Thinking of starting a Health IT company? Here are top three industry challenges

http://pandodaily.com/2012/12/19/thinking-of-starting-a-health-it-company-here-are-the-top-three-industry-challenges/

by rmorrison • 14 years ago

128 110 14 years ago

tel3• 14 years ago

I'm in the 7th month of starting a Health IT company and would be happy to answer (some) questions if anyone has any.

rficcaglia11• 14 years ago

I'm in the 41st month of a Health IT startup and I'd be happy to give you a preview of the questions you havent even thought of :)

Honestly if you can't fund full speed (dev, QA, support, sales, mktg, ops, clinical studies) for a minimum three years before the first hospital sale, assuming you are selling to hospitals, then get out now.

Happy to shar war stories over a pint!

tel3• 14 years ago

We're not selling to hospitals, but we might someday... so that's a pretty damn good data point.

Mz6• 14 years ago

I would be thrilled to pieces if either of you emailed me and let me know what you are up to, etc.

Thanks.

sgarg263• 14 years ago

I have been in the health care industry for a long while. Also, working on a health care startup. If people have questions, I would love to assist.

wging2• 14 years ago

Your HN profile says you're at CloudAmp, which doesn't seem to be a health IT startup at all. What am I missing?

tkl3• 14 years ago

Hi rficcaglia, I would like to buy you a pint, or lunch, or coffee or something. Are you in the Silicon Valley area? Your email is not listed, but mine is. I am interested in natural language processing and machine learning in the medical field. Would you know anything about this?

chintan2• 14 years ago

How do you find your sales lead? Specifically, my question is how do you identify a potential sale target? Is it through your connections. call calls or online ads?

lucidrains8• 14 years ago

i've been thinking about how to create something that can disrupt the medical industry for a long time, ever since beginning medical school. the sad truth is that medical industry doesn't welcome software disruptions. software adoption is usually a bureaucratic process due to the direct risk to human health, not to mention HIPAA and other regulations. quality of the software is not as important as selling the software while offering strong credibility and insurance, which makes it significantly harder for the typical small agile team to succeed. i am at the point where im wondering if i should sacrifice my time and efforts on a medical startup or just settle for other challenges that are not so messy. regardless, software will fix our healthcare system one way or the other. it's probably just going to take a long time.

rmorrison2• 14 years ago

I would recommend trying, especially if you have medical training and know the space. While it is difficult, with the appropriate go-to-market strategy and determination you can get a foothold and grow from there.

guylhem12• 14 years ago

Medical credential will help, but not a whole lot.

There is some strong interest in the market to keep things as they are, even if they are less efficient. Incentives are not aligned at all.

rficcaglia11• 14 years ago

I recommend not trying - not for profit anyway - unless you directly influence (did they come to your birthday party?) multiple people at the C-Level at 2 or 3 major hospital prospective customers, ideally academic research centers, depending on your idea

lucidrains8• 14 years ago

thanks! i will try, at least for a little while. honestly, at this point, i think a true disruption can only happen if diagnostic tests are put into the consumer's hands instead of being held hostage at the hospital, and we just aren't there yet.

slap_shot• 14 years ago

> the sad truth is that medical industry doesn't welcome software disruptions

This is a message that really needs to stop being regurgitated around the technology start-up space.

The medical industry DOES welcome software disruptions. The past two years have been the two biggest years in healthcare software disruption, in terms of VC dollars invested in that sector[0], the number of accelerators that have accepted healthcare related start ups (YC has now invested in a several) and the rise of accelerators focused on healthcare (e.g. Rock Health, Health Box) that have graduated over 100 'small and agile' teams that have established product-market fit, and raised institutional funding.

Healthcare is a space that does require a significant understanding of industry-specific knowledge (third party payment models and regulations are examples), but I feel that many other industries that are being disrupted have similar barriers to entry.

In my experience, most developers ignore the medical industry, citing similar complaints as yours, but neglect to mention the incredible growth that has been demonstrated in that industry for a while now...

[0] http://rockhealth.com/resources/rock-reports/digital-health-...

rficcaglia11• 14 years ago

Raising funding is one way to punch through the hurdles discussed in the article. I think the point is that if you want to innovate, why should it take $5M in funding if you can demonstrate a good idea working. Answer: all the reasons mentioned in the article.

