Business Models of Digital Health Technologies: Implications for ROI

In my last post I discussed problems with measuring the ROI of digital health technologies.  One of the problems is that the sector doesn’t fit neatly into traditional healthcare business models. There have been multiple articles  written about business models of new digital health technologies. A quote from yet another article from an attendee of a past mHealth Summit expressed an interesting view “…I came away from the panel with very little new knowledge. A business model to me answers one of two questions, and often times both; (1) How do we make money? and/or (2) How do we save money? Sadly, there was little to be gleaned from the speakers regarding the actual business models they have attempted to deploy, successful or not…”  I believe that this describes the crux of the issue. Monetization of these technologies is problematic and what I would describe as business models.

In the remainder of this post, I will propose what I consider potential business models for digital health technology companies.

1.    Traditional business model:  This model follows the path of traditional medical devices or other products. They are digital technologies that I would say fall into two categories: IT and patient management devices/apps. The IT products include EHRs, analytic tools, and any IT add-ons which address operational or patient management issues. The medical device/app portion consists of those products required to go through FDA approval. They are purchased by or licensed to healthcare practices and institutions. The ROI of the IT portion is elegantly discussed in an article by HIMSS. The article references a trilogy of tangible value of financial, clinical, and organizational described by  the Center for Informational Technology Leadership. The HIMSS article documents studies demonstrating decreased medication errors and improved patient satisfaction with EHRs. That being said, there is little evidence of any cost savings (and perhaps a negative ROI) as examined in a New York Times article.  There have been positive ROI experiences with patient portals. ROI has not been demonstrated for remote patient monitoring, even for defibrillator remote monitoring which has been around for over a decade. Other types of remote monitoring, especially in the context of preventing hospital readmissions has yet  to be extensively studied across different disease states as well as socioeconomic and geographic spectra. A potentially significant player in affecting IT ROI will be analytics. These technologies will hopefully calculate their own ROIs.

2.    Partnerships with established companies: Many small digital health tech companies have single products. They are looking to get into the marketplace but are competing with companies offering multiple products or those already having customer distribution. The value of having the R and D already done by experts is attractive to larger non-digital tech companies desiring to get into the digital space. These larger partnering companies can calculate the ROI of the technology in the context of their own business model.  Partnerships like this also might deliver more cost-effective bundled offerings to providers and other stakeholders.

3.    Entering the market via new reimbursement model systems: Insomuch as reimbursement for many digital health technologies has not been established, one needs to imagine more creative ways of both penetrating the market and realizing a positive ROI. If the technology is truly one whose value is apparent or beta sites with good analytical tools, the ACO market is one which provides an attractive source of clinical experience. Very recently a list of 100 new ACOs was released. ACOs realize the value of cost savings and/or better outcomes of technology better than traditional providers.  They look at overall outcomes more than readmission rates, have better analytical IT, and are more likely to look at costs more than revenue. Entering this market even in a small or beta site manner will offer an insight into the technology’s ROI, which can then be presented to investors, future customers, and partnering companies.

4.    Third party collection of data: Companies like IMS have demonstrated the value of data. Deidentified patient data will be increasing at incredible speeds and volume. Privacy issues aside (I am not minimizing them, merely eliminating for the sake of the issue at hand), this data will be instrumental in the ability for the sector itself and others to better identify effective technologies. The business models of IMS, Surescripts and others might serve as resources to determine an ROI for technologies collecting data, though obviously the ROI would depend upon potential impact of the data on healthcare and the third party’s ROI on the data.

5.    Consumer market: Predictions about the potential of wearable sensors and other technologies in the consumer sector project sales in the billions of dollars. It is difficult to price a digital technology, particularly something like an app. This makes it difficult to estimate development budgets as well as ROI. However, there are presently enough products on the market to use as blueprints for similar addition, market research needs to be robust enough to segment out the space in order to obtain more accurate estimates of ROI.

In summary, there are various business models of digital health technologies, which will be determined by the type of customer (some techs will have multiple end users or capabilities and therefore business models).  The business model will directly determine the ROI.   In addition other factors will determine the ROI, not the least of which is demonstration of the effectiveness of the technology in reducing costs, increasing efficiencies, and/or improving outcomes or maintaining wellness. Analysis of currently available products and rapid adoption on even very small scales will help determine ROIs. 

About davidleescher

David Lee Scher, MD is Founder and Director at DLS HEALTHCARE CONSULTING, LLC, which specializes in advising digital health technology companies, their partners, investors, and clients. As a cardiac electrophysiologist and pioneer adopter of remote patient monitoring, he understood early on the challenges that the culture and landscape of healthcare present to the development and adoption of digital technologies. He is a well-respected thought leader in mobile and other digital health technologies. Scher lectures worldwide on relevant industry topics including the role of tech in Pharma, patient advocacy, standards for development and adoption, and impact on patients and healthcare systems from clinical, risk management, operational and marketing standpoints. He is a Clinical Associate Professor of Medicine at Penn State College of Medicine.
This entry was posted in digital health, FDA, Healthcare IT, healthcare vendors, medical devices, mHealth, mobile health, smartphone apps, technology, telehealth, wireless health and tagged , , , , , , , , , , , . Bookmark the permalink.

3 Responses to Business Models of Digital Health Technologies: Implications for ROI

  1. Pingback: News Summary – 11 January 2013 « Tele Health and Care

  2. Pingback: The Case for Efficacy Studies of Digital Health Technologies | The Digital Health Corner

  3. Pingback: Five Imperatives for Pharma’s Digital Health Strategy | healthBACON

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s