Further confirmation of the New Reality for digital health–lower valuations, more exits, fewer startups, tech buyers not seeing ROI

In the wrap ups of 2023 last December and a month later in January, this Editor summarized it as not a year of slow, steady growth as predicted by the experts in January 2023, but one of utter turmoil starting in March, peaking mid-summer when M&A cratered and the Feds cracked down on antitrust and privacy. By year’s end, picking through the debris, we saw it as a ‘clearing’ year of the “also-rans and never-should-have-beens” that were funded willy-nilly in 2020-2022. 

The good, bad, and ugly are facing the music in 2024′. Our latest in POVs on the New Reality surrounding digital health/health technology. 

More exits of various types, reduced valuations, need to fundraise again among digital health startups. Katie Adams of MedCityNews, which of the mainstream online health news websites has the tartest takes on the business, interviewed two investors in digital health. Their POVs:

Cheryl Cheng, CEO of Vive Collective (Menlo Park, California)

  • Raised large rounds in 2021? These companies now face ‘valuation overhangs’ that aren’t ‘bridged by organic growth’ and a far tighter investment environment with reduced valuations and exits. (That exit may be a sale–or a shutdown–Ed.)
  • Investor priority? Profitability, not growth.
  • What counts in today’s environment in raising capital? Be within 24 months of being EBITDA positive. (EBITDA=earnings before interest, taxes, depreciation and amortization). Steady growth in last two years also counts as a positive. Raising money will be less difficult–not easy. (No more rivers of free-flowing money to fill one’s buckets–Ed.)
  • Have a point solution? Many providers have point-solution fatigue and are pushing toward platforms. That alone will force some startups to sell.

Ian Wijaya, managing director at investment bank Lazard

  • What are the big questions of startup boards that include investors? How many months of cash runway are left? If markets are improving, is now the time to explore a sale jointly with a financing?
  • What drives the pricing? The “specific quality of the company and the value it can achieve across its strategic alternatives.”
  • What should startups do? Thoroughly explore their strategic alternatives and separate what is actionable from what is fantasy.
  • The best deal? When companies are bought, not sold–when the buyer initiates the process, not when the company puts up the ‘For Sale’ sign. That requires a little sleight of hand in engaging with potential buyers well in advance and creating a competitive environment, which requires time.

Not a good environment for startups, either. If Redesign Health is a bellwether of startup creation–their business is building healthcare companies which are then spun off–their layoff of 77 staff from their New York-based 200 to 250 (estimated) is not a good sign. The cuts are from the areas that support new venture creation. Redesign started in 2018. According to FierceHealthcare, Redesign has started up 65 healthcare companies (over 50 stated on the website), including 40 in the past two years, but only 35 are current on their website. They are backed by a ‘who’s who’ of investors who have $165 million with, in September 2022, a $1.7 billion valuation, but they’re not going anywhere. But it’s a sign that Redesign is backing off from actively forming new startups, and likely working to ensure the survival of those in the portfolio like the challenged Calibrate.  BNN Breaking

The tech buyer market has a problem that could interfere with all the above: ROI. It turns out that while payers and providers are integrating digital health into their systems, 71% in the Ernst & Young (EY) survey said that their hospital expenses weren’t decreased by said implementation. But then there’s efficiencies.

  • 93% of respondents said emerging technology is an asset for providers and that the technology has positively affected operational efficiency (but efficiency isn’t translating into savings?)
  • 90% said their departments have more time to take care of the needs of providers thanks to pushing administrative tasks to a digital system
  • But while 86% acknowledged the potential for reducing costs via digital health, 70% said they have yet to see a return on investment


And in this year, providers are where it’s at if you’re investing–especially for-profit hospitals. This is the first time in years, according to TD Cowen analyst Gary Taylor at a Nashville Health Care Council event. Providers are finally experiencing meaningful lower labor costs. However, non-profits have come out of the past few years in uncertain to poor shape and for-profits will pick up their market share, facilities, and technology. Conversely, payers are adjusting to increased Medicare Advantage costs that have turned profits into losses (e.g. Humana, Cigna’s exit, the Cano Health and Bright Health failures). Medical utilization is rising and CMS is cutting back on benchmark payments to payers. Becker’s

All reasons why 2024 will be a most interesting year. To be continued. 

Telehealth’s primary care wars heat up: Teladoc’s Primary360, Babylon 360

The new fronts in the Telehealth Wars continue to expand, with this week Teladoc announcing that their virtual primary care offering, Primary360, is now available for health plans, employers, and other payers. Babylon Health, in its push into the US market and their upcoming SPAC, also announced that their similar program, Babylon 360, is also being offered to health plans.

Both these services connect the patient users with an assigned doctor and primary care team for ongoing care. They emphasize building a relationship with a doctor and team, not just a random selection previously typical of telehealth. Both Teladoc and Babylon are fully virtual in exams and checkups, sending equipment where needed, ordering lab tests and prescriptions, and accepting your prior health records, plus have 24/7 coverage for urgent situations. Babylon’s service also offers a symptom checker and connection to social determinants of health (SDOH) community services.

