Ali Javaheri

Associate Analyst,
EMERGING SPACE BRIEF
VR Health
Emerging Technology
[email protected]

Aaron DeGagne, CFA Originally published March 13, 2023

Analyst,
Emerging Technology
[email protected] [email protected]

Trending companies Overview

Companies in this space are using virtual reality (VR) to provide innovative
therapies and treatments for issues including education, therapy, rehabilitation, and
even mindfulness.

Background

VR has rapidly advanced in recent years, captivating audiences in various industries.

Healthcare is no exception, with VR emerging as a promising tool for both patient
treatment and medical training. By simulating realistic environments and scenarios,
VR can create immersive experiences that aid in pain management, anxiety
For further analysis of the digital health reduction, and exposure therapy. It can also provide medical professionals with
landscape, please refer to our Digital a safe and controlled setting to practice complex procedures and improve their
Health Launch Report. skills before performing them on actual patients. As VR technology continues to
improve, it has the potential to revolutionize healthcare by offering new avenues for
treatment, training, and research.

Technologies and processes

VR in healthcare relies on a variety of technologies and processes to create engaging

and realistic experiences. Head-mounted displays, the most common VR hardware
used in healthcare, provide an immersive visual experience that can be controlled by
the user’s head movements. Additionally, haptic feedback devices can enhance the
sense of immersion by providing tactile sensations, such as vibrations or pressure.
The creation of VR software involves designing and customizing 3D models of
medical scenarios and environments that can be manipulated to suit different
needs. Real-time tracking and monitoring systems can also be used to gather data
on patient responses and behaviors during VR experiences. Despite the promising
potential of VR in healthcare, it is crucial that it undergoes rigorous testing and
validation to ensure its safety and efficacy in medical settings.

Applications

Training better doctors

VR technology is transforming both surgical training and the way doctors

understand their patients’ conditions. Two studies have shown that medical
students trained on VR platforms outperform their conventionally trained peers by

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270% on assessments1 and learn at a 570% faster rate.² Schools such as UCLA and
UConn have deployed platforms such as Osso VR and PrecisionOS, respectively,
to enhance their medical programs. VR simulations are being used to help doctors
better understand various age-related health conditions—such as dementia,
sensory loss, and Parkinson’s disease—and have been found to increase students’
empathy for patients.³

Making physical therapy fun

Physical therapy has been transformed into an engaging and enjoyable experience
using VR, making the process more bearable for patients while helping them
transition back to normal activities. Some therapists claim that VR has a unique
ability to motivate patients to perform exercises they might not be able to do
otherwise.4 One study found that VR treatments significantly improve the motor
functions of children with cerebral palsy. 5 Companies such as AppliedVR and
XRHealth offer VR-based physical therapy programs.

Improving mental health

VR has proven to be a promising tool for addressing psychological ailments such as

anxiety and depression. One effective application is virtual exposure therapy, where
patients can confront and overcome their fears in a safe environment.6 Additionally,
therapeutic VR is being explored to help people achieve a more peaceful mental
state by offering simulations designed to calm the mind.

Pain management

VR shows promise in treating pain, with one study showing a 24% reduction in pain
scores for patients using VR programming.7 Companies such as HypnoVR have been
particularly helpful for those with acute and chronic pain, as well as for children
undergoing treatments. VR offers an immersive distraction that can reduce the need
for pharmaceutical therapies. Researchers are exploring whether the technology
can be used as a long-term solution to chronic pain, as well as how it can improve
post-discharge satisfaction scores and allow patients to visit their homes virtually.

1 : “Research: How Virtual Reality Can Help Train Surgeons,” Harvard Business Review, Gideon Blumstein, October 16, 2019.
2 : “Improved Complex Skill Acquisition by Immersive Virtual Reality Training: A Randomized Controlled Trial,” The Journal of Bone and Joint Surgery,
Ryan Lohre et al., March 18, 2020.
3 : “Using Virtual Reality in Medical Education to Teach Empathy,” Journal of the Medical Library Association, Elizabeth Dyer et al., October 1, 2018.
4: “Meet Virtual Reality, Your New Physical Therapist,” The New York Times, Alina Tugend, April 21, 2021.
5 : “Effect of Virtual Reality Therapy on Functional Development in Children With Cerebral Palsy: A Single-Blind, Prospective, Randomized-Controlled
Study,” Turkish Journal of Physical Medicine and Rehabilitation, Burcu Metin Ökmen et al., November 22, 2019.
6 : “A New Way for Therapists to Get Inside Heads: Virtual Reality,” The New York Times, Cade Metz, July 30, 2017.
7 : “Enlisting Virtual Reality to Ease Real Pain,” The Wall Street Journal, Lucette Lagnado, July 24, 2017.

