Q&A: Deloitte’s Peter Micca on the digital health investment boom, going public and value-based care

Digital health is quickly evolving and emerging onto the main stage of healthcare. The last two years have seen an unprecedented amount of venture dollars pouring into the space. Today we are also seeing virtual care companies exit and enter onto the public markets, either through an IPO or a SPAC merger. 

Over the years, Peter Micca, a partner and National Health Tech Leader at Deloitte, has had a first hand look at many of the changes in digital health and published numerous reports on the industry. Micca sat down with MobiHealthNews to talk about SPAC, COVID-19 and the future of value-based care. 

This interview has been edited for length and clarity. 

MobiHealthNews: I’d like to talk a little bit about the investors, and start with SPACs. I know you’ve written about that, and we’re just seeing tons of them in digital health. What’s going on there? Why are companies choosing to go that route? And are you seeing mostly smaller companies going that route, or is it sort of a broad swath of companies doing that?

Micca: SPACs are just another form of finance. And if you’re an emerging growth company, and you need growth capital or growth equity, you could either get growth equity capital through a loan, you could do an IPO, you could do a private placement through private equity, you could do an alliance deal with a larger company and get milestone payments and work collaboratively. Or you could accelerate the IPO process through a SPAC. And that’s all it really does, it accelerates the process with an upfront, predetermined value based on the negotiated parties. 

It’s just another form of financing. The pipe market or the private investment in a public vehicle is important to executing that transaction. And the reality is the broader macro economic environment — low interest rates, low cost of capital, high access to capital — has accelerated the process. We are seeing more emerging companies rather than larger companies just because of the valuations that are pursuing those options.

MobiHealthNews: We’re seeing tons of money being invested into the digital health space. Do you think that’s sustainable, or is it a bit of a bubble? What do you think’s going on in terms of this and the huge valuations too?

Micca: I get that question a lot. I’m not a banker, I’m not an economist. I can’t predict the [future] macro and micro economic environment. What I will say, though, is that the demand for digital healthcare solutions in healthcare was brought to life in a very significant way by COVID. It became evident and clear to the average American the importance of healthcare technology in a way that we couldn’t have imagined. 

You see it in telehealth, where in a very short period of time, there are now a very small group of public telehealth companies that have all merged or consolidated or done a transaction in a time horizon that for other industries takes years to consolidate. And so in our experience, in healthcare, when the consumer, or the insured, becomes evident of a trend, it accelerates the environment because ultimately the consumer is paying more and more, [and] is contributing more and more to the increase in healthcare costs.

MobiHealthNews: Yeah, I’d like to talk about … that trend of consumerization [in] healthcare. There’s a lot of plans where patients are paying out more, what does that do in terms of changing the consumer or the patient’s expectations?

Micca: The more educated the consumer base, the more information and data that they have, and the more it becomes ubiquitous in the economy, the higher the expectations. Healthcare is one of the few industries where we’re constantly generating a new supply of healthcare. … As complex as healthcare is, it’s really about two simple things: how much healthcare do you want? And who’s going to pay for it?

The answer to the first one is, I want whatever you have. So if you’re creating more of it, then I want more of it. We shouldn’t be surprised if the unit cost of healthcare in that environment goes up. … And then the second question of who’s going to pay for it, the average consumer in America would say, well, not me, because I’ve already paid for it when I paid my insurance premium. …

So in that ecosystem, in that environment, the cost keeps going up, which is why healthcare inflation is outpacing most other sectors. And so the only true solution is technology, and the consumer taking a larger responsibility for their own healthcare through their behavior patterns. And that is the toughest part.

MobiHealthNews: In terms of Medicare Advantage, where the onus is on the provider, do you think that’s going to incentivize providers to adopt [digital tools] in a way that perhaps they [hadn’t before]?

Micca: There were two barriers to telehealth before COVID. One was the regulatory environment around how physicians get credentials across state boundaries and borders and the like, and the other one was reimbursement for  Medicare participants. If you are a physician, were you reimbursed at the same amount for a telehealth visit as in-person? Historically the answer was no. COVID at least temporarily kind of leveled the playing field, at least with respect to reimbursement, and allowed for the consumer to at least make a demand decision, not taking into consideration cost, because it wasn’t a factor. 

Over time, I think the decisions we make from a regulatory perspective and the reimbursement mechanisms and incentives we apply not only for telehealth, for the adoption of all new health technologies, will largely drive the consumer adoption of those new technologies and services because we have a third-party payer system.

There are companies that just have direct-to-consumer solutions that are paid out of pocket. And although that gets into the determination of the total cost to healthcare, its largely from the third-party payer system. 

MobiHealthNews: Is there anything I haven’t asked you, or any other topics that you think aren’t being written about or discussed that maybe should be?

Micca: I keep going back to how much do you want? Who’s going to pay for it? The problem is everyone wants everything, but no one wants to pay for it.