Perspectives

Tom Rodgers, SVP and Managing Director, McKesson Ventures

Telemedicine is today’s favorite happy hour conversation topic for health care policymakers and venture capitalists. The former group sees it as a low-cost alternative to expensive emergency-room and urgent-care visits that can save the health care system billions. The latter sees it as the tip of the emerging health care consumers’ spear and looks to a set of companies poised to yield strong returns for their venture investors.

Despite already being an investor in this space and a very satisfied telehealth and house call user, I would suggest a little sobriety when it comes to telemedicine. Some issues, challenges and opportunities will decide telemedicine’s future as an innovative alternative care delivery model that serves all stakeholders — policymakers and venture capitalists included.

The Challenges

One concern is margin. Is it a race to the bottom? Will the member/employee per month fee charged to payers and employers fade away due to market forces? Can you make compelling profits charging $40 for a text or video consult and perhaps another $100 for a house call? After considering operating costs, the cost of marketing to and acquiring each patient as a customer and most importantly paying the clinician, how much is left?

We’re not far from the point at which decent providers won’t do telemedicine for much less. Significant gains will need to be made on the cost of patient acquisition or providers will need to have salaried clinicians dedicated to the job in order to make the stand-alone telehealth model sustainable.

Another concern is patients. Many patients who now use telemedicine services aren’t that sick. They are logging in with symptoms like headaches, fevers, sore throats, earaches, runny noses and rashes for themselves or their kids. Treating them over the computer, tablet or smartphone is undoubtedly more convenient than a costly trip to the ER or to urgent care and keeps them away from the other sick people waiting there.

However, the big, system-wide savings aren’t there unless telemedicine visits truly replace visits that otherwise would have actually happened at these more expensive locations. If you can corner an actuary, they will likely tell you that, in theory, telehealth will reduce costs, but we are still anxiously awaiting the data that prove it doesn’t create incremental utilization.

Telemedicine may drive up costs in other ways. If a patient’s symptoms persist or can’t be adequately diagnosed, a virtual doctor will likely tell them to go to the ER or urgent care center. Telemedicine may also lead to unnecessary prescriptions. A telemedicine visit often concludes with a prescription for an antibiotic written to treat a patient’s symptoms. Is that antibiotic really necessary? Or, will it lead to more antibiotic-resistant strains of bacteria that will result in more people getting sick?

These issues keep those same actuaries and some public health pundits up at night. They fear that telemedicine may be an electronic gateway to greater utilization rather than a way to lower spending trends.

However, telemedicine clearly has the potential to be a core part of our health care delivery system infrastructure and a strong lever to bend the cost curve and make our system easier to navigate.

The Opportunities

1. Providing Front-Line Care

One way telemedicine can reach its full potential is when it’s offered as a covered benefit in a health plan. Plans can educate and incent enrollees to use telemedicine or house calls for front-line care. The plans can then leverage the knowledge or experience of clinicians to help patients access or navigate additional care if necessary. Some more forward-thinking employer-sponsored plans and individual plans are showing encouraging signs that this is starting to happen. However, for a variety of reasons, the providers should ideally be in-network health systems and clinicians rather than virtualists unaffiliated with a local provider or health system.

2. Monitoring Discharged Patients

Another strategy with promise is health systems leveraging telemedicine capabilities as a service that complements their traditional health services. For example, telemedicine could be used to check on or monitor patients post-discharge to reduce avoidable hospital readmissions.

3. Addressing Behavioral Health

Telemedicine can be an effective way to deliver some aspects of behavioral health services. That’s a clinical area in which telemedicine can have one of its greatest positive clinical and financial impacts. Unaddressed mental health issues can exacerbate an existing chronic health problem (known as comorbidities), leading to high-cost emergency room visits, hospitalizations and readmissions, not to mention loss of productivity in the workplace.

Behavioral health telemedicine consults that reduce those instances can generate big system savings. The availability of telemedicine reduces or avoids any perceived stigma attached to in-person visits with clinicians and can increase the consistent quality of and compliance with behavioral health treatment programs.

4. Treating Chronic Conditions

Most importantly, telemedicine is a powerful modality for chronically ill patients. These patients consume the most expensive medical services, and they are usually not the patients logging into today’s wave of telehealth apps or “instagramming” their kale and quinoa salads. These patients drive cost trends for the entire health system and are the central focus of those at financial risk for their care.

