Digital Health Ecosystem in the United States - Q4 2017

INTRODUCTION

United States is considered the hotbed for innovation and the digital healthcare space is no exception. With one of the largest innovation and startup ecosystems led by Silicon Valley, the country has been a pioneer in the advancement and adoption of digital healthcare technologies. 2017 has been a remarkable year of growth for the digital healthcare with record number of funding, M&A activity and mega size deals in the digital healthcare space.

INDUSTRY OVERVIEW - Size & Growth Rate

According to the Centers for Medicare & Medicaid Services, U.S. health care spending increased 4.3 percent in 2016, reaching $3.3 trillion or $10,348 per person. Healthcare spending accounted for 17.9 percent of total GDP of the country. This reflects the sheer size of the overall healthcare market in the United States and potential for digital healthcare to grow in the country.

According to a study by the American Medical Association in 2016, most physicians in United States believe that digital health has a strong potential for improving patient care. Physicians are optimistic that digital health tools will go a long way in improving efficiency, patient safety and diagnostic ability. The study also found the key drivers for adoption of digital health tools in the near future.

 AMA Survey 2016

AMA Survey 2016

The penetration of digital health solutions among consumers is also increasing. US consumers are increasingly willing to pay for e-health services in 2017. The digital healthcare market in USA will continue to lead the industry with target revenue well poised to exceed $152 billion by 2024.

 Digital Health by American Marketing Association

Digital Health by American Marketing Association

The digital healthcare sector in USA has evolved from simple wellness devices and applications to solutions that can make healthcare more efficient and effective. Consumer companies like Apple and Samsung are beginning to collaborate with pharmaceutical companies, payers and providers to penetrate their presence in the healthcare space. Digital health interventions to improve patient outcomes and empower patient to deal with acute healthcare problems is a rising theme in the digital health space. Insurance firms are getting increasingly optimistic about digital health interventions and the VC arms of payers like Humana and Kaiser Permanente are actively making investment in this area.

 Digital Health Funding by Rock Health

Digital Health Funding by Rock Health

The investor optimism in the digital healthcare space has already made 2017 a record funding year. Consumer engagement tools and Big Data and Analytics continue to be on the forefront of the investor's radar in 2017 followed by Electronic Health Records and digital therapies. The rapid penetration of wearable devices and increasing use of IOT will propel strong growth in big data and analytics focused digital health solutions.

CB insights predicts that some of the top emerging areas that can disrupt digital healthcare space could be blockchain enabled hospitals, trans-dermal drug delivery and monitoring devices and intelligent drug design.

 Funding Categories By Rock Health

Funding Categories By Rock Health

2017 has also been a year for mega deals in the digital healthcare space. In the first half of 2017 alone, the number of $100M+ deals in the industry reached record numbers.

 Number of $100M+ Deals by Year By Rock Health

Number of $100M+ Deals by Year By Rock Health

 Funded Company Categories by Rock Health

Funded Company Categories by Rock Health

INVESTORS, Advocacy groups, accelerators & Incubators, Research institutions

Digital Health has been a hot investment theme for institutional investors and investment arms of healthcare firms in recent years and 2017 has proven to be a record year for digital health funding in United States. In the first half of 2017 alone, 331 distinct investors participated in funding rounds of digital health firms, out of which 138 or 42% of investors are new entrants in the space. This signifies the growing interest as well as maturity among the investors. 

 Completed Deals in H1 2017 by Rock Health

Completed Deals in H1 2017 by Rock Health

The list of most active VC’s in this space in the last 5 years include names like Khosla Ventures, GE Ventures, KPCB, Sequoia, etc. Leading healthcare corporations such as Mayo Clinic, Sanofi, J&J, Cleveland Clinic, etc. have also been very active in promoting startups in the digital healthcare space.

 Active VCs in Digital Health

Active VCs in Digital Health

There are many advocacy groups in USA that are driving the awareness and adoption of digital health technologies among the industry players.

 US Advocacy Groups

US Advocacy Groups

Top Accelerators and Incubators in USA focused on Digital Health include:

 US Accelerators and Incubators

US Accelerators and Incubators

RESEARCH INSTITUTIONS

United States has not only got one of the biggest startup ecosystems in terms of VCs, accelerators and incubators, but has also access to some of the best research. Some of the top names working towards accelerating digital health R&D include:

 US Research Centers

US Research Centers

MERGERS & ACQUISITIONS

The most active acquirers in the digital health space has been very diversified, ranging from EHR players like Allscripts and TELUS to technology giants like IBM and apparel companies like Under Armour.

 Digital Health Acquirers By CB Insights

Digital Health Acquirers By CB Insights

 Digital Health Quarterly Global M&A History by CB Insights

Digital Health Quarterly Global M&A History by CB Insights

2017 has been another consistent year for M&A activity in the space. An increasing number of existing healthcare players across pharmaceuticals, insurance, medical devices as well as corporate investment arms of consumer companies like Apple will continue to make strategic acquisitions in the digital healthcare space.

MARKET MAP

USA Market Map.png

FUTURE PROSPECTS

The outlook for digital health looks very promising. As digital health continues to penetrate among consumers due to increased used of electronic health records, smartphones and wearables, increasing number of healthcare providers and payers will continue to make strategic investments in the space. M&A activity will increase, new investors will continue to back startups and new solutions to existing healthcare challenges will ramp up in the country. United States is well poised to continue its dominance in the digital healthcare space.

 

 

 

 

 

 

 

References

https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical.html

https://www.ama.org/publications/enewsletters/marketing-news-weekly/documents/ama_dom_digitalhealth_052017.pdf

https://rockhealth.com/reports/in-biggest-year-of-digital-health-funding-women-ceos-emerge-as-q3-2017-winners/

https://rockhealth.com/reports/2017-midyear-funding-review-a-record-breaking-first-half/

http://markets.businessinsider.com/news/stocks/Digital-Health-Market-mHealth-Segment-Growing-at-36-5-CAGR-to-2024-1002252434

https://storyofdigitalhealth.com/startups/

https://www.cbinsights.com/research/top-acquirers-digital-health-tech/