Curbside Consult with Dr. Jayne 11/6/23
Everyone is talking about the recent shutdown of Olive. Looking back over the last several months, HIStalk has been full of mentions of companies that abruptly shut down, declared bankruptcy, or are otherwise in bad shape. Plenty of other healthcare and health-adjacent are companies in those situations, but they don’t always come across our radar or aren’t noteworthy in the healthcare IT realm, so it’s difficult to know what the true number of companies in this situation might be.
In talking with friends who know the industry well, most are in agreement that it’s time for a lot of companies to pay the proverbial piper since they can’t deliver on the promises they made in exchange for startup funding. They forecast that many more companies will be trying to reinvent themselves over the coming months. Those that are successful may live to fight another day, but others may become the stuff of fire sales or ultimately closures.
Taking a look at Olive, some of the problems that they experienced are readily visible at other companies. They promised the use of artificial intelligence and advanced technology, but it was more sizzle than steak as it became apparent that they were using screen scraping tools and less-than-intelligent technologies. In visiting their booth at HIMSS, the team was more excited to talk about their big purple recreational vehicle than it was to talk about their actual solutions. When we did get them to discuss their business, there were plenty of vague ideas, punctuated by delusions of grandiosity. I wasn’t surprised when the company had layoffs in the summer of 2022. CEO Sean Lane explained in an interview, “Our fast-paced growth and lack of focus strained our product and engineering resources and prevented us from executing quickly on key initiatives.”
How many other companies out there are guilty of this? Plenty of startups go after what they perceive is the brightest, shiniest object, throwing their muscle behind initiatives without doing the level of due diligence or project planning that is needed to set themselves up for success. Product and engineering teams often work in a certain degree of chaos, but good people in those disciplines aren’t going to do that indefinitely, especially if other things are going on in the company that make things feel unstable.
I have no knowledge of how those particular teams felt at that particular company, but I’ve consulted for enough startups to have seen some wildly inappropriate leadership behavior that would make anyone vote with their feet. People don’t generally enjoy having projects shelved on a whim, or see funding diverted to initiatives that they know deep down are non-starters. They don’t like CEOS who yell at their teams, micromanage, or have Jekyll and Hyde personality swings. People also tend to be uncomfortable with the idea that their company might be selling vaporware, and are more likely to move on when that starts. One can only pull a rabbit out of the hat so many times before it becomes tiresome.
We know from the postmortem of Theranos that some of these high-flying executives may be lying to their board members and to their investors, as well as to their employees and clients. I haven’t seen any salacious tell-all stories yet about Olive, but will be interested to understand whether there was actual fraud involved or just flagrant mismanagement and a lot of excuses. In this situation, I think there is likely to also have been an element of failure to estimate exactly how much it would cost to try to do artificial intelligence work properly. It’s often much more expensive than people think, especially if you want to do the right kind of training and validation with your models. I’ve seen several companies who claim to have “AI-driven” this or that, when what they really have are sophisticated decision trees and a lot of manual intervention and hard work behind the scenes.
It’s particularly grating when I see a company that is operating in what seems to be a somewhat shady fashion, and I look at their list of investors and see only hospitals and health systems represented. These are their possibly spun-off “innovation” arms, or their venture capital funds rather than the care delivery organizations themselves, but the ultimate source of the money being used for investment is the same – payments from patients, insurance carriers, and the US government. These all boil down to being funded by you and me, in the form of our insurance premiums and tax dollars.
It also makes me angry when I see these care delivery organizations throwing major chunks of cash after technology solutions, when they haven’t yet cleaned up messes of inefficiency that could be handled by solutions they have already purchased. They’re not willing to spend the money to hire analysts and trainers to fully implement the EHRs that they’ve spent tens (if not hundreds) of millions of dollars for, or to optimize those systems to actually improve patient care for the physicians and providers or to improve the patient experience. However, they’re willing to buy other solutions that may just make terrible processes run faster and make their patients and caregivers more frustrated than they already are.
Frankly, you can buy a lot of vaccines, deliver a lot of charity care, and discount a lot of procedures for the hundreds of millions of dollars that are spent annually on solutions that fail to deliver value. Looking at some data on the largest organizations in the most recent year I could find (2021), venture funds run by large hospitals laid out more than $2.7 billion in funding rounds. How much prenatal care could that provide, especially since the US now has the highest infant mortality rate among high-income countries?
They can make the argument that the companies in which they invested are going to bring value that lowers the cost of healthcare, improves outcomes, and more, but the proof is ultimately in the pudding as far as what they are actually able to achieve. I can’t think of anyone I’ve talked to in the last several months that thinks the US healthcare system is stronger or better positioned to handle the challenges it is facing despite all this money being spent on technology. All of the practicing clinicians I speak to are on the frazzled edge, constantly being asked to do more with less, being forced to cut staff, or finding that services have been reduced. Maybe it’s time we start spending healthcare dollars on actual bread-and-butter healthcare delivery and ensure that patients are receiving a minimum level of care before we start writing big checks for pie in the sky ideas.
What do you think about the future of tech unicorns in the healthcare space? Leave a comment or email me.
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I dont think anything will change until Dr Jayne and others take my approach of naming names, including how much…