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The Next Wave of Transformative Digital Health
By Raj Ganguly, Eduardo Saverin as written on techcrunch.com
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Digital healthcare investing has gone through several waves: 2013 was the year of consumer wearables, 2014 of healthcare big data, 2015 of virtual care delivery and 2016, so far, has been about payer disruption. 2017 will be a return to the core practice of medicine: technology that enables providers and biopharma to extend their reach and take greater risk for outcomes.
In 2016, the VC market has rewarded digital health startups that are disrupting traditional carriers. In the last 12 months, we’ve seen startups, like Bright Health (new carrier, $80 million raise in April), Clover Health (new Medicare Advantage plan, $165 million raise in May), Collective Health (TPA/ASO replacement, $80 million raise in late 2015), Hixme (migrating covered lives from large group to the individual market) and Oscar (new carrier, $400 million raise in February) raise tens to hundreds of millions of dollars in venture financing at substantial Series B and C valuations.
Why? Because payers have been an easy target.
Carriers were born in an era where fee-for-service reimbursement rewarded coverage, so they built large networks of contracted providers, leveraged economies of scale in volume and rented access to these networks to self-insured employers. That compact is fraying.
Providers are taking risk and competing upstream (with the help of companies like Evolent Health), employers are building their own narrow networks to steer volume to high-quality/low-cost centers of excellence (with the help of companies like Imagine Health) and medical loss ratios (which dictate the percentage of carrier premium revenues that need to be spent on clinical services) are squeezing carrier margins.
Large carriers have responded by consolidating, seeking even more scale. However, survival through size has its limits. The DOJ has drawn the line at Anthem’s $54 million bid for Cigna and Aetna’s $37 billion bid for Humana on antitrust grounds.
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The payer disruption story has played out
Our view is the business of insuring lives at scale is labor and capital-intensive. There is substantial operational complexity required to contract with 5,600 hospitals and 800,000 physicians in the U.S., issue membership cards, verify eligibility, process claims and engage consumers when they call. It’s hard to achieve venture level returns at Series B and C valuations approaching $1 billion.
Healthcare innovation is the solution to rising costs and limited access.
We’ve seen this story before: Investors putting tens of millions to work into Fitbit and Jawbone in 2013, chasing the consumer wearables story. Similarly, 2014 was the year of using healthcare big data in vertical applications like price transparency, which resulted in Castlight’s controversial IPO. 2015 was all about telehealth — Doctor on Demand raising $63 million, MDLive raising $50 million and Teladoc raising $157 million in their IPO, all announced during an eight-week window last summer. Later-stage investors in many of those instances have not been able to generate returns at exit.
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So what’s next? The funding market is returning to enabling the core practice of medicine
Our view is that in 2017, the market will reward innovative startups that are in the business of enabling providers and pharma companies to personalize care and participate in greater outcomes-based economics.
Several tailwinds are contributing to this. In the provider world, regulation with esoteric names like “Meaningful Use 1 and Meaningful Use 2” are largely behind us and providers will have more bandwidth to move on from EMR integration (plumbing) to the use of technology for expanding care (tools). Concurrently, advances in the fields of genomics and compound specialty pharmacy are enabling new ways for biopharma companies to personalize therapeutic delivery down to an individual patient, which is a building block for outcomes-based drug reimbursement.
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Prediction
VC investment into digital health will flow to startups in the business of provider and pharma enablement. It will start to happen in the back half of 2016.
Silicon Valley Bank predicts that $9-$9.5 billion will be invested in healthcare in 2016. MobiHealthNews recently reported that digital health companies raised $150 million in July 2016 alone. In the last month, Azalea Health raised a $10.5 million Series B to sell revenue cycle management software and mobile tools to providers. Akili Interactive raised a $11.9 million Series B to develop clinically validated video games for cognitive interventions. Caremerge, which markets a care coordination platform for assisted living facilities, raised a $14 million Series C. Docent Health raised a $17 million Series A to build patient engagement software for health systems.
