15 top investors share their best 2022 healthcare predictions, from speedier drug development to a digital-health M&A boom

Top VC healthcare firms predictions  for 2022 2x1
7wire Ventures; Oak HC/FT; KdT Ventures; Tusk Ventures; Rachel Mendelson/Insider
  • We asked healthcare and biotech investors to share their predictions for 2022.
  • Their predictions included shortened drug-development time and a continued digital-health boom.
  • See the full list of predictions below.
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Ambar Bhattacharyya, a managing director at Maverick, says employers that push back on healthcare costs will fuel startups offering free visits.

Ambar Bhattacharyya original
Ambar Bhattacharyya, a managing director at Maverick Ventures. Courtesy of Ambar Bhattacharyya

The idea behind high-deductible health plans, where patients pay for a big chunk of their annual medical costs before insurance kicks in, was to lower the overall cost of care.

But that hasn't worked out, said Ambar Bhattacharyya, a managing director at Maverick Ventures. 

One reason is that healthcare isn't easy to "shop" for. It's not even straightforward to find the cheapest, closest MRI. 

Another is that people end up avoiding the care they need since they have to pay for it, so they get sicker before they interact with the system. 

"It's reached a tipping point," he said. 

Next year, Bhattacharyya said, we could start to see a lot more employers embrace either low- or no-deductible health plans, many of which offer free, unlimited primary-care visits. That way people don't have to think twice about costs before a preventative screening. 

That would boost startups such as Centivo, a Maverick portfolio company that builds health plans specifically for employers, he said. It partners with high-quality, local health systems to build primary-care networks. As long as patients stay inside the network, the visits are free.

These types of models are more interesting than the usual approach of raising deductibles from $4,000 to $4,500 to see if that affects the overall cost trend, Bhattacharyya said.

"We've been doing it for 20 years," he added. "The answer is no."

He also said that more companies would tackle virtual specialty care. Now that we're used to getting primary care online, there's an opportunity to serve more specific populations. 

Pediatrics, for example, is a tough area since parents usually have to take time off from work to make their kids' appointments. There's an opportunity for startups and providers to help simplify the healthcare experience for parents when children develop chronic conditions, Bhattacharyya said.

— Blake Dodge

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After the pandemic's 'cultural reckoning,' mental and maternal health are poised to take off, said Brittany Davis, a general partner at Backstage Capital.

Backstage Capital general partner Brittany Davis
Brittany Davis, a general partner at Backstage Capital. Backstage Capital

The pandemic's disproportionate effect on patients of color and women has boosted interest in companies addressing those groups, especially for maternal health and mental health, said Brittany Davis, a general partner at Backstage Capital. 

"There's been a kind of a cultural reckoning with realizing inequities in different populations," Davis said. She explained that the Black Lives Matter movement added extra urgency to these companies' efforts. "Health is such a human right, and what are we doing to fix this? Is there an opportunity financially?" she continued.

Davis said she'd noticed a pattern of one- or two-year-old startups that have been closing larger early-stage funding deals over the past year. 

"We're seeing the inflection point where they're able to close big seed or Series A," she said. She added, "It was a little bit of a harder journey in those early days."

Mohana Ravindranath

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Funding for healthcare-technology companies will remain strong in 2022, says Flare Capital's Michael Greeley.

Michael Greeley
Michael Greeley, a cofounder and partner at Flare Capital. Courtesy of Flare Capital.

Large amounts of venture funding would continue to pour into health tech in 2022, but maybe not at the feverish pace we've seen this year, said Michael Greeley, a cofounder and general partner at Flare Capital Partners.

Funding for digital-health companies topped $20 billion in the first three-quarters of 2021 alone, up from $14.6 billion in 2020, Rock Health said. A decade ago, digital-health funding barely topped $1 billion.

Greeley's not anticipating a big pullback. He's betting 2022 will bring another $20 billion to $25 billion to the space, as the late-stage crossover investors such as Tiger Global, SoftBank, and General Atlantic that helped drive the explosion in funding stick around.

"I think it'll continue to be an established category running at around 10% of all venture investment," Greeley said of health tech.

That means entrepreneurs in the space can breathe easier, keep their heads down, and work on building their companies, rather than speeding up fundraising plans, Greeley said.

"I don't think you need to fear that we're running off a cliff," he added. 

— Shelby Livingston

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Deerfield’s Adam Grossman says 2022 will bring big opportunities for startups that can change care delivery — but also help providers with the basics.

