Digital Health: Emerging States

On a recent walk about to get up to speed in the rapidly changing field of digital health, we biopsied the latest thinking by many of the most engaged minds in order to develop a strategic map of promising innovation and investment entry opportunities. Our stops included: Qualcomm Digital Health Summit, the Samsung Developers Conference, Singularity University’s exponential health leaders, Johns Hopkins Bloomberg School of Public Health mHealth program, JPMorgan Life Sciences Meeting, Rock Health, Citrix Accelerator, Leavitt Partners and AMA Summit on Digital Health, the Digital Health Track of BIO 2015, MIT Hack@Medicine event, UCSF Digital Health Summer Summit, IMEC Technology Partners and CEO conference, and the Data Sciences program at the Jet Propulsion Lab at CalTech. And you think YOUR feet are tired!

We met with management of leading entrepreneurial companies including LinkedIn, Welldoc, Teledoc, Doctor on Demand, Doximity, Health Engine and FitBit; leading health IT investors in our ecosystem at numerous venture capital firms; key management and board members at Merck, JNJ, Lilly, Novartis; health insurer Aetna; medtechs from BD and BSX; execs at providers Mayo Clinic, Geisinger Health, JHU, Stanford, The Methodist Hospital, USC, Kaiser Permanente; and Milken Institute Foundation.

So that you don’t have to retrace our steps, we’ll share some highlights here.

Digital Medicine vs. Digital Health: Yes, Virginia, there is a difference. In fact, there’s a significant distinction between Digital Medicine and Digital Health. Digital Medicine requires an evidence base and is data-driven. Doctors engage, use and prescribe these tools to improve health outcomes, to pursue value-based reimbursement and to gain the benefits of stickiness and retention for their patients/consumers. And what happens when we aggregate data and get a glimpse into never-seen-before information? We arrive at insights that address the triple aim of better care, lower cost, and higher quality, in pursuit of better value. That, in a nutshell, is Digital Medicine. Digital Health is, well, everything else.

Capital Flows: Digital Health is coming of age. Starting with capital flows, 1H 2015 venture dollar flows were summarized by PWC Money Tree, NVCA, Thomson Reuters and Rock Health. In 2014, venture firms in Digital Health invested $4.3B, and that flow continues apace in 2015. In fact, 9% of all venture capital invested in 2014 poured into Digital Health. (FYI, that’s more than the previous three years combined). Investment returns are beginning in the sector as the J curve is reached and sizable IPO exits (five in 2014 and five so far in 2015) have materialized, among them Fitbit and Teledoc. It’s interesting how Fitbit won in only five years, reaching $1B in revenue, an operating profit, and an installed base of >20 million by taking a narrow fitness focus, addressing the fit and the worried well. While one-dimensional, when its qualitative trend data is combined with smart phone data, EHRs, and more, a powerful network effect is realized. Fitbit’s opportunity now is to figure out how to engage next; hiring a Chief Medical Officer isn’t a bad idea. In telemedicine, Teledoc floated its IPO and reached a valuation of >$1B. When investing, the only return that counts is the one you realize. Well, these firms are rewarding investors with returns and the market with innovation and value.

Deal Flow: We heard from established venture firms active in the sector that they are seeing two or more digital health startups/week (and some 600 each in the past 18 months). In some ways, it’s a massive failure of the market. IMS reported that they count 16,000 apps addressing healthcare, depending on how you define healthcare, and >1000 wearables. That poses two big challenges: 1) how does one sort the useful from the frivolous; and 2) how do we get the useful ones to the right people?

Design: Jawbone designer Yves Behar emphasized that when the design doesn’t force users to change habits or workflow, the product can create efficiency, adoption and delight, and unlock pent-up latent demand (i.e., new categories of explosively growing markets). At MIT Hack@Med, we learned about powerful design and ideation methods to explore patient and consumer engagement. Many now appreciate that design using behavioral economics incentives can make a significant contribution to improved health outcomes. A popular use case with data to support it is pre-diabetes and the management of diabetic patients.

Stay tuned in the coming months for more, centered on teams, business models and curating. In the meantime, we’ll leave you with our overall observation that the promise of Digital Medicine is starting to become reality. Some great minds out there are finding new ways to equip doctors and enhance the patient-doctor-provider-community relationship.