Instinct Science Software’s Founder and CEO, Dr. Caleb Frankel, joins us today to guide us through the changing dynamics and goals in the veterinary market, and how Instinct is becoming a full-blown PIMS. Diving into software as a huge factor in work-life balance and burnout, this episode focuses on the ways that it’s also a definitive avenue to resolve the burnout crisis.
Welcome back to Consolidate That. Ivan, great to see you again. I’m really happy to chat with our guests today.
Hey, Ivan Zak here, really excited to have on this podcast my colleague, my friend, and my competitor, Caleb Frankel. I’m really excited to see you here. It’s been a great reconnection after I parted my ways with SmartFlow, and it’s very, very exciting to see what you’re doing with Instinct.
So by way of introduction, Caleb is the critical care and emergency veterinarian. He started his entrepreneurial and sort of technology career as a director of Brief Media, New Product. Then he became a founder and the CEO of Instinct Science Software. It started as sort of a whiteboard, accelerating into the whole workflow solution. Now, the exciting news is that it is becoming a full-blown PIMS, and they have another product on the side that is released as we speak. It’s the E-prescribe module.
So, Caleb, welcome to the show. Thank you for finding the time.
Yeah, I’m excited to be here. Thanks for having me, guys.
It’s like the meeting of two giants coming in here. I’m just going to stay out of the way.
Did you just call me fat?
No, no. Giants are strong and muscular and beautiful, beautiful giants.
Oh, there we go. Okay. All right, thanks, Ryan. Caleb, I’m very excited to hear what you’re doing. Because, I mean, if anybody would build a good PIMS for the large hospitals and for critical care facilities, that would be you. I would not take that as a task for myself. I mean, workflow optimization is a little tool on the side maybe. But building the whole PIMS, I think it’s too hard. But the way I wanted to talk about it today is sort of talk about what Instinct is doing, what is the PIMS solution? But also to talk about consolidation because this is what the podcast is about, and talk about what are they doing with the software and what does a tech stack looks like?
I’ll give you a little bit of background how I’m thinking about it. Consolidation from 15 to 20 years ago, they started with, okay, this is sort of an acquisition world. Then it’s an arbitrage. We buy and then resell. Sounds exciting. Everybody can capitalize on that. So everybody rushed into the industry. We have 50 consolidators right now. But all of a sudden, it looks like when you have 50 consolidators, there needs to be a competitive advantage and something to offer to people that you consolidate.
We started not with the culture for some reason. We started with offering more money, different type of money, so joint ventures and then some sort of retainer and incentivizing vets to stay. Then people started talking about culture. Now, people are thinking to talk about, well, being veterinarians. The tech stack never was this sort of a real advertising feature, I think, of consolidation because I don’t think that tech stack in veterinary domain to begin with is attractive.
The second part is that right now bigger consolidators started buying software, and I think that’s weird because there were two big companies, Covetrus and IDEXX, owning the software. Then all of a sudden, Pathway acquires Vetspire, and NVA partners with Rhapsody, and all of these things are happening. So let me open that can of worms and what do you think about what’s going on in the industry.
That’s really broad, yeah. A little known fact about me, I guess, is that when I graduated from school and did a internship in a high-quality specialty ER center, my singular focus and goal was to become a veterinary internal medicine specialist and open chains of specialty hospitals, which really wasn’t a thing or was sort of emerging back then. I got very sidetracked when I got out into the world and saw the state of technology and just said, “Oh, my gosh. I couldn’t do that until I solve this.” So that’s where sort of my thinking started around this. I think consolidation’s really interesting and potentially powerful if done right for the industry, actually.
I’m an ER vet, like you said, but I’m obsessed with high-quality software and using it as a tool to actually solve some of the challenges out there in our industry. A lot of people probably heard me say this, but I always say it’s not for software sake, either. If I thought tires were the solution to some of the challenges, we’d be innovating in tires over at Instinct. The truth is I am very passionate and believe that high-quality thoughtfully designed software, preferably by veterinarians leading it, is the key to solving some of these challenges out there that not only consolidators face but anybody in the industry faces.
So I’ll start there. I mean, I don’t know where you want me to focus that question, but the staffing stuff that’s going on out there is really interesting, and you sort of nailed it. Ivan, I know you’ve done a lot of work around burnout, right? I think what’s really interesting, which is one of the reasons I started thinking about how we’ll think about our software company, is that software choices are sort of deeply tied to burnout and staffing issues. Nobody’s really talking about it actually in the vet space. If you talk to a recruiter, for example, or somebody with a lot of recruiting experience, you won’t likely hear this directly as a top reason for people leaving or taking jobs. But if you listen real closely, work-life balance is usually something they bring up for people as a top sort of thing people are looking for.
