“Health 2.0 has the promise to change the healthcare industry,” the conference’s opening keynote speaker Mark Smith, president of the California HealthCare Foundation, told the audience on Monday.

Smith also asserted that health reform is necessary for innovation and vital to the success of Health 2.0 entrepreneurs’ business model because the current system is set up to pay for volume.

Launched in 2007, Health 2.0, stages an annual conference focused on innovation and on tools aimed at helping consumers manage their health and connect to care providers.

California HealthCare Foundation (CHCF), a nonprofit grant-making philanthropic organization, has set up an innovation fund so companies can “innovate, spread and change the world,” Smith said. The fund was created, he said, because “I’m tired of seeing successful pilots die on the vine.”

Despite the success of a grant-funded pilot, academic entrepreneurs often move onto the next grant opportunity, according to Smith. CHCF hopes its efforts will help entrepreneurs “try to find a way to build a business model.”

The good news is that technology is maturing and policy to support these initiatives is evolving, Smith said. The bad news is that technology is not the obstacle. Rather, guild rules, payment rules and culture are the obstacles. The other bad news is that the industry is running out of time, he said. Despite widespread bipartisan agreement that the system is broken and needs to be fixed, the cost of healthcare is continuing to escalate and the fiscal future of the country relying on healthcare reform.

Smith offered areas of opportunities for innovators:

• Solutions should address cost, but they shouldn’t merely shift cost. Until reimbursement reform eliminates the “perverse incentives” for payment, entrepreneurs need to understand which stakeholder’s money is being saved.
• Entrepreneurs should innovate in a way that makes the healthcare system more convenient for patients. They need to understand, however, that the value proposition of patients may “represent a threat to the existing order,” Smith said. He cited Kaiser Permanente’s shift of educating and marketing its electronic health record system from the providers to the patients because the EHRs delivered value for patients.
• Solutions that enable rapid learning for providers addresses the under-learning problem that currently exists because there is so much data being generated that is taking providers too long to consume. Being able to turn massive data into information and then learning “is a big priority,” Smith said.
• Finally, the enrollment of the uninsured – numbered around 35 million – beginning in 2014 creates huge challenges for payers. Solutions will be called on to address when and how the newly ensured will want to sign up.

“Health 2.0 is on the verge of taking off,” Smith said, because of the mature technology. Affordability, accessibility and improved quality and outcomes will drive Health 2.0 solutions, he concluded.