Eliminating Health Disparities by Filling the Digital Health Investor Knowledge Gap

Digital health startups secured $1.4 billion in investment in 2012 with healthcare administration, personal-health, and consumer-engagement emerging as some of the leading investment categories.[1] Despite the growing interest in healthcare, early-stage investors’ reluctance to invest in unfamiliar industries[2] has limited funding for more nascent digital health opportunities like managed long-term supports and services (MLTSS).[3]

Managed long-term supports and services entail risk-bearing organizations, like health insurers, coordinating care for frail elderly that are vulnerable to experiencing health disparities.[4] The goal of MLTSS is to triage the patient to the lowest cost care and maintain sufficient functional supports to keep the patient in the community rather than in the institutional setting.

Between the evolving healthcare regulatory environment, clinically complex patients, and dispersed post-acute care market, the multifactorial nature of MLTSS makes for an insurmountably steep investor learning curve. The deficit in the average investor’s knowledge base about MLTSS not only precludes investment consideration, but more importantly stymies the funding channels needed to fuel innovation for vulnerable populations. Furthermore, the digital health technologies currently garnering the most investment do not emphasize the elimination of health disparities for vulnerable populations[3]; in fact some may be at risk of exacerbating disparities.[5]

Filling the gap in investor understanding about the market opportunity and emerging business models for digital health startups in MLTSS could help more investors realize the potential for compelling ROI in these companies and simultaneously achieve the Triple Aim[6] for vulnerable populations.
  

Source: IHI Innovation Series. Cambridge, MA. 2012.

Market Opportunity
 
The market opportunity for MLTSS is grounded in the substantial potential for payers to profit from managing complex patients. Typical margins for payers managing generally healthy patients reimbursed by Medicaid range between 2-5%. Higher-risk patients, particularly those that are Medicare-Medicaid Dually Eligible (Duals), can lead to margins as high as 10-15%, if managed effectively. Conversely, some Duals can cost $60,000 per year.[7] And when payers fail to risk stratify appropriately and only negotiate a capitated $2,500 per member per month (PMPM) premium ($25,000 per year), they can very quickly lose a lot of money.

The profit potential from managing Duals arises from their disproportionately high utilization of acute care hospitals, with almost twice the hospitalization rate for Duals than general Medicare non-Dual patients.[8] Duals are also more likely than non-dual Medicare patients to get readmitted, with 25% of Duals and 20% of Medicare non-Duals being readmitted within 30-days of discharge.[9]

In addition to being higher utilizers, Duals also account for a disproportionate share of Medicare and Medicaid spending: Duals comprise 20% of the population and 31% of spending for Medicare and 15% of the population and 40% of the spending for Medicaid.[10] 

Source: Jacobson G, Neuman T, & Damico A. Medicare’s Role for Dual Eligible Beneficiaries.  APRIL 2012. Kaiser Foundation.

 
While 19% of the average PMPM premium for Duals is spent on hospitalization costs, Duals are also high utilizers of post-acute care services with 23% of the PMPM premium being spent on Home Care and 33% on Skilled Nursing Facilities (SNFs). Even though acute care is one of the largest contributors to Duals spending, post-acute care is the fastest growing cost.[11] Within post-acute care, institutional long-term care, such as SNF care, is $1614 more expensive PMPM than home and community based services.[12] 

Not only does MLTSS decrease cost of care, a review of 9 randomized controlled trials showed that integrated and coordinated care improves outcomes and reduces health care utilization for frail elderly people.[13] This creates an enormous cost differential for payers to take advantage of, particularly when up to 30% of “low care” SNF patients could age in their homes instead of the SNF if they had the right resources or technology in place.[14] 

With the MLTSS market doubling since 2004 [15], digital health has enormous potential to reduce hospitalizations and unnecessary utilization of expensive post-acute care by streamlining, augmenting, and scaling MLTSS.

