Health Tech Investor Outlines Key Trends
An Oak HC/FT partner outlined critical trends for health tech startups, including a need for tools to support nurse staffing, which comprises 70% of the workforce. The partner also noted increased scrutiny on structural margins and customer success costs. Additionally, the dominance of vendors like Epic is reportedly leading to shorter contract lengths as health systems seek more flexibility.
- The high cost of nurse turnover, estimated at an additional $328,400 for every percentage point increase in staff nurse turnover for the average hospital, is a major driver for health systems to invest in staffing technology. Insufficient staffing is also linked to higher patient mortality rates; one study found that each additional patient in a nurse's workload increased the risk of death in surgical patients by 7%. - Travel nurse spending, which peaked at $44.6 billion in 2022, is projected to fall to $14.2 billion in 2025 as health systems seek more cost-effective and flexible staffing solutions. This shift includes implementing internal resource pools and utilizing AI-powered platforms for credentialing, scheduling, and matching nurses to open shifts. - Investor scrutiny on SaaS "structural margins" often refers to the gross margin, which for a healthy SaaS company is typically between 70% and 85%. A gross margin above 75% is considered good and signals to investors that the business model is scalable and efficient. - Customer Success is increasingly viewed as a revenue driver, not just a cost center. This is because increasing customer retention by just 5% can boost profits by as much as 95%, and around 40% of all SaaS revenue now comes from renewals and expansion opportunities identified by Customer Success teams. - The dominance of Epic continues to grow, with the company now holding 42.3% of the U.S. acute care hospital EHR market, up from 39.1% the previous year. Its closest competitor, Oracle Health, saw its market share decline. - This market consolidation is significant, as Epic now holds the electronic records for more than 305 million patients. For many large health systems, the high financial and human resource costs of switching platforms are the primary barriers to considering a different EHR vendor. - In response to market dominance and high switching costs, some healthcare organizations are exploring procurement methods like Job Order Contracting (JOC). This allows them to complete multiple projects under a single, competitively awarded agreement, providing more flexibility and cost predictability than traditional long-term, single-vendor contracts.
