RSS Feed Link

Does B2B come after ACA?

on June 19, 2014

As part of the Kauffman-sponsored Energizing Health Collaboration Series, we've turned over eMed to Guest Editor Matt Keener, the chief architect for the Pittsburgh leg of the collaboration conference and a translational clinical neuroscientist. Here's Matt's latest contribution in his role as eMed Guest Editor.

Here's a portion of an amazing article from Josh Rosenthal, an adviser for our Energizing Health: Pittsburgh event. (See here for the full monty.) However I wanted offer you a glimpse while calling attention to this specific portion. Here Josh does a great job summarizing some of the ways the Affordable Care Act (ACA) will be the gravity around which orbits are forming, and around which any innovative solution will need to be engineered.

Specifically the changes will require a better understanding of designing business-to-business (B2B) economic models that ultimately result in a tighter connection between patients and providers to deliver value. Because it's novel territory and healthcare B2B isn't exactly sexy, even savvy VCs have limited clarity into these emerging models and limited precedents to follow.

In our Energizing Health series, we'll examine these models as we bring together selected entrepreneurs and key stakeholders within healthcare, discussing collaboration and facilitating focal development opportunities across a network of key cities. Our next city is Pittsburgh, where on July 14 we'll examine what comes beyond patient engagement and examine these business models and how we design and engineer systems that deliver health in this new space.

The Business Life Cycle of a Movement

Youth is an apt metaphor for open health data, but not the best one. Consider open health data as a startup. It's relatively easy to sketch out an idea on a napkin. A little harder to build a prototype or even throw together some seed funding and do a beta.

This year's Health Datapalooza saw open health data as an emerging midsize company, working on V2 of its production platform with clients and employees, filing taxes, doing HR and taking out business insurance.

In other words, we're making the transition from founder to operator, from creation to scale.

And that's the toughest turn in some ways.

It's a little tricky, but worth parsing. You've been seeing two markets develop side-by-side and now grow apart, and often media can't tell the difference between them, or even recognize a distinction.

Direct-to-Consumer is easy to wrap your head around. It's about consumers, patients, even doctors and hospitals and things like apps, brands and devices. These folks were at Health Datapalooza in force. But this hasn't been healthcare as much as 'wellness,' and that's a different market with a different story to date. When the Silicon Valley folks have made bets in healthcare, the results have not been stellar.

Releasing weather and geo-location created not just cool apps but real value, because those are classic markets, whereas healthcare has, up until now, functioned differently.

In healthcare supply drives demand, a fact that the Dartmouth Atlas shows quiet clearly (full disclosure: we're big fans of these folks).

More importantly, before the Affordable Care Act, and in the parts of the healthcare landscape that's not yet bearing ACA banners, quantity drove payment rather than quality creating value. Which means bad things happened and good things died on the vine.

Open health data is really cool, but it would have died young, like so many other good ideas in healthcare,

without the ACA creating the market context where it can be made valuable.

The reason open health data has made it so far is because the same folks releasing the data have also created incentives to develop a real market around using it to improve patient experience and clinical outcomes... but this means Business-to-Business economic models, and those are harder to understand, much less for which get sounds bites.

The B2B startups aren't as sexy but it's in vogue for a reason, and with healthcare, and particularly open health data, it's more important... at least for the near future.

Getting down to Business...

Essentially we're using market forces, incentivizing private enterprise to create public and social good.

While public/private cooperation sounds great,

in healthcare it has, up until now, been an awkward dance.

Part of that is because of an educational failure, with MPH-ers and MBA-ers rarely dating.

Part of it is because healthcare has lagged a bit developmentally behind other verticals, or more actively worded, healthcare has often successfully fought off the disintermediation found in other domains.

Last year, Kickstarter gave away more money to the arts than the National Endowment for the Arts with the youthful efficiency of the consumer market. Healthcare is always concerned that something like that will happen with a DTC play getting through the gates of the quantified self movement and planting a flag on the real delivery system. (Other verticals such as media stay up late at night in a cold sweat worried about how to recapture the cash cow, now that it's bolt the revenue barn.)

There is some legitimate tension, as you'd expect to find in any emerging market.

Like any evolving market, the bar to play is getting higher and startups wanting to innovate around products, services and even companies need an expertise beyond pirate metrics - specifically a wide ranging expertise across a number of fields. ACA essentially transformed the business from underwriting large group commercial risk to government-sponsored direct to consumer life-time value funnels.

If you're a startup looking to crack it, you'll need something beyond a cool viz with a nifty API - you'll need to know product, pricing, delivery, actuary and finance and sales and marketing and how they interrelate across payers, provider and long term care, much less consumer and government. That's a high bar for a pure play tech or data startup.

Category:  Ideation  Tags:  guest, B2B, Affordable Care Act

  • 1
comments powered by Disqus