For the last few years, digital health has seen increased interest as more health providers embrace what was once deemed a risky endeavor — or an unnecessary expense. But that is waning, partly because of pressure on margins.
"We get a lot of solutions looking for problems. We get very few people who want to understand our problems and our challenges, and then bring a solution to us," John Couris, CEO of Tampa General Hospital, said.
Couris spoke with Yahoo Finance at the ViVE digital health event in Nashville this week. He explained that hospitals are thinking more intentionally about where their digital investments will go after years of watching the industry grow. That has led to hundreds, if not thousands, of independent programs being used and administered by the health systems.
"So I'm not going to manage hundreds of partnerships or even thousands of partnerships anymore," he said. "We're not going to do that. What we are going to do is find those partners who really want to understand our problems, who want to help us solve those problems, and then have a very deep relationship."
"I want fewer partners but deeper relationships," Couris added, citing GE HealthCare ( GEHC ) and Palantir ( PLTR ) as examples of good partners.
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The struggle has been in the making since last year , prior to Trump's election, but is expected to continue as the industry expects to face a greater cash crunch in light of budget cuts. That includes Trump's support of the House budget bill that would cut funding from the Centers for Medicare and Medicaid Services (CMS).
"There are a lot of things that are being done that are going to help our industry ... I'm bullish on that," Couris said. "But I also think there are going to be policies and changes made that are going to put pressure on our industry. You can't balance the federal budget unless you deal with the CMS ... all roads lead to the Centers for Medicare and Medicaid. You have to be ready for that."
A big problem is that health systems often have a payer mix that relies heavily on government funding in the form of Medicare. That's because, in large part, the volume of seniors who need healthcare services is higher than the patient pool in commercial employer-sponsored plans. Commercial insurance plans pay hospitals better rates, but the bulk of reimbursements come from Medicare — and are paid out at a lower rate than what it costs to provide care.
But if Medicare funding is reduced and Medicaid support for states is reduced, that will cut into hospital revenues. Even before the shift in the political climate, hospitals were already concerned — and that impacted their ability to invest in digital health at a meaningful level.
"Given the current macroeconomic climate and increasing cost pressures on health systems, most respondents identified budget constraints as a key obstacle to investing at scale across all digital and AI categories of interest (51% of respondents ranked this obstacle among the top three)," a McKinsey report found last year.
That's why Couris advised entrepreneurs and venture funds to consider the potential for a decrease in deal-making and a greater focus on lower costs.
"I'd think of a way of selling into an industry that is under unprecedented pressure in a less expensive, more innovative way," Couris said.
Anjalee Khemlani is the senior health reporter at Yahoo Finance, covering all things pharma, insurance, care services, digital health, PBMs, and health policy and politics. That includes GLP-1s, of course. Follow Anjalee on social media platforms X, LinkedIn, and Bluesky @AnjKhem .