Three VC Observations From JP Morgan Healthcare Conference 2017

By Gavin Teo, Adam Seabrook, Hailey Hu, B Capital Group

Every January, a sea of well-pressed suits descends on Union Square in San Francisco for the JP Morgan Healthcare Conference, which is recognized as the healthcare industry’s leading venue for public and private investors to renew networks, meet companies and get deals done. As a San Francisco-based VCs, I appreciate the payer, provider and pharma worlds converging on our normally much less buttoned-up hometown. A quip overheard at the Startup Health Festival was that “blazers per capita” doubled in the Bay Area this week.

Like CES, JPM has its own list of institutional “must-attend” events, from Ascension Ventures’ strategic investor breakfast and large industry gatherings conducted by organizations like GE, JNJ and HEP, to the two-day Startup Health Festival, which this year had the privilege of Vice President Joe Biden delivering an inspiring keynote on the crucial role of entrepreneurship and technology in curing cancer.

As my investment team and I reflected on the events, startup pitches and hallway conversations, we challenged ourselves to pen down our Big Three takeaways from the conference:

Takeaway #1: “TrumpCare” is now a commonly used term, surrounded by more optimism than we expected. While 2016 markets were generally resilient in face of high uncertainty (oil prices, Brexit, Trump), healthcare was the biggest victim of increased volatility. We previously wrote a MedCity article predicting who wins and loses under the Trump regime. At JPM, it was expressed that biopharma would thrive under the new administration, with the FDA becoming more accommodating, likely leading to more research and drug innovation. Also, lower corporate taxes would lead to higher cash balances, higher levels of corporate venture activity and more healthcare M&A.

The prevailing sentiment among startups, investors, and industry leaders is perhaps surprisingly, that the move to value-based care cannot be stopped. When the dust settles, upcoming policy changes will not strip millions of Americans of the health insurance they obtained under Obamacare. This optimism has translated into a high degree of confidence from entrepreneurs that they’ll continue to find willing customers and investors. We certainly hope they’re right.

Takeaway #2: Evidence is king. From care management to digital therapeutics to treatment adherence, we consistently heard entrepreneurs talking about the need to provide evidence of better outcomes and lower costs. Not hypothetical improvements generated in controlled settings, but real improvements in real world settings. Entrepreneurs recognize that risk-bearing entities are tired of making large purchases on products when efficacy and ROI cannot be quantified. Companies like Evidation Health have pioneered new methods of clinically validating digital health vendors for precisely this purpose.

Many of the thought leaders with whom we met are taking a much more evidence-based approach to patient engagement and consumerism, while recognizing the answers will be considerably more complex than text messages and push notifications. We were privy to a science-laden discussion between Dr. Adam Gazzaley, Director of UCSF’s Neuroscape Lab, a preeminent translational neuroscience center and Ken Cahill, CEO of SilverCloud Health, the leading mental health telehealth platform — where we learned that evidence-based requires combining principles from behavioral psychology, cleverly structured incentive programs, emerging technology (e.g., AI, ML, chat bots, etc.), concierge services, or any number of different approaches. We are very much in favor of this trend — without engaged and informed healthcare consumers it is tremendously difficult to deliver better outcomes and lower costs.

Takeaway #3: “Meaningful Use” is taking on a new meaning. Digital health startups are developing novel ways to access and store patient data without needing time-consuming and expensive EHR integrations. Examples include some of the StartUp Health companies with whom we spoke. Inbox Health is collecting patient billing info at the point-of-sale to build provider cost and transparency tools. Alem Health is distributing its own hardware networking solution to collect and store patient scans, labs and prescription data to build patient records over time. Biome.io accesses hospital data warehouses to enable performance benchmarking and improvement. Xealth, which was incubated by Providence Ventures, is a “Docker for Epic”, enabling digital health vendors to publish content directly into systems like Epic HyperSpace and MyChart in their proprietary container without the heavy lift of a typical tech integration.

We’ve observed that a new focus for big data healthcare startups seems to be on integration with clinician/administrator workflows, over integration with full data sets, to allow nimbler and faster deployments.

As healthcare venture investors, we leave JPM optimistic about an exciting year ahead for healthcare innovation, venture investment and exits.

Photo Credit: StartUp Health