A (Love) Letter to Digital Health, Part II

Why, hello, and welcome back! Pull up a chair, take a load off, sit a spell. It's been more than two years (holy s#*t) since my original "love letter" to the digital health segment, and I've been reading and noticing some things of late, that have precipitated this update. And it's still a relatively New Year, 2019, the year (according to Frost & Sullivan) when digital health "will come of age." [Note: Please forgive the following slight digression.] So what does that mean, exactly, F&S? According to the Cambridge Dictionary, that means that digital health has (or soon will have), "reached its full and successful development." Hmmm. Yes, I have apparently been living under a rock, to not know that this was happening this year. To say nothing of the connotations of my prior writings to and courting of a movement that had not yet come of age! Scandalous. Well, now that you're almost fully established, I have more to say to you, my dear D.H.! And, oh yes, congratulations in advance on your passage from energetic, enthusiastic, rebellious teen upstart to workaday, bill-paying, reliable 'adulting' industry. Yay! No cake, no ticker tape parade, no cotillion - but there will be pie...charts. Maybe. Probably not, though. Welcome to adulthood. Oh yeah, one of the preeminent trade organizations of our industry (HIMSS) says that "2019 will be the year that digital health will need to answer for the way technology will increase access to care and narrow gaps in care and coverage." You must also "catch up to years of hype" and you "will need to demonstrate greater tangible results", and - no pressure - you are "under the gun." Wow. That's quite a substantial threat load. And given your age, there's some additional concern well warranted, as we all know the everyday difficulties iGens / Gen Z's are facing.

Where to start?! So much has happened! Well, we're back together as a couple. Truth be told, though, we were never "on a break." I've been working for and with you for almost 10 years now. And we are making progress. The heady pace of our early years together has been traded for incremental innovations and step changes, definitely more evolutionary than revolutionary. Not to say that you're passé / no longer sufficiently 'hyped'(!), as I read about artificially-intelligent machines named Allegra that learn and eat big data and healthcare blockchain cryptocurrency for breakfast, every day (And, there are some actual sightings of these things in the wild! But we may not fully trust our future robot-physician overlords quite yet. Yes, digression.). So what have I been doing? Why, building ecosystems with you, D. H.! You see, if you have the right data management and storage capabilities and data sources, a real interoperability solution set, the right platform for data visualization and analysis, and which supports (clinical) workflows, and...[has: a content management system, RPM devices and data, telehealth / virtual visit capabilities, evidence-based assessments and care plans, plus digital health content and programs...]well, that looks / sounds a lot like a population health management platform. Yeah. So I've been assembling / building those - and connected, digital health ecosystems - by leveraging existing best-in-class solutions. Because at this point in the game - unless you're Salesforce, or have $100M+ lying around - then it just doesn't make sense to build anything (i.e., a true enterprise-level solution) from scratch anymore (but if you do have $100M+ lying around, contact me here).

So let's get caught up. Here's what you need to know to survive and flourish as you 'cross the chasm' into...your "full and successful development." Ahem. Again, no pressure.

