The Unbundling of Care
How shifting consumer expectations, accelerated digitization and soaring out of pocket costs gave rise to care pathway innovation across primary and specialty care.
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The tech-enabled unbundling of care reached an inflection point last year with U.S. digital health companies pulling in a record $29B of funding in 2021.The emergence of verticalized care experiences was primarily driven by shifting consumer expectations, pandemic-accelerated digitization and increasing out-of-pocket healthcare costs, spawning new cutting-edge care pathways across primary and specialty care. These solutions not only enhance care personalization and accessibility, but also help to decrease the total cost of care over the long-term through increased engagement and proactive management.
Consumers demanding more out of care delivery
The craving by health care consumers for transparency and personalization is clear as evidenced by the increasing popularity of not only wearables, but also the increased utilization of care delivery that is more personalized to one’s schedule, journey, or chronic condition.
Some insured health care consumers are even going the cash pay route for services from providers such as Thirty Madison or Tia in order to receive a more convenient and/or longitudinal care delivery experience.
Agency over care provision has also come to light with growing demand from patients who prefer to be treated by doctors that share the same race, ethnicity or gender.
“In a healthcare setting, racial and ethnic biases can affect health care delivery and ultimately, lead to health disparities,” says Junko Takeshita, MD, PhD, MSCE, and an assistant professor of Dermatology and Epidemiology in the Perelman School of Medicine at the University of Pennsylvania
The desire from patients to receive care from a provider that looks like them has given rise to new accessibility tools and care services that are culturally competent and sensitive.
Pandemic-driven digitization unlocks accessibility
The pandemic drove a digital transformation globally and across all major industries. Within health care specifically, the acceleration of virtual care took center stage, helping to expand accessibility and to improve patient experiences.
Telemedicine was undoubtedly the biggest beneficiary of the digital transformation as consumers and providers increased utilization out of necessity. The expansion in usage was further aided by government enacted waivers that enabled greater access and reimbursement. While usage peaked in April 2020, adoption appears to be stabilizing at a new normal. According to Rock Health’s 2021 Digital Health Consumer Adoption Survey, 73% of existing users expect to utilize telemedicine at the same rate or more in the future.
This high adoption rate shouldn’t come as a surprise given how much the care modality helped increase accessibility to those in need. For example, telemedicine emerged as a vital solution for the Centers for Medicare & Medicaid Services (CMS) population, facilitating continued delivery of critical health services to vulnerable residents in nursing homes or to those suffering from mental illnesses in low-income areas - especially given the significant increase in the number of US adults who reported symptoms of stress, anxiety, depression and insomnia during the pandemic.
Beyond telemedicine, other flavors of virtual care such as digital therapeutics are helping to engage broader portions of the health care delivery system by delivering evidence-based programs via software to prevent, manage, or treat chronic disease such as diabetes or hypertension. Startups building in this space face significant regulatory, economic and technical hurdles in order to get off the ground. However, those that have weathered the storm have shown that incorporating virtual health into the care models of patients who suffer from chronic conditions helps to eliminate care gaps by improving patient outcomes from home.
While virtual care is not a panacea for all treatments (e.g., complicated diagnoses), the recent momentum suggests that it can function as the status quo and first line of defense for a good portion of clinical interactions post-pandemic.
Rising out-of-pocket costs creates opportunities for DTC health
51% of the US workforce is enrolled in high-deductible health plans, which have deductibles of at least $1,400 for individuals or $2,800 for families. As a result, consumer out-of-pocket (OOP) spending on healthcare was estimated to be $492B in 2021, or about $1,650 per person, according to a recent report by Kalorama. That number is nearly 10% higher than the prior year’s total and is expected to maintain a CAGR of 9.9% for the next five years.
Whether the decision to opt for cash pay services is driven by convenience or the fact that it may be cheaper for those with high deductible plans and co-payments, the result is an uptick in DTC health solutions across a variety of care verticals within primary and specialty care.
DTC care delivery differs from traditional care pathways in that the experience has to be personalized, delightful and efficacious in order to justify continual spend. In theory, if delivered correctly, the increase in healthcare consumer engagement should result in more proactive care and health cognizance - a net positive to reducing total cost of care over time.
While DTC health providers started off as point solutions for hair loss or ED, we are starting to see new types of DTC care rapidly emerge such as therapy, psychiatry and GI care. Additionally, new tech-enabled primary and specialty care centers such as One Medical and Tia provide concierge-like care in exchange for a yearly membership fee.
We remain excited about the future of healthcare and how technology can play a huge role in optimizing care pathways and improving outcomes through more verticalized and personalized care. Whether that means culturally competent care for various demographics, purpose-built solutions for the CMS population that leverage reimbursement policies, or DTC care that resonates with certain subsets of consumers, the tech-enabled unbundling of care helps to meaningfully engage broader portions of the healthcare delivery system.
For a full breakdown of where we are inquisitive within digital health, check out our NEXT VENTŪRES market map. If you are building or investing within health & wellness, we’d love to chat! Please reach out to email@example.com or head over to our website.