Can a venture capital firm reinvent health care?
The health care system seems persistently resistant to upgrades.
So is the solution buying a hospital, and giving it an infusion of technology and new ideas?
That’s the approach proposed by General Catalyst, a Cambridge venture capital firm, which announced Wednesday that it would buy Summa Health, a nonprofit health care system in Akron, Ohio.
With 7,000 employees, Summa is the largest employer in its county, operating hospitals, community health centers, medical practices, and a small health insurance arm, SummaCare. But Summa has been losing money in recent years. In the announcement of the deal, General Catalyst managing director Hemant Taneja and longtime hospital executive Marc Harrison said “the focus isn’t on taking costs out. It’s on putting innovation in.”
How could this deal become a model of health care reinvention? Both Taneja and Harrison, former chief executive of Intermountain Health in Utah who joined General Catalyst in October, have penned books laying out lofty visions. And how might it go off the rails? Remember Haven, the Boston-based venture that was going to rethink health insurance from the ground up — but closed up shop after three years and had negligible impact?
In that first category, it’s tempting to think of using Summa as a “closed loop system” where General Catalyst, and the tech companies in which it invests, could get administrators, physicians, and nurses all using new tools that could make delivering care more efficient, from finding a doctor to scheduling an appointment to getting treatment. Inside this closed loop — where Summa provides insurance coverage to a portion of the patients it treats — you could also gather data about what worked best, and ideally stop doing what wasn’t working.
Health care is “so broken,” said Sandra Fenwick, former chief executive of
Boston Children’s Hospital. “There have to be some bold, revolutionary fixes. Their goal is to use digital technologies and other operating system fixes to deliver better care, in a way that is financially stable for the hospital system, and more affordable for people. If an investor can be part of that solution, all the better.”
(Fenwick has served on the board of a General Catalyst company, Livongo, which seeks to help patients manage their diabetes.)
Harrison and Taneja like to use the phrase “health assurance” when they talk about their aims with the deal. What does that mean, exactly? It’s “the transformation of health care from a ‘sick care’ system to a resilient, proactive system designed to help people stay well,” Harrison said in an email.
The goal, he said, isn’t to turn Summa into a playground for entrepreneurs with halfbaked prototypes that they believe could help doctors and nurses do their jobs better.
“A key point is that we do not see this as a place where very young early startups will be brought into play to ‘test,’” Harrison writes. “We’ll be looking for much more mature companies that actually have a proof of concept. In particular, we’re focused on technology that reduces friction for patients and providers.”
That could mean less time filling out redundant forms, or jumping through fewer hoops to get prescriptions or procedures.
The terms of the deal are still pretty vague at this point. General Catalyst didn’t say how much it is paying for Summa, or how much it will invest over the next few years.
How could this deal go off the rails? One obvious way is that regulators don’t approve it, in part because of concerns about what has happened to other hospital systems acquired by private equity firms: layoffs, more errors, and lower quality care. For its part, General Catalyst is trying to communicate that it is planning to invest in Summa “over years to decades — not quarters to years,” Harrison said.
Another challenge will be winning over doctors, nurses, and other medical professionals who would be on the front lines of a health care transformation. Todd Dunn, who worked at Intermountain Health while Harrison was chief executive, recalled when Harrison first arrived at the company in 2016.
Harrison, according to Dunn, compared Intermountain to an early 20th-century horseless carriage and said he planned to transform it into a Tesla. That made people who worked there feel disrespected, said Dunn, who until recently was an executive at Advocate Health in North Carolina and is now working on a book.
“Change management is going to be a major issue here,” Dunn said. “Getting buy-in and support” from Summa’s employees will be crucial.
Dunn said that the press release announcing the deal forgot to mention the doctors and nurses who work at Summa; Ellen Zane, former chief executive of Tufts Medical Center, also noticed that, calling it “a significant miss.”
“The hearts and minds of doctors are at the epicenter of the success of any new initiative” in health care, Zane said. If medical professionals don’t have the right incentives to embrace the new ideas that Harrison and General Catalyst introduce, those ideas might hit a brick wall. Over time, Zane said, Summa’s new ownership may be able to sort the doctors “who want to be in an innovative environment” from those who don’t.
The modernization of health care has been a slog since 2009, when President Barack Obama signed the Affordable Care Act into law. The health care industry “has consistently proven to be a terrible buyer, implementer, and user of technology,” said Steve Wardell of Wardell Advisors, a Somerville firm that consults to digital health care companies.
But, Wardell says, applying new technology in one of the world’s biggest industries “offers tremendous future upside.” It’s an industry where software, data, and artificial intelligence “ought to have the biggest impact,” and yet still “has the furthest to go.”
General Catalyst’s experiment in Akron — if it works — could be a leap forward.