StartUp Health Insights: Midyear Funding Analysis A special analysis developed by Fard Johnmar, founder of Enspektos, LLC, a digital health innovation consultancy. Analysis 1 | Published: July 20, 2015

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Using StartUp Health Insights Data to Understand and Succeed in Health’s Digital Future Since 2010, StartUp Health has tracked funding data to help entrepreneurs and innovators identify where the money is flowing and share digital health trends with the ecosystem. This data has sparked lively conversation and debate around the following questions:

• What is digital health? How to categorize organizations in this rapidly growing sector of health innovation that increasingly crosses over/intersects with health information technology, life sciences, pharma, biotech, consumer health, brain health and many other areas

• What does investment activity reveal about the digital health market? Increases or decreases in quarterly funding levels have been viewed as a sign of the digital health market’s strength — or weakness

• Are digital health companies overvalued? Some have suggested that certain digital health investments are not reflective of current and future market fundamentals — especially those related to consumer and enterprise adoption of digital technologies

While addressing these issues is important, it is critical not to overlook other relevant questions that funding data can help us answer, including:

• What does the data reveal about the shape of health’s future? Funding activity can provide important clues about which tools and technologies will have the most impact on health and medicine globally. Savvy innovators, leaders and others are using this information to chart the future of health and prepare to take advantage of (or minimize threats from) trends that may not be obvious to most.

• Can examining funding activity reveal clues about which technologies and trends are most worthy of attention? The most important decision facing entrepreneurs, executives, medical professionals, policymakers and others in health currently is not whether to participate in the digital revolution, but how. Digital health and investment data can help industry players make important decisions about which opportunities or initiatives to pursue.

• What’s next? New and established health market players will rise and fall due to the rapid pace of digital innovation in health. Who will be the winners — and losers?

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To answer these questions, StartUp Health and the innovation consultancy Enspektos will provide regular analysis, insights and tools that will help the digital health ecosystem:

• Better understand the major forces driving digital health investment and innovation activity so that industry players can improve their ability to identify new opportunities, shape their products and services and more

• Make more informed strategic decisions about where to deploy valuable human and financial resources in digital health over the short- and medium-term

• Understand what’s coming next in order to guide and accelerate digital health innovation cycles globally This analysis is divided into three parts:

• Part I: Understanding the key forces driving digital health innovation and investment activity • Part II: Introducing a unique tool designed to accelerate the digitization of health • Part III: Providing insights that will Inform digital education, engagement and scaling activities across the health

ecosystem

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Part I: Key Forces Driving Digital Health Investment and Innovation Activity As digital health has grown in scope, it has become more important than ever to cut through the clutter of new products, tools and services in order to help organizations make sound decisions about which technologies to support and develop. One useful strategy is to identify and chart the fundamental forces driving digital health innovation and investment activity. Doing so can boost appreciation of digital’s true impact, shape decision-making and simplify efforts to identify winners and losers in health’s fast-moving future. The Forces Driving Digital Health Innovation and Investment Activity in the Top 3 Market Subsectors of 2015

Innovations

Forces Investments

What are the incentives and needs

driving individual, group, organizational

and government behaviors in health?

How can digital technologies help to accelerate or

blunt these forces?

Are there opportunities to

support and benefit financially from digital innovations developed

in response to these forces?

The Relationship Between Health Market Forces and Digital Innovation and Investment Activity

The Never-Ending Cycle: Over time, digital innovations and investments will reshape the forces influencing how individuals, groups, governments and organizations behave in the global health

marketplace. These shifts will spark the development of new technologies and funding strategies.

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As outlined in the image above, there is a cyclical relationship between the forces driving health and digital innovation/investment activity. These forces (defined as the incentives and needs influencing individual, group, organizational and government behavior in health) are being shaped by the following factors:

• Human: Important needs such as the quest to improve individual health, protect consumers from harm and more • Economic: Cost pressures and financial incentives driving patient, provider, organizational and government activity • Policy: Legislation and regulations developed to influence economics, privacy, health outcomes, behaviors, etc. • Technological: Advances in technical and scientific capabilities in genomics, data processing and other areas

Below is a series of tables outlining how these forces are influencing innovation and investment activity in the top three most active subsectors of 2015 (based on investment data collected by StartUp Health). We also provide an overview of the types of strategies successful health organizations may pursue in each of these areas. Subsector: Wellness Human People globally are looking for new and easy to implement techniques to improve wellbeing.

