This is the 4th in a series of posts comparing Seattle with other health innovation clusters. We are comparing several cities on a set of criteria of interest to healthcare startups. Katie Smolnycki is a life sciences market consultant who relocated to Seattle in early 2015 and has been a member of the Health Innovator research team. Her post below examines the institutions that can contribute to a vibrant ecosystem for health innovation companies.
By Katie Smolnycki
Continuing on our journey of exploring healthcare innovation hubs, we will examine the various healthcare institutions in Boston, Chicago, New York City, San Francisco, and Seattle. The comparison criteria in this series include the following:
- Cost of doing business – Seattle ranks in the middle.
- Financial capital – Seattle is lowest of the comparison cities in the amount invested in healthcare; 30% of angels are specifically associated with healthcare.
- Human capital –Highest ranked city in our study with the largest share of college grads[i]; hub for technology and sciences.
- Health Institutions- this post.
- Regional culture – to be posted in September.
To explore the institutions in each of these centers of interest, we decided to focus on hospitals, payers, NIH funding, and research institutions.
A competitive healthcare delivery market is favorable for innovators because these systems need to find ways to gain market share. How competitive is Seattle’s healthcare delivery market? To explore this we looked at the American Hospital Directory, which provides statistics for non-federal, short-term, and acute care hospitals in each state with data collected from each hospital’s most recent Medicare cost report[ii]. Compared with the other health innovation hubs, Seattle has the fewest hospitals and the lowest ratio of staffed beds. San Francisco and Boston have approximately the same number of hospitals and the most staffed beds per their population, with around 300 people per one staffed bed.
This suggests that the competitive pressures on Seattle’s hospital systems may be less intense than those cities with higher per capita beds. Concentration of ownership using the Herfindahl-Hirschman Index (HHI) is another method of assessing market competitiveness. The analysis below by David Cutler and Fiona Morton published in the Journal of the American Medical Association in 2013 compares the HHI across the US for hospital referral regions.
Seattle’s hospital referral region is moderately concentrated. This is similar to the markets in Boston, San Francisco, Chicago, and New York City. This suggests that the healthcare delivery market in Seattle is no more competitive, and is perhaps less competitive than the other hubs in our comparison set.
According to a study published by National Association of Insurance Commissioners (NAIC), the top large group insurance companies by market share (ranked largest to smallest) are: United Health Group, Wellpoint Inc. Group, Kaiser Foundation Group, Humana Group, Aetna Group, HCSC Group, Cigna Health Group, Highmark Group, Coventry Corp. Group, and HIP Insurance Group. At least one of top three large group insurers of NY, CA and IL all are represented in the NAIC Top Health Insurance Company report; whereas a main insurer for MA (BCBS of Mass) comes in at 23 and Cambia Health Solutions (the holding company for Regence BlueShield in WA, OR, UT, ID), comes in at 25. Seattle is not the headquarters of a single large national health insurance carrier. Our two Blue carriers, Premera, and Cambia Health Solutions, serve several western states but are not national entities. Group Health Cooperative is Washington-only.
Of the top 10 health insurance companies in the US, one is is headquartered in Chicago, two are in the Bay Area, and three are within commuting distance of the New York Metro area. This suggests that Seattle’s payer community may not have had the resources to provide a launchpad for startups, at least until recently.
Cambia Health Solutions is becoming an important player in the health innovation community in Seattle. Cambia Grove opened in the spring of 2015 providing a community space to bring innovators and entrepreneurs together with stakeholders to find innovative solutions from challenges in health care. They offer a variety of programming geared to helping entrepreneurs connect with the other players in the industry. One program hosted by Cambia Grove in July was a Reverse Pitch event which Evergreen Hospital pitched their problems to innovators in the digital health community.[iii].
NIH Research Funding
Funding of research grants by the NIH is an important part to furthering research in higher education centers, hospitals, and non-profits and for-profits research institutions. In FY2015, the NIH invested nearly $30.3 billion in medical research which allows investigators to come up with new ideas that can help change the world. This was $211 million above FY2014 budget, a 0.7% increase in funding, while FY2016 funding is expected to be $31.3 billion. The NIH main themes for driving discovery and innovation in FY 2015 funding were: today’s basic science for tomorrow’s breakthroughs, precision medicine, big opportunities in big data, and nurturing talent and innovation.
