‘Warning flare’ study: will pandemic-induced digital health solutions get renewed by hospitals in 2023-4, or will they churn?

June 15, 2023 | by

Hospitals and health systems in 2020 and 2021 were desperate for virtual solutions. But comes the reckoning now that they have returned to 1) business as (mostly) usual and 2) even more financial shortfalls. Technology and software contracts typically run three to five years, with new vendor contracts usually three or four. Did these solutions work as implemented? Probably on a spectrum of very well to ‘kinda’. But did they return the desired results in care quality, financially on investment or simply add to the fixed costs which aren’t affordable anymore?

Panda Health, a company that consults with hospitals on digital health adoption, did research via Sage Growth Partners in March 2023 surveying 100 hospital C-suite executives and leaders to assess whether they were satisfied with their current digital health solutions acquired in the pandemic period, whether they would renew with the same vendors, or search for new vendors. While this survey size is small and hedged, the directional prediction is that there will be considerable churn–turnover–among vendors in 2023-25, but not in every one of the 11 areas surveyed have the same risk.

Not unexpectedly, the highest churn risk is projected to be among telemedicine/e-visits and remote patient monitoring (RPM)–the two areas most kickstarted by the pandemic. Lower risk was found in functional areas such as self-service patient scheduling, digital care coordination, patient acquisition/activation, and IT areas such as data lakes and data fabric. Five categories are in the middle.

Telemedicine/E-Visits: 97% of surveyed health executives stated that the pandemic crisis played a role in their acquisition decision. 47% were ‘moderately’ to ‘not satisfied’ with their choices. 30% of these contracts will expire this year and next. In projecting this against a US total of 6,414 hospitals, 1,693 may be changing solutions by the end of 2024.

Remote Patient Monitoring: The pandemic kickstarted RPM adoption by hospitals. 82% of hospitals deployed their solutions since the pandemic began with 19% within the past 12 months. 53% reported that they were ‘moderately’ to ‘not satisfied’ with their choices. With 33% of contracts expiring by 2024, the study estimates that 1,058 hospitals may be changing their solutions.

A different picture–Digital Care Navigator/Website Chatbot: Only 14% of respondents adopted these solutions, all within the past two years. Only 25% of contracts come due during 2024, with 55% coming due in 2025 and the remainder presumably in 2026 and beyond. Yet of all 11 categories, 63% of executives reported some level of dissatisfaction, with 38% ‘not satisfied’–the highest percentage in the study. 197 hospitals are projected to consider changing solutions by the end of 2024. 

Even low/moderate and low churn solution categories have moderate (‘moderately’ to ‘not satisfied’) levels of dissatisfaction that edge close to 50%. Exceptions are the last two categories, Data Lakes and Patient Acquisition. Fair warning to all companies who are selling digital health into hospitals–it’s time for your customer success teams to get busy, find out where their pain points are, and who’s feeling them.

The Great Shakeup (free report, PDF download). Panda release.  Hat tip to HIStalk 14 June

Flat is Good: CB Insights’ Q1 global digital funding, deal numbers finally steady

May 25, 2023 | by

CB Insights’ quarterly global digital funding roundup had some good news for a change–the bleeding may be stopping, despite the failures of funding havens Silicon Valley Bank, Signature Bank, and First Republic Bank.

  • Funding was flat in Q1 2023 from Q4 2022 at $3.4B. Flat was positive, as every quarter in 2022 fell between 25%-35% versus the previous quarter.
  • Yet this was contrary to the decline seen in the total venture capital area, where funding fell 13% from Q4 2022 to Q1 2023
  • Deal numbers went up by 1% from Q4 2022’s 383 to 387–essentially flat, while venture deals fell again for four quarters
  • Leading in deals and funding was care delivery and navigation tech–44% of total funding and 37% of deals. It also had the largest deal size–$12.6 million–and five of the top 10 deals. Trailing a distant second was monitoring, imaging, and diagnostic tech, with 20% of total funding and 23% of deals.
  • In the back of the pack, early-stage companies made up a minimum of three-fourths of their deals: drug R&D tech (75% early-stage deal share), digital therapeutics & wellness tech (76%), and health insurance & RCM tech (81%)
  • In Q1, Europe’s digital health funding at 18% of total was $612 million. EU deals are picking up and are now at a record-high deal share (26%) in Q1 2023. US funding continued to lead, with $2.3 billion in digital health funding, equivalent to 68% of the global total. 
  • Mega-rounds remain anemic: 17% of digital health funding which is the lowest since Q2 2019. They were three: kidney care company Monogram Health’s $375 million raise, primary care provider Carbon Health’s $100 million, and fertility startup Kindbody’s $100 million. Comparing year prior for Q1, mega-rounds declined 85% between 2023 and 2022.
  • M&A exits finally increased in Q1–to 39 from 15 in Q4 2022

CB Insights summary points. The full report is available to their customers. Also Healthcare Dive.

Rock Health puts a kind-of-positive spin on digital health’s ‘annus horribilis’ 2022–a boring 2023

January 13, 2023 | by

Your Editor will be blunt. 2022 was a bucket of cold water, a bursting of bubbles, and generally an annus horribilis (as the late Queen Elizabeth referred to 1992, 30 years prior) for digital health, healthcare tech, and healthcare in general.

Here are the highlights of Rock Health’s 2022 full-year report on digital health funding for US-based digital health companies, published late last week and presented this week at JPM, through the gimlet eye of your Editor: 

Total funding for 2022 was $15.3 billion. There were 572 deals, averaging a deal size of $27 million.