Technology can play a vital role in education, motivation and engagement in wellness. Economic As populations age and non-communicable conditions such as heart disease become more

prevalent globally, there is an increased focus on helping people avoid costly treatments due to preventable diseases.

Policy In an effort to improve the health and wellbeing of large populations governments developed laws and regulations that support wellness activities and have sparked new innovations.

Technological Mobile is prevalent globally. Also, wearable technologies and sensing devices that operate inside and outside of the body are becoming more common and less expensive. These digital tools are making it easier to collect and deliver health data that may have a positive impact on wellness.

Winners in the Wellness Subsector Will: • Develop the ability to collect and analyze data that provides a big picture view of the physical, environmental, economic, health

and psychological factors influencing wellness • Deploy wellness initiatives that are aligned with consumers/providers’ intrinsic motivations, life/workflows and goals • Use a combination of digital technologies that are affordable, culturally appropriate, useful and invisible to improve wellness

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Subsector: Patient/Consumer Experience Human Consumers are demanding better experiences with health providers, hospitals and others.

Providers are also seeking more efficient ways to conduct patient care, engage in follow-up and more. In response, innovators are developing tools that help improve the experience of care by making it more convenient, on-demand and pleasurable.

Economic Providers, health organizations, payers and others, both in markets where consumers pay out-of-pocket for care and where treatment is largely subsidized by third parties, are recognizing the economic benefits of providing spaces and tools that improve patient satisfaction. These innovations can lead to increased revenues, boost reputation and more.

Policy Governments and regulators are emphasizing the importance of improving patient satisfaction and protecting consumers from harm.

Technological Digital tools such as (well-designed and user-centric) electronic medical records, mobile, wearables and telemedicine promise to help make health and medical care more user-friendly, responsive, predictive and convenient.

Winners in the Patient/Consumer Experience Subsector Will: • Understand the link between wellbeing and physical/mental health and medical experiences • Develop a nuanced understanding of the factors influencing satisfaction among patients of various cultural/ethnic backgrounds,

disease states and locations (rural, urban, etc.) and develop digital/physical solutions informed by these insights • Provide medical professionals with digital and analog tools, techniques and procedures that improve the workplace experience

and improve their ability to serve patients well

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Subsector: Big Data/Analytics Human In recognition that behavior is influenced by a range of health and non-health factors,

governments, hospitals, providers and others are using data analytics innovations to better understand and influence health (treatment, prescribing, wellness, etc.).

Economic Using health data in smart ways to highlight inefficiencies, improve processes, guide optimal medication selection and more may help reduce health spending globally.

Policy Concerns about rising medical expenditures — particularly in some high-income nations — are accelerating government efforts to develop and support data analytics capabilities and innovations that may help improve efficiencies.

Technological Improvements in data collection and analysis technologies and capabilities (in machine learning, natural language processing and other areas) are opening up new opportunities for computer-aided medical decision-making, care provision and more.

Winners in the Big Data/Analytics Subsector Will: • Develop human, technical and analytics resources that will help them understand Big Data’s benefits/drawbacks and develop

solutions carefully aligned with key health and organizational goals • Learn how to make data-informed insights usable and actionable, especially in the areas of diagnosis, point-of-care and

treatment (before, during and after) • Find ways to break down data silos (within and increasingly between organizations) to discover new and powerful insights,

reveal best practices and more Part II: The Digital Health Innovation Integration Curve: A Tool for Accelerating the Digitization of Health As outlined above, winners in the Big Data/Analytics, Wellness and Patient/Consumer Experience subsectors will have developed digital health-related capabilities, processes and resources in a range of important areas. However, today many health organizations have not yet integrated the types of innovations that will increase their odds of success in health’s digital future into their DNA. Organizations behind and ahead of the digital curve could benefit from a tool that would allow them benchmark their digital health innovation activities internally and externally. They could quickly see where they are doing well and identify areas requiring improvement. Over time, this tool could help to accelerate digital health innovation efforts across the global ecosystem.

