An essential link to mHealth devices and apps?

Guest columnist Lois Drapin thinks so. She shares her insights on Validic, an emerging company in data integration for payers, providers, preventive wellness companies and pharma;how it evolved from its original concept in consumer health engagement, along with a few pointers its founders have for fellow entrepreneurs.

One of the keystone aspects of “ecosystems” is interoperability and this also applies to the data pipeline that flows from health apps and devices to the appropriate segment of the healthcare delivery system, and eventually, to the users—patients, consumers and/or medical professionals such as physicians and nurses or other clinicians. By now, we all know that the capture and analytics for both “big” and “small” health data are business imperatives for healthcare in the US. With data of this nature, we can embrace our understanding of behavioral change at the individual and population levels. The anticipated outcomes of behavioral change may power operational and cost efficiencies in the healthcare industry.

But data will no longer come from just inside the healthcare delivery system. In addition to the changing technology enablement within the health system, as we all know, data will flow from many things—in fact, The Internet of Things (IoT). This means that data that relates to our lifestyle, wellness and health will pour from the many types of wearable devices not now connected to the heath delivery system. In addition to our computers, tablets, phablets and smartphones, are the many sensors paired with tech innovations such as the wearables— from wristbands, smartwatches, clothing (from shoes to headbands), glasses, contacts, and pendants — to things such as refrigerators, clocks, mattresses, scales, coffee pots, cars, and even, toilets…all of which are predicted to become an important market in the coming years.

Validic, based in Durham, NC, has put itself smack in the middle of that market by providing easy, affordable, efficient and accessible data integration services to four customer markets, or what CEO Ryan Beckland and co-founder/CTO Drew Schiller refer to as the 4Ps: payers, providers, preventive wellness companies and pharma. Validic also works with consumer electronics companies and infrastructure companies. The data they pipe to these customer segments currently comes from device and health app developers. You can imagines as the IoT market grows, data pertaining to health-related initiatives might also participate with Validic.

Beckland and Schiller admit their website requires a bit of updating, but they have integrated 123 devices and apps. I would bet that this number has increased since the first of the year, when I last spoke with them. They do this by providing the Validic Enterprise mHealth API to developers and customers. They like to say that Validic provides a “one-to-many connection for healthcare businesses and app developers.” Beckland and Schiller believe their enterprise API will become a true standard for interoperability. Think about this. This is a company without skin in the game, neither in the mHealth app or wearables markets, nor does it develop or own any proprietary device or app to protect. Validic sits in the middle of all that is happening with let’s say, neutrality, and provides customers and developers with an assist toward attainment of their business goals. The stream of data they can provide to customers will vary with the specific business-use case. Moreover, hospitals, ACOs, pharma, health plans and wellness companies won’t have to initiate negotiations with each and every device and app out there. Customers can have turnkey data access.

You may have heard about Validic from initial reports published in November 2013 on Mobihealthnews, announcing that Mark Cuban (one of TV’s ‘Shark Tank’ entrepreneur-investors known for his ownership of Magnolia Pictures, Landmark Theaters and the Dallas Mavericks) had just participated in Validic’s $760,000 seed round. It’s one of those announcements that makes you do a double take, and well, keep an eye on the ball, so to speak.

According to its founders, Validic collects 200 data points across all apps and devices— a wide range that includes fitness and activity tracking, nutrition and biometric data (weight, blood pressure, oximetry, glucometry, among others), data of interest to medication adherence in COPD, asthma, and other data of interest to their various customers. The data is de-identified, and Schiller affirms that Validic is “fully HIPPA-compliant.” Validic connects to devices and apps by providing its Enterprise API and by doing that, they are providing a large population data set available to all participants.

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Validic soft launched in January 2013 and had its market launch in April. According to its founders, Validic will be deployed with a 30-million population base during Q1 2014. Under its current contracts, the company is looking at an additional 70 million lives in the Q2. With Validic’s recent attendance at mHIMSS and CES 2014, my bet is that Beckland and Schiller brought home some new contracts, customers and developers.

Finding Wisdom in Startup Stories

When you meet Beckland and Schiller you know they are great friends. It’s refreshing, and they are refreshingly honest. They have enthusiasm and a tendency to finish each other’s sentences. If you believe as I do, that management teams and founders tell you a lot about the success of a company, then you will find these two pretty impressive. In 2010, Beckland started an “incentivized weight loss program.” Beckland has had businesses in real estate, finance and food service; Validic is his first tech company. A self-described economics geek by nature, Beckland had read research that showed people were successfully motivated to have significant weight loss based on financial incentive programs. Beckland said to himself “Okay, if we can figure out a way systematically to provide incentives to motivate weight loss, there could be a lot value there.”

Beckland took that thought and organized a community weight loss challenge, complete with cash prizes, in Lawrence, KS. He brought in the hospital system, the health clubs and the nutritionists. All of this was with pen and paper, however, and he knew he needed more. That’s when Beckland called Schiller, his friend from college (University of Iowa). They had known each other since 2001. Schiller graduated with a degree in graphic design and computer science. He chuckled when he said, “This was all before UI, UX was a ‘thing,’ and I guess I got pretty lucky with my background.” He owned a web development and consulting firm right out of college. He admits it was tough going until he figured out his target clients and what they wanted, but then, he was able to make a pretty good living from his efforts. “But I was always looking for something to scale,” he said. Schiller’s wife has celiac disease, and he built and sold a niche dietary site for gluten-free products. When Beckland called him to lead the tech efforts for the wellness business, Schiller thought the idea crossed both worlds. Schiller’s wife, a clinical health psychologist, also helped her husband and Beckland think through a lot of the behavior change elements, and why incentives worked the way they did. The two friends figured working together and bringing tech into the picture was a win-win.

