The document discusses the growing importance and opportunities in healthcare information technology (HIT). It notes that HIT is hot right now due to factors like the Affordable Care Act and HITECH Act driving technology adoption, ubiquitous computing putting tools in providers' and patients' hands, and investors recognizing HIT's potential for cost savings. The document outlines opportunities in areas like outpatient providers, payers, inpatient providers, and consumers. It also warns of challenges like long sales cycles and the need to clearly explain economic value.
2. Healthcare IT in Perspective
2
Banking Industry
Once Upon Not That Today
a Time Long Ago
SXSW Conference: Lisa Suennen 3-9-12
3. Healthcare IT in Perspective
3
Manufacturing Industry
Once Upon Not That Today
a Time Long Ago
SXSW Conference: Lisa Suennen 3-9-12
4. Healthcare IT in Perspective
4
Healthcare Industry
Once Upon Not That Today
a Time Long Ago
SXSW Conference: Lisa Suennen 3-9-12
5. Why HIT is HOT Right Now
5
Without change, costs will grow from $2.7 trillion now to
$4.5 trillion in 2019
Healthcare inflation is a crushing weight on the economy
Healthcare adds $1500 to cost of every GM car
Starbucks spends more on healthcare than on coffee
Companies with the highest healthcare costs grow the slowest*
Every 10% increase in “excess” healthcare costs the economy
120,000+ jobs and $28B of lost revenues*
The cost shift from employers to individuals has begun
Almost 10,000 people per day are aging into Medicare
2/3 of Americans over 65 have 2+ chronic illness
Chronic illness accounts for 75% of all healthcare costs *Rand Corporation
SXSW Conference: Lisa Suennen 3-9-12
7. Is This Just 1990s Deja Vu?
Haven’t I Seen This Bubble Before?
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It was all about the new kid on the block: the
Internet
Products focused on disintermediation, not
cost/quality:
Content portals, such as WebMD, DrKoop.com
Ecommerce portals: PlanetRx, Drugstore.com
Group purchasing websites, such as Medibuy
E-prescribing—the only thing that was more
physician workflow oriented;
Epocrates, PocketScript, Allscript
SXSW Conference: Lisa Suennen 3-9-12
8. Why It’s Different This Time
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PPACA and HITECH Act are driving technology throughout a
previously low tech system
• Near-universal access to Internet, broadband and wireless
technologies at every significant U.S. clinical organization;
• Ubiquity of smart phones & iPads put cheap computing power in
the hands of physicians and consumers
• Cheap and widely available software enables mass customization
at affordable cost with real ROI
• Recognition that the healthcare system can no longer avoid the
information age if we are serious about cost-containment
• Investors turning to HIT as biotech/medtech has become a
money-losing proposition
SXSW Conference: Lisa Suennen 3-9-12
9. And Furthermore,
The Times, They are a’Changing
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Providers facing new risk management and cost-cutting realities
Complex new delivery system models emerging (ACOs)
Employers desperately trying to exit the healthcare business
Advent of HIX changing payer industry dynamics and consumer
branding requirements
Payers diversifying their businesses
through healthcare IT acquisition
If consumers are going to pay
they need:
