A few weeks ago, I met with a VC who has been investing in healthcare for over 30 years. He asked if we invested in healthcare and I told him that we'd like to but we don't really know how to fit it into our investment thesis which is focused on large networks of engaged users disrupting large markets. Clearly healthcare is a large market, possibly the largest measured as a percent of GDP. But we haven't seen many large networks of engaged users emerging in healthcare.

A week later, I got an email from an entrepreneur I backed something like sixteen years ago. I think that his company was the very last healthcare investment I've made. He built an enterprise IT healthcare software company and sold it for a nice return. Then we mostly lost touch. He emailed me that he had a very exciting new opportunity to create a new software solution to managing costs in large hospitals. I told him it sounded like something that was needed but that we were not the right investor for him. That turned into a long back and forth discussion of the state of healthcare, healthcare investing, and the role of the web in it.

When we look at education, what's wrong with it, and what needs to happen to fix it, we can see how the web, technology, and large networks of engaged users can impact education in a positive way. That is why, after studying the market for a couple years, we started to invest in education services late last year. We've now made four of these investments and will certainly make a bunch more.

When we look at healthcare, what's wrong with it, and what needs to happen to fix it, we can't see as clearly how the web, technology, and large networks of engaged users can impact healthcare in a positive way. But that is starting to change. When we first looked at education, we saw a market that was largely controlled by big powerful institutions that were not adapting to the needs of the market. But then we saw things emerging like home schooling, online learning, low cost learning tools in emerging markets, and teachers and students opting out of the system and taking things into their own hands. And that has led us to vision of how to invest in education. We are looking hard for those kinds of changes in healthcare that can help us start to see the way forward. We know that consumers need to take more control of their healthcare choices, their healthcare costs, and their health. And we know the web and large networks of engaged users can help all of that happen.

It is likely that we'll be doing more looking and studying and less investing in healthcare for a while (as we did in education). But I'm hopeful that entrepreneurs, industry observers, and of course all of you, will help us develop a thesis that allows us to start investing in healthcare. Like education, it feels like a market where you can make strong returns and also help facilitate important and needed changes.

#VC & Technology

Comments (Archived):

  1. Dale Allyn

    Speaking from experience, a BIG part of the problem is collusion between the insurance companies and the hospital networks. Billing practices are absurd and corrupt. This needs to be better exposed and addressed. I’ll refrain from starting a long and detailed rant here. 

    1. fredwilson

      Maybe that is something a network of consumers can address

      1. Dale Allyn

        Fred, I agree, and hope that something will come of it. I have a project up my sleeve in this area, but concentrating (very heavily) on our main and very exciting project, so it’s on the back burner. I hope someone with a strong passion to improve things in healthcare will tackle this. 



        1. LE

          “POOL MONEY TO HELP EACH OTHER”.Part of the problem is that that money helps people who don’t take care of themselves and require extensive healthcare as a result. Like an uncle of mine, a diabetic, who was eating a full sugar piece of ice cream cake the other night. Did I mention he has a really big belly (belly fat is the worst kind apparently). He is in his late 80’s. We actually have drugs that can keep someone like that alive.As @aaronklein:disqus said I believe said the other day on another post “no personal responsibility”.

          1. FAKE GRIMLOCK


          2. Dave Pinsen

            If he’s lived to his late 80s he’s done something right (or has good genes).  But, by all means, let’s take the small pleasures away from your 80-something year old uncle. Maybe if he just eats oat bran he can live to his late 90s.

        2. Tereza

          This would require that healthy people buy into the insurance, too. Like in Germany.

        3. fredwilson

          hmm. insurance is a network of engaged users. 

          1. EmilSt

            Yes, but that should be bottom up driven. Consumers should be and can be in the driving seat, instead of insurers.

    2. joceph

      Hello Dale,  I am involved in medical billing start-up.  I was not aware that Billing practices have been corrupt.  Our approach is simply to provide our billing services to a big market focused on small clinics (a Market we call SMCs – Small to Medium sized Clinics).  Please advise on what to avoid.  

      1. Dale Allyn

        Where to begin, Joceph? One example: my wife sees her regular internist as a general care provider. His office is in an independent building not associated with his hospital group affiliation. i.e. he is in a network for a well known university medical system. The visit to his office was always billed as “an office visit”, but after new agreements with a particular big insurance company the billing was change to “hospital visit” even though it’s nowhere near the hospital. The price doubled. When called on this, the university medical group acknowledged that they entered into new agreements with the insurance company to arrange this practice. Now my wife’s co-pay amounts to covering the whole visit cost and the doctor receives the same as before. Cost to insurance company = $0.Example two: Wife needed a needle biopsy. Went where we were required by “in network doctor” and the insurance company. We were billed $12,000. The insurance covered $3,500, wife’s deductible is $3,500, balance due = $5,000. Asked surgeon what the price of the biopsy should be, his reply is $3,500 to $5,000 depending on exact needs, but usually on the lower end. Cost to insurance company = $0. Example three: Daughter needed an MRI of her head. Cost quoted was $2,200. Her boutique doctor (private doctor) said “no, pay cash at the same radiology clinic and it’s $495.” Instead, I found a way to prepay and get it for $360. This is the same facility, same tech, same radiologist reading the films. Contacted the insurance company to ask how much it would be if we submitted it and was told that our portion would be approx. $500 after hitting our deductible. Cost to insurance company = $0.I have a chronically ill daughter, so have more experience in this area than I’d like. The problem lies with the insurance model mostly. I find that most doctors are as frustrated and ashamed of the system as their patients. EDIT to add: Wife’s insurance policy is said to be “the best PPO” policy with good coverage. Daughter’s was the same, but now she’s working for a tech company with good group benefits, so not sure of exact details yet.Good luck with your startup. Startups are hard work and rewarding on many levels.

        1. joceph

          Dale, first of all,  all my best to your daughter.  Prayers go out to you and your family!  Secondly, I was hesitant to look for your reply and find out more about this industry that I am about to interface with.  At the same time, it is good for me to know EVERYTHING about it and approach it wisely.  I couldn’t agree more that your cases above are mostly with the insurance model and this monster is not going anywhere.  Hence, my sole purpose is to have providers get paid faster by limiting the amount of errors on claims.  I know there are software companies out there that make this easier for physicians but if they are not in the know with industry changes and/or govt. compliance, data entry will be worthless.  Let alone, they still need to hire personnel to manually enter this among other things in their practice.I am jumping in and will work hard for the betterment of the physician.  Moreover, if I can keep another well liked physician in business, keep them in the community and prevent them from working for Kaiser, I have provided some benefit to the physician and the community as a whole. Here we go.. I will keep you posted.Thank you for your input greatly appreciated!

          1. Dale Allyn

            Thank you for your kind words, Joceph. Good luck with your startup! I’ll add one comment for your project: protect your patient data as if it’s your own. We just received a letter from one of the big hospital networks here because a hospital staff laptop was stolen which contained thousands of patient’s un-encrypted data, including D.O.B, home address, phone number, e-mail, health conditions, etc. There’s no excuse for this as the data should have been encrypted and only accessible via a hardware (USB) key, etc. Don’t allow such poor design be part of your project please.

    3. laurie kalmanson

      starting with the current governor of florida… Columbia/HCA fraud case detailsOn March 19, 1997, investigators from the FBI, the Internal Revenue Service and the Department of Health and Human Services served search warrants at Columbia/HCA facilities in El Paso and on dozens of doctors with suspected ties to the company.[20]Following the raids, the Columbia/HCA board of directors forced Scott to resign as Chairman and CEO.[21] He was paid $9.88 million in a settlement. He also left owning 10 million shares of stock worth over $350 million.[22][23][24]In 1999, Columbia/HCA changed its name back to HCA, Inc.In settlements reached in 2000 and 2002, Columbia/HCA plead guilty to 14 felonies and agreed to a $600+ million fine in the largest fraud settlement in US history. Columbia/HCA admitted systematically overcharging the government by claiming marketing costs as reimbursable, by striking illegal deals with home care agencies, and by filing false data about use of hospital space. They also admitted fraudulently billing Medicare and other health programs by inflating the seriousness of diagnoses and to giving doctors partnerships in company hospitals as a kickback for the doctors referring patients to HCA. They filed false cost reports, fraudulently billing Medicare for home health care workers, and paid kickbacks in the sale of home health agencies and to doctors to refer patients. In addition, they gave doctors “loans” never intending to be repaid, free rent, free office furniture, and free drugs from hospital pharmacies.[4][5][6][7][8]In late 2002, HCA agreed to pay the U.S. government $631 million, plus interest, and pay $17.5 million to state Medicaid agencies, in addition to $250 million paid up to that point to resolve outstanding Medicare expense claims.[25] In all, civil law suits cost HCA more than $2 billion to settle, by far the largest fraud settlement in US history.[26]

    4. Friedrich5

      Agreed ! A massive disruption and a new model needs to be developed.

  2. William Mougayar

    I spent the first 10 years of my career in health care technology at the HP Medical Products Group where we sold monitoring, diagnostic & information systems to hospitals around the world. I became very interested back then in comparing the US to Canadian HC systems & wrote a deep analysis of the two.One of the gridlocks of the US health care system is the payor/subscriber system and all the administrative bureaucracy and absurdity around it. To continue ignoring how to fix that part will continue keeping the US HC system as the most expensive in the world by far, +40% more than the 2nd one.

  3. JimHirshfield

    We need a “BankSimple of health insurance”.The current state of affairs is absurd, and no one in America realizes this more than entrepreneurs when they are trying to cover themselves, their families, and early employees.

  4. gregorylent

    something like stocktwits would work for medical care .. cream rises via network is the essence of stocktwits .. medical info and care information needs something similar

  5. JJ Donovan

    Health care has been the focus of this country with nosolutions that have disrupted the norm, as they have with travel and socialmedia. 20+ years ago, I chose Health Care Administration as a major in thehopes that I could use that knowledge and my entrepreneurial desire to create valuefor a lot of people. To date, I have never seen that opportunity and really donot see it as an area that I would return too anytime soon.  Technology can  helpthe “back end” with the billing and administration and therefore reduce costs,but with all the HIPAA regulations, what private company would have a chance toprovide a hosted model to help the cause.I believe USV is on the right course to continue to avoidhealth care and focus on the “networksof engaged users disrupting large markets.”JJD

  6. LE

    “It is likely that we’ll be doing more looking and studying and less investing in healthcare for a while (as we did in education). But I’m hopeful that entrepreneurs, industry observers, and of course all of you, will help us develop a thesis that allows us to start investing in healthcare.”Right. You need to keep your eyes open and get comfortable with the possibilities and not turn off all input until it’s to late. This statement in the beginning worried me until I read the rest of the post: “we’d like to but we don’t really know how to fit it into our investment thesis” Why did it worry me? Because your investment thesis is good today and it works but it won’t necessarily work 5 years from now and you have to ease your way into new areas. Obviously you won’t be able to do that overnight.(That’s one of the problems with the “stick to the knitting approach” it doesn’t allow for any research really in experimenting in new areas in order to hedge the business environment.)”new software solution to managing costs in large hospitals”I would give a serious look at his software – I wouldn’t pass so quickly on this. I’m sure he has data (or should have data) on the sell cycle to large hospitals and what the initial reaction to the sw is. That should say plenty about what the possibilities are for this. 

    1. fredwilson

      can’t keep doing the same thing and expect the same results

  7. DonRyan

    I’ve been involved in healthcare for the last 23 years. It is an industry ripe for disruption as the incumbents are entrenched and it is in their best interest (not their customers) to maintain the status quo. I have a company I’m working with that is attempting to disrupt just part of this industry. I also have my eye on start-ups like Blueprint Health in NYC that are trying to help additional companies in the industry. It’s an exciting time to be in healthcare. I look forward to more thoughts from you.  

  8. William Mougayar

    It would be great if USV can figure out how to make a key positive impact on the US HC industry, after education. Go knock what’s broken in these industries, one by one. What’s next?

    1. Dave Pinsen

      Health care and education are both, to a large extent, demographic problems, which require government policy responses (different from the current ones). We have lots of poor people who can’t afford the cost of their own health care. There’s no consumer web tech that can change that reality. The logical policy response would be to limit the immigration of more poor people who can’t afford the cost of their own health care, but ideology, Ellis Island nostalgia, and political posturing trump logic on this.Similarly, we have lots of people who aren’t very educable, and few jobs for them. One of the logical policy responses would be to limit the immigration of people from places with poor educational track records. That would both reduce the number of job seekers in a weak job market and reduce the number of poor students in schools. The same factors trump logic on this as well.

      1. Micah

        Correct me if I’m wrong, but I’m pretty sure there are plenty of native-born poor people, too. I don’t think tighter immigration policy is a panacea.

        1. Dave Pinsen

          Sure there are, but why exacerbate the problem by importing more poverty? Saying some policy change isn’t a panacea is a red herring: there are no panaceas. But that’s no reason to eschew measures that would ameliorate a problem.

  9. Andy Brett

    Thanks for sharing, Fred – we are laying the groundwork for such a network of engaged users at Cake Health. It’s still very early on but even now we can see some promising trends. Great to see more attention to the space.

    1. William Mougayar

      That app is like a bitch to the system. It epitomizes how bad the US HC system is. You need an app to tell if you’re getting ripped off by the HC system. That’s sad.

  10. jason wright

    Going socialist might create the largest network of engaged users. Try the French healthcare model for size.Is healthcare a binary proposition? A person is either healthy or unhealthy. The transition from one to the other can be instant (accident or diagnosis), or progressive (ageing). The older one becomes the more engaged one becomes.

  11. Mike Kijewski

    Healthcare is unique in that it isn’t always clear who is the customer. I think you should expand USV’s definition of “users” to include private practice docs, regional insurers, networks of specialists, etc. as well as patients.I’m hoping to make a career investing in healthcare startups. I can’t think of a better way to simultaneously satisfy my desire to improve peoples’ lives, learn about emerging technologies, and feed my ADD. I’m excited to see you talking about healthcare, Fred!

  12. Dave Pinsen

    The challenge with disrupting health care from a consumer perspective is that most of it isn’t paid for by consumers/patients, but by third parties (government and insurance companies). The obvious angle is to target the exceptions: e.g., early retirees/unemployed without insurance who have too much income to qualify for Medicaid and are too young to be eligible for Medicare. Some entrepreneurs have successfully targeted this demo with medical tourism, where they get procedures done at large discounts overseas. A piece worth reading for anyone thinking about this, from either the consumer, or the institutional perspective:- “How the Amish Drive Down Medicare Costs”.There’s another piece that comes to mind that’s worth reading. I’ll post it separately to avoid Disqus snagging this comment for having more than one link.

    1. Dave Pinsen

      Here’s the other piece. Eye-opening for anyone who wonders why health care is so expensive in the US: “Entitlement Bandits”.

    2. fredwilson

      Exactly. Whats the home schooling of healthcare?

      1. Rohan

        Localized GP’s?i.e. many many small clinics vs many big hospitals.Small clinics that focus on the simpler stuff.While big hospitals treat the more complex stuff.

        1. LE

          “many many small clinics vs many big hospitals”You are talking about “urgent care centers”…A good idea and a good business. The scale of having many doctors sharing overhead and seeing patients makes intuitive sense. This is also a real estate idea I’ve considered. Take many specialities and rent them shared office space (reception, billing etc.). You can’t own a medical practice w/o being a doctor (in many states if not everywhere) but you can lease them and make money off facilities.  

          1. Rohan

            Interesting. I didn’t know what they were called. 🙂 Thanks LEPS: Your disqus links to a domain that doesn’t exist?

          2. LE

            ?What is it linking to? It works for me.

          3. Rohan

            Goes to

          4. Rohan

            Oops! Thanks for clarifying Larry! 🙂

      2. Dave Pinsen

        For primary care, there are some options that are analogous to home schooling (in the sense of opting out of the big, 3rd party paid for, institutional approach). The WSJ wrote about one example 8 years ago, a Tennessee MD who operated on a PATOS (pay at time of service) model. Because he didn’t take any 3rd party money — insurance or government — he didn’t need to spend any money on staff, equipment, or software to process billing, and he was able to pass the savings on to his patients, charging $35 for a typical office visit.That model wouldn’t work for more intensive medicine (major surgery or cancer treatment, for example), but it could be paired with a high-deductible, catastrophic insurance policy to cover those sorts of contingencies.

        1. jpwoodland

          This model is finally beginning to take shape as direct primary care (DPC) practices crop up.  MedLion and Qliance have generated the most buzz but there are many others (….  Using insurance to cover our basic healthcare needs is the equivalent of having coverage for oil changes for our car.  Doesn’t make sense and obviously isn’t leading to positive outcomes.  There are already many ways to invest in the changing healthcare landscape.  DPC models are growing with VC investments themselves (One Medical), then there are software platforms that empower this model and strengthen the relationships between consumers and their “health team” (Avado, Medley Health), and the more consumer-focused healthy-wellness devices (Wakemate, Fitbit).  This latter group has potential to create large networks of engaged users.  Now is an exciting time challenge the status quo in what is easily the largest market in the U.S.  

          1. fredwilson

            this is an area to look closely at

          2. kidmercury

            yup, that’s it, although the government will hunt that down to get its piece if it grows big enough. just like with the digital media disruption and everything else. the world of open systems is basically being legislated against via incumbents who have used monetary policy as their tool to steal government. but the legislation against open systems proceeds in a more subtle fashion, in which open systems are regulated in a way where they basically serve the incumbents. the carbon stuff is a prime example. open systems used to enforce nation-state surveillance adn regulation mechanisms, and thus capable of earning revenue via nation-state taxation and regulatory fees, are an example of how the perversion of open systems occurs. but once the whole system collapses (and the corresponding mass awakening occurs, shattering the shield of ignorance), then the foundation is cleared for a good start on all fronts. 

      3. ShanaC

        drug stores that give flu shots?

      4. PeterVOrtho

        In college, I had a procedure on my foot with laser beams. It hurt, I couldn’t walk for a couple days and insurance wouldn’t cover it a second time when pain came back.The equivalent to home schooling was taking a shot of tequila and using a Dremel, which worked for good. I guess I always had “the knack”

    3. Dale Allyn

      Dave, I get any of my medical needs met overseas. In fact, if I tell the truth on an insurance app. here, I’m simply rejected (I’m self-employed). I refuse to lie and therefore get what I need elsewhere. Fortunately, I’m healthy (and work at staying that way). A group policy will fix that, but until we’re up and running I prefer what I’m getting anyway: vastly better service, better prices and autonomy over my tests and care. 

  13. jason wright

    A Kickstarter for healthcare? Say I need an operation but I can’t afford it…but I am a worthy cause (a socially virtuous lifestyle, a valued member of society, et.c., et.c.) Perhaps others would be willing to chip in to fund it…in return for…um, what? Perhaps simply the warmth of human caring – does it always have to be market forces that decide the outcome? Humans could intervene if they wished to, based on their personal values and not the markets. After all, the 99% issue exists because the 1% have not only ‘it all’, but far more than ‘it all’ costs. The excess is potentially up for redistribution based on a set of old values expressed through the new technologies of today and tomorrow.Or, something less altruistic. We pay for your knee operation and you do our gardening/ walk our dog for the next 10 years. You get the idea.

    1. fredwilson

      i wonder how prevalent that issue is in the US. i had thought the issue was the other way around, that we are doing too many procedures that aren’t neccessary

    2. Dave W Baldwin

      Get involved in the right club.  There are many that provide for those whom can’t afford treatment and at same time push money into research/development.BTW, the bottom line of your comment is indentured servant.

