6 trends driving digital health market stabilization, growth

Broad cultural change

According to Deloitte's Batra, a significant difference between the digital health market of today and that of 2020 is the shift in the culture around digital health. Today, being digitally connected is a way of life. From groceries to banking to shopping, there is an app for that.

Though healthcare hasn't quite caught up to other industries, digitizing care delivery is more the norm than ever before.

"It has become naturally intuitive in a way that, five years ago, for you to say you were going to outsource things digitally or I wasn't going to have somebody physically come in and put my hands on them, you would've dismissed that from a risk perspective or a safety perspective or a quality of data perspective," Batra said. "Those points of resistance have kind of eroded over the last handful of years, particularly post-COVID."

Though the digital health heyday of 2021 is unlikely to be replicated this year, Batra believes "we are on a straight arrow up from here forward on digital health." There may still be fluctuations, especially as AI valuations continue to soar, but it is unlikely the market will decline to pre-pandemic levels.  

Variation in digital health utilization

With the digital health market unlikely to decline significantly, Batra noted that the more pressing question becomes who is adopting and embracing digital health most aggressively and who is realizing those gains in their models?

In an interview, Allison Oakes, Ph.D., vice president and chief research officer at Trilliant Health, shared data showing where digital health has succeeded in proving value, and where it hasn't. For instance, behavioral healthcare has realized significant benefits from telehealth. The widespread adoption of telebehavioral healthcare proves this out.  

Trilliant Health data shows that, as of 2024, behavioral health-related telehealth visits accounted for about 67% of all telehealth. This increase came as overall telehealth utilization declined compared to pandemic highs.

Additionally, Oakes noted that virtual care utilization varies by sex and age. The group with the highest hybrid in-person and telehealth utilization was women aged 18 to 44.

Understanding these variations can give digital health players clues as to how to focus their efforts over the coming year.

"Teasing apart and understanding which use cases digital health works for and which patients are most likely to use it, I think, are two important things to understand to try and figure out the trajectory," Oakes said.

AI is a growth enabler

The excitement around AI is having an undeniable impact on the digital health market.

Robert Garber, partner at healthcare venture fund 7wire Ventures, stated that all its portfolio companies are leveraging these technologies to scale automation and personalization.

"Our perspective from an AI lens is that this is just the newest and best set of tools that's come along in a really long time that can help these businesses scale," he said in an interview.

While humans can never be taken out of healthcare, AI enables organizations to automate the burdensome tasks, leaving humans to focus on the more intricate aspects of clinical care, he added. This can help drive affordability and accessibility -- two of healthcare's most trenchant challenges.

Batra agreed, adding that, "I actually see a potential for another peak maybe this year, maybe next, as AI and LLMs become more pointed and applied in health and there's greater comfort on accuracy and consistency on those tools."

However, he cautioned that "there is some irrationality in valuations" for AI-driven digital health companies.

"It comes down to -- you're betting on the potential, not necessarily the individual model or the individual team," he continued. "In those instances, valuations do get a little bit out of hand. The willingness to write checks gets a little bit out of hand."

Ongoing consolidation

Consolidation is on the rise within the digital health market. Rock Health data reveals that 195 M&A deals occurred in 2025, up 61% from 2024.

According to Garber, a lack of profitability is driving consolidation, which he expects will accelerate in 2026.

"Proliferation of funding in the market has led to lots of subscale companies that have not reached breakout trajectories," he explained. "So companies that are doing $10, $20 million in revenue and not seeing tremendous growth, some of them may be profitable, many of them are not... So, people are looking at leveraging acquisitions as a way to build customer bases, extend product offerings and add features and functionality."

Still, digital health consolidation faces several barriers, including a data infrastructure that may not be ready for the surge of consolidation.

"We may be a little bit ahead of seeing all that consolidation play out, because I still think there are challenges with the data being created and being used and leveraged effectively," Batra said.
"The example I always give is, if we invented a flying car on this call, could we move around our various cities tomorrow? The answer would be no, because all the traffic lights would be too low, the street signs would be too low."

Continued popularity of DTC tools

In recent years, direct-to-consumer (DTC) virtual prescribing services and tools have proved popular. Trilliant Health's Oakes pointed out that companies like Hims&Hers and Nurx, as well as services such as Amazon Pharmacy's Rx Pass and Eli Lilly's LillyDirect, are capitalizing on demand for expanded access to medications.

Earlier this year, the DEA and HHS extended the telehealth prescribing flexibility that allows healthcare practitioners to virtually prescribe Schedule II-V controlled medications through Dec. 31, 2026, a significant win for players in this space. It also makes the DTC prescribing space an interesting one to watch in the year ahead, Oakes said.

Similarly, healthcare wearables are unencumbered by some of the constraints of digital health tools, since they are also typically DTC. Batra noted that wearables don't need to integrate with complex IT systems and workflows, making adoption easier to encourage.

"What I'm seeing right now is a lot more perceived enthusiasm and runway on the wearable side because they know that if they can continue to satisfy the consumer and generate valuable data, the consumer will put pressure on the incumbents and bring them to the table," he said.

However, Oakes warned that there are downsides to the increased interest in DTC services, including disruption of the traditional patient-provider relationship and the possibility of increased fragmentation and duplication.

Greater focus on ROI

As the digital health market continues to mature, the emphasis on the technology's return on investment (ROI) will grow. Already, the market is shifting toward value, and 2026 will see this trend continue.

Batra underscored the importance of companies offering proven digital health models, including demonstrated revenue, a broad customer base and stickiness.

Garber echoed Batra, adding that sound actuarial data proving out the ROI of a solution will be critical in the future. Earlier, customers were focused on deployment, but with skyrocketing costs, ROI has become increasingly important to them.

Recent regulatory moves may offer a boost to companies seeking strong ROI. Last year, CMS launched the Advancing Chronic Care with Effective, Scalable Solutions (ACCESS) Model, which aims to support the use of technology for chronic disease management.

Though the jury's still out on whether the CMS model will move the needle on digital health profitability, Garber is cautiously optimistic.

"I'll try and be an optimist until I have a reason not to be is how I feel with all of these kinds of regulatory changes," he said. "So, the devil's in the details, and it's hard until you get in there and start deploying them to see how they're going to be used and how effective they'll be."  

Anuja Vaidya has covered the healthcare industry since 2012. She currently covers the virtual healthcare landscape, including telehealth, remote patient monitoring and digital therapeutics.