New Technologies Key to Reducing or Averting Crisis in the System in
Coming Decade
The partners at ONSET Ventures believe that new medical technologies are
crucial for helping to avert a crisis in health care in the U.S., and
that in particular, technologies that directly reduce health care costs
represent an outstanding opportunity for the venture capital community.
The crisis comes from dramatically rising demands for health care
services, rapidly increasing costs, and the inability of the current
system – particularly Medicare/Medicaid –
to continue to pay these costs at the forecasted future levels.
Although health care has been a darling of U.S. venture capitalists in
recent years, with investments hitting a record $9.97 billion in 2007,
new investments have been off sharply in the first half of 2008, with a
31% drop year over year, according to a July 19 Dow Jones Venture
Capital Report. Moreover, investment in medical devices dropped 25% in
the second quarter of 2008, when compared to the same quarter in 2007.
ONSET believes that some of its colleagues in the industry may be
overlooking a key opportunity.
“According to reports, health care spending in
the United States reached $2.3 trillion in 2007, and is forecast to
reach $4.2 trillion by 2016 – 20% of GDP,”
said Rob Kuhling, managing director at ONSET. “Over
the same period, Medicare expenditures will increase faster than
salaries and GDP. The Hospital Insurance trust fund, which at the end of
2007 stood at $326 billion, is being increasingly eaten away by revenue
shortfalls, such that it is expected to be bankrupt in slightly over ten
years.”
Simplistically, Kuhling said, there are two non-exclusive approaches to
solving this crisis – increase funding to the
programs, and/or decrease the cost of and need for services and
procedures. Funding discussions Kuhling and his partners will happily
leave to the legislators, but decreasing costs –
there is an opportunity for innovation and investment, he said.
“Anything you can do to shorten the stay in a
hospital, reduce complications, manage chronic disease more effectively,
shave time off of high-volume procedures, or change care settings from a
high-cost to a low cost environment, you have the opportunity to reduce
the financial demand on the health care system,”
added Leslie Bottorff, managing director at ONSET.
