Though we’ve had our fair share of global health outbreaks in recent history, COVID-19 most closely parallels the 1918 flu pandemic in scale and impact—a once-in-a-hundred-years type of black swan event. Overwhelmed hospital systems, a lack of extensive contact tracing, enforced mask coverings, and quarantine and isolation were all hallmarks of the 1918 experience, which is not too different from what we’re seeing today. But if there’s any silver lining that comes out of these pandemics, we believe it’s human ingenuity. In 1918, this took the form of much-needed healthcare system overhauls across the globe: Rather than relying on self-employed private doctors and religious groups, many countries shifted towards varying degrees of increased government and public intervention. Though the US did so to a lesser extent than other countries, the pandemic catalyzed a massive change in the way healthcare was traditionally delivered.
Today, we are witnessing the limits of the modern public US healthcare system, fueling the intensely entrepreneurial private sector to seek to fill exposed gaps. And just like in 1918, we believe this pandemic has brought us to the brink of mass behavioral shifts in the way we interact with healthcare, accelerating the trends that were already underway. With some 2.6 billion people experiencing a form of a lockdown, COVID-19 is unique in that it has created one of the most universally shared experiences in history. This has left room for the possibility for new healthcare habits and preferences—both transient and permanent—to quickly form at an unprecedented scale.
At Two Sigma Ventures, we believe that the brightest, most resilient founders will come out of this pandemic to shape the future of healthcare for the better. We’ve never been more excited to continue supporting healthcare companies that are working to improve lives through the use of data science and technology, and we will be looking at our new opportunities through this lens. With that in mind, here are five trends we predict will shape healthcare in the post-pandemic world:
Trend #1: COVID-19 has necessitated an expansion of the remote delivery of care, expediting the arrival of what we believe to be the inevitable.
We are now some months into the pandemic and have seen key catalysts of digital transformation rapidly unfold across healthcare. Social distancing requirements, for instance, have forced every stakeholder (patients, providers, payers) to adopt some form of a virtual tech interface. Though contactless experiences in healthcare may be occurring out of necessity for now, we believe they are also planting the seeds for longer-term transformation and creating massive new market opportunities overnight.
Recent activity in the regulatory environment has partly been attributable for enabling these shifts. Though regulatory tailwinds are typically slow to follow technological innovation, COVID-19 has forced legislators to quickly accommodate for alternative means of care. For example, The Department of Health & Human Services (HHS) has made exceptions to HIPAA surrounding the types of 2-way video platforms providers can use to interact with patients. In addition to traditional telehealth apps, many providers have opted for FaceTime and Zoom. The Centers for Medicare & Medicaid Services (CMS) has also been more active lately. They expanded Medicare coverage to allow reimbursement parity for all virtual services and introduced new remote patient monitoring (RPM) CPT codes, finally aligning financial incentives for providers to opt into virtual care models.
Patients seem to be embracing the recent digital transformation. In one survey, 66% of respondents want their provider to increase telehealth offerings post-COVID-19. Although providers and hospital systems have historically been slow to adopt the latest tech and may be harder to garner buy-in from, this type of end-user sentiment (and the potential efficiency gain and flexibility to work remote) could be hard to ignore. We believe the end-all winners in the space will be those who truly create value in the form of 1) saving providers time, 2) improving patient outcomes, 3) facilitating collaboration, and 4) improving bottom or top line.
Beyond the clear growth in telehealth, our team at Two Sigma Ventures has been excited about the picks and shovels that will enable a more seamless transition to virtual and home-based care. We’ve mapped out the startups within this first trend into five segments: RPM systems, provider communication and collaboration tools, vocal user interfaces (VUIs), intelligent workflow automation software, and point-of-care and at-home diagnostics.
Trend #2: The influx of digital health platforms and streams of patient data are further highlighting the importance of privacy and security.
Though remote delivery of care has immense potential to improve healthcare experiences for many stakeholders, it also increases the virtual attack surface available for hackers to exploit. From ad-hoc COVID-19 testing sites to uncontrolled 2-way video environments, we’ve amplified vulnerable security endpoints in the form of patients and providers.
Unsurprisingly, from February to July, there have been over 180 healthcare data breaches of patient health information, a 100% increase from the amount of breaches we saw over the same time period last year. And in the era of fake news and distrust in mainstream media, COVID-19 disinformation campaigns have run rampant, giving rise to healthcare-specific use cases for verification and authentication of public information.
