Episode #1: What Customer Behavior Says About the Future of Digital Health
Healthcare Innovation attorneys Carrie Nixon and Rebecca Gwilt open up this conversation with the question people keep asking: Where is the Digital Health Investment Ceiling?
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In this episode you’ll discover:
The convergence of events driving continued innovation in this space, including FemTech
3 ways customer overwhelm is driving market change
How to approach your customers for feedback so you don’t build something they won’t buy or use
Keep scrolling for a transcript of this episode.
Learn more from Carrie and Rebecca:
Healthcare insights (monthly email) | Telehealth/Virtual Care Mgmt Update (biweekly LinkedIn update)
Website | Carrie on LinkedIn | Rebecca on LinkedIn | NGL on LinkedIn
“We need a platform that can deliver customized, specialized services to a specific population, and so you’re seeing some very pointed acquisitions.”
Learn More Here
Read Rolfe Winkler’s report on customer overwhelm in the WSJ: https://www.wsj.com/articles/digital-health-startups-are-booming-their-customers-are-overwhelmed-11620039601 (paywall, but site allows 3 free articles per month)
A recent video chat we had about what we’re seeing in healthcare innovation: https://nixongwiltlaw.com/nlg-blog/2021/4/15/video-how-we-think-about-healthcare-innovation-and-what-were-seeing-in-the-market-right-now
Details on the Ro acquisition of Modern Fertility and the gender gap in health tech: https://www.statnews.com/2021/05/25/ro-modern-fertility-womens-health-tech/
Read the transcript:
Rebecca Gwilt (00:00):
In 2014, and that was when I was really starting to focus specifically on digital health. And he assured me during this meeting over coffee that we were in a bubble. It was a health tech bubble. You couldn't possibly put more money into it. And he was ready to stop investing in the space. And now I look back and I think, yikes,
Announcer (00:26):
You're listening to Decoding Healthcare Innovation with Carrie Nixon and Rebecca Gwilt, a podcast for novel and destructive healthcare business leaders seeking to transform how we receive and experience healthcare.
Rebecca Gwilt (00:37):
So the digital health market is hitting growth and funding records quarter after quarter, and probably for the last couple of year, well, at least the last two years. And while we've definitely seen a spike during Covid, the number of health tech, telemedicine, medical technology startups has been increasing for years. For years now, definitely since we launched the firm. It's a super exciting time for investors and founders. But I'm starting to hear more and more murmurings around sort of where the ceiling might be, how many more companies, how much more money can we pour into the market?
Carrie Nixon (01:27):
Yeah, so that's a really interesting point. I'm hearing the same thing. And my thinking is that we've really hit a turning point for a digital health, and I think we're going to see sort of an exponential curve as the uptake for digital health continues. It's almost a necessity now. I think the Covid pandemic proved that, and I do expect to see significant increases continuing. We'll see some investments that as we always do, that fail, that are not destined to really go anywhere for one reason or the other. But I think we're going to see some pretty amazing successes as well.
Rebecca Gwilt (02:06):
Yeah, I was just thinking about a conversation I had with a VC in 2014, and that was when I was really starting to focus specifically on digital health. And he assured me during this meeting over coffee that we were in a bubble. It was a health tech bubble. You couldn't possibly put more money into it, and he was ready to stop investing in the space. And now I look back and I think, yikes,
Carrie Nixon (02:36):
I wonder if he did stop investing, and if he did, I bet he's going to pick that right back up again because market is hot. And I think everyone is recognizing the need for more digital health interventions in healthcare.
Rebecca Gwilt (02:50):
Yeah, yeah, I mean I obviously thought he was wrong then because we doubled down on this back in 2014 but I still think he's wrong. I think you're right. I think we haven't seen the market top out. If you think of just the amazing growth that we've seen just in the tech vertical in the last two years after basically didn't exist before 2019, at least it wasn't being talked about. But I am interested in how instead of when the industry is going to take a downturn, what I'm more interested in is how the industry is likely to change. We're seeing a lot of new brand new innovations in the market. We're certainly seeing a lot of companies that are competing in the same space and the same products, our services, but we're seeing a lot of new concepts in the market. So I think that are our commentary on how the industry's changing, what it looks like today and how it's likely to look like tomorrow. That's probably going to be a theme of a lot of these podcasts.
Carrie Nixon (04:01):
So I see that we're sort of observing a convergence of events here and you know, mentioned the tech, the rise of tech. I think that was in part as a result of the recognition the very sort of, I know highlighted recognition at this point that there are not enough women founders and there are not enough women and investors. And when women are not in the investor's seat or in the founder's seat, then there isn't money going to fund women's health issues. And I think for whatever reason, that message has finally sunk in. And so what we are seeing is a number of funds focused on tech and on women's health. We're involved with a number of those funds. We're involved with a number of accelerators that are focused on women's health. And I take that as really good news. The other element of this convergence, of course, was covid.
(05:09):
I think as I mentioned, there's a widespread understanding now that we have to be prepared to provide healthcare in a non-face-to-face setting, because sometimes circumstances make that absolutely necessary. And then the third big event that I see as a convergence is finally a little bit more of this shift to value-based care that is occurring. We've been on this train for a while now starting in 2010 with the Affordable Care Act. It has taken a long time to make this shift to value-based care. And I think we are starting to see to first understand the necessity of it to second see more of a commitment at the top levels, levels of government to making it happen and third providers starting to understand what value-based care really means as well. So it's a convergence of events that I think is actually bringing more attention to the patient experience of healthcare as well.