I always say that we’re, let’s call it, 10 years behind the human health trends. Well, if you look at some of the data and the studies coming out of human health over the past five years, let’s call it, the number one factor by far and away, like 70 to 80 percent in burnout and why physicians leave jobs or not satisfied with their jobs is one thing, and that is their EMR, their practice management software, which is really interesting.
Absolutely, absolutely. What’s their biggest PIMS? I forgot there’s like everybody’s in medicine right now.
EPIC, yeah. So I read a huge article. It was about the human doctor talking about how, with the digitalization of medical records, he stopped seeing the patients. That was the biggest, biggest problem. I like that you went into recruiting because it will be interesting if people are more focusing on what they’re using when they’re joining the hospital. It could be the best culture, the bills, everything. But if I stay in the clinic, like I have, Ontario and Canada loves AVImark, which is on-premise, which you have to stay in the hospital. After a 14-hour shift, when you have 30 records to write, I’d rather drive home, take a nap, and then do it from home with a cup of coffee. Not still in smelly scrubs with the anal glands and stuff like that, and then just sit and type there.
Or even better, not have to go home because it is so easy to use and write records while you’re there that you’d never even think of having to write a record. That sounds like a pipe dream. Most vets who listen to this think I’m living in some different universe, but it’s just because we’ve never seen anything else. It’s crazy.
That’s exactly that. So let’s connect the two topics. You decided to expand into the PIMS world. I think that right now, it’s actually a primetime from sort of market opportunity. There’s a couple giant consolidators that said, “Okay, we need our own system.” Strategically makes all sense in the world. I don’t know who made those decisions because now to actually own something that is part of the processes in other hospitals, then not necessarily are all standalone. I mean, if it was a strategy to recruit hospitals and then have the same data set, then totally get it.
But some of these PIMS are inside of other consolidators, again, maybe a strategy of acquiring them further if they’re smaller groups. But, anyway, I can justify and I can totally say that this is a dumb idea to buy software as a consolidator. But for you right now, it’s a great window for both sort of large hospital and GP hospital software. I believe you’re going into both verticals. Then with that, so what do you think about the state of consolidators buying software, and how do you fit into this whole equation?
They’re both buying and building, actually. There’s even some groups thinking about building their own software, and I think it’s interesting. I’ve thought a lot about this and I know some high-quality humans at those places behind that, and it makes sense why they’re doing it, right? Look at the history of the state of software. I mean, there’s just no – No one solved it, so they’re doing what I’m doing, which is saying we need to solve this. We don’t have time for somebody else to solve this.
Here’s the thing. Point to one industry where that’s a thing, right? I’ve talked to some very savvy economists in Silicon Valley, software experts about this. In the long run, it’s really unlikely to work in most places.
Exactly. That’s what I’m thinking when you’re talking about it.
Yeah. I mean, well, it’s hard enough to run a hospital and a high-quality organization and focus on that. But running a high-quality software organization, Ivan, you know, is incredibly difficult. In the past, it wasn’t always cooked, but now you have nuances of security and DevOps and user experience and data. I mean, none of that’s easy.
Privacy, yeah. So here’s what I would say. Could you imagine starting Galaxy Vets and saying, “You know what? One of the first things we should do is build our own email, calendar, and word processor system. That would make sense right now.”
That’s exactly it.
Yeah, no way. Or just like an iPhone or an Android, those aren’t for us. We should build our own phones for our teams. I mean, just think about how crazy that is to invest the resources? The short answer is for the long term, they’re going to have two issues, which is, one, innovation, speed, and quality, which since it’s not your core business, right? Two is it’s going to cost them 10 plus X more in the long run to build and maintain it. If you’re lucky, that’ll get you more customized and better software for you. If you’re unlucky, which most will be, you’ll still spend that and you’ll have worse software and you’ll have to make a decision in 5 or 10 years. So I think it’s a difficult thing but I will tell you I know why they’re doing it.
Coming from the PIMS space myself, PIMS was the first introduction that I had into the veterinary world. I remember the first conference that I went to with Hippo was there was another major competitor of theirs, which was slowly losing customers. I met the CEO, and then my CEO at the time said, “You know what’s it’s interesting, Ryan? Two years ago, they had a really big booth. Then last year, they had a smaller booth. And now this year, it’s just the CEO.” He said, “For the past seven years, I’ve seen that happen with a lot of PIMS that come. People come in, and the question is, are their booths getting bigger, smaller, or disappearing is kind of the thing.”
