There is a consensus that healthcare is broken – 70% of Americans believe that the US healthcare system is either in a state of crisis or has major problems.
I understand why people feel this way. The system is more expensive than ever, but by some measures we have little to show for it – in recent years health inequities have grown, while life expectancies have declined.
Despite all this, we’re hopeful. When you compare where we are today to where we were 100 years ago – life expectancies in the mid 50’s and pre-penicillin – it gets a bit easier to believe that problems plaguing the healthcare system can be fixed. Even in the relatively short time since Collaborative Fund started investing (2010), the healthcare system has undergone radical structural and technological shifts. The ACA expanded coverage to millions, payers and providers consolidated market share, and healthcare prices continued to climb. At the same time, enabling technologies have advanced: mobile computing, IoT, AI/machine learning, and gene sequencing all have the potential to change how healthcare solutions are discovered, delivered, and paid for. With our current fund, we are looking for companies that leverage these new technologies to address some of today’s most persistent challenges in healthcare delivery.
Challenge #1: Lack of comprehensive and centralized health data, inhibiting potential for personalized care
Healthcare data has come a long way. We’ve gone from 10% to 90+% adoption of electronic health records (EHR) in the last ten years alone, which means that there is now a digital record for most health information generated today. However, just because this data is now online doesn’t make it useful. Most EHR systems can’t exchange information between providers. And patients are less likely than ever to establish a consistent relationship with a primary care physician. With patients increasingly switching between providers and health insurers, critical health information is scattered across institutions that aren’t incentivized to share data with each other. Patients, on the other hand, stand to benefit immediately from a centralized health record, making them the ideal user to design for. With advancements in real-time biometric monitoring and genome sequencing, consumers are generating more health information than ever. Some projects, like Mindstrong Health, are creating entirely new measurement systems to detect cognitive changes from smartphone data. Others, like Nebula Genomics, are leveraging existing sequencing technologies to build a new marketplace for consumers to control how their genetic information is shared.
We believe people should derive the most value from their data – especially when it comes to sensitive health information. That’s why we’re excited by patient-centric data platforms that mine new types of information to not only help people understand their health needs, but also to connect them to personalized, data-driven treatment options.
Incumbents can’t be ignored in this shift to integrated data and delivery systems. The biggest players recognize the power of consolidation to drive efficiency and gain leverage in pricing negotiations: they spent $175B on M&A deals in 2017. Compared to the $5.8B invested into digital health startups that year, legacy players have a lot of money to buy market share, and are busy creating a consolidated health system. The entrance of tech-enabled, consumer-friendly challengers, as well as tech and consumer behemoths like Apple and Amazon, will force these incumbents to find ways to offer improved user experiences and cut costs. One way to do this is with personalized care, which can improve patient outcomes, while reducing time spent at inappropriate and expensive care settings. As personalization requires information on the health of patients, quality of providers, and cost of services, this could create opportunities for platforms that facilitate and incentivize data sharing between existing players. We admire how Human API has created a real-time health data network, which providers use to access patients’ data, insurers use to underwrite, and digital health companies use when engaging their users. We’re actively looking for data platforms that bring together information from disparate sources and leverage predictive analytics to help providers and payers offer personalized care at scale.
Challenge #2: Low utilization of services to prevent and manage chronic conditions
With the medical breakthroughs of the 20th century – penicillin (1928), the first organ transplant (1954) ,etc. – physicians could treat many conditions for the first time. These new technologies were incredibly effective in treating people once they became sick, and drove the development of a reactive healthcare system, optimized for delivering acute care. Insurance grew up alongside this system, and incentivized physicians to deliver more treatments with a fee-for-service model that reimbursed based on the quantity, rather than quality of care. In recent years, chronic conditions – the leading cause of death in America – have proved difficult for the US healthcare system to handle. Chronic conditions are often preventable, developing slowly over years, and are influenced by social factors (e.g., income, education, etc.) that providers currently don’t have the resources nor responsibility to address. We’ve seen a few models emerge to fill this gap in the healthcare system: 1) new providers that offer prevention-oriented primary care 2) virtual care technologies that guide patients to adopt preventative practices. With increasing consumer preference for convenient care options, we’re most interested in those virtual care technologies that leverage AI or asynchronous telemedicine to encourage the adoption of behaviors that prevent chronic illness.
For patients with chronic conditions, frequent and consistent treatment is necessary. Today, in-person and pharmaceutical therapies are the primary treatment solutions, but inconvenience and high costs limit access. Digital therapeutics – software that reinforces or replaces clinical therapies altogether – limit the need for live interactions with providers, and lower the barriers to accessing treatment. Moreover, digital therapeutics can prioritize user experience and engagement, improving adherence and increasing the data available to inform personalized treatments. Some digital therapeutics have been met with hesitance from providers who don’t have the time to adopt a new treatment program or integrate new sources of information. We’re excited by digital therapeutics that both reduce the amount of time providers have to spend collecting and inputting data and optimize providers’ existing workflow with a superior software solution.
Challenge #3: Lack of price transparency and increasing costs of healthcare
As high-deductible health plans have expanded to cover more than 43% of the US, the amount people have to spend out of pocket, before healthcare expenses are covered, is climbing. An individual with employer-based insurance can now expect a $1491 deductible – up ~5x since 2006. Individuals who don’t have access to employer-based or public insurance have to assume even more risk before their health insurance will help with medical bills – the most popular plan on the individual exchange comes with a $4375 deductible. Increased cost-sharing via these high deductible health plans, plus a mismatch in the growth of healthcare costs and wages (out-of-pocket costs rose twice as fast as wages from 2006 to 2016), drove 25% of people to go without necessary medical care in 2017.
Americans are increasingly responsible for paying for their healthcare, but just 3% compare costs before receiving care. Why do Americans treat healthcare purchases so differently from their other expenses? It’s not just that they make these decisions during emergencies when there’s little time to shop around. It’s a lack of available information. The most commonly used discovery tools – health information and provider review sites – don’t offer cost or outcomes data, leaving consumers with little evidence-based guidance on how to find healthcare solutions that meet their needs and ability to pay. Marketplaces and care navigation tools can enable consumers to make better healthcare decisions with upfront, transparent pricing. We’re inspired by employer-oriented companies like Amino, as well as progressive providers like Kindbody, who empower consumers with upfront cost estimates for health services. As the burden of paying for healthcare continues to shift to consumers, we’re eager to partner with companies that offer experiences on par with traditional retailers – intuitive discovery, convenience, and price transparency – to win and retain patients.
We’re eager to support companies building a future where healthcare is personalized, prevention-oriented, and affordable. So if you’re working on a solution to any of these challenges, we’d love to talk to you!