A diagnosis for healthcare innovation: too much short-term thinking
Health care is complicated. But investors, like politicians and Wall Street bankers, tend to look for easy solutions
As we’re seeing in the news from Capitol Hill every day, healthcare is really, really complicated.
So is digital healthcare innovation. Yet too many investors, like politicians and Wall Street bankers, are betting on solutions that address low-hanging fruit, when real change will come from tackling the thorniest issues.
Healthcare is an enormous part of our lives and our economy, making up 20% of GDP spending. Investors put $4.2 billion into digital health companies in 2016, placing bets on startups working around chronic disease management (like my company, Rimidi), digital medical devices, and population health management.
As the thinking goes, there are dramatic inefficiencies in healthcare today, which means opportunities to disrupt broken processes and outdated thinking. Just look at how mobile payment has transformed the banking industry, democratizing banking and bringing access to millions. There is promise for a similar transformation in health.
This is all absolutely true. The only problem: many investors approach digital health innovation the same way politicians and Wall Street bankers look at healthcare: they don’t like messy, and they don’t like complicated. They’d rather look for quick wins rather than taking on complex systems or untangling regulation.
Big Failures and Small Successes
There’s no better example of this than the $700M poured into Theranos before their dramatic rise and fall. A beautiful Silicon Valley story of a college dropout disrupting the lab testing industry. A huge market with a message of personal empowerment — we should all be able to get lab tests and results quickly, easily and painlessly. Just one problem: laboratory testing is a highly regulated industry with good reason. You need to get it right. Life and death decisions may be made based on that data.
In the end, regulation slowed down innovation so the company decided to go around it and then everything came tumbling down.
As an entrepreneur raising capital over this same period of time, I was incredibly frustrated with the allure of this Cinderella story. With important work to be done, healthcare innovation can’t afford to have hundreds of millions wasted on smoke and mirrors. We need investment dollars to drive sustainable change not band-aide solutions that quickly flare out.
Conversely, investors and acquirers have been attracted to more technical and less clinical innovations in back office, billing, scheduling and price transparency applications. Companies like PatientCo have created technologies to streamline inefficient processes like billing patients or understanding and paying your bill if you are the patient.
No doubt, these are important innovations that drive efficiency, drive down cost and improve the experience of healthcare. It’s tempting to dream of the possibility that all aspects of our complicated and broken healthcare system can be ‘disrupted’ or ‘fixed’ in similar ways. Circumvent the establishment — it’s too complicated, so just go around it. After all, innovation is all about disruption, right?
But the reality is that these innovations are also barely scratching the surface of what we could accomplish. If we pretend that it’s that simple then we discount the importance of the problem we are trying to solve and we are playing a short game that won’t fix the long-term problems.
We can solve complicated problems
The fact is, health care is complicated. The combination of long-standing financial incentives, government regulation, and the uniquely personal and emotional aspect (literally life or death) of healthcare makes it a market like no other.
The complicated relationship between patient, payor and provider confounds cost-benefit conversations. Not only do we need to decide for whom we are creating value but also how to attribute the credit for improvements in outcomes or cost savings. And we must remember that attributing the value created to any one intervention can be equally complicated.
For those of you who care deeply about improving our system, as I do, let someone else fix the easy stuff. If the problem is obvious and so is the solution, someone else will get to it. For those who want to see us deliver the patient outcomes we are capable of in this country, who want to see passionate doctors and nurses love their jobs again, keep working towards sustainable solutions. We aren’t going to correct the course overnight. Twenty percent of GDP deserves an army of innovators working tirelessly to find sustainable solutions.
And investors, play the long game. Be patient. Help us create sustainable solutions that will lift us out of the current hole we are in. The legacy of your investments can be significant if you are willing to wait.