`^[a]Market Map: Digital^[b] Healthcare Infrastructure^[c]

Digital healthcare is growing up. There have been ups (2021 topped the charts) and downs (2022 was sobering), but directionally, we are in a multi-year acceleration of the digital healthcare market.

2021 was the biggest year ever for digital healthcare funding. $29.1B in funding went to 729 deals, doubling the total funding from $14.9B from the year prior. In 2022, the digital healthcare market wasn’t immune to the challenges of the overall funding market, but still beat out the total funding raised in 2020. Healthcare is one of the largest markets out there. 18.3 percent of U.S GDP — nearly 1/5th of the economy — is spent on healthcare, and digital healthcare is becoming a larger part of healthcare.

“We’re now at a tipping point where the digital health market is large enough, and growing quickly enough, to drive demand for companies that serve as the “new tech stack for virtual-first care.”

— Julie Yoo, The New Tech Stack for Virtual-First Care

Digital healthcare startups have created a new software buyer in healthcare infrastructure as they’re more willing to adopt a new modern tech stack. The early breakout apps in digital healthcare, Ro, Hims&Hers, Keeps, Nurx and others were direct-to-consumer companies. To support their growth, an entire base layer of tech infrastructure was built. Similar to how Stripe dramatically reduced the cost and time to do business online, these healthcare infra companies enabled digital healthcare startups to go to market quicker, iterate faster, and focus on the patient experience. Digital healthcare is expanding to more complex procedures, severe cases of treatment, and demographics. It’s also expanding further into the real world. In turn, companies in this space require another wave of healthcare infra businesses to improve workflows, connectivity, and interoperability. Another turn of the apps=>infra=>apps cycle in healthcare.

“The virtualization of care delivery accelerated by the COVID-19 pandemic exposed critical gaps in the healthcare industry’s core infrastructure. Today, both emerging virtual and incumbent brick-and-mortar providers are seeking nimble, digital-first infrastructure solutions that can address these gaps to facilitate true, hybrid care. Infrastructure companies are supporting tasks in the front office (e.g., scheduling, communication, patient engagement, remote patient monitoring), as well as the back office (e.g., data capture, storage, and exchange, credentialing, licensing, clinical workforce management, and revenue cycle management). As the next generation of healthcare infrastructure continues to mature, effective coordination and exchange of data have become even more critical.” Morgan Cheatham, Bessemer Venture Partners

Solutions in the emerging digital healthcare stack span across front-office administration, care delivery, and back-office insurance workflows.

We’re excited about the potential for digital healthcare infra companies to enable startups by:

• Further lowering barriers for new digital health startups to get started
• Helping them focus on better patient experience, drive specific health outcomes, and other sources of competitive advantage
• Enabling them to scale into new markets and sell into new segments
• Iterating more quickly through improved automation and efficiency
• Helping improve provider experience by augmenting their workflows and reducing burnout

It’s helpful to define what we’re focused on here. We’re focusing on vertically-focused tools building to become a part of the emerging digital healthcare tech stack. While a lot of customers in this space use horizontally-focused tools as a part of their stack, we believe that vertically-focused tools are better positioned to deeply solve the needs of this customer.

Shoutout to Adam Besvinick (Looking Glass Capital), Andrew Arruda (Flexpa), Andrew Hines, (Canvas Medical), Balaji Gopalan (MedStack), Betty Chang, Cathy Gao (Sapphire Ventures), Claire Pan (Inspired Capital), D'Arcy Coolican, Jeronimo Beccar (Hyka), Kelvin Chan (Nirvana Health), Thomas Vande Casteele (Awell), Montana Scher (Morf Health), Morgan Cheatham (Bessemer Venture Partners), and Nick Shelly (Apero Health) for contributing to this post.

Also thanks to Julie Yoo (a16z), Marissa Moore (OMERS Ventures x Second Opinion), and Jan-Felix Schneider (Health Tech Stack) for their linked essays on this topic.

