What Do Investors in the Women’s Health Industry Need to Know about Telehealth Laws in 2022?

Contributor: Delphine O'Rourke, Esq.
To learn more about Delphine, click here.

 

2022 is expected to blow by 2021 as a record-breaking year of investments and exits in the women’s health and wellness industry. Success for investors and strategic partners – just like with any new investment thesis – requires an understanding of the determinative laws with both short- and long-term impact. Healthcare laws on telehealth, expanded payor reimbursement, and closing of gaps between existing laws and innovative solutions will shape the future of the women’s health and wellness industry. However, no legal area is expected to change and have as much uncertainly in 2022 as telehealth. Investors of all types are sourcing deals for 2022 and talking about women’s health as the next big thing. This is what investors need to know about the predicted future of telehealth laws in 2022.

From giants like Goldman to startup #femtech funds like Coyote Ventures, international and U.S. investors are jockeying to find the next Maven, which raised $110 million in its recent series D funding round.

Maven1 is now the first women’s health focused startup to reach a total valuation of over $1 billion.2 In the past six months, digital technology, fertility, and women-centric provider services made headlines: Kindbody completing a $62 million raise;3 Ro, a telehealth company, acquiring Modern Fertility for $225 million;4 and the biopharma giant Merck, launching Organon, a company focused on providing general women’s health services.5 While women’s health remains remarkably underfunded compared to “men’s health,” the trend is more promising than ever before.

To understand the critical impact of healthcare regulations on investment and M&A activity in women’s health, it is necessary to understand the story of the industry over the last several years, including the COVID-19 effect. Specifically, the explosion of the women’s health and wellness industry has been fueled by several key economic, demographic, and market factors. Then COVID-19 hit, and the government’s relaxation of healthcare laws ignited a powerful spark for accelerated change.

The first key factor is women’s buying power and influence in healthcare and beyond. Women now direct 83% of all consumption in the United States6 and are predicted to control much of the $30 trillion of the “baby boomer” generation’s financial assets by 2030.7 In the U.S., 90% of healthcare-related household decisions are made by women.8 In addition to serving as the Chief Financial Officer, women are also the undisputed Chief Medical Officer of their families.9 

Not only have women achieved greater purchasing power, but there has been a commercial recognition of the massive potential market for services, technology, and goods in the women’s health and wellness industry. From luxury hotel spas to remote patient monitoring for heart attacks, the women’s health and wellness sector is vast and varied and goes well beyond reproduction. No other industry can boast 3.89 billion potential customers worldwide and 167 million just in the U.S. Women represent more than 50% of the world’s population. 

Yet for decades, women’s health was ignored, undervalued, and underfunded. That is changing. And changing rapidly. Women are demanding, and paying, for better access, higher quality, and to be at the center of the patient experience. From in-home screening of cervical cancer to apps to support mental health during menopause and in the massive whitespace that was never previously considered, more innovative technologies, services, and goods are coming to market faster than ever before. Superstars such as Clue, Carrot Fertility, and Tia are all revolutionizing women’s health in America with the thesis that medical services for women must be delivered through a female-centric and culturally-sensitive model.

The global pandemic has exacerbated existing gender health disparities in the U.S. and acutely affected women, the segment of the population most vulnerable to poverty, housing insecurity, and other sources of inequity.10 The pandemic has also shone a spotlight on issues related to quality and outcomes of care for American women which will need to be solved by both the private and public sectors and has in some cases begun to spur government intervention.

The global FemTech market was valued at over $22.5 billion in 2020,11 with an expected growth rate of 16.2% compound annual growth rate (“CAGR”) through 2027.12 The fertility sector will outpace itself yet again in 2021, bringing in more than $2.4 billion from more than 46 deals.  By 2026, the fertility sector alone is projected to reach $41 billion in sales.13 The global menopause market was valued at $14.7 billion in 2020.14 Overall, the market valuation of FemTech is on track to cross $65 billion 2027.15

Growth of the women’s health and wellness industry was buzzing when COVID-19 hit. Then federal and state governments relaxed healthcare laws in response to the pandemic, and the women’s health and wellness sector got a spark that ignited its current explosion. That spark was telehealth. Particularly for telehealth, 2022 will be critical as the COVID-19 pandemic seems likely to continue much longer, and the need for healthcare continues to increase more rapidly than anyone had anticipated before the Delta and Omicron variants. 

In the decade leading up to the pandemic, the adoption of telehealth in the U.S. had been hindered by a patchwork of state laws that placed restrictive requirements around the provision of remote care. Each state had its own laws which often conflicted and, generally, limited the adoption of telemedicine. Key areas such as how the patient-physician relationship could be established, whether and how asynchronous v. synchronous communication could be provided, physicians’ ability to provide care to an out-of-state patient, and payment parity with in-person care, were among the major regulatory obstacles to telehealth. 

