New York aims to be health IT hub – insurers,firms move forward on health IT, ACA

Today the New York City Investment Fund (NYCIF) joined the New York eHealth Collaborative (NYeC) and the NYS Department of Health (DOH) to launch the New York Digital Health Accelerator (NYDHA), a program that aims to make New York a hub for the emerging digital health technology industry. In upcoming months the program will choose 12 early- and growth-stage companies that are developing cutting-edge technology products for health care and provide them with seed money and support to develop their products.

Each chosen company will be awarded up to $300,000 along with mentoring from senior-level executives at leading hospitals and other providers in New York. The focus areas of innovation will support the development of products that help the state’s Medicaid Redesign Team and its new “Health Homes” program, an initiative intended to make the state’s treatment of Medicaid patients more coordinated and efficient.

“Our initial investment will go a long way towards attracting additional investment into New York,” said Maria Gotsch, President and CEO of NYCIF. Applications for the program are due by June 1, 2012.

The program is launching with an initial investment of $4.2 million. In addition, it is expected that the companies will attract upwards of $150 million to $200 million in investment from the venture capital community post-program. The investment capital will be provided by a syndicate of investors, including Aetna, Milestone Venture Partners, New Leaf Venture Partners, New York City Investment Fund, Quaker Partners, Safeguard Scientifics, and UnitedHealth Group. The Empire State Development Corporation, Health Research Inc., and NYeC will provide additional funds and/or services to operate the NYDHA. Most of the state’s largest health care providers have also agreed to take part in the program.

The initiative is the latest in a flurry of activity happening in the health care sector nationwide. As CivSource has reported, health care and health IT firms are seeing significant capital inflows from both the public and private sector. Despite the Supreme Court challenge of federal health care reform, states are working to find ways to streamline health care service delivery and control costs that are rising exponentially.

The private sector has been able to cash in on this at all levels from technology, to insurance and through to the financial sector as venture capital, private equity and investment banking provide capital support for the increasing number of health care focused firms.

Infosys Public Services recently released the results of its survey of health insurers which examined how they are working through federal health care reform requirements. The report, Healthcare Reform or Not: Key Imperatives for 2012, shows that despite court challenges and state-level controversy, over 80% of health plans are implementing Healthcare Reform (HCR) initiatives. Nearly 40% of health plans have already implemented Accountable Care Organizations (ACOs) and are in planning stages for health insurance exchanges.

“The major concern, regardless of any ruling is mandate compliance,” says Eric Paternoster, CEO Infosys Public Services, in an interview with CivSource. “The bulk of budget, IT, and the business change agendas are taken up with ensuring mandate compliance. Health care reform took that to a new level when they broke out issues such as the percentage of how dollars must be spent. So providers really have to be proactive.”

ACOs are also gaining traction with insurers as a way of being proactive around cost efficiency and mandate compliance.

“The nature of insurance in general is defining the risk pool so there’s a feeling that if insurers have a tight relationship with providers through the ACO model – especially around high cost therapeutic areas – they can collaborate with the provider from the beginning of the diagnosis. There is an aspect of health care reform that says that 85% of premium dollars have to directly compensate care, this means that you have to be very efficient in how you operate. So, the ACO structure allows for that. I think they’ve embraced the ACO construct faster than what we originally expected, largely because of that,” Paternoster said.