The United States healthcare system is often regarded as a hopeless, bloated mess. Indeed, the increase in healthcare costs has eaten up all worker pay increases since 1970.
But perhaps because I work closely with so many passionate healthcare entrepreneurs, I have a different, more optimistic, perspective. Like others, I see shortcomings in the system and agree that dysfunctional healthcare is one of the biggest threats to America. But not only do I think the system is ripe for reform, I think doing so represents one of the economy’s biggest entrepreneurial opportunities—one that, for a variety of structural reasons, startups are uniquely positioned to achieve.
Spending More, Getting Less
Today, the U.S. spends twice as much on doctors and hospitals as any other developed country, but without getting better results. Often, in fact, our outcomes are worse, as we’re seeing with declining life expectancy in some demographics.
Much of the blame is focused on the political battles of vested interest groups: Doctors fighting with insurers who are battling hospitals who are parrying with Medicare—on and on.
But where others see discord, I’ve begun to see alignment. Most people who pick healthcare as a career started with the mission of helping people lead healthier, happier lives. They and their employers all want to get better results by spending less. There’s consensus in the entire healthcare ecosystem on the need for efficiency.
- Most hospitals are non-profits that operate on low margins and want to be able to cure patients faster and at the lowest possible cost.
- Drug companies want to bring out new cures faster without spending billions for each new one.
- Insurers want their customers to be healthy, if only to keep them out of hospitals and stop them from running up giant bills.
- Government pays a big portion of the healthcare bills in the U.S. and wants that money to cover more people.
- Consumers want to stay healthy with less exercise or lose weight with less effort.
Efficiency is the Entrepreneurial Opportunity
Change will come thanks to an emerging class of precision technologies that can help reverse the long-term trend of declining healthcare efficiency. Some of these tools are familiar to Silicon Valley, such as mobility, cloud computing and AI. But healthcare also has its own star tech players, notably the breakthroughs in single cell sequencing, bioengineering, cell and gene-editing and computational and synthetic biology.
All these developments make it possible to develop precision solutions tailored to the specific needs of individuals at all points of the care continuum. Some examples would be personalized wellness and prevention, precision care in health systems, precision genomics platforms, protein and cell engineering, CRISPR diagnostics and genomics-based precision medicine.
By harnessing these emerging precision technologies, entrepreneurs can build companies that will greatly improve health outcomes while simultaneously making the delivery of health services more efficient. Patient satisfaction will rise, and everyone in the ecosystem, including patients, providers and insurers, will derive more value for their investment.
Questions about rising healthcare costs usually reflect concerns that consumers aren’t getting enough value for their money. But the long-term trends are clear: As people get richer and live longer, they will choose to spend more on their health and well-being if it’s clear their lives are getting better in exchange.
Most incumbents in this ecosystem are too large and are unable to reinvent their products and services with non-linear improvements and breakthroughs. This in turn creates opportunities for healthcare entrepreneurs, opportunities which come in two main themes:
- New precision solutions through the use of transformational technology platforms in user-centric solutions: Precision care has been in the news lately largely because of the mind-boggling scope of some of the genomics-based lab discoveries making it possible. The gene-editing system known as CRISPR is being closely watched on account of its amazing potential with a variety of diseases, starting with major scourges such as cancer. It’s possible to imagine a chemotherapy regimen formulated for the specific genetic sequence of an individual patient. While recent studies have suggested that some cells might reject CRISPR modifications, researchers remain confident that these sorts of short-term technical challenges can be overcome.
CRISPR is proving to be useful not only for therapeutics, but also for diagnostics. Scientists are working on CRISPR-derived home therapy kits that will one day be sold in drug stores, and much like home pregnancy tests, allow for patients to screen for an enormous range of diseases. In addition to making healthcare more efficient, the easy availability of powerful and accurate diagnostic tools will also make it more democratic, empowering people to take personal responsibility for a bigger share of their healthcare decisions.
- Increase the efficiency of the healthcare system through the focus on the consumer: As of 2017, out-of-pocket spending by consumers has become the single largest payment category in the U.S. healthcare system. This is driving increasing demands from consumers for healthcare to give them the experience and value they’re seeing in other parts of the economy. Most users of healthcare products and services are not technologists and engineers, and ease of use makes the adoption of a new solution faster even among healthcare professionals.
Users already spend billions on wellness and vanity. Since, a significant portion of our total healthcare expenditures involve a small number of chronic conditions, notably obesity, getting people to eat healthier and look and feel better not only saves lives, it also saves money. Healthcare startups that can get consumers to pay for their products obtain a competitive advantage (think 23andme, Ancestry, OneMedical, Weight Watchers, Fitbit, Headspace etc.). Many digital health companies failed because they didn’t really deliver a compelling proposition that engaged the consumer, then pivoted into selling to enterprises without re-thinking their offering. Products sold in the healthcare ecosystem that don’t engage users will fail.
How to Start
Entrepreneurs entering the healthcare market from other fields—social media, say, or enterprise IT—are sometimes overwhelmed by the challenges involved in creating a successful company, such as the formidable regulatory hurdles, or the fact that the people using your product are usually not the same as the ones paying for it. The critical factors that drive entrepreneurial success with precision solutions are:
- Focusing on the user persona (consumer, researcher, lab technician, nurse, doctor etc.) and then delighting them on a sustained basis, allowing them to achieve their goals with less effort and resources.
- Not only understanding how and why their intended customers will pay for the solution, but also demonstrating revenue velocity early in the company life cycle.
- Having IP or network effect barriers that make it harder for look-alike competition.
- Starting a movement on the new way to do things by taking the leadership role in building a platform that attracts lighthouse customers, best employees and key ecosystem partners.
There will be failures in the healthcare-startup ecosystem, probably more than in many other areas of entrepreneurship. But companies that focus on increasing efficiency and engaging patients have the potential for achieving what most entrepreneurs only dream about: Creating a successful company while changing people’s lives for the better.
Originally published on LinkedIn.