Five years after the COVID-19 pandemic first captured headlines, affected billions of lives, led to a global prevention effort, and, in the United States in particular, led to a rapid expansion of telemedicine as a primary method for care delivery, the digital healthcare landscape has come to reflect the broader state of the nation: unsettled.
Until recently, the lessons of COVID-19 were most clearly evident in the approach of US federal and state officials toward the emergence of other infectious diseases (such as mpox) and in the accelerated adoption of digital health solutions. Disease tracking and prevention strategies were — and in many cases still are — being developed and implemented at a rapid pace. Among other beneficiaries, rural and underserved populations have been positively affected as a result of the loosening of federal and state restrictions on telehealth, physician licensure, and other rules that often served as barriers to the delivery of modern healthcare.
While many of these changes persist and others are moving forward, rapid shifts in executive branch funding and compliance priorities at the federal level have created a more complex and unpredictable environment. Budget and staffing cuts, both proposed and implemented, are beginning to impact the resources available to research, develop, and deploy digital healthcare initiatives. Virtually every organization — from government agencies to academic medical centers, research-focused universities, private enterprises, investors, frontline hospitals, health systems, and individual practitioners — is now facing the challenge of making long-term decisions in the face of significant short-term uncertainty.
In the current economic and political climate, every stakeholder is being required to recalculate the resources, money, and attention available to pursue its unique mission. With regard to digital health and telemedicine, it appears that many of the lessons learned during the pandemic will endure. However, the clock is ticking on some advancements, and, in the case of many temporary pandemic-era waivers, their expiry dates have been extended only through September 30.
Despite this uncertainty, digital health solutions continue to play a major role in providing cost-effective, high-quality healthcare to Americans across the country and from all backgrounds. In this respect, at least, the trend in the United States remains consistent with the broader global commitment to digital health. For example, the World Health Organization's Global Initiative on Digital Health, formally launched in February 2024, continues to work toward country-led digital health transformation through strengthened collaboration and knowledge exchange. In its March 2025 Global Digital Health Monitor: State of Digital Health 2024 Brief, the organization noted that of 47 non-US countries that completed survey submissions:
- Forty-six percent are in Phase 3 of digital health maturity.
- Twenty-three percent are in Phase 4.
- Two — Portugal and the Kingdom of Saudi Arabia — have reached Phase 5.
In the United States, federal and state lawmakers and agency officials are continuing their efforts to balance innovation with regulation in the digital health space. However, given the recent shifts in the Trump administration's enforcement and funding priorities — which have yet to play out fully — this review of the state of the US digital health space may also be subject to change.
Licensure: New Challenges to an Old System
Prior to the COVID-19 pandemic, most states had strict limitations on the licensing of healthcare professionals to practice telemedicine within their borders. Pandemic-era waivers from the US Department of Health and Human Services (HHS) allowed for significant flexibility in telemedicine licensing requirements, though many of these waivers have only been extended through September 30.
The Interstate Medical Licensure Compact, which became operational in 2017 — in part as a result of the growth of telemedicine — continues to serve as an agreement among 40 states, the District of Columbia, and the Territory of Guam. In these jurisdictions, physicians are licensed by 52 different medical and osteopathic boards. (Note that Michigan's participation in the compact was repealed on March 18 and will go into effect 12 months from that date.) The compact enables physicians to qualify to practice medicine in multiple states by completing just one application. Similar licensing compacts have gained momentum for audiologists, speech pathologists, occupational therapists, and mental health counselors.
While the compact streamlines the application process, it does not eliminate the costs associated with obtaining and maintaining multiple state licenses. Physicians must still pay between $300 and $700 for each state license, which represents a significant financial burden for providers practicing telemedicine at the national level. This is particularly challenging as federal reimbursement rates decline and healthcare system administrative costs increase.
In December 2023, a lawsuit (Shannon MacDonald, MD, et al. v. Otto Sabando) was filed in the US District Court for the District of New Jersey. The plaintiffs argue that New Jersey licensure laws unfairly restrict the practice of specialized medicine across state lines. Although the case remains in its initial stages, the legal theories involved, including violations of the Commerce Clause and First and Fourteenth Amendments of the US Constitution, have the potential, if successful, to reform state licensure law across the country.
