Ever since my personal rehabilitation technology startup days, I have kept a close eye on developments and trends and remain in regular contacts with a number of companies and individuals in the rehabilitation technology industry. Hopefully this snapshot provides current and aspiring rehab tech entrepreneurs, managers, clinicians, researchers, and investors in this sector with a concise and realistic picture of the fragmented and dynamic landscape of rehabilitation technology as it stands today. Thank you for sharing your thoughts and commenting on what I may be missing!
Little Brother, Big Sisters
The rehab tech industry is still relatively new and thus exhibits many signs of an evolving industry. There is regular creation (and sometimes disappearance) of new companies and products. Furthermore, just a handful of rehab tech companies have been able to establish a large global presence yet, and thus many people get a somewhat biased impression of the overall market based on their location and field of work. Overall, from my personal experience, rehabilitation technology bears many attributes of a "promise of the future" kind of industry, and thus its size, might and financial firepower rather gets over- than underestimated in the marketplace.
Rehabilitation technology can best be classified as a mixed subset of a number of different markets – most notably physiotherapy equipment (i. e. electrotherapy, treatment tables, etc...), fitness equipment (incl. non-medical cardio, strength and functional training equipment), the mobility and personal aid industry (wheelchairs, orthotics, walkers, etc.), and other evolving technologies pushing into medical applications - such as robotics, electrostimulation/EMG, and virtual reality.
These markets somehow overarching rehabilitation technology are by all common measures larger, more mature, and more consolidated. A few examples: DJO – a global player in the PT equipment market – reported USD 330 MM in revenues for recovery sciences in 2012 (after that DJO delisted). Technogym – a major manufacturer of fitness equipment with some exposure to medical, reports 650MM € in annual revenues and earns over 90MM € in net profit. And Otto Bock, a manufacturer of wheelchairs, personal aids, and prosthetics is reporting almost 1BN in revenues at roughly 20% EBITDA (the company plans to go public within the next 2 years). These are figures of which the currently largest players in rehab technology can only dream of.
Clinical Benefits: Yes, but...
Most rehabilitation technology companies have invested significantly in establishing clinical evidence for their products. I couldn´t derive the exact number for published clinical trials investigating the use of technology in rehabilitation, but I would assume it to amount to at least a few thousand (Hocoma, for example, claims that 500 peer-reviewed papers on the use of their devices have been published).
Given the relatively large investment of many companies to establish sound clinical evidence, this effort did so far not result in widespread reimbursement for rehabilitation technology in clinical use. In that area, rehabilitation technology still faces a somewhat uphill battle, which I attribute to the following challenges:
Reimbursement rates and role of PT/OT in hospital setting is lagging far behind influence and reimbursement of physicians. Often, just a few minor interventions, diagnostic tests or medication prescriptions far outweigh the costs of the entire physical training program in rehabilitation. Given the importance of training in rehabilitation and the shortage of qualified therapy staff in most countries, this is a huge challenge.
Heterogeneity of patients and clinical pathways. Especially brain-related motor deficiencies are extremely diverse, and two patients with seemingly identical pathologies can respond very differently to the same treatment option. This makes standardizing clinical pathways and larger clinical trials extremely hard.
Fee-for-service schemes. The incentive to help patients recover faster in inpatient settings is very limited. Only a few countries and institutions I know of have an economic incentive to provide patients with intensive rehabilitation. Furthermore, efficiency gains from technology (i.e. fewer clinicians can look after more patients at equal or better quality of care) can often not be harvested due to legacy reimbursement setups. A big leap towards value-based care in rehabilitation would be required in order to change this.
Overall economic situation of rehab hospitals. Although this point is purely based on personal experience, rehabilitation clinics are on average not very profitable entities. With single-digit EBIT margins at best and many institutions heavily relying on donations, major investment in technology is often not feasible unless it comes with a clear pathway towards either improving reimbursement or decreasing operational costs.
Challenge to move from research to clinical setting. While the body of literature on the benefits of using technology in rehabilitation is growing quickly, not many long-term and large scale trials have been undertaken. This may be partly due to the industry´s fragmentation, but my hunch is that companies should follow a "less is more" approach for clinical trials, and instead team up with other companies, clinicians and insurance companies to strive for simple end-points, but with large patient populations. It is encouraging how collaboration within the industry, for example through IISART, is growing, but much more needs to be done on that end.
The List: Companies, Products, Indications, Use Cases
Subject to my personal biases, I have compiled a list of rehabilitation technology companies consisting of 70 enterprises from all around the world, each providing solutions to one or several therapy applications in rehabilitation. In order to keep the scope of this article somewhat compact, I have deliberately not included location of therapy (i.e. acute care, inpatient rehab, outpatient rehab, home care) or indications (stroke, TBI, SCI, Parkinsons Disease, MS, Cerebral Palsy, hip fractures, knee and hip replacements, amputations or other loss of motor functions, etc.) in the table.
