It’s been a week since the 2019 J.P. Morgan Healthcare Conference (JPM) ended and I’ve been struck by the shift in tone that’s taken to the post-conference Twittersphere this year.
Many have questioned the usefulness of the annual trek to San Francisco. I agree with a number of points raised by my friend Bruce Booth, including the unnecessary and even disgusting excess. It’s healthy to question whether all the travel, all the meetings, all the time, and all the cost is really worth it.
The skeptic in me would point to the fact that this year’s JPM was my fifteenth in a row. Over the course of fifteen years and approximately 750 meetings, I’ve only closed one deal from JPM– that’s the definition of bad ROI for an investor who loves and seeks out ROI.
Despite this, I still love JPM and still plan to attend for years to come because the value isn’t just defined by the number of deals we source.
At JPM, I also get to have nearly 70 meetings, as well as chance encounters in the streets of San Francisco, with some of the most interesting and successful executives, thought leaders, and entrepreneurs in healthcare. It’s not only highly leveraged. It’s also highly energizing– at least for me. It’s a great way to start the new year with a finger on the pulse of what’s going on in the industry.
While the skies were mostly grey at JPM, we came away from all our meetings with a more clear view of what lies ahead for healthcare innovation.
In that spirit, here is our forecast for 2019.
1. Healthcare entrepreneurs are tackling ever more complex problems and addressing patient populations that have been previously bypassed by innovation.
At JPM, we were struck by the number of entrepreneurs who are taking on big and important but often overlooked health areas and patient populations.
This includes organizations, such as:
- Our portfolio company Groups, whose services help patients suffering from opioid addiction in rural areas, where the epidemic is most severe
- CityBlock, a health system focused on providing a full spectrum of care services to Medicaid patients;
- As well as companies like Wellbe and Edenbridge Health, two organizations focused on serving dual-eligible patients in their PACE programs.
We are bullish about the future for these full-stack models tackling complex care patients but we don’t think this optimism is unfounded. Last year featured successful exits in businesses like Landmark Health and Aspire Health.
2. We know there’s a lot of hype but we are big believers in the power of AI/ML to transform the healthcare industry.
Healthcare has never been an industry full of early adopters, but we can’t ignore how much of an impact computational techniques, like artificial intelligence, machine learning, and computer vision are having broadly across the industry.
Let’s be clear: computers (or robots) are not replacing doctors anytime soon. However, we also shouldn’t assume that healthcare will remain an industry full of luddites.
The answer lies somewhere in the middle where these advanced technologies will provide insight and automation to help caregivers do their job more effectively and efficiently. And there are many examples that this is happening today:
Qventus, one of Bessemer’s portfolio companies, helps to automate health system operational workflows. Qventus’ AI-based software predicts issues and offers logistical recommendations to health teams, mitigating potential workflow and operational bottlenecks, and as a result saving hospitals money.
One of our seed investments, Subtle Medical, uses deep-learning software to vastly improve the medical imaging process, reducing the time it takes to scan a patient, enhancing the quality of the image, and often eliminating the need for a potentially harmful contrast agent altogether.
Lots of amazingly talented entrepreneurs like Daphne Koller, Chris Gibson, and Andy Beck (to name just a few) are using computer vision and advanced computational technologies to diagnose disease and develop drugs to cure said disease. At JPM, I had a chance to speak with many of these leading entrepreneurs as well as senior executives at leading pharma companies and it is notable the advancements made in this field.
Clearly, we are big believers in this trend and it is why earlier this year we announced the formation of Bessemer’s Deep Health Seed Fund.
3. There’s a new expectation that professionals who work in healthcare must be “bilingual” in both the languages of medicine and computer science.
Five years ago, it felt like there was still a dichotomy of talent in healthcare. Tech entrepreneurs were looking to “disrupt” healthcare with little actual experience or knowledge as to how the industry worked. Similarly, healthcare “veterans” often turned a skeptical eye and were way too slow to adopt modern day engineering and development practices.
Now, the majority of entrepreneurial teams we see pitch us these days are “bilingual” and employ both computational and biological/medical experts from the start. This cross-pollination that bridges disciplines and sectors is a major sign of progress for the industry and the country.
4. We are in the era of the “Healthcare OS” and the opportunity is as large as the ecosystems built on top of Salesforce.
Twenty years ago, most modern industries adopted important foundational operating systems deploying software systems like SAP, Oracle, and Salesforce. Since that time, thousands of incredible software businesses have been built on top of these platforms. Not only has business performance improved, but entrepreneurs and VCs have also profited greatly.
Twenty years later, we are just entering this era in healthcare now that EMRs are fully deployed.
Really interesting software and service companies are being built on top of the EMR ecosystem helping health systems fully operationalize financial and clinical health information and combining it with other data sources, such as genomic information, claims, and ADT feeds, etc.
The most notable pioneer in this space is probably Health Catalyst, which is a data analytics and decision support company, that is widely rumored to be a top 2019 IPO candidate.
But beyond this, there are a number of promising companies taking advantage of this trend, like our own portfolio company, Collective Medical, which has built the nation’s largest interoperable data sharing network between hospitals and health insurers.
We also think companies like the virtual scribing companies (e.g., Suki, Robin, Notable, Saykara, etc) will improve the quality of data capture and will be more effective in this new environment.
The evolution of EMR systems isn’t just blue-sky thinking. Recent reports state that more than a third of CIOs ranked electronic health record optimization as the most important area of capital investment over the next three years.
5. Despite the depressing discourse and decision-making in DC, the FDA is a noticeable bright spot when it comes to inspiring leadership and innovative policy-making.
While there was plenty of talk about the seemingly unending government shutdown at JPM, many of our conversations also revolved around the FDA’s positive actions when it comes to promoting innovation. Put simply, FDA commissioner, Scott Gottlieb, is widely beloved among healthcare entrepreneurs and investors.
Under Gottlieb’s leadership, the FDA has rolled out an initial pilot of a precertification program for software using AI/ML in order to speed up approval of these digital therapeutics. The FDA has also been forward-thinking in its willingness to use real-world evidence (RWE) via synthetic clinical trials in the approval and post-market monitoring of drugs. And, of course, his agency has been at the forefront of important public health issues such as tackling teenage vaping, addressing the opioid epidemic, and promoting nutrition.
6. Big tech’s presence was felt in a bigger way at this year’s JPM, boding well for the continued interest and investment in healthcare.
There was a more noticeable presence of tech executives at JPM this year and there were plenty of major healthcare-related announcements coming from these companies at the conference, including:
All of this, coupled with Amazon’s move into the pharmacy space, the JPM-Berkshire-Amazon collaboration, and Big Pharma becoming more and more digital (e.g. Roche acquisition of Flatiron), bodes well for the future of healthcare.
At Bessemer, we deeply believe that early stage entrepreneurs have more opportunity than ever to transform the largest and most important industry in our economy through technological innovation. We are excited to see what the future holds in 2019 and beyond!