I have worked on healthcare software for the last decade. Healthcare technology is really not something that one can understand from the outside. It is also not an area where web startup knowledge is as applicable (eventual consistency is entirely unacceptable, any caching of data must be very precise to avoid showing stale data to users and is generally not done, all sales to hospitals and most physician groups are "enterprise" sales). There are many different standards for data transmission, but none of them are required and most people see them as more of a recommendation. Non-technical people are put in charge of technical projects.
That being said, it is not a technologically challenging industry at the moment. Most of the work that is being done is just automating existing paper-based systems. The regulations that everyone worries about are really not very onerous. Complying with HIPAA is mostly common sense and the FDA does not yet regulate most information systems unless they control medical devices or provide specific types of alerting (vendors are preparing for the day when they do).
Two of the biggest challenges that I see are the caliber of the technologists in the industry and the absolutely disgusting new interoperability standards that are being developed by people with questionable technical skills.
The company to watch at this point is Epic (I do not work for Epic). They are really crushing a lot of other companies and they are somewhat progressive.
If people are interested in some of the technology that is being used in the industry outside of the standard .Net and Java stuff take a look at InterSystems. They even have all of their product documentation online, which is a bit of a rarity for enterprise vendors.
Epic's software looks and (according to the doctors that have to use it) works like a bad 1990's database program written in Access. I work with a hospital that has it implemented. It's inflexible crap, where their idea of someone using it on a tablet is "get one with windows, or here's a RDP session you can get to through a VPN". One doctor I know said it took him 17 clicks and both reading help and contacting the help desk to enter simple information, which turned out to be in a totally nonintuitive way.
We need the SMTP of medical communications, not the Microsoft Exchange. Epic's system is very like the latter.
All medical software suffers from the problem of all software where the end user and the creator of software isn't the same person - it just doesn't work in a way that makes sense.
The problem, for medical software at least, is that once you've one of the very few people who have a medical degree, you're often in demand to the point that deciding to 1. write software at a competent level and 2. have the business moxie to turn it into a decent business, the talent pool is basically nil.
Interesting side note about InterSystems - I interviewed there a few times about 10 years ago, and the first step was a written exam in Mumps (the programming language). Turns out it's popular in the healthcare space, being used in both InterSystems Cache and VistA, the open-source medical records system used by the Veteran's Administration:
NwHIN Direct is specifically trying to become the SMTP of medical communications. Which is fine as far as it goes, but covers only a few limited use cases.
I agree, especially about EPIC, but I think some of the integrated providers (like Kaiser) are themselves better at innovation than most of the software/services companies in the space.
Kaiser and Mayo are definitely doing things better than most other providers. Unfortunately the government is encouraging other providers to cargo-cult them by providing ARRA funds for copying some small part of what they do.
Education and health care are both dominated by government as the single largest player in the marketplace. The U.S. government actively sets the number of doctors, the types of procedures that can be covered by insurance, and dominates market spending through its Medicare, Medicaid, and VA programs. And if you aren't on a government program, the tax code forces you into a employer-provided insurance ghetto.
Healthcare innovation will remain low, and costs will continue to grow at double digits, until America passes real healthcare reform. Allow insurance competition across state lines, give private individuals the same tax treatment as employers when buying healthcare, and allow individuals to form groups to purchase health care (e.g. alumni groups, church groups, etc). Those three steps would go a long way to opening up the industry to the web and to innovative, competitive forces.
I don't think more small risk pools are a good solution, due to adverse selection. The very sick or old often need more treatment than they can possibly afford (because what we develop isn't limited to the value of the typical patient's labor, which is a good thing!) so our choices are to let them die through triage, or to subsidize their treatment by preventing the well and young from gravitating into cheaper risk pools which find ways to exclude the sick or old. Tax-funded Medicare and Medicaid are effectively additional risk pools you're paying for even when they aren't covering you, and yet they aren't really acting as insurers of last resort (except for certain people who meet the criteria).
First, most Americans fall outside Medicare, Medicaid and the VA programs. The government currently does not regulate individual/employer coverage. I would not characterize the entire private insurance industry as an "employer-provided insurance ghetto" - what does that even mean?