Boston received the most NIH research funding in both FY 2014 and 2015. Boston hospitals receive the most funding from the NIH for hospital research having five out of the top six top NIH funded hospitals[iv]. Hospital funding in Boston makes up almost 50% of the NIH funding received in the area. In the other regions, hospital based NIH funding makes up to 5% of the region’s NIH funds. For medical school NIH funding, NYC area schools (12 schools) receive $1.1 billion in research with Boston and Chicago medical schools (5 and 6 schools respectively) receiving over $400 million of medical school funding. Seattle only has one medical school but receives over $300 million in funding putting the University of Washington in the top five for funding in both FY 2014 and FY 2015.
Of the NIH funding that came to Washington in 2014, the University of Washington received $437 million, followed by Fred Hutch at $222 million, representing 75% of the total. This highlights the crucial importance of the UW and the Hutch in Seattle’s health innovation ecosystem. This ratio is similar to each of the other cities, looking at the top 50 organizations receiving NIH funding.
For more information on financial capital in these regions, please see our financial capital blog post
Life Science and Biotech Institutions
Washington State is home to 567 life science companies and research organizations with a majority of those located in the Greater Seattle area. There are 274 medical device companies, 182 biopharma companies and 92 nonprofit research organizations or academic research centers[v]. These companies combined add $11.4 billion to Washington’s GDP and represent the 5th largest employment sector, with a 12% growth in jobs from 2007 – 2013.
Out of the top 15 pharma companies by 2014 revenue[vi], Seattle is only has ties to three: Sanofi (some manufacturing), Gilead (inflammation/respiratory and hematology/oncology therapeutic areas and clinical research), and Bristol Myers Squibb (Zymogenetics ). In June 2015, Bristol Myers Squibb announced the relocation of the 40 Seattle based research and development jobs to San Francisco, leaving their early manufacturing group (approximately 120 employees) in Seattle[vii]. Amgen had a presence is Seattle until this past year when they closed down their facilities to cut costs. Seattle’s biotech sector is predominately small, early stage companies and some large nonprofit research institutions. For example Juno Therapeutics, an immunotherapeutics company, went public in December 2014 with $265 million IPO and a valuation of more than $3 billion. Juno recently announced a partnership with Celgene for $1 billion to work on the development and commercialization for immunotherapies[viii]. Presage Biosciences, an oncology start-up in Seattle that works to use human efficacy data earlier in drug development, announced August 20, 2015 that they received a strategic undisclosed investment from the venture capital arm of Takeda Pharmaceutical[ix]. About half of Washington’s life science companies are medical device companies, with Philips Healthcare being the largest medical device company located in the Greater Seattle area. Despite Seattle’s lack of large biopharma and medical device companies, there is still potential for collaboration with larger companies.
Seattle’s strong technology industry can help foster growth in the digital health space, as well as innovation in medical devices. In 2014, there was $1.1 billion in transactions across Washington State including IPOs, M&A activity, and venture equity and as of August 2015, there have been $2.5 billion in life science transactions, which is expected to reach $3 billion by the end of 2015. Transactions are approximately 38% medical technology, 31% pharmaceuticals, 23% health IT and 8% other[xi].
Boston, New York City, and San Francisco are home to many of the top biopharma and medical device companies (Johnson and Johnson, Novartis, Roche, Merck, GlaxoSmithKline, AstraZeneca, Bayer, Amgen, and Eli Lilly) and smaller startup companies as well. Chicago is home to fewer top healthcare companies than Boston, NYC, and the Bay Area but is headquarters for few larger companies, such as Abbott Laboratories (AbbVie), Baxter, Takeda (US headquarters), Walgreens, and Allscripts.
The presence of institutions with both the resources and the business drivers to innovate are favorable to health startups. Seattle’s position relative to the comparison cities is not as strong as it could be but still offers ample opportunities for health startups:
1. The healthcare delivery system market in Seattle is similarly concentrated as other cities but the per capita staffed bed ratio suggests that hospital systems here may still lack the existential competitiveness of other cities and may not yet be ready to look outside to the startup community for innovative approaches.
