Editor’s note: Dave Chase is the CEO of Avado.com, a patient portal and relationship management company that was a TechCrunch Disrupt finalist. Previously he was a management consultant for Accenture’s healthcare practice and founder of Microsoft’s $2 billion health platform business. You can follow him on Twitter @chasedave.
Healthcare has long been a technology paradox. There have been few places further out on the cutting edge of technology than biotech and medical devices. In contrast, healthIT has been in a time warp (see Why It’s Good News HealthIT is So Bad). Nearly 20 years after the advent of the web, the dominant healthIT vendors have thrived on a business model and technology architecture that harkens back to when Wang and Prodigy were cutting edge. That is, most healthIT still has the same company provide technology from the top to the bottom of the stack.
The widespread use of the web disconnected the front-end, user-experience technology supplier from the back-end. Whether it’s travel apps or package tracking, consumers are able to tap into back-end systems without knowledge of what mainframe or client-server system may be running those systems. The spike in digital health investment reported by Rock Health’s Q3 2012 Funding Report echoes what I heard from hospital executives at two recent healthtech-related conferences – Health 2.0 and the Digital Health Conference. That is, for the first time in my experience, these executives talked about how they recognize that they have a flood of new requirements and they have zero expectation that their legacy healthIT suppliers will meet those needs in the next 2-3 years.
This projection is due to legacy vendors being overloaded with their core business (e.g. installing electronic health records) and also having slow product cycles. Healthcare executives explicitly talk about how they want EHR-agnostic tools that will work with their EHRs. Increasingly, providers recognize that while they have complained about vendor lock-in strategy reminiscent of the Wang era, the risk of lock-in increases exponentially if they also adopt consumer/patient-facing tools from their legacy vendors. It’s one thing to disrupt your staff with switching EHRs, it’s quite another to ask patients to switch tools as well. Smart providers are disconnecting those two decisions like virtually every other industry already has. This dynamic is the core reason for the New York Digital Health Accelerator (NYDHA). See Rip Empson’s article here on why the NYDHA was formed and has 22 large healthcare providers engaging with startups at a level that is unprecedented in healthcare. [Disclosure: My company, Avado, is one of the eight companies selected for this program.]
The following slide deck from Rock Health highlights key findings such as an increase in dollars invested by VCs of 70 percent and 84 percent more deals over a year ago:
Growth in healthtech investment isn’t limited to the U.S. For example, noted investors/entrepreneurs Esther Dyson, Peter Frishauf (founder of Medscape) and Milena Adamian (founder of Life Sciences Angel Network – New York) recently invested in the Series A for VitaPortal in Russia. It’s also not limited to traditional VCs as we saw in a Community Hospital Joins Wave Of New Strategic Venture Funds To Drive Disruptive Innovation.
Already healthcare providers are realizing that what they thought was going to be their 100 percent solution is really best optimized for just 25 percent of where healthcare dollars are spent (hospital-based care). In reality, 75 percent of healthcare spend is directed toward chronic disease. Legacy healthIT has its strength in automating internal workflows of hospitals and other clinical settings. In those high-intensity settings, healthcare providers make the decisions that drive the patient health outcomes. However, with chronic disease, it’s an entirely different story. The decisions that individuals (or their families) make drive the health outcomes. For example, does the patient fill a prescription and take it properly? Or do they make the necessary lifestyle choices to optimize their health?
This dynamic isn’t lost on thought leaders in healthcare. One of the leading thinkers in healthIT, Shahid Shah (aka The Health IT Guy), laid out why legacy EHRs are ill-prepared for the era of accountability that is rapidly transforming healthcare.
The EHR systems and IT required for MU (Meaningful Use) is a quite different from what will be required for ACOs,” Shah continued. “It will be nowhere as easy for existing legacy EHRs to simply retool their current platforms, like they did for MU.”
With that said, Shah outlines nine ways future EHRs need to support ACOs.