Small and agile is a function of penetration in the healthcare market --- the regulatory friction and customer requirements will slow them down considerably as they (hopefully) move past initial pilots. There a hundreds of small startups in HIT that get 1 or 2 pilots, but then never get past that point, likely due to the points in this article.

I welcome more and more funding in this space to help educate the buyers and realign priorities toward efficiency vs. status quo. But the industry does not welcome disruptions of any kind. VCs do, in terms of VC dollars invested.

I would make a guess that the ROI YC makes on its HIT investments will pale in comparison to other industries in the long term. Only PG will know.

Mz6• 14 years ago

When castles were everywhere, the bigger castle won. Then airplanes came along and essentially made castles obsolete as an aspect of war. The future solutions in health IT will likely appear to be orthogonal to current conceptualizations of the problem.

I am curious what type of solution you have been pondering, if you don't mind me asking. (If you don't want to post it publically, my email adress is in my profile.)

lucidrains8• 14 years ago

yeah, would be happy to chat and learn from you! i don't claim to have the full picture.

TillE2• 14 years ago

As an aside, castles mostly died after serious cannons were developed in the late middle ages, some centuries before the invention of flight.

FireBeyond7• 14 years ago

I'd also like to throw myself into the ring as someone with significant medical and IT experience curious and keen to do something here. Perhaps contact me (and anyone else is welcome to, too), if you'd like to talk further.

Mz6• 14 years ago

Shoot me an email. I paid health insurance claims for over five years and would love to chat, hear what you are contemplating and all that. (my gmail account: talithamichele)

tkl3• 14 years ago

Hi FireBeyond, your email is not listed, but I'd appreciate it if you could email me as I have a few questions. I am curious as to what companies you may have meant when you said, quote: "There are entire companies devoted to nothing more than this - taking a ICD9/10 diagnosis, some procedure codes and massaging the bill to get the biggest possible bill". I had searched before for exactly this and found very little to lead me. Any help would be appreciated.

lekanwang• 14 years ago

"Your customer’s incentives are not straightforward."

So true.

Don't mean this to be cynical, but if you actually want to have a chance of upending the healthcare system, always clearly identify the flow of money (are costs paid by carriers? providers? Medicare? consumers? are the prices negotiated?), regulation (are fines built into the cost structure? what regulations are relevant? are they incentivized to be ignorant?) , and decision-making (e.g. how billing departments more often decide on the EMR to go with rather than the docs). Then check again, because it's likely you missed a huge underground river.

Then the tricky part is to align your business plan with your customers' incentives.

guylhem12• 14 years ago

As a health IT professional who did try, and will try again in 2013, this article is spot on.

There are differences between France and the US - especially in the mindset - but the payment system is very similar. In fact, the current french system (used for hospital billing since 2004, and tested for 10 years before that) was based on the US medicare DRG approach.

My job is to make patients pay as much as we can legally make them pay, using any mean necessary as long as it is legal.

In the past, my unit was the single most profitable in the whole hospital, by large. So I tried to sell things, and failed.

I would like to insist on the "incentives" topic with a quick example: I previously developed production analysis software to find and exploit the cases where an hospital could be more efficient and thus make more money (long story short, see one of my previous posts on http://news.ycombinator.com/item?id=4826314 for more details)

As I like to say, this is as good as printing money - I can say precisely what should be changed in a billing statement, why, how much it will gain, and the probability to find matching evidence in the patient file.

I can calculate an expected return, so that on small cases you can use unqualified personnel, while it might be worth to have a doctor study every page of the patient file for high profile cases (since, if you don't have evidence to back your billing claim, you are legally liable - it's not unusual for a large hospital to be fined sums with 6 digits if during an audit mistakes are found)

I tried to sell the software, with a commercial partner. In a year, we could only find a single client in the whole french public hospital system!!

Want to know why? The improved productivity - short term financial gains - can be used to demonstrate that the civil servants in charge were not as efficient as they should have been, or that they should hold to that level of efficiency in the future.

That's just like the OR example in the article - they don't want to be more efficient because basically, making more money is a liability to the top management personal career.

I was quite disgusted by this twisted way of seeing things. Medical credentials did not help me. Efficiency was not welcome. Improving one's profile, even at the expense of whole hospitals profitability, was.