Healthcare innovation is the solution to rising costs and limited access. We think of healthcare as a global economy, not just an industry — it is a $3 trillion market approaching 20 percent of GDP in the U.S. alone. Access to affordable, effective care is a universal challenge felt in both developed and developing markets. To the entrepreneurs out there — we look forward to funding the next wave of transformative digital health companies that enable greater access to quality, outcomes-based care.
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Democratizing data—
Atkins goes digital by default with Office 365 E5
We’ve determined that we want Atkins to be “digital by default.” For me, that’s not just about using technology to bring people and information together, it’s about flexible experimentation at a rapid pace.
As an important part of our strategy, we’ve invested in the latest and most comprehensive version of Microsoft Office 365, the E5 suite, to give employees new ways to serve themselves and make faster, better decisions. Multiple benefits captured our attention, but I’m most eager to adopt Microsoft Power BI. We see it as the heart of our efforts to break down silos, unlock our core corporate data and enhance personal effectiveness.
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Atkins has a history of delivering innovative answers to complex engineering problems, from designing the world’s longest driverless subway in Dubai to transforming the offshore wind energy industry to international airport modernization. We’re infusing every part of our company with that same spirit of innovation, which is no small feat for a global organization. We’ve got to think about global collaboration and choose technology systems that work everywhere in the world, tools that make it easy for people to share information and connect with each other. We can’t take months to provide employees with new capabilities—we need to be able to get them up and running.
My colleagues want a 360-degree, single, integrated view of the business and the ability to consume that data proactively without waiting for another report to be created. Using Power BI, individual employees have self-service access to intelligence that they can slice and dice in whatever ways are most helpful to them. They also have an easy way to view and share their insights through interactive visualizations. I’m a great believer in democratized capabilities across the organization, and enabling employees to access and experiment with data ties directly to our emphasis on innovation.
Increasing our ability to be data driven also helps us act faster by taking advantage of existing resources and expertise. Giving our entire workforce access to Power BI unlocks the full potential of the whole company and helps enable the agile new world we’re creating.
There are many other aspects of Office 365 that help us move faster and give us the business agility we’re looking for. For example, we use our Yammer enterprise social network to crowdsource solutions to client issues, come up with ideas for hackathons and engage diverse groups in conversations about using innovative technology to create value for our employees and clients alike.
Also, through E5, we’re extending our use of Skype for Business, making it our single solution for voice, video, conferencing and instant messaging. Moving to complete cloud-based communications gives us obvious benefits in terms of cost savings and less equipment on people’s desks. Plus, we’ll continue to gain benefits as Microsoft adds new features to the platform over time. There’s also real value in using the full capabilities of Skype for Business because it supports true mobility. Atkins has many consultants who spend a lot of time on the road. They love using Skype for Business to stay productive and effective wherever they might be in the world.
In fact, Office 365 will have a transformational impact on the way all sorts of employees work at Atkins—they no longer need to be at a desk or even in an office. They go to Office 365 to connect with colleagues and clients and bring new insights to the work we do. They tap into our innovation hubs, client communities, winning work communities and business change leaders network. And they use Microsoft SharePoint Online to set up team sites quickly for collaboration across borders, and they share information with Microsoft OneDrive for Business.
Our vision is to move the company completely to the cloud by 2020, allowing us to decommission on-premises infrastructure and concentrate our creative energy in the spaces where we can truly differentiate Atkins from the rest of the market. Using Office 365 helps us harness our collective knowledge and experience, combine it with some of our clients’ knowledge and experience, and develop innovative, successful solutions in a fraction of the time it would have taken before. I’m excited about the future at Atkins and our relationship with Microsoft and Office 365. We look forward to the ongoing benefits of using a product that’s continually evolving and adding value to what we do, just like we do for our clients.
Managed Solution is a full-service technology firm that empowers business by delivering, maintaining and forecasting the technologies they’ll need to stay competitive in their market place. Founded in 2002, the company quickly grew into a market leader and is recognized as one of the fastest growing IT Companies in Southern California.
We specialize in providing full Microsoft solutions to businesses of every size, industry, and need.
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