The Future Of Independent Medical Groups In The U.S. with Raj Voddiraju, founder and CEO of Stitch

[00:00:02] Hey everyone, welcome back to the Outcomes Rocket. So excited that you joined us for another Founder's Story episode. Today I have the privilege of hosting Raj Voddiraju. He is the founder and CEO of Stitch. He's a serial entrepreneur that has built several successful SaaS and services ventures over the last 25 plus years.

[00:00:26] I'm excited to have him here on the podcast to talk to us about his background coming from a large family of physician entrepreneurs and really has his investments in several immediate care clinics in the Chicago area and how that's really transformed into their focus today at Stitch, helping providers succeed with their clinics. So Raj, such a pleasure to have you here. Thanks for joining.

[00:00:51] Yeah, thank you for having me.

[00:00:53] All right, Raj. So let's break it down. Before we jump into Stitch, help us understand a little bit about you. Why did you choose entrepreneurship? Why did you choose healthcare?

[00:01:02] Yeah, great question. You know, I think part personal, part business. On the personal side, I come from a large family of physicians, as you said. I'm a techie turned serial entrepreneur. I started in healthcare in 2009, investing in a chain of urgent care clinics.

[00:01:20] And maybe it's the family history that kind of automatically drew me to it. But what I saw at the time is, you know, healthcare is the largest portion of our US GDP, almost 17, 19%, $4.5 trillion. It's a very, very large part of the US economy.

[00:01:41] And in spite of spending almost 14 grand per capita on healthcare.

[00:01:50] A lot of people say healthcare is not really working as well for all of us in the US. We spend three times as much as the nearest European, Western developed country, if you will.

[00:02:03] And there's clearly lots of inefficiencies, lots of areas that require innovation. And that's very inspiring for an entrepreneur that looks always at opportunities and not just opportunities to build a good business, but also make a small, meaningful impact to the world.

[00:02:25] And both of those are a big draw for me.

[00:02:28] It's been very fortunate that I've had the pleasure of being able to start companies, provide employment for a large number of people, work with some brilliant clients and folks along the way that have given me the opportunity and kind of showed us the way, so to speak, along the way.

[00:02:47] But the joy of creating something from nothing and the joy of providing for a large group of people is the automatic draw for me from an entrepreneurship standpoint.

[00:02:57] That's awesome, Raj. I appreciate you sharing that. And so you've had a couple companies, you've had some successful exits. Have they also been in healthcare or they've been tech?

[00:03:06] Yeah, so a little bit of both. So right before Stitch, the company I started was Health iPass. We started that in 2013, 2014.

[00:03:16] What I saw at that time is the patient is becoming the new payer in healthcare with the advent of high deductible health plans, more patient skin in the game.

[00:03:26] And a lot of the exchange-based plans had like $5,000, $8,000 deductibles, right?

[00:03:33] And clinics and medical groups didn't really know how to deal with this notion of patient as a payer.

[00:03:41] A lot of times you would see very esoteric and very old practices, right?

[00:03:47] You have to call them between 9 and 5 to get on a schedule.

[00:03:50] You had to go in person.

[00:03:53] They would give you a clipboard with lots of paper.

[00:03:56] The billing was always leading to a lot of confusion.

[00:04:00] You would get these EOBs from insurance companies.

[00:04:02] You would get bills.

[00:04:04] And, you know, still was reliant on old ways of settlements.

[00:04:08] And I felt like there's a massive opportunity to transform that picture.

[00:04:13] So that company was in healthcare and we worked with many, many thousands of independent practices, independent providers all across the country.

[00:04:22] And that gave me a lot more insight into healthcare and the areas where things are, you know, require innovation, require someone with maybe an outside-in perspective to look at how to improve a certain small piece of the healthcare ecosystem.

[00:04:40] I love it.

[00:04:40] Well, thank you for sharing.

[00:04:42] And yeah, there's a lot of gaps.

[00:04:44] And those gaps equal opportunities for entrepreneurs.

[00:04:48] But, you know, when the opportunity gets fulfilled, that means the problem is solved.

[00:04:52] And so there's big problems right now for physicians running practices.

[00:04:58] Many of them are getting acquired by private equity.

[00:05:01] You know, the payers are snapping them up.

[00:05:03] Talk to us about what you guys are doing to give providers hope and the structure to succeed.

[00:05:10] First of all, I firmly, firmly believe that independent healthcare groups have to remain viable and remain the backbone of the U.S. healthcare system.

[00:05:22] If we are going to solve the quadruple aim of better quality, bend the cost curve, better experience for the patient, and better experience for the provider, a lot of that happens in small to mid-sized group, right?

[00:05:38] The large groups are there for a reason.

[00:05:41] There are cases where I would definitely want to be in a well-equipped level one hospital or what have you if I have to go under the knife.

[00:05:50] But for the lot of the routine care and the lot of keeping me healthy, right, not just treating me when I'm sick, a lot of that, I think, from a value to the healthcare system comes from these independent medical groups, right?

