The Time is Ripe for Healthcare IT Start Ups (Part 1)

With daily news of healthcare mergers and acquisitions coming left and right, it’s no surprise that start-ups are also finding firm footing in the industry right now. With much-publicized incubation programs like Rock Health and Health Box giving a media savvy face to formerly unknown names, new, smaller healthcare companies – particularly those in the IT space – are finding conditions ripe to enter the market. (TechCrunch.com featured a great overview of recent, booming HIT start-up activity that you can read here.)

Omada Health, a start-up out of San Francisco focused on pre-diabetes prevention via online tools, is part of Rock Health’s first graduating class, having just ended formal arrangements with the program last month. It’s conducted two prototypes already, and plans to officially launch its official 16-week program in 2012.

I recently sat down with Sean Duffy, co-founder and CEO of Omada, as he and his team readied to move into new office space in downtown San Francisco, to learn about the process of taking an innovative idea from drawing board to incubator to market. This first part will highlight Omada’s journey from concept to business model. Next week’s blog will focus on how the company plans to effect clinical change in patients lives and drum up some revenue along the way.

Why was chronic disease prevention that idea that you and your founding partners decided to run with?

We were at Ideo [a design and innovation consulting firm], and one of the partners wanted to explore this idea a little bit. I was tasked with looking at business opportunity in disease prevention, given some of the changes in the healthcare landscape including healthcare reform. There’s an increasing recognition that there’s a huge crisis and recognition of obesity and the chronic disease that comes from that in the US, and something needs to be done. So we started down that road, and we looked at what you might need to essentially form a business that could be scaleable in disease prevention versus disease treatment. We really quickly settled on diabetes for a number of reasons.

We came up with a framework of what you’d need to have in place from a business model standpoint to make it work. The first is you have to have a medical condition that [is] a relatively expensive condition at the point of diagnosis. You have to find people that are likely to progress to that condition, so you need to identify some sort of precondition, and know that people with that precondition will progress to the condition if you don’t help them. There needs to be medical literature that shows that helping people at the point of precondition reduces the chance of them getting the condition, essentially.

A large number of people with prediabetes are likely to get diabetes in 10 years if you don’t help them. And it’s clear through medical literature that helping them reduces that risk. So it seemed like an actionable place to put some time into. Just from a business standpoint, it seemed like a great opportunity – you can show ROI. Equally important is that when we went out to talk to people with prediabetes, the diagnosis was very meaningful to them.

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