“Health 2.0“, also known as digital health – focusing on improving people’s health through a constantly evolving mix of web or mobile device apps and educational software and websites, social media, personal health records, and various forms of connected sensors – is growing and attracting much attention, from entrepreneurs, investors, the media, and public health officials.
The basic idea is that people can take charge of and improve their own health – and reduce their healthcare expenses – if they have data about what’s going on with their bodies and some basic information about what to do about it. Sometimes the data is shared with a healthcare provider.
The organization Health 2.0 estimates that there are 2540 companies in the Health 2.0 segment as of June 2013. A majority of the companies, 1465, are consumer-focused while the next largest category, professional facing, has 643 participants. There are 203 companies involved with patient-provider communications and 229 companies working on data and analytics. I’m sure the overall count increases every day.
Why is Health 2.0 such a hot segment in healthcare? For one thing, the barriers to entry are lower than in other segments like medical devices or biotech. Many of the apps are unregulated or require a 510(k) marketing clearance at most. The cost to develop and deploy an app is a fraction of what it costs to commercialize a Class II medical device.
How do these companies plan to make money? That, as the (updated) saying goes, is the $64 million question. Many of the apps and web services are free. Some use the familiar freemium model where a basic version is provided free of charge and the fully-featured version is sold for a few dollars or so. What’s lacking is a recurring revenue model, or is it?
Just as Google and other companies with large user bases do, many Health 2.0 companies aggregate and sell the data generated by their apps. It’s appropriately anonymized but it’s probably worth much more in terms of lifetime revenue per user (LRPU) than the nominal charge paid by the consumer. Plenty of researchers and marketers in Big Pharma and insurance companies as well as government would love to have large data sets with behavioral data from a target population from one of their drugs, pipeline or on the market.
The company referenced in the article, Health123, was started by ex-Microsoft and Seattle tech veterans. They plan to approach employers with the prospect of reducing their health insurance expenses by improving employee health through deployment and use of their app. It’s another revenue model. It also raises serious privacy concerns as seen in a lively discussion in the article comments.
It’s tempting to think that your company could be the one to demonstrate positive outcomes. It seems to me that there is much anticipation regarding effective health apps that can improve public health and/or “bend the cost curve” as the healthcare policy wonks like to say. Looks like there are a couple of thousand startups that are in agreement.
Takeaways: Health 2.0 presents many opportunities for medical device and healthcare IT entrepreneurs. Even hardware companies can get in on the action via development and integration of all sorts of physiologic sensors. This could turn into a “land grab” where small and nimble startups do all of the innovation and are then snapped up for outlandish valuations by big medical device and healthcare IT companies who can’t afford to miss the market opportunity.