New Marketplace
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

What Is Risk Management in Healthcare?

Healthcare risk management comprises the systems and processes employed to uncover, mitigate, and prevent risks in healthcare institutions. Understand its purpose, elements, the risk manager’s role, and more.

ED Telehealth Express Care Service Patient Room

Revolutionizing the Delivery of Care for ED Patients

How the NYP OnDemand Emergency Department Telehealth Express Care Service reduced stay times and revisit rates in one year.

Targeting Unconscionable Prescription-Drug Prices — Maryland’s Anti–Price-Gouging Law

Why, in the early 21st century, are so many drugs that were cheaply available in the 20th century becoming prohibitively expensive?

The Economics of Indication-Based Drug Pricing

What would indication-based drug pricing accomplish?

Controlling the Cost of Medicaid

Both political parties should support policies that focus on incentives as a mechanism for improving and sustaining their value.

Resetting the Nation’s Health Care Quality Agenda

Poor measures of care quality have consequences. The National Quality Forum is essential to creating measures that are valid and reliable.

Untapped Business Opportunities for Entrepreneurs in Delivery System Reform

Opportunities for Private-Sector Entrepreneurship in Health Care Transformation

Two veterans of public service say that government can do only so much — which creates attractive business opportunities for entrepreneurs.

Moving Past the EHR Interoperability Blame Game

Why can't EHRs talk to one another? We never created the right incentives, but we pretend that we did.

Emerging from EHR Purgatory — Moving from Process to Outcomes

What's the effect of the mode of physician payment when it comes to EHRs?

Reframing Analytics: Transforming Insights into Action

Centralizing clinical data for an integrated delivery system revealed a surprising lesson: sometimes predictive analytics are not enough.


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

Learn More »


From the Commonwealth to Obamacare: Reflections…

The former Executive Director of the Commonwealth Health Insurance Connector — a model for the…

Value Based Care

221 Articles

Achieving Value in Highly Complex Acute…

To improve both the value and outcomes of ECLS, Cedars-Sinai Medical Center created guidelines for…

Achieving Value in Highly Complex Acute…

To improve both the value and outcomes of ECLS, Cedars-Sinai Medical Center created guidelines for…

Insights Council

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

Apply Now