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The novel coronavirus pandemic has upended the world as we know it, taking an unprecedented toll on health and human life. Beyond
The healthcare ecosystem has quickly mobilized to mitigate the crisis – modifying care access points and modalities while producing financing mechanisms to sustain patient care amidst dire circumstances.
As the scale of the pandemic grows and downstream impacts persist, healthcare organizations are recognizing they must shift from a reactive stance to a more proactive “new normal.” Operating in this environment will require new capabilities, forcing many organizations to look externally for innovative solutions to guide this transformation.
In this piece, we examine macro ramifications of the pandemic and potential reverberations across the healthcare industry. Through this analysis, we’ve identified five opportunities that harness these disruptive forces into tailwinds, and we cite examples of venture and PE-backed companies getting traction. We believe nimble, fast-moving early-stage companies are best positioned to maneuver and create lasting impact in these unprecedented and challenging times.
How Are Macro Changes Impacting Healthcare?
Increased Role of Government in Healthcare
At a time when federal spending on healthcare is already on an unsustainable pace, the pandemic response suggests the government’s responsibilities are expected to grow. The federal government has authorized nearly $3T and counting in general economic relief measures. Further, federal agencies have earmarked $175B to aid healthcare providers whose revenue streams have been disrupted. The surge in federal spending indicates that federal debt is likely to exceed 100% of gross domestic product (GDP) by year’s end. This will pressure near-term healthcare spending and impact critical programs already on tenuous footing.
In addition to immediate one-time commitments, the government’s enduring responsibilities are also likely to grow. Amidst record unemployment of 11% (17.8 million), Medicaid enrollment could swell by 17 million, a potential 24% increase compared to pre-pandemic levels. Furthermore, as the pandemic penetrates regions of the nation in variable intensity, states with some of the highest uninsured rates are being disproportionately impacted. This will create new, longer-term responsibilities for both state and federal governments.
Financial and operational pressure on Hospitals
Health systems, which have been the last line of defense against Covid-19 infection, have been among the hardest hit healthcare sectors economically. The gross reallocation of resources to caring for coronavirus patients on inpatient units and concern for the spread of infection have led to periodic cancellation of lucrative elective procedures and services. Additionally, other non-urgent admission volumes have decreased given patient fear of contracting COVID-19 in acute care settings. As a result, health systems have lost an estimated $200B in income over the last four months, highlighting some of the challenges of the current fee-for-service paradigm that rewards volume over value.
Hospitals, which already have high fixed costs and thin operating margins, were in a precarious financial position prior to the pandemic. Looking ahead, many will also have to contend with uncertainty in future elective procedure volume, volatility in investment income and lower reimbursements as a result of treating more Medicaid and uninsured patients. This will create margin pressure and a subset of hospitals may also have a harder time borrowing capital for immediate needs. As a result, operational cost reduction is elevating as a priority for many.
Increasing Flexibility of the Healthcare Workforce
The pandemic has magnified the historically inflexible nature of our healthcare system. Data suggests that up until recently, roughly 80-90% of care was still being delivered in-person by a workforce organized to support care in brick and mortar facilities. The pandemic has exposed some of the shortcomings of this model, particularly an imbalanced and inelastic workforce unable to connect with patients where and when they need care. Although virtual and distributed care models have long had tremendous potential as solutions to this problem, regulatory and financial barriers have hindered broader adoption.
In response to the pandemic, regulatory agencies have stepped in to dramatically unlock clinician supply and capacity by both removing barriers and creating incentives. State and federal governments have unanimously eased constraints by liberalizing licensing, reciprocity and credentialing. In addition, the Centers for Medicare and Medicaid Services (CMS) has decided to reimburse over 80 telehealth services at parity with in-person care, a critical incentive for more physicians to offer the service to their patients.
The Changing Behavior and Mental Health of Patients in the Pandemic
As traditional sites of care have become risk prone and largely unavailable, patients have been forced to access new modalities to address their medical needs. Patients with low acuity conditions have quickly become comfortable with virtual care services. An estimated 16.5M Americans have started using telehealth since the onset of the COVID19 pandemic and 88% say they would use it again. As a result, telehealth adoption amongst traditional providers and direct-to-consumer telehealth platform sales have skyrocketed.
For patients with more chronically serious medical conditions, appropriate care has been less accessible, leading to a “hidden” crisis with catastrophic complications. These medically complex populations, whose care is often managed by numerous specialists, have been less certain about where to turn for their care. Hospitals nationwide have seen dramatically reduced admissions for heart attacks and strokes during the pandemic, with some states reporting a 2 to 3-fold increase in deaths from heart disease and diabetes. Notably, Michigan recently reported a 62% increase in out-of-hospital deaths, as many of these patients have forgone basic care needs due to a perceived risk of infection.
