All posts by Ed Butler

What does the Digital Health Platform Competition Mean for Startups?

In May and June 2014 we saw announcements from Apple, Google, and Samsung about aggregating the health and fitness tracking data from wearable devices and smartphones. These announcements  serve as validation that the convergence of personal fitness tracking data with clinically relevant biometrics is accelerating and that the smartphone and wearable devices are at the center of this new world of health IT

healthkitAs a part of Apple’s iOS8 rollout will be the  “Health” app offering a dashboard of health and fitness data to consumers, along with a developer product called “Healthkit”.   The announcement included mention of two of healthcare’s top brands- Mayo and Epic as collaborators. The Mayo collaboration is not surprising as they frequently and non-exclusively collaborate with many health IT companies. Epic on the other hand was a surprise, at least to me, because of their traditional walled garden culture.

GooglefitAlso in June, Google announced “Google Fit” at its annual developer conference I/O. It is a competing vision for mobile aggregator of fitness data from multiple devices and services. Google’s development partners include Nike, Withings, Adidas, Runkeeper, and other fitness app companies. Google’s approach seems to be focused on the fitness segment rather than clinical implications touted by Apple, but with Google’s development of glucose-sensing contact lenses I predict that clinical apps will be incorporated into the platform. Google is consistently one of the most innovative large companies in the world and through their Android success have deep experience in working within an open ecosystem.

Samsung Just days before Apple’s developers conference, Samsung announced Simband, a “reference design” describing their concept of “what a smart health device should be”. Explicitly “not a product”, the Simband reference design will allow developers to create apps that can send data to the Samsung Architecture Multimodal Interactions (S.A.M.I) as a data broker. It promises to be a secure, open, and diverse data platform. Samsung has partners too, must notably the University of California San Francisco (UCSF), via its Digital Health Innovation Lab, an accelerator space for startups. Samsung is calling Simbaud a “platform” even if it is not (yet) a product. That’s the beauty- and peril- of calling something a “platform”, even if it exists only as a reference design.

What does this mean for health startups?

It largely depends on what your technical capabilities are, where you are located, and especially who your initial customers are. Customer segmentation is the key to deciding for whom to develop first. Who are your target customers and what platform will be the most natural fir for them-  not in 2014, but in 2015-17, when this battle of the personal health data aggregators will play out.  I do not think this will be a “winner take all” battle, as each platform will continue to have a core niche of users who have made their smartphone choices and are unlikely to switch unless their vendor makes them look elsewhere through a major change in UI (as Microsoft did with Windows 8). The winners of the smart watch market will have a lot to do with it as well, if consumers ever adopt them at scale.  But there will definitely be a winner in the consumer health aggregation platform category. The winning platform will gain the greatest share of those developers who survive by solving real problems for (paying) customers and by retaining them as they go through their multiple device upgrade cycles.

It is encouraging news to digital health startups that each of these consumer IT giants is looking to open up their development platforms to an ecosystem of external partners. They all realize that in this early state of the industry that nobody knows which apps will hit and which (as most do) will flop. So it’s everyone into the pool, and let the customers decide who wins.

Personal Health Records and the Seeds of Disruptive Innovation

April 26, 2004  President George W. Bush gave a speech to the American Association of Community Colleges in which he said “…Within 10 years, every American must have a personal electronic medical record,” Bush said. “That’s a good goal for the country to achieve. The federal government has got to take the lead in order to make this happen by developing what’s called technical standards.”

The HITECH Act of 2009 was signed by President Obama in February 2009, and made available some $30 billion over time to  hospitals and medical professionals who satisfied regulations for “meaningful use” of certified electronic health record technology.  This year the industry is beginning implementation of Stage 2 Meaningful Use that slightly ups the adoption bar for patient access to their own records. It requires 10% of a provider’s patients to actually view online, download, and transfer their health information.

The adoption of EHRs by healthcare institutions, however, is not the same thing as having a personal health record. The generation of EHRs currently deployed were designed for the provider organizations, not the patients who must deal with many providers over the course of their lifetimes. To realize the vision elaborated 10 years ago requires a Patient-centered record – one that can go with you throughout your life, rather than having fragments of information locked up in dozens of systems within different provider enterprises.Bluebuttonicon

To partially address this need a new specification has been evolving over the past few years known as “Blue Button”.