Why timing is right

Growth in the underlying space is being driven by deeper technology, consumer behavior, regulatory, and market shifts:

• Telemedicine is becoming entrenched ^[e][f]
• Unbundling of the hospital is leading to more fragmentation of the healthcare journey
• Consumer expectations increasing pressure on providers
• Regulatory push^[g] towards greater data interoperability^{[h]  [i][j]}

Telemedicine is becoming entrenched^[k]

The pandemic-triggered demand for telehealth is stabilizing at a “new normal”. According to research, 73% of users expect to continue using telemedicine at the same or higher rate. On the physician side, 60% of them plan to continue offering care through telemedicine. With users and providers onboard, telemedicine has now become embedded in healthcare experiences. In the market, it’s gone from differentiation to a commodity.

"I think now is the right time for building and funding companies in the digital health infra space because the last several years, particularly the last few because of COVID, have cemented telemedicine and digital health broadly as a critical part of care delivery models across specialties. In order for those companies to scale effectively and in order for legacy players and large incumbents to provide comparable or nearly comparable experiences, the quality of the infrastructure must match the quality of the patient-facing product experience."

— Adam Besvinick, Looking Glass Capital

“The virtualization of care delivery accelerated by the COVID-19 pandemic exposed critical gaps in the healthcare industry’s core infrastructure. Both emerging and traditional providers are seeking nimble, digital-first infrastructure solutions that can facilitate tasks such as 1) data capture, storage, and interoperability, 2) credentialing, licensing, clinical workforce management, and clinical decision support, and 3) revenue cycle management.”

— Morgan Cheatham, Bessemer Venture Partners

“COVID accelerated the shift of care beyond the "four walls of the hospital" and reshaped the modus operandi for payors, providers, patients and regulatory bodies regarding digital care delivery. The adoption of digital models of care will increase in the coming decade and precipitate the need for specialized technology infrastructure that will enable the next generation of digital health platforms.“  — Cathy Gao, Sapphire Ventures

Unbundling of the hospital is leading to more fragmentation of the healthcare journey

Healthcare is being “unbundled” out of one-stop-shop hospitals and into point-solutions that focus on solving specific conditions in more convenient, accessible, and affordable ways.^[l] This follows a pattern we’ve seen in financial services where large banks got unbundled into distinct fintechs that use technology to provide better financial experiences in specific verticals.

“We find ourselves now at an inflection point. Healthcare has left the building. The delivery of care has broken out of the traditional walls of the hospital and moving towards where we work and live.” — Jorge Conde, Healthcare Has Left the Building

This is solving some problems, and creating new ones, particularly around fragmentation of the healthcare journey.

“This is the core paradox of the digital health era. On the one hand, we’re increasing access to high-quality care through thousands of virtual clinics that can reach patients globally, continuously, at any time of day. On the other hand, we’ve exacerbated the fragmentation of our healthcare journeys by operating each of those digital health services as separate, walled gardens.”

—  Julie Yoo, Investing in Zus Health

Consumer expectations increasing pressure on providers

Consumers are bringing their expectations from their experiences in retail, travel, and technology to healthcare. In other industries, best-in-class companies like Apple, Amazon and others have built their reputations by putting the customer first.

Consumers demand greater control and ownership of their healthcare journeys, increasing pressure on healthcare providers to offer more convenient and better solutions.

“If your legacy provider who you’ve been working with for 10 years is unable to service you virtually, then you’re going to be willing, especially if you have an actual healthcare need, to sever that relationship and go elsewhere and vote with your feet.”

— Julie Yoo, Julie Yoo, Andreessen Horowitz, on unfolding healthcare’s great unlock

"One trend that I am particularly excited by is how much "healthcare" is now a consumer good that is no longer constrained by the regulatory system in healthcare. Which makes high-velocity innovation possible. Maybe I am too cynical about the ability to innovate within the regulated space, but I have been focusing a lot of my attention on things that are health-related (and maybe were historically seen that way) but now sit outside of 'the system'.

I think meditation and therapy/coaching were early examples here but you just need to see how popular people like Andrew Huberman are to see the latent demand for this." — D'Arcy Coolican

Regulatory push towards greater data interoperability  ^{[m][n][o][p][q]}

Regulatory tailwinds are opening up access to clinical, administrative, and transactional data for digital healthcare startups and creating data interoperability in the market. We are excited about infrastructure tools that help digital healthcare companies leverage regulatory tailwinds.

We are at the crossroads of secure nationwide health information exchange. The Transparency in Coverage Final Rule announced in 2022 requires insurers to post pricing information for covered items and services, which can be used by third parties, such as researchers and app developers.