Emerging Business Models

In addition to outlining the market opportunity for digital health in MLTSS, preparing investors for more complex business models may help them become more comfortable investing in this space. A major challenge to creating scalable business models for MLTSS digital health companies is the limited purchasing power of the end beneficiary, the patient. These patients are typically financially compromised in addition to being clinically high-risk. The confluence of socioeconomic and medical risk factors limit the ability of Duals and other vulnerable populations to purchase digital health technology directly. Additionally, their technological illiteracy due to language or age barriers introduces more challenges to freemium or ad-based models.

A promising business model for MLTSS digital health startups is selling directly into risk-bearing organizations that have the most to gain from optimizing care coordination and care management for Duals. Several policy instruments have created incentives for such organizations to keep patients healthy and in their homes. These organizations, typically payers, have substantial purchasing power and can drive scale of a technology once it is adopted. A major limitation with a B2B sales strategy with payers is the long sales cycle. But the latter is a surmountable barrier, especially when investment dollars provide a startup in this space with the runway to test their product and business model a sufficient number of times to find the approach that is scalable.

Conclusion

By educating investors about the opportunities that lie in the MLTSS digital health space, we hope to facilitate more informed investment into a healthcare space that is pregnant with opportunity to create profit for investors and achieve the Triple Aim for vulnerable populations.

Other stakeholders in the startup ecosystem can help to eliminate risk for investors in MLTSS and other spaces that leverage digital health to eliminate health disparities. Incubators can vet startups for top entrepreneurs and provide a conduit for startups to difficult to reach resources such as development talent or legal guidance. Foundations can help to further educate investors and establish best practices for investment in digital health to serve vulnerable populations. The government can continue to liberate data and push for rational interoperability standards. This glimpse into socially-minded digital health innovation and investment is just one of many opportunities to leverage commercial growth to eliminate health disparities.


References:

1) Tecco H. 2013 Midyear Digital Health Funding Update. Rock Health. 2013. < http://bit.ly/19OvI7r >
2) Feeney et al. Private investors' investment criteria: Insights from qualitative data. Venture Capital: An International Journal of Entrepreneurial Finance. 1999, Vol 1(2). 121-5.
3) Startup Health, IHI, & Ostrovsky A, et al. Characteristics of Top 100 Funded Startups. Startup Health Insights. 2013. [Unpublished]
4) Medicaid. Managed Long Term Supports and Services. < http://bit.ly/S2vmzi >
5) CPEHN. Equity in the Digital Age: How Health Information Technology Can Reduce Disparities. 2013. < http://bit.ly/UMpReg >
6) Berwick D, et al. Health Aff May 2008 vol. 27 no. 3759-769.
7) Young K, et al. Medicaid and the Uninsured: Medicaid’s Role for Dual Eligible Beneficiaries. April 2012. Kaiser Foundation.
8) Segal M. CMS Policy Brief: Dual Eligible Beneficiaries and Potentially Avoidable Hospitalizations. 2011.
9) Jencks SF, et al. NEJM 2009; 360 (14):1418‐1428.
10) CMS. A Data Book: Health Care Spending and the Medicare Program. 2012.
11)Chandra et al. Large Increases In Spending On Postacute Care. Health Aff. 2013 May; 32(5): 864–872.
12) Milligan C. Innovations in Integrated Care. February 23, 2011. Hilltop Institute
13) Eklund K, Wilhelmson K. Outcomes of coordinated and integrated interventions targeting frail elderly people. Health Soc Care Community. 2009 Sep;17(5):447-58.
14) Grabowsk et al. Prospects For Transferring Nursing Home Residents To The Community. Health Affairs, 26, no.6 (2007):1762-1771
15) The Growth of Managed Long-Term Services and Supports (MLTSS) Programs: A 2012 Update. Paul Saucier, Jessica Kasten, Brian Burwell, Lisa Gold. July 2012

