Silicon Valley’s Healthcare Problem

flying cadeuciiSilicon Valley wants to love healthcare. The industry is enormous and full of inefficiency, which is to say, perfect for technology investment. So it comes as no surprise that venture money in healthcare technology startups has quadrupled since 2011 to $4.5BN in 2015. Moreover, the government wants to invite Silicon Valley-style innovation in healthcare. In January, CMS leaders stated that the next wave of EHR policy will focus on promoting startup innovation in healthcare by incentivizing open APIs and interoperability. Everyone agrees—so let’s just get going, right?

Here’s an important truth to recognize on the eve of what some like to call the “disruption of healthcare”: Silicon Valley and healthcare are fundamentally at odds.

In technology we fail fast, launch and iterate, proudly make mistakes and learn from them. In medicine, the first principle is “do no harm.” Entrepreneurs are obsessed with growth–exponential growth, hypergrowth, 10X growth–and the faster the better. Conversely, in healthcare organizations, progress is measured in months and years. My company is currently in Y Combinator, a three-month accelerator program. I have had phone calls with healthcare organizations that took longer than that to schedule.

The philosophies and operations of the two world are at odds in many ways. Too many well-intentioned startups have come up against these tensions and lost steam.

Despite this, healthcare organizations and startups can make perfect partners. I believe more startups should try to serve healthcare organizations, and more healthcare decision-makers should choose to work with startups. Here are some lesser-discussed advantages for both sides.

Healthcare organizations: Why work with startups

Startups care about user experience and will spend time with users to build empathyThe lean startup movement taught entrepreneurs to listen to users religiously. User-centric software design is remarkably absent in healthcare, with nearly half of physicians reporting that patient care has worsened since implementing their electronic health record systems. Unlike large EHR companies, startup founders don’t find user questions and feedback annoying or expensive; we seek it out and value it highly.

Start-ups generally use cloud infrastructure, which is is cheaper to deliver, faster to update, and accessible anywhere. Because cloud-based software is becoming more widely accepted among healthcare organizations, software can be drastically cheaper—think IBM versus Google Apps for Business. Startups are able to deploy and improve products rapidly, and deliver the functionality more easily to different devices and locations.

Startups constantly improve our products. Entrepreneurs are trained to monitor user activity to see which features get used the most so we can continuously make the product better. That’s how Facebook and Amazon make decisions about product improvement, and it should work that way in healthcare software too. It’s a completely different timeframe for improvement than, for example, on-premise EHR software, which involves great effort to update. In addition, on-premise products usually come with long contracts, so vendors don’t have much incentive to improve the product once the contract is signed.

Startups will go above and beyond to make customers happyIn the name of learning, product improvement, and creating customer evangelists, startups go to great lengths in the name of ‘customer success.’ My startup offers our early customers free consulting and involves them deeply in the planning of our product roadmap to make sure we are building something that meets their specific needs.

Startups: Why work with healthcare organizations

Healthcare organizations are working on meaningful problems. We have had a number of job applicants who have said, “I don’t want to work on another silly app.” There is something gratifying in committing to work on a big, gnarly problem. Fixing healthcare, in all it’s clunky, expensive glory, is a massive, life-long undertaking in an industry that touches every person in our country. I have found that people in the healthcare industry are more likely to be mission-driven and feel a deep connection with the work they do, qualities that I have also often found in entrepreneurs.

Healthcare organizations care deeply about rigor and accuracy, ensuring a high quality product. Because people in this industry know the high stakes, they are invested in making things work well. This feeds the entrepreneur’s desire to listen. If you, entrepreneur, want a super-user who is going to hold you to the highest standards, find a champion at a healthcare organization. It is a joy to serve people who are invested in high quality products.

Healthcare organizations can deploy solutions at scale. There’s a lot of consolidation in the healthcare industry these days, which is good and bad for startups. On the positive side, physicians are increasingly networked and looking for full-network solutions. Startups can pilot solutions with small sites in a network and expand across the network, rather than going door to door at many smaller organizations.

Healthcare organizations are becoming more open to new solutions. Cloud-based software was a dirty word in healthcare not too long ago, but in the past five years trust in the technology has increased, evidenced by the increased adoption in cloud-based EHRs.  There is still a high degree of risk aversion in the industry—and for good reason, there are lives at stake—but the field of trust is steadily expanding.

Mitigating Risk

Despite increasingly secure cloud technology and increasing trust, there is still of course still risk involved for a healthcare organization experimenting with startup technology. Here are some common concerns and ways to mitigate the risks. 


  • Concern: Startups might have a breach of protected health information.
  • Reality: Startups handling PHI should have policies and procedures in place and good technology for safely handling information. It is becoming easier than ever to spin up a compliant and secure ecosystem through platform services like Aptible and logging software like Splunk and Castle
  • Strategies for healthcare organizations: Ask about security infrastructure, ensure that the startup has liability insurance, and sign a standard BAA.


