THE ELEPHANT OUTSIDE THE ROOM:

Blog

Author:
Bill Pescatello

This blog was co-authored by Michael Stenclik.

How digital health startups are changing patient behavior to save the healthcare system

It’s hard not to get excited about all the change happening in healthcare. According to Rock Health, 256 companies raised more than $2M in 2014, with total funding in digital health surpassing that of the prior three years combined at $4.1B. 

That said, it’s easy to get lost in the myriad number of problems that plague healthcare today and the seemingly thousands of startups that are eagerly jumping up to solve them. Let’s focus on where we can see clear value in the near future.

Today, chronic disease accounts for roughly 86% of the $2.9T spent annually on medical care—an amount that can be materially reduced by changing consumer behaviors.

This is not a doctor’s failure to diagnose a disease when a patient comes to their office, but a failure to help patients manage their disease in their everyday lives.

The patient’s life at home is a black box to doctors and payers alike. Most patients living with a chronic disease must adhere to a disciplined regimen to maintain their health. 

Let’s take diabetes, a condition that affects 29M Americans today. The moment patients are diagnosed they are equipped with a glucose meter to monitor blood sugar and expected to engage in regular exercise. If the patients fail to do so, they are at risk for unnecessary hospital visits that drive considerable waste into a $176B category of care. Companies such as Omada Health, Welldoc, and Livongo have risen to meet this challenge through a blend of digital touch points and behavioral therapy. By interacting with patients more regularly, these companies are providing transparency to an otherwise opaque world and enabling providers to make smart interventions that reduce the cost of care.

Where else are we not empowering our patients outside of the doctor’s office?

Our team has identified $883B in addressable spend for chronic disease management that is rife for disruption. Our analysis suggests that categories such as “Depression and Anxiety” or “Cardiovascular Disease and Stroke” provide significant market opportunities that will attract ambitious founders. 
Mike Post Chart
As we look to these categories, it’s likely that the companies demonstrating the greatest success will follow a playbook that mirrors their predecessors in the Diabetes realm:

1. They’ll focus on specific categories of care where patients are expected to report their status and visits are intermittent

2. They’ll employ a blend of digital enabled touch points and behavioral science to help patients change their habits for the better

3. They’ll collect data on demonstrable outcomes that ensure reimbursement from insurers, health plans, and self-insured employers

This playbook provides a blueprint for digital health startups looking beyond the category of chronic disease as well, including companies like Ovuline (Lightbank portfolio company) that uses clinically proven guidelines and machine learning to help couples conceive and have healthier pregnancies. Recognizing that a lot of challenges associated with pregnancy occur outside of the doctor’s office, Ovuline is stepping in with mobile technology to bridge the gap and address a $230B market within IVF, prenatal care and early childhood.

Solutions like Ovuline are empowering patients to take control of their wellbeing, enabling access to care that would otherwise be inaccessible and prohibitively costly. As healthcare costs rise to almost 20% of GDP, it’s never been more important to find creative ways to improve outcomes and it’s clear to us that novel applications of technology will help pave the way.