As state legislative and regulatory bodies grapple with these issues, providers must maintain vigilance in their compliance efforts, carefully tracking the evolving requirements on a state-by-state basis.
CMS Policies and Reimbursement: Some, but Not All, Waivers Made Permanent
Since the expiration of the federal Public Health Emergency in May 2023, HHS, the Centers for Medicare & Medicaid Services (CMS), and the Drug Enforcement Administration (DEA) have extended a number of Medicare exemptions and policies. While some of these flexibilities are permanent, many remain temporary. The following is a list of some of the more relevant extensions:
- Medicare patients can receive telehealth services for nonbehavioral/mental healthcare in their home through September 30.
- Medicare patients can permanently receive telehealth services for behavioral/mental healthcare in their home.
- There are no geographic restrictions for originating sites for Medicare nonbehavioral/ mental healthcare telehealth services through September 30.
- There are no geographic restrictions for originating sites for Medicare behavioral/mental healthcare telehealth services on a permanent basis.
- Telehealth services can be provided by all eligible Medicare providers through September 30.
- Federally Qualified Health Centers (FQHCs) and rural health clinics (RHCs) can serve as Medicare distant site providers for nonbehavioral/mental healthcare telehealth services through September 30.
- FQHCs and RHCs can permanently serve as Medicare distant site providers for behavioral/mental healthcare telehealth services.
- An in-person visit within six months of an initial Medicare behavioral/mental healthcare telehealth service, and annually thereafter, is not required through September 30. For FQHCs and RHCs, the in-person visit requirement for mental health services furnished via communication technology to beneficiaries in their homes is not required until January 1, 2026.
- Behavioral/mental healthcare telehealth services in Medicare can be permanently delivered using audio-only communication platforms.
- Nonbehavioral/mental healthcare telehealth services in Medicare can be delivered using audio-only communication platforms through September 30. Interactive telecommunications systems may also permanently include two-way, real-time audio-only communication technology for any telehealth service furnished to a patient in their home if the distant site physician or practitioner is technically capable of using an interactive telecommunications system but the patient is not capable of, or does not consent to, the use of video technology.
- While the DEA has proposed new rules regarding remote prescribing, COVID-19 telemedicine flexibilities for the prescription of controlled medications have been extended through December 31.
The recent change in administration has brought renewed scrutiny to telehealth reimbursement policies, with a particular focus on cost containment and fraud and abuse. This has created uncertainty for providers who made substantial investments in telehealth infrastructure based on pandemic-era policies that suggested a more permanent shift toward digital care delivery models.
Additionally, the allocation of federal and state healthcare funding has come under increased scrutiny, with concerns that an excessive percentage is being directed toward administrative functions rather than direct patient care. This administrative burden is particularly challenging for smaller practices and providers serving rural or underserved communities.
Capital Flow and Innovation in Digital Health Technologies
Although most of the pandemic-related economic challenges in the United States — labor shortages, supply chain disruptions, rising inflation, and increased borrowing costs, among others — began to ease in 2024, the US economy is in a period of significant flux, based largely on the administration's inconsistent implementation of tariffs (or threats thereof), uncoordinated federal cost-cutting, and a highly public spat with the Federal Reserve over interest rates. Historically, however, the healthcare industry, and the digital health technology sector in particular, have shown resilience despite fluctuating market conditions.
Venture capital investment in digital health has become more selective but remains robust for solutions that demonstrate clear clinical value and regulatory compliance. In early 2025, the American Hospital Association published a summary of a recent survey which suggested that a rebound may be in store this year: Of 103 senior leaders whose companies sell digital health products, 81% have a positive outlook or are cautiously optimistic about investment prospects for 2025 and 79% say that their organizations would pursue new investment capital over the next 12 months.
Clinical workflow optimization solutions, value-based care enablement platforms, and revenue cycle management technologies have attracted significant funding. A notable trend is the increasing integration of artificial intelligence (AI) into digital health solutions, which brings both opportunities and challenges. While AI offers the potential to improve diagnostic accuracy, streamline administrative tasks, and personalize treatment plans, it also raises concerns about data privacy, regulatory compliance, and clinical validity (see below).
