Arrow breaking through wall Intoday's world, health care startups that find favor among healthplan sponsors—and the benefits brokers that counsel them—are bestpositioned to survive. (Image: Shutterstock)

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Go online and you'll find plenty of lists of health carestartups to follow. These upstarts have names like Healx, Helix,Hu-manity.com, HabitNu … and those are just a few of the “H”newbies.

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Everyone seems to have their favorites. But which horse to back?It's a tricky business, this founding or funding a health carecompany, or releasing a new product or service under the auspicesof an existing firm. Those employers concerned with health plandesign and cost, and the quality of care, want innovators thatclaim they can lower costs and improve outcomes. But they also want some sortof track record. And many think startups younger than three yearsare barely worth watching.

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“When it comes to 'solutions' in health care, we don't fullybelieve something is proven until it's been in place five years,”says Health Rosetta founder Dave Chase, himself a serial healthcare entrepreneur. “We start believing in three years.”

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Without question, Haven (founded 2018) is thehealth care “startup” that has generated the most recent excitement(or angst, depending upon your vantage point). Yet Haven hasachieved this status without offering much more than a missionstatement. But oh what a mission statement! Its founder/funders,Amazon, Berkshire Hathaway, and J.P. Morgan, that have amply fundedthe venture, tasked Haven with “chang[ing] the way peopleexperience health care so that it is simpler, better, and lowercost,” says its CEO, Dr. Atul Gawande.

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Given that mission, it's fair to say Haven's success or failurewon't be determined in 2019. But its focus on examining thebusiness relationships that constitute the current health caredelivery system positions it, by recent standards, for achievement.In today's world, health care startups that find favor among healthplan sponsors—and the insurance brokers that counsel them—may wellsurvive, if they can make it to Year Four.

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Rather than curate a list of bright and shiny upstarts, with allthe latest apps included, it may be more instructive to viewpotential disruptors by type of product or service. We reached outto an array of innovation watchers, asking them where they expectedto see significant contributions this year from relatively unknowncompanies and their products or services. Here's what we heardback.

Pharmaceutical effectiveness

The trends evolving here have less to do with the nationaleffort to rein in drug costs and more do to withconnecting the right drug to the patient. Currently, as manyas one-third of patients taking drugs for chronic conditions may betaking the wrong one. That's because physicians prescribe for the“typical” patient.

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New genetic testing services can determine whether a specificdrug will work for a specific patient. This kind of matching canlead to considerable savings for a plan sponsor over time as peopleget better because they have switched medications. ColorGenomics (2013) is among those that offer the testing. Butlittle infrastructure currently exists to connect plan member testresults to physicians. Concert Genetics (2010)offers an interoperability platform that addresses this by, itsays, “systematically communicat[ing] medical policies, networklaboratories and prior authorization requirements to clinicians ona test-specific basis at the point of order.”

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Meantime, other young companies are seeking solutions todisorders that run up health plan costs. CricketHealth (2015) says its multidisciplinary approach tomanaging kidney disorders is “realigning patients, clinicians, andpayors” to drive down payor costs. PearTherapeutics (2013) is currently focused on developing newtherapies to treat substance abuse, with a product in the reviewstage it says will address opioid addiction.

Paid on performance

Plan sponsors have shelled out untold millions over the yearsfor programs, projects, apps and equipment which promised betteremployee health at lower cost but did not deliver. What's emergingare companies willing to tie their compensation to specificoutcomes. Color Genomics is one. An employer inPennsylvania, Jefferson Health, added Color Genomics to its plan,which covered 30,000 individuals. The savings the company realizedon the testing, by no longer paying for drugs that were notworking, more than paid for the genetic testing. But Color Genomicsput its entire fee at risk, agreeing to be paid only if the testingshowed a return on investment in money saved through incorrect drugtherapy.

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Other behavioral change vendors are offering the sameterms. Among them: Omada Health (2011), whichhelps plan members manage their weight, and Verto(2013), which offers a larger range of personal health controlservices, including Rightpath Flow, an administrative supportplatform. Another is Virta, founded in 2014 toprovide support to patients with Type 2 diabetes. In 2018, itfocused on building out its commercial business, in which it puts100 percent of its fees at risk based on reversal of the disease inplan members. It sets two milestone of value to the sponsor: numberof patients involved, and disease reversal. It only gets paid whenboth have been met.

Monitoring and adherence solutions

Patient monitoring and reminder devices have not reallydelivered on the promise of improving patient health for planmembers. That's because there's no accountability loop. Whenpatients are connected to a third party–even if that party is arobot–results improve. Solutions that connect the data gathered bya device to someone (or something) that can act upon it are viewedpositively by plan designers and sponsors because of the known tolla lack of response takes on employee health.

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Conversa Health (2013) offers a platform thatreaches out to patients with a text message reminder.MediSafe (2012) is another app that loops in athird party when a patient has ignored a reminder to take a pill.Services like PillPack (2013, now owned by Amazon), and Capsule(2016) augment adherence by packaging a plan member's pills byindividual dose and home delivering them.

Employer plan financing innovators

As the traditional broker-driven model of plan design comesunder increasing scrutiny, companies have emerged that specializein alternative means of funding plan member coverage. Most of thesemodels propose to take the employer's current health care spend andrefashion it to more closely meet the plan member's needs.

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The promise is that cost to the employer will decrease andemployee health with improve as they access upstream care.Gravie (2014) is one such company. Gravie takes adefined contribution approach, in which the plan sponsor puts up acertain amount and employees choose their benefits from Gravie'splatform marketplace, with the option of spending their own dollarsto enrich the plan. Gravie, which serves as its own broker, hasmore than 500 employer clients and more than 70,000 covered lives.It also provides administrative support.

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Others offering alternative plan funding models includeHixme (2013) and ApostropheHealth (2016).

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These are but a few of the players that have made it to YearThree and appear to be gaining traction. But even they must be everwary of the perils startups face. Launching a health care businessis like no other entrepreneurial venture. Not only is the fieldalready crowded with solutions that make lofty claims, but the roadto success is riddled with potholes: federal reviews, HIPAAcompliance, identifying a market, creating the complex set ofrelationships needed to bring a new product or service in front ofa plan sponsor.

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Precise failure rates of health care startups don't reallyexist. Probably half don't make it into their fourth year. Writingfor Fast Company last fall, Dr. Paul Yock , founder of the ByersCenter for Biodesign at Stanford University, said most tech startupentrepreneurs aren't prepared for health care timelines.

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“Consumer technology startups often push quickly to get aminimum viable product to market and then iterate to improve thatproduct based on what most resonates with consumers,” Yock said. “…However, this strategy is ill-suited to health care, a much morecomplex and regulated industry.”

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And yet one that, to the entrepreneur, glitters like gold.

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Dan Cook

Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.