A Message to Digital Health Founders: There is No Money in Disease Prevention. Come Back in 10 Years.
I’m sharing insights from my 4-year journey in digital health to shed light on which sectors within healthcare offer better opportunities for monetization.
Monetization is a real challenge in digital health. Making money in healthcare tech is tough. I don’t know of many profitable digital health companies. Whether it’s governments or insurance companies footing the bill, they aren’t signing a contract unless they are absolutely sure it’s beneficial to them. Babylon Health’s flawed revenue model highlighted this monetization difficulty. Unfortunately, outside of NIH grants and academic initiatives, there’s currently no monetization in prevention, diagnosis, and medical advice. The most significant monetization in healthcare lies in treatment and drug discovery, as well as in robotics, genomics, radiology, mammography, and dermatology. It’s something new founders should keep in mind as they enter the complex field of digital health.
Venture capitalists and private equity managers might not disclose this reality, as they frequently pursue short-term gains through “pump and dump” strategies rather than prioritizing the long-term welfare of patients and physicians and confronting the industry’s critical issues. They prefer to be seen as “optimists with a vision.” Those who know me would hopefully attest that I’m an ultimate optimist, but I also value facts.
The Stark Truth About U.S. Healthcare: A System Designed for ‘Sick Care’, Not Prevention
The issue of the absence of digital health monetization in prevention, diagnosis, and medical advice goes to the very heart of the U.S. healthcare system and deserves extensive research, which I’ll try to summarize here.
❌ “Follow the money” is a principle that holds particularly true in healthcare, where arguments about scarcity are most relevant. The healthcare system is dominated by a few corporate monopolies, especially in health insurance, Pharmacy Benefit Managers (PBMs), and Electronic Health Records (EHRs). These monopolies understand that maintaining control over the market and extracting monopoly rents requires them to stifle innovation. They do this through two primary channels: lobbying in Washington and deploying “smoke and mirrors” tactics.
For example, the Inflation Reduction Act of 2022 includes provisions that place financial burdens on newer, innovative health insurance companies like Clover, Oscar, GoHealth, and Bright Health. It wouldn’t be surprising if the legal teams at these companies have not fully digested the 273 pages of the Act and are unaware of its implications.
A prime example of the “smoke and mirrors” strategy can be seen in Epic’s partnership levels: Cornerstone Partners, Partners, Pals, and Member Services. Despite frequent announcements of new partnerships, those who use Epic’s EHR system regularly have not seen significant updates since 1998.
❌ The blocking of innovation is closely linked to the lack of monetization in prevention, diagnosis, and medical advice. These areas aim to assist patients before they become ill, which is counter to what corporations want. Their profits are made from “sick care.” Aside from academic and research initiatives, there is no financial support for prevention, as the industry is not inclined to “kill its golden goose”.
However, there are areas within medicine where corporations have less influence, and where AI and other technologies are making significant advancements. These fields include treatment, robotics, drug discovery, genomics, radiology, mammography, and dermatology. It is in these areas that innovation has the potential to significantly impact healthcare.
Good News: There Are Ample Opportunities for Digital Health Innovators to Thrive
Let’s now explore the sectors within healthcare that are ripe for digital health monetization. Basically, in areas where the grip of healthcare corporation monopolies is weaker, there lie vast opportunities for digital health startups.
✅ Treatment: Digital health solutions can elevate patient care and unlock new growth avenues. Digital therapeutics, for example, can intervene at multiple points along the patient journey, such as monitoring, medication adherence, behavioral engagement, personalized coaching, and providing real-time, tailored health recommendations.
✅ Drug Discovery: Digital health technologies play a crucial role in various drug development stages, including computer-aided drug design, computational modeling for predictive toxicology, and utilizing big data analytics for clinical trial management. The traditional drug discovery process, known for its length and high costs — often exceeding a decade from concept to market — can be significantly expedited by AI. By swiftly analyzing biological data, AI can identify potential drug candidates much quicker than traditional methods. In drug discovery, digital health monetization involves using digital tools, platforms, and data to create value and generate revenue throughout the drug development process. This can include direct revenue generation or cost savings and efficiency improvements. (Sources: Healthcare Business Today, Wipro.)
✅ Robotics: In the field of robotics, digital health monetization strategies aim to generate value and revenue from robotic technologies in healthcare. These strategies capitalize on advancements in robotics, including AI, machine learning, and data analytics, to offer innovative solutions for patient care, surgical procedures, rehabilitation, and hospital management.
✅ Genomics: The field of genomics research is near and dear to my heart. As a founding member of the Artificial Intelligence and Genomic Diagnostics International Working Group (WG-AIGD), I witness numerous groundbreaking innovations in progress. Digital health applications in genomics have demonstrated significant potential in enhancing genetic healthcare outcomes and improving access, quality, and efficiency of genetic services (Source: The American Journal of Human Genetics.) Monetization in genomics combines genetic data, technology, and healthcare economics, tapping into the vast potential of genomic information to benefit various health ecosystem stakeholders. Monetization avenues here leverage the unique insights and capabilities provided by genomic technologies.
✅ Radiology: Digital health innovations in radiology can boost efficiency and throughput in imaging departments. Technologies like asynchronous communication enable the exchange of high-definition patient photos and other structured patient-reported information through store-and-forward (SAF) methods. As radiology continues to embrace digital tools and platforms, from digital imaging to AI-assisted diagnostics, new monetization strategies are taking shape. Successful monetization in radiology involves offering value-added services that enhance the efficiency, accuracy, and accessibility of radiological services. (Sources: GE Healthcare, Med-Tech News.)
