The Economist on healthcare’s transformation into a consumer product.

Digital Health

Rock Health Funding Trends for 2021

Regular Digital Health Wire readers could probably guess that 2021 was a spectacular year for digital health funding, and Rock Health’s latest full-year report confirms that investment in the space topped even the most bullish expectations.

• Total funding for US digital health startups climbed to $29.1B across 729 investments, nearly doubling 2020’s former record of $14.9B. The growth was shaped by 88 different $100M+ rounds combining for $16.6B, including four of the largest digital health raises of the decade: Noom ($540M), Ro ($500M), Mindbody ($500M), and Commure ($500M). [Chart 1]

• M&A activity grew at a similarly breakneck pace, with 272 M&A moves easily eclipsing 2020’s total of 146. Last year also saw a record 23 companies go public through either SPAC mergers (15) or IPOs (8), shattering the previous record of 8 exits set in 2020. [Chart 2]

• The most funded value propositions of the year included R&D catalysts such as decentralized trials ($5.8B) and on-demand healthcare ($4.5B). Healthcare marketplaces were among the fastest growing segments, with 3.2x funding growth driven by D2C marketplaces like Mindbody and caregiver marketplaces like Honor. [Chart 3]

• Mental healthcare was the most popular clinical indication among investors ($5.1B), raising $3.3B more than any other clinical focus. Outside of the pandemic’s less-than-stellar impact on many people’s mental health, this area has seen a funding frenzy due to the rise of virtual behavioral health platforms such as Lyra Health and NOCD. [Chart 4]

Bubble Watch

Despite last year’s record breaking digital health funding, Rock Health’s view on the market was that it “wasn’t an across-the-board bubble, but it wasn’t placid water either.” Many companies are exceeding pre-pandemic projections by wide margins, and it’s possible that historical digital health benchmarks are too low, as opposed to today’s valuations being too high. If these companies can find a way to sustain their momentum beyond the pandemic, there’s a chance we could see a repeat performance in 2022.

Remote Care

Medically Home Gains $110M Strategic Investment

The hospital-at-home space continues to pick up speed as Medically Home announces a new $110M round and a fresh set of strategic partners.

• The round was led by medtech company Baxter International and mobile care provider Global Medical Response, joining Cardinal Health, Mayo Clinic, and Kaiser Permanente who added to previous investments. Each investor is now a strategic partner in Medically Home, a strong sign of confidence in the company’s expansion plans.

• Medically Home’s platform enables in-home care for high-acuity patients through the use of RPM devices, emergency response systems, and durable medical equipment installation. Providers use these tools to continuously monitor and communicate with patients from a customized “command center.”

• The new strategic partners strengthen Medically Home’s care delivery model. GMR’s network of 30k deployable clinicians will provide quicker response times, while Baxter’s involvement will give care teams access to a wider set of therapies for critical conditions.

• Although the funding’s purpose was not explicitly stated in the press release, it’s clear that Medically Home is intent on expanding its capabilities, and $110M is a healthy amount of capital to begin scaling its services nationwide.

The Takeaway

Medically Home operates at the intersection of several key trends. The pandemic has made brick-and-mortar settings dangerous for the type of high-acuity patients that Medically Home treats, many hospitals are operating at or near capacity, and consumer preferences are increasingly shifting towards comfortability and in-home care. Medically Home’s services address each of these directly, and judging by its growing partner roster, many companies share a belief in the care model.

Nuance’s Patient Engagement Must-Haves

Consumer demands are shifting, and they’re looking to get more out of their digital health technology. Nuance outlines the 5 must-haves for your patient engagement strategy here.

The Wire

• Direct Diagnostic Testing: Providing direct patient access to diagnostic testing drives high levels of use for both web-based triage (61% who used web triage booked a test) and self-testing kits (83%), according to a systematic review of 45 studies recently published in JMIR. Across all studies, 81% of participants preferred home-based testing over clinic-based testing and 93% followed-up after a positive test (93%), which indicates that direct access to diagnostic testing could potentially lower patients’ threshold for testing and reduce primary care workloads.

• Kiddo Series A: Pediatric chronic condition management company Kiddo closed a $16M Series A round ($22M total funding) to help grow its team and expand its partnerships with health systems. Kiddo’s platform integrates remote monitoring for children, a coaching app for parents, and on-demand telehealth services to treat conditions that require continuous management such as autism and diabetes.

• Remote Kinematic Therapy: The AMA issued a new CPT III code for remote body and limb kinematic measurement-based therapy (code 0733T on page 5), widening the path to reimbursement for in-home physical therapies that are growing in popularity due to companies such as Hinge and SWORD Health. CPT III codes are intended to help collect clinical data for emerging treatments to support future regulatory decisions, but don’t have assigned RVUs, leaving coverage up to payors.

• Telehealth Adoption Characteristics: A study of 3,473 physicians at Mass General Brigham investigated which physician characteristics were associated with early telehealth adoption in the first weeks of the pandemic, finding that female (OR 1.23), behavioral health (OR 2.92), and primary care (1.69) physicians were more likely to be early adopters. The findings suggest that physicians with these characteristics could be more likely to lead the virtual care transformation.

• Waymark Funding: Community care company Waymark raised $45M to develop its platform supporting Medicaid populations, which see higher patient churn than Medicare due to members rotating out of the program as their employment status changes. Waymark’s solution to this problem involves hiring community health workers and equipping them with better training and care coordination software to improve outcomes.

• Hospital Performance: November’s hospital performance data from Kaufman Hall showed operating margins up 8.1% from October, while still down 22.1% compared to pre-pandemic levels due to ongoing labor shortages and supply chain issues. While the report shows what could be considered a recovery in hospital performance, November’s data is largely prior to the recent surge in omicron cases, and worse results are expected in December.

• Healthcare Consumerism: The Economist published an article exploring how healthcare is quickly turning into a consumer product, making the case that new technologies are replacing care middlemen with D2C models. Better data and an improving cloud infrastructure are given as examples of why we could be in the early stages of a transformation that’s likely to be “a negative prognosis for the hospital-industrial complex,” but a positive one for many patients.

• Personalized Phone Calls: A Health Affairs study found that personalized phone calls during open enrollment increased enrollment by 2.7 percentage points among a sample of over 79k consumers. The largest improvements were seen in those below 150% of the federal poverty level (+4.0 percentage points) and those older than age 50 (+5.1 percentage points). The study was designed to inform the implementation of the American Rescue Plan Act of 2021, which expands assisted coverage criteria.

• Transcarent Reaches Unicorn Status: Employer-targeted healthcare platform Transcarent raised a $200M Series C round ($298M total funding), bumping its valuation to $1.62B less than a year after its launch in March 2021. Transcarent’s rapid growth highlights investors’ excitement surrounding the company’s fully at-risk model that provides patients with a 24/7 care experience without any premiums, which aims to create better alignment between employers and payors.

• ONC Patient Address Standards: The ONC released Version 1.0 of Project US@, a technical specification for recording patient addresses. Formatting inconsistencies harm the ability of  healthcare organizations to accurately identify patients and track their records, so the new specification should help to improve patient matching and record linkage if widely adopted.