After the doldrums of 2022, the digital health sector is “poised for rapid re-acceleration” heading into 2023, BTIG managing director David Larsen notes in a Monday research report. Driving the news: Besides rising interest rates, Larsen says, the following market forces will help ignite a health tech boom:
Hospital spends are normalizing as COVID rates drop, with more patients pursuing elective procedures and physician visits. As part of the collective (real or imagined) post-pandemic return-to-normal, people will resume using commuter and elective health services and advocacy and care management tools.
Employee health care costs will rise, pushing commercial and Medicare Advantage health plans to encourage the use of digital-first and fee-for-value tools as they raise premiums. By the numbers: Referencing a survey of roughly 900 employers, Larsen notes that the total annual health care cost per employee in 2023 is expected to increase 5.6% — up from 4.6% this year.
“As premiums increase, this should lead to a lift in revenues and per-member per-month rates,” Larsen adds. he other side: Nurse wage inflation, propelled by labor shortages, looms as health tech’s biggest 2023 headwind, Larsen says.
The sector is also staring down a rise in pharmaceutical costs, which could shrink digital advertising budgets, and a potential fifth COVID surge. Between the lines: Larsen identifies a few commonalities among the digital health businesses he sees as poised to succeed next year.