Then came COVID-19 and the desperate need for Americans to get medical care of all types outside the four walls of a hospital or physician’s office. Upon the declaration of an emergency under the Strafford Act or National Emergency Act, the Secretary of HHS (“Secretary”) declared a Public Health Emergency (“PHE”) on January 31, 2020, thereby empowering the Secretary to temporarily waive, for as long as the PHE remains in effect, certain Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) program requirements and conditions of participation under Section 1135 of the Social Security Act (commonly referred to as “Section 1135 waivers”).16  A PHE declaration lasts until the Secretary of HHS declares the PHE no longer exists or ninety days after the date on which the Secretary declared the PHE, whichever occurs first. The Secretary may extend the PHE declaration for subsequent 90-day periods for as long as the PHE continues to exist. The PHE was set to expire on October 18, 2021 and was renewed for another ninety days on October 15, 2021. The new expiration date is January 16, 2022.

Under the authority granted by the PHE, the Centers for Medicare & Medicaid Services (“CMS”) issued a blanket 1135 waiver revising telehealth.17 Under this waiver, Medicare, Medicaid, and CHIP providers are eligible to treat both new and established patients using telehealth; all healthcare professionals participating in Medicare are eligible to provide and be reimbursed for telehealth services; reimbursement for audio-only communication is expanded; telehealth visits may occur using third party apps such as FaceTime and Google Hangouts;18 and government healthcare programs, including Medicare, reimburse telehealth visits at the same rate as in-person visits.19

Concurrently, states have issued executive orders relaxing certain telehealth and in-state licensure requirements for providers, including expanding the types of services that may be delivered using telehealth, allowing the provision of services via telephone under certain circumstances, and removing or reducing patient cost-sharing for telehealth visits. While some states, like Florida, have let the executive orders expire, resulting in the reinstatement of stringent regulatory requirements, others, like New York,20 have relaxed certain telehealth guidance for the remainder of the PHE.

To date, telehealth utilization in the U.S. has increased to levels 38 times higher than before the pandemic.21 The boom in “tele everything” – health, wellness, education, community – has fueled both the rapid growth of existing women’s health and wellness platforms as well as highly promising new entrants to the market.  

Without the COVID-19 waivers, the explosion of telehealth over the past eighteen months would not have happened as quickly as it has. What has everyone in the space speculating is what will happen when the Secretary of HHS ends the PHE. The blanket 1135 waiver and state executive orders will likely expire, and the restrictive pre-COVID healthcare regulations will take effect once again. 

There has been no concrete indication the Biden Administration intends to push for a national, federal, telehealth law that would ensure the regulatory relaxation continues post-National Emergency, as was predicted last Spring. Some states, such as Arizona, Massachusetts, and South Dakota, have passed legislation that make certain permanent changes to their state telehealth laws, codifying requirements that allow interstate practice for telehealth services under certain conditions, providing reimbursement rate parity for telehealth services, and allowing for asynchronous communication under certain circumstances.22

The central role federal and state executive action continue to play in the expansion of tele-everything in the women’s health and wellness sector is undisputed. An abrupt end to the regulation relaxation would, arguably, have a significant impact on new founders with innovative solutions and companies that are attempting to scale. It is therefore critical investors focus on the changes and future of the telehealth laws and regulations both at the federal and state levels and strategically consider multiple regulatory scenarios in their business and investment plans. Investing and transacting in the women’s health and wellness space is the future, and the right now, of health and well-being in our country. Don’t miss out.

What to watch out for in 2022:

  • Ongoing renewals of public health emergency every 90 days. The current public health emergency will end on January 20, 2022.
  • A federal proposal for a federal telehealth law (focus on the Centers for Medicare and Medicaid “CMS”)
  • States that are allowing their state executive orders to lapse
  • States that are implementing new state telehealth regulations
  • Expansion or retraction of third-party apps that providers and patients can use for telemedicine, i.e. Zoom, Google Meets, What’s App?
  • Changes in private and government payor reimbursement for telehealth and telemedicine services (e.g., fertility testing for Medicaid patients, reimburse-ment rates for remote patient monitoring, coverage of pelvic health therapy)

 

Contact Delphine at: [email protected]


References:

  1. Kaufman M. Maven’s unicorn status signals growing investor interest in women’s health, entrepreneurs say, Crain’s NY Bus. (Aug. 18, 2021, 5:30 AM), https://www.crainsnewyork.com/health-pulse/mavens-unicorn-status-signals-growing-investor-interest-womens-health-entrepreneurs.

  2. Id.

  3. Kindbody Announces Largest Fertility Raise in History with $62M Series C Funding, PRNewswire (Jun. 25, 2021, 6:00 AM), https://www.prnewswire.com/news-releases/kindbody-announces-largest-fertility-raise-in-history-with-62m-series-c-funding-301320003.html.

  4. Landi H. Ro will acquire women's health startup Modern Fertility in $225M deal, Fierce Healthcare (May 19, 2021, 11:58 AM), https://www.fiercehealthcare.com/digital-health/ro-will-acquire-women-s-health-startup-modern-fertility-225m-deal.