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To meet this need, Enspektos developed the Digital Health Innovation Integration Curve (see below). In addition to boosting organizations’ innovation efforts, this tool can help digital health startups identify ideal customers and partners for their products and services. Enspektos has combined the curve’s staging methodology with StartUp Health Insights to provide recommendations about where organizations may want to direct their digital health innovation efforts over the short- and medium-term in the top three most active subsectors of 2015 (see Part III).

(Download the Digital Health Innovation Integration Curve toolkit from Enspektos to guide self-assessment and business development efforts. Free at http://digihealth.info/innokit.)

Digital Health Innovation Integration Curve

Time

Impact

stage II: engagement + capacity boosting

what this means: launch pilot initiatives designed to

test digital innovations and boost the capacity of individuals responsible for

using and implementing digital products, services and tools to do so

efficiently and successfully

stage I: awareness + education

what this means: become aware that certain digital

innovations may be important, engage in educational activities to learn about

their scope and potential impact

stage III: proficiency + scaling

what this means: successfully utilize digital innovations in ways that maximize their impact on

health, wellness, organizations and people across a broad range of use

cases, disease states and needs

Developed by Enspektos, LLC | www.enspektos.com | © 2015 Enspektos, LLC

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Part III: Using Funding Data and the Innovation Integration Curve to Accelerate Digital Adoption As discussed above, organizations must develop unique capabilities and resources in order to succeed in key areas of digital health. In addition, global industry players such as pharmaceutical firms, payers and hospitals are under increased pressure to deliver less expensive, but effective products and services. They also must formulate responses to aggressive new market entrants such as Apple, CVS Health and Google that are entering areas such as medical research and disease management that were once solely in their domain. At the same time, governments globally are struggling with budget shortfalls and the challenges associated with providing care to larger (and more demanding) populations while improving overall health and wellbeing. Many organizations understand that digital can play an important role in addressing these issues, but are struggling to determine which innovations to prioritize. To help, Enspektos utilized StartUp Health’s funding data and the Innovation Integration Curve to develop recommendations for organizations across four health industries in the top three market subsectors of 2015 (as measured by overall investment activity). This high-level strategic advice is designed to help organizations stage their digital health innovation integration efforts in the areas of education, initial engagement and scaling. In addition, these recommendations:

• Take into consideration organizations’ core competencies and areas of focus • Align with industry objectives related to the triple aim (boost health outcomes, reduce health/medical costs,

improve the patient experience) • Encourage organizations to integrate a combination of digital innovations related to each market subsector rather

than individual technologies; relevant solutions include:

o Wellness: Wearables, sensors, mobile and data o Big Data/Analytics: Machine learning, data visualization and sensors o Patient/Consumer Experience: SMS, mobile health applications, electronic medical records and telemedicine

Organizations’ ability to engage in innovation integration activities will be shaped by their overall goals, market dynamics and more. To conduct a personalized self-assessment, download our free toolkit at http://digihealth.info/innokit.

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Industry: Pharmaceuticals/Biotech Subsectors: Big Data/Analytics, Wellness Key Industry Triple Aim Objectives: Boost Health Outcomes, Reduce Health/Medical Costs Target Digital Health Innovation Integration Stages in Subsectors of Most Relevance to Industry

• Wellness: Stage I – Awareness and Education (and very early Stage II – Engagement and Capacity Building)

• Big Data/Analytics: Stage II – Engagement and Capacity Building

Context for Innovation Integration Staging Recommendations and Suggested Strategic Imperatives

• Context: Pharmaceutical and biotech companies are being challenged to support patients’ health and wellbeing in ways that go “beyond the pill” and leverage data in smarter ways to improve diagnosis and medication selection. In addition, some firms are focusing on developing (or investing in) new digital products and services (using existing assets such as data) that have the potential to supplement or replace a portion of revenue from prescription medicines.

• Strategic Imperatives: In this environment, it is important that pharma and biotech firms educate themselves on how best to effectively shape health and wellness behaviors using digital technologies. They should also aggressively mine and operationalize internal and external data sets in order to optimize research, diagnosis and treatment (alone and in combination with mobile, wearables and other digital tools), especially as private and public sector payers switch from volume- to outcomes-based care and financing schemes.

Examples of What Organizations Have Achieved in These Subsectors (Stages I and II)

• Wellness: Some pharmaceutical, biotech and medical device firms are currently engaging with small and large technology companies to better understand what’s possible in digital wellness and launching initial lightweight experiments with tools such as wearables, sensors and mobile in a bid to improve medication adherence and other health parameters.