1. Sophisticated patient relationship management (PRM). According to Shah, today’s EHRs are more document management systems, rather than sophisticated, customer/patient relationship management systems. “For them to be really useful in ACO environments, they will need to support outreach, communication, patient engagement, and similar features we’re more accustomed to seeing, from marketing automation systems than transactional systems.”
Read full article here.
Despite a clear recognition of the radical transformation that is happening, it is striking that the path many healthcare providers are taking parallels that of newspaper companies (another local oligopoly/monopoly that had barriers to entry that were no longer unassailable). See WWJD? The CEO Every Healthcare Leader Should Learn From for more. In contrast, providers such as those in the NYDHA are taking a different path.
In the above piece, newspaper executive John Paton had a three-point prescription for reinvention that led to a 5x revenue increase and halving of capital expenses. This resulted in his organization going from bankruptcy to $41 million in profit in two years. There were three keys to his approach that can be applied by healthcare leaders:
Unfortunately, most newspapers didn’t adhere to that prescription. It’s a cautionary tale for hospitals, in particular. In other countries when the shift happened from a reactive “sick care” system to a proactive health-focused system, over half of the hospitals closed. Naturally, forward-looking hospitals and health systems are making moves to not only survive, but also to thrive.
If you want to see the future of healthcare, New York is a great place to start. Nirav Shah, MD, MPH is the New York State Commissioner of Health for the State Department of Health. Dr. Shah talks about fundamentally rebuilding the healthcare system. The stakes are high to make that happen. Dr. Shah oversees a budget of over $50 billion that has 5 million Medicaid recipients. Like all states, they see healthcare’s hyperinflation is devastating state budgets and education budgets, in particular (see Bill Gates TED Talk for more). “The old system, acute care focused in the hospital. That was the past. Tomorrow is chronic disease focused in an outpatient setting. That is what the Health Home program promises and that is what the Medicaid program is investing in. That is what the NYDHA is all about.” The pace of decisions by NYDHA providers is dramatically faster than procurement models of the past. I’ve already seen one Health Home program (and the hospital that is running it) evaluate and make a selection in less than two months. For those of us familiar with the excruciating year-plus decision processes of the past that has crushed many a startup, this is exciting.
At the kick-off event for the NYDHA, Intel veteran and current Executive Director of the New York eHealth Collaborative (NYeC), David Whitlinger discussed that the health information exchange his organization operates (the State Health Information Network of New York – aka the “SHINY”) will allow software developers to facilitate the information exchange critical to reinventing healthcare delivery. The missing link has been having tools that sit on top of the SHINY. The NYDHA startups will get first access to their APIs and then it will be opened more broadly.
In order to achieve those goals, it’s critical to have the right resources and players at the table. Maria Gotsch, president and CEO for the Partnership for New York City Fund, is building off of the tremendous success of the FinTech Innovation Lab that her organization orchestrated for healthcare. The NYDHA is intended to foster innovation and economic development. In tandem with the NYeC, Gotsch’s organization got commitments from 22 large healthcare providers and seven investment funds to deeply engage with the program.
For a long time I said “healthcare is where tech startups go to die,” as the decision processes in healthcare favored 20-30 year old companies that could wait out excruciatingly convoluted decision processes. Those decision processes not only killed many startups, they doomed healthcare providers to outdated technology and price tags reminiscent of the mainframe era. But times have changed.
At a recent presentation given by Leonard Achan, RN, MA, ANP and chief communication officer for the prestigious NY-based Mount Sinai, described how they have changed how they worked in the past and contrasted to what they are doing now. He said that that they are far more open to working with startups. Rip Empson reported on one example of this. Just a year ago, who would have thought mainstream healthcare organizations would be releasing “app stores” of their own. This is why VCs are voting with their pocketbooks on healthcare’ reinvention fueled by breakthrough startups leaving the Wang/Prodigy era behind.