I did not explore that much, but there seemed to be a demand for a service to selectively reduce profits, to maximize government subsidies in some units - something utterly disgusting for a libertarian. I didn't think I could do that, so I stopped.

I will try again very soon, but now I will make sure to carefully study the incentives, and do something I can morally agree with.

FireBeyond7• 14 years ago

"I would like to insist on the "incentives" topic with a quick example: I previously developed production analysis software to find and exploit the cases where an hospital could be more efficient and thus make more money (long story short, see one of my previous posts on http://news.ycombinator.com/item?id=4826314 for more details) As I like to say, this is as good as printing money - I can say precisely what should be changed in a billing statement, why, how much it will gain, and the probability to find matching evidence in the patient file."

There are entire companies devoted to nothing more than this - taking a ICD9/10 diagnosis, some procedure codes and massaging the bill to get the biggest possible bill (and vice versa, as an insurer, minimizing the same).

guylhem12• 14 years ago

Yes, that's the easy part - massaging the bill, testing.

Providing an accurate estimation of the expected gains however require both domain knowledge and statistical analysis.

Ie if your hypothesis is to add "morbid obesity", and you know how much it will gain in the bill, how likely are you to find that in the patient file, given the patient history and (hopefully) some text from the release letter?

Enough to send an unqualified worker who does not understand medical speech?

(you won't get paid for ideas, but for actual results - and too many false positives cost money, because humans have to do the fact checking)

Do you believe it's worth putting a MD on the case? It will cost more in fixed costs, and thus reduce potential gains.

Can you automate that for one patient file consisting of multiple inputs? Can you still do that for 100'000 files? How long does it take for your software to produce its result? Can it still work when it is missing some critical information you believed in your early development would never be missing - like the release letter?

Textual analysis, datamining, Bayes, even sentiment mining (see http://news.ycombinator.com/item?id=4908056) etc - everything is fair game (ex: "the patient did not seem morbidly obese, but upon calculating BMI score, was")

Then you have to convert the lead to a sale. I'm talking about having money in the bank. This requires more than a nod and a signature for hospitals. I know firsthand - in the end, only one hospital paid.

Interest and traction are irrelevant. What matters is how much money you get in the end, and how satisfied the customer is to recommend you to others (it's a small world, especially in the health-IT field)

trhtrsh• 14 years ago

> My job is to make patients pay as much as we can legally make them pay, using any mean necessary as long as it is legal.

> I did not explore that much, but there seemed to be a demand for a service to selectively reduce profits, to maximize government subsidies in some units - something utterly disgusting for a libertarian.

So your morality teaches that it's OK to scam patients, but not OK to scam the government?

guylhem12• 14 years ago

If it is legal it is no scam. Making patients pay as much as legally possible is legal.

For ex, on preexisting conditions, the burden of proof is almost reversed. I'm simplifying, but more or less in an audit the opposite party has to prove the charge could not have been caused by the preexisting condition. It is almost impossible (good luck if you are trying to prove say that the chest x-ray had absolutely nothing to do with a physician making sure a cancer did not relapse - so I'll add that preexisting condition to the bill. it has a multiplier effect on the whole bill after a threshold)

This is also moral, according to my beliefs, since it helps improving reliability (here, giving a financial incentive to always check for relapses) and efficiency.

Reducing profits by accounting trickery is illegal. Reducing profits is also immoral in the belief system I have.

You have different beliefs - good for you.

DanBC• 14 years ago

I'd be interested to see if your system would work in English NHS hospitals. I suspect it would, but you'd have to be careful how you sold it.

There's currently some discussion about the numbers of managers in English health care, and there are severe cost pressures to reduce those managers.

A system that legally maximises revenues while reducing managers seems like a good fit.

eclipticplane• 14 years ago

4th challenge: what's legal in one state may not be legal in another and may change with every legislative session.

If your customers are physicians and other practitioners, the state laws are even more complicated as to who any data belongs to. In some areas, any data about patients is technically owned by their physician.

If you're contacting patients, your attorneys will debate at length whether something is legal under the rules of HIPAA. In the end, it will be a much ado about nothing, because HIPAA is barely policed or litigated over. So you'll end up with a large legal consulting fee, a confusing legal opinion, and no clear direction on whether to move forward or not. The next attorney will have a wholly different opinion.