  • 2022 was just over half in activity compared to 2021’s “to the moon”: $29.3 billion over 738 deals averaging $39.7 million.
  • 2022 also barely made it past the pandemic year of 2020 with $14.7 billion over 480 deals averaging $30.6 million.
  • 2022 Q4 fell into a hole: $2.7 billion versus 2021’s $7.4 billion

If 2021 matched prior growth trends instead of the bubble it was, 2022 would have been viewed as flat or slightly down. 

Late stage mega deals fell into the same hole. In 2022, 35 digital health startups raised rounds of $100M or more, compared to 2021’s 88 and even 2020’s 43. 

The Covid-driven investment boom across digital health that characterized 2021 is over. The economy with a 6-8% rate of inflation, energy shortages in much of the world, supply chain disruptions, rising interest rates on money, and the rising possibility of recession led to investor cold feet. It ended the 2019-2021 takeoff and started a down cycle.

Recalibration to a ‘more sustainable run rate’ when it comes to investment

“Disrupting healthcare” may sound good, but it has a spotty track record of success. What’s attractive long term? Incremental transformation within conventional healthcare operations that in this Editor’s view cut time, cost, increase reliability, simplify processes and/or workflows, improve interoperability, reduce operational burden, or improve communication. Preferably, a combination of several of the previous!

D2C startups are particularly vulnerable to the economy–they run hot, multiple companies jump in, and then they’re cold. They have to invest a lot of money to establish a presence with consumers and that money is no longer cheap or available. Some with a decent consumer footprint can focus on B2B entry, though that is a long-buy cycle move.

Most companies will be focusing on the near term, with some of the smarter ones planting some ‘seeds’ for the future

A witty note in their report: “In the current VC climate, strong horses will beat out unicorns…though investors run the risk of betting on the wrong equine.” (Editor’s note–it may be hard to tell the difference. And unicorns have horns that poke bubbles.)

What was hot?

  • Series A deals, the conservative bets of VCs. Yet, in Rock Health’s view, these may be riskier: “investors are more likely to pay more on a risk-adjusted basis for a startup than its later-stage funders, twisting the risk-adjusted valuation upside down.” 
  • In clinical indications, mental health stayed top of the pops. Cardiovascular and oncology rose along with dark horse reproductive and maternal health. What fell? Diabetes.
  • In value propositions (sic), on-demand healthcare and R&D flipped positions from 2021. Dark horses nonclinical workflow, disease monitoring, and care coordination moved into the top 5

And what players had problems? Health systems and the tech giants seeking to move into healthcare and away from ad-based or transactional revenue. As we’ve seen, Amazon dumped Care and is facing scrutiny over One Medical, Alphabet is cutting Verily, and Meta is overall pulling back. Microsoft seems to be concentrating on incrementals and Apple has other concerns over sourcing and patents.

Rock Health’s conclusion is ‘kind-of-positive’. (What, you expected doom and gloom?) “We expect that 2023 will be built up on slow, steady, and maybe even boring strategies for healthcare startups and enterprises alike: managing cash, re-structuring to accommodate revenue volatility, and investing in technology infrastructure.”

The clunk continues: Q2 2022 digital health funding fades to $4.1B in Q2, down 50% from 2021

July 13, 2022 | by

Digital health funding continues to take a plunge. Knocked about by the hangover from the pandemic, a grinding war between Russia and Ukraine, gasoline prices jacked up worldwide, and knock-on inflation and looming stagflation, funding continues to slide. The decline in Q2 digital health deals and funding to $4.1 billion more truly reflects the downturn than Q1’s relatively buoyant $6.1 billion, which benefited from the carryover of deals negotiated during 2021’s boom and closing then [TTA 6 April]. Year over year, it was half of 2021’s high of $8.3 billion.

  • 2022’s first half (H1) total of $10.3 billion was down 31% from 2021’s $15 billion. Despite this, it is 63% above the pandemic-stricken 2020’s H1 $6.3 billion. 
  • Average deal size has dropped to $31.2 million from 2021’s full-year $39.5 million and even 2020’s $30.6 million, accounting for inflation in the past two years. Looking at funding size by series year over year, Series A funding is flat but funding for Series B, C, and D+ have dropped substantially.
  • No startups went public but four digital health companies announced plans to go public or were reported to be planning public exits. One SPAC was announced in June to close in Q3, that of VSee and iDoc Telehealth with Digital Health Acquisition Corporation. SPACs, as this Editor has noted, have gone from Funding Hero to Zero under 2022’s economics, causing many SPACs to crack (Owlet, Talkspace) and increased scrutiny by the Feds [TTA 9 June]. SOC Telehealth, an early SPAC, went private after a 90% share price drop [TTA 8 Feb].
  • Average monthly M&A has dropped substantially. 2021’s monthly average of 23 has dropped to 20 in Q1 and 13 in Q2, for a H1 average of 16.
  • Most popular funding areas are mental health (a far ahead #1 at $1.3 billion), oncology, and cardiovascular. Diabetes dropped from #2 to #4, skewed last year by Teladoc’s acquisition of Livongo. Oncology rose to #2 from #6 in 2021. For mental health, given increased Federal scrutiny and legal problems of companies like Cerebral plus the expansion of Teladoc and Amwell into the area, this Editor does not expect telemental health companies to continue to attract this level of funding but may be attractive for M&A.
  • Disease monitoring (a/k/a RPM) as a value proposition moved from #8 to #3 in investment at $1.4 billion. R&D and on-demand healthcare remained in their #1 and #2 positions.

