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If you spend time at conferences, reading industry publications, or on Linkedin and Twitter these days you’ll see an entire digital health industry admonishing traditional health care for being out of touch, slow to innovate, and resistant to change. The reality (as is often the case), is quite different from the hype.
The fact is, the health care industry is an innovation machine–but it remains cautious about digital solutions for a reason. Unlike digital health companies, success and failure in health care incumbents aren’t judged by their latest valuation (promise), but by life, death, patient results, and costs (value). Promise and value seldom arrive at the same time in health care–and digital health’s promise is still far from realized.
In short, they’ve “seen it before,” and are slow to jump on “innovations” that lack clear need, clear value, and validation. This scrutiny is a good thing. One day, we’ll all be patients and we’ll be better for it.
A mental health crisis
Yet there are areas where digital health could contribute, such as in mental health. America is in a mental health crisis. The nationwide shortage of mental health professionals combined with an enormous need has made finding timely access to affordable care painfully difficult.
Pre-pandemic statistics reported that more than half of the 50 million Americans diagnosed with a mental illness do not receive treatment. For as many as 60% of people that do receive care, it consists solely of a drug prescription–far too few receive psychosocial treatments that can teach them valuable skills and provide the confidence to navigate daily life, such as talk therapy or Cognitive Behavioral Therapy (CBT).
Digital therapeutics (DTx)–clinically validated medical interventions delivered via software–have the potential to help bridge some of that gap. While still in the early stages of serious mental illness, there are a growing number of digital therapeutics directed at the behavioral aspects of a wide variety of diseases. For example, video games for children with ADHD or apps to deliver cognitive behavioral therapy for people with bowel disease, heart disease, and diabetes.
By extension, a picture begins to emerge where digital therapeutics could offer a cost-effective way to scale therapy that would be impossible to accomplish by relying on face-to-face interactions, whether live or via telehealth. Given the length of time it takes to recruit and train new clinicians, extending treatment to include scalable DTx interventions would seem to be an obvious choice.
The underutilization conundrum
In 2021, $29 billion in venture funding went into digital health, with $5 billion going to mental health alone–more than any other disease category. Yet we rarely hear of outcome stories or see case studies with large numbers of patients.
Even evidence-based digital therapeutics are massively underutilized. Providers and payers alike remain skeptical, driven by real and appropriate concerns over what is best for patients in light of the lack of demonstrated value beyond treatment as usual.
Too many of these well-funded digital health companies employ a ‘Field of Dreams’ go-to-market strategy (if you build it, they will come), and comparatively spend little time unpacking why or how they should scale and whether scaling would provide value in the first place.
That fatal flaw manifests itself in the linear way many DTx companies approach the market: Identify some need, build a product, test it in a limited manner, seek FDA approval, hope to receive coveted reimbursement codes, and then assume that provider uptake and sales will follow. When it doesn’t, they fall back on the false assumption that traditional health care is stodgy, slow to embrace innovation, or uninterested in new treatments rather than taking a hard look at what might be very good reasons why cautious health care players have been slow to embrace their products.
Adopt a value-based mindset
Instead, digital players should adopt a value-based mindset starting with the hard and humbling work of understanding where the capability of your product and/or service is most valuable, to whom, when it should be used, and where it fits in the patient’s care journey. This approach stands the greatest chance of producing real value in the form of better clinical outcomes, patient and clinician satisfaction, and net reductions in the cost of care.
Mental health disorders are complex–and treatment journeys are long, complicated, and often disjointed. There must be confidence across the ecosystem that the improvement a digital treatment can offer is real and repeatable. A typical journey for a patient with Schizophrenia, BiPolar Disorder, or Major Depressive Disorder can include interactions with law enforcement, emergency, inpatient, residential, intensive outpatient, virtual care, home care, and often all of the above.
The billion-dollar question becomes: Where does your treatment fit in that continuum to help patients? Answering that question is incumbent on the digital therapeutics company, but many companies simply expect the ecosystem to suck their digital therapeutic into the appropriate place and/or rely on payers or employers to do so.
Complicated economics
For the last 15 years, I’ve worked closely with payers and providers to successfully innovate and integrate new technologies into care delivery.
The mental health industry is already aware of the harms of overprescription and knows evidence-based digital treatments can drive value. It also knows it can’t recruit, adequately train, deploy, and pay enough therapists to meet surging demand. Digital treatments are less expensive, standardize treatment delivery, and offer enormous opportunities for health equity.
However, that promise simply isn’t enough. The digital therapeutics world needs to prove it can deliver.
Saying “PTSD is a $200B economic burden with few solutions” is not strategic market mapping. Building a detailed map of PTSD (for example), starting with an understanding of a patient and what their life is like: How does PTSD impact them and their family; where/when do they get treatment; what the treatment looks like; and who provides it. What are the gaps and does filling those gaps provide value creation opportunities? Ask who pays for treatment now and what value looks like to them. Is change needed? For example, if medication is cheap and effective, why would someone use or pay for a digital product instead?
Too many startups don’t have a real understanding of the complicated economics behind the care models they’re trying to disrupt. A granular understanding of how the usual treatment is conducted and paid for is a critical first step to aligning your business model to that of your prospective partners. From here, you can model the value opportunity created by your product and work to design what and how you charge for the product according to how your prospective partner will benefit. Unless a company is willing–and able–to do this they’ll continue to fight an uphill battle and be perceived as just another tech solution adding cost on top of treatment for an ecosystem that is already operating on razor-thin margins.
With each partner, chart each step of care delivery in their world. Don’t assume the industry will know how and where to implement your solution. If it can’t be easily and seamlessly implemented, it won’t be used, deployed, or paid for–and the work to streamline that process needs to be done up front and in granular detail.
Get utilization and clinical buy-in, regardless of whether there’s a reimbursement code and good economics in the early going. Without demonstrated utilization, getting pull for new products is almost impossible. Deploying new treatments requires not just validation of outcome in controlled settings, but proof they can and will be implemented. Often the best way to do so is a low-cost proof of concept program with defined scope, timing, and value targets.
What we as health tech entrepreneurs view as breakthrough innovations, the incumbents in the health industry look at as barely validated treatments that create additional costs and an implementation burden. Until that disconnect is mended, digital therapeutics will struggle to achieve real adoption.
Mike Desjadon is Chief Commercial Officer at OxfordVR.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not reflect the opinions and beliefs of Fortune.
