While I have been consistent in criticizing the excessive enthusiasm and hype around so-called "Health 2.0" movement, I always tried to steer clear of pointing finger at specific companies and individuals.
Why? Because I believe innovators should be encouraged and given benefit of the doubt. Even if their ideas make absolutely no sense. Once in a while even a crazy idea works. On the flip side, once enough hard data is available, ignoring reality can be foolish. Just look at the latest Wall Street meltdown.
Thus, Revolution Health shows what is wrong with "Health 2.0"
First, in case you have not followed Revolution Health closely, let me offer a refresher. Back in 2005, Steve Case committed his vast AOL fame and fortune to make a bid to "change healthcare". He joined a long list of tech industry insiders who tried before him. Media coverage has been slow to develop, but around 2006-2007, the expectations around Revolution rose steadily. A whole lot of people jumped on the bandwagon, thinking that "Web 2.0" promises an easy path to riches in healthcare. They are easy to spot by excessive use of "Health 2.0" term.
Given around $250M invested in the company, Revolution Heath Group (RHG) had plenty of time and money to experiment with many ideas. In fact, they tried almost every Internet health idea under the sun. Many of those came by way of acquisitions, while many were developed internally by copying competitors. While it is hard to call this approach focused, at least they had a chance to try and copy almost everything that had promise, giving them the first dibs at success.
Three years later the results are in and they are not pretty
I will spare you the painstaking history and just point to Washington Post report that Revolution Health is in the process of being sold. This is a far cry from original dreams of healthcare transformation and domination, espoused by Steve Case. To put it crassly, you can afford to dream only as long as your cash flow is positive. Despite impressive starting war chest and exhaustive experimentation, most revenue streams failed to materialize, aside from plain-vanilla advertising.
To understand why the numbers do not add up, look at my earlier post estimating ad earnings of a MacRumors blogger with more traffic than RHG. Suffice to say, if all RHG does is sell advertising they do not have much a business to support hundreds of employees and even Steve's deep pockets would not keep it afloat for long. Now how does this compare with a "typical Health 2.0 company"?
Promises of "changing the world" without cash flow to back it up
Take a look at companies that talk of being "2.0" and consider if they are making any money or just waving their hands. In many cases you will not even get a clear answer of what will pay their bills once funding runs out. Even when a business model is identified, it is rare to see the numbers add up to be material, support the cost structure and provide growth to match "change the world" promise.
In fact, we do have plenty of data to know that change in the healthcare system will be anything but revolutionary. Health consumers are hesitant to engage online, aside from anonymous searching. Achieving scale in online health is anything but easy and even if you can do this by spending lots of money (like RHG) you find that your investment may be returning pennies on a dollar.
New business models that had achieved any degree of success are hard to find. In fact most of things that work tend to be minor variations of what has been around for a long time and the limitations are well known. Display and search advertising. CME sponsorships. eVisits. Enterprise software, perhaps delivered as a service (SaaS). Even Sermo information broker model is a clone of Gershon-Lehman.
What is Health 2.0 if true success is so mundane and incremental?
Let me suggest a helpful definition:
Health 2.0 term represents irrational exuberance around unproven healthcare ideas that do not have a sustainable business model. The intended use of the term is to confuse and distract the listener from questioning viability of the concept. The term should not be used for proven projects to avoid the negative association.
Sounds a lot like what "dot-com" used to mean? Everything comes full circle.
Many original enthusiasts are starting to reach similar conclusions
In fact, RHG troubles are so visible that many people excited by Health 2.0 promise are starting to ask the same questions and discount the hype. This a very positive sign for the future of Internet health. Unrealistic expectations and outrageous claims undermine the marketplace. On the other hand, lack of crazy Health 2.0 venture exits means you cannot get too far on the hype alone. You have to prove you are solving a real problem and have metrics to back it up.
So here is my shout-out to a few bloggers who are thinking clearly:
Curiously enough, most of Steve Case's problems were predicted by Joe Paduda, almost 3 years ago. You should read his full piece on Case's strategy for Revolution Health and consider a few choice quotes:
Again, I admire his vision, but the naivete can be breathtaking. For example, Case is quoted as saying "The healthcare system will be fundamentally different. It has to be. It's not working."
Steve, it has not been working for decades, and just because it is so obviously broken does not mean it will get fixed any time soon. See Africa's economies, the Middle East, the World Health Organizations' efforts on AIDS, polio, and river blindness, drug addiction - all very big problems that are very difficult to solve that have blunted the lances of all who have attempted to date.
It's a great line. But what does it mean? Case won't get into details, including financials. But Revolution Health's plan reveals that Case is pursuing the same strategy as his old company: He's going to launch a web portal next year, just as AOL did this year."
What does this mean for you?
With apologies, here's the old joke -" how do you make a million in health care? Start a consumer-directed/web portal plan with $250 million"
The most ironic twist is that Joe's assessment back then was seconded by Matthew Holt, who later ended up starting a conference to promote the wonders of Health 2.0. Perhaps the most profitable Health 2.0 business model is holding a conference to sell the dream to people who for whatever reason cannot do their own research. But over time the marketplace catches up and separates wheat from the chaff. Changing media coverage shows that this is already happening.
The sooner people ditch the hype and focus on proving their claims with metrics, the faster we will realize the true promise of the eHealth
Late last week, the Washington Post announced that Steve Case’s Revolution Health Network initiated discussions to merge with EveryDay Health. According to the Post, “the new company would be one of the world’s most visited onli...