The days of high praise for digital health companies are over, said Mario Schlosser, CEO of Oscar Health, at the Modern Healthcare Transformation Summit on Tuesday.
“Investors in digital health start with the assumption that nothing works,” Schlosser said. “This is the only way to interpret all of these estimates that we currently have, including ours.”
Schlosser was part of a panel at the Transformation Summit that included Dr. Steven Clasko, chief executive of venture capital firm General Catalyst and former CEO of Jefferson Health; Randy Oostra, CEO of ProMedica; Michael Slubowski, CEO of Trinity Health; and Karen Murphy, director of innovation at Geisinger Health System.
Clasko hinted to Schlosser and said that in 2021, someone could put the letters A and I in the same sentence, and that would be a $2 billion company. “The scores aren’t quite there this year,” Clasko said. “In a way, that’s a good thing because companies need to be more resilient.”
Schlosser called it winter for digital health investment. He said the only way to overcome this is to prove that the company has a viable business model and technology that works for its end users.
The only companies that will avoid this winter are those that fuel healthcare inflation, Schlosser said. “Some companies, like Doximity, are mainly concerned with keeping threads in the system. It still makes money, which is the irony of the American healthcare system,” he said.
The comment comes just after a difficult few months for Oscar, a New York-based insurance company. On May 10, the company announced this. leaving Colorado and Arkansas in their pursuit of profitability. During the call for the first quarter, the company reported a net loss of $77.3 million, down from $88.1 million in the same period last year.
The company’s share price has declined from a peak of $29.25 per share in June 2021 to $5.96 per share today. It is one of many public digital health companies that have struggled in the market in recent months. Others who have had a rough 2022 in the stock market include GoodRX, Teladok and Reward.
The private investment market has begun its own downturn. In the first quarter of 2022, $6.6 billion was invested, down 13% quarter-on-quarter and 8% year-over-year. according to quarterly data from Digital Health Business & Technology. There were fewer major financing deals in 2022 compared to 2021.
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Despite the market downturn, panelists remain optimistic about using digital health to transform healthcare. Murphy said Geisinger is using remote patient monitoring, artificial intelligence and patient-reported outcomes to manage chronic conditions. She said the company would rather partner with software developers and digital health companies than try to do these tasks in-house.
“Health systems have patients and know-how, and by collaborating with technology companies, we will move much faster than in the past,” Murphy said.
Clasko said that when he was at Jefferson, the healthcare system knew that partnering with some digital health companies could hurt short-term revenue, but it had to rely on an inevitable trend like home health care. That’s why Jefferson decided to invest in some digital health companies, which he did in October through a formal partnership with Clasko’s current employer, General Catalyst.
“Moody’s has downgraded many healthcare systems. Part of the reason they kept [Jefferson] with a stable ‘A’ rating meant that we were not only responsive to changes that would affect our traditional income streams, but also began to own a certain percentage of those [digital health] companies that will destroy,” Klasko said.