5 questions with Albert Waxman

Long before President Obama announced the need to digitalize medical records, Albert Waxman’s firm Psilos Group Managers invested in Active Health Management Inc., a provider of electronic medical record management, in 1999, putting $8.5 million into the company.

Active Health raised more than $72 million in total venture financing before Aetna bought the company for $400 million in 2005.

Today, Waxman looks to invest in companies that aim to solve the high cost of health care. PE Week Reporter Martha Sanchez-Avila recently caught up with Waxman to talk about his insight in the growing potential of investing in the health care industry.

Q: What is the best place for VCs to invest in health care?

A good way to start is to identify the most costly problems in health care. For instance, there’s the high cost of treating chronic diseases. Several patients make too many return trips to the hospital. We need to enable the chronically ill to take an active role. If we fix the problem, we can save about $100 billion dollars. Those savings would free up money to subsidize the under-insured. We need a system to move the care from the hospital to the home. There is great opportunity there.

Q: What other health care investment opportunities are out there for VCs?

There is a serious amount of redundancy and error in health care. For example, people have multiple doctors who order the same test or order conflicting medications. Unfortunately, people do not go around with their medical health history folded up in their pockets. We need a well-secured methodology for the patient to control their own health records. President Obama already provided incentive through the stimulus package which will spark interest in electronic medical record management companies.

Q: Are there too many medical errors taking place?

: There is a huge amount of medication error in hospitals. Those errors cause extended stays, costing more money. Eliminating those types of mistakes could save us tons of money. There is no one giant sweeping thing to fix the problems.

Q: What’s the ideal use of technology in health care?

I am a big fan of technology. We should focus on developing technology and use it to reduce health care cost. We ought to drive science and health care. The 1980s and 1990s represented a time of amazing information-based productivity growth. Now we should focus on the huge opportunities in informational medical devices. Big companies like General Electric and Intel and Cisco are working on devices such as monitoring devices at home patients, for example.

Q: What are you working on now?

I’m working on a company called Health Hero that deals with the poor care that the chronically ill get. Their answer is a remote monitoring delivery system. Health Hero uses a small device that looks like a smart phone and which has four buttons on it. It asks automated questions everyday, such as ‘How do you feel today?’ and ‘Have you taken your medicine?‘ It will also ask questions specific to the chronic disease. It keeps the patient involved and reminds them to take action in monitoring their own health. We found that over 95% of people respond to the machine.

The company is working with Medicare and is already installed with hospitals in the Pacific Northwest. The system saves larges amount of money, and lowers the re-hospitalization rate by 70% to 80 percent.