July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

CareCloud has raised $20 million to break the healthcare system out of the Jurassic era.

CareCloud offers cloud-based electronic health record (EHR) software. It provides tools for practice management, EHR, and medical billing that connect providers to each other and to patients, creating a complete digital healthcare ecosystem.

Earlier the year, CareCloud told VentureBeat that its growth tripled in 2012, helped by the U.S. government mandate that doctors be fully transitioned to electronic health records by 2014. It expects to see its revenue triple again this year. Its platform now powers around 3,000 providers in 45 states and reaches 5 million patients.

CareCloud chief executive officer Albert Santalo said most of the U.S. healthcare system is shackled with decades-old technology that hinders doctors from delivering high-quality care at a low cost and prevents them from keeping up with changes in policy and technology. CareCloud presents a desirable alternative to large legacy vendors like Allscripts, Cerner, Siemens, Epic, McKesson, and GE that primarily offer antiquated, noncloud systems. These systems can cost around $30,000 per doctor for implementation (and more for maintenance), and Santalo likened them to the “walking dead … it’s a fight among dinosaurs.”

CareCloud not only is a cheaper alternative (charging in the low thousands) but also helps doctors save money. Using its system of well-designed, web-based dashboards, physicians can make their operations more efficient. They can also increase collections, and the company manages more $2 billion annually from the clients of its revenue-cycle management services.

The market for electronic medical records is estimated at between $6 billion and $10 billion. Many doctors work with existing systems that are difficult to remove, so they are reluctant to spend the time and money to switch even when it could mean improving their practice. CareCloud’s all-cloud system offers doctors the capability to integrate parts of it with their existing vendors and pick and choose components of its practice-management software. Company spokesman John Hallock told VentureBeat that this is its sweet spot, and it gives CareCloud an important competitive edge over Athenahealth, which pioneered cloud-based EMR in 2006.

In a recent survey of 5,000 physicians across the nation, the Practice Profitability Index uncovered a trend in the “rip-and-replace” market for technology. Physicians are seeing their profits go down, and thus 41 percent of practices are making operational improvements by implementing a new EHR while 25 percent are replacing their existing EHR.

Seismic shifts are going on in the healthcare industry that are driven by major policy changes, advancements in technology, and a growing demand from patients for a more personalized, efficient, patient-friendly system. Digital-health incubator Rock Health predicted that 2013 will be a record year for digital-health investment, and this year has already seen a lot of deal flow.

With this investment, CareCloud will work on product development and stronger sales and marketing and continue its “aggressive growth.” Tenaya Capital led this round, with participation from existing investors Intel Capital and Norwest Venture Partners. It brings CareCloud’s total funding to $44 million. CareCloud is based in Miami. Read more about CareCloud on VentureBeat.

Photo Credit: Shutterstock

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

The United States’ national coordinator for health information technology, Farzad Mostashari, believes health tech innovation is only going to grow when there are economic incentives.

“Ultimately it’s going to be the market that drives innovation and not the government,” said Mostashari, speaking via Skype at VentureBeat’s HealthBeat conference in San Francisco, Calif. “There’s a lot of money to be made making healthcare less expensive.”

For Mostashari, who works within the U.S. Department of Health and Human Services’ Office of the National Coordinator (ONC) for Health IT, there are three major areas that need a tech touch, and also provide an opportunity for making major money.

Bringing costs down

Mostashari believes that making health care cheaper is the biggest opportunity in the market today. The cloud has a big role to play here in terms of using technology to provide preventative care. For example, he said, Iora Health is doing just that by providing healthcare to specific groups of people so that healthcare is targeted. But it is also using the cloud to give wellness information to its patients, also targeted to their needs, in an attempt to keep patients healthier longer, saving them money.

Digitization of data

The next opportunity is the digitization of data. This, of course, encompasses electronic health records, as well as other ways of digesting information about your own, or your patients’ health. Electronic health records are there to help with that. Currently, the Obama Administration has increased EHR adoption to 44 percent. That’s more than the 20 years of adoption prior to the administration taking over.

But hospitals, doctors, and nurses are frustrated with these records. They aren’t organized, the hardware in the hospital itself is often outdated and now, instead of light clipboard with straight information, nurses are having to tote around laptops and rolling stations to their patient’s rooms. Entrepreneurs who find a better way of displaying and storing this patient data will have a wide range of customers.

Democratization of data

The last opportunity is the democratization of that data. VentureBeat founder Matt Marshall, interviewing Mostashari, shared a story about his time in the hospital with mysterious stomach bleeding. He found himself in the ER twice over the course of a few years, having pints of blood removed from his abdomen, but despite the obvious medical issues, he simply couldn’t find data on his condition. The information wasn’t there.

This is where Mostashari says that customers will need to get involved in their own health care, as well as providers. The customer drives demand. If they become more vocal about wanting access to their electronic health records as well as connections to third party applications that can make sense of that data. Providers who see places where the tech community can fill in gaps need to start making noise as well.

So you’ve developed a cloud-based electronic health record (EHR) or medical device that will drastically change the way we deliver health care.

Just a few years ago, you may have faced a prolonged struggle to gain investment. Practice Fusion CEO Ryan Howard, CEO of Practice Fusion, one of the more dynamic new EHR companies, recalls having to use the cash from a motorcycle accident to pay the salaries of key employees. But by 2009 when the Obama administration calling for doctors to shift to electronic health records, investors saw opportunity.

Today, investors are rushing to invest in digital health.  This will be a “record year” for investment in the health care, Rock Health recently predicted. The research shows an uptick in deals in the first quarter of the year and an increase in venture capital.

But will the elite venture capital firms open their check books for you? With our inaugural health conference HealthBeat coming up next Monday and Tuesday (it’s almost sold out, but you may be able to get a ticket still if you move fast), I caught up with Sequoia Capital‘s Warren Hogarth, and Morgenthaler Ventures‘ Missy Krasner to dig deeper into their digital health investment thesis.

VentureBeat: What’s the primary area of health that you’re currently interested in? What’s the future?

Warren Hogarth: One of the key areas is bioinformatics. It’s everything that is enabled by cheap genome sequencing. We’ve made about a half dozen investments to date in the U.S. and Asia. We have also taken a keen interest in the consumer side and health IT. These new technologies will play a role in engaging people in their health in a complete way.

Morgenthaler’s executive in residence, Missy Krasner.

Missy Krasner: A sister theme would be “big data” analytics and business intelligence in health care. There is a tremendous amount of interest in sucking data out of health records and mining data from clinical performance.

Hogarth: We’re talking now about the microbiome, not just the genome. We’re understanding that the microbiome interplays with our health, and we’re seeing a new opportunity for non-invasive treatment and testing.

VentureBeat: Have you addressed the ethical concerns around mining data about the human body?

Hogarth: Patients will have choice and control when it comes to their data. Hopefully, we’ll overcome some of the concerns about the broad misuse of data. The trick is to do it in a de-identified way with a clear process.

Krasner: And in 2014, medical underwriting will be banned so patients won’t be rated based on preexisting conditions. [Medical underwriting is already prohibited for children. -Ed.]

