Do-It-Yourself Health: When Healthcare Becomes Your Own Responsibility

As healthcare costs continue to rise rapidly, there has been a growing trend of self-diagnostics and preventative healthcare to push patients away from costly procedures

By: William Choi, Associate Intern

Healthcare costs are continuously on the rise. U.S. healthcare costs are expected to rise by a CAGR of 5.5% over the next decade, ballooning from $3.5 trillion in 2017 to $6 trillion by 2027. Healthcare spending is projected to grow faster than the economy, increasing from 17.9% of U.S. gross domestic product (“GDP”) in 2017 to 19.4% of GDP in 2027. Certain categories such as hospital care, which accounts for the largest component of the national health expenditures, is anticipated to grow at a CAGR of 5.6% for the next decade, which is above its historical growth rate of 5%.

The rapid growth in healthcare costs can largely be attributed to two factors: an aging population and rising healthcare prices. The U.S. population is quickly aging and PRB projects that the number of Americans age 65 and older will more than double from 46 million in 2016 to more than 98 million by 2060. The senior population on average spend three times more on healthcare per person than working-age individuals and five times more than children and are more likely to suffer from multiple chronic diseases. On the other hand, prices for healthcare services and products are expected to grow more rapidly. CMS projects that healthcare prices will grow at an average annual rate of 2.5% over the next decade compared to a 1.3% annual growth rate in the last several years. Some factors driving increase in healthcare prices include the introduction of new and innovative healthcare technology, administrative waste at health systems driven by a complicated insurance system, and hospitals raising prices as they consolidate and gain market share.

Healthcare spending is also significantly impacted by over-utilization of emergency room services which tend to be costly and not well-insured. Moreover, the cost of hospital admissions and 30-day readmissions can add up quickly as well. In order to shift away from these expensive care, there has been a growing focus on increasing preventive care services so that patients could take care of their health before it comes to a point where they need emergency services. According to the CDC, chronic diseases that are avoidable through preventive care services account for 75% of the nation’s healthcare spending and lower economic output in the US by $260 billion dollars a year. If everyone in the country received recommended clinical care, then the healthcare system could save over 100,000 lives a year. Reducing the prevalence of hypertension or preventing permanent, long-term infections such as HIV and AIDS can also lower spending.

The spread of Covid-19 has also accelerated the increase in healthcare prices. The Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted on March 27, expands coverage requirements for all health plans, including employer-sponsored group plans. This also requires health plans to provide coverage without any cost-sharing requirements, such as deductibles, co-payments and co-insurance, or prior authorization or other medical management requirements for coronavirus-related services. Another trend that has emerged during this period is the surge in the usage of telehealth in delivery of care, which has created new opportunities to improve the health of the U.S. population at a lower cost.

AI-based Diagnostics

Due to the development of new technologies and the evolving need of consumers who are looking for more convenience and remote opportunities to engage with their health, more startups are moving into the self-diagnostics industry. Especially in light of Covid-19, patients have been actively looking for ways to diagnose their symptoms or monitor their health without having to leave the comforts of their homes. Startups in this category are building voice and text-based AI assistants that interact with patients and analyze their responses by cross-referencing thousands of case studies and examples. The AI-based chatbots created by companies like K Health and Babylon Health are able to provide diagnoses based on probability and medical precedence. This could further improve the quality of the diagnoses that the patients receive as it may take away the human biases that is possible when doctors diagnose patients.

These platforms are also driving forward the growing potential of digital triage that can help optimize healthcare utilization and costs. Startups such as Infermedica leverage the expertise of doctors with its own algorithms to offer system triage and advice to patients directly or through hospitals and insurance companies. Notably, this company operates a B2B model, working with insurance companies, telemedicine companies, and health systems that offer digitally delivered symptom-checks. This pre-diagnosis stage is a critical funnel into the healthcare delivery system as it may allow earlier detection of diseases that can be more easily treated during the onset compared to if the patients had waited until the last minute before visiting an emergency room.

In-home Testing

Although there have been numerous companies that started offering in-home Covid-19 testing kits such as Everlywell, the true disruption in the industry will be startups that can bring testing that was typically unique to clinical settings into people’s homes. The increased smartphone penetration in recent years alongside significant decline in error rate of image recognition algorithms have fueled new possibilities of using the smartphone as a diagnostic tool. The value proposition is clear as more patients are able to make better preventative health decisions or to avoid costly trips to in-person facilities. Furthermore, given lab tests are usually hard for patients to predict the cost of since they are typically outsourced, having more visibility and accessibility to these tests may motivate patients to take tests more frequently.

Startups such as Healthy.io leverage AI to bring professional-grade medical imaging to the homes of those with chronic kidney disease and enables patients to collect and analyze urine samples with nothing more than a smartphone app, a dip stick, and a color-coded slide. Another startup in the space SkinVision has created a proprietary mobile medical device solution that detects signs of skin cancer through smartphones.

Smarter Medical Devices and Wearables

There has also been a surge of innovations in medical devices that allow patients to access various aspects of their health on an ongoing basis. Startups such as Tytocare provide a comprehensive telehealth diagnostic toolkit that can be utilized by patients to connect with clinicians during virtual visits to measure their biometrics or conduct other examinations. Tytocare’s technology is currently used by every hospital in Israel to provide remote examination of quarantined and isolated patients infected with Covid-19. Another startup Tatakoto designed a device that monitors health indicators through self-dependent urine and blood tests at home.

Another set of medical devices that has gained recent popularity are wearable devices. There are startups that connect directly with existing wearable technology such as Apple Watch to collect data and provide relevant monitoring. An Israeli company called BioLert developed a software that monitors patients with epilepsy to detect episodes and notify caregivers when an event occurs. The software utilizes the patient’s personal smartwatch or smartphone to record all tracked vital signs and data and automatically saves them to the cloud. On the other hand, there are also wearable manufacturers that create standalone products. A startup called Alertgy is developing a non-invasive early detection monitoring patch for diabetic patients. Their wristband reads blood sugar levels on demand and continuously monitors changes, as well as alerting the patient or caregivers if the blood sugar levels move too quickly.

Health and Wellness

Another growing trend in preventative care is the surge in health and wellness platforms that interact directly with users to manage their health and provide recommendations in activities, nutrition, etc. Omada developed a 16-week online Prevent program as a comprehensive lifestyle intervention for people who have a high risk of chronic disease. This scientifically-based program is developed to encourage participants to adopt healthier behavior through programs such as online lessons about nutrition and fitness or a digital scale that tracks results. Another startup Health Tap allows patients to connect with a digital community of doctors to get credible answers for any of their health questions and even checklists of healthy habits to maintain.

Closing

There is a growing number of new platforms that patients can engage with on a daily basis to manage and improve their health. Giving more power to patients to be in charge of their own health will most likely have long-term positive impacts including a healthier population, lower hospital admission rates, and eventually lower healthcare costs.

Kli Capital is a New York/Montreal-based family office started by former business operators focused on backing ambitious founders. Formerly known as BNSG Capital, the Kli Capital team has been active in the early stage investment/startup ecosystem since 2014. We have spent the majority of the past 6 years sourcing, conducting diligence, investing, and providing portfolio support for our 60+ companies.