The 21st Century Cures Act and the Trusted Exchange Framework and Common Agreement (TEFCA) are a part of the push towards securely sharing healthcare information with trusted parties through APIs.

The Cures Act provides financial incentives for healthcare providers to adopt electronic health records (EHRs), promoting the adoption of digital health technologies. Most recently, The Cures Act final rules, released in March 2020, set forth penalties for information blocking and expanded the access of individuals to their health records by leveraging the FHIR (Fast Healthcare Interoperability Resources) specifications.

“The regulatory tailwinds propelling API-based patient access to claims data play distinctly to the Flexpa team's superpowers. Earlier than now would mean we're forced to screen scrape to accomplish our mission or wait indefinitely on implementations to launch. Later than now and others would have already seized the opportunity. Imagine a world where your health insurance information and all of your claims data can be instantly synced into any application you want. This is happening right now.” — Andrew Arruda, Flexpa 

"Cloud healthcare application innovators face massive barriers when it comes to selling their solutions into healthcare enterprise organizations, primarily due to complex data security and privacy compliance requirements. My co-founder Simon Woodside and I knew so many brilliant entrepreneurs who chose to give up because the path to commercial success in digital health was too hard. We founded MedStack to alleviate this problem and make it easier for healthcare innovators to succeed." — Balaji Gopalan, MedStack

Why founders think the timing is right

We asked founders on why timing is right for the companies they’re building to succeed.

“Provider staffing shortages, macroeconomic cost pressure and demands from patients & payers for better outcomes are creating a perfect storm. Care providers who are not investing in tooling to drive clinical & operational efficiency are going to die in the next 10 years. Take the view of a payer: who would you send your patients to? In the past, anyone who claimed they could provide care. In the future, the care providers who can prove they can realize the best outcomes at the lowest cost.”

— Thomas Vande Casteele, Awell

“The status quo in healthcare cannot hold ^[r]— patients are not getting better, rising healthcare costs have payers searching for better solutions, providers are overworked and admin costs are growing. To address these challenges, we need better tools and we're seeing this happen with the unbundling of the EHR. As an integration layer that enables tracking of patient progress at the individual level and population level, Morf Health will provide the connective tissue needed to make all of these solutions work together and support seamless care delivery that improves outcomes.” — Montana Scher, Morf Health

“There are both short 1-2 year trends and longer term macro trends. The biggest long term trends include the consumerization of healthcare with an increasing number of DTC brands looking to bill both patients and insurance companies. This is followed by the availability of good video call and communication software. The relaxations of HIPAA regulations during the COVID emergency also made telehealth more widely available and accessible, a boon to digital-first companies. Finally, more recently many customers are looking for efficiencies to scale their businesses while minimizing operational overhead and having real-time access to accurate financial data.”

— Nick Shelly, Apero Health 

“Funding into virtual behavioral health for the past years has been at its highest ever. Most of the funding has gone to companies providing care for patients who just need talk therapy and medication management (low acuity). As these companies start to shift to value-based-care, their business models will depend on outcomes. Hyka acts as the connector between virtual care providers and clinics offering in-person psychiatric care. Psychedelics: Psychedelics entering the market in the next few years will be offered, for the most part, in the same clinical setting as treatments like brain stimulation, ketamine, etc. This will be the explosion of Hyka.” — Jero Beccar, Hyka

Opportunities we’re excited about

We’re excited to speak with digital healthcare companies that:

• Reduce time to go-to-market for new digital healthcare companies
• Replace long and tedious manual workflows with software ^[s]
• Are API-first that allow mixing and matching point solutions into smooth patient and provider workflows
• Scale digital healthcare companies to new segments and new markets
• Ensure compliance with HIPAA and with other requirements at scale

Workflow builders and automation solutions

The number of tools in the digital healthcare stack is growing, and with it, the need to combine these point solutions into smooth patient workflows. If healthcare services continue to unbundle the hospital, the fastest, cheapest, and most reliable services in each vertical should win, increasing the need for workflow builders and automation solutions.

“ Wave 1 in digital healthcare infra was electronic medical records (Epic, Cerner, etc.). Wave 2 was digital point solutions (Telehealth, apps, wearables). On a macro level, none of those have moved the needle on cost or quality of care: we’re worse off than ever before. What will move the needle are workflows: better care team & patient coordination, better adherence to evidence-based practice, more automation & integration.”

