Where is healthcare going in 2018? In the first article of Datica’s 2018 Healthcare Trends series, I outlined six trends for 2018. I predict volatility as the government, individuals, and private sector demand change this year. In this sixth piece of the series, I explore the fifth trend — moving beyond the digital health hype.
Over the last ten years, digital health has been met with much ballyhoo and corresponding investment. Even the “digital health” term has become broad and beyond its original intent. It’s helpful to define the term before diving into its evolution and current state. According to Wikipedia, the digital health discipline is described in the following way — “The discipline involves the use of information and communication technologies to help address the health problems and challenges faced by patients.”
That’s broad. Very broad.
Digital health is somewhat synonymous with “healthcare technology,” with one caveat — healthcare technology is inclusive of electronic health records (EHRs) and I personally don’t group EHRs in with the broader digital health term.
Like other verticals and in many consumer products, digital health has followed a similar trend. We saw initial hype around mobility, connectivity and consumerization of healthcare. While those trends are still relevant, healthcare, as yet has not been disrupted or upgraded to the same extent as industries like banking, retail, and even education. Those who have been in healthcare for a while have read a multitude of stories touting new companies and technologies that were destined to disrupt healthcare. All of those, except a select few, have failed.
Here are a few of the obstacles digital health companies must overcome.
Scrutiny of technology spend is way up and proof is the antidote
In 2018, healthcare technology has finally moved past the EHR era. EHRs are now ubiquitous in healthcare organizations. As we all learned at HIMSS18, the good old days of Meaningful Use are over. However, one lingering consequence of Meaningful Use was an increase of the percentage of technology spend in most health systems budgets. That increased spend is now being scrutinized, and digital health must demonstrate solid proof of efficacy to overcome that scrutiny and succeed.
In the Digital Health Success Framework (DHSF) Datica outlined the major challenges that digital health developers must traverse. Now, more than ever, digital health products need associated proof to overcome buyer and customer skepticism. The proof can broadly fall into the following buckets — lowering costs, improving care (especially in at-risk settings), and improving the care experience.
VCs invest in scalable technologies, but healthcare is siloed and localized
Venture capital compounds the challenges of digital health. Building and scaling new technology products to meet venture capital demands falls out of alignment with selling and implementing demands of digital health within the enterprise. The localized nature of healthcare exacerbates the problem. Even for some larger systems that still buy technology at local or regional levels, one must wonder if most digital health technologies aren’t meant to be venture scale. That’s not necessarily a bad thing.
Some digital health companies have found success with a focus on localization. Those companies have discovered that while you may not be able to change the way care is delivered for millions of people you can, however, do that in one city. Scale in healthcare doesn’t have to be geographically global. Scaling to thousands of health systems is daunting, since many are finding ways to solve their problems without waiting for a well-funded digital health startup to save the day.
Over the past year, I’ve talked to multiple investors who say they see many digital health companies solving the same problems with similar solutions, and all at similar stages ($1 - $2 million in annual revenue and 2-5 customers in the same geography). Who gets funded and how do they scale with anything resembling efficiency?
EHRs don’t help the problem of scaling. Without a centralized clinical data repository; thousands of EHR silos exist all over the U.S. Selling to one Epic hospital is selling to one Epic hospital. You must go through the same extended implementation for each new hospital, with all the associated built-in pushback.
Proof and scale are necessary, but are they even possible?
Where does that leave us? Is there a way to 1) prove the ROI of a digital health product, and 2) scale that success quickly? I’m not sure. The system seems to be set up to prevent that from happening. The biggest companies I know that are strategically focused on getting into digital health, and these are some of the biggest companies in the world, are playing a very long game. Those companies know that success, at least regarding scale, is going to take many, many years. And they have the money and patience to play it out.
These companies are targeting providers because they are seen as the key to healthcare as the actual place of the transaction — care delivered and care received. Life sciences are sometimes seen as a faster path to success, but there are only so many life sciences companies and the investments those companies are making in digital health, and their strategies for digital health, are similarly long game strategies that involve being closer to care delivery.
Despite the doom and gloom of the last few paragraphs, digital health will have a significant impact on healthcare. The question is timing. Regardless of the when, the how is clear — digital health needs to be able to prove it’s worth to get into the hands of patients and providers.