Why the VCs aren’t the bad guys

By Halle Tecco and Malay Gandhi

Venture capitalists (VCs) … are a combination of professional gamblers and loan sharks. The secret to success is pure luck and ruthlessness, and when the combination works and the ball lands on the exact number on the spinning roulette, venture capitalists make lots of money.
-Margalit Gur-Arie, via KevinMD.com

The tone of this article, Why venture capitalists shouldn’t try to solve health care, exemplifies what is wrong with healthcare. In an industry plagued by uneven quality and relentless cost increases, we need everyone working together to solve problems.

Health is universal, and no one group holds a monopoly on solutions. Everyone has something to contribute, including the villainized venture capitalists (VCs) mentioned above. VCs have played a supporting role for many industries, including healthcare, and we need them as one of many engines behind our movement in digital health.

Disruptive innovation is a fundamental constant of every industry; it has and will continue to transform healthcare. Over the course of 2012, millions of health consumers walked into a retail clinic with sore throats. They were likely given a rapid strep test, potentially provided antibiotics if the test was positive, and sent home. These visits were handled by a nurse practitioner, not a physician. A new medical technology for convenient diagnosis emerged, a simple treatment algorithm is applied, and voilà, physicians were relieved from these types of low-acuity cases.

This is disruptive innovation, and it leads to lower cost and higher efficiency. Quidel, the company that developed the first CLIA-waived rapid strep test was venture-backed. What if 25 years ago, we lambasted those who invested in these types of technologies that could eliminate the need for physicians to provide certain services (and instead focus on something more important)?

Arguing against disruptive innovation, and those who fund it, is useless—it is a force that has transformed, and ultimately improved, virtually every sector in the economy. In healthcare, this means parents can eventually do the work of nurses, nurse practitioners the work of primary care physicians, primary care physicians the work of specialists, and specialists the work of surgeons. The end result is not the elimination of skilled labor from the sector, but a cascading reconfiguration of the work so that our most highly trained are able to use their unique skills versus spending time with things that others can do with the assistance of technology. In a country burdened by high healthcare costs and complex care, we should ensure that primary care physicians like Jeffrey Brenner can dedicate more of their time to coming up with comprehensive treatment strategies and coordinating teams versus handling a common case of strep throat.

The digital health movement is about using technology to improve healthcare, including its productivity. And labor productivity in healthcare is a huge problem: in the past 20 years, it has actually declined by 0.6% per year within healthcare, while growing by 1.8% annually in the overall economy. Technology-enabled transformation is desperately needed, and entrepreneurs in our space are dreaming big—from Dr. Dave Alpert with his iPhone ECG to technologist Ryan Howard creating a free EMR. Some may argue that Vinod Khosla and others are gamblers playing a game of roulette. We believe that they are helping make the future happen—by investing in visionary entrepreneurs.

Providing the resources and support for individuals to take these types of risks is critical for changing healthcare. It will enable to us to find the big, disruptive ideas that can transform the largest and least productive sector in our economy. Those are the ideas we are looking for at Rock Health. And we welcome everyone, including venture capitalists, to join us.

Halle Tecco is CEO of Rock Healththe first seed accelerator for digital health startups. Malay Gandhi is the Strategist in Residence at Rock Health.