Corporate venture capital (CVC) is on the rise, partnering with an influx of startup businesses that aim to tackle the health care system’s biggest problems and innovate on trends that are critical to the senior care industry.
With broad capabilities to invest in startups that are helping drive significant changes across the health care system, CVCs are a natural, new partner for entrepreneurs helping solve some of the health care system’s biggest problems.
“As much as big companies have figured out a lot of [health care’s] problems, they are looking at entrepreneurs to solve more,” Anna Haghgooie, a managing director at Sandbox Industries, said during a panel discussion at MedCity INVEST conference in Chicago on Tuesday. “CVCs has a tendency to dabble in innovation. It’s driven by big changes in the industry. Health care has seen a lot of changes in the last five years, and one of the ways to solve for that is by partnering with what a corporate venture has.”
With so much opportunity across the shifting health care landscape and $18 billion invested by CVCs in 2015, more major corporations are seeking out their next targets in digital health.
“The number of corporate venture capitalists that made their first investment in 2015 was a 350% increase from the same number five years ago,” said Brian Dalton, director of research at Breaking Media, a media network and home to MedCity News. “We are seeing a boom time with many new rivals on the scene making their first investments.”
Within the abundance of digital health opportunities, here are the top five targets by CVCs in 2016, according to a recent survey by MedCity:
1. Care Coordination
The onset of bundled payments and other value-based purchasing reward systems have incentivized health care to shift toward care coordination. CVCs are looking at this trend and focusing their investments on startups that work to improve care coordination and connect the care continuum through innovative solutions.
Specifically, care management platforms are areas of interest, according to Cyril Philip, an investment professional at Providence Ventures.
“Last year, it was all about add-ons to EHR systems,” Philip said at the MedCity INVEST conference Tuesday. “This year, it’s add-ones to care management platforms.
2. Analytics and Big Data
Big data is playing a much bigger role through the national payer systems, and will continue to influence reimbursement rates. As health care systems turn toward more analytics solutions, CVCs are turning their focus to companies that provide these solutions.
“Today, it just feels like, with a combination of the Affordable Care Act and expansion of benefits, not to mention the rise of cloud and mobile technology, there’s a ton of opportunity,” Mohammed Makhzoumi, a partner at New Enterprise Associates, said at MedCity INVEST.
3. Mobile Health
Wearables are entering the market at a rapid pace, but not all mobile health technology is created equal in the eyes of CVCs. While some direct-to-consumer businesses, like Fitbit and MyFitnessPal, have become widely adapted, most wearables don’t have the same type of user adoption. However, CVCs still see mobile health as a big opportunity.
Instead of simply looking at innovative products, CVCs are targeting startup businesses that have the potential to fit in with the bigger changes in the health care industry. For example, Fitbit’s ability to track activity could incentivize a consumer to use it by saving them money on their health care insurance bill after sharing that information with the insurance company, according to Tom Sudow, director of business development at Cleveland Clinic Innovations.
CVCs have their sights set on mobile health technology that can fit into a larger scheme with insurance payers.
4. Home Health Care
Home health care is also at the center of the shift to low-cost care settings.
With a recent $5 million backing by Kaiser Permanente Ventures, Hometeam, a California-based private duty in-home care provider that matches caregivers with patients, is a prime example of a startup that some CVCs are looking to back. Prior to the $5 million investment from Kaiser Permanente Ventures, Hometeam has raised $38.5 million through two rounds of funding.
“Acute care will be delivered more at home and at Walmart than at a doctor’s office,” said Sudow. “We have to ask ourselves, what is it that is going to reduce the cost in the health care system? …Technology can support that.”
Compared to traditional venture capitals, CVCs may be more interested in home health with a longer innovation period. As incentives slowly start to weigh more heavily on home health outcomes, CVCs see this space as an opportunity to increase care coordination, improve patient care and lower overall health care costs.
“It’s a 50-year game,” said Liz Rockett, principal at Kaiser Permanente Ventures, when discussing the long-term vision of health care investments. “It’s so critical be thoughtful and judicious, but knowing that it is over the longer term.”
5. Clinical Workflow
Some of the biggest cost drivers across the care continuum are based around inefficiencies in workflow. As the incentives continue to be placed on efficient care and interoperability, startups that improve clinical workflow are some of the hottest investment opportunities for CVCs.
Written by Amy Baxter