Andreessen Horowitz Sees Massive Opportunity in Healthcare
Sam Basta, MD, MMM, FACP, CPE
Senior Executive & Strategic Advisor | Value-Based Medical Technology & Care Delivery Platforms | LinkedIn Top Voice
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Hello again friends and colleagues,
A couple of days ago I came across Andreessen Horowitz 's Daisy Wolf and Vijay Pande, PhD 's Hey Tech, It's Time to Build. In Healthcare. article published in Bio + Health .
A link in the article led me to their prior article, The Biggest Company in the World. I was interesting to see some parallels between their thinking and my own, especially my Human-Centered Healthcare Platforms article from a few years ago and HAIbridcare Organizations from last week.
In today's newsletter, I'll summarize their articles with some commentary of my own. In their writing, Daisy and Vijay describe the United States' largest industry, healthcare, as a colossal, complex, and seemingly impenetrable system. However, they also state that it's ripe for disruption. They list a few examples of seasoned tech founders having entered the healthcare sector but the share their belief that there is still plenty of opportunity. The following is my reading of their ideas but I will not continue to state so because it's starting to feel very repetitive. I will alert you, however, when a comment is my own and it will make italicize them.
The Allure of Healthcare
The U.S. healthcare system is an immense, inefficient, and technologically outdated market. Despite its flaws, it presents a wealth of opportunities for tech entrepreneurs. The American healthcare market is five times the size of the global advertising market, which most of the major tech companies operate in. The sheer scale of healthcare could support dozens of FAANG (Facebook, Amazon, Apple, Netflix, Google)-scale companies, but only UnitedHealth Group currently exists at that level.
Two Potential Paths to Success
The healthcare industry's size and complexity have paved the way for two possible paths to build a consumer healthcare giant: vertically integrated and horizontal play.
1. Vertically Integrated Healthcare
A vertically integrated healthcare giant would control the entire value chain, from primary care to pharmaceuticals. This model resembles the strategy Amazon employed to conquer e-commerce. By offering a seamless, end-to-end consumer experience, a vertically integrated healthcare company could revolutionize the industry.
2. A Healthcare Amazon or Visa
Alternatively, a horizontal healthcare play could focus on building a consumer marketplace or infrastructure layer that serves other healthcare companies. Two major opportunities emerge in this model:
Regular readers of my newsletter will notice lots of similarities between my thinking and Daisy/Vijay's around healthcare platforms and HAIbridcare organizations.
The Next Frontier: Healthcare as a Tech Challenge
Why are tech founders flocking to healthcare? In 2013, Marc Andreessen noted that the most successful companies do something considered "crazy" at the time. In 2023, trying to fix the U.S. healthcare system seems to be that crazy idea.
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Addressing the Challenges
Healthcare is undoubtedly a challenging field, but it's important to face these challenges head-on:
My thoughts on this section is that the regulation and complexity of healthcare are not just quantitatively but qualitatively different than any other industry except possibly international banking from the regulatory not the complexity standpoint. For example a car is faster than a scooter but they are qualitatively the same. A rocket is not just faster than a car, however, it is qualitatively different and that is why it can escape gravity while a car can not. To push that analogy a little further, a disruptive healthcare startups needs to be qualitatively different from any other industry startup to escape the gravitational pull of the $4.5 trillion healthcare industry. Healthcare startups need to be disruptive rockets while the tech startups are usually disruptive faster cars! That is one of the reasons so many extremely successful entrepreneurs from tech struggle in healthcare including Amazon.
Those who follow my writing know that I've been very supportive of technology companies entering healthcare. I believe they have a lot to offer which is coming up below. But I think it would serve them very well to recognize the qualitative difference of that they're taking on, hence my comments.
Why Tech Founders Should Enter Healthcare
The tech world excels at data, operations, logistics, consumer engagement, and AI—all of which are sorely needed in healthcare. By applying these skills, tech founders can tackle some of healthcare's most pressing challenges, such as:
In addition, healthcare offers an unparalleled opportunity to make a meaningful impact on people's lives, attracting top talent who prioritize purpose in their work.
Totally agree, just taking into account my comments from the last section.
Tech Mindset is an Asset in Healthcare
While it's crucial to learn healthcare deeply and recruit industry veterans, tech background offers unique advantages in leading a healthcare company:
Again, don't disagree here and is why I included Agile Management and Technology in my Platform dimensions a few years ago.
Embracing the Challenge: Transforming Healthcare
To summarize, Healthcare is a complex, regulated, and intimidating field, but these very challenges make it the perfect opportunity for tech founders to revolutionize the industry. By leveraging their expertise in data, operations, logistics, and AI, tech entrepreneurs can tackle some of healthcare's most pressing problems and create lasting, positive change.
I really enjoy Daisy and Vijay's thoughts and look forward to future articles. In the mean time, I'm really interested in my readers thoughts on this topic. What is the right combination of healthcare expertise and technology startup experience in healthcare?
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See you next week,
Sam
Executive Director at Pain and Spine Specialists of New York
1 年Indeed my friend. Take care
Executive Director at Pain and Spine Specialists of New York
1 年Sam you are missing the point. The proverbial forest for the trees. To reintegrate technology is great. Having top tech companies getting into medicine not so much. And the reason is the same as the reason having insurance companies first and then emr companies and most recently CMGs getting too close to actual medical care delivery was a mistake. It’s because they are not in it for the value and care provided to patients. They are in it to make money. They are not obligated first and only to the recipient of the product; again our patients. They are obligated to their shareholders. Not sure what you mean by board certification falling apart but I would never be seen or take my mother or my kids to anyone but a board certified doc. Residency trained and fellowship trained if the question called for it. I’m sure anyone else given the choice would do the same
Executive Director at Pain and Spine Specialists of New York
1 年Sam Basta, MD, MMM, FACP, CPE sure people who are denied access to care will take what they can get. There is a big difference between offering something VS claiming that is is equivalent to seeing a board certified physician. That simply is incorrect and unless we want to further erode the expertise within the healthcare system with gimmicks we need to elevate and make these systems to support and in furtherance of making access to these doctors the North Star. If that is the goal then I support that whole heartedly but unfortunately more often than not these initiatives are being embarked on to squeeze out even more healthcare dollars for the benefit of shareholders and investors. They are not decreasing the cost of care nor are they making access to care more equitable. The evidence for this is the rise of direct patient pay. People that can afford it are forgoing using their insurance and paying out of pocket so they can actually see a doctor. I don’t think anyone wants to move to a permanent two tiered system where those that have see doctors and those that don’t get a APP and an app. Just my two cents
AVP-HR
1 年I agree with all of the points made by those who have commented and the article and would add that to upend the industry there has to be a reckoning with the way that we pay for health care and that includes blowing up the outsized role of and the way that insurance companies operate in this space. Too much preventive and non-physician care is un-billable (is that a word?) and providers of all types are tired of being told how to practice and what is appropriate care by people with a fraction of the training that they have. And patients are deterred from getting the care they need because they don't understand what is and is not covered.