Dan is Managing Director at 4490 Ventures, and a longtime healthtech startup CEO.
As the saying goes, it’s impossible to put a price on your health.
While that sentiment may ring true for many people, the price of our health is actually discrete — and rather high. In 2017, U.S. healthcare spending reached $3.5 trillion. That’s approximately $10,739 per person according to the Centers for Medicare and Medicaid Services. That figure represents 17.9% of the United States’ gross domestic product (GDP), and has remained relatively consistent over the past decade.
While in some ways that number represents a burden, in others it represents an incredible opportunity for growth. In the near future, every part of healthcare will be digitized. In the same way that the term “mobile phone” is just becoming “phone”, the term “digital healthcare” will become just “healthcare”. Everything within both the administration and delivery of healthcare is ripe for disruption through the use of new digital technologies.
Savvy innovators and investors alike have an unmatched opportunity to partake in this revolution. Here’s where they should focus their energy if they want to succeed.
Embrace the shift from fee-for-service to pay-for-value
For far too long, the fee-for-service model has reigned supreme in healthcare. Cutting time or costs would also cut reimbursement revenue, so there was little reason for providers to do either.
The implementation of the Affordable Care Act (ACA) — no matter how you feel about its politics — has put that approach to the test. By initiating value-based payment programs where providers are paid for their outputs instead of their inputs, the ACA incentivizes healthcare providers to seek out a more efficient, market-based way of doing business.
Now that reducing the costs of inputs benefits providers directly, the market is wide-open for innovation. It will still take time for pay-for-value to become the norm across the board -- and the current political climate has slowed certain investments and initiatives -- but startups with any degree of foresight can already see the writing on the wall. This shift creates the biggest opportunity for innovation since the creation of Medicare.
Explore opportunities to capitalize on a digital payment system
Right now, healthcare payments are time-consuming and tedious. As the general public embraces PayPal, Venmo and Stripe, healthcare is still bogged down in outdated models where providers first collect from the insurance company and then bill the patient for any remaining costs. It can take months for the provider to finally collect their full fee, and the majority of consumers are still receiving paper statements and paying them with paper checks like it’s still 1995.
Changing the way payments work is not only a critical step towards bringing healthcare in line with modern practices, but also an important metaphor for the idea that healthcare is indeed a business and can benefit all parties by acting like one.
The technology to implement a digital payment system already exists, and is already optimized for healthcare. SwervePay, for example, is a modern billing service that sends patients a text letting them know how much they owe and offering them the chance to easily pay their bill using a card already on file, and then integrates the data back into the necessary healthcare billing systems to record the collection. Customers appreciate the simplicity, and providers benefit from minimizing paperwork and reducing delays in getting paid.
Utilize existing technology from outside the healthcare realm
One of the simplest and most effective ways to improve healthcare is to use tools and technologies that have already been commercialized outside the healthcare realm.
Machine learning (ML), for example, is transforming diverse industries across the globe, and healthcare could be next. For example, HealthMyne is figuring out how using AI and machine vision algorithms to take imaging data — like MRIs and PET scans — and help radiologists and oncologists digitize, standardize and quantify what shows up in the images.
Another category of technology that can be easily tweaked for healthcare applications is wearables and sensors. Thanks to common products like the Apple Watch and FitBit, the hardware for wearable health trackers is already quite powerful. If hardware costs continue to come down, there will be a huge opportunity to create value not only by adjusting the hardware to be used for medical purposes, but also by developing software that can pull and interpret the resulting data. Companies like PhysIQ are already helping to organize large streams of data in ways that can help doctors make critical health decisions.
Pursue innovations that can bolster adjacent healthcare industries
It’s not just doctors who benefit from healthtech innovation. Adjacent industries including pharmaceutical companies and medical device companies can also reap rewards.
Level Ex, for example, makes video games that help doctors learn about new drugs and medical devices. Highly realistic and medically accurate, the company has successfully reached a wide audience of medical professionals: 40% of all U.S. neurologists, 30% of general surgeons, and two-thirds of all U.S. medical students use Level Ex, and pharmaceutical and device companies pay a fee to access that wide audience.
The company’s success serves an important reminder that tech innovators should think about ways to streamline and improve operations for all industry players, not only direct providers.
Get the word out and demonstrate value
The technology needed to make healthcare more efficient already exists. Now, it’s up to startups to creatively apply those technologies.
It’s also on the shoulders of startups to get the word out about how their products can add value for healthcare industry stakeholders. In an industry that has long been resistant to change, effective marketing will be critical.
With innovation, investment, and time, the healthcare industry could look very different in a decade. The healthtech revolution is just beginning.