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Very rarely—perhaps even just once a generation—an extraordinary event or force comes along that completely transforms a stagnant industry. We are experiencing that moment right now in healthcare, in what is a mass acceleration of opportunities for company creation across the care delivery space.
Acceleration of Tectonic Shifts
Even pre-pandemic, we were beginning to see tectonic shifts bringing about major changes in care delivery. Those include:
- The unbundling of the hospital, as care delivery services that traditionally have been centralized in monolithic facilities move to retail, community-based, and virtual settings
- A move away from fee-for-service and towards value- or outcome-based care and payments
- Products and services that put the consumer or patient directly at the center as a real distribution channel
- The re-contouring of provider networks, as the boundaries of clinical capacity extend beyond traditional geographic lines
- A push towards greater interoperability of data and transactional systems
- And finally, automation across the board of rote tasks that historically have been done through manual labor.
We hypothesized that these strong tailwinds were going to change the landscape of healthcare entirely… but that, realistically, they might take on the order of 10 years to play out. Now, because of the forcing function of COVID and its incredible ripple effects across the system, it is more likely that they will play out in the next 2-3 years.
In short, we are seeing the fundamental topography of the healthcare industry changing before our eyes, and it will impact all the ways that data flows and operations are run.
We are seeing the fundamental topograhy of the healthcare industry changing before our eyes, and it will impact all the ways that data flows and operations are run.
Industry Dislocation
Because we’re seeing fundamental dislocation on both the supply and demand sides of the market, the very manner by which processes and stakeholders were linked together in the past has been completely upturned in a number of ways.
First, supply side dislocation: Just the way restaurants are shrinking their menus to streamline their supply chain and operations, hospitals and providers are being forced to double down on core, essential services. This in turn creates vulnerability around the edges, leaving ancillary services like primary care, laboratory services, and chronic disease care up for grabs. Traditional provider organizations will see new competitors nipping at what used to be a core part of their services mix.
Relatedly, competition for traditional providers is coming not just from local markets, but from all over the country, at all hours of day, and through all channels (e.g. via text messaging, video, and home visits).
And last but far from least, for the first time we are seeing labor growth in the industry be reversed (in past recessions, healthcare was the only industry that grew its labor force), thus forcing a sudden focus on efficiencies and the need to do more with less.
On the demand side, at the same time, mass unemployment is leading to massive shifts in the insurance coverage landscape as consumers lose access to employer-sponsored health benefits. Tens of millions of consumers will be suddenly enrolling in Medicaid or products purchased on the health insurance exchanges, remaining uninsured, or seeking out alternative modes of coverage. Affordability will become an even more prominent focus for consumers, and people will be willing to sever long-standing provider relationships in the name of affordability and access.
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Rewiring of the Value Chain
As a result of this, we will see the value chain of healthcare be entirely rewired. We used to see multiple categories of companies each owning a different aspect of the patient journey—which led to fragmentation, poor context sharing between providers, and higher costs due to redundant processes. Now we’re going to see a new generation of digital-first providers flipping that paradigm on its head, and seeking to own the end-to-end patient journey. These new digital-native providers will be able to do that effectively by focusing on providing best-in-class care to very specific patient populations (based on demographic and conditions), instead of trying to be a one-size-fits-all model for anyone who walks in the proverbial door.
We used to see multiple categories of companies each owning a different aspect of the patient journey…. Now we’re going to see a new generation of digital-first providers seeking to own the end-to-end patient journey.
Shifting Center of Gravity of Data
As care becomes unbundled and segmented by demographic or condition, one of the risks is that data becomes more fragmented. But the data generated by these digital health companies is already far higher in resolution, continuous, and comprehensive—leagues above that in traditional EHRs. This is only accelerating, thanks to the proliferation of COVID-related remote patient monitoring, contact tracing, and home based testing.
Even if virtual clinics are able to pull data in from traditional EHR data stores using available interoperability tools, the data that they generate themselves generally isn’t flowing back into the EHRs. The center of gravity of interoperability efforts will need to shift away from only incumbents and legacy data systems, to being inclusive of digital health and ancillary providers and the high-resolution, more continuous data that those entities are creating.
Regulation as a Catalyst
All of these massive ground shifts alone should convince us of the explosive opportunity unfolding in the healthcare space. But those of us who have been in healthcare for a while know that, for better or worse, it is often only with top-down regulatory mandates that sea change actually happens. Regulation has often been used as a scapegoat for the lack of innovation, but on the contrary, regulation has in fact been a powerful catalyst for the creation of major healthcare platforms and iconic companies over the last few decades. Today, we have the benefit of several critical regulatory tailwinds around telehealth reimbursement, physician state licensure, and interoperability that are again fueling new category creation opportunities.
