This is an invigorating time for the global healthcare industry as it is progressing by leaps and bounds. Some experts expected that health spending would rise during the pandemic while others thought it might slow down. During the first three quarters of this year, the healthcare revenues were better. The use of telemedicine also increased the healthcare practices which added to the overall revenue. However, the overall revenue was still lesser as compared to the previous year. Following are the health service spending in 2020 as compared to the previous year:
Some of the healthcare sectors that were affected the most by Covid are the ambulatory surgery centers and optometry and dental offices. The sectors that were moderately impacted were physical therapy, acute care hospitals, laboratories, and outpatient rehabilitation centers. Since doctors are continuing to prescribe medications through telehealth, it is providing continuity to the revenue of the industry.
How have the health spending and utilization affected during the pandemic?
When the situation of the pandemic became apparent for the first time to the world, many experts started predicting how it would affect the health spending and utilization. The hospitalizations have spiked during the pandemic because of the Covid cases but still it is unclear that how health spending trends are going to be affected by the end of this year. To understand the trend, I’ll explain the state of healthcare industry on quarterly basis.
State of healthcare from Q1’20 to Q3’20
Using the Quarterly Services Survey (QSS) I analyzed the performance of the healthcare industry during the pandemic. During the first quarter, the spending on healthcare services were relatively low but it was still more (0.3%) as compared to the same quarter of the previous year. However, when compared to the second quarter of 2019 the health services revenue was down by -8.6% excluding the social services and prescription drugs.
Talking about the third quarter, the year to date QSS shows that the health services spending has decreased by 2.4% as compared to the same quarter of 2019. The pandemic related-spending drops have been discussed exclusive of the spending on pharmaceuticals. The spending on health services had dropped since March 2020 but after then it recovered.
State of healthcare in Q4’20
The last quarter of 2020 isn’t over yet and thus we have the healthcare investment data in this quarter as of 11/17/20. Some of the main findings and predictions for this quarter are as follows:
· Deal-share of early stage may drop off in Q4: The large stage deals continued to grab a larger portion of deal share during the Q3 as compared to the previous quarters. Also, the early-stage deals were decreased in Q3 from 51% to 46% as compared to the previous quarters of the year.
· Dollars and deals may see a decline from Q3: The deal activities and funding both are expected to decline in digital and global healthcare industry. The previous quarter saw record highs but the last quarter of this year is going to face a drop off.
· 30 healthcare mega-rounds happened in Q4’20: Around $100M+ deals occurred during this quarter which consisted of most of the deals from US and China. US saw 15 while China saw 11 during this quarter. The biggest round was for a China-based biotech company which was of $310M private equity financing.
Q4’20 expected to face drop-off in healthcare spending
The graph below explains the healthcare funding 2018 to 2020 where the data for Q4’20 is taken till 11/17/20. The quarterly global healthcare funding and deal count was high during Q2’18 but it declined till Q4’18. The healthcare spending again increased during the Q2’19 and it declined when it hit the first quarter of 2020. During the third quarter of 2020, the healthcare spending was the highest in two years. However, as you can see in the graph, the funding is projected to a decline and the deal count is expected to drop to around 1,267 or even 661.
Region wise analysis of healthcare funding
If we talk about the regional distribution of the healthcare funding, all the regions are expected to face a drop-off. Following is a depiction of the healthcare funding across the major regions in the U.S.
The above chart shows the healthcare funding in North America, Asia, Europe and other regions. The ‘Other’ regions include South America, Africa, and Australia. The funding were greatest in the North America region as compared to Asia and Europe. However, the healthcare spending is expected to decrease in the Q4’20 on the whole. The funding are expected to decline as compared to the Q3’20 but it still won’t be lesser than the previous quarters during Q1’18 till Q2’20.
Stage-wise analysis of healthcare spending by enterprises
Following chart shows the healthcare funding by the early stage, mid-stage, late-stage, and other enterprises during 2018 to 2020. The funding in the healthcare sector was highest in Q2’18, Q1’19 and Q3’19 and lowest Q2’20 and Q3’20 by the early stage companies. It’s evident that the funding was highest by the early stage companies and lowest by the late-stage ones. In Q4’20 the funding is expected to decrease for all the three stages as compared to the previous quarters of the year.
Healthcare AI Trends to watch
During the pandemic, AI has gained much importance in the healthcare industry. The role of AI could be seen in various activities during the Covid-19 such as searching CT scans for the diagnosis and symptoms of Covid-19 or arranging scientific papers on coronavirus. To my surprise, AI had a big and prominent role in the healthcare industry during the pandemic.
To understand the state of healthcare in relation to the AI trends, the White House coordinated with the AI research institutions. To understand the structure of the coronavirus better and to pave way for the drug and medicine discoveries in this regard, the big tech companies and biotech firms took the help of AI. Also, quarantine and lockdown forced the laboratories to speed up their digital pathology capabilities. Consider the following graph:
The chart shows that in spite of the economic uncertainties and unpredictability, the healthcare AI firms raised huge funding in the Q3’20. Following are the main activities that have impacted the healthcare AI trends:
* The next generation of CT and MRI scans
* Instant and rapid at-home blood testing
* AI driven passive monitoring