Digital-Health Startups Are Booming. Their Customers Are Overwhelmed.

With the potential to change the way we live and interact with the world, the digital health industry continues to be one of the hottest sectors of the economy. At the same time, digital health companies have been struggling to help patients and customers navigate their products. It is estimated that the average digital health company has at least a dozen products and services to choose from, and that number is growing. It’s not uncommon for a patient or customer to feel so overwhelmed that they give up on the products completely.

The world of digital health is expanding. There are more new startups and apps than ever before. This sounds like a good thing, but it can also mean more confusion for customers and patients. There are now more options than ever before, but this can be overwhelming.

Digital health startups have boomed during the pandemic, raising record amounts of capital for a range of services. A message from some of his clients: That’s enough.

Corporate fund managers, who are the main customers of these start-ups, say they are excited about technologies that can reduce costs and improve employee health. But the explosion of activity has led to many startups offering redundant or overpriced services, they say.

Benefit administrators are urging digital health companies to add services, merge with complementary companies and lower prices.

Many health apps promise to promote wellness, manage diabetes, improve sleep, monitor heart health, promote weight loss, monitor whether patients are adhering to physical therapy plans, and more. According to a study by venture capital firm 7Wire Ventures, mental health, a field that is growing rapidly, especially due to the burnout pandemic, has spawned more than 100 startups. There are also apps to help employees navigate the company’s other digital health apps.

We’re swamped, he said.

Meredith Touchstone,

Director of Social Services at

CarMax Inc.

We already have a very broad portfolio of suppliers. And with all this new stuff coming to market, there’s no way to value the thousands of digital health services currently available.

According to research firm PitchBook, a record $7 billion in venture capital was invested in the healthcare sector in the first quarter, the highest quarterly total in a decade.

In the first quarter, total venture capital investment reached a record high, continuing a multi-year boom driven by rapid growth and investor interest in technology companies, as well as the tendency of start-ups to wait longer to raise funds in public markets.

Even by these standards, investment in healthcare start-ups is booming: According to PitchBook, they reached 10% of total venture capital investments, which is also a record and double the average of the last ten years.

In the age of smartphones and cheap sensors, digital health start-ups promise to deliver cheaper, more efficient and convenient healthcare. Patients can quickly contact doctors or health coaches via text or video messages and out of office hours. Doctors can monitor patients remotely.

Most large employers in the US are self-insured, meaning they work with insurance companies that manage their health plans and offer a network of doctors, but employers end up paying for the cost of care themselves. Digital health apps claim to control employers’ health costs by specializing in specific areas and using digital tools to track results.

Glen Tullman led Livongo, which developed a diabetes app until it was acquired by Teladoc, and recently started his own healthcare navigation company.

Photo:

Kimberly White/Getty Images

During the pandemic, demand for digital health services increased as patients sought care remotely. Regulatory agencies in the states have lifted rules that prohibited doctors from practicing medicine outside the states. Medicare has expanded reimbursements for telemedicine visits. And there was even more money coming into the industry when

Teladoc Health Inc.

announced in October a merger with diabetes-monitoring company Livongo, which was valued at $13.9 billion at the time of closing.

Everyone is excited because there is so much money in circulation. After the Livongo sale, everyone asked: Where’s my coin?

Stuart Piltch,

CEO of Cambridge Advisory Group, a healthcare and data consulting firm. I understand Wall Street likes this stuff, but does it work? This is not yet clear.

Performance managers say it is difficult to measure the outcomes of digital health services, not least because many services struggle to demonstrate that they can reduce costs or improve quality of care.

Eric Sossa,

who was recently appointed manager of employee benefits at

PepsiCo Inc,

says digital health services work best when connected to an organization’s existing health plan, allowing doctors to view patients’ medical histories. According to Sossa, this is one of the reasons why Pepsi no longer uses Teladoc to provide telemedicine services.

Telemedicine is great, but if it’s just for overnight emergency care, it’s kind of a commodity, says Sossa. Pepsi now uses LiveHealth Online, a telemedicine service linked to the company’s health plan.

Teladoc declined to comment on his relationship with Pepsi. Pepsi did not respond to a request for comment.

Employers are requiring digital health providers to integrate with their insurers and expand the list of conditions their products treat. Employers are also pushing for services to stop charging monthly fees to all eligible employees, but only when employees use the services, as many of these apps are not used, according to benefits managers.

Startup Omada Health Inc. has launched a digital service to treat pre-diabetes by sending patients an Internet-connected scale and giving them access to medical coaches via a smartphone. The company has added services in the areas of high blood pressure, diabetes, mental health and digital physical therapy at the request of customers, reports

Sean Duffy,

CEO of Omada.

Many employers prefer to work with one party for all life-threatening illnesses, he says.

Competition is intensifying as digital health companies expand their offerings, particularly in the area of diabetes care. Livongo also began as a company to help people manage their diabetes, then added services in high blood pressure, mental health and pre-diabetes, so Omada and Livongo often compete with each other.

Analysts say the need for companies to differentiate themselves in a crowded market is encouraging transactions.

Teladoc has acquired several companies to expand its offerings, while telemedicine competitors such as MDLive, Doctor on Demand and PlushCare Inc. have themselves merged or acquired.

Therapeutic navigation – applications that coordinate other medical applications – is another area of growth and activity. Grand Rounds, which began as a provider of medical second opinions, has evolved in this space and added telemedicine by partnering with Doctor on Demand. Competitive Healthcare Navigation Company

Accolade Inc,

last month acquired 2nd.md Inc, a service that provides a second medical opinion. Last month, Accolade also announced that it would be acquiring PlushCare.

Meanwhile, the former president of Livongo,

Glen Tullman,

has already launched its own health navigation company, Transcarent Inc, which plans to offer a range of proprietary digital health services.

Sossa, who is now a consultant after leaving Pepsi, expects further consolidation. If you work at once, you’re easy to replace, he says.

Write to Rolf Winkler at [email protected].

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