Blueprint for digital health startup success

Madison-based Datica has created a roadmap for other digital health startups to improve on a 50% failure rate in the industry.

You might not know it from looking around Greater Madison, where digital health startups seem to flourish, but according to research by Accenture more than half of all digital health startups are likely to fail within two years following their launch.

That’s not an encouraging sign for the health care industry — or Madison's economy.

Aiming to improve the success rate for digital health startups, Madison-based Datica launched the first Digital Health Success Framework (DHSF) earlier this month. The DHSF is a roadmap that lays out the steps and timelines for digital health vendors who want to take their napkin scribble designs to market without making missteps along the way.

Those missteps include not being able to answer some of the most common questions that lead to success, such as:

  • At what point in the company journey should I seek my first hospital pilot?
  • When should I address HIPAA compliance?
  • When do I need to craft my business associate agreement?

The DHSF answers those and many other questions that those with their first or fifth digital health product often ask.

While the company changed its name earlier this year — it launched in 2013 as Catalyze — Datica has spent the past four years working with digital health companies that range from single-founder startups to Fortune 100 pharmaceutical companies and hospital providers. Patterns from thousands of conversations have emerged around topics like technology, cloud infrastructure, data exchange, and compliance.

“Unlike other industries where a pathway to success is straightforward, the health care industry has unique considerations not found elsewhere,” Mark Olschesky, Datica’s chief data officer, notes. “The DHSF takes those specific complexities, details the timelines and benchmarks for each, then simplifies the success process in an intelligent way that developers can clearly comprehend.”

According to research and data analytics firm CB Insights, increases in digital health funding continued for the seventh straight year in 2016 with venture deals reaching $6.5 billion. Those financial deals have financially supported companies that want to “remedy the pain points of health care.” Investors distributed the majority of those funds to early-stage, seed, and Series A companies. Yet, Datica has seen many of those well intentioned companies struggle to reach market adoption.

Datica’s mission is to reduce that 50% failure rate. The DHSF plays the role of helping teams understand the major considerations that contribute to business risks and product burdens. “We’ve seen hundreds of digital health companies pass by in our position as a top startup incubator. Most of them struggle to understand what challenges stand between them and market adoption,” explains Joe Kirgues, co-founder of the startup accelerator Gener8tor. “Datica’s Digital Health Success Framework can help organizations understand the unique considerations required for new products, which will help the health care ecosystem only get better at delivering stronger patient outcomes through new innovation.”

Digital mapmakers

Olschesky notes Datica has a rich digital health knowledge base that has been tapped by a number of successful Madison-based startups like Propeller Health, Wellbe, Healthfinch, National Decision Support Company (NDSC), and Health eFilings.

“We’re proud to say that most of the digital health companies in Madison trust us with their data,” Olschesky says. “Fortunately, most of the digital health startups in Madison that Datica has worked with have seen growth and success since their launch. With roughly 50% of digital health startups failing within two years of launch, most other places don’t quite have the luck that Madison has. Datica understands that for health care to innovate, these digital health startups must take their product ideas to market as quickly as possible. It’s for these digital health newcomers that the DHSF has been created.”

According to Olschesky, the information in the DHSF isn’t necessarily new to the industry, but its presentation is. “No one else has yet to partner with digital health vendors in such an open format. While digital health companies have successfully brought their products to market prior to the framework being created, Datica has taken the challenges that each of these has faced along the way and made it easier for the next crop of digital health companies to accelerate that success.”

In large part, Datica’s relationships with digital health vendors have revolved around educating them on what it takes to create a viable, HIPAA-compliant application that a hospital would buy into. So many startups fail because they don’t have the right information, either because they come from outside of the health care ecosystem or simply because the steps to success are either obscure or esoteric in nature, explains Olschesky.

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Datica developed the DHSF from thousands of digital health startup conversations the company has had since its 2013. Those conversations include early-stage startups to medium and high growth startups, as well as innovation group leadership from various hospital systems. “Additionally, we sourced the framework from 30 interviews with hospital CIOs and CMIOs who we’ve interviewed on the Healthcare Innovators Podcast, a show hosted by Datica CEO Travis Good, MD,” Olschesky notes.

As an open resource for digital health vendors and health care innovation groups, anyone can access the DHSF at https://datica.com/dhsf/.

The Digital Health Success Framework from Datica is an easy-to-navigate roadmap for digital health startups looking to see where they are on the timeline to success.

 

Digital health vendors can use the guide to determine where they are on the timeline of digital health success and what measures are on the horizon that they will need to address next, like HIPAA compliance, HITRUST CSF Certification, when their app needs to meet security requirements for health care data, addressing hospital EHR integrations, and more, explains Olschesky. Developers and company founders can hover over the various months shown on the framework and learn more about that particular step that will need to be addressed. If desired, digital health vendors can set up a consultation with a Datica compliance expert to help them determine where they are on the timeline and their best next steps.

“Not all startup founders — especially those coming to health care from outside the industry — will know the various steps that successful digital health product will need to traverse,” Olschesky says. “Others know the steps, but not necessarily the months in which a company needs to take these steps in the company evolution. Datica lays these out in an easy-to-navigate framework with clickable monthly tabs that provide more information about each step.

“Also not found elsewhere is what it takes to actually achieve compliance in the cloud. It is hard to close a deal with a health system or get through [an institutional review board] if you are not a master of compliance; we do our best to provide the fastest path to mastery.”

Checklist for success

Compliance and security need to be the backbone of any application, Olschesky continues. Determining which users can see what amount of protected health information and how you will distribute your application to clinicians and patients is not as easy as putting an app in the app store.

“Those, along with many other steps, are crucial to delivering an application that not only delivers outcomes but also can scale growth across multiple organizations,” says Olschesky. “Miss one of those steps along the way and backtracking will create delays and possibly negative outcomes with proposed hospital pilots. The DHSF supplies this checklist that centers on compliance and security. While many other resources are available on how to ensure startup success, digital health is unique in its regulatory requirements and that can trip up those who aren’t ready for the rigors of this industry.

“From our many Healthcare Innovators Podcast interviews, CIOs tell Datica that while a Mayo Clinic, Cleveland Clinic, or UCSF pilot is the brass ring every digital health startup hopes to achieve in the first year, it’s extremely rare without addressing the steps laid out in the DHSF.”

Olschesky admits Datica has lost a few customers who were early-stage startups that went out of business over the last few years. “While some businesses fell apart for the usual business failure reasons, I’d say that the biggest health care specific reason is that companies did not hit scale fast enough. For most significant digital health business models, your sales model is likely B2B or B2B2C. This means that you need to go through procurement with health care organizations, which in many cases are not noted for their agility in contracting.

“We’re in the same boat at Datica, where sometimes it can take us over a year to close a deal with an organization. It’s important to be able to parallelize your sales and delivery efforts and to ensure that you can prove what you need to prove to organizations fast so that the only barrier left is just grinding through contracting. What needs to be proved is usually three-fold: competency, compliance, and outcomes. The DHSF helps companies come up with the framework to demonstrate those three things.”

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