Digital Health’s Maturity Moment

On September 17^th, 2024, the Peterson Health Technology Institute (PHTI) convened a group of about 100 executives, representing major health insurers, employers, providers, investors, and patient advocacy and trade groups. The invitation-only Summit fostered candid conversations between those responsible for building, buying, and shaping digital health technology adoption within their respective organizations.  

Health insurers, providers, and employers are in a unique position to comment on the state of digital health solutions because they buy them, deploy them to members, and analyze their impact on the cost of care. Leaders from two national payers had a bracing set of messages to entrepreneurs and investors: few solutions have any impact on patients, and most are unable to engage more than single-digit percentages of eligible populations.

This is why purchasers are making investments to better evaluate evidence of impact, insisting on transparent pricing and structuring value-based or results-based contracting.

These themes came to life across each of the spirited PHTI summit discussions, which opened with a dialogue on what payers have learned from value-based contracting for digital solutions to date, how patients and providers experience technologies in their daily interactions, and how investors are shifting how they build the next generation of successful digital health companies.

Taken together, limited patient engagement and small demonstrable clinical impact has led one executive to sharpen the definition of outcome measures in contracts, clarify exit clauses, and carefully monitor solutions as they increase their footprint across markets. Another executive emphasized the burden and complexity of overseeing multiple digital solutions or vendors in her Medicaid and Medicare programs.

Both called out bright spots, including clinician-led solutions and tech-enabled chronic kidney disease management solutions, as well as other interventions targeted at specific, high-need patient groups. In contrast, they cited telehealth solutions not connected to primary care or specialist electronic record systems as examples of technologies that tend to increase fragmentation of care and patient effectiveness.

Participants converged on four areas of focus in evaluating new solutions:  

This mirrors findings in PHTI’s 2024 State of Digital Health Purchasing survey, reflecting perspectives from 300 decision makers across payer, provider, and employer organizations. 

Participants broadly agreed that the surge of investment into digital health technologies over the past decade has created a legacy of uneven performance when considering clinical effectiveness and cost. Nevertheless, health systems are continuing to rapidly integrate technology into critical health delivery functions.

Speaking on a panel at the summit, a provider described a priority for “ex-novation,” meaning the rigorous evaluation of new interventions that can lead to removing solutions out of a workflow, instead of adding to it. By phasing out practices that do not demonstrate incremental value, healthcare organizations can increase efficiency and better meet the needs of patients while continuing to foster a culture of innovation.

Patients and providers must often work together to get the most out of a digital health solution. Ambient AI scribe solutions were mentioned as examples of solutions that create more space to focus on the patient in the room, removing administrative burden from physicians. Meanwhile, patients want solutions tailored to their specific needs to address a medical condition or problem. As an example, a patient advocate at the summit cited virtual musculoskeletal (MSK) solutions that create better choices for where, when, and how a patient can receive physical therapy.

Along with the desire for simplicity and better choices was a recognition that payment had to be tied to performance. Instead of paying for solutions monthly in perpetuity with a nominal effort to demonstrate continuous use, both providers and patients wanted approaches to payment that reflected usage, intensity, and impact of digital health solutions on patient care. Virtual MSK solutions were cited as having some of these features, while acknowledging that patients rarely saw prices in a transparent fashion.

Going forward, these themes may be opportunities for innovators as they build the next generation of solutions.

The past two years have been a sobering period for investors. Digital health company values cratered starting in 2023, with a considerable pullback in new investments, and funds reevaluated how they approached diligence, portfolio support, and top-level investment theses. Despite these headwinds, there is broad recognition that technology can help meet the demand for a more affordable, modern healthcare sector.

Panelists brought a range of perspectives, from early-stage venture to late-stage private market and public market investing, exploring two key themes: developing stage-appropriate benchmarks of what impact a solution or company should be delivering, and the importance of closing the gap between entrepreneurs and purchasers as early in the innovation cycle as possible. The latter is particularly important for clinical solutions that plan on taking financial risk on delivering clinical outcomes. 

Digital health is at a reset point. Meaningful, nuanced conversations with representatives from health plans, employers, providers, investors, and patient groups on how to buy, integrate, and measure digital health solutions affirm the changing tide.

The diversity of perspectives at the summit reflected what is working: impact-focused participants from across the healthcare sector are deeply committed to integrating technologies into healthcare in ways that improve clinical outcomes, access, equity, and affordability.

As an independent nonprofit, PHTI puts actionable information into the hands of decision makers to increase knowledge about what works and provide fodder about what that is worth. This translates into greater confidence among health systems and employers who purchase digital solutions and providers who recommend them to patients. The speed, scope, and energy of the market response reveals tremendous interest in changing the status quo.

As PHTI enters its second year, we hope that frank cross-sector dialogue and collaboration can increase coverage and utilization of high-value solutions at an inflection point in the maturity of the digital health sector.