Seizing Opportunities to Innovate U.S. Healthcare
Seizing Opportunities to Innovate U.S. Healthcare
With the U.S. healthcare industry in the throes of transformation, Israeli healthcare innovators are eyeing disruption opportunities galore. What’s driving the opportunities and what will Israeli entrepreneurs need to do to succeed in U.S. healthcare?
There’s no doubt that the American healthcare marketplace is undergoing a systemic change and massive realignment. The “fee-for-service” era of volume-based reimbursement in U.S. healthcare is waning. The Affordable Care Act and subsequent government initiatives are driving towards value-based, higher quality care at lower cost. The competitive landscape is also changing: increasing consumerism in patient behavior, a shift towards new care settings, such as retail and home-based aging “in place,” and a growing reliance on non-physician practitioners. And technology is driving towards lower-cost solutions to deliver care – including telehealth, remote monitoring, virtual reality, and artificial intelligence – and also to make sense of healthcare data through analytics. The promise of precision medical solutions tapping into the human genome is literally around the corner.
With all this happening in a marketplace that’s roughly 40 times larger than Israel (in terms of of overall patient population) and that spends more on healthcare than anywhere else in the world, it’s no wonder that Israeli health tech and life science entrepreneurs are looking beyond the relatively small Israeli market and focusing on capitalizing on opportunities in the United States.
So what do Israeli health tech and life science entrepreneurs need to know to succeed in the U.S.?
1. Understand the Distinctive Regulatory Landscape
As a healthcare regulatory lawyer, the most common shortcoming that we see in Israeli ventures is a lack of appreciation for the very different regulatory environment. As a large and largely privatized market, the U.S. is subject to significantly more expansive web of anti-fraud and abuse laws than Israel. It’s easy, for example, to run afoul of U.S. anti-kickback and self-referral laws in marketing products that will be reimbursed by government health programs, such as Medicare. The need to comply with distinct laws regulating healthcare from state to state cans also be an enormous source of confusion. In some U.S. states, for example, so-called “corporate practice of medicine laws” limit the ownership and control of non-physicians, requiring complex structures to enable the delivery of telehealth services. While efforts are underway to catch the antiquated system of U.S. laws up to the realities of modern technology, change remains overwhelmingly a long way off. As challenging as regulations can be for domestic companies, Israeli start-ups relocating to the U.S. need to be prepared to learn what they don’t know. Working with lawyers and consultants who know “the lay of the land” is critical.
2. Identify the Right Partners
Beyond the practical challenge of regulatory compliance, the U.S. healthcare marketplace is a complex ecosystem with distinctive stakeholders: government programs, private health plans, large integrated, health systems, state and federal policymakers, patient advocacy groups, and more. It is essential to learn the interplay and the ways in which different stakeholders wield power. In many cases, success is defined by identifying and cultivating the right allies and partners among these stakeholder groups. For example, technologies to identify and treat certain health conditions may find little traction if marketed directly to patient or healthcare providers, but may be appealing to health plans that are bearing financial risk and see significant savings opportunities. In other cases, such as consumer-driven care solutions, the right strategic partners may be retail sales channels rather than traditional healthcare organizations.
3. Align Your Business Model With Healthcare Adoption Drivers.
As impressive as Israeli technology can be, the U.S. healthcare and life sciences marketplace is littered with examples of the second- or even third-best technology winning the day. (Think VHS versus Betamax for the archetypal case of superior technology ultimately losing in the marketplace.) While having superior tech helps, variables like the user experience, sales and marketing strategy, practical considerations, and aesthetics also drive purchase and utilization decisions. Cost and efficiency can be huge issue. Consider, for example, the continued dominance of low-cost mammography, despite vastly superior imaging technologies. Often, the biggest determinant of healthcare success will be the availability of a billing code to incentivize adoption by making reimbursement easy.
While healthcare and life science start-ups have much in common with other technology companies, the challenges identified above – the regulatory landscape, the stakeholders, and drivers of adoption of products and services – are unique to the healthcare industry. With so many Israeli and U.S. healthcare and life science start-ups converging on the same problems, the likelihood is that only a minority are likely to navigate towards meaningful success in the U.S. marketplace, with a small fraction of those succeeding on a grand scale. Start-ups trying to make the cut should delve into the the three challenges above to improve their chances of making the grade.
Harry Nelson is a healthcare regulatory attorney in Los Angeles and the co-chair of Adaptive Healthcare, a healthcare investment fund. He advises clients on healthcare and life sciences regulatory compliance and business strategy.