Digital Health: Go-to-Market Strategies that Address Provider, Payor and Patient Needs

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By Brad Jones, Blumberg Capital

In the past two years, over $20B has been invested in digital health companies and over 325,000 health apps have been developed for behavioral health and digital therapeutics. This activity is driven by regulatory changes and innovations in hardware, software, and health system infrastructure. Such trends have enabled digital health solutions to offer real clinical benefits, both inside and outside of the doctor’s office. 

Personal behavior modification represents one of the greatest near-term opportunities to improve quality of life and patient longevity, while reducing costs. In fact, unhealthy behavioral patterns account for nearly 40 percent of all premature deaths in the United States and drive 31 percent of U.S. healthcare expenditure. 

So what’s the catch? People have a difficult time changing behavior. After all, a habit is a habit. 

This is where digital health can deliver significant value. By helping patients change behaviour, digital therapeutics for chronic conditions such as diabetes have been proven to deliver better outcomes at a lower cost. Tools for digital patient engagement and monitoring drastically reduce hospital readmission rates. Even conditions that are difficult to diagnose and complex to treat, such as neurological decline, can be managed more effectively with digital solutions. 

The COVID-19 pandemic has further accelerated the transition to digital care models and contributed to a complex ecosystem that can be difficult for stakeholders to navigate. Patients, providers, payors and regulators all have distinct and legitimate roles. It is often challenging for providers to separate noise from signal and determine what is actually driving results. While studies show over 80% of providers believe there are advantages to leveraging digital solutions in patient care, adoption of remote monitoring and patient engagement tools remains below 35%. What is causing this lag in adoption and how can startups get products into the hands of providers and patients?

Strategies That Can Influence Provider Adoption:

Patients naturally look to their doctors to make recommendations about specific treatment plans, including innovative digital options. Startups also rightly see providers as distribution channels, especially if they can partner with payors to ensure unit economics are aligned and appropriate. 

Providers ultimately want clinical results and a demonstrated return on investment. While this is relatively straightforward, there are a few unique attributes that can facilitate clinician adoption of digital health tools. These include aspects specific to the healthcare industry, including regulatory and payor approval, integration into electronic health records (EHR) systems, liability protection and marketing restrictions, among others. Below we outline a few strategic areas entrepreneurs can utilize to encourage provider adoption early in a company’s lifecycle. 

Product Strategy

Digital health solutions need to fit seamlessly into provider workflow to accelerate adoption. It is imperative for product teams to build standard EHR integrations and industry-compliant security features. Administrative features that can add value should also be taken into consideration, such as automated document generation for patient reimbursement.  

As it relates to patient privacy, differing frameworks for consumer data and HIPPA regulation should be taken into consideration. Depending on the business, relevant legislation can vary drastically. Founders should know what components will relate to the business over time and develop standards that enable engineers to easily follow compliance protocol. This helps companies avoid technical debt and makes the product more attractive to clinicians.

A/B testing is a natural extension of randomized clinical trials. Every time a patient interacts with a product represents an opportunity to record data for clinical validation. Product teams should utilize development guidelines and research frameworks in order to facilitate the flow of data gathering for clinical trials. Effective, continuous testing procedures will drive improved efficacy and support streamlined clinical validation processes. 

Carrier Reimbursement 

Providers are more likely to adopt digital health solutions that are reimbursed by payors. This can pose a challenge for startups, as carriers operating under fee-for-service models may not consider innovative products until short-term ROI has been demonstrated. 

For these reasons, we recommend focusing outreach efforts on carriers that offer value-based care models. These organizations are typically early adopters of innovative care solutions because they are incentivized to promote holistic, long-term health in their patient populations. Medicare and Medicaid currently offer reimbursement for remote patient monitoring applications and private payors are beginning to follow suit. For example, Blue Cross Blue Shield of North Carolina has launched initiatives to incorporate digital therapeutics into its value-based plans. The carrier will offer reimbursements for applications related to behavioral health, making it easier for doctors to prescribe these solutions.

Clinical Validation & Regulatory Approval

Naturally, providers value empirical evidence supporting product safety and clinical efficacy. In the U.S., FDA approval is the gold standard. For less critical applications, white papers or internal studies may be sufficient. In 2017, Pear Therapeutics became one of the first companies to gain FDA clearance for a digital therapeutic. Since then, many companies have followed suit. 

Clinical trials preceding FDA validation for digital therapeutics can exhibit a wide range of costs (typically $1M – $3M) and last multiple years. Therefore, integrating pre-approved devices into a unified solution suite can be a more efficient alternative. Omada Health used this approach when it integrated FDA-cleared blood pressure cuffs and glucometers into its software offering. 

Outlining a strategy for clinical validation can help founders gauge if they will benefit from FDA clearance. If formal approval won’t move the needle, leave it to the large players with extensive resources to pursue the regulatory pathway. 

Team

Team is the most important factor in any startup, and it takes unique depth to build a digital health company that drives clinical results. Founders need employees who understand clinical science, data science, experimental approaches, and behavioral science, in addition to product and UI. While companies should value capital efficiency, early investment in a superior team is essential.

Patrick Steele, CIO Advisory Chair at Blumberg Capital and a board member at CommonSpirit Health, says: “Change is inevitable, and growth is optional.” Providers and health systems that do not adopt digital engagement and behavioral applications will fall behind. Startups that do not understand specific requirements of the healthcare ecosystem will not succeed. At Blumberg Capital, we are excited to work with founders who seek to relentlessly drive change and ultimately, a healthcare system that exhibits proactive response to innovation in care practices. 

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