- Uncertainty around Affordable Care Act repeal efforts is causing some digital health startups to reframe their products and marketing strategies while venture funding shrinks for others, The Wall Street Journal reported.
- Most at risk are startups focused on the insurance industry and those targeting hospitals facing potential Medicaid cuts, should GOP lawmakers succeed in passing a repeal bill.
- “One of the big advantages of a startup is to be able to pivot and fall into new opportunity,” Hubert Zajicek, chief executive of startup accelerator Health Wildcatters, told WSJ. “But this is change that has spelled more uncertainty. That is not change you can prepare for.”
A recent Venrock survey of executives across the healthcare industry found widespread uncertainty about the ACA’s future. Among the finding: 87% of respondents said they expect to see more venture-back health IT startups gobbled up by larger companies.
However, respondents also felt telemedicine and wearables/consumer sensors would continue to fare well regardless of the outcome on Capitol Hill, where a House repeal bill has passed and a Senate version is in the works.
Following the November presidential election, many in the health IT sector are also guardedly optimistic about the market — particularly products that improve quality of care and lower costs. “Any technology, digital technology, that enables employers or consumers to be activated and to change their behavior, take control of their health, particularly for chronic conditions, will benefit greatly from any administration,” Frank Moss, co-founder and chairman of Twine Health, told Healthcare Dive last December.
One health IT company, athenahealth, made headlines last week when Elliott Management disclosed a 9.2% economic interest in the company, stating a regulatory filing that “that shares of athenahealth were substantially undervalued.” While not a startup, the move shows continued interest in health IT companies from investors who believe the market has not cooled down.
And venture capitalists continued to invest in digital health in the 2017 first quarter. Mercom Capital Group counted 165 deals totaling $1.6 billion, nearly double the $845 million across 159 deals seen in the final quarter of 2016. Overall funding for health IT — comprising venture capital, debt and public market financing — rang in at $1.8 billion, up from $1 billion in 2016 Q4.