Deloitte Report Sees Record Growth in Healthcare Technology Investment

Spurred by the pandemic and digital health innovation, healthcare organizations are spending more money than ever before on healthcare technology, both to update what they have and prepare for a new future in care delivery.

A new report by Deloitte finds that investment in healthcare technology is soaring to new levels, spurred by both the pandemic and expectations that the industry will embrace new tools and platforms to improve care after COVID-19.

“Building off key technical advances and mass adoption of smartphones as well as incremental improvements in back-end healthcare+ IT infrastructure, health tech platforms have proliferated into a wide variety of niches, raising large financing rounds to keep scaling rapidly to meet rising consumer demand,” the company’s Road to Next report, authored by analysts Heather Gates and Peter Micca, points out. “The continuing consumerization of healthcare in tandem with macro trends such as aging demographics have ensured there is no shortage of market opportunities for health tech enterprises.”

According to Deloitte, almost $23 billion has been invested in the healthcare technology landscape through 556 completed transactions, surpassing record growth in the past two years.

This growth can be tied to multiple factors. The pandemic has compelled healthcare organizations to update and in some cases replace their technology infrastructures to accommodate new platforms of care, most notably telehealth and digital health, as the industry shifts from in-person to virtual care. This is also fueling a surge in innovative new technologies.

“Although challenges remain given the commanding market positions occupied by legacy software companies in many systems on which providers rely, innovative care models by younger companies deploying new, homegrown systems have started to lure consumers away from hospital chains,” the report notes. “Those challenges, coupled with increasing expenditures, have resulted in the continuation of hospital mergers, leading to highly concentrated markets across the US. Large healthcare organizations are often slow to renew tech stacks - but they will have to, eventually - which could provide incredibly lucrative opportunities for health tech companies looking to tackle parts of that overall value chain.”

In addition, healthcare organizations are outsourcing new digital health programs pulling in smaller, more innovative and nimble companies.

“From appointment logistics to virtual care to development of at-home testing kits, many such niches have seen significant upticks in funding as a result of the pandemic,” the report states. “Many of these businesses’ products and services only became truly viable over the past decade, thanks in large part to the increasing reliability and ubiquity of wireless communications and high-quality video, the reduction in costs of common tests, and declines in computing costs, among others. Health tech companies are now tapping the flood of funding to scale rapidly during favorable market conditions.”

Finally, with the industry looking toward a hybrid health landscape post-COVID-19, more attention is being paid to the consumer-facing technology market, especially technology that reinforces healthcare tracking and behavior modification at home. Healthcare organizations have always had an eye on the consumer market but were wary of trusting data from those platforms for clinical use. Now, with the proliferation of remote patient monitoring programs, they’re looking for ways to make those new tools and platforms work for them.