Interview with Laudio CEO Russ Richmond

As a physician and healthcare CEO, Russ Richmond already knew a lot about healthcare. But when a bad accident put him into the hospital for three months he developed a much more profound understanding of caregiving.

In particular, he learned that many of the nurses and therapists who provided him with such great care were thinking of quitting their jobs!

Once he was released he did some research and discovered that a root cause of burnout was a lack of effective management and high administrative burden. He zeroed in on a solution: support for frontline nurse managers.

These insights formed the basis for the founding of Laudio, an intelligent platform that streamlines work for frontline leaders to drive large-scale change.

Before talking about Laudio, we also discuss Russ's earlier career, including a stint leading APS, where I had previously been chairman of the board. I'm grateful to Russ for growing and exiting that business.

Host David E. Williams is president of healthcare strategy consulting firm Health Business Group. Produced by Dafna Williams.

Transcript

0:00:01 - David Williams
Hospitals have cut layers of middle management to save money, but that ramps up the burden on frontline staff, risking burnout and poor performance. Can technology help these frontline workers do their jobs better and increase margins for the health system as a whole? Hi everyone, I'm David Williams, president of strategy consulting firm Health Business Group and host of the Health Biz Podcast, where I interview top healthcare leaders about their lives and careers. My guest today is Russ Richmond, ceo and co-founder of Laudio, an intelligent platform that streamlines work for frontline leaders in hospitals. Do you like the show? If so, please subscribe and leave a review. Russ, welcome to the Health Biz Podcast. 

0:00:52 - Russ Richmond
Thank you. Thanks for having me, David. 

0:00:53 - David Williams
That's my great pleasure. Let's hear a little bit about your background, your upbringing, what was your childhood like, and any childhood influences that have stuck with you. 

0:01:10 - Russ Richmond
Sure, yeah, I grew up in Cincinnati, Ohio, and my mom was an amateur biologist, so she got me hooked in science. I mean, we went to the zoo almost every week Creeks, parks, woods, all of that and that really had a lifelong influence on me. I remain interested in those things and it propelled me to explore medicine and other areas in my future career. And she actually passed just this last year, so it's a nice way to remember her as well. 

I'm sorry to hear that, but it's a nice tribute, you know, when you can look back and see that kind of influence that's long lasting and living. 

0:01:46 - David Williams
Oh yeah, and you know it challenges you as a parent because you want to have that same mark on your own kids. So it's a wonderful thing that does live on Great. So I think you majored in bio at Michigan, is that right? So that influence was pretty direct, taking you into school. 

0:01:57 - Russ Richmond
Yeah, I got really interested in ecology actually because it was just fascinating to me that mathematical equations could explain the complexities of biologic life and that, also, wedded with a sort of a bit of a Duke Gooder view around the planet, got me hooked. And at the University of Michigan. You know you're in the Great Lakes area, so freshwater ecology specifically is where I spent my time. 

0:02:25 - David Williams
Nice, and did you get your medical degree right after that, or did you go to work first? 

0:02:30 - Russ Richmond
I did. Yeah, I went directly from that. I decided that the life of a, you know, a PhD in ecology was a bit of an individual, isolated thing and I would do better in a more human-centered career profession. And I went directly into medical school and loved every second of it and also met my wife there. 

0:02:51 - David Williams
So it paid off. Good yeah. Either one of those would have been probably make it worthwhile, so you got the double. I met my wife in business school too. That only took two years, though. 

0:03:02 - Russ Richmond
Well, hey, the education costs a lot of money, but the value's there, right? 

0:03:05 - David Williams
That's right, good, okay. So then I saw you worked at McKinsey. 

0:03:09 - Russ Richmond
I did In one shape or another. I've spent 10 years at McKinsey. I was a management consultant there, and then I also helped build a business inside McKinsey Nice. 

0:03:18 - David Williams
It was called Objective. What was that? I know McKinsey. 

0:03:25 - Russ Richmond
It was called Objective Health it was. You know, we were automating a lot of the analytics we did for health systems inside software and it was just a super interesting, fun build and I actually met my current co-founders through that experience, so it was amazing. 

0:03:38 - David Williams
Very good, and then tell me about APS. 

