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12 Rules for Health Tech Startups

By MATTHEW HOLT

Last week Mark Cuban tweeted out 12 rules for tech startups and Jessica DaMassa challenged a bunch of people to respond for health care. VC and general health care wit Lisa Suennen came out with quite the list (she got to 13) but I thought someone ought to write the real rules…

1. Never start a health tech company if you can sucker someone into giving you a real job

2. When VCs at conferences say raising money isn’t a problem, throw a milkshake at them

3. Never work with a technical co-founder who won’t give you the last M&M in the packet

4. When a clinician wants to quit their job and co-found with you, remember that the good ones could be making $500K a year reading X-rays and be on the golf course at 4pm

5. Do the 50/2 diet. Starve for 50 weeks of the year then eat and drink as much as you possibly can at HIMSS & JP Morgan parties when someone else is paying

6. When the incubator/accelerator/matchmaker says that they “chose you from 700 applicants” remember that there are roughly 700 of them and every company applies to each one

7. When you get the elusive partnership deal with the big hospital system, tech company or corporate, you’re going to expect to work at the speed of the startup and the scale of the corporate. It’ll be the reverse . (I stole this from Michael Ferguson at Ayogo)

8. After your first few clients and funding rounds you’ll be losing money at a exponential rate that matches what you had for revenue on the hockey stick chart in your pitch deck

9. Hopefully you’ll eventually be able to start making the money the health care way, by establishing a monopoly that can arbitrarily raise prices to the moon and stick it to your customers. If not, start prepping for the really big Oscar/Collective/Clover type round. 

10. Pray to whatever God you follow that Softbank is still in business when #9 happens.

11. If after a decade or so of slog, you finally get the IPO, or semi decent exit, try to ignore the fact that the Instagram guys sold for $1 billion 11 months after they founded the company

12. Hope that you can disrupt health care, but remember that UnitedHealth Group’s revenue is $220 billion and CMS spends $900 billion a year and they both appear mostly powerless to make anything better.

Matthew Holt is publisher of The Health Care Blog and advises startups at SMACK.health using these principles and a few others too!

Perspectives on Working with Healthcare Systems for Digital Start Up Companies | Part 1

Brian Van Winkle
Shahid Shah

By SHAHID SHAH, MSc and BRIAN VAN WINKLE, MBA

Start-ups are an increasingly important “node” within the healthcare ecosystem.  They are challenging status quo concepts that have long been ingrained in the healthcare system, like questioning the value of traditional EMR systems, or shifting the power of information to patients, or breaking down cost and quality transparency barriers. They may be the future of the industry, but startups have a long way to go to truly transform the system. The reasons are many, from an incredibly convoluted and bureaucratic review process and rigid risk-controlling regulations and policies, to the large-scale organizational inertia most of our healthcare systems have.    

And while all of these hurdles can and will be overcome if we work together, there are still several lessons each “node” in the ecosystem can learn to more effectively work with each other.  

This article is directed at the emerging digital solutions trying resiliently to help transform this stubborn industry. It provides some critical lessons in dealing with healthcare systems and is accompanied by reactions from a digital solutions expert with serial digital health entrepreneurship experience. We hope to provide perspective from two people living and breathing, and surviving, from both sides of the equation every day.  

Perspectives and Reactions from the Industry

Healthcare Startups Must Understand how Provider Systems Operate: Most health systems are increasingly becoming rightfully skeptical about new solutions because they feel the solutions don’t understand the environment of their system. To help overcome the challenges of introducing your innovation into a complex business and clinical environment, startups must understand how health systems operate to include how they make decisions, contract and evaluate solutions. 

