Healthcare cybersecurity breaches multiply like measles as far away as Singapore. Is it a matter of time before hacking kills someone?

Even if you are the Prime Minister of Singapore, you can be hacked. Prime Minister Lee Hsien Loong joined 1.5 million of his fellow Singaporeans in what they have termed an unprecedented data breach of SingHealth, considered to be a world model. There are the usual state actor suspects: Russians, Chinese–and North Koreans–starting less than two weeks (27 June) after hosting the meeting between President Donald Trump and Maximum Leader Kim Jong Un. (That is hardly a gracious thank you if it’s them (s/o).  POLITICO Morning eHealth reported on Monday 23 July. 

What’s happened since: Singapore banks have been instructed to tighten data procedures and use additional verification methods. The government believes 1) they are next and 2) that the healthcare breach data could be used to impersonate customer identities. SingHealth records include full name, national identification number, address, gender, race, and date of birth. (ZDNet)

The National (UAE) reported that the hack specifically targeted the PM. Their angle was that Singapore has ambitions to host a ‘smart city’ as does the UAE and testing Singapore means that the UAE may be next. Singapore is covering a different angle–the ‘inside job’ one. They moved to disconnect computers from the internet at public centers which may inconvenience patients and healthcare staff but which weakens data collection for this very busy centralized system. (Reuters) Watch the government press conference here.

Will the next WannaCry or NotPetya kill someone? That is the premise in this article in ZDNet and one we’ve discussed previously. It’s not a targeted attack on a particular life, but could be an infrastructure failure–for instance, an industrial control for electricity that destroys systems including those to dependent homes or hospitals. What this article doesn’t include are all those aging hackable connected devices in operating rooms, hospital rooms, and in-hospital Wi-Fi powering tablets and other connected devices. KRACK can be very wack indeed! [TTA 18 Oct 17]

Who’s available? A user training professional with experience in security, social alarm, and telecare control rooms

Mr. Paul Dixon has taken advantage of our open offer to Readers who are available to lend their talents to new or established companies in the healthcare or healthcare tech field. 

I am a “tech-savvy” and experienced user training professional with extensive experience in providing training in a broad range of contexts and environments. I am specifically experienced in security, social alarm and telecare control rooms. As I also have a background in management and leadership, one of my key differentiators is that I focus on behavioural change in staff, not just on “mechanical” user processes.

In addition to training, I can create a full range of user-focused training materials.

Mr. Dixon was kind enough to include a comprehensive overview of how he can contribute to a company. He’s available for short and medium term projects as a freelancer, or on-going user training on an ad-hoc or retainer basis. Contact him on (m) 07734 600950 (UK) or paul@pauld.pro.  He’s on Twitter at @PaulWBM.

Will Matt Hancock be a refreshing change for NHS? Or another promise unfulfilled? (updated)

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2018/07/matt-in-a-binder.jpg” thumb_width=”200″ /]Matt In A Binder? With the sudden departure of Jeremy Hunt from the Department of Health and Social Care in the Cabinet’s ‘change partners and dance’, the new Secretary of State Matt Hancock comes over from heading Digital, Culture, Media and Sport. A couple of weeks in, it can be determined that he is a big advocate of technology and looking forward, not back (which Mr. Hunt spent a great deal of time doing):

Technology has a proven ability to radically change the world for the better – be it in finance, in education and in transport. But nowhere does technology have greater potential to improve lives than in healthcare. (Statement on Gov.UK/Health Service Journal 12 July )

And he glows again about increasing the use of apps within the NHS, though Digital Health goes a little overboard in calling the Rt Hon Mr. Hancock ‘app-happy’ even though he’s built his own this year so that his West Suffolk constituents can keep track of his activities. 

