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Digital health market is hot, but startups still struggle to create sustainable business models – MobiHealthNews


Digital health is still in many ways the new kid on the block within the healthcare industry. Within a short amount of time, the new field has turned the heads of investors and providers alike But now the industry is beginning to grapple with questions around how to implement a sustainable economic business model. 

“In the next five to six years or so the market is estimated to be $120 billion,” Santosh Mohan, managing director at the Brigham Digital Innovation Hub, said yesterday during an Enterprise Insights Series Event (in partnership with Google Cloud and Rock Health). “Now that is a large number. I think we are still in the early days and there are many unrealized expectations from digital health. I want to say we are not in an investment bubble. I think the digital health solutions have started to show value and we are moving beyond talking about who pays for the pilot, and talking about how do we build these sustainable economic models for digital health to gain revenue and gain scale.”

Despite the fact that digital health technologies are starting to demonstrate value, entering an industry as established as healthcare can be tough. 

“Our entrenched business models are very strong. We have been around for over 200 years and our hospitals have figured out revenue models that work and are fine, right?” Dr. Kamal Jethwani, senior director of Partners HealthCare PivotLabs, said during the panel. “So the burden of proof is on the startup to prove that this is better than status quo. And the status quo is actually pretty good. Our efficiency levels are pretty good — if you think about Partners’ hospitals with Harvard-trained doctors, we are providing very good quality of care. To beat that quality of care is actually very difficult.” 

Startups may not be able to come in and shake up an established industry that easily, but Jethwani stressed that collaboration and codesign is one piece of the puzzle to getting that buy-in. He said that at Pivot Labs, 75% of the team’s work is around co-development. The organization works with big pharma, medtech, providers and startups to get ideas flowing between the different innovators. 

It isn’t just provider innovation organizations seeking collaboration in order to figure out these business models. Payer organizations are also interested in the space. 

“I think another one of the themes is around codesign, co-development and collaboration. Blue Cross Massachusetts has just launched a major 30,000 square foot innovation center called Wellbe and part of the express purposes of that center is to serve as a collaboration center for ideas and action,” Sukanya Soderland, chief strategy officer and SVP of BCBS of Massachusetts, said during the panel. 

Not every idea is going to have a sustainable business model, but that’s OK, Jethwani said. His organization is looking to help companies and stakeholders figure that out early on. 

“Not everything that gets validated is commercial ready,” Jethwani said. “So, I want to say in over 50% of cases either the technology or the business model or the need isn’t there yet where someone would find them commercially viable. We think of that failure as a success because we have de-risked this now for someone else, for a VC or a buyer of digital health.”

While ROI is important to both health plans and providers, sometimes the stakeholders are more focused on their own personalized goal. 

“From the employer’s perspective — many of them health is not their business, it is banking or manufacturing — they are coming at this from the standpoint of ‘What value is this going to bring to my organization?’” Holly Collinsa, partner at Mercer, said during the panel. “That could be financial ROI. It could just be a different kind of value. It is aligning with some other goal whether it is a healthier workforce or more productive. They are bridging some gap.”

There may not be a one-size-fits-all business model. The questions that stakeholders bring to the table around validation, ROI and value are constantly shifting. However, as a whole the industry is beginning to see the tools as valid. Now it needs to tackle the next steps before implementation. 

“When I joined providers would say, ‘Prove to me that digital health works. Prove to me the ROI. Prove to me it is effective,’” Jethwani said. “I did so many randomized trials I can’t even remember. Today no one asks me that question. Today the question they ask is ‘Can you prove to me that it is not going to add to my workload?’ Because everyone is convinced that it works — they just don’t think the how is figured out yet. So today all of our validation efforts are focused on the provider satisfaction, workload and implementation metrics rather than true clinical outcomes, because people know that is happening.”



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