Marcus Whitney: 3 healthcare innovation trends that leaders should keep an eye on

I once had the honor of being a keynote speaker at the 2019 HFMA Annual Conference. With that came the tall task of immediately following Dr. Zubin Damania, better known as ZDoggMD, who shared his story of innovating in healthcare as a physician entrepreneur.

Damania made the case that we had created a system that does not allow front-line workers to do what they signed up for and were trained to do, which is to care for patients. Instead, caregivers are subject to the rules of insurance companies, the revenue goals of hospitals and the demands of electronic medical records, which in combination make it incredibly difficult to provide the best care possible. 

As an investor and innovator, and not a physician, my message was to describe what is a deep need for more proactive innovation in healthcare. I acknowledged that the industry was not likely to be disrupted by a Silicon Valley startup, but that didn’t mean disruption wasn’t inevitable. I urged the audience to consider proactive innovation as disruption insurance and that we needed to get out in front of real threats to our industry before they put us on our heels. 

People seemed to like both talks, but the event left me feeling that a couple of keynote speeches wouldn’t be enough to move the industry to action. 

Soon after, the great disruption that few of us expected could happen, COVID-19, arrived. And everything has, indeed, changed. 

Well into the pandemic, in November of last year, I had dinner with some friends who hold senior leadership positions in four health systems. I asked them, “Is it different this time? Are we finally going to see real change?” Their response, almost in unison, “Absolutely.” 

One of them added: “We have no choice; everything is completely different. We have to operate differently.”

Indeed, we are living in dynamic times in our industry. We are seeing innovation in healthcare gain traction in ways previously considered impossible. Below are the three trends that are showing the most momentum for innovation in both the industry and with investors. 

Trend 1: Workforce shortage

The Great Resignation has impacted every industry, but no sector more than healthcare, and for good reason. No segment of the American labor force had a more grueling experience during the pandemic than frontline healthcare workers. They saved countless lives, but at a very steep price. They operated under the most stressful situations imaginable, and their challenges shifted from a lack of PPE in the beginning to the politicization of vaccines in the end. 

The growing need for clinicians, combined with higher acuity patients arriving at hospital front doors, is fundamentally changing how hospitals operate. 

We see tremendous innovation around nurse staffing, nursing education and technology that automates the work that nurses were previously doing. A combination of all three innovative approaches will be needed, and even then, hospitals will be unable to continue running as they once did. 

There will be a shift of services to the home, telehealth and specialized providers. This shift will create tremendous opportunity as health systems prioritize their workers on certain services lines and look to partner with others or, in some cases, steer patients to other sites of care. 

Trend 2: Behavioral health

The pandemic forced us all to put our lives on hold, kept us from being able to touch our friends and families and resulted in almost 1 million lost lives in the United States. An already under-addressed behavioral health epidemic was supercharged by COVID-19, and now the healthcare system is trying to catch up. 

The Centers for Disease Control and Prevention’s Household Pulse Survey of 2020-2021 found that 25% to 30% of adults in the United States reported experiencing symptoms of anxiety and/or depressive disorder.1 Thankfully, through emergency authorization, we found that telehealth could be an incredible tool to get people the help and support they need at the most critical times. 

That authorization was made permanent in November 2021, leading to a movement of innovative companies into the behavioral health space, leveraging technology. Five percent of the early-stage companies that entered the market in 2021 were in some way targeting behavioral health. Most of them had a telehealth component, and many of them also had a niche-focus. Some targeted schools, others targeted senior citizens and yet others targeted employers. Some are focusing on even more specific segments of the patient population: teens, LGBTQ, Blacks, Indigenous or people of color (BIPOC), and even healthcare workers. 

In a recent conversation, a friend who is a very successful healthcare venture capitalist responded to my concerns about the flood of companies entering the behavioral health space by saying, “Yes, it’s a lot, but the need so far-outstrips the industry’s current capabilities that there is room for many winners in the short term.” I think he’s right. 

Again, one big problem with innovation in this space is the workforce. These new platforms are fighting to provide access to the same therapists and social workers, which ultimately will drive up costs. A rush to fill the labor gap with less experienced professionals could lower the quality of care. Some health systems know this all too well and are using their balance sheet to lock in these valuable professionals through behavioral health practice acquisitions. These are inevitable speed bumps on the way to creating a behavioral health system that is long overdue in America. 

Trend 3: Value-based care

When I first started investing in healthcare innovation in 2015, I was regularly told that value-based care was a pipe dream and fee-for-service would continue to dominate the payment landscape. While fee-for-service is still dominant today, value-based care has more momentum than ever. Multiple companies have gone public in the past few years on value-based care models, and new value-based care payment models for home health, dual eligibles and more are being green-lit each year by CMS. 

We are seeing a lot of momentum for companies in the analytics space that can take data from disparate sources and, through data science, illuminate opportunities for improving patient outcomes at lower costs. These companies are analyzing both entire populations and individual patient’s clinical journeys. We have seen the emergence of a robust primary care market for value-based care, with companies like Oak Street Health, VillageMD, agilon health and Vera Whole Health.  

Specialty care has been slower to gain momentum, but today is full of opportunity as we now have a spotlight on the ways care for many diseases has been deficient. In these cases, we see more patient-centric disease management solutions coming to market to help patients control their data and take matters into their own hands. 

The conversation about value-based care is expanding beyond episodes of care and bundles, as it must. The urgency to lower the cost of care while improving outcomes has been turbocharged by the healthcare worker shortage. The willingness of incumbent payers and providers to explore opportunities in innovative solutions has dramatically increased. This trend is also leading payers to take greater initiative in directly providing value to their members, and they are looking to innovative companies to help them do so. 

Prepare for a power shift

These three significant trends are likely to have considerable traction, from the regulatory bodies to the top payers and providers to the venture capital and private equity check-writers. Real power is shifting across these three themes, and there will be winners and losers in every case.