Industry To Watch In 2014: Healthcare Tech
by Iiya Pozin
Healthcare is miles behind the curve when it comes to technological innovation, an industry that historically has not been easy to innovate for. This month’s implementation of Obamacare, however, is just one of several macro trends in the space that could well create “the perfect storm” for entrepreneurship, positioning healthcare tech as a very interesting industry to watch in 2014.
“Healthcare is a reactive, rather than proactive industry,” said Zoe Barry, CEO and Founder of ZappRx, a healthcare startup that combines e-prescribing with mobile payment technology into one simple smartphone app for managing prescriptions. Barry left a job on Wall Street analyzing market trends after it became clear that healthcare – and not Wall Street – was the industry on the rise. She is now one of a dozen venture capital-backed entrepreneurs working to bring healthcare into the 21st century, all of whom are seizing on opportunities not even feasible until very recently.
There are two key trends that have changed the game just in the last few months, explains Barry, “opening up what could be a landgrab for ambitious startups who want to disrupt the healthcare space.” Among these was a new piece of legislation called the HITECH Act, which among other things like encouraging electronic medical record adoption, forced some of the major players such as Amazon’s Web Services (AWS) to make technology that other tech entrepreneurs depend on heavily, finally available to those working in healthcare.
“You also have the rise of Accountable Care Organizations,” said Barry, “where a doctor’s compensation model is shifting away from fee-for-service to pay-for-performance.” What this means is that doctors will need to get more information about their patients in order to get reimbursements from medicare and, in order to have more data on patients, they will need to be open to adopting more technology into their practice.
But don’t quit your job just yet to launch a startup in healthcare. While arrows point to an industry ripe for innovation, here are 5 key points Barry recommends savvy entrepreneurs trying to tackle the complex healthcare ecosystem should consider:
Partner with the big players, don’t circumvent them: You see a graveyard of startups in healthcare that have tried to disrupt and break into the marketplace without any major alliances, little digital sandboxes of innovation that went nowhere. This is because in healthcare specifically, alliances are critical. The best way to be successful in forming such an alliance is to prove that as a nimble startup you can execute on fixing a problem with fewer resources, in a shorter period of time, than a behemoth company can even mobilize and set a budget due to bureaucratic limitations. Then, find a champion within this company – someone who is ambitious but too risk adverse to go join a startup – and show them how implementing a partnership will save their company money, and be a huge win for them.
Specialize: Solve one specific problem in healthcare, not ten of them. Because healthcare is so behind in technology, it’s easy to get distracted or overly ambitious about solving multiple problems and you ultimately wind up trying to boil the ocean with a match. Healthcare is so vast, it’s easy to underestimate the energy and focus required to execute on automating even the smallest task.
Have a business model: Unlike the viral tech plays where a company first scales and then thinks about monetization, in healthcare you need to have a business model from the start. You want to make sure you are solving an acute pain point, a service or product that a customer is legitimately willing to pay for. This is because healthcare is very interdependent: you have the doctor, the pharmacy, the patient, the insurance provider, and a dozen other stakeholders that any one service has to coordinate with. Going viral is nearly impossible – hence there is no Instagram of Healthcare. But with a solid business model, you stand a chance.
Hire seasoned healthcare professionals: So much of the healthcare business is based on trust and relationships, more so than in other industries, because you are dealing with people’s’ personal health information as well as their access to care. You must hire team members with a track record in healthcare, for their experience and their rolodex. But balance your team with young and hungry talent that is ambitious, diehard, and fearless when it comes to solving huge problems. As for attracting top tier talent? Be prepared to get creative with compensation packages – If you’re idea is good enough, people will come on board for equity.
Seek funding from the private sector, not the government: Obama recently called for entrepreneurs and innovators to come to Washington, wanting to make it easier to win government contracts and navigate the federal contracting space. However it is easy to “make a call” for entrepreneurs and exceptionally difficult to have an impact. The government is too bureaucratic to fund ideas without a customer or a track record, and you will lose valuable time, energy, and resources in Washington trying to win a government contract. VCs and angel investors will fund concepts and make bets on people. There are several VCs around the country with life science and technology branches like Atlas Ventures who will fund early startups because they see the legislation changes and the opportunities opening up for innovation around healthcare.
Category: Healthcare Technology Trends
