How Can Entrepreneurs Reconstruct the U.S. Healthcare System?
This week’s blog post is a one-on-one interview
with Lisa Suennen, venture capitalist and healthcare business consultant. She
sits down with American Heart Association Director of Development, Jarod Hector
to discuss the United States healthcare system its inefficiencies, potential
solutions and what entrepreneurs should consider when starting a healthcare
business.
Jarod Hector: I am pleased to be joined by none other than the Venture
Valkyrie, Lisa Suennen. Thank you for sitting down with me today.
Lisa Suennen: Thank you, Jarod. As you know I am
a believer in the American Heart Association and its mission.
JH: This is a loaded question and there is no simple answer, but, as
you see it; what is currently wrong with healthcare as we know it?
LS: Wow, so many issues make our healthcare
system suboptimal. First and foremost,
and I presume we are talking about the U.S., the incentives are totally
misaligned. Providers are not paid to give patients what they want or need;
patients are not connected to what things cost or how to measure value; payers
are generally focused on how to drive down costs but not how to drive up
quality or personal service. And on
top of it all, people are generally uninformed and not interested in taking
good care of themselves in the near term when the consequences of poor health
behaviors are many years away. It is a
prescription for high cost, poor outcomes and constant disappointment for all
involved.
There are changes underway in the system and
trends that can help with these problems: price transparency, consumers being
forced to engage more due to their own financial share in the system,
regulation that fosters attention to patient satisfaction and outcomes. Also, the
availability of technology to help providers deliver better more personalized
care, etc. But it’s a long road to a
high value system and we are still very much at the beginning of the journey.
JH: Given, the healthcare system’s inherent inefficiencies, it seems
logical that technology and data analytics are the obvious solutions to help
improve the system. Are they enough on their own? And, if not, what else
needs to be done to improve care?
LS: Technology and data are essential to system
improvement, but they are not sufficient to make the changes needed. We also
need far better means of using the mountains of data in a meaningful,
personalized way. Clinicians and patients need tools to make the data useful in their
actual day to day experiences. We also
need to ensure that the system properly incents the use of the data for
positive outcome, both clinical and financial. Data can tell you what the likely problem is
and what might be done about it, but if the motivation isn’t there to make
change it doesn’t matter. That
motivation might be financial or personal.
The technology needs to be married to methods that engage participants
in the system to change their behavior for the good and for the long term. And
by participants I mean payers, providers and especially patients, whose
behaviors are notoriously difficult to change, even in the face of data showing
the importance of that change.
JH: We’ve discussed the problem and potential solutions. It seems as
though every 5 minutes, there is a new healthcare startup. What should an
entrepreneur who is thinking about creating a healthcare startup consider,
before making the leap? Is digital health, the “holy grail”? Should
entrepreneurs, still consider therapeutics and device? If digital health is the
chosen focus for an entrepreneur, should enterprise or the consumer be the
target?
LS: Wow! That’s a lot of different points tied
together, so let me break it apart a bit.
The most important thing to do when starting a
company of any kind is to ensure that you are solving a real problem and that
customers will pay you for the solution you are building, regardless of what it
is: digital health, therapeutic, device, whatever. This means that entrepreneurs must not be enamored with their own idea,
but spend the time to understand what potential customers’ challenges really are
and what they value within a solution. This is the same whether you are targeting
consumers or enterprises. Both will pay
for things that they value and that make their lives better in tangible,
measureable ways.
All too often entrepreneurs deliver products that
solve perceived problems, not real ones.
The biggest mistake I see made
time and time again is not getting out and talking to at least 50 entities or
people who might be your customers. Lean
startup methodology suggests you should seek at least 100 customer inputs. There is way too much Kool Aid drinking by
entrepreneurs who think their idea is so great that if they just build it,
customers will come. That Field of
Dreams strategy rarely works. And
consumers are particularly loathe to part with their money for healthcare
products since they are so used to having them paid for by others. It doesn’t mean they are a bad target, just a
complex one.
Digital health is not the holy grail. It is the marriage of technology to enhance
the value, precision and accessibility of other things, whether it is data,
treatment, drugs, devices, services, whatever.
