How SDOH will influence the next wave of health tech startups

Social determinants of health can have a big impact on patient care and patient outcomes. As a result, they also can have a major impact on value-based care, which is on the rise. This all adds up to SDOH becoming increasingly important in healthcare today.

Consequently, the impact of SDOH also is being felt in the bubbling world of healthcare technology startups. The practical use of SDOH is new and exciting in healthcare, and entrepreneurs are catching on that this is an area that could benefit from new technologies and reap rewards for smart players.

First, understand healthcare today

So why exactly are entrepreneurs today looking at SDOH? What is compelling about SDOH to a startup type of executive? What piques their interest?

“Let’s start to answer these questions by looking at a few facts about our healthcare in this country,” said Joanne Lin, a principal at Newark Venture Partners, a venture capital firm whose areas of specialization include healthcare technology. “Clinical care is estimated to account for less than 20 percent of what affects a person’s overall health outcome.”

The majority of factors that materially impact a person’s health occurs outside of the doctor’s office and yet most of the $3.5 trillion annual U.S. healthcare spend is still incurred in the clinical setting, she added. Furthermore, only about 5% of the population – typically the chronically ill, and those with the most complex and compounded health issues – actually accounts for approximately 50% of the healthcare expenses, she said.

“This imbalance indicates that there’s a fundamental problem with how healthcare is delivered in this country causing all types of inequities and, frankly, mismanagement,” Lin contended. “Now, any one of us might think that this is enough evidence to trigger entrepreneurs to try to address this issue. In fact, these statistics are not the result of new research and have been widely known for years. So why now?”

"If we can collect standardized SDOH data at the individual level, it must also be incorporated into population health management platforms to inform care coordination efforts."

Joanne Lin, Newark Venture Partners

Startup entrepreneurs today need the perfect combination of an urgent problem impacting a large population, a large market size (in terms of dollars spent), a window of opportunity, and the possibility of building a scalable solution, she explained. These last two factors have recently aligned for startup executives to perk up and pay attention to social determinants of health, she said.

SDOH startups have begun

A few innovative founders have realized that this is a market ready for new solutions, and tech startups like Solera, UniteUs and CityBlock Health already have raised hundreds of millions from investors, Lin pointed out.

“Most of them are focused on tackling the issues related to matching patients with the existing maze of social services, which is an extremely fragmented ecosystem,” she related. “We also are starting to see that the landscape for startups in the SDOH space is rapidly evolving.”

The most important pieces of the puzzle – the regulatory policy and healthcare infrastructure – are finally becoming aligned to support innovative solutions to address some specific social determinants of health, Lin said. The industry also has seen an emergence of focus on things like healthcare transportation or tackling food deserts, she noted.

“The biggest catalyst to reaching this point has been the industry’s transition to a value-based care system where stakeholders share the risk and are incentivized to control cost,” she said. “In a report by Health Care Payment Learning and Action Network, it is estimated that in 2017 around 34% of U.S. healthcare payments were tied to alternative payment models, an increase from 23% since 2015. A 2017 whitepaper by Change Healthcare identified more than 40 states that have a state-initiated plan or strategy to move toward value-based payment and almost half of those are multi-payer in scope.”

Value-based care driving SDOH

With a goal of providing the best outcomes at an optimal price, stakeholders must now expand their scope to address the social determinants of health, too, Lin said. Ultimately, this paradigm shift supports payers and providers in aligning social needs and clinical care, she added.

“This transition aligns with the development of foundational technology infrastructure throughout the healthcare industry,” Lin noted. “With the regulatory pressure created after the passing of the HITECH Act in 2009, today, more than 95% of hospitals have demonstrated meaningful use of certified health IT and electronic medical records, according to CMS, compared to only about 31% in 2003.”

As this core technological plumbing was being laid in place, the industry saw an explosion of healthcare technology startups enabling interoperability across software solutions, improving point of care delivery, the consumerization of healthcare and powering healthcare data exchanges.

“Between 2010 and 2018, the value of capital investments – venture plus PE – in digital health increased by 1,115%, reaching a record $14.6 billion in 2018,” Lin said. “This activity has primed senior decision makers at health systems and health plans to adopt technology to improve care outcomes and operations. A survey conducted by The Deloitte Center for Health Solutions found that 80% of hospital respondents reported that leadership is committed to establishing and developing processes to systematically address social needs as part of clinical care.”

Trends that point to SDOH and health tech startups

The first wave of startups in the space focused on aggregating the fragmented ecosystem of social service providers and public health resources, giving health systems and plans the ability to direct patients appropriately.

The second wave of startups is now cresting on a range of other opportunities to move the needle when it comes to addressing social determinants, Lin said. The trends now fall into three major categories, she added.

“First, standardizing data collection and integrating data on social needs and analytics in interoperable IT,” she said. “According to a survey conducted by the Deloitte Center for Health Solutions, 88% of hospitals screen patients to gauge their health-related social needs, though only 62% report screening target populations in a systematic or consistent way. Furthermore, much of the nuanced data is buried in social work notes that the care team is not accessing.”

AI and predictive analytics

Second, the need to leverage artificial intelligence and predictive analytics to help segment population data to give a real-time picture of the populations being served, as well as identify the populations that should be targeted for prevention purposes, Lin stated.

“Healthcare data has grown by leaps and bounds over the past decade, but just because this data is now available does not necessarily mean it is being utilized effectively,” she said. “If we can collect standardized SDOH data at the individual level, it must also be incorporated into population health management platforms to inform care coordination efforts.”

There is an opportunity to make use of this data, not only to better understand a patient’s health needs, but also to start making personalized, data-driven decisions, she added.

“And third, tech that continuously tracks and analyzes outcomes as well as data that can help demonstrate an ROI on social needs investments,” she said. “Healthcare organizations want to see ROI from addressing social needs, in terms of improved health outcomes and/or reduced costs. However, unlike other types of investments, it’s pretty difficult to isolate the benefit of these programs over a given time period. Currently, only 35% of hospitals have the tools they need to track the outcome of SDOH investments.”

Health IT to be impacted by SDOH startups

If this opportunity develops the way Lin expects it to, all of the existing healthcare information technology stack will be impacted. The platforms likely to see the most change early on will be the revenue cycle management systems and EHRs, she said.

“Revenue cycle management software facilitates all the administrative work that happens from delivery of care to when the provider gets paid,” she said. “Current solutions are simply not adapted to capture all the services related to SDOH. Furthermore, given the shift away from fee-for-service, revenue is no longer the sole measure of success for a provider. EHRs will also have to ingest more data from more sources to become the holistic source of truth for one’s health record.”