5 Key Trends in Health Care Investment’s New Wave
The COVID-19 pandemic greatly accelerated the adoption of digital health technologies, advancing the industry by years of progress in just a matter of months. The Nashville Health Care Council’s recent panel discussion, “A New Wave of Health Care Investment in Nashville,” explored the dramatic shifts occurring in the ecosystem and how top investors are tapping into the latest trends to shape the future of health care.
Guest speakers included Adam Boehler, CEO, Rubicon Founders and former director, Center for Medicare and Medicaid Innovation; Brad Smith, founder and CEO, Russell Street Ventures and former director, Center for Medicare and Medicaid Innovation.; and Marcus Whitney, co-founder, Jumpstart Health Investors and founder and Managing Partner, Jumpstart Nova. Anna Haghgooie, managing director, Valtruis (a WCAS Company), moderated the discussion.
Here are five top takeaways from the conversation:
1. Valuations may be high, but that’s ok.
2021 was a record year for health care investment, with deal volume in the first three quarters already exceeding the total deal volume for all of 2020. According to a report by Rock Health, the first nine months of 2021 alone brought in a total $21.3 billion across 541 digital health investment deals, overshadowing the $14.6 billion record of 2020. Some are questioning whether health care is experiencing a post-pandemic bubble in which valuations are too high and unsustainable. The panelists agreed that valuations are likely to come down or level off, but businesses with strong models can weather the expected slowdown.
“The changes happening in health care are very real – the rise of telehealth services, focus on consumer experience and serving vulnerable populations, just to name a few. These focus areas are not going away, and both private sector investors and government programs are already investing in these innovations,” said Smith.
“It’s not just health care; valuations are high for the entire market. But, if a company is creating real value, it’s worth something. The public dialogue around these trends has changed for good. Health care is moving in a certain direction, and the size and talent in the market won’t be forgotten,” said Boehler.
2. Full-risk models open space for meaningful innovation.
According to the panelists, value-based reimbursement models present opportunities to reinvent spaces in health care. They discussed primary care, rural care and specialty care examples where capitation offers room to create change and value.
“Thinking about underserved and vulnerable populations, that’s where there is a lot of opportunity to make a difference. It takes looking at a very specific subset, such as rural health, long-term care or intellectually disabled populations, and finding creative ways to bring better, coordinated care at a high value,” said Smith.
3. Tech talent is choosing health care (finally).
It’s often lamented that health care is way behind the times regarding technology. Why are other industries so far ahead? Part of the reason has to do with tech talent. For a long time, top technologists opted to focus on areas like media and retail, where a faster pace and fewer regulations offered a more appealing path. But the panelists see this changing.
“The technology has been broadly available for health care investment but putting it to use has been more of a policy issue than availability. There are some signs that health care is becoming attractive to technologists because the industry is finally opening up to using data in a more meaningful way,” said Whitney.
4. To bolster health equity, shift the power center.
Events of 2020 brought DEI efforts into the spotlight, and with it, more calls on the health care industry to drive a more diverse, equitable and inclusive community. Whitney is using his new health care investment fund, Jumpstart Nova, to invest in promising, Black-led health care companies.
“We are beginning to have a more unified perspective on the inequities within our society. But there is so much that needs to be done to get to the root of racial and social justice. One piece of that is getting to the power center. By investing in Black founders, we’re bringing in voices and perspectives to health care leadership that we didn’t have before,” said Whitney.
5. Successful innovators look at the big picture.
It is estimated that 90 percent of digital health startups fail within the first five years. Panelist agreed that execution and scaling is the hard part, and entrepreneurs should think hard at the outset about how company growth will play out.
“Whether you’re buying or starting a business, a lot of those risks can be known in health care if you think deeply about the end-game. If you don’t think about the full picture, it caps you as a company. Don’t limit yourself to one piece of the continuum but think about how your solution fits in to the big picture. Be very thoughtful about how your product will look years from now,” said Boehler.
The Council’s “Trends and Influencers” series is presented by BlueCross BlueShield of Tennessee. Supporting sponsors include Bass, Berry & Sims, Cressey & Company and LifePoint Health. For more information about the Council and upcoming events, visit www.healthcarecouncil.com.