Though health tech investment dropped last year, there’s still plenty of need for innovation in healthcare, said Peter Micca, audit and assurance partner and national health tech leader at Deloitte.
Micca sat down with MobiHealthNews to discuss the consulting firm’s recent report on the health tech investment environment and the growing role of platform-enabled ecosystems.
MobiHealthNews: What are some of your big takeaways when you look back at health tech funding in 2022 and early 2023?
Peter Micca: The funding is down, and the public exits are down. It’s concentrated on a smaller number of more robust companies that have a real value proposition and demonstrated a return on investment and are ready to scale. And valuations are down.
It’s a bit of an adjustment. But the reality is, in this industry, the demand for innovation and technology still far exceeds supply. It’s a question of when – not if – and at what valuation point will it occur.
I think those companies that, during the last two years, were not able to secure either incremental funding or the level of funding that will allow them to scale rapidly are going to have challenges getting access to capital at the price points that they want. Those companies that did, and have some dry powder, and are doing well in the market with their solution are going to do well.
The macroeconomic conditions will have an impact in terms of interest rates, whether we head into a deeper recession, but healthcare has proven to be recession-proof over the years.
Can we predict the next few quarters? You know, that’s not my role. But what I will predict is that well-established market incumbents need the innovation and technology that’s coming out of the emerging growth companies. Which is why we wrote the piece: Our view was that alliances, partnering ventures going to market in a collaborative way will become increasingly important as M&A.
There’s been a lot of M&A, right? But M&A can be expensive. M&A is not always a creative. M&A involves people, and it can be slow. And I think that the pace of change that we’re seeing with new innovation, speed to market is important. Which is why our view was that collaborations around platform technologies, alliances with market incumbents and new market innovators will be increasingly important in the near term.
MHN: How do you think the Silicon Valley Bank collapse will affect your outlook this year?
Micca: We’re a little hesitant as a firm, as you might imagine, to comment on particular companies. What I will say is, this isn’t the first time in history that we’ve seen market adjustments. I think, overall, people now see the two things: One, people now see the value of diversification. And two, I think the broader markets now really have an appreciation for the importance of the venture community and emerging growth companies to the broader economy.
As an example, some of the engineers, engineering talent and finance talent that is being trimmed by some of the larger market incumbents, those people are getting soaked into these emerging companies. Talented people aren’t trying to find a job right now, they’re going to organizations that need them. To some extent, it’s helping some of these emerging companies with some talent gaps they had. There was a war for talent over the last couple of years.
MHN: So one big takeaway from your report was the growth of the platform-enabled ecosystem. Can you define that? And how does that differ from the more traditional pipeline business?
Micca: The technology organizations – I think we even mentioned Uber and others in the report – that enable the disintermediation of the access that the consumer has to a particular service.
What impact will that notion, that platform have in healthcare? How will people be able to utilize kind of a direct-to-consumer platform to access the healthcare system in a more efficient way? It’s clearly something that the ecosystem is yearning for.
We saw what Uber did to so many different channels. And I think the organizations that are able to kind of harness that and bring that to the consumer will really differentiate themselves.
MHN: Do you think these platform businesses are particularly suited for health tech? Or do you think that’s just something that you’re seeing in the ecosystem more generally?
Micca: Well, I think you’re seeing it in all industries. Technology is a connector and a disruptor. It changes distribution channels, it changes access points across all industries. And I think healthcare has been slower to adopt it, largely because we have a third-party payer system. We’re a more complex reimbursement environment.
Healthcare is not a consumer good. It’s viewed as something that everyone needs, not just once. You have the health equity component of this that makes it even more challenging.
So, it can’t always be sold as a consumer good. No one purchases healthcare the way they purchase an iPhone, right? You say, “Okay, I don’t want the $1,000 iPhone with all the bells and whistles. I’ll take the $200 version that doesn’t have all the stuff I don’t want.” You don’t buy healthcare that way. Now, you buy discretionary health care that way, but discretionary healthcare is a little different than true healthcare.
Ultimately, the organizations and consumers that move towards upfront preventative care and wellness will win the day. So healthcare doesn’t become a back-end service, it becomes a front-end capability. Now, for that to work, technology is important. The ecosystem is important, but the patient and the consumer are important: how we live our lives, what we eat, play into that in a very significant way. And to some extent that is beyond the control of technology.
Dr. Anobel Odisho will offer more detail in the HIMSS23 session “The Power of Automated Care Programs in Improving Outcomes.” It scheduled for Tuesday, April 18 at noon – 1 p.m. CT at the South Building, Level 1, room S105 C.