With the distractions and disruptions of Covid finally fading, digital health enters 2023 with a clarity of vision, if not full predictability, not enjoyed for three years.
The broader underlying trends driving digital health – for example, the digitalisation of health systems, hospital IT upgrade investments and a shift towards value-based care (VBC) models in the US – continue. These have the overarching goal of reducing the costs of healthcare provision, streamlining workflows, improving patient care and expanding healthcare services reach.
For some digital health players, particularly the disruptors who entered the market (with mixed success) directly in response to breakneck pandemic-driven demand, the ‘end’ of Covid creates new challenges to their models. In the highly fragmented remote patient monitoring (RPM) market, in particular, some companies will fall by the wayside. For others, the relative calm of 2023 buys time to plan with greater certainty and implement strategic plans. As such, specific trends will emerge in digital health in 2023, which we outline here.
Big Tech Becomes Mainstream
After almost a decade of knocking on digital health’s door, Amazon, Google and, to a lesser extent, Microsoft will finally make the leap from pure cloud play into healthcare IT and services. Amazon and Google will build on recent acquisitions and product launches to cement their position as disruptors in healthcare IT and services.
VBC will drive Big Tech’s move into the mainstream. Amazon’s HealthLake data aggregation solution, launched in late 2020, will kick on. We also foresee Amazon making more acquisitions this year to flesh out its portfolio. This follows its $3.9B acquisition of primary telehealth concierge business One Medical last year.
VBC will also be the springboard for Google’s digital health strategy in 2023. The company will expect to leverage its $1B Verily investment, the launch of an AI-powered medical imaging suite last October and its Care Studio platform. These, along with an integration tie-up with EHR vendor MEDITECH, promise to disrupt the existing IT vendor ecosystem in 2023.
In the public cloud market, the power struggles between EHR vendors and Big Tech, which have been a feature in recent years, will make way for a more collaborative approach this year. Partnerships between Google Cloud and Epic (in the US), and Amazon Web Services (AWS) and Dedalus (in Europe) will accelerate the adoption of hospital EHRs to the public cloud (from a relatively low base of just 15% in the US in 2022, for example). As more hospitals complete their migration journeys, hospitals will in 2023 start to realise lower operating costs, total cost of ownership and improved data security. Increasingly analytics and artificial intelligence (AI) will play an influential role in this, particularly in the early stages in the curation of data to support clinical decision making. Big Tech’s role as a conduit for IT vendors delivering software to provider and payer organisations will also evolve during the year.
VBC Reboot Takes Root
Having been hamstrung by Covid for three years (after underwhelming and underperforming for the best part of a decade), the US VBC market will finally shake off the shackles and reach its true potential in 2023. The value of the global VBC market is forecast to reach $11.3B in 2025 (with the US accounting for 80% of that), from $6.8B in 2021.
Large health systems, Integrated Delivery Networks (IDN), big tech, big retail and major EHR vendors will all drive VBC services adoption. Business models will be increasingly predicated around VBC, and new revenue streams realised.
IT will play a central role in this, especially investment in risk stratification, care management and patient outreach tools.
US retail health clinics are aligning with this new VBC reality (see also below). This year will also see pharmacy retail giants expand their primary care services to more of the population than ever before. It is forecast that these clinics will, in 2023, account for double the share of the US primary care market than they did in 2022, deploying their financial firepower to develop the scale needed to improve patient experiences and reduce total healthcare costs.
As more large retail clinics offer primary care services and IDNs continue to acquire practices and hospitals, there will be a continued reduction in the number of small, independent family practices and standalone hospitals in 2023.
Size is Everything: Consolidation Around Big EHR Vendors to Pick Up Pace
The trickle towards procurement around large hospital EHR vendors, underway over the last two years, will become a more pronounced stream in 2023. This will widen the gap between the likes of Epic (in the US) and Dedalus (in Europe), and tier-2 vendors.
In Europe, consolidation around big EHRs will be notable in Germany, where the €4.3B Hospital Futures Act (KHZG) hospital digitisation initiative is being executed. KHZG funding allocations are based on the vendors meeting criteria around 11 main pillars covering diverse technologies. Big EHR vendors hold the cards in this.
Oracle Cerner is poised to capitalise on this trend in the UK, where the NHS is encouraging Acute Trusts that are part of the same Independent Care System (ICS) to move towards a common vendor for EHR. Oracle Cerner is already well placed in this market. However, the company has challenges elsewhere this year, and the market will be watching its steps closely. It continues to grapple with a steady erosion of US market share to rival Epic, as well as persistent problems with its flagship Millennium EHR solution on a multibillion US Department of Veterans Affairs contract. Cerner, which was acquired by Oracle last year, must also find a way to stage manage fallout from software multinational SAP’s recent announcement that it would pull support for Oracle Cerner’s i.s.h.med EHR solution by 2030. This year, we expect Oracle Cerner to respond to this by offering clarity to its customers on its intentions for i.s.h.med. Until it does, the vultures will be circling.
Household Names to Become Synonymous with US Primary Care
Walgreens, CVS and Amazon will become household names in primary care provision in the US in 2023, deploying their unrivalled physical reach and supply chain and logistics expertise to reach more of the US population than ever.
This follows a 2022 of headline acquisitions including Walgreens company VillageMD’s $9B purchase of urgent care provider Summit Health, and CVS’ $8B buyout of Signify Health. As the US retail pharmacy chains assemble the technology (for example risk stratification, analytics and workflow tools, as we discussed earlier) needed to transform primary care, these, alongside healthcare systems, payers and independent practices, will begin to make more money from VBC.
The retail giants will, however, face challenges in 2023. These include how to handle higher acuity cases, and how to manage the connection between healthcare provision and securing reimbursement from government and commercial payers.
Telehealth and RPM to Change Tack
Telehealth and RPM will adopt a more strategic stance in 2023, replacing the reactive, quick-win approach of the Covid era. Cementing themselves in a maturing VBC ecosystem, telehealth and RPM vendors will support VBC delivery. Real time remote patient data and video/virtual consultations will be at the heart of this effort.
We expect more acquisitions, partnerships and product launches from telehealth leaders Teladoc and AmWell, as well as VBC pioneers Innovaccer and Health Catalyst. As telehealth and RPM becomes more mainstream and more consolidated, the emphasis here will be on developing toolsets that will manage patients and serve VBC contracts via virtual care.