Next Things First


Reform: Finally, Some Discussion of the Real Issues by Rob Coppedge

In light of all the distraction recently generated by discussions of health care IT (and even, cue the smoke machines, Health 2.0), I was very pleased to find Senator Tom Coburn, MD, and Regina Herzlinger’s piece in the Huffington Post.

In a week that for many of us has been dominated by reading the “wouldn’t-it-be-cool-ifs” of messenger bag-carrying technology evangelists, it was refreshing to see a call for a much needed national debate around the *real issues* facing the health care system.

With little fanfare, Congressional leaders may be near to agreeing on the most sweeping expansion of government in a generation – the de-facto takeover of the health insurance market by the government. Congressional Democrats are already icing the champagne. When the President’s “Medicare for all” plan is coupled with the budget, which contains a “down payment” of $634 billion over the next decade for health care, government-run health care may be inevitable.

All sides in this debate acknowledge that the U.S. has long needed easier access to health insurance. This need has gained urgency for the many Americans who are fearful of losing their employer-sponsored insurance in the midst of a recession. Unfortunately, the President’s plan will not only endanger the U.S. economy, but millions of patients as well.

They make clear that the issue here is cost containment. Or, perhaps better, that solving the “access” issue without controlling costs may be politically expedient but is a recipe for disaster.

The fundamental problem is that the President and congressional leaders lack realistic plans to control the health care costs that are already crippling U.S. global competitiveness. As a percentage of GDP, our businesses spend roughly 70 percent more on health care than competitors in other developed nations, yet we hardly receive 70 percent more in real value.

We talk a lot about cost containment – and in the world of health care venture capital, some of the most exciting investment opportunities address just this set of issues. But translating these decidedly market-focused ideas into terms that are politically palatable is difficult. Denying reimbursement for treatments, no matter their relative value or efficacy, has interest groups rushing to mount the barricades. However, as Coburn and Herzlinger point out, there is a risk of even greater hazard if we don’t engage the cost containment challenge now:

In the end, the Democrats’ health care reform will require drastic rationing… Consider Canadian patients, who may wait a year or longer to get radiation therapy. Or ask one of the nearly 1.8 million Britons who are waiting to get into a hospital or have an outpatient procedure. Or talk to the German breast cancer patients who are 52 percent more likely to die from the disease than Americans.

Concerns about rationing and patient outcomes are not demagoguery. How else can a government control costs in the real world? Many experts, including the Congressional Budget Office, dismiss as wishful thinking the Democrats’ claims of achieving efficiencies through bureaucrats’ dazzling implementation of information technology and other technocratic tools.

And this is where the real world collides with the health care technology bandwagon. It goes without saying that health care lags behind in the implementation of back office and administrative information technology. And certainly this is due in some part to all the factors that are debated regularly in the blogosphere. However, it is also due to the basic fact that there has been little ROI for physicians implementing these technologies.

I worry that we are just further confusing the issue. As my colleague Alan Buffington points out:

Isn’t it interesting that no matter how many times they are corrected, politicians and media folk refuse to distinguish between health care and health insurance.  Failing to make this distinction is what causes the problems discussed in the article.

If you watch the blogs, Twitter or CNN, you will have proof that the problem Alan points out is deep and widespread. The problem with health care is that it is “hard” – complex, path dependent, interlocking, huge, with substantial ethical and moral considerations. For most people (especially politicians),  this is way too much.

Posted by RobC

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Gupta Out; Doesn’t Want to Stop Performing Brain Surgery by charlottegee
March 6, 2009, 9:23 am
Filed under: politics | Tags:

ac_guptaCNN’s Sanjay Gupta is officially out of the running for the Surgeon General position, as of last night. From the Washington Post:

Speaking on “Larry King Live” hours after news of his decision broke, Gupta said he did not want to stop performing brain surgery, leave his television career or spend extended time away from his family….

