LAS VEGAS—The combination of COVID-19 disruption and longer-term industry trends has left health tech innovators in a prime spot for growth, by one former Centers for Medicare & Medicaid Services (CMS) chief technology officer’s reckoning.
Ed Simcox spent plenty of time with entrepreneurs over his nearly three-year stint at the agency, largely thanks to the Startup Days initiative launched under his watch. He crossed the aisle into the private sector with his appointment as chief strategy officer at precision health and artificial intelligence startup LifeOmic in early 2020.
While he acknowledged that the tech side of healthcare has generally lagged that of other industries by a few years, Simcox was generally bullish about new and expanding opportunities for startups looking to close that gap.
Speaking in an on-stage interview at the 2021 Healthcare Information and Management Systems Society (HIMSS) Global Conference in Las Vegas, he broke down the main drivers of those headwinds.
Startups have greater access to health data than ever before
Data-driven health startups were in a very different place during the past half-decade or so, Simcox recalled. Many had developed tools that sought to drive large-scale insights but couldn’t win over investors and other stakeholders without the data to prove it.
“We had a situation where the greatest hurdle wasn’t necessarily activating the innovation; it was getting a hold of the data to put that innovation to use and prove it—proof of concept, trial, pilot, things of that nature,” he said. “That was a supremely difficult thing to do, and we saw a lot of failures associated with the lack of free flow of data.”
The game changer for these startups has been the 21st Century Cures Act—specifically, its requirements that EHR vendors and other healthcare organizations provide patients with access to their data, no longer block population health opportunities and enable third-party APIs.
“The 21st Century Cures Act is a big deal. Don’t underestimate how big a deal it is,” he said. “We’ve seen APIs take hold in other sectors very strongly, not so much yet in healthcare. 21st Century Cures is really opening the door as far as modern API technologies to be used to transfer data and compute.”
To illustrate the shift, Simcox pointed to Open.Epic, the EHR giant’s tool for communicating interoperability capabilities by exposing logic and data structures, as well as its App Orchard ecosystem, a more premium program that exposes proprietary logic and has seen “a great increase in appetite” from the innovator community.
“I think that is fantastic. That’s why I’m calling them by name, I applaud them for doing it,” Simcox said. “Honestly, in 2017 I wouldn’t have thought we’d see that remarkable [of a] transformation from one company—and we’ve seen that across the board.
Health equity becomes a priority
While the 21st Century Cures Act also carved out support for programs addressing health equity among the underserved, the public health emergency has put a spotlight on health disparities, Simcox said.
Disparities across different geographies, ethnicities and demographics were exacerbated as a result of COVID-19, meaning that tech solutions with strong equity focus are now enjoying greater awareness and demand.
“The heightened focus on health equity over the last 18 months has really turned a lot of heads in the investment community to innovators that are coming out with ways to address health equity,” he said. “We have ways to solve that in the innovation community, people have been coming up with these ideas and starting these businesses for quite some time. COVID really gave a strong voice to those companies.”
Telehealth reimbursement, regulation and acceptance
Plenty has been said on the rise (and pullback) of virtual care during the COVID-19 pandemic. The technology’s breakthrough was a type of validation for the former American Telemedicine Association board member, who noted that the modality has faced numerous barriers on its long road to adoption.
“There were times during my career where I said ‘Gosh, I don’t know if we’re ever going to break through with telehealth. I don’t understand why it’s so hard,’” Simcox said. “There are a lot of policy issues behind why it’s been hard for us to really penetrate with that technology and get it paid for—which is really key to folks investing in your companies.”
The relaxing of site-based restrictions and reimbursement from payers due to COVID-19 represents more than a temporary foothold, he said. It’s a sign that the Congressional Budget Office is “overcoming a fear” tied to a short-term increases in cost tied to broader access to care.
“This is a little bit ‘Inside the Beltway’ stuff, but if you’re an innovator in telehealth it’s important to understand,” he said. “The Congressional Budget Office was afraid that telehealth was going to give more access to care to more people.
“That’s kind of a remarkable statement, right? But it’s true. The way they score these bills as they go through Congress is they look at [if] this is more money that has to be attributed or apportioned to CMS, for instance. The answer [is] it might be—at least at first—because people are going to get care for the first time or get the care that they need during COVID or they’re in a rural area, underserved population.”
