How the decline in investment in digital health could affect hospices

Declining investment in digital health has implications for hospice and palliative care providers.

The digital health investment boom fueled by the pandemic is waning, at least for now. The term “digital health” can be defined broadly, according to Dr. Arif Kamal, associate professor of medicine and population health at Duke University. It can include electronic medical platforms, telehealth solutions, data analytics and remote patient monitoring, among many others.

This type of technology has been proliferating in the hospice and palliative care ecosystem for several years to identify patients in need of their services, increase touchpoints without additional staff travel, reduce staff burden, build efficiencies and, more recently, to prevent the spread of COVID-19.

“I think there’s actually an innovation happening in disease-based care that palliatives and hospices need to be aware of because we’re increasingly going to be part of the supportive care apparatus to realize a future that looks more decentralized,” said Kamal Hospice News. “After that, I think the other thing is really looking at the scalability of the work that we’re doing, recognizing that there’s a limited workforce and a growing demand for the expertise that we have.”

Investors poured loads of money into digital health in 2020 and 2021, but this year they’re clutching their wallets a little tighter.

Investment in the sector exceeded $29 billion in 2021 through 729 deals, according to a report by venture capital fund Rock Health, but so far 2022 has not kept pace.

Digital health startups brought in $6 billion in investment in the first quarter of 2022, down from $7.3 billion in the fourth quarter of last year, Rock Health said in a separate report.

Q2 saw more declines. Global digital health funding fell 32% sequentially from Q1, according to CB Insights.

To some extent, the market may normalize after extraordinary years led by a pandemic.

“Digital health companies got a lot of traction and a lot of excitement from investors, especially during COVID when everyone was at home and really the only access to care for many different specialties in different populations was digital health,” said Chris Booker, partner at Nashville-based investment firm Frist Cressey Ventures told Hospice News. “So what you’re kind of seeing is almost a normalization of that increased investment and increased valuations back to higher valuations of other industrial businesses and investment in other sectors at this point.”

Another factor in the space is rising interest rates, according to Booker.

The US Federal Reserve has signaled its intention to continue raising interest rates to achieve greater “price stability,” according to remarks by Chairman Jerome Powell. In the minds of many in the economic world, rising interest rates signal an impending recession — although that’s not necessarily the case, according to a recent analysis by the Deloitte Global Economist Network.

Rising interest rates can have a dampening effect on company valuations and the cost of raising money or pursuing acquisitions.

Hospices may be somewhat insulated from the decline of digital health because of the ever-present need for in-person services, Booker said. However, they could feel an effect, especially when it comes to increasing virtual contact with patients.

As more care has moved into the home over the past two years, telehealth has become an increasingly important game-changing tool that extends beyond the pandemic. This is particularly important in rural areas where clinicians travel long distances.

“As the physical location where these patients receive care shifts more to the home instead of institutional settings, there will be a need for more connectivity, and that’s where digital health is starting to play a bigger and bigger role.” , Booker Hospice News said. “And I worry that there could be a reduction in all these ways of investing in digital health.”

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