I don’t even think we will be using this term in 10 years…it will just
be “health” and we will assume that it has a digital component, like virtually
every other business. There is an aching
need for great products of all types, health IT, health services, therapeutics,
devices. But in every single instance, the product needs to make a profound
difference in quality of outcome, respond to the individualized needs of
consumers and deliver value in a way that reduces overall cost to the
healthcare system. If you can
demonstrably meet those three criteria, it is probably worth building.
JH: How does the investment community (specifically VC) view the
healthcare sector? Do VC’s need to change their approach when looking to
invest in the sector? Beyond the money, what should entrepreneurs
consider before accepting VC money?
LS: The investment community is very
schizophrenic about healthcare investing.
There are some venture funds that are dedicated only to this; those are
clearly committed groups. The rest of
the venture world, and that is the vast majority, thinks healthcare is too
complex, too much in flux, too regulated and the buyers too conflicted to be
worth pursuing. We are starting to see
an influx of tech investors to some parts of healthcare, notably digital
health; but without a clear understanding of healthcare dynamics and workflow,
they may not realize the returns for which they hope. Traditional
healthcare investors, at the same time, need to be savvier about how technology
can change healthcare delivery; and, how essential health economics has become
to new product adoption.
“Digital health” has spurred a revived interest
in healthcare investing (and the numbers have risen from $300mm in venture
investment to over $5 billion in five years), but it is still dwarfed by
venture investment in other sectors. To be successful in this field, you need to
focus keenly on whether the concept you are backing can deliver on the “Triple
Aim” of better health outcome, lower cost, and improved
quality/experience. If the investment
can’t deliver on those things, it is likely not a winner. In this day and
age, it is especially important to be delivering improved health economics.
Entrepreneurs should enter into their investor
relationships like they are getting married. They should be sure that the
investor is a good partner, complementary in skills, able to bring value beyond
the dowry. I wrote an entire article about this topic.*
Entrepreneurs should also be careful not to seek
venture capital too early. All too often the goal becomes about raising
money and not about proving out the value proposition with customers. This is a mistake young companies make all
the time. Entrepreneurs should not make
venture capital a goal, but rather a means to an end, and that end is
growth. Venture money can help a young
enterprise grow, but it can’t fix a bad idea.
Make sure your concept is sound, customers want it, and that there
is a true market. And your solution has to be able to deliver before you get
too far down the financing road. It’s a
lot harder with high cost therapeutics, but there are evolving capital
efficient ways of starting businesses, even here.
JH: As you know, the American Heart Association
has funded many of the major innovations in cardiovascular disease and stroke
treatment and prevention. What more can the organization do to help advance
cutting edge innovations to the commercial marketplace?
LS: The AHA
has a uniquely good opportunity to help in transferring the massive amount of
research it helps fund and turn that science into faster cures and treatments
for patients. The AHA has already started, through its Science and Technology
Accelerator, to bring solutions from the lab to the patient. AHA can
further this opportunity with even more focus on that endeavor and by targeting
its funding efforts to all stages of the process between scientific discovery
and commercial delivery of products that improve the health of Americans and
others. Great science that never makes it into the bodies of patients does not
advance health. But investing beyond
the bench to get high value science to the market and into patients is a real
opportunity for AHA.
The AHA also
has an unprecedented brand and reach to educate the greater consumer and
provider community about best practices.
Considering the importance of behavior change in maintaining good
cardiovascular health, the AHA can be a partner to enterprises in education and
fostering an understanding about the importance of nutrition, exercise,
preventive health, etc. We need to
change how we educate our population about these things, starting with children
in school and also how we train doctors to practice. We need
to change our American concept of being healthy to something that is a lifelong
journey, not what happens when you get hospitalized. AHA has a role to play here in creating
programs that serve the entire continuum from preschools to medical schools.
JH: Well said Lisa. I want to thank you for your
time and being a champion of this organization. I look forward to seeing you at
our upcoming Health Sciences Innovation · Investment Forum on April 22nd
here in NYC.
LS: Thank you.
I am excited to attend the forum, it will be a tremendous day of networking and
sharing knowledge capital.
*Editor’s Note* the above referenced article can
be found here: http://venturevalkyrie.com/vc-or-valentine-how-venture-investing-is-like-romance/
