Here's where the real investment opportunities are in health care IT

As investors look for new opportunities to invest in healthcare IT, they confront a conundrum of sorts. The traditional trajectory of investing in independent startups doesn’t seem to work in this vertical. The barriers to adoption are simply too great, as is the effort required to overcome them — if it’s even possible.

Technology innovation in the healthcare space has historically been stunted because of proprietary concerns over data and silos within the organizations. Technology vendors, who entered the EMR and EHR data space early, often have claims on the data and are unwilling to integrate or share data with new vendors. Even emerging categories of technology in healthcare such as wearables are falling into the same trap. The data isn’t being shared with the patient’s care providers or being integrated with other systems across the healthcare organization to provide a full picture of a patient’s health.

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In order to transform healthcare and unlock the data silos, we must revisit the model for seeding technology innovation in the healthcare sector. The traditional approach — the startup funded by VCs and other private investors — does not work. Precisely because of the above issues, these startups operate outside hospitals and are unable to integrate easily with existing infrastructure; they do not have access to proprietary data; and they have not been able to generate meaningful sets of data on their own.

Technology incubator programs within large hospitals do not face these same challenges. At hospitals such as UCSF Medical Center and Johns Hopkins, incubator programs are already integrated into the organization’s infrastructure and are able to access existing data. They start with a single initiative or project and then grow organically across the organization once they’ve begun demonstrating meaningful results. Hospital administrators and medical practitioners don’t have as many concerns about giving technology innovators access to new systems and data because they’re seeing the positive change and growth driven by technology innovation.

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Ross Mason will be speaking about ‘The Connected Hospital’ tomorrow at VentureBeat’s
HealthBeat 2014 conference in San Francisco. You can register for the event here.

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At UCSF Medical Center’s Center for Digital Innovation (CDHI), this model has been particularly effective. The center’s goal is to drive the adoption of new digital health technologies from within the organization. By connecting modern mobile capabilities with existing communication systems (pagers) and the EMR at the hospital, CDHI developed CareWeb: a new type of engagement platform that creates a digital conversation around the patient. This platform securely integrates patient information across key systems while also enabling new cross-department and doctor-patient communication. As a result, all caregivers have a complete, real-time view of communications regarding the patient, enabling them to deliver better and more efficient care.

Similarly, the Mayo Clinic Venture’s entrepreneurs work closely with Mayo physicians and scientists to mine new discoveries to transform healthcare. The program is currently developing technologies in several sectors, including diagnostic, biopharmaceutical, healthcare IT and devices. And this is all from within the larger medical research group, where existing infrastructure and data are accessible.

Since startups operating outside healthcare organizations face such severe and entrenched institutional barriers to effective integration, investors should look instead to seeding the already established and trusted IT incubator programs within hospitals. These investments present much less friction for the successful adoption of innovation since they are already “in the door” of their target with one less historically impenetrable barrier to overcome.

This investment model has already created significant change, and ultimately, improved treat patient care. We should to continue to foster this momentum by investing resources in more in-hospital incubator initiatives.

Ross Mason is founder and vice president of product strategy at integration platform company MuleSoft. Building on the open source Mule project he had created three years earlier, he founded MuleSoft in 2006 on the idea that connecting applications should be easy.

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