VentureBeat: Are you buying into this “quantified self” trend? Is it empowering for patients to have access to all this data about their health?

Hogarth: I think it’s empowering. I just had my genome sequenced, and my doctor was able to use that information to make a decision regarding my health. Companies like Jawbone are taking reams of data and surfacing it to a physician in a meaningful way.

Krasner: I spent five years at Google Health trying to get patients to engage. We tracked some of the early adopters of Basis, BodyMedia (recently acquired by Jawbone), and other great activity trackers. But there are a couple things that still need to happen. The data that is collected needs to actually be put into nuggets that are actionable. We need to take this data and figure out how to use smart algorithms to provide usable clinical insights. Otherwise we’ll get alert fatigue.

Hogarth: We need to go beyond the “chronically worried well.” We need to make an impact on people who are obese.

Krasner: I did some interesting research by signing up for Weight Watchers. I went to the meetings and subscribed to the mobile product, the device that helps you count activity. It’s a great program but we are still in the stage where patients have to record what they’re eating and put manual data into the app. The next piece of technology will automatically know my patterns. We’ll see a fantastic amount of adoption.

[Editor's note: Krasner will moderate a panel at HealthBeat on the "death" of the personal health record (PHR). That's different from the Electronic Health Record (EHR), which is alive and well and seeing serious innovation. Also at HealthBeat, we'll have executives of the major disruptor EHR companies speaking, from Practice Fusion's Ryan Howard, to the leaders of CareCloud and AthenaHealth).

VentureBeat: Are there areas that you wouldn't invest in?

Hogarth: We don't invest in drug discovery or medical devices that are pre-FDA approval. [Venture capitalists say it's a nuclear winter for medical devices. Read more on that here. -Ed.] It’s too risky, and there is a lack of control. When it comes to devices, I would love to see a culture where things happen in a timely manner.

VentureBeat: What’s the one big health care transformation that you’re most excited about?

Krasner: The one area we haven’t talked about is the new insurance models for health. Patients are being asked to pay more out of pocket than ever before. That whole wave is forcing people to think much harder about where they go. There is no transparency around quality and price. There is a big opportunity here.

Hogarth: We will see a big transformation with employee sponsored healthcare — we’ll see businesses not offering insurance. You’ll shop and make a decision about health care based on price. We’re looking hard at startups that consumerize this experience.

Meet and mingle with health investors at HealthBeat, VentureBeat’s conference in San Francisco on May 20 and 21. Partners from Sequoia Capital, Bessemer Venture Partners, Norwest Venture partners, and Kleiner Perkins Caufield Beyers will speak on a panel “Health IT: The Numbers, The Funding, The Exits,” about the drivers making this industry segment more appealing to investors. 

photo credit: Emmanuel Gadenne via photopin cc

Janice Nicholson is CEO of i2i Systems.

As someone who has spent over 20 years focusing on the needs of healthcare organizations, I have experienced firsthand their unique challenges while using technology to improve patient outcomes. I think we have a major dilemma when it comes to health IT and it’s time we call it out.

First, let’s get right to the heart of the matter: What factors limit health IT’s ability to support quality measurement and quality improvement?

My response is based on field experience in supporting hundreds of clinics and practices who are using more than 30 different Practice Management (PM)/Electronic Health Record (EHR) systems. I would like to tell you that we have figured out why health IT investment has not resulted in more dramatic improvements to outcomes of care, and that we have the solution — but we do not.

What I can share with you are three of the top challenges we have experienced in helping organizations realize the benefit of health IT adoption.

Limitations within EHRs yield roadblocks

The first challenge is that of standards and interoperability. EHR makers claim the records interoperate, but what they don’t say is at what level. Much of the data in EHRs about patients is customized, unstructured data. Even within the same EHR, templates allow a patient’s medical data to be stored in different locations of the database using different representations. This means that while you think you may be accessing information at one end of the EHR, the information you really need might be on the other. This lack of EHR vendor standardization and inability/unwillingness to share customized, unstructured data cripples efforts to address Meaningful Use (MU) and severely limits the analytic capability of EHR data.

Health IT capabilities are behind the times

The second challenge is that EHRs do not fully support MU requirements. Our current health technology isn’t able to analyze data in a way that would allow us to support tactical, operational, and strategic improvements in public health management. This primitive state hampers organizational leaders, management, and even care teams from proactively monitoring and improving performance. To meet requirements of MU Stage 3, organizations need tools that will support long-term, sustainable change.

A simple example of this is HbA1c testing for diabetic patients. Evidence-based guidelines suggest that A1C screening for a diabetic patient should occur at least twice during a year-long period. This simple adherence tracking for one patient becomes complex very quickly when managing population health for thousands of diabetics.

A lack of incentives creates stagnancy

The third challenge is lack of incentives to achieve higher levels of performance. We often see organizations drawn to our solutions mainly for required reporting to payers. We encourage organizations to leverage our tools to their fullest, but sadly, many are satisfied with threshold performance since there are not enough incentives for them to dive deeper into what’s available out there. This speaks to the lack of a data-driven culture incented to measurably improve health outcomes.

Challenges provide the opportunity for solutions

Despite all these challenges hindering the healthcare industry’s ability to successfully move forward in using technology to their advantage, I see various opportunities.

First, Health IT vendors must provide clinics open access to their data, and remove barriers to standardization and interoperability. Performance can then be measured in a reliable way and shared across the health system.

Second, we need to face the reality of what EHRs currently deliver. There is no single, comprehensive, all-inclusive Health IT solution that will meet everyone’s needs today and in the future. Rather, the real solution lies in cultivating a healthy and diverse Health IT ecosystem. We have to help providers understand the intelligence tools they need so they can plan and budget for what will be required to monitor, improve and sustain health outcomes.

Third, we need to increase the percentage of revenue directly related to pay-for-performance. Organizations must be incentivized for behaviors that drive change. This will naturally catalyze the quality life cycle that results in high performance.

We can be optimistic if we address these opportunities. Success is within our grasp and it can come at a price that you, me and the rest of the nation can afford.

Before founding healthcare software provider i2i Systems, Janice Nicholson worked as a software engineer and played a major role in developing a patient management system for private practice. She has managed over 10 major product releases; and, prior to its acquisition by WebMD, she served as the vice president of product engineering at HealthPro Solutions.

Hospital image via Shutterstock

Interested in learning more about opportunities in digital health? HealthBeat, VentureBeat’s health conference takes place on May 20 and 21.

The Iron Yard has launched the Southeast’s first digital health accelerator, proving that innovation shouldn’t be confined to Silicon Valley.

The Iron Yard’s tech collective was formed by a group of locals in the small city of Greenville, South Carolina. The original idea was to inspire networking among like-minded folk, but the Iron Yard quickly spiralled into a tech accelerator, a coding academy for kids, and a coworking space.

And now, the founders are asking entrepreneurs to fix some of the biggest flaws with our current health system.

Entrepreneurs enrolled in the accelerator will receive $20,000 in seed capital funding, three months of mentorship and training, a full year of free coworking space in Spartanburg, S.C., and the opportunity to demo their product at the Health 2.0 conference in San Francisco.

