Printed without permission (but I like the topic). Original from CBInsights.com
I recently had the chance to attend Rock Health’s Digital Health Summit and below are my notes throughout the two-day event and my overarching takeaways.
Digital health is very different from tech (especially time horizons)
Health is a gigantic, lucrative, and an essentially recession-proof business. But companies in healthcare are often slowed down by regulatory issues and the need for health outcomes data, i.e. data showing a given therapy’s effectiveness and safety. That may be why in health, “it’s better to be long-term greedy, than short term greedy,” as Chamath Palihapitiya of SocialCapital put it several times.
Almost every speaker from the VC side emphasized that venture capital as an asset class was designed to make risky bets on companies that have longer return timelines, so healthcare is an important place for them to be. As Noah Lang of Stride Health said, “The important thing is to be patient.” (I’m guessing he didn’t intend the pun, but it got some laughs.) Chamath was a bit more blunt, saying ”VCs should be investing in health but instead, they’ll keep investing in these on-demand brownie delivery services instead.”
Unlike tech startups, healthcare companies don’t enjoy the luxury of a soft landing. Tech is known for pushing out products and iterating as they get feedback, especially when things aren’t working. Health is different because products cannot fail. People’s lives are at stake. And because of that, potential customers — not to mention regulators in many cases — want to see evidence that these companies have an actual impact. This presents many healthcare startups with the Catch 22-type problem, “how do we get evidence if we can’t get customers?”
Healthcare needs to be more personalized
As we move towards value-based care where price is dependent on results (as opposed to fee-for-service), attention to patients is being given new priority. The old system that fits patients into a one-size-fits-all mold is primed to be disrupted. Whether it’s using software to connect customers/patients with caregivers that match their preferences (like Honor), or making sure wellness or healthcare coaches continuously work with the same users to understand their needs (like Lantern), or helping users find the right insurance company for them (like Collective Health). This is a great time for small and nimble companies to find niches where they can appeal to patient needs or fill gaps, which could allow them to compete with some of the larger entrenched players.
Preventive medicine is what’s cool right now (and still growing)
The Affordable Care Act in the United States expanded the market size and importance for preventive medicine by creating incentives for healthcare organizations to keep patients out of hospitals. Plenty of startups are ready to operate in this space. With more individualized care, companies can make sure that at-risk patients are identified and helped before they have to enter the hospital. Lyra Health does a good job of this by identifying patients that might need behavioral health services at critical moments by using data (like after pregnancy or coping with chronic disease). The goal of Human Longevity is being able to use genomic data to identify problems before they occur, rooting the company in preventive medicine. As we get more data from patients outside of hospital settings, it will be easier to identify those who are at risk.
Lots of entrepreneurs are coming from tech into digital health
It was interesting to see the number of entrepreneurs that were jumping into healthcare from tech (even if they didn’t have a background in the field). On the panels were David Ebersman from Lyra Health (previously Facebook), Ali Diab from Collective Health (previously at Qwilt Software) and Alejandro Foung from Lantern (previously at Trulia), as well as many entrepreneurs I met at the reception with similar backgrounds. Coming from tech brings positive qualities, like the willingness to break systems when they aren’t efficient, the desire to move quickly, and a strong customer-oriented focus.
However, it’s important when going into healthcare to understand more patience is necessary (see above) and behaviors are very different. In tech, investors/customers care much more about your growth and potential. In healthcare people care much more about how much money you’re saving the system, and want data to back up your claims.
It’s all about the data, and that data needs to be open. We need better interoperability.
New health data is being created by the boatload, and healthcare is not doing a good job keeping up. Fitbit CEO James Park made a relevant observation in this regard when he said Fitbit’s fitness trackers allow people to visualize something that was previously invisible (like steps taken in a day, sleep duration, etc). As wearables, diagnostic tests, online portals, and other instruments create and accumulate data, we need better ways of packaging it and making it usable so that doctors and systems are not bombarded with noise.
Unfortunately, due to tight regulations surrounding health data, outdated electronic medical record (EMR) systems, and hesitance about data quality, there is very little communication and interoperability between systems. These barriers will need to come down in the future for any progress to happen. As J. Craig Venter of Human Longevity said, the innovations in genomic data/linkages that his company is doing with the genome are “only useful if the data is available”.
Siloing health problems is no longer the way to go
Healthcare has historically taken an approach of focusing on one issue at a time, but “integrated care” is coming into the spotlight as more people realize the cost of “co-morbidities,” or interrelated health threats. J. Craig Venter spoke at length about how different alleles and phenotypes are interconnected, and we need to look at disease holistically.
More anecdotally, several presenters spoke about how patients with chronic diseases who subsequently develop mental health problems as a result (such as depression) are much costlier to the system than either problem alone. However, reimbursement from insurance companies currently isolates each condition separately, even as more evidence mounts that they are interrelated. In the future, we’ll be able to use better data to understand how health problems correlate and better treat and price our patients.
Digital health aims to improve efficiency and remove humans from non-core functions
One of the biggest improvements digital health can bring is to improve efficiency. Many startups are trying to remove any process that isn’t a core function of a healthcare professional (Sandy Jen from Honor spoke extensively about how their software removes a lot of the tedious aspects of caregiving that are not directly related to taking care of customers). By using software, not only can more time be dedicated to better care, but there is also an opportunity for better scale so that practitioners, coaches, and caregivers can see far more people in a far shorter time.
Branding is extremely important
The concept of “branding” came up several times in different contexts. The first time was when DJ Patil said that the branding around software workers in government needs to change. Workers are often called “IT” when in reality they’re designers, programmers, product people, etc. and it’s important to recognize them as such. Sandy Jen from Honor spoke about branding in the context of marketing different services. She spoke about how people are adamantly against people putting their parents into home-care services, but if the same product is positioned as “someone coming to check on your parents every couple of weeks,” people are much more receptive.
And finally, David Ebersman from Lyra Health talked about the importance of phrasing and methodology of outreach when talking to people that might be at risk for behavioral disorders (which prompted a wider conversation about the stigma barrier in behavioral health as a whole, since many potential patients can’t get past the stigma of admitting they are depressed or struggling with a treatable disorder).
The current regulatory framework is broken
There was unanimity among everyone at the conference about the need to address the broken regulatory framework. Chamath talked quite passionately about this issue, and explained that the capital intensity required to get through the FDA process was what allowed companies like Axovant etc. to go public at crazy high valuations without any products out. On the other hand, many investors are scared that regulatory burden will cripple their investments before their companies can even get to the starting line.
Meanwhile, Leslie Botorff of GE Ventures outlined the different levels of regulation the FDA imposes, and how startups are trying to find ways to stay in the less heavily-regulated classes of FDA approval. On top of FDA issues, the need to be HIPAA compliant is one of the driving reasons why interoperability and data sharing are such complicated issues in the US market.
Developing countries are great places to start digital health companies
Developing countries have become ideal places for investors to look to for investments in digital health companies. Not only do these companies face less stringent and complex regulations (which result in lower costs to start companies and a more open uses of data), but the governments in these areas are much more concerned with increasing the overall health of their citizens so that they can compete with the standard of living in the US.
In addition, the massive populations and their growth — in India and China specifically — yield extremely high patient-to-doctor ratios, which creates a strong demand for more efficient systems. Combined with a growing working class that will have more income to spend on healthcare, the arenas outside the US are starting to look promising.