Healthcare is one of America's fastest-growing industries. A rising interest in value-based care -- which rewards providers for actually keeping patients healthy rather than just running tests -- has drawn much attention to the field of wearable devices. Wearables developed by companies like FitBit, Apple, and Samsung can continually monitor biometric data, such as walking distance or heart rate. As the field expands, it is likely that wearables will incorporate more advanced sensors that will have them behave more like medical devices, monitoring more complex things like blood sugar levels.

Motley Fool Explorer took a closer look at wearable devices in its April Exploration, which it titled Health Care's Tech Checkup. In the following interview, Explorer lead advisor Simon Erickson interviews Adam Fawer, who is the Chief Operating Officer of Noom. Noom is a wearable device company that uses data to help more than 45 million people live healthier lifestyles.

In their discussion, Simon and Adam address the following topics:

  • 0:17-Top investing trends in the healthcare industry
  • 2:05-How wearable devices will impact the future of healthcare
  • 5:48-How Noom is addressing healthcare's future as a business

A full transcript follows the video.

If you would like to learn more about other key trends that Motley Fool Explorer is identifying for investors, click here.

Simon Erickson: Hi, everyone. Explorer advisor Simon Erickson joined today by Adam Fawer, who is the CFO and COO of Noom. Noom is the leader in scalable healthcare coaching, which is helping more than 45 million people alleviate conditions and lead healthier lives. Adam, thanks for joining us this afternoon.

Adam Fawer: Thank you for having me.

Erickson: One of the things I wanted to start with is we're looking at healthcare this month, Adam, and you guys are very interested, as well, in the investment landscape in healthcare. Can you tell us a couple of the trends that you're seeing [for] investors in this space? Why is there so much interest in healthcare start-ups these days?

Fawer: I like to think of it as what people used to say about advertising. Everyone used to say that half of all advertising is wasted -- it's just no one knows which half. And then the internet came along and it was much easier to see which half was wasted. Now with all of the different wearables that are out there and trackers, [where] everyone has a cellular phone in their pocket which can also collect data, and there's more and more integration into EMR, I think people are learning which half of healthcare is wasted and which half is not.

And if you combine that with value-based care, suddenly there are going to be real winners and real losers in terms of those that drive real health outcomes. People will know and be able to see that there's real health outcomes being driven and they'll be willing to pay for that. And those who don't drive health outcomes [will] be able to see that, too.

So I think there's a lot of interest, right now, in health ads because now, more than ever before in our history, people can see what's working and what's not working.

Erickson: And if we do start focusing on that half that is working and it's really going to start driving the outcomes, how do you see that impacting the larger system of healthcare? You mentioned value-based care. How does this play a role in that, and what does that system look like in the future?

Fawer: There are a lot of systems out there or services that charge insurance companies, for instance, on a PMPM basis, which stands for per member per month. So you might have a firm that does telephonic coaching, which might be honestly a glorified call center, and they're charging the insurer per member per month, meaning that if the insurer covers 1 million people and this service charges ten cents PMPM, it's going to leave them charging the insurer $100,000 a month whether or not they do a good job with their service.

And what we are seeing is that organizations and insurers are slowly moving away from PMPM type pricing and moving into pricing that is either outcomes based, or milestone based, or based on at least levels of engagement and participation.

I think this can be -- and it is and will continue to be -- really disruptive, because it used to be looking at a service and saying, "Can you cover my whole population? I generally think this is a good direction to go, so I'm going to pay for this service." And slowly it's moving over to a place where, "You want to charge me X for that? What's the return on investment that I'm getting and what are the outcomes that you're driving?"

And what we focus on at Noom is the DPP, which is the Diabetes Prevention Program. That's a lifestyle-coaching program that was developed in the early 2000s. What it does is dramatically reduces the likelihood of someone who has prediabetes becoming diabetic. And there have been a tremendous amount of studies from CMS (Centers for Medicare and Medicaid Services) showing the efficacy of this type of program.

And CMS, although they're not reimbursing for it yet, [has] announced they will reimburse for it in January, 2018 and the current guidelines of how they're going to reimburse for it is value-based. It is whether someone signed up for it, how many weeks of the curriculum they made it through, and how much weight they lost; because depending on how much weight you lost, that shows how effective the program is because if you lose more weight, you reduce your diabetes by a larger and larger amount.

And I think that's an excellent example of something that Medicare is going to be rolling out early next year -- moving the industry away from just paying for a service because it's there, to paying for a service depending on how well it does.

Erickson: Yes, we've definitely seen the CMS and Medicare shifting from that fee-for-service schedule to the value-based care schedules. For your business, are you focusing on the individuals as consumers, or are you focusing more on the enterprise or insurers? How is it that you're setting up the business to go after the opportunity?

Fawer: That's a really interesting question. We see a growing trend that people are people, and whether you are servicing consumers directly in a direct-to-consumer model, or if you are serving people through the enterprise; at the end of the day, you're really treating the individual person.

The enterprise is really just a different channel to reach those people, because the metric that we primarily look at is how many paid lives are in our program. So [for] how many people who we are servicing each month have we done a meaningful action in our application, or [who have been] interactive with one of our healthcare coaches?

Again, the enterprise is really a channel to get to that length, so in the future we think that companies are going to look at it more in this way, and there's going to be a real blurring of the lines between what is a company that is a B2C company versus what is a company that is a B2B company.

Erickson: You can learn more about Noom at www.Noom.com. That's N-O-O-M dot com. Adam, thanks again for the time with us here today.

Fawer: You're very welcome. 

Simon Erickson has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Fitbit. The Motley Fool has a disclosure policy.