The big trends in health care today are rising consumerism, a shift to value-based care, emerging data sources, and the use of advanced technologies for improving care delivery and reducing costs. There is unprecedented innovation opportunity in the digital transformation of health care.
At a recent industry event, I moderated a panel discussion on innovations in health care with a group of technology innovators and health care veterans. We all agreed that technology-led innovation was accelerating rapidly, but the innovation landscape had a set of unique challenges as well. In this post, I share some of the key thoughts from the discussion.
The market landscape for health care innovation
In the past few years, we have seen several significant changes in the market for technology-led innovation in health care. Here are some important trends.
- A shift towards the virtualization of health care. Many routine health care services are now available on your smartphone - a perfect example would be urgent care visits or routine consultations. According to one report, there are over 300,000 health apps in the Apple and Android stores. However, only a small number have reached critical mass, indicating that consumer preferences for virtual care are changing slowly.
- Huge amounts of venture capital pouring into digital health: $11.5 billion in 2017, according to one report. The first quarter of 2018 has seen continued investments in digital health, serving as a validation of the promise of digital health innovation and the opportunities in the digital transformation in health care. At the same time, many of these startups are struggling, exits are not keeping pace with expectations, and a few that have raised very large amounts of money, such as Outcome Health, have gotten into trouble for trying to find short-cuts to growth and profitability.
- Innovations from big technology firms are also struggling to gain traction. Recent troubles at IBM's Watson Health business which has reportedly laid off significant numbers of employees in the face of market and organizational challenges indicate a deeper problem for the business model itself.
- New data sources such as genomics, wearables and social determinants are driving a whole new way of managing patient populations. Unstructured data, such as clinical notes, is now the new goldmine that people are digging into, with the help of emerging technologies such as AI. Other emerging technologies, like blockchain, are still in early stages but with great potential. However, data interoperability, especially with the big electronic health record (HER) systems like Epic and Cerner, remains a challenge.
- We are in early stages of breakthroughs such as gene-editing with CRISPR (powered by massive data analytics capabilities) that are likely to transform health care, along with an explosion in smart sensors and wearables. Other technologies, such as augmented reality (AR) and virtual reality (VR) are in very early stages but show enormous potential in transforming the way health care is delivered in future.
Health care's innovation focus and the players
A recent survey by Modern Healthcare indicates that health care consumerism is the no. 1 area for innovations, followed by clinical practice, or care delivery, and payment reform or alternate payment models. Most respondents in the survey felt that innovation was accelerating.
Data from Rock Health, a venture capital (VC) firm, lines up with the survey responses. While disease diagnosis and treatment remain significant focus areas, consumer empowerment is emerging as a strong funding category, confirming the rise of consumerism in health care. As health care shifts progressively away to virtual care delivery models, interest in telemedicine, remote monitoring, and alternate care delivery models continue to drive innovation.
It's not just VC firms that are funding and driving technology-led innovation in health care. We are seeing health systems getting into the innovation game themselves by setting up funds. Examples include Partners Healthcare, UPMC, Intermountain and Mayo Clinic, to name a few. While these funds are relatively small, the opportunity for promising startups with innovative solutions to accelerate the path to product validation and market acceptance improves with the support of the sponsoring health system.
We are also seeing some non-traditional partnerships emerging. The big announcement earlier this year by Amazon and Berkshire Hathaway, and the more recent announcement by a consortium of health care companies to invest in blockchain technology are examples.
Despite health care's reputation as a slow follower of technology, the innovation ecosystem is buzzing. In my book, the Big Unlock, I refer to four categories of technology solution providers: The Custodians such as the EHR vendors, who have the data and the workflow; the Enablers, which are big companies like Google, Microsoft, and Salesforce who have invested in health cloud infrastructures that can be rented for building digital health experiences; the Arbitrageurs, which include global consulting and technology services firms who rely on information and labor arbitrage for developing and delivering technology solutions; and finally the Innovators, which include the hundreds of startups and VC-funded companies who are developing entirely new ways to deliver health care. Every one of these categories is innovating in their own way.
At the heart of the innovation ecosystem is a final category of innovators, namely the health care enterprises. Leading health systems are innovating with health care delivery models and pricing/contracting models and are using technology to enable their digital transformation.
Into the great wide open
Despite all the activity and the fierce competition, there is good news for innovators; the market is wide open, and there is no single dominant entity in the digital health innovation landscape. Each of the categories of technology providers I refer to have their unique strengths, and many would like to become that one dominant solution provider of choice.
While it does not seem likely that we will see a dominant digital health innovator in the near term, the window of opportunity for innovators is narrowing. As the high value "white spaces" get filled up and the risks of failure increase, VCs are committing larger and larger amounts of funding to more mature companies in the hope of a successful exit. New entrants in the innovation landscape will either need to find new white spaces or build "better mousetraps" to challenge well-capitalized incumbents on their turf. At the same time, as the pace of exits picks up, VC firms will look for new investment opportunities for their liquidation gains. For now, it's best for digital health innovators to operate with an abundance mindset. It's an "all you can eat" world out there.