Health Tech Startups Pursue Consolidation in Virtual Care Model

The health tech industry is witnessing a significant trend of consolidation as startups opt for mergers and acquisitions to stay afloat. This development is fueled by the challenges of raising capital, advances in artificial intelligence, and the influence of private equity. With a notable increase in mergers and acquisitions (M&A) deals, larger companies are strategically acquiring smaller entities to enhance their virtual care offerings.

XRHealth Expands Through Strategic Acquisition

XRHealth, a company specializing in therapeutic virtual reality, has recently acquired RealizedCare. This marks XRHealth's third acquisition in the past three years, highlighting its commitment to expanding its capabilities in the virtual care space. The acquisition was driven by a shared vision between XRHealth and RealizedCare, as both companies aim to leverage virtual reality technology to improve therapeutic outcomes.

RealizedCare's decision to sell to XRHealth reflects a broader trend among health tech startups that are struggling to secure funding. Faced with the choice between selling or shutting down, many startups are choosing the former, leading to an increase in M&A activity within the digital health sector.

Innovaccer Strengthens Position with Story Health Acquisition

Innovaccer, a prominent health tech company, has recently acquired Story Health, a startup focused on addressing heart failure. This acquisition marks Innovaccer's fourth within a year, underscoring its aggressive strategy to enhance its capabilities and offerings. By integrating Story Health's expertise in heart failure, Innovaccer aims to provide more comprehensive solutions within the virtual care model.

The acquisition trend is not unique to Innovaccer. A growing number of well-established health tech companies are acquiring smaller players to strengthen their market position and expand their technological offerings. This consolidation is largely driven by profitable companies seeking to absorb innovative startups that face financial challenges.

Surge in Health Tech Mergers and Acquisitions

The digital health sector has experienced a surge in mergers and acquisitions, with 102 health tech M&A deals recorded in the first half of 2025 alone. This number is significant compared to the 112 deals in all of 2024 and 109 in 2023. The increasing frequency of these transactions reflects the ongoing consolidation trend within the industry.

The rise in M&A activity is propelled by advancements in artificial intelligence and the involvement of private equity firms. As AI continues to transform healthcare delivery, companies are keen to integrate cutting-edge technologies into their offerings through strategic acquisitions. Additionally, private equity firms are playing a crucial role by providing the necessary capital to facilitate these deals.

Consolidation as a Survival Strategy

The current wave of consolidation is driven by several factors, with the financial struggles of health tech startups being a primary catalyst. Many startups find it challenging to secure adequate funding in a competitive landscape, prompting them to explore merger and acquisition opportunities as a viable survival strategy. By aligning with larger, financially stable companies, these startups can continue to innovate and contribute to the virtual care ecosystem.

Overall, the trend of consolidation in the health tech sector is poised to continue as companies seek to enhance their technological capabilities and expand their market reach. This strategic approach not only ensures the survival of innovative startups but also contributes to the advancement of virtual care models that are transforming healthcare delivery.