In his maiden speech, Mr. Hancock promoted a drive to replace pagers with smartphone apps as part of a £487 million funding package and connecting Amazon Echo with the NHS Choices website. It was overshadowed by a seeming walking back of the 95 percent four-hour A&E treatment target. Telegraph

Much of the criticism comes from those who see his appointment as yet another step in the privatization and regional devolution of the NHS due to campaign donations from the chair of pro-market group the Institute of Economic Affairs (IEA). However, Mr. Hunt faced the realization that NHS trusts are $1.2bn in debt and sought workarounds such as adoption of an ACO-type model (which in the US has a strong element of public incentive) and increased use of private health insurance to cost-shift. He wasn’t a technophobe, having inked a deal with the UK Space Agency to repurpose space tech for health tech and funding innovators in this conversion up to £4 million–which can be said to be ‘out there’.

Mr. Hancock also announced this week the £37.5 million funding of three and five ‘Digital Innovation Hubs’ over the next three years. These will connect regional healthcare data with genetic and biomedical information for R&D purposes.

Will he last? Will there be positive changed fueled by technology? Will the May Government last? Only time will tell.

What are your thoughts? (If you’d like to post anonymously, write Editor Donna in confidence)

Here’s select opinion from across the spectrum:

Don’t be fooled, Matt Hancock will be no better for the NHS than Jeremy Hunt was (The Independent)

New health secretary Matt Hancock received £32,000 in donations from chair of think tank that wants NHS ‘abolished’ (The Independent)

Roy Lilley’s always tart take on things NHS extends to the new Secretary dubbed ‘No18’. A deft wielding of Occam’s Razor and a saber on reflexive phraseology such as ‘driving culture change’ (it can be cultivated not driven–this Editor agrees but the tone and structure need to be set from the top), dealing with suppliers, and the danger of creating an electronic Tower of Babel due to lack of interoperability. (Does this resonate in the US? You bet!) (See NHSManagers.net if the link does not work.)

Margaret McCartney: Health technology and the modern inverse care law (BMJ) — to paraphrase, that the greatest need for healthcare is by those least likely to have the right care at the right time available. She points to Babylon Health, which counts Mr. Hancock as a member, as not only unproven, but also not needed by those able to afford other options. (But didn’t we know that already?)

The Theranos Story, ch. 53: No more blood to squeeze out of this particular rock

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2018/07/Rock-1-crop-2.jpg” thumb_width=”150″ /]Rock. On. The latest chapter in the Last Throes of Theranos is the action by plaintiffs Robert Colman, Hilary Taubman-Dye, and other indirect Theranos investors to settle their lawsuit before there is nothing left. The settlement was made late last week in the US District Court of Northern California for an undisclosed amount.

The plaintiffs originally proposed a class action which would have included about 200 other individuals investing through various funds.This was denied by the District Court in early June, but the ruling permitted individual lawsuits. The class action would have been under California state law, as indirect investors are not eligible through Federal securities law.

Mr. Colman was an early (2013) investor through Lucas Venture Group and Ms. Taubman-Dye was a third-party investor through SharesPost in 2015 [TTA 30 Nov 16]. Their charges centered around Theranos’ false and misleading statements made by the company, They were excluded from the share buyback a few months later when there were still some funds in the company [TTA 29 Mar 17] and before Fortress Investment Group put in their funding (December). Their legal action was brought not only against Theranos, former COO Sunny Balwani, and former CEO/founder Elizabeth Holmes but also–interestingly–the SEC (Law360). 

A sidelight to this is that there is an HBO documentary about Theranos in progress. The filmmaker Alex Gibney has sought to make public video depositions from two Theranos cases, according to the WSJ (paywalled). Judge Cousins ordered Theranos to work with Mr. Gibney’s lawyer to determine what excerpts of recordings will be released. Mr. Gibney better get his skates on while there’s still interest in the barely-breathing Theranos–or Ms. Holmes pulls the full Saint Joan reenactment in a Home for the Very, Very Nervous. MarketWatch, Bloomberg, Becker’s Hospital Review  Our TTA coverage is indexed here.

