Dreamit Ventures surveyed 14 health system CIOs and innovation leaders in Q4 2021 to see how healthcare organizations are adapting to the new normal of the ongoing pandemic. Participants include innovation leaders in systems ranging in size from 250 to more than 1,000 beds. Notable systems surveyed include Children’s Hospital of Los Angeles, Moffitt Cancer Center, Atrium and Children’s Hospital of Philadelphia, among others. The survey was geographically diverse, reflecting some meaningful changes in the way the healthcare system now engages with startups.
As the Covid-19 pandemic continues to put pressure on healthcare organizations across the country, corporate health leaders say they are seeking innovative solutions to address the pain points of the crisis as well as new healthcare delivery models. This includes doubling down on improving the patient experience and access to virtual health, as well as solutions to reduce widespread clinician burnout and provider shortages. However, only solutions with a demonstrable ROI that integrate into EHRs and existing workflows will be seriously considered.
“Solutions that create a better, more engaging consumer experience are more important than ever,” said Todd Dunn, vice president of innovation at Atrium Health. “However, they must deliver measurable business and clinical outcomes. The burden of proof has never been higher.”
Despite the stricter standards adopted, record levels of investment are flowing into digital health companies.according to CBInsights, U.S. funding for medtech startups hit an all-time high of $37.9 billion. Globally, digital health funding was $57.2 billion, median late-stage deal valuations increased 3x, and the average time between growth-stage fundraising was shorter.
But can these well-funded startups achieve the rapid growth assumptions consistent with this level of funding? Only time will tell, but any seasoned medtech investor knows that “rapid scaling” is an oxymoron when it comes to selling to enterprise healthcare systems, providers and payers.
There are many positive signals. IT budgets are gradually recovering. While 2020 was marked by IT budget freezes and deep cuts, 30% of health systems surveyed see an increase in health tech budgets in 2021, compared to 5% of ours 2020 Survey. While 25% of respondents reported freezing budgets in 2020, only one system reported a new freeze in its IT budget in 2021. It stands to reason that bigger budgets would have a favorable effect on startups.
From 2020 to 2021, the areas of greatest concern are mental and behavioral health (50% to 92%), operational efficiency (64% to 92%), and provider workflow and burnout (20% to 62%). Health The emergence of social determinants of and family hospitals also represents an area of increasing interest for healthcare organizations. Our experience from our national network of healthcare providers shows that new challenges fuel a strong interest in innovation. The outlook is positive for platforms addressing many of the emerging “fire” problems.
However, an additional challenge for startups heading into 2022 is HR and IT bandwidth constraints. 80% of respondents said IT costs, capacity constraints, and other EMR integration issues face challenges when working with healthtech startups.
“Bandwidth for timely implementation remains our biggest challenge in working with startups,” said the innovation director for a large integrated health system in the mid-Atlantic.
“Initiating the pilot is especially challenging now, given the overwhelming burden of burnout for healthcare workers as we approach the third year of the pandemic,” said an innovation leader at a large children’s hospital in the Northeast. The combination of staffing shortages makes it more challenging to engage in new technology solutions.”
Overall, CIO reports need to balance the challenges they face with the risks associated with working with startups.
“We’re very interested in working with startups, but we also need to think about long-term planning,” said a senior innovation executive at a mid-Atlantic mid-sized integrated health care system. “Startups are high risk, which makes it challenging to ensure long-term plans work and solutions meet our needs.”
As the pandemic enters its third year, our survey shows promise for digital health companies that solve pressing problems, deliver demonstrable ROI, and improve provider workflows. The drive to meet these challenges has never been higher. But the valuation bubble isn’t high, and it’s safe to say that many startups won’t make the cut given the expectations of health system CIOs. In a few months, this could be the best of times and the worst of times.
Photo: Khanisorn Chaokla, Getty Images
