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VC investors demand more than an idea and smart technology

By Mike Moran, Project Editor

Investor interest in telemedicine may be on the rise, thanks in part to changes in reimbursement that make it easier for providers to get paid. But not just any old start-up or entrepreneur can pull in the Do-Re-Mi.

Jonathan Linkous

"It's pretty straightforward," said Jonathan Linkous, the ATA's CEO. Investors "are looking for something that will give them a good return on their investment. That means you have to demonstrate ROI."

In short, it helps if a telemedicine vendor looking for investment dollars has  business experience and understands the healthcare market because "an idea and smart technology will not guarantee success." Investors have an eye out for telemedicine technology and services that help hospitals and other healthcare providers enhance care, improve outcomes and reduce administrative burdens, Linkous said.

To give attendees a better sense of what the investment community is looking for – who gets the money and why – the ATA Board of Directors, Telehealth Investors Panel and UCLA Institute for Innovation in Health have created a special session, "Venture Investor Panel: Financing Telemedicine." The session runs from 3-4 p.m. Monday in Salon III at the San Jose Marriott.

The panel will feature:

    •    Eve Kurtin,
senior advisor for
Vantage Point Capital Partners of
San Bruno, Calif.;
    •    Lisa M. Suennen,
managing member of
Psilos Group Managers, LLC, in
Corte Madera, Calif.; and
    •    Jack Young, senior Investment manager for
Qualcomm Ventures
of San Diego, Calif.

Molly Coye

The panel will be moderated by Molly Coye, MD, MPH, chief innovation officer for the UCLA Health System
Institute for Innovation in Health.

Until recently, venture capitalist funding has been sporadic. But that's changing, Coye said, as new payment models emerge and help increase provider access to telemedicine technology and services.
"One change is in the actual commitment or obligation by health plans and other payers to reimbursement for telemedicine services," she said. "The second reimbursement change is the movement by many delivery systems to accountable care organization structures that place the providers at risk for the total cost of care or part of the total cost of care.

"The result of that is that (providers) become much more interested in telemedicine as a way of increasing access (to) low-cost care and preventing avoidable emergency room use and hospitalizations."

For a long time, the telemedicine market was fueled mainly by grants, and the focus was not necessarily on driving profitability. Over the past couple of years that has been changing, Linkous said.

"It's not just hospitals that are providing services," he said. "It's hospitals that are outsourcing. It's private companies that are going direct to the consumer, and there are partnerships of various kinds."

"From our own perspective, with bundled payments and accountable care, successful telemedicine companies won't compete with hospitals," he added. "They'll work with hospitals to provide ROI, increased clinical care and improved efficiencies."

Coye said most investors feel more comfortable investing in telemedicine systems used by hospitals, which tend to have larger budgets than do most physician practices.

When it comes to mHealth, there's an "overwhelming" number of start-ups, and that shows a lot of interest but makes it hard (for investors) to judge which companies will succeed, Linkous said.

"mHealth is another form of telehealth and a game-changer  in terms of providing access to information systems," Coye added. "Unfortunately, the reimbursement model for it is not strong. It doesn't take much investment to develop mobile-help (applications). So there is a plethora out there but only a few earn a significant amount of money."


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