Can medical technologies (those that aren’t device or medicine related) scale globally with the challenge of different domestic regulations and industry structures? The Insurtech industry poses a similar question.

In the early 2000’s we advised a management team on its Management Buy Out of a South African medical claim switching business. MediKredit is an online medical claims processing business. It was one of the first to look at online adjudication of claims according to (client) medical scheme rules. At the time I realised how complex these rules are – and how they differed from scheme to scheme, and from country to country. I became fascinated by the impact of industry structure on the industry.

The MediKredit system embedded these rules; of course not only managed scheme rules but others (for example contra-indications in medicines) – at the pharmacist level. But what drove the success of this business was its integrations into medical insurance administration platform and pharmacies. By being able to adjudicate and authorise payment online, it cut down the cash cycle in the industry by a very large factor. But at the same time, it was highly reliant on having as its major client Discovery (the South African health and insurance company), which even then dominated the medical insurance claims industry from a payer perspective.

Today Discovery further dominates the South African Medical Aid administration space with 57% of the open (public) market (results presentation six months ending 31 Dec 2020) – in this context public is not public sector but private medical insurance offered to the public. The next largest scheme is that belonging to Medscheme and between the two they have well over 80% market share (by value). Thanks to socio economic challenges, 80% of the healthcare market spend in South Africa is in the private sector, but 80% of the population is reliant on the state sector (not privately insured), complicating the story a bit further.

This all shows how the South African market has dominant “payers” into healthcare provision, similar to the dominance of Medicaid/ Medicare in the USA and the NHS in the UK. In effect these payers dictate to some extent the way in which Medtech companies can grow. If your online company cannot integrate into the systems of major payers, and can’t achieve scale in servicing providers, it will be very difficult to build, let alone scale a business.

A med-technopreneur is therefore constrained not only by the market structure, but often by the combination between the payers and the practitioners and the way in which they interact. And an international play means that you have multiple jurisdictions and payers to manage.

It is difficult enough to crack one’s domestic industry, but replicating this in other markets may be a bridge too far. MediKredit tried to follow Discovery on its misadventure to the US market – and met a similar fate – more to follow though, on Discovery.

One particular Medtech theme that keeps cropping up, is telemedicine. This innovation, which should be a game changer, whether just a consult or a remotely controlled surgery, is constrained by legal requirements. In theory the technology should enable doctors to operate remotely, indeed across borders.

In reality, the simple idea of logging-in, choosing a doctor, making an appointment and consulting all on line, whilst not only possible, is happening. But it seems so difficult to scale, again due to domestic regulations and industry structure. Vezeeta has taken an acquisition approach in this sector in the Middle East Africa region, as a way of leveraging common technology and best practises, and gaining economies of scale.

This playbook to acquire similar companies which have managed to establish themselves through their focus in a particular market through mastering the regulations and industry structure, can be replicated in other Medtech sectors and geographies. This is not unlike the approach of established insurance groups such as Talanx or Axa.

Discovery left the USA with one win – and with it found a fantastic angle to scale its Healthtech offering called Vitality; partnering with John Hancock in the USA. Vitality is a behaviour based loyalty offering that Discovery had proven in South Africa through its own medical insurance company. It is now managing to grow strongly in the most difficult regulated markets of Europe through supporting the leading insurance companies in these  markets with technology, providing the tech enablement and sharing in the profits of the insurance proposition.

In conclusion, there will always be niches to conquer in regulated markets. A question mark exists though on global scale – most Medtech or indeed Insurtech offerings will not achieve this due to the structural challenges that exist. However, there are some models out there that appear to be working and we look forward to exploring more threads in this space.