The past decade has witnessed remarkable evolution across healthcare broadly. Striking research advances – from fast, low-cost gene editing in the form of CRISPR to novel biologic therapies – have added important new tools in the fight to diagnose, treat, and prevent disease. Innovative funding models across the risk-sharing spectrum have realigned incentives more naturally across payors, providers, and patients. The adoption of continuous monitoring and remote technology has started to transform the provision of care from an on-premise, reactive discipline to a distributed, preventative one. While much remains to be done – and cost containment in particular has proved a chronic challenge despite enormous investment – these are encouraging advances. In this piece, we wanted to discuss another broad trend that directly impacts how consumers (patients) experience the industry: the increasing consumerization of healthcare1.
In our view, three key intersecting trends have combined to produce the current boom in consumerized healthcare:
The first is the rising expectation consumers have been trained to hold for the technology they interact with, largely imported from their experience with consumer internet. As that sector has matured, certain elements have become table stakes – a clean design aesthetic, slick UX, and clear navigation, among others. As consumer internet companies broadly – from ecommerce to social media – compete for best-in-class user experiences, consumers directly benefit. Increasingly, they are demanding the same quality of user experience from the healthcare industry.
The second is the increased weighting consumer preferences have taken on within healthcare over time, as information around patient experience and provider reputation has become more freely available – empowering patients to exercise their preferences around when, where, and by whom care is delivered and in what format.
The third is the emerging de facto inability of legacy providers to retrofit existing work flows and retrain employee bases to operate in a more consumerized world; this is particularly so given many legacy providers operate on wildly outdated tech stacks due to the heavily regulated, risk averse nature of the industry. In that way, significant parallels exist with the evolution of fintech, where upstart firms (Block, Stripe, and Plaid, for example) have largely catalyzed innovation rather than large, entrenched incumbents.
The unfortunate arrival of COVID-19 accelerated each of these existing trends, as necessity became the mother of invention. Taken together, these factors have produced a slew of innovative, next generation HCIT companies from remote patient monitoring to BNPL for healthcare.
While naturally varied, these patient-facing upstarts tend to share some common features:
Modern UI + User Flows: legacy providers are notorious for relying on limited or outdated technology to manage patients (in 2022, it is still common practice at many care centers to have patients complete intake forms with pen and paper!). In contrast, the best of leading-edge consumerized healthcare companies rely on a clean aesthetic, purpose-built UIs and natural user flows reminiscent of consumer internet. In addition, many are natively API-friendly, reducing the amount of information patients are required to input manually.
D2C as an Entry Point: many firms providing care in some fashion tend to begin as direct-to-consumer models, with a pivot to a more efficient go-to-market via selling to employers or insurers often on the horizon. This tends to be the case as neither employers nor insurers are apt to fund care for their employees or covered lives absent proof points around efficacy, which as a result typically need to be created in D2C format. This approach also allows companies to optimize their product / service through iteration in advance of a more scaled rollout.
Pushing Care To Lower-Cost Settings: a core tenet of many new entrant care delivery firms has been substituting away from high cost of care settings (e.g., hospitals) to low cost of care settings (e.g., the home). A prime example of this dynamic exists within remote patient monitoring (RPM), a quickly growing category that seeks to monitor (often chronically ill) patients via technology in the aim of managing illness more effectively and preventing some portion of high-cost, acute care episodes. These businesses have particular relevance in value-based care and corporate self-funded health plan settings.
At Asymmetric, we believe the opportunity for consumerized healthcare firms to grow into enduring businesses and meaningful players in the ecosystem is a real one. However, the current euphoria surrounding the space at times glosses over structural issues that have and will continue to prove difficult for upstart firms to navigate. In our view, chief among these issues are:
Incentive Misalignment with Entrenched Incumbents: scaled, entrenched incumbents continue to wield significant market power across the healthcare landscape. As such, new entrants often must determine how to coexist with powerful existing players. Firms that fail to do so often face a difficult road in attempting to scale. For example, disease-specific vertical RPM organizations that lack a proprietary care organization and as a result attempt to integrate with PCPs – requiring a change to PCP work flows and employee behavior – without clear economic incentives often fail to garner meaningful traction.
Light Tech Overlay Framed as Meaningful Innovation: we believe the largest market opportunities will prove to be for firms that catalyze genuine innovation in the provision and funding of care. However, we often see uninvestable offline models brought online through a light technology layer framed as innovative health tech firms (any business that resembles an offline care provider + Zoom is a good candidate to fall into this category). A good heuristic here is innovation that meaningfully improves the patient experience, quality of care and / or value equation for a given healthcare application.
Unrealistic Payor / Employer or Pharma Adoption Narrative: as noted earlier, the common upstart digital health GTM two-step – begin as a D2C model to create proof points for an eventual, more efficient scaling exercise through employers or payors – is well-established. However, the data set required for adoption by these potential customers represents a high bar; in particular, most payors we speak with feel bombarded by new age health tech firms seeking access to and funding for their covered lives. Payors are sophisticated in estimating realistic ROI, however, and when measuring benefit over an acceptable timeframe relative to cost only a minority of firms are left with a compelling value proposition. Similarly, we frequently see new entrants that plan to capture data with their initial product and eventually sell that data to pharmaceutical companies, which have higher still standards for data quality and integrity relative to payors / employers. While many firms may capture seemingly valuable data, only a minority will be saleable given constraints such as (i) how big a priority area a given data set lies in for pharma at the time, (ii) how data was captured / is structured and (iii) how it fits into pharma’s existing data infrastructure, among others. While some firms will likely succeed in executing on this strategy, we have generally elected not to underwrite such future expansion absent an unusually strong basis for conviction in a given firm’s approach.
Despite these challenges, it is rightfully an exciting time in consumer-friendly healthcare - innovative solutions are desperately needed, and as early proof points get created a rising tide of demand has built for these approaches. Relatedly, we’ve felt fortunate to meet a number of wildly talented founders building in the space (including one stealth investment that we are excited to share more about soon). If you or someone you know has an innovative idea to improve the patient experience in healthcare, we’d love to chat.
1 For this application of consumerization, we mean the broad shifts – from business model to design aesthetic – that firms have implemented in response to the growing weight consumer preferences have garnered in the healthcare calculus.