Eight Drivers that Will Define Digital Health in the 2020s, Part 1

We believe that proactively thinking deeply about what will drive the next decade of healthcare will help us both filter through the noise of digital health, and quickly identify the right investment opportunities. We believe that 2020 represents an unprecedented inflection point in digital health (due to both the COVID-19 global pandemic, as well as many other factors) and we aim to define the trends for the coming decade and their implications for our investment strategy.

The drivers of digital health that we see defining the 2020s are:

1. The Rationalization and Modernization of Healthcare Finance
2. End-to-End Population Health Automation
3. Bridging the Digital-Physical Divide for Safety and Quality
4. Technologies Serve a World of Provider “Haves” and “Have-Nots”
5. Telehealth Forces an Unbundling and Reimagining of Care Coordination
6. Diagnostics Move into the Community and Home
7. Personal Health Monitoring Becomes Outcome-Driven
8. New Sources of Trust Emerge in Healthcare

Our thoughts will adapt as the world changes, but for now, these eight (in no particular order) represent what we believe to be the most important current drivers in digital health. Today, I’ll focus on our first driver, which focuses on the dramatic changes we see occurring in “HealthFinTech.”

The Rationalization and Modernization of Healthcare Finance

Anyone who’s ever received a ten-page hospital bill for a relatively minor procedure knows that healthcare billing and finance has a lot of room for improvement. The reality is that even hospitals themselves often don’t fully understand where their costs, revenue and profits come from as comprehensively as other private-sector institutions, and optimizing their financial outcomes remains a challenge.

We believe that this situation is no longer tenable, primarily because health systems are facing and will likely to continue to face an unprecedented disruption in the volume and mix of their revenue sources due to COVID-19, ranging from the short-term drop in revenues that came from diminished caseloads in 2020, to the long-term change in the mix of remote versus in-person care delivery. This set of changes will require a closer look into opportunities for efficiency, how to grow profitable but relatively small revenue streams, and new ways to look at costs, such as with Activity-Based Costing, which breaks down expenses minute-by-minute for every provider involved in a course of treatment, creating much more visibility into the true costs of patient care.

In addition, from the consumer side of the equation, we believe that patients will no longer tolerate arcane models for settling payments, now seeing that care can be delivered remotely and efficiently using modern technology. The time for excuses is over with billing portals that appear to be from the 1990s, costs that are elucidated only months after procedures, and payment models that don’t take into account modern financing options. This challenge is accentuated by the continued rise of High-Deductible Health Plans (HDHPs), which the vast majority of physicians feel create significant challenges for their patients. However HDHPs could provide some opportunities for companies that help consumers get greater value from their healthcare, as those consumers are paying for an ever-larger proportion of it out-of-pocket.

LionBird is looking for “HealthFinTech” innovators who are successful within our current fee-for-service model, but who are also bridging the gap into value-based care through cost transparency, innovative payment/financing models, and thoughtful approaches that help providers get paid fairly and help patients pay fair prices. The negative health side effects that come from avoiding or delaying care due to unaffordable costs (or not having access to other resources such as food, rent, etc. due to the high cost of care) is very real, and we believe that a more intelligent healthcare finance system will improve outcomes for patients as well.

With this in mind, we want to see companies that “open the hood” on any or all parts of healthcare finance, particularly those that show an immediate ROI for payers, providers, and/or patients. We are systematically searching for, and welcome inquiries from, entrepreneurs who are bringing the best technologies, concepts and analytics from fintech into the provider, payer and patient realms.

If you found this interesting, check out the full white paper, Eight Drivers of Digital Health in the 2020s, a comprehensive look at how LionBird views the future of digital health.