Can equipping care homes with telehealth save the NHS £1bn? (UK)

Well, every little bit helps the budget shortfall and the new Health Secretary. A five-year study of care homes run by NHS Calderdale (Yorkshire) Clinical Commissioning Group (CCG), equipped with sensor-based equipment (telehealth and telecare) plus a multidisciplinary nursing team available to support residents, saved on bed days, hospital admissions, and even GP visits to care homes. Admissions relating to falls decreased by 7.7 percent in the past year, resulting in an annual saving of more than £200,000.

The 383,500 UK care home residents with complex long-term conditions represent just 0.7 percent of the population, yet they account for a disproportionate amount of the NHS budget. The Calderdale study saved 7,000 hospital bed days in its first two years alone and GP visits to care homes reduced by 45 percent. 50 percent of care homes reduced falls by least 10 percent.

The Quest for Quality in Care Homes initiative co-sponsored by Tunstall Healthcare extrapolated from the Calderdale results that the NHS could nationally save £1bn, avoid some 226,000 hospital admissions. and release 2.5 million bed days. Digital Health, Tunstall Healthcare study page

News roundup: Walmart and Microsoft AI, are derm apps endangering public with 88% skin cancer diagnosis?

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2017/12/Lasso.jpg” thumb_width=”150″ /]Walmart and Microsoft partner to change the retail experience via AI. The five-year agreement will switch over applications to the cloud and will affect shipping and supply chain. It’s projected in Healthcare Dive that the impact will be in healthcare as well. Microsoft announced last month that it is forming a unit to advance AI and cloud-based healthcare tools. The landscape is under extreme pressure in retail and healthcare delivery, and Walmart needs to ready for future moves which will certainly happen. Walmart is rumored to be interested in acquiring Humana and is currently working with Emory Healthcare in Atlanta. Then there is CVS-Aetna, Cigna-Express Scripts, Google, and (looming above all) Amazon. (Though you can tuck all the years of Amazon’s profits into one year of Walmart’s.)

The ITV News headline grabs attention — but are dermatology apps really endangering the public when teledermatology can help diagnose 88 percent of people with skin cancer and 97 percent of those with benign lesions? A University of Birmingham-led research team did a metastudy of the literature and found three failings: “a lack of rigorous published trials to show they work and are safe, a lack of input during the app development from specialists to identify which lesions are suspicious and flaws in how the technology analyses photos” particularly for scaly or non-pigmented melanomas. But did access to these apps encourage early diagnosis which can lead to up to 100 percent five-year survival? Of course review is required as recommended by the study, but this last factor was not really examined at the British Association of Dermatologists’ annual meeting in Edinburgh. University of Birmingham release with study abstract

Highlights of The King’s Fund Digital Health and Care Congress 2018

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2018/06/kf-digital-health-2018-300×145.jpg” thumb_width=”150″ /]As The King’s Fund itself pointed to these two Digital Health articles, this Editor (who did not attend) will summarize their findings on the two days. Surely more to come!

Day One: digital transformation was not just about patient and clinician tools, but also about culture and partnerships

  • The King’s Fund’s researchers presented findings from their recently released report, ‘Digital change in health and social care’ where local organizations can speed change faster than nationally (more detail here)
    • Tight collaboration is necessary to bring change, not only within organizations, but also with providers and suppliers
    • The culture gap is significant between technology and clinical and must be overcome
    • Technology may be the only way “by which the NHS would be able to face “long-term pressures” facing the healthcare system”
  • What are lessons learned from national and regional NHS digital transformation projects?
    • How do you bring data together on a large scale?
    • Primary care practice is the obvious place to engage people with technology
  • No ‘post code lottery’–All patients should have access to digital services (the standard criticism of Babylon Health)

Day Two: build the technology around the patient

  • Put the patient first–some technology does not
  • The paramount importance of safeguarding the patient
  • Patients should be involved continuously with technology–and patients inspire technology

TTA is a media partner of The King’s Fund digital health conferences and was pleased to be a supporter this year.

Care Innovations sells off Validation Institute. But is there more to the story? And a side of Walmart Health action.