— Thomas Vande Casteele, Awell

Awell, Zus Health, Morf Health and others efficiently connect point solutions into patient onboarding, triage flows, patient profiling and “know your patient”, and care pathway workflows.

Data exchanges, routers and interoperability solutions ^[t][u]

With more tools being adopted into the healthcare stack, the need for data connectivity between the tools is growing. There has been an increasing focus on enabling interoperability of digital health records from consumer-facing interfaces to databases, certified EHRs, home-grown EHRs, and digital devices.

“Apero's co-founder Jacinda was previously the CTO at Doctor On Demand. While scaling them to 1M video visits per year, one of the company's biggest pain points was lack of access to good data surrounding medical billing - despite working with a leading RCM company.  Also, my mother founded one of the leading lactation consulting centers, and after developing her own custom workflows, found that there was a lack of integrated billing and eligibility support leading to surprises to staff and patients.  As "software eats the world" there is a role for more API-based companies to take the load off engineering teams for non-core parts of the app.”

— Nick Shelly, Apero Health

Health Gorilla , Particle Health, and others allow digital health teams to access unified patient data. We’re also excited about solutions like Ribbon Health which open up access to provider data and solutions like Serif Health which open up access to newly-published price transparency data.

Insurance-based finance stack ^[v]

The first breakout wave of digital healthcare apps, Ro, Hims&Hers, Nurx, and others didn’t interact with insurance systems. The next wave of digital health companies is pushing virtual healthcare into the world of insurance. Technology vendors in the credentialing, contracting, billing and claims management space have not innovated for decades. A modern finance stack is emerging for digital healthcare companies from credentialing and enrollment to backend administration tasks with insurance companies such as submitting claims, and to frontend interaction with clients.

“However, several trends exist that will encourage virtual health startups to become part of an insurance network and enter the "revenue cycle" world:

• Billing insurance is a much larger market than cash pay, and people want to use their health benefits.
• More complex procedures are more expensive and exceed many patients' disposable income, so cash pay is not really an option.
• As digital-native patients grow older, they will require more complex treatments over the next few years.
• Modern approaches to health care, such as remote patient monitoring and telehealth visits, are increasingly reimbursable with health plans.” – Modern finance infrastructure for digital health, Health Tech Stack

“As a payer, health system or telehealth company, every time you contract or hire a provider, you have to go through a long process to bring them into your network so that they can provide care,” he said. “It takes 30-40 days and costs about $200 per provider. Most of the time, there are no APIs, no integration and no workflow automation. We are trying to reduce that time period into two minutes.” — Anshul Rathi, CertifyOS, CertifyOS raises $14.5M in Series A funds for credentialing automation platform

I also think there's a lot of potential for start-ups in the Revenue Cycle Management (RCM) space (Nym, Fathom, Notable) as many RCM workflows are manual, rules-based and highly repetitive.” — Cathy Gao, Sapphire Ventures

“Consumers today expect price transparency before booking an appointment. Google search trend volume alone for insurance coverage of therapy has 4x'd. Our growth is driven by this new norm, and we've seen rapid adoption of our AI-powered eligibility checks across our smaller clinics to large publicly-traded therapy groups.” — Kelvin Chan, Nirvana Health

New finance infrastructure stack has emerged. Eligible allows companies to embed billing insurance experiences into their own app. Candid provides billing APIs to simplify the reimbursement process for providers. CertifyOS provides API-first credentialing, licensing, and enrollment.

In-person <> virtual care interoperability infrastructure

As virtual care companies scale, they are pushed to interact with in-person care to be able to handle more complex cases. This requires them to move from a virtual care model to a virtual-first care model.

“Exciting innovations around at-home diagnostics, digital biomarkers, and monitoring are making more remote care possible. However, a consumer-directed journey doesn’t operate exclusively in a virtual care model; it interacts with virtual and expansive in-person care touchpoints—in the home, physician practices, hospitals, retail clinics, urgent care, etc.”

— Consumer adoption of telemedicine in 2021

We are excited about solutions like Sprinter Health and GetLabs who are building infrastructure  for at-home diagnostic collections and Axle Health who build tools for healthcare companies to manage their in-home workforces as well as offer them their network of in-home clinicians.

