Scalability of digital health business models

Klaus Stoeckemann

For some time now everybody, including entrepreneurs in Healthcare have recognized that the digital health market is quite different in terms of how to scale a business model. Compared to other markets, such as e-commerce, it is less clear here who the payer in the business model will, could or should be. This is one of the main challenges we as investors have, when evaluating new investment opportunities.

The fact that so far the patient has not been in the center of the universe when it comes to decision making, many of the doctors today are still reluctant to recommend digital solutions while at the same time the customer (the patient) is uncertain himself.

If that is true, you should not wonder that stakeholders in the system, such as legislation, health insurance companies and doctors are holding back in implementing more of digital health solutions. With the internet and healthcare information platforms such as for example Netdoktor, patients are getting more and more informed about diseases and potential solutions. The title of Eric Topol’s book: “The Patient will see you now”, is giving an idea on how things will develop.

I believe that the asymmetry of information among the stakeholders is one of the reasons why scalability so far is limited. Another reason might be that stakeholders cannot agree on what has been validated enough, so that it can be offered to a larger group.

Think about how long it took to finally implement online consultation and the respective legal framework in Germany. Finally, we have online consultation and it is even reimbursed, hurrah. But if you compare this to “Hao Daifu online (Good Doctor)” an online platform for mobile consultation in China which has 490.000 doctors and 7.500 hospitals, there is still room for improvement not only in Germany but across Europe.

While a country such as Germany has a great legacy in Healthcare and many achievements other countries are jealous of, this also is hindering digital innovation to be implemented fast, compared to “green field countries” such as countries in the Arabic hemisphere but also India.

Besides all these elements, especially in Germany the fragmented reimbursement situation on how innovations, and in particular digital health ones, are reimbursed represents a major challenge. One of our companies Emperra (www.emperra.com) has developed ESYSTA, the first fully integrated digital solution for diabetics including a connected smart insulin pen and a blood-glucose meter paired with coaching elements which significantly improves outcome. After two years of working with a large health insurance company they could prove the benefits of ESYSTA resulting in the first hybrid reimbursement including hardware, but also data transfer, coaching as well as “Pay per Performance” elements. We need to get this kind of digital solutions to markets faster!

Yes, it requires significant adjustments how care will be delivered in the future, but this is needed in order to cope with chronic diseases such as diabetes. Think about if all stakeholders would communicate based on the same information, what kind of (better or right) treatment decision could be made by using digital health solutions. In order to achieve this, it may require something like a clearing or validation platforms for these solutions.

An example is the Rx Universe platform by Mount Sinai in New York, which enables doctors to prescribe reliable apps. Such platforms can serve as a compass and will foster the adoption of apps or other digital health solutions not only by doctors, but also by patients.

The question of B2B (Business to Business) or B2C (Business to Consumer) than may become secondary in terms of who is paying. The customer behavior for paying out of pocket might be positively influenced compared to a situation where he has just to try a solutions and a doctor is not willing to using or recommending non-validated solutions. And also the payers will most likely be more willing this kind of validation.

The will to disrupt the healthcare system which was good enough so far needs to stand out more!

All the components for a modern, more convenient, easy to use and to deliver, more patient centric digital healthcare system is already there. However, to unlock and scale the market, I believe involvement of all stakeholders will be needed for the development of scalable digital health business models.

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