Point of View

Adopt emerging tech before it becomes table stakes

June 17, 2021

Digital health—a class of health-focused technologies including mobility, health IT, wearables, telehealth, and personalized health—is at the beginning of the end of its journey. The end is near—not because digital health is becoming obsolete but because its underlying technologies are maturing and providers are exploring and adopting new and different technologies. So, where do you, healthcare enterprise, find yourself on that journey? And can you leverage digital health to improve the Triple Aim (cost of care, health outcomes, and experience of care) before it is too late?

Digital health underpinnings are losing their market differentiating aura

The underpinnings of digital health are merging technologies, such as artificial intelligence (AI), blockchain, IoT, and quantum computing, among a suite of other impactful technologies. On the back of these emerging technologies, digital health has developed fascinating solutions such as Kyruss for patient engagement, Moderna’s mRNA success with COVID-19 vaccinations, and Ginger for mental health. Enterprises have been steadily adopting new technologies for a variety of administrative (claims, billing) and care (utilization, coordination of treatments) functions.

A recent HFS Research Pulse survey indicated that healthcare enterprises were either implementing or had scaled 65% to 75% of their investments in emerging tech (see Exhibit 1).

Exhibit 1: Healthcare enterprises exhibit material emerging tech implementation and scaling

* includes machine learning, deep learning, computer vision, NLP/NLG
** includes predictive and prescriptive analytics
Sample: 800 respondents from Global 2000 enterprises
Source: HFS Research Pulse, April 2021

Healthcare enterprises across the ecosystem have been steadily investing and scaling emerging technologies. The same HFS Research indicates that healthcare enterprises expect to increase their investments in emerging technologies between 75% and 85% over the next 12 to 18 months. However, the question remaining is if the pace of adoption aligns with differentiation or with industry-wide standard operations.

Without sustainable outcomes, investments in digital health will experience fatigue

Investments in digital health have increased significantly for several years due to market enthusiasm driven by ideas designed to help expand enterprise footprint, differentiate, disintermediate the status-quo, allow consumers more control over their health, manage specific disease conditions (mental health, diabetes), or just be the cool new toy. According to Rock Health, the investment frenzy reached new heights in Q1 2021, attracting as much money in 90 days as it did in 2018 or 2019 (see Exhibit 2).

Exhibit 2: Investors have deployed serious money has been deployed into digital health

Source: Rock Health

As exciting as digital health has been, it is still finding its success anchor
There have been some high-profile M&A activities for digital health firms, including Amazon’s $1 billion acquisition of PillPack in 2018, Teledoc’s Livongo acquisition late last year for $18.5 billion, and Walmart’s foray into telehealth with its recent acquisition of MeMD in May 2021.

Startups have attracted significant investments in 2021, including Ro, a telehealth and online pharmacy company raising $500 million; Insitro, an AI-driven drug discovery company raising $400 million; Forward, a tech-enabled primary care enterprise raising $225 million, and the list goes on. Holon IQ estimates that there are some 60+ digital health unicorns (companies with valuations of greater than $1 billion) around the world with a combined valuation of more than $125 billion.

While there have been many financial success stories, this level of investment enthusiasm is unlikely to last which presents an opportunity for legacy healthcare enterprises to leverage digital health startups, accelerate their adoption of emerging tech, and materially improve the Triple Aim. Some legacy enterprises have developed venture funds, such as Cigna Ventures, Kaiser Permanente Ventures, and more, with millions of dollars earmarked for digital health investment. While the investment may be available, operationalizing and scaling have been a challenge; it can be addressed by unshackling the traditional mindset and adopting a more agile approach.

The financial successes have not translated into healthcare successes… yet

Anchoring on the Triple Aim as success metrics, we can see no evidence suggesting digital health has successfully moved the needle. There is no evidence to suggest that it has made it any worse, either; however, the amount of money pumped into the segment for close to a decade should have resulted in some appreciable positive impact at the health consumer level and beyond (see Exhibit 3).

Exhibit 3: The runaway train that is the cost of care and chronic conditions in the US

Digital health is an amalgamation of interesting ideas that solve one challenge at a time. There is nothing wrong with that, except it is in an industry where coordination and integration are an effective way forward. The response to COVID-19 surfaced many examples of coordination and integration, such as Pfizer partnering with Moderna, a digital health company, to leverage AI and accelerate vaccine development.

Consider health and healthcare having remained sub-optimum due to a focus on treatment vs. prevention, a lack of coordination of treatments, and overindulgence of bad food, and medication. While digital health has attempted to solve for the Triple Aim it has not been done in any coordinated fashion, exacerbating the industry’s challenges.

Unless digital health can adopt a more structured industry-wide view that includes collaboration with legacy enterprises, it will chalk up individual victories instead of a team win. The lack of sustainable improvements to healthcare could be the legacy of digital health as we pivot to the next wave of emerging technologies.

The Bottom Line: Digital health companies and legacy healthcare enterprises across the ecosystem must form meaningful partnerships to optimize their investments in emerging tech and expand use cases to make a material impact on the Triple Aim

Digital health financials suggest that legacy healthcare enterprises have some serious competition breaking the shackles of the status quo. We have seen some of that with Oscar and Bright Health reforming health plans, Babylon and Forward shaking up providers, and Syntekabio and 23andMe pushing life sciences. However, to scale and disrupt is a challenge by itself. It comes down to the collaboration between legacy healthcare enterprises that bring scale, and the disruptive bones of digital health. Can they do it with a sense of urgency? If so, we are cooking now!

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