  14. Bijan Salehizadeh

    Fred- A very thoughtful approach.  These are indeed strange days in healthcare venture. As you have likely seen, many established VC firms are abandoning healthcare investing altogether – driven out by a confluence of issues including an inconsistent FDA, long product cycles, and indirectly by a mini-boom in non-healthcare VC investing where getting a business to scale is much easier than in healthcare. On the other hand, many IT only firms are rushing into consumer health IT and wellness investments – an area that historically has had very very few exits and a lots of roadkill. Frankly alot of them are delusional about who will pay for products and what business models work in healthcare.  The Bay Area is filled again with consumer health internet companies who are hoping for consumer self-pay or pharma ad dollars to help them. Sorry to say it – aint gonna happen.Consumers wont spend money on their own “healthcare” – although that may slowly change over the next generation as high deductible plans become the norm not the exception.But this wont be an adoption curve that will create overnight “networks of engaged users” that you guys at USV have invested in historically.  Everything in healthcare – including health IT –  takes 3x longer and is about 10-15 years behind other segments of industry. But it could eventually happen.In addition, there is and has been a great opportunity in enterprise IT investments in healthcare – that opportunity isnt as sexy as some other categories but it’s a proven money maker.  The overlay of data analytics and big data onto healthcare creates even more opportunities here – especially around selling predictive analytics to insurers and hospitals.As a healthcare VC myself, I find it to be a schizophrenic time in the industry. Lots of inexperienced money piling into small swaths of consumer health and wellness while the old money retreats rather quickly.One final data point for you: firms that are categorized as “IT-only” have historically performed the worst when investing in healthcare (relative to diversified and health-only firms) – at least according to 30 years of Cambridge data on realized exits. The difference is massive and I plan to publish a post about it on my blog sometime before Christmas.

    1. Eric Page

      Love it and couldn’t agree more. Recently moved to Silicon Valley after selling my last health care business and noticing that a lot of HC tech companies are competing with other start ups rather than competing with the status quo. It’s like everyone is gunning to develop Web 7.0 when the health care industry wants Web 2.0 (maybe 1.5)

    2. fredwilson

      yup. i worry about all of this. i don’t want to be “inexperienced money piling into small swaths of consumer health”

  15. Ela Madej

    There’s an extremely interesting chapter in Freakonomics /  Superfreakonomics on healthcare. They are describing one (I believe Nobel-wining) theory and how it took into consideration what’s broken now, what incentives people have and how a optimal healthcare system can be created (and much more, I am oversimplifying).Singapore, being Singapore managed to apply that theoretical framework a few years ago and it seems to work very well (they are minimizing spending, people are healthier, they can receive they remaining healthcare $$ as a part of their pension so it pays off to be healthy and use public healthcare $$ wisely)…. Would be great to see those models in big economies like the US or in the EU.

    1. Rohan

      ‘Singapore, being Singapore..’+1

      1. Ela Madej

        didn’t want to sound too judgmental so thought I’d phrase it like that 😉

        1. Rohan

          Haha. Yeah. Makes sense. I’m a Singapore Permanent Resident myself. So, I did appreciate that. :)As for what that translates to.. I guess that’s a whole different discussion altogether. 🙂

    2. LE

      “they can receive they remaining healthcare $$ as a part of their pension so it pays off to be healthy”That’s payoff in the future. Human nature goes against this when confronted with feeling good NOW.You can’t ignore that many of the  reasons people are not healthy  is not due to lack of education (although that is a cause obviously) but due to the fact that:1) Eating (and drinking) is an addictive pleasure that you feel in the present so it’s hard to motivate the population to not overeat, indulge etc. to their detriment. (I gave an example of my diabetic uncle in another comment. I had a sliver of the same cake (it was my birthday cake) and had run as usual the same day.)2) Exercise takes work and is hard for many if not most people to keep up on a regular basis.

      1. Ela Madej

        You’re absolutely right but that framework actually recognizes that and doesn’t try to fight the human nature. I think in that people are able (or at least should be!) to take some of their annual healthcare savings and spend them…. Or – it might be a good idea to make personal healthcare “savings” tax deductible so that the incentive is more tangible in the short run… 1 & 2  –  Education and teaching people the right habits when they are very young has proven to work.  Giving them access to parks / bike routes /  healthy food for kids at school will definitely help. And making good & healthy food affordable is a big part of the equation.

    3. William Mougayar

      Singapore is very advanced in this regard. They will soon have DNA analysis for each citizen in order to get proactive with their healthcare.

      1. Howard Yeh

        Singapore is probably rich enough and authoritarian enough to make DNA analysis mandatory. This sounds like a great way to identify health risks on a population scale. Singapore’s government can get away with that. It’s hard to imagine the US doing that. Too easy to spin it into a eugenic scare.There’s a knee-jerk resistance to even getting finger-printed.

        1. Rohan

          Right you are

      2. leigh

        Hello 1984 



    1. Dave Pinsen

      Fitocracy, an NYC-based start-up, runs what’s essentially a social game for fitness.

      1. Tom Labus

        Ultimately, it’s a personal responsibility but if this helps I’m all for it.

    2. William Mougayar

      Well said Grimlock. Very true.

    3. fredwilson

      i don’t use any of these fitness tracking devices, but i believe they all use their own proprietary software/services. i wonder if there is an opportunity to build a service that is device agnostic

  17. ayo

    I’ve recently talked to 2 entrepreneurs with products in beta that have the potential to create large networks/communities of engaged users. Before seeing these products, I largely shared the blockage (couldnt see how the web would help) but both of these approaches have a lot of potential. One enables people with chronic illnesses to instrument their symptoms and how they interact with drugs, and applies data science to that data on the backend to help both patients and doctors understand their illnesses better. The second connects nurses together in a social network to share best practices and improve outcomes across hospitals/patients. What binds them both (and is similar to your approach to education) is that they both empower individuals and enable them to enact change from the inside. 

    1. William Mougayar

      These approaches sound like they are on the right track as long as they aren’t bitches to the HC system who everybody is subservient to, one way or the other.

    2. Eric Page

      I haven’t seen these particular companies but I have seen many other similar companies. Unfortunately, the overwhelming majority of will struggle because, at the end of the day, the near term financial incentive for specialists/hospitals is aligned with worse health, not better.To me, there is a two step process required1) Align payment so that the employer (who pays the bill), the patient (who chooses the care) and the primary care provider (who influences 80% of overall healthcare spend) win and lose as a team. I’m not smart enough to figure out how to align the specialists and hospitals towards good outcomes. 2) Use all of these amazing technologies everyone in Silicon Valley and elsewhere are creating.

    3. fredwilson

      empowering individuals is the key for sure

  18. William Mougayar

    Here are 3 segments of opportunity in health care:1) Chronic care – 60% of adults have at least 1 chronic condition2) Long term care – by 2030, the population over 65 will double in the US3) Home care – much cheaper than institutional care & where new connected devices can make a difference.

    1. Andrew Korf

      how about wellness programs and disease prevention?  – most costs in healthcare are avoidable through education and prevention? 

      1. William Mougayar

        Definitely. And someone else has started a thread on Prevention as a big focus.

        1. Andrew Korf

          And mitigation… helping those with chronic conditions mitigate the effects of their condition and vis a vis reduce the shared costs. I believe something like 60% of annual healthcare costs are generate by 5% of the population. Better targeting through big data aggregation can help. are working on it.

      2. leigh

        My sister is in health prevention – she’s associated with a palliative care and complex care hospital so her programs are well funded but the amount of money going into those programs is minuscule compared to treatment research.  Its like dealing with crime on a system level vs. punishment and incarceration or dealing with education on a a system level (all of which by the way are completely related)….

    2. Tom Labus

      How the family deals with these issues will play a large role in the level of care.  It seems now that in many homes this type of care is “outsourced”. 

  19. jason wright

    I remember being in Budapest, Hungary a couple of years ago. I came across several Americans who were there specifically for major dental treatment…at a fraction of the cost of US care. I also recall a German I know going to Turkey for eye surgery at reduced cost.

  20. William Mougayar

    This may sound out of left field, but to address healthcare you need to fix junk food and processed food. They are the biggest lifestyle related causes of many illnesses including cancer.Start with high-schools foods like what Jamie Oliver is doing in the UK. And look at the food available at airports- it’s all junk chains! Btw- this problem applies equally to Canada & the US, the 2 biggest consumers & producers of junk food.

    1. Dave Pinsen

      Must have been all that junk food Steve Jobs ate that gave him pancreatic cancer.

      1. JamesHRH

        Dave – Steve was a genius, obv. But the reports that he went non-traditional for over 6 months, when treating cancer for an internal organ, left me slacked jawed.I had a friend with TB. She worked harder than anyone I know to battle an ugly situation. She had a younger sister who just rolled with it. Her sister died right at the average life expectancy (21). My friend made it to near 35.She tried all kinds of stuff (crystals, cleanses when they were way out there as an idea, etc.). I only ever asked her one thing: you are doing what the Doc told you to do too, right?

        1. Dave Pinsen

          A fair point question what Jobs did after he was first diagnosed. But my point was that he got cancer in the first place despite eschewing junk food, meat, etc. (and doing Yoga). Lots of people do. It happens.The broader point is that secular liberals often attempt to replace the religious morality they’ve abandoned with similar forms of secular shaming: making the poor smokers huddle in the cold, trying to get poor people to eat bland vegetables, etc.

          1. JamesHRH

            Its not food – its environmental. Purely anecdotal statement of observation.

          2. Nick Bauman

            Steve Jobs had an eating disorder. He also had hepetitus in his 20s. I thought everyone knew that. Don’t use him as a model of good nutritional choices.

          3. William Mougayar


          4. Rohan

            I’m not sure about the disorder.He was just overly experimental with his diet.

        2. LE

          “non-traditional for over 6 months”What’s more amazing is that he had access to the top medical minds in the country and made that decision.  I remember when Ted Kennedy was sick and he had a top doctors fly in to see him to discuss options.In the end I think the lesson is that if you have a close friend that does something that you clearly think is harmful to their health (assuming you know all the facts) take a stand. Say “I  believe in this so much I won’t be friends with you anymore if you follow that path”. That will get their attention. The problem is most people don’t want to risk putting their reputation on the line by doing that or don’t have the will to pull it off. I wonder what would happen if Jon Ivey had taken a stand with Steve what would have happened.  Of course you can say it’s none of his business and it is in one sense. But hey people are willing to do OWS for what they believe it so why not something like this? (Ok in this particular situation with the public nature of Apple there are problems with this approach but…)

          1. JamesHRH

            could not agree more. Friends don’t let friends make poor life threatening decisions.

          2. Rohan

            I guess his friends were too scared to stand up to him.And I guess he also didn’t have too many good friends outside Apple.. which also plays a role.Work-life mix etc

        3. leigh

          uh – oh – i’ve gotten into this argument with so many pple.  Let’s take Steve Jobs out of it.  He regretted his choices so he may not be the best case example.BUT….are you doing what the Doctor told you?  Doctor’s are not gds.  It is modern witchcraft on a good day.  What they told you to do twenty years ago is the opposite of what they say today.  I have a cousin who is passionate about cancer treatments being the blot letting of this century and while I don’t exactly agree, i would say their arguments are stronger then i would have ever believed.So my advice to anyone – think of any industry in the world – now – think about how many people are truly good at their jobs.  Say top 10%?  Now think about that and Doctors and forever in your future do your homework and be your own best advocate —which is EXACTLY why networks of pple with experiences can be a powerful thing for healthcare.  

          1. JamesHRH

            Mainstream med is fairly solid, Leigh. I personally only deal with MDs who say ‘we really do not know much, but here is what we do know.’The crack about awesome CDN healthcare was just to see how many CDNs would jump at the bait!

        4. fredwilson

          geniuses do some nutty things

      2. William Mougayar

        My mention of cancer shouldn’t be taken out of context in relation to junk foods. It’s only one of the factor. It’s a known fact that junk foods and processed foods have great amount of unatural preservatives, many of which stay in our bodies for a long time and start to lower our immune system, whereas wholesome & raw foods strengthen the immune system.

        1. Dave Pinsen

          Faddishness and classism seem to dominate this issue. Consider an example: deep frying.Years ago, McDonald’s had a delicious desert: deep fried apple pies. They haven’t had it for years (the baked ones they sell now taste like cardboard by comparison). Apparently, they were successfully pressured by health food zealots (most of them probably affluent) to ditch them.So, lower socioeconomic classes don’t have that great, affordable dessert anymore. Are they healthier because of that?On the other end of the socioeconomic scale, I read a review of the NYC restaurant Craft recently, in which the reviewer described how delicious the deep fried hard boiled egg was that was part of the restaurant’s signature salad. But I bet no one is protesting deep frying at Craft.

          1. William Mougayar

            Deep frying is equally bad in my books whether at a top restaurant or McDonald’s. Incidentally, I just heard on the radio a comparison of junk food cost vs. cooked meal. They gave the example of a family of 4 at McDonald’s full meal with drinks costing $30 (and without counting the cost of clogged arteries) vs. cooking a whole chicken with vegetables at $15.

          2. leigh

            Health care costs related to choices (whether that be smoking, eating etc.) are absolutely staggering.  Will it be fixed by McD’s changing their menu?  Obviously not…. but to suggest that the crisis of obesity = faddishness?  

    2. LE

      “out of left field, but to address healthcare you need to fix junk food and processed food.”Not out of left field at all. The problem is the consumer (where “consumer” means the bulk of people don’t want that.)Example:The local quick place here is called “WaWa”. I’m sure Fred ran into a Wawa when he was at Wharton. This is like a 7-11 that is extremely well run but only in PA/NJ/DE/MD/VA (if this company ever goes public – buy the stock).Anyway Wawa has all this comfort food that they sell. I asked the manager why they have so little low fat ice cream one day. His response “doesn’t sell”. At a different Wawa I asked why they don’t have chicken cheese steaks they only have beef cheese steaks. Answer: Doesn’t sell nobody buys (they used to carry at this particular location which is typical of others it but don’t anymore. The person though offered to make it for me in a few days (like I said they have their act together customer service wise at least). Wawa sells cigarettes. I asked several different checkout people how many people buy cigarettes: Answer: “LOTS” maybe 30 to 40%. I asked because they always ask me “anything else” as if to prod for cigarette sales. In fact, the sales of cigarettes is one of the reasons the food at Wawa is so reasonably priced. It brings people into the store that wouldn’t come in if no cigarettes (it’s an entire ecosystem that’s my analysis nothing they would ever admit to.) And they do make money on the cigarettes I believe the price is mandated by the state (not to mention the state getting tax dollars from cigarette sales as well).I’m really not sure much can be done in the area of the way people eat though. And that’s why healthcare is such a good investment opportunity.

      1. William Mougayar

        Yup. The process food companies should be the next public target, just like tobacco companies were,- they are killing people silently. Just look at the list of preservatives in these packaged foods. If you can’t pronounce it or it’s a long name or it sounds like a chemical, it’s bad for you. 

        1. LE

          “process food companies should be the next public target”Food and tobacco have the same addictive effect and processed food is as entrenched in our economy as tobacco was. The economy needs to be weened off of this over the course of 40(?) years (like happened with tobacco in case you are wondering why that wasn’t simply outlawed if it was so dangerous). To many people earn a living off that industry that is creating producing and advertising food and getting people to eat food that simply didn’t exist in the 1960’s. I don’t believe that is something that is going to happen any time soon. 

          1. William Mougayar

            I agree it’s more entrenched than tobacco was. But we have to start somewhere. If I had the money & time, I would start raising awareness like Jamie Oliver did.

    3. laurie kalmanson

      first step: stop subsidizing corn production/high fructose corn syrupsecond step: start subsidizing fresh vegetables and fruits

      1. Richard Koffler

        Better yet, subsidize none of it. The United States Federal Government has no business picking winners and losers.

        1. laurie kalmanson

          we disagree. healthcare is part of what a civilized society provides; making policy decisions is what responsible governments do, responsibly.

        2. laurie kalmanson

          the govt invented the internet and subsidized the development of the tech industry; those were winners

    4. Rohan


    5. Dave W Baldwin

      Joy and I loved his first season in the US in West Virginia, trying to change the menu. Unfortunately, something happened second season in LA where we saw the first episode then nothing.



    1. JamesHRH

      That’s Clay Christensen’s hack – take the low cost perceived low capability solution and move it up market.

      1. fredwilson

        clay got me thinking about this 

    2. Eric Page

      The problem is less about optimizing the transaction (“have person for little things, doctor for big things”, aka specialization) than it is about optimizing the process of improving a patient’s health. This requires a relationship between the patient and a primary provider who gives expert guidance. This can be a mid-level with primary care doc as backup.Across the world, there is a direct correlation between # of Primary care providers, improved health outcomes and lower costs. Our country has been promoting specialization at the expense of general care and you can see the results.

      1. laurie kalmanson

        in its early years of modernization, china used “barefoot doctors” to bring up to date healthcare to places that didn’t have anysimilar models prevail in developing countries todaythat model would go a long way here toward serving people who have no healthcare: preventive, routine stuff; relationships that encourage people with chronic illnesses to act in ways that improve health; home visits for people too unwell to travel for routine tests, procedures, nyc, when i was growing up, the pediatrician came to the house at any time of the day or night for fevers, etc. it was infinitely easier for parents and patients.the visiting nurse service does a little of tht today.

    3. Carl J. Mistlebauer

      Actually most state medicaid programs are switching to Managed Care (MCO) and they are using nurse practitioners to cut costs.

    4. laurie kalmanson

      a family practitioner / nurse practitioner does most of the routine things at the large pediatric practice i use. it makes sense.

  22. JamesHRH

    This is not my bag o’ doughnuts, but………Every big business has back office issues. Why? Because back office executives don’t ever have to trade risk against opportunity. It is why Peter Drucker was so big into outsourcing: if you outsource your back office, at least your back office is now run by real business people.Health insurance is an entire industry of back office work. It is a mess because it never faces opportunity decisions.It is why Obamacare style reforms never connect to the US public: they like risk/opportunity themes.

    1. laurie kalmanson

      the back office work is largely dealing with the insurers, who want neither to pay the providers nor approve care for patients

  23. JamesHRH

    The obvious hack is to keep people healthy. But that’s not the answer.A surgeon friend said that you need 1 major hospital for every 500,000 people. Everything else should be outpatient or done through a highly specialized facility (specialized staff cuts costs).This is in Canada, where everything is awesome with healthcare…….Hacking health care requires hacking near ancient beliefs that have stacked the existing assets in highly unproductive (centralized) paradigms.The assets and the beliefs will be hard to move around.

    1. leigh

      lol James, everything is not awesome with healthcare.  You are just young and don’t have any major healthcare issues. While again, i wouldn’t trade our system for the US, it’s a serious issue that’s getting worse as our wait times and healthcare in general is getting worse.

  24. Howard Yeh

    Much of medicine’s curative effect is based on placebo. For depression, as much as 75% of pharmaceutical’s effect is due to a combination of natural recovery and placebo (the hope of getting better). See Irvin Kirsch’s book “The Emperor’s New Drugs”. There are even placebo surgeries!Indeed, if you have depression, it doesn’t matter if you are talking to a Freudian or a Cognitive Behaviourist. Any therapeutic discipline you choose will improve your mood. You can also talk to your pastor. If much of “psychiatric care” isn’t about medicine, but care, how can the web scale the human factor that provides care? I think psychiatry is ripe for a revolution. There could be a grand amatuerization of psychiatric care. Like what blog did for journalism.