First implemented by the Department of Veteran Affairs, the tool has been used by millions of Veterans.  In June 2013, Todd Park, the current U.S. Chief Technology Officer and former Silicon Valley entrepreneur, said that over 88 million Americans now have access to their data via Blue Button and over 1 million have used it. The first iteration of the Blue Button specification fell short of what is needed to spark the development of functionally useful personal health record applications. The next generation specification, known as Blue Button+,  is intended to provide patients an easy way to directly transfer their data from provider systems into personal systems. It has a data structure that can be displayed more elegantly and also incorporated into new functionality. The data to be included is promising. The 2013 Blue Button+ Implementation Guide includes the following sections:

Blue button plus sections

The disruptive potential of Blue Button+ can be seen in the diagram below:


This architecture has the patient (Ellen) initiating a transfer from 3 of her providers’ systems to an application she has authorized.

The reason this technology will be disruptive is that it empowers patients to get their own data from different provider systems and into their selected consumer apps.  For example, this could allow startups and others  to create smart phone apps that also combine personal fitness trackers, personal health diaries, photographs, you name it, so that the consumer, Ellen, has it all in her pocket.  The patient who sees 3 doctors and visits 2 hospitals over 10 years (not uncommon in this age of changing jobs and health plans) can trigger the aggregation of their own medical records.

If widely implemented, this may eventually lead to the market disruption pattern documented in the works of  Harvard’s Clayton Christensen. The now dominant health information technology vendors may have to look over their shoulders at the startups that begin to climb the value chain, delivering useful and low cost solutions to market segments previously underserved by the established players.

And yet… is it real?  After the disastrous rollout of the Affordable Care Act’s crucial Health Insurance Exchanges we all have to pause and wonder if the federal government is capable of executing any complex information technology initiative. Last February, with great fanfare, the Blue Button+ Implementation Guide was announced, along with competitions for new Blue Button+ apps and a promise that a Blue Button Connector would be rolled out by the end of 2013. The Blue Button Connector will be a tool for consumers to find their health data to download and resources to make this possible. However, Mobihealth News reported that Lygeia Ricciardi, director of the ONC’s Office of Consumer eHealth , said at the Consumer Electronics Show in January 2014 that the Blue Button Connector rollout is delayed. She said that a beta may be available in late February 2014.

On the bright side, this is still primarily a technical specification. Unlike the Health Insurance Exchanges, the BB+ spec is not a big government IT project. Software to process apps that can use this data can be written by anyone with the coding skills.  It remains to be seen whether the  electronic health record vendors will make it work. This is why the data sources listed in the Blue Button Connector will be important to monitor.

As the enterprise electronic health record systems are opened up the data can be applied in new ways – under each patient’s control- to provide more tools for navigating their lives. These seeds of disruption offer consumers more informed choices, better tools, and over time can change the face of the healthcare industry.

The 10 year-old presidential vision of a personal health record for every American is getting closer. We should continue to expect resistance, both passive and active, from some industry stakeholders who want to use electronic health records as a “lock-in” strategy for customer retention. The role of federal leadership in developing technical standards, recognized by President Bush a decade ago, as implemented through the HITECH regulations, may yet create the seeds of  new innovation in health consumer empowerment.

Ed at meetup 2

Ed Butler is a founder and lead organizer of the Seattle Health Innovation Forum. He is currently conducting market research related to the convergence of personalized medicine and population health management.

FDA and 23andMe- is there a Hubris Gene?

Most readers of this blog may already know that 23andMe is an innovative Silicon Valley company backed by Google Ventures that has been providing affordable genetic tests to consumers indicating their genetic risks for certain diseases.  It explicitly does not provide diagnoses.  The recent controversy around the FDA’s crackdown on 23andMe has been very instructive.  There are important public policy issues surrounding FDA’s Warning Letter to 23andMe as outlined by Ezra Klein’s blog.  I think this episode can also be seen as a cautionary tale both entrepreneurs and the regulators.