He said the surgeon general “has to have a little bit of a higher profile. Whoever takes this job has to be out there really advocating the issues of public health. At no time is it probably more important than right now, as we’re dealing with health-care reform. These issues really go hand in hand.” …

An administration official said last night that Gupta “was under serious consideration for the job of surgeon general. He has removed himself from consideration to focus more on his medical career and his family.”

Gupta, who was once named one of the “sexiest men alive” by People magazine, was never officially named to the post and continued to report for CNN. Sources said the medical journalist told CNN executives that he wanted to devote more time to his medical practice and to his duties at the network.

Posted by CharlotteGee



Obama Watch: Update on Daschle’s Team (from David Kreiss) by Rob Coppedge
December 11, 2008, 11:46 am
Filed under: health policy | Tags: , ,

Here’s the first of Senator Daschle’s crew to be named – From today’s NYT:

“Jeanne Lambrew, who helped Daschle write a book about health care reform, will serve as deputy director of the new White House office. She also worked on health policy at the White House during the Clinton administration and currently serves as a senior fellow at the Center for American Progress, a liberal think tank… Leaders of health advocacy groups have described Lambrew as one of Daschle’s most trusted advisers on health issues. She will oversee planning efforts.”

(For the full text of Obama’s nomination click here.)

Posted by David Kreiss – among many  things, former Special Assistant to the Administrator of CMS



A Cold Winter for Start Ups by Rob Coppedge

Our methods are not scientific and I don’t know what you can reliably extrapolate from our results, but you heard it here first: It is already a very cold winter for health care start ups.

In the past week, I have received numerous calls from companies either (1) suspending their fundraising activities and cutting back to bare bones operations or (2) flat out closing up shop.  After nearly 15 years in and around venture capital, I have never seen so many interesting, well positioned companies go through this existential crisis at the same time (not counting the decimation of waves of nonsensical business models in the early 2000’s).

Perhaps it is an effort to clean things up before the end of the year, but I am not so sure that what we are experiencing now isn’t a harbinger of much worse things to come. A few trends worth considering:

1. Waiting it Out. Many early stage companies pulled (or never launched) their fundraising efforts during mid-2008, hoping to relaunch in early 2009.

2. A Dustbowl. By all reports, venture capitalists with “dry powder”  have pulled back and are sitting on their hands waiting to get a handle on the cash needs and time to exit for their current portfolio companies. Not that there has been much venture for early stage health care companies recently anyway, but this is creating a veritable Dustbowl.

3. A Dustbowl, Inside a Chasm? Not only is the industry segment traditionally (and especially now) underventured, but there is little capital for the size of deals needed by early stage health care companies. These companies need $500,000 to $5 million, but few if any are placing this kind of capital in health care start ups (much easier to raise $10-25 million, even in this market). This “Capital Gap” is a big problem, and will be hard to address with the capital and investors in the market now. Larger fund sizes mean larger deals – and most firms with long term health care specialty have been raising much larger fnds. And for funds that have been dabbling in the early stage,  opportunities to move up the risk curve to positive EBITDA deals is very attractive in this market.

4. The Limitations of Angels. The only good news for companies raising capital this fall has come from regional angel networks – but these pools of capital are limited and often regional in their focus.

So, as we move into 2009, we expect to see the companies that have been trying to wait out the market finally launch fundraising efforts out of necessity – and the demand for capital will significantly outstrip the supply. Angel networks won’t be able to keep up and the traditional venture community will remain focused on less risky deals and reserving capital for their existing portfolio companies (which may not see an exit for much longer than originally expected).

While I hope to be proved wrong, we are predicting that these trends will lead to the continued loss of jobs in early stage businesses and potentially the lack of introduction of new innovation into the health care market over the next 12 months. The good news is that well capitalized businesses will have a hey day in this sector, as there is considerable opportunity to build and grow health care services companies in this market (even industry novices can pick up on the increasing clamor for efficiency,  quality and cost effective access – all require new, technology driven solutions). But without the proper capital, there is certain to be a chilling effect on innovation and growth.