It’s a lot more common for the PIMS providers to disappear because it is an extremely difficult thing to put together. I think veterinary medicine has tackled it in a much more difficult way because vets in the vet industry has decided that your EMR is integrated with your CRM, which is not what happens in human health care, which is why I think it’s so difficult for anyone to solve perfectly. That’s why you have so many add-on to the ancillary products. But in the idea of having a consolidator and looking at the consolidators acquiring and building out their own things, do you think that the groups that have been acquired by consolidators are going to continue to see growth? Or do you think that their vision should be growth within that consolidator?
I think that’s really interesting. Yeah, I mean, I think there’s only one example of that that Ivan mentioned recently. All I know is they’re going to have a hard time because so much about software is the data protection for independent hospitals. Building a business that actually innovates their software because now you have one customer, and that’s that group, and there is a ceiling to that. On the flip side, the good news is they get complete control and customization for themselves.
On the downside, the innovation for the rest of the industry and giving back through that goes away because people can’t use it, right? In masses over the long term, they can’t use that software. We’re hearing that on the ground floor. That becomes incredibly challenging to have your competitor across the street, owning your hospital and data, and no matter what one agreement says, right?
Yeah. Let me then poke in that. You said that now you have control of your backlog. Do you? Because now you have an organization with 400 hospitals with a request from it, so it’s like you have very annoying 400 people or even more in the organization. There’s 8,000 people in the organization. They all want features, so it’s the same as servicing the client base. I don’t know if you have trouble with that, but we have a very, very sophisticated framework where the requests were coming in from the clients and then from internal resources. So your marketing has a request to R&D, your support has requests, and everybody has requests. Managing that was a nightmare, and it’s a nightmare in software. Then on top of that, you don’t have a competency in that if you’re running consolidators. So now you’re adding completely unknown business unit. So I don’t even feel like it’s one source of requests.
You nailed it, and it’s actually riskier because what happens then is the most important people aren’t the veterinary staff in those orgs, right? So you always get the most important people driving the features. This is actually what I’d love to talk about, which is how staffing and team happiness is really driving the future of software decisions. I can explain why I think that. But when you have an org like that making decisions, what you end up having happen is the IT teams features are the ones that are innovative because none of the veterinary end user, your most important employees, are getting a say at the table when you have that kind of structure.
In an independent organization, the market sort of drives it, and you get a more, I think, well-rounded approach, which is why instinct exists. The market has said that the team is the most important stakeholder, and one of my favorite things that’s happening out there right now is people are choosing and leaving their jobs because of software. That’s something I bet no recruiter’s talking about, right? But we’re hearing these stories from so many people. It’s even happening at the consolidator level where people are saying, “I’m not going to let you buy me if that’s the software we have to use.”
This is great market dynamics. I couldn’t be happier that this is happening. I’m biased because of what we’re doing with instinct. But we did this because we thought that would happen. Great story, a hospital owner came up to me at IVAX and said, “Are you the guy behind Instinct?” I happen to be in the booth and I said, “I’m one of the people. I’m one of the founders.” I said, “I’m Caleb,” and he said, “You know, Caleb, I hate you and I love you.” I said, “Wow.” That’s so aggressive, and I don’t know this person.
He said, “I own this specialty hospital, and I hate you because I have a staff member who I really want to hire, and she is a critical care specialist coming out of a school, and she said she wants to work here. But you only work here if we get Instinct. And I love you because I just did a demo of your software, and it’s incredible.” But we’re hearing stories like that, and what’s exciting about it is that the team is being prioritized because, you know what, the market says you have to.
Well, I’ll throw a challenge. I don’t know if you faced this already or not, but I totally agree with you that the software could be developed only by the request from the end users, and that’s the only way. That’s the only way to create software that people will use. What I bumped into when I started selling SmartFlow to many consolidators, so you go from veterinarian. I literally with SmartFlow – One person said, this is also flattering on the call, when I demoed it, they said, “Did you have anybody say no to this after your demoed?” It was true because it was like one after another customer, they were just getting it. It was flattering.
Then we started selling to consolidators, and I was just getting a glaze. It was just like people will be like, “Okay, sure.” Then when I joined IDEXX, I was looking at this and I was trying to build a framework. How do you sell to consolidators? Why, if they’re doctors in the clinics that they run, completely just bought into it, they love using it? When you go to management, then they don’t understand the use. So the interesting thing is that they’re completely different goals, and that’s the problem of consolidation all together. Because the goal of the veterinarian is to help the pet, is to help the pet owner.