I had been planning to get the 23andMe test before the November 22 Letter came out but because it was expensive enough at $99 I kept putting it off. In the first few days after the FDA letter, 23amdMe was still offering the service, so I ordered one.  It came a few days later to my mailbox:

23andme box

Before submitting the test I had to agree to the terms and conditions, that included these important caveats:

23andMe terms

Fair enough-  they are saying that this is not medical advice (I knew that already), and an acknowledgement that the genetic information I get will be incomplete and possibly in error.  They’re saying that if I can’t handle the information then don’t do it. I accepted the conditions and consented to have my results included in their growing crowd-sourced database that will be used by researchers to accelerate the pace of discoveries and cures.

Next I opened the box and found the test tube.  Looks pretty safe, doesn’t it?

23andme tube

I waited 30 minutes after eating or drinking anything and then mustered enough saliva to fill to the indicated line on the tube. I then screwed the top on and mailed it off to 23andMe’s processing center in Los Angeles.  I had been looking forward to getting the results until I saw 23andMe CEO Anne Wojcicki’s post  December 5th saying that customers who purchased the kits after November 22 (like me) will not have access to the promised health related results.  No discount, either, on the $99 unless I want a full refund and agree to cancel the test entirely. I am disappointed both in 23andMe and in the FDA. I understand why 23andMe had to back down, but am still disappointed not to get their interpretation of the data. I will get my unanalyzed DNA dataset and the ancestry information only. My disappointment with the FDA is that they over-reacted to what is still essentially an information service. I am curious about the assertion that this is a dangerous “device” and wonder if they have exceeded their mandate.

Hubris is a part of the human condition that has been documented since the bronze age. It is an overconfident pride. FDA’s letter asserts that “if the BRCA-related risk assessment for breast or ovarian cancer reports a false positive, it could lead a patient to undergo prophylactic surgery”.  Patients do not do their own surgery. Before prophylactic or any other surgery a discussion would take place with the medical team. That is a good thing for consumers, and yes, it is disruptive to a paternalistic medical culture to have an activated patient asking questions about the evidence. The FDA declaration that this Personal Genome Service is considered a Class III medical device- the most restrictive classification-  seems to me to be an unreasonable escalation of what should have been the exploration of an open question. As Duke University’s Misha Angrist wrote of the FDA letter, “it reads like the letter of a jilted lover”.  Hubris indeed.

As David Dobbs pointed out last week in the New Yorker, “if the F.D.A. indeed insists on making 23andMe prove beyond doubt the validity of every single correlation, no genetic-testing service will be able to economically deliver medically relevant genetic information directly to consumers. It will destroy the industry and leave medical genetics in the hands of a medical establishment that has already failed to give people an easy way to obtain and use the elemental information in their own spit.”

What about other medical decision support services?

I have had similar questions about the “Meaningful Use” of  Electronic Health Record systems incentivized by the Center for Medicaid and Medicare Services via the 2009 stimulus package. Even though such systems automate clinical workflows and offer clinical decision support information to providers they are not subjected to FDA requirements for pre-market clearance and adherence to design controls of regulation-inspired “quality management” systems. This was in part because within HHS there was an internal debate balancing the FDA’s mandate with the need for speed in the implementation of the 2009 American Reinvestment and Recovery Act (ARRA). Fortunately for the public, there was enough internal pushback that the FDA regulators were held at bay. Had Electronic Heath Records been held to Class III standards, many of the products then, and now, on the market – especially the market leaders at the time- would likely have received similar letters as did 23andMe last month.

Lessons for Innovators

I see 3  lessons for entrepreneurs from the unfortunate drama of 23andMe vs FDA:

  1. Take the FDA seriously, even if you think it’s crazy that they think your product is a medical device.
  2. Find your local or regional biotech trade association and work with them to better understand the regulatory climate and how to be effective within it.
  3. Explore regulatory climates in countries outside the US. Most of the world’s growth in the next decade will be outside the US. The rapid growth of mobile internet access opens new opportunities for medical information services.

I look forward to the policy discussion about the classification of  health information services as medical devices. Hopefully the FDA can find a better balance than what we have seen so far. I hope that they do it soon.  I’m really curious about what’s in my 23andMe report that the FDA won’t yet allow me to see.

Ed at meetup 2

Ed Butler

Is the healthcare industry ready for the consumer?

I moderated the panel/audience discussion at the Seattle Health Innovation Forum this week that explored the convergence of healthcare, wellness, and population health management. It became clear that while the health industry may not be ready for the savvy consumer, health services consumers – and many providers- are increasingly ready for a better experience.