  5. Parsons L. Merck & Co spinoff Organon launches with the aim of 'improving health outcomes for women’, PMLiVE (June 3, 2021), http://www.pmlive.com/pharma_news/merck_and_co_spinoff_organon_launches_with_the_aim_of
    _improving_health_outcomes_for_women_1371176    .

  6. Beyond the VC Funding Gap: Why VCs Aren’t Investing in Diverse Entrepreneurs, How it’s Hurting their Returns, and What To Do About It, Morgan Stanley 1, 10 (2019), https://www.morganstanley.com/ideas/venture-capital-funding-gap.

  7. Baghai P et.al. Women as the next wave of growth in US wealth management, McKinsey & Co. (July 29, 2020), https://www.mckinsey.com/industries/financial-services/our-insights/women-as-the-next-wave-of-growth-in-us-wealth-management.

  8. The FemTech market is expected to grow at a CAGR of over 13% during the forecast period 2020-2026. Globe Newswire. (June 4, 2021, 7:40 AM), https://www.globenewswire.com/news-release/2021/06/04/2241990/0/en/The-femtech-market-is-expected-to-grow-at-a-CAGR-of-over-13-during-the-forecast-period-2020-2026.html.

  9. Id.

  10. Connor J et.al. Health risks and outcomes that disproportionately affect women during the Covid-19 pandemic: A review, 266 Soc. Sci. Med. 1,5  (2020), https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7487147/pdf/main.pdf.

  11. Femtech Market Size By Type (Products, Software, Services), By Application (Reproductive Health, Pregnancy & Nursing Care, Pelvic & Uterine Healthcare, General Healthcare & Wellness), By End-use (Direct-toconsumer, Hospitals, Fertility Clinics, Surgical Centers, Diagnostic Centers), COVID-19 Impact Analysis, Regional Outlook, Application Potential, Competitive Market Share & Forecast, 2021-2017. Glob. Mkt. Insights (July 2021), https://www.gminsights.com/industry-analysis/femtech-market?utm_source=PrNewswire.com&utm_medium=referral&utm_campaign=Paid_PrNewswire.

  12. Id.

  13. Femtech Expected to Break New Grounds at 5.

  14. Menopause Market Size, Share & Trends Analysis Report By Treatment (Dietary Supplements, OTC Pharma Products), By Region (North America, Europe, APAC, Latin America, MEA), And Segment Forecasts, 2021-2028. Grand View Rsch. (June 2021), https://www.grandviewresearch.com/industry-analysis/menopause-market.

  15. Femtech Market Revenue to Cross USD 65 Bn by 2027.

  16. CMS Takes Action Nationwide to Aggressively Respond to Coronavirus National Emergency. Ctrs. for Medicare & Medicaid Servs. (Mar. 13, 2020), https://www.cms.gov/newsroom/press-releases/cms-takes-action-nationwide-aggressively-respond-coronavirus-national-emergency.

  17. Unlike a traditional 1135 waiver, providers don't have to apply for an individual 1135 waiver.

  18. Notification of Enforcement Discretion for Telehealth Remote Communications During the COVID-19 Nationwide Public Health Emergency. U.S. Department of Health & Hum. Servs. (Jan. 20, 2021), https://www.hhs.gov/hipaa/for-professionals/special-topics/emergency-preparedness/notification-enforcement-discretion-telehealth/index.html.

  19. COVID-19 Emergency Declaration Blanket Waivers for Health Care Providers, Ctrs. for Medicare for Medicare & Medicaid Servs. (May 24, 2021), https://www.cms.gov/files/document/summary-covid-19-emergency-declaration-waivers.pdf.

  20. Comprehensive Guidance Regarding Use of Telehealth including Telephonic Services, N.Y. State Department of Health (June 2021), 
    https://health.ny.gov/health_care/medicaid/program/update/2021/docs/mu_no07_jun21_speced_telehealth_pr.pdf.

  21. Bestsenny O et.al. Telehealth: A quarter trillion dollar post COVID-19 reality? McKinsey & Co. (July 9, 2021), https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/telehealth-a-quarter-trillion-dollar-post-covid-19-reality.

  22. Jerich K. Arizona passes law to dramatically expand telehealth access. Healthcare IT News. (May 13, 2021, 3:58 PM), https://www.healthcareitnews.com/news/arizona-passes-law-dramatically-expand-telehealth-access; Jerich K. Massachusetts governor signs law safeguarding telehealth coverage. Healthcare IT News. (Jan. 4, 2021, 4:22 PM), https://www.healthcareitnews.com/news/massachusetts-governor-signs-law-safeguarding-telehealth-coverage; Wicklund E. South Dakota Governor Permanently Expands Telehealth Coverage. mHealth Intel. (Mar. 11, 2021), https://mhealthintelligence.com/news/south-dakota-governor-permanently-extends-telehealth-coverage.