As TTA has noted previously, this was all to be expected. Will 2022 funding perk up like 2020’s did through Q3 and Q4, or fall off like in 2019 as money sits on the sidelines? Rock Health does try to put a rosier shine on the retrenchment in its roundup, as has venture capital–reality can be good for you. Another depressive factor is regulatory uncertainty in multiple areas and Federal involvement, which some companies can work to their advantage. The Rock Health summary discusses this at length. Also Mobihealthnews. 

Digital health funding’s Q1 hangover from 2021’s bender–and Q2 is a question mark, even for Rock Health

April 6, 2022 | by

Chug the Pedialyte and pickle juice, down those milk thistle caps for the liver. It’s a morning after quarter that we knew was coming. After 2021’s mighty year for health tech investment, doubling 2020’s, capped by a $29.1 billion total across 729 deals [TTA 29 Jan], the slump we knew would arrive, did. Rock Health’s tracking of 2022’s Q1 proved to be a less than stellar $6.0 billion across 183 deals. It mildly lagged 2021’s Q1 but was still 75% more than 2020’s depressed Q1 at the start of the pandemic.

Even in January, the 2022 projections were iffy. Silicon Valley Bank projected, based on anemic post-IPO performance, that there would be ‘massive consolidation’ and even acquiring companies to hire talent [TTA 14 Jan]. Rock Health and Silicon Valley Bank noted the waning of SPACs as an easy way to IPO for a variety of reasons, including SEC scrutiny. A combination of both was SOC Telemed. which IPO’d via a SPAC at $10, and was taken private seven months later at $3 per share–after trading at $0.64. SOC was not an outlier–larger telehealth brothers Amwell and Teladoc had taken major share price kicks in the head at 50% and more by February [TTA 8 Feb].

The rest of the story is mixed as the economy continues to open up with the pandemic over, but the stock market is wobbly, inflation soars as does a Russia-Ukraine war. 

  • Average deal size was $32.8 million, again below 2021
  • January was a cheerier month than the following two, with companies raising $3.0 billion. Some of this was carryover from 2021 deals that didn’t quite make it past the post. February slumped to $1.4 billion while March ticked up to $1.6 billion, not a good trend going into Q2.
  • Rock Health’s Digital Health Index (RHDHI), a composite of publicly traded digital health securities, fell 38%, far below the S&P 500’s 5% dip over that same time period.
  • SPACs tumbled along with the market, continuing their fall since 2021. Deals were canceled, taken private (SOC Telemed), and companies sued for misleading investors (Talkspace).
  • Late stage deals continued to roll: mega Series D+ deals in Q1 2022 included TigerConnect ($300M), Lyra ($235M), Alto Pharmacy ($200M), Omada Health ($192M), and Ro ($150M). D and above deal size fell by $16 million. But average deal size fell off at every Series, less so for B and C.
  • Lead clinical investment areas were mental health continuing far in the lead, followed by oncology, cardiovascular, and diabetes. Oncology rose from the fifth spot in 2021 to #2 in Q1, displacing cardio. In value proposition, the top three were on-demand healthcare, R&D, and clinical workflow–this up from the 11th spot.

A weak start for 2022, but only compared to 2021. Q2 and maybe even Q3 will be the test in this mid-term election year. Rock Health Q1 report

Predictions, predictions for telehealth, digital health, and all those cybersecurity risks

February 3, 2022 | by

crystal-ballJanuary is the month for predicting what’s ahead, and while this Editor has no pretensions to be Sibyl the Soothsayer despite the picture, let’s look at what others see in their cloudy crystal balls.

Frank McGillin, CEO of The Clinic by Cleveland Clinic, works intensively with telehealth in this joint venture between Cleveland Clinic and Amwell. His prediction: telehealth will evolve towards concierge care, as providers reduce “platform sprawl”, coordinate the virtual care experience, and provide multidisciplinary virtual care.

  • Telehealth is now “a permanent mode of access”, though the pandemic created “platform sprawl” as providers reached for any and all modes and providers which could be implemented quickly
  • Healthcare providers and plans now have to scale back and reconcile all this to “design a digital trajectory with intention”
  • This means developing a personalized approach to telehealth delivery and to provide a seamless, highly coordinated care experience
  • Their approach is to focus on multidisciplinary virtual visits and case analysis for patients with complex conditions, such as their Virtual Second Opinions program for conditions such as brain tumors and prostate cancer.
  • Virtual multidisciplinary support reduces the risk of suboptimal treatment plans and can eliminate long travel times and exposure to COVID-19 for vulnerable patients. For payers and employers, this can add up to better outcomes and reduced cost of care.
  • “Intelligent” remote monitoring also removes another layer of risk in providing the right care at the right time
  • Continuation of relaxed interstate licensure requirements are needed to provide fast access to medical experts, particularly for primary care providers.

Interview with Healthcare IT News 

Healthcare Dive has been running a series on industry trends, and this installment focuses on digital health.

  • Healthcare will become more predictive and proactive, with insights fed by connected devices and analytics (commonly lumped under AI) that enable organizations to collect, analyze, and act on massive amounts of data.
  • But algorithms don’t have judgment and data can have bias, leading to poor decisions, such as the distribution of vaccines. Expect more oversight from the Federal level down on AI research and policymaking, 
  • Virtual care will continue to grow in virtual diagnostics, patient-reported outcomes applications, and digital homecare platforms
  • Telehealth and digital health is integrating into the traditional delivery and payment model–partnerships with health systems, payers, and employers.
  • Virtual care access is booming in niche areas such as women’s health, hospital at home, and mental health, with investment dollars flowing in. Telemental health is moving into consolidation.
  • Cybersecurity will become more of a focal point for healthcare companies in 2021, with hackers finding their way into all these contact tracing apps designed in a hurry, plus digital health systems, many of which are poorly protected. Targeted attacks have skyrocketed.

