Healthcare Startups – Factors affecting Success and Failure

By | May 30, 2015
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Global momentum is changing rapidly for the wide-spread acceptance of digital healthcare and related apps to improve healthcare quality and the enhance the accessibility to the needy. People who are skilled with the knowledge on technology but hardly has any experience on healthcare are finding their spot in the booming sector.


“If you look at the healthcare sector, it is one of the last sectors to be disrupted by technology. Nothing much had changed when you compared 20 years ago with three years ago. Now, of  course, things are looking up,” said Varun Dubey, AVP, Practo. According to the Mercom Capital Group, 2014 was the year with more than $4.1 billion in venture funding for digital health companies. This amount is more than the amount raised in the last three years put together. Digital healthcare sector includes wearables, monitor vitals, apps that facilitate outpatient care, CRM systems that helps building better doctor-patient rapport. In the startup industry, it is common for the entrepreneurs to neglect major factors that are critical for success. The major factors for the success of the digital healthcare startups are listed below:

1.Simplification of workflow:
Creating of just the workflow problems for providers will not help in anything. The app development may look good but it does not aim to solve any problems with the data, there is no use to the app. Workflow simplification is critical for any healthcare startups. If the entrepreneur is not able to integrate with the prevailing process and systems, it just means an additional burden to all. Also, no doctors or nurses are interested in signing in and signing out every day. Electronic health record is the master in this modern world. Craig Joseph, EHR Physician Advisor at Texas Children’s Hospital says, “Integration with EHR is one of the main roadblocks preventing startups from taking their work to the next level.” EHR vendors are not keen about associating themselves with the startups. But on proving how helpful the app or the products and services of their company could be, EHRs can get on board. If the startups already has few major hospitals on board, then it would be easier for the EHRs to convince. The products of the startups that can simplify the tasks of the doctors and help them do their tasks more effectively will the startups to get EHRs give the access to the kingdom.

2.Pay-for-performance model:
Startups that help its providers in treating and diagnosing patients in a cost-effective manner are high in demand. A key driving force to that is the pay-for-performance model. The common practice for years was to pay the service provider based on the services offered, like consultation fees for meeting patient in the doctor’s clinic, ordering a scan etc., Nowadays, the insurance companies are rewarding the startups on the basis of the performance measures for quality and efficiency and how much they help the insurance companies in saving.  For instance, for a patient with allergies in the skin, instead of dropping to the clinic, he can just send a picture of it to his doctor for consultation. This would cut the cost of using the out patients room in the hospital and cut the burden of travelling for the patient.

Many digital startups work to maximize the utilization of resources available. Various technologies use helps in communicating with the doctors better and at ease. There are psychiatric apps that allows the patients to interact with the doctor without actually facing them. It reduced the awkwardness for a patient to face and open up to a psychiatrist directly. As a result, the providers are looking for help from healthcare startups to reach their performance targets more effectively with fewer office visits and saving time.

3.Empower Entire Team:
Outcome-based payment encourages team based approaches to the treatment. Doctor are the most expensive resource to any hospitals. Service providers are looking at way to improve the performance of PAs, nurses and technicians. Through this, doctors can work on the critical cases alone and save money for hospitals. There are various apps that can monitor vital status and other body mechanism and it helps the doctors as an indicator and help providers produce better clinical results at much lesser costs. Thus empowering the entire team with the services from the startups would help is improving the overall proficiency of the hospital.

4. Personalization of Health Benefits:
CXA’s platform is a user-directed and internet-based service that brings one closer to the democratisation of healthcare. The employees are able to convert the insurance dollars they do not need into benefit dollars to purchase the wellness service that fits their needs. In partnership with MyDoc, CXA has introduced a communication platform on telehealth to connect the employees of a company to healthcare professionals. This give more importance and the benefits of the personalized health management that keeps an employee informed about his health decisions.

Apart from the factors that could help in the success of the healthcare startups, there are some causes to be checked to avoid disrupting the functioning of the healthcare startup. They are:

* Lack of Definite Focus:
There are lots of evidence that suggests the lack of focus can kill startups and is widely prevalent in the healthcare sector. The healthcare sector has a lot of pain points which has to be worked out, so the startups generally take in all the areas of problems and tried to resolve all. But it has to be noted one can take in only the number it is capable of taking in. When it tries to step into all, it might end up not resolving even one. So it is best for startups to pick that one area of trouble and offer expertise and solutions for it.

* Information from Consumers not Adequate:
Expecting consumers to enter their personal information of health records would fail to give meaningful traction. Not all consumers are ready to give the complete details of the health, and even if they give there is no guarantees that is true. The same is considered to be one of the reasons for the failure of Google Health.

* Required huge amounts of money:
This issues crops up during the bubble period, where the visions of the business are filled with grandeur and superficial funding investors threw huge sums of money. End of the day, those startups would not be capable to sustain.

* Too Many Partnerships:
A startup which is reliant on too many partnership is likely to face issues as partnership involve big players. The big players would have different systems and working process. Many good workable ideas have died waiting for approval for business developments and legal departments to process any formality as they do not share the startup’s sense of urgency.

* Lack of Information on Reimbursement:
This has been one among the top reasons for the fall of many healthcare startups. From 2011, the venture capitalist funding have been on a gradual increase. 80% of the companies that receive funding are business to business (B2B), yet still many entrepreneurs think customers would pay for their product and services. Knowing the fact, many startups make the mistake of building healthcare startups with the model of B2C companies. If the companies find other business to sell their products before it is too late, they manage to survive. This could be through advertising the model or giving the license for technology to organizations. It has to be understood by the startups that consumer is the product  and not the customer.