While some stakeholders may argue policymakers aren’t doing enough to keep these allowances in place, Simcox said those in charge are being convinced that the short-term spending increase will yield a durable positive effect on patients.
“I’m very bullish on that,” he said. “I think Congress will make some moves, CMS will make some moves and HHS at large will make some moves to promote telehealth.”
AI and automation ease administrative burdens
Healthcare AI has been a steady area of advancement, Simcox said. A growing number of startups are putting together these tools covering use cases ranging from FDA-regulated diagnostics to clinical decision support and workflow support.
The added opportunity, however, comes from the pandemic stressors piling onto practitioners.
“There’s a real appetite now amongst providers and individual providers as well as provider organizations to figure out how to reduce the documentation burden, the reporting burdens for quality reports and things of that nature—which would really, really help reduce clinician burnout, which has also been really exacerbated as providers have had to address issues around COVID,” Simcox said.
Value-based care rewards effective tools
The continuing shift toward value-based care among both commercial payers and CMS rewards virtual care and other digitally-enabled therapeutics that deliver strong outcomes.
For innovators, that means that telehealth and other effective technologies don’t necessarily need to fit into a rigid code structure in order to gain reimbursement and, therefore, adoption, Simcox said.
“There’s no longer a question of ‘Who’s going to pay for this? What can we code against to offset the capital?’” he said. “That’s very exciting, … you’re going to see a more entrepreneurial spirit among healthcare providers as we shift to value.”
Healthcare catching up on cloud
Simcox called out healthcare’s limited embrace of cloud technologies a particular sore spot in comparison to other industries. Within the app and API economies of these sectors, innovators and investors expect that organizations have already jumped on board and are reaping the benefits.
“A lot of it has to do with EHR technology being largely not cloud and the three-tier stack, enterprise data center-type applications, he said. “But cloud shows great promise. The company I work for, for instance, we’re 100% cloud-native. It makes us very agile, and it allows us to move fast and shorten the time to value.”
“That’s where one of the greatest benefits is going to be: shortening that time to value and being able to get solutions to the market quicker,” interviewer Kimberly Garriott, chief innovation officer at NetApp Healthcare, added.
“In the healthcare provider space, we spend so many thousands and thousands and thousands of dollars, just within a single organization, to prepare and test for deployment of software upgrades. In the new cloud-native world and microservices, we’re going to be able to do that sort of thing in minutes. That cost barrier is going to allow us to just encourage more innovation, more dollars to do that,” she said.
Clinical and medical device trials were among the many healthcare and life sciences operations stymied by the pandemic, Simcox noted. The vast majority of these trials required subjects to physically travel to investigation sites, he said, and many were forced to shut down due to infection risks.
In their wake, digital clinical trial platforms and other approaches enabled by telehealth, video or app technologies have risen to the occasion. But disruption not only cleared the way for new players—it also stands to “fundamentally change” trial design and recruitment in a way that benefits more people.
“What [these factors have] done is really open an opportunity for us to focus on equity in the trial space as well, to make sure we have the right representation of people in these trials and not just pull from a small demographic area and maybe taking the path of least resistance to fill our trials,” Simcox said.
Record-breaking investor support
Perhaps the easiest way to highlight the demand for new healthcare innovations is to highlight the investors throwing their weight behind early-stage and mature startups.
Total investment in the health innovation sector roughly a decade ago hadn’t cracked the $1 billion mark, and, shortly after, hovered in the $3 billion and $4 billion range for some time, he said. Things took a turn a few years back (around the time CMS released draft rules required by the Cures Act, Simcox again noted) and hit a new annual high of more than $20 billion last year at the peak of the pandemic.
Although much of the money is tied to megarounds for later-stage startups, seed funding and Series A rounds also appear to be grabbing the attention of institutional investors, Simcox said. With the industry already matching that $20 billion record by the end of July, 2021 is well on its way to becoming the strongest year yet for healthcare innovation investments.
"The general investment community and the institutional investors are really standing up and taking notice of all this money flowing in. So, I think the future is really bright,” he said.