Dr. Jeffrey A. Sachs has spent the past three decades advising stakeholders on health care delivery reform and innovation, including as a member of the state’s Medicaid redesign team, convened by former Gov. Andrew Cuomo. As principal of his own consulting firm in Midtown East, Sachs Policy Group, Sachs now mentors more than two dozen health-tech startups and entrepreneurs on business development, partnerships and market dynamics, among other issues. Prominent clients include Oscar, ZocDoc and Ro.
Last week Crain’s Health Pulse reported on the headwinds that local health-tech startups now face after last year’s funding boom. Sachs spoke with Health Pulse about what’s next for the sector and how hospitals and health systems can and should get involved.
What does the landscape of health-tech investment look like right now, and how does that differ from what we’ve seen before?
- The market’s maturing a little bit. A few years ago there were so many dollars flooding into the venture capital world that it was encouraging startups to think about growth models. It’s almost an impediment to have a revenue model too early, because it kind of limited the funding. In the dot-com era, it was a bubble, and it was over in a day. This is a very profound change that’s occurring in health care. When I talk to every single startup that comes in my front door, they usually have a problem they want to solve that they encountered with the health care system. A lot of the solutions we’re seeing evolve are very narrow. They focus on a particular use case. They’re connecting different databases, and they’re using the information to address various diseases, like diabetes. Not everyone thinks they’re going to go for an IPO. A lot of them think they’re going to either merge with other verticals or go to larger health care companies.
How is this different from the dot-com era?
- Every single venture was geared toward an IPO. Almost any crazy idea could get funded. It didn’t have the seriousness that many of the startups now have in the health sector. Even with the cooling of the public markets, there’s still a lot of funding out there. How startups are approaching getting their funding is a little different now. They’re looking at different metrics. They’re trying to get to revenue-positive situations a lot faster. This is really very profound, this digital revolution that’s come to health care. The big challenge that the academic medical centers and hospital systems have is they also have to evolve. They need partnerships, because, especially since Covid, they’ve been very challenged with staffing. A lot of the evolving technologies are trying to help them meet those. There are lots of software companies focusing on staffing models, staffing issues and recruitment.
What are the kinds of partnerships that academic medical centers and health systems are looking at or should be looking at?
- They need to think about how they shift their business model. There’s a big move on the part of the public sector toward value-based purchasing, and a lot of the big systems are still stuck between fee-for-service and value-based. In New York, the academic medical centers are still making this transition. Software companies are helping them integrate their different databases, so they have information that they could use for patient management or the front door for the consumer.
What kinds of questions should health systems ask when they’re meeting startups or looking at a potential partnership?
- “Can we do this on our own?” There are some terrific companies doing remote patient monitoring, but some systems have developed that on their own. “If we do a partnership, how difficult is it going to be to integrate the technology of our partner?” “How would we weigh it against other priorities and challenges that we have?” The challenge for startups is to show these academic centers why their solution is different from what they have already and to show them the value going forward. The academic medical centers don’t want to go into myriad partnerships and take all the time to integrate. On the other hand, there’s lots of innovation going on outside the academic medical center, and part of their challenge is they have to disrupt their own business model so they too can participate in some of those models, like ambulatory care or surgery centers.
What can the city and the state do to better nurture the sector?
- Help prepare the next generation of tech professionals. If you talk to tech companies, the biggest problem they have is that it’s very hard to get engineering talent. That’s changed dramatically from seven or eight years ago. You see more and more engineers coming, but there are some really great people that want to come here to work but can’t get into the country. The city and state, especially now with the Democratic administration in Washington, are really in a position to help facilitate some of that.
Where are health-tech startups headed? What’s the next big thing?
- The health care consumer wants to be able to get care when they want it. There’s also tremendous growth in companies that are direct-to-consumer. People are going to demand this. They’re not going to want to go to the hospital or go to the doctor’s office. They’ve gotten used to telemedicine. Many insurance companies are putting a telemedicine option into their coverage, and some of them are requiring a televisit before a physical visit. The consumerization of health care is definitely going to be a driving force over the next 10 years.
What, if anything, do you think is missing from this conversation right now?
- You have to look at the big picture. You don’t call telebanking “telebanking,” do you? You call it banking. Health care has to mature like every other industry has matured to really provide this kind of digital connection to the consumer. What’s often missing from these kinds of conversations is how it compares to other industries and other innovations that occurred in the rest of our lives. — Interview by Maya Kaufman