Conference Coverage
BOSTON – Dr. Tom Shehab is a gastroenterologist who now works in venture capital. As a principal at the Ann Arbor, Mich., firm Arboretum Ventures, he was able to give his colleagues at the AGA Tech Summit a realistic perspective on what’s needed to show value in GI innovation.
“I look at oncology products, I look at cardiology products, at urology products, at women’s health products. And I would say that we, as a profession in GI, we’re a bit behind” in the ability to present and articulate a convincing value proposition for innovations, said Dr. Shehab, formerly a physician executive.
Courtesy Arboretum Ventures
Dr. Tom Shehab
Though many clinician innovators have new and better ways to solve technology or work-flow problems in the clinic or operating room, Dr. Shehab said that he looks for more. He wants to see thought given to a plan for each stage of the design cycle. “If you have a value proposition that’s just about discovery and ideation, and you can’t talk to me or my partners about the rest of this pathway, you’re dead in the water,” he said.
“Vision without execution is hallucination,” he added, quoting Thomas Edison. “That’s why our funnel gets very narrow very fast.”
When he and his partners evaluate new technology to assess whether they will invest, Dr. Shehab said he makes sure the innovator understands and can fully explain the “Who, What, Why, and How” of the innovation.
Who: Dr. Shehab said that developers need to know not just who the end user is, but who the actual buyer will be. Is it the patient, the payer, the hospital executive, or the physician? Understanding this key point will help frame the kind and amount of information needed to prove value.
Importantly, a business plan has to include the possibility that shifts in the reimbursement language will change the answer to the question. “The buyer in health care is changing all the time,” said Dr. Shehab.
What: Dr. Shehab said that he wants innovators to be able to tell them how their product is different, and how is it clinically superior to available options. What about this product can demonstrate cost savings?
“There was a time that if I showed noninferiority – that I wasn’t worse – and if I showed quality of life was adequate, that was enough to move forward. I think now that the bar has changed,” he said. Innovators now need to show “not just efficacy but effectiveness.”
Why: An entrepreneur with a new medical technology must be able to understand – and explain – why the product is compelling to the end user. Dr. Shehab said he asks, “Why will it displace what is already being used in clinical practice?”
Recommending that entrepreneurs talk to a wide variety of people about their ideas, Dr. Shehab said, “The person you need to listen to the most is the person who told you this is the worst idea ever.” They may see something that the innovator is missing, usually one of three things: “Buyers don’t want it, the payers aren’t going to pay for it, or it doesn’t fit into the clinical flow. “
How: More and more, said Dr. Shehab, he makes sure that he knows how technologies he supports will work in an evolving reimbursement system. “How would this product fit into a dramatically different payment model?” he asks entrepreneurs.
He advised keeping a close eye on the trend toward bundled reimbursement, since even a small incremental expense has to show value to justify purchase by the hospital or health care organization when reimbursement is fixed. “Your reimbursement pathway is not a checkbox any more. It’s the most important item,” he said. “An effective value proposition tells the story of your device, but a great value proposition shows that you have a terrific device that also fits into the ‘real world’ of health care.”
The summit was sponsored by the AGA Center for GI Innovation and Technology. Dr. Shehab disclosed that he is a partner and investor in Arboretum Ventures.
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