Some of the most aggressive investing in HIT is being done by specialized funds outside of Silicon Valley run by people with medical backgrounds. Among them is Santé Ventures, based in Austin, Texas. “I truly believe if you start with a massive pain point and provide a real-life solution, you’ll be successful” as an investor, says Santé cofounder Joe Cunningham, who was formerly chief medical officer for the Providence Health System, part of Ascension Health, the country’s largest nonprofit health provider.
One Santé investment is Rise Health, a startup that runs call centers where doctors and nurses with electronic medical records triage patients, treating some “virtually” while ensuring that others get basic care. Rise is targeting health systems that both insure patients and provide their health care, such as Kaiser Permanente, with promises to limit costs while improving patient care.
Other startups have been receiving investments from large IT companies that see health care as an important new market. In 2010, both Intel and mobile chipset maker Qualcomm participated in an $11 million funding round for Sotera Wireless, a San Diego company developing a wrist-watch-sized version of the wall-mounted medical monitors common in hospital rooms.
For Qualcomm, the investment was a bet on the growth of remote monitoring, the idea that people can use mobile devices to continuously monitor their well-being while at home, says Nagraj Kashyap, vice president of Qualcomm Ventures, a $500 million in-house venture fund established in 2000. While the remote-monitoring market might take a decade or more to develop, Qualcomm doesn’t face as much pressure as typical VC funds do to cash in on investments, Kashyap says: “We can take the long view and be patient. Our goal is to make sure that wireless technology gets embedded in health care.”
Other investors believe HIT is now poised to explode. Among them is Robert Kocher, a former partner at consulting firm McKinsey & Company and one of the architects of President Obama’s health-reform bill. This May Kocher signed on as an investor with venture capital firm Venrock Partners, in Palo Alto, California.
Kocher, who calls himself “wildly optimistic about the potential for positive change in the health-care system,” believes changes will be largely driven by data.
Health-care reform legislation and other recent federal policies, Kocher says, are beginning to make a huge amount of medical data available free to anyone who might be able to can use it. In 2012, for instance, the federal Medicare program plans to open its massive trove of claims and billing data. The impact of having more information on prices, drug use, and health outcomes is “game-changing and underappreciated,” Kocher believes.
Venrock is investing in companies trying to leverage such data to help consumers and employers make rational health-care choices. For instance, Venrock is a backer of Castlight Health, a startup that offers Internet-based tools to help consumers compare prices offered for medical procedures using information it has culled from paper insurance forms.
Kocher thinks a transparency on medical pricing and results could have a big effect on health care. “Data is what creates functional markets. It lets suppliers differentiate offerings, and [buyers] understand relative trade-offs,” he says. “The problem we’ve had in the medical system is that money has been made without value creation. That is finally at the point of changing.”