What does success mean for a digital health startup?
Ginger.Io was one of the forerunners of the digital health movement and a pioneer in behavioral health care tech. They built the first successful mobile behavioral health platform, fueled by passively and actively collected patient data, run on analytics, aimed at both clinicians and patients. They became an exemplar for the industry as they built momentum with a steady drumbeat of research papers and provider pilots; Their steady progress culminated in a $20M series B fundraising round 18 months ago.
However, those big rounds come with tough questions around revenue, profit, and scalability. Today, the uniqueness of Ginger’s approach has faded – we’re awash in personal health data platforms and proprietary algorithms. Six years removed from the passage of the Affordable Care Act, the provider market for digital health tools has been slower to open up than hoped, nowhere less so than the behavioral health care system. After numerous pilots, building a recognizable name, and landing a funding round, Ginger has now earned their next challenge: Redefining their own parameters for success.
Earlier this spring, Ginger revamped their website. It’s tricky to characterize their overall shift – it’s somewhere between a pivot, a rebranding, and a narrowed focus. Given their reputation as health tech stalwart that’s successfully navigated the last several years, many are curious: What have they changed? Why did they do it? And what does it mean?
What have they changed?
Coaches: After successful pilot work with Verizon and the Centerstone Research Institute, Ginger has added coaches as an official offering to complement the automated interactions in the app. In buzzword parlance it’s the “high tech, high touch” approach popularized by Twine, Iora, and many others.
Video: This is new, and separate from the coaches. The coaches interact with patients, review data, and then serve as an internal referral into in-app video chat sessions with licensed therapists.
Branding Tweaks: Ginger’s new front page boldly declares their target patient population: those with anxiety and depression. They’ve always focused on clinical grade cases in their pilots and publications, rather than lighter acuity cases (see Joyable’s site as a contrast.) But the directness of their new public messaging suggests they’re now seeking out patients who are seeking out help.
Employer Market: The only target customer on their website is payers and employers. Given their exhaustive list of Alpha provider partners – Duke, Partners, Kaiser, UCSF to name a few – this is noteworthy. Their new growth strategy appears to be to rack up subscription licenses across corporate America’s benefits packages.
Why Did They Do It?
Employers are in: As evidenced by the telehealth land grab, the employer market remains easier to navigate and penetrate than the world of health systems. A typical subscription access deal in this segment generates up front revenue that dwarfs income from actual utilization – look up Teladoc’s latest financials as an example. Macro trends also suggest a near-term future of higher deductibles and more consumer-driven health care in the employer market.
...the employer market remains easier to navigate and penetrate than the world of health systems Click To Tweet
ACOs are on the Fence: As a whole, accountable care organizations (ACOs) have leaned towards smaller investments in digital health for specific programs around disease management, bundled payments, or readmissions. MACRA seems likely to push back outpatient readiness until there is more clarity around new payment models and the Advancing Care Information program. Ginger has had as much success as any engagement vendor in the provider market – but to move beyond pilots and land large deals that generate steady revenue, they seem to have decided to shift gears.
Consumers are Ready: While the traditional health care system is inching steadily towards digital health maturity, the real world is clamoring for it. In courting the provider market for the last few years, Ginger has been compulsively research-driven (pilots + papers), perhaps to a fault; For every two people who seek official help for mental health, three more go untreated. Waiting by the front door won’t cut it. Ginger sees what United is doing by advertising to consumers; looking at their changes to product and messaging it certainly seems they’ve thought about downstream partnership or acquisition.
What Does It Mean?
What can digital health startups take away from all of this?
- Balance Clinical and Economic Research: Behavioral health is tricky because it’s so hard to measure. Arguably, Ginger went too far down the clinical outcomes rabbit hole; their evidence page has nary a mention of any economic outcomes. Will their clinical outcomes be enough to sway corporate America? Lantern has taken a different tact early on, focusing on demonstrating an ROI for employer programs.
- Understand Your Target Market: Don’t let VC hype dumb down your go to market strategy. “Behavioral Health” is not a market, it is a set of conditions that range wildly in their epidemiology and treatment. Figure out three things: which sets of conditions you’re going after, which market segment of the health care system you’ll disrupt, and what product features can add value there. Iodine’s narrow focus on medication effectiveness, or Mevoked’s focus on maternal mental health, are two niche approaches demonstrating market savvy.
- The System Is Down: A self-serve app will not be able to transport consumers along the road to better care until our underlying infrastructure is patched up. Behavioral health care constitutes the very worst of the hackneyed horror stories we hear all too often: consumer-unfriendly, outdated, non-accountable, fragmented. Think convoluted referrals, out-of-network price gouging, broken consent mechanisms, prescription irregularity, and so on and so forth. Startups in behavioral health thus face a Catch-22: Technology is not enough to address the broken infrastructure, yet until the infrastructure is fixed, the technology can only have limited impact.
So where does this leave Ginger?
Acquisition seems like it’s the only logical path forward, and at this point a large payer might be their best option – or even their only option. Ginger’s brand value may have already peaked. More than one behavioral health insider suggested to me that the algorithm black box approach has likely turned off some customers on the health systems side who were seeking a partner, not a vendor. Ginger’s investors may have also priced it off the lot after the last funding round; One rumor claims Google’s Verily took a sniff at Ginger and passed on acquisition, due in part to a high asking price.
The unbridled hype of yesterday is quickly facing the cold hard questions of reality: How do we define, quantify, and put a price on success for a digital health startup operating in a messy market?
With a new emphasis on generating steady revenue on large-scale deals instead of racking up more one-off provider partnerships and research data, Ginger seems to be searching for proof that they have built a viable business model, not just an interesting data platform. If their bet pays off, the new consumer-centric offering combined with the open arms (and checkbooks) of the employer market will mean that millions of Americans gain access to much-needed behavioral health care. If not, Ginger may wind up like one of their own published articles: Important, but ultimately a footnote in the evolving story of digital health.