This article is sponsored by the CEO Council for Growth, an initiative of the Chamber of Commerce for Greater Philadelphia .
Philadelphia is at a significant junction in its development as a digital health hub. If you use the CEO Council for Growth’s digital health report published four years ago as a reference point and track how the region’s landscape has shifted since then, the picture that emerges is one of growing momentum particularly within the healthcare startup community. Not only have a significant number of entrepreneurs had successful exits, but they are going on to start their next healthcare ventures in the Philadelphia area.
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In an interview with Tom Olenzak, Managing Director for Independence Blue Cross’s Strategic Innovation Portfolio, he likened this cycle of talent and capital from successful exits seeding new generations of startups to what the region saw in the biotech sector with companies like Cephalon, which was acquired by Teva in 2011, and Centocor, which Johnson and Johnson acquired in 1999. Cephalon and Centocor frequently appear on the resumes of people who went on to either start their own biotech companies or join startups. For example, the board chairman of cancer immunotherapy startup Carisma is a former executive with both Cephalon and Centocor. The business recently raised a $53 million funding round from a group of investors that included the University of Pennsylvania.
The fact that Philadelphia is home to several medical schools and teaching hospitals has made it an attractive location not only for biotech businesses, which have benefited from the region’s close proximity to pharma companies, but also health IT companies. Tabula Rasa Healthcare, a health IT business that developed risk management tools to help healthcare facilities avoid adverse events, and Philadelphia-based healthcare payments business InstaMed led by Bill Marvin are being joined by a new generation of digital health companies.
Several of the digital health companies highlighted in the CEO Council for Growth’s 2014 report have since seen exits, but their founders have time and again demonstrated their commitment to the area by setting up new businesses in Philadelphia.
NextDocs, a health IT business founded and led by Zikria Syed, which was geared to improving regulatory compliance, quality assurance management and clinical trial efficiency, was snapped up by Aurea Software in 2015. Syed has subsequently founded a health IT startup VitalTrax to improve patient recruitment for clinical trials.
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Wharton grad Eric Heil co-founded and led RightCare Solutions, a business that developed discharge decision support tools aimed at helping healthcare facilities support post-acute care management. Cardinal Health subsidiary naviHealth subsequently acquired RightCare in 2015. In the past year, Heil co-founded a behavioral health startup BehaveCare in Doylestown, Pennsylvania with Bradley Bennett. The company developed a health IT solution, in partnership with managed care organizations, the VA, or other risk-bearing entities, that is aimed at reducing readmissions and is tied to adults with severe mental illness or substance use disorder. It is based on a collaboration between Heil when he ran RightCare and Bennett when he helmed Maxim Healthcare Services, a medical staffing and home care business.
Health IT vendor McKesson acquired Health QX, which developed a set of software tools to help healthcare facilities make the shift to value-based care tools, in 2016. McKesson subsequently spun out the business and rebranded it Change Healthcare. Health QX Founder Bill Conlan is now in the process of setting up his next healthcare venture.
Investment from the region has been key to these successes. In 2016, Independence Health Group, the parent company of Independence Blue Cross, helped set up a $6 million fund to invest in early stage health IT businesses with Ben Franklin Technology Partners of Southeastern Pennsylvania and Safeguard Scientifics. Ben Franklin is also part of another healthcare investment collaborative with Rittenhouse Ventures. Independence Blue Cross also supports the digital health startup community through its partnership with Penn Medicine and Dreamit in the accelerator Dreamit Health, which launched in 2014.
And yet, it seems at times like pharma companies have overtaken payers and providers in integrating these digital health tools. Olenzak of Independence Blue Cross explained that health systems like Jefferson Health, Temple Health, and Penn Medicine are figuring out how to implement innovative technologies that fit not only into clinician workflow but also their members’ lives.
“I think what happens in the pharma space is they have been looking at digital improvements, especially in things like clinical trials, where there is a more direct tie to earnings for them. If they can get to market faster, and improve their marketing efficiency, it ties right to earnings whereas with health insurers like us, a lot of the effects of what we do are long-term and are much harder to implement.
“The other thing that pharma can do is control a bit more of their workflow so when they hire an investigator to do a trial they can tell them, ‘To get paid, you will use this technology.’ With a health plan, anything that we want to do requires change in physician behavior, but we don’t own physician groups.”
Through its joint venture with Comcast, Independence Blue Cross has sought to overcome one of the biggest challenges facing health IT businesses, how to scale and rapidly expand. The seed for the joint venture was planted at an Oliver Wyman healthcare conference. Independence Blue Cross Chief Information Officer Michael Vennera recounted in a fireside chat at MedCity CONVERGE, the two companies were asked to do a demo of how they envision the future of healthcare. That program set the groundwork of what would become a joint venture by the two businesses to build a platform with a goal of using tools to support and improve the patient journey. Part of what it produced was based on how to improve the way patients are connected to their care team.
The goal, as Olenzak pointed out in the discussion he moderated, is to give patients a clear understanding of what happens next in their care journey, rather than patients having to seek out this information for themselves. A pilot with a Philadelphia healthcare provider is expected to take place sometime before the end of the year. One area of interest for the platform is orthopedics, such as a patient scheduled to undergo knee replacement surgery. The program could help patients prepare for the procedure by giving them a better understanding of what is involved, how they can prepare, and what they need to be mindful of as they recover. The program will also address what’s next for the patient, but that needs to be configurable for different people, Olenzak noted in the interview afterward. The group will use the feedback from the pilot to improve the platform.
“We truly believe if we can give people a clear path to the next best step for what they need to do to manage their healthcare and the healthcare of their families then we can start to change the way people relate to their healthcare system,” said Marc Siry, Vice President of Strategic Development at Comcast. “This is not only about a payer and not only about a media company. This is about making sure we are aggregating and targeting the next best step and solution.”
With the Independence Blue Cross joint venture, a growing investment community, and reputation as a center for healthcare education and delivery, Philadelphia is continuing to bolster its profile as a center for innovation in healthcare. It will be exciting to see how the healthcare entrepreneur community continues to evolve and strengthen in the years ahead.
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