THE TOP 5 TRENDS

SHAPING THE
FUTURE OF
DIGITAL HEALTH
April 2018

Business Insider Intelligence

Copyright © 2018, Insider Inc. All rights reserved. 1

INTRODUCTION
The healthcare industry is in a state of disruption. Digital solutions are becoming a
necessary part of the new global standard of care for patients and regulation is
being fast-tracked to catch up to digital health innovation.

These rapid changes will have ripple effects across the entire healthcare system,
impacting incumbents and new entrants alike.

Based on our ongoing analysis, understanding of industry trends, and conversations

with industry executives, Business Insider Intelligence (Business Insider’s premium
research service) has put together these top five trends to watch in digital health in
2018.

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1. Digital health will take off in emerging markets,
leapfrogging developed markets.

Although mature markets, such as the US and UK, are at the forefront of digital
health innovation, emerging markets are poised to catch up in markets such as
India, Indonesia, and China. Here's why:

 A clean slate. Digital health companies in many emerging markets have

fewer incumbents to compete with and less legacy infrastructure to
overcome compared with developed markets like the US. That means there
are fewer barriers to establishing new products and services. It could also
mean that governments will work to remove regulatory constraints to help the
emerging industry grow faster.

 Large mobile populations to tap into. Emerging markets, such as India,

Indonesia, and China, have massive populations and high mobile
penetration. That's a great foundation for launching successful digital health
offerings. Some companies are already phenomenally successful in these
markets. For example, Ping An Good Doctor — the Chinese online-to-offline
healthcare platform — claims over 77 million registered users, according to
EY. That's larger than the population of the UK.

 A need for healthcare solutions. Developing markets have large

populations living in rural, poorer regions, according to PwC. That means
healthcare solutions must be accessible and affordable to be successful.
One of digital healthcare's strongest value propositions is that it can be
offered remotely, often at lower or equal cost.

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2. The Food and Drug Administration (FDA) will catch up
to digital health innovation, which will bolster the
industry and drive adoption of new tech.

The speed at which digital health technology sprung up far outpaced the US
government’s ability to regulate these new services. But, efforts started in 2017 by
the FDA will begin to have an impact in 2018. No fewer than 12 pieces of legislation
around telehealth were brought up in 2017, mHealthIntelligence notes. Moreover,
the focus of these bills is on expediting the time it takes for innovative products to
come to market — such as the updated Medical Device User Fee Agreement
(MDUFA) — or on expanding the reach and purview of mobile solutions — such as
the CHRONIC Care Act. Further, the number of early-stage investments in digital
health companies is showing signs of slowing down as venture funds focus on
companies already delivering significant revenue, according to Accenture. This may
give the US government time to develop rules and regulations that provide clarity for
startups and ensure public safety as new business models emerge.

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3. AI, machine learning, and chatbot technologies will
become must-haves for healthcare providers.

Throughout 2017, the power of AI technology was on display: The University of

North Carolina Lineberger Comprehensive Cancer Center showed that IBM’s AI
technology, Watson, could be an effective tool in pinpointing treatments for cancer
patients; Stanford researchers developed a deep-learning algorithm that
demonstrated in tests its ability to diagnose pneumonia with more accuracy than
human radiologists; and MDLIVE found that its chatbot was 50% more effective
than traditional efforts, such as email campaigns, in boosting account registrations.

In 2018, it's likely we'll see even more examples of AI's capabilities as firms work to
prove the effectiveness of their solutions, not only to justify the massive investments
being made, but also as a way to rise to the top of what's becoming an extremely
competitive market — healthcare AI VC deal volume and funding hit a five-year high
in 2016, with $794 million in investments across 90 deals, according to TM Capital.
These technologies will be successful in improving care, reducing costs, and
boosting engagement, and that will help them become part of a new standard of
care for patients.

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4. Healthcare providers will begin to see major backlash
from patients as care is impacted more than ever by cyber
attacks.

The healthcare industry has had issues curtailing security threats, with 83% of US
physicians reportedly experiencing some form of a cybersecurity attack, according
to a survey released by Accenture and the American Medical Association (AMA).
This has resulted in massive monetary costs — over the past two years, data
breaches have cost the industry $6.2 billion, according to Becker's Hospital Review.

As health records increasingly move to digital, disruption from cyber attacks will only
accelerate in 2018. Providers will begin to lose patients as a result of these
breaches, and patients will voice their frustration with inadequate security
measures. That may compel regulators to step in with new requirements and larger
penalties for healthcare companies that suffer breaches.

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5. The healthcare industry will see increasing
consolidation as incumbents, tech giants, and digital
startups all jockey for a stronger position in the evolving
healthcare landscape.

There were over 40 mergers and acquisitions specific to the digital health industry in
2017, according to MobiHealthNews. This figure is set to rise in 2018 as the
healthcare industry continues to innovate and legacy firms shore up against the
threat of tech invaders and consumerization. This will happen in three ways:

 Legacy firms will merge to combat potential threats. By combining

resources, these companies will be able to capture a larger piece of the
nearly $3.4 trillion spent on healthcare. This already started last year. For
example, in 2017, CVS and Aetna merged in a deal valued at $69 billion.
This merger will combine CVS' extensive pharmacy and retail footprint with
Aetna's pharmacy benefits and insurance services, and give both access to
massive amounts of data. The combined entity will allow Aetna to address
"the growing cost of treating chronic conditions through the broader use of
data and analytics, leading to improved patient health at a substantially lower
cost," according to Aetna CEO Mark Bertolini.

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  Legacy firms will acquire digital startups. The healthcare industry is
quickly becoming digitized, and legacy players are having to adjust by
updating their IT systems, adding digital health services, and adopting data-
driven solutions. However, this transition can prove to be quite difficult, time-
consuming, and costly for a traditional healthcare company that may not
have the technical expertise of a digital challenger. For this reason,
traditional health providers are looking to upgrade their systems through
acquisitions. Most recently, global pharmaceutical giant Roche acquired
Flatiron Health, an oncology-focused electronic health records (EHR)
company to improve clinical trial results, optimize the process of clinical trial
eligibility assessment, and to enable the pharmaceutical company to
innovate groundbreaking research.

 Tech giants will partner with legacy firms. Amazon, Apple, and Google
have been moving into the healthcare space. Instead of competing directly,
it's more likely that these companies will create products and services that
complement the offerings of incumbents, helping to strengthen the
companies that already dominate the market. For example, Apple partnered
with 39 EHR vendors for an update to the iOS 11 operating system to allow
US iPhone users to store, access, and share their health records with some
providers in the US.

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