Tag Archives: Georgia Tech



There are at least four programs at Georgia Tech that promote the growth of technology companies:  the Venture Lab helps Georgia Tech students, faculty and staff start businesses based on research from Georgia Tech, the Advanced Technology Development Center helps new startups that may, or may not, have originated from Georgia Tech, Tech Partnerships, which can be hired by any entity or government agency to exploit technology on a contract basis, and a grant application assistance program described in the next sentence.    There is a federal grant program called Small Business Innovation Research, or SBIR.  Grants can be as high as $100,000 in the first phase and $750,000 in the second phase.  A department  at Georgia Tech, that is funded by the state, will help not just Georgia Tech, but any qualified Georgia related entrepreneur,  to apply for SBIR awards.

ROB:          This is Rob Hassett with btobmagazine.com.  Today, I’m going to be interviewing Stephen Fleming who is in charge of commercialization activities at Georgia Tech.  You know Stephen, you’re the only person I know that went to Georgia Tech and majored in a science or engineering field and had a 4.0.  I don’t want to put you on the spot, but I’ve never known anyone else who did that.

STEPHEN:      It was a lot of work.  I enjoyed school.  I had a lot of people, you know, complain about their time at Tech.  You know, Ma Tech screws you and things like that.  I actually had fun at Tech.  I enjoyed it.

ROB:               And after Tech you worked for Bell Labs, right?

STEPHEN:      Right.  I worked for Bell Laboratories and I usually describe that as back when that meant something, back before divestiture, when we still had, I think it was, seven. Nobel Peace Prize winners on payroll, and I think three of them were in my building.

ROB:               And what were you doing for Bell Labs?

STEPHEN:      Working in fiber optic lasers.  My specialty is optical physics, and I was working on a new class of a conductor laser to be used for fiber optic telecommunications.

ROB:               And then you went to Nortel?

STEPHEN:      Nortel, in the early ‘80s, after the divestiture.  This was back when Nortel was still a fabulous company to work for.  Obviously, it’s fallen on hard times in the last year or two.  I worked through the engineering ranks, system engineering, and got into product management, and then into general management.  So I did a little of everything at Nortel.

ROB:               And you worked at other companies and eventually ended up at a venture capital firm, didn’t you?

STEPHEN:      Right.  When I left Nortel, I did a venture-funded startup which went spectacularly broke, and of course, that qualifies me to give people advice on how to do it themselves.  So I was recruited into the venture capital business here in Atlanta as really a spin out of the Georgia Research Alliance.  And it’s ironic because fifteen years later, I’m now working closely with the Georgia Research Alliance; in fact, with some of the same people.  We raised about $260 Million of venture capital, which in the southeast, made us a pretty substantial fund, focused entirely on early stage technology.  We did a bunch of deals mostly here in the southeast, made a little bit of money, and were, I think, a part of the ecosystem that flourished here for a while in the late ‘90s and early 2000s.

ROB:               That venture firm was Alliance Technology Ventures, right?

STEPHEN:      That’s right.

ROB:               How many of the companies that you worked on went public?

STEPHEN:      I did four IPOs.   I did 18 deals total and I think 7 or 8 of them got acquired at some sort of positive number and a couple of them went bankrupt.  I mean, you know, that’s the nature of the game.

ROB:               Can you name a few that listeners may be aware of?

STEPHEN:      The only ones that they might have heard of is RF Micro Devices, which is a semiconductor company up in Greensboro and Highpoint, North Carolina, which makes semiconductors for cell phones.  Now it’s for almost any wireless device, a big public company.  And the other which you’d at least recognize the brand name of, at the time when I invested in it, it was Sportsline.com.  It is now CBSSportsline.com.  It belonged to Viacom, and it’s the website for CBS Sports.

ROB:               Sounds good.  And then, at some point, was it about four years ago, you became responsible for the commercialization of inventions at Georgia Tech?

STEPHEN:      Right.  When I was in the venture capital business, I had pulled about 5 deals out of Georgia Tech research, so I had some familiarity with the other side of the equation.  As you mentioned, I’m a Georgia Tech alum.  I love Georgia Tech.  I’ve been involved with Georgia Tech ever since graduating.  And when I got out of the venture capital business, I started doing some volunteer work there on campus.  That volunteer work proved the axiom that if you set the price of your time at zero, the demand is, indeed infinite.  I spent a lot of time here at Georgia Tech doing volunteer work and somehow wound up on payroll.  I’ve been here full time for the last 4 years.

ROB:               Stephen, about how many inventions are made at Georgia Tech that you guys become aware of each year?

STEPHEN:      We don’t look at any of the classified research, and there is a little bit of classified research done at Georgia Tech, actually a lot.  But we don’t see any of that.  If you filter that out, we’re looking at probably about three hundred invention disclosures a year which, for a university without a medical school, is actually quite a lot.

ROB:               How many make it into the venture lab program that you are in charge of?

STEPHEN:      Usually between 10-20%.  So I’d probably say 30-40 a year have at least some combination of strengths, which would include both what our folks and those who have private sector backgrounds, we’ve all worked in venture-funded start ups, and believe there’s potential for a start up, and that there’s somebody on the invention side who’s interested in a start up.  You really need to have both — neither one is sufficient alone.

ROB:               About how many make it out of your program per year?

STEPHEN:      Well, we just had a graduation ceremony about a month ago where we graduated 7 for the year.  And that’s probably about right, assuming there’s a time delay.  So I wouldn’t say that, you know, 40 come in one year and 7 make it out, but it’s probably on that order with a couple of years’ time delay built in.  I’d like to get to maybe 10 a year, but you know, that’ll happen.

ROB:               And I know you can’t give specific figures but generally, what does Georgia Tech get out of the deal?

STEPHEN:      Well, there’s a couple of things.  The obvious one is the least important which is licensing revenue.  We actually own the intellectual property; that’s the way that federal law works.  We write a license, a contract, with the start up company, and Georgia Tech gets a mixture of equity in the start up company and some royalties on the sale of the products that are based on that technology.  And that’s a nice thing to happen, it pays a couple of bills around here.  The more important things we get are more difficult to quantify.  For example, these companies that form, maybe they really want the next generation of the technology, and they sponsor research back at Georgia Tech.  That will pay for graduate students to do their thesis work on building the next generation of technology.  These companies will hire Georgia Tech graduates, so it’s a place for both undergraduates and graduates of Georgia Tech to go find careers here in Georgia without having to leave the state.  If they’re successful, they’ll actually give money back.  You look at the Klaus Advanced Computing Center at Georgia Tech; it’s a gorgeous, quarter million square foot building, and the core gift behind that was given by an entrepreneur who started his company as a sophomore here at Georgia Tech.  So there’s a lot of benefits that flow back to campus other than just the licensing revenue.

ROB:               And also sometimes you license the technology directly to a large corporation, right?

STEPHEN:      Oh sure.  You know there’s a lot of technologies that don’t belong at a start up, and it’s kind of the reverse of what I said a few minutes ago.  Either we don’t think that the technology has stand alone potential, in other words, it really belongs as a feature or as a part of an industrial process for a bigger company, or it may be just that the inventors have absolutely no interest in being involved in a start up.  And in that case, it’s kind of hard to build a start up if the creators of the intellectual property aren’t at least neutral to supportive, and if they’re hostile, the idea is very difficult.  So we license things to Intel.  We license things to IBM.  We license things all over the map.

ROB:               And when the inventor starts a small company, you help put together a team if necessary, right?

STEPHEN:      Yeah.  We really focus on three things when we’re trying to get a start up out the door here at Venture Lab.  Those three things are:  First, pulling together a business plan that makes sense where all the numbers add up, and we can believe that in the face of the competitive environment that there’s justification for creating a new company.  The second is recruiting management as you said.  We’re not really big fans of having our professors become CEOs of companies.  We want them to be involved but we don’t want them to be the person in charge.  So we recruit and we play matchmaker and find successful entrepreneurs here in the community.  And the last thing we do is find some money.  We’ve got several little pots of money around that we can dip into for small amounts and help get the company through that very, very early period.  Some people call it the valley of death.  I think that’s over dramatic, but you’ll find that phrase a lot in literature for getting a company started up and ready to talk to customers.

ROB:               And many of the small companies, after they finish going through the Venture Lab program, they end up at the ATDC for awhile too, right?

