Today, I’m discussing how technology is impacting healthcare, and giving a lesson on how I analyze companies within this space from an investment perspective.
How many telemedicine or phone appointments did your family have last year during the pandemic? While Teledoc has been serving up telemedicine for several years now, when the world shut down in early 2020, other telemedicine companies were also able to step into the gap by partnering with health insurance providers and appealing directly to consumers.
In addition to Teledoc, companies like MeMD, iCliniq, Amwell, MDlive, Doctor on Demand, LiveHealth Online, Virtuwell, PlushCare, and HealthTap top healthline.com’s top 10 list.
But it’s not just telemedicine in the health-tech space getting investor attention.
Health technology has several major problems to solve, including:
- Removing duplication and increasing continuity of care across multiple practitioners per patient through accurate and accessible health records
- Making virtual health more affordable to deliver and accessible beyond geography
- Free up practitioner time to connect with other practitioners and specialists and research, and less time in records.
- Leverage the availability of patient data and accessibility of anonymized patient data (cancer, as an example) to personalize more effective treatments, reducing costs and recovery times.
In addition, technology has to avoid implementation side-effects, such as practitioner burnout.
If you have noticed your doctor spending less time with you in an appointment, or working from a computer to put notes into electronic health records (EHR) instead of pen and paper; or you’ve noticed your doctor’s stress levels and distractibility during your in-person appointments, you’re not alone.
According to Dr. Robert Wachter, professor and chair of the department of medicine at the University of California, San Francisco, “EHRs contribute to burnout by turning physicians into unhappy data-entry clerks, and also by enabling 24-hour patient access without any system to provide compensation or coverage.” Physicians report less satisfaction in their practices and at the same time, are suffering higher rates of burnout.
Researchers go on to state: “senior physicians in particular loathe the “cumbersome, time-consuming data entry” that comes with using EHRs. Other problems expressed to RAND (a non-profit think-tank contributing to the research) by doctors included non-intuitive user interfaces, information overload, lower-quality documentation resulting from template-based notes, and the lack of interoperability between electronic systems.”
Critics go on to say that eventually there will be benefits but state that the technology has to improve and practitioners need to reimagine the process of helping patients get what they need and documenting that care. [source: NCBI-National Library of Medicine]
I watched my own doctor begin to transition his practice to EHR, scanning years and years of notes from hundreds of patients and 6 practitioners. He hired a service to come in and reduce two rooms full of records to one computer. Then he incorporated a computer into his appointments instead of the file-folder-paper-form chart I was accustomed to seeing.
While his attention seemed a little distracted on figuring out where to click and type, I can see a day coming where he’s not having to decipher his horrible handwritten notes for what he diagnosed or prescribed a few years ago. And I can see a day when his notes are more searchable.
So I’m wondering if the burnout situation is temporary?
I can also see it being easier to get into an appointment with a different practitioner if my doctor is booked out for 3 months and I need to be seen now.
No Solid Standouts in EHR Space
One of the most frustrating things about researching this topic is the top issues in health tech revolve around regulations, HIPAA, and electronic health records.
….And it’s ancient when you consider how quickly tech has evolved since the punch card days of the early computers that was only giving way to magnetic tape hard drives and floppy discs in the early 80s.
Almost every company I found in this space was founded before 2005; and had no venture activity in at least 7 or 8 years; For example one of the younger ipo companies – Athena Health (ATHN) went public in September of 2007 at $18 per share and currently trades at just under $10 per share.
In fact, the top two companies in the EHR space were founded in 1979; one – Epic – has only one investor, Judy Faulkner, who has never applied for venture capital and is still privately held, yet holds almost 50% of the country’s medical records on its platform, according to Johns Hopkins Medicine. Forbes referred to Ms. Faulkner in 2013 as the most powerful woman in healthcare.
The other company, Cerner – has been publicly traded since 1986, and its founders were colleagues at Arthur Andersen prior to founding what originally was called PGI & Associates. The numbers say these companies are pretty close: based on 5400 acute care hospitals, Epic holds 28% of market share, while Cerner holds 28%, Meditech: 16%, CPSI: 9%, Allscripts 6%, Medhost 4%, Athenahealth: 2% and 9% of reporting hospitals have no formal EHR system in place. [source: ehrinpractice]
Looking at Epic and Cerner’s longevity and dominance in the space, it had a similar feel to IBM, Digital Equipment and Wang in the early 80s.
Who knows which innovative startup company could step into this space, making the current old-timers in the health tech electronic records space either wake up and innovate or fade away entirely like DEC and Wang.
Can we conclude that there’s no serious innovation even though tech and encryption has evolved significantly since the early tech boom days?
While the most time consuming, high stress issue for physicians, is adapting to the EHR requirements, there are some interesting developments in the reinventing healthcare space.
Private Companies Reinventing How Healthcare is Practiced
Ro – the Patient Company
Ro operates direct-to-consumer digital health clinics, primarily focused on men’s and women’s health, as well as smoking cessation. Founded in 2017 by Rob Schutz, Saman Rahmanian and Zachariah Reitano initially focused on issues men face with aging, but then added smoking cessation and then women’s issues.
