The federal government is on the cusp of leveling the playing field for healthtech startups. Health 2.0 events have shown an unprecedented wave of innovative healthtech startups have developed over the last few years. You can also see them at demo day events that Blueprint Health, Healthbox, Rock Health and StartUp Health host. However, the health sector may be the single most challenging arena for startups.
I would argue nothing would result in population health improvement (while decreasing healthcare costs) more than having greater engagement by patients in the healthcare process. The Office of the National Coordinator (ONC) could catalyze an unprecedented wave of innovation with a stroke of a pen by strong inclusion of patient engagement requirements in the Meaningful Use requirements.
Having high expectations for Patient Engagement will cause healthcare providers to rise to the occasion to solve this critical issue. It’s well documented that three-quarters of healthcare spend is on chronic disease and decisions that drive outcomes are made by individuals (aka “patients”). It’s long been said the most important member of the care team is the patient. Now is the time to transform that from a catchphrase to reality. The ONC can do that.
The biggest potential stimulus ever for healthtech startups
We have seen how Stage 1 Meaningful Use requirements (PDF) have spurred providers into action. By and large, that has meant an infusion of customers to EHR vendors. Legacy healthIT has had very, very little focus on the patient because financial incentives motivated the development of systems designed to get as big a bill out as fast as possible — i.e., there has been no incentive to involve the patient.
When I first entered the venture capital business 10 years ago after being an entrepereneur, my partners warned me that “my bar” for new investments would get higher over time. In other words, the criteria to make a new investment – clearing “the bar” – would get more strict with time as I developed more experience and saw more things. I found this to be very true, and the notion that investors get wiser and more selective over time has become common wisdom in the industry.
But there’s something very new going on in the last few years – something very striking. Simply put, the collective bar of the investment community to fund young companies has recently gotten higher – much higher.
The entrepreneurs I speak to are feeling it every day. When they pitch their new idea to investors, they are told to build a prototype first. When they build the prototype, they go get customers. When they get customers, they are told to show engagement metrics. When they show engagement metrics, they are told to run some monetization experiments. When they run monetization experiments, they are challenged to prove scalability. Maybe I have Passover on the brain this week, but it’s like investors are putting entrepreneurs through a nightmarish version of Dayeinu, where no matter what they achieve, it’s never enough (speaking of Passover, if you haven’t seen this Jon Stewart clip of Passover vs. Easter, it’s a must. I’ll wait.).
Why is the new investment bar so high today? Isn’t there plenty of euphoria and “animal spirits” to go around with the IPO market returning, marquee acquisitions (e.g., Instagram at $1 billion) and the impending, earth-shattering Facebook IPO?
When I was a teenager, the older women in my family taught me to cook. I learned it was traditional not to add salt when cooking lentils, because it would slow down the cooking. For some reason, perhaps the sheer pleasure of being difficult, I insisted on taking two identical pots and cooking identical quantities of lentils, one with salt and one without. That caused quite a bit of a stir, and not only because I proved that the salted lentils cooked just as fast. On the one hand, my mother, grandmother, and aunts sensed more difficulties were to come. On the other, they knew they’d participated in something different and important: a scientific experiment.
The women in my family were courageous, smart, and resourceful. They knew many things: useful wonderful things. For the most part, their knowledge was received knowledge, knowledge they’d been given, not figured out on their own. This is a common situation. The idea that anybody can be taught to figure things out, that there is a logic to discovery and invention, would have struck our ancestors as radical and strange. Until quite recently — until science education became institutionalized and widespread — the creation of new knowledge depended on either genius or luck.
There’s a lot of entrepreneurial energy in the Bay Area, but I’m always surprised at how much of it is directed towards health care. As Apothecary readers surely recognize, if we were to rank sectors where the government lies ready to crush the entrepreneurial spirit, health care and education must lead the list.
So, I was excited to have wrangled an invitation to the UC Berkeley’s Haas School of Business‘ annual Business of Health Care Conference, a day-long event held last week. This year’s conference, the sixth, titled Entrepreneurial Solutions to Health Care Challenges, assembled a high-profile group of entrepreneurs, scholars, and investors.
