How refreshing it was to be back in the real world instead of the virtual, and enjoying the “loyalty of friends.” Boston hosted the HLTH 2021 conference Oct 17–20, with 6,000 attendees and an open exhibit hall ensuring a return to inspiring social interactions. Along with our colleague Charles Aunger, we enjoyed participating and returned energized by a stimulating convocation.
First things first, all attendees were proven vaccinated, tested onsite as a prerequisite to entry, and masks were mandatory. We have entered the era of the pandemic of the unvaccinated. As with past flu pandemics, this one will have lasted about two years before we have it in the rearview mirror, hopefully by end of Q1 next year.
Investment Surge Atmosphere
Notable on the finance front, investment in digital health is breaking all records and racing to a tipping point. The $21B invested by the venture community in the first three quarters of 2021 exceeded the entire 2020 annual tally, which hit a record on its own. Investors now have comparables for digital health and more paths to liquidity, as well as optionality.
Investor panels sounded a common refrain, from Robbert Vorhoff at General Atlantic, to Andrew Adams at Oak HC/FT, Julie Yoo at a16z, and Alyssa Jaffee at 7wireVentures. With the wave of capital surplus, the speed of diligence is astoundingly accelerated. We are marking days to evaluate deal diligence in lieu of weeks or months of quantitative, market, competitive, and financial research. Valuations, milestone-driven and risk adjusted, may be replaced by multiples of the last round or simply target dilution. Unit economics are ignored, revenue multiples in support of valuations are stretched, and the search for hiring quality talent is often deferred for the given company stage, as are scaling forecasts. Overlooked in the crush are when businesses lack the execution capacity to build in an enduring way. Nothing in healthcare works easily or without undue friction hinging on talent, available workforce, infrastructure, strength in operations and reimbursement, regulatory and licensing gates.
Selected insights by experienced industry leaders participating in HLTH (noted below) illustrate promises and gaps in moving from innovation to commercialization. Healthcare in America is a public trust. As such, we must get innovation and transformation right to deliver our potential for society.
Dr. Alan Lotvin, EVP of CVS Health and President of CVS Caremark, outlined innovation challenges for incumbents. In his view, it’s hard for big business to be entrepreneurs, and they’ve indeed missed some really good companies like GoodRx, ro Pharmacy, and hims. But as a $270B company with $15B in rebates alone, it can be hard to figure out what not to do. To address “death by pilot,” he emphasized the need to ensure solution scalability and address a real business purpose. CVS did 75 pilots recently and all failed evaluation. On the issue of drug pricing, Lotvin noted that pharmaceuticals are 10% of the national spend, a trend that has remained consistent for decades. High-deductible health plans and specialty medications create access and affordability issues, and the drive for generics and biosimilars accelerate competition, which is a good thing. As for PBMs, there is a push for greater transparency, but scale matters for infrastructure, technology, reliability, predictability, plumbing, and a counter-price balance to patent-holding innovators.
Dr. Gianrico Farrugia, President and CEO of Mayo Clinic, emphasized institutional values: “Our patient’s trust is sacrosanct.” Purpose-driven development drives Mayo — the duty to evaluate pilots, publish, prove it works, and see the possibilities is what “we owe to our patients.” His exemplars include vaccine development and administration achievements and the accelerated adoption of telehealth and virtual care during the pandemic. He noted that we all agree that healthcare needs transformation. But consensus stops there, descending into debate on what it is, how it is delivered, what it will cost, and who will pay for it. Speaking on intelligent information, he outlined the Mayo four-part data mantra: gather, discover, validate, and deliver with partners. Mayo has more than 100 partners in platforms and products, and algorithms running in the background with new knowledge allow each patient’s care to be increasingly individualized. Treatments can use Mayo data, but the data can’t be taken out of the system because patients trust Mayo — and that trust is inviolable. In his transformation assessment, he estimates that 30% of hospitalizations could be managed at home if everything else were in place, including factors such as housing and food, and that 70% of patients would rather be cared for at home. His hope is that more people will adapt and adopt pandemic learnings, building a better healthcare system in the US.
David Codani, CEO Cigna, was concise and to the point. His three themes were: precision pharmacological targeting (specialty pharma being key); alternative care sites (closer to the patient and more personal); and mental health implications (mind and body). His hope is that we supercharge these opportunities. As for pharma pricing, Cordani believes the US is lagging in leveraging biosimilars and that we need more precise use of precision medicines. A reward structure based on outcomes requires attention, as do clinical programs wrapped around the person. He outlined how payers have become more diversified health service companies including medical, pharmaceutical, and behavioral elements — and he suggested that similar evolution could be taken up by pharma.
Jonathan Bush, cofounder of AthenaHealth and CEO of Zus, and Glen Tullman, Transcarent CEO formerly with Livongo, are both operators, entertaining storytellers, and all-around flame throwers. Their conversation didn’t disappoint. Centered on a strategy that removes the cost and friction of middlemen in healthcare and focuses on consumer “experience,” their business model innovations win when they quickly deliver benefits with that customer focus. Their thrown gauntlet posits that, “Consumers and employers are the real buyers of healthcare, and providers aren’t the problem. Take the payer out!” At one point, Bush offered a rhetorical challenge: “Wouldn’t it be nice if your doctor was your navigator?” The idea is to go direct, where the focus is the best care over the cheapest care. Functionally, you can’t navigate a broken system with narrow networks, by their estimation, noting that the average self-insured employer-sponsored health plan has 16 relationships trying to deliver better care and value — and they can’t take anymore solutions. An up and coming theme for both Bush and Tullman as healthcare futurists is reaching the underserved. They referenced CityBlock as a forerunner to the next space, where co-pays are eliminated and Walmart-style pricing makes healthcare easy and available to everyone.
Where We’re Heading
Dovetailing on Bush and Tullman’s modification model, there is new energy surrounding the role of primary care and where the medical professionals will come from to service these centers of the future. Reimagining the primary care sector is on fire with experiments like FireFly, Oak St, OneMedical, JPM Health, Amazon Cares, Walgreens/VillageMD, CVS Minute Clinics, WalMart, and more to come.
There’s a reason for all that intensity. Hemant Teneja at General Catalyst and Ken Frazier at Merck both see the next 3–5 years of innovation running the next 50 years of healthcare transformation. Values were the key theme of note from their discussion. Teneja observed that, with the pandemic, the incidence of anxiety and depression has increased four-fold. We are realizing that we haven’t developed mental health or elder care workforces and we need to confront these problems differently. They also addressed the values context superseding transformation objectives. No one wants their healthcare “disrupted.” Rather, they want to trust our intentionality as an industry with social responsibility as a core value. Teneja and Frazier emphasized putting the patient at the center, empowering providers, and caring about inequities and unequal access to care. They spoke of optimizing for all stakeholders, rather than maximizing for some, and living our stated values.
As you can gather, HLTH 2021 supplied a wealth of information worthy of reflection and analysis for weeks and months to come. We expect to see interesting media coverage and commentary stemming from the event in the near term, and many of the issues discussed reverberating throughout our industry in the year ahead.
— Lawrence Cohen is CEO at Health2047 and Doug Given is Board Director at Health2047.