Where is the health-tech money going, is it growing and is there an end in sight? Part 2 of 3

on May 8, 2022

by Richard Nordstrom, May 8, 2022

Is the investment money growing?

Is the money still flowing? Yes, but not quite as freely as  last year. There is still plenty of capital pouring into healthcare in NYC alone 50 companies raised $1.3B in Q1 — but investors are being more thoughtful and selective. After a record breaking 2021, investors are pulling back and placing bets more selectively. Q1 funding was on par  with Q4 2021 ($1.4B).  45% of the deals were early stage which includes pre-seed, seed and Series A. 55% of the deals were late stage which includes Series B and beyond.

Virtual care and coordination  continues to lead funding, as 30% of investment dollars. The pandemic accelerated the market need for tele-health and the money soon followed as several mature and start-up companies raised money. AI enabled virtual care providers saw significant investments. In addition, early-stage AI powered decision support companies also garnered funding in the first quarter. Why is tele-health still growing 2+ years into the pandemic? According to Jones Day it’s because in the first quarter of 2022, the federal government took several steps to expand and extend Medicare coverage for telehealth services. Some think the reason is that CMS expanded coverage of telehealth services as part of its annual Physician Fee Schedule. Most notably, CMS expanded coverage for the diagnosis, evaluation, or treatment  of certain mental health disorders to include services delivered to beneficiaries located in their homes  (such that the geographic restrictions applicable  to traditional telehealth services do not apply). In order for such services to be covered, an in-person, non-telehealth service must be furnished within six months prior to the first telehealth visit and at least once within twelve months of each subsequent telehealth service (unless an exception applies) and services must be distinguished and documented in the patient’s medical record. CMS also expanded coverage for audio-only telecommunications for mental health disorders when certain conditions  are met. Specifically, the patient must be located at home, the provider must have the ability to utilize both audio and video communication, and the beneficiary must choose to utilize audio-only technology because they are incapable of or do  not consent to using audio/video technology. Second, Congress passed the Consolidated Appropriations Act, 2022, which extends certain telehealth reimbursement flexibilities for 151 days following the end of the declared COVID-19 public health emergency. Specifically, the Act extends current flexibilities that waive geographic and originating site restrictions, expand the list of eligible providers, and allow for the provision and coverage of audio-only telehealth services. The Act also delays the implementation of the in-person requirements for mental health telehealth services (described above)  for 151 days following the end of the public health emergency. Lawmakers have introduced other bills to further extend certain of these flexibilities, including in some cases, permanently.  Such bills include the Telehealth Extension Act of 2021 (H.R. 6202) and the Telehealth Extension and Evaluation Act (S. 3593).

AI Healthcare Capital TeamWhere is the health-tech money going, is it growing and is there an end in sight? Part 2 of 3