As virtual physical therapy heats up, players eye next goal

The virtual physical therapy sector has been active lately amid promising new outcomes data and fresh funding.

Why it matters: Large fundraises and promising research have buoyed the sector, but the lack of integration with the health care system stands as a challenge.

Zoom in: On the heels of recent fundraises, multiple private digital musculoskeletal (MSK) players have hinted at public debuts, and a Peterson Health Technology Institute (PHTI) report suggests these approaches might help patients recover faster and save the health system big bucks.

Yes, but: The report also found that such tools aren't well integrated with the health care system, limiting access and savings potential.

• And, if one public debut can serve as a bellwether, digital MSK company DarioHealth hasn't fared so well since its 2017 IPO.

Context: AI-powered virtual physical therapy (PT) startup Sword Health last week raised $30 million in new funding and $100 million in secondary financing to offer liquidity to employees and early investors at a valuation of $3 billion, a 50% increase from its 2021 $2 billion valuation.

• Sword CEO Virgilio Bento has been in conversations with bankers and investors and is eyeing an IPO in the second half of 2025 or early 2026.
• Bento said the company's product for pelvic floor PT, called Bloom, is its fastest-growing segment.
• "Just with Bloom, we are going to do as much revenue in 2024 [as] we did with Sword altogether in 2022," he told Axios.

The big picture: Sword's raise is at least the seventh such deal in the virtual MSK space since 2021, and Sword is the second virtual PT company to hint at a near-term IPO.

• Livara Health (FKA SpineZone), a specialty provider of value-based in-person and virtual MSK care, collected $15 million in May.
• Hybrid musculoskeletal care provider Commons Clinic in 2023 clinched a $19.5 million Series A.
• Virtual physical therapy provider Hinge Health in 2021 raised a $300 million Series D at $6.2 billion valuation and advertised ambitions to go public in 2022.
• Digital MSK startups Kaia Health and RecoveryOne in 2021 scored Series C raises of $75 million and $33 million, respectively.
• In-person PT provider Bardavon Health Innovations in 2022 paid 8 figures in a roughly even split of cash and stock to acquire virtual MSK startup PeerWell.

By the numbers: At $223 million raised so far this year, funding for the virtual MSK sector already stands at nearly double that of last year's $125 million total, per Rock Health.

Between the lines: The report found that virtual MSK solutions "stand to improve access for populations who otherwise have barriers to in-person PT, including older adults, people who live in rural areas, and those with mobility limitations."

• Specifically, the analysis found that PT-guided treatment, or the type of therapy offered by companies including Sword, Hinge, Omada and RecoveryOne, had outcomes equivalent to in-person PT at a lower cost.
• Such tools could save commercial insurance beneficiaries $737–$1,306 per person in the first year.
• By contrast, app-based exercise therapy solutions, or what's offered by companies such as Kaia and Dario, were found to "improve pain and function compared with no PT, but there is no evidence that they improve functional status comparable with in-person PT, and are therefore unlikely to be an effective substitute."

What they're saying: Overall, digital MSK care "is an excellent use case for virtual care and it can be effective," PHTI executive director Caroline Pearson tells Axios. "It's a win-win."

• Still, virtual tools' lack of integration with the health system at large limits their accessibility and impact.
• "As you think about hybrid care and medical avoidance you start to think, this has to be a part of the medical insurance benefit landscape," adds Pearson.