Today’s session with four impressive panelists talked about why large academic hospital centers have mostly failed to incorporate the “agile” methods of innovative companies in the private sector to improve patient outcomes. As Eric Topol has noted in his book The Creative Destruction of Medicine: How the Digital Revolution Will Create Better Health Care, it takes approximately 10 years for medical innovations to become widely used in clinical practice. Clinicians today face numerous inefficiencies and frustrations that could be significantly reduced with the proper implementation of information technology and yet large academic hospitals remain passive players, while most of the innovation is generated by the private sector, often by physicians who have quit clinical practice altogether in order to launch companies to create game-changing technologies. The question is, why do these clinicians feel that they must leave their institutions and enter the private sector in order to innovate?
One issue the panel discussed is the connotations of “failure” among over-achieving physicians. Truly innovative companies understand that failure is part and parcel of innovation. Agile companies quickly introduce new products and features, learn from the failures and re-iterate. The panelists agreed that physicians are trained to be intolerant and even allergic to failure. They get straight-As as undergraduates in order to get into medical school, and then push themselves to ace exam after exam as they progress through their training. “Failure is not in my vocabulary” is a common mindset among physicians. Yet many physicians do become successful entrepreneurs, so this can’t be the entire story.
Another major factor is that the most prestigious academic centers are simply arrogant when it comes to improving care and empowering clinicians. “Why should a big-name hospital with the top nephrologists invest in reducing dialysis waiting times if their patients are happy to come back over and over even though they’re kept waiting for 4 hours?” said Dr. Yeshwant. There’s no ROI there.
And when it comes to encouraging innovation among their clinicians, the big academic centers insistence on owning 100% of the intellectual property invented by their staff leaves little motivation for clinicians to spend precious time trying to invent solutions to improve care. Academic hospitals today force their clinicians to sign onerous “Assignment of Inventions” agreements, which is why many leave for the private sector. Physicians want to save the world and truly care about patients, but there still must be some additional incentive to invent.
Dr. Horn made the excellent point that in the venture capital world, most of the funding tends to go to “flashy gadgets” that are targeted mainly at middle to upper-class tech-savvy Millennials and Gen-Ys who are the healthiest segment of the population to begin with, and are the least in need of improved outcomes. “We need more down-to-earth innovation that is focused on underserved populations such as minorities, rural populations and the elderly.” How can we get private investors interested in investing in solutions that target these populations?
Finally, VCs lack of experience with MedTech and their inability to understand how the needs and motivations of physicians are different from typical founders is causing them to miss out on potentially lucrative opportunities. In particular, the standard VC requirement that “the founder must quit their current job and be focused 100% on running the new venture” makes no sense in the context of Health IT investing. Dr. Joe, in particular, recalled how countless VCs have “advised” her to quit working shifts in the ER and “focus” on her business. “How can I continue to understand the needs of clinicians and patients if I have to quit practicing completely thereby cutting myself off entirely from the market I’m trying to serve?” said Dr. Joe. Encouragingly, Dr. Yeshwant, representing Google Ventures, said that Google Ventures agrees. “They encouraged me to continue working clinical shifts, which I still do twice a week. They don’t want to cut me off from the knowledge that makes me valuable to them in the first place.”
In the end, the panelists agreed that healthcare is not a typical marketplace and therefore innovation cannot simply follow the private sector model 100%. Doctors must learn to be more tolerant of failure, but investors must also understand that “failure” cannot extend to adversely affecting patients. Healthcare will always be more conservative than the private sector in this sense, as it should be.
Yet it still seems that we’re missing a huge opportunity to develop collaboration between the large academic centers, the private sector and clinicians themselves. As an investor, here’s what I would like to see happening:
All in all, I couldn’t have imagined a better way to spend a Sunday morning in Austin. After sitting through so many panel “discussions” where each panelist made a 10-minute “infomercial” style pitch leaving only a few minutes for audience questions, the format, moderated by Dr. Ostrovsky, was a breath of fresh air. Dr. Ostrovsky limited the panelists’ self-introductions to less than 2 minutes and then opened the floor up to questions. It was the first real two-way discussion I have seen at SXSW.
Jim Ryan has spent the past 20 years building global markets for US-based telecommunications and enterprise technology companies. Mr. Ryan exited five startups (2 IPOs, 2 acquisitions, 1 Chapter 11) and now uses his expertise as one of the three founding partners of Farpoint Ventures helping startups from the US quickly build global sales channels and bring in revenues from overseas markets. Mr. Ryan has closed over $1B in export business for startups.Mr. Ryan holds a Bachelor's degree from Harvard University and a Master's degree from Osaka University. He is a native speaker of Japanese, and is conversational in Mandarin Chinese and French.In between meetings, he has climbed Mt. Rainier three times, finished the Boston Marathon and Cape Cod Marathon, climbed Mt. Washington in all four seasons and hiked to the bottom of the Grand Canyon 10 times. He holds a Private Pilot license and enjoys flying his Cessna 172 around New England and beyond.
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