A vast majority of healthcare startups do not survive longer, often losing steam even before attaining Series funding. Theranos, Zeo, and sleep-tracker Hello are few amongst such startups that have shut down in the past five years.
Theranos, one of the famous blood-testing firm founded in 2003, witnessed a fall from 2015 until September 2018 when it had to cease its operation for good. It failed to reach key development milestones and was forced to default on its debt financing. Moreover, the company faced affluent lawsuits from investors and patients when The Wall Street Journal asked about its blood-testing equipment. With its founder Elizabeth Holmes stepping down as CEO, she and former Theranos president Sunny Balwani had to face charges of wire fraud.
Similarly, another startup of that moment, Zeo, raised around $30 million from investors to build an active headband to track user’s sleep patterns and an accompanying app as a personal sleep coach. Despite having many users and buzz around this product in publications like Popular Science and Wired, the startup went out of business a few years since inception.
Tech Strategies for Healthcare Segment
The digital healthcare startups fall short due to the implementation of strategies that are built in the tech sector, an entirely different segment with its set of guidelines. This results in the failure of the early promises. Although money continues to pour for the developmental task, they fail to crack the code for delivering exciting technologies with the potential to transform healthcare.
Besides, the modernized healthcare products must appeal to the consumers as well as stakeholders, right from patients and physicians to insurers and regulators. These individuals have a say in whether a new technology or tech strategy is adopted. If you did not know, the medical devices might take years to reach the final market due to the jumping required through complicated clinical and regulatory hoops. And, it cannot always quickly be iterated once done.
This environment could result in the move quickly and break the company model. For instance, many industries are focused on developing and marketing to consumers, without considering the doctors and insurers who are actually the gatekeepers for the passage of products. This is the primary reason why 61% of B2C healthcare firms end up marketing to B2B and selling to employers, hospitals, insurance companies, and other healthcare facilities.
Need-Driven Innovation
Today’s healthcare industries can opt for need-driven innovation to simplify their procedures and safeguard their company from fall. Instead of directly leaping into the invention, and identifying the challenges to address, the healthcare businesses must learn the crucial issues and then design a technology to resolve it uniquely.
Once the innovators figure out the unmet healthcare need, they can invest in learning the problem, various existing solutions, and the stakeholder’s requirements and viewpoints to avoid preconceived notions about a solution or its design. This process typically comprises the interviews with stakeholders, researching medical literature, and sometimes in-person observations to identify the outcome of a problem in multiple healthcare settings.
Here, the innovators build a list of needs a solution must offer called ‘need criteria’ to meet various stakeholders’ demands and improve the standard of patient care. Precision, ease-of-use, cost, and quick integration with existing processes are some of the factors involved. Rather than releasing a product and then witnessing the user’s response, innovators can use the need criteria to lead the development of the solution, with the successful adoption amongst individuals.
However, the tech innovators are often tempted to avoid this process as it is painstaking for them to understand and address the stakeholder requests genuinely. This is why they jump quickly into product development without any need collation.
End-To-End Evidence Generation
To attain the key milestones such as regulatory clearance, obtaining insurance reimbursement, or raising capital, the health care startups must gather certain specific evidence and clinical data. This evidence generation is falsely believed to be of linear manner. This is a common and costly mistake that can pointedly delay the amount of time required for revenue accomplishment.
Albeit some digital healthcare startups prevail with regards to accomplishing the achievement, they come up short on financing before creating explicit proof to persuade customers to purchase from them. One can avoid such issues by starting the conversations early with the relevant stakeholders about the kind of data they need for further steps.
Additionally, one can likewise consider the Food and Drug Administration’s (FDA) Payor Communication Task Force. It comprises open and private payers, for example, private wellbeing plans, Medicare and Medicaid, wellbeing innovation appraisal gatherings, and so forth in the pre-accommodation strategy and parallel survey with the Centers for Medicare and Medicaid offices. It is primarily leveraged to shorten the time between coverage decisions as well as FDA approval or clearance.
Multiple Potential Indications
The technology used by most healthcare startups has multiple potential indications. Such firms characteristically pick the initial indication solely based on what the company’s founder knows about. For example, an originator who is a liver disease specialist, for instance, will pick liver malignant growth over mouth malignancy without a doubt. However, this is not considered to be the right call always.
In a nutshell, the evidence created in an inappropriate initial indication will deplete assets before you have any time to turn. Therefore, to determine the best indication, one has to perform a value proposition analysis on possible indications and then pick the most compelling one in terms of the competitive landscape, market size, and patient adoption.
Elements of Payment and Reimbursement
It is crucial for healthcare startups to learn more about the payer of the product and the amount of reimbursement that goes to it. Misunderstanding the details of the economics of payment impacts the healthcare business severely and may result in its downfall.
Most often, when we hear individuals pitching any clinical gadget, we expect they will get the full installment for the applicable repayment code. But then again, it is likely that one-third of the reimbursement goes to the product. Therefore, pricing any of the products without profoundly understanding the cost of goods, the reimbursement, and payment dynamic will doom a healthcare startup to failure. It is vital to note there is no shortcut to learning the economics of payers, providers, and other consumers.
Conclusion
Now, you know that merely adopting what works in the technology segment and integrating it into any healthcare startups won’t cut it. Instead, as digital health continues to take off, you need to get the consumer demands right, design an innovative solution to address stakeholders’ issues and priorities, and demonstrate that your product delivers a better outcome.
