Ignore the digital health semantics, and focus on the outcomes

Digital health is amorphous, it is everything, and it is nothing, observed my colleague Saurabh Gupta, aptly summarizing digital health in response to the different definitions by the government (FDA, NIH), industry forums (HIMSS), and other entities. At HFS Research, we will instead describe it out of respect for its continuous evolution:

Digital health is a segment of the healthcare ecosystem that aspires to create human health value by leveraging emerging technologies to connect caregivers and health consumers across multiple channels, continuously.

A digital health framework that cuts through the noise

President Johnson’s Social Security Amendments of 1965 created Medicare and Medicaid and triggered the first use of technology in healthcare, primarily to manage government reimbursements. Since then, health information management (HIM) systems evolved as computer usage increased and medical records became digitized, health information exchanges (HXE) developed, and diagnosis codes (ICD-10) expanded as part of the health IT journey. The US government then set various technology standards (Meaningful Use) and passed laws and regulations (HIPAA, HITECH) as the technology proliferation continued. This legacy genre is health IT (HIT) and is the pre-cursor to emergent digital health.

At HFS Research, we simplify the complex and will separate legacy HIT from digital health. The HFS Research digital health framework (see Exhibit 1) seeks to find value defined by the Triple Aim (cost of care, health outcomes, and experience of care) and powered by emerging technologies (IoT, artificial intelligence, blockchain, quantum computing, etc.) at the intersection of traditional industry segments, delivery modalities, and solutions categories.

Exhibit 1: The HFS Research digital health framework is powered by emerging technologies across three dimensions to deliver the Triple Aim

Source: HFS Research, 2021

Every dimension of the HFS digital health framework will evolve; market segments could expand to include provider-sponsored health plans (payviders) as they achieve critical mass, delivery channels may include augmented reality (AR/VR), while the solutions are a function of entrepreneurial imagination. As the current set of emerging technologies scale and become table stakes (RPA, AI), others (blockchain, quantum computing) will drive the next iteration of human value creation. The idea for the HFS digital health framework is to give structure and offer flexibility to a market segment that is trying to figure out what to become when it grows up.

Digital health has a small window for delivering meaningful results before the dollars will move on

Despite the infusion of emerging technologies, interest from traditional healthcare industries and entrepreneurs backed by large sums of money, the Triple Aim needle has not moved in the right direction (see Exhibit 2), as discussed in prior research. The cost trend is a runaway train with no end in sight, while we are getting sicker and our lives getting shorter.

Exhibit 2: Cost and health outcomes continue to trend in the wrong direction

Still, digital health is growing, though non-secularly, with some areas like virtual care (telehealth) and consumer engagement getting a lot of attention and investments while others, like waste and inefficiency management, are not gaining much traction. Economics is a major driver of choices, especially those funded through venture capitals (VC) and, more recently, through public investment vehicles like special purpose acquisition companies (SPAC). Rock Health indicated that Q1 2021 attracted $6.7 billion in digital health investments, as much as all of 2018 and 2019 did. Moreover, across 2020, digital health investments attracted an all-time high of $14.1 billion, a 72% increase from the previous high of $8.2 billion in 2018. Seeing the trend, we should expect a bumpy and exciting ride.

A generational chance to re-engineer those legacy processes on the backs of digital health

A symptom of digital health’s amorphous nature is its propensity for point solutions to legacy problems; it’s high-tech lipstick on the pig. A primary driver for this behavior is the coming together of digital-savvy entrepreneurs willing to take a bet and healthcare experts who revel in the legacy healthcare complexity.

The industry needs fresh and brave thinking that could include starting from the ground up. We could change how we fund healthcare (Medicare for all, anyone?), getting doctors incented on their population’s health, holding makers of sugary drinks and fatty snack makers responsible for their consumer’s health bills, and more. Some have taken a bit of a gamble with outside-the-box thinking like Forward and Iora Health, but that is not sufficiently radical to make a population impact.

The most practical path forward would be to re-engineer legacy healthcare processes using the principles and technologies underpinning digital health that can root out waste and inefficiencies, streamline and compress the value-chain (quote-to-card-to-care-to-pay), and develop ecosystems to impact social determinants of health (education, community, food, etc.). Recognizing the challenges of a highly regulated industry could complicate the path forward. Pilots are being conducted across minority communities and rural populations to test out models that substantiate a case to regulators and lawmakers. However, the pace and exposure of these pilots are not moving the needle. It will need the growing strength of digital players to expand to the not-so-sexy challenges to make a difference.

The Bottom Line: Digital health has the best chance we know to leverage technology to improve human health, transform care delivery, and reduce healthcare costs

Healthcare incentives are counter to sustainable transformations hurting health consumers. On the flip side, the misdirected incentives have attracted entrepreneurs asking the right questions, disintermediating the traditional value chains, and directly engaging consumers. These irreverent entrepreneurs are not taking no for an answer, and they can attract investments in their direction while remodeling health economics as they go. While at a population level, there is no evidence that digital health has made outcomes better or worse, which is reason enough to give digital health a chance. Lean in, be open, test it, demand better, and be a part of the transformation.