Healthcare Reform Brews Startup Gold

As state and federal insurance exchanges struggle to open their portals to millions of new insureds, the Affordable Care Act is spawning myriad opportunities for startup entrepreneurs in the healthcare IT space.

The 2009 Health Information Technology for Economic and Clinical Health (HITECH) Act in 2009 handed physicians generous incentives to invest in healthcare information technology. Unprecedented investment has been finding its way to to electronic medical record (EMR) vendors. Use of these systems has exploded, roughly doubling since 2012.

That other familiar new legislation, the Affordable Care Act, affectionately dubbed "Obamacare," seems to be awakening the sleeping giant of American capital investment, as the largest growth in the history of healthcare insurance is being launched this month. Private exchanges have offered one such opportunity, but many more are on the horizon, as healthcare providers turn to technology to cope with increases in patient services, and as new providers hang out their shingles to capture the burgeoning patient market. Coupled with the aging of the Baby Boom generation, healthcare industry fortunes have never looked so good.

Remote patient monitoring tools, including wearable sensor/transmitters, represents one of the early forays for startups. Mobile devices will monitor patients and report bio data to patients' healthcare provider teams. As the ACA changes the game from the existing volume-based model to a value-based revenue system, physicians will no longer have an incentive to order a flurry of expensive tests, but to maintain a 360-degree view of patients' health, catching threats while intervention is relatively less costly, and to prevent hospital re-admissions by remote monitoring of biometrics during at-home recovery and on an ongoing basis. Federal incentives to treat patients under outpatient conditions will be an initial major driver. A recent estimate by Rock Health pegs recent investment in this technology at $102 million.

MedTronic, a manufacturer of mobile insulin delivery technologies, recently announced FDA approval of its new "artificial pancreas," a mobile device that combines automated constant glucose testing with insulin delivery. The device, already in use in Europe, collects and can report patient blood glucose levels and insulin pump interventions on a minute-to-minute basis, and will be rolling out in the U.S. over the next year. The device does not yet transmit data, but must be downloaded.

Fitness-tracking devices are among the new direct-to-consumer devices finding acceptance in the market. Some see this development as helping to bring down the cost of mobile biometrics, and providing the data stream needed to feed the emerging preventive care and early intervention movement. The presence of such technology in the consumer market could ease consumer acceptance of more clinically-oriented mobile technologies related to population health management, a potentially enormous new segment in the industry.

Population health management encompasses tools and expertise to capture and analyze vast streams of biometric data and broader patient health information in order to identify trends that threaten particular populations. Hospitals are the current market for these tools, but new markets can be imagined among outpatient services providers of many types, in supply chain management, pharmaceuticals and medical devices, as well as government-based public health entities.

New ways of delivering primary and specialty care represent another area of growth. Concierge clinics, and clinics that cater to niche patient populations make heavy use of technology in acquiring and keeping patients, frequently commanding higher fees than broader-based clinics.

The emerging "maker community" also represents a new force in the healthcare technology and medical device development markets. New technologies that democratize the prototyping of new technologies, utilizing $35 computers, smart phones and inexpensive 3D printing, are attracting record numbers of individual inventors to the once-stodgy healthcare industry dominated by huge conglomerates like GE and 3M. What healthcare will look like after the coming boom is anyone's guess, but it will almost certainly involve more people applying more intelligence and effort to our health, and, as their achievements emerge, so may vast new wealth.

CarePrecise provides data products to the healthcare IT market, and marketing tools to vendors of health IT, medical devices, pharmaceuticals, including numerous startups.

Healthcare IT Spending Optimism

As federal support for EHR implementation ebbs, other HIT projects are crowding in to keep spending strong. Aging financial management systems will need to be replaced as pay-for-performance ramps up as a result of the Patient Protection and Affordable Care Act. The mandated switch to the ICD-10 diagnostic and procedural code set, requiring updates in IT systems, as well as more advanced coding systems to handle the vastly increased code granularity, not to mention the new technical complexities felt by state Medicaids and CMS itself, is already making good business for firms like Cognosante, a brain trust of some of the most talented healthcare IT people in the country.

BCC Research recently predicted that total spending on clinical health IT would soar to $26.1 billion a year in five years, up from $9.5 billion in 2011 and $11.2 billion in 2012. CarePrecise builds provider databases targeting various applications within the healthcare industry, including EHR, HIE, HIX and Sunshine Law (Open Payments) applications.

Joseph Conn has an excellent article in Modern Healthcare will more details.

Now We Know: Time to implement the Affordable Care Act

As the Tennessee Medical Association puts it, there is now a "certain finality" to the Affordable Care Act following the Supreme Court decision upholding the law. A huge win for the Obama administration, the decision yesterday was like kicking a hornet's nest among conservatives. The Christian Medical Association said the decision "sounds an alarm across the country to people with faith-based and pro-life convictions" and called on Congress to repeal the law.

An article in Modern Physician characterizes the response among physicians as "mixed," but the vast majority of our MD, DO, PA and RN contacts have come down strongly in favor of the law, in one case saying "The government did something right... 50 million healthier Americans is going to look pretty good here in a few years."

Whichever political side one is on, it is now clear that work can move forward on implementing the law. The Tennessee Medical Association's statement concluded "Today's decision allows us to make more definitive plans regarding reforms to our healthcare system in Tennessee." The sentiment seems to be fairly widespread through the provider side of the industry.

Some states - among them our own Oklahoma - elected to refuse federal funding ($54 million in Oklahoma's case) to establish health insurance exchanges. The decision, taken on the part of Governor Mary Fallin, appears to have been politically motivated, but Oklahoma is, in fact, developing an exchange, without the federal dollars. An agency head, speaking with an Oklahoma radio station, said "It would have been good to have the money, so we could have a more user friendly and effective system, but we'll have something, anyway."

The justices struck down provisions in the law that would empower the federal government to force states to comply with the planned Medicaid expansion or lose all of their Medicaid funding. Now states will be eligible for basic Medicare funding even if they choose not to accept the additional dollars to provide expanded care. Numerous states have sworn to refuse expanded Medicaid funding, but it remains to be seen whether any will ultimately deny this added coverage for hundreds of thousands of their citizens. The federal dollars are being offered with no required match for three years. Medicaid is often one of the biggest lines in states' budgets, and that share is growing as healthcare costs continue to rise.

A Nut Too Tough to Crack?

One of the hardest problems in health IT is the effort to get data from different silos into a centralized database that can be searched as a single dataset. So, this is us announcing our new "linking and shrinking" technology, code named "Squirrel." What does it do?

Squirrel is a record-linkage and deflation system that pulls in data from multiple federal provider databases in various formats, makes them play nice together by linking everything up under providers' NPI numbers, preserves all the data but shrinks the file size down to about 9% of the original size, puts it in a format that can be managed in Microsoft Access or other garden variety database software, downloads it to our customers, and then does it all again fresh every month.

The technology is built on record-linkage methods developed over twenty years. Interesting trivia: The precursor to the current system was built in Microsoft Access 1.0 -- you remember it, the Introductory Package -- in 1992. While we don't share all the secrets, the basic trick involves pattern matching algorithms and a lot of processing time to handle more than 13 million rows of data, comparing each provider's records between all the sources. The end result is called CarePrecise Access.

We just sent out a press release about the whole thing.

Now you'll excuse us, as we have some more nuts to collect and crunch on.