Sumi Das
The pandemic has highlighted some of the brightest spots — and greatest areas of need — in America’s healthcare system. On one hand, we’ve witnessed the vibrancy of America’s innovation engine, with notable contributions by U.S.-based scientists and companies for vaccines and treatments.
On the other hand, the pandemic has highlighted both the distribution challenges and cost inefficiencies of the healthcare system, which now accounts for nearly a fifth of our GDP — far more than any other country — yet lags many other developed nations in clinical outcomes.
Many of these challenges stem from a lack of alignment between payment and incentive models, as well as an overreliance on hospitals as centers for care delivery. A third of healthcare costs are incurred at hospitals, though at-home models can be more effective and affordable. Furthermore, most providers rely on fee for service instead of preventive care arrangements.
These factors combine to make care in this country reactive, transactional and inefficient. We can improve both outcomes and costs by moving care from the hospital back to the place it started — at home.
In-home care is nothing new. In the 1930s, over 40% of physician-patient encounters took place in the home, but by the 1980s, that figure dropped to under 1%, driven by changes in health economics and technologies that led to today’s hospital-dominant model of care.
That 50-year shift consolidated costs, centralized access to specialized diagnostics and treatments, and created centers of excellence. It also created a transition from proactive to reactive care, eliminating the longitudinal relationship between patient and provider. In today’s system, patients are often diagnosed by and receive treatment from individual doctors who do not consult one another. These highly siloed treatments often take place only after the patient needs emergency care. This creates higher costs — and worse outcomes.
That’s where in-home care can help. Right now in-home care accounts for only 3% of the healthcare market. We predict that it will grow to 10% or more within the next decade. This growth will improve the patient experience, achieve better clinical outcomes and reduce healthcare costs.
To make these improvements, in-home healthcare strategies will need to leverage next-generation technology and value-based care strategies. Fortunately, the window of opportunity for change is open right now.
Five factors driving the opportunity for change
Over the last few years, five significant innovations have created new incentives to drive dramatic changes in the way care is delivered.
- Technologies like remote patient monitoring (RPM) and telemedicine have matured to a point that can be deployed at scale. These technologies enable providers to remotely manage patients in a proactive, long-term relationship from the comfort of their homes and at a reduced cost.
- Value-based arrangements enable providers to be compensated based on patient outcomes rather than on services delivered. These arrangements incentivize providers to proactively manage patients. By taking steps to keep patients from needing to go to the hospital, providers can design preventive care arrangements for lower-cost settings like the home, reducing costs by 20% or more.
- The number of people living with chronic conditions is increasing, and the U.S. population is aging. This creates more pressure on the health system, but it also creates a bigger market and stronger incentives to serve these populations.
- The COVID-19 pandemic has introduced many Americans to virtual healthcare. Telehealth has been discussed for years, but the pandemic prompted health care providers, insurance companies and consumers to finally adopt the practice. Due to its popularity among consumers and healthcare providers, the adoption of telehealth practices will become a permanent fixture in the home.
- COVID has led to the removal of some key regulatory and insurance barriers to in-home care. For example, it’s now simpler for telemedicine and remote patient monitoring to be reimbursed.
Three ripe opportunities for innovation
These five transformations will inspire more entrepreneurs to develop ways to improve the U.S. healthcare system. Three specific areas are especially ripe for innovation to simultaneously improve patient outcomes and reduce medical costs:
Acute response
Right now, too many people end up in emergency rooms unnecessarily. From the patient’s perspective, emergency care in hospitals can be stressful, noisy and expensive, and is often accompanied by long wait times. We could save around $32 billion in costs by preventing unnecessary emergency room visits.
Ready and Dispatch Health are making it as easy to get urgent care at home as ordering a meal. Companies like these can limit emergency room visits to situations that truly warrant it.
Longitudinal care
Most Americans live with at least one chronic health condition, and 30 million live with five or more. For example, only 10% of people with chronic kidney disease (CKD) even know they have it. Companies like Strive Health combine advanced technology with high-touch patient care to improve clinical outcomes while saving as much as 30% in healthcare spend.
There are similar needs and solutions for other long-term conditions. Heartbeat Health and Hinge Health both leverage technologies like RPM, devices and telemedicine to treat cardiovascular and musculoskeletal patients at home, respectively. In addition, Heal recently partnered with Humana to expand its in-home primary care model.
Infrastructure
As care moves from the hospital to the home, so too will the infrastructure and supply chains supporting that care. Companies like Medically Home help provide software and logistics to health systems managing patients at home, while Tomorrow Health and Better Health help patients receive vital medical equipment and supplies at their doorsteps.
Bringing it home
Despite current tailwinds, there are obstacles to building truly scalable companies in this space.
First, the U.S. healthcare market is still highly fragmented, so there aren’t many players able to deliver care at a national scale, let alone negotiate national agreements. Plus, as is often the case with leading-edge startups, these business models are still unproven, and many startups will need to overcome challenging economics for some time.
Finally, although COVID-19 has improved consumers’ and providers’ eagerness to accept telemedicine, there’s still a lot of behavior change required for people to actively substitute hospital visits for home care, and insurance companies need to make the economics of home-based care viable.
That said, the secular trends are undeniable: Improvements in remote patient monitoring, value-based arrangements and virtual healthcare, combined with an increase in the number of patients living with chronic conditions and a decrease in regulatory and insurance barriers are fertilizing a growing crop of innovative home health startups.
In-home care brings clear and sustainable benefits for payers, providers and patients — and that is leading more innovators to turn their attention to this space. We wholeheartedly believe that it won’t be long before society can reap the benefits of their important work.
Disclaimer: Strive Health is a CapitalG portfolio company.
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