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Restoring cognitive ability

Startups such as Rendever are using VR to help seniors enhance their memory,
cognitive function, rehab therapy, and socialization. VR intervention has been
shown to improve cognitive and motor function in older adults with mild cognitive
impairment or dementia.8 Additionally, a team of researchers from University
College London and Cambridge have developed a VR navigation test to identify
early Alzheimer’s disease.9 The test yielded promising results and could be better
at identifying early Alzheimer’s disease than the tests currently used in clinics and
research studies.

Limitations

Despite its potential, VR still faces barriers to widespread adoption in healthcare.

These challenges include a lack of extensive clinical trials and empirical evidence
to support its effectiveness, regulatory uncertainty and lack of standardized billing
codes, affordability, data privacy concerns, and the risk of VR addiction. Adoption
rates will also be driven partly by practitioners, who may favor existing modalities.
Additionally, integrating VR technology with existing healthcare systems can be
complex and costly. Overcoming these challenges is crucial to making VR-based
treatments more accessible to patients and to realizing the potential benefits of this
technology.

Recent deal activity and market outlook

Two companies in this space, BehaVR and OxfordVR, announced a merger in

December 2022 along with a $13.0 million Series B investment led by UnitedHealth’s
Optum Ventures and Oxford Science Enterprises, creating a clear category
leader.10 The market outlook for VR in healthcare is positive, with significant
growth projected in the coming years. According to IDC, the worldwide spend on
AR/VR is projected to reach $20.0 billion with a forecasted 390% growth in VR
headset volume between 2023 and 2028.11 The IDC also predicts that one out of
10 large hospitals and one out of eight medical education providers will be using
VR technology by 2028. However, several limiting factors could slow down the
widespread adoption of VR in healthcare. These include the lack of clinical trials and
empirical evidence, regulatory uncertainty, affordability, data privacy concerns, and
complex integration with existing healthcare systems. Despite these challenges, the
potential benefits of VR in pain management, cognitive rehabilitation, and mental
health treatment make it a promising technology for the future of healthcare.

8 : “Effects of Virtual Reality Intervention on Cognition and Motor Function in Older Adults With Mild Cognitive Impairment or Dementia: A Systematic
Review and Meta-Analysis,” Frontiers in Aging Neuroscience, Shizhe Zhu et al., May 5, 2021.
9 : “Virtual Reality Can Spot Navigation Problems in Early Alzheimer’s Disease,” UCL News, May 24, 2019.
10: “BehaVR and OxfordVR Combine and Raise Series B to Create Largest VR Delivery Platform for Evidence-Based Digital Therapeutics,” Behavr,
December 13, 2022.
11: “IDC FutureScape: Worldwide Healthcare Industry 2023 Predictions,” IDC, Mutaz Shegewi et al., October 2022.

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Quantitative perspective

72 266 386 $2.24B

companies deals investors capital invested

$2.81M $44.0M $138.6B

20 median deal size median post-money capital invested
deals (TTM)
(TTM) valuation (TTM) (TTM)
-35.5% YoY
-47.6% YoY 40.4% YoY -91.4% YoY

*As of March 2, 2023

Recommended reading

“Digital Therapeutics and Virtual Reality Therapies Can Revolutionize the Healthcare
Industry,” Medium, Mehmet Yildiz, February 18, 2023.

“How Virtual Reality Is Transforming Healthcare,” US Chamber of Commerce, Diya

Li, July 7, 2022.

“Virtual Reality in Healthcare,” Jelvix, Vitaliy Ilyukha, 2023, accessed March 7, 2023.

“VR and the Future of Healthcare,” Cedars Sinai, September 1, 2020.

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