Have a rash, consult Derm; Have a UX/UI problem, consult the Design Team

I have the privilege of training at one of the most advanced, cutting-edge pediatric medical centers in the world. We have the most #1-ranked sub-specialty services in the country according to US News and World Report. As if having so many top-ranked sub-specialties wasn’t enough to be a center of clinical excellence, Boston Children’s has a particular niche because of its abundance of sub-subspecialists. I have consulted pediatric metabolic neurologists, cardio-geneticists, and neonatal pulmonologists. We have specialists in syndromes with acronyms that are common vernacular within the hallowed walls of BCH, but are usually perceived as alphabet soup in the real world outside of Children’s. And yet, I am continuously surprised to see that we (and most other medical centers in the U.S) lack a basic specialty that could be transformative in achieving the Triple Aim and increasing the value of care we are delivering. I hypothesize that large academic medical centers could dramatically improve clinical outcomes, decrease costs, and improve patient satisfaction if they had a “Design” consult team.

The Design service would be similar to most other consultation services whereby experts in a sub-specialty would be paged on an as needed basis to help the primary inpatient team answer questions outside of their scope of practice. Just like dermatologists are consulted to inquire about a perplexing rashes or neurologists are consulted about unusual palsies, designers could be consulted when there is a user-experience glitch that is impeding optimal care delivery.

I had an experience today that highlighted the need for a Design consult. I was working in an outpatient sub-specialty clinic and observed one physician attempt to train another physician on compliance requirements for meaningful use through our EMR. Both the trainer and trainee were frustrated. Clinic workflow was interrupted. Patient care was delayed. Although no patient was directly harmed, the experience left all parties involved dissatisfied. If this level of dysfunction can occur at the #2 children’s hospital in the U.S., I am afraid of the challenges that may be faced by other care delivery systems when implementing meaningful use. Design consult, stat!

If there was a Design team available by page, we could have consulted them to at least assess the problem. Like many sub-specialty services, there are many tools at the specialist's disposal to assess and manage a consult, but I propose we start with the basics; the Design consultants could have come to the clinic and gone through a very quick design exercise including the following steps: 

The designers could have observed the frustrating workflow inefficiency of an overqualified trainer disrupting the busy trainee in their care delivery (empathize). They could then define a major problem by eliciting the frustration from the trainee with an imposed new workflow that they do not perceive as a benefit to the provider or the patient (define). The designers could then empower the involved parties to brainstorm what an ideal scenario for training may look like, such as a no-pressure, reimbursed training experience with ample opportunity to practice and education about the intended goal of the meaningful use intervention (ideate). This could be followed by implementing a very small sub-component of the ideal scenario, such as having the trainer and trainee both look up the intention behind meaningful use certification on EMRs (prototype). By quickly searching the internal or external web resources, the providers could quickly discover the published justification for meaningful use which includes evidence suggesting fewer medication errors and better patient engagement when certain elements of meaningful use are implemented. The impact and learning from the prototype intervention could then be used to inform future meaningful use training experiences to improve workflow and provider satisfaction (test).

The benefit of the aforementioned design consult is a potential improvement in patient or provider experience, or at least identification and codification of the core elements of frustration. Defining the problems allows for measurement of the problem and measurement enables improvement.

The challenge that the design consult creates is an additional time burden on the provider team in order to provide the requisite information for the designers. But this is not much different from the primary clinicians providing a background history and rationale for their consult to a dermatology or neurology consultant.

Similar to other consult services, the Design team could complete part of its assessment and/or intervention immediately or inpatient and then ”follow up outpatient” for more long-term or in-depth design work on the problem requiring consultation.

Unlike most other consult services, the Design team is a generalist service that could be called upon to help with provider workflow issues, patient satisfaction issues, management challenges, branding concerns, or any other non-clinical issue whereby the problems may not be perfectly clear and the solutions to those problems are even more nebulous.