Given the complexities of the space (founders will need to ensure their product is HIPPA compliant, for instance), the accelerator will provide free legal consultations.

The accelerator is looking for a wide range of ideas — fitness apps, web-based electronic medical records, “big data” analysis tools to name a few — but the program does not support medical devices at this stage, Iron Yard managing director Peter Barth said in an interview.

In the last five years, health accelerators have popped up around the country, and venture funding has drastically increased. In order to compete with established programs like HealthBox and RockHealth, the accelerator has signed up brand-name partners and mentors from JM Smith, Mayo Clinic, AbbVie (Abbott Labs), Zebra Technologies, and BMW.

For entrepreneurs who crave small town living and a break from Silicon Valley, The Iron Yard may be the best bet. “We want everyone to have the opportunity and ability to have an effect on the digital world and an effect on society,” said cofounder Eric Dodds in a recent interview.

The three-month digital health program begins on July 15. Click here to apply and learn more.

Images courtesy of the Iron Yard

Funding for digital health startups skyrocketed in the first quarter of 2013, according to a report released today.

Companies in the health care IT space raised almost half a billion dollars (approximately $493 million) in a single quarter. A report from Mercom Capital Group, a global consulting firm, found that 104 startups received funding this quarter compared to 51 in the previous quarter. Many of the early-stage deals were fueled by health accelerators, which have popped up in recent years, including HealthBox and Rock Health.

A recent shift is that the majority of the startups that received funding are marketed to consumers rather than practices, and these include telehealth, mobile health, and scheduling apps for patients.

This trend in favor of consumer health technologies has proliferated despite the increasing interest in electronic health records (EHRs), which doctors are being pushed to adopt by 2015 — or risk paying penalties.

“The enormous market opportunity in consumer-focused health has appeared to pique the interest of investors and is likely to continue to grow as witnessed by the surge in VC activity,” said Raj Prabhu, the CEO of Mercom Capital Group.

While investment in health IT continued at a “torrid pace,” Prabhu’s research team found that mergers and acquisitions remained steady. There were 46 in the health IT space, which is on par with the previous quarter.

The top five health deals of the quarter?

• Health Catalyst for a $41 series B round .
• xG Health Solutions for a $40 million round.
• NantHealth for a $31 million round.
• Fitbit for a $30 million round (although this was reported as an intent to raise).
• One Medical Group for a $30 million series F round .

For more in-depth research, which projects a record year for digital health, check out Rock Health’s report.

Investment in health IT is one of the key themes that will be discussed at HealthBeat, VentureBeat’s upcoming health conference. 

Advancements in medicine and treatments have increased the life expectancy for baby boomers. Almost 87 million Americans, or one in four, will be 65 or older by 2050, according to the Organization for Economic Cooperation and Development.

Both these trends have many implications for hospitals and healthcare organizations. Over the next decade, the healthcare system will need to adapt to the influx of baby boomers, many of whom will have chronic diseases and need continued care. A recent study by the West Virginia University School of Medicine found that about 39 percent of baby boomers were obese, compared to about 29 percent of the previous generation, and approximately 16 percent had diabetes, compared to 12 percent of the previous generation.

The aging generation of baby boomers had been a concern for the healthcare industry for some years. Now, technology solutions are beginning to serve a vital role in creating the change needed to propel the healthcare industry to care for the influx of patients.

Healthcare technology today 

Technology implementation in healthcare today is mainly driven by government incentives. In 2009, the first electronic health record (EHR) mandates were enacted by the HITECH law and included financial incentives provided by the Health and Human Services Departments.

EHR implementation has taken off over the last few years, with nearly $10 billion in EHR incentives distributed as of December 2012. One of the core reasons hospitals and healthcare providers are adopting EHRs is to improve patient safety. While there are other benefits, such as saving time and cost, the objective of EHRs is to correctly identify patients through the continuum of care, ensuring procedures and check-ups are being recorded, as well as easing medical administration.

In order for that to happen, the EHR solutions need to fit seamlessly into the healthcare practice’s existing software solutions and infrastructure. Barcode technology creates a critical link between the patient and the clinician. If, for instance, a patient is unable to verbally identify himself or his medical problems, a clinician can scan a barcode wristband and have access to that patient’s EHR immediately, which can inform the course of action. The clinician spends less time tracking down patient records, and more time with the patient.

EHR and barcode technology implementation seamlessly links patients and clinicians; however, it is only the beginning for healthcare technology.

Connecting patients, clinicians and data

In an effort to provide the best care while adapting to the influx of baby boomers, hospitals and healthcare organizations are turning to connected health. Connected health is the idea of providing healthcare services remotely, through flexible, at home care. Managing chronic diseases, maintaining health and wellness, or ensuring patients are not readmitted following hospital treatment are all issues that connected health helps to solve. Additionally, with more patients being treated in their homes, we can decrease the amount patients admitted to hospitals.

Connected health can help solve the impending issue of the influx of baby boomers into the healthcare system, and technology is at the center of it, powering interoperability and linking patients to clinicians to their data.  By leveraging technology solutions, healthcare organizations can provide care to patients outside of the typical medical setting, consulting at home, over the phone or via video. In using technology while caring for a patient, clinicians have immediate access to the patient’s medical history, pulled from the hospital IT system, and can direct the course of treatment in real-time.

Connected health also allows clinicians to use mobile devices to deliver care or information to a patient on the spot. This is known as mobile health, or mHealth. By using tablets, mobile printers and other point-of-care solutions, clinicians can take specimen collections, issue medical or dietary information and print prescriptions. In tandem with these activities, clinicians record their course of action, medications administered, patient status and next steps. The collected information is priceless data for hospitals and healthcare organizations. In analyzing this data, new processes or improved efficiencies are discovered; all the while elevating the quality of care a patient receives.

What to expect in the future 

As connected health begins to take off, the Internet of Things (IoT) will play a larger role in healthcare information technology. Based on the definition shared in the survey “Building Value from Visibility: 2012 Enterprise Internet of Things Adoption Outlook,” 85 percent of organizations surveyed agree that Internet of Things solutions are made up of smart interconnected devices that provide more visibility into the organization’s operational events.

For healthcare, this means better visibility inside hospitals and healthcare organizations, as well as outside the typical medical setting and in the home. More importantly, IoT can provide more visibility into a patient’s status.

As seen at this year’s Consumer Electronics Show, broader IoT adoption is in full swing. In fact, 53 percent of organizations are planning to implement an IoT solution in the next 24 months, according to “Building Value from Visibility.” The healthcare industry has an even more aggressive adoption rate, with almost 60% of healthcare organizations planning to implement IoT solutions within the next two years. The gained benefits from IoT adoption that healthcare respondents noted include improved delivery process (72 percent), improved safety (66 percent), supply chain visibility (63 percent) and loss prevention (63 percent).

There are already startups developing IoT solutions for healthcare organizations specific to certain areas of inventory management and patient check-in. In the future, IoT has the ability to elevate healthcare even more, and specifically, connected health practices. Patient wristbands, medical equipment and beds encoded with sensors can track status in real-time and make hospital workflow processes more efficient. Health monitors, sensors and RFID technology at one’s home can transfer data to the hospital every minute. Hospitals and healthcare organizations will be able to consistently monitor and provide care, even if clinicians are not working with a patient in-person.

