Digital Health startups apparently found the “infinite money button” as they set yet another record in terms of fundraising activity…
Investors steered a record $6.7 billion to U.S. digital health startups in the first three months of 2021…
And everyone from JP Morgan to Microsoft is trying to get in on the next “big thing” in healthcare.
What accounts for the shift? It all has to do with a little known law that was passed over a decade ago…
- Feb 17th, 2009: American Recovery and Reinvestment Act of 2009
As a part of the American Recovery and Reinvestment Act, all public and private healthcare providers and other eligible professionals (EP) were required to adopt and demonstrate “meaningful use” of electronic medical records (EMR) by January 1, 2014 in order to maintain their existing Medicaid and Medicare reimbursement levels.
Also, as part of this landmark legislation was something called The Health Information Technology for Economic and Clinical Health (HITECH) Act
Before the HITECH Act was passed into law, only 10 percent of hospitals in 2008 had switched from paper files to EHRs.
The primary reason why so few healthcare organizations were using electronic records was due to the high expense of changing over.
Once the act was passed, the included incentives encouraged healthcare organizations and providers to make the switch to electronic health records.
And once this happened, the long, slow shift to “preventative medicine” began.
- March 23rd, 2010: The Patient Protection and Affordable Care Act (aka “Obamacare”).
Although it was controversial to say the least… The Patient Protection and Affordable Care Act was a significant step forward for preventative medicine in America.
The act mandated the inclusion of preventive healthcare – like immunizations, mammograms, and wellness visits – by the insurance providers at no added cost.
Obamacare’s free preventive services help to put the focus on wellness, early detection, and prevention, instead of treatments and cures.
Then, on July 14, 2010, the Center for Medicare & Medicaid Services released a statement stating…
Today, the Departments of Health and Human Services, Labor, and the Treasury issued new regulations requiring private health plans to cover evidence-based preventive services and to eliminate cost-sharing for preventive care.
As the saying goes, “An ounce of prevention beats a pound of cure.”
And while that may be true, there’s little incentive to prevent problems if you can’t get paid to do it.
The big problem with reforming healthcare in America has often come down to something as silly as billing codes for reimbursement; without medical codes, it means the patient has to pay out of pocket for expenses.
The vast majority of healthcare billing codes are for the treatment of existing problems – which can be wildly expensive for the patient and lucrative for the healthcare provider – vs preventing future problems – which, historically, has been almost impossible to get paid for.
But after nearly a decade of slow-paced progress, COVID-19 let the proverbial genie out of the bottle, and billing codes started to magically appear for preventative medical services (like telehealth and remote patient monitoring).
According to Journal of the American Medical Association
There were 3 primary federal stimulus packages addressing the COVID-19 pandemic enacted in March 2020:
- The Coronavirus Preparedness and Response Supplemental Appropriations Act (CPRSA),
- The Families First Coronavirus Response (FFCR) Act, and
- The Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The CPRSA was an $8.3 billion emergency funding bill that included $500 million to expand Medicare telehealth coverage during emergencies.
The FFCR Act was a relief package focused on expanding COVID-19 testing, supporting Medicaid, and enhancing unemployment benefits. It included a technical change to the CPRSA to further expand Medicare beneficiaries’ telehealth access.
The CARES Act was a sweeping $2.2 trillion economic stimulus package that provided a variety of direct economic support measures. It also expanded coverage and loosened the definitions of Medicare telehealth services.
And now that telehealth companies are flush with cash after the COVID-19 pandemic spiked both demand and investment… they’re embarking on massive lobbying efforts to secure their interests on Capitol Hill.
Is The Future of Medicine Preventative?
While you might not see splashy headlines about “explosive gains” in the preventive medicine sector, large funding rounds and splashy exits don’t necessarily translate to better patient outcomes at lower prices.
While most people may be familiar with wearable devices – like Fitbit and Apple Watch – and other virtual medicine providers – like Teladoc…
It’s going to take more than a new software application or a trendy wearable device to make a major impact on healthcare outcomes in America.
Instead, we must focus on a more holistic solution that addresses all of the major problems in healthcare, at the same time, and with great speed and scale.
But as investors, we have to be careful not to get swallowed up in the hype…
Almost every startup raising money promises to improve care, lower costs, or both. For new companies to both make money and lower overall costs, a reduction in health expenditures has to come from somewhere else — that is, out of someone else’s revenue stream. Otherwise, innovations may just add costs to the system.
Some essential parts of medicine like surgeries or physical exams won’t be replaced.
“That human interaction won’t go away,” Hughes-Cromwick said. “There’s kind of a limiting factor for what technology could do. But I’d be a fool to say it’s not going to do those things.”
That’s why I’m generally skeptical about tech founders who try to tackle healthcare…
The “move fast and break things” ethos that comes from the Facebook Era of company building isn’t going to cut it in a highly regulated arena with serious consequences for being wrong.
Additionally, there’s way too many “hands in the pie” to think an outsider can simply “disrupt” the space and expect it to work.
Instead, we need to focus on solutions that are beneficial to ALL participants in the ecosystem – patients, providers, and payers.
Because if we don’t, it means the one left holding the bag will be the US Taxpayers (and our already exploding national deficit).
Sincerely,
Jake Hoffberg – Publisher
Equifund