The Health Value Institute, part of Woburn, Massachusetts-based conference organizer World Congress, announced late last week the acquisition of the Validation Institute from Care Innovations. Terms were not disclosed. The Health Value Institute and the Validation Institute recently partnered to validate the outcomes for the Health Value Award finalists and awards this past April at the 15th Annual World Health Care Congress. According to both parties, the acquisition will help to expand the membership of validated companies, and the present offerings for HR, broker, and benefit executives. Release.

The Validation Institute was launched with fanfare back in June 2014, when GE still had a chunk of the company and during the 2 1/2 year repositioning (revival? resuscitation?) led by Sean Slovenski from the doldrums of the prior Louis Burns regime. Mr. Slovenski departed in early 2016 to be president of population health at Healthways/Sharecare, which lasted a little over a year. However, this week Mr. Slovenski made headlines as the new SVP Health & Wellness of Walmart, reporting directly to the head of their US business.  The hiring of a senior executive with a few years at Humana and a short time at Sharecare, another Walmart partner, coupled with several years in healthcare tech and provider-side is certainly indicative of Walmart’s serious focus on healthcare provision. It’s a fascinating race with Amazon and CVS-Aetna–with the mystery of what Walgreens Boots Alliance will do. Also Healthcare Dive.

But back to Care Innovations. Signs of a new direction–and a loss. The case can be made that the Validation Institute, the Jefferson College of Population Health, and validating individuals and companies was no longer core to their business which is centered around their RPM platform Health Harmony (with QuietCare still hanging in there!) However, this Editor notes the prominent addition of  ‘platform-as-a-service’ advisory services for those who are developing health apps, which appears to be a spinoff of their engineering/IT services. Vivify Health, a competitor, already does this. There is a vote of confidence; in June, Roche signed on with a strategic investment (undisclosed) as well as integration of the mySugr integrated diabetes management/app solution (release).

Looking around their recently refreshed website, there is an absence–that of the two or three pages previously dedicated to the Veterans Health Administration (VA) and the press release of the VA award. This tends to lend credence to the rumors that there was a second company that did not pass the Trade Adjustment Act (TAA) requirements that knocked out Iron Bow/Vivify Health from the VA, or for another undisclosed reason CI bowed out of a potentially $258 million five-year contract. If so, that leaves for the VA Medtronic and 1Vision/AMC Health. It’s certainly a limited menu for the supposedly growing numbers of veterans requiring telehealth and a limited choice for their care coordinators–and not quite as presented to the public or the 2015 competitors in the solicitation. Who benefits? Who loses? (Disclosure: This Editor worked for one of the finalists and a VA supplier from 2003, Viterion.)  Hat tip to one of our ‘Industry Insiders’, but the opinions expressed here are her own.

A finger-prick, 10 minute CBC test which actually works from Sight Diagnostics (Israel)

The Theranos Effect may have tainted innovation investments (versus easy puzzle-piece fits), but complete blood count (CBC) via small blood samples is hardly a dead idea. It’s very much alive with the scientists who founded Sight Diagnostics, an Israeli startup with a fit-on-a-desktop lab, Olo, which can run multiple CBC counts. Blood can be taken from a traditional or finger-stick draw, with the usual caveats on capillary blood. The technology works via machine vision to take images of the blood sample to identify and count the different types of cells with AI to do the analysis. The goal is to be able to install a lab in a doctor’s office and run the test in 10 minutes, not five days.

Sight was founded by Daniel Levner, an artificial intelligence expert who was a scientist at Harvard’s Wyss Institute for Biologically Inspired Engineering (not a Stanford undergrad dropout), and Yossi Pollak, previously at Mobileye, an automotive computer vision developer that Intel bought for $15.3 billion last year–the largest Israeli tech exit ever. Oh, and they have an advisory board of Real Scientists.

