Wednesday, May 22, 2013

NY Digital Health Accelerator Is a Model to Emulate: Startup's Perspective

Zina Moukheiber said the New York Digital Health Accelerator Is a Model to Emulate at the beginning of the program. With the proliferation of accelerators, I thought I’d share an insider’s perspective on what it was like to be in the program now that it is complete. I’ll also share some ideas on how can take it to the next level building off of their already-strong foundation.

Zina described the program as follows:

One of the toughest hurdles for health IT start-ups is getting in front of customers. Doctors are reluctant to pay, and sales cycles at hospitals can take months. Entrepreneurs often inspired by a negative personal experience, and moved to fix the problem, find later that their product doesn’t fit the hospital’s “workflow,” or offers no incentive for doctors to adopt it.

The New York Digital Health Accelerator’s (NYDHA) program was unique in that over 50 CIOs and CMIOs from 23 leading providers were the selection committee — in other words, prospective customers, not investors, made the call. These same executives agreed to mentor the startups during the program. Consequently, despite announcing that 12 companies would be selected, the program only selected 8 out of the 250+ companies that applied. With the executives making that level of commitment, they were only able to find 8 companies that met their high bar.
A major focus of the program was to get us connected to providers. A key responsibility for the provider mentor was convening meetings with their organization’s leadership. Even though they didn’t all become customers, the feedback and perspective was invaluable for our focus going forward. A few of the companies (including mine), were able to close major opportunities that are game-changers. As these were extremely competitive bids, being a part of the NYDHA program was a big help. Why? It took a lot of the perceived risk out of the equation because the providers knew that we’d cleared a high bar (i.e,., 50+ senior executives and investors had agreed that the selected companies were worth investing their time and money).
With the support of investors such as Milestone Venture Partners, Janssen Healthcare Innovation (Johnson & Johnson), United Health Group, Aetna and others, the investment was managed by the Partnership Fund for New York City (PFNYC) led by Maria Gotsch. The investors recognize Healthcare’s Trillion Dollar Disruption provides a great opportunity. The program was co-managed by the New York eHealth Collaborative (NYeC) led by ex Intel veteran Dave Whitlinger. Much of our day-to-day program interactions were conducted by Maria and Dave’s lieutenants — Jahan Ali at the PFNYC and Anuj Desai at NYeC. They teed up many opportunities such as being featured at the Digital Health Conference and getting access to federal healthcare leaders.
One of the distinguishing facets of the NYDHA is providing the most funding per company of any accelerator ($300,000 or more) — roughly 5-15x more than other accelerators while taking significantly less equity. This ensures that the NYDHA will be the most competitive program to enter as the value proposition is strongest for healthtech startups. New York leaders are striving to ensure that New York is the epicenter of healthcare’s reinvention. Increasingly, other communities are organizing themselves with similar ideas such as Tampa Bay. Like New York, they strive to be where healthcare gets revolutionized and understand what was written in Jim Clifton’s The Coming Jobs War – i.e., it’s not just about maximizing short-term equity returns. Todd Park, our nation’s Chief Technology Officer, has said that the NYDHA program is one that other locales should seek to emulate.
As Zina outlined at the outset, the NYDHA has specific focus areas:

