When it comes to health care prices, the burden piled on payers can seem almost cartoonishly heavy. News stories on the state of the industry read as though some satirist decided to exaggerate real systemic flaws into cost-prohibitive fiction. A particularly painful example hit the presses earlier this year, when a writer for Reuters revealed that the cost of a full course of oncology treatment skyrocketed from $30,447 in 2006 to $161,141 in the last few years. The change was so unbelievable as to verge on dark comedy — but there isn’t much to find funny in the situation when lives and health outcomes are on the line.
For the average employee in my home of Silicon Valley, the price crunch is challenging regardless the size of your paycheck. For local employers, however, the dilemma can be even more pointed. Today, employees of companies, large and small, expect their employer to provide comprehensive health care benefits and are largely unaware of or insensitive to the factors exacerbating market problems today. Providing these benefits, however, is easier said than done.
Employers and insurers alike face a multitude of barriers to connecting employees with affordable care. Recent research suggests that prices will increase at an average clip of 5.8% annually between now and 2024, well above the expected rate of inflation. Even worse, the increased consolidation of healthcare providers has drastically undermined the negotiating power that payers would otherwise have in more competitive markets. In Northern California, for example, major health systems, including Sutter Health, sparked outrage and protest as they have managed to amass enough of the region’s hospitals, outpatient facilities, and primary care offices to diminish regional competitors and set what many view as unacceptably high rates — all the while knowing that the lack of local competition makes it challenging for the major health insurers to push back.
As I’m back from a week’s vacation, Jessica DaMassa is slowly pulling me back into the groove with questions about Walmart dumping Castlight, yet more money for telemedicine with MDLive adding $50m, and get.health sponsoring a few tickets to health2con. All in 2 minutes, with a bit of filler!–Matthew Holt
For the last five year or so, digital health has been the Rodney Dangerfield of investment sectors, getting more attention than respect, and garnering more page views than dollars.
However, two important events reported in the last several days suggest all this may be about to change.
First, Fortune’s Dan Primack broke the news on Saturday that Castlight Health — a startup co-founded by U.S. Chief Technology Officer Todd Park in 2008, with the intention of providing increased transparency to healthcare costs – has secretly filed an IPO; an astonishing valuation of around $2B is anticipated.
That’s both impressive growth and serious money, and suggests it’s possible to win – and win big – in digital health.
Second, two complimentary reports from last Friday collectively suggest that Apple is starting to take healthcare very seriously.
For starters, the New York Timesreported that Apple executives met with the FDA in December 2013 to discuss mobile medical applications.
In addition, 9to5Mac, a website devoted to “Apple Intelligence,” claimed that the next version of the iPhone operating system, iOS8 – slated for release later this year – will introduce an application codenamed “Healthbook” that is “capable of monitoring and storing fitness statistics such as steps taken, calories burned, and miles walked,” according to 9to5Mac.
As an ever increasing amount of money seems determined to chase an ever greater number of questionable ideas, it’s perhaps not surprising that inquiring minds want to know: (1) Are we really in a tech bubble? (2) If so, when will it pop? (3) What should I do in the meantime?
I’m not sure about Question 1: I’ve heard some distinguished valley wags insist we’re not in a tech bubble, and that current valuations are justified, but I also know many technology journalists feel certain the end is neigh, and view the bubble as an established fact of life – see here and here. The surge of newly-minted MBAs streaming to start-ups has been called out as a likely warning sign of the upcoming apocalypse as well.
I have the humility to avoid Question 2: as Gregory Zuckerman reviews in The Greatest Trade Ever, even if you’re convinced you’re in a bubble, and you’re right, the real challenge is figuring out when to get out. Isaac Newton discovered this the hard way in the South Sea Bubble, leading him to declare, “I can calculate the motions of heavenly bodies but not the madness of people.”
I do have a thought about Question 3, however – what to do: reconsider digital health — serious digital health.
Here’s why: Instagram and similar apps are delightful, but hardly essential; most imitators and start-ups inspired by their success are neither. It doesn’t strain credulity to imagine investors in these sorts of companies waking up one day and experiencing their own Seinfeld moment, as it occurs to them they’ve created a portfolio built around nothing.