  25. awaldstein

    I’m ignorant of this market from an inside view.But from personal experience and dealing with health issues of my elderly mother I’ve learned the core fact as a consumer around heath care:At the end of the day, we ourselves need to take control of our decisions. Doctors, specialists and the rest are never the right people to be put in control of our life decisions around health.What’s missing that technology and networks can certainly help with?-Access to information and expert communities. Open access to information and knowledge communities are simply not available to the consumer in any easy digestible format.-Backgrounds, personal records and details around specialists so if you have to chose a surgeon, you know what you are getting.Having this would be a big step forward.

    1. Tom Labus

      Some ability to gain an understanding of terms being thrown around in life and death situations.

    2. Dale Allyn

      IMO, your assessment is quite accurate, Arnold. The U.S. also has some annoying restrictions on people getting tests they want without a doctor visit. For example, a patient fighting to balance thyroid hormone goes to doctor, gets blood test, gets medicine. But after a month or two wants to see where her TSH and T4 levels are to see if an adjustment in synthroid is indicated. Sorry, can’t get the blood work without paying $175-$350 to the doctor to order the test… … Or, in Thailand she can go to a very modern hospital, order the tests and get results in an hour, then ask to discuss the needed change with the doctor. Or do nothing if she prefers.

      1. awaldstein

        Thanks for this example.I know it is all tied together with how procedures are categorized and billed.But…as a start, access to knowledge and networks to help sort stuff out is a big step forward.Access to information and understanding is a huge disintermediator just in itself.There is a lot of good to be done and a lot of solid investments to be made just addressing the medical and nutritional information needs of the baby boomers alone.

        1. Dale Allyn

          We agree, Arnold. Speaking from experience, it can be quite difficult to gain access to good information to develop the proper knowledge to make good decisions. It’s possible, but much more work than it should be.

          1. awaldstein

            So true…People have more information about the safety of the tires they buy for their cars then the data behind tests and interpreting the results as they affect their health. Something is broken that can be fixed.

    3. laurie kalmanson

      shorter: publicly available price lists for procedures and services, posted online

      1. ShanaC

        there is no such thing because insurance companies renegotiate prices and everyone else has to pick up the costs.  further, big tests (mri) are always cheaper in a nonhosptial context, and we don’t do things like [rice compare.  I can’t go to the doctor and get a straight up price.

        1. laurie kalmanson

          that’s exactly my point — there should be a straight up price and the insurance co negotiation, which overpay some providers and underpay others, do the opposite of increasing health and should go away

          1. ShanaC

            While awesome, how do we realize that change in our legacy system

          2. laurie kalmanson

            blow up the entrenched interests; that is best done by creating new ones. no system will be pure, but we can make systems that provide more benefitsi think green tech is a good analogydestroying the old system will happen faster as soon as new players figure out how to rig the game in their favor.the game won’t ever be not rigged: but it would be great to have it rigged in ways that produce more benefits for more people

    4. William Mougayar

      Great examples of what’s needed. Note that Microsoft and Google launched health care initiatives with great fanfare and both have since terminated these efforts for various reasons. Whoever cracks the US healthcare gridlock will be a genius.

      1. awaldstein

        My sense is that it will happen from the ground up. This may have to be a revolt that spurs big change rather than a big change from a platform perspective.We can’t trust something this important to government or big corporations. The need is too urgent.

        1. William Mougayar

          Right, and what’s the average HC cost per employee in the US -~$1,000/month give or take. That taxes competitiveness and applies to startups too.

          1. Eric Page

            I believe it was GM’s CEO who said, “we have more healthcare in a car than steel”. Actual figure is around $9K/year. I have friends with businesses whose entire margin is due to being smart about their health care costs. Terrible to see that being a differentiator but it is what it is

      2. LE

        “Microsoft and Google”Both were built not by grinding it out (a reference to Ray Kroc and McDonalds) but more by riding the wave. There is a difference. I don’t believe companies like that inherently know what it is like to put in the effort in what would be a traditional business environment that doesn’t show fast uptake in the marketplace.http://hipaahealthlaw.foxro…Edit: Reminds me of how long it took AT&T and the baby bells to change since the entire company was filled with people who had worked for a utility their entire life. Those people had a particular way of thinking that wasn’t going to change overnight.

    5. leigh

      I had an idea once — to do a business for retired doctor’s where pple could rent them by the hour to be medical advocates — expert communities number one most important thing. What should I ask?What tests do i need?How do i evaluate what they are telling me?Second opinion.  

      1. awaldstein

        I have a friend (doctor and trainer) who does just that. It’s a real need.The part that you need to be cognizant though is the expert community. Medicine is changing and the umbrella of what ‘holistic’ means is growing.A retired population is not necessarily the right one. Could be but current and forward thinking knowledge is really critical to make it useful.

      2. fredwilson

        that’s a cool idea. there’s something there.

        1. Chris Hogg

          There should be a new layer of personal health advisors, akin to personal financial advisors.  This could be retired docs, ex-primary care physicians, others. One other looming problem is that that med students dont go into primary care anymore…no money, 30+ patients per day, paperwork overload, etc.  Have wondered if this new layer could give post-MD option, lowering risk of going into primary care practice. 

      3. LE

        “business for retired doctor’s where pple could rent them by the hour to be medical advocates”Under the current system this would require the doctors to get malpractice insurance. Also “retired” doctors are not necessarily up on the latest in medicine. You as the business person would also be required to have extensive insurance. People sue for what is known in the business as “bad outcomes” which doesn’t necessarily mean malpractice.  They will sue each and every doctor that had anything to do with the patient care and let the insurance companies slug it out.

      4. William Mougayar

        It depends. They would have to untainted by the system they came out of, to start with. As you well know, 2nd opinions are subjective- put 4 doctors in a room and there will be 8 opinions, each will give you this way or the other way. The best medical 2nd opinions is to have a doctor(s) in your family or relatives as they really have your interests in mind.

  26. Richard Koffler

    “…we can’t see as clearly how the web, technology, and large networks of engaged users can impact healthcare in a positive way…”Engaged people (let’s not call them users in the context of healthcare, please) is precisely one of the major components that is currently missing which the web can help fix. Sadly, ObamaCare barely notices this, instead focusing on vastly increased top-down command-and-control by the usual suspects: medical providers, payors, bureaucrats and politicians.I remain optimistic, however, that with web-based services the U.S. population will significantly increase control over their healthcare.Richard KofflerCEO, VAL9000 Inc.

    1. ShanaC

      I’m not sure a consumer of healthcare should be the point person in engagement.  If you need a serious procedure and yo’re sick, it is extremely energy ineffecient to also be making economic decisions from the personal level (even though consumers are forced into this situation).  There has to be a more holistic understanding of “network of engaged users” when it comes to healthcare

  27. Tom Labus

    I believe Doctors on the English National system can gain bonus money for keeping their roster of patients “healthy” and out of the system.There are kids in the US with adult serious diseases that are diet related.  Getting our food supple healthy is a major step in this battle. 

    1. laurie kalmanson

      this is exactly where insurance companies mediating health care fails. in the short term effort to reduce costs by denying care, the longterm health and cost benefits of providing wellness are lost.

      1. Tom Labus

        I’m with you 100% on wellness rather than illness.I hate to say it but it’s a lot more profitable if half the country are taking lots of medications 

        1. laurie kalmanson

          single payer would reap the benefits of increased wellness in money, as well as increasing health

    2. DrG

      I’m a doctor who qualified from the UK. You’re right – GPs here get ‘bonuses’ for hitting certain targets, for example, getting a certain number of their patients to quit smoking. I’m a big fan of the NHS. Awesome system.

  28. laurie kalmanson

    something large networks of engaged users could do: break the conspiratorial pricelock of insurance companies and the way they grossly overpay some providers and underpay otherswhen i go to the supermarket, the store tells me, with a nicely made tag, how much a loaf of bread isartisan bread costs more than mass-produced breaddifferent stores might charge different prices for exactly the same piece of bread, but the prices are posted, and i am free to decide if it is worth paying more for the same loaf closer to my househealthchealthcare pricing should be exactly that transparent. instead, insurers cut secret deals and neither patients nor providers know how much the same procedure has across the street

    1. fredwilson

      that’s a consistent theme on this thread. insurance is ripe for innovation and disruption

      1. laurie kalmanson’s broken.burn it down and create something that works. the original purpose — take some risk, gain some profit — has become corrupted to just taking profit.

      2. Remedy Systems

        @font-face { font-family: “Cambria”;}p.MsoNormal, li.MsoNormal, div.MsoNormal { margin: 0in 0in 10pt; font-size: 12pt; font-family: “Times New Roman”; }div.Section1 { page: Section1; }insurance is already being disrupted – but it’s happeningfrom the inside out not the outside in……..existing stakeholders (ourcustomers) are leveraging modern mobile technology to redesign their ownsystems in skunkworks-ish initiatives. it’s a hedge against being disrupted byinnovative start-ups from the outside.we have been incredibly impressed by the intelligence of the leading healthinsurance innovators. i’d venture to say they are the some of the morethoughtful ‘for the good of humanity’ people in any industry. unfortunately,they suffer from poor PR skills and haven’t really reminded the public they arethe ones who are most excited about controlling costs in healthcare. that willcome mid-2012 when the bundled payments initiative from CMS gets into fullswing.

  29. Nick Bauman

    Every country that has better outcomes and lower costs than the US has government oversight that limits the profitability of middle men like health insurance companies and pays health care workers to heal, not to perform factory piecemeal work like we do in the US. I fail to see how “market-driven” approaches address the fundamental incorrect formulation of the healthcare sector’s problem in the US.

  30. Jey Balachandran

    Hey Fred – There is certainly a need for changes in healthcare as you and the commenters here understand. There are a few areas where this change is required. One is consumer facing, as the patient, which is what most of the comments here refer to. It is a hard market to disrupt. Contrastingly, one can focus on solving the problems within healthcare, i.e. doctor to doctor. That is something the startup I work for, Doximity (, is trying to solve. I do look forward to a startup that can disrupt the market between consumers and the healthcare department.

  31. Brian Manning

    The major drivers of healthcare costs are heart disease, stroke and cancer — at least 2 of the 3 are largely preventable afflictions.  Heart disease patients cost the country millions, the rest of us are heart disease patients in training… at last check, 1 in 3 Americans were obese and on the way to lots and lots of healthcare expenditures.With that in mind, I hope to see more venture money heading in the direction of prevention — specifically, driving individual healthy behavior (improved fitness & nutrition).  Good news for investors is that there’s no shortage of innovative web services in the prevention space — FitOrbit, WorkSmart Labs, ZocDoc, the list goes on an on; not to mention the b2b services aimed at reducing employer healthcare expenditures through better employee engagement and the right kind of incentives.Some great startups are using social, gaming and other tools to help individuals get healthy and stay healthy.  Would love to see more VC dollars heading towards good prevention tools.

    1. ShanaC

      You don’t realize how expensive prevention is until you need to pay for it.It shouldn’t be that startups are RAMEN profitable, it should be VEGETABLE profitable.There is a difference.

      1. Brian Manning

        Going for a run or a walk costs you nothing…  Though I recognize good nutrition can be expensive.  That said, I don’t think our obesity problem is mostly caused by the fact that people can’t afford healthy food — we have a largely sedentary society.

        1. ShanaC

          Our work is sedentary, and our culture is to work and not do anything else.  Very unhealthy overall.

    2. fredwilson

      yup. we’ve seen all of those companies and i agree they are interesting. we almost invested in one of them. clearly should have.

  32. Richard Koffler

    I wrote my previous comment after reading Fred’s post. I’m writing this one after reading most of the comments, which run almost exactly the same threads that I hear every time I host the monthly meeting of LAVA Healthcare,… (an interest group of the Los Angeles Venture Association), which is the belief that the main problem with our healthcare system is how payors reimburse physicians and patients.This is totally wrong. The most fundamental reason why healthcare costs keep going up is because demand for healthcare services continues to grow while there’s little increase in supply, abetted by the massive disruption caused by the government’s price controls of almost half of the country’s healthcare services (Medicare and Medicaid). For many years medical providers shifted the deficits created by price controls onto private payors and self-insured individuals. The shift, however, hit the wall a few years ago.Moving onto a single-payor system (i.e., the government) will not solve the problem; in fact, it will worsen it. Costs will continue to increase, likely at a faster rate than now. Consumers would then demand that the government take care of it, shifting the deficits onto taxpayers (or more likely, Chinese buyers of Treasurys as long as they keep buying the stuff). Costs wouldn’t go down — they’d go way up — but they would simply disappeared from view.Then comes massive rationing mandated by bureaucrats, but we can leave discussing this part of the nightmare for another day.

    1. ShanaC

      There has been increases in some sorts of supplied.  You can get flue shots in time square now. You just can’t see a cheap nurse practioner for a bacterial infection while there.  And that is the problem.

  33. AVCoholic

    What I find so eye opening about the healthcare industry is how we’re practically in 2012 and for doctors to access a patients medical history is no different then how they did it 30 years ago. I was just discussing this with my co-founder this week after he had an incident that shows how glaring this issue is. He received a heart transplant 16 years ago and has been living a normal life since then. This past week he caught a bug and was hospitalized at a local hospital (not the one that did his transplant) for dehydration because of it. He always carries around with him a copy of the cocktail of meds he needs to take for his transplant and gave it to the doctors/nurses there. They misplaced it somehow and he went nearly 2 days without taking them (which could’ve killed him since in that cocktail is anti-rejection pills). That fact that there’s no computerized system which allows any doctor to be able to pull up a patients medical history no matter where they are is mind boggling. A dropbox for medical records is something that should’ve happened at least 10 years ago.

    1. ShanaC

      agreed, but hippa intervenes so that no one abuses your medical records either.  The idea of a network of engaged users in this context has to be carefully constructed because patient privacy is really that important.

      1. AVCoholic

        I don’t see why even with Hippa, the healthcre industry can’t embrace technology. More then just trying to bring the healthcare costs down, it needs to be done to prevent so many of the mistakes that are caused because of the antiquated system and save lives.

        1. ShanaC

          They are, slowly.  However when you hear that Yale accidentally leaked parts of medical records that accidentally got connected to the internet, you get problems involving HIPPA.

          1. AVCoholic

            Encrypt it like we do with credit card info on gateways. This wouldn’t be the first thing that needs to be secure. It just seems that if we wait for the politicians to incentivize or do something, we’ll waste so much time and sacrifice so many lives doing it.

          2. ShanaC

            so agree. I just think we need to think through the actual data system better so that these sorts of situations aren’t happening.Doctors, they are like lawyers in that they are conservative in their tech needs, they need stuff prethought out for them.

    2. fredwilson

      i think we will get this addressed soon. there are a lot of incentives in the health care reform act to finally fix this.

      1. JamesCurrier

        Fred, we should be cautious about believing this problem is getting fixed. The EMR’s that are being force-implemented are often 15 year old technology, and each is it’s own silo that doesn’t talk to other EMR’s. The incentive is forcing us to take a technology snapshot of the current state and the available vendors and implement it all now.  Unfortunately, the EMR vendors that are the best known, with the most aggressive sales forces, that are the “safest” solutions for IT departments to choose in their RFP processes, are the ones with the worst technology.   In one pretty well known case, at Stanford they have two hospitals right next to each other where they both run EPIC EMR’s, but the systems can’t talk to each other.  There are currently over 220 EMR vendors in the US, and they don’t interface to each other.  Their way of making money requires they NOT interface to each other. What we’re getting is thus old, non-cloud-based technologies being driven deep into these organizations, and they will be very difficult to rip out or interconnect.  4 years from now, it may well be our HIT infrastructure (installed between 2011-2014) will be one of the biggest holdups to progress in this industry.  The UK is a cautionary tale, where 6+ years ago, their centralized health care system (NHS) embarked on an enlightened digitization effort.  The systems ended up not being so great, were generally rejected by medical professionals and consumers alike, and now the NHS is in retreat mode, away from digital technology. A lot of older people are relishing being able to say, “See, I told you so.”My feeling is we need a cloud-based system that is built with the principles of design and web-services of the last 4 years that rides on top of the existing EMR’s and let’s everyone plug in and move data around freely.  Then let THAT system spread virally, engaging developers and consumers in the mass movement.  Unfortunately, the existing HIT world is not culturally able to think about it this way.

        1. David Nicholson

          Right on!! Dude, you nailed it. If the technology being rolled out is met with resistance by the ones having to use it, it probably isn’t very good!

        2. Dave Chase (@chasedave)

          As David Nicholson said, you nailed it. Worse, these old platforms are epically expensive to purchase/operate. Your last paragraph is exactly what we’ve done (the building part…spreading virally, engaging developers, etc. is our next goal). The disruptive innovators (e.g., WhiteGlove Health, Qliance et al) get what you are saying and have custom built their own solutions as legacy vendors didn’t come close to addressing their needs. The next stage is off-the-shelf versions that support the new care delivery models which is where companies like mine come in (we hope).

      2. Tim Soo

        Although a very slow start, Blue Button is a push in the right direction. The recent StartUpHealth roundtable with the HHS CTO and medicaid/re Senior advisor definitely was an encouraging discussion that the “dropbox” solution will be coming relatively soon. 

      3. hesky

        Hi FredCurious, why do u think this will be addressed soon. We see that most small office physicians have not adopted EMRs – my guess we are 5-10 years away..

        1. fredwilson

          because there are finally financial incentives in place to do this

        2. Dave Chase (@chasedave)

          Hesky – we have found that even young, tech savvy docs have frequently rejected the EHRs in the market as too complex/expensive. However, that is changing as cheaper/better sol’ns are available. The small practices are having their hands forced and are choosing one of the following paths in the next 2 years 1. Adopt an EHR. Huge growth there but you are right – most small practices aren’t there yet if you look at % penetration by practice size2. Run out the clock and retire – quite a few MDs are doing that3. Concierge Medicine – high $$, low volume and they can probably manage without an EMR/EHR though a surprising # have rolled their own EMR4. Direct Primary Care. These are Concierge-like but at a mass market price point – just spoke yesterday with the head of http://www.Atlas.MD (a DPC model) which is doing this. He has a patient living in a storage unit but his fees are less than what she’d pay in the public health clinic yet he’s able to make money. Whereas a typical practice has 4-5 administrators for every MD (they deal with all the billing, manual scheduling processes, etc.), he and other DPC practices have little or no overhead. The only way to do this is with efficient technology – guess where we’re focused 🙂  Btw, the DPC model is the logical path for Walmart’s announcement of becoming the largest primary care provider in the country. Expect huge ripple effects from their move.

  34. Tereza

    I like what Jeanne Pinder is doing with (She is sponsored by Jeff Jarvis and attended the Women’s Entrepreneurs Festival last year). It’s about getting people to share what they’re paying for procedures — driving price transparency.I’m personally interested in Elder Care as an issue. We’re all guaranteed to have to care for aging/dying parents and it’s very complex and stressful. The aging baby boom means those just behind them are gonna be pummelled. Someone is going to make lots of $$ on hacks for dealing with that.

    1. awaldstein

      Right on.The baby boomer generation should be the change agent for this segment.

    2. William Mougayar

      By 2030, the over 65 population will double in the US.