✅ Mammography: Digital solutions can refine the accuracy of mammograms, lower costs, and improve the patient experience. The data from digital mammograms can further research and development, leading to enhanced diagnostic techniques. Significant technological advancements in mammography, a crucial tool in breast cancer screening and diagnosis, not only improve patient outcomes but also open diverse monetization avenues. Monetization in mammography is complex, combining equipment sales, software subscriptions, AI enhancements, telehealth services, data analytics, and patient engagement strategies, each offering value creation opportunities for patients, healthcare providers, and technology developers. This collective effort contributes to the enhancement of breast cancer screening and diagnosis.
✅ Dermatology: Digital health solutions can support the diagnosis, treatment, and monitoring of skin diseases. The incorporation of digital tools, platforms, and AI into dermatological practices has unlocked various monetization opportunities. Monetization in dermatology not only boosts the efficiency and scope of dermatological services but also provides personalized, accessible, and convenient care options for patients. With ongoing technological advancements, the potential for innovation and monetization in digital dermatology is expected to grow, revolutionizing skincare and treatment.
Across all these domains, the key to successful monetization lies in leveraging digital health data to enhance patient outcomes, streamline operations, and forge new revenue streams. However, it’s crucial to recognize that the effective implementation and monetization of digital health solutions necessitate meticulous attention to data privacy and security, regulatory compliance, and user acceptance.
Shifting from Sick Care to Preventive Care: Strategies and Implications
To shift the focus towards preventive care, several strategies could be implemented:
🩸 Change Provider Incentives and Payment Models: Adopting payment models that reward healthcare providers for maintaining the health of their patients, rather than for the volume of care provided (known as the Fee-For-Service model, or FFS), could encourage a greater focus on prevention. Models like value-based care (VBC), direct primary care (DPC), and concierge medical services, where providers are rewarded for helping keep people healthy and for improving the health of those with chronic conditions in an evidence-based way, could be more widely adopted.
🩸 Invest in Public Health Initiatives: Increased funding and support for public health initiatives that focus on disease prevention, such as vaccination programs, anti-smoking campaigns, and healthy eating initiatives, can play a crucial role in preventing illness.
🩸 Increase Access to Preventive Services: Ensuring that preventive services are accessible and affordable for all, regardless of income or insurance status, is essential. The Affordable Care Act (ACA) made strides in this direction by requiring most insurance plans to cover recommended preventive services without co-pays, co-insurance, or deductibles. Expanding and protecting these provisions could further enhance preventive care.
🩸 Implement Regulatory and Antitrust Actions: Addressing the dominance of large corporate monopolies in the U.S. healthcare system and their preference for profit-driven “sick care” over preventive care requires a multifaceted approach, involving regulatory and antitrust actions by the Federal Trade Commission (FTC) and the Department of Justice (DOJ) Antitrust Division. These entities play crucial roles in ensuring that the healthcare market operates fairly and is accessible to all, promoting competition, and fostering innovation, including in the realm of preventive care. Beyond the actions of the FTC and DOJ, broader policy and legislative changes are needed to support a shift towards preventive care.
🩸 Educate Patients and Providers: Educating both patients and healthcare providers about the importance of preventive care and how to effectively implement it can help shift the focus away from sick care. This includes training providers in offering lifestyle and nutrition advice, as well as educating patients on the importance of regular screenings and check-ups.
🩸 Leverage AI and Other Technologies: Digital health technologies, including telehealth, wearable devices, and health apps, can support preventive care efforts by making it easier for patients to monitor their health, adhere to treatment plans, and stay engaged with their healthcare providers.
Shifting the U.S. healthcare system from a focus on sick care to preventive care requires systemic changes that involve a change in incentives for providers, payment reform, public health investment, education, regulatory and antitrust action, and the use of AI and other technologies. While the transition may be challenging, the potential benefits in terms of improved public health outcomes and reduced healthcare costs make it a critical endeavor for the future of healthcare in the U.S.
Takeaway
The U.S. healthcare system is fundamentally flawed, as it is dominated by a handful of large corporations that extract monopoly rents at the expense of the broader population, showing little interest or motivation to transition from a “sick care” model to one of preventive care. This situation results in a system geared more towards treating illnesses and conditions after they have developed, rather than preventing their onset. This model has significant repercussions for both individual quality of life and the overall cost of healthcare in the country.
A key reason for this emphasis on sick care is the structure of healthcare payments and the incentives for healthcare providers. In the U.S., providers are generally paid for procedures and treatments rather than for maintaining patient health. This arrangement, known as the Fee-For-Service model, or FFS, incentivizes the delivery of more treatments and procedures, potentially leading to unnecessary treatments and increased healthcare costs, without necessarily enhancing patient outcomes.
Preventive care requires a long-term commitment to patient health that does not always yield immediate financial benefits for healthcare providers or insurers. Actions such as regular screenings, vaccinations, and lifestyle counseling can greatly lower the risk of chronic diseases like diabetes, heart disease, and cancer. However, the advantages of these interventions are often realized over years or decades, making them less appealing in a system that prioritizes short-term results and profits.
Digital health presents significant challenges for new startup founders. Many enter the field with noble goals to ameliorate the myriad issues plaguing the healthcare system. Yet, the allocation of funding within the industry is highly asymmetric. This article aimed to shed light on the reasons behind this disparity and to provide guidance. I hope it’s been helpful.
👉👉👉👉👉 Hi! My name is Sergei Polevikov. I combine my knowledge of AI models with my unique skills in analyzing the financial health of digital health companies, no pun intended. 😊 I never sugarcoat or filter the hard truth. Follow me, support my work and join a vibrant community of healthcare AI enthusiasts! Your engagement matters. 🙏🙏🙏🙏🙏
