The Madison area has nearly everything it takes to become a national health technology hub, but there are still some missing pieces, speakers told a meeting in Madison last week.
And, they said, the cost of health care is way too high and that will have to change.
Leaders of three Wisconsin health tech businesses said finding investors — a major stumbling block for Madison area startups for years — is no longer a problem for health IT companies.
“We’re getting contacted by national venture capitalists,” said Mark Gehring, a serial entrepreneur who is co-founder and chief strategy officer of HealthMyne, a Madison startup with technology to better analyze tumor images.
HealthMyne has 18 employees and finalized its first outside investment round of $4.5 million in March.
Gehring said when he co-founded asthma device company Propeller Health in Madison in 2010, it was hard to raise money, even from Wisconsin investors. Since then, health care IT has become a very hot investment prospect, nationwide and in Wisconsin.
Gehring said investors have come to realize Madison has unique health IT expertise — in large part because of the monumental growth of Epic Systems Corp., the Verona electronic health records giant, as well as longtime expertise from UW-Madison.
“The community understands the health care space and how it works,” said Gehring. “That is not easy to replicate.”
Doctors and hospitals work together here; that doesn’t happen in other cities, said Michael Barbouche, founder and CEO of Forward Health Group, Madison.
“We are the target that everybody is trying to hit,” Barbouche said.
But what is “sorely lacking” here is more mentoring for young entrepreneurs who may think they have the golden key yet have little experience in the health care industry, he said.
“You’ve got to be in it a while to have an idea of how to make it work,” said Barbouche. “A 26-year-old doesn’t have a good grasp.”
Forward Health Group, founded in 2009, analyzes large amounts of health care data to improve quality of patient care and reduce cost. The company has 36 employees — up about two-thirds in the past year — and anticipates $5 million of revenue for 2015, Barbouche said.
Maybe the veteran health tech CEOs should get together and come up with a list of companies they think should be built, “then get the 26-year-olds and say, ‘Go run that company,’” he said.
Health care seen as still too expensive
Barbouche said the health care industry is in for some major shakeups, as the Affordable Care Act, also called Obamacare, takes further hold and federal and state budgets are squeezed.
Barbouche said while doctors and hospitals work well together in Madison, the price of medicine is too high.
“Health care in this town is stupidly over-expensive,” said Barbouche, whose wife, Ellen, is an internal medicine physician at UW Hospital.
He said the formula for paying for health care is overdue for some alterations.
“We’re not going to keep building more hospitals,” Barbouche said.
The Affordable Care Act is “unleashing some pretty radical changes,” agreed Michael Eaton, chief design officer at Elli Health, a Delafield company that can diagnose a patient’s symptoms and prescribe medicine, or line up a doctor’s visit.
Not only do more people have health insurance, but with the availability of more data and more options, they are changing the way they choose their health care, Eaton said.
“So I can take care of myself, and make better decisions,” he said. “That, to me, is radical.”
Elli Health has half a dozen employees and is close to signing its first client contracts, Eaton said.
The three business leaders spoke to about 85 people at the Wisconsin Innovation Network meeting at the Sheraton Madison hotel last week.
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