Healthcare law in the US is absolute shit.

mcphilip• 14 years ago

> 2. Good enough is not good enough

I don't think this really sinks in until you work in the industry. As an example, I knew of a developer who accidentally forget to make a list page scrollable and it got through QA that way. I heard rumors that ultimately the bug resulted in a patient being given the same immunization twice since the user was unable to scroll down the list page.

And that's a relatively benign example...

jordan0day• 14 years ago

I'm not sure the point the original article was trying to make -- in reality, a lot of HIT software is terrible. "Good enough" would be significantly better than a lot of the crap that is out there.

sachinag2• 14 years ago

This article understates the issues delivering software solutions to patients, providers, or payers. The lack of data standards has completely crippled the ability for new companies/products to innovate and break through. When I worked at a healthcare VC, we deemphasized IT in favor of medical devices because the path for success is much clearer and easier to trod.

The reason I can be so confident that it's the data standards, BTW, is because the DICOM data standard exists for medical imaging. IIRC, the founder of Heartlab invented the format, it somehow escaped a proprietary home, and dozens of companies innovated on top of it. The existing EMR vendors - GE, Cerner, Epic, etc - all have proprietary data standards for storage and interchange. My due diligence on this revealed that the companies would each have to spend three years re-writing their software against a common data standard. Of course, they should have to. It would help patients immensely and all sorts of innovations would spring forth, just like after DICOM.

drstewart• 14 years ago

What about HL7?

lucidrains8• 14 years ago

it's delimited by pipes... i mean, it is a standard, but it's far from ideal.

sachinag2• 14 years ago

HL7 is a data interchange format, not a data storage format. You can't code to that spec the way you can to DICOM. EHRcon and CDA are jokes.

And, of course, the vendors who stitch together siloed datasets from proprietary vendors make a killing. So that's yet another group who loves the status quo.

skue2• 14 years ago

HL7 is often characterized as a "70% standard," meaning that instead of getting complete agreement from vendors, they decided to standardize most of it. (HL7 3.0 is an 80% standard, but no one really uses HL7 3.0, at least not in the U.S.)

Think of HL7 as a language with many dialects. As a result there are whole industries for translating feeds both within hospitals (integration engines) and between institutions (RHIO/HIEs).

louthy• 14 years ago

As the saying goes:

"Once you've seen one HL7 message, you've seen one HL7 message".

rmorrison2• 14 years ago

I agree that the lack of data standards and interconnectivity is on of several big problems that have traditionally crippled health IT innovation. But, advanced technology is becoming so cheap, and the pain points have become so large, that companies are changing.

Technologies that can compensate for inconsistencies between existing systems (like my company's product, http://comprehend.com) are enabling health IT to do things previously unthinkable.

rficcaglia11• 14 years ago

I would argue that it is the crippling lack of appetite for change and innovation that stifles breakthrough technology that would create a data standard and a thriving interoperable service ecosystem.

The success of an innovative idea will attract the other members of a data ecosystem. ( Your example proves that!) So you need to have innovation first - not standardization. Standardization may follow.

You were right to abandon IT as a VC --- this is an industry that is not about ROI. The only reason I do it is I can afford to subsidize it, fueled by the letters we get from patients thanking us for making their lives better, or saving them a tremendous amount of pain and suffering.

The MDs at the hospitals I know don't do it for the money. Despite the outrageous prices in US healthcare, they get paid pennies on the dollar for 24X7X366 work (they take it home!) and little thanks (and lots of lawsuits). Often their own institutions don't support them. I would never recommend my child be an MD in the US, at least not for profit. (Advice a family friend and physician once told me when contemplating med school, which I took to heart.)

error543• 14 years ago

As a current developer for a health IT company, much of this is true. Even with the current incentives to go electronic, many doctors just simply prefer paper charts and are willing to forgo the $40k a year just to keep things the status quo. My particular company is growing by leaps and bounds because we started with a very simple Practice Management model and grew out from there whereas I see a lot of startups try to jump directly into EMR's which can be a tough market to crack.

But for anyone looking to get into Health IT, I highly recommend it. Healthcare is a multi-billion dollar industry that is in dire need of some disruption and the programming challenges are both interesting and rewarding (shameless plug: we're hiring).

