Last Thursday we lost a good friend in Tim Mahoney, who passed away after battling pancreatic cancer for the past year. His service is today in Lafayette, LA. He’ll be missed greatly by all of us, and prayers go out to Melinda and the whole family. His lovely obituary can be read here. Will miss you man.
(Cancer) Patients today walk in the office and they have no idea that the therapy being chosen is usually the one that offers the greatest return to the oncologist. Today in that interaction there is information that isn’t being shared.
I have no problem with the oncologist saying we’re picking this regimen because it’s also the most cost-effective. But we have to emphasize the other point time and time and time again: The treatment has the same result as the alternatives. We are not jeopardizing your outcome, but where we have multiple alternatives we are taking the one that is most cost-effective.
If there are multiple options available, in my mind the patient would be indifferent to which one is offered unless there was a substantial difference in side effects or results. Faced with several regimens that are basically the same, I’m going to look to my physician for what’s the right thing to do."
We’ve had a few questions come up in the last couple of weeks at Flatiron Health from employees on what the best practices are from a tax perspective on the RSU’s or option grants they receive from our company. A lot of this stuff can be highly confusing. There are ISO’s vs. NQSO’s (each with different tax implications), 83(b)’s, options with vesting schedules, RSU’s with repurchase rights, all the while trying to set things up correctly from a tax perspective (i.e., get long-term gains treatment wherever possible as opposed to ordinary income to minimize their tax bill).
Long story short, startups in my opinion, especially in the early stage when you can actually take advantage of certain strategies due to low shares prices, should have some sort of tax advice resource available to their employees. It’s not smart for the founders or someone employed by the company to give tax advice, as that’s a whole liability on its own, and it’s also probably not realistic to expect the employee to have a family accountant who is an expert in startup options/equity and their tax implications (and optimal strategies). I know I didn’t when I got started in startups.
For example - it seems pretty obvious (and I’m no accountant) that employees at super early stage companies when their stock is worth pennies should “early exercise" their options and get RSU’s with repurchase rights, which starts the long-term gains clock (but only if you file an 83(b)). I wish I knew that was an option. If so, I would have recommended it to folks at Invite who came on early and received option grants.
I don’t know the right solution yet. But it would be great for startups to have some sort of centralized but third-party resource to point their employees to when it comes to best practices related to the stock or option grants we give them. It doesn’t feel like something the general counsel should do, or the PEO/HR company (ex. Trinet, Ambrose, etc.) should do, or even the CFO/accountant of the company, so I’m not sure what the best strategy is.
Those are the things we use at Flatiron and we consider our essentials. If you’re curious of anything other system we use that I left out, please ask.
Like most entrepreneurs, when I hear the words “government regulation” attached to a startup idea, my first reaction is negative. Traditionally, customers buy products and services that either generate new revenue or reduce existing costs. But in healthcare, they also buy products and services that help them meet certain government regulations. In healthcare, government regulation can breed opportunity.
For many sectors of healthcare, the government requires providers and/or payers to do something they may not normally do. For each of these requirements, the stakeholder will need a solution in order to meet that requirement. Here are a few examples in healthcare (just to name a few):
Many businesses have been created (or accelerated) that offer solutions to meet the above requirements. Generally speaking, the best solution over time is from a company that makes that solution their core competency (as opposed to each hospital building their own solution, for instance).
So, if you’re looking for a startup opportunity to tackle in healthcare, it may be worth your time to research the (many) government regulations that are out there.
It’s hard to think about. The healthcare industry would be rocked if a cure for cancer was produced, and probably couldn’t afford it. Cancer is a huge problem for our country and world, but it’s also a huge business. From what I’ve read, it can be one of the more profitable specialities of many providers. Estimates put it at $150B in direct expenditures treating/managing cancer in the US, with an additional $100B in related costs.