The panel included C-suite executives from 5 companies on the front lines of the dramatic changes that are occurring in health insurance, corporate wellness programs, and care delivery systems. This included senior leaders from two of the regions largest health plans and three innovative new companies targeting health and wellness needs.

One of the themes that emerged from this discussion was that disruption of the current health marketplace is being driven by retail consumer dynamics. Individuals with higher deductible health plans are no longer shielded from all costs of care, and are increasingly armed with information about their health choices. People expect to be able to make an appointment to see their doctor as easily as they book a hotel room. Retail organizations like Walmart are introducing the convenience of drop-in clinics to their customers. The increasing reliance people have on their smart phones provides a new way for brands to interact with their customers, and many established healthcare institutions have been very slow to  respond.

Ryan Schmid, CEO of Vera Whole Health described the quantifiable savings for companies who  embrace a unified approach to health and wellness that includes on-site clinics and health coaching services. Randy Wise, VP of Marketing for Group Health Cooperative alluded to more than 6 decades of innovation that Group Health has made in uniting coverage and care delivery and in using electronic health technology with patients.  Herbert Ong, President of Healthentic presented an approach for aggregating data from providers and payers in order to measure the effectiveness of employer health benefit programs. Jo Masterson, co-founder of 2Morrow, explained the importance of mobile solutions, now that consumers increasingly depend on smartphones on so many areas of their lives. Dave Young, VP of Wellness and Consumerism of Premera Blue Cross described the impending “wave of consumerism” that the health industry as a whole is not ready for, and how his company is already implementing a strategy that incorporates deep customer segmentation as part of a population health strategy.

The audience consisted of about 70 people representing numerous health startup’s, medical professionals from Seattle area health institutions, and universities. Several physicians commented about the difficulty they and their medical colleagues face as the industry shifts service delivery and payment models. This event also included structured networking sessions that allowed participants to meet each other along themes that included finding financing for innovation, big data for precision medicine, sensor technology, healthcare reform, and the potentially disruptive role of allied health professions.  The next Seattle Health Innovation Forum will be on October 2, 2013.

Ed Butler photo

Ed Butler

Will healthcare price transparency drive consolidation?

People of a certain age remember a time in the 1990’s when the “World Wide Web” was cool and new and you could get a free browser from Mosaic and a supported browser from Netscape for about $45. Then a certain dominant software company that made it’s money through operating systems and office suites decided to make browsers free through bundling.  Remember? How would you have liked to be in the browser business then?

Katherine Baicker and Helen Levy have an interesting piece in this week’s New England Journal of Medicine that examines the implications of price transparency in medical markets. In “Coordination versus Competition in Health Care Reform” they describe implications for competition resulting from Accountable Care Organizations, bundled payments, and other key elements of healthcare reform.

Baicker and Levy point out that “the problem arises because bundling offers providers who have market power in one product domain (such as tertiary hospital care) an opportunity to dampen competition in other product domains (such as primary care) by requiring insurers to contract with them for both products in order to receive discounts.”

This is an  example of how the restructuring of a $2.7 trillion industry will have winners and losers. The traditional “pricing” of medical procedures, never truly based on unfettered  economic forces, may become another arena for the consolidation of healthcare institutions, with small players finding that the nominal procedural “prices” for their services disappear as fast as browser sales did in the 90’s. It is hard to compete with “free”. Certainly a time to think creatively about new business models, isn’t it?

Lean Outsourcing and Distributed Teams


On Monday evening (August 5, 2013)  I attended a panel discussion at Seattle’s SURF incubator on the issues startups face with distributed teams and outsourced teams. The panel was organized and facilitated by Lara Feltin, CEO of Biznik. The panelists included David Tyler, a Y-combinator grad and currently with Cloudant with teams in Boston, Seattle, Seoul, and other places; Lyle Hazle, the CTO of MyFive; Shawn Errunza, COO of Jintronics; and Georges Khoury, CEO of Attendible. Several members of the audience were also quite knowledgeable about  the topic, including the CEO of a company with employees in 12 timezones!