Adding to Sight’s credibility is their CE Mark gained for Olo and completion of a 287-person clinical trial at Israel’s Shaare Zedek Medical Center, both announced this week. Webwire

The company is up to a Series B and has raised over $25 million since 2010 (Crunchbase)–a drop compared to Theranos, a subject where the founders are a little bit touchy, based on this Editor’s read of the Forbes article. While Olo is investigational in the US, their malaria test Parasight – which detects malaria using digital fluorescent microscopy and computer vision algorithms–has already sold over 600,000 units in 24 countries across Europe, Africa, and Asia–another major difference from Theranos. A significant investor is Eric Schmidt, formerly of Google, and head of Innovation Endeavors (SF Business Journal, slightly paywalled).

Video (01:56)

News roundup: FCC RPM/telehealth push, NHS EHR coding breach, unstructured data in geriatric diagnosis, Cerner-Lumeris, NHS funds social care, hospital RFID uses

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2017/12/Lasso.jpg” thumb_width=”125″ /]FCC backs post-discharge RPM plan. The “Connected Care Pilot Program” proposed by FCC commissioner Brendan Carr would provide $100 million for subsidies to hospitals or wireless providers running post-discharge remote monitoring programs for low-income and rural Americans such as those run by the University of Mississippi Medical Center. The goal is to lower readmissions and improve patient outcomes. The proposal still needs to be formalized so it would be 2019 at earliest. POLITICO Morning eHealth, Clarion-Ledger, Mobihealthnews

NHS Digital’s 150,000 patient data breach originated in a coding error in the SystmOne EHR used by GPs. Through the error by TPP, SystmOne did not recognize the “type 2 opt-out” for use of individual data in clinical research and planning purposes. This affected records after 31 March 2015. This breach also affects vendors which received the data, albeit unknowingly, but the duration of the breach makes it hard to put the genie back in the bottle, which NHS Digital would like to do. Inforisktoday, NHS Digital release

Unstructured data in EHRs more valuable than structured data in older adult patient health. A new study in the Journal of the American Geriatrics Society compared the number of geriatric syndrome cases identified using structured claims and structured and unstructured EHR data, finding that the unstructured data was needed to properly identify geriatric syndrome. Over 18,000 patients’ unstructured EHR notes were analyzed using a natural language processing (NLP) algorithm.

Cerner buying a share in population health/value-based care management company Lumeris through purchasing $266 million in stock in Lumeris parent Essence Group Holdings. The angle is data crunching to improve outcomes for patients in Medicare Advantage and other value-based plans. Lumeris also operates Essence Healthcare, a Medicare Advantage plan with 65,000 beneficiaries in Missouri. Fierce Healthcare

NHS Digital awarding £240,000 for investigating social care transformation through technology. The Social Care Digital Innovation Programme in 12 councils will be managed by both NHS and the Local Government Association (LGA). Projects to be funded span from assistive technologies to predictive analytics. Six winners from the original group of 12 after three months will be awarded up to a further £80,000 each to design and implement their solutions. New Statesman

Curious about RFID in use in healthcare, other than in asset management, access, and log in? Contactless payments is one area. As this is the first of four articles, you’ll have to follow up in Healthcare IT News

A mHealth refutation of ‘Why Telemedicine is a Bust’

Worth your time over a long coffee is David Doherty’s lengthy analysis of a recent article published on the CNBC website on the ‘failure’ to date of what was supposed to revolutionize healthcare, the telemedicine ‘video visit’. Mr. Doherty counters point-by-point that the concept of telemedicine is already out of date–that the future of healthcare is with mobile devices, such as the EKG-taking KardiaMobile. He points to the distrust of large telemedicine companies such as Doctor on Demand and American Well as being heavily wedded to health insurers (the prevalent business model), selling/trading patient information, and breaking the individual doctor-patient relationship.

