Insights

Digital Health – Shifting into Hyperdrive

With the topic of health and healthcare systems in the spotlight in the current climate, ClearlySo Healthcare and Well-being Sector Lead, Carl Bergholtz gives us his take on the sector within impact investing.

By Carl Bergholtz, Investment Manager & Health and Well-being Sector Lead · April 14, 2020

If there is anything that the global COVID-19 pandemic has proven to us it is that healthcare systems are over stretched and underfunded. While digital health solutions have started to come of age over the past couple of years, they have not been adopted to the extent necessary to alleviate some of the pain that global healthcare systems are currently suffering. An understanding of the benefits of using digital technologies to solve a myriad of problems that have been brought to the fore as a result of the pandemic has come about at lightning speed. Also, new solutions that have in the past have taken months, if not years, to push through the system have been adopted in a matter of weeks.

The drivers of global healthcare trends over the past few years have revolved around the following themes: Global healthcare expenditures have been steadily rising as life expectancy continues to climb and chronic diseases (such as cancer, heart disease and diabetes) continue to grow[1]; Consumer expectations and needs are evolving (consumers are demanding more convenient and accessible care delivery options); and new diagnostic and therapeutic models have emerged (there has been a move towards proactive rather than reactive care models).

Venture capital funds have seen the emerging trends, and this has translated to an increased level of investment into companies looking to challenge the prevailing status quo within the healthcare industry. The past few years has seen a dramatic uptick in investments being made and as the graph below shows, transactions have also been growing larger over time. Investors have been looking into new solutions, both digital only and software-enabled hardware, from a diverse range of healthcare related subsectors such as:

  • Telehealth and remote patient monitoring
  • Wearables and disease and biometric monitoring
  • Clinical trial management and healthcare analytics and big data
  • Digital therapeutics and personal health tools and tracking
  • Healthcare communications and engagement, including scheduling

Figure 1: Development of European Venture Capital Invested into Healthtech companies ($m) 

Even if these trends have led to a surge in investment dollars to find solutions to alleviate the pressure of increasing healthcare expenditure and accommodate consumer behavioural changes, and even though the benefits of some digital solutions have been evident, stakeholders including regulators and healthcare provisioners have been slow to implement changes.

This is now changing, and it is changing fast, as a result of the disruption caused by the COVID-19 pandemic. As an example, NHSx (the unit within the NHS responsible for driving digital transformation and lead policy, implementation and change) has fast tracked many applications to relieve some of the strain on both primary and secondary care practitioners and patients in the UK. The most noticeable one perhaps being the increased provision of telehealth solutions as an alternative to face to face consultations with local GPs who have had to close.

While this is all good and well, the healthcare industry is different from many other industries in which start-ups play a role. In the healthcare industry it can sometimes have very serious consequences if care provision is not applied to the highest standards. As such, it is understandable that some decisions should not be taken lightly, and government regulations should most definitely play a part. That having been said, there are a significant number of digital health start-ups that have performed robust clinical trials to prove the efficacy of their solutions and products, but still often come up against a brick wall of red tape and general inertia when trying to work with established healthcare providers. Also, not all digital health focused companies need to go through the same level of clinical validation. Some companies can offer substantial efficiency gains, with the associated cost savings, by digitising things such as recruitment and staff scheduling in a more efficient way.

Developments in digital health and the subsequent utilisation of new models of care delivery have the potential to fit well with the trends within global healthcare that we are seeing. Digital solutions are already having an impact on making healthcare provision more proactive instead of reactive through, for example, remote monitoring solutions, remote diagnostics and remote therapeutics.

There are, of course, several moving parts in the journey to a digital revolution. Can regulations be harmonised across countries to facilitate mass adoption, can healthcare providers (public and private) muster the will to push through solutions that will potentially alter care pathways and as a result clash with existing vested interests, etc.

If anything, we think that that the current crisis has shone a spotlight on the maze of problems faced by healthcare providers and highlighted the need for changes to be made for the long-term benefit of both healthcare practitioners and patients. Business as usual will not be an option when the situation stabilises and as such clinically proven and scalable digital health solutions undoubtedly have a promising future.

There will always be a need for in person consultations with clinicians, so we are not advocating a digital only world, the outcome will be a digi-physical world of healthcare provision in which healthcare providers become more efficient and consumers become healthier (and happier).

So, with many things starting to move in the right direction for digital health start-ups we think that the scene is now set for step change in adoption across different health related sub-sectors. The pain being felt by start-ups in the current environment will hopefully only be a short-term issue, and the companies that can weather the storm will be well placed to benefit from the changes that we are seeing. Investors will increasingly look into the sector as a priority as the market stabilises and companies begin to navigate the new business opportunities available to them. As mentioned, scalable digital solutions to healthcare related problems can be very impactful in a short period of time and as such investors will look to capitalise on the potential growth trajectory of these companies in the coming years.

At ClearlySo we spend a significant amount of our time working with healthcare companies and entrepreneurs with a mission to solve some of most pressing issues being faced by healthcare providers as well as patients. To mention a few examples, these companies include businesses providing effective mental health therapy products, companies offering services enabling the remote care and monitoring of patients, companies bridging the market gap in elderly care and companies providing rehabilitation solutions for patients that have suffered from strokes. We are awed by how dedicated these companies are to their core mission of helping people. We remain open for business and are always willing to talk to entrepreneurs to see how we can help them in fulfilling their mission.

[1] Health expenditure will outpace GDP growth over the next 15 years in almost every OECD country, according to new OECD forecasts. Health spending per capita will grow at an average annual rate of 2.7% across the OECD and will reach 10.2% of GDP by 2030, up from 8.8% in 2018, according to a new OECD report. Health at a Glance 2019: OECD Indicators – November 2019