The Tipping Point in Digital Health

By Jared Augenstein, Senior Manager, Manatt Health

Editor’s Note: Below are some key takeaways from the recent Rock Health Summit, a digital health conference bringing together more than 650 thought leaders from technology, venture, policy, research and medicine to focus on tackling healthcare’s most challenging problems.


We Are at an Inflection Point in Digital Health

The digital health space is evolving from one of limitless opportunity but narrow scale to one of increasingly measurable impact. We are on the downward slope of the “peak of inflated expectations” and moving into a period where high-value solutions with scalable business models will emerge. Technology-enabled health services companies, such as Omada and Virta, are generating meaningful clinical evidence while successfully growing their user base. Digital-first health plans, such as Oscar and Clover, are moving past their first few years of rate uncertainty and effectively managing their medical loss ratios while expanding into new markets. The life sciences industry is being disrupted by the impact of low-cost genetic testing and the vast troves of data collected by companies like 23andMe and Helix.

The “People-Process-Technology” Triumvirate Is Woefully Out of Balance

The industry has begun to recognize that the “people-process-technology” triumvirate is out of balance. We are moving away from technology-driven solutions to fundamental people and process redesign, enabled by technology. Former Centers for Medicare & Medicaid Services (CMS) Administrator Andy Slavitt noted, “Airbnb doesn’t call itself a tech company. It just uses technology to get stuff done.”


Successful digital health companies, providers and life sciences firms have recognized that focusing on people and processes is at least as important as—if not even more important than—focusing on the technology. User testing is critical. It is also hard to overstate the importance of engaging front-line workers and clinicians in devising useful solutions. Companies that own the “full stack” from a product experience perspective will realize the greatest market success.

Openness and Flexibility Are Critical for Health Systems

Health systems operate as closed environments with respect to technology—and for good reason. Becoming a digital health leader, however, will require a culture shift toward openness and flexibility. Nontraditional healthcare players can solve very real healthcare problems. For example, many health systems now use Lyft or Uber to arrange for patient transportation, both increasing convenience for patients and reducing costs for health systems that previously ran their own transportation programs or paid higher rates.

New digital health companies, unencumbered by legacy IT systems and prohibitively expensive cost structures, can deliver high-value healthcare services, such as diabetes or asthma management, at more cost-effective prices. They are also far more scalable. Digital health leaders will need to be skilled at testing a multitude of potential partnerships and then having the focus to choose the two or three most promising partners or vendors.

Artificial Intelligence in Healthcare: Can’t Live With It, Can’t Live Without It—but How Do We Organize?

A survey of Summit attendees revealed that respondents rated artificial intelligence (AI) as both the most overhyped and the highest-potential technology in digital health. One speaker noted, “It’s tough to distinguish between which companies are actually doing AI and which have an Excel spreadsheet.”

Many health systems are behind the curve on AI and will need to expand their internal capabilities dramatically in the future. AI, machine learning and deep learning techniques will play a crucial role as health systems transition from completing and optimizing their electronic health record installations to meaningfully capturing value from the mass amounts and types of data they collect. Since talent is scarce, AI experts are commanding mid-six-figure salaries. To bring the greatest value to the full system, AI will need to remain centralized in the short term in nearly all organizations.

The Value-Creation Curve in Healthcare Is Non-Exponential

Despite the ambitious growth curves littering digital health pitch decks, there is a new acceptance that, unlike in consumer technology, the value-creation curve in healthcare is more linear than exponential. Most healthcare interactions are subject to the principal-agent problem. For the most part, clinicians are making decisions on behalf of (or at least significantly influencing) their patients. This principal-agent approach makes typically scalable direct-to-consumer models particularly challenging. In addition, there are few network effects in digital health. The value that patients realize typically accrues directly from the product itself—not from an increasingly large user base, as is the case with many other digital technologies.



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