Advice

(1) Recognize that Decisions are Consensus-driven and Permissions-based: Unlike other industries, where “shadow IT” is rampant and there can be one or two “key decision makers,” in health systems you’re not likely to get very far without figuring out how to build consensus among an array of influencers and then figuring out how to get permissions from a group of key decision makers. You should seek a “Sherpa” that understands enough about your solution to champion the idea of change – which is really what you’re seeking when you’re selling a new solution (the solution is just the means to accomplish the change, it’s the change that’s hard). The first thing to focus on is to identify the group of decision makers and how you convince them that the status quo should be abandoned in favor of any change – then, once you know how to convince them of some change you’ll work with the group to get the right permissions to work on the change management process – which will then influence a purchase of your solution.

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Cats & Dogs: Can We Find Unity on Health Care IT Change?

Today we have a humming economy and insane politics. In early 2009 we were in economic meltdown and were about one week into the sanest, soberist Administration and even Congress over many recent decades. In February 2009 they passed a stimulus bill that had a huge impact on the health IT market (and still does). At that time there was much debate on THCB about what the future of health IT policy should look like and how the stimulus “Meaningful Use” money should be spent. My January 2009 summary of that whole debate introduced the notion of “Cats and Dogs in health IT”. They’re still around today. We’re reprinting it here as part of our 15-year THCB birthday party–Matthew Holt

 

Those of you paying attention for the past few days might have noticed on the one hand a sense of optimism and unity as Barrack H. Obama, somewhat somberly, began his presidency.

Meanwhile, over the past few weeks the fur has been flying among the electrons on THCB while some very knowledgeable and opinionated health care wonks and geeks have been battling it out about what exactly we should be doing in terms of federal health care IT spending.

Given that even among you smart THCB readers this may be all a little perplexing, I’m going to try to try to make what I hope are some elucidating comments to put this argument in context. I’m doing this partly because I’m perplexed too, but also because I think that there is some hope for a middle road.

First the basics: As sometime THCB contributor & uber-CIO John Halamka makes clear in this excellent post about The Greatest Healthcare IT Generation, some $20 billion of the soon to be passed “spend it as fast as you can” stimulus package is going to be targeted towards health care IT. Now, that’s by no means the biggest part of the $800 billion or so package, and it’s not even the biggest part of the health care spending in the bill. Nearly $87 billion or so is going to support Medicaid, although that will mostly will be replacing cuts being forced on states.

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Emerging Healthcare Innovation Space Needs Serious Investors, Herd Thinning

flying cadeuciiJust a few years ago, you would have had to scour the show floor to find a startup exhibiting at the HIMSS Annual Conference. But, for the first time this year, they will have a major presence at this show that gathers more than 37,000 health IT professionals and innovators who are developing next-generation technologies. In fact, more than 200 startups will be on the floor at the inaugural Hx360 event taking place at the conference in Chicago– demonstrating the perceived ripening of the industry for disruption and the rising expectations of entrepreneurs and the investors supporting their efforts.

Drawing these innovators like the Sirens from the Odyssey is the newly empowered and often under informed consumer with their high deductible and array of chronic diseases. Healthcare provider organizations, payers and pharmacies must adapt to them and view them as actual customers not untapped wells overflowing with potential CPT codes. Now, more than ever, the industry needs to focus on quality experiences and good clinical outcomes for patients – and many startups are developing new approaches and technologies to tackle these issues. In order to make these new approaches a reality sooner rather than later, larger industry players need to understand the dynamic landscape, and work with and invest in these emerging companies.  Incumbents with their large feet planted squarely on the traditional solid ground are sensing some seismic rumblings and how well they are leveraging and embracing these emerging companies to help maintain their balance may determine whether they can sustain themselves moving forward.Continue reading…

Tales From the Accelerator

flying cadeuciiI hate to give away all the punch lines from my California Healthcare Foundation report on healthcare accelerators, so you will just have to read it for yourself. However, a few extra tidbits that didn’t make it in are here below (as you can imagine, I can’t be quite as Lisa-ish in a commissioned report as in my blog). Among my many discussions with a myriad of willing report interviewees (thanks to all of you!), I started collecting some funny stories that I have begun to refer to as Tales from the Accelerator Crypt. A few of them are here below for your amusement.

