Venture Capitalist Group Offers Six Steps for High-ROI Healthcare Change

NEW YORK—The Psilos Group, a healthcare venture capital firm, has spotlighted information and medical technology as critical to healthcare reform, insisting that expanded adoption and investment activity in IT will produce big results.

"We cannot simply go on investing in incremental changes to approaches that have failed repeatedly," said Albert Waxman, senior managing member and CEO of the Psilos Group, which released its "Annual Outlook" this week. "If done well, new medical technologies and disruptive models of delivering healthcare services can be the foundation for new businesses based on 21st century information technology.

The recently enacted Patient Protection and Affordable Care Act (PPACA) affords healthcare entrepreneurs and investors an unusual opportunity to respond with innovation, the report asserts.

As part of its second "Annual Outlook" on healthcare economics and innovation, Psilos notes that failure to establish a culture of innovation in healthcare delivery will lead an existing $2.5 trillion industry to continue to inflate to over $4.5 trillion by 2019, as projected by the Centers for Medicaid and Medicare Services (CMS).

"A real healthcare industrial revolution would go a long way towards eliminating the 30 percent waste and error in our current system, improving national competitiveness and creating new products for global exportation," Waxman said. "The return for the U.S. will be a vibrant healthcare economy that enhances the public good and private enterprise at the same time."

Founded in 1998, Psilos has $580 million under management and has invested in 38 companies across three markets – healthcare services, healthcare IT and medical devices. Marquee portfolio companies have included ActiveHealth, AngioScore, Click4Care, Definity Health, ExtendHealth, OmniGuide, QualityMetric and SeeChange Health.

Psilos highlighted six specific areas where innovation can bring about near-term, high-impact and high-return changes to improve the U.S. healthcare system:

  1. An efficient system to prevent and manage chronic illness, which accounts for 78 percent of all our healthcare expenses. Technology can help improve care management to prevent costly procedures and to incentivize consumers to live healthier lifestyles.
  2. Error reduction in inpatient, ambulatory, and post-acute care. These errors are most often the result of poor information flow and imperfect human behavior. Innovative solutions to help care administrators avoid costly and tragic mistakes have begun to emerge and have demonstrated positive clinical outcomes.
  3. New technology and benefit plans to deal with the diabetes epidemic, which costs an estimated $170 billion annually in the U.S. Improved diagnostic solutions and healthcare management programs will go a long way in controlling the spiraling costs.
  4. New medical technology to enable earlier, better diagnosis and thus earlier intervention with high-cost, high-morbidity diseases. Continued innovation around technologies that help identify diseases earlier will have a vital financial and clinical impact.
  5. Medical devices to foster less invasive and more effective surgical interventions. New minimally invasive surgical technologies will enable care givers and hospitals to provide treatment options that reduce inpatient use and result in fewer negative side effects and better clinical outcomes.
  6. Expanded adoption and investment activity in healthcare information technology. This includes venture investments to recognize and sponsor entrepreneurs committed to developing modern solutions that bring about the much-needed innovations to put the U.S. healthcare economy on track for a successful future.

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