Digital Health and Delivery: Virtual Care Companies and Their Underwriting

Sector Definition and Market Structure

Digital Health and Delivery is one of the five sectors inside LeverVenture's Life Sciences and Healthcare mandate, alongside Biopharma and Therapeutics, Diagnostics and Precision Medicine, Devices and Robotics, and Longevity and Neuro. It covers companies that deliver care outside the traditional office visit, and the software and services that make that care billable, measurable and safe.

Medicare defines the core modality narrowly. Under 42 CFR 410.78, an interactive telecommunications system means, at a minimum, audio and video equipment permitting two-way, real-time interactive communication between the patient and the distant-site physician or practitioner, and it may also include real-time audio-only technology for a service furnished to a patient at home when the practitioner can use video but the patient cannot, or does not consent to it.

Market Segments

We describe the virtual care market in five segments, each with its own buyer, evidence burden and regulatory exposure.

• Direct-to-consumer virtual visits, paid in cash or through a health plan, where the cost of acquiring and retaining a patient decides the economics.
• Employer and health-plan programs, sold per member or per engaged member, where renewal depends on documented outcomes.
• Medicare-billed virtual services, including telehealth visits and remote monitoring under the Physician Fee Schedule, where federal coverage rules set the ceiling.
• Technology-enabled provider groups, often organized through a management services organization, that hold risk-based contracts with Medicare Advantage plans, which CMS pays through advance monthly payments under 42 CFR 422.304.
• Clinical software sold to providers and health systems, including decision support delivered through certified health information technology.

Capital Market Conditions

Capital in the sector has concentrated. Rock Health's 2025 year-end funding overview, published January 12, 2026, reports $14.2 billion of venture funding for U.S. digital health startups across 482 deals in 2025, with mega deals above $100 million accounting for 42 percent of all funding. The same report counts 195 digital health M&A deals in 2025, up 61 percent from 2024, and more than 600 companies that last raised in 2021 or 2022 and have neither raised again nor exited.

The payer mix is moving toward managed care. KFF reports that in 2026, 35.2 million of the 64.2 million Medicare beneficiaries with both Part A and Part B, or 55 percent, are enrolled in Medicare Advantage. A Medicare Advantage plan may offer additional telehealth benefits for Part B services that are not payable under section 1834(m) of the Social Security Act, provided it also furnishes in-person access at the enrollee's election (42 CFR 422.135).

Regulatory Perimeter as of October 2026

As of October 10, 2026, CMS's Telehealth FAQ states that through December 31, 2027 beneficiaries can receive Medicare telehealth services anywhere in the United States and territories, and that starting January 1, 2028, except for behavioral health services, they will generally need to be in a medical facility and in a rural area. The Drug Enforcement Administration and HHS issued a fourth temporary extension of telemedicine flexibilities for prescribing controlled medications, effective January 1, 2026 through December 31, 2026 (90 FR 61301).

A vendor that creates, receives, maintains or transmits protected health information on behalf of a covered entity is a business associate under HIPAA (45 CFR 160.103). A consumer application outside HIPAA can fall under the FTC Health Breach Notification Rule, 16 CFR Part 318, as amended in 2024 (89 FR 47054), whose definitions reach websites, mobile applications and connected devices that track diseases, health conditions or vital signs, and which requires breach notices no later than 60 calendar days after discovery.

The HTI-1 final rule (89 FR 1192, January 9, 2024) revised the decision support interventions criterion, and in the eCFR text current as of October 7, 2026, 45 CFR 170.315(b)(11) requires intervention risk management for each predictive decision support intervention a developer supplies.

State law adds a transaction layer. Oregon's Health Care Market Oversight program, under ORS 415.500 et seq., reviews mergers, acquisitions and other business deals that involve health care entities and meet certain criteria, and the management services organization entry below summarizes the 2025 Oregon and California statutes that govern physician-practice structures.

The CMS ACCESS Model, a voluntary ten-year model that began July 5, 2026, gives Medicare-enrolled care organizations recurring outcome-aligned payments for managing conditions including high blood pressure, diabetes, chronic musculoskeletal pain and depression, with full payment tied to measurable health outcomes.

Investment Criteria and Underwriting

LeverVenture invests at the growth stage, between venture capital and buyout. The thesis states that venture capital underwrites the science, private equity underwrites the optimization, and LeverVenture underwrites the commercial inflection, where the live risk is execution. We take minority positions, we make no leverage claims, and the work in our seat is operating work.

Operating Evidence

A digital health company must meet all seven conditions the thesis names: Market, Position, Evidence, Unit economics, Management, Exit logic and Impact. A company that misses one is declined, with the reason written down. In virtual care, Evidence means clinical risk substantially retired, and Unit economics means economics that already hold at a small scale, which we read through acquisition cost, engagement and renewal in each payer channel.