Mr. Doherty sees the future of telemedicine enabling individual doctors to better serve their patients on several levels–video consults, monitoring, and via high-quality apps–seamlessly.  But the insurer-employer-practice model is hard to break indeed, as American Well, Teladoc, and Doctor on Demand–all of which started with a DTC model–found out. And reimbursement is improved, but discouraging. mHealth Insight

Department of Justice won’t challenge CVS-Aetna merger: report

DOJ, stay away from our doors! The $69 bn CVS Health and Aetna mega-merger looks like it will go sailing down that river, if Mr. Market is right. Shares in both companies enjoyed a nice bump on today’s report that the DOJ won’t challenge this merger. The local Hartford Courant is relieved that Aetna plans to stay in their longtime HQ city (since 1853), conveniently omitting their long-standing plan to set up a big shop in NYC. CNBC

What a difference from a year ago when two mega-mega-mergers, Aetna-Humana and Anthem-Cigna, were shot d0wn–nay, riddled with bullets–in the Senate and in two courts [TTA 9 Feb 17]. Cigna is still living with the hangover of their bad breakup with Anthem, with a fight over a nearly $1.9 bn breakup fee [TTA 17 May 17] continuing in the Delaware Chancery Court in 2019.  Cigna nixed any other insurers in a horizontal merger and sought out Express Scripts, a pharmacy benefits manager (PBM) which was reeling a bit after its largest client (coincidentally) Anthem departed. Anthem sued its PBM, Express Scripts, for $15 billion, alleging the PBM overcharged it by $3 billion annually The merger will cost them over $550 million in transaction cost and that is just the beginning. That $1.9 bn would sure come in handy. Modern Healthcare 

RCGP chair at The King’s Fund: destroy Babylon Health’s GP at Hand ‘amazing model’, the present financial model–or both

A whole lot of disrupting goin’ on. At The King’s Fund’s June conference on ‘Reimagining general practice’, Royal College of General Practitioners (RCGP) chair Professor Helen Stokes-Lampard at the opening plenary seemingly did the impossible–praising Babylon Health’s GP at Hand while wishing its destruction, along with the present UK practice payment method. First, health leaders had a ‘lot to learn’ from the GP at Hand model–and that NHS IT systems at present were inadequate in meeting patients’ needs. “‘Let’s have tech that works and use innovative ways of consulting. Because the reality is we’re looking foolish and people are looking for alternatives. The rise of the private GP health sector is not a coincidence – it’s an inevitable consequence of the NHS not keeping up.”

If you cannot beat them, join them–and figure out a new way of paying GPs. ‘[We] have to totally adopt that technology right throughout the NHS for everybody so it destroys [Babylon’s] business model and it is normal across the whole of general practice – tech tsunami stuff. Or we have to tear up the financial model by which we pay [practices]. And one of those things has to happen fast. I would suggest we need to do both.’   

Her remarks are in the face of GP at Hand cresting at over 30,000 patients, with over 3,000 signing up in May.

Both Professor Stokes-Lampard and following speaker Professor Steve Field, CQC chief inspector of general practice, pointed to a model such as GP at Hand ‘cherry picking’ primarily healthy patients rather than a broad population and destabilizing surgeries. Both agreed that the disruption had major implications for ‘the financial contracting model in general practice’.

Earlier, GPonline exclusively revealed that market research firm Ipsos Mori is investigating–at a cost of £250,000–the impact of GP at Hand, including its long-term implications for the sustainability of traditional general practice.

The Theranos Story, ch. 52: How Elizabeth Holmes became ‘healthcare’s most reviled’–HISTalk’s review of ‘Bad Blood’

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2018/07/holmes-barbie-doll-1.jpg” thumb_width=”125″ /]A Must Read, even if you don’t have time for the book. During the brief Independence Day holiday, this Editor caught up with HISTalk’s review of John Carreyrou’s ‘Bad Blood’, his evisceration of the Fraud That Was Theranos and The Utter Fraud That Is Elizabeth Holmes. Even if you’ve read the book, it’s both a lively recounting of how the scam developed and the willingness–nay, eagerness!–of supposedly savvy people and companies to be duped. The reviewer also reveals that Mr. Carreyrou wasn’t the first to raise questions about Theranos after raves in the press and kudos from the prestigious likes of Eric Topol. Mr. Carreyrou’s first article was in October 2015 [TTA 16 Oct 15] whereas Kevin Loria wrote the first exposé in Business Insider on 25 April 15 which raised all the fundamental questions which Theranos spun, hyped, or otherwise ignored–and Mr. Carreyrou eventually answered. (Our blow by blow, from him and other sources, is here.)