2. The health insurance industry in the Northwest has not been a national launchpad for startups.The recent activities of Cambia Health Solutions is a positive development.
3. NIH funding in Seattle lags Boston, New York, and San Francisco but is still respectable. This provides a critical funding stream and keeps Seattle in the running as an attractive location for health startups. This is mostly due to the influence of the UW and Fred Hutch in attracting federal research funds and spinning off new companies.
4. Seattle has a vibrant community of life sciences organizations that are not as large as those found in Boston and other life sciences hubs. The economic impact of this sector has been strong, with 12% job growth 2007-2013, as the 5th largest employment sector in the state.
By Angela Hong, June 29, 2015
This post is part of a series that compares Seattle with other cites using these criteria for what it takes for an area to become a health innovation hub:
- Cost of doing business / regulatory complexity
- Talent availability
- Financial capital
- Health institutions one might work with
- Regional culture / quality of life
Our last post compared the relative cost of doing business in Seattle. Seattle falls squarely in the middle compared to the other cities in our sample (Boston, Chicago, NYC, and SF). In this article, we’ll explore how Seattle fares in financial prowess.
In 2012, Seattle was ranked 9th in the top 10 best U.S. cities for business by ThinkAdvisor and also named the “29th most competitive city in the world.” In 2014, it jumped to 4th on Forbes‘ list of “best places to launch a startup.” While many factors make a city favorable to entrepreneurs looking to invest in new health products, financial capital is one of the most important. Its presence in Seattle is helping to make the city an up-and-coming hub for innovation, especially in the field of health.
Compared to other large cities, Seattle is becoming more well-known for its ability to draw ingenuity through financial capital. Exhibit A below shows that the number of angel investors in the city rival those of other major metropolitan areas: such as New York City, San Francisco, Chicago, and Boston. While New York and San Francisco currently outnumber most cities in local angels—at 1221 and 2163, respectively—Boston’s 397 seems reachable for Seattle. The Emerald City, as shown in this Angel List report, has 277 individuals who provide start-up capital for businesses, and this number is even greater than that of Chicago, which currently stands at 271.
This places Seattle in the running with major healthcare innovation hubs. And if the city’s number of investors begins to increase, a rise in healthcare-specific investors at the current rate would put Seattle level with well-established cities in terms of financial capital available for healthcare-related businesses.
Exhibit A: Angel Investor Comparison
Follow the Money
According to this Angel List data, eighty million dollars were invested by Seattle’s angels investing in health startups.This is lower than the other cities in our survey. The highest amount is spent in San Francisco at $1.04 billion and the second lowest is Chicago at $150 million.
Seattle: Financial Capital Overview
While Seattle has many fine qualities which make it an ideal business start-up city, it may not be thought of as a top health innovation hub in the way New York City, San Francisco, Boston, and Chicago are currently perceived. However, with rising numbers of angel investors interested in funding health-related businesses and the amount of financial capital for healthcare innovations already in motion, the city and its resources should be considered by those looking to make a difference in the medical field via creating new products, ideas, and business.
About the author
Angela Hong is a co-founder and CEO of Healthy Beeps She moved to Seattle from Boston in 2014 and is leading the Health Startup Location Attractiveness project.
Deciding where to locate a health startup company often comes down to one question: where are you? Yes, there’s no place like home, but is this the best way to geographically locate your fledgling enterprise? With the odds of founding a successful health startup already stacked against you, why not pick a place where your chances are a little better than they might otherwise be?
As described in our January 2015 and March 2015 posts, the Health Innovators are conducting a quick, unscientific, but structured comparison of 5 cities: Seattle, San Francisco, Chicago, New York City, and Boston along several variables:
- Cost of doing business / regulatory complexity
- Talent availability
- Financial capital
- Health institutions one might work with
- Regional culture / quality of life
Please participate in this study by taking our Health Innovation Location Attractiveness survey.
Today’s post focuses on the cost of doing business in each of these comparison cities. Future articles will explore the other 4 criteria.
