A Perspective for Health Tech: What Physicians, Hospitals and Senior Living Providers Need
There are countless technology products and solutions available, but the marketplace is becoming congested and difficult for many health care providers to make sense of. Some are also still recovering personally and financially from the stresses of the pandemic. Others may be taking a step back to reassess long-term digital/data needs—moving from one-off solutions towards more integrated, long-term strategies. While venture capital still has plenty of dry powder to invest, health tech deals are significantly down since 2020.
What is a health tech company to do?
I think a good place to start is understanding the current health care environment and what health care providers need from your product or solution. Here are three things to consider.
First, understand the health care environment and market. The pandemic hit health care hard. Economic issues like high inflation, supply chain disruption and labor continue to impact finances. There are also ongoing trends like alternative payment models, technology, aging in place, alternative settings of care, health equity, population health, chronic care management, social determinants, provider burnout and so much more that may warrant consideration. We’ve been able to work with start-ups to help them understand how and where their solutions fit into the health care ecosystem and emerging trends.
It’s also important to recognize health care’s operational mindset is different than the technology or start-up mindset. Starts-ups tend to move quickly, grow quickly and correct issues as they go. That makes sense when speed to market is vital, but the approach may not always algin well with health care. As the saying goes, asking for forgiveness rather than permission doesn’t necessarily work well here, especially when there could be legal and financial impacts or even patient harm.
Bottom line: health care revolves around people and people’s lives. This may make the decision-making cycle longer and create a purchasing lens based on far more than dollars and cents.
Second, know your customer’s needs and wants. Here’s my list of four general themes health tech can consider when looking at funding, markets or pitching to health care providers:
- Make it fix a problem. Most providers are not looking for a solution to problems they don’t have. They are looking for it to addresses a pain point or an unmet need. Further, ask yourself if your solution is superior to current solutions. One investor we work with put it succinctly: The inertia of “good enough” is an enormous force to overcome – if is not 10X better, faster of cheaper, it may cost too much to sell.
- Make it financially viable. Health care reimbursements are complicated. Understanding how providers receive reimbursement for services is foundational. If the solution or product has no reimbursement that can be attached to it, then demonstrate how it can reduce workload, increase efficiency or help improve quality care. Especially now, real-world ROI is a big factor. Consider using a “Follow the Money, Follow the Risk” approach. Starting with your solution’s workflow, identify the key stakeholders (e.g., patients, payers, providers, pharma, investors, etc.), then trace the money flow and equally important, identify who holds the risk at each step. Your value proposition may reveal itself in surprising ways.
- Make it frictionless. Ideally, the technology should integrate with other technologies, such as an EHR, and should not create more administrative burden. Health care providers already have tons of protocols, workflows and tasks to do each day. Health tech should be usable, intuitive, and replicable. If not, providers likely won’t have the bandwidth for it right now. Remember, enterprise solutions will require you to work with your client’s IT departments. Be prepared.
- Make it compliant. Providers are heavily regulated. A health tech company should have a general understanding of the legal and regulatory implications with their products/solutions. One Founder/CEO we coached once asked, “Why is this so complicated?” Our reply: Yes.
Third, building off #4 above, be generally aware of how your product or solution fits into health care’s complex regulatory and legal environment. Health care is considered one of, if not the most regulated industries. For example, if your product or solution stores or transfers patient data, be aware of patient privacy requirements, like HIPAA. If your product is a medical device, understand emerging cybersecurity requirements. If you’re suggesting certain marketing or sales tactics, consider health care’s Stark and Anti-Kickback Statute (AKS) requirements. Not recognizing these requirements or even tripping these lines as “part of the cost of doing business” is not a good approach.
In fact, we have seen an uptick in Federal Bureau of Investigations, Department of Justice and other investigations into all things health care—including health tech. If we want a few recent examples, consider Cerebral, a start-up telepsych company that the Department of Justice (DOJ) investigated for alleged non-compliance with controlled substance regulations. There’s also the recent example of Outcome Health, which agreed to pay $70 Million to resolve a fraud investigation, and whose original founders and former executives were charged with fraud by the FBI and convicted. And then there’s athenahealth’s $18+ million agreement to resolve allegations it violated the AKS.
Seeking consulting and/or legal advice can help keep you compliant but also show prospective buyers that you’ve done your homework.
How we can help
Health tech companies can design and market their products or solutions better when they are attuned to the uniqueness of the health care industry. Conversely, for health care providers, having a digital strategy that integrates into enterprise goals and risk management practices will impact your technology considerations and purchases. CLA can help with all of it, including start-up, manufacturing, operations, tax, and financial needs to digital assessments and strategic positioning. Reach out today.
A note of thanks to CLA’s Chesley Chen for his insights with this blog.
Jennifer Boese is the Director of Health Care Policy at CLA. She is a highly successful public policy, legislative, advocacy and political affairs leader, including working in both the state and federal government as well as the private sector. She brings over 20 years of government relations and public policy knowledge with her to CLA. Well over half of her career has been spent dedicated to health care policy and the health care industry, affording her a deep understanding of the health care market and environment, health care organizations and health care stakeholders. Her role at CLA is to provide thought leadership, policy analysis and strategic insights to health care providers across the continuum related to the industry's ongoing transformation towards value. A key focus of that work is on market innovations and emerging payment models. Her goal is to help CLA clients navigate and thrive in an increasingly dynamic health care environment.
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