The review also picks out from the book the scabrous bits of Ms. Holmes’ delusions; her makeover to become the blond Aryan female Steve Jobs mit Margaret Keane-ish waif eyes–something she took far too literally; the affair between her and Sunny Balwani, certainly in violation of the usual ethics–and her Hitler in the Bunker, April ’45 behavior as Theranos collapsed around her. 

The review concludes by telling the healthcare community something we need said plainly, often, and written in 50-foot letters:

Theranos is a good reminder to healthcare dabblers. Your customer is the patient, not your investors or partners. You can’t just throw product at the wall and see what sticks when your technology is used to diagnose, treat, or manage disease. Your inevitable mistakes could kill someone. Your startup hubris isn’t welcome here and it will be recalled with great glee when you slink away with tail between legs. Have your self-proclaimed innovation and disruption reviewed by someone who knows what they’re talking about before trotting out your hockey-stick growth chart. And investors, company board members, and government officials, you might be the only thing standing between a patient in need and glitzy, profitable technology that might kill them even as a high-powered founder and an army of lawyers try to make you look the other way.

In other words, what you (the innovator, the investor) is holding is not a patient’s watch, it could be his heart, lungs, or pancreas. (Musical interlude: ‘Be Careful, It’s My Heart’)

The Theranos Effect is real in terms of investment in small companies out there on the ‘bleeding edge’. The cooling is mostly salutory, and we’ve been seeing it since late last year (see here). But…will we remember after it wears off, after the fines are collected, the prison time is served?

Rock Health’s ‘Another record-breaking first half’ in digital health funding is actually–flat. (With a Soapbox Extra!)

The Breathless Tone was the clue. “It’s déjà vu for digital health, with yet another record breaking half for venture funding.” It was déjà vu, but not of the good sort. This Editor hates to assume, so she checked the year-to-year numbers–and first half 2018 versus 2017 broke no records:

  • 2018:  $3.4 bn invested in 193 digital health deals 
  • 2017: $3.5 bn invested in 188 digital health companies [TTA 11 July 17]

But ‘flat’ doesn’t make for good headlines. Digging into it, there are trends we should be aware of — and Rock Health does a great job of parsing–but a certain wobbliness carried over from 2017 even though the $5.8 bn year finished 32 percent up over 2016, analyzed here [TTA 5 Apr 18]. Their projection for 2018 full year is $6.9 bn and 386 deals.

Let’s take a look at their trends:

  • “The future of healthcare startups is inextricably linked to the strategies of large, enterprise-scale healthcare players—as customers, partners, investors, and even potential acquirers.” It’s no mistake that the big news this week was Amazon acquiring tiny, chronic-conditions specializing prescription supplier PillPack after a bidding war with Walmart for an astounding $1bn, making its 32 year-0ld founder very rich indeed and gaining Amazon pharmacy licenses in 49 states. (Prediction: Walmart will be pleased it lost the war as it will find its own solutions and alliances.) 
    • Enterprise healthcare players are cautious, even by Rock Health’s admission, but the big money is going into deals that vertically integrate and complement, at least for a time–for example, Roche’s purchase of Flatiron Health. And when it doesn’t work, it tends to end in a whimper–this May’s quiet sale by Aetna of Medicity to Health Catalyst for an undisclosed sum. Back in 2011, Aetna bought it for $500 million. (Notably not included in the Rock Health analysis, even though they track Health Catalyst and the HIE/analytics sector.)
  • The market is dependent on big deals getting bigger. If you are well-developed, in the right sector, and mature (as early-stage companies go), you have a better shot at that $100 million B, D, E or Growth funding round. B rounds actually grew a bit, with seed and A rounds dipping below 50 percent for the first time since 2012. 
  • The Theranos Effect is real. Unvalidated, hyped up claims don’t get $900 million anymore. In fact, there’s real concern that there’s a reluctance to fund innovation versus integration. The wise part of this is that large fundings went to companies validating through clinical trial results, FDA clearance (or closing in on it), and CDC blessing.
  • The dabbling investor is rapidly disappearing. 62 percent of investors in first half had made prior investments in digital health including staying with companies in following rounds.
  • Digital health companies, like others, are staying private longer and avoiding public markets. Exits remain on par with 2017 at 60. Speculation is that Health Catalyst and Grand Rounds are the next IPOs, but there hasn’t been one since iRhythm in October 2016. The Digital Health public company index is showing a lot less pink these days as well, which may be an encouraging sign.
  • Behavioral health is finally getting its due. “Behavioral health startups received more funding this half than in any prior six-month period, with a cumulative $273M for 15 unique companies (nearly double the $137M closed in H1 2016, the previous record half for funding of behavioral health companies). Of these 15 companies, more than half have a virtual or on-demand component.”

