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2018 Forecast: Another Theranos, Hospital Hiring Slows & Successful HIT Exits

For what is now an annual tradition, we are once again attempting to be healthcare soothsayers. We are proud to share with you our 10 healthcare predictions for 2018. In 2017, amaz-ingly, eight of our predictions came true.

For 2018, we are betting on the following:

1. Another Theranos

We think at least one healthcare information technology company with an enterprise value of more than $1 billion (not including Outcome Health, which we could not have predicted tanking so spectacularly quickly) will be exposed as not having product results to support their hype. It will also expose embarrassed investors who did not do careful diligence and founders with poor integrity.

2. Hospital hiring slows

After a decade of sustained hiring every month, hospitals will stop. Many will downsize their administrative staffs as admissions continue to slowdown and reimbursement pressures intensify. We expect multiple months with net healthcare job losses which would be the first time this has occurred since the Bureau of Labor Statistics started tracking the data.

3. Successful HCIT exits

After a long wait, and more than $10 billion of venture capital invested in startups over the past five years, we will begin to see successful IPO and M&A exits. These will reassure growth investors to keep pouring money into companies with traction.

4. Amazon does not disrupt PBMs

Despite daily rumors, we think Amazon will not shake up the PBM sector. Instead, Amazon will limit its healthcare market footprint to its existing consumer products and distributing non- regulated healthcare goods to healthcare providers (adopting a B2B and not B2C strategy).

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Artificial Intelligence & How Doctors Think: An Interview with Thomas Jefferson’s Stephen Klasko

As I walk into the building, the sheer grandiosity of the room is one to withhold — it’s as if I’m walking into Grand Central station. There’s a small army of people, all busy at their desks, working to carry out the next wave of innovations helping more than a million lives within the Greater Philadelphia region. However, I’m not here to catch a train or enjoy the sights. I’m at the office of the President and CEO of Thomas Jefferson University, Dr. Stephen Klasko, currently at the helm of one of the largest healthcare systems in the U.S.

Let me backup a little.

The theme of nearly every conversation about the future of technology now revolves around Artificial Intelligence (AI). Much weight is placed on the potential capacity of AI to disrupt industries and change them to the very core. This pressure has been felt to a large extent within nearly every aspect of healthcare where AI has been projected to improve patient care delivery while saving billions of dollars.

Unfortunately, most discussions exploring the implications of AI only superficially look at either the product or the algorithm that powers these products. The short-sightedness of this approach is not an easy one to fix. Yes, clinical studies validating AI backed products are vital but AI cannot be viewed just like any other drug or a medical device. There’s much more to be considered when we examine the broader role of this technology, because this technology can shape the entire healthcare system. To place the impact of a far reaching technology, you need an even longer sighted vision. It’s a rare breed of people that have experienced the tumultuous history of change within medicine but can still call upon the lessons learned to execute innovations and bring meaningful results.

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The Conference Created by Innovators for Innovators

Get set for a new exciting conference experience coming this spring from Health 2.0 and HIMSS, focused on the collaboration between developers and healthcare providers on building emerging digital health technologies: Dev4Health.

Join hundreds of developers, innovative leaders, designers, chief technology officers, chief innovation officers, start-ups, and health tech enthusiasts for two days of strategic networking, idea generation, and innovative workshops – plus live demos some of the newest health tech start-ups.

Top Reasons to Attend Dev4Health

  • Innovation Leaders: Hear cutting edge ideas to infuse your technology strategy with the latest insights and methodologies.
  • Developers: Benefit from immersive content and hands-on learning by sharing open-source code, applications, interfaces and other resources with like-minded developers.
  • Health Systems: Discover the latest health tech products to hit the market with live demos by some of the most innovative start-ups in healthcare.
  • All Attendees: Join in-depth panel sessions focusing on health tech trends, including open tools in the U.Shealthcare server; healthcare focused developer programs; artificial intelligence and machine learning; blockchain; and more!
What are you waiting for? If you’re looking to collaborate with developers on building new applications

or discover new tools to enhance the healthcare experience, then Dev4Health is the place to be this spring.

Register today!

Take advantage of the early bird savings. Save up $100 when you register by March 16, 2018.

Looking for sponsorship opportunities? Please contact Patrick Ryan at 781-424-2755.

Will Amazon Eat the Market?

Last Tuesday, a trio of corporate heavy weights announced they were joining forces to fix the U.S. healthcare system. The CEOs of the three—Jeff Bezos of Amazon, Warren Buffet of Berkshire Hathaway, and Jamie Dimon of JP Morgan, vowed to create “an independent company that is free from profit-making incentives and constraints..to provide simplified, high-quality and transparent healthcare at a reasonable cost.”

Details about the proposed venture are limited but it nonetheless sent shock waves across the industry. Stocks for industry mainstays like United Health, CVS, Express Scripts, Mylan and others plummeted. And, on the heals of mega-deals like CVS’ $69 billion acquisition of Aetna two months ago, speculators theorized it might be Armageddon for healthcare as we have known it in the U.S.

