A VC’s perspective on healthcare investment

April 23, 2010

- Dr. Bijan Salehizadeh is a general partner at Highland Capital Partners and focuses on investments in medical device, healthcare services and healthcare information technology companies. The opinions expressed are his own. -

With the passing of the new healthcare reform legislation, there are new-found opportunities to make the healthcare system more efficient with the influx of more than 32 million people over the next several years. With this surge, there will be an inevitable paradigm shift not only for consumers, but also for businesses.

Startups will quickly fuel the healthcare space with new technologies and solutions as the industry looks to aid the expansion of hospitals and health-related companies. For instance, the concierge medicine route is being supplemented with Web-based applications created to access the needs of the consumer while providing businesses key insights so as to foster growth and targeted programs.

With that in mind, here are 3 themes investors are focused on right now:

1. CRM (customer relationship management) for physician practices

Why is it that every other category of small business in the country has figured out CRM other than physician practices? I’m talking about electronic scheduling, reminders for visits, etc. Really basic convenience-oriented items that make a huge difference to patients/consumers. Old school “practice management systems” don’t really seem to cut it. If restaurants can do it, then doctors’ offices must be able to do it in 2010.

2. Practice profitability tools

Continuing the theme from above: the small to mid-sized medical practice is a small business, but most practices have no idea what it costs them to deliver a unit of service. I am on the lookout for tools and services that will help docs and other providers measure the profitability of each customer. I understand that profit and medicine don’t mix well for some but many small practices are at the breaking point now and with declining Medicare and Medicaid reimbursement, they may be in deep deep trouble.

3. Expert systems focused on chronic disease management

Study after study keeps showing that simpler is better when it comes to medical treatments for chronic diseases and that we are a nation of over-utilizers (sic). Three-cent pill Lasix is better for hypertension than the new fancy $5-pill branded drug. There are dozens of examples like this from recent studies in cardiology, diabetes and hypertension.

People have spoken about bedside-decision support and evidence-based medicine for ages. I believe the next 5-10 years will finally usher in the era of guidelines-driven medicine at the grassroots level. Otherwise, the combination of reform and no cost-cutting or payment changes will mean the healthcare system really will be bankrupt.

The government’s Agency for Healthcare Research and Quality (AHRQ) and the U.S. Preventive Services Task Force (USPSTF) have given a boost to this idea and now industry needs to step in with easy to deploy systems that fit into the work flow. Again, the road is littered with many broken-decision support vendors using traditional enterprise models. I think it’s the next generation companies that will succeed in this space.

In all of these cases, the companies with products in the market and revenue traction and those with efficient sales models will likely attract the most attention from investors.

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i thin everything is moving in the direction of concierge medicine like http://clinicalnotebook.com/

Posted by jamespizzle | Report as abusive