Recently I heard an insurance exec speak about innovation opportunities in healthcare. Somehow, he made it through his hour-long talk without once mentioning our President and his healthcare agenda. He talked about the pressing problem and need for solutions for chronic disease management in an aging population, but somehow never mentioned that these problems can’t improve if people aren’t insured. The soliloquy included a lengthy discussion of the rise in healthcare costs, complete with an alarming graph projecting unsustainable costs in the future. There was much finger-pointing in the direction of pharma, healthcare organizations, and providers (all valid), but little in the direction of the insurance industry or the government. The re-framing was concerning to me, as it was delivered to a non-healthcare, mostly investment industry, audience.
He went on to talk about opportunities to tackle these risings costs, what kinds of innovation were needed to improve this dismal state of affairs. He lamented that we will never see revolutionary improvement in health like we’ve seen in the past during the vaccine era. I could’ve argued that that statement was not accurate for multiple reasons, but I decided to point out just one.
I raised a hand and said, “Well, I think there would be revolutionary change if we insured everyone.”
He said he was “trying not to go there” and didn’t want to make this a political discussion. Awkward silence.
I know it’s really sexy to talk about innovation in healthcare and digital health and not healthcare policy, and trust me, I love it too, but let’s get real: innovation can’t happen in an utopian bubble. Innovation needs to happen in the real world and the real world needs to have policy that supports innovation. Patients with chronic disease, for example, need to be insured to be able to access innovative therapies.
Besides access to healthcare, people need a safety net, social support, access to healthy food, jobs, housing, and an education. It would also help if we were better stewards of the environment and protected our air, water, and soil from pollution, and tried to prevent the planet from becoming a giant petri dish for life-threatening infectious diseases.
Let’s not do cool things just to do cool things. Can we please do things to actually improve the lives of people with real struggles in the real world? It’s our government’s policies that make the difference.
Last month, the seventh annual Rock Health Women’s Summit was held in San Francisco to promote gender diversity and support more women leaders in Digital Health. According to research from Rock Health, women are the predominant players in the health care marketplace. Women represent 78% of the health care workforce, make 80% of health care decisions in families, and represent 75% of all caregivers in the home. Their influence on health care is profound.
It’s strange, then, that women don’t have equal representation in industry, especially in terms of leadership positions. Women run only 6% of the companies in Digital Health. As it so happens, women also represent only 6% of the venture capital industry. (According to angel investor John Landry, who spoke last month at Capital W’s Boston Women’s Venture Summit, this number is even worse in Boston, with only 3% of VCs being women.)
The gender disparity in venture capital creates a barrier to achieving gender balance in the companies they fund, as VC teams with mostly men are more likely to invest in companies with mostly men. It’s been found that VC teams with women are two times more likely to invest in management teams with women and three times more likely to invest in companies with women CEOs.
Besides being equitable, from a business perspective, it’s also profitable to invest in companies with women on the executive team. According to Rock Health, start-up teams with women on the executive team raise more money than all-male teams during first rounds. Also, companies that have women in board-level leadership positions have been found to produce a greater return on investment.
Gender diverse companies also tend to have greater diversity in general, in terms of race, sexual identity, and sexual orientation. This is important to consider because employees these days – Millennials especially (now the largest generation in the workforce) – prioritize diversity at work. Millennials have a “remarkable lack of allegiance,” according to Lynne Sterrett of Deloitte Consulting, adding, “It’s a serious challenge to us as business leaders.” What has been shown to attract and retain Millennials is having shared personal values and a deep sense of purpose. According to Ali Diab, CEO of Collective Health, a company with a health care benefits platform, “There is a certain meaning, a certain sociological tapestry that Millennials want to feel when they come into the workplace. They want to feel like what they do has that social impact broadly speaking.” Diversity has been cited in numerous studies to be integral to creating a more inclusive work culture and has also been found to result in teams that make better decisions, perform better, and are more successful.
Events like the ones sponsored by Rock Health and Capital W last month help to spotlight success stories that can hopefully inspire others. One Massachusetts firm, Zaffre Investments, the investment arm of Blue Cross and Blue Shield of Massachusetts, and its managing director, Leah O’Donnell, were recognized at the Capital W Summit for being the investment firm with the highest ratio of women-led companies in 2014 and 2015. Six of the firm’s 10 companies are women-led, including Boston-based Ovuline, which has a fertility-tracking app.
Although progress is being made, change has been very slow. Terra Terwilliger from the Clayman Institute, who spoke at the Rock Health meeting, discussed the problem (in both men and women) of unintended bias, sharing an eye-opening study that demonstrated how removing gender from resumes can improve the chances of hiring more women. She challenged the audience to consider before hiring or not hiring an applicant to ask themselves if they, too, may have an unintended bias.
