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Fitbit or FIT shares for Dad this Father’s Day?

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With Fitbit stock soaring to a 52% gain on its first day of trading, should kids be getting Dad an actual Fitbit, or a few NYSE:FIT shares for this Father’s Day? The IPO raised $732 million in one day, taking FitBit’s valuation to over $6 Billion USD. What’s behind that kind of value?

Fitbit’s balance sheet and trajectory are impressive. Sales were up from $76 million in 2012 to $745 million in 2014, a 10-fold increase in only two years. And they are actually profitable! But is this success based on consumer trends that could fade? Or is there long-term value?

As with every IPO, a concoction of hope and fear affect what everyday investors are willing to pay: hope that growth will continue, or fear of missing out. But there might be another hope at play with Fitbit.  Maybe thoughtful investors see the long-term value of wearables like Fitbit for healthcare reform.

On the one hand, Fitbit is clearly marketing to young people who are already fit. 5 seconds on their website will tell you this. Healthy people do not put financial strain on the healthcare system. Roughly 80% of health care spending is on people over 65 with chronic disease.

On the other hand, serious medical innovators are taking wearables and their associated apps seriously. “We call it the Internet of healthy things,” says Joseph Kvedar of the Partners Healthcare System’s Center for Connected Health. “This is important, it’s game changing and it’s the future.”

Why game changing? Well, healthcare payers and providers are sharing more financial risk for the health of defined populations as provider reimbursement models continue to move toward “pay for value”. But formal health services account for only 10 – 15 percent of people’s health.

Would you take on financial risk for something you could only influence 10 percent of? If you were investing in IT to reduce your financial risk and improve your result, would you continue to invest in IT that addressed only 10% of your problem? Are Fitbits a silver bullet to influence some of the other 90 percent? Not quite.

Kvedar recently wrote about the challenges payers and providers face in learning how to share financial risk for patient populations. Deciphering each other’s language is part of the problem. Another is the fragmentation of healthcare services in the midst of trying to make care integrated and accountable.

With everyone from pharma going “beyond the pill” with patient support programs, to retail pharmacies like Walgreen’s going “beyond the store” with virtual visit programs, the potential for conflicting communication that confuses patients increases. Fitbits are potentially yet one more engagement channel that ‘accountable’ providers and payers need to account for.

So how do we untangle this ball of confusion? First, connect everything to patients. We’ve written previously about how this simplifies health IT interoperability by orders of magnitude. Second, isolate the essential elements of patient engagement – education, collaboration and motivation – which we’ve also written about before.

We congratulate Fitbit on their success.  We believe they, and others like them, are an essential component of effective patient engagement.  But healthcare still needs both the essential elements of patient engagement, and the ability to connect everything to patients. NexJ Connected Wellness delivers both.