This was the 44th event of the Lean Startup Seattle meetup. This series was founded in May 2011 and inspired by the Lean Startup movement sparked by Eric Ries’ book The Lean Startup. This approach is characterized by iterative development guided by ongoing interactions with customers to ensure that the products and services developed are tightly focused on customer value. Having distributed teams is challenging when the product is being continuously refocused based on customer feedback. Inclusion of outside vendors via outsourcing adds another level of complexity.

Here are some of the key ideas that I took away from this session-

  1. Never outsource strategically important core competencies to outside firms. If you use contracted design and development services make sure to get written assignment of intellectual property rights.
  2. When working with remote members several teams found that having ongoing “always on”  audio and video links with remote team members valuable in simulating the close working relationship one has in an agile environment.  People laughed at the story of getting used to it when a remote employee’s dog barked.
  3. Offshore teams, whether internal or outsourced, involve cultural differences that the teams need to understand. David Tyler described his experience working with a team in Korea, where even the language used speaks deferentially and formally to people at different levels within the hierarchy. He said that Americans can inadvertently come across as rude because of our customary informality. He said it helps to have designated point persons on remote teams who are sensitive to and can manage these dynamics.
  4. Onboarding is often a challenge in growing companies and it is even more challenging with remote team members. One practice that several companies used was to have the most recent new hires take responsibility for updating the onboarding manual with details that might have changed since the last person came on. They would get the information from experienced team members but would take the time to make sure it was recorded in a shared Wiki.
  5. Systems of metrics are essential so that productivity is visible to all team members.

This session was a good example of a grassroots community of world-class talent that has formed to freely share experience about starting new companies and solving new problems. It is an exciting time to be in Seattle.

Zen rocks -ps1

Ed Butler, Agate Point founder



Are we asking the right healthcare price transparency questions?

The increasing popularity of higher deductible health plans have made prices relevant to an increasing number of patients. This is driving increased demands that payers and providers provide tools and data to better inform consumers of expected prices of planned procedures.

I am convinced that increased consumer participation in paying for their health care is, though painful, a necessary step towards individual empowerment. For the past 70 years the selection of providers and the services they provide have been negotiated behind closed doors among payers, providers, and sometimes employers. Business-to-business prices are often set by volume, and in the current climate payers are narrowing networks to extract even greater discounts. For uninsured individuals this is the worst of all possible worlds, because not only do they have to pay out of pocket, the rates they pay (if they can) can be the artificially high list prices that the institutional buyers do not have to pay. Greater access to competing health plans in 2014 through the individual market exchanges- and to the payer-negotiated prices is going to be much better for individual health consumers.

There are 2 basic problems with much of the current tooling and discussions about healthcare price transparency:

  1. It further reinforces the antiquated “fee for service” a la carte model. We need to be moving towards paying for health outcomes rather than building new infrastructure around the old chartmaster model. Prices for procedures should be easily accessible by consumers, but we need more bundled services with the quality of outcomes recognized for the value provided to the patients. Patients should not have to pay for the consequences of medical errors. A short hospital stay can be more valuable than a long one, just as a direct flight is worth more. Pricing is a powerful lever, so we should be thoughtful about what behaviors we are encouraging.
  2. The tacit assumption that there should be a defined, unchanging price for every procedure is disconnected with economic reality. Prices change all the time. The last-minute traveler scrunched in the middle seat of your next flight likely paid more for her ticket than the person seated in the more desirable aisle seat that was bought months earlier. Healthcare is similar to the travel industry in that we have a finite capacity and a population of potential customers with varying degrees of schedule flexibility. Standardizing procedural fees is the answer to the wrong question.

The biggest problem with the lack of healthcare price transparency is simply that the consumer does not know what the price will be. The fact that it varies from facility to facility and from time to time should not be cause for outrage. Let’s use pricing as a strategic tool in the empowerment of consumers.

2013 Life Science Innovation Northwest Health IT Highlights

The need for demonstrable return on investments in health IT and biotechnology was a theme I heard repeatedly at the Life Science Innovation Northwest conference held in Seattle July 10-11.


Sponsored by the Washington Biotechnology & Biomedical Association, this year was the first time that they offered a separate Health IT track for a half day. The conference draws around 1,000 attendees. Although attendance for the Health IT track sessions averaged only 20-40 people, most of these presentations offered clear and compelling ROI arguments.