More opportunities investors are excited about

Value-based care tech stack

“To improve health outcomes is to reimagine how healthcare in the U.S. is delivered: upending traditional fee-for-service, volume-based models and replacing them with value-based models. We’re coming to an inflection point for Value-Based Care (VBC) — accelerated by federal regulations and COVID-19 — and these value-based organizations rely on a fundamentally different tech stack. I’m excited by founders building for these whitespaces; for example, data aggregators to piece together a whole picture of your patient, panel management to ensure patients are scheduled for proactive care, patient engagement and care management solutions to design intelligent clinical workflows, actuarial modeling tools that help forecast and measure value.” — Betty Chang

Ambulatory surgery center (ASC) infrastructure

“I am particularly intrigued by the ambulatory surgery center (ASC) market. There are several thousand of these facilities in the US, and the number of surgeries being routed to ASCs is growing significantly. These centers need improved digital health infra and software, and there is a flood of private equity money moving into the space (both for ASC rollups as well as for software buyouts). On the back of this thesis, I recently invested in Orchestra Health, which is building care coordination software and telemedicine for perioperative care with a specific focus on ASCs to start. I also am a pre-seed investor in Impilo Health, which is building infra for remote healthcare with a particular emphasis on vertically integrated remote patient monitoring solutions and device management. This type of offering is critical for digital health companies that can't offer their own RPM solution easily as well as larger healthcare players that want to take advantage of the logistics and device management offering that Impilo has. “  

— Adam Besvinick, Looking Glass Capital

Next-generation EMRs

“I'm excited by the potential of companies building next-generation EMRs (Canvas Medical, Capable, Elation Health). Fast-growing companies need EMRs that are fast, flexible and extensible from an integrations perspective.” — Cathy Gao, Sapphire Ventures

“I decided to build Canvas back in 2015, before "Digital Health Infrastructure" was a term of art. The way I looked at it was really simple, I wanted to build software to help clinicians because their work is important and they need help. The decision was rooted in the belief that the right kind of software can unlock faster iteration on care models, and that iteration is necessary to achieve the vaunted Triple / Quadruple / Quintuple Aim of healthcare transformation.”  — Andrew Hines, Canvas Medical

AI-driven applications in digital healthcare^[w][x]

“While it may seem like the healthcare industry is too regulated and risk-averse of an industry to adopt the first wave of  AI solutions, I actually think healthcare AI is a huge opportunity because healthcare is an industry that deeply benefits from every additional minute or cent saved. TORTUS AI is a great example of a solution with the potential to improve both physician and patient happiness by streamlining the physician workflow. Ataraxis is another that provides data-driven decision support for physicians. .”— Claire Pan, Inspired Capital

“Large language models (LLMs) s^[y][z]uch as GPT are emerging as a new facet of healthcare infrastructure. These models, referred to as “foundation models,” are by definition skilled in many tasks and are increasingly adept at handling clinical data, such as abstracting key elements from large corpora as well as summarizing clinical information via accessible, natural language. Today, this technology, combined with other machine learning models, is well-suited for back-office tasks such as generating documentation for prior authorization and abstracting CPT codes from clinical documentation for billing. LLMs also show promise for automating front-office tasks such as pre-populating asynchronous telemedicine responses and automating the production of materials for patient education. Companies building in the space include Abridge" — Morgan Cheatham, Bessemer Venture Partners

Cybersecurity

“Cybersecurity is one area of healthcare infrastructure that remains underinvested and underserved. The number of health data breaches reported has grown ~20% annually over the last several years with ~41 million records compromised across 609 incidents in 2021. While providers are the most cyber-vulnerable segment of healthcare and life sciences industries, representing ~2/3 of health data breaches in 2021, 85% of hospitals do not have a dedicated security executive, and only spend ~4-7% of IT budgets on cybersecurity (relative to ~15% in other industries). As care increasingly moves out of the four walls of the hospital,becomes supercharged by smart devices, and integrates new data sources such as -omics data, cyber attack surfaces and risk profiles are growing exponentially, and the industry will require better infrastructure for securing the vast amount of data it generates.” — Morgan Cheatham, Bessemer Venture Partners

