Digital investments can help reduce costs and create new business models in healthcare, says Klaus Boehncke, Digital Healthcare Lead at L.E.K. Consulting. Nick Herbert caught up with Boehncke to learn more about the opportunities in an evolving digital healthcare market
In terms of definition, Boehncke describes digital health as information and communication technology that supports the four primary goals of healthcare: better outcomes, improved patient experience, lower cost and an improved clinician experience. The four primary aims of healthcare act as guiding principles for healthcare organisations investing in delivery of care, staff training & education, and new technologies.
‘The core digital health themes we see emerging are really around patient engagement and empowerment,’ said Boehncke. ‘That is something that has been accelerated through Covid because patients really were, in some cases, unable to physically go and see a medical professional.
‘Covid dramatically changed the willingness of clinicians and patients to accept digital health.’
Many clinicians and patients experienced telemedicine and digital technologies for the first time during the pandemic, and those experiences have subsequently changed the way the public interacts with healthcare professionals.
‘Patients now expect a hybrid approach,’ said Boehncke. ‘They want to be able to go physically to see a healthcare professional if it suits them, but if it doesn’t ‒ because maybe it’s late at night, it’s hard to get an appointment or its’ difficult to travel ‒ then they want to be able to fully engage in digital format. That’s the key trend.’
Other established trends include clinician education and training. ‘That’s an obvious one where digital could help through videos,’ said Boehncke.
And data. ‘We see a dramatic increase in the number of project engagements we do as a strategy consulting house on the subject of data,’ said Boehncke.
It’s not only in the private sector where healthcare data is being leveraged, similar efforts are being made in the public domain. The UK’s NHS, for instance, has a £400m-plus competitive tender in the market, looking for a software company to provide and operate a federated data platform.
‘There are some very public healthcare efforts looking to leverage data ‒ for research and development and operational efficiency,’ said Boehncke. There is also interest in leveraging digital technology to improve commercial efficiency, care delivery and back-office processes.
‘This is nothing new,’ said Boehncke. ‘But it is worth noting that a lot of hospitals still run on paper in Europe. That is changing and there is some significant public funding being injected into this segment of the industry.’
From hospital to clinic to home
As has been seen in other parts of the economy, digitisation is a conduit for moving services closer to the end user. Healthcare digitisation, for example, is accelerating the shift from hospital to clinic to patient.
As more surgery becomes standardised and equipment becomes smaller, a greater quantity of surgical procedures previously carried out in major hospitals are being undertaken in outpatient clinics.
This trend has resulted in some provider networks introducing a hub-and-spoke strategy, where major hospitals are supplemented with clinics for the more generic procedures.
‘And then you have telemedicine that reaches the final mile into your home,’ said Boehncke. Healthcare can now be accessed from the comfort of the sofa and at any time of day. ‘You now have telemedicine providers at the end of the telephone line, on video link or a chat, and you can engage with professionals,’ he said. ‘Through digital technology you don’t even need access to a physical clinician as a starting point but can be guided by an AI symptom checker, for example.’
Ada Health in Berlin is an example of a global health company created by doctors using AI to improve human health by transforming knowledge into better outcomes. It is the world’s most popular symptom assessment app, with 10 million users and 25 million completed assessments.
There is also a cost benefit to be realised from care moving closer to the home. Reducing costs is especially important for cash-strapped healthcare systems around the world facing the growing challenges of aging populations ‒ not necessarily aging healthily – and suffering from severe staff shortages.
In recent years, healthcare M&A activity has reflected the slightly conservative approach taken by the underlying sector to technology. But that is changing. ‘You see considerable M&A still being conducted in the traditional areas,’ said Boehncke. ‘Investing in the hospital and clinic space has been growing as more and more care is transferred from hospitals to an outpatient setting.’
Outpatient clinic chains have been a popular feature of healthcare M&A. ‘Clinics that are brought together under the same processes and systems ensure a better quality of care because they are focused on providing a particular type of treatment,’ said Boehncke.
Renal care company, Diaverum, which was recently sold to M42 for a rumoured US$2.5bn, is a good illustration of a firm in a traditional investment area for private equity and M&A ‒ a clinic built with physical infrastructure ‒ making the transition to digital health, including AI, and with dramatically improved patient outcomes. ‘That’s where you see legacy M&A, and newer M&A happening,’ said Boehncke. ‘Diaverum is an example of where the two themes come together.’
For M42, the Diaverum acquisition represented an opportunity to leverage both companies’ clinical and technological expertise to expand healthcare services and healthtech solutions across both existing and new markets. Both companies share a focus on specialty healthcare and aspire to be at the forefront of integrating AI and technology into patient care.
‘Diaverum’s pioneering digital care offering fully aligns with M42’s focus on leveraging advanced technological solutions to deliver precise, personalised patient care,’ said Hasan Jasem Al Nowais, CEO of M42, at the time of the transaction.
Other areas of interest are found in companies that have developed patient engagement software. Companies such as M.Doc in Germany (the target in April of a major investment from CompuGroup Medical), or BeeHealthy (part of provider group Mehiläinen) in Finland.
‘Healthcare is a really attractive market segment that is growing and relatively crisis-resistant,’ said Boehncke. ‘We do see software companies, even the large ones, moving into this field.’
In 2022, for instance, Microsoft completed the acquisition of Nuance Communications, bringing its AI capabilities (also driven by large investments in OpenAI and ChatGPT) together with its clinical software services. In the future, Nuance, a leader in conversational AI, will be able to transcribe discussions between the patient and healthcare provider, enter that data into structured fields and create entries in electronic medical records.
‘It will be interesting to see how the physical and digital ecosystems evolve,’ said Boehncke. ‘As a patient, you want to have a seamless patient journey. You want to be able to interact with the healthcare system when it suits you either in digital fashion or physically.’ Companies must adapt to patient demands either as a one-stop shop provider or as an ecosystem of providers working together to offer a comparable experience.
Healthcare data is another area of the market that offers value, but capturing that benefit depends on the widespread adoption of digital capabilities. ‘The value of data is a lagging indicator, because you have to have systems in place that capture digital data before you can exploit it,’ said Boehncke. ‘Now, all the digital trends are converging. We have better and cheaper data capture in and out of the hospital and the data that is emerging is much more holistic and much more valuable.’
Less cost, better outcomes, more opportunity
The adoption of digital health can help reduce the cost of delivering healthcare. Going digital can also improve patient outcomes as well as unlock a significant amount of value for investors. Boehncke highlights three current value generating trends: patient engagement and digiphysical approaches, data platforms and AI, and digitised clinical and back-office workflows.