The RxView Blog

Real world data, analytics, and insights for healthcare decision makers

Advera Health Analytics, Inc.

Playing the Long Game

Posted by Brian Overstreet on May 13, 2016


“Hi, my name is Brian and I’m a healthcare IT / digital health entrepreneur”.  From 2013 to mid-2015, I used that line with pride and maybe even a little boastfulness when meeting people for the first time in Silicon Valley, Washington DC, and everywhere in between.  Lately it hasn’t carried as much cache.

In 2014 and the early part of 2015, an amazing number of new healthcare IT startups sprung up and raised venture capital financing.   During that period, almost $9 billion of venture funding flowed into the space to anyone with an idea on how to improve outcomes, increase medication adherence and engagement, build a new wearable, or <insert the buzzword/jargon of your choice here>.  But toward the end of 2015 the party stopped.

What happened?  Reality finally caught up to the hype.

If you talked to anyone in Silicon Valley 18-months ago, you would have heard the ubiquitous mantra about healthcare being a $1 trillion market opportunity and absolutely ripe for disruption by agile, forward facing tech companies.  And certainly that was as true then as it is now.  The problem for tech companies is that while healthcare is ripe for disruption, that doesn’t mean that it’s actually going to get disrupted anytime soon.  It’s a lot like the interviews we see on the local news here in California with people who monitor earthquake faults, “the San Andreas Fault is due for a major seismic event very soon.” Okay, when? “It could be tomorrow and it could be in 250 years”.

While market surveys universally show that providers, systems, and insurers desperately want technological progress, there are real and significant impediments to that progress.  Chief among them is the fact that any changes that are made in the care continuum affect patients.  No one wants to be on the cutting edge of something that’s going to negatively impact patients.  That’s why it takes so long and so much money to get new drugs to market.  Similarly, buyers in the healthcare markets want extended trial periods, published and validated scientific results, and big name early-adopters already using and approving of new technologies.  None of which is conducive to the type of quick uptake tech companies and their venture investors like to see.  It’s a lot harder and slower to get a multi-hospital IDN to adopt a new platform to improve patient outcomes than it is to get millions of teenagers to download a new app that allows you to create and text your own emojis (and yes that’s a real thing, and yes it just sold for $100M – so the joke’s on all of us).

The other very real issue slowing uptake is the battle with ingrained technology platforms.  Through the late 1990’s and early 2000’s, most large healthcare organizations spent billions of dollars on specialized hardware and software platforms to run their major systems.  While those were probably outdated the day they went live, ten years on those systems are kryptonite for newly developed technology.  In late 2014, we were rolling out the first iteration of our enterprise platform and many times trial users couldn’t get our system to work properly.  After a few frustrating months we finally found the culprit – a lot of these users were running desktop computers powered by WindowsXP and Internet Explorer 6.   Once we identified the problem, we pushed people to upgrade their computers and that solved most problems, but  a number of users didn’t have the ability to upgrade their system or download another browser.  They were locked into an outdated system, even to the detriment of being able to discuss and deploy better technology solutions.  In the two years since, we’ve had to spend a bunch of time crafting versions of our product that function better on older systems, but that’s complete sacrilege to most VC-backed technology firms.

All of which explains why starting sometime about a year ago, healthcare IT and digital health companies started missing their projections – badly.

Nobody recognized it at first, in part because most of these companies are small and private, but as time passed more and more instances became public.  In February, one of the hottest healthcare IT startups announced major layoffs.  And they weren’t the only ones - the WSJ wrote a piece titled For Silicon Valley, the Hangover Begins focused on the major cutbacks at startups and the poor public performance of the few healthcare IT companies that have gone public recently (Care.com, Castlight, Fitbit, and more).  All of which seem to be a reflection of the realization by impatient venture capitalists that disrupting healthcare will not be fast or linear.  And it certainly doesn’t help that in the very few cases where someone found a short-cut, it turns out to be bullshit (see, Theranos).

Even here at Advera Health, we haven’t been immune to this issue.  Back in October, we did a heavy review of our progress and projections and reached the same conclusion that a lot of other players in the space had (or shortly would) reach.  Slowing down and focusing on the “boring” aspects of a business like profit margin and burn rate isn’t as sexy as rapid expansion of people and product, but was necessary for the longevity of the company.  Six months on from that painful point, the company is back to hitting projections and advancing important project milestones.  We’re even dipping our toe back into the hiring market.  Those few of us who can continually adjust to the realities of the slow uptake in the healthcare market will ultimately succeed.  But for those hundreds of other me-too applications that were funded a little too easily a couple of years ago, well if they’re not already gone they likely will be soon.

All of which makes us that much more excited for the launch of coverage of clinical evidence for multiple sclerosis in Evidex, and a group purchasing organization contract that will allow hospitals and health systems easy access to our products.  Stay tuned to this space for the official announcements of both.  And if you just can’t wait until then, feel free to reach out.

 

 Brian M. Overstreet, President, Advera Health Analytics, Inc.

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