Two cities are trying to become digital health hubs and create their own Silicon Valley.
Economic development leaders in Kansas City, Missouri, and Fort Worth, Texas, want to foster an environment that will attract digital health entrepreneurs and investors, adding their municipalities to the list of cities building healthcare tech ecosystems.
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Maria Meyers, executive director of University of Missouri Kansas City Innovation Center, said she was at a healthcare investor conference when she realized Kansas City’s place in the digital health economy lagged behind similar-sized cities.
"Someone stood up and said, ‘We invest in digital health companies and we like Silicon [Valley]-esque markets like Salt Lake City, Nashville [Tennessee], Research Triangle Park [in North Carolina] and Minneapolis,'” Meyers said. “That was the list that Kansas City should have been on. We’re one of the birthplaces of [health tech] dating back to 1979 and Cerner.”
Since Oracle bought Cerner in May 2022 for $28.4 billion, the company has drifted from its Midwestern roots. Cerner’s user conference, renamed Oracle Health, moved from Kansas City, where the legacy health IT company had been, to Las Vegas in 2023 and will be held in Nashville this year. While Oracle Health still employs more than 10,000 in the Kansas City region, the company closed two of its Kansas City-area campuses in November 2022 and has conducted layoffs over the last few years.
Cerner’s longtime presence in Kansas City has meant a lot of health IT talent in the region, even if they no longer work for the company. Meyers reached out to Dick Flanigan, a longtime Cerner executive who left the company in July 2022, to launch Digital Health KC in March 2023. The nonprofit organization aims to increase collaboration among existing companies, launch 20 digital health startups in the region within the next three years and help 10 companies become ‘unicorns.’
In November, the organization received a $4 million grant from the Patterson Family Foundation, the Ewing Marion Kauffman Foundation and the U.S. Commerce Department for the initiative.
Flanigan and Meyers have looked at how other cities, including Nashville and Raleigh, North Carolina, have attracted digital health and other tech companies. Flanigan said the development of other digital health markets has been driven by organizations that promote networking through meetups and events. That’s what he said he envisions Digital Health KC doing for Kansas City.
“We connect ideas to talent, talent to companies, companies to capital and those companies with capital to the market,” Flanigan said. “There is a progression from idea to market validation and growth. Ecosystems that naturally occur somehow find a way for smart people to connect with other smart people [who can then] find money, build companies and go to market.”
Kansas City also offers tax incentives to companies, although not specifically focused on healthcare. One incentive offers companies relocating to Kansas City the ability to retain a significant portion of employee withholding taxes.
It’s not an easy task, though, Flanigan said. Metropolitan Kansas City has fewer than 3 million people, or less than 1% of the overall U.S. population. A smaller market means a smaller test market for digital health companies.
As such, convincing investors and entrepreneurs to set up shop in Kansas City can be a challenge but it's gotten easier as investors look beyond the coasts, he said. The organization is interested in working with health systems in the area, including University of Kansas Health System, to provide a testing ground for these companies.
Can physical therapy be bigger in Fort Worth?
Economic development leaders in Fort Worth, part of the nation's fourth-largest metropolitan market, are less likely to run into population problems. But they struggle to connect digital health entrepreneurs and the local investor community.
“The biggest challenge is the amount of capital that you can tap into locally so that you're not just having to go and raise capital in other locations,” said Hayden Blackburn, executive director of TechFW, a Fort Worth nonprofit organization focused on helping area startups.
Other Texas cities such as Austin already are known as tech hubs. Luke Hejl, CEO of virtual care company TimelyCare, said he spent most of his life in Austin but was recruited to Fort Worth for another company. When he started TimelyCare, a telehealth platform for college students, in 2017, he chose Fort Worth because he thought it would be a good place to grow his business and raise his family.
He said what’s also helped is the support he’s received from Blackburn and other economic leaders. And the city’s medical innovation district offers a lot of potential collaboration with providers and other companies.
“I can look out the window and see we've got the new Texas Christian University medical school across the street,” Hejl said.
The Anne Burnett Marion School of Medicine at Texas Christian University will open in the summer. The district is also home to more than 40 healthcare-focused companies.
Cameron Cushman, vice president of innovation ecosystems at the University of North Texas Health Science Center, sees Fort Worth as a hub for physical therapy startups. Along with the fact that UNT Health Science has a physical therapy school, he said it’s an area of medicine that’s ripe for disruption.
“The physical health and physical therapy innovation capital of the world is not really a subset of healthcare that any city owns,” Cushman said. “We think that's a unique opportunity for us to go after.”
As part of that push, UNT Health Sciences has launched a physical therapy health accelerator with investor and startup support company TechStars. In September, the accelerator elected 10 startups to work within the city's medical innovation district.
Fort Worth also offers tax incentives that are equipped for healthcare-focused startups. Specifically, it offers to reimburse up to 50% of a company’s qualifying research and development expenses performed within the city limits. Those credits can also be transferred to another business entity.
Neighboring city Dallas was named as one of three hubs in medical innovation by the Health and Human Services Department’s Advanced Research Projects Agency for Health, along with Cambridge, Massachusetts, and Washington D.C. It all adds up, Blackburn said.
“Even in Texas, the difference between Austin and Dallas/Fort Worth, is that we have so many hubs of innovation across our region that connect us to each other,” Blackburn said.
