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It is every entrepreneur's dream to start a company that can help solve business challenges. If they're successful, these self-starters are rewarded financially for their innovation. Unfortunately, not every idea turns a profit. Why is healthcare seen as a difficult market to penetrate by the newest generation of entrepreneurs? The answer may have something to do with the most common myths surrounding healthcare startups.
The increased dependency on technology within the healthcare sector and its adoption of EHRs has encouraged many entrepreneurs to consider the healthcare market as a launching pad for their next big idea.
The potential for healthcare mobile applications to reduce cost for payers or increase patient engagement has grabbed the attention of hospitals and health plans, as well as federal and state entities. What some healthcare professionals see as a failing system that is complex and impossible to fix, entrepreneurs see as an opening to introduce new tools and ideas to drive change. U.S. healthcare expenditures accounted for 17.9% of the total GDP between 2009 and 2013. That data reflects that our country has one of the most expensive healthcare systems in the world. But it also shows that it is not a neglected market -- it's one dedicated to solving many of its existing challenges.
Most tech startups may not be familiar with healthcare and are likely to be intimidated by this sector. Those in charge of tech startups also are unaware that they are faced with many of the same myths that surround healthcare startups -- six of which follow.
Successful startups can be run only by healthcare experts
Healthcare startups have debunked this myth on many occasions. Kit Check is one example. This successful company was founded by Kevin MacDonald and Tim Kress-Spatz, neither of whom came from a healthcare background.
What they did possess was a tremendous knowledge of software architecture, technology innovation and radio frequency identification, as well a talent for coming up with creative solutions to complex problems.
These skills and aptitudes allowed them to develop software for hospital pharmacies to help them significantly reduce the amount of medication errors caused by manual medication tracking. This product shows that healthcare problems can benefit tremendously from an outsider's view of the issue.
Healthcare is too complex for any startup to understand
There are a number of areas within healthcare with complex processes and workflows. Many of the newly installed advanced technical systems, including EHRs, have either sustained the same old pains or replaced them with new ones.
Entrepreneurs should view these inefficiencies as opportunities and consider designing an app, software tool or medical device to facilitate the care process. Whether it is something patient-centric -- such as an online tool to help patients manage their chronic disease -- or a cloud-based service, such as one that enables clinicians to reach patients anywhere and anytime, healthcare startups aren't short on areas where their innovation can help healthcare.
FDA regulations are too complex to get past
The FDA's role is to ensure patient safety, and it must enforce guidelines that will ensure that software and medical device makers provide patients with products deemed safe for their use. Not all hardware manufacturers or software startups fall under FDA jurisdiction.
In its Mobile Medical Applications Guidance for Industry and Food and Drug Administration Staff, the FDA stated that its focus is "on the apps that present a greater risk to patients if they don't work as intended and on apps that cause smartphones or other mobile platforms to impact the functionality or performance of traditional medical devices."
Healthcare startups should recognize that any app they develop will likely be regulated if it is considered moderate-risk or high-risk.
There's a lack of funding for healthcare startups
In the past few years, the market has seen a tremendous growth in venture funding for healthcare startups. In a report released by funding provider Rock Health Teresa Wang states that "the explosive growth in digital health funding represents [a] 168% year-over-year growth," and that within the first six months in 2014, "143 companies have successfully raised $2.3 billion.
"Not only are there more companies receiving funding," she continues, "but the average deal sizes are also up to $15.6 million compared to last year's $10.0 million." Blueprint Health and StartUp Health are two other examples of funding providers. The existence of these companies shows there is support available for startups within the healthcare arena.
The product must be revolutionary
A startup does not have to become the next Facebook or Google to be considered a success. While not every business challenge requires a groundbreaking innovation, there will always be opportunities for entrepreneurs that can build a plan for solving them. Looking at many of today's success stories of apps that have gained mainstream adoption, many are very simple and their success was a result of being the first to deliver a solution to a common problem.
Too many big players already are in the space
In looking back at the history of the most lucrative software, it's clear that many of them were created during a period when giants such as IBM, Oracle, Microsoft and others had a tremendous investment in research and development. There also were a few startups that began in garages and managed to hit it big and offer some widely used products and services.
Social media sites' open source operating systems and mobile apps are a few of the areas in which technology startups have achieved fame and financial gain. For this reason, young companies should not be concerned with the big healthcare players. The likes of the giant EHR vendors are focusing on their product lines, leaving plenty of unexplored territory for entrepreneurs to develop healthcare products and services.
Nobody can deny that the majority of startups will fail due to a number of reasons. Entrepreneurs must take a serious look at the problem they are attempting to address and ensure they can deliver tangible and realistic positive results. Startups require dedication, a quality product, funding and the ability to sell the concept to venture capitalists.
As Jonathan Patrick, an entrepreneur and chief lending officer at University of Tennessee Federal Credit Union, describes on his blog: "Most equity finance experts will tell you that it takes hundreds of presentations to land one investor. Those odds are not very promising." Following his advice and ignoring the perceived myths listed above are a starting point for healthcare startups just getting their business off the ground.
About the author:
Reda Chouffani is vice president of development at Biz Technology Solutions Inc., which provides software design, development and deployment services for the healthcare industry. Let us know what you think about the story; email email@example.com or contact @SearchHealthIT on Twitter.
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