Amidst the growing government debate about repealing and replacing the Affordable Care Act (ACA), digital health startups are thriving. TechCrunch reports that venture capital money continues to pour into this sector. “Dollars are flowing into digital health at an unprecedented rate, with spending in the sector racing toward $32 billion by 2018.” And the Chicago Tribune provides numbers from (health startup itself) Rock Health: “Since 2011, venture capitalists have poured $17.8 billion into digital health startups, including insurance shoppers for individuals and small businesses, companies that help providers take advantage of provisions in the law, and startups that enable employers to cut down on costs.”

In an industry fraught with regulations and tangled by interdependent stakeholders–an industry that is yet, at the same time, deeply intimate–there is ample opportunity for innovation. Digital consumers have grown increasingly accustomed to on-demand access, exercising a new level of control over their personal affairs. Their jurisdiction extends to their health care and medical records, especially as many consumers are now paying directly for their health insurance through the Marketplace Exchange.

This confluence of events throws the fate of the ACA in sharp relief. But regardless of whether the act survives in part or intact, consumers have come to expect digital facility and management of their health care options. The push to digitize patient records will continue, and the platforms built to enable consumers will persist by popular demand. The ever-increasing trove of data mined from newly digitized health information will doubtless inform the industry.

The Republican plan for health insurance emphasizes customer choice, which will still breed competition and further innovation in the market. The Republicans also emphasize a pay-for-service model, which will introduce more transparency into the true cost of health services. That is one of the considerations health startups have to face: understanding the flow of money is crucial to truly provide an essential service and ensure your staying power.

The healthcare industry is a complex landscape both risky for investment and ripe for reinvention. Building a successful business requires navigating regulation, handling government money, and understanding the roles and priorities of the myriad of stakeholders involved, including many nonprofit organizations. For example, patients pay monthly premiums and (worryingly) high deductibles. However, the bulk of the cost for expensive medical procedures, hospital stays, etc. is paid for by insurers, and these inflated costs are often obscured to the consumer. As TechCrunch puts it, “With the complexity of the healthcare supply chain, which consists of so many intermediaries and payment methods between the end user and supplier of service, it’s easy for incentives to be misaligned.”

Balancing the end needs of patients with the priorities of providers is only part of the challenge. Entrepreneurs must also consider the competition in an increasingly cluttered investment field, and have a plan for defining and measuring success. Who is currently providing the need you have identified, and how can you better fill that gap? Finding a focus amidst an increasingly entangled infrastructure is critical and necessary to manage scalability.

Challenges aside, the impact of the ACA on Silicon Valley startups would be difficult to disentangle and impossible to uproot entirely. Many recent health care startups rely on ACA regulations, and so may need to restructure. The flexibility and choice offered by the ACA has been a boon for non-health startup business models based on the gig economy, like Uber. Without that insurance option available to its workforce, Uber would likely need to provide options for affordable healthcare to sustain its employee base.

Much of the investment money flowing into healthcare startups has funded models focused on catering to self-insured employers, who are looking to save money and improve the bottom line for their workforce. And a lot of investment money has also gone toward the end user: patients. Targeting patient populations is one way to narrow your focus: the “worried well,” women, chronic sufferers (allergies, diabetes, etc.), and holistic wellness practitioners.

This new digital face of healthcare also highlights a contrast between younger generations of consumers and the disproportionate aging Baby Boomer generation. The access, control, and kind of care expected by these different demographics differs greatly, but the discrepancy demands a solution. Many health startups have focused on the challenges presented by the rapidly retiring Baby Boomers and the need for efficient, cost-effective care of the elderly, which will in many cases be managed (at least in part) by members of younger generations.

These challenges aren’t going away, and neither is consumer demand for control over their healthcare. Healthcare startups that can successfully create and innovate in this space won’t go away either.

2017-06-19T15:37:46+00:00 March 9th, 2017|Blog|0 Comments

Leave A Comment