Adam Grossman, a partner at Deerfield Management
Adam Grossman, a partner at Deerfield Management. Deerfield Management

New care models that reimburse providers for how well they take care of patients, otherwise known as "value-based care," should continue to see a lot of investment in 2022, said Adam Grossman, a partner at Deerfield Management. 

"Whether there's M&A that occurs or new companies emerging, it's an area where there's a lot of capital flowing," he said. 

Both providers and health plans may need help with the new responsibilities, which involve creating new opportunities for healthcare startups. 

Deerfield launched such a company, Alo, with the North Carolina Blue Cross Blue Shield plan over the summer. Alo offers technology and administrative tools meant to help independent physicians transition to value-based care and spend more time working with patients. 

Deerfield also invested in Curation Health, which helps providers identify gaps in patient care, and Somatus, which works with health plans, health systems, and doctors to improve kidney care, a growing area of focus in this slice of the industry, Grossman said.

What these startups have in common is their relevance to providers' day-to-day tasks.

As much as investors like to talk about disruption, Grossman saw a lot of opportunity in 2022 for improving healthcare's basic functions. 

Outside of value-based care, we need solutions to help with labor issues, such as nurse staffing, and revenue management — anything using technology to improve efficiency behind the scenes, he said.

— Blake Dodge

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The shortage of doctors and nurses will force startups to get creative in ways they can provide on-demand healthcare, 7wire Ventures' Alyssa Jaffee says.

7wire Ventures partner Alyssa Jaffee
Alyssa Jaffee, a partner at 7wire Ventures. 7wire Ventures

The Great Resignation has already arrived in healthcare, and the worsening doctor and nurse shortages would undoubtedly trickle down from hospitals to on-demand digital-health startups, said Alyssa Jaffee, a partner at 7wire Ventures. 

Many startups rely on doctors, nurse practitioners, and physician assistants to conduct virtual appointments, prescribe medication that is then mailed to patients, or even help refer patients to other specialists. During the pandemic, many startups were able to attract new care providers by offering remote work and more flexible hours than would be possible in a traditional hospital or clinic.

But now startups are running into the same problems as other employers hoping to retain doctors and nurses. Mainly, those professionals are tired, and there are fewer qualified employees to fill the growing number of jobs out there. 

"The pressure of provider shortage has just grown so immensely that it will be an incredible challenge going into next year," Jaffee said.

Startups would have to look to new areas to fill the roles they needed to continue growing at the pace investors expected, Jaffee said. One example is MedArrive, a company Jaffee's firm invested in in November, which relies on EMTs to provide some healthcare services inside patients' homes. EMTs complete training as part of their certification that allows them to complete tasks such as drawing blood with their license.

"They found a way to unlock a provider supply that hasn't been utilized," Jaffee said of MedArrive's business model.

— Megan Hernbroth

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Rock Health's Sari Kaganoff gives four reasons digital health will see a major M&A boom in the next year.

Sari Kaganoff, general manager of consulting for digital health fund and advisory firm Rock Health
Sari Kaganoff, the general manager of consulting for Rock Health. Rock Health

Digital health is ripe for more mergers and acquisitions in 2022, said Sari Kaganoff, the general manager of consulting for Rock Health, a digital-health fund and advisory firm.

One straightforward reason for that is hungry blank-check companies called SPACs looking to find their match, she said. General Catalyst's version, called the Health Assurance Acquisition Corp., is hardly a year old, and it's looking to fund the next Livongo.

What Kaganoff called the "platform wars" is also cause for more consolidation. Platforms — the places that people go to get care, whether it's Walmart Health or the telehealth giant Teladoc — are tacking on more assets to create simpler experiences for patients.

The expansion's largely been driven by M&A, which should continue into 2022, Kaganoff said.

"Who's going to win? Is it going to be Teladoc Health is everything? Or GoodRx is everything?" she said. "Or maybe there's just different flavors. But everyone's trying to move into everybody else's territory is sort of the point."

Companies will also use a lot of last year's record funding haul — startups raised more than $20 billion in the first three-quarters of 2021 — for buying products and companies, Kaganoff said.

Especially given the talent crunch right now, M&A is a straightforward way to not only expand into a product area but also gain the people you need to run it, Kaganoff said.

"Why should I build something when I can just go by the guy next door?" she added. 

Lastly, as big tech companies and big healthcare companies start to build out their strategies in digital health, we should see them acquiring startups, too, Kaganoff said. Healthcare's "middle children," such as Best Buy, are also using M&A to gain footholds in the $3.8 trillion industry. 