  • From an East Coast Economic Development-Focused AcceleratorBy far the worst idea pitched to us was from a company that proposed to prevent falls among the elderly with a vest containing an airbag whose deployment is triggered by EEG signals coming from a wearable computer brain interface.  It’s probably obvious why this is so insane. Getting beyond who might actually wear such a thing around their home or to bed, can you imagine the number of erroneous deployments from the notoriously unpredictable, noisy EEG signal?  If only they had made a video. That same week in the same city, I was amazed to be introduced to a rival company also developing a wearable airbag for accidental falls, but at least this one was triggered by an accelerometer.  File under “You know wearables have jumped the shark when…”
  • From a University Program in CAThe most awful pitch we had was from a clinician-entrepreneur whose answer to every probing question on commercial viability was “This is going to save countless lives.” It was his answer to every question, clinical to operational to financial. The most entertaining stage moment, however, was when a CEO of a company developing a ‘next generation’ needle-free injector did a live demonstration of his product by injecting himself with saline while up on stage doing his pitch. He unbuttoned his shirt, gave himself the shot and buttoned up again, claiming how painless it was. As he continued to speak, blood pooled and spread from the injection site, down his arm and across his entire white shirt. It was a slow motion disaster. He didn’t recover very well. Needless to say they didn’t win the demo day competition.

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Innovation Isn’t A Pipe Dream, How Health Care Organizations Can Adopt Digital Health Technologies

devchal1

Startups announce new technologies to solve healthcare problems every week, but how much of these new technologies hit the public market and reach widespread adoption? Even more, how much technology gets adopted by key institutions that work directly with patients and deliver care? 6 out of 10 physicians reported that they did not use digital health technology for clinical purposes, including communication with patients and other providers and only 27% of physicians actively encourage their patients to use digital health applications, according to PriceWaterhouseCooper’s Top Health Industry Issues 2014 report.  While many health systems are beginning to explore different avenues for innovation, some even creating internal departments to address innovation, many are still slow to adopt. As many as 36% of healthcare service organizations report that their organization has no mobile technology or innovation strategy.

Digital health startups, compared to traditional technology startups, have the additional burden of breaking into an established health care system before their solution can really gain traction. Whether it’s a hospital network, health plan provider or direct consumers, all of these groups want to see a product or service that has been validated. With so much activity in the digital health space, potential customers, especially large health systems, want to mitigate risk by purchasing a solution that has shown evidence of the benefits they claim to deliver.

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Launching Aledade

farzad_mostashariToday, I’m launching a new company, called Aledade.

Aledade partners with independent primary care physicians to make it easy and inexpensive for them to form and join Accountable Care Organizations (ACO) in which doctors are paid to deliver the best care, not the most care.

This is good for patients who will find that their trusted primary care doctors are more available and better informed than ever before. It’s good for doctors who want to practice the best medicine possible, the way they always wanted to. It’s good for businesses and health plans looking for healthcare partners that deliver the highest possible value and outcomes. And it’s good for the country as higher quality, lower cost care will help lessen the strain on our budget and our economy.

The world of start-ups may not be the usual path for those leaving a senior federal post, but it’s the right decision.

For me, Health IT was never the “ends,” but a “means” to better health and better care, and I continue to believe that better data and technology is the key to a successful transformation of health care. And it is why the attempts to do so now can succeed, where they have failed before.

Empowering doctors on the frontlines of medicine with cutting edge technology that helps them understand and improve the health of all their patients- that is the mission of our new company, and one that has animated my entire career. Continue reading…

Why the Creative Destruction of Healthcare May Not Be Such a Good Idea

From childhood most of us remember the sage parental advice on how to deal with bullies–“sticks and stones can break my bones, but words can never hurt me”.

Of course, we all know that words do hurt, maybe not physically, but they certainly take a toll on our psyche.