STEPHEN:      It’s not required; it certainly is encouraged.  You know our graduation criteria out of Venture Lab happens to look a lot like the entrance criteria into ATDC; that’s not by coincidence.  You know we’re corporate siblings so we’re both part of the same organization, the Enterprise Innovation Institute at Georgia Tech.  And a lot of our companies do find that ATDC is the logical next step for all the benefits that it provides, both in terms of the bricks and mortar facility, but more importantly, in terms of the coaching and in terms of the connections they can develop while being part of the ATDC for a couple of years.

ROB:               And just for the benefit of the listeners who may not have lived in Atlanta a long time, the ATDC is the Atlanta Technology Development Center which is located at Georgia Tech in the same building as Venture Labs, right?

STEPHEN:      Except I’ll correct you on two things.  It’s the Advanced Technology Development Center, not the Atlanta Technology Development Center.

ROB:               I’m sorry.

STEPHEN:      The reason that’s important is we do have a facility in Savannah.

ROB:               Oh okay.  And you also do something, you run something called Tech Partnerships?

STEPHEN:      Technology Partnerships is another group here at Georgia Tech.  We’ve developed a lot of hard earned knowledge on how to truly commercialize technology, taking it from the laboratory to the market, whether it’s through a start up or through it’s licensing.  And that knowledge is worth something.  So we have a group, as part of commercialization services, that does that on a contract basis, and we’ve had contracts .  We currently have one with NASA; we’ve done it for the Navy; we’ve done it for a foreign government in partnership with a U.S. company.  So we actually will help other people figure out what their technology is, which of their technologies could be suitable for start ups, and help do things much like we do for Venture Lab with the exception that we don’t actually put money into those.  We only put money into the companies that have Georgia Tech intellectual property.

ROB:               Understood.  And then you also help small companies apply for research grants, right?

STEPHEN:      There’s a federal program which has been around for a while called Small Business Innovation Research, or SBIR.  This is a program where 11 agencies of the federal government essentially have to pay a tax of  2½% of their research budgets which has to go to qualified small businesses.  These are usually on the order of about $100,000 to start with, and they grow to $750,000 in the second phase.  This is wonderful money for start ups.  Because it’s aimed at start up companies, you’re not competing with the big boys; you’re only competing with other start ups.  There’s no equities; they’re not taking ownership, and there’s no debt component.  You don’t have to pay it back.  It’s a pure grant.  Really, all you have to do is find an agency that wants something that you have, convince them that you can develop it, and go through the solicitation and the competitive process, and it is competitive.  Once you win it, you have that money to work on developing the technology, giving back whatever deliverable the agency has asked for.  It has helped create or strengthen the growth of your company.  It’s a great federal program.  We do have a department here at Georgia Tech that is funded by the state to help anybody in Georgia, not just Georgia Tech companies, but anybody in Georgia who is interested in exploring or in applying for this SBIR awards and we help with that.  That’s a free service we provide.

ROB:               Stephen, what is the Seraph Group?

STEPHEN:      Seraph Group is a different hat that I wear.  It’s an investment vehicle aimed at high net individuals.  Mostly folks who have either looked at Angel Investing and decided that it takes more time and effort than they have because they have a day job, or they’ve tried Angel Investing and discovered that it’s a lot harder than it looks and they’ve lost a lot of money.  So what Seraph Group does is provide them a vehicle by which they can invest a certain amount of money.  Seraph Group is set up to make capital calls.  Seraph Group charges management fees and carries interest.  Seraph Group has full time due diligence staff.  Seraph Group has all the capabilities of a venture firm.  It simply does not take money from the large institutional investors so the individuals aren’t trying to compete with a pension fund to get into the mix.  Seraph Group targets early stage deals, not solely technology.  Although I’d say a preponderance of the 18 deals we’ve done have been technology related.  And the sweet spot is that between a $250,000 and $1.5 Million into a serious A-round.  That’s where Seraph Group is targeting, and that’s nationwide.  So we have 130 investors scattered all around the country.  And we’ve done deals in half a dozen states at this point.

ROB:               And you were one of the founders?

STEPHEN:      Well, I helped assemble it.  The true founder is the one full time partner.  I’m on the investment committee and helped to get it organized and helped to recruit some of the investors.  Now I spend a little of my time looking at the deals that come through Seraph Group’s deal flow and help them make the decision about which ones to invest in.

ROB:               What range of money does the Seraph Group generally invest?

STEPHEN:      Like I said between $750,000 and $1.5 Million is kind of the sweet spot for early stage investment for us.  And that’s an area in which a lot of funds have been kind of abandoned.  It’s really up to the Angel market and to new intermediate vehicles like Seraph Group to fill that.  So deal flow has not been a problem.

ROB:               So does Seraph Group invest in start ups or do they have to go through a friend an family round first?

STEPHEN:      They don’t have to.  A lot of deals do go through friends and family rounds just because that’s kind of the natural progression, but Seraph Group absolutely has been first money into several of the deals we’ve done.

ROB:               I believe you mentioned to me that sometimes, Seraph Group will invest in a deal, and then some of the Seraph Group investors that are particularly interested will buy the deal from Seraph Group, and take it over.

STEPHEN:      Yeah.  The way the model works, most of the investors that we have are involved in Seraph Group.  To be blunt, they have a lot more money than they have time.  So they don’t have a lot of time to look at individual deals.  They don’t have a lot of time to manage individual deals, but they do have significant financial ability.  So what we can do is we make the investment so that Seraph Group is the general partner and the investors are limited partners.  The general partner makes the investment.  Then it shows that through a showcase, that we do three times a year, to the limited partners.  And the message is essentially that if you like this deal, if you’d like to put more of your financial wherewithal into that deal, we’ll transfer a portion of  Seraph Group’s holdings to you at Seraph Group’s cost.  We don’t make any money on that transaction.  But we get our money back from the investment that we’ve made, and it essentially lets us recycle our money if we do it right, 4-1 leverage.  To be accurate, we’ve got 130 investors at a $100,000 a piece.  That means we have $13 Million under management.  But since we’ll do this 4-1 leverage, we get to act like we’re a $65 Million fund because we’re making investments that would be appropriate for a $65 Million fund.

ROB:               Also, you are involved with a group that’s trying to develop an airplane that can actually make it into orbit, right?

STEPHEN:      Well, I’m involved in a spaceship company.  I don’t know if I’d call it an airplane that makes it to orbit.  That’s going to take a little longer and cost a little more than we’re working on right now.  We are building a runway-launched vehicle, which takes off horizontally just like an airplane, then goes vertical and will go into space.  It does not go into orbit.  There’s a difference between being in space and being in orbit.  Space is just a matter of altitude, whereas orbit is a matter if speed.  You have to be going fast enough that when you fall you don’t hit the ground, which is essentially the definition of orbit.  But we are building a suborbital; in other words, just a straight up and down vehicle which will be a really fun ride for passengers.  And there’s also some scientific and industrial applications for the flight that we’re selling some seats for that as well.  But the one that catches everyone’s attention is obviously passengers.  The company’s called XCOR, X-C-O-R, and we have partnership with a company that is selling tickets for us.  So far, we’ve taken deposits on 22 tickets for this very fun ride.

ROB:               How much is a ticket?

STEPHEN:      $95,000 which is a lot of money, but it’s not the $20 Million which is what people thought space tourism was going to cost which, of course, gets you to the international space station.  We don’t go to the space station.  You don’t get to hang out in orbit for a week.  You are strapped into the seat of a small vehicle that looks a lot like a jet fighter except it’s powered by rockets.  And you get a really fun ride going up, and you get a great view.  You get a little bit of microgravity, which people call zero gravity.  And you come down and land at the same runway you took off from.  There seems to be a pretty significant category of individuals who believe that’s absolutely worth $95,000, and those willing and able to pay.

ROB:               Has the aircraft, the rocket, been tested yet?

STEPHEN:      The engines have flown in a winged vehicle that we built under contract to a private company.  So the engine has been flown, I don’t know the right number, but probably on hundreds of flights.   So it is a well-tested engine.  The actual vehicle is still under construction so that hasn’t been tested yet.  But I’ve gone out and sat in the cockpit of the vehicle being built, and I fit.  So I’m excited about getting a chance to ride it one of these days.

