Profitable Business Models
Profitable Business Models
Dec 19, 2022
Content
In this tight funding climate, digital health companies are feeling pressure to reach profitability sooner than later. But, will they be able to?
Who is paying whom?
In this tight funding climate, digital health companies are feeling pressure to reach profitability sooner than later. But, will they be able to?
Many founders are reevaluating their business models to answer that question and many are finding gaping holes in them.
Digital health startups, whether D2C or B2B or B2B2C, have placed big bets on selling into payers as their ticket to success. And this makes sense as public and private payers are increasingly partnering with providers of digital health solutions to assemble various products into a unified ecosystem.
However, since three out of five digital health companies plan to sell into payers in order to build and scale in their markets - the concentration on payers is an over-saturated pathway that won't likely work for most.
The bar to partner is quite high. Payers evaluate on clinical robustness, regulatory approvals, proven cost value, easy integration capabilities, provider adoption and intuitive user experience. Currently, joining an insurance network is a somewhat drawn-out procedure that requires a ton of documentation. Each insurance's credentialing process might take two to five months and there are around 150 state-level boards, and each has its own specifications.
A pathway to profitability will require health tech companies to battle :
Build vs buy decisions that impact results and time to value capture
Clinical robustness that is lacking in the industry
Next-generation managed care models supported by advanced analytics
Personalized payment experiences that support insurance reimbursements and simplify the billing process
Only then can digital health firms provide a clear financial narrative that demonstrates how they can boost revenue, cut down on overhead and medical expenses, and better member outcomes.
If the burn-rate has enough gas to manage all of that - great. If not, expect to try on more creative business models that hopefully disrupt the status quo.
We hope for the latter.
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Nixon Gwilt Law
Modern finance infrastructure for digital health
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Is your digital health business model clinically robust? 44% of digital health companies said no
The word 'digital' is getting far more heard and echoed in the healthcare cosmos. Major technological advances including standards and terminology (SNOMED), interoperability (FHIR), advanced analytics, machine learning, digitization and the Internet of Things have found numerous applications in healthcare. Despite their promises, digital innovations have scarcely translated to technologies used in routine clinical practice. Health IT and its adoption is often resisted by powerful actors in healthcare delivery. According to a report, 44% of Digital Health Companies Have Low Levels of Clinical Robustness. It is important for digital health companies and businesses to revisit their strategy, business planning and team structures to bring clinically robust digital products and services.
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