Digital Health Investment in 2020
With $12 billion in funding, a 62% increase over 2018, digital health had its best investment year on record in 2020.
While two dozen large deals represent 41% of the investments, and much attention has been given to the outliers (i.e., the $18.5 billion Teladoc - Livongo deal), 59% of the capital went to a high number of smaller deals.
What does the investment tell us about this emerging industry? Which segment(s) are of the greatest interest to investors and why? And how will this record funding year impact the provision of healthcare and health outcomes?
To better understand the trajectory of digital health, Luminous analyzed investment in the space versus current US healthcare costs. For deeper insight, we broke down the number of companies and investment dollars into segments based on the steps of the health progression (Prevention, Diagnosis, Treatment, Monitoring, and Management) – see graphic below.
Currently, US healthcare costs are concentrated on Treatment (40%), Diagnosis (30%), and Monitoring (20%), with Prevention and Management the lowest share (5% each). However, when it comes to investment in digital health, on average, Monitoring companies are the best funded, while Diagnosis businesses are the least funded.
Prevention represents only 5% of costs, however, approximately ¼ of the companies and ¼ of the funds were spent in this segment, denoting a strong belief that digital wellness can help reduce overall spend.
Diagnosis, second highest in healthcare costs, received only 10% of digital health attention (13% of the companies and 7% of the funds), perhaps underlining the belief that diagnosis must remain the realm of physicians and not technology.
While Treatment is the most significant step in terms of healthcare cost at 40%, it received only ¼ of the investments and the attention of ¼ of the companies, possibly highlighting how technology is expected to enhance existing treatments, not replace them.
Unsurprisingly, Monitoring, which represents 20% of healthcare costs, received the highest attention in digital health (1/3 of the funds and 1/3 of the companies) compared to all other segments across the health progression. This funding comes on the back of a number of studies demonstrating how digital monitoring helps to improve health outcomes.
Perhaps the greatest opportunity is for digital health solutions that serve to integrate the steps in the healthcare progression. Our analysis “The mHealth Opportunity” revealed that 84% of all mHealth investment ($35 billion) is in chronic diseases, addressing the need for measurable outcomes and improved disease management.
By putting the Spotlight on patients, Luminous can help you identify opportunities along the healthcare progression and build digital health strategies and solutions to address them.