Next Things First

HEALTH 2.N0 (More Opinions on Health 2.0) by charlottegee

Our post on Health 2.0 has generated even more feedback. Here’s the latest:

Health care is a very attractive industry for venture investing. There are numerous reasons for this, but in this gloomy economic environment, two are paramount: the inelastic demand for what the industry produces (health!) and the incredible amount of inefficiency gumming up and increasing the cost of care delivery. It is an industry begging for the sort of innovation that early-stage, venture-backed companies can provide.

In this context, the Health 2.0 “trend” is interesting to me. The basic premise is sound: take a successful concept from another industry and apply it to health care. The social media concept has been successful in some other industries, namely entertainment (a la and business (a la Websites like these deliver value primarily around information sharing, providing platforms and distribution for user-generated content and facilitating electronic “networking.”

These are important, relevant services. However, while the excitement about the possibilities is huge, I question the amount of value these Web 2.0 services create for consumers or providers of health care.

What about information sharing, distributing user-generated content or electronic networking creates health care value? Sharing information could be valuable, but in health care accuracy is critical, and there is no verifiability to socially generated content (generally speaking). Electronic connections and networks probably aren’t significant in the context of health care on an individual basis. And how many “amateurs” do we want to hear pontificating about their health, wellness regimens, remedies, etc.

On further examination, isn’t this just “noise” distracting us and diverting capital away from the more fundamental problems and technological challenges of the health care industry? Health 2.0 seems to ignore the mountain of existing systemic inefficiencies – creating a solution without a distinct (or at least a relevant) problem in mind.

Ultimately, I think social media in the health care industry can provide some value in creating communities and support groups. However, as businesses, these generally have a low hit rate and do not have a reliable revenue source or expandable business model.

As a health care investor, I am excited about Health 2.0 only because it is distracting my competitors from the real opportunities in the health care space.

Submitted by Jory Caulkins
SSARIS Advisors, LLC

(If we only knew how he really felt … )


Top 5 Things Too Many Health 2.0 Companies Forget (From Tobin Arthur) by charlottegee

More thoughts on Health 2.0, drummed up by our 10/23 post below. This one from Tobin Arthur, CEO of iMedExchange.

When Rob Coppedge, a colleague at iMedExchange and Founder of Faultline Ventures, placed the challenge to submit thoughts regarding the value and future of Web 2.0, I decided to add my two cents.

Having recently participated on a panel discussion at the Health 2.0 Conference in San Francisco, I had the opportunity to learn firsthand what some industry leaders and industry contenders are up to. This, and my interaction with dozens of other Web 2.0 companies and their management teams on a regular basis, provides the framework for my Top 5 Things Too Many Health 2.0 Companies Forget. The fact of the matter is that, while this list is little more than common sense, most companies that give Health 2.0 a bad name are butchering one or more of them.

1) Failure Is Healthy. In order to achieve progress, we have to be willing to try and fail. It’s healthy to have a broad range of solutions being tested in the marketplace. The market will vet the winners from the losers and the healthcare marketplace is the better for the process.

2) Don’t Do Just Because You Can. While the Web and a myriad of development tools now available enable new sites to be rapidly and inexpensive proto-typed and introduced to “the market,” this does not mean that every new tool or site introduced has merit. There are far more losing propositions in the marketplace than eventual winners. Just because you can do it, doesn’t mean it should be done … the market eventually figures this out. The ability to register a domain name on for less than $10 is not a license for every entrepreneur-wanna-be to start frittering away the hard-earned money of family and friends.

3) There Isn’t a More Powerful Communication Tool Than the Internet. The Internet is the most enabling communications platform ever created! As such, I believe we are just beginning to harness some of that power and there is far more to come. Factors like security, trust, etc. that are limiting or slowing adoption in some potential areas are not insurmountable characteristics of the Web.

