WHY DO DIGITAL HEALTH START-UPS FAIL?
JULY 8, 2019 @ 7.10PM
Start-ups - to increase your venture capital (VC) funding by 10%, tell the investors you run a platform. To increase you VC funding by 20% - tell the investors that you are operating in digital health. But, if you really want investors to empty their pockets, tell them that you are using blockchain, Artificial Intelligence and Internet of Things (IOT).
Dr Ng Xun Jin from Sunway Medical Centre who was presenting at the Telemedicine: 4th Industrial Revolution in Healthcare conference recently described both – healthcare and the airline industry as complex, high volume, multiple touch points, emotional, high safety requirements, very technical and costly.
Nevertheless, he said that the airline industry is able to achieve a relatively high level of standardisation and realise a variation which is absent in the healthcare industry.
“Wherever you fly, all over the world, apart from the level of comfort in the airport, we see a significant level of performance in the airline industry, but we do not see this in healthcare.
“This is because the expected outcome is different. When you deal with the airline industry and ask all 150 passengers what is your expected outcome - they would all want to reach their intended destination. However, when you ask 150 different patients with the same condition of their expected outcome, the answer would vary.
This is where medicine and healthcare is unique, and this is where the challenge lays.
What is a digital health start-up?
A digital health start-up is not merely a new company, but any innovative ideas or solutions in healthcare that has a digital component to it with some form of connectivity to the internet.
Ng pointed out that fail does not mean that the company has gone bankrupt. Instead, it has failed to acquire customers to establish funding and are unable to proceed to do so in the given context of health.
Gaps and barriers
Among the numerous reasons for a start-up to fail is the lack of knowledge that exist in the person evaluating the start-up. In many cases, the evaluator may lack the intelligence or the necessary knowledge to access the start-up – whether it is compatible with the company or not. This isn’t a big issue as the start-up could move on by approaching another company. However, there would be drawbacks if you and your team have gaps in the areas of business, demographics, clinical workflows, regulation, guidelines and technology.
“Where do you make your money from? Are you a business-to-business (B2B), business-to-consumer (B2C), are you trying to profit share with organisations or are you selling to the government? Are you like certain groups that try to heal cancer and save the world?
“If you are a B2B company, can you help drive up revenue, increase efficiency, acquire more customers, is it a regulatory requirement – for example – the government says tomorrow that all hospitals need some form of digitalisation in your medical records. Do you know regulatory requirements or at least are you able to help improve quality of care?
While most companies claim that they are able to deliver, the question that arise is – are the numbers justifiable? If you are bringing in an offering and trying to penetrate a certain business segment – are you aware of the average revenue or the extensiveness of the business that you are trying to penetrate into? If you are a B2C - do you have all the components of the entire value chain? Is your service comprehensive? If you are building a platform offering dietary advice, do you have on hand - panel of dietitians to give a consult? Do you have on hand a panel of trainers who are able to advice on physical activity? These are questions that are worth thinking about from a business aspect.
Demographics are a game of statistics.
“The distribution of public-private healthcare spending in Malaysia is 50 – 50. That means if you are targeting private-in-patients; you have actually lost half the population.
“The percentage of out-of-pocket payments in private medical institutions is 39%. The rest of them are coming from insurance companies. If the insurer is not going to cover a certain value you are providing, you have not done your margins or opportunities much further.
Supposedly, you are interested in offering a service – for example remote health monitoring and you are giving your patients a device with Bluetooth connectivity that sends data over to their phones and on the back end, the provider is able to see the blood glucose data.
Although this sounds like a splendid idea, after a while, news reports claim that 3.6 million Malaysians are diabetic. If you think of it in a statistical sense and from clinical standpoint - out of the 3.6 million diabetic patients, how many of them warrant close-up monitoring? Your numbers would drop down further. Of those who warrant close monitoring, how many of them are willing to be monitored? Of those who are willing to be monitored, how many of them can afford the diabetic strips? Taking these numbers into consideration, you are able to narrow down the pool that you have to play in.
3. On clinical practice
A popular believe is that doctors are resistant to change.
“It might not be the case,” said Ng as many innovative solutions are unable to fit within the clinical workflow that is fast and continuous with a high volume of patients.
“Doctors have been doing it the way they do for ages. Clinical workflow is something that all clinicians have, but something that is never discussed about. We have clinical workflows so that we can economise our practice.
For example – is the use of the traditional thermometer which takes a minute to get a reading. If the doctor sees a child; invariably it might take more than that. With a LCD Digital Infrared Thermometer which costs RM80 and last for a year, it cuts down consultation time from eight to seven minutes. The value is when this is multiplied to 15 patients a day.
4. Cloud storage, e-prescriptions, import restrictions
Technology is another principal barrier, said Ng, when neither of us know how it works or what else is out there.
“When it comes to technology, there are two theories that often emerge – one is the A, B, C, D, E theory and the other – XXXXX methodology.
“We have companies that offers a range of features and those that push out solutions that fringe on medical solutions such as the one in Australia that combines digital heart sounds using some forms of audio capture mechanism in combination with a single lead ECG, plus some forms of xxxxx algorithm to be able to diagnose or predict early signs of valvular heart disease.
“These are the barriers and limitations that we are faced with where the evaluator is unable to fully comprehend the technology in a limited time resulting in it being shelved away.
Gaps can be narrowed, but are persistent. One of them is the maturity of underlying technology. If you are offering a solution that integrates multiple services to hospitals that is yet to have electronic medical records, it is not going to fly as it does not have the foundation to support the technology that you are trying to bring in.
Next is user acceptance. A great idea to you may not get the buy-in hence it is going to get delayed. Finally is the cost. If there is a budget of RM100,000 for a certain technology, it doesn’t matter if there is something else which is the best. It is just not going to go through.
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