VCs See Promise in Healthcare Apps

by | Jan 5, 2009

vcArticle in today’s NY Times that looks at where the Silicon Valley Venture Capital (VC) firms are likely to place bets in 2009. Some highlights and our comments follow:

1) Article starts by saying almost anything Web2.0 that is ad-supported and free to the consumer will fall out of favor.  No argument there.  This new reality will not be limited to just Web2.0 companies but encompass Health2.0 firms as well.

2) Venture Capital firms are not too crazy about funding iPhone/smartphone apps and instead are investing in mobile hardware/infrastructure plays.  They are much closer to this market than we are, so maybe they know something we don’t.  From our vantage point, however, we see plenty of opportunities for new mobile apps, thus remain bullish on smartphone apps, particularly those targeting health & wellness.  Despite some 400+ health apps for the iPhone, most of those apps are simplistic, me-too apps and only a handful truly capture the imagination.  On top of that, there are the platforms for Google Android, Nokia’s Symbian, Blackberry and even Microsoft Mobile.  None of these other mobile platforms have come close to replicating the AppStore, but if they do, watch out.  There is still a deep vein to tap here that the article and maybe some VCs fail to see.

3) Despite not seeing much opportunities in the mHealth, VCs do see a lot of promise for healthcare apps, especially, at least the article infers, consumer-facing apps.  While we would like to share their optimism, we are skeptical that quick returns will come easy for several reasons including:

  • Consumer adoption is a challenge on two fronts, education to drive motivation/adoption and privacy,
  • Liquidity of health information is still in the dark ages and
  • Mixed response among care providers.  While some encourage use of such tools, there is a significant number of care providers who are not supportive and even discourage consumer use of these tools.

Yes, there are opportunties here and yes, IT is still fairly new to healthcare, but there are some deep structural issues to overcome. VCs looking to invest will need patience, something that is rarely found.


  1. Alex Burgess

    Agreed on #1, and regarding #3…

    To me, it all comes back to industry creating/offering simple, effective and affordable applications/services that respect a physician’s ability to choose when, how and why they bring HIT into their practice.

    Government doesn’t need to create “markets” or “business models” to sustain/drive HIT adoption. Physicians are not weary of technology or unaware of the value one has when reviewing relevant/accurate clinical data in a single view (if 35 FP doctors can buy Epic for their Group, then doctors will spend $), but the investment has to be worth their effort/money and so far industry has continously failed to deliver despite VERY effective marketing engines at the legacy EMR companies.

    The pursuit of perfection (complex/$$$) often sacrifices the opportunity to improve care/lower costs now (simple/effective/cheap). During a time when all of us must watch every expense, perhaps it is time to rely upon tradtional American values of ingenuity, thrift and industry focusing on improving outcomes, reducing errors and getting physicians paid to help drive adoption.

    Wow, too much coffee this morning!

  2. Kamal

    Agree with your remarks that consumer adoption is yet low and liquidity of information is scarce. but this is the start if perhaps a new age of HIT . With the advent of Google Health and Microsoft Health vault, we could start to change these dynamics.

    We have made an application on both these platforms, Trialx ( to help provide patients personalized recommendations for clinical trials. Apps like these could drive users to adopt PHRs and also draw in some VC funding, hopefully !!

  3. Elsa Schafer

    Try talking to Tomas Moran at Palo Alto Medical Foundation in California if you want to find out how to use electronic data to measure outcomes, improve care, lower cost, and improve primary care to pay physicians adequately while optimizing all healthcare workers’ effectiveness. He’s got the best software!

  4. Alex Burgess

    The software Tomas Moran uses is called a disease registry. PAMF’s registry was developed by their IT staff (how many Solo or small practice doctors/groups have those?) and then integrated into their EMR because it could not provide the types of performance metric-driven analytics practices/administrators need to document improved care.

    Actively using registries offers the easiest, most effective and affordable pathway to documenting improved outcomes NOW rather than YEARS later once all the expense, disruption and insanity of the typcial EMR implentation wears off…

    Middelsex IPA (Middleton, CT) used a disease registry to generate up to $9,000 (+/-) in P4P income per physician and the doctors NEVER touched a piece of IT (paper charts) and no one had an EMR. So, paper-based practices documenting improved care and getting paid for it. Is the idea to create digital practices or improve care at lower costs?

    A 100-physician group in southern NJ used a disease registry to track improved outcomes with Diabetic patients from certain self-insured employers in their area. They then used that data to negotiate higher FMV payment schedules for diabetic care through the local employers/plans resulting in significant revenue improvement for the group.

    ANYWAYS, there are LOTS of simple ways of helping physicians adopt HIT that don’t bankrupt the practice or require physicians to learn new ways of practicing medicine. I believe the market/VCs will reward those companies who focus on delivering simple, effective and affordable products creating improved outcomes today, and that those companies who stay focused on creating complex, expensive and disruptive tools will go away.

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