Prior to the pandemic, our healthcare system was already grappling with a behavioral health crisis. In the midst of persistent access challenges, the pandemic has produced unprecedented levels of social isolation, financial distress, and domestic instability. These stressors, combined with the increasing turmoil of social injustice and political debate, have led to an astounding 300% increase in the reported rates of depression and anxiety. As the pandemic and economic shutdowns persist, it is evident the increased demand for behavioral healthcare will only intensify.
The simultaneous convergence of these macro forces has significantly disrupted normal operations in our healthcare industry. Stakeholders who aim to survive and potentially thrive amidst this disruption must innovate and navigate real-time transformation. We have highlighted five key areas of emerging need where early stage healthcare companies can create high-value, enduring impact for customers, partners, and the industry at-large.
Five Emerging Opportunities for Innovation
#1 Support the Provider Value-Based Care Journey
Macro forces suggest we are at a unique moment in the history of value-based care (VBC) adoption. The downstream impacts of the pandemic have created new incentives for payers and providers to align on value-based payment arrangements as an alternative to the fee-for-service status quo. This has the potential to catalyze new payment model innovation and broader adoption of VBC.
Over the last decade, the federal government’s efforts to advance VBC adoption have spurred commercial health plan’s efforts to innovate their own payment models. As the government’s near-term role as a healthcare payer grows, it is likely to push for VBC as a cost control mechanism across the payer and employer landscape. In fact, some commercial health plans are already beginning to offer prospective payments to providers in return for their commitment to participate in future value-based care programs.
In addition to payer efforts to advance value-based care, data suggests healthcare providers in alternative payment arrangements have fared better than their peers in fee-for-service arrangements. This reality is re-shaping how providers think about their future business models, spurring new dialogue about the merits of prospective payment arrangements, which can offer steadier and predictable cash flow to providers.
While providers may have more financial incentive to adopt a value-based business model, the complexity and cost of building a VBC infrastructure will remain as barriers to adoption. Many providers will, therefore, seek experienced partners to help guide their VBC journeys. This presents a unique opportunity for VBC enablement vendors, who offer the technology, operating capabilities and staffing support critical to developing a value-based care infrastructure.
VillageMDAgilon Health, Privia and Aledade are leading the pack in delivering suites of value-based enablement services to risk-bearing provider groups. Their value-add includes care management capabilities to augment population health, analytics to support clinical decision-making and administrative capabilities to help providers track their performance. Stellar Health is an earlier stage company whose technology recognizes the critical role primary care providers play in value-based care models by prompting them to complete value-based care workflows incentivizing completed actions with financial rewards.
#2 Automate the Healthcare Enterprise
It is well-documented that repetitive manual processes and human inefficiency are drivers of unnecessary hospital administrative spend. Yet these challenges persist due to low adoption of automation technology. As health systems seek operating efficiency and quick value creation, they are likely to embrace enterprise automation strategies like robotic process automation (RPA) and artificial intelligence (AI) to enhance productivity and free staff up to practice at the top of their license.
Across industries, these technologies have demonstrated the most value automating repetitive, high-volume and rules-based activities such as scraping web data and filling in forms. There are a number of similar automation opportunities scattered across the hospital enterprise, such as claim status checks during the revenue cycle process, insurance verification efforts in the contact center or inventory management as part of supply chain and ordering. While implementing automation seems prudent, scalability and enduring ROI have been elusive for some hospitals. This is due to the challenge of finding alignment between these technologies, the nuanced and unstructured nature of hospital processes and the staff supporting these processes. Therefore, automation platforms capable of facilitating process discovery and standardization, supporting human-in-the-loop synchronization and enabling self-governance have the most utility.
Several companies are helping hospitals automate enterprise processes, targeting the end-to-end automation of specific functional areas as part of a broader enterprise automation strategy. Syllable AI is an intelligent automation platform for the healthcare contact center, capable of processing live web, mobile and phone requests from patients and either resolving them or triaging to human staff appropriately. Suki AI, a Flare Capital portfolio company, and Alpha Health are focused on automating revenue cycle processes. Suki offers a voice-enabled and AI-powered platform that automates clinical note documentation as well as coding and billing related administrative tasks, while Alpha Health leverages people, data and machine learning technology to automate reimbursement tasks.
#3 Synchronize Virtual Primary Care through a Longitudinal Offering
The in-person nature of primary care, rooted in the relationship between patient and “PCP,” has been hallowed ground. Despite this tradition, studies suggest as many as 80% of primary care services (validating symptoms, triaging care, and developing treatment plans) can be delivered virtually. The fallout from the pandemic has created a unique opportunity to realize this potential as patients have gravitated to virtual solutions to access care. However, the rapid surge in virtual care options has been overwhelming for some patients, leading to mixed experiences. This suggests an opportunity to streamline the virtual care experience through a longitudinal offering to support the continuous patient journey.
In order to “create” a longitudinal virtual primary care offering, risk-bearing entities (payers, employers and provider groups) have experimented with aggregating point solutions into a cohesive offering. As new solutions rapidly come to market and delegated entities include virtual care as a medical benefit, the challenge of aggregating these offerings will grow. Therefore, there is a growing need for natively integrated products that leverage provider scale and power longitudinal (engage, treat and close) care experiences.
