A new report by PitchBook predicts that the digital health sector should expect – and even need – more integration to succeed.
And behavioral health will see an important role in that movement as it continues to drive the continued use of digital health in the U.S. However, behavioral health providers should consider doing more in the future. rather than single-point solutions. in the last few years.
“To be successful, digital health companies must provide comprehensive health services with integrated coordination of telehealth and care, have a clear strategy to reach large populations of members and/or will provide care for current unmet medical needs,” the report said.
Venture capital has flooded into digital health following the onset of COVID and the resulting mitigation efforts. It forced millions into digital care and created a massive business and regulatory experiment. The use of telehealth has increased as a result.
However, the use of behavioral health through telehealth has grown at a higher rate than any other area of care. As of December, behavioral health-related claims made up about 40% of all telehealth-related health insurance claims tracked by the nonprofit research group Fair Health. Mental health conditions accounted for about 62% of all telehealth-related claims in the same month.
In the year 2022 it is seen that the flood of venture capital funding has decreased significantly. Venture capital funds invested about $7 billion in digital health companies last year, 55% less than 2021’s $15.6 billion, the report said.
“While there are many important areas of opportunity for digital health startups, risks for companies in the sector include competition and market fragmentation – especially in the main telehealth and health – the need to scale to achieve revenue, and the need to overcome point solutions. fatigue of payers and employers,” says the report.
Despite retreating investment dollars and the perceived need for consolidation, “exit activity will be almost non-existent” in 2022. PitchBook tracks $200 million in exit value activity last year and about $11 billion in last year.
Companies face a “frozen IPO market,” economic headwinds that led to widespread declines in startups and a lack of clear or large incumbents for strategic acquisition partners last year, according to the report. .
Behavioral health startups and other digital companies face challenges that transcend direct-to-consumer (D2C) and business-to-business (B2B) models. For the former, D2C companies face competition from “hundreds of thousands of health applications,” which can be an expensive marketing proposition. For the latter, B2B clients are shifting expectations to focus on results and impact.
“In the employer market, there is an ongoing shift from PMPM to per-appointment due to lower utilization and employers increasingly looking for telehealth providers to prove return on investment (ROI), ” the report said.
Despite the shift, the employer market is becoming increasingly attuned to the need for behavioral health services and the potential increase in providing digital support for conditions such as substance use disorder (SUD).
The report points to SUD support, including for alcohol use disorder (AUD) and opioid use disorder (OUD), as having the potential to be one of the fastest growing segments of the health category due to “clear cost benefits in reducing substance dependencies. .”
“The COVID-19 pandemic has led to an increase in substance use and a growing recognition of the mental health impact of substance use, and initiations for alcohol and cessation have increased over the past few years,” the report says. “Online alcohol cessation programs tend to see more demand from the younger generation, and because people become more sensitive to alcohol as they age, an aging population is another cause in this category.”
Beyond telehealth, other digital solutions, especially the most high-tech and leading interventions, face more difficult scrutiny.
Digital therapeutics — services that seek to treat conditions and treatments like drugs — require specific and scientific proof to succeed. Unlike other health-focused apps or self-guided content, these interventions deal with questions like “will it work?” This is driven by the opaque relationship between digital solutions and results, the report says.
“Growing clinical evidence and provider recognition that digital treatments can be effective treatment options are drivers of future growth in the space, and while there are many health coaching and wellness apps available in the app stores, only a few have clinically validated results. , an aspect that startups in this space can emphasize to distinguish themselves,” the report says.
Virtual reality continues to feature strongly in behavioral health interventions or behaviorally influenced conditions such as metabolic disorders.
In a separate report, PitchBook highlighted companies such as OxfordVR and BehaVR for their virtual reality services that offer exposure therapy and relaxation programs aimed at improving behavioral health outcomes. Other services include improving behavioral health to reduce chronic pain or improve physical therapy outcomes.
PitchBook is “bullish” on virtual reality but acknowledges that it is “another new category in digital health with high growth potential.”
“Health care has been slow to adopt digital formats – even as the world becomes more digital – although the COVID-19 pandemic has accelerated health care trends,” the report said. “The next wave of innovation will be led by technologies that bring healthcare closer to the patient, whether through home testing platforms, digital therapies, or new ways of delivering health guidance based on data collected from wearables, genetic testing, and biomarker analysis.”