Editor’s note: This guest post was written by Dave Chase, the CEO of Avado.com, a patient portal and relationship management company that was a TechCrunch Disrupt finalist. Previously he was a management consultant for Accenture’s healthcare practice and founder of Microsoft’s Health platform business. You can follow him on Twitter @chasedave.
Currently, the federal government is poised to level the playing field for healthtech startups. An unprecedented wave of innovative healthtech startups has been developing over the last few years. You can see them at conferences such as Health 2.0, TechCrunch Disrupt, TEDMED and demo day events that Blueprint Health, Healthbox, Rock Health and StartUp Health host. Nonetheless, the health sector may be the single most challenging arena for startups.
Nothing would result in population health improvement (and decrease healthcare costs) more than having greater involvement/engagement by individuals in the healthcare process. The Office of the National Coordinator (ONC), which is part of Health & Human Services 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 huge issue. Consider 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. It’s 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. As I outlined in “Patients are More Than a Vessel for Billing Codes,” 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. Not surprisingly, the customers these vendors serve are concerned about the ability to meet the patient engagement requirements (good summary by Adrian Gropper here of Stage 2 Meaningful Use) as their vendors don’t have that skillset. The fact is, it’s an entirely different proposition to get bills out than to develop software that actively engages a consumer (aka “patient”).
Fortunately, there are scores of innovative startups who are well positioned to address the patient engagement requirement. Look no further than the companies in startup incubators/accelerators or the scores of companies demonstrating at Health 2.0 conferences. These software developers from Silicon Valley, Seattle, Boston, New York and elsewhere have the skillset to address this critical requirement. They can assist healthcare providers directly or via their vendor partners.
Unfortunately, with little awareness of innovative healthtech startups, providers and legacy vendors are pushing back against the requirements proposed by the ONC. There is a major risk that the proposed requirements will be watered down based upon this feedback. What could be the biggest ever jumpstart to the healthtech startup community could become a missed opportunity. More importantly, the opportunity to make a huge difference in the health of our population would also be missed.
Call to Action
A petition to support the increase of patient engagement requirements has been posted. There is an ever-growing citizen movement exemplified by the Society for Participatory Medicine (S4PM) to expand patient engagement. One of the most visible leaders of the S4PM movement is Dave deBronkart (aka “e-Patient Dave”). We met during TEDMED and he echoed the importance of strengthening the patient engagement related requirements in Stage 2 Meaningful Use. The startup community has also been encouraged to support this petition.
I just returned from attending 2012 TEDMED. During the event, they had a “Great Challenges“ contest. Not surprisingly, “The Role of the Patient” was a leading vote getter. This despite the fact that it didn’t begin to hint at the role patients can play if they’re equipped with information. And that’s a major point of why patient and family engagement are proposed in Stage 2 Meaningful Use. As support built for the challenge, it’s critical that your voice is heard on the proposed Stage 2 Meaningful Use requirements. Voting for the petition is great to raise visibility, but the most impactful thing you can do is to comment on the government site. Or you can email comments to email@example.com. One’s comment could be as simple as “I support the strengthening of patient engagement requirements of the proposed Stage 2 Meaningful Use requirements” or as involved as a point by point analysis of the proposal.
At TEDMED, I had the opportunity to meet Lygeia Ricciardi from the ONC. She emphasized how critical it was that each and every person who has an opinion takes the time to comment on the portion of the proposed Stage 2 Meaningful Use. The comment period for the proposed Stage 2 Meaningful Use closes May 7, 2012. If you believe that it’s important to increase patient engagement and you want to support innovation, there is no better use of your time than to take a moment to have your voice heard. Take 5 minutes and do it now. If you want to reshape healthcare for the better, there is nothing more impactful than to support strong patient engagement requirements. There has never been a better time to jumpstart innovation to improve the health of our world.
Note: The image accompanying this article is from Regina Holliday. As described on her Wikipedia page, Regina paints images that encapsulate her view and others in the e-patient community. She speaks and paints at events such as TEDMED.
Here is the original post: Government Poised To Provide A Huge Boost To Healthtech Startups