The accelerator’s mission is very focused, answering the needs of the state and health care providers. Start-ups need to have a product that addresses care coordination, patient engagement, analytics, or message alerts. New York is moving away from a fee-for-service system for Medicaid patients suffering from chronic illnesses, to one based on patient outcome. That involves coordinating care among different health care providers to prevent the likelihood of hospitalization. NYEC also oversees the state’s health information exchange which allows hospitals and doctors to electronically transmit patient records; it is looking to build applications on top of its network.
At the kick-off of the NYDHA program, Dr. Nirav Shah, the New York State Commissioner of Health, explained how the NY Health Home program is a key plank of how they are shifting from a hospital-centric view of healthcare to one that extends beyond the hospital walls. A reason why providers need modern cloud-based vendors is captured in the needs of the Health Home. They require systems that can scale from a two-person clinic with no IT infrastructure (other than an Internet connection) to a large urban hospital and everything in between. Not only would it be cost-prohibitive to deploy a traditional client-server model, it’s a highly dynamic time when providers don’t want to be burdened with nightmarish version upgrades typical in a client-server model. It was refreshing during the program to find providers who fully understood this and how it was imperative to move to a cloud-based model. These smart providers recognize how other health systems are spending billions to prepare for the “last battle” rather than looking forward.
NYDHA Recognized for its Results
Since the launch of the program in September 2012, the inaugural class of companies made tremendous strides in a marketplace (healthcare) noted for its slow pace of change and long decision cycles. The following are some of the accomplishments of the program shared by the NYDHA:
  • In aggregate, the companies raised approximately $5 million in funding in order to drive growth while significantly expanding their customer base.
  • This growth has led to the creation of jobs in New York, with the companies hiring 40 new employees since the program’s inception, with plans to add 41 additional staff by the end of 2013.
  • In addition to providing product feedback, the participating healthcare providers facilitated 17 pilots at their organizations. Mount Sinai has adopted Cureatr’s enterprise-grade mobile care-coordination mobile app. Mount Sinai has signed a multi-year contract to roll out the app to Mount Sinai clinicians. The Brooklyn Health Home (an organization of 50+ independent provider organizations) and Maimonides Medical Center (large hospital in Brooklyn) selected Avado as their enterprise-wide standard for a patient portal and engagement platform for multiple years. [Disclosure: Avado is the company where I'm the co-founder, CEO]  By the end of the summer, Aidan will be helping 30,000 patients choose their post-acute care.
The NYDHA has received broad national recognition including the following:
  • The California Healthcare Foundation has called the NYDHA one of the most successful accelerator models in the country. In particular, the report noted the financial and strategic ties that have already been forged in the market. These strong market ties are critical because they will determine which accelerators survive and thrive in the long term.
  • The Rotman School of Management has ranked the NYDHA the number one Health IT Accelerator in the world, compared to 21 similar accelerators. The ranking was based on 10 different criteria including access to customers, investors, government, and support for innovation.
Raising the Bar on HealthTech Accelerators
There are some terrific healthtech accelerators such as Blueprint Health, Healthbox and Rock Health. They continue to raise the bar as Rock Health has brought in significant new funding and I’ve heard great things about Blueprint’s latest class while Healthbox is expanding their footprint with an accelerator in Florida. The great thing for healthtech entrepreneurs is as each one raises the bar, it gets better for the entrepreneur. In turn, that helps the health ecosystem. The best accelerators will separate themselves from the pack. Until the new accelerators establish a track record, I’m dubious of their value given meager funding (e.g., $20,000 per company) and aggressive asks on the equity front (e.g., 6-8%). I have a hard time imagining how they will get high quality companies with unfriendly terms such as this.
As part of the exit from the NYDHA, they asked for feedback so they can continue to improve. The NYDHA is in the planning stages of the next class. Along with others, I suggested broadening to additional health organizations. I was pleased when the NYDHA indicated they are looking to bring on sponsors and additional mentors from payers, pharma, and tech companies. This is a smart move, particularly as the lines are blurring between various industry segments. Large multi-specialty groups, tech companies, pharma, etc. tend to make decisions faster than traditional hospitals. I’m certain the first class would welcome the opportunity to get in front of these organizations as well. It will be interesting, over time, to see which accelerator programs foster their “alumni” to ensure their long-term success. That would be logical given the equity interest as well as to promote the cache of their alumni companies.
I’ve personally seen payers and pharma, in particular, making major bets (largely behind the scenes today) versus most health systems that are just dipping their toe in the water. My most read piece on Forbes has been IBM’s Reinvention Should Inspire Flat Pharma Businesses which speaks to the imperative pharma has to avoid the fate of the railroad industry. Future NYDHA classes should benefit from the aggressive moves by pharma and payers. I would expect Anuj Desai (NYeC’s VP of Business Development) is going to be busy striking deals with these organizations.
Ultimately, the litmus test for accelerators is how well they fix the market inefficiency of innovative healthcare organizations not being aware of innovative technology companies that could accelerate their market success. With the longest program (9 months) and best funding, the NYDHA has grabbed the pole position. As nimble startups themselves, I’m certain that other accelerators are going to respond and try to leapfrog the NYDHA. Everyone, including the NYDHA, benefits by this healthy competition. It’s never been a better time to be a healthtech startup.

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