ROB:               Wow!  Stephen, if anybody wanted to get in touch with you about any of these programs, is there one number they should call, or a website?

STEPHEN:      I’m pretty easy to find on e-mail; just Google me.  You have to put “Stephen Fleming Atlanta,” or “Stephen Fleming technology,” or “Stephen Fleming Georgia,” because if you just put “Stephen Fleming” you will find out a lot about New Zealand Cricket.  There’s another Stephen Fleming out there who runs the Cricket team.  But I’m pretty easy to find and all my contact information is on my blog, which is academicvc.com.

ROB:               That’s all they need?  They could get all your information at academicvc.com?

STEPHEN:      That’s right.

ROB:               Well, I really appreciate your being on the program, and it’s been a pleasure Stephen.

STEPHEN:      I’m happy to do it anytime.  Thanks for the call.

ROB:               Thanks a lot.






Bill says that converting corn to ethanol useful for powering motor vehicles uses approximately ninety percent (90%) as much energy as it creates.   He goes on to say that  converting cellulose from pine trees to ethanol uses about thirty percent (30%) as much energy as it creates.

ROB:               This is Rob Hassett for btobmagazine.com.  Today, I’m going to be interviewing Bill Bulpitt who is the senior engineer with the Strategic Energy Institute at Georgia Tech.  Hey, Bill.

BILL:              Good morning, Rob.  How’re you?

ROB:               Doing good.  How are you doing?

BILL:              I’m all right.  A little cold today.  A little cold.  The energy meters will be spinning today.

ROB:               I appreciate your being on today.  Now Bill, you have a mechanical engineering degree from Georgia Tech.

BILL:              Right.

ROB:               And you were a co-op while at Tech.  You were a co-op in Florida somewhere, right?

BILL:              Yeah.  I worked for Pratt and Whitney Aircraft for two years in West Palm Beach when they were building rocket engines for the Saturn program and also the gas turbine engines that powered the SR71, so it was pretty exciting stuff.  And then I worked for an additional year as a co-op with Scientific Atlanta here in Atlanta.

ROB:               Well, great background there and in school.  And then you worked for the Georgia Research Institute.

BILL:              I worked for the Georgia Tech Research Institute when I got out of the military in the late ‘70s and early ‘80s.  And a lot of what we were doing at that point in time back then under the Carter administration was renewable energy research.  But funding for that kind of started drying up in the early ‘80s, and so I ended up leaving and eventually joining a subsidiary of the Southern Company and building power plants.

ROB:               And that became Mirant when it was spun out?

BILL:              Right, it started out as Southern Electric International and then we changed the name to Southern Energy Incorporated, and then that subsidiary was spun off from Southern Company and was then called Mirant, which is still in business in Atlanta.

ROB:               And then you went in to environmental consulting for a fairly short time, right?

BILL:              Right.  I had done environmental consulting for a time before I came to the Georgia Tech Research Institute down in Florida.  I was doing that back in the mid ‘70s.  I was doing air pollution control work for paper mills and power plants down there.  And then when I left Mirant, I did some environmental work again, related mostly again to industrial companies and the power industry before coming back to Georgia Tech four years ago.

ROB:               So you came back to Georgia Tech and joined the Strategic Energy Institute about four years ago?

BILL:              Correct.  Right.

ROB:               And what is the mission of the Strategic Energy Institute?

BILL:              Well, we have several missions.  But the overarching mission is to be a coordinator, an umbrella, for energy research programs at Georgia Tech, and also in cooperation with other universities.  We actually, believe it or not, do a lot of work with UGA and have a pretty cordial agreement with them, much more so than on the football field anyway.  And there are so many different schools at Tech and so many different research centers at Tech that all have an interest in energy.  And what we try and do is get people working together and get people chasing funding together from various sponsors in the hopes that overall, the final product will be better than if each school was trying to do it by themselves.

ROB:               So you have various initiatives at Georgia Tech and in cooperation with other schools to try and come up with solutions for the energy issues that we’re dealing with correct?

BILL:              Correct.  That’s correct.  For example, UGA and Georgia Tech are working quite closely together in the biofuels area, and we’re doing research programs in making cellulosic ethanol from the pine tree resource.  And that has a good future in the state, and hopefully, we’re going to be able to get more funding, certainly from the new administration, that’s what we’re looking for anyway.

ROB:               I have a list of sources of energy and what I’d like to do is go through each one and get your comments about whether you think it’s a long term solution or a dead end, etc.

BILL:              Okay, sure.  Now this is my opinion now.  You know, it’s not necessarily Georgia Tech’s opinion, but I guess I could say it’s based upon twenty years of experience in the utility business and additional years in the research business.

ROB:               First of all, let’s start with the obvious which is oil.  What do you think about the future with oil as a source of energy for us?

BILL:              Well, I think oil has its place.  Now 98% of transportation obviously in this country still comes from oil.  I think maybe 2-3% has been displaced by natural gas, the Boone Pickens Solution, which makes sense in certain applications, particularly for fleets.  For example, the buses in Atlanta, most of them are fueled with natural gas.  But for better or for worse, oil obviously is the fuel of choice for transportation.  Now what we’re trying to do with the cellulosic ethanol is make a contribution towards displacing some of that oil at least at a 10% level, which is the gasohol that is 10% ethanol, which virtually is available in most places now in this country.  And ultimately, we’d like to see the availability of E85, which is 85% ethanol and 15% gasoline.  A lot of people are driving vehicles they don’t even realize are capable of using this fuel.  It was started some years ago, let’s say ten years ago.  In particular with SUVs and things like Ford Explorers and so forth to where they were capable of burning this E85 because it got … And I don’t know all the details, but it got the auto manufacturers some break on their corporate average fuel economy numbers if they made so many cars that were compatible with this flex fuel.  But anyway, you know, there’s a lot of people that I work with at Tech and a lot of people that we keep up with, in particular people like Matt Simmons out of Houston, who have published a number of papers and books related to peak oil and the end of oil, and I believe there’s a lot of evidence that certainly production of oil probably peaked back in the ‘70s worldwide.  And that’s not to say that there aren’t undiscovered resources out there; I believe there are.  But at the end of the day, the competition for this very, very valuable resource is only going to get more intense.  Right now, we’ve got a bubble again where oil is $40 a barrel after being $140 six to nine months ago.  It will be back.  It will be back.  We’ve seen this before.  I mean I can remember very vividly the energy crisis of ’73 and ’79.  And we don’t need to be in a place where, and I’m talking about the United States, we’re totally manipulated by offshore resources.

ROB:               No doubt.  What about diesel?

BILL:              Well diesel, unfortunately, diesel has got a very bad reputation in this country.  And I have to lay that on some of the failed products that were sold as diesel automobiles back in the ‘80s.  And, you know, Americans in general got kind of a bad taste in their mouth about the use of diesel as a transportation fuel.  Now obviously the truckers have never changed, but I think as I was telling you another time, two times I’ve rented diesel cars, actually three times, diesel cars in Europe.  One time was an Audi A6 which was a beautiful car anyway, but it was a diesel, in France.  And another time it was a S40 Volvo in Ireland.  Now the S40 Volvo which is a relatively small sedan, it’s smaller than a Camry, or maybe almost as big as a Camry, but this was a six speed, a manual transmission six speed diesel, it had a lot of get up and go, it got an honest forty miles a gallon, it was quiet, it was a pleasure to drive and, you know what, if I could buy that car in America, I would consider it, but I can’t.  It was never brought to this country because for better or worse, a lot of offshore manufacturers perceive that diesels can’t be sold in this country, and a lot of it has to do with ancient history, but I don’t know how that’s going to get changed.  Now you know, as you’ve seen with the whole deal last year and even today, the price of diesel has been significantly higher most of the time than gasoline, and that’s to do with the so-called refinery split, and that’s because they don’t tune the refineries in this country towards diesel; they do it towards gasoline, and that makes the price of diesel higher.

ROB:               So diesel could be made to be competitive with oil on price and you’d get a lot more mileage anyway?

BILL:              Yes, that’s right.

ROB:               It still requires oil, but I guess if everybody was driving diesel, it would require less oil.

