This report introduces a new sizing model for digital healthcare that reflects the recent impact of the COVID pandemic on the sector, with the goal of identifying the new opportunities and risks presented to operators and others attempting or considering investment in the market. A key finding is that market development has been accelerated four years ahead of its prior trajectory, meaning that players should significantly reassess the urgency and scale of their strategic application.
Download the additional file to access the database tool accompanying the analytical report
STL Partners has long argued that if telecoms operators want to build new businesses beyond connectivity, they will need 1) clarity on which customer needs to address and 2) long term commitment to investment and innovation to address them. Adding value farther up the value chain requires significant new skills and capabilities, so we believe telecoms operators must be deliberate in their choice of which customers they want to serve, i.e. which verticals, and what they want to do for them. For more detail, see STL Partners’ report How mobile operators can build winning 5G business models.
We believe that healthcare is a vertical that is well suited to telecoms operators’ strategic scope:
- Healthcare is a consistently growing need in every country in the world
- It is a big sector that can truly move the needle on telcos’ revenues, accounting for nearly 10% of GDP globally in 2018, up from 8.6% of GDP in 2000 according to WHO data
- It operates within national economies of scale (even if the technology is global, implementation of that technology requires local knowledge and relationships)
- The sector has historically been slower than others in its adoption of new technologies, partly due to quality and regulatory demands, factors that telcos are used to dealing with
- Improving healthcare outcomes is meaningful work that all employees and stakeholders can relate to.
Many telcos also believe that healthcare is a vertical with significant opportunity, as demonstrated by operators’ such as TELUS and Telstra’s big investments into building health IT businesses, and smaller but ongoing efforts from many others. See STL Partners’ report How to crack the healthcare opportunity for profiles of nine telecoms operators’ strategies in the healthcare vertical.
Our research into the telecoms industry’s investment priorities in 2021 shows that the accelerated uptake of digital health solutions throughout the COVID pandemic has only shifted health further up the priority list for operators.
Figure 1: Digital health is among telcos’ top investment priorities in 2021
Source: STL Partners, Telecoms priorities: Ready for the crunch?
However, few operators have put their full effort into driving the transformation of healthcare delivery and outcomes through digital solutions. From our conversations with operators around the world, we believe this is in large because they are not yet fully convinced that addressing the challenges associated with transforming healthcare – fragmented and complex systems, slow moving public processes, impact on human lives – will pay off. Are they capable of solving these challenges, and is the business opportunity big enough to justify the risk?
Taking a cautious “wait and see” approach to developing a digital health business, launching a couple of trials or PoCs and seeing if they deliver value, or investing in a digital health start-up or two, may have been a viable approach for operators before the COVID pandemic hit, but with the acceleration in digital health adoption this is no longer the case. Now that COVID has forced healthcare providers and patients to embrace new technologies, the proof points and business cases the industry has been demanding have become a lot clearer. As a result, the digital health market is now four years ahead of where it was at the beginning of 2020, so operators seeking to build a business in healthcare should commit now while momentum and appetite for change is strong.
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How is COVID changing healthcare delivery?
The first and most significantly affected area of the digital health landscape throughout 2020 was virtual consultations and telehealth, where almost overnight doctors shifted as many appointments on to phone or video calls as possible. For example, in the UK the proportion of doctor’s visits happening over the phone or video rose from around 13% in late 2019 to 48% at the peak of the pandemic in April-June 2020, while US based virtual consultation provider Teladoc’s total visits tripled between Q219 and Q220, to 2.8mn.
By necessity, regulatory barriers to adoption of virtual consultations were lowered. Other barriers, such as insurers or governments not reimbursing or underpaying doctors for virtual appointments, and organisational and culture barriers among both patients and providers also broke down. The knock on effect has been acceleration across the broader digital health market, in areas such as remote patient monitoring and population level analytics. (See more on the immediate impact of COVID on digital health in STL article How COVID-19 is changing digital health – and what it means for telcos)
The key question is how much of an impact has COVID had, and will it last over the long term? This is what we aim to answer in this report and the accompanying global database tool. Key questions we address in this analysis are:
- How much has COVID accelerated adoption of digital health applications?
- What are the cost savings from accelerated uptake of digital health following COVID?
- Which digital health application areas have been most affected by COVID?
- Beyond the COVID impact, what is the total potential value of digital health applications for healthcare providers?
- Which digital health application areas will deliver the biggest cost savings, globally and within specific markets?
To answer these questions we have built a bottom-up forecast model with a focus on the application areas we believe are most relevant to telecoms operators, as illustrated in Figure 2.
Figure 2: Five digital health application areas for telcos
Source: STL Partners
We believe these are most relevant because their high dependence on connectivity, and needs for significant coordination and engagement with a broad range of local stakeholders to succeed, are well aligned with telecoms operators assets. See this STL Partners article for more detail on why these application areas are good entry points for telecoms operators.
NB We chose to omit the Personal health and wellness application area from our bottom-up model. It is a more generic and global application area than the others, dominated by players such as Google/Fitbit and Apple and with little integration thus far into formal healthcare services. While it is nonetheless an area of interest for telecoms operators, especially those that are seeking to build deeper relationships directly with consumers, it is a difficult entry point for telecoms operators seeking to build a healthcare business. This global and consumer focused nature of this application area also means that it is difficult to find reliable local data and quantify its value for healthcare systems.
What are these forecasts for?
Telecoms operators and others should use this forecast analysis to understand the potential value of digital health, including:
- The size of the digital health opportunity in different markets
- The market size for new applications across the four areas we modelled (remote patient monitoring, virtual care and telehealth, diagnostics and triage, data and analytics)
- The relative size of the opportunities across the four application areas in different countries
- The pace of digital health adoption and market growth in different countries and application areas
In other words, it shows how big the overall digital health market is, how fast it is growing, and which application areas are most valuable and/or growing fastest.
In a follow-up report, we will expand on this analysis to assess how much of this value telecoms operators specifically can capture.