Keep in mind that Rock Health tracks deals over $2 million in value from venture capital, excluding government and grant funding. They omit non-US deals, even if heavily US funded. 

Their projection for 2018 full year is $6.9 bn and 386 deals. Will their projection pan out? Only the full year will tell!

A Soapbox Extra!

Rock Health, like most Left Coast companies, believes that Vinod Khosla is a semi-deity. This Editor happens to not be convinced, based on predictions that won’t pan out, like machines replacing 80 percent of doctors; making statements such as VCs have less sexual harassment than other areas, and even banning surfers off his beach. He was at a Rock Health forum recently and made this eye-rolling (at least to this Editor) statement:

Is there one area in the last 30 years where the initial innovation was driven by an institution of any sort? I couldn’t think of a single area where innovation—large innovation—came from a big institution. Retailing wasn’t disrupted by Walmart, it was by Amazon. Media wasn’t changed by CBS or NBC, it was by YouTube and Twitter. Cars weren’t transformed by Volkswagen and GM—and people said you can’t do cars in startups—but then came Tesla.

Other than making a point that Clayton Christensen made a decade or more ago, the real nugget to be gained here is that formerly innovative companies that get big don’t grow innovation (though 3M tends to be an exception, and Motorola didn’t do too badly with the cell phone). They can buy it–and always have. 

Go back a few more decades and all of these companies were disrupters–and bought out (or bankrupted) other disrupters. CBS and NBC transformed entertainment through popularizing radio and then TV. VW created the small car market in the US and saved the German auto industry. GM innovated both horizontally (acquiring car companies, starting other brands) and integrated vertically (buying DELCO which created the first truly workable self-starting ignition system in 1912).

YouTube? Bought by innovator Google. Twitter? Waiting, wanting to be bought. Innovation? Khosla is off the beam again. Without Walmart, there would be no Amazon–and Amazon’s total lifetime profit fits nicely into one year of Walmart’s. Tesla is not innovative–it is a hyped up version of electric car technology in a styled package that occasionally blows up and remains on the borderline of financial disaster. (Model 3, where art thou?)

I’d argue that Geisinger, Mayo Clinic, and Intermountain Healthcare have been pretty innovative over the last 30 years. Mr. Khosla, read Mr. Christensen again!

The King’s Fund Digital Health & Care Congress next week on 10-11 July

Time has flown by since this Editor first mentioned this event and now it’s next week. This year’s meeting features case studies in creating the right culture for large scale digital change, using digital technology to improve quality of care, prevention and changing behaviors, population health informatics, tools for self-management, reducing clinical variation, mobile working in community services, and much more. Featured speakers include Matthew Swindells of NHS England, the Rt Hon Paul Burstow of TSA, Ruth Rankine of the Care Quality Commission, and more. See the agenda here for Day 1 and Day 2. (TTA’s own Charles Lowe will be chairing Breakout T2B: Quality improvement 11:45am on Tuesday 10 July.) Two very full days 10-11 July, Tuesday and Wednesday, at The King’s Fund’s London location. For more information, click the advert in the right sidebar or here