The whole second paragraph makes it clear that you don't understand the complexities of the Healthcare industry. You provide very broad brush statements like "allow insurance competition across state lines", the complexities of that single issue alone are staggering. Are you aware that the strength of most in-state insurance carriers is their in-state network. An insurance company IS it's network. In addition each individual state has a Department of Insurance which also regulates all carriers in that state. DOI rules and regulations vary from state to state. Expanding your coverage to another state is a very complex undertaking.
Also, Individual groups do have the ability to purchase healthcare - see many professional organizations(AIGA, etc) as working examples of this today.
In either case, making those changes won't just magically open the industry to "the web and to innovative, competitive forces". There are already competitive forces at play. Any new player attempting to join the fray faces an uphill battle just in the regulatory aspects of the business alone.
What do the advantages of the web and new technologies bring to insurance? How do these changes the provider networks which are the backbone of major insurance coverage today? These are the types of questions which need to be posed, and the people in the best position to answer these questions and change the game are insurers themselves. There are many smart and talented people working in insurance. The recent proposed Healthcare changes have helped to begin the process of moving forward and thinking differently, but with an industry like this it will take time.
It is happening, insurance providers are looking at new technologies and ways to provide the coverage that people expect, for lower costs, in new and different ways.
It is a common tactic for people invested in a broken status quo to dismiss critics as "not understanding the complexities". Which insurance company or regulator do you work for? I've worked on health care policy professionally, I assure you I understand the issues.
Much of the distortion in the current system come from the fact that employers can deduct health care expenses, which means that you save around 15-30% versus buying healthcare as an individual with aftertax dollars. That single policy is what ties health care to your employers-- in my mind, a kind of serfdom that keeps people tied to jobs simply because of health care insurance.
So getting tax equality by eliminating the deduction, or extending it to individuals, would rock the market. Beyond that, it actually is as simple as allowing interstate competition, which will allow people to escape all of the insane state regulations, and lack of choice, that drive up costs.
And groups can't organize to purchase health care-- I'm talking about a world where my university alumni association or church has a plan, and I could choose that for life, and it has the same tax and regulatory treatment as my employer's health care offering. I want vastly more diverse delivery mechanisms, all competing for my business, and ideally with a long-term relationship that would naturally incentivize preventative care.
Didn't they bring up ending the employer deduction for insurance during the 2008 Presidential election? I'm all for it, but to make it politically viable you need to spin it in a way which doesn't look like raising taxes or reducing benefits, which is hard when eliminating a deduction. The only way I think it would work is to make personal insurance deductible, and somehow ensure that salaries take into account the implied value of current healthcare.
(Personally, I am so glad I have $100/mo $3500 deductible HSA coverage, personally; I'll eventually set up employer healthcare at my startup, but in the perfect world, I'd rather pay employees 1.5x as much to manage it themselves, and maybe another .5x to the government for other people's care; trying to find and manage benefits like that is a big pain.)
It's not forbidden. It's just rarely considered worth the space. I hate to say "lurk more", but you are new here, and you don't yet understand the complexities.
>"The government currently does not regulate individual/employer coverage."
Are you sure about that? Last I checked, the feds mandate an immense number of details about how private insurance is provided, and that is only growing with the new health care law.
>"I would not characterize the entire private insurance industry as an "employer-provided insurance ghetto" - what does that even mean?"
1 of every 2 dollars spent in health care in the US is spent by the government. These three programs are clearly the 800 pound gorillas in the room. Medicare's price controls directly drive shortages and oversupply, and its billing practices set the standard for the rest of the industry.
Most Americans aren't Medicare or Medicaid beneficiaries, but we're all affected by these programs. Medicare sets a price floor on all procedures covered by the program.
Also, Medicare will not compensate providers for bad outcomes, but Medicaid is state-administered and usually just pays claims blindly. Entitlement arbitrage is bankrupting many states, but that's a whole other issue.
IMO, we've created a multi-headed hydra, where the only winners are the mandarins who understand the arcane regulatory structure.
Medicare and Medicaid are such large payers that the decisions they make move the rest of the market. Second, at some point most Americans are eligible for one program or the other if for no other reason than the good fortune of old age.