And speaking of cybersecurity, over at HealthITSecurity, they rounded up the experts to opine on All Those Security Risks that fast implementation of telehealth and moving devices out of the hospital walled garden have created. Remote patient management is now an asset, no longer a ‘nice to have’, for providers, setting up a situation where patients are increasingly both the beneficiaries of more convenient health delivery and victims of security breaches and ransomware.

  • ‘Out of hospital’ care means that data is being transmitted between multiple points. Network security isn’t guaranteed. So attacks can originate at the weak points–either the home or hospital environment.
  • The fast implementation of telehealth during the pandemic meant not only did systems not work together well, it also meant multiple points of vulnerability
  • Over 80% of surveyed healthcare providers globally harbor concerns about data security and privacy (Kaspersky/Arlington Research). And a shocking 70% admitted that their practice used outdated legacy operating systems, exposing them to security vulnerabilities.
  • “A culture of security” means maintaining endpoint security and BYOD policies across the organization’s network, identity management and zero trust tactics, and yes, security consciousness on patients’ parts.
  • Patients should not be responsible for security, providers partly, which leaves the responsibility with the vendor. But healthcare organizations are responsible for evaluating their vendors, and how they are interacting with and storing their data.  

Will ’22 digital health investment be historic? Or a question mark? The jury is out.

January 29, 2022 | by

Some say historic, or will it be a historic question mark? It’s only January…Earlier this month, a Silicon Valley healthcare VC funding analysis [TTA 14 Jan] looked at 2021 funding — up over 150%–that was skewed to biopharma and health tech. It noted the SPAC slowdown, anemic post-IPO performance, and a decline in M&A value, while consolidation and buying for expansion will be the trend.

Healthcare Dive spoke to some industry mavens, and came up with a split picture. Some see turbulence ahead due to rising interest rates, a fluctuating market, and political instability leading to tighter purse strings, others see blue skies and lots of money flooding in from new investors in love with health, following the Amazons and Microsofts, fearing that they’ll miss out. Certainly, 2021 was more than warm. Both Silicon Valley Bank in the previous analysis and Rock Health came up with just under $30 billion in 2021 investment.

The feather in the wind: Rock Health’s numbers indicated skyrocketing exits–with SPACs nearly double that of IPOs. Funding hit record mega rounds of $100 million+ that spread to early rounds–10 Series B and one Series A. Mega money means mega pressure to perform in young companies. The SPAC highway increasingly narrowed to a two-lane road by end of year based on regulatory scrutiny and even some timing out (SPACs have to consummate a deal in two years). Exits for investors are to take back money or write off losses, if they get shaky about a company or category, even if they find a more attractive squirrel. Yet the fact is that $13 billion raised by VCs this month has to go somewhere–but will it be in health tech? Time will reveal all.  Also Healthcare Dive on the Rock Health year-end report.

Comprehensive “clinic-on-the-wrist” digital health sensor system debuts. Apple Watch of future? (UK/US)

August 18, 2021 | by

The likely future of the Apple Watch and medical monitoring. Rockley Photonics, a silicon photonics company based in Oxford England and Pasadena, has debuted a sensor module that can enable wearable devices to monitor multiple biomarkers, including core body temperature, blood pressure, body hydration, alcohol, lactate, and glucose trends, among others. The module (exterior above far left and mid-right) combines with hardware and application firmware for consumer applications, such as wrist-worn diagnostics.

The mid-left-hand view shows the reverse (skin) side of the module with the photonic ICs and application firmware. Current sensors use green-light emitting diodes (LEDs) and the Rockley system uses an infrared (IR) spectrophotometer that generates a large number of discrete laser outputs from a single silicon chip covering a broad optical band which can penetrate underneath the skin. The module communicates with custom cloud-based analytical engines via a Rockley smartphone app (far right).  

Obviously, Rockley is seeking to commercialize this through partnerships with consumer electronics companies in digital health and fitness monitoring. Rockley is a key supplier to Apple for sensors. Release, FierceHealthcare 

Financially, on 9 August they closed their SPAC with SC Health Corp. of Singapore after the UK courts approved the business combination. As of 13 August, it is trading on the NYSE as Rockley Photonics Holdings, Ltd. (RKLY). Rockley received $167.8 million in gross proceeds, including $17.8 million from SC Health, as well as $150 million from the financing completed in connection with the announcement of the business combination, led by top-tier institutional investors including Senvest Management LLC and UBS O’Connor and participation from Medtronic. According to their 22 July shareholders letter, all their revenue is attributable to two companies: Apple and Hengtong Rockley, a Chinese joint venture, and an accumulated deficit of $298 million.   Release

A new event–and not all virtual! HLTH and CHIME to launch ViVE in March 2022.

April 21, 2021 | by

Does it seem like forever that there’s been a new digital health conference, fully in-person–and not labeled HIMSS? HLTH, a relatively new entrant to the big healthcare event calendar starting in 2018 in Las Vegas, and CHIME, The College of Healthcare Information Management Executives, will launch ViVE on 6-9 March 2022 at a location (TBD) in Miami Beach. They are positioning it as an annual event for digital health leaders innovating across the spectrum of health and care. 