Sadly, I expect to be getting more phone calls from entrepreneurs scaling back and shuttering operations during this cold Winter… which might last well into next Fall…

Posted by RobC



A Glimpse at Where We Could Be Heading… by Rob Coppedge

The Center for American Progress, Obama transition team chairman John Podesta’s think tank, has just released a blue print for health care reform (The Health Care Delivery System: A Blueprint for Reform).

The book’s goal is clear – even stated right up front:

This book offers recommendations and path¬ways to systematically promote quality, efficiency, patient-centeredness, and other salient characteristics of a high-performing health system. The blueprint it lays out is a vision of how different parts of the system should be structured and how they should function. Even more specifically, it proposes policies that the next administration and Congress could enact over the next five years to improve our health system.

Since the people involved in creating this report are almost certain to end up in (or in close orbit around) the new Administration – and since every sign suggests that health care “reform” is going to be top of Obama’s list of priorities – this is an essential read for people in the industry.

We would love to hear your thoughts:  from the perspective of health care’s importance to economic recovery to its role in the decline of American manufacturing; from the fiscal impossibility of continuing growth in spending to the moral imperative of taking care of our older and sicker populations.  The ways that the public and private sector work together to “reform”  and “change” the system will create a range of opportunities for innovators and have the potential to impact America’s social and economic well-being for generations to come.

Posted by RobC



Health Care as Lone Bright Spot by Rob Coppedge
December 8, 2008, 1:00 pm
Filed under: economy, Uncategorized | Tags: , ,

As blogger Merrill Goozner writes over at GoozNews.com, the only bright spot in the recent jobs numbers came from the health care industry:

Looking for a bright spot in Friday’s dismal job report? Think how bad it would have been had the health care sector not added 52,100 jobs last month.

That’s right. While the rest of the economy was shedding nearly 600,000 jobs and the nation’s once-proud automobile industry went begging for a bailout so it could continue to pay for, among other things, its employees and retirees health care bills, hiring remained robust at the nation’s hospitals, physician offices, diagnostic labs, nursing homes, and home health care agencies.

This raises an interesting conundrum for health care reformers who are primarily concerned about the unsustainable rise in health care costs. Who in the midst of a deep recession will be willing to whack away at medical waste when it is one of the only sectors generating lots of new jobs for thousands of fearful Americans?

Read through Goozner’s full post for some interesting analysis.  We feel strongly that – especially during the economic downturn – segments of the health care industry are positioned well for growth.  With the announcement of major (if still undefined) federal investments in  health care technology, there is a possiblity these fundamental trends will be augmented by government spending.

Posted by RobC



The Politics of Health Care by charlottegee
November 19, 2008, 11:11 am
Filed under: politics | Tags:

Yesterday the Los Angeles Times had a nice piece on the state of health care and its role in the political landscape (or is it the other way around?). The article provided a good overview of where we are now and what may or may not happen, depending on some part on the usual political activities (like the latest PhRMA ad campaign). Here are some of the more interesting snippets:

  • Hospitals and physicians are increasingly worried about the escalating burden of newly unemployed workers being thrown onto the rolls of the uninsured.
  • Liberal advocacy groups see the Treasury Department’s $700-billion commitment to banks and other financial institutions bolstering the case for a similar investment to help sick Americans get medical care.
  • Still unresolved are important details about the cost of a new system, provisions for increasing quality and a mechanism for compelling businesses and people to participate.
  • “We have a huge financial problem in this country,” said Joe Antos, a healthcare scholar at the conservative American Enterprise Institute, who called the idea that bold action would save money on healthcare “completely ludicrous.”
  • “If you don’t fix healthcare, healthcare expenses are going to make this banking bailout deal look like a rounding error,” [Sen. Ron] Wyden told physicians, business leaders and healthcare industry leaders gathered for a meeting today in Los Angeles.

Read the entire article: Political temperature may be just right for healthcare overhaul

And … what do you think of this?: DASCHLE TO HEAD HHS

Posted by CharlotteGee

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