Needed Disruption: Why We Need Mental Health Unicorns
Many Americans know firsthand someone with depression yet reaching treatment is often an impossible task. Mental Health is a section of healthcare with rising needs, increasing costs, and demand is outpacing supply. 19.1% of U.S. adults experienced mental illness in 2018 (47.6 million people) — this represents 1 in 5 adults.
Only 43% of known people with mental illness in the USA receive treatment. Equally alarming, numbers for undiagnosed are not reflected here and these numbers also do not include size estimates of populations lost to suicide. Globally, two-thirds of people with a mental disorder go untreated. For more serious mental illness, the National Institute of Mental Health, measured 51 percent of adults in the U.S. with bipolar disorder and 40 percent with schizophrenia go untreated per year.
A unicorn is a startup company valued at over $1 billion. These are fast-growing companies; usually with traction for user adoption but often high growth for revenue as well. This is why Unilever bought Dollar Shave Club for example. The problems these startups target have large market potential — their potential to earn revenue looks enormous. Yet, the fundamentals that current unicorns solve big problems is dwarfed by the size and costs associated with mental health. Digital health shows great promise to meet consumer needs.
Tackling mental health can benefit everyone, reducing healthcare costs and stress on emergency services, increasing productivity, leading to better happiness for all, and saving the lives of those important to us:
- Patients hospitalized with serious mental illness are much more likely to be readmitted in the next 30 days if they do not receive follow-up treatment.
- The average hospital cost for a patient readmitted for a mood disorder is $7,100.
- Untreated mental illness costs the country up to $300 billion every year due to losses in productivity; worldwide this number is $1 trillion.
- As many as 90 percent of cases of suicide are attributed to mental illness.
Suicide rates in the United States are increasing for 13 years in a row, a number that is up 40%. Suicide in America is dominated by white men, who account for 70 percent of all cases.
Projections for the global behavioral health market size is on path to reach US$ 240 billion by 2026. The market is growing at striking compound annual growth rate around 2.5 % over the forecast time frame 2019–2026. Even this is conservative as it is projected to only serve a fraction of the total needs because of undiagnosed populations and limited definitions for mental health.
Looking beyond mental illness, self-care and total wellness aspects of health can see a boom to an addressable market larger than 19.3% of adult Americans. “Health is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.” Individuals, Insurers, and companies can see a return by investing in mental health tools. People with depression have a 40% higher risk of developing cardiovascular and metabolic diseases than the general population. People with serious mental illness are nearly twice as likely to develop these conditions.
Much of Mental Health is Hard to Scale
Mental Health currently works with analog methods: One-patient to one-care-provider. To increase scale we need automation wherever possible, peer-to-peer models, and reduced friction for top of pyramid patient-to-skilled-care-provider. Self-guided solutions combined with chatbots and other forms of light touch offer some options to reduce costs. While reducing the friction to reach a skilled professional can further increase access and lower costs.
Disruption vs. Complementing
We are already seeing health innovation that creates a new market and value network and abandons existing behaviors for new ones, displacing established market-leading institutions, products, and alliances. Current healthcare providers not only have trouble improving their existing products but are suffering from increasing compliance needs and top heavy models that do not see improved margins at scale. Healthcare providers often find the return on serving mental health falls outside of industry resources. New startups can target those overlooked segments, gaining a foothold by delivering more-suitable functionality at significantly lower prices.
True disruption isn’t the only option; while there is room to serve a mass market with new direct to consumer needs, existing healthcare providers can adopt those same tools using a variety of business models discussed below. The overall mental health needs of the USA can be best served with a combination of all those models. Even the best direct to consumer model won’t replace all healthcare needs and the real mental healthcare revolution will see a solution that is both easily accessed, integrates with their other healthcare and is affordable.
Not all mental health startups and innovation should disrupt. There are five business models that can see growth for our wellness.
- Self-insured employer benefits
- Value-based reimbursement
- Device-like reimbursement
60% of U.S. counties in 2018 didn’t have a single practicing psychiatrist, and more than half of adults with a mental illness went untreated, according to the National Alliance on Mental Health.
Even in the most developed markets like San Francisco or New York, many mental health professions that accept insurance simply are too busy with private practice consumers than to bother with insurance reimbursement. I recently spoke to several parents including Jeff, a parent who makes $70,000 a year, and is forced to pay $250 per hour for his child’s care because the therapist’s reimbursement from insurance would be $120 ($60 for a family counselor and $120 for a more skilled therapist). Here we see demand far outpacing supply.
Direct to consumer models can help reach the underinsured and those who have other barriers to care. Developing ways to port these services to primary care providers could have interesting benefits to customer retention and improved overall health.
Companies can see a ROI for workplace mental health programs, improving the productivity of employees, reducing liability and mitigating other costs. In addition to the potential to increase total employee wellness, employer competitiveness, long term disability claims are reduced by 30%. Where employee perk programs suffer is their ability to convert past the employer sell to achieve scale within organizations.
Part of the intricacies of the healthcare space is that much of the revenue is tied up by old players and requires a change of will or politics. Yet, new billing codes which are the faucet to healthcare improvement are being created for digital health. CPT, which stands for Current Procedural Terminology, is the code set used to describe procedures and services performed by physicians and other healthcare professionals or entities. A CPT code is a billing code used for clinical procedures that are consistent with contemporary medical practice. There are two CPT Category tracking codes specific to the CDC’s National DPP that more accurately identify the non-clinical service performed by CDC-recognized National DPP providers. Code 0488T was created for “Preventive behavior change, online/electronic intensive program of prevention of diabetes using a standardized diabetes prevention program curriculum, provided to an individual, per 30 days” We can imagine these adjustments to an often achariac system as hope for the future of digital mental health.
The premise here is that startups receive fees based on the cost savings they achieve for total healthcare cost reductions. Negotiating and administering this is often a tough proposition. Yet, the potential to win large contracts will develop as the space and track record for interventions materialize.
Software as a Medical Device, SaMD — is a model similar to prescription digital therapeutics (PDTs). FDA clearance enables companies to make medical claims and pursue device-like reimbursement. The barrier to entry here is high because of the costs and waiting time for FDA approval can be tedious, uncertain, incurring high costs. The lifecycle of mental health startups may see companies start out as D2C and evolve to B2B2C when employers take advantage of scaling for employees and then win FDA approval for a defensible business model.
On the brightside, Adoption
Generation Y and Z are hit the hardest with mental illness issues. Telehealth, mobile apps, and on-demand services not only reduce costs but are seen as desirable solutions for the fast pace life styles of modern life. As evident with wearables, there is a major interest to leverage technologies for better health outcomes and should be a signal to entrepreneurs and investors that there is consumer will.