The event will incorporate CHIME’s spring forum, a full plate of networking events and presentations, matchmaking, the ViVE Expo, and a gala. For more information on the event or to register interest as a sponsor or partner, see the ViVE page. Release. 

(This Editor admits that the thought of a new and in-person conference is exciting. It’s nice to contemplate normality!)

CHIME is a 5,000-member association of C-level and senior healthcare IT leaders across 56 countries. The organization parted from the annual HIMSS event this year in Las Vegas 9-13 August, which will be a hybrid in-person and virtual conference [TTA 4 Feb]. Registration and information on the event have been updated.

The HLTH 2021 next event is in Boston 17-20 October. Like HIMSS, it’s scheduled to be a combination in-person and virtual event. HLTH is more broadly inclusive of healthcare care models and consumer health issues. The in-person portion will be at the Boston Convention & Exhibition Center, located in the Seaport District. 

A smash Q1 for digital health funding–but the SPAC party may be winding down fast

April 7, 2021 | by

An Overflowing Tub of Big Funding and Even Bigger Deals. The bubble bath that was Q1 deals and funding is no surprise to our Readers. Your Editor at one point apologized for the often twice-weekly roundups. (Better the Tedium of Deals than COVID and Shutdown, though.)

Rock Health provides a bevy of totals and charts in its usual quarterly summary of US digital health deals.

  • US funding crested $6.7 bn over 147 deals during January through March, more than doubling 2020’s $3.1 bn in Q1 over 107 deals.
  • Trending was on par through February, until it spiked in March with four mega-deals (over $100 million) over two days: Clarify (analytics), Unite Us (SDOH tech), Strive Health (kidney care), and Insitro (drug discovery). These deals also exceeded 2020’s hot Q3 ($4.1 bn) and Q4 ($4.0 bn).
  • Bigger, better. Deals skewed towards the giant economy size. $100 million+ deals represented 66 percent of total Q1 funding
  • Deal sizes in Series B and C were bigger than ever, with a hefty Series B or C not uncommon any more. Series B raises were on average $49 million and C $77 million. One of March’s megadeals was a Series B–Strive Health with a $140 million Series B [TTA 18 Mar].
  • Series A deal size barely kept up with inflation, languishing in the $12 to $15 million range since 2018.
  • Hot sectors were a total turnaround from previous years. Mental health, primary care, and substance use disorders, once the ugly ducklings which would get their founders tossed out of cocktail parties, became Cinderellas Before Midnight at #1, #2, and #3 respectively. Oncology, musculoskeletal (MSK), and gastrointestinal filled out the Top 6 list.
  • M&As were also blistering: 57 acquisitions in Q1, versus Q4 2020’s 45

Given the trends and nine months to go, will it blow the doors off 2020’s total funding of $14 bn? It looks like it…but…We invite your predictions in the Comments below.

Les bon temps may rouler, but that cloud you see on the horizon may have SPAC written on it. A quick review: Special Purpose Acquisition Companies (SPACs) typically are public companies that raise money through their own IPOs for the express purpose of buying other companies. Often called a ‘blank check’, they have no purpose other than buying one or two other companies–in the latter case, merging them like the announced Cloudbreak and UpHealth last November–and converting over to the company’s identity and business. The timeframe is usually two years. Essentially, the active company goes public with a minimum of the messy, long, expensive, and revelatory process of filing directly with the SEC (in the US). This quarter, Rock Health’s stat on SPACs was that they raised $83.1 bn this quarter, exceeding by $0.5 bn all SPAC activity in 2020, mainly late in the year. Their count was two SPACs closing in Q1 and 8 more announced but not yet closed (counting Cloudbreak/UpHealth as one).

As an exit door for investors, it’s worked very well–but is dependent on private equity and public investors having confidence in SPACs. One thinning of the bubble may be the scrutiny of Clover Health’s SPAC by the SEC [TTA 9 Feb] over not revealing that they were under investigation by the Department of Justice (DOJ). Certainly this was a material circumstance that could dissuade investors, among other dodgy business practices later unveiled. Mr. Market tells a tale; Clover went public 8 Jan at $15.90 and closed today at $7.61. Their YahooFinance listing has a long list of law firms filing class-action lawsuits on behalf of shareholders.

Clover may be the leading edge of a SPAC bust. SPACs are losing their luster because there are too many going through, jamming bandwidth at the bank and law firm level. As time ticks by and deals are delayed, the private funders of SPACs are growing squeamish, according to this report in National Review’s Capital Note (yes, National Review has a finance newsletter). “In the past two weeks alone, four blank-check deals have been halted, with SPAC shares declining significantly from their highs early this year. The slowdown follows an influx of short-sellers into the opaque financial vehicles and a sell-off in high-profile SPACs such as Churchill Capital Corp IV.” Reasons why: lower quality of companies available to go public via SPAC–the low hanging ripe fruit has been picked–and the last mile in SPACs, which is PIPE funding (private equity-investment-in-public-equity financing) is getting skittish. The last shoe to drop? The SEC in late March announced an investigation into SPACs, making inquiries into several banks seeking information on their SPAC dealings, which is alluded to near the end of the Rock Health report. CNBC  (Read further down into the NR article for a Harvard Business Review dissection of the boom-bust dynamics of ‘controversial practices’ like reverse mergers as a forecast of what may happen to SPACs. Increased popularity led to increased negativity in reverse mergers.)