BILL:              That’s correct.  Sure.  You know, and that has to do with just the mechanics of the engine.  I mean I don’t consider myself an expert on diesel, you know.  Thermodynamic efficiency of a transportation engine has a lot to do with compression ratio, and diesel engines are twenty to one compression ratio.  They’re compression ignition; they don’t have spark plugs.  And that in itself improves the overall efficiency of the engine which allows it to get much better fuel economy than the same size gasoline engine.

ROB:               Now you had mentioned to me though that diesel does emit particulate matter as far as environmental issues?

BILL:              It’s always been a problem with particulate yes, and that’s unburned carbon particles.  And I think that they’ve gone a long way in improving fuel injection systems.  Again, I don’t consider myself an expert on diesel.  And there is evidence that some of the restrictions in this country on emission standards in some of the states, I mean California for example, are probably much stricter than what most of these European offerings have to meet.  I think as environmentally astute as the European Union is, I find it hard to believe that they’re really that lax, and I can’t tell you with certainty, but their standards may be the same as the worst in America at this point; I don’t know.  Anyway, there are some things in the diesel emissions that are not desirable compared to gasoline; let’s put it that way.

ROB:               What about nuclear, Bill?  Nuclear energy, do you think we have a future, that there is a future for that?

BILL:              Well, nuclear has a place for sure, I think.  Now you know … I mean I worked in the utility business for almost twenty years.  None of what we did had to do with nuclear energy.  Most of what we did, really most of it had to do with natural gas.  But we did do some coal and some other fuel oil as well in central station generating plants.  But in this country, what’s happened is obviously, you know, I can remember when Three Mile Island happened and how bizarre it was that that particular month in time when that happened, that movie came out with Jane Fonda in it about the meltdown of the nuclear plant.  I’m trying to remember what the name of it was, but it really set the whole country abuzz on the dangers of nuclear power.  The fact of the matter is that what happened at Three Mile Island was not all that bad in terms of what was actually released to the atmosphere and the danger that was there for the local residents near Harrisburg, Pennsylvania.  But Chernobyl obviously was just a mammoth event that even today … That was 1986, so 23 years later, I don’t think we fully understand what all of the effects of Chernobyl have been.  Obviously, there were thousands of people that died from the radiation poisoning, and those that were involved in the so-called immediate clean up, et cetera, and that was really one of the worst environmental events in history.  We only now are beginning to realize what the long term effects on people were and so forth.  But the fact of the matter is that the Chernobyl reactors were of a type that were inherently not nearly as safe as any of those that were built in the U.S., and now the new designs that are being put out there by Westinghouse and General Electric and other manufacturers, Arriba.  These nuclear plants are going to be inherently much more safe because of the failsafe mechanisms that in the event of any kind of failures of cooling water pumps, et cetera, et cetera, there will be orderly shutdowns of the reactors in a safe manner.  Now the problem with nuclear that people just have to realize is the cost.  And I’m talking about capital cost.  Capital costs that are being published right now for this new wave of nuclear plants that are being permitted are something in the order of between $6,500 to $8,000 a kilowatt.  Well, that’s two to two and half times more on a dollars per kilowatt basis of a coal plant that could be built today, and really five times more in terms of cost than the coal plant that was built only ten years ago.  So a lot of this is driven by commodity pricing of steel and concrete and copper for the generators, and exotic metals that are needed in the reactors themselves and so forth.  But the fact of the matter is that people just need to realize that the electricity coming out of these reactors when they go commercial, when they come online, is not going to be cheap.  It’s not going to be low cost power that we have been enjoying for the last twenty years.

ROB:               But it does reduce the use of natural gas, I guess which is the fuel of choice right now for power plants, right?

BILL:              Right.  Natural gas is the fuel of choice and a lot of it has to do with the fact that people like to beat up on the electric utilities, but the fact of the matter is that they don’t have much choice right now.  It’s at their peril that they would try and start the process for permitting a coal plant because there’s so much momentum against them right now related to global warming and the greenhouse gas issues, and emissions issues, and not-in-my-backyard issues, and the mountaintop mining issues, and all these other things.  And the ash bills like we saw in December up in Tennessee from when the TVA plants … There’s a lot of things working against coal right now.  So that’s why a utility executive that is forced to face the need for new generation, his obvious solution that can be done quite quickly, I’m talking about a plant that can be permitted and brought commercial in three years or less, probably, is to build a combined cycle gas turbine plant of the type of plants that I built when I was with Mirant.  They are quick to market, but the big unknown there is what’s the price of natural gas going forward?  I mean what’s the price going to be?  Georgia Power’s putting in a bunch of new gas-powered generation out here at Plant McDonough on the Chattahoochee River, and I think it’s going to go commercial about 2016.  Well, the price of the construction of the plant is going to be reasonable, but nobody knows what the fuel price is going to be in 2016.  They have projections, but who knows how good they’re going to be.

ROB:               Now France relies for their electricity mostly on nuclear power plants, right?

BILL:              I think about 80% of their generation comes from nuclear, and the remainder … They do have some hydro in their mountainous regions, and they probably have some natural gas.  I don’t know if they have any coal at all in France.  They may in some regions, but I’m not aware of it.

ROB:               You had told me that each of their plants is a lot less than our nuclear plants, and you told me why.  What was that reason?

BILL:              Well, when they decided to … When Electricite de France, which is a government agency really so they have the benefit for better or worse, I say the benefit, but they have an agency which is responsible really for the overall generation of electricity for the whole country.  And that cuts out a lot of the red tape and a lot of the blind alleys.  And once they make a decision they can move on it.  And they made a decision some years ago, and I’m going to say thirty or forty years ago, that nuclear was the way to go for France, and they felt like that was a good choice.  And so what they did is they standardized a reactor design.  And I don’t know the details of whether or not this was EDF’s own engineering that did some of this or if it was some of the big consultants that worked with them, or how exactly it came down.  But they standardized a reactor and they replicated it twenty times let’s say for this particular design, whereas in this country, in the U.S.,  virtually every reactor built in the ‘60s and ‘70s up in to the ‘80s was a custom design.  It was engineered to the nth degree, overseen to the nth degree by NRC.  And I’m not saying that was a bad thing.  I mean you’ve got to have the watchdog regulators in the nuclear business.  But as a result, each plant was like a fresh sheet of paper and when you do that, an awful lot of money gets spent on consulting fees and construction fees and so forth.  So the price of a plant goes up.

ROB:               Yeah.  I’d imagine so.  Alright, now let’s get in to ethanol.  What is your opinion of ethanol made from corn?

BILL:              Well ethanol made from corn it gets a pretty bad wrap from a lot of quarters, and the main thing being some people say well it takes more energy to make it than the value of the energy that’s in it.  I don’t believe that.  I believe it’s a net plus, but it’s not a huge net plus, whereas ethanol from cellulosic materials which we’ll talk about in a minute I assume, is a better energy balance.  But here’s what you have to think about.  This is in my way of thinking, okay.  Any ethanol that displaces petroleum fuels in a mixture in this country potentially represents that many, whatever many, fewer barrels of oil that we’re importing from people that don’t necessarily like us all that much, whether it’s coming from the Middle East or Nigeria or whatever.  Now this has been a boon for better or worse to a lot of farmers in the heartland, particularly in places like Iowa, Minnesota and the Dakotas for example.  There have been all of these corn ethanol plants built that have been huge moneymakers for the farmers, and the farmers are typically part owners.  There’s a lot of them that have been built by agricultural co-ops which the farmers actually own.  And so when gasoline got so high and the price of ethanol tracked behind it, these people made a lot of money over the last ten years.  Now was that at the expense of somebody else?  Well, you know, the whole food versus fuel debate will go on forever.  Obviously the price of corn got very high.  Did it affect the price of chicken feed?  Did it affect the price of tacos?  Did it affect the price of anything based on corn?  Sure it did.  Absolutely, I believe that happened.  But I don’t think it’s necessarily a bad thing.  People like to say the ethanol experiment in this country was an absolute disaster.  I don’t think that’s true.  I think it has at least focused the debate on what the avenues are that we can make renewable transportation fuels from.

ROB:               Now what is the advantage of making ethanol from pine trees, which I understand is one of your projects?

BILL:              Well, the energy balance on pine to ethanol can be as good as … Let’s say the total energy for the ethanol that’s produced, perhaps 30% of that energy goes to making it and the rest is a net plus.  So the energy balance is better than corn to ethanol.