The goal of consolidation is to produce a return on investment to their shareholders. If the shareholders are interested in money, which they should be because they’re investors, then you’re chasing two different goals. So just like you said, in the company, even the company acquires the software product or starts running the software product. You end up with woof ware that is designed to drive crazy analytics. It works totally for the business, and everybody who uses it on the floor hates it. That’s exactly what happens. So it’s interesting how that transitions. I don’t know if you’re bumping into that a lot already because as soon as consolidators won, they want your analytics. They want everything that is sort of about the network, not about the veterinarians.
Yeah. It doesn’t have to be or though, by the way. That’s our approach at Instinct. It has always been or, and the reason is, is because historical software is they saw what you saw, right? That to convince the masses of hospitals to give you their revenue, to pay your overhead, and help you develop software, you sell to the people that matter. They ignored the end user. Every software that I know of ignored the end user, right? We are taking a different approach. So we started by putting the end user in the foreground, knowing that eventually we would get the market pressure to build on top.
But we’ve started from a different point of view, and here’s how I think about this like a team experience, let’s call it, that’s going on out there. You have to figure out – So what you saw back in the days that you were doing that with SmartFlow a few years ago, I think things are changing. Here’s like how I think about this. You have to sort of figure out what you want to optimize for if you’re a consolidator right now, right? You have to figure out what you’re solving for. Usually, the market determines that.
It’s just like in vet school, when you were trying to figure out what was going on with a patient and the savvy clinician would say, “Make a problem list. Stop and make a problem list, so you can see everything.” It was easy to lose track of the patient’s BG that was 39. But then you make a problem list and you go, “Holy shit, he’s hypoglycemic.” That’s the thing we need to solve for right now, and it turns out it helps you focus on saving that patient. It’s no different.
We’ve migrated from even three years ago, Ivan. From the days when if you were going to start a hospital, or a chain of hospitals probably resonates with you, getting funding, keeping the doors open with cash flow, attracting clients and referrals, those were your number 1, 2, 3 things you had to worry about. It was what you needed to solve. It’s really interesting, right? None of that matters anymore. Capital is crazy right now. If anything, you’re going to be turning away patients because of all the hospitals that have to close from staffing issues. Referrals don’t matter. There’s too much traffic in caseload in the market. So now, the thing you need to solve for is attracting staff, full stop.
So the market sort of already made this change. How does software play into this? Well, if your organization traditionally chose software because of some specialized advanced inventory feature or a data layer that helps a very small subset of your sea level employees do their job better, but you ignored all your nurses and doctors who you can’t hire and retain, you have to sit down these days and go, “What the hell are we doing here?” This isn’t rocket science or MBA level strategy, right? The dinosaurs are going to have to figure this out, or they’re going to go away.
I know that sounds dramatic, but look at what’s going on in every city in the US right now in the world with ER and specialty hospitals. They are shutting their services down. I don’t know if everybody knows that. Some hospitals are even closing their ERs or at least pausing. This is happening in my city, and it’s not because of revenue. It’s not because of cash flow. It’s not because of bank loans. It’s not because of equipment. It’s because of one thing. We can’t staff our hospital, period, right?
So if you don’t figure this out, if you don’t figure out how to retain and keep staff, look at case studies in other businesses. This is how established businesses that were leaders go away. The warning signs are all there for these big consolidators.
100%. I love what you said about focus on the problem because I think for the last three years, researching and working with consolidators, they didn’t focus on we’re going to go into industry to solve problems. They focus on the opportunity. There’s a big difference focusing on opportunity or focusing on the problem because most consolidators that come in and they say, “We think there’s a functional business, and there’s an opportunity by increasing marketing. By optimizing the cost through optimizing labor, optimizing in cold labor, and by pushing the vendors, we can squeeze more out of EBITDA, and then play arbitrage and then resell these clinics.” Well, nobody needs marketing because we have three weeks out appointments already, and people look at the Facebook. People are yelling at the clinics because they can’t get in.
They can’t get in anywhere.
Nope. 6, 10 hours waits in Los Angeles. They can’t get in. So there’s no need for marketing. The squeezing more cost out of the labor costs that people are leaving in were increasing the cost of labor, so you can’t do that. Then vendors are sure you can squeeze out of MWI and other 10% on it, but it’s not going to move the needle. Right now, all of these companies strategically have to focus on solving the problem, not chasing the opportunity. The problem with these consolidators is that they haven’t been built to do that. They are not even built to do what they put in their thesis, not even talking about solving a problem.
Then solving a problem with not enough people, I totally agree with you. Software is a huge component of it because people burn out because of that. But there’s many others in the burnout that I’m researching and continuing the studies in. This is what people need to focus on because otherwise, it’s not an opportunity anymore. We have a big problem, and there’s many ways to solve it, and software is through one of them. I wanted this to be a segue for you to tell us a little bit more about the e-prescription and how you’re getting into the general practices as well.
