The HealthTech Conference is back on October 27-28, 2015 for its 4th annual event and this theme, "Moving the Needle in HealthTech," will highlight how industry leaders have implemented disruptive solutions from emerging companies and validated their impact.
30 years ago, I started a roller coaster journey helping several amazing entrepreneurs build sustainable Unicorns and suffering a couple of "Unicorpses" along the way. As a lonely HealthTech pioneer, I have learned, over and over again, that the key to success is aligning the business model with customer interest. Being a great business architect may come across as black magic... but it really is not! The key is to understand that customers do not just buy technology, they expect a total solution to solve their perceived pain points for all their stakeholders . The word perceived is critical here...
Understanding what drives your expected champions, users, and buyers in a moving healthcare landscape is an ongoing process to build new markets and create sustainable barriers of entry.
As the healthcare industry attempts to destroy its old silos, we are seeing massive transformation. This includes aggressive acquisition and consolidation by payers and providers to increase their purchasing power in the new Value-Based Care world. Not only are they consolidating within their own sectors but they are reshaping their business definition by entering other health segments. Provider-owned plans cover less than 10% of the private insurance market, but their membership is growing, according to an analysis by A.M. Best Co. of 150 provider-owned plans. At the same time, several payers have acquired providers across the continuum of care...
As their customer models are changing, entrepreneurs need to innovate their own business models beyond traditional product sales and call points. The growth of mobile connectivity has provided a disruptive force to enable technology-enabled services and a new business approach called PaaS: products-as-a-service. Entrepreneurs are able to bypass the treacherous healthcare journeys of never-ending pilots and long selling cycles ...with at risk pricing, and unbundling of traditional healthcare services and value chain.
I look forward to talking more about these points during my key note at the HealthTech Conference 2015.
2015 is shaping out be a debutante year for digital health startups on Wall Street. Early in January this year, during the J.P. Morgan Annual Healthcare Conference, there were whispers and chatters among leading VCs and investment bankers that over half a dozen companies were almost ready to file their S1s. Thus far, it has played out accordingly...we witnessed Evolent Health (EVH), Fitbit (FIT), MindBody (MB), Teladoc (TODC), and Natera (NTRA) complete successful IPOs that are now traded on the public market. While the last few weeks of summer has been gut-wrenching with the global market turbulence, which has beaten down the stocks of these rising stars, many believe that the mega trend driving the digitalization of healthcare is gaining momentum. The fundamentals of many of these companies are solid --positioning well to deliver value to long term investors.
Meanwhile, the list of unicorn startups is growing on the private side, featuring a few digital health high fliers: Jawbone, Nant Health, ZocDoc, and a few more which are likely to join the elite club shortly: Collective Health, FlatIron, Practice Fusion, and more. It has been nothing but a hectic 4 years since Rock Health started to track funding in this space via its popular funding reports: Digital Health Funding: 2014 Year in Review, and over $10B in venture investments have poured into thousands of companies mining gold in the big H space. While there are believers or brave-ones like myself and my fellow venture investors in this emerging space, the recent escalation of valuation on new and follow-on investments has certainly raised some eyebrows -- and have many experienced investors in a quandary bouncing between opportunity and reality. Fortunately, the IPOs, and thereafter trading of the first batch of companies, have revealed some clues about the equilibrium.
While there is no set formula for VC financing sequence or success, many that have succeeded have followed a tried and true path of managing their company growth and fund-raising by focusing on the right milestones and metrics:
We (Qualcomm Life Fund and dRx Capital) have fortunately met and tracked a large number of the companies in the space over the years. Closing their series B is clearly a chasm to cross for seed/series A-funded companies. Many entrepreneurs burned through the initial funding and extended their lifeline via series of bridge notes, yet to find any institutional funds willing to write that big check. Often, if one has not yet pivoted, the company fails to make enough progress to show strong KPIs and related growth - which investors are eyeing. For a few that have crossed that first onerous chasm, and demonstrated promising customer traction, a bidding war by VC firms quickly ensued ... and then often ended up with breathtaking valuation and heavily oversubscribed rounds. The digital health space is maturing rapidly. Entrepreneurs and investors are better to be aware of, and align themselves quickly to the good ol' venture investing norm. With a number of digital health start-ups having grown up in front of our eyes, and making their own waves as public companies.. with transparency -- it is time to reflect, and play ball smarter and harder.
- Seed/series A: team, vision and market
- Series B: Key Performance Indicators (KPIs), especially customer traction
- Series C: revenue growth, gross margin
- Mezzanine round: revenue in scale, path to profitability
- IPO: revenue growth trajectory, market share, EBIDTA
I'll be speaking about how to leverage digital media to personalize patient engagement. But let me be clear: patient engagement over digital is completely broken in our healthcare system.
Why is it broken? Because most of the healthcare system doesn't treat patients as consumers. To be fair, the burden of stringent regulation around what can be communicated electronically makes this more difficult, but many other regulated industries have done a better job despite these hurdles.
It's hard to imagine how any other industry would survive if it treated its customers the way the healthcare system treats its patients. Imagine travel websites, movie streaming sites or social networks making their customers go through 10x the number of steps actually necessary to complete a task. Those businesses wouldn't last long.
