Three Takeaways From Our Report on Startups Addressing Clinical Capacity Bottlenecks

As the world's population grows and ages, the demand for medical care rises. However, there is a concerning trend: the number of physicians is not increasing as quickly as the population, which is leading to a higher number of patients per physician every year.  

The consequences are significant. Patients are experiencing longer wait times, shorter interactions with providers, and a lack of continuity of care. Physicians are experiencing higher levels of stress as they struggle to keep up with the increased demand for their services.

To address this issue, healthcare organizations and VCs are turning to digital health technologies to help alleviate the burden on physicians and improve patient care. These tools are designed to streamline administrative tasks, reduce the workload of physicians, and provide them with greater autonomy in decision-making. 

In partnership with Dealroom.co, Inkef, and MTIP, our healthtech report finds that VC investment in European Physician Tools companies has raised $1.2 billion in 2022. While this represents a 40 percent drop compared to 2021, there was a 2.7x funding growth compared to 2018.

We break down the three key takeaways and drivers of the industry below, including the increasing role that physician tools and VC investment are playing in the industry. And we dive deep into the numbers and trends in the full report, which you can download here.

Physicians and hospitals are looking for new ways to cope with increased work pressure

European health services have been facing years of inadequate planning and chronic under-resourcing. In the BMA analysis of the OECD EU, the patient/doctor ratio was used as a baseline to estimate the size of the gap. England has a very low proportion of doctors relative to the population. The average number of doctors per 1,000 people in OECD EU nations is 3.7, but England has just 2.9. Germany, by comparison, has 4.3. England would need the equivalent of an additional 46,300 full time doctors. 

According to this analysis, the main reasons for inefficiencies and shortages are:

• Overdue workforce planning
• Uneven regional distribution of doctors
• High vacancies
• Insufficient growth in the medical workforce
• Rising stress and declining well-being (vicious circle)
• Early retirement 

The result is a vicious cycle of mounting pressures, declining staff well-being, and poor retention. According to the 2023 Physician Burnout & Depression Report by Medscape, which surveyed 9,100 physicians across 29 specialties, 53 percent of physicians reported feeling burnt out––a significant increase from 47 percent in 2021 and 26 percent since 2018. 

In another study across 10 countries, most physicians reported an increase in their workload since the beginning of the pandemic. Younger physicians (under 55) were more likely to experience distress. And, in nearly all countries, emergency medicine, internal medicine, and pediatrics have been identified as the specialties with the highest levels of burnout, mostly due to bureaucratic tasks and long work hours.

Thankfully, digital health tools have emerged in the last few years as one of the key strategies to mitigate the workload of physicians and support their daily tasks in several ways. Today, companies continue to grow in number, and for this report, we identified over 350 startups supporting physicians and hospitals in Europe. We segmented the sector into the following buckets: 

European VC investment in tools for physicians has increased since 2018 and peaked in 2021 with the pandemic

With these systemic issues in mind, investors have started to warm up to the space and pour capital into the sector. In fact, startups raised $1.2 billion in 2022, their second-best year on record. The greatest year for VC funding in physician tools startups was 2021 with $2 billion raised, which can be explained by the combination of pandemic-driven urgency, digital adoption, and a global high-water mark in venture capital. 

‍Over the last three years, there has been a significant increase in rounds over $40 million and mega rounds, which now make up more than 50 percent of all VC investment. This trend is indicative of the growing maturity of startups in the field but is also skewed by startups in the robotics field. 

Out of all segments, treatment assistance attracted the bulk of investment in the last five years with $1.3 billion concentrated in 30 rounds. These tools can enhance the precision, safety, and efficiency of medical procedures. These tools can help reduce the risk of human error, such as hand tremors or fatigue, during procedures which can help manage heavy workloads and reduce the physical strain of performing procedures. The high amount of funds raised with a relatively low number of rounds can be explained by the higher capital needs for companies developing robotic tools given longer development timelines and complex regulatory pathways.

This segment is followed by front- and back-office tools that raised $1 billion and had the highest number of rounds in the last five years. Front- and back-office digital software tools are becoming increasingly popular due to their ability to automate tasks, such as scheduling, managing patient records, and processing payments––allowing healthcare providers to focus on delivering high-quality care to patients. Additionally, the use of digital software tools in healthcare can help reduce errors, improve communication between providers, and provide patients with easier access to their healthcare information, making them an interesting and valuable investment for healthcare organizations.

The route to success still presents certain barriers for European startups in this sector‍

The industry is ripe for innovation, and startups are taking up the challenge of alleviating the load of physicians and hospitals. However, the road to success is paved with challenges inherent to the digital health industry, such as navigating regulatory requirements and convincing healthcare providers to adopt new technology.

In our report, we found that some countries, such as the United Kingdom and France are capturing the most funding in the sector with $1.7 billion and $1.4 billion cumulated respectively since 2018. This represents almost 65 percent of total investments in the space, in Europe. 

There’s a significant investment gap with other European countries, such as Spain, Denmark, Sweden, and Italy which are receiving just two percent of investments. It is worth noting that these countries experience fewer healthcare shortages with a doctor-to-patient ratio higher than the OECD average, which could account for a lower sense of urgency.

But even with all of this movement, physicians and hospitals have the last word on whether or not they want to use new technology. Physicians are typically busy and have limited time to allocate during the day to learn more about cutting-edge technologies.

“We often hear about conferences carried out by external companies on medical training or disruptive technologies, said Dr. Johanna Salomon, an ENT Surgeon in Paris. "But because of the staff shortages in most public hospitals in Paris, we interns have to focus on more urgent tasks. When I eventually attend conferences, the rooms are almost empty.”

Presenting new technologies to physicians and hospitals prematurely, without sufficient evidence of their efficacy, can result in a roadblock to adoption due to concerns about complexity and time consumption. In addition, physicians and hospitals are likely to prioritize tools that are user-friendly and easy to integrate into existing workflows. 

‍In this way, startups and other innovators must strike a balance between introducing cutting-edge technologies to the healthcare industry, while also ensuring that they have sufficient evidence to demonstrate their value and ease of use to busy physicians and hospitals. It’s up to all stakeholders to work together to ensure that doctors are equipped with the tools they need to provide the best possible care to patients.

To sum it up, digital tools have the potential to significantly alleviate the workload of physicians and hospitals. While VC funding in the space grew significantly, the current shortage of staff is hindering the ability of physicians to learn and integrate new technologies into their workflow. By supporting new workforce strategy plans, implementing measures to retain staff, and decreasing pressure, we can allow new technologies to be smoothly integrated into hospitals, and virtuously change the status quo of health care.

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