Unraveling Healthcare Innovation Spend: Where Healthtech Founders Need to Focus

Originally published on MedCity News on June 24, 2024

There is an urgent need for health systems to develop efficient strategies that balance improved patient outcomes with financial health — here are three areas to focus on.

Patient outcomes have always been the North star for U.S. healthcare systems. However, spending surged to $1.356 trillion in 2022, and the industry is still grappling with the financial aftershocks of 2020-2022, including labor shortages and high turnover. There is an urgent need for health systems to develop efficient strategies that balance improved patient outcomes with financial health.

We believe that there are three opportunity areas where hospitals can achieve this balance through innovation: staff management, operational efficiency, and increased access to care. Healthtech startups that focus on these areas are poised to engage more effectively with potential customers and drive transformative changes in healthcare delivery.

Staff management

Effective staff management is crucial, particularly in the wake of the Covid-19 pandemic when 100,000 nurses exited the workforce and exacerbated existing staffing shortages. This crisis has led to emergency room delays and prolonged hospital stays, directly influencing patient outcomes and financial stability. In an attempt to alleviate these pressures, healthcare systems are looking at various approaches to resource management.  

A prevalent human capital solution is nurse marketplaces, which offer hospitals the ability to adapt quickly to varying staffing needs by hiring nurses on a temporary basis without the long-term commitment or the costs associated with traditional hiring processes. The Series B startup Incredible Health’s distributive approach to the problem attracted $80M in venture funding from Andreessen, Base10 Partners, and Obvious Ventures to name a few.

Investments in staff development to improve retention rates are also gaining momentum. Initiatives like HCA Healthcare’s $135 million investment in clinical education programs aim to advance nursing care for patients.

There are also investments being made in solutions that offload some of the manual, tedious work for nurses, reducing time spent on non-patient-facing activities and enhancing overall care. One successful initiative is Mayo Clinic’s computerization and geo-tagging of hospital carts. They use this to precisely track the location and amount of medical supplies in real time and alert hospital staff when adjustments or refills are needed.

Operational efficiency

Very much related to the above, operational efficiency in hospitals is another area that can directly affect financial health and health outcomes. Not only will efficiencies streamline processes but they will also help allocate resources more effectively. Healthtech startups that can build solutions to remove friction for hospital staff and enable them to provide better, faster care are likely to capture hospital venture spend going forward.

AI can play a vital role here, enabling faster, more accurate patient care and quicker, more informed decision making. Today, the larger health systems are leveraging their vast data pools to train AI models, automating routine tasks and enhancing diagnostic processes across various specialties.

One area that is top of mind for hospitals is how to reduce the length of the patient’s stay. The Kansas City VA Medical Center has implemented a system that predicts the likelihood of a hospitalized patient needing to be moved to a more intensive care level within 24 hours.

Another area that is of high interest to hospitals is digital platforms that can streamline communication, improve coordination of care, and enable staff to respond efficiently to patient needs. Cone Health is working with tech startup Rad AI Continuity to automate patient follow-up on significant incidental findings in radiology reports, ensuring they are communicated, scheduled, and completed. Not only will something like this produce better patient outcomes, but it will also increase margins for health systems.

Access to healthcare

Improving access to healthcare is a key focus for modern healthcare systems. It aims to close the gap between available medical services and the needs of patients, particularly those in underserved or remote areas. By removing the necessity to travel for care, more individuals can receive timely medical attention, resulting in less emergency department visits. Enhanced access also enables hospitals to capture dollars outside of their facilities.

Many hospitals have integrated telehealth and virtual care solutions directly into their services, often through partnerships with technology providers or by developing their own platforms. For example, KeyCare, a series A startup backed by 8VC, LRVHealth, and others, leverages Epic Systems’ technology to expand virtual care for health systems, enhancing integration and patient experience by partnering with virtual providers and supporting a wide range of care options.

Virtual care can also help combat the challenge of the value-based care model whereby hospitals get paid for patient outcomes. Since patient outcomes are in many cases not solely impacted by physicians’ direct care, virtual rehabilitation allows for continuous, consistent management of chronic conditions, and can help put more variables back in the hands of the provider.

Hybrid models of care are also pivotal, combining in-person and virtual care to optimize treatment efficacy and patient convenience. For example, Cone Health has developed an intelligent patient routing system that recommends virtual doctor visits based on patient age and symptoms, setting up online appointments within 24 hours to expedite care and reserve in-person visits for more critical cases.

Future outlook

The healthcare industry is ripe with innovation opportunities, especially for startups building solutions that directly impact the financial health of healthcare providers. Looking forward, healthtech founders should prioritize the following as they build out their products:

1. Ensure that whatever they build can integrate with and complement existing workflows and do not add undue administrative burden.
2. Leverage AI to drive efficiencies across diagnostic processes, care modality navigation, and treatment plan matching, thereby alleviating staffing strains, reducing costs, and improving patient outcomes.
3. Prioritize revenue generating levers such as patient engagement and throughput, promoting higher appointment booking, attendance, and consistency around participation in the care process.
4. Develop patient-centric care models that emphasize accessibility, which may come in the form of remote/ hybrid care, culturally/ racially specific solutions, and improved flow of information.

In conclusion, healthtech startups that address these pillars effectively, and enable a balance between financial sustainability and exceptional patient outcomes will become extremely attractive to healthcare systems. Partnerships built based on the above will set the stage for exciting innovation in the field and build a robust foundation for the future of healthcare.

Editor’s Note: The author has no financial relationship with any of the companies mentioned.

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Naomi Goez is a Principal Investor at Forum Ventures who is focused on deal origination, evaluation, and execution. She is a former supply chain operator who began her career in the fashion industry, managing Western Hemisphere production and sustainability initiatives at Centric Brands, and later navigating the fundraising process at a pre-seed stage circular brand. She received her MBA at The Wharton School, while working as an MBA Associate at Alpaca VC, and is passionate about promoting diversity in the ecosystem as well as supporting underrepresented founders and investors alike.

Michael Cardamone is the CEO and Managing Partner at Forum Ventures. Working with hundreds of founders since Forum’s inception in 2014, he has helped portfolio companies navigate the fundraising process and optimize their position in the market. Michael was one of the first 30 employees at Box in a BD role and then led partnerships at AcademixDirect. After 6 years in operating roles, he launched Forum Ventures in San Francisco, a B2B SaaS focused accelerator and fund now with locations in New York City and Toronto. Michael is also an angel investor to over a dozen companies