There are scores of digital health companies, and investors already have difficulty differentiating between them. But executives who have been there say opportunities are on the table to become a leader in the marketplace.
Entrepreneurs and would-be healthcare business tycoons often look at the funds being thrown at digital health companies and the $3 trillion valuation of the industry and see lucrative possibilities. However, such entrants all too often miss the mark because they don't understand the industry or don't make promises their product can keep.
Healthcare Dive sat down with three healthcare executives at Health 2.0 in Santa Clara, California, last week to discuss what a modern day digital health market entrant needs to be equipped with in order to make it to market (aside from huge rounds of venture funding). Keys to the kingdom include an intimate knowledge of what makes the healthcare sector unique and respect for the end user.
Understanding the health system is a strong advantage
To call healthcare complicated is an understatement. From payers to providers to medical device companies, there are many players fighting over a person's healthcare dollar.
Health data transparency company Amino CEO David Vivero likes to say there isn't one healthcare industry but a number of industries in the space that are significant. To that end, it's important for companies to know what problem a product is trying to solve. "So many companies have overpromised and under-delivered in terms of effective software and solving an underlying problem," he told Healthcare Dive. "You have to know your pain point really well."
"One of the big challenges people run into — and I think the Achilles heel of digital health — is making outlandish promises to consumers and assume the halo of Silicon Valley will make [them] more effective," Vivero added.
To identify and understand a pain point, a depth of knowledge of the health system's strategy is necessary. "It comes with a sense of trust. You appreciate how challenging it is to put new tools or solutions in place," Geoff McHugh, chief commercial officer at healthcare experience company Docent Health, told Healthcare Dive.
Docent Heath offers a hybrid of technology and human interactions to help guide patients through their healthcare journey. The company recently expanded patient services across three departments — maternity, orthopedics and cardiovascular — at Dignity Health. Eventually the company is interested in expanding its services into chronic, complex care cases such as diabetes, McHugh said, adding that understanding the health system will help with having patience over the industry's purchasing cycle.
That cycle is notoriously long in healthcare. "Some of the best ideas get stuck in the sales cycle because they don't solve a real problem with an effective solution," Alexi Nazem, CEO and co-founder of healthcare jobs market platform Nomad Health, said. A poor approach for an entrepreneur to make is to build a tool and then look for a problem that it can solve, he said. Rather, seek out a problem and then build a tool around that.
For example, some estimates have predicted that by 2025, a physician shortage could fall between a range of 46,000 to 90,000 physicians. In order to address the issue, Nomad recently partnered with Texas Hospital Association to help state hospitals fill temporary physician staffing positions.
Know and respect your end user
While healthcare does have some unique business structures, there are aspects to the industry that make it just like every other one. An authentic relationship with an end user, Vivero says, is necessary — and a notion that can often get lost in healthcare.
He notes that relationship is important even if the end user is not footing the bill. In Amino's case, the company strives to provide healthcare service cost transparency to consumers. However, many of its clients are employers passing down the service to members of their staff.
Since the company began, it has built data out to include information on urgent care chains' costs and is currently pushing to share hospital cost data. Amino recently released information on the five most and least expensive hospitals in New York and expects to build out similar reports in the future.
Nazem echoes Vivero and acknowledges the patient is not a direct customer for Nomad Health, but says what the company does impacts the patient. Ultimately, everything in healthcare is about patients, according to Nazem. "If you look at [the industry] like a $3 trillion slush fund, you can divorce yourself from the real thing we're trying to do: positively impact patients' lives," he said.
Nomad acts as a marketplace for physicians searching for locum tenens, telehealth and permanent positions. Talent makes an organization what it is, Nazem says, adding that finding, training, keeping and growing healthcare talent is one of the most important things an enterprise can engage in. To that end, the workforce on the front lines meeting patients while at their most vulnerable is critical to a provider's success.
"If you are truly providing a service or technology that people at their most vulnerable times are going to use to help them, then you need to have an appreciation that this is not a consumer, this is a human being," McHugh said. "If you’re building a solution that’s distant or not getting energy from people on a human level, then it’s hard to build a sustainable culture around that. It’s also hard to combine that effectively with your health system partners because this is what they do every day."
Stand out and don't rely on pilot partners to generate data
As mentioned, the purchase cycle in healthcare can be brutal for vendors. For one, companies need to have enough capital to make it through those first crucial sales cycles. In addition, vendors need to reverberate with providers quickly.
"The businesses that are betting on an ROI oriented around a long term customer lifetime value are struggling," McHugh said, adding, "If you don’t have a story that allows your solution to get budgeted in a year...I think you’re going to struggle to get attention."
Because health systems' bottom line are being compressed and the payer mix has shifted, it can be challenging for companies that don't present a compelling story to share around ROI in a short amount of time. McHugh, a former managing principal at The Advisory Board Company, also advises more dependence on the data generated in a native platform instead of extracting data sources from providers.
Otherwise, a company relying on data from a pilot program could have a hard time quickly sharing ROI with future sales prospects.
Armed with due diligence on the industry and a quick, easily understandable ROI, new entrants into the healthcare space can hope to build upon their million dollar idea.