0:03:42 - Russ Richmond
So after Objective Health, I joined APS APS. So after Objective Health, I joined APS. Aps was an adaptive learning platform for physicians and nurses in high-risk areas like obstetrics, and what we proved which was actually very cool was that we could dose learning in obstetrics and reduce high-risk events like maternal fetal hemorrhage and save lives, and so it really hit on. You know all mission elements and it was a great little business that grew quickly. We bought another business and put together an assessment platform and then we ultimately sold that to Bertelsmann and Reliance Learning. 

0:04:23 - David Williams
Very good. So, as you may or may not recall, I was actually on the cap table there because we had I've had plenty of, you know, of guests who had worked, and I worked for a summer at McKinsey and I worked for Boston Consulting Group. I had people done similar jobs, but I don't think I've ever also had another chairman of APS, and I know you were the CEO as well but I the CEO as well, but I helped to get that business going, I know I absolutely remember that because we had to get on the phone a couple of times? 

Yeah, exactly. So why are we sending this guy a check? But there was a reason. I helped to get it done, exactly. Anyway, let's talk about Laudio. So you know what was the unmet need that you saw and how did you you know in all your work that you'd done before that. How did you uncover that need? 

0:05:07 - Russ Richmond
Yeah, well, you know, laudio came out of a very personal experience. Right as we were selling APS, I was in a terrible skiing accident and spent three months in the hospital, and you know I've made generally a full recovery and I'm doing great. But you know that was seven years ago and, as you do, when you're in a hospital for three months, you get to know your caregiving team very, very well, and what surprised me was that all of my nurses and therapists told me that they were thinking about quitting their jobs. So after I got out of the hospital, I couldn't I just couldn't get that thought out of my head, which is why I was getting the best care in the world I was at MGH Spalding, et cetera, with really great people, yet they wanted to quit, and so that triggered some research, and what we learned is that a large proportion of the reasons for this burnout and this is well before COVID right were related to not being managed adequately and the administrative burden in some of these roles, and so we very quickly centered on the frontline manager as a key leverage point to fix the problem. So that was sort of like the entry point into Laudio. Fix the problem, so that was sort of like the entry point into Laudio. 

And the founding thesis of Laudio was like really simple. It's like what if we made these frontline managers like population health managers? So you know, in population health a physician has a panel of 2000 patients. They have risk models and they differentially reach out to each of those patients based on the care gaps they want to close and that reduce the risk of the population. And our thought was hey, what if we put the frontline managers and health systems into the same role? What if they had risk models that looked at the likelihood of burnout or quitting with their employees? And what if they were the equivalent of care gaps they could close with these employees to reduce the risk of turnover and improve employee engagement? 

And so, with that founding thesis, we approached a CNO that we had gotten to know over the years at the University of North Carolina and said, hey, would you let us build this for you? And we built it and turned it on and for the first time in my life it like immediately worked. I mean, it was ugly and it was you know a bit of, you know, minimal, viable product, but it actually did make a difference. And that is what kind of led us on to this whole idea. They say all big ideas start small, this idea that the frontline manager is this key leverage point for so much impact in the health system. And we've been off to the races since then. 

0:07:56 - David Williams
So when a person goes into the hospital, they often think about a doctor or a nurse or a nurse aide or something like that. Who are these frontline leaders? Frontline manager? What sort of a title would they have? Would I see them around as a patient? 

0:08:08 - Russ Richmond
You might, because often they'll check in with the patient, doing something called a patient round to audit the work that their team is doing for you as a patient. We've learned a lot about frontline managers. The most archetypical title for a frontline manager is just called a nurse manager. About 60% of the employees in the health system are nurses and each nurse has a manager. The manager tend to have a very large span of control, so about 100 direct reports, which is it's kind of insane, right, yeah, and so, and that, combined with all of the lack of automation and administrivia that they put up with in their daily lives, means that they spend a lot of their time on the bureaucracy and less time on the one-on-one coaching and hands-on management. And so you know. 

But these managers exist outside of the nursing profession as well. There's managers of lab, radiology, pharmacy, transport, environmental services, grounds crews you get the idea ambulatory clinics they're all over and they all have these common needs where they have large spans of control, they have a lot of administrative burden and they want to spend more time with their teams. So that's who they are, and you know. You talk to one and what you learn really quickly, david is. I mean, these are the busiest people in the world. I mean, they are insanely busy. So they're typically responsible for a 24 by 7 operation, but they're working, you know, 8 to 12 hours a day trying to keep up with that entire operation. And then, between all the performance reviews and all of the coaching and all of the time and attendance work and the payroll and the compliance work and the auditing work, they very quickly get buried under it. So that became sort of the focus of our initial platform. 

