• When COVID-19 rocked financial markets in the first half of the year, private investors invested $ 5.4 billion in digital health startups, the industry’s largest investment in the last decade, according to a new semi-annual report from Rock Health.
• The research firm and venture capital fund have reversed their previous prediction that the pandemic will reduce access to digital health capital and now expect to break records this year for total funding, the number of transactions, and the size of businesses transactions.
• Reducing regulatory and reimbursable barriers to the adoption of digital healthcare services designed to support healthcare systems during the public health crisis sparked investor interest in May and June after a hiatus earlier this year, released the report on Monday.
Investments in the digital health sector got off to a good start in 2020 with a record $ 3 billion in the first quarter alone before momentum slowed in March and April. However, the disruption to inactivity as COVID-19 quickly spread across the world did not last long. Rock Health notes that of the eleven major deals worth $ 100 million or more in the first half of the year, five occurred in May and June, when the outbreak and subsequent economic recession in the United States were underway.
Funding for digital healthcare companies was $ 2.4 billion in the second quarter, 33% more than the quarterly average of $ 1.8 billion in the past three years. The average turnover in the first half of 2020 was $ 25.1 million, well above the previous record of $ 21.5 million in 2018.
On-demand health services, disease surveillance, and behavioral health are among the most popular investment areas.
The largest medical device deals included $ 125 million for Outset Medical, which makes a connected dialysis system, and $ 146 million for portable defibrillator maker Element Science.
The main recipients of financing in other sectors were Alto Pharmacy’s prescription delivery service ($ 250 million); Amwell Telehealth Services Company ($ 194 million); Insitro AI-Based Drug Discovery Platform ($ 143 million); Dispatch Health, an on-demand emergency care company ($ 136 million); and the evidence-based psychiatry and therapy platform Mindtrong Health ($ 100 million).
Regarding the distribution of investment transactions among different types of corporate investors, the share of medical device companies has decreased slightly since 2018, from 6% this year to 4% last year (3% in the first half of 2020) as a supplier of biopharmaceutical products. Traditional technology companies and companies have increased their shares since last year.
The report highlighted several policy changes that helped expand the use of virtual assistance, including the CMS, which removes the video requirement for reimbursement for some telemedicine services. Enable remote billing for outpatient services, and question multiple providers for reimbursement for long-distance services. HHS agreed to lift HIPAA penalties for telemedicine issues in good faith and lowered the penalty limit for some violations. Additionally, many states have lowered the barriers to admission so that physicians of all levels can provide care.
“Although some of these changes are not permanent, it is difficult to close the barn door once the cat is out of the bag. Both consumers and providers have discovered the value and convenience of virtual assistance. We believe these new virtual care habits will create paradigms of care beyond the pandemic” said Rock Health.
A warning about the optimistic outlook for digital health investments in 2020, as the pandemic appears to fuel interest in the digital health sector, a second wave of the virus, and a possible long-term economic slowdown could quickly halt the uptrend says the relationship.