• Big Data: Novartis and Roche have partnered with Qualcomm Life to capture and analyze a range of data from clinical trials, medical devices and other sources in order to improve health outcomes, streamline medical research and more.

• Big Data: Merck has accelerated its capacity building and engagement efforts in Big Data and analytics via its M2i2 group.

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Industry: Payers (Private Sector) Subsectors: Big Data/Analytics, Wellness, Patient/Consumer Experience Key Industry Triple Aim Objectives: Boost Health Outcomes, Reduce Health/Medical Costs, Improve the Patient Experience Target Digital Health Innovation Integration Stages in Subsectors of Most Relevance to Industry

• Wellness: Stage III – Proficiency and Scaling • Patient/Consumer Experience: Stage II – Engagement and Capacity Boosting • Big Data/Analytics: Stage II – Engagement and Capacity Boosting

Context for Innovation Integration Staging Recommendations and Suggested Strategic Imperatives

• Context: Globally, payers are adapting to an environment where consumers have become more demanding and digitally empowered (to varying degrees). This has required them to think carefully about how to incentivize and support wellness (using rewards and punishments to shift behaviors is a popular strategy). Data has become increasingly valuable in this context, as it can help to reveal unique insights about consumer and medical professional behaviors and motivations. In addition, payers recognize that ensuring patients have positive and more convenient care experiences (using digital/analog tools) may improve outcomes, reduce costs and increase satisfaction.

• Strategic Imperatives: Payers should optimize their ability to use digital tools (along with human support) to boost wellness and ultimately prevent disease. Firms can also learn from their experiences using data to optimize internal operations and improve medical decision-making to scale their data utilization and security efforts, especially as care becomes more personalized. Also, established payers can learn much from new market entrants such as Oscar Health Insurance, which is using digital tools in unique ways to boost patient satisfaction, member health and more.

Examples of What Organizations Have Achieved in These Subsectors (Stages II and III)

• Big Data: Anthem worked with IBM to use its data to increase providers’ use of evidence-based medicine. It is also engaging with IBM on other initiatives designed to improve and streamline patient care.

• Patient/Consumer Experience: UnitedHealthcare established a partnership with three telemedicine firms (NowClinic, Doctor on Demand and American Well) to deliver video-based physician visits to its self-funded members. The focus is on helping patients — especially those living in rural areas — access care more conveniently and affordably. All UnitedHealthcare members will have access to these services by 2016.

• Wellness: United Kingdom-based private medical insurer VitalityHealth offers members rewards based their use of fitness trackers, mobile apps and other digital tools.

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Industry: Hospitals and Hospital Systems Subsectors: Big Data/Analytics, Wellness, Patient/Consumer Experience Key Industry Triple Aim Objectives: Boost Health Outcomes, Reduce Health/Medical Costs, Improve the Patient Experience Target Digital Health Innovation Integration Stages in Subsectors of Most Relevance to Industry

• Wellness: Stage II – Engagement and Capacity Boosting • Patient/Consumer Experience: Stage III – Proficiency and Scaling • Big Data/Analytics: Stage II – Engagement and Capacity Boosting

Context for Innovation Integration Staging Recommendations and Suggested Strategic Imperatives

• Context: Hospitals are under increased financial pressure as governments, payers and others look for ways to reduce health spending and bring transparency to medical pricing. Also, in some developing countries, hospitals are coming under increased strain as demand for services grows, but funding levels remain inadequate. In addition, hospitals are seeking ways to improve patient satisfaction during and after hospital stays to boost trust (this is a major goal in China), increase revenue and improve quality of care.

• Strategic Imperatives: With patient satisfaction becoming increasingly important, hospitals should use digital technologies to streamline patient care, relations with caregivers and families, improve physician workflow and more. In addition, with hospitals — especially in the U.S. — becoming increasingly responsible for ensuring patients remain healthy post-discharge, understanding how to use digital tools to boost wellness is a priority. Finally, hospitals must become proficient at using data (in secure ways) to improve efficiencies, reduce waste, and achieve quality and outcomes improvement goals and more.

Examples of What Organizations Have Achieved in These Subsectors (Stages II and III)

• Big Data: Allina Health, based in Minneapolis, outsourced its health analytics operations to Health Catalyst in a 10-year, $100 million deal designed to help Allina use data in ways that improve health outcomes and reduce health spending.