The most informative panel that I attended addressed “Venture Capital – Positioning Health Care Startups for Success,” moderated by Rebecca Lynn of Morgenthaler Ventures. The panel comprised Missy Krasner, also of Morgenthaler Ventures and the former Google executive who launched the now defunct Google Health; Lisa Suennen, a co-founder of the Psilos Group (perhaps the longest-standing pure-play healthcare VC); and Jeff Tangney, former president of Epocrates and founder of Doximity.
Key take-aways from the panel discussion were:
Digital health is where the opportunity lies, but both healthcare investors and IT investors bring unhelpful biases to this new sector.
Although the Bay Area crowd is loathe to hear it, some of the best new health IT businesses are in places we’d shun – like Michigan or Nashville.
Some digital-health entprenreneurs think they have a business, but they only really have a product. Nothing wrong with that, but you’ve got to sell it, not fund it.
There’s a new movement in healthcare – and it’s growing from a surprising place. Instead of emerging from government or industry, it’s budding from the grassroots –from everyday physicians. The movement is democratizing health information and giving birth to a new landscape: Interactive Health.
Interactive Health is transitioning clinical care from real-world, costly encounters to virtual, inexpensive, cloud-based care. And the view from the cloud is better. This transformation is starting with the most fundamental interaction in healthcare: patient question, physician answer.
In late April of 2011, HealthTap decided to help facilitate this movement by bringing together physicians to engage online and create a roadmap for “care in the cloud.” Nine months later, the growth of physician engagement on HealthTap and beyond proves that Interactive Health is here to stay.
I like health Web sites and tech start-ups. I think the democratization of medical information is a beautiful thing. It’s a cliche that you can find out more about a hotel than a doctor with a few Google searches. I love how that’s starting to change. I also think that electronic medical records will improve health care over the long haul.
But I am also cynical about the idea that technology is some sort of panacea all that ails the sector. I read Michael Lewis’s book The New New Thing when it came out in 1999. There’s a great anecdote in it about Netscape founder Jim Clark. He was looking for another big challenge and decided–this was 1996–that all that was missing from health care was good software. So he started Healtheon. To Clark it was just a matter of writing some really good code and all the inefficiencies and paperwork that bedeviled the industry would go away. His business plan was a flow chart showing how software cuts out paperwork. It was simple.
Flash forward and Healtheon is buried somewhere deep inside WebMD. There’s still a lot of waste and paperwork that hasn’t gone away.
Since Clark there has been a parade of other ambitious health-tech entrepreneurs. Do you remember the search engine Wondir? Or the comparison-shopping site Vimo? Or Carol.com? How about Steve Case‘s modestly named Revolution Health? What about Subimo?
Health system CEOs would be well advised to study what newspaper industry leaders did (or perhaps more appropriately, didn’t do) when faced with a dramatic industry change. Turn back the clock 15 years and the following dynamics were present:
Newspaper leaders knew full well that dramatic change was underway and even made some tactical investments. However they didn’t fundamentally rethink their model.
Newspapers were comfortable as monopoly or oligopoly businesses allowing for plodding decisions. Their IT infrastructure mirrored the plodding pace with expensive and rigid technology architectures.
Newspaper companies bought up other newspaper chains and took on huge debt.
Owning printing presses was a de facto barrier to entry allowing newspapers unfettered dominance.
Depending on one’s perspective, it was the best of times or the worst of times to be a leader of local media enterprise.
Before they knew it, owning massive capital assets and the accompanying crushing debt became unsustainable. The capital barrier to entry transformed into a boat anchor while nimble competition dismissed as ankle-biters created a death-by-a-thousand-paper-cuts dynamic. Competitively, newspaper companies worried only about other media companies or even Microsoft, but their undoing was driven by a combination of craigslist, monster.com, cars.com, eBay, and countless other marketing substitutes for their advertisers. In addition, there were easier ways to get news than newspapers. Generally, the newspaper’s digital groups were either marginalized or unbearably shackled so that the encumbered digital leaders left to join more aggressive competitors. The enabling technology to reinvent local media didn’t come from legacy IT vendors who’d long sold to newspaper companies, but from “no name” technologies such as WordPress, Drupal and the like.