Information transparency to make
Financial tracking systems
Anytime/anywhere access
Personalization
SXSW Conference: Lisa Suennen 3-9-12
10. Where Are the Big Opportunities?
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Outpatient
Providers
Payers
Inpatient
Providers
Consumer
Others
SXSW Conference: Lisa Suennen 3-9-12
11. HIT is HOT: Venture Investments Up, Up, Up
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2010-2011 Healthcare IT Deal Growth
(# Deals)
30%
26%
% Growth in Investment Activity
25%
20%
15%
10%
5%
-6% -3%
0%
-5%
-10% Biopharmaceuticals Medical Devices Health IT
2010-2011 Growth (# Deals)
2011 Biopharma Med Devices Health IT
Investment ($ billion) $3.9 $3.3 $0.6
2010-2011 $Growth (%) - 27% 22%
SXSW Conference: Lisa Suennen Source: Dow Jones VentureSource 3-9-12
12. HIT is HOT: The Proof is in the Payments
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There is ton of HIT development money out there from
non-traditional sources:
CMS
ONC and a myriad of Other Challenges, Grants and Incentives
Return of the Accelerators/Incubators
Robust exit environment for HIT companies
100 acquisitions 2010-2011 compared to 76 in 2009-2010
Acquisition checks getting larger
Suddenly everyone’s a healthcare company
38 of the 2011 Fortune 50 are in the healthcare business compared to
5 of the 2001 Fortune 50
Even Merck and Pfizer now have HIT-focused funds
SXSW Conference: Lisa Suennen 3-9-12
13. What to Watch Out For
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Doctors and consumers don’t like to pay for things
Lives are short and sales cycles are long, especially in the
payer and hospital worlds
If you can’t explain your economic value, you will lose
Nothing ever happens in the timeframe you think it’s
going to happen
“We always overestimate the change
that will occur in the next two years
and underestimate the change that
will occur in the next ten.”
-Bill Gates
SXSW Conference: Lisa Suennen 3-9-12
14. What to Watch Out For:
The Curse of the Underpants Gnomes
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SXSW Conference: Lisa Suennen 3-9-12
15. But If You Have a Good Thing, Money Abounds
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Incubators/ Angel Venture Corporate
Accelerators Investors Capitalists Investors
Rock Health Hopefully Psilos Group United Healthcare
Blueprint Not Chrysalis, Venrock Humana
HealthBox Your Cardinal, HLM Wellpoint
StartUp Health Parents Physic, Kleiner Aetna
More to come Aberdare, Lemhi Siemens
Camden, Excel Merck, Pfizer
Mohr Davidow Best Buy
Morgenthaler Walgreens
and many more
SXSW Conference: Lisa Suennen 3-9-12
16. Thanks and Have a Great Meeting
16
Lisa Suennen
Managing Member
Psilos Group
lisasuennen@psilos.com
Read my blog at
http://venturevalkyrie.com
SXSW Conference: Lisa Suennen 3-9-12
Editor's Notes
Or perhaps it’s the stupid economy In psychology there is a thing called the “operational diagnosis” The idea is that despite all of the problems you have had in your life like your parent not loving you enough, there is some particular issue that brought you in TODAY. In healthcare, the economy is the operational diagnosisThe only thing inflating at a comparable rate to healthcare is higher education“Excess healthcare costs is defined as the amount by which growth in healthcare costs exceeds growth in GDP
Content portals, such as WebMD, the original Medscape, Adam.com, DrKoop.comEcommerce portals: PlanetRx, Drugstore.com and a host of other online pharmacies and consumer-focused shopping channelsGroup purchasing websites, such as Medibuy
And the promise of software as a service and the cloud amplifies the possibilities
Bullet one points:Reimbursements heading downPay for performance and other “creative financing”Financial penalties for readmissions, medical errorsSignificant market drive to force pricing transparencyBeing asked to act manage care like insurersBullet one subpoints:Retail clinics, Concierge practices, Worksite medicine, TelemedicineBullet two points:Healthcare makes profitable companies unprofitablePercentage of employers offering health benefits at lowest point in 12 years (60%) and droppingEstimated that 30% or more will drop health insurance when PPACA is fully implementedHIX leads to need for consumer personalization, service responsiveness and branding
HIT M&A Valuations in last 18 months-Allscripts bought Eclipsys for $1.2 Billion-Aetna bought Medicity for $500MM-Harris bought Carefx for $155mm-Optum bought everything else: Axolotl, Picis, QualityMetricAnd of course there are many moreBig companies now in the Healthcare business include Apple, Best Buy, Dell, Salesforce.com, Oracle, and a myriad of othersYes, it is possible that there will be too much money chasing after HIT and that can lead to a lot of lemons, but also clear there is also ample opportunity to make lemonade, even if it is cloud-based lemonade, by investing in those enterprises that can truly move the needle on healthcare system quality and cost.
I cannot tell you how many people I talk with who don’t really have a business model.Here is a real quote I heard in the last few weeks from an entrepreneur who came to pitch me: “Right now we’re focused on finishing the product and getting pilots done and after that we’ll figure out how we will make money?” That’s when I started reading my email.