Industry titan Ralph Muller talks about the US Healthcare Industry past and present

Ralph Muller, Executive Chairman and Partner Seminal Healthcare
Ralph Muller, Executive Chairman and Partner Seminal Healthcare

Ralph Muller is a healthcare industry titan with three decades of experience leading two of the nation’s top ten hospitals. He has profound knowledge of improving management and delivery of healthcare. Ralph was from 2003–19 the CEO of the University of Pennsylvania Health System, where he helped transform Philadelphia’s healthcare landscape, improve patient access and support breakthrough innovation. Under Ralph’s leadership, Penn grew into a world-renowned, academic medical center-based health system caring for more than 5 million patients annually. A signature effort of his tenure was the creation of the Penn Medicine Center for Healthcare Innovation, which brings together physicians, nurses and social scientists to test new healthcare models.

Welcome and thank you for joining us for a brief chat with Ralph Muller. I guess a good place to start is how did you get into healthcare?

MULLER: Like most people, you try to engineer your career, but in the end, it all comes down to luck — how you happen to be in the right place at the right time. And for me, I was literally going down an academic path, and the then new Governor of Massachusetts, Michael Dukakis, wanted to initiate several new social and health programs but also promised to balance the budget. So, his new administration asked me to come up with some spending estimates in just seven days. After this task was completed, I was surprisingly asked to become the Budget Director for the State’s public welfare department, including Medicaid. A program to support low-income healthcare, like the UK’s NHS. Soon after, I went from merely understanding how these healthcare programs were financed to becoming the COO of the department. After a few years, I was hired by the University of Chicago Hospital, which was in financial trouble at the time. Fast forward 17 years, I made a move back East and did a similar job at the University of Pennsylvania. I guess over the years, I have built a strong reputation for figuring out complex financial situations and fixing them.

Source: The New York Times

In healthcare, how do you balance responsible healthcare with good business? Is business inherently conflicted?

MULLER: In healthcare, it is imperative to put the patient first. If you are good at helping people, taking care of patients, it is always good for business. So, there should be no inherent conflict. At Chicago and Penn, our staff training programs were geared around everybody delivering better patient care, whether it was a senior surgeon or a ward assistant. Everyone must take patient care very seriously. Ultimately, it is the reason why you become a nurse, or a doctor and your reward is loyal patients and ultimately a thriving business. Having a caring and patient-centric culture is core. When I first got to Penn, I came across the Chairman of the clinical department who was boasting that his patients had to wait 57 days to be seen and he took this as a marker for success. I said that was terrible — we need to see these patients next week or they will simply look somewhere else. Another example was a doctor who would schedule his patients in batches of 30 at the same time, so that he would not waste time between individual appointments. Again, he was over inflating his value and at the same time annoying 20 plus patients. In essence, I looked to change the way success was measured and make a cultural shift towards fully patient-centric care.

So, you left Chicago and moved to Penn. From what I understand, Penn was not in great shape, why the move?

MULLER: Penn Medicine was essentially in deep financial distress and hemorrhaging money. Penn had great doctors, but the administration made many strategic mistakes, especially how they expanded their operations. There was talk of selling Penn, but the doctors were reluctant — so I was asked to help duplicate the success of Chicago. The US is not like the UK where everyone has healthcare insurance. Here we have a range of insurance plans providing imperfect coverage. One of the problems was that Penn attempted to take over that responsibility but failed spectacularly.Likewise, when they took over neighboring hospitals, as new owners, they felt the need to change all the doctors but were then surprised by a mass exodus of patients. All these things were fixable, and it was not too long before we got the business stabilized and back on track.

Today, Penn Medicine has become a $8.6 billion enterprise with more than 40,000 employees — ranked among the top US research institutions and is considered at the forefront of medical innovation. Could you talk more about this journey?

MULLER: So, as you fix mistakes and stabilize the business, good things start to happen — and in our case, it started with the culture. The core of our change was becoming patient-centric, which, as I said, turns out to be good for business — we moved from $1.5 billion revenues in 2003 to over $8 billion today, with $8 billion in cash. I am immensely proud of what our team has achieved over this period, and I expect continued success for Penn. To name only a few breakthroughs, I must start with the ground-breaking development of our mRNA technology, which, as you may know, is behind the Pfizer and Moderna COVID-19 vaccines. Also, our pioneering work in immunotherapy, specifically CAR T cell therapy to cure acute lymphoblastic leukemia. The list goes on and on, from developing personalized cancer vaccines to the world’s first gene therapies, curing one form of blindness and other genetic disorders. Over the last three years, Penn has received 13 US FDA approvals tied to research breakthroughs, treatments, and techniques developed in our labs. Finally, I would be remiss if I did not mention the wide range of companies tied to Penn’s innovative prowess — companies that have created multiple billions of market value and have helped power US leadership in healthcare innovation.

