Spotlight on Consumer-Directed Technologies: 7wireVentures 2024 Digital Health Predictions

2023 was a dynamic year for our industry, our nation, and the broader international community. On a global scale, regional conflicts, natural disasters, and political instability highlight the uncertainty of what lies ahead. Accompanying these disasters were economic and banking challenges, including the continued rise of inflation and collapse of Silicon Valley Bank that threw the start-up world into crisis. Within the healthcare arena, hospital expenses continue to outpace reimbursement while labor shortages leave hospitals understaffed and clinicians overworked.

Despite these challenges, the year presented its share of bright spots. ChatGPT entered the world, holding the record of the fastest growing consumer app in history. The year also saw investors and entrepreneurs increasingly focus on business fundamentals and responsible cash management, a trend we expect will continue into 2024.

Within the digital health sector specifically, the gradual return to normalcy makes us cautiously optimistic we are hitting a stable, more sustainable state for the near future. 2023 is projected to close with $10.7 billion in funding (annualized based on YTD Q3), relative to $8.1 billion in 2019 (pre-COVID), $29.2 billion in 2021, and $15.3 billion in 2022. From a segment perspective, 2023 funding flowed towards companies that provide services to support disease treatment and complex conditions management. Further, investors continued to demonstrate confidence in virtual platforms and services for mental health support due to the durable commercial interest and persistent consumer demand post-pandemic.

At 7wireVentures, we believe that 2024 will see continued innovation within the digital health space and provide increasingly personalized, effective healthcare for all. Our predictions for the new year include:

#1 The Algorithm Will See You Now – Generative AI will be ubiquitous in administrative functions and carefully migrate into clinical service to support the delivery of care

While AI is not new to healthcare, rapid advances in the field in recent years represent an early start to the industry’s next chapter. In particular, 75% of health executives believe generative AI will reshape the industry by increasing efficiency of administrative processes and boosting productivity. However, only 6% of those same executives have a plan in place to integrate artificial intelligence into their clinical workflows. As AI development continues, we expect to see commoditization in the space fueled by an increasing number of free, open-source AI models. Similar to the journey of cloud infrastructure and services, more offerings in the market will drive downward pressure on price. In short, large language models themselves will become table stakes — a basic infrastructure instead of a true source of competitive advantage.

The democratization of generative AI technologies will lower the barriers to adoption and push the industry to view AI integration not as a “nice-to-have”, but as a “must-have” component of their operations and offerings. Health systems in particular will increasingly deploy generative AI tools to reduce costs and alleviate labor shortages. The technology will span multiple use cases, from creating more efficient administrative workflows, to expediting the nurse hiring process, to preventing payment fraud. Digital health companies will integrate the technology into their platforms to support more personalized care experiences, increase engagement, and drive clinical adherence and efficacy. “Ultimately, AI will not replace doctors – but doctors using AI will replace doctors not using AI.”—Tom Lawry, Former National Director of AI for Health & Life Sciences at Microsoft.

#2 The Great Digital Health Shakeout – In light of a tempered financing environment and increased buyer scrutiny, digital health consolidation will accelerate as players aim to broaden their value propositions

The digital health industry is still an emerging market that continues to mature. As buyers grow more sophisticated and funding markets become less forgiving, we expect a surge in both vertical and horizontal consolidation, as companies seek to enhance the value delivered to members. Companies in the sector will seek to both enhance their value proposition by offering consolidated, one-stop-shop offerings to consumers, and to strengthen their businesses by leveraging efficiencies of scale such as business model synergies and larger combined networks. The digital health sector saw a number of significant transactions, including CVS Health’s $10.6B acquisition of value-based primary care provider Oak Street Health, Amazon’s $3.9B acquisition of primary care provider One Medical, and WeightWatchers’ $132M acquisition of medical weight loss platform Sequence. Notably, 7wire portfolio company Transcarent’s $100M acquisition of the employer facing assets of 98point6 earlier this year will allow the business to combine best-in-class AI technology with human touch to drive personalization and access to care.

