When things go wrong, like the Zika virus arriving in your city or environmental contaminants ending up in the water supply, public health is the Caped Crusader of the health care industry, working in the shadows to prevent and defend against complex threats that can harm our fair communities.
Americans are largely unaware of the outsized role that public health plays in making their lives better and longer. Researchers from Brigham Young University found that adults believe about 80% of increased life expectancy is due to medical advances and clinical care. The truth is that public health has been a secret success story, providing 25 years of the 30 year increase in life expectancy since 1900.
Amid talk of record funding rounds and valuations in Silicon Valley, it’s easy to forget that venture capital is not the only health funding game in town. Despite the lifesaving role that public health serves in our communities, our industry receives only three percent of the health care spending pie. This fact is even more outrageous when you examine the return on investment of clinical care compared to public health: Access to clinical services accounts for 10% to 20% of your health status while 70% to 80% is affected by social, behavioral, and environmental factors shaped by public health efforts.
Public health relies mostly on public sector funding, which has been declining and overburdened due to decades of budget cuts. With the repeal of the Affordable Care Act, the Centers for Disease Control and Prevention, our national public health agency, would lose $890 million or 12% of their annual budget and states would lose more than $3 billion over the next five years.
Given the Trump administration’s $54 billion in proposed cuts, we’re seeing local and state public health departments scramble to enact revenue-generating activities such as fees and fines, which are a drop in the bucket compared to the estimated shortfall in public health spending of $20 to 24 billion. More importantly, these activities don’t provide the scale and operational efficiency required to run on lean budgets with the necessary impact on health outcomes. For the first time since 1993, life expectancy in the United States has decreased.
As a result, major stakeholders in health care are feeling the pain from the public sector pinching public health pennies.
Both insurance companies and health systems have been shocked by the high costs of populations with poorly managed, largely preventable chronic conditions such as asthma and heart disease. The Institute of Medicine found that $55 billion in wasteful health care spending was attributable to “missed prevention opportunities.” Health disparities cost another $309 billion in direct and indirect costs. Super-utilizers, or patients with complex clinical conditions and typically multiple non-clinical problems such as homelessness also drive up health care costs. Although super-utilizers only comprise five percent of the U.S. population, they contribute to 50% of health care spending.
Clinical care can no longer afford to go it alone. And public health can not afford to not develop more innovative, cost-effective ways to deliver their essential services to high-need populations. As investors in health startups working with these patients, we believe that the adage, “an ounce of prevention is worth a pound of cure” has never been more true. We think that the best answer to this challenge is to bring the best technology minds and public health experts together as a new field: “Public health technology.” Public health tech leverages public health strengths (integrated, systems-level approaches based on evidence) with those of technology startups (aptitude in driving integration and scalability) to prevent disease onset and protect the health of our communities.
These converging trends–diminishing public health funding, increasing costs of care, and growth of value-based care–make this an optimal opportunity to invest in public health technology. The nation’s largest insurers, UnitedHealth, Aetna, and Anthem have already reached the point where nearly half of their reimbursements are paid through value-based care models. This trend will continue to accelerate through programs such as Medicare Advantage.
The digital health sector has certainly produced many changes in the health care industry to the tune of $4.2 billion in venture capital investment last year, but hasn’t provided the necessary disruption due to concentrating on largely low ROI clinical care. The whispers are starting to grow in volume: Digital health is more new than improved and sorely in need of more significant results rather than facile claims.
The tide is certainly changing. As more entrepreneurs and investors begin to delve into the market opportunity in prevention and protecting health within the most vulnerable of populations, we’ve already seen a few early breakout successes:
- Omada Health (raised $76.5 million) targets high risk individuals, leveraging web design, tech, and health coaches to prevent the onset of diabetes.
- Clover Health (raised $295 million) uses data analytics tools to proactively identify and fill gaps in care as a Medicare Advantage for seniors to drive down costs and improve health outcomes.
Studies have shown that investing $10 per person per year, or $2.9 billion, in proven community-based disease prevention could yield net savings of more than $16 billion annually within five years. And 73% of registered voters support public health investments that improve the health of communities. The venture capital community is slowly coming around to asking for cost savings and clinical results before asking for growth.
At our public health-technology fund, “P2Health Ventures,” we’re starting to invest in this opportunity. The global market for preventive health services alone is projected to hit over $432 billion by 2024. Here are a few examples of entrepreneurs outside of Silicon Valley that we’ve seen building promising public health tech startups:
- Rimidi offers diabetes management for primary care clinics that aims to drive improvement in efficiency for managing hard-to-reach, costly populations with diabetes.
- Foodstand helps build good eating habits through community-wide challenges to help people stay healthy without calorie counting.
- bosWell’s works with community-based organizations, called CBOs, to work with vulnerable individuals and improve care coordination for Medicaid patients, as well as to guide decision-making for their associated health plans. The idea is to triage the highest-risk patients for cost-effective interventions.
In our view, there has never been a better time to invest in the future health of our communities and pioneer the emerging ecosystem of public health tech.