The Hard Thing About Preventative Healthcare — And How to Find a Scalable Business Model for Prevention

This article was originally published on Medium on Dec 12, 2023.

“An ounce of prevention is worth a pound of cure,” stated Benjamin Franklin in 1736 to Philadelphians in his efforts to advise citizens on fire prevention and vigilance.

Chronic and lifestyle-related health issues are certainly a fire that is smoldering and getting more and more oxygen every year. The bellows that are fueling this flame are modifiable risk behaviors, of which the CDC outlines the following:

• Physical inactivity
• Excessive alcohol use
• Tobacco use and exposure to secondhand smoke
• Poor nutrition (diets lacking in fruits and vegetables, and abundant with sodium, sugar, and saturated fats)

According to the CDC, six in ten adults suffer from at least one chronic disease (heart disease, cancer, chronic lung disease, stroke, Alzheimer’s, diabetes, and chronic kidney disease), and four in ten suffer from two or more. They are the leading drivers of US’s $4.1 trillion healthcare costs. The Australian Institute of Health and Welfare reports that cardiovascular diseases, cancer, COPD, and diabetes account for 75% of chronic disease related deaths, but adds that the impact of chronic disease should not be measured in deaths alone. Specifically, they mention mental illnesses as a major contributor to poor health and disability.

A UN Chronicle Article mentions that a healthy balance over the four modifiable risk behaviors seems to be associated with up to 80% reduction in the risk of development of these chronic diseases.

Furthermore, an aging population base is a major driver of healthcare costs in the future. According to World Economic Forum, this “seismic demographic shift” affects most of Europe and North America, as well as many Asian and other countries, such as Japan, South Korea, China, and Australia. In many countries, the old-age to working-age ratio will almost double in the next 40 years.

Given this data and the apparent favorable sentiment of governments toward preventative healthcare, there is a striking contrast to actual spending on these services. The European Commission reports that, on average in the EU, 3.4% of healthcare spending (or 0.37% of GDP) is put on preventive care. That translates to 111€ per person. Over 85% of this expenditure is financed by governments or compulsory health insurance; the rest is divided between enterprise, out-of-pocket, and other financing sources.

According to Peterson-KFF research, the US spends about 3% of healthcare budgets on prevention. They also report a decline in the percentage in the US from 2000 to 2018, and note that the share remains flat over time in many countries.

The Hard Truth

Let’s face it. Nobody is willing to pay for prevention (at scale). Nearly the only exceptions are vaccination programs, which are preventative healthcare at its core (though not targeting lifestyle but biological mechanisms of disease prevention). It may sound harsh, but let’s digest this bombshell.

There are numerous small-scale national or regional initiatives where a public body funds a time-limited preventative care program. Typically, they intend to assess health outcomes or healthcare resource use implications of a specific preventive intervention, often in the form of public education and awareness.

Interestingly, many screening programs (e.g., prenatal and newborn screening or cancer screening) are often classified as preventative care. I would argue that they are not. If a program intends to screen for the presence or absence of a disease, it’s not really preventative (though it can ensure early and timely interventions to treat the disease). If a program intends to identify risk factors, they could be considered preventative, given that appropriate interventions would be administered, and preferably, monitored for efficacy and effectiveness.

The tricky thing about lifestyle-related preventative interventions is that generating a clinical evidence base can take an inhibitory long time, and the effects of a preventative intervention can be challenging to distinguish from a myriad of other factors over time. Reaching relevant clinical endpoints can take from several years to tens of years.

As the benefits of lifestyle-related preventative interventions typically take several years to materialize (in a tangible, measurable sense), it’s also difficult to budget at scale. Policymakers' window to results is typically limited by their political tenure, at risk at every election (every 4–6 years). Thus, funding long-term programs may be viewed as risky, as results are not ready by the next or even the following elections.

Budget frameworks also create a considerable challenge. Preventative care programs are most often funded from healthcare budgets. If you invest heavily in preventative programs, which part of current healthcare would you cut from? Primary care? Specialist care? Elderly care? Cancer screening? Vaccinations? Limiting access to effective therapies?

Given that we see no real upward trend in healthcare spending for preventative care, and it’s not to be expected in the near future, what models could a company developing preventive care solutions take?

Business Models For Preventive Care Companies

Over the past decade, there have been myriad approaches toward healthcare. Indeed, there are many scientific articles detailing (often small-scale) pilot studies with a preventative digital health intervention. Typically, results are favorable (as expected). On paper, these initiatives' societal, health, and economic advantages are clear. However as stated above, generating long-term clinical evidence can be a daunting task that may take decades.

Hence, we’ve seen extremely few successes in preventative digital health in the healthcare setting. It’s fair to point out that the game is not over with healthcare, but companies need to be mindful of the factors affecting their motivation to buy.