ROB:               What is it for corn to ethanol?

BILL:              Pardon me?

ROB:               What is the balance for corn to ethanol?

BILL:              It’s probably about 10%.  In other words, it’s probably about 10-12%.

ROB:               Versus 70%.

BILL:              Versus what?

ROB:               Versus 70% for —

BILL:              Correct.  Correct.  And why is that?  Well, you’ve got to look at … Now when I talk about cellulosic ethanol, I’m talking about in the case we’re focused on, for example, pine trees, pine plantations, for example, that have been grown for pulp and paper in the Southeast for the last fifty years.  These plantations, a lot of them have been grown on land that was marginalized years ago, used to be tobacco land, used to be cotton land, a lot of it pretty low productivity compared to the beautiful soil that you see in places like Iowa and western Minnesota okay.  The black loam that is so productive for vegetables.  So you’ve got a lot of land in south Georgia that’s sandy and it really is not very productive for growing vegetables that had been used for cotton and what not in the past, and has been changed over for growing pine trees.  Well you’ve got an infrastructure in place too that has served the pulp paper industry.  And you don’t have the cultivation needs and the energy needs in terms of energy to make fertilizer, energy for tractor fuel, energy to run irrigation pumps that would make growing corn in these same regions so energy intensive relatively. So you go out there and you put out seedlings for pine trees and you let them grow for fifteen years, then you thin them.  Ten to fifteen years, then you do a thinning.  Then you let them grow another ten years, thin them again, and then if you … The whole thing about pine trees in this state or in the Southeast, you’ve got a lot of different ways to go in the past.  You go to saw timber which is very valuable material.  You go to pulpwood which is valuable, but less so.  And in the case that we’re talking about, the demand for pulpwood has waned in the past five to ten years because pulp and paper, the pulp and paper industry is not as robust as it once was.  90% of the commercial forest land in Georgia is owned by tree farmers now, whereas thirty years ago, 90% was owned by paper companies.  The tree farmers want a new outlet for their product which is their trees, and they’re all for the rise of the cellulosic ethanol market.  So that’ll give them a new place to sell their product.

ROB:               Is ethanol from pine trees, is it available now for cars?

BILL:              No, it’s not.  There have been some demonstrations on a small scale done here and there.  We’ve made some at the Georgia Tech laboratories here, okay.  And there’s a plant being built down in Soperton, Georgia by Range Fuels.  They use an entirely different process than we do.  But at the end of the day, they’re going towards a fully commercial plant to make cellulosic ethanol from pine.  I’m not sure, I think the first phase of that plant is slated to start making some fuel at the end of ’09 or early ’10, but I don’t know when they’re going to be fully commercial.

ROB:               Why has the ethanol from pine trees not progressed more quickly?

BILL:              Well, it’s kind of interesting.  Back when I was here at Georgia Tech back in the ‘70s, we actually had a pretty impressive program to make ethanol from trees.  Back then, it was funded by the Department of Energy, but then it was all hardwoods, okay?  And DOE sponsored various programs to make ethanol from hardwoods because hardwoods were readily available, and in a lot of places are considered junk trees.  Whereas certainly in the Southeast, pine timber was considered untouchable because it all belonged to the paper companies, and the paper companies knew where their pine trees were going.  They were going in to the paper mill or maybe to their satellite sawmill, but certainly not for any other use.  And they just weren’t available, so you weren’t going to be able to get that material.  Now, like I said, it’s changed.  It’s flipped the other way, and most trees out there are owned by private landowners in the Southeast, and also there’s just a slow down in some of the other markets and the owners want to be able to hedge their bets and go to a different place.

ROB:               Bill, we’re about at the end of the time we’ve got allotted.  If you were the Secretary of Energy right now or Barack Obama our president, what would you be trying to do on the energy end?

BILL:              Well, you know, there’s been a lot of talk in the past ten years that energy’s come back up as a point of discussion, of what the silver bullet is, and there really isn’t a silver bullet.  But this goes back … Unfortunately, if I wanted to be nostalgic and somewhat disappointed, we go back to the days of the Jimmy Carter era in the late ‘70s when we were coming off of the second energy crisis and we were going to have a solution, and we were going to get America off of oil and we were going to become more self sufficient.  There was an opportunity then to advance research in a lot of fronts.  There’s another opportunity now.  I hope it sticks this time.  I think renewables have a role.  They have a role in this country.  Now, it’s not a be all and an end all, because let’s face it, when I built a natural gas fired 550 megawatt power plant with gas turbine engines, the last project I did in Michigan for example, I could put 550 megawatts of generation on about four or five acres of land with a gas pipe coming and call it done, okay.  Very quick, very simple, very clean.  Now, the only unknown there is what’s the price of that natural gas going to be?  But we need to keep that on the table.  We need to keep coal on the table.  We need to clean up coal.  We need to continue to follow the clean coal route at some level.  Because we still have two hundred, two hundred fifty years worth of coal reserves in this country, but we’ve got to be smart about how we use it.  And the public sentiment is quite against it at the moment.  I think we do need to advance nuclear power.  We’ve got to figure out what the waste solution is on that.  We’ve got to get Yuka Mountain or an equivalent in operation to deal with that.  But renewables have a place.  And the point I was going to make with the gas turbine is a 500 megawatt natural gas fire plant on three acres … The equivalent to do that with a wind farm will take square miles, okay.  That’s just the reality of it.  A wind machine, for example, has only a 30% capacity factor, and you have to space them apart.  And you can only put them in places where the wind blows well.  And we did a study along with Southern Company off the coast of Georgia that shows there is a wind resource here.  We could put some substantial wind farms off the coast and use that as renewables.  There’s a lot of biomass in the Southeast that could be utilized.  We have to be smart about it.  We have to make sure that five plants aren’t built on top of each other and the price of wood becomes three hundred dollars a ton.  That’s not going to work.  So somebody’s got to be minding the store on smart growth in power plants, for example.  But anyway, I would say to the Obama administration — advance the ball on renewables.  Make it more of a factor in this country like it has become in Europe, but don’t turn your back on traditional technologies.  You’ve got to make sure you’ve got them advancing as well.  And if anything new comes down the line in terms of nuclear or what not, it can be utilized.

ROB:               Bill, if anyone wanted to follow up with you, how could they reach you?

BILL:              You can call me at the Strategic Energy Institute at Georgia Tech.  My number’s (404) 385-6939.  Or you can email me at bill.bulpitt@energy.gatech.edu, or you can go on the main Georgia Tech website and Google on the website “energy institute,” “strategic energy,” and our website will come up.

ROB:               Bill, thanks a lot for being on today.  It was very informative.

BILL:              Alright, you’re quite welcome anytime.



Mark Braunstein, an acknowledged authority on the health care industry, says that those who have objectively studied the issue, eventually realize that the economics of the healthcare industry are not the same as for other industries and that healthcare operations in which the doctors are paid a salary generally provide better medical care for the money than health insurers that pay doctors based on such factors as the number of procedures.

Q:           This is Rob Hassett with btobmagazine.com.  Today, I’m going to be interviewing Mark Braunstein who is a Professor of the Practice in the College of Computing at Georgia Tech, and who is also the associate director of the Health Systems Institute at Georgia Tech.  Mark has an undergraduate degree from MIT, and was always interested in technology and computers, and is also a medical doctor.  He attended medical school in Charleston, South Carolina near his home.  Today, we’re going to be talking about the current healthcare crisis and what can be done about it.  Mark, it’s a pleasure having you on today, and I understand that after you obtained your medical degree, you actually became a professor in that same medical school.