After reviewing state and local government websites for the costs of setting up new companies, we found minor differences in the fee schedules for business licenses and formation of business entities. We found that the complexity of the corporate registration process and business licensing did vary significantly, with Seattle as the easiest, and New York City and San Francisco as the most baffling. California’s $800/year tax on LLC’s is certainly a disincentive, and New York’s antiquated requirement to publish professional LLC formation announcements in 2 newspapers can cost upwards to $2,000.
Office space is another area where we found some differences in our benchmark cities. Using the monthly rate for a private office in a co-working space as a proxy for office space generally we found that an office in Seattle was $100 to $200/month less costly than the comparison cities. A private office at We-Work in Seattle is $500/month, and is $700/month in New York City and San Francisco.
That, of course, raises a more personal question- how much income does one need to live in these cities? As a proxy for cost of living we used the CNN Money Cost of Living Calculator.
For the ease of comparison, let’s assume we pay a software engineer $100,000 in Seattle. For an equivalent lifestyle in Chicago, that would only require $92,000. In Boston, $108,000, San Francisco it takes $131,000, and in New York City it would require $175,000 for the same lifestyle that $100,000 affords in Seattle.
Finally, we looked at the KPMG 2014 Competitive Alternatives Study index for comparing the overall cost of doing business. All 5 of our benchmark cities are in the top 10 most expensive cities in which to do business.
According to this analysis, Seattle (101.4) is right in the middle, roughly tied with Boston (101.1), and significantly more than Chicago (99.1). Not surprisingly, New York City (103.6) and San Francisco (104.2) are nearly tied for the most expensive places to do business not only of these 5 comparison cities, but of all 31 US cities over 2 million in population. For comparison, the least expensive city for doing business in this KPMG report was Atlanta (94.7). Perhaps in future comparisons we could include Atlanta, Washington/Baltimore, and San Diego as contenders.
So who wins? It’s not just about the cost of doing business or the hassles of setting up a company. The other factors- human talent, financial resources, startup culture/quality of life, and health institutions with whom startups can collaborate and pilot their innovations will all be reviewed in upcoming posts. Stay tuned! Let us know what you think in the Health Innovation Startup Location Survey!
CEO, Videris Health LLC
Telehealth is a rapidly growing market opportunity that can improve the patient experience, lower costs, and improve quality of care on a global scale. The Seattle Health Innovation meetup, March 5, 2015 from 5:30pm-7:30pm, will feature a panel of experts on Telehealth implementation, including smartphone apps for patients with chronic diseases and video technology for primary care visits with medical providers. Hear from these innovators on how they work with care delivery systems to introduce new care models enabled by technology. Find out about the analytics they use to measure success and what they have found to be key issues.
Light food and beverages will be served to facilitate networking before and after the panel. This is a grassroots effort and there is a $10 registration fee. To register, please click here.
This meetup will be held at the Cambia Grove at 1800 9th Avenue, Seattle WA 98101 on the 2nd Floor. Please arrive before 6:00pm because the doors lock. After 6:00pm you can only get in by walking down into the underground parking deck and take the elevator to the 2nd floor.
It is in the same building as Regence Blue Cross on the corner of 9th Ave and Howell Street. For more information about this new hub for health innovation in Seattle see the Geekwire article from last October: “New ‘Cambia Grove’ health-care innovation center in Seattle will link tech startups with big players”.
The Seattle Heath Innovation Meetup is comprised of individuals interested transforming health and healthcare. It was started in 2013 by leaders from Seattle-based health startups and welcomes individuals from healthcare delivery systems, payers, research organizations, universities, investors, and the community at large.
The program will include brief presentations and a panel discussion with these health leaders:
Fareeha Siddiqui, MD, MPH is the Director of Research and Innovation, Global to Local, an innovative non-profit formed by Swedish Health Services, the Washington Global Health Alliance, HealthPoint, and Public Health Seattle & King County to serve residents in the SeaTac/Tukwilla area. This area has more than 70 ethno-linguistic groups and twice as many people living below the federal poverty level and far higher mortality rates than the rest of King County. It offers a unique opportunity to work with populations relevant to Seattle’s global reach.
