Finding the money in Connected Health
It reminded me of First Tuesday. During the Internet boom, throngs of start-ups would convene on the first Tuesday of each month to swarm around venture capitalists at some local watering hole. The air was electric!
Last week I attended a reception for people interested in “connected health” – broadly, programs that use technology to better connect patients with physicians and other caregivers. Major health insurers were there, as were large physician groups, leading venture capitalists, and a profusion of start-ups. With healthcare a key growth theme for telecom carriers, and the embrace of new technologies a key imperative for insurers, the enthusiasm was over-powering. Yet I walked away thinking that many of these firms were running down blind alleys.
Undoubtedly, connected health could significantly enhance patient care. Home blood pressure cuffs that download data directly to physicians, pill bottles that alert relatives when they remain unopened, text message reminders to eat right, and dozens of other programs are occurring today. With chronically ill patients seeing their doctors relatively infrequently, healthcare could cheaply improve through creating a virtual connection that alerts the care team about potentially hazardous situations.
Despite this promise, very few programs have been scaled beyond pilot stage, and no one could point to a firm making profits in this field. Given that the technology to record and transmit data is relatively straightforward, this is troubling. The problem seems to be a lack of focus.
With so much buzz in the air, firms are rushing to sell their solutions to a wide range of stakeholders – insurers, telecom carriers, physician practices, patients and their caregivers. As during the Internet boom, companies feel pressure to stake out their leadership fast to deter hungry competitors. However, a key weakness of the healthcare system is that stakeholders are inter-dependent but their incentives are not aligned. One stakeholder’s honey is another’s brussels sprouts. Rather than try to create a one-size fits all solution, firms should focus on a particular stakeholder and craft a solution so compelling as to make that target customer force others to embrace it.
For example, health insurers want to avoid costly hospitalization of their sickest members, and also prevent unnecessary physician visits by the “worried well” whose vital signs could be easily checked remotely. Insurers could fund home monitoring technologies such as blood pressure cuffs. Physicians may dislike the extra work of checking online logs of blood pressure readings, but insurers with substantial market power in an area could force doctors’ participation in the program. Patients could be provided with modest incentives for sustained participation, much as companies sometimes reward employees who regularly use the gym. The program would look very different for the sickest patients vs. the worried well – for instance, patients would be required to take readings at different frequencies, and the highest risk patients might need to answer supplemental questions about how they are feeling. It would be essential to laser-focus on the target market, and then branch into other markets as the technology becomes part of the normal workflow of a physician practice.
Pharmaceutical companies, by contrast, want to improve adherence for chronic medications, and also to differentiate their therapies in the eyes of physicians and insurers. Adherence may be most financially important for people on expensive medications, which are probably so costly because competition is weak. Conversely, differentiation may be critical when a drug is at risk of commoditization. Firms need to target the disease state and patient type, and think through all the elements of a program that are essential to make a solution work in that situation, e.g. patient education, outreach to physician office staff, and clinicals that compare the solution to realistic alternatives.
The overall lesson is that land grabs seldom work when creating new markets. Rather, firms need to prioritize and segment stakeholders, focus tightly on a small number of targets, and deliver a complete solution (including through partnerships, if necessary) to make the stakeholder so eager about the offering as to force others in the industry ecosystem to collaborate in its implementation. Then, as the solution gains traction, it becomes easier to extend it into adjacent markets.
Unfortunately, it seems that many of the current players in connected health are orienting themselves around sexy technologies, and approaching the market as, say, a telecom company or a consumer electronics firm. In the intensely cost-pressured world of healthcare today, stakeholders do not want to buy technology; they want solutions.
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