The first half of 2016 was the strongest on record for digital health companies. According to StartUp Health, there was nearly $4 billion invested in over 150 early stage deals. For 1H16, the top digital health investment category was patient/consumer experience at $958 million, or nearly 25% of invested capital. StartUp Health notes that over 7,600 startups around the world are working on digital health. And that’s just the startups.
Similarly, fintech is also experiencing a strong fundraising environment. While overall deal volume is actually down a bit, according to KPMG and CB Insights, in 1Q16, fintech attracted approximately $2.5 billion in early stage funding as VC-backed fintech deal activity hit a new high. Following this strong start to the year, the number of global VC-backed fintech deals is expected to exceed 500 in 2016.
The intersection of healthcare IT and fintech
Revenue Cycle Management (RCM) is at the nexus of HIT and fintech. It’s all about the spaghetti factory of interconnected lines that result from having multiple providers (hospitals, doctors’ offices, urgent care facilities, etc.); working with multiple payers (Medicare, Medicaid, insurance companies, etc.) each with multiple plans covering millions of people. It’s a complicated mess that much too often leaves even the most sophisticated individual incapable of knowing the full cost of procedures in advance or of fully understanding the appropriateness of charges after the fact. It often leaves doctors and others incapable of understanding how much they will really receive, or the profit or loss associated with any given patient or procedure. Furthermore, providers can’t just focus on revenue, as outcomes, cost, and profitability are also key elements in the equation. Moreover, bundled payments and risk-based contracts are establishing fixed payments for some procedures, leading hospitals and providers to more closely measure and control their fixed costs. Of note, more than 200,000 physicians (~25%) in the U.S. are now hospital employees; aligning them with affiliated physicians and others on the ‘team’ could greatly help reduce costs and improve care. It’s a mess. The only good news is that literally hundreds of firms have emerged seeking to make the world of healthcare-related payments more transparent – or at least a bit less opaque. Over the past few years, we have witnessed a proliferation of companies melding HIT and fintech technology to address the transition of the traditional fee for service US healthcare model to one that favors value and quality-based care at the lowest cost.
Price transparency and new payment models are key
Price transparency vendors have emerged in many areas of healthcare, helping educate healthcare consumers, employers, and insurance plans on their choices. Care transitions and associated clinical data transfer are being more emphasized. Big data and analytics are helping providers spend more wisely and target the most appropriate patients to proactively monitor and from whom to collect payments. A new wave of payment capabilities have been introduced which are more intuitive and user friendly and can more quickly adjudicate medical bills and receive payment.
It’s clear to us that more typical, consumer-like capabilities are coming to healthcare. Imagine shopping for medical procedures and doctors with an Amazon-like experience, complete with price comparisons, reviews and streamlined payment options? This is the future as the healthcare IT and fintech segments collide and new, exciting technologies emerge to reshape the industry. We are excited to be part of that journey.