4) Where Is the Business Model? What’s the sustainable business model? Too many entrepreneurs, and frankly too many venture capitalists, don’t have a true understanding of how their venture is going to make money in the marketplace. My eyes roll back in my head every time I hear a “company” purport to change the way healthcare fundamentally works with their new whiz-bang business model. Healthcare, as a wise businessman once told me, is like a battleship. You cannot expect to turn it on a dime. If your model relies on “changing healthcare,” go ahead and throw your money straight into the toilet. The industry is far too vast with far too many political, economic, legacy and other issues to contend with. Rather, you can build a valuable enterprise with the much more humble objective of making an incremental change in the market. Nothing wrong with shooting for the moon, but do so with underlying fundamentals to be successful if you hit the lamppost instead.

5) Do What You Know. Stick to what you know. I know technology. More specifically I know how to leverage technology to the benefit of physicians. There are plenty of things I don’t know how to do: practice medicine, suck management fees off LPs (I hear it’s pretty easy), defuse a bomb, successfully manage investment portfolios in Bear Markets, and the list goes on. I am building an innovative online community for physicians. It’s in my wheelhouse. The moment I attempt to do any of the other items listed above, and expect to make money off of them, my wife has permission to kick me in the ass. This made the list because in almost every case where a business doesn’t have an air-tight business model, I can probably find Founders who shouldn’t be doing what they are doing.

The Value of the Internet (Or More Ideas on Health 2.0, From Gerene Schmidt) by charlottegee
October 27, 2008, 2:09 pm
Filed under: consumer engagement, health it | Tags: ,

In response to our previous post about the buzz surrounding Health 2.0, Gerene D. Schmidt, president of SB&E, Inc. (Science, Business & Education), submitted the following perspectives:

While the Internet has unparalleled value in researching information of every kind, there are limits to value in some fields. There is a widespread belief and expectation that the Internet fulfills all information needs in any field. One field in which this is thought to be the case is healthcare (e.g., using online programs for diabetes management).

To the contrary, experience has demonstrated that in some aspects of healthcare, there is little or no value in using Internet programs for self-management of chronic diseases. Another example is Internet-based disease management programs/services that failed to meet expectations for patient education and improved self-management and outcomes. Consider this case: Pediatric patients and their parents in a diabetes clinic in a large mid-western university-based healthcare system began bringing printouts of blood glucose patterns in statistics, bar graphs and pie charts from the pharmaceutical sponsored program they used online to enter their personal blood glucose data. When the diabetes team, MDs and RNs/CDEs, asked how they interpreted the data to apply to daily diabetes management for Type 1 Diabetes, neither the older children nor their parents had any idea of where to begin in knowing what the data meant and how to use the data in daily management., version 2.0 by charlottegee

The Health 2.0 conference took place in San Francisco yesterday and today (take a look at all those sleek, pretty sponsor logos:

The “traditional” definition of Health 2.0 is “the use of social software and light-weight tools to promote collaboration between patients, their caregivers, medical professionals, and other stakeholders in health.”

We’ve all seen these websites. A few of us may even use (and benefit from) them. More likely, the majority of us have just read about them on blogs or in newspapers and wondered: “Does anyone actually use those sites? Why would anyone want to add yet-another social networking site to his list of bookmarks?”

At any rate, there certainly seems to be a never-ending crop of Health 2.0 sites popping up on the web … targeted either for particular professions or diseases and conditions or goals like weight loss, increased physical activity and smoking cessation. And someone is giving them lots of money.

Capitalizing on this trend (and perhaps fulfilling its own prophecy), this week’s Health 2.0 conference has generated a lot of interest, with a SRO audience of 1,000. Over at The Health Care Blog, Matthew Holt writes of the buzz:

Tonight the party starts, the beautiful (and not so beautiful) people gather, and the shows under way—and that’s just the Health 2.0 team! There’s also 900 + speakers, guests, media, volunteers and the community is buzzing. Wall Street may be going crazy, the election may be a cakewalk (or not) but in health care interest in combining user-generated content with personalization based on data is growing. Last year around 500 people got together to find out what Health 2.0 was. Really, we only had about 35 decent options from which to choose our eventual 25 demo panelists (and one or two of those were a little of a stretch).

This year he says they chose from over 250 (!) presenters.

