More than a decade ago, all Spencer Trask & Co. Chairman Kevin Kimberlin had to do was flip through a few pages of Dartmouth Medical School research to know that he wanted in on a business plan to reform health care.
Today, entrepreneurs and their financiers have more than 2,500 pages to sweat through as they seek out the business opportunity needle in the haystack of federal health care reform ”“ but as the saying goes, 99 percent of inspiration is perspiration.
No shortage of health and benefits entrepreneurs, both seasoned and new, are poring over the legislation as they mull new services that might emerge from the Patient Protection and Affordable Care Act.
Some of the bill”™s components, particularly elements that address new patient consultation services dubbed “medical homes,” were predicted more than a decade ago by Dartmouth Professor John Wennberg, after he founded Health Dialog to provide such “personal health coaching: for those uncertain how to proceed after receiving a medical diagnosis and recommendation from a doctor.” The company hired Spencer Trask to help it track down early financial backers; those investors got their payoff in 2008, after Health Dialog was acquired for $775 million by British United Provident Association.
Knowing there was a need for its services among patients, Health Dialog forged a market by approaching insurance companies with the idea that they could ultimately save money by providing Health Dialog”™s services to their members, on the expectation that sufficient numbers would opt for less radical treatment options and so lower overall costs.
The Boston-based company was onto something, as it turned out, particularly as attention turned in the past few years to unnecessary or unproven medical treatments as one cause of skyrocketing medical costs.
“We started realizing this thing was scaling,” Kimberlin said. “We said, ”˜Holy smokes, we are getting the biggest cheerleaders in the world.”™ We thought, ”˜We are going to get a lot of attention, and we are going to get a lot of competition.”™”
Competition is expected to be heated in the new world of health reform ”“ with the bill ironically expected to help new companies in general by making it easier for entrepreneurs to leave the security of their existing employers”™ health plans as they strike out on their own.
Consultants are likely to find the earliest opportunities, whether in the area of employee benefits, information technology, or law. David Lewis, CEO of the Stamford-based OperationsInc, was bemused at the number of business solicitations he began receiving the moment the federal bill was passed, from law and benefits firms offering expert seminars on the topic. His own company consults on human resources strategies.
“What I am wondering is, where are they getting their information so quickly?” Lewis said, citing the massive size of the complex bill.
In time, individuals at some of those companies may latch onto ideas for products or services that provide the basis for a big company like Health Dialog.
For now, the collective industry appeared to be holding its breath as Congress staged the final battle over health reform. Norwalk-based Irving Levin Associates Inc. tracked 211 mergers in the health care industry in the first quarter, down from 268 deals in the fourth quarter last year, citing uncertainty from health reform as a major reason for the slowdown.
The same trends were evident in the venture capital industry, with 18 percent fewer deals in the first quarter according to PricewaterhouseCoopers L.L.P. and the National Venture Capital Association, based on data provided by Thomson Reuters which has a Stamford office.
“With health care reform passed and an improving exit market, we are expecting venture investment to increase moderately throughout the rest of 2010,” said Mark Heesen, president of the National Venture Capital Association, in a prepared statement.
