Investors pinpoint areas of saturation, opportunity in digital health

By Jonah Comstock
11:54 am

Money TreeValue-based care, patient engagement, and data analytics are three of the biggest trends in healthcare, according to a panel of health investors that spoke at HIMSS 2015 in Chicago this week. Anuj Desai, Vice President of Market Development at the New York eHealth Collaborative, Adam Koopersmith, a Partner at the Pritzker Group, and Ned Schwartz, a Partner at Drive Capital, shared some of their insights on trends in health investment and tips for companies seeking funding.

Two big trends that are shaping the sorts of companies investors bet on are value-based care and consumer-centric healthcare. Koopersmith noted that customers are both taking on more financial risk for their healthcare through changing how they interact with payers, and increasingly taking charge of their personal wellness through data-gathering connected wearables.

"As the consumer is becoming more influential in the healthcare space, a lot of the traditional B2B players, whether that’s providers or insurers, need to have a much more consumer-facing orientation, and a technology that can help them make that transition is great," he said.

Panelists also agreed that the transition to value-based care is ramping up, and investors are looking for companies that can support that transition as well.

"The train has left the station on value-based care," Schwartz said. "The system has tried things like bundle payments every couple years for the last few decades. I think the reason why it never stuck before but it sticks now is EMRs. The reason value-based payments failed is because you need tons and tons of data to make it happen."

As a result, data analytics technology that can turn all the new data from EMRs and from patient wearables into health improvements (and therefore cost savings) is a very attractive area for investors. But Desai warned that it's also an oversaturated area.

"So many firms already focus on analytics, we’ve seen in our accelerator program that companies in that space really struggle," he said. "But as the market matures and there's more and more data, there might be some new insights. I’m really interested in seeing analytics companies that merge different kinds of data together."

Like data analytics, direct-to-consumer is an area where healthcare seems almost, but not quite, ready for a slew of new companies. Desai also said that the New York eHealth Accelerator has seen a few companies start out as direct to consumer healthcare offerings, but pivot into B2B2C offerings that sell to patients via their doctors.

Koopersmith highlighted Analyte Health, an online STD clinic Pritzker invests in, as evidence that the direct-to-consumer business model can work in the right context in healthcare. Analyte Health has a net promoter score in the high 70s, which suggests it's resonating well with early users.

Panelists also touched on the importance of collecting data and running pilots to attract both customers and investors. They cautioned entrepreneurs against misrepresenting themselves in terms of their product's market readiness, or biting off more than they could chew. Desai advocated starting with small pilots that could be accomplished in six months or less, and then scaling up as the company builds its relationship with its provider partner. Koopersmith said that investors aren't necessarily looking for dramatic results from an early stage company, but they do want to see numbers "trending in the right direction" for whatever value metric the company uses to track its success.


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