Let’s explore some available go-to-market models and paying customer segments for digital preventative health solutions.

Healthcare providers and health systems

With only 3% of healthcare budgets being spent annually on prevention, there’s not much playing ground for digital preventative health entrants. The problem: it’s challenging to find scale with that budget allocation. It’s nearly impossible to scale from pilot to national and international use. Also, evidence from one country has not typically sufficed in other countries due to differences in health systems. Healthcare delivery, organization, payment models, and underlying populations can vastly differ from country to country.

Hence, some preventative digital health companies have switched from “pure” prevention to focusing on treatment of a disease — say, diabetes, obesity, hypertension, anxiety, or depression. This also means more regulation and an increased clinical evidence burden for these companies. This makes a lot of sense for these patient populations but narrows the focus from a population perspective to a smaller, defined patient group.

While preventative health budgets are (and are likely to remain) small, soaring healthcare costs present opportunities. Healthcare professional resources are tight, drug costs are increasing, and population is aging, growing, or both. Hence, preventative solutions can unlock willingness to pay if they provide evidence of the following:

1. Decreasing the number of patient visits, consultations, or in-hospital stays, e.g., by using patient-reported data to target the need for visits or exams.
2. Increase healthcare professional efficiency, e.g., by using smart algorithms to triage or stratify patients to appropriate self-care interventions, incl. exercise, diet, and psychological self-help.
3. Extending or amplifying the positive health effects of drugs or other treatments.

One concrete example of the latter is a push for tying the reimbursement of novel GLP-1 (or other weight loss) drugs to a digital lifestyle intervention, which supports health gains during and after the active drug treatment period.

These focused approaches open the possibility of decreasing the time needed for clinically meaningful, measurable outcomes from several years to months.

Having said that, political decision-making plays a huge role. This is evidenced by the cancellation of Australia’s National Partnership Agreement on Preventive Health (already a while back). As one of the respondents stated in this interview article, “We got to scale. We were on track. We made all the tweaks we needed to. We had done some interim evaluation. Then the funding was cut.” When dealing with public budgets, the focus tends to change, and acute needs in other domains outside of healthcare may result in healthcare spending cuts. And in these cuts, treating people who are already sick overtakes preventing them from getting sick in the first place. Patients need to be treated anyhow.

Payors

The same principles apply when targeting payors as the paying customer. In some countries, healthcare payments are driven by public payers (e.g., governments and municipalities). In other countries, models rely more on private health insurers.

In any case, payors share the same goal: providing better outcomes with less costs. However, payors have been reluctant to reimburse preventative measures, primarily for two reasons. Firstly, relevant long-term health economic evidence has been scarce. Secondly, payors are not accustomed to reimbursing digital solutions. While they clearly define pathways for reimbursing drugs, the same cannot be said for digital health technologies, especially preventative ones.

Let’s take a big US payor, Cigna, as an example. Elaborating on preventative healthcare services, they mention an annual check-up, flu shot and other vaccinations, mammogram, and colonoscopy. While these are undoubtedly important, there’s no mention of lifestyle-related or preventative psychological interventions. How about a digital tool for supporting a healthy lifestyle, or a mental health toolkit to tackle and cope with psychological issues before they escalate?

Commercial payors have still expressed interest in prevention, as they also face increased cost pressure. The concept is simple. Each dollar spent on prevention should cut multiple dollars of spending in the future. Yet, we still await truly large-scale payor partnerships and roll-outs for these solutions, and many initiatives are on a pilot or limited roll-out stage. This, too, makes sense. Payors want to have hard data on the effectiveness of these solutions before deciding to invest in longer term and on a larger scale.

Payor partnerships also open an avenue that would not stress health systems, as these benefits could be offered and delivered to health plan beneficiaries outside of the direct healthcare context.

Could digital preventative solutions, which inherently allow more active and continuous monitoring of health parameters, be used to incentivize beneficiaries by offering lower premiums to active users? This may serve as a competitive advantage for health plans, in terms of a more comprehensive offering and potential price reductions.

Another payor-associated model is to tap into existing reimbursement codes. While these focus on the healthcare interface (and hence target the treatment of an illness rather than prevention), reimbursement is available, for example, in the US for remote patient monitoring. You could consider these as preventative means in the sense that they allow continuous health state monitoring, and may prevent recurrence or exacerbation of diseases, and reduce the number of acute visits and hospitalizations due to early interventions.

Employers

Employers offer health benefits to their employees for various motivations, including talent acquisition, retention, satisfaction, and increased workforce well-being, potentially translating to fewer sick days and more productivity.