Fortunately for students education had fewer licensing requirements than healthcare. This allowed for the home school loophole, and for a network of alternative education providers to slowly grow and flourish outside of government control. Healthcare faces much stricter regulations as to who can provide care and how they administer it, so I expect much less change and improvement.
clayton christensen advises that the solution to healthcare is personalized medicine, technologies like portable diabetes monitors. Imagine if you needed surgery, a robot comes to your house and performs it, much cheaper than doctors and hospitals. such system are currently being developed with military funding - battlefield telerobotic surgery
creating a small area of sterility isn't a impossible task, if you can create large one in an operating room, creating a smaller one can't be all that hard (with robotic equipment)
Creating even a small sterile environment is actually quite hard. What is the robot going to do, autoclave or boil everything in my bedroom? The main reason that most patients actually survive surgery now is that a huge amount of effort goes into keeping operating rooms sterile.
Personally I believe the problems with healthcare and education are largely the domain of government to fix.
I actually believe in the (now-dead) Republican policy that, in the US at least, education is a state not Federal issue. By making it a Federal issue, we're just creating one giant bureaucracy and we all know how good those are at solving problems.
We should probably have a model like some European countries where the money follows the student and what school a student can go to isn't restricted by some arbitrary boundary on a map.
Likewise the tenure system has to go. What was imagined as a means of allowing academic freedom has become a recipe for entrenched mediocrity and stagnation.
Also, it's a problem that schools are largely funded by property taxes. This alone ensures a better education for the rich. I'm not sure what the alternative is but we need one.
As for healthcare, IMHO we're largely in this position because of the "blank check" model for health insurance and because of pharmaceutical patents.
Each country has different laws about what is patentable and what isn't. In the US, for example, nuclear technology is expressly forbidden from being patented as it is seen as a matter of national security. In India, health care is seen likewise so pharma patents aren't allowed, providing for cheap generic medicine.
I foresee a day when the US will swing in India's direction. Not that I necessarily think this is all good. The fact is, drugs are expensive to develop but it's also true that the pharmaceutical industry spends more on marketing than anything else (basically getting doctors and hospitals to use their drugs).
Also, litigation is a problem for health care. We all pay for outrageous punitive damage awards.
Lastly, it's a problem that insurance in the US is essentially tied to employment and large employers get that substantially cheaper than smaller employers (let alone individuals).
And of course the complexity and administrative overhead are huge problems, which is probably the one area that could be disrupted without government intervention. But it doesn't help that part of the reason things are so complex is essentially to deny coverage.
Large corporations have created a mythology of an epidemic of frivolous lawsuits that Americans have completely internalized: those women weren't sexually harassed they just wanted to be bought off, or: she probably spilled coffee on herself on purpose.
Also, you mention government bureaucracy and efficiency: I think it's worth pointing out that you can have a large amount of inefficient private sector bureaucracy, where the government could step in and create a more efficient system. The highway system is one obvious example. I think healthcare is also in this category.
Personally I believe the problems with healthcare and education are largely the domain of government to fix.
Is there precedent for this? It's not that I disagree that we have policy-level, institutional problems that won't be fixed by the next hot startup.. But I do think that many of those problems are pinned to overwhelming costs that innovation could demonstrate ways of affecting positively. The way we deliver healthcare in the US is far too costly, inefficient, and frankly dangerous.
It can be a pain in the ass to innovate within the current context of healthcare IT, but there are more opportunities now than ever before to completely ignore the way things have been done until now and make a dent.
[Disclosure: Been building in healthcare for a little over a decade, and currently bashing away at an early stage startup that's devoted to completely rethinking the way primary care is delivered]
The problem with venturing into healthcare is dealing with highly regulated industry and wrong incentives for most of the players.
"Large networks of engaged users" do exist, but the ones who control real money (doctors, hospitals, insurers and pharmas / device makers) are highly suspicious of outsiders. Every one of them has the incentive to not share their data with the competition, even though they will all publicly pay lip service to doing this in the name of "improving patient care".