  35. jeremyhamel

    Healthcare is a very big industry that is in need of innovation. I’ve been in Health IT for 10 years now and I haven’t seen much change. The technology is there and healthcare is becoming a more mobile market, this is why I start my own company.  My co-founder and I look at solving problems for niche within the Healthcare industry. This is a great post and I think a lot of VC feel this way.  Thanks for

  36. aminTorres

    I am not a doctor and I know nothing about healthcare other than I pay too much for it and never use it. But as some car insurance claim to reward good drivers, why isn’t there – and perhaps there is – a health insurance company wich develops, encourage/requieres/motivates users to a certain minimum, of exercise a month?Many ways it can be measured but without going into the how tos. Since it is in the best interest of the health insurance companies that people never actually need to see a doctor, why isn’t a health insurance company developing a nike+ like device to reward users. Why isn’t a health insurance company also opening affordable gyms across America. Why aren’t they also running or partnering with healthy food stores?Perhaps this is too wild but then again I know noting about medical insurance.  

    1. LE

      Blue Cross in our area had a program years ago that paid for part of a health club membership. There is a device that you use at the health club where you login your arrival. Here is something similar in North Dakota that offers a whopping $20 month credit:…”health insurance company also opening affordable gyms across America”One of the first case studies I had in business school dealt with the issue of health clubs basing membership fees on a % of members not showing up. If everyone who bought a health club membership used it on a regular basis the club wouldn’t be profitable.

  37. Aaron Klein

    Health care is just a darned tough problem to solve. I haven’t spent a ton of time thinking about solutions, but the problems are pretty clear.We do procedures whether they are needed or not to avoid the ambulance chasers from winning millions and driving up our malpractice premiums.We certainly won’t find it in our hearts to deny life saving care to people who can’t pay.The consumers of health care have almost zero understanding of the costs of their care, so there are no good economic choices being made.We use insurance, with all of its overhead and cost, for simple maintenance.Yet if we take “simple maintenance” out of insurance, people won’t get it done, driving up the need and cost for catastrophic care.I am absolutely convinced that the solution involves a bottom-up approach, not a top-down bureaucracy. And I’m convinced it involves the creation and alignment of economic incentives, not a massive entitlement program with unlimited all-you-can-eat everything for free.It’s amazing that we have a system of incentives that works reliably for taking pristine care of our vehicles and homes, and insuring them in case of catastrophic damage, but we can’t figure out how to do that with the body we inhabit.I’m sorta focused on disrupting another massive market, so I’ll have to save my energy on health care for another day. 🙂

    1. awaldstein

      Perfectly said:”It’s amazing that we have a system of incentives that works reliably for taking pristine care of our vehicles and homes, and insuring them in case of catastrophic damage, but we can’t figure out how to do that with the body we inhabit.”

  38. Matt Ehrlich

    Well i have never posted here but since I am the entrepreneur in question, maybe its an appropriate time. My name is Matthew Ehrlich, and I have started and sold my interests in three start ups. Two of them healthcare, and one of them hosted software. I understand Fred’s investment thesis and it has been solid gold. I am looking to appeal to his NEXT investment thesis. Personally I think companies that he invested in at 5m valuations are a lot riskier at 5b valuations :). The biggest challenge facing the country is healthcare costs. I think I have a solution ( i have computerized the supply chains of 325 hospitals including all of the biggest ones). Eventually by controlling the supply chain you can THEN get the consumers. You can’t give the consumers the access to what they need until you control the hospital and doctor info.

    1. ShanaC

      but sir, I want to avoid hospitals.  Just another money suck unless absolutely necessary.

      1. Matt Ehrlich

        Sadly its necessary. As willie sutton said he robs banks because thats where the money is. The data is with the hospitals, the teaching universities(they employ the docs at the teaching hospitals) and the doctors and their affiliations with hospitals. To get the data to create the repository there is no way of getting around this that I see

        1. Gabriel Griego

          Actually the data is less with the hospitals than you think. There are about 6,000 hospitals. In contrast, there are about 17,000 physical therapy clinics, 18,000 skilled nursing facilities, and a variety of other institutions (e.g. surgery centers or doctor offices) that provide an array of medical services. The provider industry has become very fragmented in the last 20 years or so. 

        2. ShanaC

          I have the type of genome that is very valuable.  I rather someone just asked me for the data instead of the hospital.

        3. ShanaC

          Yet another reply:Not only do I wish you asked me, I wish I was involved in the process of creating and managing my data.  It is nuts that there isn’t a central location with my weight, age, height, that also has my perscription for glasses data.   And what that means long term.  And maybe my exercise records pulled out of foursquare. 

          1. Dale Allyn

            Shana: it’s worse than that. A patient can generally not even get accurate copies of their own medical records and lab work without going to great lengths by ranting like a lunatic or hiring a boutique doctor (concierge doctor) to collect all your records (the real records with margin notes) so that you can take charge of your own care. This sort of practice (keeping patients in the dark) is part of the system devised to mask the medical professions’ insufficiencies and to maintain “the hierarchy”. It’s upside-down, but patients must be willing to take the helm as well, and that is a big step for some. In stead of throwing one’s self at the mercy of the doctor, we should all be as focussed and critical consumers as we are when we buy a computer or cell phone.

          2. Donna Brewington White

            You raise a critical point.  We must think of ourselves as consumers and even clients — not “patients.”

          3. ShanaC

            Oh I agree.  Also, this system makes us dependent on doctors for solutions which they may not have, or may be controversial.Which always makes me go, WTF.So how do I get the right set of records for myself, digitize them, and share them with privacy restrictions freely to the people who need my records

          4. Dale Allyn

            @ShanaC:disqus wrote: “Oh I agree.  Also, this system makes us dependent on doctors for solutions which they may not have, or may be controversial.Which always makes me go, WTF.So how do I get the right set of records for myself, digitize them, and share them with privacy restrictions freely to the people who need my records”Shana: The best way is to get a doctor to act as your advocate and to request all records from all of your previous doctors. In my daughter’s case, she worked with a “boutique” doctor (or concierge doctor) who charged $60/month (rain or shine). He started by assembling a complete folio of all the materials he could collect from her previous doctors. Eventually, she stopped subscribing with him because her circumstances changed and his help was no longer useful. One can find general practitioners (G.P.s) who, when interviewed just as one would interview an attorney, will collect the same materials for patients. It may take more than one interview to find such a G.P., but they are around. Further, when blood tests or other labs are ordered, one can ask the requisitioning physician to have the lab CC you, the patient. We simply build relationships with the lab techs and add the CC request ourselves. We get the lab results when the doctor does (this is for our daughter and not my wife). My wife’s doctor simply gives her a copy when she goes to see him (rarely now) because he knows not to mess with me. 😉 He’s a good guy, but knows I’m done with the game. Interview doctors just as you would hire an attorney. Tell them what you expect from the relationship, and what you will provide them in terms of honest information and consideration of their position and difficulties. If you tell them that you intend to study issues associated with your medical needs, comfort the doctor a bit by letting them know that you understand the risks of collecting information on the internet, and show some compassion for how they must feel when dealing with those who search the internet and have little knowledge, but still act as if they’re fully schooled. That does not mean to wilt, just to show them that you get their side too. Asking for research documents such as peer reviewed papers associated with a condition can show that you’re interested in “real” info and not just web chatter. Respectfully consume medical care just as you would consume a flat screen tv (only more so), requesting information which exceeds the little brochures they provide in the office. Own your health care. If your doctor loses patience with you, replace him/her. There’s no magic to what they do. They know some useful things in their space, just as you know about your areas of interest. The “sharing” part of your comment should wait, but technology is not the obstacle. We can fix this, and should.

          5. JamesHRH

            Dale – if you know anyone who has had a serious cancer issue, it is unbelievable how tough record keeping becomes.I know someone that refused to end any conversation with anyone unless they gave him a photocopy of their file w margin notes. He developed a reputation as a bit of a nut.Then His wife developed a complication and he was THE ONLY PERSON who had easy access to her completed file w notes ( he was lugging around this huge case, like an accountant on an audit).A real eye opener.

        4. Donna Brewington White

          Matt — It helps to have someone active in this space, who is part of the disruption process, joining in the convo.  Thank you.  Enlightening.

    2. PeterVOrtho

      Matt, I’m also a serial entrepreneur in healthcare, specifically medical device. Very familiar with the challenges in supply chain. It is easy to switch buying a Bic pen from staples to office depot, it is not as easy to switch a partial knee replacement from Stryker to Zimmer (Due to training, design philosophy, etc.). I am sure your hypothesis is well thought out, I just can’t get from a to b with the limited information, is the site live?

      1. LE

        “not as easy to switch a partial knee replacement from Stryker to Zimmer”I’m wondering also what role, if any, superstition plays in high end medical device sales. You find it in other professions, for example it’s hard to get painters to switch paint brands and it’s hard to get printers to switch printing ink and they tend to stick with the same printing machinery brands (ditto for photographers but that could be because of lens investment). The decision isn’t based on rational decision making but brand loyalty bordering on superstition in addition to what you have mentioned.

        1. Gabriel Griego

          LE,It has less to do with superstition and more to do with the Doc’s comfort with the product and their relationship with the company rep. It’s a pain in the butt for an Ortho to switch to a different implant (e.g. Stryker to Zimmer) because they have to get trained and comfortable with the new implant and establish a new relationship with the company rep, whom they rely on to make sure they use the device correctly … to insure good patient outcomes.

          1. Dave W Baldwin

            @LE:disqus @95accab8d0c9d518768f68786bce9bf5:disqus It is one thing to look at the shorter term such as brands of implants and another to look longer.About 20 yrs. back, my son had to have procedure requiring bone replacement, which was supplied from his own body.In ’07, my wife had to have bone as they rebuilt her knee which was supplied from a bone bank.Unfortunately per your points regarding Stryker vs. Zimmer, it does come down to ‘who knows who’, ‘who is slicker’, ‘who actually is smart enough’ and so on. Knee replacement is a big market and if you want immediate reward, hedge your bets in the companies.  If you want to look long, realize there is a shelf like to what we see currently.

    3. Patrick Altman

      How do you prepare for, estimate, and deal with the enormous political risk in trying to plan and build solutions for the healthcare space?

      1. PeterVOrtho

        Not to speak for Matt, but the trend of squeezing healthcare companies is not going to do a 180 anytime soon. Any business that creates a mass efficiency (improving the supply chain for example) where there is tremendous inefficiency should have as good of a chance as any, no matter the political mood. Deep pockets tend to strive to go deeper.

    4. William Mougayar

      Is your solution meant to optimize the current system or disrupt it?

    5. Cowboy Coder

      As we know, the US has overwhelmingly the highest per capita medical industry expenditures (I am hesitant to use the term health care costs since the system is not about health care, that is a clever propaganda term) in the entire world and throughout all of history and what can only be considered abysmal outcomes considering that fact.The reasons, which I have observed firsthand over decades, is massive fraud, corruption and profiteering. Providing government paid for “health care” which is a con game isn’t going to improve anything at all. It makes no sense to subsidize a system that is the only modern industry that is more criminal than that of banking. Complete tear down and building from scratch is the only thing that could save a system this bad. That is unlikely to happen though.

      1. Donna Brewington White

        “I am hesitant to use the term health care costs since the system is not about health care…”With due respect to the medical and “health care” professionals that have served me and my family well over the years, unfortunately, I have had bad enough experiences to find myself agreeing with this statement — particularly at the hospital level.  I may have never known this if I didn’t have a chronically ill child.  I have learned to remain very alert and to question everything!

        1. Tom Labus

          We had a serious illness in our family a few years ago and I learned to study a lot before any “specialists” meeting and to push back a little or a lot.  What was amazing was that in many instances even with my limited info, I could get them to cave on their opinion.  

          1. Donna Brewington White

            Same here, Tom.  I have spent hours doing research which has caused us to have greater involvement and control in our son’s treatment and, in many cases, to reject the advice of the experts. From your comment “I could get them to cave on their opinion”: That’s interesting that they would cave in — makes you wonder what motivated the advice to begin with.I understand that sometimes the situation involves an “educated guess” by the medical professional, but it was shocking and disconcerting to observe that some treatment options are intended to perpetuate medical dependency or to incur additional costs.

    6. fredwilson

      thanks for stopping by and joining the conversation. i didn’t want to “out you” unless you wanted to out yourself. which you did. thanks.

    7. Brad Weinberg

      Not sure if you are in New York, but would love to discuss your idea with you and see if Blueprint Health ( could be helpful to you.

      1. fredwilson

        brad – i encouraged Matt to talk to groups like yours. great idea

  39. ShanaC

    Some discussion points:We need to change our billing system to no longer be procedure and medication based.  It shouldn’t have been the case that when my mom was writing software with McDonald Douglas for the healthcare industry, that said software would cause congressional hearings because it caused raises in Medicare and Medicaid costs (it was normalized all costs to the highest possible billing rate within hospitals.)We need to reform the patent system, and the FDA in light of individualized medicine – every single trial is a new FDA fee.  Those are expensive, especially in light that every new compound is patented for defensive reasons (bad patent law affects other industry).Finally, as the patient in this system – it is hard to incentivize good behavior when good behavior is excessively expensive.  Starting with vegetables and ending with screening for problems later on.  Meanwhile if we paid for the right things, our long term costs would go down.Fix all three, all works out.

  40. Eric Page

    Agreed. With over $1T of waste in the system, the incumbents (payers, specialists, hospitals) have a real big interest in keeping the status quo. I sold my last healthcare business 2 years ago and spent the last two years researching the industry. It seems to be almost impossible to work with the entrenched players to improve. DPC, in some form, will win.The key, to me, is to find a model where you can optimize for outcomes rather than optimize for patient satisfaction, which is where many of the existing DPC models struggle.

    1. Gabriel Griego

      Eric,I’m interested in what you mean by “optimize for outcomes rather than optimize for patient satisfaction”. Shouldn’t those be one and the same? Also, what does DPC stand for? Apologies if I missed it in the thread somewhere. Thanks!

      1. Matt Mireles

        You can’t optimize for outcomes unless you have some clever algorithm that normalizes outcomes against a baseline “normal” outcome for each particular patient. A dumb system will get you the medical equivalent of the US public school system, post-No Child Left Behind––a world where doctors only want to treat the healthy because they’ll have the best outcomes and make the numbers look good.The problem with using patient satisfaction as the core metric is that patients don’t actually know what constitutes good medicine. They know what makes them feel good…but the two are not the same. If you optimize for “patient sat,” snake oil salesmen and willy-nilly opiate/pyschotropic prescribers will rise to the top. My point is that there are plenty of charming idiots out there. Bedside manner and professional competence are not the same. 

    2. fredwilson

      can you measure outcomes effectively?

  41. Matt Mireles

    Before I was an entrepreneur, I was in healthcare on and off for 10 years, mostly in pre-hospital care as an EMT in Los Angeles and then a Paramedic in NYC. The healthcare establishment is actually more innovation proof than the education establishment, and that’s saying something! What I’ve learned: Do not invest in enterprise health software! The user is about as far from the economic buyer as could possibly be!The classic great investment in healthcare: WebMD.Anything that circumvents and disrupts the health establishment is good. Anything that sustains it is bad. @fredwilson:disqus There will be an AirBnB for doctors. When it arrives, invest in it. It will be awesome. The first doctors will be mom’s who don’t want to stay at home but can’t do full-time. The first customers will be yuppies. The company will probably serve as an insurer to both the patients and the doctors. But the economic and social benefits will be massive. Mark my words…

    1. LE

      “AirBnB for doctors” “The first doctors will be mom’s who don’t want to stay at home but can’t do full-time”Issue of malpractice insurance? Currently I believe a Doc can get covered for either full time or 20 hours per week. Where will the Doctor see patients? At patients home or?

      1. Matt Mireles

        At first the service will be very lightweight, but like AirBnB itself, it will get more feature rich and robust over time. At maturity, the service will provide both malpractice insurance for doctors and some form of subscription-based primary care services for patients–the exact opposite of “catastrophic insurance.” Driving it will be a deeply engaged and passionate user base that relentlessly reviews and recommends various doctors. Reputation within the community will be the coin of the realm.

    2. fredwilson

      ooh. airbnb for doctors. i like it matt

    3. ShanaC

      how would my medical records work in that situation?

      1. Matt Mireles

        Medical records portability is a hard problem that doesn’t need to be solved to make this work.

  42. Carl J. Mistlebauer

    Well, healthcare….its a really interesting subject!We decided to establish our own self funded employee health insurance plan after getting hit with rate increases regularly, poor customer service and claims paying by our insurance carrier, and absolutely no ability to work with local healthcare providers to educate our employees.I will say that after 10 years of self funding covering over 1,000 employees our healthcare system is really illogical.There really is no way to pass on healthcare savings to the patients as health insurance pays for procedures on a percentage of what is usual and customary by zip code.  There is a big misconception that most patients have no idea what health services cost, but the reality is that most people have a very clear idea what things cost and cost is the number one reason people put off going to the doctor.Ask a doctor or a hospital what their rates are for a specific procedure and or an office visit, and they cannot tell you.  That’s because their rates are based upon the contract they have with the network that you belong to.The reality is that to hospitals, the doctors are their “consumers,” to doctors the insurance company and the drug companies are their “consumers,” and insurance companies answer to no one.If you are truly going to make changes to healthcare then you have to find a way to break the stranglehold that insurance carriers have on the system and that cannot be done as our system  works today.  There are some interesting start ups in the heatlhcare world and I wrote about them on my blog sometime ago:…We were able to do some very interesting things with our self funded plan, save a ton of money, and actually had people come to work for us because of our health insurance, but the reality is it took a lot of work and butting quite a few heads against walls sometimes.As a self funded plan we were able to fall under ERISA regulations, or federal law rather than any particular state laws (even though NY attempted to force us to follow their laws) and that gave us tremendous lee way in designing our networks and plan documents.As long as insurance companies control the networks of and contracts with providers and as long as state laws are applied then there is no way the patient will be the “consumer” of healthcare services in this country.  

    1. Tom Labus

      How do premiums compare for employees with self funded and insurance plans?

      1. Carl J. Mistlebauer

        We started self funding in 1990 and we set our rates for our insurance at exactly what we were charged by BC/BS at the time. In 12 years later our rates were the same as they were in 1990 and we had added dental, short term and long term disability, and life insurance to the whole package. We also found that BC/BS were gouging us on family coverage and we were able to reduce the cost of family coverage dramatically.When we downsized, we ended up with over a million dollars in our healthcare account, so in effect it was a “profit center” for our operations.Our single coverage (the only rate I remember) cost the company 220.00 a month in 1990 and our employees paid $5.63 a week for their portion (hint, never give employees anything for free otherwise they will forget that they have the benefit!)

    2. fredwilson

      wow. you have some great insights. how big do you need to be (employees) to consider self insuring?

      1. William Mougayar

        Bingo. Groupon for healthcare. Self-organizing groups of employees defining their own terms and getting better deals. By condition, geography, company, etc…

      2. Brad Weinberg

        Most people don’t know that 80% of companies with 1K or more employees are self insured.  About 50% of companies with 200 to 1,000 employees are self-insured with an upward trend. Approximately one-third of insurance coverage is from employers, one-third is from the insurers, and one-third is government. The traditional insurers (Aetna, UHG, etc) still act as ASOs (administrative services only) for self-insured plans and handle all of the physician contracting and claims management.Increased small business self-insurance is potentially a big trend/opportunity in the next 5 years.  Albeit there is risk that health insurance exchanges will push many of these employers to defined contribution health plans instead and allowing employees to purchase insurance through the exchanges.Companies like Array Health and Bloom (purchased by Well Point) are doing interesting things in the insurance space.  I hope there are many more and we at Blueprint Health ( would love to help people innovate in this space.