At Instinct, we’re trying to offer something that can sort of immediately relieve some of these issues. I know traditionally, the thought for a consolidator or a practice is, “Oh, my gosh. We’ve committed to the software. We sunk costs. It’s such a big lift.” We’re not just focused on making amazing software that the market, the veterinarians are out there asking for when they take a job. We’re focused on making this easy to install, which is something very different, right? We do the lift. Everybody thinks it’s like this huge, multimillion dollar adventure. We’re out there proving right now that we can handle it for you, and it’s not, and actually your team will be happier.
That’s one of the things we’re focusing on and that means solving ancillary problems that are out there. We’ve created a new product called InstinctScripts, which is the first true agnostic e-prescribing platform for the industry. This is solved in human health. It’s a big challenge to solve because you have to mitigate pharmacies and the veterinarians and the regulations. But we decided to take this on last year. One of my colleagues, and I know one of your friends, Ivan, Dr. Elliot Garber, is leading that initiative in Instinct. We’ve released the product. It’s out in the market in beta right now. We’re getting some really exciting feedback.
The exciting thing is we’re not proprietary about this stuff. We’re going to offer this connected to any PIMS, by the way. We think it solves a problem and we’re excited about what it’s doing for the hospitals already, solving these problems around phone volumes and hiring staff just to manage the prescription refills. So that’s one thing we’re doing. Then you nailed it on our full practice software called Instinct EMR. It’s brand new. I think when I was on your other podcast, we weren’t even talking about it yet.
Not yet, yeah.
Yeah. So we have tried to bend space and time over the past year and a half and have hunkered down and built a specialty emergency hospital at level PIMS. It is running full centers, some for longer than a year. We actually released it in beta in June 2020. But it came out of beta in February this year, and we’re really excited about what it’s doing. It’s advanced greatly. Then now, we’re turning our engines to offer a suite of general practice tools into this so that –
What I think makes us unique is consolidators don’t really have a great unified software platform option. Meaning if you have specialty and general, it’s a tricky thing to navigate, and we’re trying to solve that for them because the thought of managing two plus of these is not going to be a thing. I mean, I know some consolidators are managing 20 plus, but the dream is to have one solution that can fix this for you, and that’s what we’re aiming to do.
That’s really cool. We’ve blown through 25 minutes and we do have this promise to our listeners. I think I see you’re on the edge of the seat to ask a question. Want to ask another one?
I’m ready. I’m ready. Well, first off, I was going to say if you want to see and learn more from Caleb, you can go to their website, instinct.vet. I have actually bumped into a client that is using the EMR, and they were raving about it. So a second-hand very positive review there for you too. So I thought that was great to pass along.
Our two questions that we ask everyone, Ivan knows I’m amped up for them, first off, what book would you recommend for people to read to get some more knowledge and sort of share some of the thoughts you’ve had?
I’ll recommend a fellow pen person’s book actually. I’ll recommend Originals. I don’t know if you’ve heard of this book by Adam Grant. But it’s a fabulous book, and there’s a great example that actually applies here. I remember it sticking out when I read it. There’s an example of researchers looking at sort of high-quality performers out there in employment. They stumbled upon the fact that people who used a browser, Firefox or Chrome, were much more productive employees, stayed long term, and were innovators than somebody who used what came with your computer as the default, whether that’s Safari or Internet Explorer. This was a few years ago.
This is a great story about why this book is so interesting. It’s about original thinking, challenging the status quo. It’s not because they use those browsers. It’s just it’s self-selected for people who went out and said, “Even though it’s more work, I’m going to go find the better tool, and that’s going to make me a better employee.” That’s what applies to everything they do, and I thought that was awesome from that book. There’s a lot more examples like that.
Awesome. The second question is if there was another person you’d recommend for us to have on the show, who would you recommend?
I’m going to give you Paul Pion from VIN. I don’t think we had him. Paul has become a friend, and there is probably nobody better out there that has the view of the arc of the industry and the forces right now between outside influence like private equity money and veterinarians having a seat at the table. I think he’s an interesting thinker on these things.
Fantastic. Yeah. Well, this was great.
Absolutely. Well, Caleb, good luck with the PIMS with Instinct. I know we’re going to be doing a test drive. That’s for sure. Yeah, if anybody is looking for new and innovative software that will solve both a specialty and GP, that I think it is definitely worth looking at. So thank you for finding the time and thank you for joining us.
Thank you guys.