New Marketplace
Clip
Why Health Care Isn’t Staples or Starbucks (05:12)

Why don’t we see more chains in health care services, like we do in other industries? New Marketplace Theme Leader Leemore Dafny comments that most clinics have the same patient care process. “It ought to be fairly standardized and automated,” she says. “There shouldn’t be all this reinvention of the wheel. What is going with that? Where is the scalability?”

They may have the same process, says Rushika Fernandopulle, CEO of Iora Health, but there are very few who have been able to scale, particularly across geography. “With a lot of chains and retail — Staples, Starbucks — you can take essentially the same thing and stamp it out. Health care is local, for better or for worse,” he says. “It’s local in terms of the physician culture, the illnesses, patient experiences, the payment model, the competitive landscape.”

So the questions are: What can and should be the same, where that makes business sense, and what can and must be different, because health care is local? “The problem is, most existing health care people get it wrong on one side. They try and just keep it variable, and they don’t standardize enough,” says Fernandopulle. “And when the Staples and the MBA types try to do this, they try to standardize too much, and it fails. I think it’s really hard to get it right in the middle.”

A related challenge for new entrants is raising funds. “Is there money growing on trees, because everybody recognizes there is such a problem with health care delivery that they’re willing to invest in anything that has some promise?” asks Dafny.

“Generally yes, money is relatively available in health care — but not for bad ideas,” says Jeff Kosowsky, Senior VP of Corporate and Business Development for American Well. “It still takes a lot of work to raise it.” Kosowsky notes that American Well has been “very blessed to not have venture capital,” adding, “if you’re on a venture capital model that says, ‘You’re set, and you have to exit,’ we’d be 3 years late.”

“When I started doing this 12 years ago, it was almost impossible to raise money to do health care delivery things. Everyone was chasing the new drug or the new device,” adds Fernandopulle. “I think it has gotten much easier and there are a lot more people who are looking to invest in this space.” It’s still difficult to raise money as a new health care entrant, however. “The venture capital and private equity markets are geared for too short a time frame for doing the sort of stuff that we are doing,” he says, whether that’s an IPO flip within 18 months or 5-year closed-end funds for an organization 6 years young. “We’re solving really hard social problems. This is about behavior change, about moving a huge industry. It is a huge return but on a longer time frame, and I think the funding mechanisms we have in general don’t match with that.”

From the NEJM Catalyst event New Risk, New Business Models held in Boston, October 6, 2016.

More From New Marketplace
New Risk, New Business Models

How NYP Used Its Innovation Stack to Launch a Telehealth Program

NewYork–Presbyterian uses a structured program for developing innovation. The first project was the development and launch of a comprehensive telehealth offering in less than a year.

New Risk, New Business Models

Good Riddance to Big Insurance Mergers

If there is any silver lining, it’s that other insurers might learn from blocked mergers and devote more energy to growing by offering superior value, rather than by swallowing rivals.

New Risk, New Business Models

Massachusetts Hospitals Seek to Get Larger to Shrink Costs

Beth Israel Deaconess Medical Center, Lahey Health, and New England Baptist Hospital propose to merge to gain market heft. What will be the impact on costs in one of the nation’s most expensive health care markets?

My Favorite Slide: Surprising Mortality for Some Americans

Call to action: Survival statistics for a slice of middle-aged white people in the U.S. are uniquely troubling.

New Risk, New Business Models

Focusing on High-Cost Patients — The Key to Addressing High Costs?

A focus on high-cost patients may not only fail to contain health care spending, but it may also help to entrench the status quo.

New Risk, New Business Models

Improving Hospital Incentives with Better Cost Data

Hospitals’ existing cost data could be used to substantially increase the accuracy of the Medicare payment rates for inpatient hospital care.

New Risk, New Business Models

Success and Failure in the Insurance Exchanges

Efforts to reform or replace the ACA should proceed with the knowledge that highly publicized market exits are a poor and probably inaccurate signal of a failing market.

New Risk, New Business Models

Changing How We Pay for Primary Care

Primary care accounts for more than half of the United States’ office visits, but direct spending on primary care is only a tiny portion of our nation’s total health cost.

New Risk, New Business Models

Getting Real about Health Care Costs — A Broader Approach to Cost Stewardship in Medical Education

In the next era of cost-stewardship education, future and current physicians will have to be taught to reduce spending across the care continuum.

New Risk, New Business Models

Discord Between Ballad Health and the FTC

How a proposed merger of two large rural health systems has created opposition from federal regulators and economists, but supporters among local business groups.

Connect

A weekly email newsletter featuring the latest actionable ideas and practical innovations from NEJM Catalyst.

Learn More »

Topics

Value Based Care

107 Articles

Health Care — A Final Frontier…

Design must move beyond narrow projects and encompass complex systems.

Good Riddance to Big Insurance Mergers

If there is any silver lining, it’s that other insurers might learn from blocked mergers…

Why Real-World Results Are So Challenging…

User engagement outside of clinical trials is the critical factor.

Insights Council

Have a voice. Join other health care leaders effecting change, shaping tomorrow.

Apply Now