A:           Yeah, I was on the faculty there for three or four years.  I had actually gotten a grant while I was still a medical student, to develop an early electronic medical records system.  The idea was really to have a model of healthcare in the community. So we had pharmacists and dentists and social workers, and all sorts of people that you would run into in the healthcare system community.  The electronic medical record that we developed actually served all of those disciplines, so the idea being a unified record that everybody could use and see.  The pharmacy part of that attracted a lot of attention.  Most listeners to this probably recognize it when they take a prescription to the drugstore and they use a computer system to fill that prescription. What they probably don’t realize is that a computer keeps a record of all the medications they’re on and checks them to make sure that they’re safe when taken together and that the dose is appropriate, and so forth and so on.  We were actually the first people to do that.  And there was so much interest in that that, I approached the medical school with the idea of starting a company to commercialize the technology, which we did.  It attracted the attention of Kaiser Permanente and the U.S. military, both of which ran huge pharmacies back then.  And I actually thought I would remain an academic, so I went out looking for a company that would handle this thing commercially, and ended up finding National Data Corporation over here in Atlanta.  And we did an arrangement with them and, in retrospect, that was really the beginning of NDC Health, which many people will recognize as a company that got to be pretty large.  And two or three years later, they actually made me the proverbial offer you can’t refuse, to come over here and run that business for them, which I did.  And I ran it for eight years.  It grew to be a very successful business in the pharmacy automation field before I left and came over to Georgia Tech and started another company, this time developing handheld computer-based electronic medical records for the home healthcare industry.  And I got involved with Georgia Tech as a result of that and remain involved, and that company was acquired almost 3 years ago.  Several people over here wanted me to come and help them develop programs in the whole area of health information technology which, as again many listeners will probably know, is a major thrust now.  President Bush made a big commitment to health information technology back in 2004 in the State of the Union Address because he and his Administration saw it as part of the solution to improving the quality and reducing the cost of healthcare.  President Obama continued that.  Not a lot of people seem to realize this.  He actually pretty much continued President Bush’s programs, both in terms of the approach, and the dates.  But the Bush Administration never actually funded the program, and Obama saw the Stimulus as a way to do that.  And there’s $20 Billion in the Stimulus that is going to incent physicians and hospitals around the country, particularly those in rural areas, to adopt electronic technology and a more modern approach to practicing medicine, which those of us in the field believe, and hope, will lead to a more efficient and effective and safer healthcare system.  That’s kind of my career in a nutshell.

Q:           That’s quite a career, Mark.  Mark, we know that most medical providers have computerized their financial information, but that most health information has not been computerized.  I know you are a big proponent of that.  What have the obstacles been to having that done?  In other words, why has the health data not been saved on computer and available in databases as has the financial information?

A:           What we’ve never been able to do before is overcome the disincentives that exist within the healthcare system that have actually kept physicians and hospitals from fully embracing electronic medical record technology.  In the case of physicians, for example, studies would tend to indicate that most of the financial benefit, probably somewhere around 80% of it, accrues to payers because electronic medical records among other things can help eliminate duplicates of tests and procedures and they can also be used to alert physicians when the particular test or procedure they want to do might not be the best choice.  Well, that doesn’t financially benefit the physician.  In fact, it may reduce his or her revenue in that particular instance.  So it’s hard to get physicians excited about spending $50-100,000 of their own money to install something that won’t really have all that much direct benefit to them.  Now when you make healthcare more efficient, that saves money for whoever it is that’s paying for the healthcare, and in large part in our country, that is employers and the government.  So that’s really the rationale for the government for providing these financial incentives if it feels that it will benefit.  The cost of doing it is probably going to be about $50 Billion when all is said and done, which is a lot of money.  But I was at the conference in 2004 when the Bush Administration kicked this off, and Tommy Thompson, I think he’s the former Governor of Wisconsin, who was, at that time, the Secretary of Health and Human Services, gave a speech to our group.  It was all live in a big room.  And I’ll never forget that he said he felt that this investment, once made, would save the Medicare program as much as $130 Billion  a year.  Now I’ve seen numbers as low as $70 Billion a year, and as high as $200 Billion a year, but it doesn’t matter whether you’re the low number of the high number, that’s not a bad return on a $50 Billion investment.

Q:          Mark, how is the Bush Obama program going to work to incentivize healthcare providers to computerize their health information records?

A:          The program that the Obama Administration developed and funded under the stimulus has four elements.  First, that financial incentives will be provided so that doctors and hospitals implement electronic medical records that are capable of what the Administration is calling “meaningful use.”  Now “meaningful use” is not yet finally defined in detail, but in general, it’s going to be about what I mentioned earlier to you, systems that can look at the clinical situation of each patient and compare the proposed treatment against what is generally regarded as the best available treatment for that situation.  The second component is that these electronic medical records systems will be connected to a Health Information Exchange.  Now there won’t be a national Health Information Exchange.  There will be local exchanges that are connected to a national network, so it will really be a network of networks.  There might, for example, be one in the metro Atlanta area. And the reason that’s important is that no matter where a patient goes …  Let’s say you’re a patient of a doctor in Dunwoody, and you’re involved in an auto accident downtown, and they take you to the Grady Hospital Trauma Center, which is the best trauma center in this area, they would have instant electronic access to your information, and that could easily prevent a real mistake.  Let’s say you’re allergic to some medication, or have had some prior history that’s relevant to how you would best be treated for whatever your problems were.  Now there are obvious privacy issues in that.  I mean if you are conscious and you can give consent, then there’s no problem.  But even if you do that, there is the issue of who are you, exactly.  If you have a common name, in a city as big as Atlanta, there will likely be many people with that name.  So there are technologic solutions to all of this, but it isn’t simple.  But HIPAA requires that all of these problems be solved.  So that’s the second element, that the doctors have electronic medical records that can help them practice a more effective medicine, and that they be connected to an information exchange so that no matter where you go, your information is available.  That works in reverse too.  Let’s say that a doctor feels that you need an x-ray or a laboratory test, and you’ve actually already had it done recently, say when you were in the hospital.  These days because it can be very difficult for the doctor to get those results, even if his office is across the street from the hospital, they often just repeat the test.  If that information were available electronically, then presumably they wouldn’t do that.  They would just look at the tests.  I mean this stuff is already being done.  There are places around the country where this capability already exists.  The State of Indiana, for example, is quite advanced in this area.  So I mean it’s not speculative that this could be done.  The third requirement is that doctors will have to report on how well (really their systems will do it for them), they are delivering care according to the guideline that have been established.  So what am I talking about there?  Well, let’s take diabetes for example.  There is a blood test called Hemoglobin A1C that’s accepted I think pretty much everywhere as the best way to determine how well diabetes is being managed in a patient.  So it’s pretty likely that several guidelines are going to say that any diabetics should have that test done according to some regular period, annually or whatever they end up recommending.  So doctors are going to be judged on whether they do that for their diabetic patients.  The data today shows that it’s often not done, even though everybody agrees it should be done, and a big part of the reason is because physicians who are practicing in a manual paper environment, really don’t have an effective way to manage it.  And then the fourth element of the plan is that de-identified patient data, in other words patient data that can not be attributed to anyone in particular, will be aggregated into databases, and there will be research centers established, maybe one at Georgia Tech who knows, where we are going to look for patterns that represent clinical effectiveness, and those patterns will become tomorrow’s standards.  So what do I mean by that?  Well, there was an article in USA Today just earlier this week.  Kaiser Permanente already pretty much has a structure in place, so they can do it now.  They’ve been studying knee replacements.  It turns out (and I’m not a surgeon, so this is news to me too) that there are three approaches to gluing an artificial knee in place.  One involves no glue; one involves something they called regular glue in this article, and the third involves a hybrid glue that I assume is more expensive.  And what Kaiser was interested in is which approach actually works the best, because in Kaiser, if there is a need for the second knee, Kaiser’s going to have to pay for it.  Their contracts with employers don’t allow them to bill the employers.  They get paid a flat amount of money to provide care.  And it turned out by collecting this data and analyzing it over a period of time, that the regular glue was actually the most effective.  So you can be sure in Kaiser, there’s now a rule programmed into there computer system, or there will be one soon, that says you should use regular glue, and if a physician tries to do a knee replacement using another approach, he’s going to be alerted and they may report on it.  I don’t know exactly how Kaiser handles that.  But that’s an example of clinical effectiveness, or clinical effectiveness research.  It’s looking at data about a large number of patients to see what actually works best in the real world.  These are projects which might be extremely expensive or difficult to do, but if you have computerized data being collected about patients routinely, these research projects may become actually quite easy to do, or certainly much less expensive to do.  So that’s the plan, and it isn’t really very different from the plan that the Bush Administration put forth.  The major difference is the Bush Administration felt that by removing market obstacles, and I can’t really comment on exactly what those might be, that the industry would adopt this technology without federal incentives.  I personally never thought that would work because of all the reasons we already discussed, and in any event, it’s sort of a moot argument since the Obama Administration, under the Stimulus, is providing the incentives that they  hope will incent doctors to do this.

