COVID-19’s Impact on Healthcare Startups
I created this blog to help founders and employees grow their healthcare startups. I did that because I’ve been fortunate to work with incredible people, particularly in the art of strategy and business development. The problem is, I don’t have any answers for the real questions you’re really looking for. I can’t build you a sophisticated epidemiological model to accurately predict caseload, ICU capacity, and contact tracing. I can’t tell you what Governor Cuomo is thinking right now because I have no access nor help treat your loved ones for lack of a medical license. All I have is this silly blog.
In absence of truly being able to impact COVID-19 beyond promoting social distancing, I want to make sure your company survives 2020. I know you didn’t work 80-hour weeks for the past few years to see your company go bankrupt. There are a million other problems easier to scale and less challenging to solve than ones related to healthcare. Therefore, this blog will discuss the state of go-to-market as I see it. After speaking with various startups across the country, I have begun to see a bifurcation. Those with versus without go-to-market interest. And just to remind you, I’m specifically talking about sales and marketing, not ongoing operations (those are busy for everyone).
Startup’s with strong go-to-market activity
On one hand, some startups are overwhelmed with interest. Website traffic and inbound requests are at an all-time high. I’m mostly talking about direct-to-consumer (DTC) startups who typically provide virtual care, remote monitoring, or telehealth services to patients worried about COVID-19 or other acute conditions. Particularly given the relaxation in HIPAA and telemedicine regulations, there’s a ton of opportunity to serve patient needs. I am cautiously hopeful that all of you are trying to provide a real solution, and not just capitalizing on the opportunity to expand your firm’s brand. No advice from me, just keep paddling as fast as possible. The market is crowded, so focus on delivering an exceptional patient experience in this time of need. That will serve you well down the line.
Startup’s with go-to-market challenges
On the other hand, other healthcare startups focused on the enterprise sales or B2B market seem to be struggling. Your already long sales cycle just got a whole lot longer. If I was running strategy and business development for your startup, I’d throw out the original playbook for 2020. There’s a famous quote that says, “If I had eight hours to chop down a tree, I’d spend the first six of them sharpening my axe.” If you haven’t demonstrably altered your product, pricing, marketing, or sales process in the past month to adapt to COVID-19, shame on you. Let’s go through some of the major stakeholders and why they’re not returning your calls.
If you sell a solution or service to hospitals, forget about it unless you’re a ventilator company or respiratory therapist staffing firm. They are obviously focused on what is most important. Hospitals are low margin businesses to begin with, especially if supply and demand has increased prices for temporary clinical workers or PPE. We also still don’t know how this all shakes out in the numbers once we’ve managed COVID-19. It is my suspicion that many hospitals will need time to reconcile the lost revenue in non-elective procedures (especially the commercially insured ones) with the surge in ICU care, especially if Medicare and Medicaid are the dominant payers.
Think health plans are more insulated? By nature, health plans haven’t yet shown the losses coming. But I can assure you that no actuary predicated a spring / summer pandemic when they set their rates with their state insurance commissioner. Claims processing and third-party administrators are notoriously slow, allowing for a claims “run-out” period to account for any lingering expenses before billing the patient. Anyone who requires ICU-level hospital services to treat COVID-19 will need a ton of back-and-forth between the provider and health plan before we know what the true cost is. Because of this lag, I’d expect most health plans to hold off on signing any new, expensive partnerships until after Q3 2020 statutory filings. Employers have the similar problem, in addition to dealing with their employee’s well-being and loss of revenue due to bear market.
Even primary care practices and elective-procedure focused specialists are seeing drops in non-urgent volume. Providing actual medical care as an independent practice has consistently become harder-and-harder over the past decade. 2020 was not what they were hoping for. I know it was already hard to get ahold of the medical group founder for a pitch meeting, imagine trying to do that if they just laid off half their administrative and nursing staff as the practice shifts to telehealth visits.
I suppose you could be trying to sell services to drug manufacturers or medical device makers, but I think it’s safe to assume COVID-19 has taken the mindshare of their leadership and resources as well. Unless you can specifically improve their chances of getting a new rapid diagnostic test, vaccine, or anti-viral medication approved by the FDA and publicly adopted, you are not the priority. There’s of course a range of other stakeholders in healthcare who you could be selling to, pharmacy benefit managers (PBMs), dialysis clinics, or nursing homes for example. But again, going to be difficult to gain traction on new deals.
In closing for this blog, I hope that you are appropriately planning for 2020 to be a unique year. I know that venture-backed companies typically raise enough capital for 18-24 month periods and that investors expect significant growth since the last fundraising round. If this was going to be your big year to sign new partnerships, I wish you the best of luck and hope you’re being creative. It’s possible to grow, but you may need to prove a strong value proposition in the current environment that can be parlayed into a larger opportunity once COVID-19 is under control.