Healthcare in the United States today costs $13 thousand per person. If that sounds mind-boggling, it’s because it is. This country has the most expensive healthcare system in the world but report health outcomes worse than in any other developed country.
While the situation seems dire, some solutions are already in effect. Healthcare technology companies are working diligently to curb wasteful spending and improve care for patients while making physicians’ jobs easier.
As a patient, you may have already seen some of these technologies in action. If you haven’t, then you’re in for a treat.
U.S. Healthcare Spending
As mentioned, healthcare costs $13 thousand per person, or, as of the end of 2022, more than $4 trillion in total. That data is from the Center for Medicare Services (CMS), and it projects the total spending to hit $6.8 trillion by 2030, which translates to a future cost of $19 thousand per person.
Why is our healthcare system so expensive? Much of the excess spending is due to inefficiencies in physician workflows, patient care pathways, and inconsistencies across hospital systems. There is also wasteful administrative spending, and billions are lost due to billing mistakes.
To top that, our population is aging. 21% of the U.S. population will be over 65 by 2040, and chronic medical conditions are rising. 6 in 10 Americans have at least one chronic medical condition, and 4 in 10 have at least two.
Implementing changes to increase efficiency and reduce costs has become essential. To that end, some companies have figured out how to generate revenue and profit by addressing these issues.
Enter, HealthTech.
HealthTech, Defined
HealthTech has a wide range of definitions depending on which organization or social media influencer you follow. One unique take on the definition comes from the team of healthcare and finance experts at Langar Holdings, Inc:
“Companies that develop technology to create efficiency in healthcare by addressing key pain points of patients, providers, payors, and hospitals.”
In other words, HealthTech is a technology that solves various pain points within the industry.
The key pain points are important to understand as they ultimately lead to wasted time, resources, and inefficient workflows, which in turn contribute to the high cost of healthcare.
Pain Points In Healthcare
Langar’s team reviewed data from the Centers for Medicare & Medicaid Services (CMS) for all the different areas of healthcare spending. They identified seven unique sectors that represent where wasteful expenditure occurs and where existing public HealthTech companies are making a difference.
These sectors, and their definitions, are as follows:
- Access to Care – Provide care outside of a hospital setting through virtual, in-person, or hybrid care.
- Biopharma – Pharmaceutical and biotechnology companies that use artificial intelligence as part of their process.
- Decision Support – Provides clinicians with patient-related information that is intelligently curated or presented to enhance patient care.
- Hospital Operations – Improves the efficiency of hospital workflows as they relate to patient care.
- Clinical Trials – Efficient management of trials that support novel treatments.
- Insurance – Technology that supports government and private programs.
- Treatment Device – Devices that use smart learning algorithms to help clinicians treat medical problems.
Further analysis conducted by Langar’s team revealed how much money could potentially be saved using healthcare technology.
The result? $890 billion and climbing.
The Public HealthTech Universe
There are over six thousand public healthcare companies in the U.S., Europe, Australia, and Canada, and 104 qualify as HealthTech based on the Langar definition*. In addition to solving key industry pain points, these 104 companies earn at least 51% of their revenues from HealthTech products or services.
The combined total market cap of these companies is $617 billion*.
How HealthTech is Poised to Change Healthcare
HealthTech is the fusion of healthcare and technology. Healthcare is an industry resilient to most market dynamics, as there will always be a need to treat sick and injured patients. Technology is a deflationary feature that can decrease a company’s operational expenses.
Thus, when healthcare companies properly integrate technology into their product and/or service, they should become fundamentally stronger, more scalable businesses.
HealthTech Predictions
We now know how HealthTech is impacting the industry today. It is also important to consider how it will continue to affect healthcare going forward.
10-year predictions by Langar’s team are below based on their analysis of the different sectors and industry trends.
1 – The Treatment Device sector will continue to have the highest average market capitalization.
Most treatment devices require patents and FDA approval, which makes it harder for new competition to enter the space. In addition, once devices are adopted into patient care workflows, they become standard practice, making them harder to displace.
2 – Access to Care will see the greatest number of new companies investing in the space.
The pandemic not only changed how we perform patient care but also altered how we deliver it. Before the pandemic, in Q1 2020, 7% of Medicare patients used telehealth; at its height in Q2’2022, usage was 47%, and for the last six quarters, usage has been between 15%-20%.
While usage is down from the peak, it’s still 2x-3x higher than pre-pandemic levels in both rural and urban areas, indicating that this change is here to stay.
In addition, being able to reach a provider from the comfort of your home, especially for non-urgent issues, results in less patient throughput in hospitals, emergency rooms, physician offices, etc. The overall effect improves the patient experience and allows sicker patients to receive the in-person care they need more quickly.
3 – Hospital Operations will increase in total market capitalization the fastest.
Upwards of 80% of hospital expenses are spent on fixed costs such as overhead, including rent, staffing, medical supplies, and the deflationary costs of invested assets. Of this, the cost of labor is the biggest piece of the pie.
The COVID pandemic changed patient access and demand for surgery and treatment services. Hospitals have had to adjust staffing to meet patient volume, but it is an ongoing task and a source of wasteful expenditures.
Hospitals will increasingly look to partner with companies that provide technology to help decrease fixed expenses and improve staffing models.
4 – Decision Support technology will become ubiquitous.
Using artificial intelligence in healthcare decision-making can help to reduce errors and save time and money.
While nothing can replace the years behind a physician’s training, Decision Support technologies can improve turnaround time, gather data, and improve patient outcomes.
5 – More non-healthcare companies will adopt HealthTech to enter the healthcare space.
We are already seeing this happen. Amazon is planning to acquire One Medical, and Walmart is expanding its healthcare arm.
The footprint of these non-healthcare companies will continue to grow within HealthTech. With their already established widespread customer base, these companies are uniquely positioned to use HealthTech to provide solutions and capture a portion of the healthcare market.
Final Thoughts
As healthcare costs continue to rise ($6.8 trillion by 2030, projected), inefficiencies will rise, and so will the number of pain points within healthcare that technology could address. This creates more demand for companies to enter the HealthTech industry and attempt to solve these issues. It also prompts older healthcare incumbents to pivot to become HealthTech companies.
This article was produced by Langar Holdings Inc and syndicated by Wealth of Geeks.
source https://wealthofgeeks.com/healthtech/
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