Q:          Mark, how does the U.S. health system overall compare to the health systems of other countries around the world?  Is it the best?  Is it the most expensive?

A:          How much time do we have?  Well, it is and it isn’t, I guess is the best answer.  When it comes to high technology care, for example, a heart attack or, to use the example I used earlier, major trauma in an auto accident on the downtown connector, the data would seem to indicate that we are the best in the world.  The survival rates for those sorts of things in the United States are better than they are anywhere else.  Now once you get beyond that, most of the rest of healthcare, and this tends to surprise people who are not close to healthcare, is the management of chronic diseases, things like diabetes, and hypertension, and chronic obstructive pulmonary  disease, arthritis, and so on.  The conditions that once you have them, you’re going to have them for the rest of your life because there is no cure.  Now they can be managed, but they can’t be cured.  The management is actually quite complex because people are quite mobile in our society, so they move around.  Medicine is highly specialized.  We have far too few primary care physicians.  So, for example, I saw a study just the other day that said a patient with five or more chronic diseases, and that may sound like a lot to our listeners, but people actually rarely have just one chronic disease; they tend to have several of them.  So a patient with five or more chronic diseases, over the course of a year, is going to have care provided by somewhere between fourteen and fifteen different organizations.  Many of those are going to be different physicians offices, but some of them might be a lab or something like that.  This data comes from analyzing claims, so any entity that can submit a claim gets counted.  That’s over a year!  Now you can imagine, if there is no organized system to assure the data is shared and exchanged among these fourteen or fifteen different entities, that there’s lots of room for mistakes and for duplicative care.  I mean I don’t know what was done before or I can’t get to it, I’ll just do it again.  This same group of patients, these patients with five or more chronic diseases, represent about 20% of the patients in the Medicare system, but they represent half of all the cost in Medicare, so it’s a group of people that people are quite interested in.  There is good evidence out of some other countries, Denmark being the example that most people point to, that if you had electronic medical records everywhere and you had free exchange of this data, you can actually substantially reduce the cost of caring for people with these sorts of chronic diseases.  I mean in the last study I saw, which is a period of I forget how many years, the cost of managing chronic disease in the United States rose by 54%.  In that same period of time, the cost of managing chronic disease in Denmark hardly changed, and actually the populational statistics in Denmark are quite similar to ours.  People are roughly the same age profiles and so on and so forth.  So they’re we’re clearly not the best in the world.  Now exactly how bad we are is a matter of debate.  There is data that is widely quoted, and I must confess I use it a lot too, that would say we’re at or near the bottom among the 36 or 37 industrialized countries that contribute data to a database that everybody looks at.

Q:          Mark, you’re saying that we’re near the bottom according to that data?

A:          Yeah, in the management of these chronic diseases and in general public health statistics, things like vaccination rates and maternal and child health, so on and so forth.  There was just an interesting study this week out of the University of Pennsylvania, however, which suggested that we’re not quite that bad; we may be more like in the middle.  And the difference is because of lifestyles in this country.  Another issue with chronic disease is that maybe half of it is due to lifestyles, due to poor diet, nutrition, lack of exercise, so on and so forth.  And the obesity rates in the U.S. are the highest in the world.  And this study suggested that the healthcare system is being unfairly credited or discredited by these lifestyle differences, and if you factor them out, then maybe we’re in the middle.  But whether we’re in the middle or near the bottom, the reality is we spend nearly twice as much per capita or based on our gross domestic product on healthcare, as anybody else.  So at least with respect to these chronic diseases, which are the things that are driving healthcare costs in the country, you can argue we’re not getting our money’s worth or we’re just spending too much money, because the results don’t align with the level of expenditure.  And that’s really what all of this is about.  I mean that’s what President Bush, and now President Obama, are so concerned with.  Can we use the combination of electronic records and health information exchange, and quality reporting, and clinical effectiveness research, to allow us to more effectively manage in a coordinated and continuous way the chronic diseases that so substantially burden our healthcare costs.  As a group, they represent 3/4 of all the spending in this country on healthcare.  That’s 3/4 of $2.5 Trillion!  From the federal government’s perspective, where they pay all the costs of Medicare, and where the trust fund is looking like it’s going to run out in a few years, we’re talking about 90% of the costs.  So it’s the right problem to focus on, and there is data from other countries that it’s possible to do better, and that computer technology can be a key strategy in doing better, so you know, it all seems like a reasonable thing to do to me.  But of course I’m prejudice.  I’ve been interested in this for a long time.

Q:          Now you mentioned that primary care physicians, that we have a lack of them in the U.S., and that effects our healthcare system in an adverse way.  What is it that primary care practitioners do for us?

A:          Well they’re the main line of treatment for these varied chronic diseases.  I mean if you think about it, if you go to a cardiac surgeon, he or she is very focused on “I’m going to fix that valve problem you’ve got,” or “I’m going to bypass your Atherosclerosis,” or whatever it is.  But who actually looks at you in total over time?  Well, that’s the job of a primary care physician, a family practitioner, a general internist, a pediatrician, or an OBGYN.  And the number of medical students that are going into primary care has dropped dramatically.  I was at a meeting earlier this week and talked to someone who said that at Duke, for example, their graduating class in this past June, of 175 students, only three went into primary care.  My own alma mater, I was there as well earlier this year, and only 8% of the class went into primary care.

Q:          What’s causing that in your opinion?

A:          Well, I think there’s general agreement on that.  The average primary care physician makes about 1/3 of what a specialist makes in this country.  So if you can imagine some young person who has gotten themselves into significant debt to go through college and medical school, and even though they might be motivated to go into primary care, they’re looking at a level of compensation that’s maybe 1/3 of what they can make by spending 3-4 years in training and becoming a specialist.  Many of them, in fact it sounds like most of them, make the decision to become a specialist.

Q:          Is that because insurance companies pay more to specialists or Medicare does, or both?

A:          Well, I think the real answer is that specialists, in many instances, do procedures.  And procedures are quite lucrative: surgical procedures, colonoscopies, and so on and so forth.  I think we as a country are going to have to look at that issue.  Or we’re going to have to do things that leverage the primary care physicians we do have, and there are interesting ideas along those lines, because there is a concept called the patient-centered medical home.  I actually don’t like the term because it makes you think we’re talking about something that takes place in the home, and it really means a home for the patient with respect to medicine.  The idea is for a primary care physician, instead of practicing medicine in the conventional way where they sort of do everything, for them to head up a team that would involve nurses and other practitioners to provide a level of access and continuous care, that would help achieve better results in the management of chronic disease. And there are physicians around the country doing this, and there is pretty convincing data that it actually works.  That you can manage chronic disease more effectively and more efficiently using this approach.  And, of course, the doctor leverages their time and effort.  The interesting problem here, and this is particularly relevant to a state like Georgia, which is so large and has such a large rural area, over 1/2 of the physicians in our country are in practices of four or fewer doctors.  And the kind of investment in people and technology, because everyone agrees the patient-center medical home requires electronic medical records to do the coordination and the record keeping and keep track of which patients need what done and so on and so forth, that level of investment is really beyond small medical practices.  There was a recent study that rather dramatically showed that the larger a medical practice is, the more likely it is to be successful in practicing this way.  So the government, as part of the Stimulus Program, has put a special emphasis on helping these small practices that tend to be in rural and underserved areas, adopt this technology.  So in addition to paying for the technology, the Stimulus Program is also going to pay organizations to work with those doctors and help them successfully implement the technology.  That’s actually something that Georgia Tech is going to be involved in, I think.  We have a proposal in, and actually we heard earlier today that our preliminary proposal, which we’re doing with others, it isn’t just us, was accepted and we’ve been invited to submit a final proposal.  So helping these small practices that are out there in rural and underserved areas adapt to modern technology is important.  And another idea that’s starting to gain some attention is that if doctors have electronic records and were connected to a health information exchange so the health data was much more accessible, that maybe they wouldn’t need to employ a nurse to help them manage chronic disease patients because maybe they’re too small to afford that.  But one nurse could actually work with several practices, from home or wherever, because the clinical data that’s needed suddenly becomes accessible.  So this idea of doing a patient-centered medical home more virtually is something that people are interested in.  One way or another, we’re going to have to get our arms around this.  We can’t afford as a country to have chronic disease continue to grow like it is, fueled in large part by growing rates of obesity, and lack of exercise, and poor diet and nutrition, and continue to manage it so inefficiently.  Because that really is the thing that’s driving the inexorable growth in healthcare costs to a great degree.  Most people think it’s because the population is getting older and that’s a factor.  But the lack of efficiency and effectiveness in managing chronic disease is a bigger factor, I think.

