The primary bright spot in health IT that emerged in the survey was virtual care, remote care and telemedicine, with three-quarters of respondents reporting interest in companies focused on those areas, compared to just 67.5% prior to the pandemic.
The survey seemingly reaffirms trends spotted last quarter.
Digital health startups got a collective $4.5 billion in funding during 2020's first quarter, a 4% drop from $4.7 billion in funding during the fourth quarter of last year, according to a report from CB Insights, a firm that analyzes data on venture capital and startups. Funding deals in digital health also dropped 8% quarter-over-quarter.
Deals involving telemedicine companies, however, doubled—rising from 51 funding deals in last year's fourth quarter to 103 deals in the first quarter of 2020.
Telemedicine funding rose to $1.6 billion, up 278.9% from $418 million in 2019's fourth quarter.
"Telehealth has been the strongest example of growth," said Marissa Schlueter, a senior analyst at CB Insights. She added that mental health and social determinants of health startups have also seen a rise in funding in recent months.
CB Insights hasn't completed its report for 2020's second quarter, but Schlueter said a preliminary review of funding data suggests digital health funding may continue to drop. Based on data available to date for the second quarter, funding deals for digital health startups are expected to be down 6% quarter-over-quarter and down 12% year-over-year.
"For the full year, I would expect that deals will probably be down slightly," she said.
Telemedicine has experienced marked growth in response to the COVID-19 outbreak, helped by federal agencies waiving regulatory restrictions and expanding reimbursement.
In fact, telemedicine spending is expected to grow to $250 billion a year as COVID-19 paves the way for virtual and remote care, according to a recent report from consulting firm McKinsey & Co.
UnityPoint Health's $100 million venture capital fund recently invested in Bright.md, an asynchronous telemedicine startup. Discussions for the deal started before COVID-19, but it "came together relatively quickly after the outbreak," said Matthew Warrens, managing director of innovation at UnityPoint Health Ventures.
Warrens said COVID-19 hasn't shifted the fund's focus, since patient-facing digital tools were already part of its strategy.
"If anything, COVID will accelerate the consumer demand for these digital products," Warrens said. West Des Moines, Iowa-based UnityPoint Health launched the venture capital fund in May of last year to invest in early-stage digital health, medical device, therapeutic and healthcare services startups.
Tim Epple, a principal at healthcare consultancy Avalere Health who advises private equity firms, said he's seen a dip in investing interest across healthcare. Some private equity firms have paused investments into provider groups and physician services on account of lower patient volumes and revenue experienced during the pandemic.
But firms that typically invest in provider groups could see gains from investing into telemedicine companies and bringing those virtual care services to physician practices in their portfolio, he said.
"Not only are you investing in a stand-alone asset or platform that has its own merit … you're actually investing into a platform that, in a lot of ways, could probably integrate with your current portfolio," Epple said.
Investors' waning interest in other health IT segments likely won't last forever, according to Healthcare Growth Partners' survey.
Though most private equity funds indicated COVID-19 would lead to a moderate decline in their firm's view of health IT valuations over the next six to 12 months, most said COVID-19's effect on health IT valuations over the long-term would be neutral or a moderate increase.
McCord said he expects to see the dip in private equity funds' interest in health IT segments to continue during the COVID-19 pandemic, largely on account of uncertainty about a second wave. But "I think once we get on the other side of the pandemic, you'll see that sentiment change," he said.