  • Precision Image Analysis, a company offering cloud-based post-processing analysis of cardiac MRI’s. This approach uses sophisticated software and expert analysts to offload  labor intensive functions from physicians, resulting in lower costs and increased revenues.
  • Corengi, Inc. helps  patients and researchers recruiting for clinical trials to find each other.
  • Translational Software  enables labs to provide pharmacogenetic decision support information to providers about molecular diagnostic testing.
  • Medanext, a Redmond-based company addressing the transition of care of patients from the clinic to the hospital and back to home, thereby reducing improving outcomes and lowering costs. They provide Android-based tablets to patients to help them, and their adherence coaches, with a personalized “health path”, a template-based health action plan for each patient.
  • Valant Medical Solutions is a, EMR/EHR and billing system for behavioral health practices. Unlike many of the other behavioral health systems in the market that were primarily designed around regulatory compliance concerns, Valant is designed for usability by the clinicians.

It was refreshing to hear candid and insightful presentations from small companies who are bringing new products into the healthcare market. It is especially rewarding to produce an ROI for customers and also realize the “double bottom line” of making a difference in healthcare.

Finding the Health Innovation Community in Seattle

Where are the centers of health innovation? By innovation I am primarily talking about products, services, and business models that dramatically change the affordability, quality, and accessibility of healthcare. I am not primarily talking about the important but incremental improvements that health institutions make to streamline their operations. Those sustaining innovations are necessary but are insufficient. Where are the innovators who are working on the new technologies, services, and business models that will dramatically lower the per capita costs of care, improve the health outcomes of populations, and  make healthcare easier and more satisfying for all involved?

seattle skyline  The first cities that come to mind are those with visible health accelerators and medical technology centers, like the San Francisco Bay Area, New York City, and Boston. Seattle also comes to mind, of course, because I live here. I am biased, but I am convinced that Seattle should be considered as an important location for anyone interested in creating solutions that can transform healthcare on a global scale.

Here is my case. Seattle has a very competitive payer and provider market with highly regarded care delivery systems such as Group Health Cooperative, Swedish Medical Center, Virginia Mason, the University of Washington, and others. Although most are intensely focused on cost containment, they also recognize that their survival depends on strategic agility in an uncertain environment.

Seattle is also home to large, smart employers who, as self-funded entities, demand ongoing cost containment and quality improvement. It has a highly skilled and growing technical workforce. Because it is an engineering center for  companies like Amazon, Facebook, Google, and Microsoft it brings a concentration of people who understand the power of personalized data, predictive analytics, and social media. It is also the home to a thriving biotech sector and global health institutions like Path and the Gates Foundation. Most of these engineers, designers, and business people live and work within 25 miles of each other. As part of a broader tech community, powered by, Geekwire, and other platforms facilitating face to face interaction, it is hard to go more than a week without attending a social gathering of digital marketers, creative designers, and web/mobile developers.

Lean startup at surfSeattle Lean Startup Meetup, May 2013

I have been exploring the Seattle startup community and more traditional associations like HIMSS and HFMA, in search of a community focused on the kind of innovations that will produce dramatic results in health and wellness on a global scale. A few months ago I began asking at different forums for a show of hands of people who were interested in working on health innovation. There were usually a small number of hands that would go up. Clearly a need existed for people to come together in a forum outside their companies, trade and professional associations to learn from each other about market conditions, find new colleagues, and participate in the difficult work of changing healthcare.

Eventually I found others who shared a sense of urgency for creating a new forum on health innovation that can draw on the entrepreneurs, developers, and change agents working within existing health institutions. We are organizing the first of a series of meetings focused on health innovation. The Seattle Health Innovator Meetup will hold its first event June 27, 2013 at 6pm at the SURF Incubator, 821 Second Avenue 8th floor, in downtown Seattle.  For more details see this link.

Where are the best health tech startup opportunities?

imageI am doing market and product research supporting a new healthcare startup.  When I tell people what I do, one of the top questions I get is “what are the best  opportunities in healthcare for startups?”

