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The digital health reset: Where does digital health go from here?


Last year was a scorching year for venture capital investment in digital health, with COVID-19 stoking the investment landscape into a frenzy. According to Rock Health, the sector raised a whopping $29.2 billion across 736 deals in 2021. But the digital health investment bubble has undoubtedly burst. Funding for the sector totaled $12.6 billion across 458 deals in the first three quarters of 2022, making it unlikely that it will reach half of last year’s catch.

U.S. digital health venture funding and deals from 2012 – 2022 YTD

Fig. 1 Data is from Rock Health. Data includes U.S. deals > $2 million, through September 30th, 2022.

So, what’s behind the digital health slump? Investors are adopting a more cautious stance amid geopolitical unease and rising inflation and interest rates. Digital health startups launched in the pandemic era are also facing a moment of reckoning as investors seek a pathway to profitability. And across the startup landscape, companies have put IPO plans on hold due to valuation markdowns and choppy market conditions.

Despite these factors, there are signs of optimism. While digital health funding has cooled, it hasn’t dried up. There’s been some standout action this year, such as major acquisitions by Amazon and CVS. Akili Interactive also hit the public markets with a special acquisition (SPAC), marking this year’s first digital health public exit. Moreover, providers continue to adopt healthcare technologies that enable remote care as patients seek convenience and ease in how they access healthcare.

Using healthcare commercial intelligence, we can dig into the latest trends shaping the digital health ecosystem and identify opportunities in this shifting landscape.

Telemedicine is leading the charge for digital health tool adoption

According to a survey by the American Medical Association (AMA), physician adoption of digital health tools is accelerating. This includes digital solutions involving telehealth, mobile health (mHealth), remote monitoring, wearable devices, and other technologies that support the provision of healthcare.

But which technologies are winning buy-in? And which have fallen flat?

Among physicians embracing digital health tools, the largest numbers reported enthusiasm for virtual visits (57%). Moreover, the percentage of physicians using virtual visits exploded from 14% in 2016 to 80% in 2022.

We can see a similar pattern in our data, which shows there were less than one million patients with a telemedicine claim in 2016. As the pandemic spread across the globe, patients and providers sought ways to safely access and deliver healthcare services. Health systems and hospitals ramped up telehealth operations overnight. Physicians worked to manage growing volumes of patients via virtual visits. And telemedicine claims skyrocketed to 92.6 million in 2021.

Telehealth visits from 2016 – 2021

Fig. 2 Data is from Definitive Healthcare’s Medical Claims database. Claims data is sourced from multiple medical claims clearinghouses in the U.S. Data is updated monthly.

While telehealth is being used to manage a range of conditions, the top telehealth diagnoses in 2021 were related to behavioral health. According to insights from our medical claims database, more patients are using telehealth services for conditions related to anxiety, depression, and mental health than physical health conditions.

Physicians leverage RPM to improve care and efficiency

Remote monitoring devices (53%followed virtual visits in capturing enthusiasm among physicians. Some common remote patient monitoring (RPM) devices include blood glucose monitors, blood pressure monitors, and weight monitors. In terms of adoption, the percentage of physicians using remote monitoring devices for improved care grew from 13% in 2016 to 34% in 2022.

RPM devices are playing an increasingly crucial role in chronic disease management. These devices have the potential to improve chronic care management by collecting and sharing biometric and patient-reported data with care teams who evaluate trends and intervene if required.

According to our hospital technology data, hospitals are also investing heavily in this space. Nearly 1,600 hospitals use care management or chronic care management software from vendors like Lumeon, Symplr, and Vynca, among others. We expect investment to continue to flow into RPM as the prevalence of chronic diseases rises and health systems and physicians face increasing pressure to reduce hospital readmissions.

Digital tools guide physician decision-making and help patients take charge of their care

Among other uses, 47% of physicians are now employing healthcare technology for clinical decision support, while 43% are using tools to improve patient engagement.

More than 5,900 hospitals, including leaders like Ascension and Cleveland Clinic, have clinical decision support software in place. These solutions help providers make diagnostic and treatment decisions and have been linked to improved adherence to clinical guidelines, increased clinical efficiency, and reduced prescribing errors.

Furthermore, more than 4,300 hospitals have implemented a patient engagement solution. Patient engagement refers to the participation of patients in their own care. Research suggests that patients who are more actively involved in their care have better health outcomes, so it’s no surprise providers are leveraging technology in this space.

As for emerging technologies, intentions are high for future adoption, but current usage is low. According to the AMA survey, digital therapeutics have the highest percentage of planned adoption in the future. While only 11% of physicians reported currently using digital therapeutics, 40% said they would use digital therapeutics within a year.

It’s worth noting that the first digital health company that dared to go public this year was Akili Interactive–a digital therapeutics startup. Akili develops EndeavorRx, an FDA-approved video game-based digital therapy addressing attention deficit hyperactivity disorder (ADHD) in children. The company will use the funds raised from the exit to support EndeavorRx’s broader commercial launch.

Learn more

Selling into healthcare isn’t easy. Long sales cycles, multiple decision-makers, and complex deployment processes are only some of the challenges. Healthcare commercial intelligence can help you understand the current investments within an organization and identify the best fit for your products. Start a free trial today to get a live look at our platform and see how we can help your business grow faster.

Nicole Witowski

About the Author

Nicole Witowski

Nicole Witowski is a Senior Content Writer at Definitive Healthcare. She brings more than 10 years of experience writing about the healthcare industry. Her work has been…

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