The changing regulatory environment under the new administration has also raised concerns about potential limitations on research that examines differential treatment outcomes based on demographic factors such as gender, race, ethnicity, and age. This could hamper efforts to address healthcare disparities and develop more personalized treatment protocols.
Additionally, reduced federal funding for clinical trials and research, including digital healthcare solutions, is creating gaps that private investment alone may struggle to fill. The lack of fully integrated platforms for clinical trial management remains a significant challenge, highlighting the need for enterprise-level solutions in this critical area of healthcare innovation.
Expanding Influence of AI on Medical Specialties and Workforce Dynamics
The rapid advancement of AI in healthcare is reshaping certain medical specialties, particularly those such as radiology, pathology, and dermatology that rely heavily on image interpretation. As AI systems demonstrate increasing accuracy in reading X-rays, MRIs, and other diagnostic images, some medical students and physicians are reconsidering their specialization choices.
This trend reflects broader concerns about the potential for AI to displace certain aspects of physician work, though most experts emphasize that AI tools should augment rather than replace clinical judgment. Highlighting the continued importance of holistic clinical reasoning and patient interaction that extends beyond algorithmic interpretation, it is important to note that physicians do not treat films; they treat human patients.
The Food and Drug Administration (FDA) has stepped up its oversight of AI-enabled medical devices, requiring more rigorous validation and clearance processes. On January 6, the FDA published Draft Guidance: Artificial Intelligence-Enabled Device Software Functions: Lifecycle Management and Marketing Submission Recommendations. This draft guidance proposes life cycle considerations and offers specific recommendations to support marketing submissions for AI-enabled medical devices. The draft guidance also highlights recommendations from previous guidance (in order to assist manufacturers with applying those recommendations to AI-enabled devices) and provides additional recommendations on topics of specific relevance to AI.
This heightened scrutiny reflects growing awareness of the potential risks associated with algorithmic decision-making in healthcare, including bias in training data and the challenge of validating continuously learning systems. Healthcare providers utilizing AI tools for clinical documentation such as automated note-taking during patient encounters face potential Health Insurance Portability and Accountability Act (HIPAA) violations if proper safeguards are not in place. Health systems and hospitals are establishing stricter governance frameworks to mitigate these risks, but the rapid pace of innovation often outstrips the development of internal policies.
The integration of AI into medical practice also raises questions about training, credentialing, and liability. Medical schools and residency programs are beginning to incorporate AI literacy into their curricula, while professional societies are developing guidelines for the responsible use of these tools in clinical practice.
For digital health developers, these shifts underscore the importance of designing AI systems that complement clinical workflows and support physician decision-making rather than attempting to automate complex clinical judgments. Solutions that enhance efficiency while preserving the physician's role as the ultimate decision-maker are likely to see the strongest adoption in the coming years.
Regulatory Oversight and Cybersecurity: Shifting Priorities
As the HHS Office for Civil Rights (OCR) faces potential budget cuts under the new administration, its capacity to conduct oversight regarding compliance with HIPAA, the Americans with Disabilities Act, and related legislation is likely to be constrained. This reduced federal oversight comes at a time when cybersecurity threats to healthcare entities are reaching unprecedented levels.
According to The HIPAA Journal, data breaches involving 500 or more healthcare records reached near-record numbers in 2024 (second only to 2023), continuing an alarming upward trend. Healthcare data remains a prime target for hackers due to its high value on black markets and the critical nature of healthcare operations, which make organizations more likely to pay ransoms.
A significant concern is the lack of a private right of action for individuals affected by healthcare data breaches, leaving many patients with limited recourse when their sensitive information is compromised. While many states have enacted laws more stringent than federal legislation, enforcement resources may be stretched thin.
The expected new HIPAA regulations under the Trump administration regarding cybersecurity will likely establish clearer standards for healthcare entities, but questions remain about implementation timelines and enforcement mechanisms in light of resource constraints.
For healthcare providers, researchers, and vendors, cybersecurity has emerged as one of the most significant operational and compliance risks. The integration of AI systems, which often requires access to vast amounts of patient data, further complicates the security landscape. Organizations must implement robust security frameworks that address not only technical vulnerabilities but also the human factors that often contribute to breaches.
