Betting on Health Care Start-Ups That Cut Costs

from The New York Times Bits Blog – by Claire Cain Miller

Biotechnology and medical device start-ups typically take many years and a lot of money to get to market. But Chrysalis Ventures, a venture capital firm in Louisville, KY., takes a different approach to health care investments.

Instead of backing the discovery of new drugs or the creation of new medical devices, Chrysalis searches for health care start-ups that make treatments more productive or make information about health care more cost-effective and accessible to patients.

And though no one is quite sure what the health care reform package that comes out of Washington will look like, companies that help patients while lowering costs will likely benefit, said David Jones, chairman and managing director of Chrysalis Ventures.

“Whatever form health care reform takes, we believe companies that can improve the productivity and efficiency of improvement of health care services and avoidance of medical problems are going to prosper, and we’re putting our money behind that belief,” Mr. Jones said.

One start-up in which the firm recently invested is called Achieve. It helps people who are struggling to pay their medical bills create a personalized budget that incorporates their credit card bills and other debt. “It makes medical services more affordable to consumers and reduces bad debt costs to providers,” Mr. Jones said.

Another is called CerviLenz. It is a simple device, cleared by the Food and Drug Administration, that helps determine the likelihood that a pregnant woman will have a pre-term birth. That is a problem that costs the health care system $26 billion a year, Mr. Jones said. But if it is diagnosed early, doctors can use progesterone to prevent some of the early births.

In October, another Chrysalis portfolio company, HealthMedia was acquired by Johnson & Johnson. HealthMedia provides health coaching for patients, but over the Web. Patients with chronic diseases or those who want to prevent diseases can go online or get text messages that help them lose weight, remember to take their medicine or manage diabetes, for example. “It automates what would otherwise be a nurse on the phone,” Mr. Jones said.

Chrysalis has $400 million under management and closed a new, $175 million fund last year. While most venture firms are cutting back on investments this year, Chrysalis figures that these cost-saving technologies will be in more demand than ever. The firm usually invests in five new companies a year, but this year will probably back eight. Most are in the Midwest or the South.

“We really do feel it’s an attractive time to put money to work in the kinds of companies we’re looking for,” Mr. Jones said.


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