Another JP Morgan annual healthcare conference has come and gone. I’ll share a few key takeaways – the first being that San Francisco is a nice break from chilly Boston this time of year. Coming out of JPM last week, I’ve been rethinking the year ahead and in this article I’ll highlight my key takeaways from the many meaningful discussions of the conference. In a second article later this week, I’ll offer some thoughts about what we expect to see in digital health in 2016 related to the job of healthcare providers and health plans.
One notable takeaway from JP Morgan has been widely reported: nobody’s expecting significant IPO activity from digital health companies this year. Overall, presentations at the conference suggest that public and private organizations are cautious about the prospects of 2016. Later stage companies are postponing their IPOs or rethinking the need to do so. Early stage companies are playing it lean, suggesting that it’s still hard work to find commercial partners who can help validate their solutions. The emerging companies are the ones generating solid data that validate their solution’s alignment with new healthcare models. This evidence is helping the emerging companies drive those partnership and commercialization conversations forward.
“The steady amount of funding, which we believe accurately reflects the market opportunity, should calm any concerns of a bubble.”
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We’ve noticed that there’s been some chatter about a digital health bubble. The above quote from Halle Tecco, CEO of Rock Health, accurately describes why we should be skeptical that bubble does exist. I think huge investments in health tech companies represent three things: the size of the opportunity at stake, the time it takes to realize value in healthcare, and the many externalities that challenge emerging players. As Halle explained over at HIT Consultant, we’re seeing digital health funding continue to rise, albeit at a more reasonable rate than in record-breaking 2014. And in 2015, M&A activity almost doubled in volume, proving that real value is being created. In 2016, we’ll continue to see firms capitalize on the opportunity to create value through partnerships, mergers and acquisitions.
What’s driving all of this activity? We think Bessemer’s perspective is valuable. There’s a trillion-dollar-value shift taking place in the next five-10 years. This is because 75% or more of all healthcare payments will be value-based by 2020. We see it happening in our business now. For example, in the state of Vermont alone, our customer The University of Vermont Medical Center announced ambitious plans to achieve 80% value-based payments by 2018. In the year ahead, we expect many more pronouncements like this.
In my next article this week, I’ll look at a few of the biggest opportunities in digital health at the moment – Telehealth, behavioral health, and how EMR incumbents will respond in 2016. There are interesting insights into what’s driving opportunities in the world of payments, reimbursements and funding.
Photo: Flickr user Jeff Gunn
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