Can the PayPal Mafia Fix Health Care?

Last week, the Health 2.0 venture Practice Fusion held its second annual Connect conference in San Francisco. Practice Fusion is an exciting business for a few reasons:

• It provides a free electronic health record (EHR) to physicians and allied health providers.
• It’s completely independent of the “legacy” healthcare business. (Competitors include stalwarts AllScripts and Cerner.)
• It’s attracted investment from Peter Thiel’s Founders’ Fund and similarly enterprising venture capitalists. It’s now got $40 million of capital.
• It’s led by a classically heroic entrepreneur: Ryan Howard ran the company on his own credit card for four years, nearly missing payroll, and was only saved by a legal payout related to a motorcycle accident.
• It got Dr. Farzad Mostashari, MD, the National Coordinator of Health Information Technology, to give a speech (via Skype) praising private enterprise in health IT. And he’s an Obama appointee!

There’s a lot to like about Practice Fusion.

At the conference, the CEO reported that the platform now contains 25 million health records, three times more than the Veterans Health Administration or Kaiser Permanente. However, it’s not quite clear how many physicians this covers. (The thread of comments below TechCrunch’s Josh Constantine’s article reflects a wide range of intelligent opinion, including a low estimate of 2,000 daily users by The Health Care Blog’s Matthew Holt.)

Plus, there’s the question of whether Practice Fusion’s EHR data would be as useful as others’ is. The VHA and Kaiser Permanente are integrated health systems. Their health records capture the entire range of patient experience. This may not be as true for Practice Fusion’s EHR.

This free EHR is encumbered only by a small ad at the bottom of the screen. Nobody to whom I spoke at the conference believes that these ads will bring in enough to build the business. Practice Fusion will have to sell the data. This is surely why Palantir Technologies, a cruncher of Big Data, presented at the conference. Palantir is also funded by the PayPal mafia.

The people who most want/need these data are Big Pharma. But they already get it from suppliers like IMS Health, which package data from pharmacies. What does Practice Fusion promise to add to the mix?

It was also apparent at the conference that Practice Fusion’s target market is sole practitioners and small groups. But few of these will survive Obamacare. Practices small and large are being bought by hospitals and health plans, and most observers agree that few independent practices will remain if Obamacare survives its legal and political challenges. (Not that these roll-ups are a good thing. Consultant Jeff Goldsmith has a devastating critique of them here.)

Furthermore, although there was no scheduled Q&A, users in the audience peppered the VP of Engineering (Matthew Douglass), the VP of Product Development (Edwin Miller), and the Medical Director (Richard Rowley, MD) with questions during their presentations—even interrupting them in mid-sentence.

The boisterous questioning seemed prompted by a need amongst the users to build confidence that their use of Practice Fusion’s EHR would result in their earning $44,000 each in “meaningful-use” payments offered by the federal government. Indeed, this is a key selling point exploited by Practice Fusion: Its EHR is not only free—you earn money by using it!

I’m not saying that this was the only priority communicated by the crowd. Indeed, yelps of joy erupted when the beta version of the EHR for the iPad was demo’d. (Of course, liking your iPad and actually using it in clinical practice are very different things. The latter has a sketchy record.)

Another interesting future feature will be the ability to book appointments online, also announced (but not demo’d) at the conference. Of course, this is what ZocDoc (the topic of an earlier column) does. And ZocDoc is—like Palantir and Practice Fusion—funded by the PayPal mafia!

This impressive constellation of healthcare ventures invites the question of whether their investors are encouraging more formal collaboration between these firms. If these three could come together to offer a more comprehensive suite of products and services while still venture-financed, their promise of disruption would become even more compelling.