First, what we know for sure:

The new venture will focus on the collective buying power as employers of healthcare for the 1.15 million employees in their organizations. Their approach features five strategies widely. widely used by large self-insured employers to contain their employee health costs. This one is expected to leverage technology in a unique way:

  • Primary care gatekeepers: Large employers vest considerable responsibility in primary care services that appropriate preventive health, manage chronic populations and control referrals to specialists and hospitals. Promotion of healthiness and wellbeing, the integration of physical and behavioral health and alternatives therapies that reduce dependence on unnecessary access prescription drugs are mainstays of the primary care gatekeeping model.
  • Narrow networks: The networks of hospitals, allied health professionals, hospitals and others will be tight. Those providing high quality, low cost services will be contracted, and employees will be empowered with data to monitor their performance.
  • Supply chain management: Every line item fixed and direct cost will be lean. Prescription drug use, for instance, will be accessed through a restrictive formulary, and so on. Amazon is known to be hyper-efficient in its operating budget: employees are expected to fly economy class and office opulence is a no no.
  • Employee choice & risk sharing: A key to the venture’s uniqueness will be the tools and responsibility given employees to select plan options that align with their needs and preferences. High deductible plans will be options, but technologies that equip them to make informed choices of doctors, treatments, hospitals, drugs and others will be a central feature.
  • Technology: Technologies that allow employees to own their medical records, interact with Alexa for information and counsel, integrate smart devices and engage with their providers are the backbone of the venture. Knowing treatment options, their costs and where the highest and best value is accessible in the employee’s provider network is central to the venture’s success.

None of these five is new, but together, they’re powerful IF implemented aggressively and at scale.

Let’s face it. Healthcare’s ripe for disruption: we cost too much, hide prices that bear faint resemblance to their underlying costs, avoid accountability for outcomes, complain we’re underpaid and over-regulated, protect our silo’s so each gets a piece of the pie, mark everything up and pass-it-through and declare we’re the best system in the world.

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A Whiff of Market-Based Health Care Change

Tuesday’s announcement about Amazon, Berkshire Hathaway and JPMorgan (A/BH/JPM) was short on details. The three mega-firms will form an independent company that develops solutions, first, for their own companies’ health plans and then, almost certainly, for the larger health care marketplace. But the news reverberated throughout the health care industry as thoroughly as any in recent memory.

Health care organizations were shaken. Bloomberg Markets reported that:

Pharmacy-benefit manager Express Scripts Holding Co. fell as much as 11 percent, the most intraday since April, at the open of U.S. trading Tuesday, while rival CVS Health Corp. dropped as much as 6.4 percent. Health insurers also fell, with Anthem Inc. losing as much as 6.5 percent and Aetna, which is being bought by CVS, sliding as much as 4.3 percent.

As expected, these firms’ stock prices rebounded the next day. But you could interpret the drops as reflections of the perceived fragility of health care companies’ dominance, and traders’ confidence in the potential power of Amazon’s newly announced entity. Legacy health care firms, with their well-earned reputations for relentlessly opaque arrangements and egregious pricing, are vulnerable, especially to proven disruptors who believe that taming health care’s excesses is achievable. Meanwhile, many Americans have come to believe in Amazon’s ability to deliver.

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Pharma’s (Big) Data Problem

C.P. Snow, author of “The Two Cultures”

Despite (some might say, because of) a raft of new biological methods, pharma R&D has struggled with its EROOM problem, the fact that the cost of successfully developing a new drug, including the cost of failures, has been relentlessly increasing, rather than decreasing, over time (EROOM is Moore spelled backwards, as in Moore’s Law, describing the rapid pace of technology improvement over time).

Given the impact of technology in so many other areas, the question many are now asking is whether technology could do its thing in pharma, and make drug development faster, cheaper, and better.

Many major pharmas believe the answer has to be yes, and have invested in some version of a by-now familiar data initiative aimed at aggregating and organizing internal data, supplementing this with available public data, and overlaying this with a set of analytical tools that will help the many data scientists these pharmas are urgently hiring to extract insights and accelerate research.

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A Patient Experience-Based View of the TEFCA

Let’s give the Office of the National Coordinator (ONC) credit for trying. In what’s arguably the first significant piece of policymaking, the newly Republican HHS issued a draft Trusted Exchange Framework and Common Agreement (TEFCA) that aims to implement the massively bipartisan 21st Century Cures act mandate to end information blocking. Are they succeeding?

Why should you care? After almost a decade and many tens of $billions spent on health information technology, neither physicians nor patients have access to a longitudinal health record, transparency of quality or cost, access to independent decision support, or even the ability to know what their out-of-pocket cost is going to be. After eight years of regulation, precious little benefit has trickled-down to patients and physicians. This post looks at the TEFCA proposal from the patient experience perspective.

The patient perspective matters because, under HIPAA, patients do not have choice about how our data is accessed or used. This has led to information blocking as hospitals and EHR vendors slow-walk the ability of patients to direct data to information services we choose. Patients lost the “right of consent” in 2002. This puts a regulation-shy administration in a quandary: How do they regulate to implement Cures, when current HIPAA and HITECH-era regulations give all of the power to provider institutions bent on locking-in patients as key to value-based compensation?

