HealthTech Investing: Opportunities outside the Doctor’s Office

When the average person thinks about their health and what impacts it, they think about things like exercise, eating habits, and maybe genetics.  These are easily digestible topics that allow people to feel some measure of control over their health - or in the case of genetics, absolves them of any guilt over what they cannot control.  What often gets overlooked is a massive set of variables known as Social Determinants of Health (SDoH) which are often underlying driving factors for health inequities, illnesses and public health concerns. These include transportation, food insecurity, housing stability, education and social isolation, among others.

The term “SDoH” first emerged when the World Health Organization established a Commission in 2005 to address the social factors leading to poor health and health inequities. It’s been over a decade since the launch of the WHO Commission, but recently there’s been a resurgence of focus on SDoH, especially for investors focusing on healthtech and the evolution of the healthcare industry.

Today, clinical care is estimated to account for less than 20 percent of what affects a person’s overall health outcome. We now know that the majority of factors that materially impact our health occurs outside of the doctor’s office and yet the majority of the $3.5T annual U.S. healthcare spend is still incurred in the clinical setting.  That’s a signal to innovative founders and investors that its a market ripe for new solutions, and tech startups like Solera, UniteUs and CityBlock are answering that call by connecting patients to the appropriate social services. For new companies to effectively tackle this issue though, capital investment is only one piece of the puzzle. The good news is that both regulatory policy and healthcare infrastructure are now aligned to support innovative solutions to address social determinants of health.  

The biggest catalyst to reaching this point has been the industry’s transition to a value-based care system where stakeholders share the risk and are incentivized to control cost. In a report by Health Care Payment Learning and Action Network, it is estimated that in 2017 around 34 percent of U.S. healthcare payments were tied to alternative payment models, an increase from 23 percent since 2015. A 2017 whitepaper by Change Healthcare identified more than 40 states that have a state-initiated plan or strategy to move toward value-based payment and almost half of those are multi-payor in scope. With a goal of providing the best outcomes at an optimal price, stakeholders must now expand their scope to address the social determinants of health, too. Ultimately, this paradigm shift supports payors and providers in aligning social needs and clinical care.

It’s also no coincidence that this transition aligns with the development of foundational technology infrastructure throughout the healthcare industry.  With the regulatory pressure created after the passing of the HITECH Act in 2009, today, over 95 percent of hospitals have demonstrated meaningful use of certified health IT and electronic medical records, according to CMS, compared to only about 31% in 2003.

As this core technological plumbing was being laid in place, we saw an explosion of healthtech startups enabling interoperability across software solutions, improving point of care delivery, the consumerization of healthcare and powering healthcare data exchanges. Between 2010 and 2018, the value of capital investments (venture + PE) in digital health increased by 1,115 percent, reaching a record $14.6B in 2018.  This activity has primed senior decision makers at health systems and health plans to adopt technology to improve care outcomes and operations. A survey conducted by The Deloitte Center for Health Solutions conducted a nationally representative online survey and found that 80 percent of hospital respondents reported that leadership is committed to establishing and developing processes to systematically address social needs as part of clinical care.

cartoon from Jack MAypole

The first wave of startups in the space focused on aggregating the fragmented ecosystem of social service providers and public health resources, giving health systems and plans the ability to direct patients appropriately.  The second wave of startups is now cresting on a range of other opportunities to move the needle when it comes to addressing social determinants.

For one, standardizing data collection and integrating data on social needs and analytics in interoperable IT is a major opportunity for investors.  According to a survey conducted by the Deloitte Center for Health Solutions, nearly 9 in 10 (88%) hospitals screen patients to gauge their health-related social needs, though only 62% report screening target populations in a systematic or consistent way. Furthermore, much of the nuanced data is buried in social work notes that the care team is not accessing.

There is also the need to leverage AI and predictive analytics to help segment population data to give a real-time picture of the populations being served, as well as identify the populations that should be targeted for prevention purposes.  Healthcare data has grown by leaps and bounds over the past decade, but just because this data is now available, does not necessarily mean it is being utilized effectively. If we can collect standardized SDoH data at the individual level it must also be incorporated into population health management platforms to inform care coordination efforts.  There is an opportunity to make use of this data, not only to better understand a patient’s health needs, but also to start making personalized, data-driven decisions.

And finally, we are hungry for opportunities to continuously track and analyze outcomes as well as data that can help demonstrate an ROI on social needs investments.  Healthcare organizations want to see ROI from addressing social needs, in terms of improved health outcomes and/or reduced costs. However, unlike other types of investments, it’s pretty difficult to isolate the benefit of these programs over a given time period. Currently, only 35% of hospitals have the tools they need to track the outcome of SDoH investments.

The time is now.  We're optimistic that the innovators, entrepreneurs, radical practitioners and social scientists out there will step up to the plate. But let's be clear, this is much more than a market opportunity, this is a societal need. Ballooning healthcare costs are not sustainable for providers, for payors, and most importantly, not for patients. So let's put down our green juices and focus on the social determinants of health that can really deliver us to a healthier future.

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