Archived Insight | May 5, 2022

The Current and Future State of Digital Health

Technological innovation that made information and decision-making tools easily accessible to consumers changed how we purchase real estate, how we shop for cars and even how we select companions. Now, it’s also changing how we access healthcare and manage disease.

Woman With Diabetes Checking Blood Sugar Levels After Sports Training

As you have probably experienced, new digital technology is enabling patients to access care without going to a traditional provider’s office. Digital therapeutics, also known as virtual therapeutics, uses software and smartphones, tablets and computers to help patients manage their health conditions virtually. Point solutions are usually stand-alone product offerings or smartphone apps for conditions, such as for diabetes or musculoskeletal care, that try and bridge the gap(s) in care between face-to-face healthcare visits and in an individuals’ benefits. Think of digital therapeutics or point solutions as “disease management 2.0” or “wellness 2.0,” where the care delivered is virtual instead of a phone call from a remote care manager.

Healthcare is dynamic and always evolving. As a result of these trends, a variety of non-traditional care models — such as telemedicine, digital wellness resources, retail health clinics and on-site health centers — flourished in the past few years to meet employer and employee demand for increased access and affordability.

Virtual care gained momentum during the pandemic. Previously, there was resistance from both the provider community and from patients. Patient concerns about privacy and data security, as well as provider concerns about the quality of care and losses in revenue were factors. Interest in avoiding in-person care during the pandemic overrode these concerns and accelerated acceptance of virtual care. For one Segal plan sponsor client, one-third of all behavioral health outpatient visits are virtual.

In the last decade or so, there’s been an overwhelming increase in the number of digital start-ups in healthcare — mostly point solutions. Plan sponsors are experiencing “vendor fatigue” from all the companies trying to sell these one-off solutions.

Staying on top of the many offerings is a challenge. We’re here to help with an overview of the current state, thoughts about what to expect next, and top tips on what to look for in a digital partner.

What’s the Relationship Between Digital or Virtual Therapeutics and Telehealth?

Frequently these terms are used interchangeably, but they are not the same thing. Telehealth is a broader term that encompasses everything that can be delivered virtually and digitally, including digital or virtual therapeutics.

The current digital health marketplace is very crowded

The advantages of digital therapeutics are many, as we summarize here:


Aim to deliver favorable clinical outcomes by addressing three social determinants of health

Aim to deliver favorable clinical outcomes by addressing three social determinants of health:

  1. Access to primary healthcare
  2. Access to quality of healthcare
  3. Health literacy
Address factors that can have an impact on a patient’s health

Address factors that can have an impact on a patient’s health.

Lack of transportation is one example.

Offer broader reach and sophistication than mostly information-centric consumer wellness apps

Offer broader reach and sophistication than mostly information-centric consumer wellness apps.

Complement devices that collect vital signs to help patients better manage their health conditions

Complement devices that collect vital signs to help patients better manage their health conditions.

Examples include glucometers or wearables.

Promote desirable behavior changes via real time virtual health coaching

Promote desirable behavior changes via real time virtual health coaching.

Compare this with the approach to disease management in the 1990s.

Meet access needs of the population

Meet access needs of the population.

With a shortage of clinicians in all specialties and primary care, virtual care can reach a wider audience.

Provide customized therapy

Provide customized therapy.

Messaging can be individualized and customized based on demographics and user preferences.

Increase patient engagement

Increase patient engagement.

Patients are interested in using digital therapeutics because they provide relevant assistance and customized messages.

Improve outcomes

Improve outcomes.

More patient engagement results in better outcomes.

Share new medical knowledge and therapies

Share new medical knowledge and therapies.

As treatments and protocols evolve, digital therapeutics can quickly incorporate them into their workflows.

Reduce the cost of care

Reduce the cost of care.

The scalability of digital platforms allows wider patient outreach at lower costs.

Enhance well-being

Enhance well-being.

Virtual health is a core component in helping consumers proactively improve or maintain well-being.

Numerous offerings are available. The marketplace has many products that cover several conditions, including (but not limited to):

  • ADHD
  • Behavioral health, including substance use disorders and pediatric behavioral health
  • Cancer
  • Cardiovascular conditions
  • COPD/asthma
  • Diabetes
  • Digestive health
  • Hypertension
  • Musculoskeletal conditions
  • Neurologic disease or injury
  • Obesity management
  • Skin conditions
  • Sleep disorders

COVID-19 certainly helped accelerate the emergence of new digital start-ups in 2020.

Private investment continues to flow into these programs. The U.S. digital therapeutics market is projected to have a compound annual growth rate of 24.8 percent from 2022 to 2030, according to Grand View Research.

