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Peter Micca, Deloitte & Touche LLP, is a senior partner serving a broad array of clients in all sectors of the health care, technology, consumer, and life sciences industries. He has significant experience with health technology organizations, software as a service (SaaS) organization, clinical and diagnostic operations, emerging growth, as well as venture capital and private equity–financed organizations in these industry sectors. Peter currently leads Deloitte’s National Health Tech practice, serves on the board of directors of the American Red Cross and Springboard Enterprises (a nationally recognized accelerator of women founders in health care). Micca has advised Columbia University’s Woman’s HITLAB, and is an active venture capital investor in women’s health organizations.
Simon Gisby is a principal in the M&A and the Life Sciences & Health Care practices at Deloitte and is the Future of Health leader for Deloitte US Risk & Financial Advisory practice. He has experience in all aspects of life sciences and health care M&A strategy and execution, joint ventures, and partnerships. His clients include global pharmaceutical and medical device companies, health plans, health systems, and health care information technology companies. He has been awarded the M&A Advisor Healthcare Deal of the Year Award and Healthcare Restructuring Deal of the Year Award, is a frequent presenter on health care M&A and the future of health, and has contributed to numerous articles on M&A and health care. He is a Chartered Financial Analyst and a graduate of Oxford University.
Boris Kheyn-Kheyfets is the Life Sciences Healthcare Platforms and Ecosystems lead at Deloitte. He has over 12 years of experience in strategy, and he works routinely with digital health startups to alleviate the unmet needs of the largest health care organizations. He has advised leading plans, providers, and life science companies on their growth strategies. Most recently, he is working with national health plans, major health systems, and biopharma companies to launch new platform businesses and formulate partnerships across the ecosystem. Prior to Deloitte, Kheyn-Kheyfets worked in venture capital and startups, evaluating investment opportunities in digital health. He holds an MBA from Columbia University and a BA in economics from UCLA.
Christine Chang, MPH, is a research manager with the Deloitte Center for Health Solutions, Deloitte Services LP. She conducts primary and secondary research and analysis on emerging trends, challenges, and opportunities within the life sciences and health care industry. She has written on topics including health equity, innovation, and emerging technologies.
Madhushree Wagh, Deloitte Services LP, is a senior research analyst with the Deloitte Center for Health Solutions. She conducts research aimed at informing stakeholders about emerging trends, challenges, and opportunities in the life sciences and health care industry. She holds an MBA in marketing.
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As the dynamics of the 2022 and early 2023 macroeconomic environment swept across the United States, the health tech market felt a cooling effect. The health tech sector’s 2022 venture capital funding fell short of 2021, dropping about 30% from US$39.3 billion in 2021 to US$27.5 billion in 2022 (figure 1). However, 2022 investments were still approximately 30% higher than in 2020, and more than doubled from 2019. As the overall venture capital funding continues to trend up, interviewed health tech experts remain optimistic about the opportunities to bring innovation to health care in 2023 and beyond. To keep pace, innovators that have been primarily focused on growth are also finding ways to bridge longer funding cycles.
A year ago, our report showed a spectrum of reactions to the concept of platform-enabled ecosystem, which deviates from the traditional pipeline business model. Some industry leaders were bullish on the idea while others expressed skepticism about ecosystems as a future business model. However, our latest analysis of 2022 later-stage venture funding shows that eight of the top 10 funded health tech innovators are, by our definition, platform-enabled ecosystems (See sidebar, “What is a platform-enabled ecosystem?” for more information.), and we expect platform-enabled ecosystems to continue to gain traction in the market.
To understand what the macroeconomic environment could mean for the health tech market moving forward, the Deloitte Center for Health Solutions continued its annual look at US health tech investment trends. To understand the current and future landscape, we conducted a data analysis of venture capital deals in the health tech1 space and interviewed nine executives from investment and startup companies between November 2022 and January 2023.
“Macro markets are where ingenuity, resilience, and perseverance pay off. Many of the best inventions happen during market downturns. The most sustainable and impactful solutions can emerge over the next three years. It is a challenging environment, and many startups will not make it, but it’s a healthy part of the innovation cycle.” —Partner, venture capital firm
“Macro markets are where ingenuity, resilience, and perseverance pay off. Many of the best inventions happen during market downturns. The most sustainable and impactful solutions can emerge over the next three years. It is a challenging environment, and many startups will not make it, but it’s a healthy part of the innovation cycle.” —Partner, venture capital firm
Interviewees believe that the health tech market holds much opportunity moving forward and the sector continues to show strong signs of growth to disrupt health care. For example, the median health tech deal in 2022 fetched a valuation of more than US$57 million, which was substantially higher than the 2021 median (US$33.9 million) and that of years prior (figure 2).
