3 Questions This Healthcare Investor Finds Herself Asking Startups All The Time
Explore the pivotal questions in healthcare investment, ensuring startups not only thrive financially but also enhance societal health and equity.
The journey of startups seeking capital is often punctuated by pivotal conversations that delve into the core of their motivations and future plans. Candace Richardson, a seasoned healthcare investor and Principal at General Catalyst has navigated through hundreds of these dialogues, each time exploring the depths of what success truly means to the founders who stand before her. The essence of these discussions often revolves around a blend of financial and societal returns, seeking to unveil not just a robust financial model but also a genuine desire to positively impact numerous lives.
The query, "What does success look like to you?" serves as a mirror, reflecting the motivations and aspirations of startup founders in the healthcare sector. Richardson finds that the responses to this seemingly simple question are "very telling," revealing a window into the founders' motivations and providing a glimpse into whether their ventures will stand at the intersection of financial gain and societal benefit. With its staggering $4 trillion annual spend, the healthcare industry certainly presents ample opportunities for financial success. However, the real challenge, and indeed the more rewarding pursuit, lies in steering the industry “in the right direction for our society,” as Richardson astutely asserts.
Navigating through the complexities of the Medicaid space presents its own set of challenges and opportunities for innovation. The lack of innovation in this sector is notably documented, and one of the primary reasons for this is the state-by-state basis of Medicaid regulations. For a Medicaid-focused startup to expand beyond a single state, it must navigate through myriad regulatory concerns and varying budgets, as Richardson elucidates. Furthermore, the comparatively lower reimbursement rates on a per-member basis in Medicaid, often half the amount providers receive for the same care under Medicare or commercial insurance, pose an additional hurdle.
Yet, the narrative of Cityblock Health, an early investment by General Catalyst, demonstrates that innovation at scale in the Medicaid space is not only possible but can also be financially viable and socially impactful. Cityblock Health has pioneered delivering value-based care for Medicaid and dual-eligible populations, showcasing that it is feasible to serve these populations, enhance their health outcomes, and operate a profit-generating business, especially in their more mature markets.
Richardson underscores the importance of not overlooking the Medicaid population, even for companies that do not exclusively serve them. Ensuring that Medicaid is on the roadmap of startups is crucial to prevent this segment of the population from being ignored simply due to perceived financial constraints.
Moreover, the model of care and its applicability across diverse populations is another focal point of Richardson’s inquiries into startups. When startups present patient outcomes or engagement data, she probes further, asking if different populations have stratified the data. This approach ensures that the quality of care across various segments of the population is consistent and aligns with the broader objective of health equity. Even with the noblest of missions and health equity at its core, a startup needs robust data to track its impact. Stratifying data in this manner can also serve as a potent tool for customers, as it aligns with the concerns of employers, payers, and health systems, all of whom have a vested interest in health equity.