0:10:17 - David Williams
The hundred to one span of control is probably the biggest I've ever heard of. I know when I was at BCG they used to say a hundred people was about as big as you could have an office At that level. That's the edge of where you expect to actually recognize everybody and know their name. Potentially Any more than that you know, never mind to manage all of them. So that's kind of nuts. 

0:10:36 - Russ Richmond
Yeah, and then add to that turnover right. Sure, you've got 20 to 25 people quitting each year. You've got a lot of temporary labor around you. You're not even overlapping on the night shift, so you don't know everyone's name. So having genuine personalized outreach becomes even more a problem for you. 

0:10:58 - David Williams
Hospitals have certainly had a lot of financial challenges lately. Some have even ended up in bankruptcy. You know it's in the news now and one of the things they've done is a lot of companies have done sort of get rid of middle management. You know D layer sounds good. Make it, make it sleeker, make it simpler. You've kind of explained in a sense you've got these nurse managers with with some such a big span of control. But what's the overall impact of the, of the D layering? What's the impact on employees? What? How does it factor into what a patient experiences? 

0:11:28 - Russ Richmond
Yeah it's really a collision of priorities, david. So and I'm you know I'm very aligned with health systems on that is that they have to take costs out. There's no doubt about it. Anyone that understands this marketplace knows that. At the same time, you know where do you go and how do you get at that cost. You know 50% of their cost is related to labor In an academic medical center. It could be higher and you know, often you have mandated nurse to patient ratios and those types of things, so you have some of that labor that is locked in. So the only place to go then, in a world where you have wages going up everywhere, is in the ancillary roles, supportive roles and the middle manager roles. So what we're seeing is a compression there. 

Now the problem is that this means that spans of control are going up, are going up. 

We just published an article it's on our website where there's a record number of managers that are not just covering one unit now, but two, and we're seeing more and more and more of that. 

So the only way to keep things like patient experience and employee engagement up is if we can automate away a lot of the non-value-add work, which is just a core lean principle, and the good news on that front is there's a ton of that work that can be automated away. I mean, what we're finding is that these managers are they're cross-system right. They don't have something built just for them, so they're trying to grab data from the EHR, from the time and attendance system, from the HR system, et cetera, et cetera. It goes on and on and on, and they typically are performing their key workflows in a manual way. So, as an example, let's say they have to write a annual performance review. Let's say they have to write a annual performance review. They'll be, you know, looking through a filing cabinet and looking at things that they printed off from their Outlook system related to that employee. 

So you just hear those things and you're thinking, ah, there's an opportunity here, and indeed there is. I mean we can add about six extra hours in the week back to a manager to get back to what they need to really be focusing on and not just need to, but what they want to be focusing on. So it's a double win. 

0:13:57 - David Williams
You mentioned your MVP back in North Carolina. How has the offering evolved and what do you offer now? 

0:14:04 - Russ Richmond
So, you know, we initially came out of the gate saying let's reduce turnover, let's improve retention, and the good news is that we've gotten a lot of traction on that. We can generally reduce turnover by about 20%, sometimes more, and we can keep it at that lower level, which is awesome. And what that led us to understand is that these managers, they can have impact on a bunch of different metrics. So after that, david, we went after unnecessary overtime, which is triggered for a whole variety of reasons we won't go into here, but the manager is at the center of coaching the team around how to deploy their resources and not to trigger that. So we ended up saving millions of dollars in unnecessary overtime. And then we said, huh, could we also use this to improve the patient experience? 

So we have now built workflows around as I was mentioning before, called leader patient rounding, where the leaders are stopping in the patient's rooms. They're asking the patients how's our team doing caring for you? And if the answer is not, well, if the food is cold or at nighttime it's noisy, they can't sleep, or they're in pain or someone didn't introduce themselves. There's a whole series of checklists that need to be filled out here. That manager has the opportunity of real-time service recovery to improve that patient's experience while they're still in-house, before they go home and fill out like an HCAP certificate or something like that. 

So we are now doing more of that work. And then that led us to the idea of auditing the work in general. So we do quality and safety audits, so reducing patient falls. When that leader is in the room, they can say, oh, is the bed at the right height? Is the patient wearing the socks, can they reach their call button? All the checklists that you would do to reduce falls, as an example. So we're really excited that now this platform that we built for frontline leaders now really can drive results across the quadruple lane. And that's where we're positioning the company really, which is we want to help health systems take care of more patients at lower costs, with better outcomes than they ever could before. And the way we're doing it is by super powering up these frontline leaders and managers. 

