At this 12 months’s HLTH convention in Las Vegas, Bessemer Enterprise Companions launched a report that analyzed the digital well being sector’s efficiency over the previous 5 years and supplied phrases of knowledge for the following cohort of startups in search of to construct resilient enterprise fashions that may ship long-term worth.
Throughout an interview on the convention on Sunday, the 2 authors of the report — Bessemer traders Sofia Guerra and Steve Kraus — mentioned how they got here up with their 4 predictions about the place the digital well being world is headed in 2024.
“Companies-as-Software program” will emerge as a brand new class of healthcare AI
As generative AI and LLMs get extra superior, a brand new class of AI instruments are rising that ship a service as the ultimate product relatively than offering a workflow instrument the place the tip person completes an motion. This new development flips the SaaS mannequin on its head, Guerra identified.
“SaaS isn’t going anyplace, by the best way. It is a new class that’s rising particularly for AI corporations. When you consider the output of an algorithm, it’s not going to be a workflow instrument {that a} person is interacting with to allow them to do work on the software program — it’s going to be the work itself,” she stated.
As an example, some generative AI corporations will probably emerge that promote prior authorization or scientific trial participant identification because the output of their software program, Guerra defined. These corporations might be promoting providers, however the providers might be supplied all by expertise — there are “little or no individuals concerned,” she defined.
In different phrases, with a Saas mannequin, an individual is within the loop utilizing the software program to make a job simpler. With a services-as-a-software mannequin, the individual lets the software program do the job for them.
“Our thesis is that you simply’re in a position to faucet into enterprise course of outsourcing-type markets, the place there’s individuals probably within the Philippines and India doing loads of that work, however now you possibly can allow it utilizing AI,” Guerra added.
Guerra and Kraus pointed to SmarterDx, which offers scientific overview and high quality audit of medical claims, and Abridge, which is creating software program for transcription and scientific observe technology, as two examples of Bessemer portfolio corporations within the rising services-as-software house.
Healthcare fee corporations should align incentives between suppliers and payers
There are loads of corporations in the marketplace that target healthcare income cycle administration — however incentives are nonetheless misaligned between payers and suppliers, and each events are nonetheless stricken by fee inefficiencies. Consequently, the market is rife with duplicate methods, and suppliers and well being plans nonetheless wrestle with handbook processes and bloated administrative prices.
“I believe the holy grail actually comes right down to turning into the interstitial tissue between the payer and the supplier — not designing an answer for a supplier and one for a payer. That’s like a recreation of cat and mouse,” Guerra defined.
She stated there’s a huge alternative for software program to attach the executive processes of payers and suppliers, giving approach to a extra environment friendly healthcare fee system. For startups to achieve constructing this software program, they must observe the cash and align incentives between the 2 events.
Bessemer is searching for corporations that may harmonize the fee course of between the 2 stakeholders and eradicate duplicative, antagonistic methods for issues like prior authorization, claims adjudication and high quality audits, Guerra famous.
Some examples of prior authorization corporations in search of to foster a greater fee relationship between suppliers and payers embrace Cohere Well being and Verata Well being, which was a Bessemer portfolio firm till Olive acquired it in 2020. These corporations used evidence-based protocols to routinely authorize medical providers on behalf of well being plans, which in flip accelerates operations for suppliers.
If you wish to promote tech to suppliers, it’s possible you’ll have to rethink your distribution mannequin
The report highlighted oblique monetization as a brand new distribution benefit rising within the digital well being world. Some startups are offering their software program at no cost, shrinking their gross sales cycles and permitting them to make the most of oblique monetization methods early on.
“One of many greatest challenges in well being tech is distribution,” Kraus stated. “It’s actually difficult to promote to well being methods. Firms are looking for pockets of spend that well being methods already must automate and make extra environment friendly. It’s not like they’re creating a brand new spend — they’re simply making an attempt to make use of fashionable expertise to make it cheaper, higher, quicker.”
For instance, Bessemer portfolio firm Home Rx, which goals to make specialty remedy extra inexpensive and accessible, offers expertise to practices and earnings from specialty pharmacy prescriptions by distribution agreements with drugmakers. Moreover, Verse Medical and Doximity are two examples of corporations utilizing oblique monetization methods that aren’t in Bessemer’s portfolio.
Contingency-based pricing is usually simpler for well being methods to swallow than upfront charges, given the monetary pressures suppliers are going through proper now, Krause identified. The aforementioned SmarterDx is an instance of a startup that makes use of this distribution mannequin.
“They may take a look at a hospital’s charts and say, ‘Hey, we predict you’re lacking some scientific documentation right here. And by the best way, if we determine $10 million, we’re going to take 10% — versus charging some type of SaaS charge, which must be accredited upfront,” Kraus defined. “Particularly in these robust occasions — when all people is contracting with well being methods which might be having enormous working losses, and payers are having challenges too — excited about distribution or pricing fashions that make it simpler to promote into the system goes to be necessary for entrepreneurs.”
The biopharma worth chain should develop into extra environment friendly
Biopharma has had a robust market efficiency previously few years, however the trade is starting to face some severe challenges. Many of those corporations are specializing in therapies that serve area of interest populations, akin to precision oncology medicine, so R&D prices are rising whereas gross sales forecasts are dwindling.
Moreover, the Medicare drug value negotiation program is placing new pressures on pharmaceutical government groups, prompting them to make use of AI to make the worth chain extra environment friendly, Guerra stated.
Bessemer is watching startups that promote expertise to biopharma analysis groups to allow extra environment friendly goal discovery, akin to Sphinx Bio and Bessemer portfolio corporations Watershed and Peptone. The enterprise fund can also be enthusiastic about startups that facilitate quicker and extra environment friendly scientific trials, like Faro Well being, Lokavant, readout.ai and portfolio firm Mural Well being, in response to the report.
Photograph: rudall30, Getty Pictures
