At HBI 2020 we interviewed Chinta Bhagat, a managing partner at private equity house L Catterton, the world’s biggest private equity investor in consumer products and retail, about the destruction of the general hospital and the new digital models that will replace it. “If you don’t have digital embedded in everything you do in such a way as to give the customer a choice of how to interact with you, your business will eventually be destroyed,” he says. Bhagat should know, he led McKinsey’s healthcare practice in Asia for many years and at Khazanah Nasional was intimately involved in the creation of Pan-Asian hospital chain IHH. He is now scouting the world for digital healthcare investment opportunities.
His principal tenet is that the new apps and digital offerings are based on the customer or patient experience. “For health care services that is revolutionary because the model has been based on either top-down government decree or money flow – doing stuff that pays.” It is as though ten thousand would-be Steve Jobs are trying to reinvent the healthcare equivalent of the mobile phone.
The consumer in the new world moves from a hospital where they see a doctor who diagnoses based on experience and prescribes a mass-manufactured product such as say a stent to a new world where the diagnosis is partly or mainly AI-driven, care is mainly home-based and the products are personalised, based on your genes.
Bgahat says there are about 30-40 specialities within a typical large hospital and each in turn will be digitised with treatment delivered at home or in outpatient facilities. This is already happening in diabetes and he expects to see the same in fertility, orthopaedics, oncology and hormone treatments.
He points to a Chinese orthopaedic start up as an example. “There is an app which looks at your posture and walk and does prevention to avoid wear and tear leading to hip or knee operations.” That would then be married to telehealth enabling the consumer to talk to doctors, an operating theatre and post-op rehabilitation and monitoring. The entire care pathway is removed from hospitals which for decades have made a lucrative income from joint replacements.
“My consumer-led colleagues think health care is crazy. You enter a hospital, in many countries with no idea what you will have to pay, some idea that you may be cured and knowing you will probably have a bad service experience. Yet you are desperate to get through the door. There is no other industry like that.”
The new digital business models will, he says, seamlessly combine medical services such as surgical operations with apps and monitoring devices. He has been scouring the globe for these beasts. Interestingly, he says they can be found in all geographies although he says China really is the world leader.
L Catterton expects consumer health tech (broadly defined as tech based solutions which are led by consumer experience although possibly paid for by insurers or state payors) as growing from $217bn in 2019 to $388bn in 2024, a CAGR of 11%. Within that he singles out three markets of particular interest:
– ePharmacy where patients order pharmacy drugs, devices and services. Here he expects the market to grow from $50bn to $100bn as Amazon and others attack the core bricks and mortar pharmacy chain model. This he says is more about ecommerce and retail than the other categories.
– Telehealth and remote monitoring which he sees as two sides of the same coin. Both have grown hugely through Covid – he expects the sector to rise from $57bn to $112bn in the five years to 2024. He is particularly interested in monitoring internal vital signs such as glucose levels or cardiac rhythms without intrusive injections or blood sticks which he sees as a big, big market. Here he sees players such as Dexcom and Panasonic.
Disease management he describes this as a catch-all term for the digitisation of hospital specialities. He expects this to grow from$50bn to $80bn in the five years to 2024. Diabetes is the most obvious here but other sectors include Alzheimers.
He thinks the long anticipated change to digital is happening now. “Compare digital health apps of five years ago to today and it is like night and day. There are a lot of very smart entrepreneurs out there.”
So won’t all this consolidate into a few giant platforms covering every condition – groups like say Teladoc, the giant in telehealth which bought Livongo, which offers coaching and monitoring for chronic diseases or Ping An, with its huge telehealth reach and advanced AI?
Bhagat says not in the short-term. “Right now consolidation is proceeding much more slowly than the appearance of innovative new companies. Yes, eventually we may end up with big platforms, but there is plenty of room now for single condition innovators.”
And the existing players? Bhagat smiles: “Most incumbents in most industries don’t wake up in time and hospitals have been protected for years by regulation. So I don’t think it will be any different in healthcare.”We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.