Telemedicine services that offer a multidisciplinary team of caregivers to a payer’s sickest enrollees, for example, have the potential of creating big savings. Other tactics include remote monitoring of compliance with treatment plans and medication regimens and digital health coaching or concierge-like services to patients with chronic conditions.

There are some compelling examples of this starting to happen, but it won’t become mainstream until the patient’s incumbent care team is financially motivated to embrace telehealth, either as a result of the shift to value-based payments or, more realistically in the near team, if they can receive traditional fee-for-service reimbursement.

The future of telemedicine lies in its ability to become a true care delivery option or practice extension for managing patients, particularly seniors, with chronic medical illnesses and behavioral health co-morbidities. The stakeholders best positioned to drive this and realize the financial gain are the providers, health systems and perhaps even pharmacies that currently care for these patients. They are paying close attention but are for the most part still watching from the sidelines.

Telehealth must evolve from a standalone consumer and acute care model, outside of the continuum of care for patients. It must become a recognized and valued segment of the care continuum, connected to all the other links in the chain of delivering care. That’s where the long-term clinical and financial return on investment can be found. And, by the way, the customer acquisition cost for an existing patient is $0.


Four Ways Health Care’s Flavor Of The Month Can Become Its Next Chicken Soup was originally published in McKesson Ventures Perspectives on Medium, where people are continuing the conversation by highlighting and responding to this story.

Author: McKesson Ventures
Posted: May 27, 2016, 8:49 am

Tom Rodgers, SVP and Managing Director, McKesson Ventures

After we announced the launch of McKesson Ventures in December, I had the opportunity to speak with a number of people outside of our new venture capital fund — including several health care and business journalists — about why we’re doing what we’re doing.

Many seemed curious — if not slightly skeptical — about why we’re entering the seemingly crowded market of health care venture capital that is getting more crowded by the day. Several also questioned whether a company that’s perceived to be big and slow-moving can play well with others on a health care field with filled with nimble rookies.

Let me offer a few reasons why I think the timing is great for a well-established, veteran company like McKesson to join this ecosystem.

Stakeholders like McKesson know the jobs to be done in health care. We can use that expertise and vantage point to shape the direction of the solutions that these emerging leaders are developing.”

It’s Time to Thin the Herd.

There is no doubt that an unprecedented amount of venture capital has been pouring into health care, particularly in the area of digital health. Mercom Capital Group, for example, recently reported that the amount of venture capital funding in health care information technology more than doubled to $4.7 billion last year from $2.2 billion in 2013. Its great news for a industry that has long suffered from inertia and an incentive structure that optimized for consumption of high-cost services and treatments rather than for value and improving patient experience and provider accountability.

These investors are drawn in by a number of compelling new dynamics. Among those are the HITECH Act, the ACA, the availability of new wireless and mobile technologies, the health care needs of an aging population, energetic evangelists like Rock Health, rising health care costs and the sobering realization that the system is broken and we have no choice but to change.

Although the money invested so far has funded critical foundation-laying work, for the most part we have yet to see the new ballparks and stadiums rise from those foundations. Most funding has sponsored initial product iteration, business model exploration and proof-point gathering. We’re now at an awkward but exciting stage where some “culling” is going to happen. That’s the reality, and the roster cuts are probably going to increase dramatically as these companies go out for large Series B and C rounds of financing. Many will be left in the dugout if they don’t have differentiated value propositions and paying customers to give references.

We’re going to see some maturing take place in this space. The leaders that emerge will be the ones who learn how to navigate the often brutal health care enterprise sales cycles or those that acquire the much-anticipated but rarely sighted “health care consumer.” For us and others likeCambia Health, now is the perfect time to enter the market and support some of those emerging leaders. We’re joining the game in the late early innings, if you will, with a well-rested and strong pitching arm.

Healthcare Expertise Is Needed.

Much of the money that’s been directed toward these early-stage companies has come from “outside” sources that understand technology and can recognize charismatic leaders going after large markets in dire need of disruption. It’s come from tech investors, life-science investors and passionate angels.

What has been in shorter supply and will be critical during these middle innings are investors that understand why the coefficient of friction is so high for driving innovation and behavior change in health care. I expect that participation and active investment from venture firms that really understand the health care industry and the health care market soon will be in greater demand.

Stakeholders like McKesson know the jobs to be done in health care. We can use that expertise and vantage point to shape the direction of the solutions that these emerging leaders are developing. We can smooth the infields and base paths that they’re trying to navigate.