We have the opportunity to change the healthcare industry and evolve with the aging population. With the right solutions and infrastructure, technology can deliver on one of the healthcare industry’s biggest goals: providing the best care possible and creating a safe environment for patients.

Alicia Torres is the healthcare global practice leader for Zebra Technologies Corporation, a recognized global leader in technologies that extend real-time visibility into business operations. At Zebra, Alicia is responsible for expanding the global healthcare market with new and existing solutions for customers. 

Alicia has over 25 years of experience in the healthcare industry, with positions including a hospital financial executive, an internal strategy consultant for a large, public healthcare company and a successful entrepreneur. In 1997, she founded Rosebud Solutions, a healthcare software firm that offered five software programs to address various areas of operations within hospitals. Prior to founding Rosebud Solutions, Alicia was the director of the health economics group at Kinetic Concepts Inc., whose products provide wound healing therapies and technologies. Alicia earned a bachelor’s degree in business administration from the University of Texas at Pan. For more information please visit www.zebra.com.

photo credit: The Community Foundation of Herkimer & Oneida Cos. via photopin cc

Imagine browsing dozens of reviews from past patients before booking a doctor’s appointment — all from a smartphone.

This is the vision for Practice Fusion, a San Francisco-based startup that is best known for its free electronic medical record (EMR). Today, the digital health company is launching a web app for scheduling doctor’s appointments, which will be closely followed by iPhone and Android apps.

“We want to facilitate the entire patient journey and life cycle,” said CEO Ryan Howard. The new consumer-facing technology is known as “Patient Fusion,” and Howard describes it as a “Yelp for doctors.”

We covered Practice Fusion’s history and culture after an office visit. Check out the story here. Howard will be speaking at our upcoming HealthBeat conference.

It’s a strategic move, given that Practice Fusion has already amassed doctor profiles and information about your health, all contained within its EMR. Howard admits that by marketing new products to patients, the company will augment its brand with hospital decision-makers. In a nutshell, Patient Fusion is a smart physician acquisition tool.

Already, Practice Fusion claims it has 3 million open appointments for the month of April alone, more than any of its competition. Roughly half of its user base of doctors have opted in — the app will go live with 27,000 doctors and 1.5 million reviews. These physicians serve an estimated 60 million patients across the U.S.

Patient Fusion is directly competitive with ZocDoc, the New York based scheduling technology that has registered about 30,000 doctors.

According to Howard, it’s still a problem as a third of staff time is spent on “scheduling, and canceling and rescheduling.” Patient Fusion was developed to reduce these inefficiencies, and help patients find an appointment at a well-reviewed doctor nearby.

The app isn’t intended as a monetization stream for the company. But it will be deemed a success if more doctors sign up to the EMR  (the company is going after big pharmaceutical advertising deals).

Another goal is to use patient’s data to help them find the best doctor; if you suffer from diabetes, for instance, the app will begin to prioritize physicians in the search rankings with relevant expertise.

Howard observed in a recent interview that accessing and mining patient information can save lives. “We can recommend drug therapies based on their popularity [with previous patients],” he said, and claims there are 200,000 avoidable deaths a year because “data is simply not shared.”

Practice Fusion pulled in its most recent $34 million funding round in June 2012, and counts PayPal cofounder Peter Thiel among its investors.

Sources are telling us that WellDoc, a startup that provides chronic disease management solutions, has found a buyer.

Elite health incubator Rock Health substantiated the rumor that WellDoc has been shopping for an acquirer in a blog post.

Last we heard from WellDoc in August 2012, the company announced its intent to raise $10 million in funding. An SEC filing revealed that the company secured $500,000, so funding may be drying up (unless there is something we’ve missed.)

Among the potential buyers, one source suggested that healthcare management giant Alere is interested, given that they inked a deal to market WellDoc’s diabetes tracker.

A spokesperson from WellDoc declined to comment on the acquisition.

As we reported yesterday, the U.S Food and Drug Administration (FDA) is under pressure to decide how to regulate thousands of new mobile medical applications. Congress has been in session for three days to hear from the experts in the health IT sector on topics like taxation, regulation, and consumer privacy.

Silicon Valley’s health IT investors and entrepreneurs currently operate under a set of FDA guidelines issued in 2011. At that time, the FDA stressed that it had not yet issued an “overarching software policy,” and it asked for the public’s input.

Two years later, developers and investors are still “waiting on the sidelines” for an official decision, said Ben Chodor, the CEO of health app store Happtique, who called me after testifying in House Energy and Commerce committee yesterday.

This delay may prove to be a hindrance for entrepreneurs. “Investors are clearly following the debate in D.C. about regulating mobile health apps, especially those that use attachments to transform a mobile phone into a medical device,” said Missy Krasner, the executive in residence at Morgenthaler Ventures.

For years, the FDA has had the final say on whether new medical devices are safe for clinical use. However, it is poorly equipped to react to the explosion of new mobile health applications.

A potential concern is that the FDA will step up its enforcement of health applications targeted at consumers.

“These laws were created before this new medical technology was imaginable and before it was understood, and this may hamper innovation,” said Lauren Fifield, a health policy adviser at Practice Fusion, a San Francisco based startup. ”The gap between DC and Silicon Valley is 3,000 miles, but it feels like 20 years in terms of understanding.”

Practice Fusion, an electronic health record (EHR) startup, is one of the fastest-growing players in the health IT space. It recently made its first major acquisition in the form of 100Plus, a medical apps maker, and is keeping a watchful eye on Congress. Fitfield’s said the FDA may make a short-sighted decision that could lead to unnecessary oversight in the health IT space.

What’s particularly problematic for the FDA is that some of these medical apps operate in a “gray area.” Would a device marketed to diabetic patients that connects a smartphone to a glucose meter need to be regulated? “To put it bluntly, that is the area that no one gets,” said Chodor.

Malay Gandhi, the chief strategy officer for health accelerator Rock Health [one class is pictured, above], is working on a guide to benefit its startups that operate under existing device regulations, and their best interpretation of draft guidance issued by the FDA in 2011.

“What is unclear how many of these companies—representing almost 40,000 apps—would fall under selective enforcement by the FDA,” he said.

Gandhi advised that the FDA provide a specific set of examples for apps that would need to be regulated. One example that congress is considering is a urine analysis app (it’s not clear whether the stick or the app is doing the diagnosis), which the FDA may need to approve before it launches in the App Store.

Most concerning of all is that while the FDA dithers, a small sliver of medical mobile apps used in clinical settings are slipping under its radar, which is a potential public health hazard.

“In short, FDA needs come up with their guidelines already — sooner rather than later,” said Chodor.

Top image via Rock Health 

Happy Pi Day!

This mornin’, our hard-working editorial team welcomed three entrepreneurs to our offices in downtown San Francisco. In exchange for a demo, we offered up a slice of home-cooked apple pie (courtesy of Twilio).