The ideal composition of the Design consult service could mirror traditional teaching-hospital consult services: a full-time designer experienced in healthcare, a full-time clinician (does NOT have to be an MD) experienced in design, couple of fellows, and some med students. And there you have a swat team that will guide patients and providers through their user experience challenges, potentially propose some solutions, and even prototype in real time with follow-up “outpatient."

Having a dedicated design team within a care delivery system is not a novel idea; Kaiser Permanente and Mayo Clinic have fully fledged design armies dedicated to solving large and small challenges within and outside of their institutions’ walls. Both are top-ranking healthcare delivery systems, which begs the question when U.S. News and World Report will develop a measure for ranking sub-specialty programs in healthcare design services!

Digital Health Startup Entrepreneur’s Cheat Sheet: #CustomerDevelopment #LeanStartup #InnovationAccounting #DesignThinking #PirateMetrics

As a physician, I carry around cheat sheets to condense critical information into an easily accessible stack of pocket-sized, laminated tri-folds. They include important numbers to call, medications to use in a code-blue situation, and antibiograms to help select the right drug for the right bug. This is all information I know how to use but may not be able to regurgitate off the top of my head, especially in life or death situations.

As an entrepreneur, there are no such cheat sheets. There’s no pamphlet or app that condenses the essentials of Customer Development by Cooper and Vlaskovitz, Lean Startup by Reis, Innovation Accounting by Maurya, Design Thinking by McCarthy and Berkowitz, and Pirate Metrics by McClure. Although a startup may not be as tenuous as a critical airway, easily accessible information on startup techniques can help an entrepreneur focus on the process rather than on the technicalities of entrepreneurship.

I heavily borrowed from the above mentioned thought leaders in entrepreneurship to create the following cheat sheet.






The x-axis of this cheat sheet is oriented to the stages of customer development. On the left is the beginning of the value discovery process: problem/solution fit. On the right is scale, every entrepreneur's goal. Of note, I switched the wording order of product/market fit to market/product fit to show an evolution from problem to market and solution to product.

Just above the axis are a series of build-measure-learn cycles from Lean Startup. The build-measure-learn cycles are only valuable in the context of the type of risk they are designed to test and eliminate, which is shown above the build-measure-learn cycles in the risk-matrix.

Based on Maurya’s "Running Lean" and "Innovation Accounting" literature, the three major risks to the business model (product, market, customer) are outlined with their respective “critical questions.” The questions along each type of business model risk are organized based on a progressive sequence of steps including understanding the problem, defining the solution, and qualitatively and quantitatively validating the elements of the business model. Due to space limitations, I did not incorporate the lean canvas, which itself is a very powerful tool. These elements of innovation accounting have corollaries to elements of design thinking such as "empathize", "ideate", etc (italicized above).

As build-measure-learn cycles are completed, the questions about business model risk in the innovation accounting matrix increasingly become answered. The learning from these experiments helps to inform best practices for optimizing the conversion funnel shown at the top of the image.

An important note about this presentation of the conversion funnel is that in enterprise level sales in healthcare, I have found that the “retention” and “revenue” sections appear transposed. When selling into payers or providers, the customer is often retained first for a pilot then they pay some time later. And referrals only come later in the sales cycle.

As startup teams go through build-measure-learn loops to conduct experiments that eliminate risk to the business model and inform the conversion funnel, they will hopefully efficiently move toward the right side of the x-axis.

Moving beyond cheat sheets, startup entrepreneurs would greatly benefit from a set of validated, peer-reviewed best practices in digital health innovation to guide them to creating the next disruptive technology.

From garbage dump to recycling plant: Cultivating a place for startups to be reborn

Failing fast, failing cheap, and failing often is a good thing. It leads to efficient discovery of value and eventual creation of products and services that are scalable.

Healthy byproducts of that process are “failed” or invalidated ideas. Many ideas are interesting but have no real potential to scale. Some ideas may not be scalable in the current time or current marketplace or via the current business model or with the current target consumer. But perhaps they could be scalable or value generating in a different context.

