1. Consumer demand is reshaping healthcare. “Healthcare is highly fragmented, and so it doesn’t work for consumers and their families,” Kristen Valdes said. “It’s estimated that our healthcare data is now strewn across 73 to 78 different locations—it is not persistent, portable or personalized from a healthcare perspective.” Many consumers are frustrated by the time and effort required to see a doctor. A more accessible and transparent consumer experience, facilitated by interoperable digital healthcare solutions, can help solve this problem. “Creating different pathways to fit into user lives from a convenience standpoint actually increases engagement,” Valdes said.

2. The United States is experiencing a shortage of mental health practitioners, exacerbated by sharply increased demand for mental health services during the COVID-19 pandemic. Telehealth and other digital tools not only can help make the most of mental health clinicians’ valuable time, they can ensure that a patient receives the right mental health service in a timely manner. “The mental health system was not really designed that way, historically,” Geoffrey Boyce said, “But now with technology in the mix, we’ve got more options to make sure that we can run a 24/7 on-demand program that makes sure that a licensed psychiatrist or behavioral health clinician is available, that that clinician is privileged with the facility, they’re enrolled with the relevant payers, they’re logged in, and they’re able to connect in that moment. That’s a huge thing, particularly when you think about individuals in moments of psychiatric crisis.”

3. Fast-evolving state laws will shape the future of virtual care and may encourage digital health companies to pursue hybrid models that involve elements of in-person care. “We’re seeing more and more state laws, or Medicaid reimbursement or healthcare plans, put in place requirements that want there to be connectivity with an in-person provider,” Lisa Mazur said. “It may not be that virtual-care-only providers start opening up clinics everywhere or start a direct primary care-type model, but we are definitely seeing this demand for there to be coordination back to the primary care provider or back to that hospital or health system.”

4. The current regulatory environment is favorable to ongoing innovation in digital healthcare. “I think we’re at the beginning of trying to have the government create some set of train tracks so this can work, and the head of the Office of the National Coordinator (ONC) is the railroad builder,” Steve Bernstein said. Valdes noted that ONC, the Centers for Medicare and Medicaid Services, and the US Department of Health and Human Services have been very prescriptive around facilitating telehealth. “We’ve all heard about information blocking and interoperability rules, but CMS has outwardly said, ‘We are trying to create a shoppable healthcare consumer,’” she said. The rollback of some anti-kickback and safe harbor rules allows providers and payers to prevent leakage and refer into their own systems. “At the same time, they can offer monetary incentives to consumers for closing gaps in care that are aligned to their care plan, so now we can create digital loyalty programs, which create stickiness,” Valdes said.

5. In the face of these persistent trends, investors remain bullish on digital health. “Whether it was the pandemic or it was just time, digital health and virtual care in particular have reached a point where we’re really not going back,” Pete Tedesco said. At the same time, today’s extremely high valuations mean that investors should carefully evaluate their targets in the digital health space. “For us, it’s doubling down on areas where we have intense conviction about a theme, a specific company and the team, and know we can add value to the company post-close,” Tedesco said.

6. The high valuations of 2021 and early 2022 may soon see an adjustment, Michael Ludwig said. “We’ve had a technology transformation of healthcare over the last two years very quickly,” he said. “There is now a resetting from a valuation perspective and also from a business model perspective, as to where patients want to receive care. It’s probably not only on your phone.”

7. In addition to shifts in pricing, expect to see consolidation this year. “The next 12 to 18 months are going to see a massive amount of consolidation in healthcare technology and tech-enabled healthcare,” Ludwig said. Tedesco agreed. “There are a lot of companies that have raised a lot of money and now don’t have that exit valve,” he said. “One of the things that private equity has been good about over time is finding consolidation plays. If there are a number of point solutions that can be combined into a broader care continuum, that’s an area that we can see private equity dollars flow into, to create more longitudinal platforms.”

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