For the next office hours on March 28, we’re extending the invite to health and med-tech startup founders. We want to hear about your challenges, biggest successes, and any upcoming news.

Can’t make it to office hours? If you work at a disruptive healthcare company, don’t forget to register for HealthBeat on May 20-21. HealthBeat is our inaugural event to showcase how information technology is driving out inefficiencies in healthcare.

So, we tempted you with the pie… Just fill out the application form to apply for office hours on the 28th! The deadline to apply is Tuesday March 26 at 12pm PT.

Futurist and entrepreneur Michael Vassar has an issue with the U.S. medical system. He hopes to “humiliate” it into providing better quality care by creating a “product that works better than the system.”

With $500,000 in startup investment from PayPal cofounder Peter Thiel, he has handpicked a crack team of physicians and software engineers (including Skype founder Jaan Tallinn) for a new health care company called MetaMed. The goal is to leverage data and statistics to take the guesswork out of medicine.

“It seems very possible to add 10 or 20 years of healthy life expectancy to a person who gathers all the relevant data today,” said Vassar in an interview with VentureBeat.

It’s possible, but only for Metamed’s affluent private clients.

MetaMed provides high net-worth individuals with access to its team of doctors who dig deep into patient history, metabolism, genomic variation, results from companies like 23andme, and other research to deliver a full medical report.

MetaMed cofounder and chief scientist Michael Vassar

He cites some terrifying statistics from recent reports to highlight the extent of the problem they are trying to solve: Over 30 percent of fatal illnesses are missed during diagnosis, doctors only spent an average of 11 minutes with patients during primary care visits — and this figure hasn’t changed since the 1930s — and cancer death rates have decreased by less than 5 percent over the past 40 years.

It’s still early days, so MetaMed’s New York-based team is primarily occupied with providing doctors with high-quality research for a tricky case or medical conference. ”Doctors don’t usually have a public health or statistical background,” he explained. “So they aren’t in a position to distinguish between popular hypotheses in the medical field.”

MetaMed also works directly with patients who are suffering from a chronic condition like migraines, Lyme Disease, or even cancer. They receive varying treatment options from doctors, so turn to MetaMed for a concrete answer. ”We try to figure out what the global opinion is and not just take the dominant literature position,” said Vassar.

For about $400 per hour for a doctor and $200 per hour for a senior researcher, patients will receive an in-depth report and a medical consultation to discuss the results. It’s not dissimilar from ultra high-end company Private Health Management, dubbed by the Wall Street Journal as the “doctor to the 1 percent.”

When asked about whether MetaMed will share any of its medical findings, Vassar said he is open to a conversation. But Vassar said the company is not in the business of “awareness raising” and won’t be “spending millions trying to convince the public of every finding.”

MetaMed is aware of the security and compliance issues in the health care industry, so they are clear that patients need to volunteer their personal health information. This data is stored on a secure server, and is never shared without patient’s permission.

The company is on the lookout for physicians to hire to add to its medical advisory team as it expands its service internationally. According to Vassar, one of the major challenges to growth involves recruiting doctors at the top of their field, especially those in specialties. “There are just not that many good doctors out there; not every city has even one, unfortunately,” he said.

When asked about what makes a good doctor, he said it’s those who feel that their residency forced them to “violate” the principles they learned in medical school. Vassar doesn’t go as far as outspoken entrepreneur Vinod Khosla in suggesting that technology will replace doctors, but he does believe that machines can perform a “much better job of medical diagnosis.”

The idea for MetaMed was formed when Vassar was the president of the Singularity Institute, a research organization focused on the field of Artificial Intelligence.

At that time, Steve Jobs was suffering from pancreatic cancer, prompting Vassar to consider a scenario in which the late Apple CEO brought together Nobel Prize-winning scientists and physicians from around the world to consider his case. “That is the solution we are trying to create with MetaMed,” he said.

Medical research image via Shawn Hempel, Shutterstock

This is the latest in a series of stories about startup culture. This week, our reporter checked out Practice Fusion in San Francisco, a stark contrast to Twilio’s fast-paced work ethic, and Couchsurfing’s laid-back hippie culture.

If CEO Ryan Howard hadn’t been involved a serious motorcycle accident, Practice Fusion would have crashed and burned years ago.

Howard was knocking on investors’ doors to fund his free electronic health record (EHR) with little success. Doctors were reluctant to ditch paper-based systems, so it seemed to the VC crowd like the right idea at the wrong time.

But unwilling to admit defeat, he used cash from the settlement from his motorcycle accident to pay the salaries of three employees.

“We were going out of business, I needed two root canals, and I was in massive debt,” said Howard in an interview at the company’s sprawling San Francisco office. “I would define the period of 2005 to 2007 as me, in my pajamas, furiously working in my house.”

In 2009, Congress passed the Health Information Technology for Economic and Clinical Health Act. With the Obama administration committed to the proliferation of EHR’s, Practice Fusion caught the attention of a band of angels, including investor Peter Thiel, the managing partner of Founders Fund. Thiel recently declared: “Practice Fusion revolutionizes our interactions with the medical community, just as Facebook did for social networking.”

Thiel saw an opportunity to take advantage of a government mandate that push doctors to adopt an EHR. The fixed deadline is 2015 — after that, eligible health care providers who don’t comply will be penalized by CMS, the federal agency that administers Medicare and Medicaid.

With eligible doctors and hospitals receiving “meaningful use” checks for switching over to Practice Fusion’s free EMR,  it’s not a tough sell. Albert Santalo, the CEO of cloud-based EHR provider CareCloud, is a competitor but credited Practice Fusion for its “evangelist efforts” and creating ”greater awareness of EHR technology by doctors in general.”

With new investment, Practice Fusion stacked up its sales team, and grew 500 percent for two years in a row. Last year, according to Howard, it turned over “serious solid revenue,” primarily through advertising. It recently had to revise its expectations for 2013, as a few weeks into the new year, the sales team secured its first million dollar advertising deal with a major pharmaceutical company.

Practice Fusion has about 150,000 users, including doctors, nurses and hospital admin, which is about six percent of the addressable market. Howard sees an opportunity to make money through the fast-growing store of data. Stripped of any personally identifiable markers, patient information can be sold to pharmaceutical companies.

He responds to a question about potential privacy concerns by listing the positive outcomes from mining data about doctors and patients. “We can recommend drug therapies based on their popularity [with previous patients],” he said, and claims there are 200,000 avoidable deaths a year because “data is simply not shared.”

This is in sharp contrast to online health portal WebMD, which is struggling to conserve its relationships with big pharma and recently laid off 14 percent of its staff. In its seven years, Practice Fusion has grown to over 250 employees, and has about 20 job openings.

What’s the culture like?

Employees at Practice Fusion’s office in downtown San Francisco are reminded every day about the sheer fluke that led to the startup’s existence.

“A great leader has to be vulnerable,” Howard explained. Photographs and news clippings from Practice Fusion’s past adorn the walls. I even saw a fading Starbucks napkin, a souvenir from the founding team’s first “office.”

The well-funded startup is in full hiring mode, but it’s looking for a specific type of employee to add to its team.

