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Woodstock For Geeks: SXSW Interactive

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Opportunities for SXSW and HIMSS.

By Lisa Suennen (Co-Founder & Managing Partner, Psilos Group)

At HIMSS a few weeks ago, I was feeling semi-hip among the healthcare uber-nerd crowd that worries about how to make big hospital and healthcare enterprises function with big data.

Fast forward two weeks and I found myself, too uncool for school and entirely overdressed, among the techno glitterati at South By Southwest (SXSW) in Austin, TX. Not a suit to be found here at this gathering, which would blanche at the thought of being called a conference. SXSW is more of a happening. More than anything, sensory stimulation is the big difference between HIMSS and SXSW; the former is conducted in black and white while the latter is conducted in riotous technicolor.

Don’t get me wrong, SXSW (or “South By” as the locals call it, sending the hipster meter to its limit) is loaded with techno weenies, they are just of an entirely different species than the kind that are native to HIMSS. These guys are all about their iPhones and Pinterest and lord knows they have got the Twitter thing down. There was a program being promoted at SXSW called “Tweet a Beer” where you could pay-it-forward by sending your favorite nerd or nerdess a beer through Twitter if you were in the SXSW orbit.

In stark contrast to the crowd who works 9-5 in a glass tower, this is the live fast, die young, work at a Starbucks crowd that thrives on 4-hour energy drinks, double lattes and stock options. And beer I guess.

SXSW on Twitter

SXSW is such a phenomenon that there are even Twitter feeds about NOT being there. Witness one tweet from the deluge called #notatsxsw from @vielmetti:

“If you’re not at #sxsw let me summarize: utilikilt, ukulele, startup, kickball cancelled by rain, barbeque.”

I have to say my favorite Twitter post on the subject was from humorist Andy Borowitz:

“I’m here at North By Northwest. Where the hell is everybody? #nxnw Note: I still feel like an idiot when I say the word “tweet” and thus I’ll never truly be one of SXSW’s natural leaders.”

SXSW – Interactive

SXSW has traditionally been about music and film. There are massive festivals of both within the SXSW program and as I sat in the lobby of my hotel I saw celebrities of both worlds milling about. Coolest sightings were ?uestlove (pronounced Questlove) of the band the Roots (bandleader on the Jimmy Fallon show… Fallon was there too), Australian stud-muffin Chris Hemsworth (star of Thor) and bad ass actor Danny Trejo, although the place was crawling with the people who fill the pages of People and Rolling Stone.

My Participation in SXSW

The SXSW events in which I participated were part of the Social Health Start Up Bootcamp, which was sponsored by Health 2.0 and Boehringer Ingelheim with much coordination by the incredibly upbeat and sharp Shwen Gwee of Edelman.

I had two tasks: first was to give an opening, stage-setting presentation about the state of healthcare IT investing; the second was to participate in a fireside chat with recent past Chief Technology Officer of the United States, Aneesh Chopra (fyi, at the conference it was announced that Todd Park will replace Chopra as the new U.S. CTO).

The gist of my presentation was to explain why healthcare IT (“HIT”) is suddenly hot as an investment area and the various issues that both advance and detract from this reality. I have written extensively on this topic so won’t rehash it all here (you can revisit a few of my prior blog posts on the topic here and here), but suffice it to say that just two years ago HIT wasn’t even measured as its own investment category by those who track venture capital investments — it was just buried in the life sciences categories and dwarfed by biotech, pharma and medical device money.

Since those particular segments have fallen on somewhat harder times, money is flowing fast to HIT and, in fact, venture investment in HIT as measured by number of deals was up 26% in 2011 as compared to 2010. In contrast, both biotech and medical device investing were down in 2011. Only about $600 million went into HIT in 2011, however, a number less than 1/5 of what went into each of the other sectors, but still up 22% over the prior year.

Why HIT?

There is a concept in psychology called the “operational diagnosis.”

This is the idea that, despite the fact that you have had a lifetime of misery and that your parents didn’t love you enough, it takes one final thing to get you to finally decide to start therapy. That reason–the specific impetus that led you to seek help today is the “operational diagnosis.” It answers the question, “why now?”

So while we have long and desperately needed healthcare IT solutions to help correct the unmitigated disaster that is our healthcare system, the reason that HIT is finally getting attention today, the “why now” is, in my humble opinion, the fact that the national economy tanked.

We could all blithely pretend that the ridiculous inflationary costs of our healthcare system weren’t at red alert level as long as the economy was growing like crazy, but the minute the economy collapsed and you are Starbucks and you realize you are literally spending more money on employee healthcare than on coffee, you have probably had enough. Moreover, as employers have eaten over 113% in health insurance premium cost increases in the last 10 years, employees themselves have borne 134% increases over that same period. With annual health insurance premiums rising literally 4-5 times faster than wages and general inflation, consumers are taking it where the sun don’t shine and they are beginning to engage in a more significant way in their own healthcare experience.

