6 helpful hints for healthcare startup founders–and funders

Investor Skip Fleshman of Palo Alto (of course)-based Asset Management Ventures has six points of sound advice for founders and developers–and funders of same–who think that their Big Idea(s) are the one thing which will revolutionize healthcare, particularly because of their personal experiences. We’ve observed that successful startups have fitted themselves into the Healthcare Establishment’s game [TTA 19 May], but if an investor is still seeing that attitude, it’s still there. AMV’s track record is there with investments in several healthcare companies, including Proteus Digital Health and HealthTap. Mr Fleshman’s points with this Editor’s comments:

1. Listen to the market–and it’s not direct-to-consumer, despite a cursory reading of Eric Topol. Find where your product or service can reduce or avoid cost, increase engagement and improve quality i.e. patient outcomes (which are all linked, see #4)
2. Hire people who know how to speak the language–experienced healthcare people who can work the system but also get the changes and want to make a difference. And no, they may not look or act like you. They’ll often have gray hair and families. Unless they are independently wealthy, they also expect to be paid decently. Quite a few will be women who don’t act or look like you either, but are invaluable in your organization in multiple ways.
3. Understand how the money flows–and the money is with providers, payers, self-insured employers and (Mr Fleshman doesn’t mention this) government (Medicare, Medicaid, the alphabet soup of HHS, CMS…). The incentives (shared savings) are now to providers to pull cost out of their system but somehow maintain population health quality and outcomes. How to pull this off is where the innovation is needed. Partner wherever you can–and this Editor would add, with other successful early-stage companies as well.
4. Read the Affordable Care Act–with a bottle of painkillers and eyedrops. Exchange plans are becoming examples of unaffordable care. High-cost premiums (unless income-based subsidized, paradoxically encouraging low earnings), restricted provider, high-deductible healthcare with government directly subsidizing payers, risk-imbalanced, dependent on the young paying premiums which they are not. This escape from reality will not sustain. Change will happen, but in the short term, look at CMS and what they are doing to change healthcare models, including episodes of care. Look also to ending or changing the game in those never-ending, high-cost Battles of Stalingrad in diabetes and mental health.
5. Plan for the long haul–none of these entities change quickly. His analogy of attempting to turn a doorknob by banging one’s head on it applies particularly to payers.
6. Beware of death by pilot–His sound point is that you may need to pay, directly or indirectly, for pilots. The healthcare model is pharma clinical trials. If you save money, you are on safer ground asking for a modest two-way investment but then set a clear expectation to transition to paid.

This Editor will add that this article should also be pinned on the walls of later-stage companies having some success, to keep their eye on the prize.  VentureBeat

Read more: Do startups truly threaten the ‘healthcare establishment’?   A primer on why startups failCan startups learn from digital health’s flops? Battles of Stalingrad: The diabetic experience: the fly in the Quantified Selfing ointment, Unhappy endings: where even innovation cannot make a difference, and Patients should be less engaged, not more

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