0:16:30 - David Williams
Well, you've more or less answered. My next question was about how do you measure the impact of what you do. You sort of laid it out according to the quadruple aim and it sounds like if you're doing automation using a system, you can measure things fairly directly. Is that right? 

0:16:45 - Russ Richmond
And we have to get very sophisticated on this, David, because, you know, health systems are always like, hey, how can I figure out what Laudio is doing versus the nine other things in the same category? And so what we're able to do is we help them do the analysis where we look at hey look, these are your managers that are like massively using Laudio and these are your managers that are using a little bit less. Can we see a difference between the two groups? Yeah, and you often can, and it's very dose effect, and that is what has gotten all of these health systems behind the ROI story. And that's just, you know, makes my heart sing. 

0:17:23 - David Williams
So, as you mentioned, the nurse managers are super busy. They're fundamental to the running of the hospital, but they're probably not the ones that can decide to use Laudio and write you a check. So how do you connect what you do with the priorities of the C-suite and actually get in there and make the sale when there's a lot of other people doing, you know, maybe making similar claims, not doing exactly what you're doing, but also saying we're going to save money, improve engagement, et cetera? 

0:17:53 - Russ Richmond
That's such a great question because Laudio is in that straddle where we have a ton of resource focused on delighting our users. But you know we're a C-suite purchase, so you know we really need to speak about lining up behind their initiatives. When we talk to any health system C-suite leader, we ask what their priorities are for the year. Some of them have priorities, by the way and by the way this is increasing, which is really awesome about supporting their leaders. Like they've heard too many stories from their frontline leaders that they're drowning, and so in maybe 30% of health systems right now there is a 2024 initiative around supporting their frontline leaders and then we just latch onto that. But others have, you know, priorities across the quadruple lane. 

It could be that some health systems are getting paid on their ability to retain employees, so we're able to come behind and say, look, let's talk about what you're currently doing with retention and how Laudio, on top of that, can kind of turbocharge that and get sort of a new approach to the same old problem to put more torque on it, and that's really effective. Same old problem to put more torque on it, and that's really effective. Sometimes it's about operational efficiency, so it's we need to reduce our unit costs or the labor costs per unit of service. And we've gotten very sophisticated at going down there and saying, okay, where are you spending on contract labor? Where are you spending on overtime? How can the system turbocharge that spending on overtime? How can the system turbocharge that? 

So the answer is always we start with their priorities and then link the platform to those, and that's something we've learned over the years and that's been really effective. But usually it's got a component of reducing turnover, improving retention, improving engagement, reducing personnel costs, and we put that together with one of the outputs better service, better quality, those types of things. 

0:19:51 - David Williams
Yeah, you mentioned all the labor costs that a hospital incurs, even worse in an academic center, and so technology is an obvious category to substitute for labor, and that's been done to a good degree. But we also hear a lot of complaints about that. For example, electronic medical record caused a lot of pain. I was just speaking with a physician the other day who's in his third hospital he's been in. That's shifting to Epic. It's always difficult. Nurses even strike over the use of AI. So how does it apply to Laudio? Because on the one hand, I'm hearing makes all sense what you're describing, and then I would say you know, are there people on the floor saying, oh, this is another technology thing, it actually just makes my life even harder? You at least must deal with that perception before you come in. 

0:20:40 - Russ Richmond
We really do. Our users are so busy, david, that often they can't kind of see over to the next horizon and see how much better their life could be if they could embrace a different technology or new system. And so we have. It's up to us, and you know, to show them that. So yeah, there's some skepticism around technology solutions and you know our world, which is, you know, leadership and management and, by the way, we just published a book on it on frontline leadership and health systems. 

The human is always going to be in the center of that. 

I mean, no one wants to be managed by a robot, right? So just leading with that is often very reassuring to folks At the same time is often very reassuring to folks At the same time. That same manager can actually be a lot more effective. If you just think of a normal bell curve distribution and think about moving the bottom 50% up to the top decile or top quartile, the impact there in a house system is tremendous, and the way we do that is by putting everyone on the rails of best practice, by automating these workflows, and the more automation, the more we can help them get rid of searching for data or finding the right piece of information or scripting, something they don't need to script because it's already been written a million times, or whatever it is to better connect them into their job of the one-on-one connection with the team member they're managing, the better we can make it their job. So it is a challenge and also there's some great solutions for it, and we've just got to help people see. 