Arguably, Ralph is the the father of “Cellicon Valley”: See Video

Source: OECD Health Statistics 2020

What are your thoughts on why US healthcare is so expensive? I mean, I have seen reports about it being twice as expensive as the OECD average.

MULLER: As you may know, the pricing on drugs in many of these countries is government controlled, whereas the US operates a relatively free market — companies are able to price in sometimes massive research costs. New technology adoption is also accelerated. Also, on average, US healthcare professionals earn twice as much as their OECD counterparts — also a function of operating in a market-based healthcare economy. On the flipside, there is a cost to this with various sectors of the health industry being powerful actors in the political process, for example, with drug companies, insurance companies and hospitals being heard in Congress.

How do you see technology playing out within healthcare?

MULLER: Well, new technology is enormously powerful, as you suggest, from accelerated technology adoption to AI and data analytics being central to reshaping the healthcare industry. So, for example, with machine learning, you take Philadelphia with more than 2 million people. We can comb through and analyze electronic medical records and insurance claims and get a treasure-trove of insight to extrapolate. It will help us target interventions, suggest changes in lifestyles, and, of course, prioritize care budgets. However, to do that requires features like having universal identifiers and computer systems that communicate and are available to the care team in real time.

The challenge is not just to innovate but to integrate with a doctor’s protocols for patient management, within an overly complex and layered care system with complex insurance codes, different billing systems, and antiquated record keeping — these are pitfalls that entrepreneurs face and fail repeatedly. There is a surprising level of naivety that is rife among budding startups that may have a clever solution but do not comprehend the scale of complexity within healthcare. While machine learning, AI and data science are developing, they will be immensely powerful for healthcare. However, as recently seen by the healthcare company ‘Haven’, backed by Amazon, JP Morgan, and Berkshire Hathaway, ceased operations in February after only three years. Haven promised big results in reforming healthcare by pulling together the know-how and scale of three of the best-known employers in America. It aimed to improve how people gain access to healthcare, starting with their own work forces, yet after 3 years, it was gone.

Source: ObjectBox (

As Executive Chairman of Seminal Healthcare, can you talk more about your investment thesis and in particular the concept of 5 in 50?

MULLER: We have built one of the stronger healthcare teams in private equity, including an active national advisory board of leading professionals. We understand complexity, cost structures and government policies. We believe that combining our deep technology insight with our understanding of the social and cultural issues that shape healthcare — will provide us with a unique investment vantage point. Broadly, we look at companies at the forefront of seminal industry trends, where such trends can be described as thematic megatrends driven by technological and social transformation.

The healthcare industry is at a point of massive transformation and disruption and we foresee changes in types of delivery models, points-of-care, and accelerated technology adoption. The “5 in 50” model is a good example of how we focus and helps us to evaluate or realign business models. Simply, 5% of Americans account for 50% of all US healthcare spending — such as chronic care or complex episodes. That is a lot of money, so we look for businesses that are focused on the top 5%.

Maybe we could use our last few minutes to talk about the new Biden administration, your expectations, regulatory pipeline, and opportunities?

MULLER: I think we will see a continuation of what President Obama started, that is, the wholesale revamping of the US Healthcare System. We will see greater funding for pandemic-related pain points and the expansion of insurance coverage. 30 million Americans are uninsured today. I would expect that number to come down by 10 million under this administration. For the last four years, Trump’s administration sat on their hands, focusing on the political mudslinging of ‘Obamacare’. I anticipate that healthcare will be reintroduced into the government’s orbit, along with a revolving door of professionals who were exiled during the Trump administration.Their agenda will be broad and more strategic, from insurance coverage to centralized control planning and coordination, from population risk management to universal daycare and preschool education. The most obvious implication will be a massive push towards telemedicine and a move towards integrated systems. I think some of the big systems today will get even bigger because they have plenty of financial and intellectual capital. So, a concentration of big systems and telemedicine.

Thank you for taking the time to talk to us today. To learn more about Ralph Muller and Seminal Health — Link.

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Seminal Capital is a specialist investment manager that invests in growth companies at the forefront of seminal industry trends.