Why Israel Has Become the Perfect Health Tech Incubator

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Dr. Yossi Bahagon, a family physician and Managing Partner at Israel’s first digital health VC fund, talks about patient-centered healthcare, new companies to watch, and why Israel is a unique place to start a med tech company. Interview by Logan Plaster

Telemedicine: I’m interested in hearing from you about a couple of companies or technologies coming out of Israel that you are particularly excited about or inspired by.

YOSSI BAHAGON: There has been a lot of hype around digital health and telemedicine in the last five years. In reality, the adoption of digital health technologies is not standing up to the hype. Some of this is because it’s an emerging field and buy-in by physicians is very early. So in spite of the hype, I believe we are still in the early days of this revolution. Talking about patient-centered platforms, talking about the integration of genomics into our day-to-day health, talking about utilizing artificial intelligence in our day-to-day healthcare and so on; this is still very, very early.

TM: What are the specific trends you’re seeing out of Israel?

BAHAGON: First is patient-centricity. Many organizations talk about patient-centricity but it’s by far not a reality. The usual model today even with regards to digital health is B to B to C. So, you have to go through the healthcare organization, whether it’s a provider or payer, and offer the value proposition through them. And then maybe they will take it to the end consumer.

Imagine a world where 30 percent of the transactions and interactions will be at the level of the end consumer. This issue hasn’t been cracked yet. More than 90 percent of digital health companies do it B to B to C, while the whole idea was to move the power into the hands of the consumer. When you say E-Health, many people think the E stands for the technology. I think that the E stands for the empowered patient, the educated patient, the enabled patient, the expert patient.

So for me, the E stands for me being at the center of the system. This can be translated to reality in many ways. It can mean connected devices that truly monitor me in a convenient way and transfer only clinically significant data to my provider. This can be a system that learns my habits and provides me with true insight and actionable recommendations that can affect my daily living.

Today, our clinical data is being utilized by our payers and by our providers who sell them to pharmaceutical companies, to medical device companies in anonymous ways. But since it’s my data, why am I not getting anything out of it? I’m talking here about the market of billions of dollars a year. The patient is not in the center.

TM: Are there specific companies that you see taking strides in the area of patient centrality?

BAHAGON: Let’s start with personalized disease management. A company named Dario developed a connected glucometer which connects to your Smartphone and provides insights both on the patient level and on the medical team level. There are many connected devices and there are several connected glucometers. What makes Dario different is not their solution – though you can argue they have a brilliant solution – but the fact that they are succeeding in selling this comprehensive diabetes management solution direct to consumers. Tens of thousands of people from all over the world pay out of pocket money because this solution brings them value that they don’t get from the traditional solutions that their payer and provider gives them.

Another example is a company named Sweetch, which translates your data from your smartphone into actionable recommendations in order to promote your physical activity and weight reduction. This platform learns your habits end-to-end without asking you any questions: Where you live, work, go to lunch, how your calendar looks. Based on that, it provides you “just in time, just in place” baby steps recommendations in order to increase your physical activity. Let’s say you have a 40 minute gap in your calendar. It might tell you to walk seven minutes to the nearest Starbucks, buy yourself a coffee and you’ll come much more alert to your next appointment. It takes the general notion of “you need to walk 30 minutes a day” and turns it into dynamic recommendations.

Another example is a company named TytoCare, which bridges the gap of enabling the physical examination of the patient when he’s remote. For the first time in the history of medicine, you can really check the patient from a distance. And all these pictures and sounds are recorded. And it’s the patient who owns them. And based upon these recordings, you can offer the next generation of Tyto, which is by analyzing these sounds and images. In several years, the patient will be able to put the Tyto on his chest and the device will hear his lung sounds and say: There is an 80 percent chance that you have pneumonia. The platform won’t replace the physician, but will serve as a clinical decision support, both for the physician and the patient.

TM: What makes Israel such a unique environment for health tech innovation?

BAHAGON: Israel is really a unique place with regards to the ability to develop disruptive healthcare solutions. Why? Because the Israeli healthcare system is 100 percent digital and has been for ten years. Health records have been digital for the last 15 years. For the last seven years, every citizen in Israel has been able to access his electronical health records or personal health records from his Smartphone whether it’s his lab results or his last discharge from hospital. I can log in and order my chronic prescription with a few clicks. And this is at the nation level. So things are a reality here that I would say will take the U.S. about five years to achieve. That makes Israel a living lab. It will take Europe about seven to ten years to come to this place. So things that we already are doing and the mistakes that we’ve already done and the successes that we already achieved are a great learning park for all the other countries that are going through this path.