Ali Diab has solved this problem at Collective Health by instituting a 1:1 men to women hiring ratio. He shared that his inspiration for this was his personal experience, having been raised by a mother who worked. “I grew up in a household where my mom was a surgeon but my dad went to grad school, a PhD program, so I got to observe the power of having that sort of a professional female force in the house.” He went on to say, “I also got to observe all of the gender issues she had from her home country, which is in the Middle East … but also here in the US where she dealt with a lot of sexism. So for me it was a very personal thing, I just wanted to make sure we had women well represented because I just feel very passionate about it because of my mom’s experience.” Collective Health has been very successful with this strategy and has even managed to create an engineering team that includes 25% women, which is unheard of – “astronomical” according to Diab – in typical tech companies. Diab also shared that he feels Collective Health has seen the fruits of this hiring policy in the market as well.
Former VC partner Karen Boezi, now an investor with Broadway Angels, urged women to be more confident, speak up, and take more risks. She also encouraged greater investments in women, sharing her thoughts about how successful they can be. “Women, I think, can be very focused on ‘getting it done.’ They have their eye on the ball and they are very good executors, very good managers.” The panel was especially bullish about women with children, calling them “ruthlessly efficient.” In speaking about the positive experience of a small investment firm called Mission Bay Capital, which invested in her biotech company (among others), she said, “They’ve had nine exits so far, all led by women.”
Hopefully, as more people in Digital Health recognize the business advantages of having gender diverse teams in their firms, opportunities for women will continue to increase.
Overall venture capital funding made a sharp decline in the last two quarters amid worries (justifiable or not) of a bear market and a funding bubble in technology investments. In contrast to the tech market, however, digital health funding continues to grow at a record pace. According to Rock Health, $4.5B was invested in digital health in 2015 (an increase from $4.3B from 2014) and $981 million has already been invested in the first quarter of this year. It seems on pace to be another stellar year, which is remarkable considering what is going on in other sectors.
Many are skeptical about the investment potential of healthcare technology investments and have been wary to enter the market (perhaps especially so with all the negative media that companies like Theranos and Zenefits have attracted). Additionally, regulatory barriers and the longer timeline needed with healthcare innovations tend to scare potential investors away. But anyone familiar with the sad state of technology in healthcare can see, even with the record-breaking investments thus far, that there continues to be an enormous untapped opportunity in healthcare–greater, I believe, than in any other sector.
Digital health is vastly underfunded.
Technology is taking over most of our personal and professional lives with indispensable apps, wearables, and other connected devices and software. At home, we have smart appliances, lighting, thermostats, security systems, media systems, and even smart cars. And we have Siri, Cortana, and Alexa doing our bidding. But in healthcare, we’re still in the Stone Ages in terms of technology. Communication via faxes, for example, is still common between hospitals and doctors offices. There are small glimmers of hope, such as patient portals, higher-functionality EMR systems, and telehealth services, but the fact is that we are still a far cry from the ideal vision for healthcare, which includes a seamless cloud-based network of devices and software that can track and record a vast spectrum of patient information, the ultimate goal being the use of computational technology to help prevent, predict, diagnose, and yes, even treat disease. Ultimately, collecting information on large populations of patients could have profound impact through public health measures that can prevent disease and thereby reduce healthcare costs. This can only be accomplished with a wide-spread network of software and devices, that includes electronic health records, wearables, devices based in the hospital, office, and at-home, and with telehealth capabilities. In addition, there are too few companies working to collect, store, manage, and interpret health data.
There is still a lot that needs to be done.
According to MarketResearch.com, the healthcare “internet of things” (IoT) is expected to reach $117B by the year 2020. The fact is, the full potential of digital health won’t be seen until every hospital and doctor’s office and home is connected via cloud-based devices and software and with the development of machine learning platforms that can make sense of the reams of health information.
It is a little challenging to think of all of this in the abstract, so here are a few examples of the potential of the healthcare IoT. Imagine that a spike in certain population health data (like temperature) is detected in a region of the country that alerts public health officials to early to a disease outbreak that can then be contained to prevent an epidemic. Imagine that a change in an individual’s biometric data alerts that person to seek medical care, detecting a life-threatening disease, like cancer, early and improving the chances of cure. Imagine chronic health conditions like diabetes are monitored routinely and continuously with real-time blood glucose levels, with immediate adjustment by doctors of insulin dosages, thereby preventing hospitalizations due to uncontrolled diabetes, and also preventing long-term diabetic complications, such as kidney disease.
These are only a few examples. There are countless other opportunities in healthcare.
In addition to the opportunity to improve healthcare delivery, there is the opportunity to improve the quality of care through tools that provide greater communication and transparency of information with patients and improve care coordination between the providers of those patients. And by changing the focus of medical care to prevention and early diagnosis of disease, there is the opportunity to decrease the outrageous cost of healthcare as well, by decreasing the need for excessive medication, surgery, unnecessary visits, and hospitalizations. According to the Commonwealth Fund, in the US we spend an outsized proportion of our GDP on healthcare versus other countries. Other developed countries spend between 8.8%-11.6% to our 17% of GDP, related in part to better-connected health IT networks.
It’s hard to fathom how much digital health tech is needed to serve a US population of 318 million and a global population of 7 billion, but one thing is certain: the market is huge. We should stay bullish on health tech investments now, and probably for a long while to come.