Will L.A.’s digital health scene keep growing?

In many ways, the blossoming Los Angeles digital health landscape mirrors the city’s growth as a startup hub even though it saw a drop-off in funding in 2018. 

There were 34 deals valued at $369 million in 2016 in Los Angeles County, Irvine, and Newport Beach, according to Startup Health Insights. However, in 2018, deal count fell, and the total value of those 22 deals was significantly smaller, at $153 million. 

Polina Hanin, a director at Startup Health, a digital health accelerator, attributes the drop-off to a pair of “mega-deals:” human cognition startup Kernal’s $100 million funding round in 2016 and the $115 million raised by Alignment Healthcare, a Medicare Advantage startup, in 2017. “While average deal size trended down as a result of this, median deal size steadily grew from $2.5 million in 2016 [to] $3.5 million in 2017 to $4 million in 2018,” Hanin said, by email. 

That said, L.A. is uniquely positioned to become a center for health care startups for many of the same reasons that startups in other sectors are putting down roots in the City of Angels. 

It has multiple research universities and a number of legacy science-first organizations like the biotech Amgen and the City of Hope cancer hospital. It’s seen some big life sciences exits, like Gilead Sciences’ 2017 acquisition of Kite Pharma, one of the leading developers of CAR-T therapies, for $11.9 billion. Plus, the health care industry is the region’s largest employer due to the presence of major health systems like Kaiser Permanente, Providence Health and Services and Cedars-Sinai. 

Los Angeles is “at the forefront of science, technology, and culture,” said Katerina Schneider, founder and CEO of Ritual, a health tech company that makes vitamins for women that has hired researchers from companies like RB, Clorox, and Beachbody. 

Another factor at play is the region’s complicated health care system, which makes it ripe for innovation. 

About one-third of Californians across the state use Medi-Cal, the state’s Medicaid program for the poor and disabled. Pair the growth of Medi-Cal along with the fact that Los Angeles is still home to a mix of small community hospitals and large integrated delivery networks, and that’s created a need for better ways to share patient information, said Claudia Williams, CEO of Manifest MedEx, a not-for-profit health information exchange network. 

“Medicaid health plans are increasingly a dominant force in the health care of California,” she said. “Fragmentation of data information is really hampering our ability to really rapidly innovate and work with startup companies.”

But problems like these are often fodder for founders. The idea behind Figs, a local medical apparel brand that’s raised $75 million, aims to resolve two issues: ill-fitting medical attire, and a lacking buying experience for these items, according to Trina Spear, Figs’ co-founder and co-CEO. Cara Lunsford, a registered nurse, founded HolliBlu, a nurse recruiting startup, when she realized how archaic that recruiting process is for nurses. “There were newer, fresher ways of thinking,” she said. 

What’s your take? What factors do you think are most important to building a local digital health ecosystem? 

News I’m Watching

BUSINESS | Vertex’s biggest bet yet? Curing type 1 diabetes. The drugmaker, long focused on cystic fibrosis, is buying Semma Therapeutics, an early-stage firm using stem cells to develop a cure for type 1 diabetes, according to Stat. At $950 million, this is the biggest deal so far for the Boston-based biopharma company. Vertex CEO Jeffrey Leiden, who is stepping down as chief executive and taking on an executive chairman role, has focused on expanding Vertex’s portfolio beyond CF therapies. Dr. Reshma Kewalramani was the new CEO earlier this summer. 

Editor’s Pick: “Nearly $1 billion invested to get their hands on this tech; their approach is stem cell differentiation to make new beta islet cells for the pancreas. Very promising stuff.” - Jacob Burns, IP and innovation consultant

RESEARCH | Medical imaging rates are still rising. Here’s why. A study published in JAMA found that utilization of imaging is rising in the U.S., as well as in Ontario, Canada, despite initiatives to curb overuse. Researchers evaluated more than 135 million exams between 2000 and 2016, finding that rates of growth are slowing but imaging is still on the rise. This means that widely publicized campaigns like Choosing Wisely have not effectively reduced the number of imaging scans that patients undergo. 

Editor’s Pick: “More work needs to be done to contain imaging use rates and determine whether the imaging that is used is appropriate. “ - Lisa Kerhulas, Siemens Healthineers

CAREERS | Home health care, the most in-demand and demanding job in the U.S. There are about 2.3 million home health workers today, up 150% from a decade ago. That explosive growth has shined a light on one of the most “emotionally and personally demanding” and worst-paid jobs in the U.S., at a time when aging Baby Boomers are increasingly in need of this kind of care, reports The New York Times. These workers take on varied roles — social worker, housekeeper, dietitian, diaper changer, and warden and are paid on average $11.52 an hour. 

Editor’s Pick: “Home health aides and other health care workers who are lower in the hierarchy generally work terribly hard for less-than-stellar pay.” - Keith Carlson, registered nurse

*Comments have been lightly edited. 

What’s your take? What factors do you think are most important to building a local digital health ecosystem? Share your thoughts in the comments, using #TheCheckup.