Differentiation, profitability prospects key to digital health market success

Pinpoint your differentiator

Identifying and doubling down on what differentiates offerings from competitors will be critical for digital health companies in 2026.

However, "differentiation is as hard as it's ever been," Robert Garber, partner at healthcare venture fund 7wire Ventures, told Virtual Healthcare. "A lot of these solutions look very similar and have similar value props, and separating the wheat from the chaff is increasingly challenging."

He added that one of the primary reasons digital health companies face challenges is not due to the technology itself. Rather, they are trying to disrupt ingrained systems and behaviors, whether among physicians or patients.

Thus, as companies zero in on their differentiator, be it product, outcomes or another factor, they must keep patient and physician experience at the forefront. For example, neither party wants to access numerous tools to address a single condition, Garber noted. Companies that can provide holistic patient care and integrate their tools seamlessly into the clinician workflow may have a leg up on others.

Not only that, but AI and other emerging technologies can also be used to personalize digital healthcare more than ever before, offering another key point of differentiation for digital health companies, Garber stated.  

Focus on integration

Neal Batra, a principal at Deloitte and head of its Future of Health practice, highlighted the importance of digital integration in 2026, underscoring that digital health companies often fall into the trap of focusing only on one aspect of the healthcare ecosystem.

"What they don't necessarily understand is how to tie into the larger technical environments that they're trying to plug into," he said in an interview. "And it's a real shortcoming because you're doing one thing, but the organization that you're looking to sell to has 10,000 other vendors who are showing up, saying that they can help in similar ways across other areas."

To set themselves apart, digital health companies must understand the technical stacks and environments in which their solutions will operate and explain how they can be integrated with ease.

"It is also why a lot of [deployment] has been incremental because [digital health solutions] are integrating into ongoing technology environments, and it's very, very hard to convince a partner to do a technical reset around your solution," he explained.

Establish a pathway to profitability

Profitability has long been a challenge in the digital health space. Though elusive for many companies, profitability prospects are key to scaling companies, especially for those interested in public exits and M&A. 

Allison Oakes, Ph.D., vice president and chief research officer at Trilliant Health, noted that data-driven demonstrations of a solution's efficacy and return on investment (ROI) are critical to financial success in the 2026 digital health market. And it's not just about whether a solution can be profitable or deliver a positive ROI, but also about how long it will take to do so.

"There's also a lot of talk about what that time horizon is to expect something to flip to giving a return on investment, and that time horizon is becoming shorter," she said. "So, in terms of boom or bust, and what companies might sink and companies might swim, using data to really demonstrate whether or not it's effective and whether or not it's cost-effective are the two most important things."

Monetization strategies will be an essential aspect of companies looking to establish strong profitability prospects.

According to Oakes, direct-to-consumer (DTC) and subscription-as-a-service approaches could be helpful for digital health companies from a business standpoint; however, it is still important for companies to ensure their solutions can plug into the broader healthcare system.

Garber echoed Allison, adding that there is a fair amount of activity in the DTC space, although there are barriers to scale.

"There are examples of direct-to-consumer models, like not just the Him & Hers of the world, but like a Function [Health] that have built pretty sizable businesses," he said. "But I think the challenge with that is that the population willing to pay out of pocket continues to be pretty small. So, when you're asking somebody to pay $500 a year for whatever tool it might be, it's a very small market."

Batra highlighted the popularity of subscription and consumption, or pay-as-you-go, models in the business-to-business sales model as well. These models are especially successful when the company can demonstrate that the tool's value exceeds the subscription cost; however, Batra hopes to see more gain sharing in the models in the future.

"In other words, you can pay for the basic solution, but I want to give you a return that's so substantial that you give me a portion of those savings as we continue to demonstrate it," he said. "And that demonstrates a fundamental value proposition as opposed to something that you have to squint very hard to see."

Continual evaluation of tools

As the digital health market continues to prioritize value, companies will have to focus on gathering rigorous data and conducting evaluations to prove it.

"More is not necessarily better, and more tech innovation or more digital health players for the sake of having them, I don't think, is necessarily a good thing," Oakes said. "So, while experimentation is great, it's important to be collecting that data to understand if these sorts of interventions are having the intended consequence or if there are potentially unintended consequences that we need to be aware of."

Oakes also emphasized the importance of pivoting quickly when a solution is not having the intended outcome. Amid the rapid adoption of digital health solutions, companies must ensure they are not introducing low-value tools to the market, as it is challenging to limit their use down the line.

The coming year offers exciting new opportunities for start-ups and incumbent companies alike. However, seizing those opportunities will require digital health companies to double down on the basics: differentiation, profitability, integration and evaluation.  

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