I structured products and solutions into the following categories: lower extremity rehabilitation (i.e. gait trainers, treadmills, overground walking devices, foot-drop devices, etc.), upper extremity rehabilitation (i.e. hand, arm, finger), solutions for early mobilization, strength training, gait & motion analysis, swallow/speech rehabilitation, respiratory, virtual rehabilitation, functional electrostimulation, EMG devices, and all others that I didn´t find a matching category for.
Furthermore, I have tried to collect information on HQ location, headcount, revenues, profitability, and major funding or ownership structure where available. Of these 70 companies, 13 have been founded in the last 5 years, whereas 33 have been around for 15 years or more. Employee headcount ranges from 1 to 260 employees with an average of 47.
Being aware of the limited availability of meaningful numbers (employee numbers were either derived from Linkedin or from company websites), I would assume that the global rehabilitation technology industry employs somewhere between 7'000 and 15'000 people, and achieves an annual sales volume of roughly € 1bn.
Revenue and profit numbers are in most cases quite hard to come by, and the estimates provided by analysts should be taken with a grain of salt. Only a handful of companies publish their earnings, by far the majority is privately owned. Wherever EBIT and revenue figures could be derived, the numbers and corresponding source have been included in the list. Since most companies that went for an IPO have done so in order to obtain growth financing, the available profit data may be quite biased. In order to provide transparency, I have also provided the source of each figure.
Way Forward: Courage, Consolidation, or Conquerors?
Due to the constant appearance and disappearance of startups and products and after quite a few mergers in the past year, one might ask whether the rehab technology industry is ripe for a major disruption. I personally see three potential developments that could come about to stir things up for good:
Courage: If any of these players is able to obtain a major investment through a private offering or an IPO, they could potentially get a toehold to a critical number of products, people, technologies, patents, and distribution channels. Any investor looking to do this must however buy into some grand vision of rehabilitation technology (i.e. big data, telemedicine, inpatient rehab moving to an outpatient or home care setting, etc.), because I don´t think there is a short-to-medium path to justify the costs of such an endeavor at current revenue and profit streams. In this context, I am very curious – among other things - about the unfolding of DIH/Hocomas IPO plans, and I´m also quite curious on how Mindmaze ends up spending whatever is left of its >100MM war chest raised in 2016.
Consolidation: With increased regulatory pressure, substantial sales costs, and if changes in reimbursement and clinical pathways remain incremental at best, a number of companies may have to team up among themselves to master the upcoming challenges. In many key markets, only a handful distributors are accessible, and there are substantial network barriers for new distribution channels to open. Hence, I expect that merger and acquisition activity will remain high, and that many of the promising new startups entering the rehab market will either be swallowed up by incumbents or pivot to other industries.
Conquests: Could it be that a great conqueror arrives with a big war chest, buys up companies and technologies, or just copies whatever products she deems copy-worthy? Right now, I don´t think so. Major medtech players have eyed the rehab tech industry for a while, only to conclude that it is still too early-stage to warrant major investments and the starting up of their M&A machinery. However, I can see a few trends that have the potential to change this:
Neuromodulation. Efforts to cure or relieve disability of spinal chord injury patients through neuromodulation have received major VC backing and quite some hurray in mainstream media in the past years. The neuromodulation market is big, mature, and occupied by heavyweights like Medtronic, or Boston Scientific / St. Jude. If their efforts to establish scientific evidence to such a treatment for gait impairments pays off, then that will undoubtedly shake up the rehab technology industry.
Exoskeletons graduating to wheelchair-replacements. So far, I am unaware of any exoskeleton company either achieving a major win in the legal battle for reimbursement as a personal device, nor do I foresee the technology to become safe enough for unsupervised use by the average SCI, stroke or MS patient just yet. If either of these equations change, then the rehab technology industry will surely be disrupted quite substantially.
Non-medtech players looking to move into personal mobility. This could be a chicken-egg kind of thing with my previous hunch: Toyota recently hinted at such a vision with their "start your impossible" advertisement. If they or another major corporation however has the courage and vision to do go all in within the next years – I doubt it. But we´ll see.
Big data. If value-based care becomes more widespread in rehabilitation, we will see the likes of Amazon, Huawei, Google, or others provide solutions aimed at generating a wealth of diagnostic and training data in rehabilitation. If that happens, then the disruption to current rehab tech players could be immense.
Changes in clinical pathways or reimbursement. In many countries, hospitals have distorted incentives to improve outcomes or save costs while guaranteeing the same standard of care as today. This problem goes far beyond rehabilitation. Since rehabilitation is a process that may involve highly patient-specific interventions (this is especially true for neuro), I don´t think that value-based-care (i.e. pay-for-performance, better CMG definitions and corresponding DRGs, etc.) will arrive in rehabilitation very soon. If it does, it would however have a huge potential for greatly disrupting the industry.
Finally, let me finish this piece by voicing my admiration for the relentless efforts of many innovators in rehab technology to improve patients´lives. As healthcare technology overall, rehabilitation technology is a challenging environment to be an entrepreneur. However, I have seen first hand how clinicians are enabled to help patients regain their old life thanks to rehab tech, and I sincerely hope that whatever is on the horizon will allow the rehab tech pioneers to multiply their fantastic work in the future!