• Investment in Digital Health: "With a record $8.1B in funding and the absence of an equally robust exit market, there is more scrutiny on digital health than ever before," said Rock Health. But no bubble, they also say, with some semi-compelling, pretty subjective-y data. "But who cares?! Lookit all dat cheddar!", said someone else. Yes, that's a lot of money, and another record year, again. But StartUp Health reported that just over $3.2B went to the Top 10 digital health(-ish) financing deals, out of a total pool of $14.1B (which included international deals). And now Series D and E deals account for six percent of the total deal count, which is the highest percentage over the last five years, unsurprisingly. Oh, and no one talks about or lists % of funding by stage / round type, just deal volume, or median deal size by stage. This means that a lot of investors are still paying to keep the lights on at their portfolio companies, until such a time as they have achieved sufficient market velocity and/or traction (or rather until some PE firm comes along to buy two or more struggling companies, in an attempt to mash them together, et voilà, instant value creation!). And sure enough, I recently did a quick (informal) survey of the active investment portfolios of about 20 venture capital firms, lesser-known and blue-chip firms alike, and I was substantially...underwhelmed. There has indeed been a "proliferation of point solutions" (see below), and it's certainly been established that there's no IPO market, so...startups, start looking for a dance partner / potential mashup! The better news, in my mind, is that there is unprecedented attention / funding being put to good use across some traditionally under-served / under-emphasized segments, such as the mental and behavioral health spaces.
• Fortune's Healthcare Predictions for 2019, [Consolidation in] Digital Health: "Growth equity will get tighter in 2019 for small companies that have not achieved product market fit. This will lead to a flurry of consolidation into platforms. Many new companies have been started over the last five years, and it is time to sort the true successes from the “just OKs”. Compounding this trend is large employers going from being the early adopters, to more willing to rely on their health plan partners who have responded to the proliferation of point solutions by incorporating many of them into their standard benefit designs. This will be a rough transition for many early stage companies since payers have even longer sales cycles and higher standards for proving effectiveness than large employers." So, in essence, get ready to mash. There is, for the first year that I can remember, an actual (public) discussion of failures in the digital health world. It certainly has been happening, but few were willing to talk about it (publicly). Here's a great and very applicable quote from the very-wise Rob Coppedge: “considerable capital was burned [by digital health startups] without building truly sustainable businesses” because founders “lacked expertise, underappreciated healthcare specific workflows, [and] misunderstood the full healthcare consumer journey.” Well, D.H., I think that you have to take that a little personally. But that's just part of becoming a fully-self-realized adult-type industry, as personal / long-term industry growth is going to come with some setbacks and some painful lessons learned.
• The (Healthcare) Battle for the Home: Continued adoption of technology + steady progression of value-based care (and pricing pressures) + population health management perspective = a real battle royale for the home, with combatants coming from all directions and sectors: home health / home care, big tech, consumer electronics, startups, private equity, payers, providers - you name it, they're all in the mix, competing for space in and data from our homes. I've long foretold (well, for several years, now) of the future of healthcare represented in a 3D-holographic A.I.-clinician-genie that pops up in your living room anytime your vitals begin to fluctuate outside of normal parameters: "Please state the nature of the medical emergency." It's coming. Meanwhile, this is an exciting space, with battle lines clearly being drawn over the past year. Winners in the space (IMO) will be determined by how awesome of a technology platform they have (with actual interoperability capabilities), and how well or efficiently they are able to manage and direct (people) resources (at least until the aforementioned A.I.-clinician-genie appears), or how much of a captive audience they may already have access to, and finally, there is also some IoT influence / impact in the mix. Why is the 'home' the most critical healthcare setting of the (near) future (or now)? Because we population health managers need that data to complete our 360-degree, longitudinal patient record (Where are those dag-blasted gaps in care?!), and, because it really is the potentially lowest-cost setting. Now all we need is a blockbuster summer movie, starring your GamGam, of course, and executive produced by one or more of the following: Apple, Amazon, Google. I can see the billboard now..."Home Health: Rise of the Machines."
• Big Pharma and...(Hmmm, I've lost track...let's go with:) "Pharma 4.0": “We have still not seen significant ROI [return on investment] in digital health,” said Geoff Meyerson of Locust Walk. Please don't take that personally, D.H. Pharma has had a number of (internal) hurdles to overcome to fulfill the "beyond the pill" vision. And true innovation comes slowly to large industries (particularly those under the 'healthcare' / 'life sciences' standards. That said, big pharma has definitely been on a digital health-related hiring spree. Unfortunately, this is at least the second or third such round...but the current one seems to be the most pervasive and widespread one, yet. Except "digital health" seems to mean something different to pharma, than it does to everyone else, as it still seems to be focused on the "engagement" and "data gathering" levers, as opposed to the "outcomes" lever. And that (still) makes sense, as pharma's primary business is selling pills and the like, despite their want to get "beyond the (traditional business model)." So, most of the folks that big pharma is hiring, have little or no actual / prior digital health experience (more typically, just 'digital' / marketing). But it's totally different this time around, it will stick, and there will be 'significant ROI.' Totes!
• "Allegra, where is the the game-changing innovation in digital health?": Well, the last couple of years have seen some pretty big step changes, D.H. Big Tech. Just (more) tech. M&A and consolidation. Payers changing their business models (i.e., mega mergers, payers becoming providers, payers partnering with providers). Adoption. Utilization. Scale. More data. An ungodly amount of talk about (sorry, have to...) "A.I.", "machine learning", "blockchain", "interoperability", "population health", "precision medicine", and "value-based care," to name a few super-buzzy buzzwords. Clearly, any / all of the Big Tech cos have their sights set on the $3T U.S. healthcare pie, and each has a different strategy for cutting their slice. I won't get into each of their respective strategies and accomplishments, as many others have already done so, suffice to say that each has now cannon-balled into the pool, after years of walking around the edge. Tim Cook (back from The Future!) told Jim Cramer that, "Apple's most important contribution to mankind has been in health." That's heady stuff. Not to minimize the weight (and foreshadowing!) of Future Tim's report, but it definitely helps when you have 1,000,000,000 users on your platform, when you start your concerted push into things healthcare. I'd call that a 'good start.' Here's another Big Mover: Salesforce. While I'm guessing that the adoption of their new-ish Health Cloud product is lagging behind the original "Pinky and the Brain" sales forecast, it's not for lack of trying - or innovating! They are innovating the crap out of that product. A true enterprise-level care management platform to start when it launched at HIMSS in 2016, it is fairly-rapidly evolving into an incredibly-robust, full-fledged population health management platform - equally applicable for use by providers and payers - par excellence. In fact, as a Health Cloud customer myself, I have to call out Mt. Sinai Health System as an innovator (sorry, "Trailblazer"), because they had the vision and the courage to take the leap and make the investment. I bet it's paying off, or will shortly - they have 300K Medicaid patients on it. The main difference (competitive advantage) of the Health Cloud platform vs. all of the other PHM platforms? Flexibility. So those are the macro moves and movers. What about among those of us in the trenches? There are some exciting entrants / platforms out there, D.H., to be sure, even if many of them are still in the "point solution" category (for now). Here are few of my current favorites: Ada, Babylon, BenevolentAI, Buoy, Cityblock Health, Embleema, Hashed Health, Heal, Healx, K Health, Lark, Livongo(-Retrofit-myStrength), Murj, Notable, Prognos, Sapiens DS, Seqster, Solv, Suki, Upfront, Verge Genomics, Xealth, and Zipline.
• Parting Thoughts: We've come a quite a ways, you and I, D.H. Heck, I remember when we were all about the cell phone. And yet, there's so much left to do and accomplish and improve and...that's the great thing about U.S. Healthcare: So many problems yet to solve! Advice on how to be successful in the space? I have a lot. But here are a couple of softballs: 1) Keep this as your mantra: "No outcome, no income." 2) If you want to "build the next generation digital health solutions that resonate with target users, solve actual problems and have the potential to disrupt markets", understand (and live) this: "True digital health innovation depends entirely on such foundational real-world insights being represented in every decision-making step throughout product development." There are no shortcuts, particularly in healthcare. Now go out there, develop a product, raise some money, and crush it. Easy peasy. Love ya, D.H.!