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NYCEDC Bets on Streamlined Pilot Studies to Buoy NY Healthtech Startups

Xconomy New York — 

It’s one thing to come up with a new digital health product, say an operating system for health benefits, or a widget to help with patient referrals, that you think might change healthcare. It’s another to get clinicians to actually use it. That’s where pilot studies, or test runs of a new technology at a healthcare organization, come in. Their results can make or break a startup, but so can the time and money needed just to run them.

The New York City Economic Development Corp. has seen this firsthand over the past few years, while running a program originally called Pilot Health Tech NYC—now the “Digital Health Marketplace”—meant to connect digital health companies with large healthcare organizations for pilot projects. More than two dozen pilot studies were started through the program, but the results weren’t always great. Many projects just weren’t leading to “meaningful commercial relationships,” according to Andrew O’Shaughnessy, a senior project manager with the NYCEDC.

“We dug deep into why that was,” he says.

The result is some changes to the original program (more on that below) and a new gamble by the NYCEDC focused on younger companies. It’s teaming up with a small company run out of Columbia University, HITLAB, to launch an initiative called the Digital Health Breakthrough Network. Through the program, a network of local, small healthcare organizations—independent doctors’ offices, community health clinics, and pharmacies—will help run pilot studies for a selected group of very early healthtech startups. The idea is that these trials will be smaller, faster to execute, and cheaper to run than the industry norm.

The NYCEDC is betting that investors and large healthcare organizations will take these studies seriously, and that positive study results will translate into, at the very least, the beginnings of a commercial relationship or an investment round. (The NYCEDC’s specific goal is to jumpstart more healthtech companies in New York and create more jobs.) Negative results, on the other hand, means less time and money wasted on a product that either needs refinement or shouldn’t be carried forward.

“We are taking something of a risk,” by betting on the validity of these trials, O’Shaughnessy says. As Rock Health managing director Halle Tecco wrote in this blog post last year, “a validation pilot should not be confused for a real customer relationship.”

O’Shaughnessy adds, though, that the NYCEDC’s hope isn’t necessarily that a health system looks at a study and immediately stamps a product for approval across a vast network of hospitals. Rather, that it’s a start. Maybe a customer views the product as “substantially derisked,” and offers a startup a pre-sales pilot run with “more generous terms” than the company would have gotten otherwise. Maybe the customer dedicates more resources to the alliance and moves it forward quicker. Maybe a startup gets an investment it otherwise wouldn’t.

“Even if we’re not successful in generating all the data you’ll ever need for commercial validation—and we probably won’t—we are going to help you get from zero to one, and from a prototype stage to the beginnings of a product,” O’Shaughnessy says.

Here’s how it’ll work. The NYCEDC has put $600,000 into the project, $200,000 of which is going to HITLAB—a roughly 20-employee research organization on Columbia’s campus that advances healthcare technologies—to design the trials and run the initiative. The agency is simultaneously taking applications from fledgling startups—those that are pre-revenue, or pre-Series A investment, O’Shaughnessy says—while conducting a “needs assessment” among some of the bigger healthcare players in New York.

In the meantime, it’s recruiting half a dozen or more small healthcare groups to actually test out the products. O’Shaughnessy says the NYCEDC is looking “chiefly for volunteers,” but in some cases will financially compensate these organizations for participating. What’s in it for those that won’t get paid? “We think it’s really important…to make sure that we’re grounding technology in real human needs and we think that physicians and other care providers are going to respond to that” he says.

The NYCEDC plans to foot the bill for 16 pilot studies over the next two years and select the first four candidates in the last week of May. After those 16 studies are completed NYCEDC will effectively hand the program off to HITLAB.

O’Shaughnessy says these studies will be small, between 10 and 30 participants apiece, and last just one to three months apiece, compared to the six to nine month pilots that are more typical for the industry. It’s up to the startup to decide where to go with the data afterwards, and whether to promote it publicly through the NYCEDC’s program or keep it confidential and pitch it to investors.

“This program is going to be a tremendous step in the right direction for startups,” says Matt Buder Shapiro, a co-founder of New York-based healthtech startup MedPilot, who isn’t associated with the initiative. “I just wish the network was expanded to a more diverse group of smaller surgery centers and franchises, as well, so that more startups could benefit from the program than just the ones that are tailored to physician practices, clinics, and pharmacies.”

The new initiative has been part of a learning process for the NYCEDC. It started up Pilot Health Tech NYC in 2013 as an “innovation competition.” Healthtech startups pitched their wares and vied for award money that was designed to help them get through a pilot study with a big healthcare organization. 21 awards were handed out totaling $2 million through the first two rounds of the competition, and 32 pilot studies began. They didn’t all work out though, either because startups weren’t connecting with the right decision-makers, or they weren’t ready to scale up to meet the demands of a large customer.

So the NYCEDC focused on the former problem first, and streamlined the original initiative. It’s now meant to help connect more advanced startups with “empowered” folks at healthcare organizations and provide technical assistance and funding, and has just been renamed the “Digital Health Marketplace” to reflect that change.

Other groups outside of New York are similarly helping to connect innovators with decision-makers in large healthcare companies. A Raleigh, NC-based hospital called Rex Healthcare does this via a program called Rex Joint Ventures, launched in 2012. The University of Washington recently launched the Primary Care Innovations Lab, which helps connect privately held startups with doctors and other experts. Seattle’s Cambia Health Solutions started the Cambia Grove, a 9,000 square foot meeting and workspace space meant to allow various stakeholders to discuss new ideas.

The NYCEDC, for its part, is making some progress here. Today, it will announce 11 different partnerships between New York digital health startups and health organizations that were forged through the Digital Health Marketplace. Those pairings are getting a total of $500,000 combined to run pilot programs to test out products. For instance: RubiconMD, a Blueprint Health grad that developed a Web-based platform that helps primary care doctors quickly get e-consults from specialists on patient cases, will make its product available to providers in the Callen-Lorde Community Health Center in Chelsea. The two will work together to quantify the impact of the service on patient outcomes.

Now it’s on to helping out the earlier-stage startups, via the breakthrough network. Time will tell if the agency is on to something.

“We have our hypotheses about how people are going to respond about the value of what we’re putting out,” O’Shaughnessy says. “[But] we’ll see what happens when we make contact with the market.”