Healthcare Information Technology

What Does Healthcare Have In Store for 2018 – Part II? Here Are Our Predictions.

February 2018

Last month we shared Part I of our predictions for the New Year covering new risk models, EMR as a platform, and blockchains as the new infrastructure. Here is Part II of our outlook for the year.

Valuations of mid-to-late stage companies could see lower altitudes. Even though 2017 was a banner year for digital health funding at a record $5.8 billion, in many ways, it fell short of expectations. There were no IPOs in the digital health space in 2017, and M&A volume was weaker than expected. According to Rock Health, there were 119 M&A transactions in 2017. This was 18% below 2016 volume and 36% below 2015 when M&A activity was at its peak. Many existing investors who underwrote the mega rounds of companies like ZocDoc, 23andMe, Omada Health and others could be under pressure for exit in the next 1-2 years. Median holding periods are now approaching 8-9 years, which is outside the comfort zone of many VC and cross over funds.

Software as Medical Device (SaMD) becomes a serious category. We are pleased to see FDA’s pace in approving a variety of diagnostic and monitoring software applications both for the professional as well as consumer markets.  Many of these apps have already gone mainstream such as monitoring heart rate to EEG analysis. Hundreds of companies are now developing new software for rapid diagnostics. This should lower costs to consumers and put almost $300 billion of primary care annual revenue into play. 

Artificial Intelligence will illuminate the blind spots and hidden gems. Biology is incredibly complex and our understanding of it has largely been driven by empiricism; hence billions of $ lost in drug discovery. In addition to accelerating drug discovery, AI will move rapid diagnostics and complex therapies to another level. We are getting closer to the day that doctors no longer make the primary diagnosis or plan therapies, but instead they will ensure that the diagnosis and the therapies are relevant and meaningful for the patient.

We are looking forward to another exciting and eventful year!

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