Healthcare leaders are seeing more value in innovative platforms aimed at tackling large industry problems rather than one-off solutions with a smaller reach, according to a recent survey.
And those same leaders aren’t particularly enamored with the Amazon, Berkshire Hathaway, JPMorgan partnership or buzzwords like artificial intelligence.
This year’s annual survey from venture capital firm Venrock—which polls about 400 forward-looking investors, entrepreneurs, CEOs and government employees across the healthcare industry—outlined a distinct shift from app development to building platforms to address complex problems.
That’s particularly evident in the list of companies that survey respondents wished they invested in. Devoted Health, Collective Medical and Bright Health—three startups taking on massive challenges associated with cost, coverage and access to care—ranked as the top three on that list.
“Two-three years ago people were trying to figure out how to build a product with a couple million and sell for a couple billion,” says Bob Kocher, M.D., a partner at Venrock. “Now we’re really seeing a preference for the opposite.”
At the same time, industry leaders are recognizing that the business of healthcare is a tough nut to crack. Nearly 70% of respondents said they are worried about bad news from Oscar Health, an insurance startup that has yet to turn a profit despite a lot of fanfare.
Just over 60% said they were concerned about Alphabet-backed Clover Health, which has weathered its own financial struggles.
Still, Kocher says the perspective among healthcare innovators is different than other tech industries where industry giants like Google and Apple will buy up companies at an inflated price.
“You don’t have the get rich quick legacy that you have in other tech sectors,” Kocher says. “Your dream isn’t in three years to go work at Optum.”
Skepticism runs deep
The challenges of healthcare have turned industry leaders into a hardened bunch. Respondents were skeptical of the Amazon, JPMorgan, Berkshire Hathaway partnership that, so far, offered more hype than substance. Just 16% said it was the most important healthcare event in the past year, behind the survival of the Affordable Care Act (51%) and the CVS-Aetna deal (22%).
Three in four respondents said there will be more talk than action when it comes to lowering drug prices, and more than half predicted it will take another 2-3 years for AI to really matter in healthcare. Just 7% said the industry would see successful applications this year.
That may have something to do with marketing. Kocher says he gets multiple emails each day pitching AI as a solution to some type of healthcare problem.
“But it’s not AI; there’s nothing AI about,” he says. “They think as a VC I’ll just give them money.”
Talent tops the list of concerns
Although survey respondents were far less concerned about regulatory changes and economic uncertainty, 71% said they were worried about talent and hiring in 2018, up from 59% in 2017.
Some of those concerns stem from a stronger economy that creates a tighter job market for employers. But the Trump administration’s travel ban and changes to the H1-B lottery have put a stranglehold on foreign talent in the IT and medical industries.
Much of that foreign talent was coming from Latin America, the Middle East and India, countries that have been the subject of “sharper rhetoric” from the president, Kocher said.
“It’s going to mean higher labor costs and poaching labor,” he added.