Vive Collective, a new investment platform to build, fund and scale the next generation digital health and healthtech companies, recently convened a diverse group of industry leaders, operators, experts, and innovators for its second annual Vive Collective Summit in Austin.
During the three-day Summit, Vive Collective brought together an incredible group of operators and pundits to share open and honest dialogue about the state of our current healthcare environment. Topics included current market conditions, Medicaid, value-based care trends and opportunities, and artificial intelligence (AI). Following is a summary of some key takeaways.
2023 Market Conditions
It’s nearly universally agreed upon that the 2021 boom in both digital health investing and valuations of 50-100x revenue multiples should be forgotten as we are adjusting to a new normal. Key takeaways regarding 2023 market conditions included:
- Corporate investing: With down valuations of many startups, large corporate investors are looking to buy additional capabilities to provide them with a competitive advantage for years to come.
- Stricter cash management: Given the tight financing environment and the collapse of Silicon Valley Bank (and with it, access to venture debt), founders need to be more careful with how they utilize their capital. Having an 18- to 24-month runway should be a high priority. The years-long mentality of “growth at all costs” will not work in this environment and smarter cash management with the orientation towards profitability and preserving runway is now valued.
- Down round financing: Down round financing was up 20% this year, compared to a minimal 2% to 5% in previous years. As the funding drought continues, there was also discussion around whether structured term sheets would become a more regular feature in financing rounds. Given the financing challenges, companies are focused on building strategic syndicates that can really help them build their businesses during challenging times. This has always been true in healthcare but even more so in this environment.
The White Space of Medicaid Disruption
As our nation’s largest payer of healthcare services with a budget of over $730 billionand covering 93 million people, Medicaid innovation has received relatively minuscule funding, with the top 10 largest Medicaid startups having only raised $1.5 billion. Despite regulatory hurdles and reimbursement complexities, there is a huge opportunity to impact mass change, especially on some of our most vulnerable patients, including children. Some striking points that jumped out included:
- Medicaid enrollment has increased 70% over the last 10 years, and 30% over the last year since COVID.
- 42% of all births and 40 million children are covered by Medicaid.
- Roughly 60% of Medicaid beneficiaries are people of color.
Due to the population that Medicaid serves, there is an immense opportunity to improve the care of patients with the highest needs. And because there is such a wide swath of patients covered under Medicaid, there is a lot of flexibility in building creative solutions for each sub-segment of the population.
However, as the Public Health Emergency ended earlier this year, it is important to note that 24 million people are at risk of losing Medicaid coverage — this would be the largest transition of coverage since the Affordable Care Act. If you are involved with Medicaid patients in any way, reach out and encourage them to check their mail or go on the CMS website to fill out the renewal forms.
Value-based Care
As we continue shifting care and incentives away from fee-for-service and hospital groups to outpatient centers and managed care organizations, value-based care (VBC) continues to be a major area of focus. In addition to major VBC deals being executed this year, VBC providers can serve as a bridge to care for previously underserved populations.
Currently over 30 million patients receive their care from a Federally Qualified Healthcare Center, and anywhere between 10% to15% of Americans live in remote healthcare communities. VBC models (although still in their nascent stages) have started providing care to those communities, and in conjunction with telehealth capabilities, have improved access and interoperability for patients and providers alike. While there is a lot of promise and expectation from VBC models, there is still a lot of missing enabling technology and critical data and workflow handoffs that need to be worked out before the quality of care and expected cost savings can be realized.
In addition to technology and care model innovations, payment model changes have also spurred further growth in VBC. Specialty health plans such as DSN, CSNP, and PACE, all provide the high-revenue and capitation opportunities that help finance some of the provider models bringing care to high-risk populations. These new payment models need to be integrated into care models and workflows to best reach the appropriate populations.
AI, Data, and Technology
Generative AI, generative AI, generative AI — these seem to be the hottest words in tech these days. At the Summit an expert described important use cases of Generative AI and held a workshop to think through how this technology could be leveraged to improve pain points in healthcare from prior authorizations and billing to patient communication and triage. However, with these advances also came issues revolving around data and overall technology privacy. While we have generative AI and other means of increased technologically enabled interoperability, policies regarding the sharing of such data are being developed to catch up with changes. Beyond the technical capabilities of tools, how we use those tools may be changed depending on ongoing policy debates at the state and federal level. The key right now is to stay attuned to what our policymakers are doing so we know how to best use technology moving forward.
Closing Thoughts
As an investor, I am energized to learn from so many experienced and insightful leaders in their respective fields and more importantly, to be able to share it with the readers of Healthcare Business Today. Vive Collective will continue to evaluate and support initiatives across all of these areas and welcome more of these conversations with founders and experts across these fields.
Kathy Ku, MD
Kathy Ku, MD, is vice president of Vive Collective™, a new investment platform to build, fund and scale the next generation digital health and healthtech companies.
