Our Healthcare Vision

Health is the essential, universal human need, yet the healthcare industry is failing people across the globe. Everywhere, demand and costs are increasing, but not always efficacy. We are optimistic that consumerisation, technology and innovation in payment models can yield better, more accessible and lower cost care.

The Healthcare challenges

A sector facing spiralling costs and increased demand

Health is the essential, universal human need, yet the healthcare industry is struggling to deliver accessible, effective and affordable care to all. Demand for healthcare is growing rapidly as a result of population ageing, chronic disease expansion, and the search for higher quality of life. By way of example, in Western Europe the average age of the population is now 44; in the US, 180 million people suffer from at least one chronic condition; and everywhere wellness is increasingly becoming consumers number one priority.

The cost of healthcare is spiralling, creating an affordability crisis. In the US, healthcare spending represents 18% of GDP today, up from 10% at the end of the 1980s. Even in single payer markets, healthcare costs as a share of GDP have doubled in the last 30 years and are heading to a level that is hard to sustain - Sweden already pays USD 5,500 per annum in healthcare cost per capita. In the US, where employer-funded coverage is a mainstay, there is a risk that ballooning healthcare costs put companies at a competitive disadvantage in the international marketplace. And patients are increasingly being forced to pay for healthcare out of pocket as more of the direct cost is passed on to them: out of pocket medical expenses are now more than USD 1,000 for every person in the US - the same spending as the top eight health insurers combined.

The growth in financial cost of healthcare is not necessarily leading to better outcomes. Care providers in most healthcare systems have been reimbursed via a fee-for-service model, which has led to overconsumption and a lack of accountability for patients long-term health. The growing scale and complexity of healthcare has created an enormous administrative burden on physicians, reducing their effectiveness. Overconsumption, administrative complexity and failure of care delivery has created huge, often hidden waste. In the US, the Institute of Medicine estimates that waste represents over a third of the USD 3tn US healthcare economy. In the UK, regarded as one of the most efficient healthcare systems, waste pockets are still common with GBP 5bn in estimated savings from lower variation on hospital procurement alone. 

The healthcare system was not built around the customer

Traditionally the stakeholders in healthcare have not included patients, but a combination of payers and physicians. Patients often do not understand how their insurance works or what is covered when and where. 61% of US patients report being confused by medical bills, often ignoring them in hopes they will clear up without intervention. Such experience with medical bills has caused many patients to be hesitant to seek additional medical care, with some opting to forego care altogether.

The Healthcare Opportunity

Consumerization and innovative models reducing inefficiencies

Despite these challenges, we are optimistic that delivering better care to more people at lower cost is achievable for four reasons: the urgency of the problem for payers, the size of the prize for solution providers, the enabling role of technology and the readiness of the consumer to change habits.

Payers are determined to find fresh solutions and reformsmost importantly by incentivising accountable care. Encouraged by governments and self-insured payers, innovators are shifting the marketplace to value-based reimbursement which pays care providers based on better health outcomes rather than the number of appointments held, prescriptions written, or surgeries performed. These payment models reward businesses that reduce cost of care and focus on care management rather than solely the point of care. In the UK, the National Health Service capitates primary care such that general practitioners (GP) receive a fixed reimbursement per patient and hence are responsible for managing cost of care. Fostering an environment as such that incentivizes preventive, continuous, long term-oriented care is critical for healthcare innovation as, according to the WHO, 80% of health determinants occur outside of the hospital.

Technology is beginning to have a decisive impact on healthcare. The way we access advice, choose doctors, receive treatment and pay medical bills has already advanced in the last decade. Even so, healthcare is less “digital” today than almost any other sector of the economy. In part, this is due to information being fragmented and siloed in healthcare, reducing the ability to collect and mine data for insights. Developments in medical science and the application of big data, machine learning, and digital delivery will accelerate the adoption curve. Technology crucially will help providers practice at the top of their game, surface data insights at the right time, and augment a doctor’s reach to deliver population health. Patients will increasingly receive preventative care at a personalised level at any time and any place, thereby reducing the burden on the acute care infrastructure.

Consumer expectations are shifting

Consumers are looking to take control of their health and, as significant payers, are seeking the same level of service they receive in other areas of their lives. Healthcare services are consistently ranked among the worst performing industries for customer satisfaction, including access, price and convenience. The average Net Promoter Score (NPS) of a US health insurer is 12, a pharmacy is 28, Amazon is 62 and Apple is in the 80s. Yet, the same people who shop on Amazon and use an iPhone buy healthcare. 

The average NPS score of a US health insurer is 12, a pharmacy is 28, Amazon is 62 and Apple is in the 80s. Yet, the same people who shop on Amazon and use an iPhone buy healthcare.  

Our Healthcare Ecosystem

Kinnevik as a Healthcare Services investor

At Kinnevik, our mission is to build digital businesses that address material, everyday consumer needs. We seek companies that are leveraging technology to address some of the largest challenges in healthcare. To date, we have invested in four innovators – Babylon, Cedar, Livongo and VillageMD – that are focusing on these distinct issues. Babylon is redefining access to care; Cedar is elevating the patient's financial experience; Livongo is transforming care management for chronic conditions; and VillageMD is scaling the delivery of full stack, high quality, value based care.

Our companies combine proprietary and third-party data with machine learning capabilities to develop cost-effective products that are easily accessible and make patient’s lives better at the time of need. Whilst these are young companies, the results are already there to see. Compared with other practices, patients who switched to Babylon’s "GP at Hand" on average reduced their trips to accident and emergency. Providers using Cedar have seen approximately a third increase in patient collections and a 95% or greater patient satisfaction rating. Livongo has an NPS of 64, delivers measurable and sustained clinical improvements as well nearly USD 2,000 of gross medical savings in diabetes per participant per year. Lastly, payers contracting with VillageMD have seen total cost of care reduce by up to 20% all while improving patient satisfaction. 

We believe our growing portfolio of disruptors can generate lasting value, which in turn helps reduce the cost of care and alleviate funding constraints. This should create a win-win-win for consumers, governments and the healthcare economy.