HealthTech is undergoing a digital transformation that is expected to show remarkable growth over the next decade. Emerging markets should experience the most growth as offline systems move online and should be able to adapt faster without the need to update legacy systems. This represents a significant cost advantage that should help keep health costs under control. However, a considerable amount of investment is still needed to develop better infrastructure to take advantage of future cost savings.
The recent wave of venture capital investment in HealthTech has created a competitive landscape of startups taking advantage of the digital transformation of healthcare. An IBIS Capital report indicates that healthcare spending is expected reach $9.6 trillion over the next three years. HealthTech funding hit $1.4 billion with 145 deals in 1Q2016 according to Mercom Capital Group, that is a 27% rise over 4Q2015. Let´s look at some of the challenges that lie ahead on the road to digitizing healthcare.
The Healthcare Dilemma
- Aging population and increased life expectancy– The global population of over 60 is expected to double by 2050 due to falling mortality rates and advanced treatments that are helping us live longer. Better living conditions, improved hygiene and sanitation will allow for a better quality of life. As a result, healthcare budgets will struggle to keep up with the increased costs and need to find ways to close the gap. Europe and North America will make the up the lions share of the elderly population standing at 52% and 38% by 2050.
- Greater demand and increased household income– Emerging economies represent about 85% of the worlds population and approximately 90% of the emerging markets population are under the age of 30. By 2018, households earning more than $25,000 per year will rise by 30% with half of those households in Asia. The age distribution of old people will increase 4.6x and the proportion of children will fall by 0.3x.
- Workforce Shortage and Chronic Diseases –Lifestyle related chronic diseases have been increasing at an alarming rate, and represents 63% of the total deaths. Deaths from Diabetes will increase by 50% in the next 10 years, 10% of worldwide deaths (7.5million) are due to tobacco consumption. More than 1.9bn people are overweight and 13% of the population is considered obese. Non-communicable diseases such as cancer and heart disease represent 63% of all deaths. More aggravating is the dwindling figure of growth of young physicians and healthcare infrastructure. In the United States, the number of physicians aged above 60 is growing by 22%, while the number of physicians aged below 49 is growing at only 0.3%.
HealthTech Market: Evolution & Key Sectors
Investment in HealthTech is helping key sectors transition into more innovative and sustainable business models. A combination of products, services and information are needed to overcome ongoing healthcare challenges. Some investment strategies are focusing on key sectors including: telehealth, mobile health, electronic medical records, wireless health and emerging health.
- Telehealth: It involves the exchange of data between a patient and a physician offering a service using telecommunication technology, which may be as simple as them discussing over the telephone to the complex ones like the doctor measuring health parameters remotely through wireless devices. It could also be health professionals discussing and sharing information.
- Mobile Health:Involves using mobile technology to monitor, consult, give medicine or deliver treatment. Mobile health can include remote patient monitoring devices (such as portables and wearables), MP3 players and mobile applications.
- EMR/EHR: Electronic Medical Record/ Electronic Health Record is information about the patient’s medical history that is stored in a digital format and can be shared through health network, patient, doctors and health insurers.
- Wireless Health: It involves integration of wireless technology with traditional medicine that can help monitor, diagnose, prescribe treatment and improve health.
- Emerging Health: Emerging health and medical technologies including bionics, 3D bioprinting, genomics, implantables, robotics, anti-aging drugs and machine augmented cognition.
HealthTech Market: Landscape
- The global HealthTech market comprising of the above sectors and a few other small market is expected to rise more than threefold from $60.8b in 2013 to $233.8bn in 2020.
- CSS Insights says the wearables market is expected to see revenues to rise from $14b in 2016 to $34b by 2020. This is a very competitive sector with well funded startups like Quanttus, Huami, Athos and many more already making a footprint in this space.