And speaking of SPACs...Health tech/digital health eyes are upon what Glen Tullman and the ‘late of Livongo’ team will be doing with their SPAC, Health Assurance Acquisition Corp., which is backed by Hemant Taneja’s General Catalyst, also a former Livongo funder. Brian Dolan, who is now publishing Exits and Outcomes. His opinion is their buy will be Color, formerly Color Genomics: opinion piece is here. Messrs Tullman and Taneja are also leading Transcarent, a company that brings together employers, employees, and providers in a seamless, app-driven integrated care model. Forbes

The cool-off in SPACs may burst a few bubbles in the bath–and that may be all to the good in the long term.

Rock Health/Stanford U Digital Health Adoption Report: high gear for telemedicine, digital health, but little broadening of demographics

March 3, 2021 | by

It’s good news–and an antidote to the bubble at the same time. Rock Health and Stanford University Medicine-Center for Digital Health’s just-released report found that, unsurprisingly, that telemedicine/telehealth use rocketed during the pandemic and gained ground that would not have been true for years otherwise, as of September 2020. However, the growth was not largely from new demographics, but largely among the adopters of telehealth in 2019 and prior. It also rolled back to about 6 percent of visits. Wearable use also boosted, especially for better sleep, as did self-tracking. But overall healthcare utilization cratered from March onward, barely reviving in the late summer, and telemedicine use declined to a steady state of about 6 percent of all visits–far more than the near-zero it was pre-pandemic. Here’s our rundown of the highlights.

Telemedicine user demographics haven’t changed significantly. It accelerated among those in the 2019 and prior (through 2015) profile: higher-income earners ($150K+), middle-aged adults aged 35-54, highly educated (masters degree and higher), urban residents, slightly male skewed (74 percent men/66 percent women/67 percent non-binary)and those with one or more chronic conditions (78 percent) and high utilizers (87 percent with 6+ visits/year). This profile apparently sustains across racial and ethnicity lines. (page 15) The non-user profile tends to be female, over 55, lower-income, rural, not on a prescription, and Hispanic. (page 23)

More usage of live virtual video visits than before–11 points up from 32 to 43 percent. These reduced reliance on non-video communications: telephonic, text, asynchronous pictures/video, and email. (page 12) And respondents largely accessed live video and phone visits through their doctor, indicating a pivot on practices’ parts: 70 percent of live video telemedicine users and 60 percent of live phone telemedicine users. (page 17) But the reasons why were more acute than this Editor expected: 33 percent for medical emergency, then minor illness (25 percent), then chronic condition (19 percent). (page 16)

Barriers to use remain significant in telemedicine and have not changed year to year except for awareness of options. (page 22-23)

  • Prefer to discuss health in-person (52 percent)
  • Not aware of options (much less this year)
  • Provider didn’t recommend
  • Cost
  • Poor cellular or broadband connection is minimal (3 percent). There is also no barrier of ‘inability to use’, though this may be skewed by the survey group being online (see methodology).

Wearables and digital information tracking accelerated, but ‘churn’ continued. 54 percent of respondents adopted wearables, up 10 points, while information tracking increased by 12 points.  (page 11) Unpacking this:

  • The populations with the highest rate of digital tracking were those with heart disease, diabetes, and obesity as chronic conditions
  • The leading reasons for wearables remained fitness training and weight loss. However, right behind these were major year-to-year spikes in better sleep (27 to 52 percent), managing a diagnosed condition (28 to 51 percent), and managing stress (24 to 44 percent).
  • The surprise uses of wearables? Managing fertility tracking and menstrual cycle.
  • Yet wearables churn continues. From the study: 55 percent of respondents who owned a wearable in 2020 stopped using it for one or more purposes (though they may continue using it for another purpose). The demographics tend to mirror telemedicine users for adoption and stopping use. (pages 24-28)

Healthcare utilization overall, telemedicine or not, has barely revived versus the March baseline, using the Commonwealth Fund data TTA profiled here. The report usefully digs into the groups that delayed care: 50 percent of 35-54-year-olds, women, Northeast residents, chronic conditions, and mental health. (page 34)

Yet trust in health information remains with the person’s physician, family, hospital, payer, and pharmacy. Overall, there is a reluctance to share data with entities beyond these. Health tech and tech companies aren’t trusted sources, along with social media, and lag to less than 25 percent, along with less willingness to share data with them. COVID-19 data is broken out in sharing, generally following these trends except for more willingness to share this data with governmental entities and research. (pages 29-31) 

The report recommends that for telemedicine to go deeper into adoption, refocusing is in order: (page 21)

  • Shift from a transactional model to a continuous virtual care or ‘full-stack’ model
  • Seek a different kind of customer. One-third of telemedicine visits were for emergencies. A more sustainable model would concentrate on chronic condition management and lower-acuity care.
  • Accept that new care models are disintermediating the patient-provider relationship especially in the younger age groups

The methodology of the survey: N=7,980 US adults, matched to US demographics; dates conducted 4 September-2 October 2020; online survey in English only. Rock Health summary, link to free survey report download, Mobihealthnews article.

Funding, acquisition news roundup, round 2: Lyra Health’s $187M Series E, DarioHealth-Upright, GetWellNetwork-Docent Health, Hillrom-BardyDx (updated)

January 29, 2021 | by

Our cowgirl has been keeping busy rounding up more news on funding and acquisitions. Significance? Nearly all are major rounds only dreamed of a year ago for these relatively small companies boosting valuations into the stratosphere. The acquisitions also extend these companies into multiple lines of business.

