Also at stake was what the insurance landscape will look like for health technology companies, many of which depend on tapping into data about large, diverse populations. Last year, venture capitalists poured more than $4.1 billion into digital health startups — more than they invested in the three previous years combined, according to data from Rock Health. This year, digital health companies are on track to rake in the same amount or more.
The Chronicle talked with Teresa Wang, strategy manager at Rock Health, about what the Supreme Court decision means for health tech startups. Started in 2010, Rock Health is a San Francisco seed and early-stage investor in health care-related startups, including telemedicine, weight loss and big data companies.
This interview has been edited for space and clarity.
Was this ruling something health startups and investors were keeping an eye on?
Definitely ... From a digital health entrepreneur or investor’s perspective, it’s important that the (law) was upheld because it’s been one of the main drivers in digital health adoption and investment.
The (health-care overhaul) came with caps that require insurers to spend 80 to 85 percent of each premium dollar on medical needs. If you’re an insurer now, you’re much more open to adopting payer administration tools on the back end. ... You’re also more likely to invest in medical technologies or digital health solutions that you think work, because they help reduce cost.
What were some of the concerns if the Supreme Court hadn’t upheld the subsidies?
Health care reform hinges on being able to increase access. With lack of access, a lot of the things driving innovation in digital health wouldn’t matter as much anymore. Population health management (data-driven efforts to keep the population healthier as a whole) would be on a much smaller scale. Being able to take care of a group of people or a population is a lot less compelling if it’s a subset.
The idea of providing value-based care (which aims to provide better outcomes at lower costs) also matters a lot less if a significant portion of your patients don’t fall under any of those reimbursement or insurance schemes.
Was there hesitation in the industry with such a central part of the health care law hinging on the court’s decision?
With any ruling or any decision about a law, having clarity is extremely helpful so entrepreneurs and startups can move forward with their business strategies, assuming — at least for the next 16 months (until the next election) — that access isn’t going to be challenged from a subsidy perspective.
There’s already an immense amount of investment in health tech. Do you expect to see more, now that this is settled — at least for now?
This has been a strong year. It’s not likely that we’ll see double the investment of 2014, because that was such an incredible year. But if you take a step back, digital health accounted for 8 to 10 percent of all venture funding. I think we’re at a healthy level of investment.
Is there anything that we don’t know yet about how the ruling will affect startups?
Having the (health law) upheld by the Supreme Court kind of gave the green light for major insurers to continue their consolidation. Because the (law) actually limits the amount of profit hospitals and insurers can generate, we’re seeing a lot of the big players trying to find scale in the hopes of generating higher margins and additional savings.
What we don’t know yet is whether or not, (in the long term), that will be good for digital health companies. Having three major insurers that you go to instead of five (to sell a product) — is that going to be helpful for a digital health company? Does that make it easier for them to gain scale and mass distribution?
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