March 11, 2022

Digital health transformation: how payers can foster innovation without compromising on outcomes​

Examining the role of payers in the digital health revolution

For years now, excitement has been building across the healthcare sector over the promise of digital health transformation. Nimble, technology enabled companies would inevitably reshape the care landscape and redefine the trajectory of a sector weighted down by unsustainable cost and inequitable access to care. While the promise remains, these challenges have led industry to build value in insulated silos, focusing on specific disease states, pieces of the care continuum, or enabling tools to solve specific administrative challenges. To unlock the true value of this growing ecosystem, financial incentives must be realigned for providers to embrace transformation and stitch the discrete systems together. From this viewpoint, payers are the lynchpin in the digital health ecosystem. They can help accelerate expansion of access to care by building the missing infrastructure to safeguard patient privacy and helping clinicians turn the ever-growing pool of passive health data from consumer devices into actionable insights.

Why are payers slow to embrace change?

Payers operate slowly and conservatively. This is driven by both internal and external forces: the industry’s culture has been shaped by slow to evolve regulatory constructs, uneven engagement by members, and by the durability of the fee-for-service paradigm that continues to dominate the US health system. While innovation has continued to proliferate and industry has raced ahead pursuing the promise of digital health ecosystems highlighted above, payers have proceeded with caution.

The rationale behind this is sound: digital health services must prove the health and economic outcomes values that they have long promised. But the longer commercial payers in particular wait, the greater the risk of disintermediation grows. New risk-bearing entrants have emerged with focused, innovative solutions for particularly challenging components of the continuum of care. Babylon Health is building on the foundation of its virtual care platform to create an expansive longitudinal offering. Oscar Health is similarly expanding its services portfolio of virtual care offerings to migrate lower-acuity encounters out of high-cost settings. These organizations are capitalizing on the growing recognition of the long-term value of digital health solutions in both commercial and public markets- for the first time on record, over 90% of employers reported offering telemedicine services through their sponsored plans, according to the Kaiser Family Foundation.¹

Digital submarkets are consolidating – payers have a unique opportunity to integrate solutions and create value for members and providers

How can payers have an impact?

Despite the rate of change, this subsector is still young, and it will take time to generate a sufficient body of real-world evidence to see meaningful change at scale. Payers can support this transition by implementing the lessons learned elsewhere in the industry, and address some of the boots on the ground reality of the market:

  • Lead with underserved populations:

Medicaid populations in particular trail behind Medicare and commercial segments in terms of access to preventive services. Any lift to engagement and access can improve health economic outcomes. Commercial and public payers should work together to build more inclusive plans to reach Medicaid enrollees and create patient-centric strategies.

  • Invest in enabling capabilities:

Leading payers are uniquely positioned given their scale to remove the bottleneck of passive health data generated by wearable technology used by their members. Partnership with EHR companies to expand analytics and security capabilities can help to turn this passive data into meaningful clinical insights for providers and create immediate value for the system.

  • Broaden emphasis on community-based sites of care:

While there is no shortage of health hubs popping up in the market today, payers should continue to invest in low-cost settings and use digital technologies to expand service offerings.​

  • Embrace value-based care:

Underpinning each of these opportunities is the core need to integrate digital roadmaps into a broader value-based care strategy. Better care coordination and episodic transfer will be required to make the recent growth of digital care permanent.


The digital health revolution is broad in scope: access to care, fiscal sustainability, and health equity are all tied up in its success. Payers will require focus and commitment to a long-term strategy to foster rather than hinder innovation. They must embrace their role in setting the right template for digital ecosystems before these networks are ready for scale. Focusing first on those markets with the greatest need will find willingness among patients and providers for experimentation and improve sustainability for the system as a whole.

¹ “2021 Employer Health Benefits Survey” Kaiser Family Foundation, Nov 2021,

Related team members

Richard Crumb
Managing Partner & Co-Founder Menlo Park
Jaime Batista
Principal Yarmouth
Walt Shepard
Principal Boston
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