PathologyWatch’s Regulatory Navigation Playbook: A Guide for Healthcare Tech Founders
Healthcare regulations are often seen as innovation’s biggest obstacle. But in a recent Category Visionaries episode, PathologyWatch CEO Daniel Lambert revealed how understanding and embracing regulatory complexity became a key differentiator in their journey to transform pathology diagnostics.
The Regulatory First Approach
When asked what advice he’d give to founders starting healthcare companies today, Daniel emphasizes the importance of thorough regulatory preparation: “Really reading up on how the FDA thinks about AI and stark laws and sunshine act and anti kickback laws and Medicare billing laws, getting a very good understanding of how many legal opinions were going to be needed to grow a company like this.”
This isn’t just about compliance – it’s about understanding the landscape well enough to build a viable business model within it.
The Pre-Revenue Regulatory Checklist
Before PathologyWatch could even begin selling, they had to clear several regulatory hurdles. As Daniel explains, “Since we work in healthcare, we actually had to get the insurance contracts first. So there was a sequence of setting up shop, getting on the insurance plans, and then going to the first dermatologist.”
This methodical approach meant investing significant time and resources before generating any revenue, but it proved crucial for building a sustainable business.
Laboratory Regulations: A Hidden Complexity
Beyond the obvious healthcare regulations, PathologyWatch had to navigate specialized laboratory requirements. Daniel notes, “Laboratories are regulated by an organization called CLIA. Understanding what they’re looking for too, and how they’re thinking about digital pathology, I think that would have been helpful.”
This multi-layered regulatory environment influenced their entire business model, leading them to build their own labs rather than just developing software.
The Patience Principle
One of the key lessons Daniel emphasizes is the need for patience when building in regulated markets: “Sometimes you can’t move at lightning speed. We face a wall of regulations, some things that were made for other parts of healthcare that end up impacting Pathology.”
This slower pace, while frustrating for startup founders used to rapid iteration, actually helped PathologyWatch build deeper competitive moats.
Turning Regulations into Advantages
PathologyWatch found ways to use regulatory compliance as a competitive advantage:
- Transparency in AI Development: “We have several published studies that shows exactly what the AI got right and what the AI got wrong… We also published all of our flaws, too. Yeah, I think that’s a really important part, especially in healthcare.”
- Integration Capabilities: By understanding regulations around medical records and data sharing, they built seamless EMR integrations that became a key selling point.
- Trust Building: Their thorough understanding of regulations helped build credibility with healthcare providers, leading to 180 clinic partnerships in just two and a half years.
The Future Perspective
Looking ahead, Daniel sees regulatory expertise as crucial for industry leadership: “I think that we’re publishing standards of how digital Pathology is done.” This positions PathologyWatch not just to comply with regulations, but to help shape how they evolve.
For healthcare tech founders, PathologyWatch’s experience offers valuable lessons about the strategic value of regulatory expertise. Rather than viewing regulations as obstacles to be minimized, they can be seen as opportunities to build competitive advantages that are difficult for others to replicate.
As Daniel’s experience shows, success in regulated markets often comes not from finding clever workarounds, but from embracing complexity and building solutions that truly address both regulatory and customer needs. The key is investing time upfront to understand the regulatory landscape thoroughly enough to innovate within it effectively.