Xconomist of the Week: Lisa Suennen on Healthcare Reform Post-Election

11/8/12Follow @wroush

It’s been a stress-inducing year for innovators in the healthcare arena. The Patient Protection and Affordable Care Act, which calls for the creation of state exchanges to extend health insurance to millions of people who currently lack coverage, passed Congress by a slim margin in 2010 and has been under assault by Republicans ever since. This week’s presidential election was widely seen as a referendum on whether the reforms in the law should move forward.

As long as that question was up in the air, it was hard for businesses to guess what the economics of healthcare might look like a year or two from now—and that kind of uncertainty makes it all the more difficult for startups to sell new products and services.

Xconomist Lisa Suennen is co-founder and managing member at the healthcare-focused venture capital firm Psilos Group, which runs three funds with over $580 million invested in healthcare services and healthcare technology companies. She’s on the boards of startups AngioScore, PatientSafe Solutions, OmniGuide, and Veralight, and also serves on an advisory board at the Department of Health and Human Services that oversees the department’s “Investing in Innovation” prize program. In other words, she evaluates the opportunities in healthcare innovation for a living. So we were curious to get her take on President Obama’s victory this week. Does it really clear the way for enterprises, investors, and startups to keep experimenting with ways to improve health and reduce costs?

When I spoke with Suennen Wednesday morning, she said she didn’t think either candidate had done a great job explaining what he’d do to get healthcare costs under control. And even if Mitt Romney had won, she added, it wouldn’t have staved off the coming transformations in the healthcare industry, which is under huge economic pressure to increase efficiency.

Still, Suennen thinks President Obama’s reelection should help to calm skittish healthcare investors—and at the very least it means we can skip over the period of anarchy that would have greeted an incoming Romney Administration. She sees big opportunities for companies that can offer consumers new ways to stay healthy, or hospitals and insurance companies new ways to cope with changes like the decline of fee-for-service billing.

“I am in healthcare venture capital because I feel like in addition to the ability to make money, you can actually do some good,” Suennen says—and she’s excited about Psilos companies such as SeeChange Health that are coming up with radical new ways to improve the health of patient populations.

Here’s an edited version of our talk.

Xconomy: Healthcare played a big role in the presidential election, but I’m not sure the real issues about costs and access to care ever got discussed. As you watched the votes come in Tuesday night, what was uppermost in your mind?

Lisa Suennen: It was the concern that the two parties seemed to be fighting about different methods of not fixing the problem. We have to have a framework to address value and cost in healthcare. While the health reform law is not one that reduces cost, it can be worked on and fixed and tinkered with and improved. But it wasn’t clear what [the Republican] alternative was going to be, except “not that.”

In general, I’m always amazed by how well people can separate talking about the economy from talking about healthcare. If you dig into the numbers, healthcare is the biggest, fastest-growing expense in the economy. If you don’t address that, healthcare costs will become such a large portion of our overall national spending that it’s unsustainable. It really has to be addressed as part of economic recovery. It is not separate from the economy. They are intrinsically intertwined.

But no matter what happened with the election, a lot of things that have been set in motion in the healthcare world would have continued on anyway. We are experiencing a seismic shift in the way the system operates, more as the result of economic pressures than as the result of any particular law.

X: In attacking Obamacare, the Romney campaign seemed to be trying to tap into some primal fear on the part of conservatives. What do you think is the main source of the opposition to the Affordable Care Act?

LS: There is a legitimate concern that you are opening up insurance that is paid for by the government, and maybe by employers to a certain extent, to 30 million new people, which has a significant cost. And it isn’t clear how these costs are going to be covered, at a time when we are already under great economic pressure in this country. I think that is the main issue, and it’s a legitimate concern. Certainly, there was also a lot of rhetoric around giving benefits to people who weren’t earning them, and whether that’s the job of government.

X: Imagine that Governor Romney had won. Do you think the healthcare reforms kicked off by the ACA would have completely unraveled?

LS: No. When the ACA was first being debated a couple of years ago, there was this standstill period of chaos, anarchy, and entropy. There was a lot of standing on the sidelines, which affected progress and investment in this space. That is something that could have happened again. Everybody would have stopped and said, “Wait a minute, we have all these exchanges we’re building, all these accountable care organizations, all these pay-for-performance models, and we need to stop.” It would have slowed down progress, even though, as I said, some of these things are going to happen no matter what.

X: But Romney didn’t win. So what happens now—full steam ahead?

LS: There is a whole timeline for what is supposed to get done around value-based benefits, accountable care, pay-for-performance, and other things that are talked about in the ACA. I think now you will start to see organizations getting back to the timeline and marching on. The marketplace will probably move even faster because there is certainty that … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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  • http://twitter.com/ADeGheest Anne DeGheest

    As always Lisa’s comments are spot on. At HealthTech capital, we have seen a lot of innovation and entrepreneurial activities but the majority are focused on the direct to consumer market. As Lisa discussed, the big opportunities will be in providing better productivity and patient engagement tools for the existing players in healthcare like providers, insurance and self-unsured employers…which requires a deep understanding of existing workflows, incentives (mis) alignment and regulatory oversights at the state and federal levels…this require collaborative team work and smart money with expertise in healthcare, technology and consumer engagement!