The event featured an exhibition session where emerging digital health companies (with some others) demo’d their initial products, followed by a plenary session introduced by FutureMed Executive Director (and former MGH medicine colleague) Daniel Kraft, and featuring presentations to the packed house by several leading innovators – including one of the developers of IBM’s Watson, which is pivoting from Jeopardy to clinical medicine.
Given the high density of reporters there – to say nothing of innovators, would-be innovators, VCs, and assorted poseurs (categories not mutually exclusive) – I expect there should be lucid coverage available elsewhere on the web.
Instead, I want to capture the three sequential reactions I had, which strike me as somewhat analogous to Haeckel’s Law (ontogeny recapitulates phylogeny), as each response seems to reflect a distinct stage of professional development.
The inevitable initial, and most visceral reaction to this sort of event, is that technology is wicked cool, and will deliver us all; I think this two minute introductory video captures the vibe more effectively than any description I could offer. I’m also certain any student of semiotics would find it especially rewarding.
Accordingly, even much of the informal discussion at the event seemed to revolve around Big Questions, lofty ideas, and the Next Big Thing. New technologies and approaches – artificial organs from stem cells! Computers that can read your mind! Bottom-up innovation! Exponentials! – were discussed expectantly, the key question being not if, but when. The remarkable progress many in the tech crowd had seen in other disciplines suggested that technology advances in health would be similarly achievable, and just as inevitable.
These days my physician colleagues and I are up to our necks in a health technology revolution. To be honest, its not as captivating as Pinterest or socially-engaging as a Google Huddle but to be sure your life will depend on it. The revolution ushered in by electronic health record (EHR) is less about the technology than the widespread impact it will have on patient care. Rather than digging through stacks of paper charts, your doctor will have ready access to all of your health history on a digital device. And not just your health history, soon I will be able to combine it with the history of other patients in my practice: the digitized data will allow me to track the childhood obesity rate in my clinic and trend it over time with just a click (or tap). But look out, there are glimmers of another emerging health tech revolution.
I recently attended the Health Innovation Summit organized by Rock Health, a seed accelerator for health startups based in San Francisco. Coming from the bureaucratic and comparatively stagnant world of health care systems, this event made me feel like I could dream again. Speakers provided pearls of wisdom for an engaging design. Panels offered strategic advice to attract VC and Angel funding. Most exciting was the chance to hear from entrepreneurs, each of whom offered their own incremental solution to improve health.
Take something like Cardiio, which measures heart rate in a few seconds by scanning your face. Imagine how future related technologies could replace monitoring wires and tubes thereby improving comfort during a hospitalization and reducing hospital acquired infections.
A few weeks ago, I had the opportunity to talk with an innovative company about a new product. I make it a policy not to endorse any particular company or product on this blog, so this is not an endorsement. Rather it is a fascinating story that tells us lots about human nature and gives us clues on how we should design healthcare programs, apps, etc. as we move into the world of patient engagement and accountability. And we are moving there. Whether your focus is achieving meaningful use of your EMR (increasingly we’re going to be graded on how we engage our patients in this regard), the journey to becoming an Accountable Care Organization (as we enter an environment where we’re compensated for quality and efficiency, patient engagement becomes key) or simply that you realize that we don’t have enough healthcare providers to take care of all those folks who need it (in this case, patient engagement becomes a tool to give patients the opportunity to be their own providers, taking work off of our beleaguered primary care workforce), patient engagement is all the rage.
Right out of the gate, we health care providers have a big hill to climb. We are the ones who remind you that you are sick. Who wants to be engaged with that? Once patients get into the mindset of being sick, the context becomes pain, suffering, inconvenience, depression, time out of work, rehabilitation, and on and on. It’s no wonder that patients don’t engage much (other than the occasional masochist among us). And the conversation immediately gravitates to whether insurance will pay or not. We’ve observed patients in our connected health programs who are happy to go to the sporting goods store to fork over their own money for a heart rate monitor so they can watch their heart rate during a work out, but baulk at paying for a blood pressure monitor to be part of a hypertension program. After all, fitness is your own business, but when we’re talking about sickness your insurer owes you ….