“We’ve deployed more into health care this year than last year and deployed more last year than the year prior. We are growing our health care practice.” —Partner, venture capital firm
“We’ve deployed more into health care this year than last year and deployed more last year than the year prior. We are growing our health care practice.” —Partner, venture capital firm
As in past years, late-stage companies continued to see more investments (75%) than early-stage companies (25%).2 This trend may be due to many of the typical factors, including an investor focus on proven value propositions, but could also be attributed to fewer companies choosing to go public in 2022.3 According to the executives we interviewed, some investors decided to pause new investments or shift to earlier-stage investments to adapt to today’s economic climate. The shift in focus seems to have resulted in a “back to basics” approach that may continue into 2023. In addition to focusing on growth, innovators may be looking to achieve stability, to help them bridge longer funding cycles, and, potentially, provide meaningful value to their clients.
“Industry has shifted its focus toward unit economics, capital efficiency, and long-term sustainable value. All our portfolio companies have strong balance sheets. They’re all focused on sustainability versus hyper growth.” —Partner, venture capital firm
“Industry has shifted its focus toward unit economics, capital efficiency, and long-term sustainable value. All our portfolio companies have strong balance sheets. They’re all focused on sustainability versus hyper growth.” —Partner, venture capital firm
According to interviewees, today’s investors are less focused on telehealth and general mental health, as have been the focus during the past few years. Instead, investors are more focused on specific areas of mental health (e.g., populations like the elderly and women), hands-on care delivery approaches, and value-based care solutions. Back-office efficiencies continue to be of interest, particularly those that show a quick return on investment. Health equity is gaining attention, both through investing in startups founded by racially and ethnically diverse people and/or women, as well as solutions focused on Medicaid populations and drivers of health (social determinants of health), such as housing and food.
Some startups are tackling these investment areas with a platform-enabled ecosystem approach. According to Deloitte analysis of data available in PitchBook’s health tech funding database, eight of the top 10 later-stage funded companies in 2022 are aligned to platform-enabled ecosystems. Our analysis indicates that this investment trend could continue to grow.
Unlike traditional pipeline businesses, which focus on selling a specific product or service to customers and competing on cost, quality, or market share, platform-enabled ecosystems, or platform businesses, compete on network effects that focus on an improved customer experience and differentiated offerings (e.g., ridesharing companies). Platform businesses develop an ecosystem through a network of users and partners who exchange information, services, or goods with each other. By leveraging the collective power of their users and partners, platform businesses can create more value for consumers than traditional pipeline businesses (figure 3).
Platform-enabled ecosystems, in particular, can be well-aligned to help the transition to value-based care. Here are a few examples:
The intelligent, scalable platform enables clinicians to focus on serving patients throughout the entire care journey in areas including cancer, surgical, gastrointestinal, chronic, maternal, population health, and more. It can reduce clinician burnout by reducing repetitive, manual administrative tasks and decreasing the number of patient portal messages that need to be answered. According to Memora Health, the platform has reduced inbox messages by 40%.5 Furthermore, it has reduced emergency department visits, increased patient education and screening rates, and improved medication adherence.6
o Underutilized asset: Gives nurses more time to spend on patient care.
o Ecosystem delegation: Delegates tasks appropriately to different types of clinicians as well as administrative departments (e.g., billing) and partners with other patient and clinician experience platforms including remote patient monitoring systems, billing services, and telehealth tools.
o Modularized components: Uses a single platform to customize experience for providers; provides ability to turn care modules on and off.
o Focus on consumer experience: Reduces the friction in patient interactions by using a convenient and easy mode of communication: text messages.
o Positive network effects: Allows clinicians to spend more time with their patients, deepen the provider-patient relationship, and build trust. This allows clinicians to drive medical interventions that produce better outcomes, reduce costs, and help health systems transition to risk.
Through its merger with BridgeHealth, Transcarent providers its users with access to surgery centers of excellence that offer high-quality surgery at contracted rates, though Transcarent also partners with other surgery centers.8 Transcarent also recently announced plans to partially acquire 98point6, an AI-powered primary care startup.9 This will give Transcarent access to 98point6’s physician group and software. Transcarent is offered through some employers and is paid based on how much it saves employers, aligning incentives and moving toward value-based care.10 According to Transcarent, the platform has reduced unnecessary urgent care and emergency department visits by 40% and reduced readmissions and complications by 80%.11
o Underutilized asset: Provides multimodal (virtual, in-home, on-site), asynchronous, convenient care and reliable health care knowledge through a health guide as well as access to primary care physicians and surgery centers of excellence.
o Ecosystem delegation: Partners with employers, clinicians, pharmacy, behavioral health, surgery centers of excellences, and chronic condition management apps.
