For empowered “medical consumers” to really transform the healthcare system, as Health 2.0 proponents would have, clear pricing and quality data for medical care is essential. Unfortunately, such information is currently in short supply.
The startup change:healthcare aims to fill that void with a revamped Web site, just launched this afternoon. And it’s a nifty idea, if unfortunately still flawed in execution. See our review at VentureBeat Life Sciences.
Can social networking help restrain, or even lower, healthcare costs? The Nashville, Tenn., startup change:healthcare is primed to find out.
Healthcare plans are inexorably forcing more cost-sharing on patients — a strategy some call YOYO, for “you’re on your own” — which means that the actual cost of medical care is looming larger for many Americans. Healthcare free-marketers think that’s a good thing, arguing that cost-consciousness will make people better medical consumers and cut down on the overuse of costly services. Their counterparts, meanwhile, worry that fewer people will be able to afford decent care and that individuals motivated to scrimp on medical care will tend to forego preventive check-ups that could catch serious conditions early, thus actually driving up costs over the long run.
Either way, we’re all likely to have to start paying more attention to what our medical care costs, not least because higher deductibles, coinsurance and co-payments are probably going to saddle us with a larger share of the bill. Yet medical pricing is murky to the point of almost complete opacity, since it’s difficult and at times almost impossible to find out what doctors or hospitals actually charge for an appointment or a procedure. Even then, costs can vary widely depending on how old a patient is, where she lives, whether she’s insured or not, and even what hospital or pharmacy she happens to step into.
It’s this informational void that change:healthcare hopes to address with a freshly revamped site that’s just gone live. The new service wraps together the startup’s previous two Health 2.0 services –MedBillManager, a subscription service for helping people manage complex medical bills, and FindYourDoc.com, a physician directory that change:healthcare took down several months back in anticipation of the redesign — and bolsters its social-network aspects, particularly the ability of users to share medical-cost information and rate their doctors or hospitals. The ultimate idea is to build up a database — one supplemented by data from employer healthcare billings, Medicare and other sources — that can help anyone shop around for high quality but inexpensive medical care.
We’ve covered change:healthcare in the past — see here and here, for instance — but I held off reviewing its offerings in light of the pending redesign. That was probably just as well, since FindYourDoc in particular had a slapdash feel to it, thanks to some odd display quirks and some gaps in hospital data that probably weren’t the site’s fault (it relied heavily on Medicare data at the time) but which were disconcerting nonetheless.
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TODAY’S HEADLINES:
Another slow news day, as yesterday we covered most of the fundings other sites are writing about today. I’ll update if anything else crops up. In the meantime, feel free to check out yesterday’s briefing or any other items here.
HemCon Medical acquires Alltracel Pharma – This item is now a standalone post here.
Transoma Medical, implantable wireless device maker, withdraws its IPO – Transoma Medical, a St. Paul, Minn., maker of implantable wireless diagnostic sensors, formally withdrew its $77.6 million IPO. Transoma postponed its IPO earlier this month; unsurprisingly, the company cited “unfavorable market conditions” as the reason for its withdrawal.
Transoma is one of several startups working on ways to monitor the vital signs of sick or at-risk patients in ways that don’t require invasive procedures or constant visits to the doctor’s office. The company’s devices, which received FDA approval last October, involve an implantable recorder that monitors a patient’s heartbeat and a handheld wireless device that records the data and regularly transmits it to a physician’s office via a home-installed base station.
The company has raised just over $25 million in three funding rounds since its founding in 1984, when it was known as Data Sciences International. Although Transoma generates close to $40 million a year from sales of its older diagnostic products, it is still burning cash at a rate of roughly $4.3 million every quarter. As of Sept. 30, 2007, Transoma held $26.1 million in cash, equivalents, and working capital, so its cash situation isn’t yet dire; if those trends hold, it will be down to about $17 million by the end of March. Don’t be surprised if Transoma hits the fundraising hustings again before long.
MedBillManager adopts new name as parent company change:healthcare aims for March 3 relaunch – MedBillManager, a site that helps people sort through complex medical expenses, will adopt a new name and Web site as it relaunches on March 3. Its parent company, Nashville, Tenn.-based change:healthcare, is consolidating its various Health 2.0 properties under its own name; these will now be available at www.changehealthcare.com.
