A.I. Healthcare: The Go-To-Market Opportunity for Digital Healthcare
by Robert James Horne & Margaret Wehrenburg / Published January 30th, 2024
Key Takeaways:
Leading health technology investors are starting to agree with Forest Hill Labs that A.I. healthcare companies are a go-to-market opportunity for the larger digital health sector.
The transition from a consumer market to the more lucrative medical care and insurance coverage markets are the prize.
Pay particular attention to:
A.I. healthcare company Dario Health which appears to be leading A.I. healthcare companies because of its integrated service offerings platform (i.e. gateway) for the digital health market to use;
Amazon’s digital therapies store (similar to Apple I-Tunes) is another potential gateway which we anticipate will make using digital medicines and therapies easier for insurance plans to cover/people to use
For clues on the evolving functional nature of A.I. as a medical services workforce alternative, look to behavior/mental health and other forms of therapy.
‘Shaping the Medical Care Market for Digital Health” Forest Hill Labs, 2024
Introduction
A digital 4th industrial revolution in healthcare has been on the minds of lawmakers and industry CEOs for decades. While significant steps have been made in certain segments of the market, such as electronic health records and clinical decision support products, full market disruptions that usually accompany these revolutions have been missing.
Until now.
We and leading health technology investors believe A.I. healthcare companies are the go-to-market opportunity for the larger digital health sector. We explain our thinking below.
Artificial Intelligence: A “Go-To-Market Strategy” for U.S. Digital Health
Artificial Intelligence (A.I.) health care companies are creating new market opportunities for other companies in the digital health sector. The transition from a consumer market to the more lucrative medical care and insurance coverage markets are the prize. Investment firm Andreessen Horowitz recently released a report that identified AI healthcare companies as the go-to-market moment for the entire digital market.
“In the digital health public markets, there are (1) tech-enabled service companies that have excelled in speedy go-to-markets, but have been low margin due to human labor, and (2) healthcare SaaS companies that are high-margin, but have struggled in go-to-market because of the difficulties of selling SaaS to human-loving healthcare entities.
AI health companies will not have these limitations. Margins will be way better than human services. Go-to-market will be far easier because AI companies can sell “AI humans,” as opposed to fighting the uphill battle of selling software on which healthcare companies must train their overworked employees. Just like the internet completely transformed go-to-market for software companies, AI will transform go-to-market for health tech companies.”
One question we had after reading this report: Why are A.I. healthcare companies the solution for the larger digital health market?
Why A.I. Healthcare Is a Key Capable of Unlocking the Digital Health Market
Why hasn’t digital healthcare fully disrupted the medical market? The answer is multi-varied, but historically the functional nature of most digital healthcare products wasn’t viewed by the sector or public as appropriate for use in medical care because of quality issues that raised patient safety and medical liability concerns.
This has relegated the digital healthcare market to a consumer-facing market and not a medical market. One big difference in these markets is that most people use health insurance to purchase products and services in medical markets, and money from their own pockets in consumer markets. Needless to say, the medical market is much more lucrative than consumer-facing markets in the healthcare sector. The two biggest barriers to medical care are:
medical professionals who have generally shunned using digital health products to deliver medical care; and
insurance companies have traditionally limited coverage of digital healthcare products under health insurance products.
Many digital health companies have also been unable to demonstrate to these stakeholders the direct economic and quality-of-care improvement arguments that resonate with insurance companies. The result has been to exclude digital health from a majority of revenue opportunities in healthcare. This is why investment has fallen off over the last few years, and why some digital health companies see their future as selling the company to more established entities in the medical care market.
That is now changing. A.I. healthcare companies have begun to successfully make this transition from the consumer to the medical markets. There are several technical reasons responsible for this transition that we will explore in future articles but for now consider A.I. a medical workforce alternative. One capable of using digital therapies and other digital health products in medical care encounters. One able to realize care quality and cost benefits of these alternatives for insurance companies with business models and monthly capitated payment structures to realize improvements and savings more easily. A once-in-a-generation opportunity to better translate a digital health consumer-facing market into a new and improved medical care market.
In March 2022, we wrote an article about how A.I. in healthcare was transforming the sector. This on the heels of Amazon & CVS health using A.I. and digital healthcare to transform the business of medical service delivery using the internet and retail locations to remake the entire sector. Then investment firm Andreessen Horowitz wrote their report. In total, these pieces support the argument that labor alternatives in the healthcare market are unique opportunities to remake the sector and create savings along the way.
Recommendations
We have been tracking health market disruption because of digital health for years now. Below are a few factors Forest Hill Labs is using to track progress in the A.I. and digital health sectors. We hope you find the following useful:
Look to the medical retail business models by Amazon Health & CVS Health for clues on how A.I. healthcare companies are changing the business of medical care and coverage.
Look to behavior/mental health and other forms of therapy, which are education-based medical services and therefore the easiest for A.I. healthcare companies to replicate, for a better understanding A.I. capabilities in medical care.
Pay particular attention to integrated service offerings from:
A.I. healthcare company Dario Health which appears to be leading A.I. healthcare companies because of its integrated service offerings platform (i.e. gateway) for the digital health market to use;
Amazon’s digital therapies store (similar to Apple I-Tunes) is another potential gateway which we anticipate will make using digital medicines and therapies easier for insurance plans to cover/people to use.
Conclusion
A special thanks to the authors of the Andreessen Horowitz Report: “Underestimating A.I. in Healthcare” for their efforts. This report was the impetus to develop and write this article. Visit their website for more: Andreessen Horowitz | Software Is Eating the World (a16z.com).