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Dave MacDonald, CEO

Ken Beck: We are very honored to have our CEO, Mr. Dave MacDonald. He is not only a health care attorney, very learned and knows so much about this industry and the legalities, he’s also an MBA. Dave has run major hospital groups and knows the verbiage and the process to close business, for hospitals, MSOs, and IPAs. And we thank Dave and Krista, our President for arranging this call.

Dave: My role as CEO is to oversee the financial, strategic, legal, and operations of our company. but my background before I joined Pulse was in the hospital on the physician side of leadership and management; from large academic medical centers to small community hospitals, and also managing large national physician groups.

My perspective on our offering/service to physicians and providers across the country is a little bit different having sat in the board rooms of a lot of these hospitals. I know where their challenges are.

The number one thing that every hospital executive board room talks about is ‘why are my physician groups losing so much money?’ And a lot of times depending on the size of the group this can be a very material number. Often times in the millions of dollars. On average it could in the range of 150k per physician.

So they are always trying to find new ways in order to generate new revenue for these physician groups What happens is they go out, acquire practices, or employ new doctors, and they are never as busy as they were when they were independent and entrepreneurs. They come in [physicians], they get huge benefit packages or 8 weeks off, continuing medical education time off, and their productivity numbers drop.

Therefore their profitability drops with it. And the hospitals and big groups get burdened with that. So CEOs, COOs, CFOs across the country are always looking for new ways to make their physicians more productive.

What is great about our service, is not about them grinding out more work and more patients on an hour to hour basis, but it’s about extracting more revenue opportunities from the patients they’ve already established. So that is the opening lead into any executive if you have access to these people across the country. It’s about talking around the pains of the physician groups that are employed by the hospital.

And you can know with certainty that they are all losing money, and you have a partial solution to that. The other alternative, that we derive from our service offering, is that we provide downstream revenue, for these hospitals.

So after our diagnostic testing is done a lot of times if there is an abnormal finding they may need additional follow up with a different specialist, like a cardiologist or vascular surgeon, maybe a diabetes specialist or some other type of specialist in the group. They may need additional ancillary testing, sleep labs, sleep apnea, different panels of labs, lab tests for cardiovascular disease, surgery, placement of stents.

Not only is it great from a diagnostic perspective, and it increases revenue for physician offices but also creates downstream opportunities for the hospital.

Another thing that every board room talks about is downstream revenue. “How do we capture more revenue from the patients we have?” Because it’s a lot easier to do that than to go out and acquire new patients through regular competitive forces.

And then another piece of that is retention and retention of our patients. ‘Let’s make sure they’re choosing our hospital every time they need more of these services.’

So if you can envision, a good proactive doctor doing a preventative cardiovascular screening and getting to that patient before he becomes an acute patient, we are referring to within our network. And that is what they want. They don’t want that patient going to a competitor, going to some other specialist outside which would take revenue away from that system.

So 70% of the doctors in this country are employed by a larger group or hospital-employed group, and that trend continues to happen year on year, mostly because of the administrative burden with reimbursement, and all the different insurance companies, medicare.

So more physicians are migrating towards an employed relationship, so that trend is going to continue into the foreseeable future, especially as the physician population ages and there is a shortage of physicians, and the younger physicians are more motivated by benefits, time off, what’s in it for me, vs. starting up their own practices.

Say, the physicians in their 50’s and early 60’s were leaders in that movement, that we are not really seeing that from recruits coming out of medical school. At this point, they just want different things. Whether we call it the “entitlement” generation or not that’s the reality. We interviewed over a 1000 physicians and the questions that they were asked were all about “what’s in it for me?” vs. “how do I start my own business?” and drive of an entrepreneurial spirit. So I can’t see that trend changing.

So the good news for us as a company, as representatives of our company, it creates a huge opportunity to approach these executives with a solution that they are all feeling. And the way our model is set up they don’t have to go out and spend a lot of money on capital. In fact, there is no start-up cost.