It may seem counter-intuitive, but the ideal job candidate, according to Howard, has little or no health care experience. In his view, employees that have worked in the industry for too long as less inclined to dream up big ideas, and the “unlearning” process takes too long.

Practice Fusion is looking for high-achievers, but it’s important to Howard that employees are “happy and healthy,” and fit in with the culture. During a walk through the company’s offices (his dog trailing behind), he told me about a seriously talented engineer who was recently asked to leave as he didn’t get on with the team.

New employees undergo an extensive training process, which involves several weeks of education on a range of relevant health care topics, such as meaningful use, billing, and the regulatory issues facing big pharma. Similar to larger companies like Google, Practice Fusion emphasizes professional development, and mentors assigned to junior-level employees ensure that they meet goals.

High-performing employees have the freedom to try their hand at roles in different departments — one staff member I met started out in the call center (this team cold-calls doctors to inform them about the free EMR) and later shifted into product.

Word of warning: If you love to pig out on cookies and soda, Practice Fusion is probably not for you. The kitchen is fully stocked with healthy and organic food, and it has no carbonated drinks.

“I believe you should be emotionally and physically at your best,” explained Howard, who also insisted on offering free weekly yoga and soccer classes for the staff. This focus on balance means the startup has been able to retain talent through its ups and downs.

In a recent end-of-year report from RockHealth and Interwest Partners, survey respondents predicted that Practice Fusion would be the most likely digital health company to IPO in 2013. The company raised a massive $34 million in venture funding in June.

For those that stayed loyal to the company from its early days, the bet is about to pay off.

What are the best perks?

• Healthy meals: Food is catered every day, and Practice Fusion has a fully stocked kitchen with delicious treats. From time to time, the company will invite nutritionists to meet the staff and discuss healthy eating plans. 
• Fitness opportunities: New employees receive a FitBit to help them track activity levels throughout the day. In addition, a weekly yoga class takes place in the office, and everyone may have a discounted gym membership.
• Computer science classes: Employees that want to bolster their mobile development or Excel skills can enroll for free in any of Academy X’s classes.
• Dog-friendly office: Howard is rarely seen without his trusty sidekick.
• Work/life balance: Employees receive four weeks of PTO per year, in addition to the standard vacation time.

Hiring?

• You betcha. Practice Fusion has openings in almost all its departments at a variety of levels. The fast-growing startup is currently hiring in legal, finance, operations, product design, engineering and more. 

“Startup culture” is a new series that highlights what it’s really like to work at a Bay Area startup. Please send your suggestions for the most rockin’ office spaces, startup happy hours, or company perks via email (christina@venturebeat.com) or Twitter (@chrissyfarr). 

Med-tech is off to a bold start this year with a hot acquisition, which will serve to consolidate the market.

Epocrates Inc., a medical applications company based in Silicon Valley, is being scooped up by AthenaHealth for $293 million. According to a company press release, AthenaHealth will pay $11.75 per share, a 22 percent premium to Epocrates’ Friday closing price.

Massachusetts-based AthenaHealth provides cloud-based services and tools to doctors and hospitals. The company faces fierce competition from Siemens Medical Solutions USA, Inc., Quality Systems, as well as Allscripts Healthcare Solutions, which is retooling after a protracted drama with its board. 

Epocrates is an attractive prospect for AthenaHealth, as it has built up brand-name recognition with doctors. AthenaHealth estimates that it is has been used by 338,000 U.S. physicians to pull up short summaries on drugs, including information about side effects and interactions.

“Capturing mindshare has been an uphill battle for Athena for years, and the addition of Epocrates to the platform is a step in the right direction,” said Greg Bolan, an analyst with Sterne Agee & Leach Inc, in an e-mail interview with Bloomberg.

The acquisition will help the company gain an iPhone app and expand into the lucrative electronic medical records (EMR) market.

“I have been an admirer of Epocrates since it first emerged and have watched the company grow consistently, one app download at a time, as it has cemented itself into the consciousness of America’s physicians,” said Jonathan Bush, the president and CEO of AthenaHealth in a statement. “Together, we’re excited by the opportunity to redefine the mobile toolset for care givers,” he added.

Atlanta-based WebMD, the largest source of medical information on the Web according to Comscore, will cut 250 jobs in the coming month as part of an ongoing effort to save $45 million per year.

The company will lay off 14 percent of its total workforce across all offices, a direct result of a disappointing third-quarter. As the Atlanta Business Journal originally reported, about half the employees at the company’s headquarters may be affected. It is unclear which departments will experience the worst layoffs, but early reports suggest it will be sales, video production, information technology, and editorial. The cuts come at a short-term cost increase: They’ll cost the company approximately $8 million in its first fiscal quarter of 2013.

In an official statement to the press, the company revealed that it will also put into effect other “cost-saving actions” during the first months of 2013. We have reached out to a spokesperson from WebMD for comment.

The company is seeing a decline in advertising from large pharmaceuticals, its bread and butter. In recent years, the Food and Drug Administration has tightened regulations on how big pharma can advertise. In addition, WebMD is facing competition for these ad dollars from a host of startups that offer consumer-friendly health information. Competitors include HealthTap, which provides patients with an online link to thousands of physicians, and Everyday Health, which provides medical news and information.

In November, the company announced that revenue had declined from $135 million during the year-ago period to $117 million. Despite the fact that traffic continues to grow (reaching an average of 107.2 million unique users per month and 2.56 billion page views in Q3), advertising and sponsorship income took a downward turn. CEO Cavan M. Redmond admitted that the company would need to adapt in an increasingly “challenging and changing” marketplace.

“Becoming leaner and more nimble will enable the company to extend our leadership in this highly dynamic and increasingly demanding marketplace,” said Redmond, in a statement. “In addition, anticipated changes in U.S. healthcare will provide meaningful new opportunities to link the needs of patients, consumers, and healthcare professionals to enable them to navigate their care. We are moving swiftly to implement these operational changes and new market initiatives.”

All eyes are on healthcare technology startups, but the space is still treated with caution by angel investors and the venture capital community alike.

Most investors don’t have the specialized knowledge to understand the pain-points that doctors and healthcare providers face, and many will not see return on investment in three to five years, the period they are typically willing to wait. It takes a special kind of investor to fund a health tech company.

New York-based online trading platform SecondMarket may have a solution to the problem, as part of its broader plan to stimulate investors’ interest in verticals like healthcare and education. SecondMarket’s members are used to buying up shares in consumer-focused companies like Twitter and Foursquare.

“Our members might be interested [in a space] from a macro-perspective, but they don’t feel comfortable enough to deploy capital,” said Jeremy Smith, SecondMarket’s CSO in a phone interview.

The company has teamed up with digital health accelerator Startup Health for the month of December to offer its members’ access to white papers and webinars produced by independent parties, and curated by Startup Health.

Since its inception in 2011, Startup Health has enrolled 23 startups in its intensive three-year program. The program favors companies that have already raised a small seed round, and offers them mentorship and a professional network to maximize their chances of success.

“You can’t expect our members to put in capital and hope for the best,” said Smith.”We’ve created a program to help them get educated.”

