Posted: 17 Aug. 2021 9 min. read

COVID fueled health tech investment; can the momentum last?

By Peter Micca, partner, National Health Tech Practice leader, Deloitte & Touche LLP

For investors, health tech has never been hotter. Investors pumped nearly $15 billion dollars into 372 digital health care deals during the first half of 2021. That tops investments for all of 2020.1 A decade ago, digital health investments were a fraction of what they are now (fewer than 100 deals and just $1.1 billion in investments).2 As I mentioned in my January blog, many investors view the post-pandemic era as a multi-year opportunity.

Some of our clients are now beginning to ask us when (or if) interest in health tech might begin to cool down, and what might cause that to happen. We think the following two factors—along with emerging demographic and macroeconomic trends—could have a sizable impact on future investment trends:

  • Regulations: In health care, regulatory bodies often have to keep up with new technological advances and changing business models that are driven by innovators. The US Food and Drug Administration (FDA) is working to streamline approval processes for some digital products.3 Digital health products are typically treated the same as more traditional medical devices and need to be approved through traditional processes. However, digital health products often need regular updates in response to real-world performance and user feedback. Adding new features, functions, or upgrades can require developers to go through a lengthy regulatory process. The Digital Health Software Precertification (Pre-Cert) Pilot Program, which was launched in 2019,4 could be the first step along a new pathway for approving and updating software as a medical device (SaMD).5 In addition, recently enacted rules around interoperability, for example, could make it easier to share electronic claims data and information generated through digital devices. More than 60% of finance executives surveyed by Deloitte said increased data-sharing will improve care coordination, quality of care, and outcomes.
  • Reimbursement: Reimbursement is typically challenging, particularly when a technology is new. This adds uncertainty to whether there will be a new code for the technology, if it will be covered by health plans, and how much health plans will be willing to pay. For example, health plans and health systems are still trying to determine how to price virtual health care visits. The shifting site of care has reimbursement implications. These emerging growth companies could see increased price pressure on products used in lower-acuity settings.

Health care is changing, investors are watching

Deloitte’s Center for Health Solutions recently collaborated with MedTech Innovator (MTI)—a global nonprofit accelerator for medical devices, digital health technology, and diagnostic companies—to evaluate trends across the start-up landscape. We also interviewed leaders from start-ups and companies that could be strategic acquirers. Our report will be released in September. Through our data analysis and interviews, we quantified the following trends: 

  1. Start-ups and strategics are expanding beyond episodic care and procedures: Innovation is often focused on prevention and wellness, early detection, and diagnosis. Some companies that have historically targeted specific therapeutic areas defined by a procedure (e.g., implanted devices) are adding products and solutions to their portfolios. This can help address the full patient journey—from diagnosis to rehabilitation.
  2. Care is shifting away from the traditional inpatient setting: Ambulatory clinics, at-home care, self-administered diagnostics, and remote patient monitoring are growing areas of interest. This trend has implications for reimbursement and clinical support.
  3. Technology in health care is getting smarter: Many start-up technologies have digital capabilities that include advanced analytics and artificial intelligence (AI). Strategics seeking acquisition targets might be looking for these capabilities.
  4. Investors are looking beyond proof of concept: Many start-up companies are securing seed funding. But investors have become more astute over the last few years in assessing value, clinical efficacy, and reimbursement potential and might be less willing to make significant investments.

SPACs offer start-ups an alternative to IPOs

Start-ups need money to generate clinical evidence to show the commercial potential of a product or idea. Initial Public Offerings (IPOs) via the open market have traditionally been the most common way for start-ups to access public funding. Special purpose acquisition companies (SPACs), which offer an alternative path to IPOs, are among the biggest growth areas on Wall Street. These investment vehicles raise funds and then look to merge with one or more privately held companies. Over the past year, SPACs have grown in popularity in a wide range of sectors, including health care. In 2020, for example, close to 20 SPAC transactions were focused in the health care industry, higher than during the past four years combined, according to our recent report, SPACs find new prescription in health care. Here are two recent examples:

  • GigCapital2 Inc., a SPAC, merged with Uphealth Holdings, a digital care management and digital pharmacy company, and Cloudbreak Health, a telehealth provider, to create a public digital health tech company valued at $1.5 billion.
  • Longview Acquisition Corp. II, a SPAC sponsored by affiliates of a capital management company, announced plans to go public with Heartflow, a company that specializes in creating computerized heart models to treat coronary diseases. The $2.4 billion merger is expected to generate $400 million in cash to be used for company growth, product development and other general corporate purposes, according to the announcement.6

The COVID-19 pandemic likely accelerated investment trends that were already well underway. Health technology has moved into the mainstream and is no longer limited to niche investors. Amid economic headwinds, investors (and consumers) saw potential value in everything from telemedicine to wearable devices to artificial intelligence and health care robotics. The commitment to developing innovative products that support the whole patient journey appears to be even stronger than it was before the pandemic. Few if any health technology investors are still talking about the COVID-19 pandemic. Instead, they are focused on consumerism, health access and equity, remote patient monitoring, virtual health, and interoperability. While some factors could cause investment trends to slow, virtual and digital health are now a part of the fabric that connects consumers—and investors—to health care.



1. H1 2021 digital health funding: Another blockbuster year…in six months, Rock Health, Q2 2021

2. Q1 2021 funding report: digital health is all grown up, Rock Health Q1 2021

3. Empowering digital health stakeholders to advance health care, US FDA Digital Health Center of Excellence, July 9, 2021

4. Digital Health Software Precertification Program, US FDA Digital Health Center of Excellence, May 6, 2021

5. Software as a Medical Device, US FDA Digital Health Center of Excellence, December 4, 2018

6. HealthFlow, the leader in precision heart care, announces merger with Longview Acquisition Corp. II to become a publicly traded company, HeartFlow press release, July 15, 2021

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