        1. fredwilson

          we should get together and talk Brad. i hear you are doing great things

      3. Carl J. Mistlebauer

        The reality is that 50 employees is a good beginning number. BUT, it depends on the demographics (age, health) and you need to look at turnover (the greater the number the better for the plan). It is a GREAT way to tailor a health insurance plan to meet the needs of your employees as you can circumvent all the various state laws.Since our workforce was 85% female, we contracted with a mobile mammogram company to come to our two plants and give free mammograms. Since we had a daycare, we had a doctor visit the daycare once a month to provide education and check ups to parents who agreed (first it was just parents who had their insurance through us, then we expanded it later on as a majority of the kids in the daycare had parents that did not work for us). We also did annual health fairs in our plants.You have alot more creativity and flexibility with self funding.

        1. Carl J. Mistlebauer

          One other point, we also created a newsletter that we sent out monthly to the homes of our employees and we shared on a monthly basis the plan financial status, we also showed financially what services cost, how to get better deals, how to review their billing, and why preventative medicine is smart medicine.Here is a good source for general information:http://www.selffundingmagaz

  43. felipecruz

    I’m a lead developer in a startup and we are building an android/google maps tool to collect health data from people in ‘poor’ communities.. Brazil has a very large primary care program and we hope to improve data gathering as well as apply some AI or machine learning algorithms, for instance, to detect/predict epidemics of dengue It’s a starting point I guess 🙂

  44. David Nicholson

    Holy cow, there are so many good comments! Not surprisingly though, there seem to be a lot of non-medical folks engaged. Herein lies the problem. Empower *providers* with excellent technology, which truly makes them more capable to do their jobs, and patients will begin to get better care for less money. Data collection should be a function of care provided. It’s not! Holy hell, it’s not even close to that. Anyone bent on disruption that starts with decision makers detached from patient care (non-providers, numb-nut administrators come to mind) may make money but will not disrupt. The ONC tweeted today ( touting how great EMRs are but that provider satisfaction sucks. Big surprise. Sure a digital version of a written prescription is better than the doctors hen-scratch but it’s not easier for the doctor. Real example: a provider recently told me his new e-prescribing platform does not track his narcotic usage per patient. Such a simple thing but not a part of the technology we get to use.

    1. fredwilson

      we need to fix that

  45. David Nicholson

    …sorry, window won’t let me post it all at once…more to come!

  46. David Nicholson

    And an important part of technology providers need is the ability to engage the patient in the process. So many issues could be solved with provider and patient engaged in the platform. Fraud will decrease. Inaccurate billing will decrease. If a diagnosis or procedure code got generated as a result of the spoken, typed or written interaction of provider and patient so many issues would go away.Ranting more now. For the guy wanting to provide solutions for medical billing: find a way to get rid of billing clearing houses.Shed light on the medical device and implant lobby and their payouts: ACE Program cost containment of joint implants went right out the window.

  47. David Nicholson

    There are some startups approaching the right trajectory. Simplee Health and Doximity come to mind.Providers should be viewed as the value just as the users of Facebook and Twitter. Patients will logically follow.Boy am I glad Fred wrote this post and for all the attention it is getting. We desperately need your help. I am a provider. All day, every day taking good care of you and the ones you love in a broken system.

  48. kidmercury

    only way the problem gets solved is after the revolution, or as a part of the revolution. i.e. consider how hezbollah offers health and education services for its members. health and education are a part of culture and community.the revolution doesn’t come until the new monetary system is built. even that is ancillary, for none of the good stuff happens without the political will to create new governments. #fsonly the truth can set us free.9/11 was an inside job,kid mercury

    1. Guest

      That was a bad example about hezbollah. They offer these services as a bribe to enlist support by a poor population and they block the government from providing these services. And their money comes from Iran and they are tainted with malicious intents, terrorism and war agendas. Very bad example. 

      1. kidmercury

        You are implying they are immoral; my comment was not meant to be interpreted as an endorsement of their ideology, only a citation as to how such networks are part of the new value network driving the disruption of healthcare. Also, I should note that a group that is seen as terrorists by one group can be seen as freedom figters by another group. Who is right depends largely on one’s own perspective and personal experiences.

  49. Chirag

    As yet another entrepreneur involved heavily in the healthcare arena, we can for sure expect several months of trial and error before there are practical, beneficial (to most, if not all, parties), and measurable solutions to this knot of an industry.  One thing is for sure, those to succeed are those that disrupt (at least) or even completely circumvent the current healthcare incentives system.

  50. Chris Kurdziel

    Fred,As someone that used to work in healthcare IT and jumped ship to the more internet/consumer-web centric world pretty recently, I think there is a huge amount of opportunity in healthcare (especially on the “big data” end of things). You are definitely right to have your eye on this space.  One of the biggest problems I encountered in the industry, though, was the culture of many large healthcare organizations and the lack of willingness to change. Status quo is a hugely powerful factor when it comes to workflow in the healthcare IT world.  As the demographics of healthcare shift and more young people enter the medical community, I think we’ll definitely see a bit of the “consumerization” of many healthcare IT products, though this probably even lags behind traditional enterprise IT.I’m really optimistic about programs like Blueprint Health in NYC to increase visibility of healthcare startups within the larger startup community and will definitely be studying all the space pretty closely.  Would love to see more thoughts from you and others in the community as you learn more.

    1. fredwilson

      there are a number of healthcare startup programs. blueprint in NYC and rockhealth in the bay area. they are certainly on our radar.

  51. Gabriel Griego

    Fred,After over 8 years in two medical device start-ups, it’s clear to me that the medical industry is ripe for disruption, but there is no easy path. The challenge is that the existing institutions are monolithic and have no incentive to change. And as importantly, consumers tend to think that their insurance company should pay for their health, and their doctor should make their decisions about their health.Consumer behavior is starting to change though, primarily because of the hunger for good information, the recognition that doctor’s often have no answer or the wrong answer, and the availability of good information via the internet. I believe this is one of the areas that disruptive ideas could take hold and make a difference.

  52. John

    One challenge with your investment thesis for healthcare is that healthcare is somewhat unique in that a HUGE amount of market power (see pharma, other medical procedures) is held by such a small number of people (see doctors).  So, there’s a huge market, but there’s not a huge number of users to engage.  Of course, there’s still the consumer (patient) side where you could have the large engaged users.  Plus, patients are slowly becoming more engaged in their healthcare.As a side note, I’ve started kicking around the idea of hosting a Healthcare “Disrupt” for healthcare IT companies to pitch their companies.  Could be a great place to continue your research.

    1. fredwilson

      yes, that consolidation of market power is the primary reason we have avoided healthcare to date

    2. Geoffrey Clapp

      You should do a Disrupt/Health in your area. There are a few “Disrupts for Healthcare” out there, models you can steal (and by steal, I mean steal in a TedX kind of way – meaning, you’re encouraged to) and also health-specific incubators, hackathons, etc – it’s a very vibrant community. If I can help you get that started, drop me a line.

  53. Donna Brewington White

    This is good news, Fred. I am pretty enamored with Steve Case’s Revolution LLC although I don’t know anything more than what is published. They have some investments under the umbrella “Revolution Health” which may be along the lines of what you are thinking.…The opening statement on the page for Revolution Health which mirrors the more general mission of the overall company: “Revolution Health invests in disruptive health and wellness companies.  We invest in businesses that take an innovative approach to addressing health-related challenges and have the potential to significantly disrupt an existing market or create new market opportunities.”Some of the investments are directly healthcare related and some are more “health and wellness” oriented.  Two of these are internet-based which of course would be more relevant to USV.  Does this strike a chord?

    1. William Mougayar

      That’s a great link Donna. Thanks. They were also recently covered in Forbes

    2. fredwilson

      yes, they are after a similar goal. we should study what they have done.

      1. William Mougayar

        Also, find out why Microsoft and Google killed their health care initiatives after trying. I think they were called HealthVault and personal health record. There’s something to learn from these big efforts.…

        1. Geoffrey Clapp

          Yes and no. That’s a bit like saying Wikipedia can’t survive because Google killed Knol. Despite Jimmy’s constant need for your money (I kid, I kid…) I don’t think that’s 1:1 fair anaolgy.What is fair is that Google didn’t bring anything new or special to the table that was a “Google Solution for Healthcare”, it was, in the end, a very poor product with no secret sauce. Brands don’t win, solutions do.The Microsoft product, HealthVault is still alive.

          1. William Mougayar

            Hi Geoffrey. How is the HealthVault initiative going btw? I wouldn’t automatically dismiss learnings from the Google initiative where Eric was personally involved. It must have started with some valid hypotheses if even the implementation may have been flawed. 

          2. Geoffrey Clapp

            I think you misinterpreted both points, which is likely my fault for making them unclear in such small number of characters – sorry for that, I can see issues with how I wrote them. Sunday morning in California. Need Coffee.On HealthVault, I was simply correcting where you said “find out why they both killed their products”, but they both didn’t kill their products. Honestly, I’m not sure on what metrics you mean “how is it working out” – since every home device to come out still integrates with it (as to many pharmacy chains), I’m not sure if you consider it a failure or not – without understanding your point of view,it’s hard to agree or disagree if it’s a failure. But I’d love to hear what you think, and why, and have a discussion on it. It’s quite possible we agree. I have lots of issues with that product, integrating into it and using it everyday in a “eat my own dogfood” approach (I try to be a patient…it sometimes works, sometimes does not)Nor am I suggesting to dismiss Google’s issues. I’m simply saying killing it wasn’t a good or bad sign. Just a few minutes with Adam Bosworth (who founded Google Health, and has spoken out about all it’s issues) are chock-full of good learnings. There are simply a lot of people that say “Oh, Google failed, this market stinks”, and that’s a horrible over-simplification.I hope that helps a bit, sorry for not being more clear.

          3. William Mougayar

            Thanks for clarifying and expanding on your thoughts. I apologize that I misrepresented the status of the Microsoft initiative- although I can’t substantiate how well it is doing and whether it’s another Microsoft middleware solution or something that has a greater motive to improve the HC system and patient lives.I think the linkage to Adam might be the key to learning from Google. You seem to know a lot about this topic, and I appreciate your coming back to straighten my comments.

          4. Donna Brewington White

            I think I am figuring out that Google can afford to fail as I look at the growing list of failed/abandoned products.  I wonder if there is a different passion and care in product development when you can’t afford to fail?  And greater efficiency.

          5. Geoffrey Clapp

            I don’t know. I think that’s a valid point and true for a lot of large companies. At the same time, I think Google is a little different. I think in that case, it’s more about the company and it’s leadership picking a few areas it can excel at, that are tied to their strategy and goals. Most of what they have purged is about focus – at least, observationally.I’ve gotten to know a lot of people on Google Health and other Google projects that have been canceled. There’s no lack of skill, love, or passion for what they do, I think they are just part of a company going through a focusing function – not unlike Apple in 1997 – but a little less painful and with fewer layoffs, but all around a corporataiont attempting to focus.

          6. Donna Brewington White

            It is easy to forget that Google is still a relatively young company that grew really fast — and without a lot of precedent to guide them. It makes sense that they would be at this stage that you describe.

          7. William Mougayar

            Perhaps, but it’s also possible to tie incentives to the group itself therefore motivating their direct efforts. Of course, it’s almost never the same as a startup which can die if it fails vs. failing in a large company where they transfer you to another department.

  54. Robert Metcalf

    I would love a web product that allowed us health care users to share the cost of various procedures/services across providers so that we could get a feel for how much something costs. It’s almost impossible for a patient to determine how much a procedure will cost until AFTER it’s been performed, which makes it very hard to make an educated decision. And the hospitals and insurers conceal this information. Which is the perfect problem for the web to solve.

    1. fredwilson


      1. impartialvoice

        That’s a good point.  I think not only the cost, but the procedure codes that the physician is going to use to claim, compared to the procedure code the insurance co. used under their coverage.  I have personal experience and quite annoyed by the fact that the physician claim to the incorrect code which the insurance doesn’t cover and I have to pay out of pocket after the procedure.  And having the hassle to appeal the claim for readjustment.  This scenario is especially true for PPO or medicare patients. E.g. Physican in MA claimed Blood Test under Annual Physical while Blues in CA had Blood Test under Preventive Care.  Result: Patient pay out-of-pocket for blood test, or patient appeal the claim which he/she need to gather evidence with the physician and provider which will take several months to complete.If there is a web community where patients can share their experience or submit questions and resolved through crowd-sourcing (similar to Quora), along with some indexing/categorization of diseases types, that would definitely help lower the time and money that consumer spend dealing with healthcare claim related issues.

        1. Dave Chase (@chasedave)

          That is what HealthTap is intended to be – sort of a Quora with MDs answering questions. Don’t get me started on claims/billing codes – it’s a Gordian Knot designed by Rube Goldberg. At Direct Primary Care practices what you described is offered for far less (or free) compared co-pay costs at insurance-centric practices. Using insurance for a blood test would be like using car insurance for Jiffy Lube – that’s how crazy the system is now in h/c.

          1. impartialvoice

            Dave, I think HealthTap is great for health related issues, kinda taking WebMD to the next level and easy to use.  However this still doesn’t address the issues with claims and billing code for the patients.  If there’s something like HealthTap which provide advice to patients on claims-related questions prior or after the visits, that would be awesome!  At least for me.  I really like your idea of Direct Primary Care practices which I read from previous posts.  I guess the only issue is malpractice insurance, but why wouldn’t more Doctor do this?  Is there other regulatory issues that still need to work out?

          2. Dave Chase (@chasedave)

            Regarding the claims-related questions, two companies that I know of are tackling it — Simplee and Cake Health. I’m not sure if they’ll address the Q&A aspect but they are generally solving for that problem. On malpractice, history suggests that one’s malpractice coverage is cut in half with Direct Primary Care — see…. It’s logical. If you have 30-45 minute appointments vs. the typical 7 minute appointments, the chances of missing something are reduced. Further (and I’m speculating), it would seem that if you feel like you have a relationship with your doctor which is possible in 30-45 minutes (and not in drive-by appointments) you are less likely to sue. 

  55. andyidsinga

    Hi Fred / all, i think some advances in healthcare will come out of fitness and games. There are several devices and apps that help people get exercise, compete, monitor progress and connect with others.Some of these devices include heart rate monitors – its easy to imagine them having even more capabilities focused on the ‘health’ ..oops, i meant ‘fitness’ of the user.maybe the fitness angle allows the tech. to grow outside of the existing “healthcare” regulatory environment.ive observed a few of these types of apps posting results to twitter ( Brad Feld using Runkeeper comes to mind ) doubt some of the users are more healthy due to their use of the apps :)( after reading the rest of the comments i saw that others said similar things about 8 hours ago …cheers to those comments , sorry for the blurt )

    1. fredwilson

      this is an interesting area. but it seems like the people who use them are the people who are already taking great interesting in their fitness.

      1. Chris Hogg

        Data will be a big change agent.  Agree that today it is only the very engaged who are using these devices. But as data collection becomes more passive and ubiquitous (even just daily activity level from your phone, or ‘health accessories’ like Jawbone UP), we will see greater opportunity to re-engage the masses with their bodies and health (and hopefully impact behavior change).  We cannot change what we don’t measure.  Today the only measurement of health behavior is a chronic condition (high BP, diabetes) that manifests over 30 years, and we are not good at 30 year feedback loops.  So i like companies like (passively measures mood based on activity, GPS and SMS), Azumio (measures heart rate and heart rate variability (good measure of stress) using iPhone camera), or Basis watch (measures heart rate, activity, galvanic skin response), for their new ways of collecting valuable data.  Then you couple these new data streams with newly available large datasets (like EMR data, large government datasets on behaviors and health), and with great analytics to engage people with their bodies and health.  i think this is the first step (of many) on the individual engagement side of the equation.

        1. fredwilson

          great insight chris. i agree with you. do you think there is an opportunity to create an uber network that works across all these devices?

      2. andyidsinga

        yeah, thats probably a key challenge to overcome.there appears to be some sort sort of surge happening lately. ive noticed a bunch of people ( some in my family ) doing 5k runs. Maybe just a lot of fitness sharing on twitter and fb combined with cheap software and hardware?

    2. Tim Soo

      So on its face, gamification and the integration of social media and healthcare seems like a phenomenal opportunity for preventative care. But from what I’ve seen (anecdotally and in epidemiological studies) is that there’s a demographic mismatch. By and large, though this statistic is gradually changing, the subset of people who use and know how to use smartphones and more complex UI web apps tend to also be healthier. These are people who are already conscientious about their health. But the average hospital patient is of a lower socioeconomic status, often without medical insurance, and it is that group that waits til the last minute until coming to see a physician due to fear of costs. And it is that group that then requires expensive procedures and surgeries.Not to say that there isn’t gradient of tech-savvy-ness or that the statistics aren’t gradually changing, but I feel as though we have a huge number of start-ups and companies targeting a disproportionate fraction of the patient population. Just look at the socioeconomic spread of the obesity epidemic. Those who need the most medical attention rarely carry around iPads.The true innovations that stick in this next episode will be low-tech, wider-reach ideas, while we wait for health tech catch up. Recall, one of the biggest (if not the biggest) game changer in nosocomial diseases were those Purell stations — simple, but effective.It’s hard to accept, but if you want to have a wide patient-side reach in healthcare, it is often necessary to revert a few years back in technology. Not to say that these wellness apps aren’t fantastic — they are — but the world might not be ready quite yet to handle them all.[note: of course an exception to this entire argument are within niche diseases that are truly environment independent w/o socioeconomic disparities]EDIT: … also didn’t see Fred’s comment until now essentially saying the same thing. Hah. At least I can say that the studies back up his hypothesis!

      1. andyidsinga

        Great comment and points. I completely agree that the solutions will not *necessarily* a high tech mobile app – and that valuable solutions are often straight forward and elegant like hand cleaning stations and water filters.

  56. EmilSt

    Consumers need to take more control of their choices in general, in society or commerce. Freedom is more then just choosing between two or few (even many) pre determent choices. Consumers should be able to create choices.After two years in US I realized that this is country of logic. Except for healthcare. So probably the biggest disruption could be made here. And it must be done because this system is unsustainable.Today, with the Internet, social, local… consumers can unite in meaningful groups and bring healthcare providers on their terms.

    1. fredwilson

      yeah, that’s what i am thinking

  57. Dave W Baldwin

    Due to limited time, haven’t had a chance to read all comments.  From those I’ve read, feel it important to point out something.You cannot blame everything on Insurers.  Government is equally guilty.  Remember the bigger money pit is made up of Medicare. There are crooked people in all sides of the issue, ranging from the employee going to ER in order to get a form saying he/she doesn’t have to work the next day, the Doctors, the Clinics, the Adjusters, Insurers and so on.  Yet, there are many front end providers who try their best and are slapped down facing the system that tries to take from them and reward someone else.No matter what, we need to focus on driving tech innovation to cure.  At the same time, the reality of hospital stays becoming shorter and shorter should force care units that are set up to handle the less than a day treatment.To get on the other side of the big money players lobbying the government to mandate treatments/prices/who’s paying and so forth will be a tough one.

    1. Dale Allyn

      Dave, you’re correct that fraud on the part of the insured, and other “players in the pool” is also an issue. Insurance fraud (healthcare or otherwise) hurts everyone. 

      1. Dave W Baldwin

        Absolutely.Prayers and thoughts regarding your family.

        1. Dale Allyn

          Thank you, Dave. We’re happy to receive prayers and well-wishing. We’re doing well, and our daughter is doing much better, no thanks to certain aspects of the healthcare industries. To be clear, we see so many other families dealing with similar or much worse situations that we extend our prayers and best wishes to all. We feel lucky and want to do whatever we can to have a positive effect on the lives of others. Edit: dropped words, as usual.