"Between all of those features, that's a lot of M&A," Kaganoff said.

— Blake Dodge

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Annie Lamont, Oak HC/FT's cofounder and managing partner, doesn't think consumer startups that don't accept insurance will be sustainable in the long term.

Oak HC/FT cofounder and managing partner Annie Lamont
Annie Lamont, a cofounder and managing partner at Oak HC/FT. Oak HC/FT

Many Americans on high-deductible health plans have the ability — sometimes it's a necessity because of costs — to shop around when picking how, when, and where they receive healthcare services. It's a shift from selecting from a limited menu of "in network" providers as dictated by insurance plans.

But that trend of "consumerization" isn't sustainable, said Annie Lamont, Oak HC/FT's cofounder and managing partner. 

In reality, she said, all healthcare companies have been marketing themselves to patients all along, and the newer companies were overlooking a key area that could shut them out of future revenue.

"The only difference for a consumer business online was that they didn't have reimbursement," Lamont said. "Those models, I don't know that they're going to be sustainable."

Lamont said that insurance companies and self-insured employers would eventually start to buy or build similar services to these companies and compete with them directly. In that scenario, the patient would likely choose the cheap and convenient option, which might not be the scrappy startup. 

At the same time, larger healthcare companies don't have the best track record on adopting new technology that mostly benefits patients, she said. That leaves some room for startups to push the envelope.

"We've been a little dismissive in the past about consumerization. It's been this sort of buzzword for 10 years," Lamont said. "But the payers are talking about engaging consumers, which they have no idea how to do, so it can be just like any other provider as long as they get reimbursement and they're in-network." 

— Megan Hernbroth

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Canaan's Byron Ling thinks dental and mental-health startups are poised to expand in a post-COVID America.

Byron Profile Pic 2 (1)
Byron Ling, a partner at Canaan. Canan

Canaan's Byron Ling hasn't been investing in certain areas of healthcare this year, such as startups that specifically serve patients with certain conditions, including diabetes and musculoskeletal disorders, but "it's not been for lack of trying," he said.

The red-hot healthcare market has pushed investors such as Ling to get creative on the types of deals they pursue to avoid inflated valuations or risk paying more for a company's hype than its actual technology or service. 

For his part, Ling has started looking at startups that are on the periphery of traditional healthcare. Startups offering dental services or mental-health care are of interest to him going into next year because patients typically already pay out of pocket for some or all of their care in those areas. That could make them more likely to pay for a newer option that has marginal improvements, such as easy-to-use software or virtual appointments, over the existing options. 

"We'll know more in six to nine months, but there's been a big post-COVID advantage for new entrants because so many people had to shut down their businesses in COVID," Ling said of dental and orthodontics startups in particular. "So there's a very interesting reopening play there."

— Megan Hernbroth

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General Catalyst's Holly Maloney says more providers will focus on the combination of mental and physical healthcare in 2022.

Holly Maloney, a managing director at General Catalyst
Holly Maloney, a managing director at General Catalyst. General Catalyst

After record investment in mental health this year, 2022 should see more companies focus on blending behavioral and physical healthcare, said Holly Maloney, a managing director at General Catalyst. 

Challenges with mental health often coexist with other physical health conditions. For example, people with diabetes are up to three times more likely to have depression.

But they're rarely addressed in parallel. Doing so could help patients and more aggressively drive down the total lifetime cost of their care, Maloney said. 

Companies such as Equip Health, which offers virtual care for eating disorders, and Firefly Health, are heading in that direction, Maloney said. Technology needs to allow for different providers seeing the same patient to work together.

Maloney also said that the industry's slow shift away from fee-for-service models would drive a new crop of startups.

As more providers transition to value-based care — where they're paid based on how well their patients are doing, instead of on how many procedures they order and perform — they would need to change the way they operate, she said.

Provider groups may need to track medication adherence and other measures of patient health with more granularity to fulfill requirements of the new, complex contracts with health plans, she said. Patients may need better tools to stay involved in their care.

Companies such as Ribbon Health and Stellar Health are solving for this, Maloney said. 

It's an area that calls for a lot of partnerships between the venture, tech, and care-delivery communities, she added. 

"Because there are a lot of moving parts — that's for sure," Maloney continued.

— Blake Dodge

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Computers and robotics will be used in every part of healthcare, from drug development to hospitals, says Cain McClary, KdT Ventures' managing partner.

