Home care startups in the digital healthcare space are beginning to determine which path they should take as they adjust to a new investment environment.
Despite some troubling digital health investment numbers, insiders at Rock Health Advisory say a shift in strategy and a willingness to partner with other like-minded companies is helping these companies survive.
“One of the exciting things we’re seeing now is more of a payer and provider understanding that there’s no one digital health app to rule them all,” said Tom Cassels, president and CEO. director of Rock Health Advisory, at Home Health Care. New. “To really solve complex problems, these digital health solutions can complement each other.”
Rock Health is a San Francisco-based strategy and consulting provider focused on the digital health market.
Cassels cited the partnership between SCAN Health Plan and MedArrive as an example.
The two companies partnered in December to provide a COVID-19 booster and flu shots to homebound seniors in Los Angeles and Orange counties in California.
Cassels also mentioned the partnership between virtual care company Teladoc Health Inc. (NYSE: TDOC), digital pharmacy company Capsule, and Scarlet Health, a division of BioReference Laboratories.
In this relationship, Teladoc can now offer same-day drug delivery and home lab collection.
“What that tells you is that there will always be people, processes and technologies,” Cassels said. “These kinds of add-on systems are signs of maturing and understanding how to work with digital health at an entry level.”
While a number of digital health companies are forced to lay off staff after growing too big, too soon, Cassels said others have been able to survive by partnering with established providers or payers.
There are still slight concerns from insiders about the profitability of digital health startups, given the economic uncertainty and a slowdown in transactions. Cassels believes the second half of 2022 will see more M&A activity than the first half, in part because of the maturity some of these digital health companies have shown.
“I think we’ll probably see a pick-up in trading in the second half as people find true north in terms of their valuation,” he said. “I think there will be a number of private equity firms looking at later-stage companies that won’t go public. If you look at the index of digital health companies, it’s come down significantly this year. I think the acquisition in this space of mature companies through private equity is something that we are looking at.