Adoption Imperative Part I: Digital Health’s Inflection Point

by Sanjana Basu, Radical Ventures

Music CD sales peaked in the year 2000. For most music listeners, the polycarbonate plastic disc was replaced long ago by digital files and, ultimately, digital music services such as Spotify that were enabled by smartphones and cloud computing.

Digital Adoption in the Music Industry

Twenty years later CDs remain the dominant medical imaging file transfer mechanism for major hospitals and imaging clinics. To gain access to their CT, MRI or ultrasound images, patients must travel to the hospital or other healthcare provider, wait in line and pay to have a physical CD burned. To then share those images with a doctor, that CD would have to be delivered, typically by courier. In some cases, patients were required to undergo — and pay for — duplicate rounds of imaging because of a lack of interoperability.

The outmoded system of relying on CDs to share diagnostic images is emblematic of many technologies within the healthcare industry, a sector with technology adoption cycles that have appeared, at times, to border on inertia. While the state-of-the-art in consumer tech continued to race ahead, much of the healthcare industry remained stuck in the 1990s (or, given the ongoing reliance on fax machines to communicate, the 1980s).

Suddenly, in March of 2020, everything changed.

In response to the COVID-19 pandemic, healthcare systems have been forced into a phase of rapid digital transformation. In the case of medical imaging, systems reliant on physical CD distribution were disrupted when healthcare facilities stopped all non-essential visits and patients could no longer enter hospitals to pick-up their diagnostic images on CDs. Providers quickly sought digital alternatives. PocketHealth, a medical image access and sharing platform for patients, doctors and hospitals, funded by Radical Ventures, saw an immediate 300 percent increase in demand. The PocketHealth app and web portal empowered thousands of patients across Canada and the United States to access their images and share them with doctors digitally, at a time when they had no other option.

PocketHealth’s increased market momentum is just one of several examples that underscores the massive shifts we are now seeing in digital health. Regulatory and behavioural changes induced by COVID-19 are propelling hockey stick growth in digital health tool adoption.

From Q4 ’19 to Q1 ’20 major telehealth companies saw dramatic increases in revenue

The Adoption Imperative

With longstanding institutional barriers evaporating, we anticipate the adoption of digital technology to accelerate across all touchpoints within the healthcare sector. From hospitals, doctors, researchers and patients, we expect to see digital technology integration expand until it nears equilibrium with adoption rates in the consumer sector.

The rapid expansion of healthcare technology will come in two waves. In the first wave, novel digital health applications and business models will become mainstream. The massive acceleration of digitization and the resulting datasets from this first wave will set the foundation for the deep technology solutions of the second wave where artificial intelligence (AI) is positioned at the centre of health innovation.

Many of the tailwinds currently being experienced in the digital health space will lay the groundwork for data driven approaches to personalized healthcare. The hallmark of the sector’s second wave of digital adoption will be healthcare’s move from reactive medicine to proactive medicine that is personalized and predictive, with AI at its core.

“Maximum Flexibility”: An evolving regulatory paradigm

On March 30th, 2020, the Centers for Medicare and Medicaid Services (CMS) released new guidelines for the US healthcare system to tackle COVID-19. CMS outlined plans to take “historic and unprecedented steps to equip the American healthcare system with maximum flexibility to respond to the … pandemic.” The announcement introduced wide-ranging changes to existing regulations, effectively fast-tracking digital technology adoption in the sector.

Key amongst these regulatory changes is the expansion of telehealth coverage that provided a push to digital-first healthcare delivery. CMS ensured there was a market for digital innovators in this space, as it expanded Medicare to pay for an increasing range of services from virtual visits to remote patient monitoring. New rules also permitted interstate licensing for Medicare and Medicaid providers that make supply more elastic to address major demand gaps. In addition, the US Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) announced enforcement discretion for remote communications easing care delivery by allowing providers to use a list of popular applications for video chats to communicate with patients, without the risk of penalties.

In Canada, Prime Minister Trudeau announced a significant investment to develop and launch digital health tools. The announcement recognized the need to support citizens through the crisis as well as provide the required flexibility to health systems. The Ontario government also announced increased public funding of virtual care and Telehealth Ontario, and is now working closely with AI researchers from the Vector Institute to develop a fully anonymized and secure health data platform to fight COVID-19.

The impact of these sweeping regulatory changes and public health commitments is reflected in behavioural shifts amongst consumers. Stuck at home and in need of care, patients began to test and use a range of digital health tools from remote consultation to monitoring at a massive scale. According to data published by the White House, in April “telehealth claims for upper respiratory infections … from private insurance increased nearly 12 times from the daily average.” This increase was offset by a decline or stagnation in hospital outpatient, urgent care, and skilled nursing facilities claims. In the UK, results from an Ipsos MORI survey revealed that there was “an 80% increase in the number of people that had used an online GP in the 3rd week of March compared to in the 2nd week.” And in Canada, statistics revealed that the percentage of virtual primary care visits has climbed from 4% pre-pandemic to 60%.

US Upper Respiratory Infection Private Insurance Claims 
by Type of Service, February 1 — April 1, 2020

Concurrently, regulatory changes and unified global efforts were being made to speed up the identification and commercialization of COVID-19 treatments. In the US, the FDA began issuing emergency use authorizations for the use of therapeutics for certain hospitalized patients. Moreover, on March 18th 2020, the World Health Organization (WHO) and its partners announced a solidarity trial to find a potential treatment for COVID-19. The initiative enlisted patients from over 100 countries and simplified procedures (e.g. no paperwork) to arrive at a solution in a scalable manner.

All of the efforts cited above reflect expanding adoption to meet existing technological capacity (albeit under stress). As new norms and expectations are established in this sector, it seems unlikely that patients, providers, and pharma will retreat into the past. And while it can be argued that regulatory changes may be temporary, behavioural changes and habit formation endure.These changes are fertile ground for a new healthcare reality to emerge. The next post will dive into how we see the future of healthcare playing out.

— R —

Read Part II of the Adoption Imperative tomorrow.

About the Author

Sanjana Basu is an Investment Associate with Radical Ventures. Sanjana is passionate about the healthcare space and the many companies that are using deeply disruptive technology to advance the sector. Prior to Radical, Sanjana worked at the strategic investing and incubation arm of the Tata Group, the $100B Indian conglomerate based out of Mumbai, India. At Tata she was involved in investing in and incubating technology enabled ventures in the fintech, retail-tech and mobility-tech space, the operational support of early stage portfolio companies as well as the end to end management of exits. Sanjana also worked as an Investment Banking Analyst at Barclays focused on M&A and DCM. She completed her MBA from the Indian Institute of Management, Bangalore and her undergraduate in Economics & International Relations from Tufts University in Boston, US.

If you are building a business that enables this new era of healthcare, have thoughts that resonate or have a different point of view, let’s chat!

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