A Pathfinder in Wireless Healthcare Says Reimbursement, Not Innovation, is the Critical Factor for Startups Today

Xconomy San Diego — 

Within the span of a few months, it seems as though wireless healthcare has come into focus as an emerging area of innovation and technology convergence.

That has been especially true in San Diego, where the Gary and Mary West Foundation committed $45 million at the end of March to create the West Wireless Health Institute. Yet the institute actually represents the culmination of years of work behind the scenes by representatives of Qualcomm, the San Diego wireless industry giant, Scripps Health, Johnson & Johnson, and a handful of other key players.

As the opportunities for innovation become more apparent, San Diego’s James Sweeney is gaining broader recognition as an industry exemplar. As Xconomy’s Juha-Pekka Tikka recently reported, Sweeney founded CardioNet (NASDAQ: BEAT) a decade ago to create wireless technology that helps doctors diagnose irregular heartbeats by allowing them to continuously monitor a patient over three weeks. Following CardioNet’s successful stock market debut last year—a notoriously bad year for IPOs—the company currently has a market valuation of more than $430 million.

Which certainly helps justify Sweeney’s introduction as “the first grandmaster of wireless health in the business world” when he took the stage yesterday as a keynote speaker for the Wireless-Life Sciences Convergence Summit in San Diego

Sweeeney’s key point, which he repeatedly emphasized, is that technology innovation alone is not sufficient to create a successful business in wireless healthcare. “In the world we’re moving into, more than ever, if you can’t justify the cost benefits, then you will fail,” Sweeney said. “In my view, getting the FDA’s approval is not nearly as hard as getting the CPTs and insurance reimbursement approvals.” (He’s referring to codes for Current Procedural Terminology established by the American Medical Association to facilitate billing Medicare and health providers.)

Sweeney said healthcare represents the largest industry on the planet—a $3 trillion juggernaut with an estimated $600 billion wasted every year. Eliminating even a small part of that waste can lead to an extraordinarily successful business in healthcare. But “you are not going to get paid for cool ideas,” Sweeney said. “You are not going to get paid for saving lives. You are not going to get paid for anything unless you can prove that you can save them money.”

In a wide-ranging discussion, Sweeney offered other advice to aspiring wireless healthcare entrepreneurs:

—“I encourage you to think of really big ideas,” Sweeney said. “This is the most exciting time I’ve ever seen in healthcare, and there are unlimited resources available even in this economy for the right idea.”

—India recently unveiled plans to build 5,000 hospitals throughout the country over the next 10 years. “I think that could be an easier testbed for some of these incremental changes,” in technology, Sweeney said.

—Because the recession has caused a sharp drop in philanthropy, hospitals are “almost paralyzed” when it comes to approving new capital outlays, Sweeney said. So it’s easier to propose innovative technology as a service that hospitals can pay out of their operating budget.

—The physician still is key to developing a successful business. So you have to get a leading physician who really believes the innovation you are bringing to market is something that will benefit patients.

—“Physicians want to do the right thing. They want to improve medical care for their patients. And they want to make money—and not necessarily in that order,” Sweeney said. “It’s much easier to get them to change their behavior if you can improve the care for their patient—and make them money,” and making them money includes saving them money.

—“Every venture capital firm I talk to today says, ‘We’re only involved with late-stage companies and we’re only involved in companies with positive cash flow,’ ” Sweeney said. “And I say, ‘I know three companies that meet that criteria. So what are you doing with the rest of your money?'”

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