          1. Dave W Baldwin

            Nice to see someone who understands the value of receiving positve thought and passing that thought to someone else (forward).To win the war, we need to avoid battle following the rules written by those motivated by vanity and greed.Signs of hope include many of those who have a true talent are at the stage of life where they can concentrate their work in collaboration with others in the same position along with lower overhead needed. This decade will bring about a change in the two roadways, one filled with overpaid/ one filled with greater knowledge, where the latter will begin to gain a more appreciative audience and their accomplishments will accelerate.

    2. LE

      ” to get a form saying he/she doesn’t have to work “Not a day went by that my wife didn’t tell me about a patient wanting to be put on permanent disability so they don’t have to work ever again. 

  58. Roger Toennis

    “…help us develop a thesis that allows us to start investing in healthcare.”Here is a posible thesis that you might use to look at this in a different light.Thesis for USV to position education and healthcare innovation as primary investment priorities…”Without disruptive changes for the better in the quality, affordability and delivery of healthcare and education in the US, the ability for US-based Venture Capitalists to operate effectively and deliver consistent returns to LPs in any area of venture investment will diminish over time and eventually collapse.Lack of access to affordable healthcare and highly educated workers is a primary roadblock for many of the most talented innovators to take the risk to start venture companies of any variety.Therefore, because USV believes it has both a moral responsibility to the society that allows for it’s success, and a fiduciary responsibility to it’s LP investors to make sure there is a rich and growing community of startup ventures to fund, USV will from this point forward invest 25% of each fund in education and healthcare startups.In order to kickstart this new investment thesis we will be recruiting some of the brightest minds in healthcare and education reform to help us consistently find the most promising education and healthcare startup concepts. We will also reach out to and partner with Federal and State government agencies and key political figures to help pave the way for these companies to become successful in re-inventing and improving education and healthcare.USV will also work to enroll other VC and Angel firms in collaborating to pool fund resources so that all the VC’s who join the “Education/Healthcare Investing Cooperative” will all commit to invest 25% of their funds in education and healthcare.I’m sure folks have a million reason why this can’t be done. When people make the choice to be “can do” versus “can’t do” this could happen. It’s not Rocket Science. I bet you could even get Congress and the Administration to agree to provide public money grants to this cooperative fund.

    1. fredwilson

      While i agree with your sentiments, i dont think this is the best way to approach investing other people’s money

      1. Roger Toennis

        OK so I’m confused. Are you now saying you don’t think there is money to be made investing in education and healthcare? Didn’t you say in your post…”But I’m hopeful that entrepreneurs, industry observers, and of course all of you, will help us develop a thesis that allows us to start investing in healthcare. Like education, it feels like a market where you can make strong returns and also help facilitate important and needed changes.”Or is it just the form of how you might decided to invest that’s the problem?

        1. fredwilson

          i think there is a lot of money to be made in both categories. we think we know how to do it in education. still figuring out healthcare.

          1. Mark

            Fred- if you think you are on the right track with respect to education, perhaps you should look at applying some of those lessons to healthcare.  In many ways, the healthcare problem is an “education” problem (lack of pricing information; lack of product information; ratings. etc.).   To me, the avenues that are most interesting are not about how to make healthcare better via new treatments, drugs, devices, etc., but around how to get people to “care about their health.”   Hint:: monetary incentives work very, very well…      I know you are just scratching the surface here, but if you’d like to spend some time discussing what I’ve learned over the course of many years, ping me back.  There are plenty of challenges, not the least of which (raised by many commenters) is that the US healthcare system is so fragmented between various stakeholders:  patients, providers (hospitals, clinics, physicians, nurses, nursing homes, pharmacies, to name a few), and payors like Medicare, Medicaid, commercial insurers, and employer groups to name a few.   Also, others have raised the issues of certain legal/regulatory hurdles around privacy (like HIPAA — and it’s with two As, not two Ps).  There certainly are legitimate concerns for some stakeholders involved in storing and transmitting protected data.  But given your focus on large networks of engaged users, I’d not be as concerned about that.  For one, people appear to be getting much more comfortable with sharing certain health information.  An example cited by one commenter is Patients like me — a fantastic support network.  Another example is the Yellow Dot programs that many elderly drivers participate in.  Essentially, drivers who place relevant healthcare information in their glovebox are provided a Yellow sticker to put on their cars, so that first responders are alerted that certain health care information about a passenger is available in the event of n accident.  The traction for this program — starting out as a small demo project — has been remarkable.… There are a variety of others as well. Anyway, good to see you and your colleagues at USV taking a close look in this area.  Would be happy to share further insights too.     

          2. fredwilson

            mark – i like your ideas. how do we get together and chat? where are you located?

          3. Dave Chase (@chasedave)

            “Hint:: monetary incentives work very, very well…”  This is correct and needs to be scaled. The Vegas example I gave in my comment showed it can work even with a people-intensive, manual process. When only 1 out of 700 had to go to the more expensive (for the employee, not employer) model, it’s worthy of attention. Unfortunately, most employers still think they have only two options when dealing with spiraling healthcare costs – eat the costs and have their margins hurt OR cut benefits by shifting more burden on employees. The smart employers realize there’s a 3rd way – the right incentives and creating more consumerism in their employees’ h/c expenditures. My piece on DIY Health Reform expands on this a bit –…. “Fun” fact for the day: In Fred’s lifetime what we spend on h/c in the U.S. has increased 274x compared to 8x for all other consumer goods. 

          4. Mark

            Hi Fred-Could not reply to my own comment.  I’ll send you an email off line. Dave, I think some employers are starting to get a lot smarter about incentivizing certain types of healthy behaviors.  My sense, however, is that the employers doing some of the more interesting things are the larger ones because the costs to scale these ideas/concepts are easier to bear for larger companies.   I’d expect certain types of programs to trickle down to smaller employers as more evidence becomes available about what works vs. what doesn’t, as well advances in technology makes adoption of these programs more cost effective and easier to administer.  

    2. LE

      “In order to kickstart this new investment thesis we will be recruiting some of the brightest minds in healthcare and education reform to help us consistently find the most promising education and healthcare startup concepts. We will also reach out to and partner with Federal and State government agencies and key political figures to help pave the way for these companies to become successful in re-inventing and improving education and healthcare.USV will also work to enroll other VC and Angel firms in collaborating to pool fund resources so that all the VC’s who join the “Education/Healthcare Investing Cooperative” will all commit to invest 25% of their funds in education and healthcare.”Time to do this?As Fred said, this is not something that the investors would necessarily sign on to. But besides that, what you are suggesting would take time away from the core current mission of the fund. As such it would inevitably lower returns and time and concentration on the current objectives. Also making a statement such as “we will commit to invest 25%” to me seems like a PR move at least to me.

      1. Roger Toennis

        Look you either want to take risks that allow you to make a lasting difference in the world or you focus exclusively on maximizing returns by investing in the same old fluffy internet hype solutions, like Twitter and Foursqaure, that you have always invested in. Frankly I think there is more real money to be made in healthcare and education investing. But it takes balls and nerve to break out and start trying to change the world for the better by focusing on venture investing that really has meaning.

  59. Dennis Buizert

    I cannot comment on the healthcare in the USA. Only thing I know is that I love the healthcare system that we have here in the Netherlands.I pay around 145euro per monthWhat does it cover?Health improving surgeryVisits to the doctorBasic dental (and health improving)What does a doctor provide?Prescriptions that can be bought legally at the pharmacist.He can recommend you to visit a doctor which is part of the hospital. He gives you advise. Nothing more. What does the dentist cover?Dental repairs and twice per year a check up.That is a basic set which is 80-100euro per month depending on your insurance company. I have extra on top of that, which provides me bracers fixes (I still have 2 of them which ill keep for the rest of my life). And some others like recovery visits after i.e. a surgery. I pay a bit more then I want too but when shit hits the fan, I am fully covered and for others I am 80% covered.Next to the 145 p/m I have to 250euro “own risk”. Which is usually used to medicine that is not covered by your insurance until you spend more then 250euro. The government gives me 90euro back per month to cover for the basic. 

    1. LE

      I frequently see people comparing the US to other countries and how the health system works in those countries. But I don’t think you can compare a country such as the US because of a) population b) our country is not as homogenous c) military spending. They are different places. The scale is different. Things that work in a small country (both geographically and population wise) won’t work in a large country. Just like you can’t compare NYC to a small town in the midwest. Of course that doesn’t mean that there aren’t things that are better or can be adopted by the different country. Taking the US vs. Netherlands vs. Israel for example and look at military spending as a % of GDP. But then  look at Israel and how their military expenditure per GDP is higher (but Israel is much more homgenous and of course they get Military aid from the US so how accurate is that figure anyway?)…The bottom line with using any data comparison is that you can make the data say anything you want if you look long and hard enough. (I’m not saying that is what you were doing and I understand you are just giving an example in your country.)

  60. Lucas Dailey

    At the low-hanging fruit end of the spectrum, you can disrupt the way medical information is conveyed.A Madison startup, ScioMD is disrupting lab reports to make them more understandable and actionable for patients, and more quickly digested by doctors to save them time. (Obviously saving doctors time en masse is the bigger biz model opportunity.)

  61. William Mougayar

    After reading these threads, it seems there are 3 types of issues with healthcare:1) STRUCTURE – attacking the structural problems of the system itself2) MANAGEMENT – ways for consumers to better manage and fend off the absurdities of the system3) EFFICIENCIES – improving the efficiencies of the “delivery” part & the relationships with the care providers#2 and #3 are more approachable in the short term. #3 is a requirement, no matter what. #2,- if well done can start to attack the core of #1 and weaken some of its current gamification schemes, and that might be the way to start changing the system itself, i.e. by weakening those that are benefiting from it the most (ironically it hasn’t been the patients). 

  62. Geoffrey Clapp

    One of biggest problems with Healthcare is the definition of Healthcare. If you read between the lines of the post, part of what I see is “how the heck to I even get my head around this beast that is called ‘healthcare.'” As you can see from the comments, this conversation goes from BackOffice efficiency to Wellness devices (such as the Jawbone Up) to Pharma and drug discovery (not to mention payment systems and incentives for physicians) – all, “healthcare”. With it’s own language and complexities, it’s built to be insular and obtuse – but over the last 10 years, a real movement has started to tear down those walls, and to embrace change. It’s really hard, but the rewards are really big – in both karma and financial terms.The community (Blueprint in NYC, RockHealth in SF, dozens of hackathons, hundreds of startups, lots of fed-up industry people) are all here to help and navigate those complexities, if you are really interested at getting into the space. I am sure most of us would help out USV gratis, just to help the movement.  Like Education, it’s too important to let fail.

    1. fredwilson

      yup. we are starting to engage with the community. we like to do that first and for a while before starting to invest.

  63. Paul Ford

    Have you looked at FlexMInder Fred?  http://www.flexminder.comThey nailed it at TechStars Seattle Demo Day recently.  Great team, great concept, and they are getting major traction with the large insurance companies.  Making the current system more efficient, and far less painful.

    1. fredwilson

      i am a big fan of flexible spending accounts. i will take a harder look at this one.

      1. Deepak Kumar

        @Teknowlogist:disqus, thanks for the kind words! @fredwilson:disqus, I’d love to brief you on what we are up to at FlexMinder. Flex spending accounts are great in theory, but in practice are plagued with inefficiency & paperwork. We are fixing that.I’ll reach out via email.Best,Deepak KumarCEO & co-founder,

        1. fredwilson

          keep after me on email. i am wayyyyy behind on email and miss stuff, particularly right now

          1. Dave Chase (@chasedave)

            @fredwilson:disqus there’s an email waiting for you in your inbox with the data on Direct Primary Care. I think it has the biggest single opportunity to do a reset on healthcare as a whole driven from the DIY Health Reform movement with an assist from the federal reform (one of the aspects that has bipartisan legislative support). Happy to forward it to others who want to email me – (dave at avado dot).While addressing the fundamental formula that has been proven globally (more primary care access = healthier population =  less money spent), it fundamentally addresses the underlying cause of out-of-control h/c costs. Much of what’s done in h/c is fixing symptoms (ironic isn’t it). Anything that provides care (via a for-profit model) cheaper for the individual than the gov’t’s public health facilities while reducing downstream costs 40-80% AND has Google/Apple level Net Promoter Scores demands attention in my book. Each of the DPC providers I’ve interviewed has ~ 1/3 of their patients who were uninsured (and still are incidentally since this is insurance-free). The doc at AtlasMD had a couple great comments in my chat with him this week1. “A good scalpel makes a surgeon better. Good communications makes a primary care doc better.”2. He shared how one patient lives in a storage unit, yet his $50/mth fee is less than co-pays at the local public health center so she gladly pays it to get better care/service.

          2. fredwilson

            Thanks daveI hope to get to my email this weekend

  64. BillSeitz

    I’m surprised nobody has mentioned

    1. fredwilson

      you have now Bill. it’s a very interesting model.

  65. BillSeitz

    This is where I tell people that we would have had universal catastrophic coverage in the 1950s were it not for the UAW.…

  66. JamesHRH

    Fred – one last thought…..sometime I will tell you how I came to learn this, if you want.European health model = PracticalityAsian health model = Systemic PerformanceNA health model = InterventionismNot 100% accurate, but philosophically true.Europe is focused on work / life balance, higher food quality, general population is neither highly fit nor morbidly obese. The home of bottled water, bicycles and assisted suicide for the terminally ill.Or: good food, good wine, not too much work, not too much play, no going overboard in anyway.Asia is focused on the health of the entire system, not the individual or the individual parts. Sometimes the leadership pushes the system to the brink, with individuals paying the price along the way.Or: the home of chronic illness treatments: herbals, acupuncture, meditationNA is the home of the star system. Go for it baby. When the wheels come off, do something about it. But until then, just do what feels good.Or: the home of 5000 calorie burger, stomach stapling and surgeons as TV soap operas.Why do I think this is important? Each of the cultures needs to be represented in a hacked medical system: intervention, chronic management & practical health leadership.That’s a tall order.

    1. fredwilson

      great comment james

  67. Dan F.

    Iam curious about the evolution of your thesis as it pertains to education.  I had started a conversation with one of yourcolleagues several years ago pertaining to an idea I was working on, probablyabout the time you guys starting talking about education.   While I will admit my idea had some flaws,what I saw was the need to change how educators teach children, bringing moredynamic interactions and technology into the classroom.    I havenot stayed entirely up on the evolution in education but some of the start-upsI see are playing on the periphery of the primary delivery mechanism–publicschools.   I guess these new delivery methods are forming cracks but thereis a long uphill battle and it would require a revolt by the engaged parties tochange the system.    Justcurious to see if you have links to other articles outlining your education thesisand how these new startups can speed up the much needed transformation.    I think we all agree that education andhealthcare are two massive and complex institutions with multiple stakeholders andthe existing  power holders  will do whatever they can to keep theircontrol and will only change when forced to.

    1. fredwilson

      our approach is and has always been to go around the existing system, not work with it

      1. Emmet Gibney

        I agree that it’s important to circumvent the system in order to truly disrupt the status quo.  However, when you say go around the system I think it’s also important to point out that physicians are not the system, nor are the other healthcare professionals.  It’s the bureaucracies that they have to interact with that are the system.Looking at Google Health as an example, it failed because it did not engage with the physicians first.  Patients are NOT going to take control of the healthcare system, they can’t even take control of their diets.  I can assure you that healthcare professionals are exceptionally frustrated with the system, and engaging them directly is the best way to disrupt the system.  Think of a trojan horse sneaking in and disrupting things from the bottom up.

        1. Dave Chase (@chasedave)

          Emmet – you are correct in saying “physicians are not the system, nor are the other healthcare professionals.  It’s the bureaucracies that they have to interact with that are the system.” Much of the automation taking place in healthcare is automating broken “systems” whereas I think the real action is with the disruptive innovators on the care delivery side which is the  point of the Healthcare Delivery Innovation Alliance ( – disclosure: I’m a founding board member. They aren’t looking to make 3% improvements. Rather, they are rethinking things from the ground up. Typical of these orgs was a MD who set up a Direct Primary Care practice. A big chunk of his practice are previous uninsured people. He shared how one of his patients lives in a storage unit and his fees are less than what she’d pay at the public health center that provides a lower level of experience. And he’s doing this as a money-making business…not charity care. How does he do this? Among other things, a typical MD practice has 4-5 FTEs for every MD to deal with billing, scheduling, etc. He has ZERO admin staff. This is possible with the right mix of technology. He’s adding 30-50 patients to his practice every month. How many MDs can say that?If you are a clinician frustrated with the status quo, take action. Orgs like HDIA are there to support the movement. Entrepreneurism is alive and well in healthcare. It just gets overshadowed by the behemoths. 

        2. fredwilson

          great point emmet. maybe physicians are the large network we should be trying to find, at least part of it.the way edmodo went to teachers and then to students and bypassed the K-12 establishment should inform how we think about this.

  68. Yishai Knobel

    There is one low hanging fruit that fits your philosophy of large networks of engaged users bypassing the gatekeeper:  healthcare cost transparency.  This problem has been solved in Airline pricing by Kayak and in personal finance by Mint. In the next 5 years, the indecipherable “Explanation of Benefits” we get from our insurance companies will become obsolete for web users.  I know of at least two startups that are working on this problem and more are emerging.Unfortunately, in our own space (Consumerization of Medical Devices), there are still too many gatekeepers on the way to the patient.

