Rising Investment in Healthcare: Opportunities and Disruptions

Rising Investment in Healthcare: Opportunities and Disruptions

The Affordable Care Act has caused a massive shake-up of the healthcare industry in a variety of ways. While mainstream press coverage has primarily focused on the political implications, the healthcare business landscape has radically changed due to new incentives and opportunities created by the reform.  The disappointing initial introduction of the ACA’s website notwithstanding, incredible progress has been made in healthcare technology.  A record $700 million was invested in digital health in the first quarter of 2014.   Below describes products and companies that are already impacting providers and consumers and those that will do so in the future.

Products that Impact Consumers

Companies have invested many dollars in developing products that target individual consumers.  Some companies have found opportunities in the ACA’s insurance mandate, such as products that assist people in signing up for health insurance.  Wearables and other wellness apps have perhaps gotten the most attention, due to large players such as Google, Samsung and Apple joining the fray.  Whether the wearable industry will be a fad or a sustainable industry is being called into question due to new research suggesting one-third of American consumers who have owned a wearable device stopped using it within six months.  However, companies will continue to invest money into ideas and products that deliver information quickly and in more innovative ways to consumers.  Younger people have shown they want to interact with their healthcare in a different and more involved way and the ACA has paved the way for new startups that will help them do so.  Examples include an app that turns health goal achievement into a game and a company that uses live, two-way video to connect fitness trainers and clients.  Studies have shown that mobile health applications could have more dramatic effects; a Mayo Clinic study found one such application reduced cardiac readmissions by 40 percent.

Products that Impact Providers

Many companies are now investing in products that could ultimately help providers as they battle to lower costs and increase healthcare outcomes.   Initially, providers focused on adopting electronic health records (EHRs) due to corresponding financial rewards (starting in 2011 and continuing through 2016) included in the ACA.  From 2012 to 2013, use of health IT more than doubled.  Providers are also being affected by companies that focus on healthcare pricing transparency.  Some of these companies, such as Castlight, have been rewarded by investors and the stock market due to optimism that they can help contain healthcare costs.  Individuals are becoming more directly exposed to the cost of healthcare via increased patient responsibility.  A report found that patient out-of-pocket costs increased by 22% from 2011 to 2012.  Patients will become more involved in their care due to increased financial responsibility and, thanks to companies like Castlight, will now have the tools to better evaluate their hospital options.  Hospitals may find themselves under increasing pressure to maintain competitive pricing rates in order to attract patients.  

Room for Opportunity

Companies are increasingly investing in the healthcare industry to create more innovative products that aim to increase the quality of care while lowering costs.  Hospitals and individuals will need to continue to engage with these products to realize their benefits, while providers in particular must be aware of their disruptive potential and adapt.

Michael T. Putnam is a Senior Associate at Triage Consulting Group in San Francisco, CA. He has a B.A. in International Relations, with a minor in Business, from the University of Southern California.