The healthcare investment world doesn’t just involve traditional VCs anymore. From Mayo Clinic to Cigna, other types of players — namely, providers and payers — are exploring the space. That very concept will be up for discussion during a panel at MedCity INVEST on April 23-24 in Chicago. Prior to the conference, two panelists shared their thoughts.
First of all, what’s prompting these organizations to dip their toes into the investment world?
Jessica Zeaske, a partner at Echo Health Ventures and an INVEST panelist, said it has to do with a need to keep up in the evolving healthcare environment.
“Providers and payers need innovation to compete and survive in the rapidly changing healthcare market and often look to external sources of innovation, like start-ups, to learn from or to partner with for this innovation,” she said in an email.
Via email, another panelist, Cleveland Clinic Ventures partner Dr. Akhil Saklecha, noted that providers make the move because they want to achieve a financial return by leveraging their clinical care abilities and becoming involved in product or business development.
For Cleveland Clinic, the venture opportunity also gives physicians and inventors the chance to keep innovating. “The Clinic wants to support that type of culture,” Saklecha said in a phone interview.
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Naturally, these provider-led and payer-led fund differ from traditional VCs.
For instance, while a conventional venture capital firm can put in money to support a startup, it doesn’t have all the backend expertise that a provider fund has, Saklecha said. A hospital fund has physicians, nursing staff and hospital administration, not to mention the know-how regarding processes like onboarding doctors when a new IT system is implemented.
Zeaske noted that corporate VC programs can assist companies with strategy tasks or offer emerging market intelligence. But “[p]roviders and payers can offer experience and in-depth insights on healthcare’s regulatory and operational complexity, which is often more valuable than capital,” she said.
The healthcare environment continues to evolve, but the expert panelists had a few predictions about what’s next on the horizon for investing.
Looking ahead, Saklecha said he sees the biggest opportunities in software and artificial intelligence.
As for Zeaske, she pointed to promise around improving delivery and analytics. “More and more companies are prioritizing consumerism in healthcare, including innovative payment models, convenient care options, and personalization through data,” she said.
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