Focused on the telemedicine method of delivering services, Reitano says, “If I squint into the future, I think there’s an opportunity to genuinely be able to offer as many Americans high quality, affordable primary care for less than the cost of their [health insurance] deductible.” [source: Forbes]
Pricing for consumers comes in monthly subscriptions around $20 to $40, depending on whether members want end-to-end services including virtual visits, in-home diagnostics and pharmacy for ongoing care. In
Ro has been on the move with acquisitions, with the acquisition of Kit – a 17 month old startup in the at-home health testing space in June 2021. Other acquisitions in the last 12 months include Workpath, an in-home care API (application programming interface – which is a fancy way of describing the use of apps that talk to each other).
Their initial funding came from General Catalyst Partners. General Catalyst remains actively involved in funding rounds, along with FirstMark, with the most recent Series D raising $500 Mil in March of 2021. Total funding now exceeds $876 Mil, with a valuation of $5 Billion [source: Forbes – the article disclosed that Forbes has a small investment in Ro]
Tempus is an artificial intelligence (AI), molecular-biology company, focused primarily on cancer research, through direct access to over 3 million patient records and counting.
Founded by Groupon co-founder Eric Lefkofsky, Tempus was an idea that began when Lefkofsky’s wife was diagnosed with breast cancer. The focus started out to better understand tumors at the molecular level and customize treatment to individual needs.
In the early days of the Covid-19 outbreak, Tempus pivoted to include one of the first at-home testing kits. Citing a lack of diagnostic testing in those early days was an example of the market gap in the health-care infrastructure preparedness for such situations.
AI is used to analyze the massive amount of data involved. In January Tempus launched its Tempus ONE device for patient-facing clinicians to access data and incorporate patient test results into the equation for a quick and more accurate personalized treatment solution.
Tempus was valued at $8 Bil at the time of its G round of funding in December, 2020 and in May, 2021 was listed #16 on CNBC’s list of top disruptors.
Social networking, artificial intelligence, and delivery methods in the publicly traded space help to gauge the overall trend of the sector.
While LinkedIn has a practitioner networking space, Doximity targets physicians from many different specialties, including pharmacists, physician assistants and nurse practitioners. The company claims to be the largest community for healthcare professionals in the country with 70% of all US doctors already signed up for membership. [source: UpCity]
According to the company’s website, services include giving practitioners the ability to have virtual face-to-face appointments with patients through an anonymized number, transfer patient info to referring practitioners via the app, and keeping up on the latest news and research and complete continuing education just by reading the articles.
Doximity was founded in 2010 by Nate Gross, Jeff Tangney and Shari Buck. Tangney had tried his hand at a health tech startup previously. The company “Epocrates” is a practitioner research and support site focused on shortening the time it takes for a practitioner to do necessary due-diligence on a patient’s presenting condition, and the company still helps with disease information, infectious disease treatment, alternative treatments and lab-diagnostic information.
Tangney took the lessons learned from Epocrates: Don’t raise too much money. Don’t burn too much cash. And fix a real problem for practitioners. [source: CNBC] Co-founder Shari Buck comes from a background in mobile software design and development, and co-founder Nate Gross, MD serves on the faculty at Stanford (Clinical Informatics Fellowship).
Doximity raised $605 Mil with its IPO just one month ago (June 23, 2021) with a valuation of $4.6 Billion and a stock price of $26 per share. As of July 29, the current stock price is $59.86.
Intuitive Surgical (ISRG)
Robotic assisted surgery is a mainstay. The da Vinci System developed by Intuitive Surgery is almost a household name in surgical circles these days. Surgeons began using the technology in surgeries to successfully perform computer-enhanced closed-chest heart surgeries in 1998 [ source: NASDAQ]. If you’ve ever had a family member go through open heart surgery, half of the recovery is from chest trauma. Since then, the FDA approved the use of the system for gallbladder, gastroesophageal, prostrate, thoracoscopic and gynecologic procedures.
Founder Frederic Moll is considered the Bill Gates of robotic surgery. In 1994, Moll pitched the idea to his employer who rejected it, so he rounded up investors and went after it himself. [source: MDDI (medical device and diagnostic industry)]
Intuitive Surgical went public at $9/share in 2000. Now it trades between $970 and $985 per share.
While HealthTech gets a lot of attention from investors, the elephant in the examination room (electronic health records) hasn’t had the disruptive technology come in to knock the old-timers out of their comfort zones yet.
Instead, look to the way traditional practitioner visits are being repurposed for delivery outside of geographic and insurance limitations while staying affordable. And watch how data is being used to customize treatment options and lower costs.
Also look to innovations in diagnostics and procedures especially with AI gaining ground.
Stay tuned – next up is the exciting space of self-directed health tech – where the patient is more involved in leveraging their own data made available by emerging health tech to change behavior and drive up wellness.
What do you think? What are the top health issues you’d like to see technology address? Where would you invest if you found a startup addressing that issue? Comment below!