The company announced the changes in an email; for a Web version, see here. A screenshot of the new site suggests that change:healthcare will now be emphasizing social networking as part of services for medical-bill management, finding and rating doctors, and comparing prices across various healthcare providers.
Oracle Healthcare cuts Precision Thera acquisition price by roughly 15 percent – Back in December, the “blank check” acquisition company Oracle Healthcare Acquisition agreed to buy the Pittsburgh diagnostic biotech Precision Therapeutics in a transaction that was virtually impossible to value at the time. Only later did the companies indicate that the acquisition would cost Oracle around $150 million (based on the issuance of 19 million Oracle shares at a price of $7.90 apiece detailed in this prospectus).
Not any more, apparently. The two companies just agreed to reduce a key variable in the calculation that establishes how many shares Oracle will issue to Precision’s owners, cutting the deal’s value by approximately 15 percent to roughly $127.5 million. The details, however, remain a bit murky: The deal’s participants haven’t done anyone a favor by describing the ratio at which Precision shares will convert to Oracle shares in a dense, wordy paragraph. Complex calculations like this should be set out in an equation with clearly defined variables, dammit.
In addition, the proposed amendment to the merger deal will cause founders of Oracle to forfeit shares of the special-purpose acquisition company, or SPAC, currently worth $14.8 million. It will also eliminate a “top-up” provision that would have handed Precision shareholders extra Oracle stock if the SPAC’s share price declined.
What does all this add up to? It sure looks like everyone involved in the deal is getting a haircut of some kind, although why this is happening now isn’t remotely clear. I’m certainly tempted to think that Precision is turning out less of a bargain Oracle thought, but at this point, it’s impossible to know for sure.
For more about SPACs, see our coverage here.
UPDATE: The merger is dead.
The burgeoning movement known as “Health 2.0″ makes some pretty big claims about the power of social networks and Web services to transform the sprawling mess we like to call the U.S. healthcare system. One of the central principles is that providing individuals with better information about medical treatments and procedures will make them better “medical consumers” capable of exerting market pressure that can improve quality and lower prices.
There’s nothing at all wrong with that notion in the abstract, although there are plenty of reasons to doubt whether “empowering patients” this way will really produce significant change. Among them are the fact that the majority of medical costs in any given year are run up by a small minority of the population, many of whom are often so sick that they aren’t in any sort of position to shop around for the best deals. Measuring the quality of healthcare is also a thorny problem that no one seems to have really gotten a handle on at this point.
Still, anything that helps better inform patients and enables them to make the best medical and financial decisions possible has to be applauded, and that’s a direction that many Health 2.0 startups seem to be headed in. I’ll be writing more about a number of these efforts over coming weeks and months, because some of them are already starting to shed some interesting light on medical and insurance practices that were previously all but invisible.
One of them is a Nashville, Tenn., startup called change:healthcare. The company is probably best known for its site MedBillManager, a subscription service intended to help people with complex or “consumer directed” health plans — such as those with high deductibles — cope with their medical finances. Until late last year, change:healthcare also offered a physician and hospital site called FindYourDoc.com, which also presented some preliminary information on medical costs at some hospitals. That site has been down while the company integrates its offerings under the change:healthcare brand and unveils a new emphasis on letting people share and compare their medical costs. I’ve held off reviewing either service until the integration is done, which change:healthcare says will happen by March 1. The company raised $1 million last October, which we wrote about here.
In the meantime, though, change:healthcare has produced a couple of interesting case studies that illustrate how widely the cost of drugs and medical tests can vary within a single geographic area — a fact of which most people (myself included) are almost wholly unaware. This is the sort of information that could be very useful to the uninsured and anyone without a comprehensive, major-medical style health plan that covers just about everything — the very sort of plan that is quickly going out of style at the moment.