Cain McClary, founder and managing partner at KdT Ventures
Cain McClary, the founder and managing partner at KdT Ventures. KdT Ventures

Cain McClary, the founder and managing partner at KdT Ventures, believes more automation and computational tools would make their way into healthcare and change the way we work. 

It's not the first time these tools have shifted the way we discover and develop drugs. In the late 1980s, pharmaceutical companies began using a new tool called high-throughput screening. The tool sorts through hoards of chemical compounds or biological molecules, looking for the right fit for the medication a company wants to make. Instead of a scientist running individual tests, a machine can run dozens at the same time. 

It's now common across the industry. 

These days, drug companies such as Insitro, Exscientia, Novartis, and Cota Inc. are using machine learning and artificial-intelligence algorithms to speed up drug discovery. Meanwhile, companies such as Avrobio and SQZ Biotechnologies are developing automated manufacturing machines for cell and gene therapies. 

Robert Bart, the chief medical information officer at the University of Pittsburgh Medical Center, told Insider in December that the use of software to automate certain repetitive computer processes, such as data entry and billing, hasn't taken off as much as health leaders hoped.

But McClary expected that it would reach other areas of healthcare. 

"I think we will continue to see computation embed itself across the supply chain from advanced telemonitoring or medicine solutions, virtual clinical trials and even virtual control arms, machine-learning-driven diagnostics, semiautonomous hardware devices for procedural care, and the wide-ranging impact of AI in drug development," McClary said. 

Allison DeAngelis

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Decade-long drug development may become a thing of the past, says Julia Moore, a managing partner at Breakout Ventures.

Breakout Ventures Managing Partner Julia Moore
Julia Moore, a managing partner at Breakout Ventures. Breakout Ventures

Creating a new medication used to be something that could take a decade or longer. Researchers would work by hand, running trial-and-error tests to pinpoint the best drug candidates. 

But now, things are happening so rapidly, they're even taking Julia Moore, a managing partner at Breakout Ventures, by surprise. 

"The pace is crazy," Moore said. Investors, entrepreneurs, and advisors swap tales from other startups about how they cut the time it takes to conduct preclinical screening or other drug-development tasks in half. 

There are many new tools driving this acceleration. Moore pointed to data-computation tools, which are being used to sift through trillions of pieces of data that are collected by hospitals, clinical trials, wearable sensors, and other means.

"We all witnessed firsthand the technology-meets-biology revolution over the last couple of years, best evidenced of course by our ability to react swiftly in designing and producing new vaccines. My prediction is that that wasn't just a reaction in the moment — but that we have permanently altered the pace of innovation at this technology-meets-biology intersection," she said.

Companies such as the Flagship Pioneering-backed Generate Biomedicines have said they can identify drug candidates in as little as 17 days, instead of in a year or more. 

Other investors agreed with Moore. They handed over $13.8 billion last year alone to startups using machine learning in drug companies. 

Those investments are going to begin showing their mettle over the next year or two, Moore said. "You should end up with much stronger, faster, smarter companies," she added.

Allison DeAngelis

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Regulatory challenges may cause the 'overheated' digital-health market to cool, says Jordan Nof, Tusk Venture Partners' cofounder.

Tusk Venture Partners cofounder Jordan Nof.
Jordan Nof, a cofounder of Tusk Venture Partners. Tusk Venture Partners

There's a lot of money flowing into the digital-health market. Some firms are partly to blame for the "overheated" market because they are writing more checks than ever at even bigger amounts that come with larger valuations, said Jordan Nof, a cofounder of Tusk Venture Partners.

But the industry is poised for a cooldown, Nof said, in large part because of potential regulatory hurdles that are expected to come down the pike over the next 12 months. Nof pinpointed reimbursement changes at the Centers for Medicare & Medicaid Services in particular as having potential to stunt growth at startups that only offer telemedicine. Currently, telemedicine is reimbursed by CMS at the same rate as in-person visits.

Digital-health companies, especially those that rely on subsidies from insurance companies to provide telemedicine services at about the same price as in-person visits, could be in for a bumpy year if those regulations were changed or repealed entirely, something Nof said wasn't completely off the table.

Tusk Venture Partners has backed several digital-health companies that could experience volatility next year because of regulations, including the direct-to-consumer powerhouse Ro and the mental-health startup Alma. Some companies, for instance, may have to adjust pure telemedicine businesses to account for hybrid models that are favored by more traditional healthcare companies.

While Nof said his firm was used to investing in areas where regulation was a prominent consideration, these changes could scare off other investors that were less familiar with the process. If those investors stop or slow down investing in digital-health companies, that could help stall the record-breaking funding activity and bring the industry back to earth, he said.