  69. Dave Chase (@chasedave)

    Good to see you take up this topic, Fred. Some good commentary here though some misconceptions about what drive healthcare costs – i.e., why we spend so much more than other countries – and thus what the attractive opportunities are. This Wa Post graphic busts common myths such as obesity or malpractice being primary drivers of why we spend more in the U.S. – http://www.washingtonpost.c…. As mentioned, chronic conditions drive 75% of what we spend on healthcare but we exacerbate that by our “do more, bill more” reimbursement model that is recognized a key driver of healthcare’s hyperinflation. Healthcare can get incredibly complex but there’s a surprisingly simple formula comparing which countries get the most/least bang for their healthcare buck as was evidenced by IBM’s study of their $2B global spend on health benefits. The formula boiled down to More Primary Care Access = Healthier Population = Less Money Spent. Naturally (sarcasm inserted), we have done everything in this country to tilt the playing field away from primary care. Curious why? Look no further the Relative Value Scale Update Committee dominated by specialists (reportedly 27 of 29 members are specialists). This AMA body is rubber stamped by the Centers for Medicare & Medicaid Services that determine Medicare reimbursement. That, in turn, drives private insurance reimbursement. Is it any surprise that primary care is the worst compensated (it’s the opposite in many other countries) category of MD?The good new is there’s a growing “Do it Yourself Health Reform” movement (google that term for more) that is taking matters into its own hands. There’s two promising items driving increased primary care access. One is most applicable to smaller groups of people – Direct Primary Care (DPC) that Jim Woodland mentioned earlier (note that messrs Bezos, Barton, Hanauer & Dell backed one such org). The other is Onsite Clinics (workplace clinics). Adopters of these models are fed up with the “get less for more” story every year when health plans are updated. While health insurance has literally the lowest Net Promoter Score (NPS) of any industry, these orgs have NPS scores surpassing Google & Apple while saving people 20-40% compared to typical plans. Better news? The most expensive downstream healthcare costs (surgeries, specialists, ER, scans) are reduced 40-80%. How is this possible? First, we pay what amounts to a 40% “insurance bureaucracy tax” by insuring the equivalent of a car tune-up. Second, Ben Franklin was right — an ounce of prevention is worth a pound of cure. Better news? There’s a clause in health reform that has barely been reported on that will ignite the DPC market (Google “Health Insurance’s Bunker Buster” for details). Want details on the savings I mentioned – email me for a PPT w/ the findings. There’s a recently-formed group called the Healthcare Delivery Innovation Alliance catalyzed by one of the disruptive innovators in the space (WhiteGlove Health) that was founded by a serial tech entrepreneur who had multiple exits including a $743M exit to IBM. Want more on DPC practices? Follow the link below to my TechCrunch pieces and click on “The Most Important Organization in Silicon Valley No One Has Heard About” for more. The next piece I wrote for TechCrunch details the Onsite Clinic movement (hopefully it will publish soon). Employers are disintermediating traditional healthcare providers often via 3rd party service providers where there’s been exits – e.g., Concentra being bought by Humana. Employers are paying the lion’s share of healthcare costs so this is a huge trend. Not surprisingly, these companies are growing 100% annually. Twenty percent of companies with over 500 employees reportedly are pursuing onsite clinics.Fred – You asked about the self-insurance trend. Surprisingly, one only needs about 50 employees for self-insuring to work (it’s coupled with a stop-loss policy for the massive/unusual claims). The macro trend is similar to what happened with pensions. What was once a defined benefit evolved to a define contribution with 401k’s. The same will happen in healthcare. Whether people like it or not, they will be forced to become literate on health economics as more of the cost burden will be in their hands (similar to what it was 30+ yrs ago). Most have the equivalent of preschool level health economics literacy. Smart consumers are spending 80-90% less than others on things like MRIs. The opportunity for disruption is epic which is why I got back into HealthIT. Even though it had been a logical place for me to operate with my background, healthcare has been so moribund that I didn’t want to do startups there. Small example why from my past – a top hospital I worked with was in year 7 of debating their unique patient identifier scheme. The absurd level of consensus decision making killed many a startup. Fortunately, that is changing.Want more on healthcare disruption? Click… for my TechCrunch posts.In case you wonder about where I come to these conclusions, I spent the beginning of my career at what’s now Accenture implementing HealthIT systems and doing business process redesign in 25 health systems in the West prior to founding Microsoft’s Health business which became their most successful vertical. You can see my commentary on TechCrunch, Reuters, Huff Post, KevinMD, Forbes, etc. tagged at…

    1. Richard Koffler

      Dave, good comments but the WaPo chart is not, IMO, the model to point to, especially the parts that advocate controlling prices and provider compensation. For example, meds are cheaper in, say, Canada because the government there imposes price controls. The biopharma company’s deficit gets shifted to the US. The consequence of imposing Canada’s level of prices here would be a reduction in R&D, especially for drugs that will not have large markets — something that has been happening for a while.Perhaps your most salient point is the car-tuneup analogy. I would add the “money is not an object” mentality that dominates when care is paid with OPM. “I’m not ready to part with mom, so do whatever it takes because money is not an object,” says junior about his mother who is virtually dead and kept alive artificially at thousands of dollars per day, none of it paid by mom or her family. I don’t know the number any more, but heroic medicine that keeps dead people alive one more day accounts for a healthy double-digit percent of the total healthcare pie. This doesn’t happen in the other countries we get compared with, does it? Certainly not in the UK.Lastly, defined-contribution employment-based plans will clearly drive costs down while increasing quality and access but, what how will these plans be affected by legislation and regulation that essentially mandate defined-benefit plans designed by politicians and bureaucrats?

    2. Mark Essel

      Thanks Dave for sharing an informed perspective. I need to read up on in house clinics.My personal health care for the past decade has been a walk in clinic because I trust the doctor. Unfortunately his office isn’t part of my company plan.

    3. fredwilson

      that’s a lot of data dave. very helpful. thanks.

    4. William Mougayar

      Amazing analysis given your background and knowledge. But isn’t part of the chronic illnesses spectrum acquired one way or another by a lifestyle related parameter? In other words, what % of chronic conditions could be avoided all-together given the right prevention? Definitely on track with you regarding increasing the primary/GP care as a prevention measure and to lower the costs associated with specialty care. (Good to see you were a Whistler addict as I was in the early 80’s and lived both in Vancouver and Seattle. I’ll try to reach out to you separately.)

      1. Dave Chase (@chasedave)

        Yes, lifestyle has a lot to do with some key chronic conditions. One of the key reasons that Direct Primary Care (DPC) practices make a dent here is they actually have the time to get into these factors. In a typical 7 minute apptmt driven by flawed insurance reimbursement models, there’s little time to see more than a presenting symptom and then order a test or write a prescription. DPC practices has 30+ minute discussions and they are incented to keep you healthy. With the “do more, bill more” model, it’s good news when the patient comes back more frequently. Likewise, a hospitalization is a money maker for the hospital when it should be viewed as a failure (except childbirth). The places that are seeing demonstrable progress on vexing issues have “carrots” and “sticks” such as the employer who finally succeeded after multiple failures dealing with costly obesity and substance abuse (it was in Vegas). If the individual didn’t follow the program, there was a “3 strikes, your out” policy where they were moved to a much more expensive health plan. Out of 700 employees, only 1 got strike three. It can be done but one has to take a fundamentally different approach.

      2. Geoffrey Clapp

        Totally agree that the wellness movement only has impact getting ahead of the lifestyle issues that lead to our greatest costs – Chronic Care. Mostly, because no one has financial incentive to care about Chronic Care post-diagnosis, in the system, today (I admit, “no one” is a bit dramatic). The biggest problem with Chronic Care (post diagnosis) is the lack of aligned incentives. That’s what my startup’s space was (well, “is”- but we sold it, so the “my” part is the part in the past…)  There is a reason that only IDN’s  and the VA (in the US, and the EU, globally) currently consume cost-savings approaches (or any approach) to Chronic Care, and that’s because the incentives just don’t match up for anyone else in the system, so people with Chronic Disease fend up being an excersise in pushing the costs around (or out – we have experienced many a sad story there).  Most employers are are not worried about the diabetes and heart failure you’re going to get from your pizza-and-energy drink programmer lifestyle…35 years from now. Yet, that’s the largest part of the costs to our system. Even worse, there are very few, if any patients with a single chronic disease. We covered over 130 permutations of co-morbidity – which makes it sadly, even more complex in our doctor, rather than patient, centric care-system. Even though that’s where the costs are, and the market is huge, it’s horribly fragmented in the US. Chronic care is doubly-fragmented, if you will. The VA (and Kaiser, slowly) has it figured out, but with full capitation, it’s “easier”, hence broader adoption in the EU. That’s not an argument for/against their Healthcare system, just pointing out why Chronic Care systems and startups have trouble cracking that market, stateside. We most of our eggs in the VA basket, so to speak.

    5. David Nicholson

      You make some good points. Your link to the Wash Post undermines some of the points you made in your post though. Most of those graphics are myths themselves.Providers aren’t resistant to change and health IT. We are resistant to the sh&*#y stuff that has been foisted upon us. Most of what is supposed to help us do our jobs just gets in the way and makes it more difficult.Providers enabled = better patient care = lower health care costs.Read his comments:  James Currier

      1. Dave Chase (@chasedave)

        I’m curious which of the graphics are myths. They seemed pretty well sourced and Ezra Klein is usually good about sourcing. Couldn’t agree more on the $hitty software out there — I’ve seen it and implemented it. Here’s the problem in my view. Decision processes in large health systems (gov’t & private sector) are comically convoluted and consensus driven to the point of absurdity. What spits out the other end of processes like that is exactly the cruddy software you mention. It’s not like there hasn’t been good software developed but those companies haven’t been able to survive those decision processes. When the large health systems (and there are exceptions) complain about what they get, they need to look in the mirror. The decisions play to the strengths of incumbents who’ve been in there years, are golfing buddies with the CFO/CIO, etc. — they have the financial endurance to outlast the interminable decision processes.This is a key reason why our customer acquisition strategy avoids those large systems unless they come to us asking for a solution. The individual and small practices run by clinicians are more able to make sound decisions. It helps when the user is also the buyer. Eventually, the outmoded decision processes will get threatened by the disruptive innovators on the delivery side (MedLion, One Medical Group, Organic Medicine Now, WhiteGlove Health, National Surgery Network, etc.). Those types of orgs make decisions in a way that allows for innovative, modern software platforms.

        1. David Nicholson

          Oh man, you nailed it too! Decisions by hospital administrators are some of the most asinine I’ve ever seen. The reasons are as you stated and even more comical than most can imagine. The hospital I work is implementing its “paperless” system now, to the tune of ~$25M. However, not one person in my department (anesthesia) has been engaged by the vendor in order for us to see a demo, comment on implementation or better yet for them to ask us what we need to do our jobs.The “myth” that disease prevalence doesn’t drive cost. Craziness. If:then, if there were no diseases the cost to care for those diseases would be what? Zero dollars. The elephants in the room are:  government (…, legacy/proprietary software providers, proprietary data in drug development patient studies and the resulting contamination of study data (actually, study data gets contaminated at many steps in the process), lack of a real way to measure patient outcomes, inability to track patient behaviors, poor data visualization, the hospital lobby, the medical device lobby (this is not about innovation, rather preserving market share), 2X number of administrators compared to other countries, meaningless but costly accreditation processes. I could list more… just let me know. All of these things exist in order to help cure diseases, or so they say, right? This speaks to the drinking/smoking, older population and obesity graphics too. Isolating a disease or diseases as if they exist in a vacuum yields these results. Tracking data on diabetic complications is probably the best model for doing a good job at this because there is usually a clear link to the long-term complications. However, case in point. Type 2 diabetes is a function of lifestyle choice, primarily. Obesity is usually the culprit. But do the complications of type 2 diabetes get included in their own category or the obesity category or should there be a lifestyle category? Its a data viz, data collection, food supply, life style, government policy, emotional well being, tax policy,  (on and on and on) problem.Doctors charge more because they can – myth. If doctors could charge more, it wouldn’t matter anyway. They get paid what CMS says. All private insurers take their cues from CMS.Doctors make too much. What are their costs required to practice in comparison to other countries? Then compare the net. The data presented to validate the claim was a comparison to what a patient makes and that $64B of excess cost for “healthcare workers” proves that “doctors” make too much. Wow! Who is this guy? Also, compare the work hours, life style and other intangibles in your understanding of whether or not your doctor makes too much. Maybe its just me but I want the person who might have to cut on my brain to make more than me – by a lot. It kind of makes the risks worth his while, somewhat.Malpractice claims paid are usually the data points for this argument. Quantify this with malpractice premiums paid by physicians, the likelihood that a doctor is 20 times more likely to be sued in his/her career than the next nearest profession – engineering, and the other under the radar costs – tests, surgeries, prescriptions, etc – and the true costs will emerge. Study after study has replicated the fact that you are more likely to get a cash settlement as a medical malpractice plaintiff if you did not suffer from an act of malpractice than if you did actually suffer from and act of malpractice. That’s jacked up!The two graphics that are dead on correct are the outpatient care costs graphic and the administrative cost graphics. These are also impacted by a lot of what I mentioned earlier. Suffice to say, hospitals make a ton of money in the outpatient procedure arena. But, strangely enough, the new health reform legislation tilts the balance for these procedures to them instead of non-hospital settings, which perform said procedures for fractions of the cost. Probably because the hospital lobbyist plays golf with Nancy Pelosi’s chief of staff or some other nonsense – like, doctors make too much money since they are usually the owners of non-hospital settings. Colonoscopy cost at the hospital ranges from $1500-$3000. In the GI clinic of our local GI group, ~$500.Thoughts?

          1. William Mougayar

            Indeed. The chronic condition that keeps coming back over and over again is COSTS. It’s a well known fact that US healthcare costs and its wide variations and administrative overheads are its most vexing ailment. There is a healthy debate going on in this blog. Why isn’t this type of debate carried elsewhere in the open? Instead, healthcare is debated from a political angle and it turns quickly into a Democrats vs. Republicans view on things. In the meantime, the patient is still agonizing. Pun intended in all these descriptions.

          2. ShanaC

            The thoughts on study contamination actually frightens me more than any part of what you said.  How are we supposed to make medical progress.

          3. David Nicholson

            Great question and is really representative of why Fred, et al are looking for clarity in their health care thesis. The medical community needs tools to help with efficiency and shedding light on data collection. Study data, when involving patients, should always be open and available for anyone to view, including non-medical people. Too many entrenched companies with old revenue models are hanging on in health care. Like the EMR purveyors, old technology with a government mandated windfall heading their way. Hopefully, their last gasps are iminent!

  70. Stanfeld

    FredIt might help if you read my blog. Repairing the Healthcare System. Look at the summary category. The letter I wrote to Obama will give you a good summary on what has to e done.Also look up healthcare insurance industry, tort reform and defensive medicine, ideal electronic medical record, and ideal medical savings account.My brother Charlie Feld and I are working on putting the business model for healthcare into his business model developed in the Blind Spot.The solution is relatively easy in my view if the core to the solution is the physician and the patient.The key is that the solution is constructed from a practicing physicians point of view.Stanley Feld M.D.,FACP,MACE

    1. Dave Chase (@chasedave)

      Stan – [I tried posting this on your blog but I get error messages when posting.] We are of like minds in terms of the importance of getting individuals more in touch with their spend. While greatly oversimplifying, when we stop insuring the equivalent of a car tune-up in healthcare (and thus disconnecting people from real costs), we’ll be on the right path. There’s a DIY Health Reform movement that is well underway. I’ve written a fair amount, for example, about Direct Primary Care (DPC) which I describe as two parts Marcus Welby and one part Steve Jobs. Follow this link… for more detail. Also Kai Falkenberg is doing a series on Forbes about ideas to address healthcare costs. You may want to contribute to that –…

    2. fredwilson

      hi stanley. nice to hear from you. we are just starting our work in this sector. as i mentioned in the post, it will likely take us a few years to get up to speed and start making investments. we are focused on large networks of engaged users (patients?) so that will be our focus. i’d love to get your take on this face to face. we should find a time to do that.

  71. John Revay

    Interesting – after reading through 300+ comments  I did not hear much about “Obama Care”, I think Fred referenced “health care legislation” It pisses me off – hearing all of the people on the right (Republican presidential debates talking about repealing Obama Care) – At least he tried to fix it, I have not read the 2,000 page document – however I think there are some good parts to the law.  I have a family of 5 and up until recently we spent out of pocket $17K/year ( w/o and tax benefit) for health care.  We have subsequently swicthed to a individual family plan ( non employer group plan) and are spending $6K/year with $12K/year high deductible. That said we are very careful with any and all health spending since it costs me dollar for dollar.  I typically defer many tests and or procedures – I would have automatically done in the past, or ask for the cost of visits, test & procedures before  they are done, and often called to negotiate w/ the billing office. The latest way to save is to go to Costco for generic prescriptions- I spend about $29 for a 90 day supply of 2 meds.I think if more Americans had to pay out of pocket (real dollars) for their health care – it would drive change – quicker.  Lets take away the congressional medical plan – and then see how quickly things change.

  72. Rmbeddow

    Fred, I thought this to be an interesting and evocative post. Some posts seem to believe that this is all about US Medicare. If you are referring to Global Healthcare, in all its myriad forms, then there have been some highly successful examples

  73. David Nicholson

    Here’s a guy who has succeeded wildly in the health care space ( and on more than one occasion he chose not to pursue the $$ in deference to what he knew to be best for his patients. Therein lies a huge problem with attempts to fix health care. There are lots of motivating factors. Only one should matter – what makes people healthier?Entry points are hard to see. Engage with providers and you will start to see them. We just can’t write code and hack.

  74. David Nicholson

    sorry, here’s the link

  75. Tim Soo

    “But we haven’t seen many large networks of engaged users emerging in healthcare. “This, to me, has been one of the most odd aspects of the healthcare start-up world that I still do not completely comprehend.From my (novice) perspective as a future clinician / current entrepreneur, I see health companies falling into two camps [warning: the following will be a oversimplified broad generalization]. [Blue] The first focuses on empowering non-patient side of healthcare (businesses and physicians) to work better within themselves. This group optimizes infrastructure, whether by making paperwork more fluid (e.g. insurance flow, EHRs, ABILITY network, etc) or by reducing barriers within the ungodly inefficient organizational and communication structures in the healthcare systems (e.g. Up-to-Date, ZocDoc, Awarepoint, etc). [Red] The second camp focuses on empowering an individual patient to help him/herself via health and wellness applications (e.g. way too many examples of great companies in this field). They focus on gamification or disease tracking towards the end of preventive medicine. Others increase patient access to their records and/or increase access to each other (patient-to-patient networks).[Black line] But I’ve yet to find a successful app or start-up that effectively give patients a true, collective voice in fixing healthcare. Aside from the non-profit organizations here and there, where is the connection that gives patients an input into how healthcare should be fixed? Rather, what we continue to see are businesses trying to fix within businesses and then using patient-side metrics as a meter of success. Why not get them involved from step one?Let’s face it, without unified support of users, any app no matter how innovative will be successful. It will just be a repeat of the Green movement, which didn’t pick up true traction until it affected everyone via gas prices (again, forgive the generalization) or the recent internet censorship issue, which didn’t get much active support until people realized that the issue directly affected their internet usage. Nothing changes until it hits home.Our biggest problem is a cultural one, not just a problem of policy or antiquated technology (though those issues are both ever-present). We regard physicians, businesses, and policy-makers so highly that we try to fix healthcare from the point of B to C, thinking that if the business side of healthcare is fixed, then the consumers will benefit. But with so many businesses fixing separate pieces of the puzzle, the consumer base become fragmented and few gain effective traction. So we can either wait for the healthcare problem to become so paramount that everyone is forced to become involved (and we’re getting close to that point) or adopt a new train of thought. The philosophy (and the problem we should be solving) is to first unify that “large network of engaged users” capable of actually making a cultural change and then and only then will we see actual sustainable change in

    1. fredwilson

      i’m totally with you. that’s the opportunity we want to find and fund

      1. Tim Soo

        Hah. Working on it!Would definitely love to pick your brain at some point if you’ll let me buy you a cup of joe. I’m not exactly building “invisible instruments” anymore, but I’ll be up in NY w/ Blueprint in Jan. Cheers!

        1. fredwilson

          send me an email and we’ll do it

    2. Dave Chase (@chasedave)

      Tim – The challenge has been “Blue” (internally focused IT) is where the revenue is. “Red” (consumer focused) is where much of the startup activity is because everyone can relate to this — there’s some VC money going in there but the revenue models are unproven (generally consumers won’t pay and providers don’t have an incentive which leaves employers – some progress there with companies like Mindbloom, Keas, etc.).You’re on to something with the “Black” as the non-profits (American Heart Assoc, Livestrong, etc.) are one of the few groups that have credibility with both individuals and providers. We initially targeted them but it was tough to mobilize them as the catalysts of this movement despite their advocacy on behalf of individuals. Starting solely with consumers hasn’t proven successful to date (WebMD, Google, Microsoft and others have largely failed in consumer-driven efforts). Of course, there’s some unique challenges with healthcare – tough to tackle chronic issues from a consumer-only perspective as most don’t have the knowledge or motivation on their own. Our bet is that there’s a movement towards “Collaborative Care” that will sweep over healthcare. There’s an ever growing cohort of doctors who realize the most important member of the care team is the individual – after all, they are the only one in the world who has been to all of your apptmts and individuals (even with chronic conditions) spend less than 1% of their life at h/c provider facilities. Docs like @SeattleMaMaDoc @HJLuks:twitter  are great examples. This is why we built the first Collaborative Health Record (a term coined by John Moore and a MIT researcher) as it treats the individual as an equal on the care team. To date Personal Health Records have been islands that providers ascribe no value to (and thus they have failed miserably) and EHRs which are provider centric with little value delivered to the individual. As Hubspot has popularized the concept of Inbound Marketing, our goal is to articulate and popularize “Collaborative Care” and we have found a wellspring of these types of docs (but need more). They instantly invite in hundreds of individuals at a time.  

