The real opportunity in digital health
Right now anyone with a half decent digital health story can raise billions on the public markets. Look at Babylon or for an even more extreme example, Pharmeasy in India, which is IPOing with a value of $6bn. A knowledgeable investor claims it was being valued at as little as US$800m in the autumn of 2020.
Click here to see the HBI Intelligence report on digital health, and here to see the largest players in the sector by revenue.
So where is the real value in digital health? We think at the moment it resides almost entirely in the ability to control where patients go for initial diagnosis. Insurers can massively cut their costs if they control this initial patient pathway. In 2020 Sneh Khemka when he was at Aetna running population health and vHealth told us that 65-70% of users of the telehealth app had an entire issue dealt with remotely and that overall the cost savings with initial telehealth were in excess of 40% – and even higher where a large corporate agreed to mandate the initial use of telehealth by its employees.
But areas like chronic disease management are far less proven. Proper management calls for physical interventions. And there are few studies which demonstrate convincingly that it works. There is also a real danger of digital chronic disease management merely adding an extra layer of cost over and above the current analogue models.
As to Babylon, the real danger is that it will not be able to control patient pathways adequately in the USA. We hear that insurers are paying roughly $4,000 per capita a year for Babylon to manage chronically ill patients. A few extra visits to an emergency room could quickly make that loss making. And Babylon will effectively be competing directly with the big US insurers who are its prospective clients. They have vast data troves and have built or bought in telehealth offerings. It will be an uphill battle.
There is a danger that deals like this if they fail will cast a long shadow over the sector. Just look at the UK care sector, which has never really recovered from the Four Seasons and Southern Cross debacles.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
