The accelerating rate of healthcare innovation

November 18, 2022

3 min read

Current economic headwinds are challenging, and we thought we’d take a momentary reprieve to zoom out and reflect on some of the longer-term trends that are promising. Namely, the rate of healthcare innovation has increased rapidly, owing not only to massive infusions of venture funding in recent years, but also to the achievement of several important milestones. Here we enumerate some of them, as well as propose some questions, opportunities, and food for thought. 

1. Modularization of health technology

Just as AWS democratized access to online data storage and cloud computing, just as Shopify ubiquitized and accelerated online retail, so too have recent developments supported the “modularization” of health technology. By this, we simply mean that it is increasingly easy to access “plug and play” units to build a business in healthcare. SteadyMD, Wheel, and other telehealth staffing companies enable one to rapidly access virtual care providers. Truepill, Wheel, and other pharmacy fulfillment companies allow one to rapidly set up virtual pharmacy ordering and delivery. What else can be modularized? Remote patient monitoring – collecting vital signs and other data to help physicians with diagnosis; providing equipment, infrastructure, and support to measure key patient features outpatient – has yet to be adequately solved… who will win, and what will it take? Similarly, what will it take to adequately modularize the use of “physician-extenders” such as nurses, medical assistants, and technicians and to allow businesses to rapidly leverage task-shifting to achieve efficiencies?

2. Transparency of pricing and contract information 

Price transparency is a fundamental first step towards intelligent shopping. Of course, it’s necessary but not sufficient – stakeholders also need to be bundled, and free market conditions must exist. But nonetheless, transparency is an important ingredient. It was game-changing when GoodRx improved pharmacy drug pricing visibility. Recently, even more paradigm shifting developments have occurred: with the advent of the No Surprises Act and the CMS Price Transparency Rules for Hospitals and Payers, we’ve truly entered a new era in healthcare. This cannot be overstated. In two years, we have eclipsed decades of precedent and progress. For the first time ever, hospital prices and negotiated payer-provider contracts are openly available; companies like Turquoise Health are parsing and democratizing that information to improve equitable contract negotiation. Where else in healthcare would benefit from such change? Devices and medical equipment have long been intricately bundled: through arrangements such as “buy one get one” deals and discounts on catheters if the hospital has purchased that manufacturer’s requisite cath-lab, behemoths like Phillip and Medtronic have entrenched themselves in the system. Is there a way to improve transparency and contracting flexibility in this arena too, and enable smaller manufacturers to compete? 

3. Partnerships between VCs and hospital systems

For years, the healthcare industry has made its peace with horrendously long sales cycles – nine to eighteen month endeavors that often clip startups’ wings before they can achieve flight velocity. Increasingly, we’re seeing larger venture capital organizations entering partnerships with hospitals to fast track pilots and dismantle unnecessary bureaucratic barriers. Recent partnerships include: Andreessen and Bassett Healthcare; Redesign Health partnering with UPMC; General Catalyst with UC Davis Health; the list goes on. If this trend truly accelerates the rate of innovation, it will be a breath of fresh air. However, does such cross pollination run the risk of polluting incentives? Many argue that healthcare quality and safety declines as hospitals entangle themselves with private equity; and it cannot be denied that dilution of mission is inevitable as hospitals erect their own venture investing divisions. 

4. Regulatory changes expedite adoption of AI

The FDA has accelerated review and approval of artificial intelligence (AI) technologies. This process – the “Software Precertification Pilot Program”, a.k.a. “Pre-cert” program – is a step in the right direction, and a report was recently issued detailing the results of the pilot. Laggardly regulation has long attenuated the pace of innovation, and assuming safety is not compromised, such radical action is music to our ears. However, per Joel Selanikio’s recent analysis and contrary to expectation, established legacy med tech players (GE, Siemens, Philips, Canon) have continued to dominate as they leverage deep pockets and expansive networks to rapidly acquire (in every sense of the word) AI capabilities. Nearly 40% of such FDA approvals are going to older companies, and although new entrants are winning FDA approvals, such regulation is far less disruptive than originally expected. 

Altogether, while healthcare innovation is an uphill battle, our pace is quickening. Despite the looming economic recession, our hopes are not allayed and we remain optimistic about what the next ten years have in store.

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Primary author of this article is Kush Gupta, co-authoring with Amit Garg. Originally published on “Data Driven Investor”. Kush is an Associate with Tau Ventures. Amit is Managing Partner and Cofounder of Tau with 20 years in Silicon Valley across corporates, own startup, and VC funds. These are purposely short articles focused on practical insights (I call it gl;dr — good length; did read). See here for other such articles. If this article had useful insights for you, comment away and/or give a like on the article and on the Tau Ventures’ LinkedIn page, with due thanks for supporting our work. All opinions expressed here are from the author(s).