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Health 2.0: Innovators, Opportunists and Delusionals

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Health 2.0 just had its largest ever event, with 50 percent more attendees than their previous largest event. A number of companies launched during the conference, but like many events, the most interesting activity wasn't what happened on the main stage but the many side meetings/events that took place. The other notable item is the recasting of major corporations from within and outside of the traditional health care arena. This is further evidence highlighted in the Healthcare Disruption series on TechCrunch.*

One of the most intriguing quotations was by Mark Bertolini, CEO of Aetna, who stated, "We're evolving into a HealthIT company with a health insurance component." He stated that $12 billion out out of their $34 billion in revenue was from non-insurance revenue streams and that they have done over $1.6 billion in acquisitions in the last year. There's much more to come from large corporations. I had several conversations with Fortune 100 companies that are extremely serious about having a presence (or expanding their existing presence) in the health care industry. Most haven't announced anything, but don't be surprised to see more in the coming months.

Broadly speaking, my takeaway from Health 2.0 was that there were three categories of people leading projects and startups: Innovators, Opportunists and Delusionals. In all three cases, Tom Evslin's observation that "nothing great has ever been accomplished without irrational exuberance" captures the state of the industry. Naturally, many will wash out, but some huge successes will emerge.

The most interesting, of course, are the Innovators. More on that in a moment. The Opportunists remind me of many companies in the dotcom boom. Consultants, investment bankers and the like chase the almighty buck as they see health care as a place to make a quick buck. Unlike the dotcom boom, there's not many quick flip opportunities in health care, though expect to see some micro transactions that can provide a modest return for developers. It's easy to sniff out the Opportunists, as they have little background or true passion in health care and sprinkle in the right buzzwords like "meaningful use" to act like they understand the landscape.

The Delusionals were all over at Health 2.0, demo'ing "cool apps" yet sadly falling into the same trap as many startups that were rubble from the Internet bubble. They have familiar quotes from that bygone era: "We're not worrying about revenue." I've seen this movie before and know how it ends. Apparently, they didn't read "HealthTech FAIL: Lessons For Entrepreneurs From Health Startups Gone Awry."

The Innovators are where the real action is. I'll highlight a couple of examples where I spent much of my four days during the Health 2.0 event. There was a two-day Code-a-thon sponsored by Novartis. I believe Novartis publishing an API will be looked back on as a seminal moment in the shift to Pharma 3.0. I outlined the implications of this in "Health 2.0 Code-a-thon: Novartis invites all comers to innovate around their API" (disclosure: Avado provided the underlying platform for the implementation of forms and services integrating with the API). More than even the implications of the API, Novartis did a great job of signaling to the market that they are "open for business" to working with innovative individuals and startups that they can partner with to evolve their business.

As interesting as the disruptive technology is, I'm most fascinated with disruptive new health care delivery models. Clayton Christensen's groundbreaking book was The Innovator's Dilemma; however, he followed that up with his co-author Jason Hwang, M.D. with a book entitled The Innovator's Prescription: A Disruptive Solution for Health Care. In that book, he highlights many of these disruptors. Earlier I highlighted a couple of examples of disruptive new health care delivery models in "MedLion: The Most Important Organization In Silicon Valley That No One Has Heard About" and "WhiteGlove Health's Funding Round Powered by Technology-enabled Services."

It's hard to argue with the case made by Christensen and Hwang that in order to slay the health care cost beast that is bankrupting local, state and federal government, disruptive innovation has to happen. One of the most respected economists in the world, Laura Tyson, stated, "We don't have a debt problem, we have a health care problem." The newly formed group, the Healthcare Delivery Innovators Alliance (HDIA), was founded with the purpose of identifying and advancing standards for new health care delivery systems that can demonstrate that they can dramatically lower costs while improving the health outcomes and consumer experience. Having played a role with the IAB (the industry association for the Internet ad market) in the aftermath of the dotcom bust, I was asked to share how that experience can be instructive for accelerating the growth of disruptive innovators in health care delivery. Also presenting and participating in the first in-person meeting of the HDIA was the Innovator's Prescription co-auther Jason Hwang. (Disclosure: Avado has joined HDIA as a founding member of the alliance.)

I was pleased to find out that the founders of the HDIA have a similar plan to the "Prescription" that I outlined in the embedded presentation below. As with the turnaround of the Internet ad industry, proof, standards and education are critical to accelerating the growth of these exciting new models. The Alliance is inviting organizations to join their movement. While welcoming any organization that is sincerely driving innovation, the HDIA is particularly interested in employers who share the interest in reversing health care's hyperinflation. Naturally, if employers (who pay for the majority of health care) signal to the market that they are going to buy from health care delivery models that are really making a difference, it will accelerate the growth of these models. The reality is that any disruptive innovator has nothing to lose, while incumbents are primarily focused on preserving current revenue streams. With those revenue streams in health care adding up to almost 20 percent of the economy, rest assured that the incumbents will use FUD and every other tactic in the book to protect that ocean of revenue.

As with any group that brings change, the Innovators are going through the Three Stages of Truth articulated by Arthur Schopenhauer -- first, it is ridiculed; second, it is violently opposed, and finally, it is accepted as fact. Organizations such as MedLion, WhiteGlove, Qliance and others are in the second phase, as they have proven that their models work, and it threatens status quo. The HDIA's purpose is to get it to the final stage of truth.

View "HDIA Introductory Presentation" and "Getting healthcare innovators their fair share" on Slideshare, or view the embedded slideshow below:

*The following is the Healthcare Disruption series referenced above:

Healthcare Disruption: Pharma 3.0 Will Drive Shift from Life Science to HealthTech Investing
Healthcare Disruption: Providers Will Use HealthTech to Differentiate and Produce Better Outcomes (Part II)
Healthcare Disruption: Providers Are Making Newspaper Industry Mistakes (Part III)

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