Health care innovation is hard. A few, rare companies will achieve compelling liquidity without having to go deep into their bullpen, but most won’t be so lucky. The market needs more investors that have health care compasses, even if they may appear rusty and analog.


Why Now Is The Time For McKesson To Enter The Venture Market was originally published in McKesson Ventures Perspectives on Medium, where people are continuing the conversation by highlighting and responding to this story.

Author: McKesson Ventures
Posted: May 27, 2016, 8:46 am

John Hammergren, Chairman and CEO, McKesson

How often do we visit the doctor’s office and think, “This again?” when handed a long medical form to fill out? Don’t we all wonder why our medical information can’t be automatically transferred from our primary care physician to the specialist? Or to the hospital or outpatient surgery center?

The answer is this: we don’t currently have a national network of connectivity that allows for the safe and secure sharing of health information between all locations of care or with patients. The good news is that such a system is possible and, with the right industry and political leadership, could be in place in the next few years. But it won’t happen without consumer engagement.

Why should consumers care about sharing their health information — aside from the aggravation of repeatedly filling out the same forms?

We should care because we are all patients and currently we are at the mercy of a disconnected health care system. The status quo leads to fragmented and lower quality patient care. Wouldn’t it be better for patients if emergency department staff had immediate access to their medical history and medications? Wouldn’t it be better for patients if, when filling a prescription, their pharmacist could see all prescribed medicines to check for drug interactions? And wouldn’t it be better if we could view our health information in the comfort of our home any time, day or night?

There are hurdles to overcome before a national system to share medical information becomes a reality. Today, many in the health care industry have been narrow in their approach to supporting a robust network of connectivity. Some health care IT vendors and even some providers focus exclusively on the patient’s electronic health record (EHR), arguing that if it’s technically possible to share a patient’s information from point A to point B or from EHR to EHR (often for a fee), then they’ve “checked the box” and achieved connectivity.

But this is a shortsighted view — and puts the needs of the patient last. If it is acceptable to claim success when two health care IT systems can technically communicate — but are not actively sharing information — then the bar is set far too low. Patients deserve better; we all deserve better. Our nation needs a broader, seamless system of interconnectivity that allows providers and patients to have the right information for the right patient at the right time, regardless of the technology platform used or the location of care.

As health care reform continues to evolve, the care choices that consumers have will also evolve. Patients are already receiving care in a variety of new settings and monitoring their care with an array of tools. The rapid proliferation of mobile applications and the increasing adoption of telehealth services will also give health care providers additional patient information — often in real-time. These new tools will also allow for the creation of personalized health and treatment plans for individual patients.

True connectivity will allow patients, their providers and designated caregivers to see a complete view of their health record, creating more engaged, informed patients and caregivers. A successful network also will put the needs of the patient first to ensure that the patient’s entire care team has 24/7 access to all of the information necessary to select the most effective care plan and support services.

The benefits of real health care connectivity are numerous — but how will such a system be achieved?

Fortunately, the health care technology industry is already at work creating the infrastructure framework needed for a truly connected system. Trade alliances such as the CommonWell Health Alliance, comprising competitors, providers and patient groups, are creating a seamless flow of patient health information between hospitals, doctor’s offices, labs, pharmacies and nursing homes — regardless of the technology platform used at each location of care. Through sustained collaboration and ongoing dialogue, industry partnerships are making the safe and secure sharing of health information a reality.

What role can consumers play in moving the ball down the field? As patients and consumers, we play the most important role. We should insist on the same level of connectivity in health care that we have come to expect in so many areas of our connected lives. We should refuse to settle for paper forms and incomplete information. Instead, we should demand a seamless, interconnected system that provides access to the right health information regardless of where we receive care.

If you are interested in participating in the dialogue about creating a national system to safely and securely share patient data, I encourage you to share your thoughts with your federal representative. There is a strong interest in Congress to address this issue in the current legislative session.

But you should also talk with your physician about your desire to have online access to your complete medical records. At your next medical appointment, when you’re handed a piece of paper to fill out, ask whether the information will be available for use by other medical professionals who may be involved in your care — specialists, labs, pharmacists, etc. A vocal consumer population is a critical ingredient to make the patient’s needs and wants heard as we build out a truly connected health care system.


