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Market Trends

The Race to Empower Consumers and Support Practitioners

Mar 23, 2022

The Healthcare IT space experienced record-breaking M&A and capital[1]raising activity in 2021, and this pace may be poised to continue throughout 2022 – particularly for companies investing in the augmentation of their cloud-based Software-as-a-Service (SaaS) platforms.

Last year, there were 574 M&A transactions, 77 initial public offerings, and 17 SPAC deals in the Healthcare IT industry, according to CB Insights[1], which also found that the median valuation of digital health businesses at the time of IPO increased in 2021 by 33% year-on-year to approximately $1.6 billion. A KPMG survey of healthcare and life sciences leaders found that more than 73% of respondents[2] anticipated higher valuations in 2022 for Healthcare IT companies. There have been at least 65 digital health M&A transactions in the first quarter[3] of 2022, compared with 63 transactions in Q1 2021, according to Digital Health Business & Technology data.

Virtual care, direct-to-consumer (DTC), revenue cycle management (RCM), and post-acute care continue to see strong strategic and financial interest. Developments in provider[1]focused, payer-focused, and/or life sciences-focused software also may present opportunities for issuers and acquirers.

These technological innovations are, to a certain extent, in response to the increasing healthcare cost burden on consumers, in the form of higher deductibles and premiums, as well as rising inflation that has outpaced wage increases. Healthcare costs often even outpace[4] inflation, according to the Kaiser Family Foundation.

Compared with the costs of traditional in-person doctor’s appointments and hospital treatments, DTC solutions may be more affordable. Online prescription discount programs, and navigation apps that enable patients to better manage their healthcare process, also are creating more consumer-focused services potentially capable of alleviating some of the cost burden.

Virtual Care & Direct-To-Customer

The COVID-19 pandemic is largely seen as enabling virtual care platforms to accelerate traction over the past two years. As it became harder for primary care patients to go see doctors in-person, many visits migrated onto telehealth tools. Subsequently, both patients and physicians became much more comfortable using telehealth than they had been prior to March 2020. Since then, virtual care has expanded in usage.

A complement to virtual care is direct-to[1]consumer platforms, which mail prescription and over-the-counter medications directly to patients who order them online. Available medications encompass nutrition, stimulants, dermatology, hair treatments, contact lenses, and more. Obtaining prescription medications often requires patients to undergo health exams, so these companies tend to provide online questionnaires or telehealth sessions with doctors.

The abundance of internet-based medical information, as well as the rising costs borne by consumers, have contributed to making consumers more proactive regarding their healthcare decisions. As a result, Healthcare IT tools are increasing their accessibility and conveying healthcare data in ways that consumers can more readily understand. This extends to health navigation apps, such as those offered[5] by self-insured employers to help their employees find suitable doctors and gauge treatment costs, as well as apps that help consumers obtain discounts to save money[6] when filling prescriptions.

Competition & Consolidation

Many virtual care and DTC companies have emerged during the past few years, each attempting to distinguish its offerings and establish competitive advantages, to varying degrees of success. So far, streamlined online user experiences, and effective multimedia branding campaigns, appear to be playing considerable roles in attracting large numbers of patients to the most well-known platforms.

Several major virtual care and DTC providers have venture capital or private equity backing, while other such companies are publicly traded firms that conducted either traditional IPOs or SPAC[7] deals. Since 2015, some virtual care and DTC[8] companies have acquired firms in multimillion[9] dollar and multibillion[10] dollar deals, in capital structures ranging from all cash, to cash and promissory notes, to cash and stock transactions.

The strategic goals of acquirers may differ depending on their business models. In general, DTC acquirers have sought to accumulate products under one parent entity, while keeping the brand names of acquired companies that are highly recognizable to their audience, without changing much of the acquirer’s backend operations. Virtual care acquirers often have sought to integrate enhanced backend capabilities from acquired companies and initiate cross-sell opportunities to their patients, while keeping only the parent entity’s brand name.

Technological Hurdles

Across nearly all aspects of Healthcare IT, the vast majority of companies still have great potential to upgrade their technologies in order to match the levels of sophistication found in other industries. Although the healthcare industry more broadly has increased the pace of technology adoption in recent years, inefficiencies abound for information such as patient health histories, doctor-to[1]hospital communications, as well as patient-specific insurance pricing for medications and procedures.

HIPAA[11] regulations are one factor limiting the incentive for Healthcare IT firms to accelerate innovations on the digitization and transmission of data. Inertia is another. Buyers of Healthcare IT at hospitals, doctor’s offices, ambulance providers, and insurance companies often still rely on non-digital processes that are heavily paper-based and labor dependent. Many healthcare decision makers also put much of their attention on addressing organizational complexity and administrative needs.