In one of my previous roles, I was the founder and the manager of Digital Health Division the largest HMO in Israel. It’s an HMO that has 4.4 million members, 14 hospitals; 1,300 ambulatory clinics. It’s only second to Kaiser in the States. We built a system with a very patient-centric approach that is currently being used by over two million different patients each month, for over four million interactions each month. And the amount of knowledge and experience that you get regarding what works, what doesn’t work, was enormous. I had a group of people whose entire job was to go out into the clinics and hear the physicians: Where were the pain points? What do they think about the system that we developed? Are they afraid of this system? Are they empowered by this system? All this experience and knowledge is out there to be replicated by other countries.

The other aspect of Israel is that it simply has an innovation atmosphere. It has been called the “start-up nation” but that’s not just a slogan. Really, there is innovation in the air here. And you can find the roots for that in the fact that Israel is continually in survival mode. We live a good life, but it’s not like living in a place where everything is in place and nobody threatens you. Israel lives under a lot of threats and these threats create an environment where you need to innovate to survive.

The third component is the support of the government. There is an Innovation Authority in Israel that gives non-diluting funding for selected start-ups. Every industry needs someone that will believe in the young entrepreneur and give them the runway that they need in order to build a company when the risk is very high. And the Innovation Authority in Israel gives this runway for selected companies. They have a due diligence process in place. And selected companies get millions and sometimes tens of millions of dollars in non-diluting equity to realize their dream. And it is done not from the return on investment perspective. It’s done as a strategic move to leverage and to create this innovation and ignite this innovation environment.

TM: What can the American health tech community learn from Israel’s start-up mentality? How can we cultivate more of an “start-up nation”?

BAHAGON: It’s not that you can copy-paste what happened here in Israel. It’s never the same. The population is not the same. The culture is not the same. The payment methods are not the same. Everything is different. But the most important thing I would say is to learn to listen. Both sides – not just them listen to me but also me listening very, very carefully to what they say. And if you are not in a true listening mode, bi-directional, it will fail for sure.

TM: What has been your experience in terms of entering the U.S. healthcare market? 

BAHAGON: The U.S. is a really great place for digital health because the system is becoming more and more digital. They have the budgets in place. Everybody understands the value proposition. On the challenging side, there is a lot of noise in the U.S. Meaning, even if you come with a great team and with a great solution, you will find 20 more companies claiming that they do the same thing that you do, whether they do it or not. At the end, I believe the leaders will show themselves and stand out in the crowd. That’s the reason why companies, in order to stand out, need to raise tens of millions of dollars. And when you raise these amounts of money, it becomes a chicken and egg problem. Now you have to sell your product at a very high price in order to bring the money back to your investors and to survive.

TM: Is there a way around that vicious cycle?

BAHAGON: What I recommend – and this is not trivial – is that start-ups try and go global as fast as they can. Sometimes they say, “Listen, I don’t have enough money to go global. It will defocus my efforts.” And I’m not saying it’s easy to go global. But if you want to go only to the U.S. market, take into account that you will need $30 million to start with. If you think globally, maybe you can create your initial penetration in easier, cheaper countries and then penetrate the U.S.

TM: What’s a practical way to collaborate internaionally?

BAHAGON: One of the ways is definitely OurCrowd. OurCrowd is currently the most active VC in Israel, by far. Allen Kamer – a successful digital health entrepreneur himself who sold his last health analytics company to United Healthcare – and I established this digital health fund a month ago. We keep a database of all the digital health companies in Israel. The second resource that I would recommend is an organization named Start-Up Nation Central, which is a not-for-profit organization that gives a bridge to outside investors, organizations, in healthcare and beyond. The third way is through the Authority of Innovation in Israel. It’s a small community. So, we all know each other. We brainstorm from time to time on how to raise and grow this industry in Israel.

ABOUT THE AUTHOR

Co-Founder / Editor-in-Chief
Logan has created, edited and designed healthcare publications since 2005. After redesigning and managing Emergency Physicians Monthly, he founded Emergency Physicians International in 2010, and then launched Telemedicine Magazine in 2015. Logan is the co-founder of The mHealth Toolbox, a project that brings practicing physicians into the conversation about innovative medical technology. Logan also serves as the Director of Communications for The IFEM Foundation, the leading non-profit supporting global emergency care development.

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