FireBeyond7• 14 years ago

You should also consider the pre-hospital field - a paramedic/EMT in the field with a Toughbook, etc (where they're not still with paper) is typically using horrible software, with little flexibility to what by nature can be a rapidly changing encounter. I see this every day, and hear the cursing that accompanies it, and think to myself that there is so much that could be done to improve this.

error543• 14 years ago

That's a really great idea and honestly, our biggest problem now isn't a lack of work but rather a lack of programmers. The entire health care industry from the EMT's up to the hospitals really needs an overhaul as some of the software used is decades old.

desigooner• 14 years ago

What I've observed is that it's hard to get the decision makers listen to you and often, they're unwilling to invest any more than they've already done towards any solution. Granted these conversations were mainly concerned with a SaaS based solution targeted towards HR & Administrative Operations vs. the field techs.

z00mer• 14 years ago

e54 : What are your contact details?

error543• 14 years ago

Shoot me a message at jyoung@azaleahealth.com

FireBeyond7• 14 years ago

Some quite good points:

"For example, inside a hospital, operating rooms (OR) are often profit centers, and emergency departments (ED) are often cost centers. The hospital may be receiving subsidies to maintain its EDs based on its ratio of OR profits to ED losses, in which case a product that ultimately makes ORs more profitable may not be worthwhile to the hospital."

To an ambulance service (emergency and pre-hospital medicine is my area/passion), IFT (Inter-facility Transport) is a near guaranteed paycheck, 911 response is generally a cost center.

DrChrono has it good, because the government will pay their customers (the doctors and facilities) for the implementation.

But it's definitely an area that could do with some work in unseating some entrenched and ultimately complacent incumbents.

skue2• 14 years ago

> DrChrono has it quite good, because the government will pay their customers

Only if their customers can document, attest, and verify that they meet the standards for Meaningful Use as required by federal law to receive their subsidies. And this can be a considerable burden for the smaller practices that DrChrono targets.

Plus consolidation within the industry means their market is shrinking as larger hospital systems buy up small practices and move fold them into to their hospital-grade EMR systems such as Epic, Cerner, and MEDITECH - all while these larger EMR companies are concurrently giving their products to small practices in order to become regional standards.

Plus, for those remaining practices they have a LOT of competition - there are literally thousands of outpatient EMR solutions, including Practice Fusion, which is well established and free, meaning providers can pocket the subsidies.

DrChrono is a great technology, but don't think they don't face their own challenges.

xxpor• 14 years ago

Is 911 response REALLY a cost center? Around here, to get an ambulance, it's $500 (IIRC) up front + $16(!!!!!) a mile. And the closest hospital might be 10 or 15 miles away. And I dont think this includes material costs (any drugs, etc.)

FireBeyond7• 14 years ago

911 response, unless ran very well, and / or miserly, is absolutely often a cost center. You have "frequent fliers" who you may see several times a week, without insurance. Billing sends them a bill, but there's no realistic expectation of payment.

You can't, even as a private agency (and should 't - for better or worse, I'm a proponent of "socialized" medicine, even in bastardized form) refuse a patient transport, though about the best you can do is advise a patient that their insurance is unlikely to pay if the ambulance transport does not have. "medical necessity", even with (especially with) Medicare (who requires us to get a document from the physician stating the necessity of "transport in a fully equipped BLS/ALS ambulance").

Add to that Maintenance, drug purchase (must be kept stocked and current, even if rarely used), fleet Maintenance (driving code in a truck carrying N extra 10-15000 lb at high speed places a lot of strain on a vehicle), insurance (likelihood of an accident), insurance (malpractice in this area is usually carried by the agency, not individual), regulatory and other costs, costs of maintaining sufficient crews on duty so you can respond even when others are out doing long distance transports (hospitals to nursing homes, home, or stabilized patients to bigger or more appropriate hospitals) or transporting your frequent fliers, and it begins to add up.

ryanteo• 14 years ago

Hi everyone, happy to chime in from an Asian perspective. I'm Ryan, based in Singapore and tried to co-found an online platform for procurement of medical supplies for private clinics. Faced many of the industry's frustrations as expressed in this discussion too. Would be happy to share my experience too.

yen223• 14 years ago

Hi,

I'm curious, how big, do you think, is the medical IT market in Singapore?

superchink• 14 years ago

I'd say it's pretty big. I'm somewhat familiar with a national project for exchange of clinical data and it's in the hundred million dollar range.

