General Catalyst’s healthcare plans raise concerns over patient safety

Venture capital (VC) firms typically inject money into startups to get them off the ground. But General Catalyst, which was founded in 2000 and is now one of the largest VC firms in the US, has plans for a different kind of partnership: acquiring and operating a health system.

In early October, the VC firm created a healthcare company called the Health Assurance Transformation Corporation, or HATco, co-founded and helmed by former Intermountain Health CEO Marc Harrison, and announced HATco’s intention to buy a health system.

“HATCo’s charter is not to disrupt healthcare systems; rather, it is to be in service of healthcare organizations everywhere to change how they deliver a fundamentally better experience for consumers—and to prove the transformative effect of a true partnership between technologists, caregivers and capital,” Harrison and Hemant Taneja, CEO and managing director of General Catalyst, wrote in a blog post.

General Catalyst is not new to the healthcare space; it has partnerships with more than 20 health systems that cover more than 15% of the US population. But owning a health system is a different ball game, and some healthcare experts are concerned that a health system that’s owned and operated by a VC could come with negative ethical consequences for patients.

“The evidence shows that there are conflicts of interest. If you’re pursuing profits, then that can sacrifice patient safety and patient quality,” Christopher Robertson, a professor of health law, policy, and management at Boston University, told Healthcare Brew. “I would worry that a venture capital firm could pull a healthcare system so hard trying to eke out so much profit that it really does undermine patient care.”

General Catalyst has yet to publicly share many details of what HATco’s ownership model would entail, or when with whom a potential acquisition would be made. Spokesperson Sue Kwon told Healthcare Brew the company has no additional information to share beyond what’s in Taneja and Harrison’s blog post, but said HATco “should have news in Q4 of this year or Q1 of next.”

Ethical concerns

The health system HATco wants to acquire would serve as a “testing ground” for the health tech developed by companies under General Catalyst’s portfolio, Stat reported.

“You don’t have to buy a hospital system to test new medical technologies,” Robertson said. “There’s more of a question in my mind why they feel like they need to own the healthcare system in order to do what other companies have been doing for decades.”

Perhaps, Robertson offered, what General Catalyst intends is to “have a place where they can diffuse innovation, where they can bring more widespread use of technologies that have already been tested scientifically.”

That could help hospitals adapt more quickly to new and improved technologies. Plus, it would be beneficial for health tech developers to get a better inside look into hospitals, Robertson added.

“If we can get devicemakers more fully integrated into the healthcare system, then they might be able to more quickly spot problems and more quickly solve the problems and more quickly innovate around the problems,” he said. “Those sorts of synergies, in theory, could be a good thing.”

But, he continued, “that’s not to ignore the very severe risks created by this sort of relationship as well.”

Besides profits being placed above patient safety and quality, another concern is that General Catalyst may be “pushing the use of technologies” on hospitals before the tech is ready to be used in a patient setting, Robertson said.

“That could be one particular mechanism through which this conflict of interest becomes problematic,” he said.

Ultimately, “there’s no perfect way to design a hospital system in the US,” Robertson said.

What’s important to him is that General Catalyst sets up a “robust compliance practice with independent physicians running the medical practice […] and deciding who gets to join the staff.”

“They should model their hospital around those ideas that really separate the business functions of the hospital from the medical decision-making,” Robertson said. “That’s a way to reduce the conflicts of interest.”