The context of this question is the fact that we are now living through fundamental changes in the healthcare system driven by population demographics, technological advances, and a shift of healthcare business models from volume to value. This is driving consolidation of health systems and a move by health insurance companies towards more diversified offerings.  Traditional  distinctions among providers, payers, and purchasers of health services will be harder to draw 3-5 years from now because risk management responsibilities will shift from payers and purchasers to providers and consumers. The consequences of this industry restructuring will require different strategies for payers, providers, purchasers, and consumers. The established health institutions realize they have to change. Changes happen  slowly in healthcare. How can  startups with limited financing survive this transition and provide the innovation that the industry needs?

Predicting the future in healthcare is not for the risk averse. As in the Illiad, the gods seem to be taking sides in this battle over the $2 trillion  health market reset. Last week the US House of Representatives voted for the 37th time to repeal the Affordable Care Act even as the industry mobilizes to provide health coverage to tens of millions of uninsured lives. If not repealed, which seems less and less likely, this will provide individuals with unprecedented coverage for preexisting conditions, mental health services, and preventive health. Regardless of the political fortunes of the 2014 mid-terms, the market is steadily driving increased consumer financial participation and an accompanying increase in the importance of consumer behaviors in the health industry.

This is still a work in progress, but here is my list of the top 3 healthcare startup opportunities and how they are evolving:

1. Patient Engagement=> Social CRM for Healthcare

The phrase “patient engagement” (or “member engagement” for payers) gained currency over the last 2-3 years but as a category name reveals the historic disconnect between internally focused enterprises and their consumers’ experiences. New digital consumer tools to manage health, wellness, and health financial activities are an opportunity to create a new kind of relationship with the patient/caregiver/member.  The value proposition is multi-sided in that health institutions need “engaged” customers and the customers themselves want relief from the difficulties of navigating the health system. Startups like iTriage have already created better portals than are available from legacy Electronic Health Record systems because they are consumer-centered and multi-provider/multi-enterprise in scope- just like the real world. Price transparency has become increasingly important to consumers as we bear a larger portion of these costs. I believe these tools will eventually converge into  a specialized Health Care Social Customer Relationship Management category supporting multiple enterprises and offering social connection (real and online) among its participants.

2. Quantified Self => Personalized Population Health Services in the Cloud

Self tracking devices and software have a solid beachhead with early adopters and the adoption curve is spreading. The Pew Research Center has recently completed a new study showing that 60% of US adults say that they track their weight, diet, or exercise program. 33% track health indicators like blood pressure, and 12% track a health indicator for someone they care about. Only 1% are using an online tool. This is an area where startups face fewer disadvantages from the large enterprise health IT vendors.

Last year I started using a digital activity tracker after two of my healthcare clients expressed interest in this technology. I have personally experienced the addictive effect of seeing my activity statistics during the day. I look forward to getting the little email messages, badges, and rewards congratulating me for staying active.  In coming months we will start to see affordable non-invasive sensors deployed to track  health indicators like blood sugar, blood pressure, pulse, oxygen saturation and automatically synch to  virtual health records in the cloud. I believe that this will be disruptive- as Clayton Christensen puts it- because we are competing with non-consumption. Imagine a world where the general population has access to easy and fun personal health dashboards that track health indicators associated with diet, exercise, even medications. Creation of wearable sensor solutions integrated with advanced predictive analytics in the cloud is an area where startups have a window of opportunity.

3. Health Tech Accelerators => Private Equity Funds

Health Accelerators are startups too.  Startups need seed funding, access to potential customers, and mentoring in order to be successful at starting small and then scaling to achieve their potential. Health industry accelerators have recently emerged to provide a boost to entrepreneurs building these new products and institutions. Typically accelerators provide limited seed funding, office space, and access to a supportive community in return for equity in the startups they select. Getting into an accelerator program is a very competitive process.  By selecting the best from hundreds of applicants, accelerators create a portfolio of winners.  This spreads risk of failure (always a consideration in startups) across several teams and increases the odds that some of the bets pay off. The accelerator firms themselves are new entrants in the private equity marketplace and will be worth watching as they work up their way up the private equity value chain. Here are some health-focused accelerators worth watching-

Most of these accelerators are sponsored by large healthcare institutions and vendors. It provides a way for complex organizations to benefit from the parallel creative processes of dozens of teams while bearing a fraction of the costs.

The opportunities for health startups are risky but the payoff has a social value that will be felt by generations to come. It is a great time to start.


Ed Butler