After two years of bootstrapping a startup, I’ve seen colleagues come and go with great ideas gaining exciting momentum then extinguishing just as quickly as they became hot. Some failed startups only made it to the idea phase. Others built appreciable technology. Most startups achieved valuable invalidation. All of these ideas and code and learning usually goes to waste because there is no repository for them to be stored. And shortly after the spark of one startup goes out, several new ones pop-up, many times striving for the same magic that their predecessors failed to create. Mistakes are remade. The square wheel is reinvented.

What if the startup community had a mechanism to preserve the institutional memory of the successes and more importantly failures of preceding startup attempts?

Instead of the current virtual startup graveyard that lives in the recesses of the Way Back Machine (web.archive.org), I propose creating a central repository of composted startups to serve as the fertilizer for future innovation. Beyond just providing the micronutrients of ideas to inform revisioning of prior startup concepts, such a repository could recycle programming architecture, business models, and networks to rapidly relaunch old ideas in new ways.

Such startup recycling plants have real potential for self-sustainability by commercializing repackaged startups and reselling them to other startups, corporations, or M&A firms. The startup recycling plants could also take the approach of re-purposing technology for sectors with completely different business models and value drivers such as academia, non-profit, or global health. What if the startup ideas that barely missed the mark with achieving enough traction to scale in a the private sector space could be recast in the public space to create just as much value but with a different sustainability strategy?

Such startup recycling plants would have to be carefully curated. Startup incubators and accelerators, such as www.startuphealth.com, could serve a logical home for these places of rebirth. Also, large corporations with investments in open innovation have the potential to perform the function of startup purgatory. And then there are the non-profit spaces for innovation such as GHDonline.org that could add value to this process.

The current lifecycle of most startups is an open circuit that dissipates the spark of innovation. Closing the loop of the startup lifecycle with a startup recycling plant has the potential to breathe new life into old ideas, transform a patchwork of hackers into a productive professional workforce of entrepreneurs, mitigate some of the downside risk for investors, and eliminate enormous waste from the innovation process.

Vote for our SXSW panel! Hacking Medical Training through Innovation

We are at the beginning of a historic era for innovation in health care delivery in the US due to the convergence of payment reform, proliferation of mobile technology, and changing provider culture toward value rather than volume-based care.

Academic medical centers (AMCs) have the potential to be leaders in this era of delivery reform, but most have yet to display a commitment to delivery innovation on par with their commitment to basic research. This discrepancy is not due to lack of talent or innovative spirit in AMCs, but rather because of a paucity of training in designing and implementing end-user validated interventions and a lack of established pathways for career advancement in clinical innovation outside of research, among other barriers.

Please join us in the exploration how AMCs can become leaders in efficient, patient-centered, and commercially sustainable innovation by committing to disruptive changes in training the next generation of clinician-innovators.

The panel includes the follow forward thinkers in health care innovation:

Madhura Bhat: Founder of Health for America

James Merlino, MD: Surgeon and Chief Experience Officer, Cleveland Clinic

Krishna Yeshwant, MD: Physician, Brigham and Women's Hospital; Partner, Google Ventures

To vote for the panel, please see http://panelpicker.sxsw.com/vote/22335

We are at the beginning of a historic era for innovation in health care delivery in the US due to the convergence of payment reform, proliferation of mobile technology, and changing provider culture toward value rather than volume-based care. Academic medical centers (AMCs) have the potential to be leaders in this era of delivery reform, but most have yet to display a commitment to delivery innovation on par with their commitment to basic research. This discrepancy is not due to lack of talent or innovative spirit in AMCs, but rather because of a paucity of training in designing and implementing end-user validated interventions and a lack of established pathways for career advancement in clinical innovation outside of research, among other barriers. The panel will explore how AMCs can become leaders in efficient, patient-centered, and commercially sustainable innovation by committing to disruptive changes in training the next generation of clinician-innovators. - See more at: http://panelpicker.sxsw.com/vote/22335#sthash.dcS4JUnq.dpuf

