Pandemic as market catalysts for digital health adoption
Digitalization is driving the movement toward a better healthcare system and creating changes in market forces such as patient demand, and provider adoption.
The black swan event of the 2008 global financial crisis exposed the fragility of a centralized financial system. The crisis created an opportunity for the creation of a decentralized financial ecosystem. In 2009, Bitcoin— the first successful digital currency—was created and initiated the decentralized financial ecosystem. In November 2021, the crypto industry's value reached three trillion dollars.
The Covid-19 pandemic that began in early 2020 created a similar crisis in healthcare. Famous American venture capital firm Sequoia Capital called it the black swan of 2020. While Nassim Nicholas Taleb, author, mathematical statistician, and risk analyst who coined the black swan theory, is “irritated” with the reference and thinks, “The pandemic isn't a black swan but a portent of a more fragile global system."
Whether the pandemic is a black swan or not, it is undeniable that the crisis exposes the fragility of the current healthcare system. We are almost two years into the situation, and we have seen numerous changes in healthcare. We are witnessing a kick start of a paradigm shift in the healthcare industry, akin to the beginnings of decentralized finance in 2008 at the heels of a financial crisis. We see changes in patients, payers, and providers' behaviors. Most importantly, we see many innovators in healthcare argue that the current healthcare practices need to be replaced with a patient-centric healthcare system that is affordable, accessible, and readily available to the patient.
We want to be part of this movement and have been doing many things to participate in it. We have enabled healthcare innovators to speed up their processes faster. We also want to curate and create content that helps innovators understand changing contexts and patterns in healthcare innovation.
We plan to release a series of articles that will help innovators learn the past, present, and future and, more precisely, the creation and adoption of digital health.
Let us get back to the digital currency analogy. There had been several attempts at creating digital currencies before 2008. But one of the many factors that contributed to the adoption of Bitcoin is the timing. Bitcoin came into existence right after the 2008 financial crisis as a decentralized alternative to the centralized financial system. It solved the technical problem of double spending using software with an elegant synthesis of many technologies such as cryptography and distributed network computing. Bitcoin was an idea whose time had come.
Similarly, most technical parts for digital health existed before the pandemic. But they appeared like a sum of the parts rather than a whole system. We saw those parts coming together and witnessed changes in patient adoptions, adaptation for survival by providers, and payers responding to the environmental dynamics.
Many people know that the breaking point in US healthcare has reached. How does the US spend more than double per capita on healthcare than any developed nation with the worst outcomes? Why do medical bankruptcies represent 66.5% of all personal bankruptcies in the US? Why has the average medical insurance premium increased by over 50% in the past decade?
Evidence and facts suggest that most people have reached the breaking point on healthcare in the US. The general population cannot afford to increase their expenses on healthcare anymore. We can see that increasing the spending on healthcare is not the only solution to improving healthcare outcomes. The current healthcare system needs to change.
In 2022, most people will have access to broadband internet and use video conferencing technologies or instant messaging apps. We have seen that patients are ready for digital adoption and demand digital solutions. We can categorize this readiness into technical and behavioral.
The penetration of those apps has reached not only the younger population but also, the older generation. Most people are digitally ready to use internet technologies. Furthermore, continuous care through remote patient monitoring requires the adoption of wearables and medical devices. Consumers have been adopting these wearables for their wellness. And at home, medical devices for specific uses like heart rate, blood sugar, glucose, and blood pressure monitoring have gained momentum.
Machine learning algorithms have reached human-level performance for detecting and diagnosing diseases. Digital technologies for all categories such as patient education and engagement, provider care collaboration, clinician decision support, and disease diagnosis are ready for adoption and acceleration. And consumers are willing.
In 2018, 92% of American households had at least one type of computer, and 85% had a broadband internet subscription. Smartphones were present in 84% of households, while 78% owned a desktop or laptop. These data indicate that consumers of new technology are increasing, and information technology has reached a majority of the American population.
Although consumers are ready to adopt new technologies, it does not mean the readiness has translated ubiquitously. Adoption still has challenges. Still, technical and behavioral readiness has created a demand for digital health and inspired innovators to develop new products, services, and business models. But before the pandemic, digital health was only a luxury option. But after the pandemic began, digital health became a necessity which exploded the acceleration in adoption.
When hospitals had to close treatments deemed 'nonessential' such as cosmetic or elective surgeries, specialty care, and many other treatments, they had to forego their revenues, resulting in a massive financial loss. The American Hospital Association estimates a total four-month economic impact of $202.6 billion in losses for America's hospitals and health systems, or an average of $50.7 billion per month between March 1 to June 30, 2020.
The Covid-19 pandemic acted as a forcing function for survival. Providers had to embrace telehealth during the pandemic to continue providing care to patients. If they did not offer telehealth services, they could not generate revenue for survival. Also, patients living with chronic illnesses needed regular visits to healthcare centers. Furthermore, patients with preexisting conditions were vulnerable to contracting the coronavirus at hospitals and clinics. So the only safe way to get physicians’ consultation without being exposed to risks was a virtual visit. Thus physicians started adopting telehealth for primary care visits and periodic follow-ups for chronic disease patients.
New analysis indicates telehealth use has increased 38X from the pre-COVID-19 baseline.
- FDA approved Emergency Use Authorizations ( EUAs) for remote or wearable patient monitoring devices in 2021
- Before the pandemic, providers had limitations for what they could bill for their telehealth services. But following the lockdowns that rendered person-to-person consultations impossible, Centers For Medicare & Medicaid Services (CMS) issued the telehealth reimbursement code on March 6, 2020. It incentivized the providers to accelerate telehealth adoption. CMS expanded the billing codes with more regulations in progress currently.
Medicare Telemedicine Health Care Provider Fact Sheet
Source: CMS
- Medicare Physician Fee Schedule 2022, the U.S. Centers for Medicare and Medicaid Services proposed for the first time a set of CPT codes for remote therapeutic monitoring.
Source: Federal register
Funding in healthcare startups has increased multiple folds in the last two years. The first half of 2021 closed with $14.7B invested across 372 US digital health deals with a $39.6M average deal size.
More investment in healthcare innovation means more players in the market will create new products and services. Along the way, many might fail, but a few will succeed. There will be iteration towards more stable innovation with failure and success.
This introductory article has laid out the overview of changes in market forces such as patient demand, provider adoption, regulatory incentive, and increased investments that are driving the movement towards better healthcare.
We will write more about innovations, opportunities, and challenges in digital healthcare soon. So please subscribe to get a notification for when we publish another article.