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October 09, 2014
By Charles Ellison


While the Affordable Care Act will remain one of the most controversial laws ever, experts are wondering if it has accelerated a wave of innovations and investments in the burgeoning digital healthcare space. Fortune’s Erin Griffith notes that “part of the Affordable Care Act [which] forces insurers to redeploy capital rather than distribute it to shareholders. And that’s where things get interesting. One effect … [is a] spike in venture interest in health care startups.”

Recent figures show an increase in the number of individuals transitioning from no insurance to some form of health coverage. Patient volumes are growing at hospitals, with experts pointing to both the implementation of ACA and an overall improvement in the job market (more workers typically translates into more people with employer-based health coverage). 

All of the above potentially creates a growing digital healthcare climate whereby applications within the nation’s health system collect lots of patient data—and find ways to use it. It’s no surprise this is where the future of healthcare is headed. Commonwealth Fund researchers Sarah Klein, Martha Hostetter, and Douglas McCarthy observer in an October report that “The health care industry now has the opportunity to catch up, using tools ranging from smartphones and tablet computers to remote sensors and monitoring devices to deliver care, information, and support to patients where and when they need it. These technologies also can play a key role in closing communication gaps between providers and patients and in forging new relationships among providers and their peers.”

According to StartUp Health Insights, nearly 350 companies in the digital healthcare space have raised over $5 billion in the past three quarters of 2014—with funding expected to double each subsequent year. Venture fund analyst firm CB Insights tells a story of investors putting up $6 billion “across 1401 deals in the past five years” in digital health startups. Even companies like Facebook, Apple and Google, Mashable’s Samantha Murphy Kelly reports, “are dabbling with health and fitness data.”

Gartner’s recent Hype Cycle on Healthcare Providers and Standards offers insight into those investments, explaining that “to meet future standards of care, satisfy patient experience and quality expectations, and remain strong in competitive markets, health care delivery organizations will embrace the IT that enables it. They will expand their use of automation, situational awareness, cloud, mobility and interoperability standards necessary to safely extend the reach of their business and clinical systems to new and existing constituents.”

However, as Forrester’s Chris Sherman notes, there are significant challenges with the explosion of patient data and digital healthcare. Patients face the risk of exposure to security breaches (as the recent breach of Community Health Systems data by hackers from China this summer showed), and the transition from a somewhat archaic healthcare system won’t be easy. “Amid a rising tide of compliance pressures, employee mobility, and high black-market values for personally identifiable information (PII) and personal healthcare information (PHI), security and risk professionals at healthcare organizations are dealing with staggering amounts of endpoint-related data loss and exposure when compared with other industries,” notes Sherman.

Indeed, digital healthcare presents exciting innovations and possibilities on the horizon, with enormous revenue potential drawn from a convergence of policy changes and heightened investment. That said, startups will need to keep the regulatory and transition challenges mentioned above in mind. Companies in the digital healthcare space will also need to rely more heavily on vendors that can offer them the specialized expertise to develop, manage and implement technologies identified in that Gartner Hype Cycle and beyond. At the same time, because the digital healthcare space is so massive, service providers must—in turn—seek out talent that not only understands the technology, but must also have a grasp of the healthcare landscape.

Charles Ellison is a senior analyst relations strategist for TEKsystems. He keeps close tabs on changes and public policy shaping the innovation space. He is also a former congressional staffer, senior aide to state and local elected officials and an expert advocacy strategist. You can reach him with questions and comments @twoARguys via Twitter.

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