Imagine if a “vaccine” for cancer was discovered tomorrow (albiet unthinkable right now). There are thousands of hospitals that make big money off of treating cancer, and many more private practices. Cancer patients create revenue for providers at nearly all levels, from labs to imaging to surgery to chemotherapy (pharmacy) to radiation therapy to post-operative care, etc… There are thousands of oncologists in this country. 40% of R&D from big pharma is dedicated to cancer. Perhaps they could re-allocate resources towards other specialities, but there are countless billion-dollar tertiary care facilities focused exclusively on cancer throughout the country.
While we all want cancer to be cured, one has to think, with cancer being such a big business, how bad do the big providers also want it cured? I’m not talking about the brilliant and talented physicians and researchers tirelessly working for their patients and institutions towards a cure, but the business operations at a higher-level.
If anyone has any anecdotes / history lessons on how our healthcare system has reacted to a major disease being cured (ex. Polio?), I’d love to hear it.
I was talking to a few folks today looking to get into healthcare, and a good analogy for a big trend happening in healthcare occurred to me. In short, healthcare providers are being forced to take on more and more risk for the quality of the care they provide, and that closely mirrors what happened in online advertising with advertisers vs. publishers.
Just like in advertising, in healthcare there is a spectrum of risk shifting. The poster child is the so called accountable care organization (ACO), whereby the provider’s fee reimbursement is tied to certain performance and quality metrics. Another example is bulk payment, where the hospital is given a flat price for a population, say a group of CHF patients, and based on data the payer expects each to cost $5,000 to care for, and that’s the amount the provider gets regardless of services done. Any dollar below that level that the provider spends to get that person up to the agreed-upon metrics they are allowed to keep, any dollar over the provider eats. So then, things like double ordering MRI’s and hospital re-admission rates become really important, as it’s pure financial loss.
So, back to advertising. If you look ad ad-tech, over the last 15 years there has also been a shift of risk from publishers to advertisers. When an advertiser pays a publisher on a CPM basis (forgetting the countless middlemen in between), the advertiser is essentially taking on all of the risk for that campaign. If no conversions are generated from the media, the publisher still made their money and the advertiser had a negative ROI. Of course advertisers started wanting to shift risk to the publisher, saying things like “I want to pay you Mr. Publisher only when you generate a sale for me.” Then, companies like Ad.com and others popped up (not the publishers themselves of course, as very few of them are large enough individually to gain attention from a busy ad buyer) who allowed advertisers to pay out on CPA and thus pay for media only when that media generates a sale for them. That created a full risk shift to the publisher, which made them accountable for the performance of the media and in theory aligned the industry.
The similarities are quite similar to healthcare. Industries in free markets will in theory evolve towards alignment, unless outside forces like government keep them from doing so. Healthcare right now is unaligned, whereby the payers / insurance companies (in the analogy, the advertisers) are paying their providers (the publishers) in their network for every service the provider does, and nobody wins. Every time the hospital does a heart surgery, they get to charge the insurance company for doing so, just like how a publisher in advertising gets to charge the advertiser a CPM for the impressions they just served for them. In this new world, if the heart patient comes back into the hospital two days later because that last operation didn’t get the job done and symptoms were missed or mis-treated, the hospital gets dinked and loses money, much like how a publisher on a CPA basis eats inventory they serve that doesn’t generate a conversion for the campaign. Oh, and the patient was a victim of the cycle.
Personally, I think the much-talked about risk shifting happening in healthcare right now couldn’t be more opportune. Financial alignment is the only way to curb our healthcare spending in my very naive opinion, as it very much still is a business. Of course it’s still very early in this process and very few providers in the grand scheme of things are actually on the hook right now for the quality of their care from a reimbursement perspective, but change is coming and it can’t come fast enough.
Recruiting engineers is hard. It’s one of those things that you also just have to get done if you’re a technology startup. Some of the best engineers in the world who think dynamically and work hard to make something happen work at startups. If you’re a startup, those are the kind of people you want (as opposed to 9 to 5’ers at large companies).
A good way to find these folks is to get organized and start tracking startups or companies that get acquired, track the date of those events, and then set your self reminders to talk with those folks around the two and three year anniversary of those deals.