All of this buzz does raise some questions. What do we do with all of this user-generated content? Which platforms and features (and, yes, gadgets and widgits) work and which don’t? How does a consumer, a physician or a caregiver go about separating the wheat from the chaff, with so many options out there?

Oh, and, what about traditional health care services (remember that “legacy” business: the actual provision of care?). One might wonder if all this Health 2.0 stuff is on the periphery having little-to-no effect on the delivery of care, or whether there is more of an impact on established models. For instance, for someone just diagnosed with diabetes, does having an online social network have any real impact on her health outcomes? How does her interaction in an online community affect her relationship with her caregivers and the facility? Does anyone know?

Thoughts on where we go from here? The floor is open.

[We will be posting comments and perspective from our friends, readers (and even those we think are totally off base) over the course of the next week. Let us know what you think.]

Posted by CharlotteGee and RobC

Surplus Weight and Cargo by charlottegee
October 21, 2008, 4:10 pm
Filed under: economy, venture capital | Tags: ,

Over at The Atlantic, James Fallows has a post about the “tension between funders and entrepreneurs” in tough economic times titled “Sobering news dept: The Hobbesian world of startups.”

In his post, Fallows references Lawrence Wilkinson, who related that “many of VCs and other funders are now saying: bad times mean your company isn’t growing as fast as we hoped. So, we will take more of ‘your’ share.”

Wilkinson continues:

Some of these entrepreneurs have no choice; they need cash, so they are holding their noses and swallowing the deals.  Others are finding alternative ways to get by and to grow.  But none of them will, I suspect, ever see their investors the same way again.  None of them will ever again hear the representations of these members of the incumbent financing class with the same degree of trust (which is, I believe, a real shame for the private equity folks I know who are *not* behaving greedily, but who may be tarred by this brush).

Interesting reading, viewpoints and words of warning (?) all around.

Posted by CharlotteGee

The Week in Numbers by charlottegee
October 17, 2008, 11:11 am
Filed under: week in numbers | Tags:

Installment Two:

Health care stories increased across all media from 256 stories to 439

Jury awards $10.7M to woman who waited for brain scan

Death Rate 70% Lower at Top U.S. Hospitals

Three Nashville-area companies highlighted as uncovering “the mystery of health care costs and advancing health care’s ‘pricing transparency’ movement”

Microsoft, partners plan 20-year genetics project

Up to a fifth of adults, including college students and shift workers, may be using cognitive enhancers

Five Reasons WellPoint’s $10M Healthcare Competition Won’t Work

Federal Agency Doles Out $18.9M in Grants for EHRs, Health IT

Posted by CharlotteGee

What “Joe the Plumber” Means for Health Care by Rob Coppedge
October 15, 2008, 9:11 pm
Filed under: health policy, medicaid/medicare | Tags: ,

Hard to believe that was the last debate. We are actually going to get to vote and close out the never ending campaign. And after nearly two years of talking, what do we actually know about what would, could or might happen to our health care system under a new Administration?

Listening to the debate tonight, it became clear to me that we don’t know much – primarily because the candidates themselves aren’t sure what they’ll have the money to do. As Dick Morris said before the debate last week in Nashville, the next President will be like a trustee in bankruptcy court. As the waves of financial crises (subprime to credit cards to the fall out from buy out deals) wash over the system, the next President will have the political will but no financial wherewithal to do what they (and their supporters) would like.

But, as McCain invokes plumbers and Obama follows suit, one thing is clear – this is Walmart rhetoric: Who can help the little guy more? And in that world, despite strong rational arguments of why it shouldn’t be so, I believe Medicare Advantage plans are in big trouble.

Obama picked on them tonight. They were one of the only things he could bring himself to single out as “cuttable”. McCain didn’t discuss them, but even with his strong support a heavily Democratic House and Senate will surely go after them aggressively.

So, with government sponsored business being one of the only recent growth areas for health plans – and many insurers like Humana having gone deep into that business – it will be interesting to see the how a show down between Washington and the private sector changes the landscape of the health plan business.

Posted by RobC