It’s obvious that the payer-provider walls are coming down in all directions–telehealth is one more. Babylon, as we noted earlier, acquired two California-based practice groups. Payers like lower-cost, more convenient visits, and after a fractious start, have for some time. Many of the insurtechs either have close relationships with providers or have bought practices (Bright Health’s NeueHealth)–copying the Optums which have affiliations with or ownership of practices all over the US. It’s also another pressure on primary care practices around reimbursement. Often the answer is to either sell out or enter into value-based care arrangements.

For the patient/member, there’s the benefit of convenient care, and a relationship with a team, albeit not with an in-person option right now–if these services are consistent in their promise and steady in their physician/clinician groups. Mobihealthnews (Teladoc)

Higi and Interpreta’s data mix partnership–questions on consent, data security

[grow_thumb image=”https://telecareaware.com/wp-content/uploads/2017/08/Interpreta-Higi.jpg” thumb_width=”150″ /]Higi (also higi), which has placed health monitoring kiosks in over 11,000 US retail locations and a 5.5 million signup base, and data cruncher Interpreta announced that they are partnering to blend Higi’s vital signs data with Interpreta’s claims, clinical and genomics data analytics. Based on Mobihealthnews’ article and the joint release, an individual’s health information taken at higi retail stations will be “prioritized within Interpreta in real time”. They also claim that for the first time, insurance payers and providers will be able to leverage biometrics data, clinical, claims and additional genomic information a person may obtain from genetic testing services into a ‘personalized care roadmap’ that closes gaps in care. This is positioned as a big advance in population health and it all sounds great.

Perhaps not so great are the details. What about consent and data security? Aside from absolutely no mention of patient consent and HIPAA compliance in the above news, this Editor suspects that past, current and future Higi users may not be made aware that their vital signs data recorded with Higi will be 1) sent into a non-Higi database and 2) integrated with other information that appears in Interpreta’s database. How is this being done? Is consent obtained? What then happens? Is it used on an identified or de-identified basis? Where is it going? Who is doing what with it? Can it be sold, as 23andme’s genomic information is (with consent, but still…)? “Interpreta works in the realm of precision medicine, continuously interpreting and synchronizing clinical and genomics data in real time to create a personalized roadmap to enable the orchestration of timely care.” but they do this for providers and health plans who are then responsible for privacy and data integrity. Consent for Higi to keep a record of your blood pressure when you drop into your local RiteAid or ShopRite is not consent for Interpreta to use or manipulate it. These questions should have been addressed in the release or an accompanying fact sheet. We welcome a response from either Higi or Interpreta.

And one last and exceedingly ‘gimlety’ observation by this Editor: kiosks get hacked, and here we have not a price to a McDonald’s meal but a portal to deep PHI. Here’s a two-part article in an industry publication, Kiosk Marketplace, if you are skeptical. Part 1, Part 2 

A ‘Game of Thrones’ analogy to potential health insurer mergers

The Wall Street Journal has likened the merger action pending among America’s largest insurers to the series ‘Game of Thrones’, said thrones occupied by Aetna, Cigna, Humana, UnitedHealthcare and Anthem. These more aptly remind this Editor of the final stages of airline deregulation, except that none are in a non-medieval bankruptcy court. Their actions reflects the payers’ urgent concerns that now is the time to reinforce a national presence, that revenues in a Obamacare environment (well, we’ll see the effect of that US Supreme Court subsidy decision due imminently) can do nothing but go down and that Medicare Advantage, commercial accounts, health system relationships (ACOs) and health IT systems are the place to be. What is missing: the fate of those independent, state and regional Blue Cross-Blue Shield (collectively, the ‘Blues’) which are not part of Anthem, many of which are ‘non-profit’ (note the quotes); the positive effect of competition on pricing and a fair consideration of the negative effects of monopoly. Ah, but there are no flung axes, regicide or poisonings to be found here. The real theme of ‘Game of Thrones’ is the effect of the powerful on the powerless (we the insured), which the WSJ writer doesn’t address…..Insurers Playing a Game of Thrones (if you hit a paywall, search on the title)

What’s the big thing behind the Cognizant acquisition of TriZetto?

The $2.7 billion acquisition of HIT payer-provider services company TriZetto by IT/BPO outsourcer Cognizant indicates the value that large, largely offshored companies are seeing in health data. According to Fortune, “The combined company has more than $3 billion in healthcare revenue, as well as about $1.5 billion of potential revenue synergies over the next five years from which Cognizant can cull further gains.” Cognizant’s healthcare and life sciences sector is about 26 percent of their $8.84 billion total annual revenue, but what they haven’t had is the provider-payer software and TriZetto’s IP.

So why the big number (which exits the investors quite nicely) which nearly equals the value of the combined companies in healthcare? The trend this Editor has spotted (more…)