Digital health to reverse downward M&A trend this year, analyst predicts
- Digital health M&A will increase in 2018, according to CB Insights Senior Intelligence Analyst Nikhil Krishnan.
- Digital health companies can provide complementary areas of expertise as software's importance in healthcare increases, Krishnan said in a webinar outlining 2018 digital health predictions. For example, wearables could bring design and user experience principles to medical device companies while AI-enabled medical devices could find new homes at tech giants like Apple and Amazon.
- Large digital exits have been "few and far between" due to high valuations, incumbent hesitance and increasing private capital. However, corporate tax cuts gave healthcare companies more money to acquire.
Digital health companies have been building value over the years and an influx of new capital and changing market forces could turn around digital health M&A's downward trend.
The decentralization of healthcare and blurring lines within the industry naturally leads to acquisition activity as incumbents and new entrants look to join forces. As Krishnan noted, legacy companies can only consolidate so much. Traditional companies will continue to enter into nontraditional business lines.
Krishnan expects new entrants will force a response by means of acquisitions, co-branding, partnerships and new business lines. Already, a cadre of health systems have bandied together to create a generic nonprofit drug company.
Of the many digital health predictions from CB Insights for 2018, many had user-experience/the patient at the forefront.
- Medicaid as a focus area: With more than 70 million Americans on Medicaid and social determinants of health becoming a hot topic, companies will look to new plays in the market addressing traditionally underserved populations. Some companies are tackling the opportunity piecemeal through transportation, benefits explanation or patient engagement follow up services. Others, such as CityBlock or Healthify, are taking a holistic approach.
- Virtual trials will increase in frequency: Companies have been looking to modernize clinical trails enrollment to conduct and disseminate research faster. For this to occur, pharma and biotech companies will need to become more comfortable with mobile studies.
- Vendors will step in to address patient financing: High deductibles are making patients think of healthcare as a line-item household expense. Payment is becoming more difficult so companies are looking to assist in the payment process. Examples include Amino's new HSA offering, KindHealth's deductible payment program and GreenSky's upfront credit line.
It wouldn't be a predictions piece without the mention of blockchain, which will continue to be more hype over substance this year, the presentation concluded. So far, there have been no success stories in the space, despite money being thrown at the concept.
- CB Insights Digital Health: Trends to Watch in 2018
- Healthcare Dive Health IT eyes M&A as market grows up
- Healthcare Dive The 5 drivers pointing toward the decentralization of healthcare
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