A digital health company uses software, sensors, connectivity, or data analytics to deliver health care services, improve medical outcomes, or help people manage their own wellness. The industry was valued at $312.9 billion in 2024 and is projected to reach $2.19 trillion by 2034, growing at roughly 21% per year. That growth reflects how broad the category has become: a digital health company might build an app that delivers therapy for insomnia, a platform that lets you video-call a doctor, or an algorithm that scans medical images for signs of cancer.
The term covers a wide spectrum. The FDA defines digital health as spanning mobile health, health information technology, wearable devices, telehealth and telemedicine, and personalized medicine. What unites these companies is that their core product is technology applied to a health problem, rather than a drug, a surgical device, or a traditional clinic.
The Main Types of Digital Health Companies
The digital health landscape breaks into several distinct categories, each solving a different part of the health care puzzle.
Telehealth and telemedicine companies connect patients with clinicians through video, phone, or messaging. These platforms replace or supplement in-person visits for everything from urgent care consultations to ongoing mental health therapy. Some focus on a single specialty, while others function as broad virtual clinics.
Remote patient monitoring (RPM) companies use connected devices to track vital signs outside a hospital or clinic. The data typically includes blood pressure, heart rate, blood oxygen levels, blood sugar, body temperature, and respiratory rate. That information flows to a care team in real time, allowing earlier detection of problems like dangerously high blood pressure or irregular heart rhythms before they become emergencies.
Mobile health (mHealth) companies build smartphone apps for everything from tracking physical activity to supporting clinical decision-making. This is the largest subcategory in published research, appearing in more studies than AI, web-based tools, or connected devices. Some apps are simple wellness trackers. Others are sophisticated enough to guide patients through behavioral therapy programs or help clinicians make better treatment decisions at the point of care.
AI and diagnostics companies develop algorithms that analyze medical data, often imaging. Radiology leads this space by a wide margin: 723 of the 950 FDA-cleared clinical AI algorithms as of mid-2024 were designed for radiology. These tools do things like automatically grade breast density on mammograms, quantify plaque buildup in heart arteries from CT scans, measure brain atrophy on MRIs, and flag suspected strokes or pulmonary embolisms before a radiologist has even opened the scan. Some send instant smartphone alerts to stroke teams when they detect a brain bleed.
Health information technology companies build the infrastructure that health systems run on: electronic health records, data analytics platforms, and interoperability tools that let different systems share patient information.
How Digital Therapeutics Differ
Digital therapeutics, often called DTx, occupy a unique corner of the industry. These are software programs that treat, manage, or prevent a medical condition, and they’re held to a much higher standard than a typical health app. The Digital Therapeutic Alliance defines them as “evidence-based therapeutic interventions driven by high-quality software programs to prevent, manage, or treat a medical disorder or disease.”
Three characteristics set DTx apart. First, the product is software, classified by the FDA as “software as a medical device.” Second, it must produce a therapeutic effect, similar to what you’d expect from a drug or medical device. Third, it must be backed by clinical evidence, typically from randomized controlled trials published in peer-reviewed journals. Most DTx products that have received regulatory approval went through the same kind of rigorous clinical testing required for conventional drugs. A DTx product for substance use disorder, for example, would need trial data showing it actually reduces substance use, not just user satisfaction surveys.
This evidence requirement is what separates a digital therapeutics company from a wellness app company. Both might deliver content through a smartphone, but only the DTx company has clinical proof that its product works and regulatory clearance to make medical claims.
How These Companies Make Money
Digital health companies use several revenue models, often in combination. Subscription fees are common, where a health system, employer, or insurer pays a recurring charge (sometimes calculated per member per month) for access to the platform. Some companies use pay-per-use pricing, charging only when a patient completes a visit or uses a specific feature. Others license their software directly to hospitals or clinics.
Many companies layer on additional revenue streams to stay financially viable. A telehealth platform might add e-pharmacy services or lab testing to generate income beyond virtual visits. Hybrid pricing models that combine subscriptions with per-use charges let companies adjust who pays based on the customer. An employer might pay the subscription while individual employees pay small fees for premium features.
The customer is often not the end user. A company selling an AI diagnostic tool typically sells to hospitals or radiology groups, not to patients. A remote monitoring platform might contract with an insurer who wants to reduce hospital readmissions. This “B2B2C” structure, where the company sells to a business that then offers the product to consumers, is one of the defining features of digital health business models.
Regulation and Data Privacy
Digital health companies face a regulatory landscape that varies depending on what their product does. A fitness tracker that counts steps faces minimal oversight. Software that diagnoses a medical condition from imaging data is regulated as a medical device. The FDA uses a framework called Software as a Medical Device (SaMD), defined internationally as “software intended to be used for one or more medical purposes that perform these purposes without being part of a hardware medical device.” The higher the risk to the patient, the more scrutiny the software receives before it can reach the market.
Any company that handles patient health data in the United States must comply with HIPAA, the federal law governing health information privacy. The HIPAA Security Rule requires companies to protect the confidentiality, integrity, and availability of all electronic health information they create, receive, store, or transmit. That means implementing administrative safeguards (like employee training and access policies), physical safeguards (like securing servers), and technical safeguards (like encryption). For a digital health company, where the entire product runs on data, these requirements shape everything from how the app is built to how the company stores records.
What Makes This Sector Different From Traditional Health Care
Traditional health care companies build their value around physical assets: hospitals, manufacturing plants for drugs or devices, networks of clinics. Digital health companies build value around software, data, and the ability to scale without adding proportional infrastructure. A telehealth company can serve 10,000 more patients without building a new wing. An AI diagnostic tool can analyze a million more scans without hiring additional radiologists.
That scalability is part of why the sector is growing at 21% annually. But it also creates challenges that don’t exist in traditional health care. Digital health companies must prove that their technology works in real clinical settings, not just in a demo. They need to integrate with legacy health IT systems that weren’t designed for modern software. They have to navigate a regulatory environment that’s still catching up to the technology. And they must earn the trust of patients, clinicians, and payers simultaneously, each group with different concerns about whether a piece of software can really do what a human or a pill has always done.
The companies that succeed tend to combine strong technology with clinical rigor. They run trials, publish results, obtain regulatory clearance, and build into existing clinical workflows rather than asking doctors and patients to change how they work entirely.