.406's Healthcare Investment Focus
Hard to believe that I’ve been investing in healthcare companies for more than 20 years. Throughout that tenure, I have seen several periods of promise and a few of tragedy, but I have to say that I have never been more excited about the opportunities as I am today. It feels like there is ‘gasoline in the streets’ due to the confluence of three important factors:
- The Forcing Function: Pain in the Market. As Chris Mckown (co-founder of Health Dialog and Iora Health) often says, “fixing US healthcare is THE most important business problem in the world.” Costs are unbearably high and results are unacceptably low. If we don’t get this right, pretty much nothing else matters….status quo isn’t working and new approaches are required.
- The Discontinuity: Shifting of Risk. Pick your buzzword — population health, disease management, bundling, accountable care, risk sharing, value -based care, payment reform— they all represent some version of integrating the risk/payment obligation and the delivery of care. This drives a gigantic shift in the way players think and operate.
- The Opportunity for Disruption: Digitization of Clinical Data. Until relatively recently, the only consistently available/accessible information about a person’s healthcare experience was billing information — it was almost exclusively the domain of insurers/payers and it was delayed and somewhat opaque. Yet, even with this kluge data, pioneering companies like Health Dialog were able to identify people that needed help, engage them and improve the lives of/reduce the costs for large swaths of people. In today’s world, where detailed clinical data is digitized via electronic medical records where every interaction with the health system is recorded and where health data can be continuously captured via smartphones or IoT devices, it is possible to identify and intervene to improve health with precision and in near real-time.
These are, of course, not the only factors at play….just the most important in my view. Embedded in these factors are big trends like an aging population; a more technophilic society; unprecedented and dirt cheap data storage and processing resources; AI/ML improvements; and evidence of effective non-traditional clinical approaches, to name a few.
In this environment, we see a once in a generation opportunity to build really important companies that offer systems, technologies and services that support the delivery of clinical services that improve health outcomes, lower overall healthcare cost and create better experiences for patients. We have been thrilled to back several companies that are achieving this so-called ‘triple-aim,’ including:
- Health Dialog (sold to BUPA then RiteAid) — THE pioneering population health company — the first to use sophisticated data analytics to identify and engage a broad population with the objective of facilitating shared decision making.
- AbleTo — committed team delivering tele-behavioral health to help the many people who experience anxiety and/or depression in connection with a major medical condition…AbleTo’s patients recover more quickly, are re-hospitalize less frequently and learn skills to avoid/manage future healthcare issues.
- Iora Health — pioneering team leveraging technology to reinvent the primary care practice by focusing on keeping patients healthy vs. treating them when they’re sick. Iora patients see monstrous improvement in every imaginable health metric; as a population, they spend way less than they’d otherwise spend; and they love the experience (NPS scores >90!). While Iora is mostly focused on Medicare Advantage populations, their approach is age agnostic (I’m a patient)…it’s actually just common sense.
- Axial Health— ‘wicked’ (yes, .406 is based in Boston) smart team using advanced data and analytics to make sure that pain patients are on the right care pathway, improving co-morbidities and avoiding the path toward opioid addiction.
- Welbe Health— super passionate team using state-of-the-art technology to deliver innovative, high quality and economically-sustainable care to frail elderly patients.
You may note from the preceding list and our full portfolio that we don’t just look for healthcare IT companies, but have embraced companies that deliver technology-enabled services. This is driven by our belief is that, at this moment in time, if you’re trying to be disruptive in healthcare, you almost always need to do so by delivering a service. Since we’re in the early innings of creating a new version of US healthcare, the total addressable market for next-gen healthcare technology to support a ‘new system’ is generally too small to justify venture investment. Otherwise stated, pure play tech companies will make sense, but for the moment, there is an untenable risk of being ‘too soon.’ One exception, in our view, is the area of healthcare data interoperability, which fuels the whole ecosystem. For example, Redox is the first, best and only company focused on making it simple and secure to get information into or take information out of an electronic medical record. Also, we just backed a team (still in stealth) building a company that will help insurance companies organize and convey their data to the next generation of data-driven providers (e.g., AbleTo, Iora, etc…) that are beginning to engage with their members.
So, against this backdrop, we see the opportunity to build a whole new landscape of really important companies…it’ll be a very busy decade!
Close in on our interest list are companies that help people address the non-medical aspects of their lives(so called ‘social determinants’) — this is such a critical area in a world where the objective is to keep people healthy v. treat them when they’re sick. I that same vein, we are really excited about companies, like Welbe, that enable patients to be cared for in lighter touch, less institutionalized setting — not a new trend, but one that can inflect with technology and payment changes.
Please stay tuned and I’d love to hear what you think!