      1. Tim Soo

        Haha, well stay tuned. We’re working on building in the black. It’s an interesting problem but one I believe is definitely solvable. Our video on the site [] is quite a bit antiquated (in terms of the current rendition of our prototype) and only gives the consumer side of the picture, but it might give an idea of how we’re attacking the problem.[huge fan btw, love what y’ll are doing.]

        1. Dave Chase (@chasedave)

          Nice video on the site. I’m signed up. Looking forward to it shipping!

  76. PamSwingley

    Nice to see this post. For the last several years we’ve been engrossed in the challenge of applying technology to improve healthcare. While we still don’t have all the answers, here’s where we are today: Mobile PRM ( makes it easier to manage chronic diseases through mobile, patient-centric health care solutions that improve outcomes at lower costs. Free consumer version here: Our patient relationship management platform leverages the power of smartphones for medication reminders and compliance monitoring, patient education, bio-metrics and goal tracking, treatment feedback, and patient outreach. We also provide a full PHR giving patients the ability to consolidate and share health information. Happy to share more.

  77. Krishnan Sakotai

    A thought provoking post. Most healthcare ventures today are focused on Technology. However some aspects of healthcare such as childbirth and maternity services are seeing a degradation of quality, mainly brought about by decline in personalized care. Increasing rates of cesarean operations and unnecessary interventions are causing lifelong health problems for women (and babies). In my native India cesarean rates are as high as 75% in most hospitals.We are trying to effect positive change in birth practices one mother at a time by changing the model of care in maternal and newborn care. I wonder if there are similar companies which address core healthcare issues as opposed to technology enabling health processes.

  78. Dr Aniruddha Malpani, MD

    Dear Fred,All of us will be patients some day. What can we do to ensure that we get the best medical care when we fall ill?Our book, Using Information Therapy to Put Patients First is now online at…This has been published under a Creative Commons Open LicenseInformation Therapy – the right information at the right time for the right person – can be powerful medicine! Ideally, with every prescription, your doctor should prescribe information; and in a perfect world, every clinic, hospital, pharmacy and diagnostic centre would have a patient education resource centre, where people can find information on their health problems.This book explores how Information Therapy impacts all players in the healthcare ecosystem – patients, doctors, hospitals, health insurance companies, pharmaceutical companies, and the government – and how it can help all of us.Information Therapy can help to heal a sick healthcare system – and everyone has an active role to play in making this a reality!Dr Aniruddha Malpani, MDMedical DirectorHELP – Health Education Library for PeopleExcelsior Business Center,National Insurance Building,Ground Floor, Near Excelsior Cinema,206, Dr.D.N Road, Mumbai 400001Tel. No.:65952393/65952394Helping patients to talk to doctors !Information Therapy is the Best Prescription –   !Read over 20 health books free at http://www.helpforhealth.orgRead my blog about improving the doctor-patient Relationship at http://doctorandpatient.blo…Join India’s first health wiki at

  79. TrialHive

    What about clinical trials? Sponsors can’t find investigators, investigators can’t find subjects and subjects can’t find trials all resulting in an average delay of of 4.6 months lost per trial.  When you consider that each day a drug is delayed from market, sponsors lose up to $8 million  you are looking at an industry total of $1.1 Billion.  We think that an effective network can help solve this problem. Check out TrialHive Team

  80. Dale Allyn

    Charlie, I can show you from our own medical bills, examples of how our co-pay and deductibles allowed for the insurance company to pay $0 while claiming to have picked up the lion’s share of medical bills. It’s deplorable. Furthermore, accounts receivable agents at the hospital network admitted it to us (including the agreements between the two). It gets ridiculous if one researches it, talks with doctors and discusses details with those in the know at facilities where procedures are done (like needle biopsies, radiology clinics, etc.). As near as I can tell (and feel directly) the majority of abuse is heaped on self-employed and those with private policies, rather than larger groups. But the systems feed off of each other, obviously.



  82. PhilipSugar

    My biggest issue ever is when I had an employee that had a very difficult pregnancy with twins and it doubled the rates for our 150 employees because our “experience level increased”…..WTF  we pay you 1/2 Million a year and then we have a big claim and you want to screw us????  That was BCBS of DE and we went to US Healthcare at the time.Biggest problem with healthcare is that as Milton Freedman said there are four ways to spend money.1. You on you:  You care about quality and cost2. You on somebody else: You care about cost but not quality: Gift3. Somebody else on You: You care about quality not cost: Expense Dinner4. Somebody else on Somebody else: GovernmentInsurance companies are number 2, you are number 3.  Medicare and Medicaid are number 4.

  83. Dale Allyn

    Charlie, we desperately need tort reform. Doctors want to practice medicine, not law. Edit to add: Missed your last line there. I’d love to talk with you sometime about our project (I think you’ll like it ;). I was in NYC a couple of weeks ago and thought about pinging you, but ran out of time.

  84. laurie kalmanson

    re tort reform: it’s a symptom, not a causepeople who sue doctors have no place else to go if they are injured and cannot work and have no healthcare.a more secure social safety net would eliminate that pressure on doctors who are skilled but human and make mistakes, as would getting rid of the small number of doctors who are truly dangerous.

  85. LE

    “The one idea I had was offline: home rounds by general practice docs for a subscription–on top of medicare or health insurance. “Highly inefficient – think about it. Instead of patients queuing up in a doctor’s office where the valuable time of the doctor is not wasted, you have the doctor spending his time traveling to get to the patients who are watching TV (sorry for that example but it’s what comes to mind.) Also GP is one of those specialities that is in demand and easy to get a job in (because the pay is the lower end of the scale) there is no oversupply. (You’d be surprised to know that in some geographic areas there is an oversupply of cardiologists as only one example.)

  86. Mike Kijewski

    I’d love to see concierge medicine take off Charlie.

  87. LE

    “And a bunch of older, decently well off patients would love the ability to get home visits instead of having to drive to an office. But I can see younger families wanting it too. “You are talking about concierge medicine basically which has a following among the rich. But onsite that is not cost effective. At the office much of the labor is offloaded to a lower paid nurse etc. If the doc is the one visiting then you either have to schlep a nurse along or the doctor has to do all the work which ends up costing more and taking more time (then an office concierge visit). Not to mention the fact that you don’t have all the equipment and supplies (ekg etc.) to bring onsite.

  88. Dave Pinsen

    It’s an interesting idea, but I think you may be underestimating the desire of American physicians to make as much money in as little time as possible. There was an NY Times article a while back about a psychiatrist’s response to slightly lower health insurance reimbursements: he stopped doing talk therapy with patients, seeing one per hour, and started billing for 15 minute med checks, seeing 4 patients per hour.That’s just one example, but I think it’s emblematic. Your model might work better with qualified foreign physicians, but American physicians have done a great job of keeping out that competition, by lobbying states to require qualified foreign physicians to redo their entire residencies in the US. So physician comp gets inflated by the lack of competition, and, thanks to our liberal immigration policies for pretty much everyone else, non-physician salaries get driven down, which leads to more patients with stagnating or declining incomes and relatively fewer physicians.

  89. LE

     By the way I want to clarify that I wasn’t commenting on whether it was a good business idea or not (where “good” equals “way for someone to make money”) but  that it was inefficient from a healthcare delivery point of view.

  90. Dale Allyn

    Feels like fraud. We considered pursuing it, but are choosing our battles and timing. One can battle it within the system and be devoured by it (financially and emotionally), or work to effect change that will hopefully benefit all. It takes time, but is worthwhile IMO. Incidentally, a doctor friend of mine who volunteers to help the indigent who seek care at this hospital network said to me after I was commenting on my feelings: “Their billing is entirely corrupt. That’s why I refuse to work with them other than to help the patients in need.” He works there free of charge, helping both patients and interns, but maintains his practice outside of their system. He also goes to retirement homes every Friday to provide care for elderly who have difficulty getting out. His office is closed on Fridays so he can do this. A great guy.  Edit: dropped words

  91. Cowboy Coder

    What he describes is common and business as usual. Fraud and corruption are endemic and considered normal throughout every segment of this highly profitable industry.

  92. LE

    “END OF YEAR, DOCTOR GET BONUS BASED ON HOW MUCH MONEY LEFT OVER IN POOL”Incentives the doctor to do the wrong thing in terms of the patient’s interests. This is already happening in a hosptial setting where the doctor is pushed to “d/c” (discharge) the patient as quickly as possible.”LESS PROCEDURE, MORE HEALTH”Health is something that needs to be judged over the long term, not just the short term.

  93. Andrew Korf

    Future of healthcare from a smart new aquaintance: “Diagnostics + open source + prediction + mobile platform + finding an issue years before it physically manifests itself = immediate health future.”

  94. ShanaC

    How about instead we give them a bonus based on what the actuary for this group says about the health of the pool.  If it is a varied age pool, should work.  (This would require me entering a pool with you, with all the costs that I have versus you)

  95. Carl J. Mistlebauer

    This is called an HMO

  96. leigh

    In Canada, many doctors are so worried about saving the system money that they choose not to do things unless there is overwhelming evidence.  Having six doctors in my lifetime in my immediate family, I can tell you every one of them would say that you have to push to ensure you get the healthcare you deserve.  And if you go to the hospital alone without an advocate, you might as well bring the hurst with you at the same time.I wouldn’t trade our system for yours in a million years, but giving incentives not to treat/test/procedures is not the way to do it.  

  97. Dale Allyn

    @ccrystle:disqus I’m in northern CA, and have colleagues in NY and near Philadelphia. Hope to get to NY again soon, but headed to Thailand next week. 

  98. Nick Bauman

    A single payer system minimizes tort costs by design because it’s not worth it to sue yourself.



  100. LE

    “MEASURE HEALTH GOOD IDEA, BUT HOW DO?”Short term that’s easy. Monitor stats like  weight, blood workup, blood pressure, urinalysis etc. Long term is just as easy – but the problem is tying in the “reward” system to something long term (like with corporate earnings you see what happens with that.)

  101. ShanaC

    the whole doctor situation can be a bit coercive.  Technically the role of the doctor for most decisions is to advise, but it is often the case that the doctor also becomes the point person for decisions as well due to lack of medical knowledge by the person consuming the care.

  102. Eric Page

    Issue with concierge medicine is that it exacerbates the primary care shortage. It’s a benefit for the 500 people who receive concierge care, a disaster for the 1500 people that the doctor no longer serves.Overall, I feel like concierge medicine (as traditionally defined) optimizes for patient satisfaction rather than patient outcomes. The two are not the same.From an above comment, it sounds like you are a healthcare investor. Would love to hear your comments on my thoughts.

  103. ShanaC

    so what do the rest of us do.

  104. Dale Allyn

    @ShanaC:disqus wrote: “so what do the rest of us do.”I’m not sure I understand re. “the rest of us”. In our case, we suffered the financial cost the best we could and feel like we’re basically uninsured much of the time. I would prefer to have only catastrophic coverage and pay all incidentals out of pocket, but I’ve not found a trustworthy solution. Due to my daughter’s situation, for which the insurance company attempts to deny care prescribed by in-network or out-of-network doctors, we’re pretty beat up over it (at times, but I try to ignore it to focus on work-arounds), which is why I hope to see a meaningful solution that helps people across the board. And I hope to contribute to the solution. I’m not one who uses much medical care, and I prefer that basic stuff be paid out of pocket at time of care, but witnessing first-hand what many go through, especially the chronically ill, there must be solution found in the U.S. Transparency will be a big part of that solution. Sorry for replying to myself, but hit the Disqus limit.

  105. ShanaC

    @daleallyn:disqus the rest of us in terms of the fact that most of the US can’t afford to do what you are doing.  Either with or without insurance.  Nor is everyone so poor to need to go to your friend.  There is no in between of health coverage for medium stuff (broken bones, minor surgery)

  106. Dale Allyn

    @ShanaC:disqus “the rest of us in terms of the fact that most of the US can’t afford to do what you are doing.  Either with or without insurance.  Nor is everyone so poor to need to go to your friend.  There is no in between of health coverage for medium stuff (broken bones, minor surgery)”Please don’t assume that I am wealthy and therefore “self-insure” with ease. Quite the contrary. I’ve been fortunate to have some success in business, but have also experienced severe downturns in this brutal economy. I’m committed to our startup and we live very, very conservatively in order to pursue that commitment. If I were to expose details of that decision I think you’d be shocked. That said, I very much appreciate your comment and realize that it’s not an approach that everyone can stomach (yes, I meant “stomach” because there are some serious financial trade-offs for such an approach). I’m not much for going to doctors. We’ve lived in our community for ~ 25 years and I don’t have a doctor here. I saw my wife’s doctor once about 15 or 20 years ago. However, due to my daughter’s situation I have been in many, many doctors’ offices and studied medicine in a way I never knew I would (luckily I have a pretty strong science background). So I am extremely compassionate towards those who might be in a situation similar to my daughter’s, but who might not have someone to filter doctors’ feedback, catch their mis-diagnoses (many), to push back through their arrogance used to mask their incompetence (the best thing a doctor can tell me is “I don’t know” ;), or to call B.S. against the insurance company which attempts to disallow coverage. It’s deplorable what someone who is already suffering from health issues must endure at times, and borders on the inhumane. Only recently did I start to seek care for myself, which I do overseas. I happen to work in S.E. Asia for my previous business (which supplies us with our basic needs while working on our new project, though my business has been slammed in this economy), so started with some preventive measures recently. I wish that everyone could experience what I receive in terms of healthcare, and I hope that at least parts of it will find its way into our system. My wife and daughter suffer through the U.S. system while I get what we should all receive in a developing country. (I travel alone for business, and my medical needs are different then theirs, which would require more follow-up, etc.) We, in the U.S., must find an answer that provides quality care to all while still allowing proper compensation to the very hard working doctors (Thursday golf day not withstanding 😉 and other healthcare providers. I don’t believe that this will come from purely socialized medicine, nor will a large corporation with a certain primary color in it’s name have anything to do with the solution. I have a couple of disruptive solutions that I think could work to relieve some of the pressure, part of which has been grazed here in this thread. Sorry, this is sliding into rambling now, but I wanted you to know that I don’t mention my process as a braggart, but as one who is frustrated that one must go to such lengths for basic care. If more Americans experienced what is provided in places like Thailand (in their best facilities, typically too expensive for many local people) there would be a revolt against many medical care providers in this country. I’m hopeful that we can glean some of the good from other systems globally, while retaining the best parts of our system.

  107. ShanaC

    @daleallyn:disqus I’m sorry for assuming.  I know self insurance is problematic from having my parents – who self insure.  I also agree – going to a foreign country for basic primary care is extremely stupid for us as a country. I think if you keep your labor force healthy, you’ll do better as a country.  Which means we have to get people going to go to the dentist, doctor, nurse practioner, what have you.  They catch problems before these problems get bad and expensive.My parents sit and worry about me extensively in this process for similar reasons.I do hope you disrupt this.  Badly.

  108. ShanaC

    weird milton friedman thing – he actually LIKED option 4

  109. fredwilson

    i’d like to meet your smart new aquaintance. that’s an interesting formula

  110. fredwilson

    yup. great chart and that’s the number we need to move in the opposite direction for sure

  111. LE

    “out-of-pocket has gone from 47% in 1960 down to 12% in 2009″There was no where near the amount of expensive procedures and tests in the 60’s as there are now. And people didn’t live as long (to require expensive tests) and there were essentially no wonder drugs either or large investment in drug research (that keeps my diabetic uncle alive using up health care dollars).Doctors still made house calls. So while it is probably true that out of pocket has gone down even if adjusted for things that are available now vs. then the data doesn’t have the same impact. Things have changed. News people reporting the Kennedy assassination sat at steelcase desks smoking cigarettes in the 60’s with wood paneling as the backdrop.

  112. PhilipSugar

    Sorry but are you crazy???  He hated Option 4:…He railed about all government spending.  He has a famous speech about how stupid it is to think increasing government spending stimulates the economy.  He correctly points out that if that truly were the case we should increase government spending to 100% of the economy.   He wanted to see the Fed abolished.

  113. PhilipSugar

    When he said have the government give everybody catastrophic and make people pay for their own, what he was doing is say for the vast majority:  You are spending money on you option 1.That is why I offer a HSA.What we currently have is insurance companies on option 2 (they only care about cost not about quality), and people on option 3 (nobody asks what something is going to cost or shop around)You have to have some way to backstop the catastrophic and that is what government should do.

  114. ShanaC

    No he liked a variance of option 4…His solution is to kill medicare/medcaid and have the GOVERNMENT give everyone a disaster medical insurance plan.  And essentially make any savings going to medical untaxable.  He thought the fee for service thing with the government involved was a bit ridiculous in that it pushed up costs when in conjunction with corporate subsidized care.

  115. Chukwuma Onyeije, M.D.

    The model of an HMO was correct in theory but deeply flawed in practice.  We now have the knowledge from the previous attempts to create incentives that enhance patient care and improve outcomes.  I don’t think it’s possible to dismiss the propagation of targeted smart incentives a priori based on an assumption that it will be handled in the same way 2 to 3 decades later.  No?

  116. Chukwuma Onyeije, M.D.

    I suspect that you actually just answered your own question and provided us with the key.  I think it is a GOOD thing if doctors choose NOT to do things if there ISN’T overwhelming evidence.  (the opposite construct…. doing anything based on little or no evidence…. Is costly and [ultimately] ineffective as evidenced by decades of practice in the US).However…. It is ALSO important for patients to have autonomy, ownership and empowerment in their individual care decisions.  This balances the good that can be obtained by evidence based medicine with the necessary checks and balance obtained from a participatory patient model.

  117. Chukwuma Onyeije, M.D.

    In other words (as ShanaC said) a modification of option 4.  A purely instituted version of option 1 is theoretically palatable but practically unworkable … without what you refer to as a backstop.  Most who suggest that Friedman was in favor of Option 1 are seriously amiss if they ignore the backstop/Option 4 clause.  Without which, his entire construct falls apart.  So, I wouldn’t say that it is “crazy” to suggest that Friedman was in favor of option 4.  This is always a matter of degree in terms of how much of a backstop we choose to provide.  But in any system the backstop is irreplaceable.

  118. Carl J. Mistlebauer

    HMO’s were an attempt to form a patient/provider partnership and in theory and based upon most of the comments on this post, its what everyone is looking for as a “solution.”The reality is that our healthcare system is dysfunctional and the establishment of a patient/provider partnership is almost impossible.With our self funding plan we actually established a gatekeeper program where the doctor who was chosen as an employees and or dependents gatekeeper got reimbursed more giving the doctor an incentive to spend more time with the patient and take more of an interest in their care.We also wrote a program that allowed us to establish doctor recommendations that if followed would result in lower doctor visit copays for the patient.If the doctor recommended that you lose weight, lower your cholesterol or quit smoking and the employee did so then they paid less out of their pocket for their healthcare expenses.That one simple program took a huge effort to overcome existing mindsets (privacy) and a couple of laws but it worked and saved a bunch of money which is what we used to pay the gatekeepers more per visit.Or something as simple as getting the employee to go to the doctor. Most Americans are not on salary nor do companies have adequate personal or sick day policies so when an employee has to go to the doctor it costs them alot more than a doctor visit copay….it costs them a day of wages.

  119. fredwilson

    the size and vibrancy of this comment thread tells me all i need to know. head turned slightly. looking in new places for new things.