Soaring demand for virtual healthcare services in the pandemic fuels M&A

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Teladoc’s $18.5 billion acquisition of Livongo results from the combination of two of the largest publicly-traded virtual care companies; and is the third-largest acquisition of a U.S. company this year. Among other deals, direct-to-consumer telehealth company Thirty Madison raised $47 million from partners including Johnson & Johnson, Humana invested $100 million into Heal, and telehealth startup Ro raised $200 million in a new round of funding; all strong signals to investors that digital health is beginning to disrupt the market.

Predictably, consumer demand for virtual care is soaring, accelerated by the pandemic, but primarily because of widespread realization that virtual care can effectively and efficiently replace some in-person healthcare services. Hospitals and insurers have leveraged telehealth platforms to monitor patients with milder Covid-19 symptoms, lessening the burden on emergency rooms and urgent care centers. Likewise, online monitoring of employees returning to work, healthcare workers operating within hospitals, and students attending schools, for Covid-19 symptoms has become commonplace.

Yet the need to manage patients virtually has laid bare some of the fundamental cracks and fissures of the healthcare system, including the absence of quality healthcare access and the critical need for platforms & modalities that effectively manage chronic conditions.

Healthcare models that offer care only after patients experience symptoms results in some of the highest global medical expenditures in the world -- with more than 75% of all health care costs attributed to chronic conditions. According to projections, by 2020, approximately 157 million individuals will be afflicted with chronic diseases; 81 million with comorbidities that require even more intensive care and focused treatment. Currently, a third of the population lives with chronic conditions, and 7 out of 10 deaths in the U.S. result from chronic diseases. In addition, widespread medication non-adherence affects half of all patients prescribed medication and treatment. Adding the complications and consequences of medication non-adherence to these disturbing statistics reveals a broken U.S. healthcare system sorely in need of an overhaul.

So what does the future of virtual care look like as healthcare players shift towards digital health technologies? With a focus on prevention and well-being, we will see technologies detecting root causes of diseases before illnesses develop into full-blown problems. Care delivery, likewise, will continue to change, occurring outside brick-and-mortar healthcare facilities and inside homes, workplaces, and even schools. These new paradigms will provide a glimpse into the interoperability of digital health platforms, and the ability to get real-time analytics and data-driven insights, furthering the goals of prevention, diagnosis and treatment.

Yet perhaps most importantly, consumers will become more engaged in their health, with increased autonomy, empowerment, and more control over their health information -- and the ability to choose their own modality of care. With technologies specifically geared towards health goals and conditions, and options that are more convenient and affordable, consumers can actively participate in their own healthcare.

Although the healthcare industry has been resistant to change and late to adopt technological innovations, the need to manage patients virtually has forced every healthcare stakeholder to embrace digital transformation. Today, even as the larger mergers and deals signify that healthcare is on a forward (and fast) moving trajectory toward digital health, along with a friendlier regulatory environment in the future, the pace of change must accelerate. A large scale industry transformation to accessible, affordable remote care, that will serve more people than ever before, cannot come soon enough.

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