Lyra Health, a mental health therapy benefit company for employers, closed an additional $187 million in a Series E round led by Addition Capital. This adds to a torrid 2020 $185 million Series C and D bringing their total funding to $475 million. The company claims a valuation of $2.3 billion and doubling its customer base in 2020 to 2 million members, with marquee clients such as Genentech, Morgan Stanley, and Zoom. Lyra Health uses cognitive-based therapy (CBT) models using virtual self-care, coaching, and therapists. Also announced was a partnership with ICAS World, an employee-assistance provider. Lyra is one of many companies in an increasingly crowded category using the CBT model to save employers and payers money on employee and member mental health with and without chronic conditions such as diabetes. Earlier this month, the Talkspace app, which focuses on direct to consumer therapy, announced they were going public through a ‘blank check’ SPAC with Hudson Executive Investment Corp, in a deal valued at $1.4 billion, including debt. Release, Mobihealthnews

DarioHealth, an Israeli-US company concentrating on digital diabetes and hypertension management, extended into musculoskeletal (MSK) therapeutics with the $31 million acquisition of Upright Technologies Ltd., another Israeli-US company. Upright uses a $100 sensor that provides biofeedback and vibration reminders to correct posture plus digital coaching. Last year, Upright was heavily advertised on US television. The buy will transfer to Upright $1.5 million in cash and $29.5 million in stock, and is expected to close in about 10 days. Dario also completed a $70 million private placement for 3,278,688 shares of its common stock at a purchase price of $21.35 per share. Dario has about 150,000 users and Upright 90,000 users. Dario is projecting a 2020 revenue of $7.6 million. Release, Mobihealthnews

GetWellNetwork, a relatively small player in patient engagement and communications in the inpatient care journey, announced it has acquired patient-messaging company Docent Health for an undisclosed sum, beefing up capabilities in data analytics and directing patients to additional services. According to Crunchbase, GetWellNetwork has funding to date of $19 million.  Release, Mobihealthnews

Wrapping it up is cardiac monitoring giant Hillrom’s acquisition of Bardy Diagnostics for $375 million plus future potential payments based on the achievement of certain commercial milestones. Hillrom is also acquiring net operating losses valued at more than $20 million and 230 employees. The BardyDx Carnation Ambulatory Monitor (CAM) is a lightweight cardiac patch monitor for heart rhythm diagnostics using P-wave-centric ECG detection. The irony here is that BardyDx positioned itself squarely against Hillrom’s Holter monitors. Nothing like buying out the competition! Release, MedCityNews

COVID-19 and telehealth–promise or peril? And the perils of digital health in conflict countries and India.

January 14, 2021 | by

The Journal of the International Society for Telemedicine and eHealth (JISfTeH) has published its latest issue today (13 Jan). JISfTeH is one of the few journals which shine a bright spot on digital health in developing countries. This month concentrates on conflict countries and COVID in India: 

  • Scaling Up Digital Health In Conflict Countries discusses the lack of any form of digital health and coordination in Afghanistan, Somalia, Sudan, and, with some exception, Nigeria. It compounds the extreme lack of healthcare services–for instance, 23 percent of Afghanis have poor access to healthcare, resulting in a high mortality rate. It can change. Rwanda, once synonymous with war, has one of the best healthcare systems in Africa due to the use of digital health services. India is using digital health in combating the TB explosion of 300,000 cases in one year. The exception in Nigeria is the liftoff of 54Gene, a genomic studies company in the world’s most genetically-diverse continent, which has secured $4.5 million in seed funding.
  • Speaking of India, telehealth has been kickstarted there due to COVID-19. The Indian Government is prioritizing the use of telehealth in the population and both public and private institutions have rolled out initiatives. India’s challenges are how patients pay for it (70% of healthcare expenses out of pocket) and how it reaches the two-thirds of population in rural areas where there is inadequate telecom and broadband for services. The irony, of course, is that India is a huge exporter of software and telecom services to the world. COVID-19 As A Catalyst for Telehealth Growth In India: Some Insights.

The editorial by Richard E. Scott of Canada and Prof. Maurice Mars of South Africa, COVID-19 and eHealth: A Promise or Peril Paradox?, cautions on the floodgates opening for telehealth in COVID’s wake. Spontaneous telehealth, where “healthcare providers themselves saw the value of an eHealth solution and implemented it independently and without traditional steps or approval” is quite separate from evidence- and needs-based telehealth. There is a lot of pressure at the national level, by the WHO, and by vendors to ‘make hay while the sun shines’. “Enthusiasm must be tempered with thoughtful guidance” on multiple and quite variable factors.

Digital Health as Boom Town: 2020’s dizzying funding rounded up by Mercom Capital, StartUp Health

January 9, 2021 | by

BOOM! Mercom Capital Group published their Q4 and 2020 roundup of global digital health investment and, no surprise, the investment picture for just about anything digital health was in sharp contrast to most of the COVID-afflicted world economy.

The topline:

  • Global VC funding (private equity and corporate venture capital) was $14.8 bn across 637 deals. It was a 66 percent increase in funding compared to 2019’s $8.9 bn in 615 deals. The modest increase in deal number and huge increase in funding points to the acquisition of more established companies requiring Big Deals.
  • Total corporate funding, including VC, debt, and public market financing, totaled $21.6 billion

 

In a stunning change, telemedicine was Top Of The Pops, with $4.3 bn in investment, 139 percent over 2019’s $1.8 bn. It was over double the former star categories of data analytics and mHealth apps.