Three companies that are innovating the longitudinal, virtual primary care experience are 98point6, K Health and Eden Health, a Flare Capital portfolio company. 98point6 offers an on-demand, virtual care experience that resolves basic care needs by sequencing both technology and chat-based primary care consults to screen and treat patients. K Health has quickly evolved from a symptom-checking solution to a platform capable of connecting members directly to a range of contracted physicians for electronic live chat-based care for as low as $9/month. Meanwhile, Eden Health has built a virtual-first NCQA accredited patient-centered medical home model for employers that virtualizes the experience of a best practice traditional primary care clinic. Eden deploys multidisciplinary care teams including behavioral health and navigation assistance interconnected with the healthcare system to help employees navigate their healthcare journey at their office work site or virtually.
#4 Develop Dynamic, Community-Centered Home Care Models for Vulnerable Populations
The pandemic is hastening the ongoing transition of care away from acute care settings (ED, inpatient) to the lowest cost, and now “safest” site of care, the home. Medically complex patients, many of whom are particularly vulnerable to coronavirus, unable to leave home and in need of higher-touch care, are accelerating this transition. Healthcare claims outcomes data suggests providing care in the home for certain populations is worth the required upfront investment for additional services. Recognizing these benefits, payors are incentivizing home and community-based care, taking a lead in catalyzing this shift. As this shift accelerates, however, health systems risk falling behind unless they actively participate in shaping the change.
The inpatient model has been designed and staffed to accommodate high capacity and treat broad care needs at a central site. As care grows decentralized, this model will have to be reconstructed. Health systems will need to ensure that their workforces and equipment are mobile, dynamic and organized around individual patient needs. For higher-acuity patients, hospital-at-home models will also need to package care delivery, remote monitoring and supply chain into a more cohesive and flexible offering.
Several companies are assisting health plan and health system efforts to extend their care reach into the home, allowing providers to treat a wide range of clinical needs. Dispatch Health and Ready Responders are two on-demand and mobile care providers. Both companies partner with health plans and health systems by bringing on-demand, mobile care teams to patients’ homes and providing in-home care for non-emergency needs. Contessa Health, meanwhile, helps health systems deliver hospital-at-home programs and enables health plans to effectively contract for this new model of care.
For higher-need patients, home-based primary care as well as Program of All-Inclusive Care for the Elderly (PACE) models have proven to be uniquely effective at improving outcomes and reducing costs. Concerto Health and Landmark Health are two home-based primary care providers that contract with health plans to address more complex member needs, by providing longitudinal home-based primary care and care coordination amongst multiple specialist clinicians. PACE models, characterized by their interdisciplinary staffing, dynamic site-of-care synchronization and community orientation, have been particularly adaptive and effective at caring for elderly and complex patients during the pandemic. WelbeHealth’s recent expansion and remote home-based care innovations lend further credence to the adaptive nature of this model of care.
#5 Integrate Primary Medical and Behavioral Healthcare
If the “first mile” in fixing the Behavioral Health system in the U.S. was increasing access to care, the “last mile” will surely be improving outcomes of that care. A critical next step in improving treatment efficacy involves better integrating behavioral health with the rest of the patient’s medical journey. Integrated models have demonstrated better outcomes for both adult and adolescent populations.
An emerging class of companies is developing solutions to better enable integrated care for adult populations, including Quartet Health, Concert Health, and Mindoula. Quartet Health offers healthcare providers both technology and access to a network of behavioral health providers to facilitate better collaborative care and has most recently signed a large national collaboration with Centene. Concert Health works closely with primary care providers and deploys a full-stack collaborative care solution including remotely delivered behavioral health care. Finally, Mindoula partners with both health systems and health plans, providing virtual care teams and technology-enabled support services to help its partners engage and treat their patient’s acute needs.
The unique needs of the adolescent and pediatric populations are often overlooked in the broader discussion about behavioral health. As rates of anxiety, depression, suicidal ideation and autism spectrum disorder rise, so does the need for better care options. Effectively managing the behavioral health needs of this population requires integrated care with additional wraparound capabilities, especially family-centered engagement, but also school and community-based support. Brightline and Opya are two companies that have set out to address this need, creating collaborative, multi-specialty clinics that engage care teams, families and communities in providing care while leveraging a digital platform to ensure overall continuity.
As the Covid-19 pandemic rages on, it’s clear the ramifications of the pandemic are likely to permanently reshape the healthcare industry. Targeted evolution around key areas of change will be required to successfully navigate the healthcare world beyond Covid-19. We believe the areas that will require the most adaptation are in value-based care payment models, digitally integrated and tailored care delivery and automation. As the healthcare industry begins this dynamic journey, we believe early-stage companies have a once-in-a-generation opportunity to shape the future ahead.