By Sebastian Seiguer, CEO of emocha Health
The pandemic accelerated powerful market forces – true consumer demand from both the patient and the healthcare delivery system for digital health. Digital health has been on the rise for some time, although before the pandemic, the pace of adoption was considerably slow. Early market entrants struggled to either adapt to existing business models or create new ones through lobbying efforts.
Telehealth as a function (streaming, HIPAA-secure video) is now considered a commodity, and the best operators can entrench their positions by broadening their services. Teladoc/Livongo is one example, and these types of mergers are fueled by a combination of factors. Funding is not a current issue for M&A in digital health, and revenues are skyrocketing amid the pandemic. Moreover, most US health insurance is provided through employer plans, and the promise of reducing long-term costs through disease management approaches has created pent-up demand that can now be satisfied.
The market for digital health is about to explode, mostly because of a startling cultural mind shift change. As a society, we have changed how we think about services that were previously geographically and temporally constrained. For example, we actually talk about kids “going to school” while they are sitting in the kitchen on a computer. We’re growing accustomed to a vocabulary that refers to “meetings” and “siderooms,” and conferences are still selling virtual “booths.”
At emocha, one of our digital health solutions is a program to help children with asthma use their inhaler correctly. The program involves a patient video recording themselves using their inhaler at every dose, while an AI-assisted nurse from the emocha team reviews the video to assess and correct breathing technique and improve administration. The idea of implementing through school-based health centers was ludicrous this time last year, but not anymore. School health officials now understand this virtual experience. The last barrier here is red tape, and when that is cut – for each disease use case, market segment, and stakeholder – the evolution of healthcare delivery will be lightning quick.
With location and time no longer a semantic and conceptual constraint, asynchronous and digital delivery of healthcare services is about to take off. The market is ready, but the larger, well-funded players are not. The build versus buy decision will tend to lean towards the latter, especially as digital health funding has reached unprecedented levels this year. What do we do with all that cash when best-of-breed niche players have perfected segment-specific and patient-specific solutions that work?
The market for M&A and financing is truly at a frothy point, but effectiveness and efficacy will start to be concerns by this time next year. Teladoc may have overpaid for Livongo, but if they can sell the program onwards through their arrangements with employer health plans, it will not matter short-term. I have yet to hear from any market insider that Livongo effectively works; in the middle term, competition will heat up for solutions that truly reduce employer health care costs.
While there may be many digital health solutions for disease management, it’s a big stretch to expect an app to get someone to change habits such as nutrition and exercise. We have to figure out what actually works very quickly. Covid-19 affects the lungs and heart in ways we still do not understand, and we can expect health consequences for the most vulnerable after we reach peak vaccination levels. Likewise, we can expect our scientific and clinical experts to develop therapies to remedy these problems. Validated approaches in the non-virtual world, but effective when delivered digitally, must evolve to help us get through the after-effects of Covid-19. Healthcare workers can expand their capabilities, and see more patients, when using a technology-enabled adaptation of a validated approach to help patients remotely.
The next generation of digital health players will actually solve problems in healthcare that were constrained by appointment schedules and geography. The lowest hanging fruit in healthcare is the decades-old problem of medication non-adherence. We need patients to succeed with their therapies. Telehealth boom or not, managing medications is a critical aspect of disease management. An example of such a solution is DOT (Directly Observed Therapy) a validated, proven public health practice that includes a daily medication management appointment, daily confirmation of adherence, and human engagement & support.
Larger players are flush with cash, healthcare problems are rampant and are only going to increase, and we now use vocabulary that does not discriminate between virtual and physical space in our daily lives. This is a recipe for a lasting wave of digital health innovation, and a very active 2021 for M&A.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.