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COVID-19: Three Health Care Sectors Still Attracting Investment

Since President Trump declared a national emergency concerning the Novel Coronavirus Disease (COVID-19) outbreak on March 13, 2020, the health care industry has witnessed increased focus by investors on sectors closely tied to combating the disease, assisting people with coping with COVID-19 and delivering health care while abiding by social distancing measures. This article discusses three areas in the industry that are still attracting investment activity amid the COVID-19 pandemic. 

Mental and Behavioral Health

While medical care providers are increasing their efforts to combat isolation and loneliness as Americans comply with state “shelter in place” orders, the mental health and behavioral health sectors are seeing increased investment activity including investment in startups along with established companies. 

Investment funding for mental health startups hit a record high in the first quarter of 2020 with an emphasis on employer-focused startups that offer mental health services. For example, Lyra Health, a company which offers a mental health platform for employer’s workforce founded on evidence-based treatments, secured a $75 million funding round in March. Likewise, Vida Health, a virtual health care platform for employers that connects people with chronic ailments to professional therapists and coaches, raised $25 million to meet the increased demand for mental health services surrounding the COVID-19 pandemic.

Investors are also increasing investment to established firms that provide behavioral health care services. As one example, in April 2020, LifeStance Health, a leading provider of outpatient behavioral health services in the United States, announced that TPG Capital would be joining its current investors, Summit Partners and Silversmith Capital Partners, to support LifeStance’s expansion of behavioral health services. Additionally, UnitedHealth Group’s Optum Ventures medical provider unit is in talks to purchase AbleTo, a provider of virtual behavioral health care services.

Key Take Aways: 

  • The expansion of telemedicine as an approved behavioral health modality will accelerate consumer access to mental health care. 
  • The behavioral health field will increase its intersection with primary care as behavioral therapists and clinicians provide early and preventative treatment options for patients before possible inpatient stays or more aggressive outpatient treatment is sought. 
  • It is likely that payers will embrace these models since behavioral health will provide a “first line of defense” and may result in decreased costs and enhanced outcomes. As a result, value based payments models for behavioral health may soon be around the corner.


As the pandemic has forced primary care and specialty physicians to adopt virtual care and telehealth to allow patients to continue to receive care while social distancing, firms helping facilitate remote medical care are gaining increased attention from investors amid the COVID-19 pandemic. This year, the U.S. telehealth industry is expected to grow considerably due to the COVID-19 pandemic. Telehealth service areas that are gaining much of investor’s attention include companies that provide behavioral and mental health services and primary care. 

Some recent examples of investments in the field include:

  • Masimo Corp. acquired certain connected care business assets from NantHealth Inc. for $47.25 million.
  • Carbon Health, a primary care provider using in-person and virtual care to provide services, announced that it raised an additional $28 million for its Series B1 round.

In addition to the increased investment attention to the telehealth industry in the U.S., the Canadian government is also investing in telehealth as a way to provide Canadians with more virtual health resources and mental health tools to cope with the effects of the COVID-19 pandemic. On Sunday May 3, 2020, Prime Minister Justin Trudeau pledged $170M to develop digital mental health services in wake of the coronavirus outbreak. The investment funds will be used to develop online platforms and apps to improve access to mental health resources and expand capacity to deliver health care virtually.

Key Take Aways:

  • The COVID-19 pandemic has enabled CMS and State agencies to relax regulations surrounding payment reform, clinician cross State licensure, face-to-face visit waivers, and originating site expansion. 
  • It is likely that these changes will become permanent features of the health care landscape when the pandemic is over as physicians, payers and patients become more and more comfortable with the “new norm” of health care delivery. As a result, the telehealth industry is likely to continue to grow at a rapid rate.  

Artificial Intelligence in Health Care

Artificial Intelligence (AI) has significant and wide-ranging potential in the health care industry and investment in machine learning and AI is ramping up as investors look to tap into this growing field. According to an Accenture report, growth in the AI health care market is expected to reach $6.6 billion by 2021—a compound annual growth rate of 40%. Accenture also forecasts that AI applications could create $150 billion in annual savings for the U.S. health care economy by 2026. 

Areas where the health care industry is seeing more and more use of AI are in the sectors of medical diagnostics, drug discovery, and clinical trials. In addition, medical providers are also looking to AI to help maximize resources as they struggle to treat the influx of patients presenting with COVID-19 symptoms. As an example, Quebec-based AI supercluster, Scale AI, invested $3.4 million into eight projects focused on solutions addressing challenges brought on by the COVID-19 pandemic.

Key Take Aways:

  • Clinical liability in AI is an ongoing area of development. While it is recognized that AI takes many shapes (some administrative, others direct diagnostic and clinical) the question of when will a provider or clinician be exposed to liability for using AI tools (or conversely not using AI tools) and instead relying on professional judgment alone is still to be decided.
  • This is an evolving area of risk management for AI software developers, providers and payers. AI has a bright future but how it is actually used by clinicians and providers in the health care field will be determined based on the health care setting, the AI resource and its purpose. 
© 2020 Foley & Lardner LLPNational Law Review, Volume X, Number 139


About this Author

Melesa Freerks, Foley Lardner, health care business lawyer, corporate attorney

Melesa A. Freerks is an associate and health care business lawyer with Foley & Lardner LLP. She is experienced with advising health care clients regarding corporate transactions, compliance programs, fraud and abuse issues, physician employment agreements, privacy issues, and tax-exempt status. She is a member of the Health Care and Life Sciences Industry Teams.

Ms. Freerks provides transactional counsel to health care organizations, group practices, physicians and other health care companies in a variety of business transactions, including...

Christopher J. Donovan, Foley Lardner, Partner, Litigation Lawyer

Christopher J. Donovan is a partner with Foley & Lardner LLP. He focuses his practice on advising companies and their investors and lenders in mergers and acquisitions, recapitalizations, buyouts and restructurings as well as advising on a broad range of commercial arrangements. Mr. Donovan has particular experience in the health service, particularly post-acute, and life sciences sectors. He has a unique blend of deep regulatory as well as corporate and finance experience to bring to a transaction as a result of his consummating dozens of health and life science deals, both domestic and international. He is a member of the firm’s Health Care and Life Sciences Industry Teams as well as the Private Equity & Venture Capital Practice.

Prior to joining Foley, Mr. Donovan was a member of the Corporate and Health Practice Groups for 29 years in the Boston office of McDermott Will & Emery LLP.