Corporate Practice of Medicine: Outdated Laws Continue to Stymie Growth
Although many private equity investments in digital health offer distinct advantages — including expanded geographic reach, economies of scale, and access to management expertise — they continue to risk violations of state corporate practice of medicine prohibitions.
This is a particularly pressing concern given that digital health research, development, and implementation typically require substantial financial resources, often only available through the types of private equity investments described above. Approximately three-quarters of physicians in the United States are now salaried employees, and half of all physician practices are owned by a hospital or corporate entity.
By their very nature, telemedicine and digital health typically transcend jurisdictional boundaries. As a result, compliance with ownership, employment, and other obligations in one state may not ensure compliance in another. This diversity of rules and exceptions continues to limit the formation, development, and use of telemedicine alternatives for fear of creating legal exposure.
The ongoing wave of hospital mergers, driven by the need for scalability and financial sustainability in an environment of low reimbursements, further complicates this picture. While consolidation may enable the investment in technology infrastructure necessary for digital health innovation, it also raises antitrust concerns and questions about access to care, particularly in rural or underserved areas.
Until state legislatures modernize their approach to account for new methods of delivering care and the financial and operational arrangements that support such methods, telemedicine providers and healthcare entities will need to maintain rigorous compliance programs that address the varying requirements across multiple jurisdictions.
Reproductive Telehealth: State Versus Federal Stalemates Continue
In the wake of the US Supreme Court's 2022 ruling in Dobbs v. Jackson Women's Health Organization, the landscape for reproductive telehealth services remains highly fragmented. States continue to enact contradictory laws regarding access to abortion and other reproductive healthcare services, creating significant challenges for telehealth providers operating across multiple jurisdictions.
Recent shifts in federal enforcement priorities have introduced additional complexity to this already challenging environment. With reduced OCR oversight capacity, concerns have emerged about the enforcement of privacy protections for individuals seeking reproductive healthcare services through digital platforms.
Telehealth providers of reproductive healthcare services must navigate not only the varying state laws regarding the services themselves but also complex questions about data privacy, prescribing authority, and insurance coverage. This regulatory complexity has led some providers to limit their geographic footprint, potentially reducing access to care for individuals in more restrictive states.
The legal status of medication abortion via telehealth remains particularly contentious. States remain divided, with approximately half allowing telehealth medication abortions and the other half either expressly or effectively banning this form of treatment. The Supreme Court's 2024 decision in FDA v. Alliance for Hippocratic Medicine preserved access to mifepristone in states where abortion is legal but did not resolve the underlying tensions between state and federal authorities in this area. In 2025, a federal district court judge in Texas ruled that three states — Idaho, Kansas, and Missouri — have standing to continue a new challenge to the FDA's rules on offering mifepristone via telemedicine.
Conclusion: Despite Conflicting Signals, Compliance Remains a Priority
Digital health has firmly established itself as an essential component of the US healthcare system, offering benefits in access, efficiency, and potentially quality of care. However, the regulatory landscape continues to evolve rapidly, with significant variations across states and shifting federal priorities.
For digital health providers and the organizations that work with them, a robust compliance framework remains essential despite — or perhaps because of — the changing regulatory environment. As federal oversight resources potentially diminish in certain areas, the importance of proactive compliance programs, comprehensive risk assessments, and regular policy reviews becomes even more critical.
The integration of AI into healthcare, while offering tremendous potential, introduces new regulatory and ethical considerations that organizations must address thoughtfully. Meanwhile, ongoing challenges related to licensure, corporate practice of medicine restrictions, and varying state laws regarding specific services such as reproductive healthcare require careful attention to jurisdictional differences.
Despite these challenges, the fundamental value proposition of digital health remains compelling. Organizations that can navigate the complex and changing regulatory environment while delivering demonstrable clinical value will continue to find opportunities for growth and impact in this dynamic sector.
As we move further into 2025, digital health stakeholders must maintain vigilance regarding compliance obligations while advocating for regulatory frameworks that protect patients without unnecessarily hindering innovation. This balanced approach will be essential to realizing the full potential of digital health to transform healthcare delivery in the United States.
A version of this article was previously published on the Chambers and Partners website in June 2025.
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