The top five disclosed M&A transactions in 2020 they tracked were:

  • Teladoc’s acquisition of Livongo Health for $18.5 bn
  • Blackstone’s acquisition of a majority stake in Ancestry.com for $4.7 bn (despite the ‘bloom off the rose’ of consumer genetic testing)
  • Philips’ acquisition of BioTelemetry in cardiac monitoring for $2.8 bn
  • Invitae’s acquisition of ArcherDX for $1.4 bn
  • WellSky’s acquisition of Allscripts’s CarePort Health (CarePort) for $1.35 bn

The Executive Summary is available for free download at the link in the release. The full report will set you back $599 – $999, depending on the version.

StartUp Health has slightly different numbers but in total investment tracks almost to Mercom Capital’s estimate at $21.5 bn. For telemedicine, it still triples year-over-year but StartUp’s totals are lower: 2019’s $1.1 bn to 2020’s $3.1 bn. Part of the difference may be remote monitoring, which StartUp considers separately. It doubled from $417 million to $941 million. Their deal counts were also higher: 764 in 2020 compared to 716 in 2019. Another fun fact in their tracking are their city leaders in health innovation funding: Beijing, Tel Aviv, and London, confirming that New York and the San Francisco metro no longer have money, interest, or their former attraction. A fuller list would have been interesting. More is in their Part 1 study. Part 2, to be released next week, will cover their dozen ‘health moonshots’.

Breaking: Teladoc and Livongo close merger in $18.5 billion deal, staff/board changeovers

October 30, 2020 | by

Breaking: Today (30 October) Teladoc announced the closing of its merger with Livongo. The release itself is pro forma. The acquisition is interesting in how rapidly it was completed: from ‘git to gone’ in under three months. By contrast, Teladoc’s close on much smaller InTouch Health took eight months. It is, of course, still positioned as a merger, but it is clearly a purchase based on the terms and their branding. (More of Editor Donna’s thoughts on this here and here.) 

Livongo shareholders will receive 0.5920 Teladoc shares plus cash of $11.33 for each Livongo share (including the special dividend declared by Livongo). The Motley Fool did the math and valued it at $18.5 million after the shareholder approval. Current Teladoc shareholders will own 58 percent, with Livongo investors holding 42 percent. Mr. Market continues to be cross, as the day started with TDOC above $215 with the current price (1pm Eastern time) at just above $197, though Teladoc’s 3rd Q earnings were excellent. TDOC’s share price just before the acquisition hovered in the $230s.

This Editor has already noted the reported exodus of many of Livongo’s top management, presumably to the bank: CEO Zane Burke, President Jennifer Schneider, MD, CFO Lee Shapiro (widely conceded as the merger engineer), and SVP of business development Steve Schwartz. David Sides, Livongo’s COO, and Arnnon Geshuri, Cheif (sic) Human Resources Officer, retain their same position as at Teladoc. According to their latest (29 Oct) 8-K, new members of the board effective 19 November will include Glen Tullman (formerly Livongo Executive Chair), Chris Bischoff (Kinnevic AB), Karen L. Daniel, Sandra Fenwick, and Hemant Taneja (General Catalyst, of which more follows).

MedCityNews detailed the above plus that R&D will be headed on an interim basis by Yulun Wang, PhD, who came over from InTouch. Also, a number of Livongo execs (Glen Tullman, Schneider, and three other managers) are putting their new wealth to work for their futures with General Catalyst’s Hemant Taneja, a Livongo backer. An S-1 was filed on 19 October to create a new special-purpose acquisition company with the goal of raising $500 million. Commonly dubbed a ‘blank-check’ company, a SPAC is a public company designed to quickly take a private company public versus the slower process of an IPO. Recent healthcare examples have been Hims Inc. and SOC Telemed. 

Livongo’s website as to management is already updated and cut over. The Teladoc site does not have a Livongo page other than on press releases and a landing page here. Much remains to be seen in this consolidation of telemedicine and monitoring/coaching, including whether the combined company can deliver on much-needed profits.

Withings closes $60 million Series B round to fund expansion, B2B development

July 29, 2020 | by

Withings, a digital health developer with devices ranging from smart scales to analog-style smartwatches , this week closed on a substantial Series B funding of $60 million. Led by Gilde Healthcare, the round also had participation from long-term Withings partners and investors, Idinvest Partners and Bpifrance through their Large Venture funds, as well as BNP Paribas Development, Oddo BHF Private Equity, and Adelie Capital. Their total funding is now estimated at $93.8 million. According to their release, Withings will be using the funds to globally scale its dedicated business-to-business division MED PRO and further develop consumer health devices. With this, they will also add about 100 positions in the US and France, including expansion of sales, marketing and R&D.

Founded in 2008 in France, TTA has tracked Withings since 2009 with a scale that Tweets your weight (at a hefty $159). In April 2016, the company was sold to Nokia for a hefty €170 million and became Nokia Digital Health. Nokia’s hope was to use Withings and its pricey (at least in the US market) but stylish and innovative IoT devices to spur its own development of consumer digital health. Two years later, Nokia sold back Withings to co-founder and former chairman Éric Carreel, having not experienced much success in the consumer sector. Shortly thereafter, they premiered a revived Go (with an e-ink face) and the Steel HR Sport smartwatch, then progressed into heart and sleep monitoring.

MED PRO is a relatively new division that concentrates on professional uses of their devices and data analytics within health systems, health plans, disease management programs, and academic and pharma research. Withings also appointed a new global Medical Advisory Board which includes Dr. John Halamka, President of the Mayo Clinic Platform, Dr. Stéphane Laurent, former Head of Clinical Pharmacology in Hôpital Européen Georges Pompidou in Paris, and Craig Lipset, former Head of Clinical Innovation at Pfizer.  Mobihealthnews, Crunchbase