If I decide to go ahead, I will author the book my colleague, Dr. Luis Pareras. Dr. Pereras is a venture capitalist. He lives in Barcelona. In Europe, aging populations, plummeting birth rates, and soaring costs make it hard to sustain overly generous social welfare states. I live in the U.S, where, to a lesser degree, a similar situation is emerging.
Here Medicare is approaching bankruptcy. Medicare is the single biggest contributor to our growing budget deficit. In Europe, centralized bureaucracies often smother innovation. This may soon be the case in the U.S. Europe and the U.S. are inextricably interlocked sectors of the global economy – economically. clinically, but not always culturally.
Nevertheless, both physicians in Europe and the U.S. are unhappy because government is cutting their pay and ramping up regulations to make national ends meet. Some physicians in Europe and the U.S are turning to venture capitalists to get the money required to launch start-up health –related enterprises. Others rely on their own finances or angel investors.
Of Wikipedia’s list of 91 notable venture capital firms, only 8 (8.8%) are headquartered in Europe, 4 in London, 2 in Germany, 1 in Paris, and 1 in Moscow, while 78 (85.7%) are in the U.S., and 4 elsewhere (2 in Singapore and 2 in Israel).
In the U.S, 41 are in California, 13 in Massachusetts, 7 in New York, 5 in Texas, 3 in Pennsylvania, 2 in Connecticut, 2 in District of Columbia, 2 in Virginia, with single firms in Kansas, Washington State, Colorado, Maryland, and Rhode Island.
Why such a book? The reasons are complicated and overlapping. Physicians are by nature entrepreneurial. They often rely on other people’s money. Many physicians want to escape from negative practice environments – mounting bureaucratic burdens, declining reimbursements, increasing expenses, decreasing autonomy and practice satisfactions.
Some physicians are willing to take entrepreneurial risks, to roll the dice with their reputations and their own money, or money from relatives or angel investors. Some are seeking refuge from overheads imposed by 3rd parties, public and private, Still others are entering concierge practices or practices requiring only direct-cash transactions. Many believe that once they are freed from 3rd parties, they can provide cheaper and better care through “disruptive innovations.”
But how? How does one change one’s practice? How does one access venture capital, the financial oxygen required by startup enterprises? Where are the best sources of reliable venture capital? What are the economic and control tradeoffs between individual entrepreneurs and investors? What is the process by which one embarks on an alternative career? In Dr. Peraras’ excellent book, Innovation and Entrepreneurship in the Health Care Sector: From Idea to Funding to Launch ( Greenbranch Publishing, 2011, 460 pages), he has described the process in detail.
Dr. Peraras and I envision a smaller book – full of concrete case studies illustrating why entrepreneurial physicians have either succeeded or failed in new ventures. We want to tell where physician entrepreneurs got their money. We want to describe the pratfalls, beartraps, and opportunities lurking out there . We want to interview these entrepreneurs. We want to ask them the lessons they learned. We will list notable venture capital firms. We will take note of health care trends barreling down the health care pike.
An instructive example of what is going on the venture capital field appeared recently in an interview with Rebecca Lynn in the December 11 edition of HealthLeaders Magazine. Ms. Lynn, a partner in Morgenthal Ventures, a venture capital and private equity firm in Menlo Park, California, had this to say.
“Some argue the healthcare industry is innovation-proof. It is risk adverse. It is too slow – even unwilling to change. It is too complicated and regulated to change.”
“Change will come from outside entrepreneurs unfettered by the status quo – who can tame the healthcare data beast and who are willing to try new ideas – such as outsourcing some care to patients themselves.”
“The only way to get the data is through an EMR…that’s automatically populated by your physician, by the labs, and by the pharma companies. The data’s got to be in the cloud, and it has to be free.
‘One thing we’ve learned is that doctors pay for nothing. It’s not a slam against doctors. It’s just a fact of life.”
“That’s why our firm invested in PracticeFusion – a free web-based EMR with an open application program interface that grants access to other applications.”
“Start-ups must get creative when it comes to revenue models. Offer a product that’s free, and it will take off like wild fire.”
“Patients have proven they are capable of tending to their own health care issues . Diabetics manage to measure their insulin levels, and women take pregnancy tests at home all the time…The trends to passing to patients some of the responsibility of their own care will continue – from ordinary lab tests to in-home medical devices and technologies such as blood pressure cuffs, glucose meters, and smart scales.”
“We cannot afford the healthcare industry as it stands. You hve to look at ways to deliver better care, increase efficiency, reduce readmissions, and reduce costs. That’s why healthcare has to be readmitted.”
Richard L. Reece, MD, is pathologist, editor, author, speaker, innovator, and believer in abilities of practicing doctors and their patients to control and improve their health destinies through innovation. He is author of eleven books. Dr. Reece posts frequently at his blog, Medinnovation.