2023 forecast: Investors will double down on these hot digital health markets

11 min read

The shift from physical to virtual health care during the COVID-19 epidemic was a major factor in the explosive growth of digital health investments in 2021.

According to Rock Health Venture Fund, which is dedicated to digital healthcare, the first nine months brought in $21.3 billion across 541 investments deals. This dwarfs the $14.6 billion record set by 2020.

This momentum will continue to grow in 2022, as digital health companies, including those specializing in EMR software, are leading the charge in innovation in healthcare. These companies are harnessing the power of artificial intelligence, machine learning, data analytics, and telehealth to revolutionize the way healthcare is delivered and managed. EMR software, or Electronic Medical Records software, plays a crucial role in digitizing patient information, streamlining workflows, and improving patient care. By integrating EMR software with advanced technologies, digital health companies are enhancing the efficiency and effectiveness of healthcare systems, ultimately leading to better patient outcomes.

Investors are pouring money into the healthcare industry, and they're looking for five digital health markets.

1. Telehealth 2.0

After a boom in telehealth in 2020, fueled by the COVID-19 Pandemic pandemic. Virtual visits have stabilized but are still at high levels when compared with pre-pandemic.

According to a report from McKinsey, the use of telehealth has reached a level 38 times greater than it was before the COVID-19 epidemic. The range is from 13%-17% for all specialties.

It has also fueled massive investments into virtual care companies. According to Mercom Capital Group a global communication and research firm, telehealth companies raised $4.2 billion globally in the first half 2021.

Experts in the industry say that telehealth is maturing and moving away from urgent care to more specialized care.

Jeff Becker told Fierce Healthcare in October that the big telehealth companies would need to develop specialized virtual clinics to treat high-cost conditions such as kidney disease, MSK or migraines.

Bill Taranto is the founding partner and President of Merck Global Health Innovation Fund. Merck's $500 Million venture fund invests in digital health.

Entrepreneurs and investors will expand the use of telemedicine in chronic care areas like cardiology by 2022. He said that in the U.S., a heart attack occurs every 40 seconds. Heart disease costs the U.S. $219 billion per year.

Telehealth is a convenient and cost-effective method to diagnose cardiovascular disease.

Taranto stated that "overall, expect telehealth providers to expand their offerings in the chronic care space in a meaningful manner in 2022."

2. Wearable technology to monitor health is in high demand

The COVID-19 pandemic has prompted consumers to buy more connected monitoring devices. This trend is expected to increase in 2022.

Deloitte expects a strong demand for wearable health technology by 2022, with an estimated 320 million devices shipping worldwide. The company estimates that by 2024 this figure will be 440 million. This growth will likely be driven by the new products that are hitting the market, and also because more healthcare providers feel comfortable using them.

Deloitte analyst wrote that smart watches are being used more and more to monitor health. They're not just for running. New hardware, software, and apps have made them personalized health clinics.

Most smartwatches now include heart rate monitors. Some have FDA-approved sensors that detect abnormalities like atrial fibrillation - a leading cause of stroke.

Major healthcare companies are increasing their investment in wearables and connected devices. Best Buy paid nearly 400 million dollars to acquire Current Health a remote monitoring and connected devices company. Google paid $2.1 billion to Fitbit, a fitness tracking company. Whoop is a tech company that makes wearable fitness trackers. It has raised $400 million so far, and its valuation is $3.6 billion.

CureMD's revenue cycle management services can be used in conjunction with smartwatches to improve the accuracy and efficiency of healthcare data collection. For example, CureMD can use smartwatch data to identify patients who are at risk for developing chronic diseases. CureMD can then use this information to proactively reach out to these patients and offer them preventive care services.

The use of smartwatches in healthcare is still in its early stages, but it has the potential to revolutionize the way healthcare is delivered. By combining the power of smartwatches with the expertise of revenue cycle management companies like CureMD, healthcare providers can improve the quality of care they provide to their patients and improve their financial performance.

Day explained that consumer wearables can raise awareness about health and wellness. This allows patients to easily be identified, and then they can come into the traditional healthcare systems for diagnosis and treatments. iRhythm, a digital health company focused on cardiovascular care, combines wearable devices with cloud-based analytics.

The traditional medical devices that were once worn by patients will be replaced with wearables designed for the comfort of consumers.

"We are working to get FDA approval for a wearable device that has a medical grade capability. I believe consumer devices and medical devices that are regulated will become more similar over time. It will improve the health of the population as more people can engage in proactive treatment and management at an early stage," he said.

