Hello from Denver, where I’m spending the weekend at Nikhil’s Out of Pocket group retreat! This week’s content is a little different than normal, because I’m resetting my idea of what this newsletter is. I’ve been writing more or less weekly for almost two years, and I want to make sure that all of this content is building on itself in a rational way.
To that end, I’ve been thinking through what direction my previous issues point in, and what direction I think the newsletter should go from here.
So here’s my working thesis (about healthcare and about this newsletter), with links to previous articles where I’ve written on the topic, and which will now live on the About page of Acute Condition. I’ll go a little deeper into each part below.
Many digital care models are currently based on IRL care—to make sense to buyers (payers, employers, provider partners, even patients) the model still has to feel recognizable. So:
Telehealth is largely commoditized
Remote patient monitoring, which has a lot of promise, has hardly progressed farther than consumer wearables
The potential primary care implications of those consumer wearables remains locked
Digital therapeutics are being priced and prescribed like traditional pharmaceuticals, putting a financial moat around them
CMS has provoked some rearranging of the traditional model—although full expression of value-based care remains locked by traditional challenges and, in some cases, not-yet-scalable science and computing power
At the same time, supply and demand constraints (in addition to some founders’ vision of a future healthcare system divorced from the inefficient model we’re stuck in) have forced the beginnings of some new models to appear
For example: Digital therapeutics, (kind of) new therapy models, asynchronous specialty care, integrated click-and-mortar, the earliest phases of hospital-at-home
It remains to be seen if the development of new, innovative models requires going around the traditional system or going through it
Many digital care models are currently based on IRL care
Unlike other sectors—digital cameras, cellphones, ridesharing—where software and new technology was truly “disruptive” of the traditional model, healthcare has remained resistant to change. Healthcare enterprise software (and, in some cases, hardware) is stuck in the early days of the internet. More than that, the delivery of care is still based on a twentieth century hospital-centric model that requires patients to seek out and attend visits with their doctors, all of whom rarely, if ever, interact.
Because this is what all the major legacy players (hospitals, payors, employers) are comfortable with, it’s very hard to sell change.
As a result, telehealth is a commodity product, by which I mean that (1) it replicates the traditional visit through the medium of video, without any changes (one could call it skeuomorphic); and (2) it is provided, undifferentiated, through a variety of platforms (including the video platform Zoom, which has become so ubiquitous that, like Kleenex, the verb “to zoom” increasingly means logging into a video call).
And, because the traditional structure of a patient visit remains the structure of most patient visits, technology that could be used to track and improve patient health, hardware like remote patient monitoring equipment/consumer wearables and software like digital therapeutics, are, respectively, either locked out of the healthcare industry altogether or priced the way traditional pharmaceuticals are.
CMS has provoked some rearranging of the traditional model—although full expression of value-based care remains locked by traditional challenges and in some cases, not-yet-scalable science and computing power
Huge disruption aside, the path towards change seems to be through a modification of the financial incentive model. To that end, CMS has spent roughly the last decade experimenting with value-based payment models with varying degrees of risk. Some value-based models are very specific (think bundled payments for knee replacements) and some are more general (the Direct Contracting model). But although everyone seems aligned that this is the correct approach, the actual results coming out of each pilot have been mixed. In short, it’s complicated.
At the same time, supply and demand constraints (in addition to some founders’ vision of a future healthcare system divorced from the inefficient model we’re stuck in) have forced the beginnings of some new models to appear
Mental health care and some chronic conditions are so lacking specialists that the situation has provoked the development of new or partially new models. In this category, I’m thinking of asynchronous care, group therapy, guided classes, and similar. In each case, purchasers might be convinced to try a new model because of a dearth of alternative options.
It remains to be seen if the development of new, innovative models requires going around the traditional system or going through it
There’s no reason for hospitals to be the central hub of American healthcare. There’s no reason for chronic condition patients with well-controlled disease to have to see their physicians in-person to confirm that, yes, the disease is well-controlled. It doesn’t make sense for primary care visits to be reimbursed by visit (rather than for overall health), or for smoking cessation counseling to happen only once in a while and even then only during a doctor visit.
The messiness of the traditional system, in other words, makes the idea of going around it altogether very appealing. But given the expense of healthcare provision and the fact that people will more than likely need to interact with the traditional system at some point in their lives, at least in the current environment, sustainable change is almost certainly going to have to happen in concert with the traditional system.
Conclusion
Where does that leave us? I don’t know. The more I worked through this, though, the more I started to believe that the concept of “digital health” is only at the very beginning. Rather than being an end-point, the maturity of commoditized telehealth post-COVID (which is where we are now) is likely to be a step along the path to a more tech-enabled, integrated, value-based goal.
This is exciting to me, because it means change is likely to come from people taking big swings and finding innovative ways to partner with the traditional system. And the traditional system is going to have to find more efficient ways to evaluate and partner with digital health companies—the complaints about being inundated with point solutions and new ideas can’t and shouldn’t last.
So: Reply to this email, comment below, let me know if you agree or disagree with any points of my thesis. Moving forward, I intend to keep the format of this newsletter the same, but this will be the undergirding idea that I’ll be testing and writing towards. Next week I’ll be back with new thoughts around this central thesis. Onwards!
This information shouldn’t be taken as investment advice (obviously), and the opinions expressed are entirely my own, not representative of my employer or anyone else.