  • Concern: Startup services may not be reliable.
  • Reality: Startups are extremely good at the new discipline of DevOps, making sure every developer is also responsible for testing features and monitoring operational logs. It is easier than ever for startups to log and track any disruptions to availability and errors that users experience through tools like PagerDuty. Startups also provide superior customer service and can fix problems more quickly. 
  • Strategies for healthcare organizations: Pilot first with a few users and see how it goes. You can also ask about the startup’s testing processes, and look for cues in the engineering and customer service culture of the vendor. Startups can also offer to provide regular data backups to customers so that organizations can feel secure in knowing they have the data no matter what happens.


  • Concern: Startups don’t have the expertise to meet my workflow, or I won’t be able to customize it. 
  • Reality: Startups are eager to learn about workflow and use methods like design thinking and lean development to learn up front and continuously improve the user experience of their products. Tools like Intercom allow vendors to track user activity and engage with users for feedback. Entrepreneurs are also willing to give customer significantly more sway over the product roadmap and custom features than an established company. 
  • Strategies for healthcare organizations: Offer access to users for research and testing and allow the vendor to monitor user activity for product improvement purposes. You can also ask for custom features directly in the contract.

Meeting in the Middle

Both sides have to compromise for Silicon Valley and the healthcare industry to engage productively. It can and must be done to make progress in the industry that costs 17.5% of our GDP and touches all of us.

As entrepreneurs, it’s important we remember that people’s lives are at stake when we work in healthcare, so it requires a slower pace and fewer mistakes than other types of ventures. We can earn trust from healthcare organizations by delivering great products and acting as true partners, and in that way we can encourage healthcare organizations to risk going on the journey with us. Armed with strategies for mitigating risk, decision makers at healthcare organizations should place a bet on startups dedicated to solving your problems, and today more people than ever are willing to do so.

For my team at Able, the healthcare organizations we work with challenge us, teach us, and learn from us, and it is incredibly rewarding. We are aware that the problem we are working to solve will require a lifelong collaboration between technologists and healthcare professionals. And to us, that’s an exciting prospect.

Rachel Katz is the CEO of Able Health, making it easier for physician organizations succeed in pay-for-performance programs. She is passionate about bringing technologists and healthcare professionals together to solve problems that matter.

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7 replies »

  1. “…the vast complexity of the healthcare system, and is also completely oblivious to the (powerful) policy environment which drives so many aspects of the industry.”

    I wrote this in 2009:

    “I will by no means be the first to note that our medical industry is not really a “system,” nor is it predominantly about “health care.” It is more aptly described as a patchwork post hoc disease and injury management and remediation enterprise, one that is more or less “systematic” in any true sense only at the clinical level. Beyond that it comprises a confounding perplex of endlessly contending for-profit and not-for-profit entities acting far too often at ruinously expensive cross-purposes…”

    Not a lot has changed for the better. See my recent post citing the work of Einer Elhuage on “Fragmentation,” which seems to be intensifying.


  2. Hi Davis, your articles resonated strongly with me. I loved this statement in particular: “Health and medical care is an incredible intersection of technology, science, emotions, and human imperfections in both providing care and comfort.”

    I, too, am allergic to statements about Silicon Valley and technology being able to completely overhaul medicine in the next X years. I believe, as you argued, that this perspective ignores the vast complexity of the healthcare system, and is also completely oblivious to the (powerful) policy environment which drives so many aspects of the industry.

    However, even though I don’t agree with them, I’m glad those “disrupt everything” entrepreneurs exist because that perspective will also lead to very cool innovations that others who are closer to the system may not dream up. I only ask that the “disrupt everything” entrepreneurs also respect the work of all the people along the spectrum, from disruptive to status quo. We need multiple different perspectives and approaches to really answer the question, “how do you care for a country-full of people?” It is naive to think there’s only one good approach.

    Thanks for your comments!

  3. Thanks, John. It’s a tough balance to have the patience required to succeed in healthcare and also maintain the sense of urgency which powers startup growth. Thanks for reading!

  4. Great points. Completely agree. We all can benefit from collaboration of insider and outsider status and learning and building on different points of view. It may take some time however for that to happen – https://thehealthcareblog.com/blog/2012/08/31/vinod-khosla-technology-will-replace-80-percent-of-docs/ and http://www.davisliumd.com/abraham-verghese-vinod-kholsa-robert-pearl-the-future-of-health-care-stanford-innovation-summit/. Nevertheless, over time we should be optimistic that we can make care more affordable, accessible, and convenient if we work together!

  5. Good article Rachel. So true about working from the inside of an established health care entity like a hospital system or medical system to get real insight. However, as you noted, healthcare is “glacial” and getting to “GO” can be tediously long. Thank you for your insights.

  6. Nice post. Will y’all be at HIMSS16 in Vegas? Hmmm… just checked. Apparently not.