SecondMarket’s investors are encouraged to pour thousands of dollars into promising health tech startups, as well as Startup Health’s new fund. According to a document available to SecondMarket’s network of accredited investors, Startup Health is building up a $7.5 million Innovation Fund to support up to 100 digital health and wellness startups. The new fund will take a 2 to 10 percent equity stake in each startup.

The hope is that this will provide health tech entrepreneurs with sufficient capital to test the market opportunity, and in a position to raise venture funding later down the line.

Healthcare image // lenetstan, Shutterstock 

The experience of waiting in line at your chaotic, paper-strewn doctor’s office may be a thing of the past.

Hello Health, the electronic health record provider popular with independent and local physicians, has pulled in $11.5 million in venture funding.

Around the world, doctors are shifting from paper documentation to electronic medical records. “The practice of medicine hasn’t changed much for me over my career. The business has,” said Hello Health user Dr Richard Goldberg, a New York-based family practice physician.

When Dr. Goldberg opted to get “computerized and have everything run smoothly,” he was won over by Hello Health, which wouldn’t require his practice to pay any up-front fees. In fact, the company claimed that in the long term, it wouldn’t cost him anything at all.

Hello Health works a little differently than most ERP providers. Doctors do not pay for the service; patients do. In fact, medical practices might even make extra cash by charging patients to access Hello Health’s services (like secure instant messaging). Hello Health charges patients around $5 per month for its opt-in services; the startup makes money by taking a cut, and the rest is given back to the doctors.

Electronic health record (EHR) software is particularly appealing for doctors as it reduces the time that is typically spent on paperwork, and makes them more available to patients. Hello Health, a New York-based subsidiary of Myca Health in Quebec, Canada, also offers billing and accounting software and a secure system for prescription requests to be processed online.

To succeed, Hello Health will compete with companies like Practice Fusion, which also offers scheduling, charting, and billing online services and which makes money through advertising rather than fees.

“Independent physicians are beginning to test alternative business models,” said Ian Ihnatowycz, president and chief executive officer of First Generation Capital, in a statement. “Research estimates one in three independent physicians will aim for higher yields by adopting subscription-based care models, and this trend will increase 100 percent annually for the next three years.”

Hello Health has pulled in a total of $21.5 million in VC money in the previous year. This round of funding was led by First Generation Capital.

Healthcare and the cloud is a major topic of discussion at CloudBeat. A panel of experts will gather to debate ways to improve security for cloud-based systems, and how digital services can bring benefits to both doctors and patients. Read more here about breaches of patient’s health records.

Top doctor image // Shutterstock 

Athenahealth’s systems work as Web-based services, a strategy designed to take advantage of the Internet’s flexibility and to make it easier for doctors to digitize their practices without making a huge amount of up-front investment. That said, Athenahealth’s business is still a fledgling one; last year, it lost $9.2 million on revenues of $70.7 million.

You can’t swing a dead cat among venture businesses these days without hitting a new online site devoted to healthcare information of one sort or another. Over the last few months, we’ve seen a parade of major announcements — many of them big on vision but vague on particulars — from the likes of Steve Case’s Revolution Health, MedBillManager, TauMed, DailyStrength, and other sites that offer some mix of searchable health information, social networking, doctor comparisons, medical-bill management or digitized health records designed for people who want to make sure that doctors of their choice have access to their medical information. (See previous coverage of the space by Matt Marshall and Dan Kaplan here, here and here.)

The latest entrant is HealthCare.com, which just announced $6.1 million in a seed funding. The company’s site is currently an “alpha” version, according to HealthCare.com Chairman Robert Monster, but it gives you a sense of what the company plans to offer. The site’s core lies in its searchable disease and drug database, which Monster says will aggregate the “best information” on health available across some 70,000 other Web sites. HealthCare.com also plans a “symptom checker” that allows users to zero in on potential diagnoses via clickable Flash animations of the human body, and individual accounts for patients and doctors, which for patients means personalized health information and management of electronic health records, insurance information, and online prescriptions. For doctors, the site plans to provide personalized Web sites, blogging tools, some form of network for doctor-to-doctor story-swapping, and “knowledge boards, forums and surveys.”

Without question, this online-healthcare stampede indicates that venture capitalists are intensely interested in the area. It’s equally clear, at least to me, that this space is already in danger of overcrowding, since it’s difficult to imagine that any of these services can succeed unless they attract a critical mass among their desired audience, whether patients, doctors, large healthcare providers or insurers (and sometimes all four).

More fundamental, however, is the question of whether these services are really addressing pressing needs. The medical social-networking promised by the likes of DailyStrength, for instance, sounds a great deal like the sort of thing patient-support groups have offered on various disease-specific Internet sites for some time. It’s not at all clear to me what patients have to gain by re-creating those communities on a single site, since cross-talk between people with very different health problems is generally pretty rare — cancer patients and people with back problems, for instance, don’t generally have much to say to one another.

There are, of course exceptions, such as various autoimmune conditions and certain related cancers. It’s also possible that advancing knowledge of the molecular basis of disease — that is, for instance, the genetic mutations that drive particular cancers or different forms of heart disease — may eventually break apart today’s disease categories in ways that an integrated community site might be better poised to exploit. All that is still some ways off, however, and in the meantime it looks like the traditional diagnostic categories are going to hold sway.

The idea of helping patients manage electronic health records, by contrast, is very attractive, but it faces a number of hurdles that most of these companies scarcely acknowledge. For instance, the NYT recently noted that fully three-quarters of all doctors aren’t using electronic health records — a number that goes up to 95 percent if you look only at offices with five or fewer doctors. One major reason: Doctors generally don’t have a financial incentive to invest in the necessary technology.

As the NYT reported:

The experience of Dr. Richard Baron, who practices with three other physicians in an office in Philadelphia, provides a glimpse into the predicament. In 2004, Dr. Baron and his colleagues made the transition from ink and paper to computers and electronic health records. They were doing what health care reformers had been advocating for years. But the arithmetic of investing in health-information technology is daunting, especially for small practices like Dr. Baron’s. His office spent $140,000 on personal computers, including tablet PCs, servers, software and installation.

The office’s annual technology costs, he said, were about $50,000, including maintenance and technical support, and he plans to upgrade the three-year-old computers at a cost of $54,000. Those costs do not include the lost productivity in the first year, when the staff was learning to use the new technology.

Dr. Baron’s office has saved money — in transcribing medical reports, for example — and his practice now handles its 6,000 patients with three fewer office employees. He described other benefits, mainly the ability to find information quickly for patients, hospitals, insurers and labs with a few keystrokes.

The technology, Dr. Baron said, has also helped make him become a more adept physician. But it has not yet paid off in dollars and cents: the savings in salaries is less than the costs entailed in computerization. “It is a high-risk venture,” he said, “and you do it at your own financial peril.”

Until those incentives change — and don’t hold your breath on that one — it’s hard to see how online services focused on electronic health records are going to have much impact.

