Health Care Becomes Entrepreneurial (Finally)

All of us know that you have to be a little crazy to be an entrepreneur. Launching, let alone sustaining, a new enterprise can be challenging along almost every dimension − mentally, emotionally, and often financially. Historically, this reality has been even more sobering in the health care sector, where the typical hardships experienced by any start-up have been amplified by numerous industry-specific challenges: Extensive regulation, entrenched players with a strong grip on the status quo, confusing paths to entry, and an even more opaque path to payment have made health care a particularly treacherous territory for entrepreneurs.

But ongoing changes in policy, technology, and industry culture are now creating unprecedented opportunities for those with just the right kind of crazy. In our group at Merck, we are witnessing this opportunity firsthand as we collaborate with start-ups in the areas of digital health, big data, and health IT.

FOUR DYNAMICS ARE DRIVING THIS NEW ERA OF HEALTH CARE INNOVATION:

Finally, there is a financial incentive to innovate. Government-led measures to reform health care such as the HITECH Act, which infused billions of dollars into improving the sector’s use of information technology, and the Affordable Care Act (ACA), create a business case for performance improvement that never existed before. Accountable Care Organization (ACO) models in both the private and the public sectors are rewarding providers for lowering the overall costs of care and keeping patients healthy.

While the managed care movement made a similar run in the early 1990s, the movement towards accountable care, bundled payments, and other population health efforts have not caused the type of backlash that managed care did − in large part because most of these models have not meaningfully restricted patient choice. RxAnte, Evolent, and Humedica are just three of the many new companies seizing the opportunity to help old players comply with new policy standards that focus on improving outcomes and efficiency.

New players are fearlessly sensing the opportunity. Health care is attracting an influx of talent from other industries to tackle some of its toughest problems. Top-tier thinkers from data science, business, finance, and the digital world are coming together to find new solutions. Through the venture capital community, veteran corporate leaders like John Scully, Steve Case, and Gerald Levin are contributing capital and deep business expertise to numerous health-related start-ups. Tech company founders like Max Levchin of PayPal, Samer Hamadeh of Vault.com, and Naveen Selvadurai of Foursquare are diving into health care as well, bringing new perspectives and talent into the domain. All recognize the enormous size of the opportunity to make a profit while improving care, lowering costs, and improving health.

According to a recent Rock Health report, venture funding of digital health companies exceeded $1.9 billion in 2013, up 39% from 2012.

Access to data is enabling us to better understand and address problems. Improving the amount of and access to higher-quality data will enable stakeholders across the health care ecosystem to work together to better understand the gaps and flaws in care. While we are only in the early days of the open data movement, innovative uses of data will empower new approaches to improving outcomes. The intelligent use of data will have a transformative influence on all points of care. Entities like Optum Labs are bringing together physicians, pharmaceuticals companies, hospitals, ACOs, and researchers to identify predictive analytic algorithms than can anticipate when patients are likely to get ill — so that we can intervene and improve outcomes.

Consumer technology offers direct access to patients. With unprecedented access to information, patients are being empowered in new ways. The proliferation of wearable devices from companies like Fitbit and online support communities like PatientsLikeMe are sparking a dramatic rethink of how patients can learn about and monitor their health. These technologies currently affect a small share of the population. But as they continue to improve and adoption by consumers grows, there will be a plethora of opportunities for innovators.

All of these developments spell the dawn of an exciting new era for entrepreneurs, techies, investors, clinicians, and, last but not least, patients.

Article from the Harvard Business Review Blog (By Sachin H. Jain and Thomas Tsang | 8:00am May 26, 2014)