2022 was a superlative year in the don’t get bored and zone out department. Who thought Ukraine would kick Russia’s ass? Who thought the Donald would deflate? Who thought seemingly insatiable mania about digital health ventures could generate such a deafening sucking sound so quickly?
These are all wonderful things…depending on your point of view about the future of course. I will leave the joy of the first ones to other, more worldly writers, but let’s talk here about the digital health deflategate.
First, this is in part nothing to do with healthcare; we are in a macro contraction whose causes are myriad and decades in the making. There are jokes about “printing money” but we effectively did that — by lending it out from the Federal Reserve at ZERO interest and then BUYING bonds with PRINTED money so that the coupons of bonds would keep going up. We did this for so long and with such impunity that we created a ton of scary inflation that we are now frantically dealing with…not to mention a boom in speculative alternative currencies which can’t be printed when politicians get silly.
But all this cheap currency made for a real willingness to put money into new equities. This gave a great break to all kinds of novel digital-first care ideas that might not have gotten funded when money was tight. Throw in the pandemic and we had us a regular orgy of new companies all trying to find pieces of care that could be served digitally. We found a TON of them and the data is exciting. I feel as though I have seen enough evidence in the last four years of digital health to say we have sufficient pent-up energy in the care system to achieve our first multi-year reduction in the cost of care (reduction in share of GDP) since the 1990s. I’m massively excited to see how we can all convert the potential energy into kinetic energy.
What is the new thing?
Nudging. Nudging is the new thing. There are thousands of new care modalities that have in common: 1) real mastery of a narrow, largely behavior-driven, syndrome of illness; and 2) deployment of a focused team of professionals and tech to keep patients more compliant with a regime of behaviors that keep the syndrome under control. This is more satisfying care to deliver for providers since all the patients fall within their expertise. It’s a boon for tech people since this care MUST be delivered in a digital first way in order to be affordable. It’s a boon for platform tech since these care models can afford to ingest much more signal in the delivery of care than place-based, doctor-only, fee for service providers could ever ingest (or would ever want to). I think it’s a boon for data services too for the same reason. Once machines are allowed to help with the delivery of care, “not enough time to read everything” goes away as a constraint.
How might it manifest?
I think the primary manifestation of these breakthroughs is a way-paving for a generation of companies to MAKE MONEY SAVING MONEY. This was true in the early 90’s in the childhood of the HMO…and became less so as HMO products expanded and consolidated to the extent that they couldn’t really walk away from any provider contract. The providers were so rolled up and the HMOs were so big that everyone needed to end up in network. Then the change in law establishing minimum standards for health plans’ medical loss ratios–which has value in its own right–further diminished the savings incentive, by making it so that the primary way to increase profits for a health plan that already reached its maximum efficiency was to help medical costs glide upwards. This new tech-enabled nudging can help reset some of these incentive structures so that provider organizations and their customers can actually win by providing equivalent, or often better, care at a lower cost.
What does it mean for us entrepreneurs in 2023?
Well… be sure to read my post on the joys of recession. I wrote that a year ago but it didn’t get picked up, partly because it seemed no one was accepting that we were in a recession.
In addition though, 2023 is the year of the pudding. The proof now can NOT be in member growth rate. It can’t be in anecdotal devices of superior clinical outcomes. In fact, it can’t even really be in statistically significant large-number evidence of superior outcomes. In 2023, the pudding is that you create rock-solid cash savings for buyers of healthcare. I think that means that many worthwhile point solutions that have excellent offerings will need to work quickly to club up with aggregators or find other means of going to market with guaranteed easy savings math for unsophisticated benefits buyers. It will also mean efficiency will begin to trump effectiveness. Whatever you are doing, no matter how noble and brilliant, if it doesn’t have a hefty gross margin for you after delivering real savings for benefits buyers (or the middle man you have married to go to them for you), you are in deep doo doo.
Take heart, though: as I said in the recession piece, many of us (myself included for most of my career) HATE letting people down so much and making tough personnel decisions that it takes a serious whack on the head to do it before it’s too late. 2023 should provide just such a whack.
Featured photo by Jana Ohajdova on Unsplash