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Scott Shreeve, MD

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I'm the CEO of Crossover Health, a patient-centered, membership-based medical group that is redesigning the practice, delivery, and experience of health care. We offer urgent, primary, and online care to our members who can access our technology platform, practice model, and provider network from anywhere and anytime to optimize their health. Email Me

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Several of my colleagues forwarded me a great article co-written by my favorite futurist, Jeff Goldsmith. He offers a very firm but fair critique of the state of the digital health industry. I appreciated that this was not written as an “I told you so” piece; rather, he wrote it as a guide to what to expect in the months and years ahead. Like Jeff, I am not a digital health skeptic—I see the opportunity for innovation. However, separating the difference-makers from the dross-generators is a critical role the market plays. As market actors, there are opportunities for our members, clients, and payers to find the silver lining, learn from this moment, and continue the fight for “health as it should be.” 

First, a Brutal Culling.

The narrative over the last month has been brutal in the market but in digital health particularly:

  • Teladoc, the poster child of digital health, has a 42x revenue valuation that’s been slashed to 2.7x (in dollar terms, that’s $45B down to $5.7B, not to mention its $10B write-off of the Livongo purchase). 
  • Public health companies’ earnings reports are talking about difficult pricing competition, absurd at-risk fee arrangements, widening operating losses, impending layoffs, and all portending even wider spread consolidation (see my prior The Great Consolidation series). 
  • Even those companies reporting solid earnings and good operating discipline are being relentlessly hammered for just being in the room. 
  • Jeff also uses the wider telehealth industry to highlight how irrationally exuberant market predictions were, spurred on by the artificial reality of the pandemic meeting overcapitalized funding sources who bid up deals to absurd valuations and massive funding rounds. 

Tinder meets Match meets molotov cocktail meets market riot.

A Great Repricing 

All of which has led to a massive repricing of those same assets a short twelve months later. The dramatic reductions in the industry have been extensive and pervasive, creating the “valuation trap” (raising at high prices and then experiencing either a market or company underperforming, which creates the need to raise a subsequent round at a lower valuation). Furthermore, there is an “operational trap” where competitive pricing pressures, increased labor costs, and glacial client decision-making (often due to the blooming of thousands of me-too solutions) cause companies to burn through their cash. This all comes together when companies try to raise again only to be surprised that the previously warm welcome mat to financing has turned into an iron door that doesn’t open. 

It’s easy to see all of this in hindsight—but also easy to forget—that much of the  irrational market and innovation hubris was directed to funding innovative tech tools, supporting disease management, surfacing evidence-based practices, engineering better communications, etc. Many of these features (maybe they never should have been firms to begin with?), which were handicapped by their autonomy and lack of integration into overall clinical workflow, will ultimately be picked up from the rubble and integrated into more stable organizations, and the messy process of digital health innovation will continue anew. Candidly, I think this is all long-term positive. It means the broader healthcare sector can take stock, see what has worked with these new tools and capabilities, and then build them into more nuanced and comprehensive delivery models that are needed, wanted, and more sustainable. It won’t be pleasant for the “tourist” investors and many startups or even established companies, but it would be doubly calamitous if meaningful innovations were lost in the financial flotsam.

But then, a Path Forward

At Crossover, we’ve always been big advocates of new technologies that add value by helping us communicate better, provide more meaningful care, and make better business decisions, while building stronger relationships not just with our members, but between our care providers. While we consider ourselves digital natives, we’ve never bought into the idea that the human experience and trusted relationships would be fully replaced by these tools. Augmented, yes, but not supplanted. As I have argued in other posts, the flood of virtual care apps, bots, and devices has been a fragmenting and fracturing influence in an already complex healthcare architecture and experience. The brutal culling and great repricing will be a chance to rectify that.

I’ve also noted before that the adoption of a hybrid approach and integration of the right tools can’t occur without changes to how healthcare is paid for; it must move from a transactional model and mindset to one which is comprehensive, integrated, and accountable. Having shifted to such a business model, the opportunities for providers, employers, and payers to leverage (and aggregate) the many innovative tools designed in the last decade—and in this last cycle—will multiply rapidly. With these embedded in a modern practice, the way forward in healthcare will not only be better, it will help us finally achieve “health as it should be.”

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