Even as offerings increase, there’s consolidation. Examples of recent mergers include Teladoc with Best Doctors and Livongo; Accolade with 2nd.MD and PlushCare; Castlight with Vera Whole Health, GrandRounds and Doctor On Demand as well as VirginPulse and Welltok. Some of these mergers have synergies, while others don’t. As the marketplace matures and fewer battled-tested players survive, plan sponsors may benefit.

While the healthcare solutions enabled by technological innovation are promising, not all of them yield the same results — nor are all equal when it comes to participant disruption. It’s hard for a plan sponsor to be sure the vendors and formats it selects will best meet the needs of the plan and its participants.

Which digital therapeutics are most promising?

These virtual tools that have exhibited promising outcomes:

  • Virtual physician consultation evolving into virtual primary care
  • Chronic condition management and digital health coaching for diabetes, hypertension and weight management
  • Virtual physical therapy for musculoskeletal conditions that’s connected with musculoskeletal centers of excellence
  • Virtual counseling for behavioral health issues that integrate medical and behavioral care and include talk and text-based counseling

As several of these solutions mature, it’s increasingly clear that the promise of digital health solutions is not so much in cost savings, but in these two factors:

  • Educating consumers and empowering them to take better control of their health creates more likely follow through with provider treatment instructions, thereby resulting in improved outcomes and perhaps lower future costs
  • Extending access to healthcare providers, because telehealth services allow healthcare professionals to offer extended hours or virtual access to patients who reside in regions that have limited provider choices

How should plans cover these benefits?

Digital therapeutics that are connected to specific disease states or prescription drugs can be prescribed and added to drug formularies as a pharmacy benefit. Similarly, digital solutions might target medical benefits when they involve providers. This could apply to a situation where a developer engages telemedicine doctors to prescribe the app to patients (or “users”). According to a 2021 survey by Xcenda, a firm that conducts research on health issues, 41 percent of covered therapies fell under the medical benefit. Another 43 percent of therapies had product-dependent coverage.

To get the most out of these apps, we believe plan sponsors should make them available at no cost to the participants, offer incentives to download the apps and encourage use of these new digital services, setting lower patient copayments per visit. This strategy will help improve engagement rates over time.

Plan sponsors should require vendor tracking and reporting on a routine basis. Work with your consultant to establish quarterly reporting on engagement rates, resolution rates and user satisfaction levels.

The future of digital health will be more integrated

Point solutions typically address only a small portion of the needs of an overall participant population and cannot integrate with other solutions and platforms. Today, it is not unusual for plan sponsors to have as many as 10 different non-integrative point solutions or apps to address various patient needs, which contributes to vendor fatigue. We expect this situation will prompt plan sponsors to look for integrated solutions from their current health provider network and PBM carriers to replace multiple, separate contracts.

To better serve plan sponsors and their participants, as the market matures, the digital therapeutics industry may transition toward a more integrated approach and offer broader platform with multiple solutions. It’s also possible that, with the exception of a few large contenders, most of these solutions become part of large plan offerings.

As we’ve noted, the areas with most promising digital health offerings are virtual primary care, diabetes, hypertension, obesity, musculoskeletal conditions and behavioral health. Point solutions in these areas will continue to play a significant role as stand-alone solutions, or as part of health plan offerings. Health plans offering these solutions will have a strong competitive benefit. Today, most of the large health plans do offer one or more of these point solutions as part of their broader offering. This trend is likely to continue.

As the offerings evolve, here are our top tips on what to look for in a digital partner:

  • Ability to prevent, manage or treat a medical or behavioral health disorder or disease
  • Best practice design and clinical protocols using evidence-based medicine and regular updates to protocols
  • Patient privacy and security protection
  • Engagement of end users in product design and constant updates
  • Publication of trial results that include clinically meaningful outcomes in peer-reviewed journals
  • Have been reviewed and either cleared or approved by regulatory bodies as required to support product claims of risk, efficacy and intended use
  • Claims appropriate to clinical evaluation and regulatory status
  • Collection, analysis and application of real-world evidence and product performance data
  • Compliance with all applicable laws and regulations

We believe virtual or digital healthcare services are here to stay. These services should be part of every healthcare program. Adding these patient-centric programs improves benefits offered to plan participants and increases patient engagement and empowerment. That leads to better outcomes, which helps manage costs.

Stand-alone point solutions vs. integrated service offerings will continue to compete for market share. Certain point solutions and their integration with broader benefits delivered by health plans and PBMs may prove to be the most convenient way to add these services, which benefit the plan and its participants.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.