Digital Health Business Strategy: A Careful Balance

By on February 19, 2020

When it comes to market success for digital tools in the health sector, business strategy can be far more complex than in other industries. Understanding customer-driven market trends is important, but healthcare’s complexity can camouflage customer demand and its regulatory ecosystem adds layers of additional considerations.

Customer Demand and Digital Solutions

The convenience, competitive pricing, answers-at-your-fingertips responsiveness and hyper-personalization delivered by top technology brands and their integration into other industry sectors has created an expectation for digital health solutions that deliver the same experience.

In some instances, consumers are finding the solutions. For example, telemedicine is gaining momentum as consumers discover that digital interactions with high-quality providers are oftentimes more convenient and less expensive than face-to-face encounters. Other tools are providing access to prescriptions, better health condition management solutions, better information sharing enabling smoother transitions among care settings, and more efficiency in everything from hospital operations to scheduling appointments to identifying in-network care options.

When it comes to business strategy, however, digital health solutions need to recognize that consumer pressures are frequently at odds with existing incentives within care delivery systems and, perhaps legal and regulatory requirements. Accordingly, it is critical not just from a compliance perspective but also from a business strategy perspective to navigate the healthcare industry’s unique market and regulatory dynamics.

Balancing Demand with Reality

Many healthcare regulatory requirements can be addressed without resulting in significant changes to a business model. For example, consent or authorization requirements can interrupt otherwise seamless patient encounters, but not fundamentally alter a business strategy. In other instances, a business model may be fundamentally flawed due to legal restrictions – such as restrictions on payment for referrals – that undercut a core adoption or revenue strategy but which have no application in many other industry settings.

Sometimes the most challenging regulatory overlay relates to healthcare economics. Although digital health companies work within an increasingly supportive reimbursement infrastructure, patient power remains blunted by the third-party reimbursement system, and the system itself can be opaque and is generally not designed to accommodate the new care models made possible with digital health tools. Further, other consumers within the healthcare ecosystem, such as providers of healthcare services and third-party payers, do not always share the same perspective as patients. Accordingly, a digital health tool that may be beneficial to a provider may not be something a patient finds useful (or usable), and a digital health tool that addresses a patient demand may not find traction with a payer or provider, requiring the patient to pay out-of-pocket for the tool. Accordingly, even if a product itself functions very well and produces beneficial information or outcomes and is supported by consumer demand, if it doesn’t find traction within the clinical and financial interests of all of the interests, then adoption will be limited and even the most revolutionary technology will not realize its potential.

Finding Balance in Shifting Sands

Healthcare economics is a complex subject, and is impacted by politics, entrenched interests and lack of uniformity among payment and delivery systems. Healthcare regulation – which is sometimes tied directly to financial arrangements – is daunting, and can sometimes be a barrier to the most effective digital health deployment models. Nonetheless, digital health tools are increasingly finding traction and two trends in healthcare economics and oversight are helping open the market to more opportunity.

The advent of more risk-sharing or risk shifting arrangements, capitation models and outcomes-based reimbursement systems are bringing consumer demand closer to the forefront of healthcare economics, and are also creating more economic incentives for consumers, providers and payers to adopt digital health tools. Rather than a pure focus on reimbursement for services, these payment models are creating economic incentives for payers, providers and consumers to find solutions to the cost, quality and access challenges our system faces. This is opening the door for the traditional technology value proposition – to do more, more efficiently and effectively.

Along with the evolving financial models, healthcare legislators and regulators have begun the process of modernizing their approach to better address the deployment of digital health tools. This will not be a fast process, as the issues are very complicated, but reform is the word of the day. Laws and regulations are being updated to address digital health solutions directly, such as through expanded reimbursement opportunities, or indirectly, such as through reforming fraud and abuse laws to accommodate the increasingly cross-party collaborative approach to delivering care.

Change within a complex system, of course, brings more complexity. Nonetheless, this complexity is navigable and effective business strategies are being developed and deployed. Change, it is said, brings uncertainty; but in the case of digital health the trend of change we are seeing in healthcare economic models and regulation is creating both opportunity and confidence that this traditionally insular and isolated marketplace is opening.

Dale C. Van Demark
  Dale C. Van Demark advises clients in the health industry on strategic transactions and the evolution of health care delivery models. He has extensive experience in health system affiliations and joint venture transactions. Dale also provides counseling on the development of technology in health care delivery, with a particular emphasis on telemedicine. Dale has been at the forefront of advising clients with respect to the globalization of the US health care industry. He advises US and non-US enterprises with respect to the formation of cross-border affiliations and international patient programs. In addition to writing regularly on matters related to his practice, Dale has spoken at numerous conferences around the world on the globalization of health care. Read Dale Van Demark's full bio.




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