Q:          Mark, you had mentioned to me those being some of the reasons the U.S. has such a high cost in the medical field.  Also, you had mentioned that paying doctors by the procedure you thought was not the best way to efficiently provide medical care.

A:          Well, that’s yet another issue.  How should doctors be paid?  Now this is probably a more controversial issue than anything we’ve talked about.  But when people point to the real success stories in U.S. healthcare, they tend to point to organizations like the Mayo Clinic and the Geisinger Clinic.  And the Mayo Clinic, of course, is in Minnesota, although they have a clinic as well in Jacksonville, and I believe they have one over in Phoenix, too.  The Geisinger Clinic is in rural Pennsylvania, and there are others.  Kaiser Permanente in California is held up as an example.  These all actually have a very different economic system than we have in most of the country.  Doctors are on salary. Often there are incentives based on the quality of care that’s delivered.  In the rest of healthcare, the incentive system is really based on the quantity of care that’s delivered, not on the quality.  People listening to this who feel like they wait a long time to see their doctors, and they only get a few minutes with him, should recognize that the doctor is incentived to see as many patients as possible during the day because they’re paid based on quantity, not on quality.  And a lot of people, I’m certainly one of them, think we need to find a way to change that.  Now doing that without these same information systems is virtually impossible.  Because if you’re going to incent people, and reimburse people and pay people based on quality, you have to have a way of measuring quality, and to do that you have to have reliable data.  So I think that is probably the ultimate objective here, that that’s probably where the federal government would like to take Medicare in time.  But we’ve got a long way to go to get there.  But there are examples in our country.  If you look at the organizations I mentioned earlier, in general, they get better results for lower costs.  And part of it has to do with their investment in information technology, but part of it has to do with the way the incentives are set up.  And actually, I talk to more and more doctors, certainly I’m not saying this is a majority of doctors, but I talk to more and more doctors who say that they would actually be happy with such an approach.  They’re really tired of trying to manage an office as a business.  Dealing with all the various claims and insurance plans and everything is very tough.  I think if a fair system that fairly values everyone could be devised, that it would probably be pretty well accepted.  That’s not to say that there wouldn’t be physicians who would want to opt out of it, and I can’t imagine we’ll ever have a system where there isn’t private practice, and I can’t imagine we’ll ever have a system where people who want to have more care than whatever system we evolve to, feels is appropriate, won’t be able to buy it.  That’s true in every country I know of, even though they all have some form of a single-payer system.  I think virtually all of them also have some form of parallel private practice where people who want more and can afford to pay it can get it.

Q:          That’s interesting that at the Mayo Clinic and Kaiser Permanente, the doctors are paid on a salary.

A:          Right here in Atlanta, Piedmont Hospital has 400 physicians who are on salary.

Q:          And I’ve heard that Johns Hopkins and the Cleveland Clinic are on the same program.

A:          Right.  I mean it’s a notion that surprises many people, but running a medical practice, given the complexity of our healthcare system  …  I mean, keep in mind that everyone listening to this who works for a company that provides health insurance, actually has a unique health plan.  Every company that has health insurance sits down with whatever company it contracts with to administer that plan … and let me make sure that the people listening, understand that as well.  Virtually every business in America that has, let’s say 100 or more employees, the number is not that precise, actually self insures.  In other words, they’re not buying health insurance; they’re buying administration of a health plan that they’re funding.  Typically what they do is they buy a catastrophic policy from let’s say Blue Cross which insures that their total annual expenditure won’t exceed a certain amount, but everything below that is actually their money.  They are paying the insurance company to administer it.  And they can sit down every year with the insurance company and decide what they want the rules to be.  Do we want to pay for this drug?  Do we want to pay for mental health?  Do we want to pay for this, that and the other.  So now imagine you’re running a physician practice in a big city like Atlanta where you’re seeing people from lots and lots of different companies and lots and lots of different insurance plans.  Well, it’s pretty complicated to keep all of that straight.  And there are costs associated with that.  So it’s not totally clear that many physicians wouldn’t be just as well off on salary as they are trying to run a private practice in this complicated environment, particularly given that they were never trained to do that anyway and probably aren’t terribly interested in it.

Q:          Now, of course there’s a lot of talk that the possibility of medical malpractice lawsuits causes doctors to provide more procedures than are necessary.  What’s your feeling on that?  What’s your observation?

A:          Well, I don’t have a feeling, I’ve studied the matter.  I can only tell you what I’ve read.  And unfortunately, I’m not going to be able to give a terribly satisfactory answer here.  First of all, a study that I always cite, done by Price Waterhouse Coopers, suggests that as much as 1/2 of all the money spent on healthcare in this country is actually a waste.  Now they break it down into lots of different categories, but in a tie for first place among the largest categories, and I think its $120 Billion each but don’t quote me on that, is unnecessary tests and procedures.  And then the question becomes, well how much of that is done for fear of medical malpractice?  And I’ve done a good bit of research, looking at various studies, and they’re all over the place.  The biggest number I’ve ever seen is, of course it depends to some degree on what test you’re looking at, but the biggest range I’ve seen is that it varies from 20-30% of all unnecessary tests and procedures.  The problem was done by a medical group, so it was a survey.  So it’s not really clear how unbiased that is.  At the other extreme, there was a study done by the Harvard School of Public Health back in 1990, that concluded it really wasn’t a factor much at all.  And there’s a third study that I show my students that concluded it was about 9-10%.  So it’s kind of pick your money, and take your choice.  I don’t know which is right.  It’s clearly an issue that has a lot of attention, but it’s far from clear just how big a factor it really is.

Q:          Mark, this has been very interesting.  I understand your wife is co-author of a very popular book.  I saw great reviews on it.

A:          Well, my wife is a family physician and she’s a huge believer of patient empowerment.  She believes that people need to understand more about their own healthcare and they need to be responsible for doing the things that will keep them healthy.  So she co-authored a book called “Your Body, Your Health.”  It’s kind of an interesting scenario.  You have to know my wife to appreciate this, but she sort of goes chapter by chapter, and reviews the things that one of which is going to kill you, and one issue by another explains to you what you need to do to not get killed by that particular problem.

Q:          When you’re in the hospital or being treated?

A:          No, this is out in the world.  Remember we said earlier that you know while everybody watches. … You know, I don’t watch a lot of television, but they watch shows like ER which, of course, focus on dramatic high technology medicine because it’s a great story, and we are the world’s best in that.  But that isn’t really what kills most people.  Most people are killed by chronic disease, and chronic disease in large part, and there are genetic causes, in large part is a result of human behavior.  So there are things you can do to live a longer, healthier life, and that’s what her book is about.

Q:          And Mark, if anybody wanted to reach you, what’s the best way for them to do that?

A:          Well, the only way to reach me reliably is e-mail.  I do have a public webpage, so anybody can type in “Mark Braunstein” and “Georgia Tech” and they’ll find my page.  It’s the first thing that comes up on Google, and my e-mail address is on there.

Q:          Excellent.  And I do want to mention that Stephen Nagler is my good friend who was, at one time, the chief surgeon at Northside Hospital, and who did help on this.  Mark, is there anything else you’d like to say about the medical industry or anything?

A:          Well, you know, I hope people will not get focused on some of the stuff that gets tossed around in the media and the popular press.  This is a very complicated industry.  It doesn’t work the way the rest of our economy works.  It’s very difficult actually to understand any of these issues without a good bit of study.  But I hope people that are actually interested, will take the time to do that and to understand the dynamics as I indicated an issue like how significant is fear of medical malpractice, is not an easy issue.  And I think if we have a more informed public, hopefully we as a society in a rational way, can come to some consensus and do the things we need to do to fix our system, because the system can’t continue the way it is.  There just isn’t enough money to fund it.

Q:          Thanks, Mark.

A:          Thank you.