[00:06:04] And there's a lot of stuff that has occurred over the last 20 years in terms of electronic medical records and all the administrative inefficiencies from a patient experience standpoint, clinical innovation that has occurred.

[00:06:17] But not a lot of stuff has been done around the people that work in these healthcare settings.

[00:06:23] And that was the big aha moment for me.

[00:06:27] You know, people make the practice, right?

[00:06:29] If we have happy employees, that leads to happier patient experiences.

[00:06:33] And that's the only way to keep these things thriving.

[00:06:36] And if you're a small practice, let's say you have 20 employees, right?

[00:06:41] A big part of keeping employees happy is to make sure that you are protecting their health and offering the right kind of benefits.

[00:06:50] And when you're a 20 employee practice and you go out to the market and want to find a good health insurance or medical insurance or vision insurance or what have you, you're automatically going to not get the best possible benefits at the best possible rate.

[00:07:06] And what we are doing here is to band together a lot of these small practices so they can all stand tall together as opposed to each one fighting their own fight.

[00:07:18] And it manifests in three core ways, right?

[00:07:21] Number one, better benefits and a better price.

[00:07:25] Again, not fighting as individual groups and leveraging the group purchasing powers.

[00:07:30] Think of it as a co-op.

[00:07:32] Think of it as a group purchasing organization.

[00:07:34] Think of it as like a cost for employee benefits.

[00:07:38] That's number one.

[00:07:39] Number two, we bring certified HR expertise.

[00:07:44] A lot of these small practices, you know, they have a practice administration.

[00:07:49] They may know all about referrals and patient acquisition and things like that.

[00:07:57] They're not necessarily experts in HR.

[00:08:00] And they're always worried about what if I'm not doing something.

[00:08:04] And, you know, constantly labor laws are changing in every state.

[00:08:07] And some of them may not even have a good policy handbook together, an employee handbook together, may not even have the right labor posters.

[00:08:15] So there's a lot of, you know, deferred maintenance that occurs with respect to HR.

[00:08:19] So what we're providing is certified HR expertise for all of them.

[00:08:25] And they don't need a full-time HR person at that level, right?

[00:08:28] It's a fractional HR expertise that they get.

[00:08:31] The third is basically modernizing their payroll infrastructure.

[00:08:37] So making sure that you've got good ways to manage employee schedules, you know, the time card and time and maintenance.

[00:08:46] The system is modernized with biometric clocks, you know, so on and so forth.

[00:08:50] And in the HR infrastructure, of course, are tools that will help with the professional development of their staff, right?

[00:08:59] At the end of the day, all of these things help strengthen the value prop for the employees.

[00:09:05] And that's the way for them to attract and retain talent as opposed to this talent war where they're losing people to the large health system or whatever.

[00:09:16] So very geared towards helping independent practices continue to thrive.

[00:09:22] So Raj, covering those three pillars, finance, operations, sales and marketing, do you guys cover just operations and finance?

[00:09:30] Or do you also do stuff with sales and marketing?

[00:09:32] Yeah, so for us, we provide the PEO service across all aspects, all staff members of a medical group.

[00:09:40] And regardless of the job function at that end.

[00:09:42] And at the end of the day, from a finance standpoint, it's better benefits at a better price.

[00:09:47] So it's adding value to the bottom line.

[00:09:50] If you keep employees happy, it definitely helps with the top line for a medical practice, right?

[00:09:56] Better patient experiences and all of that.

[00:09:59] So we affect all aspects of a medical practice.

[00:10:03] Got it. Thank you.

[00:10:04] And so shifting gears to really kind of wins that you've seen and things that you really want to highlight as you've been building this business.

[00:10:14] What does it typically look like before a practice uses your technology and service and then after?

[00:10:21] Great question.

[00:10:22] So, like I said, a lot of times they struggle to be able to attract and retain talent because they don't have the right package of benefits for their employees.

[00:10:32] They have a hodgepodge of different vendors, different tools that they may be using and still running the risk of not being compliant in terms of state laws and requirements, if you will.

[00:10:49] Whether it's around PTO management, whether it's any type of policy that they have.

[00:10:55] A lot of times the client is not the expert in terms of HR, like I mentioned before.

[00:11:02] So that's the expertise that they're receiving.

[00:11:04] In terms of a technology platform, lots of them are using very old, you know, somebody may be on a QuickBooks, somebody may be using an ADP.

[00:11:12] And what they're going to see with Stitch is a very, very modern platform that deals with the entire hire to retire cycle.

[00:11:21] So how do they hire the right people?

[00:11:24] How do they create the jobs?

[00:11:26] Post it to all the places that will help them attract talent.

[00:11:30] Take them through the entire process to onboarding of their staff.

[00:11:34] To managing the performance of their existing staff.

[00:11:38] Giving them professional development through the learning management system that we have as part of the platform.

[00:11:44] Make sure payroll runs, it's compliant, et cetera, et cetera.

[00:11:49] All the way to the off-boarding, if you will, of an employee.