Companies^{[aa] [ab][ac]}

If we’re missing any companies^[ad] that should be included, feel free to add your comment here with your suggestion. Also if you have any experience using any of the companies below, share in the comments as well. :)

Analytics

• Ursa Health
• ClosedLoop^[ae]
• Briya
• Lightbeam
• Instabase
• Lynx.MD

Billing and revenuCedar Gate Technologiese management

• Hint
• Candid Health
• Serif Health
• Accorded
• Nym Health
• Nirvana
• Apero 
• Enter Health 
• Olive 
• Fathom Health
• Eligible
• Availity
• R1
• Curafi
• Tailormed
• FinThrive
• Waystar
• Adonis

Clinical Staffing

• Wheel
• Medcase
• SteadyMD
• OpenLoop
• Nurse-1-1 
• Pillar
• RxLiv
• MD Integrations
• Hyka
• Incredible Health^[af]

Compliance and credentialing^[ag] 

• Vanta
• Virtru
• Accountable
• Skyflow 
• Aptible
• MedStack 
• Nightfall
• Verifiable
• CertifyOS
• Medallion
• Mocingbird
• Axuall 
• ClearPol
• Flinn Comply

Data Routers^[ah][ai]

• Health Gorilla
• Avaneer Health
• Metriport
• Particle Health
• Human API
• Wingspan Health
• 1up Health
• Flexpa 
• Ribbon Health
• Zus Health
• Health Compiler
• Healthjump
• Seqera Labs
• Leyr

Diagnostics

• Ash Wellness
• Sprinter Health 
• GetLabs
• Axle Health
• ixLayer
• SimpleHealthKit
• Hurdle
• DarbyRupa Health
• Scan.com

Daslab

EHR

• Avon Health 
• AthenaHealth
• Elation Health
• Canvas Medical
• DrChrono
• Osmind
• Healthie
• AkuteHealth
• Capable Health 
• Lunar^[aj][ak]

Medplum

• Doctorly
• Elephant Healthcare

Patient communication and CRMs

• Freshpaint
• PhaseZero
• Healthnote
• Tellescope 
• Welkin
• Cured
• Spruce
• Orchestra Health
• Infinitus Systems
• TebraRoger

Payments

• Walnut 
• Cedar
• PayZen
• Paytient
• Turquoise Health
• PayGround

Provider enablement ^[al][am]

• Pearl Health
• Topography
• Impilo Health
• Abridge

Workflow automation and collaboration

• Awell
• Dock Health
• Morf Health
• CareAlign
• Redox^[an]
• UpHill Health
• Buddy Healthcare
• Promptly
• Memora Health
• SUBLIMD

Active investors in the space^[ap]

406 Ventures

7wireVentures

3one4 Capital

A16z Bio + Health

Ahren

Albion VC

Amino Collective

Ascension

Atlantic Labs

Bessemer Venture Partners

Better Tomorrow Ventures

Centre Street Partners

CoVenture

Crossbeam Venture Partners

Define Ventures

Eka

Elaia

Firstminute Capital

Flare Capital Partners

Form Ventures

General Catalyst

Generator VC 

GSR Ventures

Greycroft

GV

Headwater Ventures

Heal Capital

HealthTrend Capital

Healthy Ventures

Hoxton Ventures

Hummingbird VC

Initialized Capital

Inspired Capital

IQ Capital

Kindred

Lerer Hippeau

Lifeline

Looking Glass Capital

Lorimer Ventures

LRV Health

Lux Capital

Maveron

Mehtas Ventures

Menlo Ventures

Meridian Street Capital

MMC Ventures

Nina Capital

OCA Ventures

Octopus Ventures

OMERS Ventures

Out of Pocket Health

Overwater Ventures

Panoramic Ventures

Pear VC

Playfair Capital

Project A

RH Capital

Rock Health Capital

Sapphire Ventures

Speedinvest

Susa Ventures

Tiny.vc

Town Hall Ventures

Triplepoint

Twelve Below

USV 

Virtue VC

Vive Collective

Vorwerk Ventures

Voyagers Health Fund

We plan to publish more of these and would love your input. Subscribe at Signature Block and we’ll share the next Open Market Map with you.

Lastly, if you’re building or investing in this space, feel free to reach out to us at team@weekend.fund.

– Weekend Fund