How Toronto’s PocketHealth learned to sell technology to cash-strapped Canadian hospitals

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Canada’s publicly funded health care system is a notoriously frustrating market for domestic medical technology vendors to crack. Many complain they can’t land a sale in their own backyard because of stingy, risk-averse buyers, despite success abroad. It’s a problem that has surfaced in several government reports and that no one seems able to solve.

But for Toronto’s PocketHealth Inc., it’s a different story. The six-year-old startup, whose software enables patients to receive digital medical images from health care providers over the internet, has been installed by 400 health care centres in Canada – and nearly 90 per cent of imaging providers and hospitals in Ontario, including Toronto’s University Health Network and William Osler Health System and McMaster Children’s Hospital in Hamilton.

They not only did so willingly, they’ve also spread the word to others who have since adopted it. “It was a no-brainer for us,” said Mike Sharma, director of diagnostics with Niagara Health, which brought PocketHealth to his employer’s five centres after adopting it at previous employer North York General Hospital. “They banged on the doors, got in, then through word of mouth it reverberated throughout our community.”

Now, after establishing a toehold south of the border, too, including in five California centres operated by giant Universal Health Services, PocketHealth has raised $20-million in venture capital. The funding was led by U.S. growth equity firm Questa Capital and backed by past investor Radical Ventures. “They’ve made a very slick, efficient consumer-friendly platform and figured out the right way and value proposition to sell it,” said Questa’s Washington-based managing partner Ryan Drant.

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How has a domestic vendor to the health care system succeeded here where many have failed? By offering what Mr. Sharma calls a “no-brainer” proposition.

The default situation at most hospitals is antiquated: They deploy staff to spend hours a day burning images onto CDs, which patients then have to retrieve to pass on to their doctors and specialists. PocketHealth co-founder and chief technology officer Harsh Nayyar discovered this was how things worked in 2013 when he received images while employed in Silicon Valley. So he and his brother Rishi, now chief executive officer, set out to provide a bit of innovation and solve a lot of problems for both hospitals and patients.

Their solution was to build an online file-sharing system that hospitals could use to replace their CD burners – and give it to them free. It would be secure and interface with their image archiving systems, and hospitals could then refer patients to a URL where they could download their images for $5.

“We were competing against CD-ROMs,” Rishi Nayyar said in an interview. “Nobody wants them. I was literally saying, ‘Delete your CD burning line item from your budget, take those staff burning CDs now, and move them to the front desk or into patient care.’ ”

It was a compelling pitch to cash-strapped Ontario public hospitals that typically have little flexibility in their operating budgets. It enabled them to free up resources since they no longer had to buy blank CDs or mail them out. Mr. Sharma estimates the switch to PocketHealth has saved Niagara more than $100,000 a year in materials and staff costs.

As for patients, they not only saved time and effort travelling to hospitals to pick up CDs, but, in many cases, they also more than offset their costs to get there by ordering online – and didn’t have to keep track of another physical item.

Unity Health Toronto, which oversees St. Michaels Hospital, St. Joseph’s Health Centre and Providence Healthcare, was one of PocketHealth’s first customers. By 2019, St. Joseph’s had shut down its film library, reusing the space for angiography and redeploying staff to other tasks.

Dawn-Marie King, Unity’s senior director for labs and imaging, figures Unity saves $120,000 to $150,000 a year using PocketHealth. She noted other technology vendors often come with preconceived products that don’t quite fit what hospitals need, or presuppose they can afford costly installation or licensing fees. With PocketHealth, “We didn’t have to find capital dollars, which is really hard to do in the Canadian health care system” she said.

“It’s an amazing business model but more importantly a solution that works for everyone on all sides of it,” said Jordan Jacobs, managing partner with Toronto’s Radical Ventures, which invested US$6.5-million in PocketHealth in 2020.

Even so, sales were slow going in the early years. “Everybody was like, ‘CDs will be around forever,’ which to us is absurd,” Mr. Nayyar the CEO said. “Change is really hard in health care.”

But demand picked up thanks to word of mouth, and mushroomed in 2020 as health care centres scrambled to find alternatives to get images to patients during lockdowns.

PocketHealth is now offered by 150 organizations – up from 60 in 2020 – at 550 sites and has been used by 600,000 patients. Revenue for the 60-person company has grown sevenfold in two years, PocketHealth says, though it doesn’t disclose revenue.

With its new financing, PocketHealth is looking to expand into the United States, where Mr. Drant said, “We’re convinced the value proposition is at least as good if not better” than in Canada.

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