o Modularized components: Uses a single platform to triage users, assist with navigation and engagement with the health care system, and address multiple care needs ranging from urgent care and primary care to specialty care.
o Focus on consumer experience: Enables users to quickly access care from pre-vetted sources with the assistance of a health guide, all from their smartphone.
o Positive network effects: Attracts more employers by understanding which interventions are improving health outcomes the most.
o Underutilized asset: Provides multimodal, compassionate, holistic care.
o Ecosystem delegation: Focuses on drivers of health as well as behavioral health, while working with health plans, community-based organizations (including shelters and food pantries), local providers, and paramedics and EMTs that provide urgent care at home.15,16
o Modularized components: Leverages their own tech-enabled delivery model.
o Focus on consumer experience: Places the focus on patients first; for example, additional specialties are brought in while the patient is being seen, rather than scheduling follow-up appointments.
o Positive network effects: Provides compassionate care that has improved outcomes and decreased costs.
Platform-enabled ecosystems can use data to automate predictions and/or change care pathways. They can also expand their reach beyond the initial core business and move into either disease areas or focus areas, all while continuing to help improve the end user’s experience and provide value.
The investors we interviewed continue to be optimistic about the future of health tech, even during the current economic environment. Additionally, they noted that the companies that survive this period will likely be stronger for it. While market dynamics can change, particularly for individual companies, here are a few considerations for companies to think through in the near-term:
Whether or not the macroeconomic environment changes in the near future, the health tech sector is expected to continue drawing investors’ attention and driving innovation in health care. However, with an already full plate—including growing their businesses while bridging longer funding cycles and demonstrating value—innovators will need to decide what their focus is and what they can delegate to other stakeholders. As investors and innovators work on transforming the existing health care system from a treatment-based, reactionary care system to one focused on prevention and well-being, as outlined in Deloitte’s vision for The Future of HealthTM, platform-enabled ecosystems should be top of mind.
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PitchBook’s definition of health tech: Companies that provide mobility and other information technologies to improve health care delivery while decreasing costs. It entails the use of technology and services – including cloud computing, Internet services, and social mobility – to optimize patient-centric health care. Source: Pitchbook.com, “Home page,” accessed March 3, 2023.
Peter Micca, Simon Gisby, Christine Chang, Maulesh Shukla, Trends in health tech investments, Deloitte Insights, February 26, 2021.
Sydney Halleman, “Health tech companies weigh options to stem cash burn as IPO market sags,” HealthcareDive, November 21, 2022; Gabriel Perna, “The IPO market disappeared in 2022. Will it return in 2023?” DigitalHealth, December 20, 2022.
Katie Jennings, “Transcarent to acquire part of AI powered 98point6 in 100 million healthtech deal,” Forbes, March 6, 2023.
Alex Knapp, “Digital health startup Transcarent just raised 200 million to grow its concierge medical business,” Forbes, January 1, 2022.
Heather Landi, “Cityblock Health raises another megaround of cash, boosting valuation to $5.7B,” FIERCEHealthcare, September 7, 2021.
Catherine Shu, “Cityblock Health CEO Toyin Ajayi on how to scale human-centered care models,” TechCrunch, October 18, 2022.
Rolfe Winkler, “Digital-Health startups are booming. Their customers are overwhelmed.,” The Wall Street Journal, May 3, 2021.
ChristianaCare, “ChristianaCare partners with Hims & hers to expand in-person health care access,” news release, November 17, 2022.
Rebecca Pifer, “Omada partners with Intermountain on diabetes management inn Utah,” HealthcareDIVE, January 12, 2023.
The authors would like to thank Maulesh Shukla for his expertise throughout the research process and insights on data analysis.
The authors would also like to thank Wendy Gerhardt, Rebecca Knutsen, Prodyut Ranjan Borah, Laura DeSimio, Zion Bereket, and the many others who contributed to the success of this project.
This study would not have been possible without our research participants who graciously agreed to participate in the interviews. They were generous with their time and insights.
Innovation starts with insight and seeing challenges in a new way. Amid unprecedented uncertainty and change across the industry, stakeholders are looking for new ways to transform the journey of care. Deloitte’s US Life Sciences and Health Care practice helps clients transform uncertainty into possibility and rapid change into lasting progress. Comprehensive audit, advisory, consulting, and tax capabilities can deliver value at every step, from insight to strategy to action.
The Deloitte Center for Health Solutions, under the guidance of Executive Director Jay Bhatt, delves deeper into your top-of-mind issues and provides fresh thinking around complex challenges. Timely, relevant research and thought-provoking analyses deliver insight to help you see solutions through a new lens.
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