Rebecca Gwilt (06:21):
Yeah, I'm just thinking of all of the things that I want to pick apart and talk about in those sort of three areas of convergence. Just the whole thing is just fascinating how it's unfolding. So earlier this month Rolfe Winkler wrote a piece for the Wall Street Journal, and he was focused on we've seen a lot of digital health news that's very positive and the worlds are oyster and there's a ton of money and VCs are fighting to get into these deals. But Rolfe really talked from a customer perspective, and we talked to a lot of our clients about this in particular, sort of putting themselves in their customer's shoes, figuring out what their pain points are, and really solving whatever the issue is for them, not just saying, this is a bright shiny object, it's new. It'll be great for marketing, adopt this because they won't use it if it's not useful to them.
(07:19):
So Rolfe interviewed a number of purchasers of these technologies. A lot of our very successful clients are selling to large self-insured employers health plans, payers. And Rolfe collected some feedback from those folks and it had a great perspective on what their purchasing behavior is looking like and the kinds of things that digital health companies might want to consider when they're selling into these groups. And also I think it sort of foreshadows what were to likely to see cause a shift in strategy for a lot of these companies. I'm going to link the article in our show notes but I wanted to talk with my brilliant partner about some key takeaways from the article that I think are important for digital health companies to consider. The first is that these customers are overwhelmed. I know we just went over how many new companies are in the space and selling into the space that's been happening for five or 10 years now. And these customers have are they just have these companies <laugh> knocking on their door all the time, every day with different solutions, and they're having trouble having trouble managing it, frankly.
Carrie Nixon (08:39):
Yeah, no, I think that's exactly right. We are hearing that from our digital health clients and our life sciences and med tech clients who are selling into the healthcare space. So for example when they're selling into physician practices or health systems, they are consistently hearing the feedback that there are too many portals and too many logins and too many systems to have to get into where information is kept in all different places. And that's understandable. I remember one health medical practice administrator telling me that she has 14 different portals to, that she has to log into on a regular basis to do the business of the practice. And that's really tough. We see a lot of remote patient monitoring companies that are coming down the pike, and that is a newer type of care management services service with chronic care management services being another type of virtual care service. And providers are saying, or physician practices are saying, why would I want one vendor to provide me with remote patient monitoring services and an entirely separate vendor to be providing CCM services, chronic care management services for the same patients? They're basically going to be serving the same patients. I need to have one platform and I need to have one login, and I need to have those types of services coordinated for the patient and coordinated for me.
Rebecca Gwilt (10:20):
And I think that coordination is the basis of another one of these sort of takeaways, which is there are a lot of digital health companies that are doing things like predictive analytics and have AI-based tools that sort of ingest claims data, for instance, from self-insured employers to deliver insights to customize their solution to the employee population. But many digital health companies are not integrating with the insurers that are underlying the benefits provided to the employees. And so the systems aren't integrated, the systems aren't talking to each other. And not only does that create inefficiencies and gaps in being able to deliver services for the digital health company, but for the employer as well. They're trying to integrate the technology that they use and they're trying to integrate their claims data into their vendor data to marry them together to improve care. And I think a lot of companies haven't gotten there yet.
Carrie Nixon (11:37):
Yeah, I think that's right. I mean, I think at one point in the 2010s I thought that we were headed toward the decoupling of insurance, health insurance as provided by employers. I thought we were heading more towards private or public markets for health insurance. It doesn't look like that's happening at least not right now. And so you're absolutely right that integration with the employers is key if they're going to succeed.
Rebecca Gwilt (12:07):
Yeah, we've got clients that are getting I mean, it's unimaginable how much <laugh> energy this must take up, but we've got clients that are getting daily, weekly, monthly, massive data transfers between systems because, well, there's privacy issues of course, but because they want to sort of have the most up-to-date data to make their predictions, to run their algorithms but without any integration, honestly, it's a privacy risk in itself, taking these massive, massive data sets and having them travel through multiple systems. So solving that problem I think is going to be sort of a big challenge in the next five years. I think also to your point, Carrie, with the RPM in the CCM systems, we've got a lot of digital health companies that are specializing now and they're finding great success by specializing on a particular patient population or a particular condition. And what I am seeing is that the same thing you're seeing is that customers are saying, that's great.
(13:14):
We would love a customized, specialized solution, but we don't need five customized specialized solutions. We need a platform that can deliver customized, specialized services to this whole population. And so you're seeing some very pointed acquisitions. For instance, the company Ro just acquired Modern Fertility, Modern Fertility, very, very specialized Ro, broader platform, and I think we're probably going to witness a lot of acquisition activity in the next couple years as the article calls them. One trick ponies, which I think is a little derogatory, but companies that are very targeted being acquired or consolidated to offer a more consistent platform to customers.
Carrie Nixon (14:01):
Yeah, I think that's right. I expect when we were already seeing it, as you mentioned I expect to see some consolidation in the industry where we're seeing aggregators of services as a whole come in and make the big plays. I think that's right.
Rebecca Gwilt (14:19):
Okay, so this has been a really wonderful discussion. I hope you have gotten some value out of it. Do you digital health companies out there, you should be seeking this kind of feedback from your customers so that you can pivot and add the kind of value that they are looking for. And this is changing as we're we're going to be talking about on this podcast. If you're doing this already, great job. I'd love to hear what you're hearing. I'd love to hear whether this is the kind of feedback you're getting. Is it a different conversation when you're talking to a large physician practice versus a health system? And are you looking at the market to see potential acquisition targets and joint venture targets? I hope you'll leave your thoughts or questions in the comment section. And thanks so much for joining us. Thanks everyone.