Posted: 10 Apr. 2020 10 min. read

COVID-19 could alter and even accelerate health-tech investment strategies

by Peter Micca, partner, National Health Tech Practice Leader, Deloitte & Touche LLP

Last year, US investments in health technology topped $7.4 billion, according to Rock Health. While the novel coronavirus might have stalled investments across all industries, we expect this pause will be temporary. But we also anticipate that post-COVID-19 investors may follow an investment path that is different than the one they were on before the virus broke out. The pandemic has helped highlight the importance of health technology, which is suddenly front and center economically, politically, and socially.

Prior to the COVID-19 crisis, the Deloitte Center for Health Solutions interviewed executives from 15 health care and non-health care venture capitalists (VCs) and corporate venture capital (CVC) firms. We also analyzed funding and investment data for health tech innovators. Among the main investor groups, we expect CVCs will likely be under most pressure in the short term to curtail investment. It is too soon to know where future investment dollars will flow once we move past the current crisis. However, we expect to see a continued emphasis on health technology, particularly virtual health.

Removal of regulatory hurdles could change future investments

Some US start-ups in the virtual health space have seen a recent surge in activity in response to increased demand and more relaxed regulations. Although the technology to conduct virtual doctor visits has existed for decades, regulatory and financial barriers have often hindered adoption.

In response to the novel coronavirus, some regulatory hurdles have been removed…at least temporarily. On March 27, the White House enacted the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act. Along with $100 billion in emergency funding for hospitals and other provider groups, the new law opens the door wider for virtual health. For example, patients who receive at-home dialysis won’t be required to have an in-person assessment to qualify for telehealth services. Moreover, the law also allows federally qualified health centers and rural health clinics to offer telehealth services to Medicare beneficiaries at a rate comparable to in-person visits. The law also provides $200 million “to provide telecommunications services, information services, and devices necessary to enable telehealth services.” 

The US Department of Health and Human Services (HHS) temporarily eased some regulations to make it easier to conduct virtual health/telehealth. On March 17, the US Centers for Medicare and Medicaid Services (CMS) said that a 1135 waiver would allow Medicare to pay for office, hospital, and other virtual-health visits. As of March 29, CMS had expedited waivers for 34 states. In addition, the HHS Office of Inspector General (OIG) announced that clinicians could reduce or waive cost-sharing for virtual health visits paid through federal programs. Prior to the waiver, Medicare could only pay for virtual health visits in a limited number of circumstances, such as when a patient is in a rural setting.

While the loosening of certain restrictions might be temporary, we expect adoption could continue to grow even after the COVID-19 emergency has passed. Demand from clinicians and consumers could cause some restrictions to be removed permanently. In the near-term, we anticipate that adoption of virtual health will accelerate in an uncoordinated, haphazard way. But over the longer term, it will likely become the new normal. Adoption might be episodic based on geography, speed to market, funding, and the type of technology being introduced. As investment strategies emerge in this new normal, investments in virtual health technology could grow if it is able to validate its potential.  

Incumbent players could eye new partnerships

As virtual health and other digital-health technologies have become more integrated into life, work, and culture, many health care organizations have developed their own internal investment strategies. Our research pointed to a trend of collaborations and partnerships—rather than acquisitions—between incumbent players and companies from the outside. Incumbents include hospitals and health systems, health plans, medical-device manufacturers, and pharmaceutical companies. Non-traditional participants include technology firms, large retailers, and other consumer-focused industries. These organizations are looking to accelerate change in the health sector. Consider these two examples from our recent paper on investment trends:

  • Merck: The corporate venture arm of Merck invests globally in companies with proven technology or business models. Its aim is to increase revenue and enhance value creation. The Merck Global Innovation Fund (GHI) has focused its investments on health tech–centered companies and platforms.1 It has more than 40 digital health investments and $500 million in evergreen funds. Merck GHI’s investments have concentrated on four major areas: therapy planning, care management, e-clinical trials, and health analytics and AI. Merck GHI’s strategy is concentrated on investments that have current revenue, are almost profitable, and that pursue growth capital.
  • The BlueCross BlueShield Association (BCBSA): The corporate venture arm of the association invests in emerging companies that align with its corporate strategy. The nation’s 33 Blues companies have pledged more than $575 million across three funds to invest in companies that are focused primarily on health technology. BlueCross BlueShield Venture Partners is focused on long-term strategic partnerships to drive revenue and distribution while simultaneously promoting innovation across the industry.

What might lie ahead? It’s worth noting that the uncertain economy could change or delay investment strategies. However, the temporary or permanent removal of regulatory hurdles could accelerate investments in virtual health and other digital technologies. Even before the outbreak, health care and life sciences companies were migrating toward a more digitized world that is guided by consumer preferences. Patients who had a positive experience with virtual health during the pandemic might help drive further adoption. Moreover, increased digitization is likely to change how therapies are provided, how clinicians practice, how health plans pay for care…and where investors place their bets. 


1. Deloitte, Health tech investment trends: How are investors positioning for the future of health?, March 12, 2020

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Peter Micca

Peter Micca

Audit & Assurance Partner and National Health Tech Leader | Life Sciences & Health Care

Peter Micca, Deloitte & Touche LLP, is a partner with 30 years of experience serving a broad array of clients in all sectors of the health care, technology, and life sciences industries. He has significant experience with health technology organizations, software as a service (SaaS) organizations, pharmacy benefit management, clinical and diagnostic operations, emerging growth, as well as private equity–financed organizations in life sciences and health technology and services. Micca applies a deep knowledge of industry sector business issues regarding the emerging trends surrounding consumerism, convergence, cost considerations, regulatory and compliance issues, and consolidation.