Investors Interested in Health IT—With Caveats

11/21/12Follow @cathyarnst

Established companies such as Dell Computer (NASDAQ: DELL) and Becton Dickinson (NYSE: BDX) say they are eager to invest in health IT startups—they just need to figure out how the U.S. healthcare system is going to evolve over the next five years; what applications are most likely to get reimbursed; what technologies make the most sense for doctors, for patients, and for insurers; and how they can mesh a startup’s culture with highly regulated, slow-to-change industries.

That was the confusing message from a conference for entrepreneurs and investors in New York on Tuesday, sponsored by the Life Sciences Angel Network, titled Healthcare Information Technology: Change, Outlook & Opportunity. One of the speakers, Steve Hochberg, has started or invested in some 12 early-stage medical technology companies, and last year was named chairman of Continuum Health Partners, New York City’s largest hospital network. Yet he told the meeting that when it comes to health IT, “the healthcare delivery system is so complicated that I’ve chosen to invest elsewhere.”

That’s not to say that there aren’t opportunities, if innovators can come up with a product that makes healthcare better, cheaper, more accessible, or better yet, all three. The attendees were not all that interested in electronic medical records systems, but in the opportunities created by the escalating rollout of computers and networks into hospitals and clinics. Speakers generally saw two important opportunities for new health IT solutions—consumer-focused applications that would help people better manage their health or medical spending, and products that help doctors do their jobs more efficiently.

Hochberg noted that Continuum, which includes Manhattan’s Beth Israel and Roosevelt Hospitals, is doing everything it can to get patients out the door faster. So his advice to health IT innovators: “I would focus on the home. That’s the promised land for entrepreneurs.”

Home monitoring devices, or devices and applications that prompt consumers to engage in healthier behaviors, appeal not only to consumers but to insurers and employers seeking to lower their costs, speakers said. That makes it easier to get reimbursed, a critical issue for any health IT product.

Applications and IT products targeted at hospitals are a tougher sell, but could find success if they help doctors better coordinate care and simplify their offices, said Ira Blaufarb, a cardiologist at Mount Sinai Hospital in New York. “We need IT solutions that help my office move patients through faster, and we need ways for patients to get the information they need because we often don’t have time to give it to them.”

The meeting included speakers from Dell Computer, based in Austin, TX, and Becton Dickinson, from Franklin Lakes, NJ. Both said their companies are looking to step up investments and partnerships with health IT entrepreneurs, but are concerned that if they get involved with a company at a very early stage it will turn out to a “one hit wonder.” In healthcare, they said, health IT startups must be able to form lasting relationships with a number of customers, especially if they are targeting hospitals and doctors.

David Feygin, vice president of corporate strategy for Becton Dickinson, said his firm is looking for products that address the inefficiencies in the healthcare system, such as non-adherence to medication. However, any product must demonstrate that it would have a positive economic impact on healthcare.

Andrew Hill, chief medical officer of Dell’s Healthcare and Life Sciences division, said startups must also deal with an intensely regulated environment, in which every state has its own set of rules about implementation of health IT. “But when it comes to regulations, my advice to entrepreneurs is to suck it up,” said Hill. “This is the world you live in.”

On the other hand, all the speakers agreed that the U.S. health system is going through a period of tremendous upheaval and deconstruction. Out of such chaos can come great opportunity.

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  • http://twitter.com/madamian Milena Adamian

    Hi, thanks for the report. We had no idea there was an editor from XConomy at the conference covering it. I am not sure if the message from the industry was confusing – probably a “sobering one” and provided some insight into future.
    Please correct, Dr. Andrew Litt not Dr. Hill from Dell Corp.