'No Return of Investment for Health Technology' warns experienced investors

Rob Coppedge, CEO of Echo Health Ventures announced in a post on the 6th September 2017 that ‘Digital health tech is dead’.

Rob has more than 20 years of experience in healthcare venture capital, so his opinion counts. Echo Health Ventures invests and develops health care companies.

How did such an experienced health investor come to this conclusion? And is his judgement correct?

Rob’s point is that that the return on investment (or ROI) of health technology just doesn’t add up. He estimates that over the past three years, about 16 billion in investment has been poured into about 800 companies offering digital health products.

‘If the investors of these companies were to generate the returns they are expecting, we would need to triple the public market cap of the health IT space by 2021.’Rob Coppedge

Rob also pointed out, that in place of real ROI, there is an abundance of effusion and cheap flattery.

The only thing that has grown faster than dollars invested in digital health has been the hype surrounding it – with conferences, blogs, incubators and Twitter handles springing up everywhere.’

Rob Coppedge

Modern technology been able to turn expensive legal services into subscription based online platforms. People do banking, order transport and food via an app.

Why isn't the health industry taking up new technology?

Patients don't go shopping for their own health care services

The Western world’s health industry run’s on a ‘third party payment system’. Either the Government or Private Insurers pay for healthcare. Patients don’t. This has been the norm since the end of World War II.

This means patients don’t have any of the purchasing power they take for granted when they buy a house or car. They can’t shop around, check out prices, read reviews then make a choice based on their individual needs.

If people get sick, the Government or private insurer will decide where they go, and will eventually pay the providers a hidden sum that the patients will never know about.

What appears to be a layer of protection, is actually locking the health industry away from the harsh world of consumer demands and global competition.

Prices stay high. Standards stay low. Sick people have no choice and just accept whatever they are given in a fatalistic manner.

Funding is 'per item' not 'per treatment'

In healthcare, funding is paid per each individual item, not for the whole treatment for a condition or disease. This is sometimes referred to as ‘fee for service’.

Just one trip to the Emergency Department, a set of bloods, a CT scan, several sets of observations and a medical review, will trigger dozens of different bills. These will be sent off to an unrelated host of businesses, that in turn are (eventually) reimbursed by different Government and or Private Insurers.

Would you consider buying a house, brick by brick, metre by metre of electrical wiring, or piece by piece of timber? Of course not. It would make the purchase of a house impossible to estimate, save for, compare prices and pay for.

Perverse incentives

This billing practice actively encourages over use of aggressive medical treatments. It also provides no incentives for healthy living.

The more people become overweight, the more Coronary Artery Bypass Grafts get done, the more cardiologists and hospitals get paid. The more people lose weight, eat well and exercise, they less cardiologists and hospitals get paid for CABGS.

Aggressive medical intervention equals big profits and an army of well paid staff.

Cheaper, home based care using smart devices and chronic care management means low profits and staffing cuts.

The future

The current of health and welfare spending in the West is unsustainable.

Newer health technology and home services are cheaper, more accurate and customer-friendly.

Which is Wikihospitals promoted new health technology services, direct to both patients and Doctors.

© Wikihospitals 28th September 2017