The “unhealthy” Trifecta. Public healthcare expenditure in Southeast Asia is projected to grow to $740bn by 2025 from $420bn today. But as a % of GDP (~2.5%) the region sits at one-third of the OECD average (7.7%). The inherent infrastructure gap can be addressed in part through the adoption of digital health solutions. The relationship between Provider, Payor and Patient is somewhat broken in SE Asia, despite healthcare demand being the fastest growing segment of household and public expenditure. Solving the payor problem will unlock what we believe to be a $5.6bn revenue opportunity per annum in the region. This requires digital health providers to crowd-in insurers, credit providers and managed care networks in order to drive up access and affordability.

Fragmentation creates opportunity. Healthcare ecosystems vary dramatically in SE Asia. Triangulating business models with the primary value drivers is the only way to determine who the winners and losers will be. Broadly speaking, we favour B2B and B2B2C models in categories where the value proposition is quantifiable. The provisioning of healthcare can be broken down into five broad categories : awareness/education, prevention, treatment, disease management and administration. The category winners will be those that have identified and addressed the pain points of the payors. Given the nascent state of the ASEAN digital health space, the part that remains unclear is the approach – ie. vertical vs horizontal.

Is value-based care the answer? Given legacy infrastructure, workflows and processing, there are a number of companies targeting the root cause of medical inflation. MyDoc is building a value-based digital managed care platform that has crowded in one of the largest health insurers in the region, Prudential. Health data analytics platforms like Mesh Bio help healthcare organisations better diagnose and manage chronic diseases (driving down cost at the point of care). One of the more ambitious companies in this field, MiyaHealth, is attempting to vertically integrate the whole value chain by being the insurer/HMO, the third party administrator and managed care network (think BUPA 2.0 – the global pioneer). By aligning outcomes over utilisation, they are fundamentally trying to change how healthcare is provisioned.

A full-stack approach in a patient-centric model is the alternative way. When the payor and patient are the same, health management platforms can drive meaningful reach. Jio Health in Vietnam provides an integrated solution (remote clinic, lab and pharmacy) that is not only on-demand but in-home. Vivant’s approach in India is stakeholder driven either through product innovation or directed care programmes. These types of platforms lend themselves well to defined-benefit schemes for insurers to underwrite. This is in stark contrast to platforms like CXA where the value proposition is more as an intermediary and administrator (with commensurate unit economics). As is the case in financial services, it is also unclear whether large B2C platforms like HaloDoc, AloDokter and Hello Health will need to verticalise their offering to monetise their user base.

The promise and potential of Artificial Intelligence in healthcare is a thematic worth tracking. In particular, the impact of AI on detection, prevention and disease management. Biofourmis positions itself as a digital therapeutics platform that is modality-agnostic. Within disease management, this is crucial to monetisation and scale. At a foundational level, Engine Biosciences sits in a field of computational biology that could materially lower drug delivery costs. And whilst the field of early detection attracts a lot of venture capital, the addressable market size is commensurate with the level of investment. In that regard, companies like Qure.ai that represent the second generation of AI companies in healthcare take a modality-specific approach (in their case for tuberculosis screening) to ensure a payor is identified. Whether AI models in healthcare ultimately become commoditised (as they have in credit scoring) remains to be seen.

Same same but slightly different! The addressable market opportunity for digital health is not too dissimilar to what we see in financial services. Arbitraging the gaps in trust, access and regulation through asset light strategies will be the key determinants of success. Given the low base of healthcare provisioning in SE Asia, crowding in big pharmaceuticals, medtech, distributors, credit providers, insurers, welfare bodies and NGOs will be critical to sustainable digital health ecosystems. Analogous to our views on insuretech, we anticipate a collaborative approach between incumbents and start-ups to yield the best results. Those with a Payor-centric models potentially stand to gain the most.