Do startups truly threaten the ‘healthcare establishment’?

Or are successful startups fitting into their game? Chris Seper in MedCityNews paints the picture of one side of a quandary. The ‘healthcare establishment’ fundamentally and to its detriment does not understand and is threatened by the startup and innovation process. A startup may begin with an idea which is, in his words, ‘almost always flawed, sometimes deeply’. If the founders are smart, they will test their ideas, validate them and change them appropriately. If not, they will fail. But it is easier for the Establishment to point at the most egregious of the bad ideas and use them to rationalize the status quo.

But being congenital contrarians, we paint the house on the other side of the street. Has the Establishment caught up with–or in some cases, co-opted startups, making them and their funders ‘do their diligence’ and be more cautious before emerging? This Editor would argue yes, and largely for the better.

**The ‘Wild West’ days are over. A few years ago, a truly bad or deeply flawed health tech idea or could easily find funding, because it was all blank slate, new and ‘transformative’.The sexiest hooks were Quantified Self, sleep, employer health incentives, interactive coaching, genomics, app prescribing and (last) wearables. A lot of founders imagined themselves as the Steve Jobs of Healthcare, down to the black turtleneck. Now there is a history of success and failure. The railroads reached the dusty frontier towns.

**There’s now a ‘Startup Establishment’. National accelerators like RockHealth, StartUp Health, Blueprint Health, and regionals like Health Wildcatters and ELabNYC, have moved past the ‘kitchen table partners’ who need the basics of a business plan and pitching skills, to later stage startups with track records and research pedigree which are truly in the validation phase. This shift became evident about 2013. Their partner rosters now include Big Pharma, Big Funders, Big Medical Device, Big Providers and Big Retail.

**Dumb money is history. RockHealth, Gartner, research2guidance, Mercom Capital and Parks Associates, among others, have chronicled the entry of large VCs in investments and exits. The Series B [TTA 7 Feb 14] and B to C (or acquisition) crunches are evidence of tougher standards. Angels and seed investors–even the classic 3Fs (families, friends and fools) and crowdfunders–do their homework first. Unfortunately, this also means that some companies with strong premises, which haven’t turned the ROI Corner or have hit a technology scalability wall, become ‘insolvent with a great idea’.

**The new standard is ‘where does it fit’— into workflow, healthcare business model, saving money, improving measurable outcome goals, knitting together data and communications–and more–and does it solve real, measurable problems.

**FDA and government involvement, security/hacking threats and that your IP really does need to be protected further favors some critical mass and caution.

The smarter parts of the Healthcare Establishment are buying innovation: note the purchases and alliances recently made by Humana, Anthem, GE (Ventures-StartUp Health and Care Innovations’ certifications), Optum (Alere Health) and Medtronic (Cardiocom), Mayo Clinic backing Better, and HealthSpot/Xerox (only ‘to hand’ examples). The laggards? Hospitals and many insurers (Aetna’s struggles with CarePass and Healthagen) are not a surprise.

To paraphrase in a slightly fractured way the sage ‘Pogo’–have we (startups) met ‘the enemy’ (the Healthcare Establishment) and he is now (to an increasing degree) us?

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