Mz6• 14 years ago

For those saying they would like to chat, I have started a posterous group called Health IT:

http://health-it.posterous.com/

Consider yourself invited.

Mz6• 14 years ago

For those interested in joining, you may have to shoot me an email to be added. My gmail account: talithamichele.

ams6110• 14 years ago

I would add that "agile" development is a hard sell to institutional customers. They want one or two releases a year, tops. Certainly not monthly and absolutely not continuous. "Change management" committees will become your own little hell.

intractable• 14 years ago

In my experience, one of the most significant hindrances has been access to and communication with medical personnel:

- Medics, especially specialists / surgeons, have extremely busy schedules, often holding down both public & private patient responsibilities as well as performing duties for their specific colleges etc.

- The level of IT-savvy amongst healthcare pros is generally low.

- They seem to have a different logic to us IT folk, answers are nebulous for non-medics and hard rules are very difficult to pin down. Ask the same question n times and you will get n different answers, from the same respondent.

When you find a medic who is willing / able to help and towards the positive on all the above axes, you must hold onto them with a death grip.

rficcaglia11• 14 years ago

Surprisingly I work with a lot of MDs who think communication and lack of professionalism and thoughtfulness in software engineers is a significant hindrance to success.

- Medics have extremely busy schedules and so they don't want to have their time wasted by lack of data, lack of rigorous testing, and risk to their patients. Software pros work in cozy offices not splattered in patient fluids, from 11AM - whenever, and yet don't expend the extra effort to statistically test data, design efficient algorithms and user interfaces, etc., before throwing something over the wall as a MVP. - The level of healthcare savvy among software pros is generally pretty low - MDs seem to have a logic that focuses on quality, meticulous attention to detail, going the extra distance without added compensation, acceptance of hard and legally binding rules about ethics, data collection, privacy, security, efficacy, peer review, etc.. Run the same software program n times and you will get n different bugs, from the same software developer.

When you find a software pro who is willing / able to help on all the above, you do need to hold on to them (and pay a high market salary, with good health care benefits, and reward them for quality and precision vs. MVP attributes.)

sgarg263• 14 years ago

In the current environment, health care IT solutions will go further if they help professionals and patients do 'more with less' instead of 'more with more'. The dynamics in the article are real, but there are tons of way around the challenges posed. The article to me says that the market has yet to be cracked, but the opportunity is still pretty huge.

rficcaglia11• 14 years ago

Unfortunately the entrenched attitude is do 'less with more'. There are ways through the challenges posed - but not 'around'. YMMV.

Until patients pay directly for their care and have transparent pricing, I don't anticipate real innovation. (of course examples exist of innovation within the current system: Athena Health, One Medical, PracticeFusion, ZocDoc - but all of these took quite a lot of time and effort and funding to punch through the barriers noted in the article...so yes, it is possible, you are correct).

That said the current (US) system rewards existing thinking and does not encourage efficiency and outcomes and patient satisfaction.

pionar• 14 years ago

This could really be for any enterprise IT company.

wging2• 14 years ago

Eh. If you send out two shipments of Doritos, nobody dies. If you administer a med twice, a patient very well could die. Consequently, if you make it even 1% more likely that a med will be administered twice, patients will die.

rficcaglia11• 14 years ago

Absolutely true. That said, software should never replace human thinking (until the singularity, Ray) and the clinician must be the final authority.

Same goes for pilots - the software can help, but as too many pilots have discovered, looking only at the instrument panel (especially one instrument) is a bad idea, speaking from experience ;)

anon6567• 14 years ago

I got this pitched to me a couple of months back, but why not start a Yelp-like medical tourism service? Americans can save a ton of money going to S. Korea or anther country with similar healthcare standards at the fraction of the price. It would have to be elective surgery, but you can save a ton of money.

dawson• 14 years ago

OT: There are a lot of people in this thread thinking about starting or joining a Health IT company. I'm hiring (> 7) engineers, happy to help (answers questions, make introductions etc) or hire, email is in profile.

Thinking of starting a Health IT company? Here are top three industry challenges

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