Investors Look for a Silver Lining in the Cloud of Uncertainty around Health-Care Policy Reform

Efforts to repeal and replace the 2010 Affordable Care Act have kicked up political dust in Washington and created formidable challenges for health-care investors and startup founders who are looking for a silver lining in this cloud of uncertainty.

During a May 16 MGCS panel discussion, entitled “When Obamacare becomes Trumpcare – Implications for Healthcare VCs,” four investors discussed strategies for weathering the political storm and gaining traction in the ever-changing health-care market.

“You have to look through the smoke and noise to see where there will be challenges and opportunities in this Administration,” said Justin Field, vice president of government affairs at the National Venture Capital Association. He explained that both political parties are looking to control rising health-care costs, but in different ways. The Democrats want to increase participation in U.S. health insurance while the Republications want to push the cost of care onto the states and make consumers bear more of the cost burden.

The panelists suggested several key areas where industry investors may find opportunities:

Consumer-oriented health platforms – Anna Haghgooie, managing director-healthcare at Sandbox Industries, encouraged investors to look for “the next health platform to transform the consumer experience.” Innovative core infrastructures include those that provide greater transparency and information on consumer-centric matters such as insurance premiums and deductibles, new drugs and medical devices and costs covered/not covered by insurers.

Alternative payment plans – “The U.S. spends $3 trillion annually on health care, so it is not going anywhere,” remarked David Kereiakes, a principal at River Cities Capital Funds. “But we will see changes in how it’s paid for.” Alternative payment models designed to accelerate the change from “fee for service” to “value-based/quality-based” reimbursement now constitute 30% of all payment plans and are likely to proliferate in coming years. “Alternative payment plans are happening, but as an investor, you must balance the risk-reward profile,” he added.

Measurement and accountability – Per capita spending caps on medical care and the move toward pay-for-performance are ramping up the need for greater measurement and accountability in health-care systems, offering new opportunities for startups and investors.

Elder care – America’s baby boomers are aging and need more services. “The elder-care market is big and growing, but the customer base is difficult [to serve],” observed Dan Kidle, a principal at Arboretum Ventures. “We can help by bringing health-care solutions” to nursing homes and other outlying facilities, especially in rural areas.

Accelerated adoption of innovation – “The Blues (Blue Cross/Blue Shield insurers) are looking for innovations around value-based care and how to roll out pilot programs,” said Haghgooie. “They have a better appetite for trying new things and that is good for startups.”