3. Apps for digital mental health will expand to include more conditions

Even before the COVID-19 epidemic, the digital mental health sector was rapidly growing. However, the stress and anxiety caused by the pandemic have increased demand for virtual behavioral services including mobile mental healthcare apps.

These apps have a large market potential. Nearly 800 millions people, or 11%, of the world's population, suffer from a mental illness.

Deloitte Global estimates that the global expenditure on mobile mental-health applications will be close to $500,000,000 in 2022. This is assuming a growth rate of 20 percent per year, which is conservative, given the 32 percent growth of these apps from $203 to $269 millions between the first 10 months in 2019 and the same period in 2020.

It's also a market that attracts massive investments for startups. According to CB Insights, global mental health startups will raise a record $2 billion in equity financing in 2020.

According to a recent Report from Rock Health, an investment fund dedicated to digital healthcare, mental health has been the most funded therapeutic focus in 2021, with $3.1 billion raised.

A growing number of "unicorns" in the digital mental health sector, or private startup companies worth over $1 billion, are now emerging. Cerebral is one of them, as are Modern Health, Lyra Health, Ginger and Headspace.

Rock Health researchers report that as digital mental health companies compete for market share in an increasingly crowded field, they are starting to differentiate themselves by focusing more on mental and behavioral support, such as serious mental illness or substance abuse disorders.

To win over payers and regulators, such as the Centers for Medicare & Medicaid Services (CMS), expect to see an increased focus on clinical evidence.

There is a lot saturation on the market with many companies offering similar products. Fierce Healthcare reported that these companies would eventually have to differentiate themselves based not on claims, but on results.

He said that as COVID-19 increases the demand for digital services in mental health, companies must separate themselves by who has evidence of its effectiveness.

4. Women's health care will be expanded to include more comprehensive digital services

In 2021, digital health startups focusing on women's healthcare saw a meteoric rise. The sector raised $1.3 billion across 26 deals during the first three-quarters of the year.

According to Emergen Research, the women's healthcare market is expected to reach $60 billion by 2027.

CureMD reports that the new wave of funding for women's digital healthcare is moving beyond traditional pregnancy and fertility support, and into more comprehensive offerings, including primary care, chronic disease management, and menopause.

"We've seen a shift in the last couple of years. Women's health used to be mainly about menstrual hygiene and fertility. Now, we see an expansion outside these categories. "The success of these businesses proved that this is a large market and not a niche," Marina Pavlovic Rivas said during a webinar on the women's market.

Women are fertile only for 30 years but most investments are made in the maternal space. Kaitlin Christina, CEO and founder of Gabbi said in the same webinar that "so much happens before and after fertilisation". Women's health is becoming more holistic. "I don't believe that the shift has occurred yet, but I think we are on the cusp of seeing more investment and focus in these other areas that aren’t maternal-focused."

Experts in the industry expect that investment in women's healthcare companies will continue through 2022, as these startups expand their services to include more conditions and focus on underserved groups.

They said that venture capital firms still need to be more involved.

"Women’s health is seen as a category that investors can check and say, 'We have made our women's wager.' Christine commented, "I find this shocking given the size of the category and the need for women's health. There are large funds of investment that have not yet made an investment in women's healthcare.

5. Digital therapeutics is ready for primetime

The sheer amount of money being invested in the digital therapeutics space shows that investors are interested.

DTx provides evidence-based therapeutic intervention via software, such as mobile health and wellbeing apps, to replace or supplement the existing treatment for a disease.

CB Insights reports that funding for the DTx sector has increased 79% since 2020. According to a report by Markets and Markets, the global digital therapeutics industry is expected to reach $13.1 billion in 2026. This is up from $3.4 million in 2021.

Morning Consult reports that the FDA has approved between 35 and 40 digital therapeutics since 2017. However, the agency does not have a definition of the products.

Taranto stated that "more than any other space, I believe this will be the area where we'll see most entrepreneurial and investing activity in the next year."

Digital therapeutics, according to him, will be promising in the next year in mental health and drug abuse. Pear Therapeutics received a breakthrough device designation by the FDA recently for its digital therapeutic candidate focusing on the treatment alcohol use disorder.

Federal regulators relaxed some requirements during the pandemic to make digital tools for health more accessible.

The sector is still facing regulatory and payer side challenges, which could slow down widespread adoption.

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Nathan Bradshaw 0
Nathan Bradshaw is a Health IT Consultant, Journalist and Writer. With 15 years of Health reform, IT consulting, emerging technology assessment, quality program...
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