The Digital Health Investment Landscape Post-COVID-19

COVID-19 Update

Editor’s Note: At the start of this year, the United States was on its way to a record-breaking level of digital health investment. In Q1 of 2020, $3.1 billion was invested in digital health deals, over 1.5 times more than in any previous first quarter. Globally, there were 142 digital health deals, with $3.5 billion of investment funded across 19 countries. And then the COVID-19 pandemic hit and transformed our world.

A recent Manatt webinar revealed how COVID-19 will change digital health investing. The session shared where we will see investment priorities shift, which segments will emerge winners and how the picture is changing for providers and payers as we pass through the crisis. Crunchbase News recently published an article, summarized below, sharing five key highlights from the program. To view the full webinar free on demand and download a free copy of the presentation, click here.

During the COVID-19 crisis, there remains a lot of activity and interest in digital health. Even tech companies that have not dabbled in the healthcare space before are now entering the field. In a recent webinar, Manatt Health examined digital health investment post-COVID-19—and what to expect in 2020 and beyond. Below are five highlights from the webinar:

  1. Despite the environment, investments are still happening. Before COVID-19, 2020 was on its way to being the “best year ever” for the industry. Telemedicine—which previously was not high on the list—has become a bright spot due to COVID-19. Higher adoption, a more favorable regulatory environment, improved interoperability and a better user experience mean “digital health is clearly here to stay.”
  2. Telehealth has exploded. The number of Medicare beneficiaries using telehealth services soared from 11,000 on March 7 to 1.3 million by April 18, according to the Centers for Medicare & Medicaid Services (CMS). With the regulatory flexibilities introduced during COVID-19 likely to remain and both physicians and patients now used to virtual care, the industry will reset to a “new normal” as the pandemic fades.
  3. Healthcare providers are under stress. Without their expected revenue streams and patient volumes and facing higher-than-normal treatment costs, healthcare providers will have difficulty adopting new technologies. This will be a challenge to the 63% of digital health companies funded in the first quarter of 2020 that were focused on selling to providers.
  4. There will be winners. There are several areas where companies will do well, including those offering supply chain solutions, virtual clinical trials, digital therapeutics/diagnostics, predictive analytics and digital training.
  5. There also will be some losers. As noted in #3, providers are not taking risks on “nice to have” products. Those include products that reduce patient volume, are value based, are niche or ignore the increasing reach of Medicare and Medicaid. This could also be a more challenging time for consumer pay products or those with growth that is dependent on brick-and-mortar sites.  In addition, while booming now, companies focused too heavily on COVID-19 also may find themselves without the same opportunities post-pandemic if they don’t think about broader platforms and areas of focus.

Overall, COVID-19 may have given digital health the boost it needed to move past the hype and toward widespread adoption. It will be essential now for digital health companies to ensure their products are aligned with the evolving needs of the marketplace around proof of value, financial ROI, patient experience and provider distribution.



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