On Digital Healthcare

By Libovness ebb240a92a42c020266454c443cd7a1fdcf33d3da94f471fa02754adca8eda77libovness of Union Square Ventures &
Angela 21bc720559677c6d8529a8db0426eac01b50c3dead5064377af6e151cf476dd4ATKingyens of Version One Ventures

Intro

Part I

Mobile
endpoints

Part II

Health
data

Part III

Health
apps

Part IV

Networks & marketplaces

Outro

Mobile endpoints

How much care can we provide via the phone?

As the mobile phone has become the supercomputer at the center of our lives, it’s been remarkable to watch how much is happening around it, particularly in translating personal health and fitness signals into bits.

Health and fitness trackers (e.g., the Fitbit, Apple Watch) that interface with your phone are already mainstream, though it’s not yet clear how much, if any, of this data will be put to clinical use. In his last quarterly call, Apple CEO Tim Cook discussed a handful of hospitals that are using the Apple Watch to monitor patients with hypertension. Even if recreational health and fitness trackers do begin to garner some clinical use, this could be a long, slow burn.

devices The question is now: Which medical apparatuses won’t get attached to a smartphone?

On the more punctual, special-use end of the spectrum, you can now analyze your blood pressure via an accessory to your phone, attach a special lens to your iPhone to help identify skin cancer or cervical cancer, take your fertility temperature, or even take an eye exam (though we’d advise against doing all those things simultaneously). Like Dr. Eric Topol’s “modern black bag”. Will the family first aid kit of the future include a set of smartphone accessories?

Storing more substantial equipment at home is somewhat impractical, but we can also imagine a future where local health clinics and pharmacies become diagnostic hubs that you authenticate with your phone. There may already be a Theranos at your local Walgreens to get quick, cheap, easy blood work.

Theranos decouples blood work from the doctor’s office

It’s quite interesting to imagine a world where commodified, networked medical equipment decouples diagnostics from the doctor’s office. The unbundling of the doctor’s office, if you will.

The question is: If you could take care of the diagnostics before you visit the doctor, in what situations might you be able to avoid doctor's office altogether?

How much care can be provided from the comfort of your own home?

Telephones have been around for the past hundred years, but the majority of healthcare is still delivered in-person. While the majority of doctors visits will continue to take place in person (consider how doctors today may still use their sense of smell when assessing a patient), the proliferation of smartphones is introducing new ways to connect doctors to patients. The dispatch layer that is driving the on-demand economy to its present heights is also cropping up all over digital healthcare. This category is popularly known, for better or worse, as “telemedicine”.

With the advent of telemedicine, we’ll increasingly move from scheduling a time next week with a particular doctor to utilizing services that connect us immediately with a presently available doctor. How this behavior will affect clinical outcomes is an open question, and might have a different answer for primary versus specialty care.

With the tap of a button, you can summon a doctor to your home via Pager. At the tap of another button, you can talk or text with a doctor on your phone (see Teladoc, Doctor on Demand, HealthTap, American Well and First Opinion). And then if you’re prescribed medication, you can have it delivered to your door via Zipdrug or NimbleRx.

This looks a lot like the on-demand economy that we’re all familiar with — taxi cabs, grocery delivery, and shipping services that come at your beckoning. But with healthcare, the key question is: will it be covered by insurance?

Who will really save money when insurance providers cover telemedicine?

On April 30, United HealthCare announced that it would begin extending coverage to doctor “visits” with four telemedicine providers: NowClinic, Doctor on Demand, HealthTap, and American Well. For now this only covers about 1 million of United HealthCare’s customers, with the goal of covering all by 2016. By that time, we would also expect coverage to include more telemedicine providers.

Economically speaking, this is a compelling proposition: medical practices could reduce their costs and increase patient access, patients could get more timely care and pay less out of pocket, and insurers reduce their reimbursement to both doctors and patients. But who will pocket the savings from less expensive telemedicine visits: insurers, doctors, and patients, or just one or two of the bunch?

(Of course this isn’t really a zero sum game. It is more likely that these innovations will lead to create unforeseen value via improved access.)

Another interesting question is whether payers (i.e., insurance companies and self-insured employers) will serve as gatekeepers and kingmakers in this space. As with the announcement of United HealthCare coverage for those three services, will the winners in this market be decided by which service the payers favor? Will payers begin to subsidize telemedicine services according to consumer demand? Or will all telemedicine services end up as mere commoditized intermediaries?

What does the world look like if every doctor were a telemedicine vendor?

Indulge us for a moment: We press pause on the Earth’s rotation. Right after we raid a Dunkin’ Donuts and an Apple Store, we equip every doctor on the planet with Ring.md. or eVisit (two companies/products that enable doctors to add telemedicine to their existing practice). What would change?

Doctors fresh out of medical school/residency would suddenly have an alternative to the today’s traditional path of joining a brick-and-mortar medical practice that is part of some larger health organization. Telemedicine can offer a path to greater independence, even entrepreneurship. If so, would this reverse the consolidation that has been happening in the industry over the past several years?

Much as Uber presents itself as a marketplace but is actually just a networked, global version of an age-old taxi business, many of today’s telemedicine providers, such as Doctor on Demand and Medicast, are in fact just networked versions of the age-old medical practice. We’d like to imagine a future that will enable young, ambitious doctors to build their own unique practices that leverage telemedicine and other related services.

Experienced doctors, relieved of much of the administrative work that comes with maintaining a brick and mortar practice, can spend their time on more interesting or lucrative patient cases. Imagine a specialist in a particular illness taking patients from around the world via phone. Perhaps as a harbinger of what’s to come, we've heard that many American doctors are currently using Skype and PayPal to consult with and bill foreign patients as a means of generating new business. Interestingly, those doctors aren’t using telemedicine with their existing patients.

For patients in this telemedicine-equipped world, there’s suddenly a much broader supply of doctors around the world that you can visit. Say that you're a relatively healthy young person in the US, struggling with the price of health insurance: Could you “cut the cord” and pay out of pocket for less expensive foreign doctors for care?

More practically speaking, we anticipate that doctors will first introduce telemedicine into their practice for outpatient services and follow ups. A recent survey suggests that trust in telemedicine services vastly increases when offered for follow up, rather than an initial visit, suggesting that consumers are happy to forgo a visit to the office when they’ve already established a relationship (i.e. conducting follow-up visits with their existing doctor). And some recent studies have found telemedicine to be an effective tool in providing depression therapy to seniors. But by and large, when it comes to telemedicine, evidence of improved clinical outcomes is few and far between.

Telemedicine Do people trust telemedicine? (Source: Technology Advice)

RockHealth’s analysis of Teladoc’s S1, particularly on the company’s remarkably low utilization (300K visits in 2014, representing 3.7% of members), highlights how the capabilities for telemedicine are still vastly outpacing usage. It also shows how heated this market is: Teladoc’s current market cap is a huge multiple over its users and usage, and this will be the benchmark that many investors use when valuing companies in the space.

Stay tuned for Part II of our series “On Digital Healthcare”. You can get notified via email when Part II is out.