Where The Big Healthcare Bulls Are Running: Notes From The 2015 JP Morgan Conference
[This post first appeared at blogs.forbes.com/toddhixon on January 25, 2015.]
By Todd Hixon
FEBRUARY 5, 2015 – The Annual JP Morgan conference is a great opportunity for entrepreneurs and venture investors to learn where the big players think U.S. healthcare is going, and how they plan to play. Here’s a summary of the trends I heard at the conference, and what they might mean for entrepreneurs.
Healthcare reform is happening. None of the big company CEOs were hedging bets. The consensus view of the Supreme Court challenge to health insurance subsidies was: having come down solidly in support of Obamacare in the individual mandate ruling, Chief Justice Roberts is not likely to let the court reverse itself and dump ~8 million people off insurance during the run-up to a presidential election. Put another way, once an entitlement has been given, it’s nigh-on impossible to pull it back.
The provider establishment is focusing on incentive/payment reform, and on chronic disease. This is the main strategy to improve the value delivered by U.S. medicine while reducing cost. No one made a case or a forecast for squeezing down high prices, which are the #1 reason U.S. healthcare costs are 2x those of peer countries. And no one forecast how fast these efforts will reduce costs.
Healthcare industry participants are finally getting connected, but it will be slow and painful. The incumbents and the young, lusty challengers like AthenaHealth all have proposals for how to do this. A lot of time and blood will be spent before the winner emerges.
The establishment is accepting telemedicine, but start-ups are mostly bringing forth the products. Many emerging mobile products connect doctors and their customers, e.g., OneMedical’s mobile app. Mobile tech is also used to connect healthcare workers to information and backbone systems, e.g., Careport. Many CEOs’ slides included a picture of a doctor or nurse holding a tablet.
Personalized medicine is real at last. Experts claim that 25%+ of cancer patients can benefit from treatments that are tailored to their genes, their tumor’s mutation(s), and the specific proteins that are expressed and active in the tumor cell. This creates two huge challenges for doctors and cancer sufferers: 1) accessing this complex, fast-changing technology and learning how to use it and 2) finding ways to pay for drug therapies that cost $ billions to develop but help much smaller groups of people than the broad-spectrum drugs of the past.
A large part of healthcare is morphing from B2B to B2C. The public exchanges are the biggest part of this so far, and payer CEOs are now talking proudly about the depth and breadth of their exchange business. “Retail” medicine (see below) is also growing fast.
Medicine is moving closer to the consumer, to a surprising degree, via explosive growth in retail medicine. By retail medicine I mean providers in retail locations (e.g., MinuteClinic) and tele-access to providers in the cloud (MDLive, HealthTap). Venture money is flooding in. It’s a good thing to give people more access to basic care at better prices: this can stop acute problems earlier and cut down multi-thousand-dollar ER visits. Many doubt, however, that retail medicine can addresses the hard problems that drive 70%+ of healthcare cost: chronic diseases and the life-long behaviors that drive them.
What does this mean for entrepreneurs?
• Don’t hold back to see what happens with the ACA.
• New businesses that help take cost out of the system are safer bets, as the cost problem is not going away, and the establishment is not enthusiastic about taking out cost. Those that depend on increased spending are riskier; Congress can pull back funding even if it does not repeal the ACA.
• Helping connect the providers and their islands of information is an opportunity for entrepreneurs but risky: running with the bulls. There is high ground to be staked out in the new connected healthcare system, but there will be lots of artillery aimed at it, so agility in setting strategy and making deals is a must for success.
• Personalized medicine offers interesting opportunities for entrepreneurs, but they are tricky: reimbursement for personalized therapies is uncertain, regulation rears its unloved head here (e.g., 23andMe), and gaining traction in the field seems to depend heavily on the academic standing of company founders, which adds an unusual dimension of complexity.
• Creative proposals to streamline important parts of the healthcare business model are popping up in many places. MedAvail is putting prescription vending machines at the point of need: hospital ERs and doctor’s offices, and in high-volume retailers that lack pharmacies. iVinci is creating financing product for consumers faced with large cost shares on hospital bills. Both are getting good traction. Businesses of this type are great opportunities for entrepreneurs.
• Large parts of the healthcare industry rank at the bottom of customer satisfaction surveys, and many healthcare web sites have a user experience that would make the IRS blush. Many start-ups are aiming to improve this, but bear in mind that the big players will eventually learn to do a good job, much as many big retailers, banks, and P&C insurance companies now do a solid job on-line. Front-ending the government sites, on the other hand, will probably always be a business, as the government is just not in the business of delighting customers.
• Mobile solutions are a natural opportunity for entrepreneurs right now because the technology and the way it is used is evolving very fast, and entrepreneurs always have a speed advantage. But, as with the UX in general, the big guys will catch up. In the airline world it’s the big guys (UA, AA, and DL) that now have the best mobile presence, and smaller, younger airlines like Jet Blue and Southwest have fallen behind.
The JP Morgan conference comes right after the New Year, and for many it kick-starts the business of the year. For healthcare entrepreneurs, 2015 is going to be an interesting year: let the great game begin.