The healthcare industry is undergoing a digital transformation, with health technology becoming central to care delivery and cost management. From managing chronic diseases to providing mental health services, digital solutions are changing how health plans, employers and health systems operate. The 2024 State of Digital Health Purchasing survey, conducted by the Peterson Health Technology Institute, provides valuable insights into digital health purchasing trends, including rising investments, contracting challenges and future priorities for healthcare organisations.
Rising Demand and Increased Spending on Digital Health
The adoption of digital health solutions has surged in recent years, with 75% of health purchasers reporting increased spending, primarily driven by consumer demand for more accessible and efficient healthcare services. Patients and consumers are increasingly turning to digital tools for remote monitoring, virtual care and app-based health management, seeking greater control over their health. In response, healthcare providers are expanding their use of digital solutions to meet these expectations.
In addition to consumer demand, improved clinical outcomes are a key factor driving this investment. Around 62% of purchasers indicated that their digital health investments are motivated by the positive impact on health outcomes. Digital health solutions targeting diabetes, mental health and primary care are widespread, addressing high-burden conditions with measurable improvements in patient health. Cost savings also play a role, with 47% of respondents citing financial considerations as a reason for increased spending. Digital health technologies are increasingly seen as essential to controlling healthcare costs and ensuring the sustainability of the healthcare system.
These findings demonstrate that digital health solutions are no longer optional but vital to healthcare strategies. Expanding digital health portfolios is critical for health plans, employers and health systems to remain competitive, meet consumer expectations and manage rising care costs.
Contracting Process: Criteria and Challenges
While enthusiasm for digital health solutions is high, selecting and contracting with vendors presents challenges. According to the survey, health purchasers place great emphasis on evidence-based outcomes when evaluating digital health vendors. Clinical outcomes, return on investment (ROI), and ease of use are ranked as the top factors for choosing a digital health solution.
A remarkable 99% of purchasers prioritise improving clinical outcomes. Health systems, in particular, focus on these outcomes to determine whether a digital solution delivers value. Similarly, 65% of respondents underscore the importance of financial ROI, especially employers, who are keen to see measurable reductions in healthcare costs and improvements in employee productivity.
However, contracting challenges remain. Most purchasers (99%) use internally developed criteria to evaluate vendors, leading to a lack of industry-wide standardisation. This can create difficulties for vendors in meeting the diverse expectations of different healthcare organisations. Additionally, the average contract length for digital health solutions is two years or less, limiting the time available for solutions to demonstrate their long-term benefits. Short-term contracts, in particular, can pose challenges for solutions to manage chronic conditions, where sustained improvements often take time to materialise.
Health purchasers also face difficulties in ensuring vendor accountability. Although performance-based contracts are becoming more popular, with 79% of purchasers using or planning to use risk-based models, many organisations struggle to develop effective metrics for measuring vendor performance. While clinical outcomes, ROI and user satisfaction are common benchmarks, setting realistic expectations and holding vendors accountable remains complex.
Expanding Digital Health Offerings and Embracing Risk-Based Contracts
Looking ahead, most health purchasers plan to maintain or increase their investment in digital health solutions. Over 95% of respondents intend to sustain or expand their digital health portfolios over the next 12 months, driven by a need to improve patient experience, increase access to care and reduce costs. Health systems are particularly focused on enhancing patient satisfaction, with 80% aiming to improve patient experience through digital health tools. Employers are similarly invested in digital health, focusing on improving employee productivity and reducing absenteeism.
A significant trend highlighted in the survey is the growing interest in performance-based or risk-based contracts. These contracts align vendor compensation with specific performance metrics, such as clinical outcomes or reduced healthcare spending. Health plans and employers are leading the way in adopting these models, with 79% of respondents either using or exploring risk-based contracts. This shift reflects a growing demand for accountability in digital health as purchasers seek solutions that deliver measurable improvements in outcomes and cost savings.
As health purchasers expand their digital health offerings, there is also an increasing focus on addressing health equity and social determinants of health. The survey reveals that many purchasers want to invest in solutions that improve access to care for underserved populations, reduce health disparities and promote equitable outcomes. Digital solutions targeting mental health, substance use disorders and preventive care are high on the list of future investments. Purchasers remain committed to addressing chronic conditions such as diabetes, cardiovascular disease and obesity, which continue to represent significant healthcare challenges.
The 2024 State of Digital Health Purchasing survey shows that the healthcare industry is rapidly adopting digital health solutions. As health plans, employers, and health systems continue to invest in digital tools, they aim to improve patient outcomes while controlling healthcare costs. However, challenges in vendor selection and performance evaluation remain. The future of digital health will likely see an increased focus on performance-based contracts, with purchasers demanding more accountability from vendors.
Expanding digital health offerings to address key areas like mental health, chronic disease management and health equity will shape the next phase of digital health adoption. Digital health solutions can potentially transform care delivery, making healthcare more accessible, efficient and cost-effective. The success of this transformation will depend on health purchasers' ability to navigate vendor selection, contracting and performance measurement, ensuring that digital solutions deliver tangible value to patients and providers.
Source: Peterson Health Institute
Image Credit: iStock