[00:11:53] That entire cycle is totally modernized with the platform.

[00:11:58] And all of that, right, ultimately is improving their ability to attract and retain talent, which in turn obviously helps patient care.

[00:12:08] And, you know, the financial outcomes that a practice is going to deliver.

[00:12:12] That's great, Raj.

[00:12:13] Thank you for that.

[00:12:14] Yeah, it sounds like it's very turnkey from hire to retire.

[00:12:18] I like how you said that.

[00:12:19] Yeah, and ultimately, and are we talking the entire staff?

[00:12:23] Are we talking front of the office, back of the office, nurses, providers?

[00:12:28] Are we talking everybody?

[00:12:29] All staff, yeah, all staff.

[00:12:31] From the clinicians and physician owners all the way to the employee at the front desk to the back office functions.

[00:12:40] Everybody is going to be on the Stitch platform.

[00:12:42] That's awesome.

[00:12:44] That's awesome.

[00:12:44] Well, it sounds comprehensive, Raj.

[00:12:46] And look, platforms like this aren't built without issues or challenges, you know, and this is founder stories.

[00:12:52] So talk to us about maybe a setback that you experienced on this one and something that's made you guys better as a result of that.

[00:13:00] Yeah, look, you know, I think as one of the VCs said, right?

[00:13:04] You know, big things happen when three things come together.

[00:13:07] You've got to have people that are focused on a very big market.

[00:13:12] He calls it the big ass rule.

[00:13:14] Second, you've got to have a kick-ass product.

[00:13:17] So make sure that you're building something that caters to the need in the market.

[00:13:21] And the third, of course, is the smart-ass team, right?

[00:13:25] Pull the right people together to be able to build great stories.

[00:13:29] So far, we've been very successful in making sure that we deal with this challenge.

[00:13:35] We raised over $9 million of venture capital because we see such a massive opportunity.

[00:13:41] And the key learning for me is all about people, right?

[00:13:46] How do we create the right orchestration?

[00:13:49] And you've got to bring the right combination of people that understand the customer, right?

[00:13:54] And the challenges of the customer.

[00:13:56] That's where myself, many of the team members that have been in healthcare kind of come in.

[00:14:01] Number two is people that understand the ins and outs of payroll and HRMS.

[00:14:07] So make sure we got the right people in that arena.

[00:14:10] And the third element, of course, is the financial resources and everything that is required to be able to scale.

[00:14:18] And it's been a great journey so far in the last year.

[00:14:23] A lot more room to cover.

[00:14:25] But the receptivity from the market has been phenomenal.

[00:14:29] We just became the first and only PEO that is on the Athena Health marketplace.

[00:14:35] We have a phenomenal relationship with a company called CureMD, for example.

[00:14:42] These are folks that have worked with many, many, many thousands of practices.

[00:14:46] And it's just a strong validation that there is an acute need in the market.

[00:14:52] And we're in a good place.

[00:14:54] No major setbacks, knock on wood, at this point.

[00:14:57] But yeah, you know, I've kind of been around this journey before.

[00:15:03] And hopefully I'm not making the same mistakes over and over again.

[00:15:06] That's great, Raj.

[00:15:07] No, that experience definitely helps.

[00:15:09] And I appreciate that framework.

[00:15:11] Look, phenomenal to speak with you.

[00:15:14] And it sounds like you guys are doing great things.

[00:15:16] What closing thought would you leave our listeners with?

[00:15:19] And where can they visit you to learn more?

[00:15:21] Well, like I said, independent medical groups are the backbone of the U.S. healthcare system.

[00:15:26] We want them to be very viable.

[00:15:27] We need to take care of the people that work in these settings.

[00:15:31] As I said, people make the practice.

[00:15:33] And we are here to partner with independent groups to make sure they get the right benefits.

[00:15:40] They've got the right HR expertise.

[00:15:42] They've got the modernized HRIS and payroll infrastructure to help them focus on what they need to do to build the practice.

[00:15:50] Please visit us at stitchpeo.com.

[00:15:54] That's S-T-I-T-C-H-P-E-O.com.

[00:15:58] And we look forward to speaking to folks that may have an interest in learning more about Stitch.

[00:16:05] Amazing.

[00:16:06] Well, hey guys, I don't know about you, but I want a strong business.

[00:16:10] And I want one that runs smoothly.

[00:16:12] If you're a physician running a practice, Stitch PEO is for you.

[00:16:18] Take action on this.

[00:16:19] Check out the show notes.

[00:16:20] Make sure you visit with Raj and his team because the way you make it happen is you partner.

[00:16:26] Partnerships are the new currency.

[00:16:28] So act on what you heard today.

[00:16:30] Ladies and gentlemen, Raj Vodiraju, founder and CEO of Stitch with us today.

[00:16:36] So grateful that he joined us.

[00:16:38] Raj, we really appreciate you.

[00:16:39] Thank you.

[00:16:40] Thank you.

[00:16:40] Thank you again.

[00:16:41] And look forward to speaking to you guys soon.