To gauge the variation in drug prices, change:healthcare conducted a phone survey last November of six well-known pharmacy chains in four different Nashville neighborhoods, asking each for the price of six prescription drugs: Copaxone, an injectable multiple-sclerosis drug; the antidepressant Zoloft; the fibromyalgia drug Lyrica; Lipitor, a statin that lowers cholesterol; the sleep aid Ambien; and the allergy/asthma drug Singulair. The survey turned up some surprisingly wide disparities among the pharmacy chains, such as the fact that a Lyrica prescription costs more than twice as much at Rite-Aid as it does at Walgreens. No single pharmacy was consistently the cheapest, and prices could vary considerably even at different branches of the same chain. Kroger, for instance, charged twice as much for Singulair in one Nashville neighborhood (Green Hills/Belle Meade) as it did in another (Franklin).
These are obviously price disparities that can only exist because of the system’s opacity and, to be fair, the lack of incentive for many insured individuals to shop around for the best prices in the first place. All this leaves pharmacies free to take advantage of information asymmetries, even to the extent of cutting deals with pharmacy-benefit managers that disadvantage anyone who’s paying full freight for their prescriptions. You can see the full results of the survey here at change:healthcare’s blog (scroll down for the PDF link).
The second survey involved looking at the cost of a simple medical test for streptococcus infection, the sort of thing anyone with a sore throat and a fever might need. Here, change:healthcare not only found wide price gaps among 13 different Nashville-based healthcare providers — all selected randomly from a list of general practitioners produced by a major insurer — it was actually unable to get information from five of them for a variety of reasons. (Two phone numbers were incorrect, one office turned out to be a sleep-disorder center, another suggested a walk-in clinic, and the last insisted that the caller select the doctor as a primary care physician before they’d provide the test.) The cost of the test ranged from a rough estimate of $50 to potentially as much as $259. The full study is available here.
To be sure, two small case studies don’t necessarily prove anything about the state of healthcare pricing on a national level, much less lend support for the notion that giving individuals better information will restrain overall healthcare costs. What’s more, they’re provided by a company with a vested interest in building demand for services that will help individuals compare healthcare costs, so some perspective is definitely in order. Still, these results are indicative of the irrational pricing that undoubtedly affects many areas of medicine, which is likely to impact increasing numbers of Americans as insurance coverage grows ever more miserly. At least, that is, in the absence of some sort of comprehensive nationwide healthcare reform, although that’s a subject to revisit another day.
Featured companies: Change:healthcare, Gemin X Biotechnologies, Ipsogen, the Practice
Change:healthcare raises $1M for health 2.0 sites — Nashville, Tenn.-based change:healthcare, a provider of Web-based health information, raised $1 million in a first funding round. The investment firm Solidus, also based in Nashville, provided the cash. There’s no release, but the Nashville Business Journal did run this story.
Change:healthcare operates two “health 2.0″ Web sites designed to empower individuals by helping them better navigate the healthcare system. FindYourDoc.com offers a searchable database of doctors and hospitals, while MedBillManager is a fee-based service for helping individuals and families manage a confusing welter of medical bills and insurance statements.
Cancer-drug developer Gemin X garners $72.6M — Montreal’s Gemin X Biotechnologies, a biotech developing a variety of cancer drugs, has raised $72.6 million of a planned $114.7 million third funding round, VentureWire reports (subscription required).
The wire service cited a regulatory filing for its report. No investors were reported on that filing, although the company did just appoint Eric Roberts, a managing director of Caxton Advantage, to its board. Understandably enough, such appointments usually reflect the desire of a VC or, in this case, a hedge-fund affiliate, to keep a close eye on a significant investment.
Gemin X develops cancer drugs that, for the most part, interfere or promote the process of programmed cell death, or apoptosis.
Physician-office manager The Practice raises £1.4M — The Practice, a U.K. firm that manages doctors’ offices, raised £1.4 million ($2.9 million). MMC Ventures provided the funding. The proceeds will allow the company to expand its operations.
Ipsogen draws in $3.4M for diagnostic tests — Ipsogen, a Marseille, France, biotech focused on cancer diagnostics, raised $3.4 million, VentureWire reports. Investors included Matignon Technologies, Societe Generale Asset Management, Sofipaca and Connecticut Innovations, which provided $680,000 to help the company’s U.S. subsidiary expand its headquarters in New Haven, Conn. Connecticut Innovations is a quasi-public economic-development agency. The company’s lead product is a diagnostic for leukemia.
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