The Coming Revolution in Health Care
To understand how the American health-care system is about to change, forget Washington. Look to the innovative companies hard at work on the future.
John Hersey
The Supreme Court may have upheld the Affordable Care Act, but the future of the American health care system remains very much in question. Republican legislators have symbolically voted to overturn the law more than 30 times, and Mitt Romney has vowed to complete the job if elected. Even if the law survives, containing the soaring cost of care remains the nation's most pressing fiscal challenge. Something has to change.
Fortunately, the change is already under way. It is led not by politicians but by entrepreneurs far from Washington, eager to tap into the myriad opportunities presented by the $2.6 trillion health care economy. Their mission: to fix a system that has grown impossibly inefficient and bureaucratic. In fact, the most exciting ideas in health care are not the treatments and devices coming from research labs. Instead, they're business applications that aim to cut costs by wringing out inefficiencies and boosting communication and transparency, turning health care into a real, functioning marketplace.
Investors are intrigued. Halfway through 2012, investments in digital health care start-ups were up 73 percent from midyear 2011, according to a report put out by San Francisco-based health-care accelerator Rock Health. And the Halo Report on angel funding reported that health care companies have been receiving the greatest share of total dollars, beating out sectors such as software and energy. There's even a new crowdfunded "Kickstarter for health" called MedStartr.
In terms of size, orientation, and ambition, these companies are all over the map. Some are tiny start-ups; others are well-funded would-be giants. All of them are concerned not with new treatments and therapies and devices but with creating smarter systems. As a group, they are animated by the big ideas detailed below, new ways of thinking that are shaking up health care for the 21st century.
BIG IDEA
Medicine Is a Marketplace
With new software, the doctor will see you now, not in three weeks.
Each year, Americans pay a billion visits to doctors' offices, waiting an average of 20 days to get an appointment. Yet on any given day, even physicians with busy practices and long waitlists lose 12 percent of their available appointment times because of patients who don't show up or cancel at the last minute; some 40 percent of appointments scheduled more than 20 days ahead get canceled or are no-shows.
Users of New York City-based ZocDoc, an online service for researching and scheduling appointments with doctors, can get an appointment within a day or two. "There's a health care supply that goes underutilized because of an inefficient market," says Cyrus Massoumi, a former McKinsey & Company consultant and ZocDoc's CEO and co-founder. Combating such inefficiency is going to be even more vital when the 30 million-plus Americans expected to get insured under the Affordable Care Act start vying for appointment times. "A few years ago, Massachusetts got half a million new patients and no new doctors," says Massoumi. "Their wait times are now about 50 days. That's what can happen nationally if we don't change."
ZocDoc is free for consumers, but doctors pay $300 a month to be listed. With or without Obamacare, these kinds of services--which include Zeel, a booking site for alternative-health providers, and GoHealth, a comparison-shopping site for health coverage--seem bound to grow. ZocDoc already draws more than 1.5 million users a month in 20 major markets, including New York City; Washington, D.C.; and San Francisco. Not only is it more convenient than picking up the phone; the site offers pages of doctor ratings provided by confirmed patients. The company has raised $50 million from DST Global, the investment vehicle of Russian billionaire Yuri Milner, an early investor in Facebook and Zynga. That's in addition to $45 million raised from other investors, making ZocDoc among the best-funded health care start-ups.
BIG IDEA
The Consumer Is King
How to get good data into the hands of patients.
Even for those whose employers foot the bill for health insurance, out-of-pocket medical costs are going up, thanks largely to the increasing use of high-deductible health plans. According to Kaiser Family Foundation, last year 31 percent of workers covered by their employers had deductibles of at least $1,000, up from 10 percent five years ago, and deductibles of $5,000 for a family aren't uncommon. That puts the responsibility for making prudent health care choices firmly in the hands of consumers. "The old idea was that the patient was basically walled off from decision making," says Rebecca Woodcock, founder and CEO of CakeHealth, a San Francisco-based online platform for managing health care expenses. "That's not a sustainable model. Getting customers to care and to be part of their health planning is the real sustainable solution."
That starts with selecting care--an area staked out by start-ups such as Salt and four-year-old Castlight, which in May raised $100 million in a Series D funding round, a record for a health care IT start-up. Based in San Francisco, Castlight helps employees of midsize and large companies, including Kraft and Honeywell, do comparison shopping for medical procedures. It turns out that shopping around can make a big difference--prices for common health care services can vary more than 700 percent. "There's almost no correlation between quality and price," says Peter Isaacson, Castlight's chief marketing officer. "That lack of transparency is a core issue of what's been wrong with health care." By pulling quality and patient-satisfaction data from third-party sources (including the Department of Health and Human Services) and crunching data from hundreds of thousands of employee claims to determine actual costs, Castlight shows not just what you can expect to pay at a given provider but whether it's worth it.
The co-founders of New York City-based Salt are looking to lower individual health care costs in another way--by pointing users to low-cost medical resources, like clinics. "Our tool helps people at the moment they need care," says Salt co-founder Kiel Brennan-Marquez. Search the site for sore throat, vaccination, or food poisoning, and Salt will give you options beyond the hospital or doctor's office. "You can get any kind of vaccination or routine screening at a retail clinic," says Brennan-Marquez. "If you have a minor illness, like strep or other infections, a nurse practitioner at a community health center can run basic tests and prescribe antibiotics. These kinds of problems are disproportionately represented in everyday health needs."