If you look at patients / consumers, you can roughly divide them into the healthy and the sick. The healthy ones generally speaking do not want to invest time and effort into their health, unless it overlaps with lifestyle / food / entertainment - well covered by ventures we do not normally put into "healthcare" category. If you look at the sick ones, they tend to skew to the older demographic with lower online literacy. Even when you pick out the ones active online who care enough about their conditions what you get at best is small niche communities like PatientsLikeMe.com that are at best able to function as support networks and clinical trial recruiting sites.
Did I forget to mention that pharmas and device makers are mortally scared of participating in social media because of FDA? They are in business where even acknowledging any adverse event could make them liable for billions. This is a great example of why for most of the healthcare industry social media is all downside and very little upside.
The baffling thing to me about healthcare in the US is that there are a number of models[1] from other nations that have desirable characteristics, and yet everyone is the US seems to think it's this huge problem that is brand new and that no one has ever looked at before. It should be well known by now that most developed countries spend less money on healthcare and get higher coverage rates and better outcomes. Surely the sane thing to do would be to research those models and figure out which one seems the best fit to us and then adapt it. I'm not opposed to innovation, but our approach to solving the healthcare problem seems seriously fettered by a bad case of not-invented-here syndrome.
1: What I mean by this idea of different models is that everyone seems to assume that all universal healthcare schemes are created equal, but this is simply untrue. Some examples:
- Potential single-payer systems proposed in the US are most often compared to the Canadian system, but Canada actually has one of the worse systems (according to my previous metrics) among OECD countries.
- People also assume that a single-payer system is the only way to achieve efficiency, but Germany has a very effective healthcare system which is not single-payer.
Of course, even setting aside that we seem bad at considering the details of a solution to this problem, the real problem, in my opinion is that we can't even agree on what role government should play. If we can't even agree that the government should solve the healthcare problem, how can we even begin to agree on a solution?
Speaking from a Web/Healthcare IT startup experience: The BIGGEST challenge is that your buyer, user and payer are 3 different entities. Every budding healthcare entrepreneur wants to "disrupt" this somehow, but eventually almost everyone gives up and they either die or become yet-another-enterprisey software company that everyone loves to hate.
You can make a decent, linearly growing business if you can survive 2-3 years long sales cycles. So it makes sense that VC's don't want to venture into this space.
When we look at healthcare, what's wrong with it, and what needs to happen to fix it, we can't see as clearly how the web, technology, and large networks of engaged users can impact healthcare in a positive way.
Because we are not allowed to. I can't even write an iOS app that shows images if they happen to be X-Rays.[1] Its a group of giant monopolies and special interests who as an industry spend more on lobbying than any other industry ($250m in 2010)[2]
And they need to. The industry is ripe for disruption. It amazes me that we allow utterly fallible human beings to attempt to diagnose in a 5 minute appointment conditions that they may never have heard of. And we talk of older doctors having more experience, but only more experience in the stuff they see everyday. Meanwhile computers can diagnose conditions more accurately than humans [3] but we'll see how far the AMA lets that go. Probably require an extra specially trained doctor to operate it. They'll probably require a man to run in front of it with a flag lest this dangerous machine hurt a patient.
And yet we haven't had another thalidomide scandal since the FDA introduced mandatory clinical trials for new treatments.
http://en.wikipedia.org/wiki/Thalidomide
I'm not saying you're entirely wrong, just that its not a simple as you make out.
That being said, it is not a technologically challenging industry at the moment. Most of the work that is being done is just automating existing paper-based systems. The regulations that everyone worries about are really not very onerous. Complying with HIPAA is mostly common sense and the FDA does not yet regulate most information systems unless they control medical devices or provide specific types of alerting (vendors are preparing for the day when they do).
Two of the biggest challenges that I see are the caliber of the technologists in the industry and the absolutely disgusting new interoperability standards that are being developed by people with questionable technical skills.
The company to watch at this point is Epic (I do not work for Epic). They are really crushing a lot of other companies and they are somewhat progressive.
http://www.epic.com/
If people are interested in some of the technology that is being used in the industry outside of the standard .Net and Java stuff take a look at InterSystems. They even have all of their product documentation online, which is a bit of a rarity for enterprise vendors.
http://www.intersystems.com/