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Hidden Opportunities in Digital Health
Marco DeMeireles, Partner, The Chernin Group (TCG)
Healthcare in the US is changing. A confluence of factors have made today the perfect time for health & wellness to be revolutionized by technology: growing healthcare costs, consumer dissatisfaction, provider shortages, and, thanks to the pandemic, the acceleration of telehealth, and easing regulations. While not much of this is new, consumers now have higher expectations for healthcare services following digitization across nearly every other industry; a trend that’s been furthered by employers who have increasingly pushed the cost burden onto consumers.
In recent years the majority of private capital has focused on generalist platforms; however, there remains a number of specialties that require more targeted solutions and justify increased focus by investors and entrepreneurs alike.
In the US today, over $100Bn is spent annually on prenatal care, labor/delivery, and postpartum. Yet today, the US has the #1 worst rate of maternal mortality in the developed world. Alarmingly, estimates suggest that ~60% of those deaths are preventable. And over a third of women have at least one avoidable ED visit during their pregnancy - significantly adding to these costs! NICU utilization and avoidable ER visits are remain the #1 driver of maternity costs today.
Historically, startups in this market have largely failed to develop a business model aligned with payers that scales in a capital efficient way. Many of these companies over rotated to sell employers a “fringe benefit” without a hard ROI or real engagement. Others pursued an all-digital approach (apps with content, education) or all services (private equity style OB-GYN provider roll-ups), both resulting in mixed success.
That is beginning to change with a new set of players, such as Oula. These businesses are showing clear leadership as strong consumer brands that hone in on consumer experience needs with an eye to redesigning the underlying payment model directly with the payers.
The term psychosomatic in this context refers to physical symptoms that are influenced by the mind. Unlike symptoms that stem from a physical cause in the body (eg. a leg injury, or a bacterial infection), effective treatment for these disorders can be hard to find. Two clear examples of this are Eating Disorders and Substance Abuse. Together, over 70M Americans suffer from these conditions, yet the majority of them go undertreated, battling pervasive social stigma. Moreover, both represent chronic-like issues that require long-term, dedicated support (potentially on-demand). The rates of relapse from today’s addiction programs show we have a lot more work to do.
Today, there are a number of interesting approaches emerging for these conditions. Things like vertical communities centered around specific chronic conditions, proliferation of at-home diagnostics/wearables, and an increasing embrace of digital solutions like Equip and WorkIt. While most of these are still very early, we’re seeing promising results and strong consumer demand for better offerings in each of these end markets.
Earlier this month, the WSJ reported that a number of large healthcare systems' were intentionally hiding pricing data of common healthcare treatments from consumers. It’s a clear defensive move that shows they are afraid. Like consumer finance, entertainment, and travel, healthcare is on the cusp of a 25-year plus digitization (and consumerization) wave that will redefine the way many services are discovered and procured. In many cases, such as Maternity care, new businesses will better serve consumers pain points surrounding price, experience, and outcomes; and in other cases, such as Anorexia, these new businesses will address trust, community, convenience, and ongoing support, tapping into millions of patients’ pent-up demand. In the years ahead, I aspire to solve the core needs -- people, capital, and operations -- of emerging growth companies who are using technology to lower the costs, improve outcomes and build better experiences for consumers of healthcare services.
Any opinions expressed are solely my own and do not express the views or opinions of my employer. All information provided herein is for informational purposes only and should not be relied upon to make an investment decision and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.