The precursor to Validic was a company called Motivation Science and the program was Healthspire. Schiller built the Healthspire software, and the community weight loss efforts that Beckland had started with became the product they took to employers. Their customers were smaller-sized companies (about 4,000-5,000 employees), and a few larger ones (about 10,000 employees). They soon had 40 programs in place, but the pair realized that in order to attract large employers as customers, they needed something more. The large employers were building wellness strategies and the Healthspire incentive weight loss program was just one small piece. As Beckland described, “We needed a much more robust set of programming options.”

Ryan Beckland, CEO of Validic 
“At first, we built a bunch of tracking tools or what a lot of people do in wellness,” said Beckland. “Drew just kept saying he wasn’t going to able to build a better fitness tracking tool than FitBit, for example, that we just shouldn’t try and compete with all of these consumer products. So, we thought things through and said to ourselves, ‘why don’t we help them integrate into the corporate wellness environment?’”

Originally a health engagement concept, Healthspire was designed to help an employee match to a partner from an API integration platform and then incentivize their engagement over time by monitoring data. Beckland and Schiller took the Healthspire product out to customers in the hopes of attracting some large customer bases.

This is the part of the story from which every entrepreneur can learn—how startup companies handle these customer objections can either make or break a startup. “Potential customers started to say things like, ‘You mean you can take the data from all these integrations and send it to our data base?’…or ‘You mean, we can take that data and use it to display in my patient portal?’” When those questions arose, Beckland and Schiller said it was difficult to get those new customers back on point during their usual sales calls. So, they listened and began to understand that corporate wellness programs at the larger companies believed that they already understood how to do employee engagement—but they didn’t get the data part.

“I remember this so distinctly,” said Beckland. “We were sitting in a meeting with Safeway Health with Paul Ford. Paul was doing this thing where he kept talking about data and we were talking about employee engagement. I finally said, ‘Look Paul, you keep talking about data. What if we got rid of everything else we are doing and give you the API platform with all the integrations and a single API to do that?’ Turns out we had three meetings that day. We were out in Silicon Valley. We had meetings with Safeway Health, one with Palo Alto Medical Foundation, and we heard the same thing over and over again. Schiller took over the story at this point… “We were driving back from the last meeting that day. We were in the rental car driving back to our hotel and we looked at each other and Ryan said to me, ‘Do you want to say it or should I?’ Basically, we were ready to blow up our entire model. And so I said it, ‘We need to switch.’”

And so Validic came to life. That’s the story, and I will bet there is more to come. It’s no easy decision to blow up your business model. Entrepreneurs, who listen to their guts, and to their customers, may have some tough decisions to make. In this case, Beckland and Schiller were able make the shift. Other entrepreneurs can learn from this story, but larger companies also need to understand that certain environments may call for strategic directional changeups and the ability to turn on a dime. It’s not easy for big companies to do that, and it is just scary when entrepreneurs have to re-design their business.

Validic’s founders also want to help bring health innovations into the health system. To accomplish that task, the company is sponsoring 25 health-focused accelerator programs and working with other health entrepreneurs. Validic also is developing a community of investors. Now that Beckland and Schiller are building their customer base from the 4Ps, they are being asked about what’s next. Hospitals, payers, pharma are looking for the answers. By pairing their partners with investors, Beckland and Schiller believe they can bring customers a more robust definition of their distribution channel. “Our investors and our customers are saying ‘What companies coming out of these accelerator programs have legs?’ We want to help these entrepreneurs by providing the customer-side distribution channel and help them get the capital for them to get legs… and we do that free for entrepreneurs.”

I find Validic interesting because it has a compelling business proposition. It has customers and a revenue model; and I really like the aggregation and integration model the company is now taking to market, in this time of emerging understanding and sadly,overall hype. Although larger companies can certainly be a data pipeline for mobile health (I’m thinking of companies like Verizon, WebMD, and others), clearly just being a data pipeline is not going to be a billion-dollar business and just may be too small and tedious for those companies to take on. Others, such as Surescripts, IMS Health, even Qualcomm and Intel have core businesses to attend, new products and new market entry to focus on. In fact, these companies could make interesting alliances or investors as Validic builds its base.

Other potential companies that could find Validic interesting could be some EHR vendors. The combination of EHR data combined with device and app data becomes an even more convincing business proposition. Validic could save EMRs/EHRs a lot of effort getting there. Moreover, Validic is shoring up its brand and importance in the marketplace by building its innovation initiatives. It’s making friends and building its customer base at the same time. There may be some competition along the way or other barriers it will need to jump. But my prediction is that some large partner will come along, sooner rather than later, and make an offer they can’t refuse.

And when that happens, Beckland and Schiller will have a great payout and an investment hub already in place— ready to take these young entrepreneurs into their next winning endeavor. That’s a thumbs up for me.

Lois Drapin, MPS-H.S.A. is the founder and CEO of New York-based The Drapin Group LLC, a boutique advisory and consulting firm. As an executive and consultant, she focuses on assisting CEOs, executive teams and investors of leading edge companies and corporate divisions developing new business initiatives in the healthcare, pharma and technology (digital, mobile, data) sectors. This article was originally published in HIT Consultant and is republished here with permission (thank you Lois and founder Fred Pennic). Lois’ other commentary from December’s mHealth Summit is recommended: Verizon in the HIT ecosystemThe Velocity of Big and her Sunday Venture+ session notes.

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