Simplicity is key if we want patients to engage in new programs or benefits offered by employers, health systems and payers. The system must be easy to use and inspire patients to share their great experience with others. You won't achieve a high Net Promoter Score if the system causes users to tear their hair out in frustration and confusion.
We need to treat the patient the way we would like to be treated ourselves. Learn the patient's preferences early on and then customize the experience. Matching the activation messaging to a patient's psychographic needs will give patients reason to engage and share with little effort.
I look forward to talking more about these points at HealthTech Conference 2015.
I am officially going on the record that the healthcare system does not get the credit it deserves for Information Technology advancements it has made over the years. My theory is that this below average perception has been perpetuated because most of the maddeningly, complex enterprise systems have been implemented to serve administrative and clinical functions, and were not designed to create excellent experiences for consumers. Therefore, the technology consumers have been exposed to in healthcare has largely been in the form of adjunct portals duct-taped to existing systems, or an over-the-shoulder view of a physician entering data in their patient chart. That's a challenge we are addressing at Welltok with the introduction of the industry's first enterprise-level consumer health platform, but that's a topic for another time.
What I'll be discussing with Glen Tullman (Allscripts and Livongo) on the HealthTech panel "Serial Entrepreneurs: Secrets to Success" is how we've been successful to date and why we are not done. Health IT is far more complex than most people acknowledge or can comprehend. There needs to be a respect for the systems in place, but we also need to move more quickly as an industry and continue to innovate. This is why Glen and I are still hacking away at challenges in healthcare that can be solved with technology, and not resting on our laurels.
While this may seem daunting to an outsider - hence the earlier framing - this is what drives me to be a serial entrepreneur. There is tremendous opportunity in health technology, and personally, I believe our biggest successes are yet to come.
CarePredict has developed the first wearable sensor for seniors that detects subtle changes in activities of daily living that could be precursors to more serious health issues – enabling proactive intervention by care staff in senior living and home care. As we drive toward our commercial launch, HTC 2015 offers us a focused opportunity to interact with the core healthcare constituencies important to us – investors, collaborators, and customers.
There is currently much debate surrounding the role that technology should play in the healthcare system, specifically as it applies to the delivery of mental health care.
And for good reason. As a country, we're underserving people suffering from mental health conditions on a massive scale. The system passed the "unethical" boundary miles back, and we've now entered into the realm of the absurd, bordering Kafkaesque in my opinion.
Some people involved in argument believe we need to invest more heavily in human resources to "hire our way out of the problem." Others look to the promise of technology as a panacea that solves all problems and heals all wounds. As with most things in life, the truth lies somewhere in between.
Let's start addressing the problem by looking at the facts: 1-in-4 Americans suffers from a mental health condition, the vast majority of which have depression or anxiety as a primary diagnosis or co-morbidity. Nearly 80% of those suffering do not get the treatment they desperately need-whether that's because of where they live, their ability to pay, the stigma surrounding mental health, or a number of other systemic conditions.
To make matters worse, the U.S. mental health system couldn't treat all these people even if it wanted to. We're suffering from a drastic scarcity of mental health providers with wait times ranging from 24 days (national average) to eight months or more in rural areas.
So what do we do? We know the human connection is critical for addressing mental health conditions. Study after study demonstrates how the relationship formed between patient and therapist and the number and frequency of their interactions are key factors in improving outcomes for people with severe symptoms.
But we also know there are simple steps many people can take to address their condition long before walking into a psychiatrist's office. Things like sleep hygiene, physical activity, and simple CBT and mindfulness practices can serve as preventive mechanisms and provide targeted improvements in populations with less severe conditions. What's more, these categories of self-help interventions are well-suited for digitization and mass distribution via channels like smartphone apps and web-based services.
The challenge (and the opportunity) is finding the right combination of human services and technological supplements. It's not an either/or scenario. Empowering higher-functioning clients to take a more central role in their health through education and self-management tools enables a better patient/member/employee experience while also freeing up clinician time and resources to focus on their acute populations and deliver better care across the board.
Following this human-centered/technology-leveraged approach, more people can get the care they need when they need it, and the system as a whole can become exponentially more flexible, responsive and accessible. As a clinician and an advocate for mental health, that's all I could ever want to achieve.
Payers, employers and providers have to consider these inputs when weighing out what's right for their populations. There's no question that technology needs to play a central role in the design of clinical, prevention and wellness offerings. We can't solve the access issue without it. For what purposes and to what extent we use technology are the issues we need to address to measurably improve upon the status quo and provide help for those who need it.
Marketers have long understood the power of personalization. People respond better to messages and messengers that speak to their unique situation. Recently, tech companies like Netflix have revolutionized the field, zooming in from large segments to the needs and preferences of specific individuals to recommend which movie or TV show they want to watch next. Why can't we apply this principle to one of the biggest challenges employers face when offering new health benefits - employee engagement?
The need for this kind of personalization in employee health benefits has become increasingly apparent. Each employee has unique health goals, challenges, motivations, and behaviors. At the same time, employers are investing in a new wave of digital health tools, including apps, wearables, and other digital services. This combination results in a complex and inefficient system that leaves employees overwhelmed. Benefits administrators can solve this by connecting the right employees with the right health benefits at the right time. In addition, employees should receive targeted information that helps them become active participants in their benefits programs. By seizing both of these opportunities, employers can get the most out of their health benefits investment.