We get into these practices. We’re the ones that take all the risk on the front end as far as hiring the medical assistants, buying the start-of-the-art technology. We invest well over six figures to get into these clients and really take advantage of the opportunity of all the patients in one setting which the hospital groups get the benefit from the bulling and the reimbursement.

So from a sales perspective, you’re meeting a need of every hospital group in the country that is still struggling with the same things. It’s a perfect match because having been in that seat and looking for new revenue streams, you can’t force another 10 patients on a doctor for a day in order to generate the revenue that we could generate just by doing testing on the patients that are only coming in the office.

Sixty percent of the adult population will identify and qualify for our test and we match that up with the right underlying diagnosis to make sure from the billing and reimbursement perspective that it’s all covered. But if you think a regular internal medicine and primary care office, sixty percent of the adults walking through may qualify for our tests.

We do 3 tests per protocol all at the same time. It takes about 20 minutes. We need just a little bit of space, a computer/laptop on wheels, and our medical system performs the test. The test results are available real-time for the doctor, and we don’t get in the way of that doctor to perform in his other daily duties, in seeing those other patients.

So you can think about it, in this way a normal average doctor would see 20 patients a day, or 100 a week. Sixt of those patients will qualify. So even if you cut that in half and say 25-30 will get tested a week, that creates a huge revenue stream for that physician on an individual basis.

And most of the time when you in these offices that employed by hospital groups, there’s hundreds of doctors employed by these groups. So the math starts to get really exciting when you look at the size of the groups. Just multiplying out the number of patients times the eligible patients for the test times the number of providers and what it could mean not only for the hospital system because that’s going to be the client but for us as Pulse 4 Pulse, and for you as a sales rep of Pulse 4 Pulse.

The math becomes overwhelming and extraordinary in a positive way. And at the end of the day that’s the economics of it, but the reality is every one of us on this call has known someone who might have passed on too early because they had a development of a disease they didn’t detect until too late. And what we’re trying to do is really changes that whole perspective on healthcare and more towards preventative diagnostics that avoid this from happening.

So what we’re doing is a good thing for that healthcare community and for the patients. It’s about being at the right place at the right time. We believe that our testing solution, especially with the no up-front cost, provides a great solution for the patient, the physician, and the hospital groups that employe physicians around the country. The need is there.

It’s an easy sales pitch from that perspective. How do you get to these hospital groups? The easiest term (from the 80’s) is you have a Rolodex. Your network of people who may be at the executive level of some of these hospital groups. Just making a phone call, or shooting an email over to get that introduction going.

But every hospital is a little bit different. Just like every company is a little bit different. The political power that sits in a hospital is unique to that hospital. What I mean by that is that sometimes the head doctor has all the power, sometimes it’s the finance guy and the CFO role, sometimes it’s the CEO, or the COO.

So it really depends on that system who is really the driver, the decision-maker, the influencer, but your objective is to get in front of the right people, in front of that executive or C-suite level in order to have this discussion.

You’ll be able to ask these questions and we’ll be fully supportive if any type of hospital meeting comes up around the country. Myself, Krista, and Dr. Phil Mongulluzzo, who is one of the founders, really the clinical mind behind this. We would show up and help drive that presentation, so that all those questions around the business side and the clinical side, the operational side, finance, compliance, and legal all get answered in the same setting.

As long as the number one determinate is that you have the right people at the meeting, you have clinical buy-in, meaning from the physician, there is really not a barrier in a lot of areas to this sale. There might not be a no, there might be a “Not right now”. We’re working with a few national public companies in that same scenario. It wasn’t a no it was a “hey get back to us after 1st of the year. And we’re in that process.” There is a long sales cycle there because of the bureaucracy. But they can’t deny the problems their having with their employee physician groups.

We provide one of the solutions to that. We keep hammering that home and they are not going to find money like this type of revenue stream without massive capital investment and some other type of technology. From your perspective, I would be thinking..’ who do I know to get to these people?” Are they part of my local chamber of commerce? Does my network have access to these executives in hospitals or other big groups? That would be my starting point.

