Health care innovation shifts to IT, not devices

Health information technology is gaining ground fast on medical device innovation, and if all goes well in a few years we won't even much notice the inevitable falloff in medical device start-ups.

It's not so much a story of a new industry that's coming as it is of one that's already arrived.

This week will be the first-ever conference called Health Rising for entrepreneurs and investors in Minneapolis, and it will cover some of the same ground the first MobCon Digital Health conference covered in April. Even LifeScience Alley, long the local group for the medical device industry, now has 30 members from the field of health IT, up from just two a few years ago.

Companies here worth watching include Zipnosis, which enables common conditions to get diagnosed over a smartphone, and RetraceHealth, with video chats between providers and patients as part of its approach. Another interesting start-up is Perk Health, which provides an electronic health and fitness coach that adapts to the personality of the user.

It is not all just help for consumers; there are also new companies trying to solve IT problems inside big health systems. One is LogicStream Health, helping hospitals get more usable information out of all the electronic health records they keep on patients, in turn helping them with problems like cutting down on health conditions that develop in the hospital.

There's still a long way to go before any of these companies open up the trading on the New York Stock Exchange. But there are big ambitions. "We may be the Silicon Valley of keeping people out of the hospital," said Casey Allen, the entrepreneur behind the Health Rising conference.

For venture capital investors like locally based Michael Gorman of Split Rock Partners, the business opportunity for health information technology seems enormous.

The optimistic case starts with how much gets spent in the United States on health care, more than $3 trillion last year. And a lot of that money is simply spent badly.

Gorman said many people would be shocked to learn how much it matters where somebody gets their health care and from which provider. Part of the reason for that is that information doesn't easily move from provider to provider on what works best or how much it should cost.

In other industries with similar problems, he said, "technology has been a part of democratizing access and improving quality."

Another way to characterize the opportunity is the pervasive problem of "asymmetrical" information, an idea out of economics that entrepreneur Abir Sen said is part of the reason he's now on his fourth health IT start up.

This term means that one side of a transaction has lots of information and the other side doesn't. Fairness aside, it leads to poor choices and inefficiency. The specific information problem that his company, Gravie, was organized to solve is giving individuals what they need to know to buy health insurance when the employer's plan is discontinued.

One reason for the optimism for this industry in the Twin Cities is that there's already a giant in the business here in our backyard, the Optum unit of Minnetonka-based UnitedHealth Group.

As a place to both attract and spin out know-how and talent, Optum can play the same role in information technology as Medtronic did in the development of a vibrant medical device industry.

Gorman, among others, cautioned that it's still too early to say the era of innovation in medical devices is ending. On the other hand, by following the money it's clear a shift is already well underway.

In LifeScience Alley's latest report on funding for Minnesota's health technology start-ups, the device sector still got more money, some $57.2 million going to 18 companies in the second quarter. But 11 digital health companies attracted $36.3 million in capital, up 239 percent from the second quarter of 2014.

Providers have also shifted their thinking. At the Hennepin County Medical Center in Minneapolis, radiology department chairman and chief innovation officer Chip Truwit was happy to demonstrate on a plastic skull on his desk just how one clever medical device he invented worked.

The focus of innovation there, however, isn't on more clever medical devices. It's on what Truwit called "upstream," meaning new ways and new tools to help people stay healthy and not become a hospital patient.

He illustrated his point by talking about work HCMC is doing, along with nonprofit social service agencies and others, with patients who have a history of chronic physical disease, mental health disorders and substance addiction.

If not treated effectively every day, their chronic conditions could easily lead to another visit to the HCMC emergency room.

"I look at this with a very simple premise," he said. "If somebody in this population group hits the emergency room, we have failed."

Many of these people can't think every day about taking care of their health, he said. They may not get medications refilled in time. They forget doctor appointments. Or perhaps they do remember, but still miss the appointment because they haven't been able to schedule the right ride with a service like Metro Mobility.

"The efforts they need to make to get to the hospital are just so different from what the rest of us focus on," he said.

Many of these patients seem to have mobile phones, though, and that's one key to the potential for new technology to keep them healthier.

Maybe, Truwit said, just thinking out loud, a text message could be sent several hours in advance of an appointment with a link that can alert HCMC staff that the patient seems to be on a bus headed in the right direction.

Maybe the patient will still arrive late, but now there's been enough notice to rearrange schedules so the patient can still be seen by the doctor.

This kind of technical capability doesn't yet exist at HCMC.

"Fortunately," Truwit added, "there is an emerging and insatiable appetite among innovators to tackle problems."

lee.schafer@startribune.com • 612-673-4302