This is, of course, being further driven by numerous other insurance industry dynamics, such as the growing phenomenon of healthcare insurance exchanges, but the result is the same. Providers are also feeling the heat as market forces and government regulation force them to accept reductions in reimbursement and more financial accountability for the care they provide. A plethora of new healthcare-focused regulations and laws are the cherry on top, making greater healthcare system productivity a necessity.

The good news is that in the last 10-15 years there have been such significant advances in technology, including the near ubiquity of the Internet, broadband, Smart Phones and software as a service (“SAAS”) models that there is a kind of harmonic convergence of experiences making it the best time we have ever had to let a thousand HIT-shaped flowers bloom.

Aneesh Chopra

The recognition of the importance of HIT to the healthcare system’s health was what led to the formation of the Office of the National Coordinator for HIT and, in part, what led to Aneesh Chopra’s role as the first U.S. Chief Technology Officer, a role founded in 2009. Chopra had broad IT experience, but he had very specific healthcare experience having worked at the hospital–focused organization The Advisory Board.

If you have never met Aneesh Chopra, it helps to know that he has more energy than Justin Bieber and loves to talk HIT policy and process in a way that the Biebs is probably talking about his new Fisker sports car. Chopra has an infectious enthusiasm that makes people actually want to listen to him talk about the Open Government Initiative and data security and other things that typically prove more effective than Ambien in curing the average sleep disorder. There were real live rock stars crawling all over SXSW but to the HIT crowd, this guy is Adam Levine–or maybe I should say Blake Shelton, in that we were in Texas.

In our fireside chat at SXSW, Aneesh and I covered a wide range of topics including initiatives to bring data transparency to government, how IT can change the healthcare business and how HIT is, as he put it, “a job grower, not a job killer.” One of the things he pointed out that was quite interesting (if not surprising) is that our HIT industry has historically been great at innovating around things that further increase volume to the healthcare system, such as billing and scheduling software. Of course, this just leads to more cost, not more efficacy, which is where innovation needs to be focused. On the other hand the system has been historically lousy at innovation that improves outcome and reduces costs. That’s where today’s opportunities lie.

We also talked about the interesting dichotomy of patient privacy, which is a very squirrely concept in the age of social networking. On the one hand, federal law (HIPAA) requires very strict handling of patient data and each state further legislates on this issue. On the other hand, you see all kinds of patients out there putting their own healthcare data into the public domain, whether they are tweeting their weight (what the hell? I don’t even tell myself my weight), Facebooking about their pharmaceutical side-effects or communicating with friends about their cancer experience on Caring Bridge.

Privacy is clearly a complex issue which means different things to different people at different times for different reasons, but is “the most important thing we have to get right,” according to Chopra. “We have to earn people’s trust.” And then he was mobbed in the hall like he had just headlined with Kanye West at Madison Square Garden.

Opportunities for HIMSS and SXSW

It is an interesting time in healthcare IT and I think that the incredible gulf between HIMSS and SXSW is a perfect metaphor for the challenge.

We have to figure out a way to engage legions of young innovators who really understand next generation technology in channeling their energy into healthcare solutions. The old school enterprises who have the biggest presence at HIMSS are unlikely to be the leaders of the future if they don’t come up the social networking uber geek learning curve. On the other hand, too many of the new kids on the block can program a sophisticated piece of software in their sleep while eating a pizza with the other hand, yet don’t really understand the intricacies of how money moves through the healthcare system and where all the privacy, security and financial incentive bodies are buried.

What we really need is some Spock-style mind-melding, which should be appealing to the SXSW crowd, many of whom look like they just left a Star Trek convention. In a perfect world, the ideal HIT gathering would be somewhere psychologically between HIMSS and SXSW: fewer gray suits, less purple hair, more next generation technology, more business models that work.

If we could do a little cross breeding between species here, we just might make it work. Or we could accidentally end up with the Monster from Young Frankenstein. Wait a minute, my God it’s brilliant! He might actually be perfect! The Monster had both a gray suit AND a green head. If he knows how to code, we have a winner. Oh, sweet mystery of life at last I’ve found you!

This post was originally posted at Venture Valkyrie.

About the guest blogger: Lisa Suennen is the Co-Founder and Managing Partner of Psilos Group, a healthcare investment firm focused on providing venture and growth capital to companies operating in the healthcare economy. She serves as a Director on the Board of several Psilos portfolio companies, including AngioScore (chairman), PatientSafe Solutions, OmniGuide and VeraLight (chairman). Lisa blogs at Venture Valkyrie. Follow her on Twitter at @VentureValkyrie.