In general, it’s good practice to meet engineers at startups that get acquired pretty much the day after so as to get a jump start and build a relationship, but realistically if the acquirer is smart the best engineers will be incentivized to stick around for 2 or 3 years. Many will leave sooner, few will stay forever. The same goes for potential candidates in other areas such as sales. I’ve noticed scrappy contingency recruiters do this in the past informally, whereby they’ll say things like “I think folks at company X are probably ready to leave, so we’ll focus on them.”
A couple students starting a company recently asked me if they had too many co-founders and if their equity arrangement made sense. When you’re in college, it’s not too uncommon to have a semi-large group of friends working together on the same project which sometimes leads to a formal company starting. It could be 2-5, and I saw one recently where there were 6 classmates all coding and designing a new mobile app concept together. When we were starting Invite, there were four of us there at the beginning.
The interesting step to figure out, and take seriously, is how you setup the co-founding group both in terms of number of co-founders, titles and equity allocations. My friend Chris Dixon wrote a good post related to this, and I’m sure there are many other posts on the topic. It’s something you need to take seriously, as it sets the trajectory of the company for better or worse. It’s all too common for startups to blow up before they’ve left the launchpad due to disagreements and poor arrangements among the initial team. Here are some “best practices” if they can be called such in my opinion related to the founding team:
In my brief time in the healthcare industry, one thing I’ve noticed is that doctors treat by anecdote and not by data. They make treatment decisions for the patient sitting in front of them based on something that happened to a patient they treated in the past and their perceived outcome of that treatment. Or they make treatment decisions based on some agreed upon “best practice” (as decided by a group of like-minded physicians going off of experience).
For the best doctors in the world at large academic centers, such as top oncologists or cardiologists, this is probably fine and works well. A large part of medicine is artistic, with the top physicians reacting and making educated judgements dynamically to help their patient (and doing a great job). But in oncology, for example, around 80% of patients with cancer are treated in community hospitals where they are largely given “one size fits all” treatment off of national guidelines. These centers just don’t have the same resources as the big guys to do anything different, and can’t attract the nation’s best doctors or even install an electronic medical record system.
To make matters worse, when something goes off course and doesn’t work, which happens about 50% of the time in cancer, doctors are basically flying on instruments and making decisions such as experimental clinical trials or off-label use of drugs based on their knowledge and experience.
Wouldn’t it be useful to the physician treating your cancer if he/she was able to compare the genomic information of your tumor, your cancer type/stage/size, your various bio-markers, your age/gender and other demographic data, etc… against past patients and the treatment they received, and then those patient’s outcomes? The output of this could be “175 patients with similar demographics who received XYZ treatment lived 4.2 years longer than those who received NMO treatment”. We call this “data-driven clinical recommendations.” We’re not talking about replacing the doctor with a computer, but simply aiding their decision making with surfaced data.
Fortunately, a lot of people see this problem in the healthcare industry as well. The problem is that we’re still a long way from making this a reality. And there are a ton of reasons. The most obvious is the lack of usable data. A scary percentage of hospitals still take records with pen and paper, and others who have implemented EMR’s are still a long way off from using them correctly (and many EMR’s aren’t great to begin with). And even if data is being collected, much of it is free text from physicians that isn’t easily searchable or structured for comparison.
On the genomics front, it’s often said that the most over-hyped phrase in medicine right now is “personalized medicine,” both because of the lack of clinical utility on running genetic sequencing for the purposes of treatment decisions and also the “all-in” cost. Perhaps a more fundamental roadblock is physicians themselves who are historically resistant to change and protective of their domain. And the best institutions probably don’t want their bleeding edge treatments and data being shared by other hospitals in their area (this is a business after all).
Whatever it is, change is afoot in the industry. Hospitals are obviously collecting more and more data electronically as opposed to pen and paper. Physicians graduating medical school and residency are finally of the same generation that grew up with computers their whole life. And closest to my heart, more and more startups are tackling problems in the healthcare industry that are worth solving thanks to movements like the Community Health Data Initiative. It just can’t happen fast enough.