Want a Connected Health Care System? You Are the Missing Key. was originally published in McKesson Ventures Perspectives on Medium, where people are continuing the conversation by highlighting and responding to this story.

Author: McKesson Ventures
Posted: May 27, 2016, 8:44 am

Aaron Flink, Investment Manager, McKesson Ventures

What does it take for an innovation to take root, gain widespread adoption in the industry and truly disrupt the status quo? The secret ingredients are engage, sustain and grow. The challenge that all health care entrepreneurs and innovators face as they try to invent new patient engagement tools is developing a solution that immediately engenders broad patient engagement and activation and, over time, actually enhances the engagement level of patients using their solution.

There are a variety of avenues proven to be effective at generating the sufficient activation energy required to engage patients out of the gate. Everything from driving awareness through education, incentivizing sign-up and utilization, creating competition among users and recognizing high performers among many others. The challenge that all these initial successes confront is how to sustain and grow that engagement so that the benefits of that engagement are realized. High engagement could lead to better medication adherence, proper utilization of decision support tools when making a care decision, maintaining compliance with a wellness and lifestyle plan, increasing appropriate behavioral health utilization and the list goes on and on.

The Innovation Challenge

The McKesson Ventures team recently had the opportunity to participate as judges in two health care innovation competitions. The first was the inaugural HX360 Innovation Challenge, which held its final round at the HIMSS Conference in Chicago in April. The second competition was the annual MaRS HealthKick event, which was held in Toronto in May.

What we saw at these events is the fact that most entrepreneurs and innovators understood the need to quickly engage patients. But, we believe that they probably underestimated how difficult it is to sustain and grow that patient engagement over time.

Most of the presenters demonstrated a real thoughtfulness in creating their platforms. Their solutions had a sharp UX and were designed with the end user — the patient — in mind and with distinct strategies on how users could engage with the platforms. They gave thought to the appropriate mode (web, mobile, phone, etc.) and the frequency and nature of the patient interactions given the populations they were targeting.

What I didn’t see nearly as much were strategies to maintain and build patient engagement over time. The industry needs solutions that have the capacity to meet the diverse motivations of its potential users as well as iterate the patient experience in real-time to meet the evolving needs and preferences of the patient.

This challenge is not unique to health care — it is something that all technology platforms struggle with. But, the stakes are higher in health care. If someone’s engagement with Blue Apron or Instacart wanes, those companies lose a customer. With health care, this declining engagement is not just a missed opportunity to maintain your customer base but a missed opportunity to significantly improve health and lower costs.

Sustained Patient Engagement

Patients’ interaction with the health care system can be very episodic. It can be months or even years (for healthier patients) in between clinician interactions. Creating a solution (or approach) that consistently, meaningfully and broadly engages patients in the weeks and months in between visits with their physician or pharmacist has the potential to be truly transformative.

Let’s take an example — say you have an elderly male patient with three chronic conditions who is on eight medications. Yet, he is only moderately adherent to his medications and doesn’t always follow physician guidance on diet and exercise.

If a solution were to engage him and his family such that it helped him manage his disease and be fully compliant to his medication and care regimen, then he will most likely see a dramatic reduction in emergency department and hospital utilization. The impact would be better quality of life for the patient and dramatically lower costs for both the patient and the risk bearer.

It sounds great in theory and there are plenty of solutions that have proven they can do that for small populations over relatively short time periods. Doing that for a broad patient population for years, not weeks and months, has largely been elusive to date.

Engaging the Right Patients

A related challenge is whether a solution is engaging the right patients. Is it engaging the 10 percent of the patient population that accounts for 50 percent of the health care spending?

For many populations the costliest patients are some of the hardest to engage, but not doing so represents a large, missed opportunity. There are a number of emerging analytics approaches to identify (and target) those patients that are in the top 10 percent as well as those that may be on the brink. These solutions will allow the risk bearers (and patient engagement providers) to spend incremental time and energy with those that would most benefit from high engagement, leading to higher returns on their patient engagement efforts.

I remain excited about (and confident in) the potential value of deep patient engagement and am eager to see how the next wave of patient engagement solutions address some of the persistent challenges associated with patient engagement.


The Challenges And Opportunities In The Patient Engagement Return was originally published in McKesson Ventures Perspectives on Medium, where people are continuing the conversation by highlighting and responding to this story.

Author: McKesson Ventures
Posted: May 27, 2016, 8:35 am

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