These days in planning meetings at my own company, in articles I read on the web and at various tech industry conferences, I come across words and language that I know feel hurtful, or are at least disrespectful, to the health industry and the people who work there. I hear cavalier talk about the need to disrupt the healthcare industry.

Some thought leaders even say we will creatively destruct the healthcare industry. Consumers armed with technology will rise up, they say, and disrupt everything about the current state of healthcare.

Now imagine for a minute that you are a hospital executive, a doctor, a nurse or other clinician and you hear people who work outside your industry talking about disrupting or destructing it.

Imagine being told that consumers, patients, and tech companies will rise up and destroy your business.

There you are doing the best you can to make it through each day keeping your hospital or practice economically sound, dealing with the barrage of patients at your door, staying one step ahead of ever-increasing rules, regulations and rising costs, while those who’ve never worked a day in your world tell you they are going to disrupt and/or destroy it.

Even if there is a need to disrupt healthcare (and even many who work in the health industry might agree), nobody appreciates being told by some outsider that they know your business better than you do.

I don’t imagine my colleagues who work at Microsoft (or Google, or Apple, or Amazon) would appreciate being told by a hospital administrator or a doctor that they knew better how to run a tech company, or what ails the tech industry.

Nor do I think that most patients and consumers can really appreciate the amazing complexity of our healthcare system or the unbelievable pressures under which it operates these days.

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Can Oscar Succeed In Making Health Insurance Fun? Maybe Not Just Yet. But the Startup Is Shaking Things Up …

Last week  I went to a panel presentation sponsored by the group NYC Health Business Leaders on the rollout of New York State’s health insurance exchange.  Among the speakers was Mario Schlosser, the co-founder and co-CEO of the venture-capital-backed start-up health insurance company Oscar Health, which offers a full range of plans through New York’s exchange.

As NPR reported last month in a story about Oscar, “it’s been years since a new, for-profit health insurance company launched in the U.S.”, but the Affordable Care Act created a window of opportunity for new entrants.

Schlosser began his talk by giving us a tour of his personal account on Oscar’s website, www.hioscar.com.  Among other things, he showed us the Facebook-like timeline, updated in real time, which tracks his two young children’s many visits to the pediatrician.

He typed “my tummy hurts” into the site’s search engine and the site provided information on what might be wrong and on where he might turn for help, ranging from a pharmacist to a gastroenterologist, with cost estimates for each option.

Additional searches yielded information on covered podiatrists accepting new patients with offices near his apartment and on the out-of-pocket cost of a prescription for diazepam (which was zero, since there is no co-payment for generic drugs for Oscar enrollees).

As an audience member noted, none of this is new exactly.  What is new is to have this kind of data-driven, state-of-the-art user experience being offered by a health insurer.  Schlosser told the audience that Oscar’s pharmacy benefit manager and other vendors are providing the company with real-time data that other insurers have not demanded.

 

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Uber for Health Care?? Not So Much.

Let’s get the disclaimer out of the way:

We love Uber.

As physicians with roots in the Bay Area, we use Uber all the time. The service is convenient, (usually) swift and consistently pleasant. With a few taps of a smartphone, we know where and when we’ll be picked up — and we can see the Uber driver coming to get us in real time.

When the vagaries of San Francisco public transit don’t accommodate our varying schedules, it’s Uber that’s the most reliable form of transportation. (It might be that we like having some immediate gratification.)

So when we caught wind of the news that Uber’s founding architect, Oscar Salazar, has taken on the challenge of applying the “Uber way” to health care delivery, there was quite a bit to immediately like. From our collective vantage point, Uber’s appeal is obvious. When you’re feeling sick, you want convenience and immediacy in your care — two things Uber has perfected.

And who wouldn’t be excited by the idea of keeping patients out of overcrowded emergency rooms and urgent care waiting rooms? The concept of returning those patients to their homes (where they can then be evaluated and receive basic care) seems so simple that it’s brilliant.

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