Health-Care Reform Creates Boon for Tech Startups

In spring 2009, tech entrepreneur Neil Smiley founded Loopback Analytics, a Dallas company that markets software to help hospitals reduce the probability that patients will suffer complications and have to be readmitted.

A year later, Congress passed President Barack Obama's bill, the Affordable Care Act, which is often referred to now as "Obamacare." The law contains several provisions related to preventing unnecessary hospitalizations, including financial penalties for hospitals with high readmission rates.

Smiley came up with the idea for Loopback when the Centers for Medicare & Medicaid Services started threatening to stop paying for hospital readmissions--but it was the health-care bill that really fueled the company's growth. Loopback's  analyzes data to identify the most at-risk patients and match them with appropriate therapies. Smiley says there's so much demand for the product he's looking to double the company's headcount to 30 this year. What's more, Loopback was picked to be the technology backbone for Walgreens' WellTransitions program, which is geared toward making sure patients continue to take their medications after they leave the hospital. "We really have two key constituents: health systems, and also other solution providers, like Walgreens," Smiley says. "We're seeing opportunities on both those fronts."

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Health-care reform has spawned a plethora of business opportunities for both startups and existing companies. It's especially a boon for IT companies because the government is providing financial incentives to providers who adopt electronic medical records and other new technologies. In addition, the new law lays out monetary rewards--and penalties--that will require health-care players to collect and process data in entirely new ways.

Some entrepreneurs are capitalizing on one of the biggest priorities of the Affordable Care Act, which is to promote "evidence-based medicine," or treatment decisions that are backed by rigorous research. "A big push in health-care reform is the focus on value-based care," says Mitesh Patel, a physician and cofounder of New York-based Docphin, which provides technology that lets health-care workers get medical research and news tailored to their practices. "A key element of [value-based care] is if you're going to prescribe a medication or diagnostic test for a patient, you should know whether there's evidence behind that."

Patel and his two cofounders, also health-care veterans, felt that standard search tools like Google weren't very effective in pulling up articles from medical journals and tailoring results. That made it difficult for a physician, say, to search for the latest research on a new drug. So Docphin created a search engine that filters out irrelevant, non-clinical results and makes it easier for users to access content from subscription-only journals. Patel says 100 hospitals have adopted the platform since the company started marketing it nationwide last May.

Some older companies are finding ways to apply their expertise to solving health-care reform challenges, too. For example, Palo Alto, Calif.-based Getinsured.com, an online seller of individual health-care plans founded in 2005, was part of a team of companies awarded a $359 million contract to help the state of California develop its insurance exchange. Under the health-care reform law, states have until January 2014 to launch such exchanges, where individuals will be able to go to buy health-care plans.

Chini Krishnan, founder and CEO of , believes there will be a continued demand for expertise from companies that have developed technologies for selling health-care plans to individuals. "Tens of millions of customers will come into this market all of a sudden," Krishnan says. "Think about the technology you need to create an insurance exchange. You have to be able to rate plans. You have to be able to enroll customers in those plans. You have to be able to integrate with the carriers. The impetus will be on the states to work with vendors that have exchange applications available."

That isn't to say the new world of health-care reform will be free of hurdles for companies. Krishnan says he's struggling to find qualified people to fill the more than 35 open positions at his company. "There's a shortage of good people across all domains--user interface engineers, search engine marketers, online and offline channel managers," he says.

Marketing these new services will also be challenging. Loopback's Smiley says that even though the Affordable Care Act passed in March 2010, readmission penalties for hospitals didn't kick in for 18 months. So Loopback had a tough sell. "We had to find early adopters," he says. "Everyone is in this learning environment. It's a crazy, chaotic, exciting time. It feels like the Wild West in many ways." 

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