in in innovation for for a few years now and and I talked about it too. And in in healthcare, we all wanna create something that is gonna be disruptive and it's going to change the way the way we do things. we talked earlier about how complex our healthcare system is, right? And we do need to make improvements, but I need

to see that the founders are aware that what they're bringing to the to the table needs to work with what already exists out there. It's going to make it better. It's going to be incremental change and incremental benefit. But but we can throw it all we cannot throw it all out and start from scratch as a you know it's a healthcare system. because well it's not that wouldn't be that wouldn't wouldn't be responsible because well people's lives depend on that, right?

But what we can do is make incremental improvements to the healthcare system. So when I talk to two founders and they are going to be disruptive, you can be disruptive up to a point, but you need to keep on working within the system. You know, you you still need to connect with the system. So that's something that from the payer point of view, they still need to work with the payers, they still need to work with the providers, they still need to

kind of integrate into the system that that that we have. And some some of them don't know what they don't know, right? And they're open to learning. And some of some others are like, well no, I'm not gonna work with payers, I'm gonna do direct to consumer. And I'm that that's fine, that's great. There's a market with a cap, with, with a ceiling for, for that growth, right? And

And the thing is that if you want to grow and a lot a lot of times what I see is that your growth is going to be direct to consumer in the beginning, and then you're going to start growing with commercial insurance and then government programs. This take time, take effort. So direct to consumer is gonna carry you through that roadmap and and will allow you to do those those those, you know.

e those expansions and scale up. And the payer lens, what that helps me is understand what it would mean to work with Medicaid. You know, some sometimes I hear, yeah, I'm gonna sell to Medicaid. Yeah, Medicaid doesn't buy. If you wanna work with Medicaid, first of all, it's state by state. And you don't sell to Medicaid, you sell to the MCOs, which are managed care organizations like Elevance Health, United.

etc. And they are the they are the ones who buy your product to offer to their populations. So that's that we are getting into more complex topics. That's the the lens that I bring, that's how I that's what helps me understand. When that when when that founder either understands that landscape or is open to learning, that's when I think they can be successful in that arena.

And in in terms of the, you know, from from the payers and the provider side of things, do you think that that that infrastructure in general is it's actually ready and active to actually ingest that technology that's being built right now? So and and I ask because maybe you know, ten years ago, for example, I know it was kind of hard to sell into hospitals.

and a lot of the hospitals weren't necessarily even, you know, they weren't budgeting specifically for patient engagement stuff or things like that. so departments had some sort of budgets and then we do pilots and and there was a lot of that going on. but it was sort of hard and and long, the the sales cycle itself, right, to sell into into a hospital. And that's why I asked, like, do do you think that that infrastructure is actually ready?

and active to receive right the intake of that technology being built.

so good news and bad news. the good news is that some healthcare systems are ready, some some health systems are are ready, some some hospitals are are ready for that, are more open to it, and some are in worse shape. the the reality right now is that hospitals have been have been in a very tough position, right? we have seen hospitals closing in rural areas and having to

to be very mindful with their budgets. So that is that is a problem that that we see with hospitals. So the cycles, the sales cycles with hospitals, they tend to be long. And I don't think that's changing. Pilots are still are are still the way the way to go in in many cases. It's not the only way, but it's still something that that exists out there. It's just that there's a right way to do the pilot and there's a wrong way to do the pilot.

the the wrong way just to keep going for forever for free without showing results. It's not good for for it's not good for the hospital and it's not good for the innovator, right? And the right way to do it is there's a beginning and there's an end, preferably paid, right? And and there's results. When there's results at the end of your of your pilot, then then you can ask the hospital, well, do you want to keep seeing these results?

Or or not, because if you don't want their results, I'll just go away and take my solution somewhere else. And a lot of times if you are solving a problem for them, they will wanna keep you, right? But if they cannot see that you're solving a problem, they're not gonna keep you around, right? So you have you do have the responsibility of showing that value. If you don't show value, it's gonna be tough because also it's getting crowded.

Out there, right? There's a lot of solutions.

Right, right. Yeah. Yeah. I I remember from you know a while back the the main thing was also to find the right champion, right, within within that department or wherever is it that you want to sell into and and and having the right champion of course is also you know very helpful to help you navigate just the chain of command itself, right, inside inside the the hospital. So thank you, Martha. This was really great to, you know, to get to know your

your your background, your story, and and and I wanted to to ask you one last question if that's okay. So for for the founder listening who's building something in healthcare, right? or or maybe in and any brutally regulated, right, insider driven type of industry like healthcare, what's the one thing you tell them, right, before they waste a year learning it in the hard way?

incremental incremental benefits, right? you you do need to to you know don't fall in don't fall in love with your solution, fall in love with your problem, right? We've heard that before. And and make incremental benefits so so you can show value. Don't wait until it's amazing and then show it because by then you know the train might have left the station. Yeah. And and and also something that that I think is is is really critical.

in AI in healthcare is is now table stakes. You probably have to embrace AI and but don't make AI the product. AI is a tool for you to provide a benefit. And then the last one, I think something that's important to me because of a systems point of view, make your solution give some value

to the system overall, but don't make it more complex. You know, if when I see solutions that that create that add more complexity to the system, I I kind of instinctively back away from from those. So I would say like make it make it simpler, use AI and provide value incrementally.

Thank you, Martha. That's that's really great. And and again, thank you for taking the time to be here on the show today. I I I know your your background and you know we know each other from from Angeles as well and the group. So and I know you have a an amazing story behind you that I wanted to share with the audience. So I appreciate you taking the time to just tell it.

Thank you. Thank you so much for the opportunity and I really enjoyed it.

And where where can find or people what where can people find you? so tell you know, LinkedIn, socials, your your advisory firms of course.

Yeah, some my advisory firm is Mercogliano Advisors. But the easiest way to find me is on LinkedIn. Martha Mercogliano, just search me. I think that's the easiest way. I can spell it for you. But if you look look me up on on yeah.

I'll put I'll put it I'll share it. I'll share it w in the in the notes for sure.

Yeah, thank you. That that's the best way on LinkedIn.

Thank you, Martha. I really appreciate it. And to everyone listening to this, this was the corridor. And my name is Angel Leon. Thank you for listening.