Elizabeth Holmes, the founder and chief executive of the controversial company Theranos, has been charged with an “elaborate, years-long fraud” by the Securities and Exchange Commission. The SEC alleges that Holmes and former company president Ramesh “Sunny” Balwani deceived investors into believing that its key product — a portable blood analyzer —was capable of using drops of blood to do the kinds of workups that now require much more blood—up to ten milliters per test. Holmes fooled many people including the Theranos board of board of directors, high-powered investors and high ranking members of the military including General James Mattis, a huge fan, who left the Theranos board to become President Trump’s Secretary of Defense.
Things don’t look good for the Theranos leadership in terms of the SEC charges. The company already saw a three-year partnership with Walgreen’s collapse leaving many customers wondering if they had been deceived. The technology, which Holmes and her company touted as disruptive and revolutionary, never worked. So what happened to permit so much enthusiasm and money to be spent on a useless technology?
First, the company never published on its technology. The promise of small volume blood testing sounded great and indeed is great for many reasons not the least of which a lot less misery for patients who need to get a lot of painful blood drawn for tests. But no publication, no data driven presentations at professional society meetings, a lack of transparency turned Theranos into an 8 billion dollar Dutch tulip bubble.
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).
So I have to ask Theranos; which lab test have you reinvented? Is it the one where you do a full blood draw and send it off to UCSF to pay way more than the amount you charged the patient? Is there something in that business model I am not getting? Or did you reach back to the old “I’ll make it up in volume” approach.
The Nation’s First Modern Benefits Broker – Zenefits
And you Zenefits, if your idea of “Modern Benefits Broker” is that they are not licensed to sell insurance, I think I’ll go for the pre-modern broker.Yes I know, I’ve heard it soooooo many times, all it takes is a bit of silicon valley whiz bang and the whole world will be better, take that unique bravado and creativity and apply it to healthcare, change the world.
Only one small problem; as Esther Dyson said at Health 2.0 many years ago and I’m paraphrasing from memory:
I’ll come back in two years and most of you won’t be here, why because you don’t understand healthcare. You can build all the great systems you want, but if they don’t work in healthcare, because you don’t understand it, you’re done.
Recently, I was dining with elite radiologists. In that uncomfortable silence between dessert and the check, I said “radiology must shift the traditional paradigm by creating value streams using disruptive innovation to leverage population health to build strong ecosystems and a robust ectoplasm.”
I was experimenting if excreted verbiage hastens the check. Instead, it sparked a vigorous conversation about disruptive innovation, compelling me to drink more cognac.
In healthcare, no two words have been as mercilessly cheapened by overuse as “disruptive innovation.” This is a shame. Disruption is serious scholarship by Clayton Christenson who studies the diffusion of technology. Christenson astutely observed that when the technology (disrupter) which renders its predecessor obsolete arrives, it is cheaper and (usually) of lower quality. It is by virtue of its lower quality it can be cheaper, and by virtue of its low cost it appeals to a neglected segment of the market.
Disrupters appeal to our moral sense of social justice. A start-up brings a giant corporation to its knees -how cool is that? It’s like David taking on Goliath (with a little help from venture capitalists).