Further, the nation’s largest retailers, payers, and tech companies have demonstrated an unwavering commitment to their digital health strategies. While most have been relatively quiet in 2023 as they work to integrate massive acquisitions completed in 2022, we forecast a revitalized M&A market in 2024.

#3 Mental Health Everywhere – Mental healthcare continues to shed its stigma, with new models incorporating holistic health practices and offering novel modalities of care to improve outcomes and expand access

To tackle a worsening mental health crisis, companies are deploying care practices that go beyond standard mental health care. Meru Health, for example, provides a 12-week program that focuses on the mind-body connection in order to bridge the gap between emotional health and physical health indicators, such as sleep and diet. Mental health companies also are providing a more integrated approach to care by building multidisciplinary care teams that support long-term mental wellbeing. 7wire portfolio company Caraway provides its members access to an integrated team of therapists, gynecologists, nurses, and other clinicians alongside the company’s in-app MyPath tools to create a comprehensive approach for consumers to improve their physical and mental health.

Beyond expanding the scope of mental healthcare, companies are increasingly exploring new ways to reach patients to address access challenges and increase the effectiveness of care. New modalities have focused on self-guided approaches to care, such as virtual reality, AI-based conversation tools, gamification, and content-based learning. 7wire portfolio company Brightline is utilizing a multi-pronged approach to support scale in a way that provides immediate, personalized access to care. On-demand content, supportive communities, and evidence-based care delivered by coaches and clinicians allows Brightline to engage their members 24/7.

#4 Tackling the Nation’s Obesity Crisis – Growing public attention around the rise of obesity will increase demand for treatments and coverage by employers and health plans

The obesity crisis continues to shake the U.S. and consumers are exploring new ways to address their health, as evidenced by the skyrocketing GLP-1 usage this year. Novo Nordisk’s Ozempic and Wegovy, as well as Eli Lilly’s Mounjaro, dominated pharma markets this year due to unprecedented demand, a trend that will likely continue. While originally prescribed for patients with diabetes, their medical weight loss benefits have been garnering increased public attention. Forty-three percent of employers plan to cover weight loss drugs in 2024, nearly double the share of employers that cover them now (25%).

However, these drugs remain expensive, with Wegovy’s price tag at $16,188 per year. As popularity for these drugs continues to grow, employers will face financial challenges to cover these highly effective treatments. To support cost containment, we expect the most successful digital health players in the space will create a multi-pronged approach, that integrates seamless access to prescriptions with broader support for mental health, nutrition, diet, and other lifestyle factors. Though successful solutions will responsibly enable access to a range of obesity treatments, they will treat these medications as an entry point for consumers to jump start the weight loss journey. Ultimately, these players will strive to encourage behavioral pattern and lifestyle shifts for durable improvements in health. Accordingly, companies are incorporating these medications into their integrated cardiometabolic platforms to provide tangible consumer results. 7wire portfolio company 9amHealth, for example, offers unlimited access to an expert care team of physicians, pharmacists, nutritionists, and health coaches, delivering cost-effective strategies in cardiometabolic care to maximize the value of GLP-1 medications and provide personalized treatment for all cardiometabolic conditions, including weight loss.

#5 Investing in Underserved Communities – Investment will expand in offerings designed to support urban poor, rural health and seniors

With the end of the COVID-19 federal Public Health Emergency (PHE) declaration on May 11th of this year, the healthcare industry faced setbacks across multiple programs and permissions that were temporarily put in place during the pandemic. This new regulatory landscape has shifted the coverage, accessibility, and delivery models for healthcare that were in place over the past several years. Notably, the conclusion of PHE ended the continuous enrollment period for Medicaid members. As of December, the Kaiser Family Foundation recorded 11.9M disenrolled Medicaid members.