- Telehealth will grow at CAGR of 48% from $400m in 2013 to $6.3b in 2020. Patients requiring telehealth care will grow at CAGR of 69% from 483k to 19.3m. Telehealth patients will outgrow telehealth devices and revenue creating an opportunity for HealthTech startups.
- Mobile Health will grow from $6.2b in 2015 to $55.9b in 2020 at a CAGR of 36%. The APAC region accounts for most of this growth, where the mHealth (mobile health) expenditures will rise by 62%.
- The most promising sectors for HealthTech investment are medical big data, genomics, bionics, remote monitoring, patient engagement, IoT (Health & Fitness), EMR/EHR and telehealth. Overcrowded sectors that will need to consolidate to be sustainable are wearables, activity trackers, health apps and personal health data.
- Early sector VC investment and small M&A are in brain chips, 3-d bioprinting, implantable and bionics. Sectors ready for scale include genomics, ingestible, AI, EHR, remote monitoring and medical tricorders.
HealthTech Market: Trend & Opportunity
- Smartphones and connected devices boosting HealthTech: Global smartphone and internet penetration in emerging economies experiencing the highest CAGR. Over the last three years, the number of health app downloads on both iOS and android have increased 100%. In Africa, smartphone penetration is rising rapidly but with more than 60% of the population living in rural areas, access to medical facilities is extremely difficult and infrastructure is needed. This is a big problem for the region but presents an even bigger opportunity for venture capital.
- More people relying on social media for healthcare information: 24% of US doctors use social media at least once per day for medical information. 42% of the US consumers look for reviews of healthcare providers online. Facebook is connecting new patients to services and Yelp is recording the patient experience. 99% of US hospitals have a Facebook, Foursquare and Yelp account.
- Improving infrastructure in emerging markets: Emerging economies will experience a rise in their per capita healthcare expenditure over the next few years because healthcare systems need to be digitized to lower costs. These countries will gradually embrace new HealthTech innovations to make access more affordable and sustainable. The lack of infrastructure in rural areas is the biggest cost because doctors have a hard time to reach patients. HealthTech can easily disrupt rural areas that lack healthcare.
- Big Data Analytics will optimize HealthTech: It is estimated that duplicate patient records cost hospitals $1.5m per year. 20% of radiology tests repeated due to no patient records creating annual waste of $20 billion. With big data analytics, patient records will be digitized and accessable on request. HealthTech can leverage analytics and improve the omni-channel experience.
- Consumers willing to wear health & fitness trackers: The wearables market is projected to grow by a 150% through 2016-2020. Consumers now have a changed perception from fashion towards smart-wear. Most of the consumers use smart-wear to exercise better, eat well, find deals, control appliances, use social media, collect data and track medical information.
Building Tomorrows Healthcare Model
- Personal Transformation: The consumer will make use of electronic sensors to track numerous parameters that can be digitally processed and tracked. This new method of processing personal information will lead to a set of values such as health condition, healthy living and budgeting. This data will be regularly updated in the user’s Electronic Health Records and will incorporate real-time data for consumers and doctors to monitor.
- Transparent healthcare shopping: The HealthTech industry of the future will mark the emergence of transparent healthcare shopping where consumers will be able to optimize their healthcare choices. Healthcare services will be chosen based on reviews, benefits, price, quality and access in a transparent manner. Consumers will be able to leverage every dollar spent to get the best healthcare using crowdsourcing.
- Omni Care teams: Omni Care teams will evolve and integrate themselves with telehealth and remote-monitoring services, along with doctors, nurses and physicians. This ecosystem will help them extend their focus from caring for the sick to total personal care. Furthermore, big data and predictive analytics will enable teams to tailor offers to specific customers based on their requirements and history.
Venture capital and private equity investments are expected to continue at a similar pace through 2017. The APAC region is expected to see the biggest growth followed by the Middle East and Africa. With many parts of the world still without access to healthcare and record keeping, this leaves an opportunity for tech savy investors to too address the healthcare dilemma and put tomorrows HealthTech within our reach.