Of course, there’s also the question of how sites like HealthCare.com plan to make money. Monster says the site aims to be the “Google of healthcare” — now, where have we heard that before? — and emphasizes that the company’s founders, Matias de Tezanos and Jose Vargas, are executives with “deep experience in digital media.” (See their bios here; interestingly enough, neither seems to have any background in healthcare.) Monster, who peppers his spiel about the company with Web 2.0 buzzwords, says the site will “add value to the integrated agenda for enabling patient-centered healthcare,” whatever that means, and adds that HealthCare.com will take a “global approach” as opposed to the supposedly U.S.-centric efforts of its competitors. Stay tuned for how all that plays out.

HealthCare.com, which has offices in Miami and Bellevue, Wash., raised $1.2 million from Robert Monster’s new venture firm, Monster Venture Partners. The company’s founders and two “high net-worth individuals” from Latin America joined in the funding, Monster says, with founder contributions accounting for more than half of the $6.1 million. The Seattle Post-Intelligencer’s venture blog has some additional details here.

Unfortunately, his recommendations are disappointingly small-scale and reflective of the inordinate faith that many high-tech aficionados place in technological “fixes” for complex social phenomena. I’ll explain why in a moment.

To Grove’s tremendous credit, he argues in a recent interview with Wired News that the most pressing issue facing the U.S. healthcare system is the growing number of uninsured Americans — 44.8 million, or nearly one-sixth of the population, according to the latest Census Bureau data — and the subsequent stress that treatment of the uninsured puts on the nation’s emergency rooms.

As he says:

As the population ages, people are being thrown out of the insurance boat at a faster and faster rate and it’s the forgotten part of medicine.

We have the Human Genome Project, personalized medicine, war on cancer, CyberKnife, stem cell research on one hand — no doctor to be found or to take care of your sore throat on the other. That’s a pretty ugly picture. It’s pretty ugly today but it’s going to be uglier five years from now.

Now Grove is one of the smartest people around, and it’s refreshing to see him diagnose the failure of U.S. healthcare so succinctly. It’s equally hard to argue with his preference for breaking this hairball of a problem into manageable chunks while favoring “doability as opposed to desirability.” And, of course, the Wired News interview may not have fully captured the depth of his thinking on the subject.

That said, Grove’s proposed solutions strike me as so much whistling past the graveyard. At best, his ideas might improve access to healthcare on the margins, but without really addressing the plight of the uninsured, the breakdown of employer-provided insurance or soaring healthcare costs. At worst, they might even aggravate some of the trends he deplores.

Starting from the top, Grove dismisses the notion of universal health care on the grounds that it would disenfranchise insurance companies and that no one knows exactly how to bring healthcare cost inflation under control. No one doubts that insurance companies would fight any plan that threatened their role in the system, although Grove doesn’t acknowledge that some universal-coverage plans envision a prominent — in some cases, even central — role for insurers. (Whether that’s a good idea or not is a subject for another day.)

As for his second point, there’s no shortage of ideas — good, bad or indifferent — for cost control, such as allowing Medicare to bargain down drug prices or limiting the use of costly, intrusive and frequently wasteful medical procedures on elderly patients near the end of their lives. What’s more, most other industrial nations have already implemented some form of cost control, which helps account for the fact that their per capita healthcare spending is so much lower than in the U.S.

Instead, Grove favors tinkering around the edges of the system. He suggests that “retail clinics” — essentially nurse-practitioner-staffed outlets in Wal-Marts or drugstore chains designed to handle everyday ailments quickly and without fuss — might be a “disruptive technology” that could solve the emergency-room crowding problem. For instance, Grove says:

There is an incredible need of medical help for the 70 (percent) or 80 percent of medical care that is routine … where the diagnosis is straightforward and treatment is basically codified. They are conveniently located to where people live or shop or show up for emergency care. And by concentrating on effective delivery of standard care, they can do it conveniently but also much less expensively than doing the standard production. That’s the complex manufacturing logic…. You wouldn’t think about building a toy on the same production line as putting up airplanes. The factories will be different and the cost structure will be different.

Well, retail clinics are certainly on their way, so we’ll presumably know soon enough if they can lower healthcare costs by treating large numbers of people cheaply and effectively. On the other hand, the major problems facing the uninsured have less to do with the inability to see a doctor when they have the sniffles than with the crippling hospital bills they can face after a severe accident or the onset of an unexpected health problem like heart trouble or diabetes.

What’s more, some experts already worry that the spread of these clinics might further erode the financial health of community hospitals by drawing off healthier — meaning “cheaper to treat” — patients. Hospitals tend to subsidize care for the uninsured by charging higher prices to insured patients. If healthier insured folks take off for retail clinics, that means less money to cover expensive conditions of the uninsured that no clinic can touch.

Furthermore, the bulk of U.S. healthcare spending covers the treatment of a minority of chronically ill and typically elderly patients who won’t be candidates for these clinics in the first place. Here, Grove has another solution: Advanced sensor and communications technology with which to wire up the homes of the elderly. This would allow them to stay home, with medical personnel monitoring them remotely and reminding them to take their meds, instead of moving to long-term care facilities. So far as it goes, that vision is laudable and humane — assuming, of course, that you’re willing to overlook exactly how long the tech industry has been promising us the sort of “ubiquitous computing” that would be necessary to make it work. According to Wired News, Grove estimates that shifting one-fourth of the nursing-home population back home could save $12 billion a year.

Let’s extend the benefit of the doubt and assume that those savings are net of the expense of building out this information infrastructure in the first place. They’re still a drop in the bucket compared to the $207 billion spent on U.S. long-term care in 2005, according to Georgetown University’s Long-Term Care Financing Project. (Of that, $130 billion went for nursing-home care, the rest for home care.) Unless there’s something very screwy in the numbers here, the overall cost impact of wiring up seniors’ homes seems likely to be negligible.

Grove’s final idea is another technological fix — standardized, Web-based electronic health records that any doctor could access once a patient “unlocks” them. Once again, assuming it satisfies relatively straightforward privacy and reliability concerns, there’s nothing at all wrong with this idea. Theoretically, at least, electronic health records could promote cooperation between medical specialists, reduce medical errors and improve the long-term health of patients via better preventive care.

At the moment, however, few players in the healthcare system have a financial incentive to implement such a system, which is one of the main reasons it doesn’t yet exist. Any insurer that invests in an electronic-record system — which, even with off-the-shelf technologies, will generally cost more and work less well than expected — is likely to bear the costs without reaping many of the benefits. That’s because many of its presumably healthier customers are likely to change jobs at some point and move on to competitor health plans, who will then garner any savings. Nor do the competitive insurance and hospital industries have much reason to adopt the universally compatible, Internet-based systems Grove favors, since that would just make it easier for their customers or patients to take their records — and their business — elsewhere. Grove doesn’t even seem to acknowledge these fundamental adoption issues, much less address them.

Since last November, Grove has apparently offered similar thoughts to a variety of audiences, including a Stanford lecture crowd and my former WSJ colleague Lee Gomes. Which is too bad, in a way, because it suggests to me that no one has seriously challenged his rather glib prescriptions in that time. The healthcare crisis is real and urgent, and we could all benefit from the best thinking of a sharp-witted “rational capitalist” of Grove’s stature. Unfortunately, I don’t think he’s really offered it to us yet.