The aftermath of Silicon Valley Bank\u2019s failure is a trending topic among digital health executives and investors this week at the ViVE 2023 in Nashville, Tennessee.<\/p>\n

The gathering of digital health companies, investors and provider executives is the first large, industry-specific conference since the bank failed on March 10<\/a>. The event has around 7,500 attendees, according to organizers.<\/p>\n

SVB, a popular bank among the digital health companies and investors<\/a>, held $78.8 billion in healthcare deposits and investments as of December. It worked with 76% of healthcare-related initial public offerings since 2020.<\/p>\n

The Federal Deposit Insurance Corporation took over the bank and sold some of its assets to First Citizens Bank on Monday. The Treasury Department, Federal Reserve and FDIC fully protected depositors, which relieved short-term problems.<\/p>\n

For health system executives such as Aaron Miri, chief digital and information officer at Jacksonville, Florida-based Baptist Health, the bank failure highlights long-term concerns. \u201cIt does make me pause and look at who is funding certain companies,\u201d he said. \u201cWe\u2019re doing our due diligence carefully. I want to make sure that a company doesn\u2019t vanish overnight.\u201d<\/p>\n

Digital health companies have been more successful at raising capital than generating revenue in recent years, Miri said. Health system executives are now hesitant to partner with companies that don\u2019t have proven track records of return on investment, he said.<\/p>\n

The macroeconomic environment was already challenging for digital health startups before the collapse of SVB. Funding during 2022’s fourth quarter was the lowest in five years<\/a>, and most experts expect this year to be even worse, especially in the aftermath of the bank failure.<\/p>\n

Michael Hasselberg, chief digital health officer at University of Rochester Medical Center in New York, said that digital health companies must better articulate their value proposition to health systems.<\/p>\n

\u201cOftentimes, their lens on what their value proposition is, it\u2019s not the same lens I have as a health system buyer,\u201d he said. \u201cWe’re actually helping them develop their sustainability plan and return on investment [for] health systems wanting to purchase.\u201d<\/p>\n

University of Rochester Medical Center is among a growing number of health systems working with venture capital firms to evaluate potential digital health startup partners. The nonprofit academic hospital is working with GSR Ventures.<\/p>\n

GSR Ventures partner Dr. Justin Norden said his firm can advise University of Rochester Medical Center on what startups have sustainable business models. \u201cWhat is their funding status? Are they going to be around in six to 12 months?\u201d Norden said. \u201cHealth systems and venture funds can work together in that way to determine if there\u2019s a real path where a [startup] can be big and standalone and then exit.\u201d<\/p>\n

Health systems with in-house venture arms can take a slightly different approach. Scott Arnold, chief information officer at Tampa General Hospital in Florida,\u00a0 said the SVB collapse didn’t dampen interest in digital health or change how the hospital assesses companies. Tampa General holds equity stakes in some startups, so the nonprofit hospital benefits even when startups are sold off.<\/p>\n

\u201cWhen you invest in a company and you\u2019re incentivized to make money, you\u2019re not necessarily concerned about them being around,\u201d Arnold said. \u201cYou\u2019re concerned on whether they\u2019re going to exit properly. Will they be bought, and will that be accretive?\u201d<\/p>\n

The SVB failure may have long-term ripple effects on the healthcare space, said Holly Maloney, managing director at venture firm General Catalyst. In the short term, venture funds that did business with the bank will have to find new partners, she said.<\/p>\n

\u201cFor funds that have smaller asset pools to manage, they\u2019ll have to find new relationships with other banks to support their \u2018smaller\u2019 asset base but would still seem like a lot of money [to other banks],\u201d said Maloney, whose firm provided emergency funding to three portfolio companies after SVB collapsed.<\/p>\n

Despite these lingering concerns, experts expect digital health technology investments to escalate over time, especially if lawmakers and regulators tighten banking regulations to prevent other banks from failing, Miri said.<\/p>\n

\u201cJust like (the collapse of) Lehman Brothers taught us something, I think this taught us something,\u201d Miri said. \u201cI can\u2019t blame the system for failing when you have this infusion of tech and crypto that it wasn\u2019t prepared for. Was it shame on the companies for what happened? Maybe. Shame on the bank? Maybe. But let\u2019s learn and let’s go forward. That\u2019s what we have to do as leaders.\u201d<\/p>\n

This story first appeared in Digital Health Business & Technology.<\/a><\/em><\/p>\n

<\/body>
\n<\/html><\/div>\n<\/div>\n<\/div>\n

<\/main><\/p>\n<\/div>\n<\/div>\n

Read More<\/a>
\n Gabriel Perna<\/p>\n","protected":false},"excerpt":{"rendered":"