— Megan Hernbroth

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Companies that help clinicians track patients' health while at home rather than in the hospital are poised for a 'breakout moment,' says Liz Rockett, the managing director at Kaiser Permanente Ventures.

Liz Rockett, managing director at Kaiser Permanente Ventures.
Liz Rockett, the managing director at Kaiser Permanente Ventures. Kaiser Permanente Ventures.

As health insurers and hospitals increasingly shift care to patients' homes, companies that provide tools to help doctors monitor patients from afar could see major growth, said Liz Rockett, the managing director at Kaiser Permanente Ventures.

"We're seeing pushes that are getting really material in bringing hospital-at-home to life, so I think that the world of remote monitoring and some of the technologies that could enable that are ready for their breakout moment," she said.

Remote patient monitoring isn't new, but companies in the space have struggled to gain traction, in part because payment for remote care has been limited. Some companies in the space include Medically Home, which helps hospitals provide care in patients' homes, and Current Health, which was acquired by Best Buy in October.

That's changing now. The pandemic spurred changes to federal policy that allow hospitals to provide care to seriously ill patients at home, and the Medicare program has created new avenues for clinicians to bill for such services.

Remote-monitoring companies are also maturing and building out services to wrap around their technologies.

"You see more companies coming to understand that remote monitoring is not actually a technology play. You have to provide the administration. You have to provide the service. There are other components of the offering that are critical to delivering value to the plan or provider that you're serving," she said.

If remote-monitoring companies get it right, the potential to eliminate unnecessary costs from the healthcare system is huge, she said.

"You no longer have this crazy revolving door of your emergency room caring for this group of patients," Rockett added.

— Shelby Livingston

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CRV’s Kristin Baker Spohn sees consolidation on the horizon for the burgeoning mental-healthcare industry.

A headshot of Kristin Baker Spohn
Kristin Baker Spohn, a general partner at CRV. CRV

The $3 billion merger between the mental-health companies Headspace and Ginger was a harbinger for the red-hot industry, said Kristin Baker Spohn, a general partner at CRV.

The fast-growing space has been of particular interest to investors over the past two years, with a growing set of unicorn mental-health companies that range from medication delivery for patients experiencing anxiety and depression to virtual therapy designed specifically for children. 

Many investors are still bullish on the industry and continue to invest in the growing set of mental- and behavioral-health companies, but Baker Spohn thought consolidation was more likely as a few large companies decided to buy up competitors.

"Given the valuations of some of these companies, and in the changing landscape of acquirers, it's going to be really interesting to see how that plays out," Baker Spohn said.

A similar scenario has already started playing out in the larger digital-health industry, with companies such as Ro making billion-dollar acquisitions of other digital-health companies as a way to appeal to new patients. These companies have more funding than ever, so they can buy other companies to grow faster than they would have by building a similar service themselves.

"One of the fundamental changes that has happened is digital health is now a reliable customer segment, and a very important customer segment, in addition to being acquisitive," Baker Spohn said, alluding to the fact that many digital-health companies now sell their services directly to other well-funded digital-health companies. 

— Megan Hernbroth

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Patients are going to continue replacing their primary-care doctor with specialists focused on their unique conditions, Menlo Ventures' Greg Yap says.

Greg Yap
Greg Yap, a partner at Menlo Ventures. Menlo Ventures

For patients experiencing chronic conditions, a specialist doctor, such as a cardiologist, is often their primary way of interacting with the American healthcare system. In 2022, that trend is only going to accelerate, said Greg Yap, a partner at Menlo Ventures.

For years, younger and healthier patients have forgone the primary-care route in favor of working with doctors as needed and relying on urgent-care centers for other acute conditions, Yap said.

"The primary-care provider for a person with a chronic condition is really a specialist," Yap said. "If something dominates your healthcare experience, that specialist is really your primary medical relationship."

Yap said that, because specialty doctors were regarded as ancillary to patients' healthcare experiences, there was a significant need for more options that could serve patients with specific conditions. He gave the example of Ophelia, a virtual-care startup for patients experiencing opioid dependence, as one such case where software could combine with trained doctors experienced in treating opioid dependence and increase access to what used to be seen as non-primary healthcare.

"The ability to deliver integrated care to a targeted subpopulation, with multiple levels of care coordination, will continue to emerge as a dominant model of care for an increasing population," Yap said.

— Megan Hernbroth

Dispensed Rachel Mendelson
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