Over the past seven years, entrepreneurs and investors have launched more than 5,000 companies to develop health-related apps, care-coordination services, genomic screening, and other tools to deliver value in our fragmented and complex health care delivery system. The focus on how health care is paid for, how it’s accessed, and how patients are engaged has attracted a flood of technology talent that other industries can only dream about.

The Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 and the Affordable Care Act (ACA) of 2010 propelled this wave of digital health startups, and these enterprises have been vying for the attention of the US health care system ever since. Private and corporate investors support technologies to advance the standard of care, placing bets they hope will generate extraordinary returns.

At the CHCF Innovation Fund, we champion entrepreneurs who have the potential to bring solutions to the most pressing problems facing millions of Californians who rely on the safety net for their care. We see many companies with a lot of ideas, and in such a crowded marketplace, it can be hard to tell what will break through. How many times have I heard this one? “If we could just do a pilot, we can demonstrate a benefit.” Many start-ups — even the best ones — run into significant roadblocks or plain old bureaucratic red tape.

Some of these speed bumps are inherently good, because they weed out solutions created in search of problems. But 90% of start-ups never overcome these hurdles. If we want to make real progress toward health care’s “triple aim” — reducing costs, improving patient and provider experiences, and raising the quality of care — speed bumps should be avoided. This means we have to understand why they appear. Here are six common sources of significant obstacles for innovators.

1. Interoperability and Electronic Health Records

With the HITECH Act, taxpayers provided $35 billion to promote meaningful use of health information technology. The law’s intent was to enable patients’ medical records to be safely transmitted electronically so that providers would have this information at their fingertips. This has not yet happened. Instead we now have large electronic health record (EHR) vendors acting as gatekeepers to our private information and operating in separate silos. As patients and customers, it’s our data! We should be able to take them with us to any provider we choose. To be sure, the fault isn’t solely with EHR vendors. The data gatekeeper might be the start-up that has figured out how to do it and charge for it. It could be the provider system’s IT operation not wanting to add complexity. Sometimes, we just can’t get out of our own way.

2. Too Much Data

If one more entrepreneur says the solution is to provide more data to the physician, we will all scream! More data are not the solution to any problem. Doctors — especially overworked primary care physicians — are already inundated with data from wearables, genomic testing, and EHRs. But they don’t have the right data to make better decisions. Physicians need actionable insights that go to the right person on the care team. In his book The Digital Doctor: Hope, Hype, and Harm at the Dawn of Medicine’s Computer Age, Dr. Robert Wachter writes about hospital care teams responding to so many alarms from electronic devices that they can’t keep up, causing “alert fatigue.” The only time something seems really wrong to them is when there is complete silence. We need thoughtful and actionable insights, not noise.

3. The Long Health Care Sales Cycle

Many health care startups are led by smart people from outside of health care, and they often are shocked by the length of the health care sales cycle. While business plans in other industries can assume it lasts four to six weeks, in health care it often takes 12 to 18 months. There are good reasons for this. If your app for dry cleaning delivery stops working, that’s a bummer. If your health care solution fails, funerals could follow, so the health care system is more risk-averse. You can reduce your sales cycle time if you understand the workings of the relevant health care network. But once you know one health care provider system, you still only know just one. Most are very different, so it’s important to do your homework.

4. The Temptation to Reinvent the Workflow

Health care entrepreneurs need to understand the sanctity of the care delivery workflow. If your solution requires doctors and nurses to change procedures, that’s a significant challenge for a health care system with hundreds or thousands of employees, multiple sites, and perhaps different EHR platforms. It’s not impossible to redesign a workflow, but if you are going to propose it, you must show that your service and its benefits far outweigh the costs and challenges of implementation.

5. Expecting Consumers to Work Too Hard

If the US is going to bend the health care cost curve, consumers must be involved. However, most of us aren’t fitness or nutrition gurus, and we don’t want to be constantly entering data into an app. Entrepreneurs should prioritize passive ways to track consumers’ actions and provide nudges and rewards to change unhealthy behaviors.

6. The Complexity of the Reimbursement Landscape

The ACA aims to provide more Americans better quality of care at a lower cost per person. This involves moving provider reimbursement away from fee-for-service models to value-based care. Stakeholders are experimenting with ways to make value-based care work, but everyone is at a different stage in this process. Developers of new solutions have to figure out whether any particular approach is broad enough to work in a full range of settings. When you know how systems and stakeholders get paid or measured, you’re a step ahead.

The health care system is an extremely complex environment that offers exciting opportunities to business leaders creating new ways to make health care work for all Californians. At the CHCF Innovation Fund, we are searching for companies with the imagination and persistence to drive evolution — sometimes even revolution — in health care delivery. It’s clear that many companies are poised to dive in. For inspiration, see our portfolio of companies; they are models for doing this challenging work. The lesson is simple: The leaders who avoid the speed bumps are the ones most likely to succeed.

Carl Bouthillette

Carl Bouthillette is a former senior program investment officer for the CHCF Innovation Fund, which invests in technology and service companies with the potential to significantly lower the cost of care or improve access to care for Californians with low incomes. Read More

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