Dr. Siddiqui directs the Global to Local Mobile Health Project, which focuses on the development of cost-effective remote monitoring, sustainable health promotion interventions, and improvement of healthcare delivery. She will update us on a mobile health pilot to help people with diabetes. She was one of 6 doctors to win Seattle Magazine’s Top Doctors: Community Service Award in 2013.
Julie Maas, MBA is the Director of Client Integration at CarenaMD.
Carena is a new and growing Seattle-based company that provides telemedicine solutions including a Virtual Clinic staffed with employed 24/7 “Virtualists” and an operations team that can get a system live in 90 days or less. Carena has implemented its Virtual Clinic Offering with several leading healthcare delivery systems, including UW Medicine and Franciscan Health.
Julie’s team implements the technical and operational aspects of these solutions. She works directly with healthcare delivery systems to include the Virtual Clinic. Her career spans 10+ years of life sciences and non-profit experience in a wide range of projects and roles, including development of telemedicine initiatives while at the UW Center for Commercialization.
Christi McCarren, RN, MBA is the Multicare Vice President of Retail Health and Service Lines. Multicare is a not-for-profit integrated health system with more than 10,000 employees and a comprehensive network o services throughout Pierce, South King, and Kitsap Counties.
Steve Poore, MD is the Medical Director of the Multicare Women’s Service Line.
Christi and Dr. Poore will be speaking to us about MultiCare’s OB CareConnect program–where OB care alternates between virtual visits with a MultiCare nurse practitioner (ARNP) and scheduled visits with the patient’s MultiCare obstetrician at his or her office. The program conducted over 400 visits in 2014, including a patient in Mozambique.
Chelsea Steinborn, a current graduate student at the University of Washington, is facilitating the panel discussion. Chelsea has worked as Senior Product Engineer at Medtronic, a $27 billion medical technology and services company.
Chelsea will complete her Masters in Health Administration at UW in May 2015. She has focused on telehealth and innovative care delivery throughout the program and during her current internship at Virginia Mason. Chelsea will get the conversation started with the panelists and then facilitate audience questions and answers.
The meetup starts at 5:30 with networking and refreshments. After community announcements will be the panel discussion and at the end will be an opportunity to talk with other meetup participants.
To register, please click here.
Posted by Ed Butler, digital health entrepreneur and co-founder of the Seattle Health Innovation Meetup.
To join this meetup group and get future event notices, click here: http://www.meetup.com/Seattle-Health-Innovation-Forum/
In terms of healthcare innovation hubs, cities such as San Francisco, Boston, Chicago or NYC typically come to mind but rarely does Seattle break into the top 5 names in the list. Why not? Seattle (and Portland) has access to world-class academic institutions, top tier human capital talent and major powerhouses in the technology industry. The 2014 Rock Health Funding Report shows surprising news that Portland-based Cambia Health was becoming a major player in digital health investment. Having access to financial capital definitely helps to fuel the healthcare startup community.
As part of Health Innovator’s 2015 initiative, we plan to analyze and understand how certain cities became healthcare innovation hubs and determine how to help Seattle become a health innovation center as well. Our goal is not to imitate what other cities have done but to understand how they got there and also figure out what Seattle’s unique formula for becoming a healthcare innovation hub.
Therefore, in our next few series of blog articles, we plan to benchmark other cities’ resources and determine what contributed to their healthcare innovation hub status and then map out the current Seattle resources. After our series of analyses, we will recommend a concrete strategy and action plan of how to help Seattle become a healthcare innovation hub.
We need all members of the Seattle health community to join us to put Seattle on the map as a healthcare innovation hub. Our belief is that this is not a solo task but instead we should rally everyone in the community (e.g. students in life sciences, government sponsors, big corporations and healthcare entrepreneurs). Please join us and make 2015 the year that we push healthcare to the forefront of Seattle’s attention.
Angela Hong is a healthcare entrepreneur and a Boston transplant to Seattle. She recently joined the Health Innovators Meetup and is excited to help Seattle become a healthcare innovation hub.
The November Seattle Health Innovation meetup featured “Code Black”, a full length documentary on a busy emergency department at Los Angeles General Hospital, followed by a discussion. It was attended by about 55 people from around the Seattle and Eastside areas. It was sponsored by WebMD. Dave Chase, former CEO of Avado and now a Senior VP at WebMD welcomed the audience.
