Digital Healthcare Financing to Accelerate Digital Health Equity

Digital Healthcare Financing
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The use of digital technologies has enabled greater access to quality healthcare across the continuum of care and demonstrated high potential in advancing universal health coverage.

India is witnessing a rise in the number of digital health startups as well as in their funding. The healthtech sector received $2.2 billion in funding across 131 deals in 2021, accounting for 8.9% of all funds received by the startup world. India’s digital health market is poised to grow at a CAGR of 27.41% and is estimated to reach $485.43 billion by 2024. Similar to other sectors such as finance and education, digital technologies have shown great potential in improving health outcomes.
In spite of its promising growth, the number of digital health solutions for the underserved market remains limited. Barriers such as the prevalent digital divide, lack of clear understanding of the value proposition on the citizen side, coupled with the higher change management cost involved to digitise health facilities serving the underserved communities, have resulted in limited willingness and ability to pay for these solutions, slowing down their adoption in these markets. On the supply side, owing to the unfavourable market dynamics that increase financial risks and costs, there have been limited enablers for solution providers that cater to these markets. This provides a unique opportunity for appropriate
and context-specific financing mechanisms to address the unfavourable market conditions and drive both the availability and uptake of digital health solutions for citizens as well as
healthcare providers.

While the concept of innovation in financing is not novel, there has been limited experimentation with it to encourage digital health adoption in India. Given the high potential of both digital health and innovative financing, there is a need for concerted action by ecosystem stakeholders with varying risk appetites to come together and support digital health solution providers through different stages of their product and service life cycles and increase the demand of such solutions among healthcare providers and citizens. Government and philanthropy have spearheaded the innovative finance space traditionally. Social impact
investors, equity investors and venture capital investors can also contribute to the ecosystem, without having to bear the high risk of returns by themselves. Such partnerships can help in pooling funds and resources across philanthropy, public and market capital and channelise them towards solving problems on the demand and supply sides of digital health adoption.

This perspective explores four key areas where financing has the potential to play a catalytic role in driving digital health solution adoption in the underserved markets through the right partnerships and pooled financial resources. On the supply side, different financing instruments can make digital health solutions available to the underserved by providing upfront capital, supporting providers with risk capital during the trial phase, and returnable grants or result-based financing to demonstrate the value of such solutions. Low-cost or concessional debts can enable the digitisation of low-cost private healthcare facilities, while citizen demand can be accelerated through social or development impact bonds.

Authors: Granthika Chatterjee and Arya Ambardekar, with inputs from Ojas Malpani and Sudeepto Deb

Technical review: Lakshmi Sethuraman

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