I have long avoided investment in mobile healthcare applications, but I am afraid the time has come to reconsider.
from the Economist, "Wireless Health Care"
For a long time my pessimism has been propped up by the debacle of e-prescribing (now referred to as mobile Rx or mRx). In the venture business sometimes you show your chops by what you avoid. From 1999-2003 we looked at almost every opportunity in the mRx space, but ultimately never pulled the trigger on an investment.
In that period of time huge amounts of capital went into at least 15 mRx start-ups, with the 5 best-known companies raising over $170 million in venture capital (recall names like: Parkstone, ePhysician, iScribe, and Pocketscript), with only ePocrates (VC-backed) and Allscripts (public company) emerging as survivors, but hardly successes with a pervasive mRx product.
The idea of mRx is simple. Doctors prescribe medications using a mobile device. The mobile device runs a series of applications that confirms the appropriateness of the drug and the dosage and checks for any drug-drug interaction problems for the patient. If all clears, it sends the script to the pharmacy for fulfillment. The patient shows up, picks up the initial script, and down the road the doctor can be prompted for renewals delivered by mail order. The benefits are: (1) less prescribing errors – which saves money on waste and the potential bad outcomes related to improper medicine and (2) time efficiency for the doctor, the patient and the pharmacy.
In 1998 mRx ran on PDAs (Palm Pilots – remember those) and today it runs on smart phones. The application is simple at the mobile device, but super-complicated as an interface. The number of multi-system interactions necessary to accomplish a transaction are fantastic in number. We stayed away from the opportunity for precisely 2 reasons: (1) PDAs were just not that pervasive in the medical community, and frankly the wi-fi capability felt clunky and slow and (2) we just could not quantify the cost of building the systems necessary to interface with the pharmacy, PBM (pharmacy benefit management), Health Plan and provider IT systems, almost all of which were not web-services enabled.
But the times are changing…
Mary Meeker (equity research analyst at Morgan Stanley), predicts that mobile Internet usage is growing so fast it is bound to surpass desktop Internet usage by 2013-14 (chart below).
(For access to all of Ms. Meeker’s presentation, which is very interesting, click here)
Fred Wilson, a leading edge IT VC and Twitter investor, blogged earlier this week about the ascension of social networking platforms like Facebook and Twitter over general email as the leading communication platforms on the Internet (again, see Morgan Stanley chart below).
Pithiness and convenience drive much of Twitter’s appeal and its seems we are beginning to see a training ground for mHC emerge, where short, precise interactions will serve as the basis for successful applications, particularly in the area of remote patient monitoring, which I see as one of the more interesting areas of mHC from a return on investment standpoint.
With the mobile market now beginning to make sense, the question turns to whether the HCIT infrastructure is ready for mHC. Generally the answer is probably no, but recent trends, including the government’s proposed HC reforms, seem to be on track for stimulating changes in this area.
As we all know there are numerous conflicting issues and confusion around the HC business, including the now imminent expansion of the Department of Health and Human Services (HHS) as the next super-big Washington bureaucracy. With a little help from consultants and attorneys I am in the process of reading and analyzing our new healthcare law (a/k/a HC Reform which includes, for our purposes here, the Patient Protection and Affordable Care Act -PPACA or HR 3590 – plus the Health Care and Education Reconciliation Act – HCERA or HR 4872 plus the Health Information Technology for Economic and Clinical Health Act – HITECH ), and I promise to begin publishing my cheat sheets soon. But so far it seems that HC Reform has the potential to revolutionize HC IT as we know it, an attribute that may countervail the financial crisis spawned by its passage.
Many a future post will deal with the details of this idea (revolution, that is), but generally I believe that HHS reimbursement policies, which under HC Reform are expected to revolve around proper care coordination among primary care, specialist and hospital-based providers, will demand smart applications running accross seemless connectivity among HCIT systems. This means that existing legacy system configurations will not survive the transition to HC reform because they will need to be replaced with Services-oriented architectures (SOA) that enable low-cost web-services and data transfer. Once this transition gains steam (and it is already happening at the payer level of the value chain), mHC will be set to explode.
Please note that when I reference mHC I am really not focused on the consumer market for mHC applications (these are cute and I will talk about them soon). I am interested in applications that link patients, payers and providers in a way that optimizes HC economics and outcomes.
In upcoming posts on this subject I will begin to explore specific mHC applications, among them remote monitoring of the chronically ill and care coordination among providers, and whether the timing is right for venture investors.
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