The documentary, as well as some of the discussion touched on something that we do not talk about very often- the unexpected and sometimes negative consequences of changes intended to be positive.
Spoiler alert, I’m going to talk about some elements of the story line of the movie. I doubt if that will matter if you do get a chance to see it because the documentary’s intensity stems not from the story line but from the subject matter itself.
The film begins in 2008 in the old hospital, built in the 1920’s as a modernistic cathedral of medicine and the only safety-net hospital in the region, and was completed in the new hospital in 2012. “C-Block” was the old emergency department where the intense life-saving activities were all done in a relatively open area, separated only by small curtains, with minimal privacy for patients. “Code Black” is a condition in the ED when the facility is desperately overwhelmed by patient volume, a situation that occurs too often. The sparkling new facility was updated to provide more room and more privacy for patients, as well as eliminate the need for waivers from some regulations.
In the documentary we follow a cohort of Emergency Medicine residents from their first year in the old hospital to their 4th year in the new facility. Accompanying their move to the new facility was the loss of various waivers from HIPAA and other regulations, so that in the new facility the staff had to contend with what they experienced as burdensome, “soul-crushing” paperwork. The film highlighted the sense of loss from the old system to the new, more private yet more isolated and bureaucratic. We learn some of the personal stories of these residents and come to admire their strong qualities and we empathize with their frustration. The story line evolves around their growing resolve to recreate the best features of C-Block within the new facility. The residents want to bring the most serious cases from the waiting room into the treatment area. The resistance comes from the nursing supervisor, concerned that this would dilute the ratio of nurses to patients,thus increasing liability to nurses from potential errors made under impossible conditions. Undeterred, our heroes (the resident physicians) are able to achieve this reorganization of the beds and waiting area and feel that they once again are able to monitor what’s happening visually.
The film exposes the brutal realities of the injuries and illnesses afflicting the poor and uninsured in a metropolitan area. It highlights unintended consequences of progress- such as the design of the new facility that disconnects the medical team from the patients. It also hits the cumbersome regulatory compliance and defensive clinical documentation workloads of clinicians. The modest victory achieved by these residents in making ED patient flow changes stood in stark contrast to the empty, but desperately needed, wing of the ED closed to maintain the statutory patient-nursing ratio.
After the film Nathan White, MD, of the Department of Emergency Medicine at the UW School of Medicine, and Linda Riggione,RN provided commentary and responded to audience questions. Dr White said that the film accurately captured many of the issues facing emergency medicine. Ms Riggione represented a nursing perspective and noted that the film could have shown more of the roles of nursing and the allied health professions. One question from the audience was about the impact of the Affordable Care Act on Emergency Departments. Dr. White said that while some had predicted that ED utilization would decrease as a result of greater access to primary care, that this has not occurred. He said that ED utilization has in fact increased because people now have health insurance. He pointed out that ED’s are open 24×7, you don’t have to have an appointment, and are often more convenient for some populations than going to the doctor’s office. ED utilization is going up.
In response to a question abut where the opportunities for innovation are in emergency medicine, Dr. White mentioned a UW startup company making a microfluidic device that will detect blood clots. Dave Chase also responded with the observation that many of the innovations needed are upstream from the ED, and pointed to Iora Health as a company that is innovating with a new patient-centered model that through preventive health can avoid some patients from having to go to Emergency Departments.
In the networking portion of the meetup I had a chance to speak with two nurses from a major ED in the Puget Sound area and asked for their response to the documentary. One of them responded with a very nuanced answer. She chose her words carefully. She said that for those things that it covered it was true. I sensed that there was a deeper answer and asked where the holes were in the documentary’s coverage. “There is a lot more that goes on in an ED than what the residents do”, she said. When I asked about the portrayal of the nursing staff as barriers they both weighed in. I sensed that there was a bit of sadness in their measured remarks about the missing other unsung heroic roles in the ED.
This was the 8th Seattle Health Innovators meetup. We’ve been holding community-building events since June 2013. To join the distribution list for the next Seattle Health Innovation Forum sign up here.