Numerous surveys of doctors and medical practices have found that respondents feel they spend too much time on tasks that do not involve patient care, such as filling out forms and inputting codes. In a 2021 survey by the Medical Group Management Association, 91% of respondents[12] said their regulatory burden increased in the previous 12 months. In a 2020 American Medical Association survey of staffers, 86% of respondents[13] described their administrative burden for obtaining prior authorizations as high or extremely high. There is an opportunity for Healthcare IT solutions to drive efficiencies through the automation of these labor-intensive practices.

Digital Progress

Adopting revenue cycle management software is alleviating some of these concerns. Patient scheduling and registration software aims to improve patient waiting room experience and attendance rates. Computer assisted coding and clinical documentation software is designed to improve accuracy, lead to better care, and higher reimbursement. Denials prevention and management software strives to improve reimbursement and reduce process inefficiencies. Yet many RCM providers still rely on labor intensive work. Even so, both financial sponsors and strategic acquirers are showing M&A interest[14] in firms helping to accelerate technology adoption in this space.

Post-acute care is another area of Healthcare IT undergoing technological innovation. As the average lifespan[15] of the U.S. population trends upward, elderly patients need increased medical treatments but struggle to travel[16] for doctor’s visits, and hospitals face capacity limits, demand may increase for skilled nursing facilities, assisted living communities, and home-based care. These services require practitioners to travel to patients, and to update electronic medical records (EMR) during visits. Patients themselves also often move between these different care settings, which can impact the flow and accuracy of clinical information. Therefore, consolidators have been acquiring[17] advanced mobility[1]enabled EMR solutions.

Arguably, the type of software in the industry that is the most cutting edge — cybersecurity — is proliferating as a necessary precaution instead of as a healthcare service enhancement or product expansion. Approximately 1 in 3 healthcare facilities[18] were hit with ransomware attacks in 2020, according to a Sophos report. Hospitals in particular may see few if any viable alternatives to paying attackers[19] that have the ability to erase critical data on patients and workers, or hold hostage a facility’s entire computer network. Thus, prevention is essential. However, a cybersecurity professional labor shortage, especially in healthcare[20], is putting pressure on providers to keep pace with demand.

2022 Activity

As the U.S. begins to emerge from the COVID-19 pandemic, developments in Healthcare IT that arose from the need for social distancing and accommodating vulnerable members of the populace may now be applied to other areas of healthcare.

Americans who avoided medical treatment during the pandemic are expected to experience increased[21] medical expenditures in the future, according to the Consumer Financial Protection Bureau. As the burden of healthcare costs continue to mount for many Americans, innovators are seeking to direct technological breakthroughs toward greater pricing transparency for consumers and less bureaucracy for medical practitioners.

Notable deals so far this year include a digital health SPAC announcing plans for a potential $201 million IPO[22]; an online pharmacy acquiring a male fertility startup for an estimated $100 million[23]; a digital health provider valued at approximately $1 billion[24] agreeing to acquire a women[1]focused startup; and a tech-based primary care platform (that last fall announced plans to IPO) announcing plans to acquire[25] a chronic-care management company. This suggests that a diverse array of Healthcare IT companies will pursue capital raising and M&A opportunities in 2022.

[1]The State Of Digital Health 2021 (


[3]Will the digital health bubble burst? | Modern Healthcare

[4]Why health-care costs are rising in the U.S. more than anywhere else (

[5]Why health-care costs are rising in the U.S. more than anywhere else (


[7]SPACs and Digital Health | Deloitte US

[8]Hims Inc. - Hims & Hers Completes Acquisition of Apostrophe (


[10]Teladoc acquires Livongo, creates $37 billion health-tech company (

[11]Health Insurance Portability and Accountability Act of 1996 (HIPAA) | CDC

[12]Medical practices say regulations adding more red tape that hamstrings patient care | Fierce Healthcare

[13]Administrative burdens and paperwork are the top challenges facing physicians in 2021 (

[14]Revenue Cycle Roundup: The Latest Acquisitions, Partnerships | HealthLeaders Media

[15]• United States: life expectancy 1860-2020 | Statista




[19]The growing threat of ransomware attacks on hospitals | AAMC

[20]Infographic | The Healthcare Cybersecurity Workforce Shortage (


[22]Nashville Inno - First Digital Health Acquisition Corp. files potential $201 million initial public offering (

[23]Ro acquires Dadi to expand reproductive health services (

[24]Thirty Madison joins the health tech consolidation tsunami (

[25]VillageMD buys chronic care management company Healthy Interactions | MobiHealthNews

About the Expert

Doug Brockway

Managing Director, Investment Banking

Read full bio
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