Opportunities for Startups
So with that backdrop, what are zones of opportunity we see for startups in healthcare?
The ultimate goal for healthcare, of course, would be creating a more cost-effective healthcare delivery system without sacrificing quality. In order to do that, we need to move from a mindset of relying on intuition and human judgement, to an engineering-oriented mindset of deploying reusable components and codified learnings for a 10x level of scale and efficiency.
We need to move from a mindset of relying on intuition and human judgement, to an engineering-oriented mindset of deploying reusable components and codified learnings for a 10x level of scale and efficiency.
The only way we can accomplish that is through technology as an amplification mechanism for learning, automation, and repeatable processes. And this is another reason that the current moment in time is so unique: we now have the opportunity to wedge technology into the areas of the healthcare system that historically have been seemingly impenetrable, since healthcare organizations can no longer rely on offline methods to do their jobs.
New Operating System for Care Delivery
All these changes are bringing us fundamentally new business models (e.g. value-based care, prospective payments, direct-to-consumer) and new operating models (e.g. virtual / home-based care, asynchronous engagement, continuous monitoring) for care delivery, but we’re still relying on systems that were designed decades ago for a fee-for-service, brick-and-mortar, human encounter-based chassis.
The next generation healthcare system will need a fundamentally new infrastructure layer that treats the patient as a primary end user, has flexible and scalable data models to address non-traditional patient information, and is inherently wired for connectivity and interoperability between providers, payors, patients, and connected devices. It will enable budgeting and accounting to support risk-based business models. And this new operating system will automate the majority of rote administrative tasks and clinical interactions (versus legacy systems that were designed assuming whole armies of staff members performing data entries and queries at their beck and call).
Patient Data Liquidity
Between the time of a patient books an appointment and when they leave that visit, entire call centers of hundreds of people at each hospital system do outbound calls to collect patient demographics, contact information, insurance information, and past medical histories—all at a very high cost, and very inefficiently. Why do we spin the same wheel every time a new patient shows up in a new provider practice?
We have the capabilities and incentives today to finally move to a system that maintains the ability to assemble a full patient narrative in real-time from a networked set of data suppliers. This is a game-changer not only for the care delivery world, but also in the life sciences and clinical research spaces—where access to real-world data is increasingly imperative, to support a new generation of complex and potential curative therapeutics targeted at specific patient populations. Those same therapies will be priced and paid for in value-based terms, and that methodology can only be implemented through ready access to distributed data stores, and the ability to make the insights generated from those data available, in real time, at the point of care.
Supply-Demand Matching at National Scale
Yes, we’ve all (finally!) seen how transformative telehealth can be, thanks in large part to COVID-19. But simply focusing on the notion of a video visit between a patient and provider misses the entire broader opportunity that virtual care unlocks.
Simply focusing on the notion of a video visit between a patient and provider misses the entire broader opportunity that virtual care unlocks.
Thanks to new regulation that eliminates geographic boundaries as a barrier to accessing untapped supply across our healthcare system, we can now think about capacity at national scale versus merely at a local level. The notion of “right care at the right time and right place” will take on a fundamentally new meaning when we can initiate an on-demand appointment in the middle of the night with a provider in a different time zone, or access the national expert on a given disease without having to get on a plane. We will need new intelligent load balancing and routing mechanisms for understanding what is the most appropriate care for any given patient, and how to get it: by tapping into the national pool of provider supply and managing a complex set of clinical and scheduling rules for making the best match.
But the question of how we build a business model around this national pool of provider supply will drive innovation that sits atop these national pools of provider capacity. As consumers lose their employer-sponsored health coverage—and even those who remain employed see their benefits mix shrink due to cost cutting efforts as businesses struggle to stay afloat during this period of economic hardship—there will be significant pockets of demand for more modular insurance products to cover basic access needs or augment other thin benefits plans. This will in turn facilitate the creation of a new category of direct insurance products for consumers that can be priced more affordably, transparently, and fairly based on market dynamics.
Things that we thought not possible even a few years ago are now happening everywhere, due to the sudden shift from in-person to fully virtual operations, unprecedented changes in regulation, and economic turmoil amongst both providers and consumers. We couldn’t be more excited about the transformative opportunities for company building and scaling in care delivery in the decades to come.
It’s time to build in healthcare.
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