0:22:30 - David Williams
Artificial intelligence is a technology that's gotten enthusiasm across a lot of industries. I think in healthcare, people are looking to AI because the problems are so inexorable. You know he's describing the costs are going up, it's getting more stressful, it's you know there's more waiting times and still hospitals have trouble making money, et cetera, et cetera. What do you see as the potential of AI in healthcare? And you know, are we seeing the impact now? Are you using it? And you know any downsides that you fear? 

0:22:56 - Russ Richmond
Yeah, I think it's massive. I do think that healthcare will lag a little bit in embracing it, in that some of the well-known hallucinations and other things that can happen with AI are really treacherous when you're trying to care for a human being. 

That being said. You know and I don't have to explain this to you, but there is so much layers of you know insurance approvals and regulatory steps, and you know necessary communication pathways that all of that administrative work I do think is in the here and now for using AI to either have an agent do it or support in some way, to say, in our case, a frontline leader. I then think the toeholds in that area will start to creep a little bit further into the clinical care arena, and so the second wave will be the decision support and things that physicians need in real time. So, as an example, in that case you might have something listening in the room that's right now helping with filling out the chart or the EHR or rev cycle. 

But that same technology is very quickly going to convert into real time decision support on differential diagnosis as an example. So, and there's there's analogies for that in what we're doing as well, so I'm very excited by it. The downside is, honestly, I think it is new and what we're finding is that it's really good at a very constrained problem. So if we put the bounds on it and train, train it, train it we actually don't need a super sophisticated model. We can use an open source model. We get a ton of impact, but when we really open the aperture, it's still not kind of ready for prime time and um, and this is where you know like uh, companies like laudio, like a, a vertical SaaS like Laudio, where we have a real focus and emphasis in a world and a specific user that we can address in a very specific way. This is where we have the advantage, because we can just start knocking down those little paper cut problems one by one, and that's the march we're on right now, versus trying to globally do something with a foundation level model. 

0:25:28 - David Williams
Got it Well, russ. My last question for you is about any book recommendations. Whether you have read any good books lately or even in the distant past, is there anything you would recommend for our audience? 

0:25:40 - Russ Richmond
Oh geez, I'm a big reader, so I'll. I'll give you two. I read a book. It was a. It was a sort of an autobiography of Steve Martin, called born standing up. It was written about 20 years ago and it is so good. Not only is it funny, but you realize the grind it took him to go from where he came from to learning the art first of magic, and then music, and then comedy and art, and now it's movies and TV and all that. But you realize that and it's very inspiring because you realize that hard work, persistence, grit can get you there, as long as you're in that learning loop and iterative cycle. And you know, comedy might be the last place you think that would be applied. But he does a great job of showing you exactly how. And it's a funny book. And the other book I read I'm a history buff. 

I just read this book that just came out called the Devil of Unrest, which is about the early days of the Civil War and what was going on exactly at Fort Sumter in South Carolina? Why was that the focus point? What were the communications going on on both sides? And it's an Eric Larson book and he does all the exhaustive research. But then he puts it together in a narrative. That is like pretty gripping. I mean gripping for history. 

0:27:09 - David Williams
Yeah. 

0:27:10 - Russ Richmond
And when I read these things I'm always like why? 

0:27:12 - David Williams
didn't I ever learn that? 

0:27:14 - Russ Richmond
I mean, that's like so typical to our history. And here I have to go to like a popular book to figure it out. No, not in high school or college or anywhere. So anyway, I love those new, those new insights, and then you just get a little bit of an unlock on why the world is like it is today when you understand those things. So those are two I've got. 

0:27:37 - David Williams
Great. Well, that's it for yet another episode of Health Biz Podcast. My guest today has been Russ Richmond, ceo and co-founder of Laudio Russ, thanks for joining me today on the Health Biz Podcast, thank you. You've been listening to the Health Biz Podcast with me, david Williams, president of Health Business Group. I conduct in-depth interviews with leaders in healthcare, business and policy. If you like what you hear, go ahead and subscribe on your favorite service. While you're at it, go ahead and subscribe on your second and third favorite services as well. There's more good stuff to come and you won't want to miss an episode. If your organization is seeking strategy consulting services in healthcare, check out our website healthbusinessgroupcom.