The U.S. healthcare system has been “spectacularly incompetent” in creating a sustainable model to benefit American citizens, according to Dr. Alan Ying of Chrysalis Ventures.
For healthcare investors that means the future will require a laser-like focus on one area more than any other: cost. The old model of pouring cash into new drugs, new devices and new technologies that provide incremental improvement to health outcomes while piling on costs simply won’t fly anymore.
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Ying should know. He’s spent the last 15 years as a physician, entrepreneur, executive and investor. Ying completed a surgery residency at Duke University. He founded and later exited MercuryMD, a health IT firm that was bought by Thomson in 2006. He also is an owner of KLAS, a healthcare market research firm.
Now as a partner with Chrysalis Ventures in Houston, Ying brings that diverse experience to provide a perspective that investors who’ve spent their entire careers in the business world can’t match.
Following is a lightly edited transcript of an email interview in which Ying discusses what needs to happen for the Big Data movement in healthcare to succeed and why the federal government must play a heavy role in health IT.
Q: There’s a lot of talk about the Big Data movement in healthcare. What changes do you think need to happen for the U.S. health system to handle this massive influx of new data?
A: Three major types of data drive everything in healthcare: claims, operations and clinical. Each of these types of data are like different nuts and bolts that require different tools to use them. All the fraud, inefficiencies, duplicate costs, over-billing, bad outcomes and everything bad in the healthcare system is due to implementing too many tools. We need to agree on one type of nut and one type of bolt and one type of tool to work with. The push to data standards is a necessary regulatory action to settle on a universal tool. Unfortunately, it’s a frustrating dance between the government and industry on when, what standard and at what cost and to whom. The good news is that there’s visible progress.
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Q: Do you believe the model that drove healthcare investing for the past couple decades is dead? What do you see as the new model?
A: Healthcare investing for the last 30 years has largely been based on creating innovations that add costs to the system — devices, drugs, tests. No matter how much money you spent to create the innovation, you could always recoup it by charging more. Now there’s not enough money in the system to support that model. It’s simple math when the total pool of money grows at X percent and healthcare costs grow faster than X percent. Unless this changes and the pool of money (essentially the GDP) grows at a substantially greater rate than healthcare costs, the big opportunity in healthcare will be in finding innovations that subtract costs from the system. For investors that means spending as little as possible in growing an innovation so that you don’t have to recoup as much from the system to generate investment-caliber returns. This change doesn’t mean the historical model is dead, but it certainly affects how healthcare investments will be allocated in the future.
Q: In recent years, the federal government has made a huge push into funding health IT. Do you think the government’s approach represents taxpayer money well spent?
A: The healthcare industry has been spectacularly incompetent in creating a functional, sustainable market that is good for most of society. When the private sector can’t do this in a critical sector, the government’s job is to step in. In healthcare, the market’s not going to magically align to get out of a position of embedded opposing interests without expensive cat herding. The reimbursement changes, quality and cost metrics, data standards — all of these regulations are just expensive cat-herding methods. In a situation with high risks (long-term national economic instability) and bad alternatives (insurers or government or employers or pharma or … who?), the federal government is the only option that can organize and move at the scale required. People can and should debate tactics, but in the big picture, the government is doing its job. In this case, related to healthcare IT, its job is to make a choice on data standards where no one else will.
Q: We’ve been hearing that mobile is the next big thing in healthcare for several years. What’s preventing it from taking off or becoming more widespread?
A: Let’s clarify first: Mobile device adoption has always been big in healthcare. Ever since the introduction of the Newton, through the Palm Pilot, and into today with the iPhone, doctors have been the fastest and most highly penetrated subpopulation of adopters of mobile devices in the U.S. It has been the application of such adoption for useful healthcare purposes — patient care, cost management, care coordination — that has been abysmal. The biggest reason for this is that mobile devices have no data or IT infrastructure to work off of in healthcare. For example, a doctor with an iPhone can get his email, calendar and contacts from his work Outlook and his personal Gmail from anywhere on earth, but he can’t get the blood test results for the same patient from both his office and hospital EMRs (electronic medical records) when he’s sitting at a Starbucks. The reasons for this problem are myriad, but are beside the point. Mobile will transform healthcare when the data and IT infrastructure of the underlying institutions support it.
