Health tech 'poised for rapid re-acceleration' in 2023

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.

The 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. They all have:

• A strong consumer focus.
• Business models that align with cost-savings incentives.
• Limited reliance on acute care volumes and activity.