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Science Fiction Coming to Life

 

Given the size and scope of the annual J.P. Morgan (JPM) Healthcare meeting (I resisted the temptation to say “diversity”), everyone in town – the minority who actually attend the formal presentations, and the many others who show up in San Francisco to meet and network – comes away with a slightly different experience.

With this caveat (and with the explicit reminder/disclosure that I now work at a life science venture fund, and as always, I’m speaking only for myself), I left the meeting with two fairly pronounced takeaways.

JPM: Two Contrasting Takeaways

First, this feels like an unbelievable, almost magical time in biopharma – a colleague described it (in a good way) as science fiction coming to life. Biological technologies, approaches, and ambitions that might have been dismissed as fantasies only a few years ago now are part of the fabric of the industry – and increasingly, it seems, clinical care. Gene therapy, gene editing, cell therapy, immune modulation – these modalities, alone and in combination, are what many in and around biopharma are contemplating, and the sorts of programs many drug development organizations are hoping to prosecute. It’s hardly surprising many JPM participants emerged with the sense of optimism my Forbes colleague Matthew Herper so accurately captured.

I was equally surprised by what I saw – or more accurately, didn’t see – through the lens of data and technology. As I’ve shared on Twitter, in addition to life science opportunities, I aspire to focus on the elusive middle-ground between tech and life science, and identify and invest in grounded, implementation-focused tech-powered startups that can improve how impactful new treatments are discovered, evaluated, and delivered. However, my overwhelming impression from this year’s JPM is that while data and tech may be embraced at the level of the C-suite, and while everyone professes an interest in AI, these emerging approaches and ways of thinking have generally not penetrated most biopharma organizations at the line/operations level, and have generally not yet impacted how these organizations actually approach their basic work of discovering and developing new therapeutics. Exploratory innovation initiatives, of course, abound, as do data wrangling and integration efforts (see here, eg), but these activities as yet seem to have had minimal impact on how most R&D is actually prosecuted within these organizations.

From what I can gather, it’s not a hostility to technology as much as a sense that it’s not immediately clear to most of those in the trenches how (or even whether) the emerging technologies will meaningfully impact the work they need to do, and many are concerned about, or at least wary of, the additional work it may create. Most acknowledge the possibility that big data and emerging analytics will likely be useful eventually, but few see these changes on the immediate horizon.

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Why Consumers No Longer Want Fitness Trackers

Millions of Americans have adorned themselves with glimmering Fitbits, Jawbones, Nike Fuelbands, and Misfits, Basis, Withings, and Garmin bracelets over the years. The devices have become so mainstream even Grandma has one. Perhaps the fact that Grandma is now tracking her data means that the industry is ripe for a change.

Recently though we’ve seen the popularity of wearables wane considerably. This month Mike and Albert Lee, founders of myfitnesspal announced that they would be departing from Under Armour; and we learned that Adidas is dropping their wearables division entirely.

Why? Its a fairly easy question to answer. Under Armour spent 2017 falling from grace and it’s possible their waning interest in connected fitness is due both to financial constraints as well as a series of departures of senior-level talent including Robin Thurston (MapMyRun), and Mette Lykke (Endomondo). Looking at Adidas though, they are dropping their dedicated connected fitness division in favor of a more distributed and integrated approach.

With this shift upon us, what is next wave of innovation? Let’s look at two companies.
Habit, the bay-area based company, collects genetics, vitals and metabolism of their customers; and uses their data and machine learning algorithms to deliver personal nutrition plans that align with the user’s health goals. Parsley Health is redefining primary care medicine by committing their doctors to whole-body health than to quick fixes and bonuses.

See live demos from Habit, Parsley Health, and more at Health 2.0’s WinterTech event on January 10thduring JP Morgan week.

Tickets are selling quickly so register today!

Losing Net Neutrality Could Be Bad For Your Health: Here’s Why

The US Federal Communication Commission’s reversal of Obama-era net neutrality regulations sets the stage for broadband internet service providers (ISPs) to slow or block certain content from reaching their customer’s screens. This is likely to have a significant and potentially negative impact on a healthcare system poised to go fully virtual in the coming years.

Healthcare consumers already depend heavily on internet search results for advice when making healthcare purchases. Coupling preferred content with existing search engine optimization strategies will undoubtably steer consumer behavior. What will be the result? The American healthcare market is unique, both in its expense (higher than any other nation), and its shocking lack of value. Some of this is due to misinformed consumers swayed by direct-to-consumer marketing. Arguably, repealing net neutrality may amplify the problem.

Even more troubling is the prospect of an ISP partnering with a health delivery system. Telehealth – the use of electronic communication technology for healthcare delivery – will become standard of care in the coming years. National telehealth have already managed to get a foothold in today’s highly competitive healthcare market, supplying a disruptive and potentially cost-containing force in the healthcare market. With the elimination of net neutrality, larger, more well-established healthcare delivery systems, seeking to defend or expand their marketshare, can now partner with ISPs to preserve internet “fast lanes” for realtime video doctor’s visits. Smaller, possibly disruptive companies, unable to make these same financial commitment to ISPs, may be marginalized or lost.

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