We’re starting to see a breakdown of startups in this space into four segments: secure IoT, algorithmic innovation, cybersecurity-as-a-service (CaaS), and disinformation defense.
Trend #3: Demonstrated weaknesses in the global healthcare supply chain are bringing demand for increased manufacturing efficiency and logistics.
Times like these are the perfect opportunity to observe how our production lines and delivery systems perform under pressure. In the early stages of the pandemic, we saw frequent headlines that showcased the severe weaknesses in the way our disparate healthcare supply chain operates. A Massachusetts doctor was questioned by the FBI while trying to secure additional PPE for his hospital. An Italian startup 3D printed ventilator valves for a hospital when the original manufacturer could not (at a $2-3 cost vs. an $11,000 retail price). And the shortages in pain medications for ventilator-bound COVID-19 patients showcased the opaque nature of global drug supply chains.
Behind these headlines, we see some strong tailwinds for an inevitable march towards Industry 4.0. Social distancing requirements on the factory floors, for example, have made the case for increased forms of automation in production processes, showing the incremental cost savings that can occur from modernization. We see these taking the form of both hardware and software advances that can facilitate machine-to-machine communication and speed up production processes.
Alternative delivery mechanisms are also seeing the light in healthcare. The need for contactless experiences has opened up interesting use cases for autonomous delivery systems, with drones making long distance deliveries in the US as regulators make exceptions. And 3D printing has stepped up as a possible glimpse into the future of delivery, proving out the use cases for quickly building crucial PPE, medical devices, and other important healthcare tools.
We’ve mapped out startups within this overall trend into four segments: autonomous delivery, production line monitoring, 3D printing, and robotics.
Trend #4: The COVID-19 vaccine and treatment race has placed pressure on pharma to innovate its drug development and clinical trial processes.
In addition to centering our attention on production and delivery, the COVID crisis has also led to some major pushes to accelerate pharma R&D processes while we continue to search for viable treatments and vaccines. But with social distancing requirements in place, pharma has been hit hard with slowdowns for in-person clinical trial recruitment. Big names like Merck and Pfizer have halted new trials and existing recruitment efforts. And some 33% of total clinical trial sites are expecting significant slowdowns. We believe this should lead to a significant pick-up in traction for any efforts to 1) decentralize (i.e., facilitate management and collaboration online), 2) virtualize (i.e., digital channels as a replacement for in-person), and/or 3) automate clinical trials (i.e., new types of control arms).
One likely second-order effect from an increase in digitally connected trials is a further increase in data silos. Coupled with the huge influx of pandemic data collected from remote monitoring tools, we believe there’s a pressing need for collaboration-first, interoperable, multimodal data sharing solutions among pharma and biotech stakeholders. All of this will be especially important for the success of any layered AI/ML solutions.
We’ve mapped out opportunities in this trend into three segments: clinical trial optimization and virtualization, data sharing and management, and AI/ML for drug development.
Trend #5: We’re experiencing an emerging mental health crisis, shedding light on the need to quickly make behavioral healthcare tools and services more accessible.
And lastly, COVID-19 has had major societal implications, the effects of which will likely be felt for a number of years. Over 33% of Americans experienced high levels of psychological distress in the last few months, with many frontline workers experiencing PTSD-like symptoms. On top of the limitations on social mobility and the isolated nature of working remotely, Americans have been experiencing some of the highest levels of national unemployment in recent history—unemployment has risen more in the last three months than it did over two years in the Great Recession. This has led research to project that there could be 75,000 COVID-19-related “deaths of despair” due to suicides and drug overdoses.
We thus (and rightfully so) see intense growth potential in this space. Given America’s dominant employer-based insurance delivery model, we’ll likely see some tailwinds for startups carving out better mental health benefits in the workplace, with virtual services becoming a must. VR/AR could also see better days in the realm of behavioral health therapeutic applications, providing a more real-world experience with increasingly robust scientific evidence behind its treatments. And we’ll likely continue seeing growth in AI/ML tools, whether it takes the form of chatbots, vocal user interfaces, or social companion robots.
We’ve mapped out opportunities in this trend into three segments: VR/AR-enabled care, employer-based benefits, and AI/ML systems.
What This All Means
We invest in companies leveraging data in innovative ways. COVID-19 has ushered us into a massive new healthcare data wave, and we’re looking forward to seeing how the next generation of startups builds solutions to provide more cost-efficient care, optimizing experiences for patients, providers, and researchers in the post-pandemic world. If that sounds like you, drop me a line at caitlin.pintavorn@twosigmaventures.com. I’d love to connect.