Challenges and success factors of digital health startups

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Bringing digital health innovations to market can be notoriously challenging for startups, especially those focused on pediatric digital health innovations. In this edition of the Cerner Blog, Brad Sitler, Head of Innovation at the Bear Institute, discusses the challenges faced by all digital health startups and the associated key conditions for success, as well as unique challenges and opportunities for innovation. in pediatric digital health.

Digital Health Innovation Funding

The digital health innovation space has grown exponentially over the past 10 years, with $2 billion invested in 2011 and $44 billion invested in 2021 by global financial and corporate markets. This represents a 20-fold increase. While this level of investment is good for health innovation, it can create a hyper-competitive market for new digital health startups trying to gain traction. Additionally, the increase in funding has largely targeted specific markets such as patient empowerment, prevention/wellness, remote patient monitoring, telehealth, research, personal health and community health. population. One healthcare segment that has not seen an increase in investment is children’s digital health, which received less than 1% ($167m) of global digital health funding ($22bn) in 2020, according to StartUp Health’s annual digital health financing report.

Key challenges and requirements for a successful startup

While other industries allow incremental improvements in new solutions, healthcare, with its required upfront investments in research, data and development, needs new solutions to either capture a significant share of the market or guarantee a significantly higher price for their product or service. Studies require first proving safety, then validating performance and efficacy, and finally quantifying return on investment. This process is often repeated for each new country or region in which the solution is introduced, depending on existing payer models.

Startups focused on digital health need to hire well-rounded leadership to meet as many early needs as possible and have a clear business strategy/vision for annual milestones. These startups face a hyper-competitive market given the investment from the global financial community and need committed investment with a longer time horizon than other industries. A clearly defined go-to-market strategy, including a full reimbursement model, is necessary for success.

Gavin West, Vice President of Sales and Marketing at Smileyscope, said, “We not only have a responsibility to pursue strong clinical efficacy, but also to build a product that is fiscally efficient. Each start-up must pursue these objectives in parallel. A truly disruptive device is one that improves outcomes while reducing costs to the facility. Achieving this goal is good for the hospital, the patients and the industry.”

Pediatric Digital Health Innovation

While huge investments continue to pour into digital health innovation, not all digital health segments have received the same level of interest and associated investment. Pediatric digital health innovation is woefully underfunded compared to the broader digital health market.

Startups focused on pediatric digital health face unique challenges as the market is stratified by children’s age and weight, resulting in smaller market segments and lower investment from VCs and angel investors. Scaling the market is also difficult in the absence of significant pediatric provider organizations, the absence of HCAs, and over 250 stand-alone pediatric hospitals to individually pursue. Understanding and complying with special ethical and regulatory protections for children is another challenge.

With a predominantly fee-for-service reimbursement model, there is no driving force for substantive care model change, further limiting innovation. Dr. Kevin Cleary and Dr. Natasha Shur of Pediatric Care Innovations, LLC, explain, “Business leaders often tell pediatric innovators that their concepts are too early to invest – in other words, considerable time and resources should be dedicated to demonstrating a specific patient or provider need prior to product creation. While this is practical advice, there are too many financial and regulatory hurdles to make even the best ideas a reality. Although there have been many advancements in medicine, parts of pediatric practice have not been redesigned since the 1970s. Pediatric clinical and biomedical teams need only a fraction of the same resources and time. same support as other consumer markets to make a real difference for our children.

Fortunately, pediatric digital health startups have several unique opportunities by focusing on children. The pediatric healthcare community is very collaborative in nature. There are many grantmaking and philanthropic opportunities, and even outside of the immediate pediatric healthcare community, people are often willing to donate time and resources to help children.

Bear Institute PACK

Fortunately, innovation start-ups in pediatric digital health have access to numerous incubator and accelerator challenges with prize pools and dedicated support. The Bear Institute Pediatric Accelerator Challenge for Kids (PACK) event was designed to help pediatric digital health startups looking to bring new solutions to market for children. Bear Institute PACK is hosted by the Bear Institute for Health Innovation and co-sponsored by Children’s National Hospital and Cerner. This is an innovation challenge for pediatric digital health startups to compete for a rich prize pool including healthcare marketing/PR, targeted outreach to the pediatric community, prizes in cash, a pilot opportunity at Children’s National, and potential mainstreaming work by and with the Bear Innovation Team.

Digital health continues to be validated by the market with increasing guidance from the FDA, continued and growing investments for over a decade in digital health, entry of major technology vendors (AWS, Google, Microsoft, Apple, etc.), as well as payers and major industry associations that embrace the market.

Now is the time for digital health startups to demonstrate the claimed benefits of the technology at scale with a strong positive ROI. A growing number of incubators/accelerators with targeted funds, demonstration pilots, clinical trials with extensive data collection and integration with the decreasing number of hospital technology systems enable validation, scalability and commercial viability digital health startups.

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