Your plan of attack based on those high-level people, that can make these influential decisions. Because starting lower down it’s going to more of a grind. You start at a lower level, say “I know a doctor”… If he is an influencer or he can get you to the Chief Medical Officer, or get you to the CEO.

That’s great if he is one of those high powered doctors. It can be done at that level. But it’s really, the people that make these kind of decisions and these complex bureaucracies generally sit at that C-Suite executive level in the hospital side. You’re really going to need to get buy-in most importantly from the physicians but really the executives who operate and run the financial side of the business.

I’ll pause there for one second. Ken, is there anything you want me to address?

Ken with Tara: We had some questions about approaching MSO’s and IPA’s?

Dave: They all stand for different things. So if you have an MSO you have management service organizations and they take over a lot of the administrative function of a group of physicians. A lot of times physicians don’t want to handle the administrative burden, contract negotiations with payers, billing, IT, EMR, cloud-based computing. So they’ll outsource those administrative functions to an MSO type.

An IPA is formed mainly to bring together a group of physicians, primary care and specialist to have a stronger force when negotiating with payers, insurance companies, and the like in order to get better rates on the fee for service basis. Now some of these IPA’s might be utilized (and MSO’s depending on how they’re structured) may have capitated fee arrangement (per member per month arrangement).

And what they are doing there is all about prevention. They get a certain fee per month per member or per patient to manage the care of the patient as long as it’s contained within a certain network of providers. So the IPA coordinates all that which is really the population health of those members of that group. So if you can just think of a large town or a series of towns that certain proximity to each other they might form a group of doctors that get together because they’re a lot more powerful with 500 members than they are with one guy and one office in that town.

So they come together or they try to negotiate together to the BlueCross’s, CIGNA and the UNITED HEALTH of the world. The IPA is speaking on their behalf. They get reimbursements negotiated by the IPA, other services, like data, collaboration. They might share information on all the diabetic patients and making sure that they’re managing that population the right way to avoid the high cost and high-risk services.

They’ll self refer within their network. So if you need a specialist you want to stay within that IPA network. They want to move more towards population health, true managed care where they’re getting paid to prevent the cost of health care vs. a fee for service model which predominately runs through the country.

California is the most progressive. They started it 30 years ago. It’s been tried in the North East, but it’s had very slow adoption. But California by far, most of their networks like Kaiser-Permanente are very progressive in how they manage the large populations with groups of different IPAs. It ties into big hospital groups, they tie in a lot of doctors in that network.

If you try to go out of network, the patient ends up paying a lot more money and the doctors are penalized from a compensation perspective if they try to refer outside that network as well. There are two different purposes of those two different organization types, but some of them overlap.

Ken and Tara: Thank you so much. We really appreciate that. Here’s another question. For hospitals that are partnered with practices in the community, how does the money go back to the hospital?

Dave: If you think of the Pulse 4 Pulse model, that revenue would stay with the private practice because they are not owned or employed by the hospital. So all that revenue stays with the private practice. If those private practices didn’t have those networks setup of specialists or place to send their patients, if there was an abnormal finding and that private practice doesn’t have a vascular surgeon, but the hospital employs one, it could function as a referral stream to the hospital in creating downstream revenue that we talked about earlier.

But for the fee-for-service provided by Pulse Pulse, that would stay private to the practice. But for any service that that private practice couldn’t provide they’re really tied in with the hospital. There wouldn’t be any revenue sharing from a client’s perspective, it would be a strict normal referral path for any abnormal findings.

Tara: Thanks very much. We just wanted to let everyone know, who is on the call, that we have the best support system ever in Dave and Krista, Dr. PHil and Amy. So if you have that big account and you get that appointment they will be there 100% to support you. Dave, we want to thank you for doing the call today. We really appreciate it.

Ken: I want to 2nd that. For those on the call that have these large hospital groups, be like a bird dog. Get the initial interst and bring it back to our A-team (Dave, Krista, and Dr. PHile) and they will get it done. We just pass the ball to them.