The past year has seen the convergence of various technology trends in healthcare – analytics, digital, Internet of Things (IoT), wearables, cognitive sciences and artificial intelligence (AI). These trends are coming to life in various forms. Consider a few of these:
— The wearable device market heated up with Fitibit, Apple and Google entering the battle for “wrist-share.” Fitbit had a very successful IPO last quarter.
— Genetic analytics company 23andMe has just been declared the latest “Unicorn” and is valued at over $1 billion. This is a remarkable turnaround for a company that faced an existential crisis last year in the wake of an FDA ban on the marketing of its personalized DNA testing kit. 23andMe has reinvented itself now as a data analytics and monetization company that will help with new drug discovery.
— Telehealth platform company Teladoc has filed for an IPO on the back of strong subscriber growth for its on-demand video, mobile and phone consultation services.
— Digital health startup Theranos is completely disrupting the lab test market with its inexpensive direct-to-consumer lab tests that bypass physicians altogether
Two recent reports highlight the growing importance of digital health.
— A Goldman Sachs report released in June on the digital health revolution predicts that connected devices and IoT solutions have the potential to save over $300 billion in costs for the U.S healthcare sector. Specifically, the report focuses on telehealth and remote patient monitoring, two of the biggest use cases for digital health solutions.
— A report by Rock Health, a Silicon Valley firm that funds digital health startups, indicates that VC funding, at $2.1 billion for the first half of 2015, is keeping pace with 2014. At $1.4 billion, digital health is by far the leader, notwithstanding the skew due to a single large transaction involving wearables maker Jawbone. The report calls out the jump in interest for wearables and biosensor technologies, with that category ranking at No. 1 in terms of capital raised.
The digital health revolution is being driven partly by a need for more consumer-oriented health solutions. Healthcare as a sector has traditionally provided poor user experience to patients, with patient medical records being pretty much out of reach. Large purveyors of electronic health record (EHR) systems have provided very rudimentary digital capabilities with clunky user interfaces, choosing instead to focus on functionalities designed to maximize federal incentives. In some sense, there was a giant vacuum simply waiting for new companies to rush in to fill. And so we have Apple, Jawbone, Fitbit and their like who are trying to provide consumers with a superior healthcare experience and a semblance of control over their own health data.
Telemedicine and remote patient monitoring, driven by changes in healthcare reimbursement models that reward population health management and proactive intervention to prevent hospitalizations and readmissions, have been a big growth area for traditional healthcare providers. However, the disruptions and breakout growth stories are coming from non-traditional players such as Teladoc which has seen its subscriber base jump by over 100 percent last year and now has over 8 million subscribers.
Large corporations from other industries are also stepping into this market. Virgin Pulse, a Wellness company that is part of the Virgin group, raised over $90 million this year to tap into the market for employer-sponsored wellness programs. With healthcare costs and insurance premiums out of control, the only way for employers to keep these in control is to incentivize employees to take care of themselves and avoid hospitalizations and physician office visits. A digital platform that supports health and wellness programs and interacts with biosensors and fitness trackers seems like the right opportunity to pursue.
Companies like Theranos, Teladoc and Virgin Pulse are wresting control of patients from traditional healthcare providers primarily by offering superior digital experiences at reasonable prices. As the demographic of our population changes and millennials come of age, they are no longer going to tolerate the poor service and opaque transactions of the traditional healthcare providers. Nor are they willing to pay the high costs of traditional health insurance coverage and healthcare. This will compel the entire healthcare system to transform the patient engagement model by adopting digital platforms that provide improved user experiences, as well as scale and responsiveness to patient needs. Of course, problems with data interoperability remain, as providers, vendors and regulatory authorities wrestle with privacy and security issues.
How successful will these new technologies be? History tells us that will be when people can no longer do without a particular technology, be it a fitness tracker on the wrist, or biosensors in their underwear. In the first half of 2015, 136 new companies raised more than $2 million each. This may be the most leading indicator that the digital health revolution is inexorably pushing the status quo out of existence.