However, the realization of employers as paying target customers is not unique, and health plan managers and HR executives are swamped by approaches from digital (or digital-physical hybrid) solutions providers. In a panel discussion at last year’s ViVE conference, HR executives touted the need to see a short-term return on investment. Amidst this tumultuous financial environment, they said they don’t have the luxury to invest in solutions where the ROI comes in 12+ months — but need to see it faster.

As with healthcare and payors, employers need to see evidence as well. But the evidence looks a bit different. While concrete health outcomes play a role, employers need to demonstrate other metrics, e.g.:

• Increased employer attractiveness
• Increased employee satisfaction
• Increased productivity
• Reduced sick days
• Reduced longer-term absences driven by mental health or chronic conditions

Measures for these endpoints do not require randomized controlled trials, as you would expect to need in the healthcare setting. If you can demonstrate these benefits within the context of a single employer, you are in good standing for a larger employer-wide roll-out.

Sometimes, however, a full-scale roll-out may be cost-inhibiting. You should look for ways to find relevant subpopulations that are likely to benefit most of your solution, or build value-based business models which rely on actual benefits, rather than simply the number of users.

It’s also noteworthy that some preventative solutions may compete with the employer’s existing health plans, especially if the employer is not self-insured but relies on a commercial insurance provider. In some cases, there is a valid concern about increased health insurance costs, especially if there’s a possibility that the preventative solution might increase the number of healthcare visits. Mapping out these potential overlaps (or potential downstream effects) is essential to be prepared for discussion with employers.

Pharma and life science partnerships

The business of pharmaceutical companies is providing treatments for diseases (save for vaccination businesses, which are actually preventative!). However, preventative solutions may be meaningful in various ways to pharma, too.

Preventative digital solutions may open access to population (or sub-population) based real-world data and insights. Depending on the data collected, these insights can be used across various stages of drug development. Data can be used for, e.g., drug discovery, finding appropriate patients for clinical trials, using real-world datasets as virtual control arms, or stratifying patients for targeted treatments (using relevant data as digital biomarkers).

As mentioned earlier, lifestyle or mental health-related supportive interventions can augment health outcomes, which can be valuable for drug reimbursement and clinical uptake. There’s also a lot of value, even though more difficult to substantiate with evidence, in positioning as an innovator and a patient-centered company and improving customer relationships with healthcare professionals and patients.

The critical question for preventative solutions providers is how does their solution help pharma execute better and increase their core business — new drug development and sales. This link is often unclear, leading to uncertainties about the meaningfulness and financial impact of such partnerships. It needs to be very clear if your solution will e.g. help provide valuable data in drug development or post-market surveillance, improve treatment outcomes, or be usable in finding, stratifying, and funneling patients to appropriate, perhaps targeted treatments or clinical trials.

Consumers

Finally, selling directly to consumers is a valid option for any preventative digital health solution provider. For a consumer-focused play, superior experience is vital, and commercial success relies more heavily on direct marketing endeavors, which can be extremely costly.

As a marketing play, one of the first challenges is targeting. Which consumer segments does your solution cater to, and how will you be able to reach them with your message in a cost-efficient manner? Is there an ability and willingness to pay in this segment? Remember, in a D2C model, you’re competing not only against similar solution providers but also against every other purchase decision: Will I purchase Netflix, a gym membership, an airfryer, or a lifestyle app?

One successful D2C (even though not exclusively) digital lifestyle intervention company is the US-based Noom, whose revenue is in the hundreds of millions. They reported $400 million of revenue in 2020, and raised a $540 million Series F in 2021.

Once the number of entrants and consumer-relevant options increases in the market. Then, it’s increasingly a marketing play, and positioning plays a larger role in differentiating your offering from others.

The level of evidence in a D2C model differs from other go-to-market alternatives. The focus is more on marketing and storytelling, and consumers don’t necessarily expect to see hard clinical evidence. Case stories, testimonials, and internal / marketing-oriented studies and data play a more prominent role.

Hard is still hard — but there are pathways to success

In addition to the presented go-to-market models, there might be others and new models may emerge. One such alternative is a social-media style ad-based model. That requires building the interventions on a platform where peer groups and communities play a significant role. Alternatively, companies might just use user data for ad targeting without the community component.

Despite some (typically early) successes with nearly each mentioned model, the jury’s still out. None of the models have been superior to the other. Many companies opt for not putting all of their eggs in one basket, and go in parallel with two or more alternatives. This is good from a go-to-market risk management perspective, but presents a new risk in distracting focus, and potentially needing to run multiple parallel evidence generation, sales and marketing activities with slim teams.

As the population is aging, and lifestyle-related diseases as well as mental health issues are on the rise, no one should doubt the need for preventative interventions. Thus, I am hopeful one or several of the models will unlock a significant growth opportunity in the near future (which, especially in the context of healthcare, can mean 10 years).