Until you understand your customers, deeply and genuinely, you cannot truly serve them - Rasheed Ogunlaru
A changing environment
The world of healthcare is changing. Covid led to a rapid and fundamental shift to virtual care, the experience we had been so used to our whole lives suddenly needed to change. Venture capital money poured in and a swathe of health tech companies popped up, either to provide care or to enable traditional healthcare providers to offer care in this virtual world.
But now… the environment is changing and the goals of virtual care leaders are changing accordingly. There is less money going around and the valuations in Health Tech have subsequently collapsed (as the Babylon share price below shows),
A couple of weeks ago, I sat down with two industry veterans to delve into this changing world and unearth some insights into what we could expect in the future.
Collectively, Alexi and Rafid have 3 decades of experience in healthcare and virtual care. They have worked at companies ranging from Wheel and Cityblock Health to the Cleveland Clinic. They now embark on their next venture together.
Rafid was previously the Medical Director at Wheel and before that, a practising physician, and Alexi led Operations at a D2C online clinic called Curex. This experience across the continuum of healthcare has given them a unique insight into this ever-evolving ecosystem.
When I started out building Sanctuary Health, I hadn’t spent time in Healthcare. I was on the other side of the table as a patient, recently diagnosed with a chronic condition and I wanted to have an impact. It took a lot of time to really understand what the goals were of the companies we initially tried selling to.
How we deliver care is changing. To succeed, you need to understand how you as a business leader are delivering value to your clients. The purpose of my conversation with Alexi and Rafid was to get their insights into exactly that, where is the industry now and where is it going, and in turn, for the reader to gain an understanding of these changes.
The fundamentals
One tricky thing when speaking about ‘virtual care’ is that the spectrum of what this means is so broad. Propellor Health, Oak Street, and Ro all provide virtual care but they all have slightly different incentives. Direct to Consumer businesses such as Ro for example are primarily focused on engagement and retention because the core product is the distribution of a certain generic pharmaceutical that already has a defined outcome. And as Alexi summarised for value-based care providers at the other end of the spectrum
There's an almost unique metric of engagement for most value-based care providers for several years until you can measure outcomes. And it's really, the core leading indicator until that point in time.
There are already a plethora of blogs on, engagement, patient experience, clinical outcomes and patient acquisition. My aim with this short blog is to dig into some of the goals for these businesses in the current climate. Profitability, quality assurance and staff retention.
A push to profitability
If you work in tech, you’d need to be living under a rock to have missed the fact that companies are feeling the heat of the VC cooldown. Healthcare is no exception.
2023 has already seen layoffs from companies ranging from Carbon Health to Teladoc. You can get a more detailed breakdown of 2023 Healthcare layoffs using Layoffs.fyi.
This is the culmination of a few factors. A huge amount of competition in the virtual care space, a shift for patients away from digital to in-person care and a reduction in capital available to these companies. More now needs to be done with less.
A focus on outcomes and QA
As Alexi summarised during our call:
There is increasing pressure on both profitability and outcomes, and there's going to be more scrutiny on both of those.
In an environment where in-person care was impossible (or near impossible) in certain scenarios, the focus on outcomes took more of a backseat. And now, increased optionality is now available for patients again in terms of how they receive care, and buyers are being more considerate of the tools and services they provide.
Related to outcomes is the quality assurance process. Quality of data makes a huge difference and Alexi predicts:
People are going to need to be able to speak to their own quality assurance processes to all stakeholders. You have some efficiency numbers and engagement numbers but both of these could mean a lot of things. But what are you what are your QA processes? What can you attest to? Or certify on the quality front? And on a somewhat related note, how are you tracking and measuring outcomes?
Patients, payers, providers, partners, and investors, are all going to care more about QA process over the coming years.
A focus on the provider
As Rafid highlighted during our call:
With a push to drive profitability, in many cases care has turned into factory-type work, and, you're turning thought workers into Uber drivers. And the problem with commoditizing care like that is that you're optimizing in that situation for a financial or operational outcome and not a clinical outcome.
We're already seeing the impact of a supply-side strain on providers, specifically nurses and physician assistants. This provider shortage has been growing every year, with the average age of a Nurse now at 51, and as many as 30% of nurses thinking about leaving the profession due to work-related burnout, the future isn’t looking too promising.
Meanwhile, there has been this massive proliferation of telemedicine companies with increased demand from providers, and yet they’re competing over a much less quickly growing population of providers. You just need to see the graph below to see the massive growth in Telehealth Services businesses in the US.
As the crunch on providers increases alongside increased virtual care offerings, you will see providers have more buying power because they can shop between telemedicine platforms and digital health platforms. As Alexi highlighted on our call:
I would argue that you're gonna see provider retention as an increasingly important factor in a company's success, how well they retain, recruit, retain and engage their own provider fleets.
With increased pressure on profitability and outcomes, there’s undoubtedly going to be more scrutiny on how well virtual care companies can retain providers. And although there doesn't seem to be exact data for virtual care companies, according to Becker’s Healthcare review, the average cost of turnover for a bedside RN in a hospital setting is $40,038. Companies that are able to help manage an retain providers could be well positioned over the coming years.
The takeaway
The virtual care industry has undergone significant changes in recent years, however, as the environment changes, so do the goals of these virtual care companies. With less capital available and valuations in health tech collapsing, there is now increased pressure on profitability and outcomes, as well as a greater focus on quality assurance processes. In addition, patients are being given more options for receiving care, and buyers are becoming more considerate of the tools and services they provide. As the industry continues to evolve, it will be interesting to see how this plays out.
