Why health companies are branding themselves as tech companies.
From digital health startups to primary care groups, companies are increasingly branding themselves as tech companies first, health care companies second. Shunning ties to the mission-driven health care sector may seem counterintuitive at best and sacrilegious at worst.
Yet for many new entrants, such an approach — which we call avoidant positioning — is becoming the norm. We unpack three weaknesses of the health care label that may be fueling a broader identity crisis for these firms, and suggest that this trend represents a wake-up call for health care.
Health care suffers from a death-by-pilot-project syndrome
Health care, by virtue of its biomedical underpinnings, gives great credence to following the scientific method before embracing new initiatives. Physicians are often skeptical of new interventions without convincing evidence. The rigorous process of evaluating a new pharmaceutical product or the complex methodology of a randomized clinical trial, however, often cannot be applied to a delivery-side intervention like a new care model. Innovations in health care delivery are better evaluated through multiple small-scale, iterative pilots that let stakeholders validate hypotheses before moving into a scaled model.
To the extent that physicians are starting to appreciate the benefits of a piloted approach, there is still a certain inertia in spreading the lessons of a successful program across an enterprise. There are many reasons for this, including cultural resistance, financial short-sightedness, organizational complexity, and risk-averse leadership.
For example, a clinic system might pilot a new after-hours or weekend clinic, but find that despite improved patient outcomes and satisfaction, buy-in from the physician workforce remains poor. Or a health system might pilot a new telemedicine initiative for urgent care, but find that the logistical barriers to applying it to primary care use cases are insurmountable. This leads to a situation where the same novel ideas are revisited decade after decade in experimental contexts but never move the needle on cost or quality in a meaningful way at scale.
Health care’s reputation for not adapting to change can spook both entrepreneurs and investors. So new entrants looking to shake up the status quo might be resistant to branding themselves as situated firmly within health care, and may be more inclined to position themselves as technology companies with health care-related products and services.
Health care rarely refocuses its attention on the customer
Although health care is firmly established as a service industry, it has not always placed a premium on customer satisfaction. In fact, the experience of navigating the industry can be a downright hostile experience for patients, as they are confronted by long wait times for clinic appointments, confusing layouts and poor wayfinding in hospitals, and inexplicable coverage denials by insurers. In some respects, it seems as though every facet of the industry is intent on ensuring a poor experience for patients.
The industry has historically been resistant to incorporating patient feedback. The idea of correlating patient satisfaction scores, as measured by tools such as the Hospital Consumer Assessment of Healthcare Providers and Systems or Press Ganey scores, with quality scores or reimbursement has been contentiously debated. Physicians and researchers have actively questioned whether patients’ perceptions of their care experience have much utility, given studies that fail to show any correlation between satisfaction scores and care outcomes. In its discounting of the importance of customer satisfaction, health care has, until recently, largely missed the boat on the rising tide of consumerism.
Branding a startup as a technology outfit, rather than a health care business, may signal to consumers that the company intends to take the perceived experience of using the service or product seriously while developing a consumer-oriented approach that has so far eluded health care incumbents.
Tech companies bring new investors to the table
The health care delivery system is also saddled by unpredictable complexities, including a third-party payer system, numerous regulatory constraints, and a trend towards mergers and consolidations that lead to an increasingly uncompetitive marketplace. Given these factors and others, venture capitalists have been generally averse to tackling the sector.
According to Pitchbook data, venture capital poured more than $20 billion a year into health care over the last two years. Pharma and biotech accounted for more than three-quarters of these investments, while health services and systems represented less than a fifth. Though successful delivery-side innovations in this field have the potential to make a significant impact on the health and lives of millions, they often require a minimum 10-year runway to achieve scale, and continue to contend with an uncertain policy landscape.
Branding a company as standing outside of “real” health care may reassure investors that a positive return on investment is achievable and realistic. Investor confidence, in turn, yields larger funding rounds and a higher valuation.
Implications for health care
When a health care startup positions itself as a technology company with a particular fit in health care, it may not be an indication that the company has a misplaced sense of mission. It may be a savvy business move — one that should prompt the health care industry as a whole to engage in serious self-reflection to understand why these new entrants appear to be so averse to branding themselves as health care companies.
Health systems need to invest in a workforce culture that is tolerant of experimentation and innovation, while being comfortable sharing ideas that work with peer institutions. Trying to retain a competitive edge by refusing to share best practices or lessons learned from notable failures will set the whole sector back in its ability to scale ideas that work. It is also important to broaden the definition of scientific process and research — a nod to the fact that the work of evaluating the effectiveness of health services and technology solutions will be fundamentally different than traditional methods used for biopharma. For example, in contrast to the rules and rigor of a randomized clinical trial used for pharmaceutical targets, innovations in services or technologies need to be assessed on meeting milestones appropriate to their level of maturity and adoption within the health system.
Health care organizations also need to invest in better customer service. This implies a marrow-deep reckoning of just how broken the experience of navigating the sector can be for patients. Ultimately, new startups are inexorably bound to health care incumbents, and both new entrants and industry stalwarts have the potential to learn from one another. The semantics of branding oneself as a health care company rather than a technology company are less important than ensuring that true value is delivered to patients.
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