Each opportunity is scored on the six LeverRating dimensions: Team, Market, Product, Traction, Financial and Thesis fit. When the product is itself a regulated device, such as software as a medical device, Product expands into regulatory position, clinical evidence, reimbursement and freedom to operate, each scored on its own. Traction means repeatable commercial motion, and we read retention, reorder and the cost of the second sale more closely than the first contract.

The ROI² condition asks for one impact measure named at entry, with a baseline, an owner and a reporting cadence, reported alongside revenue, gross margin and cash. In this sector the measure typically sits under one of the thesis's three returns, which are access to care, healthy life extended and system cost removed, and the thesis requires a payer or a provider to be measurably better off before a cost claim survives diligence.

Reimbursement and Regulatory Gates

We test five gates in every digital health and delivery file.

• Channel durability: which payer pays, under which code, contract or model, and how much revenue depends on Medicare telehealth flexibilities that CMS describes as running through December 31, 2027.
• Prescribing exposure: whether the clinical model depends on prescribing controlled medications by telemedicine under the temporary flexibilities in effect through December 31, 2026.
• Data status: whether the company acts as a HIPAA business associate, as a vendor under the Health Breach Notification Rule, or as both across product lines, and whether its consents and contracts match that status.
• Corporate structure: whether a management services organization arrangement satisfies the corporate practice and transaction-notice rules of each state where the company's clinicians practice.
• Device boundary: whether any software function meets the device definition and, if it does, which FDA pathway and change control plan govern it.

Crossing sectors is the thesis. A healthcare-driven company that is also deep tech in its sensing, that is also digital in its delivery, or that carries a clean tech dimension, with an artificial intelligence layer that makes it work, is the company we look for, and we underwrite the whole company as a single object. A care platform that ships its own regulated device is diligenced on both halves, under both the six-dimension and the ten-dimension rulers.

Artificial Intelligence as the Accelerant

Artificial intelligence is the accelerant across all five sectors, not a sixth sector. In this sector it compresses triage, documentation, monitoring and outreach, and it changes the underwriting in three places.

A function that supports a clinician, and lets that clinician independently review the basis for each recommendation, may fall outside the device definition under section 520(o)(1)(E) of the FD&C Act, as FDA's final Clinical Decision Support Software guidance of January 2026 explains, and the same guidance states that FDA's digital health policies continue to apply to device functions intended for patients or caregivers. A model meant to change after authorization relies on a predetermined change control plan, the subject of FDA's final guidance of August 2025. Decision support supplied through certified health information technology carries the requirements of 45 CFR 170.315(b)(11).

Reference Entries

• Management Services Organizationhow a management company supports a physician-owned practice, and the state and federal rules that govern technology-enabled provider groups.
• Software as a Medical Device (SaMD)the FDA definition and pathways for software that performs a medical purpose, including the clinical decision support exclusions and change control plans.
• AI Diligence in Life Scienceshow artificial intelligence claims are tested against a company's data, validation, regulatory record and quality system.
• Operating Partnerthe executive with line-management experience who helps portfolio companies improve their operations.

Related Analysis

• Life Sciences and HealthcareDigital Health: From Telemedicine to AI Diagnosticswhy prospective validation, workflow integration and liability allocation decide AI diagnostic companies once model accuracy is established.
• Life Sciences and HealthcareMental Health Tech: The $5.5B Market Opportunityhow the buyer channel, the proof of value it demands and its renewal behavior separate durable behavioral health companies from churn.
• Life Sciences and HealthcareDemocratizing Healthcare Access: Digital Platforms Bridging Rural Care Gapswhy reimbursement, broadband and referral pathways set the ceiling on virtual care in rural markets.

Governing Authority and Sources

• 42 CFR 410.78, Telehealth services (eCFR, current 2026)
• CMS, Telehealth FAQ (updated October 8, 2026)
• CMS, CY 2026 Medicare Physician Fee Schedule Final Rule fact sheet (2025)
• 42 CFR 422.135, Additional telehealth benefits (eCFR, current 2026)
• 42 CFR 422.304, Monthly payments (eCFR, current 2026)
• KFF, Medicare Advantage in 2026: Enrollment Update and Key Trends (2026)
• DEA and HHS, Fourth Temporary Extension of COVID-19 Telemedicine Flexibilities for Prescription of Controlled Medications, 90 FR 61301 (2025)
• 45 CFR 160.103, HIPAA definitions (eCFR, current 2026)
• 16 CFR Part 318, FTC Health Breach Notification Rule, as amended at 89 FR 47054 (2024)
• ONC, HTI-1 Final Rule, 89 FR 1192 (2024)
• 45 CFR 170.315, Certification criteria for health IT (eCFR, current October 2026)
• Oregon Health Authority, Health Care Market Oversight program, ORS 415.500 et seq. (2026)
• CMS Innovation Center, ACCESS Model (2026)
• FDA, Clinical Decision Support Software, final guidance (January 2026)
• FDA, Predetermined Change Control Plan for AI-Enabled Device Software Functions, final guidance (August 2025)
• Rock Health, 2025 Year-End Digital Health Funding Overview (2026)