Obamacare: Spurring A New Generation Of Healthcare Startups

This post by Beth Seidenberg first appeared in TechCrunch, 2/22/14

Spurred by the Affordable Care Act, the American healthcare system in 2014 has entered a period of titanic change. The process will be messy and disruptive – it already is. While challenging for consumers of healthcare services, the shifting landscape provides tremendous opportunity for entrepreneurs, setting up the potential for an accelerated shift in healthcare delivery in the U.S.

This inflection point for healthcare in part reflects the way the Millennial generation – those born 1980-2000 – manages information. It is a tech-savvy group, connected and collaborative. They want instant gratification and recognition. And they want – and expect – to have a different kind of interaction with physicians and the healthcare system than their older brethren have historically experienced.

Millennials have at their disposal a new wave of technological tools that track, analyze and respond to their physical condition in real time. Can physicians and the healthcare system deliver this generation what they want from the healthcare system? I believe the answer clearly is “no.” Instead, they will build it themselves.

My theory is that this population segment will drive huge changes in the practice of medicine. I’d expect relatively few to sign up for insurance coverage under the ACA, for instance. But I do think this generation’s entrepreneurs will reimagine and rebuild the country’s sclerotic healthcare system.

Entrepreneurs in this area must start by navigating around some core issues.

Medicine is hyper-local, with providers protected from outsiders by state law. And it is hyper-personal, with strong regulations governing information privacy.

On the other hand, Millennials tend to believe that data access should be ubiquitous and free. They have fewer privacy concerns than the Baby Boomers, living their lives publicly on Facebook and Twitter. Millennials want to hold e-visits with their doctors; they want to text to medical providers for quick advice; they want portable insurance, transferable between jobs and across state lines; and they want clear visibility about what they are personally paying for and why. Today, in short, there is a massive divide between what Millennials expect and what the current healthcare system can deliver.

The opportunity here is gargantuan. The U.S. health-care sector generates annual revenue of close to $2.1 trillion a year, according the most recent U.S. Census Bureau report. It’s an industry that employs nearly 17 million Americans (Bureau of Labor Statistics, 2012). And neither of those figures includes the health insurance industry, which has more than 450,000 employees (Bureau of Labor Statistic, Jan 2014), and annual revenue of more than $850 billion (Annual Report on the Insurance Industry, 2013). In short, this is an industry practically begging for revolutionary change. And the ACA has lit the fuse.

Let’s take a look at five big entrepreneurial ideas on changing the healthcare landscape. Some of these areas – touching on insurance and patient care – offer the potential to build big businesses. While they may be lacking in some of the pizzazz of social networking or cloud-based software or other buzzy areas, no industry offers a richer environment for disruption.

• Information wants to be free – especially when the government has it

Under the leadership of Todd Park, chief technology officer of the U.S. government, the Centers for Medicaid and Medicare Services (CMS) has released vast amounts of de-identified Medicare performance data. Dabo Health, a San Francisco-based startup, is taking a Big Data approach to mining that information, saving lives in the process. In a recent talk, Park drew a connection between the release of aggregate health information and the approach the National Oceanic and Atmospheric Administration (NOAA) took a decade ago in liberating weather and GPS data. That move sparked an avalanche of innovation from companies like Garmin, Waze, Google Maps and many others.

• Rethinking the insurance business

While most of the discussion around Obamacare has focused on the role of the large legacy insurers, there’s a need for new players. For instance, there’s Oscar Health, a company that has launched a next-generation health plan that intends to leverage the public exchange market in New York City.

Unencumbered by traditional health plan thinking and structures, Oscar launched a plan that leverages recent advances in big data analytics, alternative site options including telemedicine, and the best in mobile and Web user experiences. From the Oscar website, for instance, you can click on a link and receive a call back from a board-certified doctor within an hour, 24 hours a day. Everything on the site reflects a kinder, friendlier and more engaging consumer experience. If they can provide competitive pricing, Oscar has a chance to take business from the incumbents.

• Building new primary care physician groups

Just as Obamacare opens the door to new insurers, so does the law create incentive for the creation of new ways to deliver medical care. A case in point: Village Family Practice, an independent primary care physician group based in Houston. The group’s goal is to provide the best possible care at the lowest total cost. The idea is to change medical practice in the U.S. so that consumers will feel good about their experiences – and physicians will be empowered to deliver quality, cost-efficient services.

The ACA, for instance, has provisions covering annual wellness visits and obesity counseling. Diabetes education has been around for years, but few have figured out now to cost effectively provide that service. Village Family Practice has figured it out, and is helping physicians deliver better care to their patients.

• Make it easier to find the right coverage

Several new companies are focused on helping consumers find the right insurer – and the right physician.

Covered*, based in San Francisco, is the first data-driven consumer recommendation engine for health coverage. Likewise, Fuse Insurance, of Cambridge, Massachusetts, has built sophisticated calculators to help consumers find health plans that meet their specific needs.

• Help employers focus on prevention and wellness

The ACA allows large employers to offer workers rewards of up to 50% of the cost of coverage for participating in a wellness program and meeting certain health standards. That’s good news for Redbrick Health*, a health engagement and behavior change company. RedBrick combines financial accountability, clinical insight, behavior design, social and game mechanics and powerful data analytics to create a personalized and persuasive experience delivered through Web, mobile and live interactions. Redbrick’s open consumer engagement hub integrates apps, devices and services, and creates a cornerstone for more effective wellness and population health management initiatives delivered through employers as well as employee benefit exchanges.

This is the beginning of the revolution. Tech savvy entrepreneurs are moving quickly to fix our troubled system, empower people with elegant and engaging tools and disrupt healthcare as we know it today.

Beth Seidenberg, M.D., is a general partner with Kleiner Perkins Caufield & Byers, focused on life science and digital health investing. Before joining the firm in 2005, she worked at a number of pharmaceutical businesses, mostly recently as chief medical officer at Amgen.

*Covered and Redbrick are KPCB portfolio companies.