Well, here we are – we made it into 2017. A new year and a new political reality: The slugfest of the 2016 election has left the Affordable Care Act battered and on the ropes. All we know for certain at this stage is that we should expect to see a thorough restructuring of “healthcare reform” as we’ve come to know it.
Understandably this has left many people disappointed at the prospect of lost progress and wasted efforts. However, the silver lining is that when the healthcare system is as enormous and as market-driven as America’s, there are plenty of opportunities to fix problems, many of which go far beyond the power of political legislature. So while coverage expansion and insurance regulations and other parts of the ACA will face the music of the new administration, it will be important for the other stakeholders in the system – employers, hospitals, pharmacies, tech companies, startups, and more – to stay the course where progress is being made.
As Dave Chase told me a few years back, “Healthcare isn’t really a trillion dollar industry, it’s more like a thousand billion dollar industries.”
The explosion of opportunity in Digital Health is result of several of those industries colliding. As we flip the calendar into January and begin a year with no small amount of uncertainty, keep an eye on the following four opportunity areas. Not only are they promising from a business perspective, but they each carry potential for meaningful, systemic reforms that can make things better for patients in the immediate term.
Simply put, Consumerism has grown from a fad into an ancillary market force into a business segment in its own right. For every redundancy, anachronism, or cringeworthy experience, there seem to be a class of companies who have stepped in to fill the gap. Say what you will about the Affordable Care Act, but the experience of using (finding, accessing, interacting with) healthcare remains largely the same as before we reformed things. Labyrinthine benefit design. Poor customer service. Needless jargon. Redundancies. Fragmented experiences.
Last year we saw evidence that the big payers are looking to the big players to course-correct. A landmark deal between Aetna and Apple aims to modernize benefits navigation and disease management apps. Denver-based WellTok, with help from IBM Watson, reached for the low hanging fruit of shoddy health plan interactions by developing a chatbot to help employees access and make use of their coverage. United is investing in prevention with partners like QualComm and Fitbit. Moving into 2017, plenty of opportunity remains.
One exciting development for this coming year is that beyond the employer space, these types of issues have become business opportunities in other patient-facing corners of the industry, chiefly in pharmacies and outpatient care. Online search tools, enrollment interfaces, and navigation assistance all remain huge opportunities. ZocDoc, HealthSparq, WellTok, Amino, One Medical, and several others are where I will be looking to keep a finger on the pulse of this quickly growing space.
Pharmaceuticals and biotech
If 2017 even simply matches the activity we saw in the Pharma/Biotech space in 2016, it will be another year for the records. Precision Medicine is getting ready for center stage on the back of historic public level support and private sector investments. The White House and National Institutes of Health awarded grants to five organizations to support research for the Precision Medicine Initiative (PMI), including a whale of a contract to Eric Topol et al at Scripps ($120M over five years. We also ended the year with the passage of the 21st Century Cures Act, a bill that some have called pork-filled, shady, underfunded, and precariously structured, but which includes $1.8 billion for Vice President Biden’s Cancer Moonshot initiative and other deals for regenerative medicine.
On the private side, interest in biotech and life sciences research and technology is entering the zeitgeist that stretches far beyond industry itself. The disastrous Theranos saga has served as a needed reality check (and even captured Hollywood’s imagination.) An industry coalition of pharma, biotech, and payers launched their own Cancer Moonshot initiative. Silicon Valley frenemies Mark Zuckerberg and Sean Parker each announced their own privately funded efforts to combat disease. Rock Health counted over 60 companies of all shapes and sizes angling for some share of the expanding genomics testing market of pharma, payers, some provider organizations, and even a small consumer segment. As data and technology from the life sciences begin bleeding into clinical practice in areas like oncology, immunology, and treatment of other genetic diseases, it’s not difficult to imagine that number doubling before the hype train hits the bumpy tracks of reality.
Public health as a market opportunity
2017 is going to be the year that Public Health approaches find a secure foothold in digital health marketplace. Last year was a breakout year for social determinants of health and the idea of paying for prevention; In healthcare’s quest for value at the population level, consensus was reached that treating conditions or diseases after they arise is far more expensive, and far less effective, than catching people as their health begins to decline.