Current estimates predict unmet health-related social needs for Medicaid enrollees impact up to 50% of health outcomes, representing a significant issue. To reach these consumers, state Medicaid agencies are encouraging health stakeholder partnerships with Community Based Organizations (CBOs) to assist in meeting both social and health needs. We expect these partnerships to deepen in 2024 to stem the fallout from Medicaid redeterminations and harness the established trust built by CBOs to provide more effective care. Platform players like GroundGame.Health represent a critical intermediary point between these organizations, by funneling the right experts and funding from MCOs to CBOs to provide the right services for patients in need. 7wireVentures portfolio company SameSky Health’s multicultural engagement platform guides health plan members and patients on their care journeys by building trusted relationships as they navigate the healthcare system. Further, given Medicaid enrollees’ prevalence of chronic and mental health conditions, the space will increasingly focus on creating platforms capable of personalizing services tailored to prevent and/or address complex health conditions.

#6 It Takes a Village – Medicare’s new rules will ease the consumer healthcare experience by providing social health support and assistance with navigating complex chronic illnesses

In November of this year, the Centers for Medicare & Medicaid Services (CMS) finalized sweeping new policy changes for 2024 in the Physician Fee Schedule (PFS) for Medicare payments. This year’s changes highlight the Biden administration’s commitment to creating a more equitable healthcare system that is simpler for all patients to navigate. Accordingly, notable changes to next year’s PFS focuses on holistic health and providing the right support for patients. Additions include new reimbursement pathways for caregiver training, telehealth services, and mental healthcare. Medicare will also now support additional reimbursement codes that tackle social determinants of health (SDOH). These new codes enable providers to receive reimbursement for conducting SDOH risk assessments for patients and providing community health integration services accordingly.

In particular, the new Fee Schedule provides reimbursement for Principal Illness Navigation (PIN) so that patient navigators and peer specialists can be reimbursed to guide patients who are facing severe and/or debilitating illnesses. This change works in conjunction with the White House’s Cancer Moonshot efforts to decrease mortality rates and improve cancer care navigation. Patients can now utilize experts to coordinate care across multiple stakeholders, receive health education, for additional advocacy, and more. In the same spirit, 7wire portfolio company Jasper Health provides an end-to-end care experience that navigates, connects, and provides actionable insights for individuals with cancer, caregivers, and providers throughout the cancer journey. With new codes for reimbursement that prioritize many consumer journeys in place for 2024, we predict health stakeholders will take actions to address barriers that those facing unmet social needs and/or undergoing complex treatments experience.

#7 Health Impacts of Climate Change Emphasized – Acknowledgement that climate crisis has equivalency to health crisis will take center stage in 2024  

Climate change is costly. The growing frequency of natural disasters are increasing global death tolls and costing billions of dollars of structural and community damage. The frighteningly frequent “100 Year” events and shifting environments are expected to cost $820B in annual health impacts. The heaviest burden of these shifts will fall on vulnerable populations who are unable to afford to move or rebuild their homes. Even “expected” natural events are starting to balloon in consequences – the California wildfires this year burned more intensely than ever before, causing a ~20% spike in Valley Fever, which causes fatigue, shortness of breath, and even lung damage. Globally, annual agricultural burning practices in Northern Thailand are causing unprecedented levels of smog and pollution, and over 1.3M people suffered from air-pollution related diseases.

To tackle this issue, we expect healthcare companies to increasingly focus on investing in innovative solutions to adapt more rapidly to these changes and reduce downstream costs. This area is ripe for disruption. Innovative solutions will harness both individualized health data and local environmental data to provide tactical information to consumers. For example, Alphabet’s Breezometer provides personalized insights by using hyperlocal climate data to understand how much pollution is in the air and how to best manage any health conditions accordingly. This intersection between climate and health will continue to expand as a focus area as climate shifts continue to exacerbate consumer health conditions.

As we look towards 2024, these 7 trends will surface within the healthcare space amidst a dynamic social, political, regulatory, and economic backdrop. These predictions are fueled by our deep conviction in the power of digital health and our continued faith in companies within this space to utilize technologies to craft a better health journey for consumers. We are excited to continue working with inspirational entrepreneurs and companies in 2024 to support our mission to empower a growing number of Informed, Connected Health Consumers.

Happy Holidays and Happy New Year!