• Wellness: Ochsner Medical Center in New Orleans launched a pilot project with Apple’s HealthKit platform and Epic, its electronic medical records vendor, to monitor and engage with patients struggling to control their blood pressure.

• Patient/Consumer Experience: Australia’s St Stephen’s Private Hospital is a first-in-the-nation fully integrated digital institution. This $96 million (in Australian dollars) facility features a range of physical and digital innovations designed to boost patient and clinician satisfaction, improve health outcomes and more.

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Industry: Government (Payers and Public/Population Health) Subsectors: Big Data/Analytics, Wellness, Patient/Consumer Experience Key Industry Triple Aim Objectives: Boost Health Outcomes, Reduce Health/Medical Costs, Improve the Patient Experience Target Digital Health Innovation Integration Stages in Subsectors of Most Relevance to Industry

• Wellness: Stage II – Engagement and Capacity Boosting • Patient/Consumer Experience: Stage II – Engagement and Capacity Boosting • Big Data/Analytics: Stage II – Engagement and Capacity Boosting

Context for Innovation Integration Staging Recommendations and Suggested Strategic Imperatives

• Context: Governments are facing intense fiscal and health challenges as populations age and non-communicable conditions such as heart disease become more prevalent globally. In addition, some countries are working to increase access to affordable care for broad segments of the population (especially in countries such as India and China where a large percentage of people pay out-of-pocket) for services.

• Strategic Imperatives: Digital can play a significant role in helping government successfully address their fiscal, public health and infrastructure challenges. From a wellness perspective they should investigate how tools such as mobile and sensors can accelerate disease diagnosis, population health monitoring and coordinate responses to public health threats — even in remote regions. Also, high-income nations can learn much from the developing world’s use of data from electronic medical records, mobile and other tools to streamline and improve care in areas such as HIV and maternal health. In addition, governments should increase their support of video, SMS and other technologies as they can help increase access to health services, improve the experience of care and much more.

Examples of What Organizations Have Achieved in These Subsectors (Stage II)

• Patient/Consumer Experience: The U.S. Department of Veterans Affairs is using video and other virtual tools to allow veterans to receive remote consultations and care.

• Wellness: Canada’s Health Infoway, a not-for-profit organization funded by the Canadian government, is creating processes and standards to accelerate the use of a range of digital tools that boost health and wellness via a combination of data, information exchange, point-of-care systems and more.

• Big Data/Analytics: Facing a £22 billion funding gap, the United Kingdom’s National Health Service will attempt to boost efficiency by mining health and medical data for insights that will help improve care and reduce spending.

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About This Analysis Insights and recommendations featured in this report was shaped by Enspektos’ 10 years of experience working with innovators, health organizations, entrepreneurs and others from around the world to understand, optimize, deploy and scale digital health technologies. Also, analysis of intelligence contained in Enspektos’ DigiHealth Informer platform informed insights regarding the capabilities and activities of organizations within key health industry segments. Launched in January 2015, DigiHealth Informer currently features more than 200,000 data points on research, market activity, technology advances in digital health and more. The DigiHealth Informer intelligence database grows by 600% every week. Learn more about DigiHealth Informer at http://digihealth.info/informer. This report is provided for informational purposes and was prepared in good faith on the basis of information available at the time of publication without independent verification. Enspektos does not guarantee or warrant the reliability or completeness of this analysis nor its usefulness in achieving any particular purposes. Enspektos shall not be liable for any loss, damage, cost or expense incurred by reason of any persons’ use or reliance on this report. About Enspektos Founded in 2005 by futurist, researcher, bestselling author and strategist Fard Johnmar, Enspektos is a globally respected digital health innovation consultancy. The firm provides unique insights, original research, products, services and technologies to health executives, medical professionals, innovators, entrepreneurs and leading health organizations from around the world. Our work is designed to improve clients’ ability to understand, innovate and excel in digital health. Enspektos’ current and past clients include Johnson & Johnson, Shire, Humana, Pfizer, the Centers for Disease Control and Prevention, the Food and Drug Administration and the Consulate General of Canada. Learn more at www.enspektos.com and follow Enspektos on Twitter @enspektosllc. For inquires, email info@enspektos.com.