The Opioid Crisis took on a new level or urgency when the CDC released data that opioid abuse has surpassed gunshot deaths in America. The 21st Century Cures act contains a billion dollars for state support in dealing with opioid abuse and addiction, on top of investments being made by state governments from Massachusetts to Kentucky to California.
Though the looming threat of Medicaid cuts will certainly impact these programs at the ground level, perhaps we’ve made enough progress this year for this to transcend public funding. We learned about a cool experiment going on in Utah to reduce regional costs by housing the homeless. More health care systems are taking action to invest in the health of their entire communities, in partnership with the Robert Wood Johnson Foundation, ReThink Health, California Healthcare Foundation, and others.
Beyond the names we’ve all heard of, we’re also seeing the early emergence of a new class of companies focused on better understanding, managing, and treating socially-driven health issues. Moreover, investors are arriving who are willing to fund these ideas, community anchors have convened forums to explore reforms, and influential physician leadership from Sanjay Gupta to the Surgeon General have issued rallying cries for new solutions.
Value-based care models legitimizing digital health
Last but not least: Despite the political clouds hanging over the Affordable Care Act, value-based care finally moved from two-dimensional buzzword into palpable programs and a series of promising market opportunities for digital health companies.
CMS announced the expansion of the Diabetes Prevention Program (DPP) to all eligible Medicare beneficiaries starting in 2018. Some experts predict that a Trump administration won’t have reason to meddle with this expansion given the general consensus that prevention is cheaper than treatment. More importantly, DPP vendors are establishing a value proposition that goes beyond federal subsidy: In addition to Omada’s first of its kind partnership with Intermountain, they and Noom have put their money where their mouth is with outcomes-based pricing models. Canary Health managed to convince Medtronic to become a reseller of their DPP and other programs. It’s a very safe bet to expect more digital DPP programs to appear throughout 2017.
On the opposite end of the spectrum from startups, we’re watching United Health roll out walking programs with QualComm and Fitbit. Fitbit also entered the medical device space in a deal with Medtronic. More broadly, it seemed like last year, many care management vendors (disease management or disease agnostic care coordination plays) shifted much of their business development efforts to the private market. Employers, Direct Primary Care practices, and a subset of health systems have become eager to find the right tech for their clinical and business needs. We’re seeing the growth of regional payers, benefits brokers, TPAs and the like who are now fielding competitive bids and Request for Proposals (RFP) to work with digital health vendors – a far cry from the market scramble/gold rush we witnessed during the height of the Meaningful Use years.
Bundled Payments programs may see some speedbumps given incoming secretary Tom Price’s mixed messages on them. Yet the industry has also moved along, as evidenced by United Health’s recent announcement to drive bundled payments for hips and knees in their commercial business. These bundled payment programs offer digital health startups the chance to prove their worth – from solutions to bring clinical workflows into the present day, to mobile apps for patient reported outcomes collection, virtual follow ups, and care planning tools. It’s safe to say that digital health companies are now competing on outcomes.
….and plenty more ahead for digital health
2017 will also bring about the continued maturation of the telehealth industry. Artificial Intelligence Looms on the horizon. We are now witnessing the start of the hype cycle for voice UI’s in healthcare, chatbots, applied artificial intelligence, and virtual reality. Boston Childrens’ started the party with their KidsMD app on Amazon Alexa, stirring the industry’s imagination for subsequent use cases. Interoperability is getting better, thanks to federal attention and private sector innovations. Patient Portals are giving way to “patient relationship management” (PRM) systems at health systems across the country.
Suffice to say, while our health care systems face an uncertain short-term future, for patients, doctors, consumers, nurses, and other stakeholders, we’re slowly seeing new tools that carry the promise of better experiences as well as new attitudes towards payment and delivery that go beyond Washington’s carrots and sticks. We should expect another busy year of partnerships, acquisitions, and business growth.