Healthcare Technologies: Trends and Opportunities

VC TaskforceOn February 28, 2013 I was honored to be a Panelist at an event organized by VC Taskforce on the Trends and Opportunities in Healthcare Technologies.

VC Taskforce is a leading organization that seeks to foster greater connectivity and networking within the innovation ecosystem of Silicon Valley.  The event was moderated by Matt Sarrel, renowned technology analyst (CNN, GigaOm, etc).  My esteemed co-panelists included: Leonard Goldschmidt, Medical Director of Telehealth and Medical Informatics at the VA Palo Alto Health System; Markus Formherz, Chief Innovation Officer (Healthcare) at Xerox PARC; and Nandini Tandon, Board Member at El Camino Hospital, which bills itself as “The Hospital of Silicon Valley.”

I spoke about several topics including the following:

1.  There are so many opportunities/trends in health care today (proliferation of EHRs, mobility, consumerization of health care, telehealth, biomonitoring/sensing, pharmacogenomics, etc.)  From your vantage point, what are 3 of the most exciting opportunities and why?

  • Quantified Self movement (e.g., Fitbit, Nike, Basis…). Active sensors (e.g., Happy Fork) and Passive Sensors (Basis: heart rate, perspiration, sleep, blood pressure, calories burnt…)
  • Move to Electronic Medical Records / Electronic Health Records (e.g., Practice Fusion…)
  • Reducing friction in the doctor-patient interaction dynamic (e.g., Zocdoc, Kaiser’s online portal…) + online healthcare comparison shopping tools for individuals and small businesses (e.g., Castlight health, GoHealth…)
  • 134 digital health companies raised $2 million or more in 2012, with four areas representing over one-third of the total investment.
    • Personal health tools and health tracking saw $143 million,
    • Consumer engagement saw $237 million,
    • EMRs (all those that capture clinical information and its corresponding app ecosystem) saw $108 million
    • Hospital administration found $78 million.

2. From your POV, what do you see are 2-3 key areas of interest for investment?

  • In general, capital efficient, disruptive technologies that have a quick go-to-market strategy and initial proof or market acceptance from the key healthcare constituencies they target.  Specific areas that are interesting:
  • a) Helping businesses and consumers make more informed health choices (ala quantified self, comparison shopping for healthcare…)
  • b) Catering to the megatrends around Obesity and an Aging population – could be more PE-style investmetns such as assisted living centers. Also seeing evidence of FDA getting smarter about risk/reward tradeoffs, a recent example being FDA approval for drugs such as Vivus’ Qnexa that fit a different benefit / risk profile than previously contemplated
  • c) Digitizing parts of the doctor-patient relationship. Don’t think telemedicine will become mainstream. But video / electronic diagnosis of certain types of ailments and follow-ups will become more common. Reduce costs and increase efficiency
  • d) DNA testing and personal genomics (e.g., 23andMe…):  allow an assessment of inherited traits, genealogy and possible congenital risk factors. Consumer awareness and advance warning system.

3. Macro take on Healthcare investing?

Healthtech investing is going to

  • Shift away from administrative, claims processing and Life Sciences TO Digital health and businesses focused on affecting outcomes, those that improve decision support, care coordination and patient engagement.
  • Tremendous amount of low hanging fruit in most parts of the healthcare value chain

4. Some other observations

  • Consumerization of healthcare is a back-channel way (“disruption from the bottom”) for innovative companies to disrupt the market. The conventional approach relying on cooperation from payors, providers, and patients has taken a long time to see results, and often involves dealing with large complex, bureaucratic organizations.  However, if consumers are able to voluntarily opt-into systems, then data can be collected in a more federated manner and ultimately the larger providers, health systems, and insurers will be more likely to participate if there is already critical mass from a consumer acceptance/ adoption perspective.  Think analogous to what did for financial information.
  • Healthcare innovation is not being stymied by technology limitations. There needs to be business model alignment. If payor-provider incentives are not integrated, then what is the incentive for a Hospital to adopt an innovative technology that reduces number of nights a patient spends in a hospital?  In fact, it could be anti-thetical to the Hospital’s business model.  Entrepreneurs need to ensure there is incentive alignment from a business perspective as a precursor to gaining marketplace acceptance.
  • There is tremendous opportunity in EHRs / EMRs and the market is begging for a change. When I take my car for service, the mechanic pulls up all the past service history from the cloud. When I go for a doctor’s appointment, I still have to fill in the same “allergies and family history” form over and over again.  This doesn’t make much sense. A consumerized / federated approach is likely to be part of the solution here.
  • The integrated Payor-Provider-Practioner model espoused by organizations such as the VA Health System and Kaiser Permanente makes a lot of sense from an incentive alignment and transparency perspective, but currently it is the exception not the norm.
  • In general, healthcare spend as a percentage of GDP in the United States is very high and the growth rates are not sustainable. In addition to business model shifts (ala integrated payor-provider incentives), reducing waste and inefficiency by leveraging technology, automation, data portability, interoperable systems, and patient (consumer) involvement will have to be part of the longer term solution.
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