We are at the beginning of a historic era for innovation in health care delivery in the US due to the convergence of payment reform, proliferation of mobile technology, and changing provider culture toward value rather than volume-based care. Academic medical centers (AMCs) have the potential to be leaders in this era of delivery reform, but most have yet to display a commitment to delivery innovation on par with their commitment to basic research. This discrepancy is not due to lack of talent or innovative spirit in AMCs, but rather because of a paucity of training in designing and implementing end-user validated interventions and a lack of established pathways for career advancement in clinical innovation outside of research, among other barriers. The panel will explore how AMCs can become leaders in efficient, patient-centered, and commercially sustainable innovation by committing to disruptive changes in training the next generation of clinician-innovators. - See more at: http://panelpicker.sxsw.com/vote/22335#sthash.dcS4JUnq.dpuf

Role of Empathy in Innovation, Teaching Innovation, and Achieving the Quadruple Aim

Role of empathy in innovation and Care at Hand as an example (16:55)

Social intelligence (28:00)

Teaching innovation in residency. Quadruple aim. (29:54)

Innovation Resources (43:11)

Filling the Payer Business Model Gap: Opportunities for Startups to Provide Value to Payers and Health Systems in the Post-ACA Era

The healthcare financing environment is rapidly changing. The Affordable Care Act (ACA) has created a rich substrate for innovation. Although healthcare reform holds tremendous promise for patients and the entrepreneurial community, leveraging the quickly evolving opportunities can be very challenging for slow moving organizations such as payers or health delivery systems. In fact, there is a rapidly emerging gap between reimbursement incentives that are being created by the ACA and the existing business models of payers and health systems (Figure 1). Nimble startups have an unprecedented opportunity to fill those gaps to achieve entrepreneurial success and create value for patients.



 

Figure 1

The ACA unleashed billions of dollars to spur innovation. Many of the ACA’s provisions transform healthcare reimbursement from volume-based to value-based. Examples of such programs include the Comprehensive Primary Care Initiative, the Duals Demonstration projects, Community-based Care Transitions Projects, Pioneer ACOs, and bundled payment projects, among several others. Each of these programs directly and/or indirectly redefine incentives for healthcare. And to ensure sustainability, the ACA has provisions to grant HHS the authority to scale these interventions without Congressional approval. That, in theory, means evidence-based and not politics-based systematic reimbursement of innovations by Medicare/Medicaid that drive down costs and improve outcomes.

Although payers and health systems have enormous resources to bare to respond to these stimuli, they are generally slow to move, which opens the door for startups to rapidly discover value, validate that value, and collaborate with payers and health systems to scale that value.

In addition to moving quickly to discover value, startups can hone their value proposition by innovating in domains that payers and health systems can be used to scale. The following domains are ripe for disruption:

-Patient engagement

-Passive digital health

-Care coordination

-Health IT interoperability

-Workforce redefinition

-Standards creation

The challenge for startups in reaching their potential to provide value to payers and health systems is getting started with iterative testing of their value proposition. Getting “in the door” with payers and health systems is incredibly challenging. One possible solution to bridging the gap between the startup's value proposition and the payer or health system’s feedback on that value proposition is creating an incubator function internal to these organizations (Figure 2). Establishing a process for vetting external ideas internally (or cultivating internaly innovation through “intrapraneurs”) can help to narrow the gap between problem and solution.  

Figure 2

The key to creating such a pathway is establishing a precedent. The real innovation has to happen at the payer and health system level with leadership that is forward-thinking/innovative/crazy enough to allow billion-dollar organizations to engage startups. Once the early-adopting corporations take the plunge, then a precedent will need to be set by the first guinea-pig startups to go through the process of incubation or cultivation. And finally, best practices will need to be created and applied through a dynamic process that creates a pipeline of innovation into these large institutions. And at that point, and only that point, will the Payer Business Model Gap start to narrow.