Payer corporate venture capital investment remains strong as the government looks to the private sector for more solutions.
When $10.4 billion represents a quarterly investment decline, you know you have a robust digital health market.
In the first quarter of 2022 (Q1 2022), global digital health funding was 36% lower quarter over quarter (QoQ), down from $16.2 billion. The decline included sizeable decreases in mental health (60%) and telehealth (32%) investment. Within the U.S., the numbers were similar with digital health investment down 37% overall.
It's important to put this in context, while also identifying the role of key payers in the digital health investment landscape.
You don't have to look back far for the last decline (19% in Q3 2021). Both recent quarters with declines were home to the COVID-19 surges. Before then, digital health funding had experienced nearly uninterrupted, overall growth since Q4 2019, with growth in three additional quarters dating back to Q1 2018.
Payer investors loom large
One of the largest digital health investors is Optum Ventures, the corporate venture capital (CVC) arm of UnitedHealthcare. The CVC has been betting on digital health since its founding in 2017. It was "the single most active corporate investor" from January–June 2021. In Q1 2022, Optum Ventures ranked:
- Fifth in the number of company investments globally
- Second among CVCs for the same metric
- Third among U.S. investors, also for the number of company investments
Among health plan–affiliated firms, Optum Ventures outranks only integrated payer-provider Kaiser Permanente, whose venture arm ranked seventh globally for its company investments.
Payers and providers alike are among the largest investors in a private equity landscape where CVC involvement has grown steadily and in three primary areas identified by Deloitte Insights:
- Well-being and care delivery
- Data and platform
- Care enablement
Deloitte noted two types of benefits: "For VC arms of large health systems and health plans, investment gives them first access to innovative solutions and the ability to pilot extensively and shape the solutions rather than just be the customers … some are [also] focused on investments as a stepping-stone to full-scale acquisitions; others are focused on financial returns and diversifying their revenue sources."
Whether one thinks these trends are largely positive or negative, even CMS has indicated it will turn to the private sector for more cost-control and equity solutions. But what happens when the private sector leans out instead of leaning in? While a single-quarter downturn in digital health funding does not constitute a leaning out, the financial trends—as well as stakeholder consolidation—bears watching as the things like telehealth utilization decrease as the pandemic wanes.
Laura Beerman is a contributing writer for HealthLeaders.
KEY TAKEAWAYS
Digital health investment dropped 36% to $10.4 billion in the first quarter of 2022.
These declines included less funding in mental health and telehealth.
Payer-affiliated Optum Ventures and Kaiser Permanente Ventures rank among the top digital health investors globally.