Musculoskeletal (MSK) Digital Health Sector Attracts $38 Billion Investment, Targeting 1.7 Billion Patients Globally

As we enter June, major news from the musculoskeletal (MSK) field continues to pour in at a breathtaking pace.

Recently, the NHS (National Health Service) announced the launch of an AI-operated virtual rehabilitation clinic to alleviate the severe shortage of musculoskeletal (MSK) rehabilitation services.This is the UK’s first (and possibly the world’s first) fully AI-operated virtual rehabilitation clinic, and currently the only virtual clinic in the UK approved by the Care Quality Commission for patient management.。

Prior to this, leading MSK companies Upswing Health and Hinge Health had just announced a partnership to combine their respective strengths. Earlier in early June, digital therapeutics company for musculoskeletal rehabilitation Sword Health completed a massive funding round of approximately $130 million.

Recent signs have repeatedly indicated that digital health appears to be experiencing a resurgence. MSK is poised to become the first sector to break the ice.

MSK encompasses more than 150 conditions affecting the musculoskeletal system, ranging from acute, short-term issues such as fractures, sprains, and strains to lifelong conditions characterized by persistent functional limitations and disability. According to an analysis of WHO Global Burden of Disease data,Approximately 1.71 billion people worldwide suffer from musculoskeletal (MSK) disorders, with a rapidly increasing trend driven by population aging.。

Musculoskeletal (MSK) conditions have long been a major cause of disability worldwide. Take low back pain, for example,Approximately 568 million people worldwide suffer from low back pain, making it the leading cause of disability in 160 countries and regions.. Other conditions, including fractures (436 million people), osteoarthritis (343 million people), other injuries (305 million people), neck pain (222 million people), and amputations (175 million people), also affected over 100 million individuals each.

It is for this reason that musculoskeletal (MSK) rehabilitation accounts for the largest share of global rehabilitation demand. According to WHO statistics,Among all adults requiring rehabilitation, approximately two-thirds need rehabilitation services for musculoskeletal conditions.. The resulting medical costs are also quite exorbitant,Taking the United States as an example, medical costs attributable to musculoskeletal (MSK) conditions account for nearly 10% of total national healthcare expenditures.。

Driven by substantial demand, musculoskeletal (MSK) health has consistently remained a key focus for investors in Europe and the United States. According to statistics,Since 2010, the U.S. market alone has invested as much as $38 billion in the musculoskeletal (MSK) sector.. Even during the recent capital winter, significant investments have frequently emerged in the musculoskeletal (MSK) sector. The majority of these investments have flowed into the digital health track.

In early June, Sword Health announced the completion of approximately $130 million in financing—a sum that would be considered “mega-round” territory even during the digital health boom of previous years. However, this is not the first time for Sword Health. As early as 2021, it completed four rounds of financing within a single year, progressing through Series B to Series D.

To date, Sword Health has raised a total of $340 million in funding, achieving a valuation of $3 billion. According to reports, its revenue has nearly tripled over the past year, and the company is seriously considering an initial public offering (IPO). If successful, it is poised to become a benchmark in the digital health sector.

Besides Sword Health, other companies in this sector are also highly sought after in the capital markets. For instance, Dario Health, which is already publicly listed; Hinge Health, which secured a total of $700 million across three funding rounds in 2021; and Omada Health, which still managed to raise $192 million in 2022.

Even so, MSK rehabilitation services remain severely inadequate, even in Europe and the United States, where rehabilitation is most highly prioritized. According to third-party reports,Since January 2023, the number of patients on waiting lists for musculoskeletal (MSK) disease treatment in the UK has increased by nearly 30% compared to previous levels. Currently, more than 300,000 people remain on the NHS waiting list for rehabilitation, with 26% of these patients having waited for more than three months.。

Clearly, the number of NHS rehabilitation therapists has fallen far short of the growing demands posed by the UK’s aging and increasingly obese population. The UK Department of Health aims to leverage AI-powered virtual clinics—offering rapid, real-time care—to accelerate service delivery, reduce patient wait times, and alleviate pressure on clinicians.

This virtual clinic is built on the Flok Health platform. Patients can be referred to the platform through various healthcare providers, including general practitioners, or self-refer via the app. AI-generated physiotherapists conduct initial video consultations to assess patients’ symptoms and provide ongoing, personalized rehabilitation guidance based on patient feedback, symptoms, and progress. According to Flok Health, its library can generate more than 1 billion potential exercise combinations.

During internal trials conducted at NHS-affiliated organizations in 2023, Flok Health’s performance was widely recognized:All pilot patients rated the AI rehabilitation therapist’s experience as at least on par with that of human therapists; 57% even considered the AI physical therapy experience superior to the human-delivered approach; furthermore, 86% of pilot patients reported symptom improvement during their AI-assisted rehabilitation therapy.。

In addition to its clinical advantages, the greater benefit of virtual clinics is the elimination of lengthy waiting periods; patients can complete a video consultation on the same day they are approved for AI-enabled rehabilitation services. Furthermore, it enables 24/7 round-the-clock service. Trials within the NHS have also revealed thatWhen the AI virtual clinic pilot ended and the service was discontinued, the waitlist for in-person rehabilitation appointments immediately increased by more than 50%.。

The impact of digital technology is clearly immediate!

Even so, the role of human rehabilitation therapists cannot be replaced by AI. Fudong MSK, which specializes in musculoskeletal (MSK) rehabilitation, received approval for its MSK rehabilitation digital therapeutic in 2022. Lu Yiming, Co-founder and Chief Medical Officer, stated, “AI without human intervention can handle standardized, protocol-driven services. However, there are risks involved; for instance, when treatment plans need adjustment or re-evaluation is required, it remains questionable whether AI can fully meet these demands.”

“Therefore, the current mainstream model remains a combination of AI and offline rehabilitation therapists. The core functionality is primarily delivered through apps, backed by AI and hardware, with human therapists maintaining a light level of involvement—essentially handling plan adjustments or assessments. This low-touch manpower model is currently considered more effective. Completely eliminating human involvement still carries significant risks at this stage.”

More rigorous reports also support this claim. The recently released “Technical Assessment of Virtual Musculoskeletal Solutions” by the Peterson Health Technology Institute (PHTI) analyzed over 2,000 papers to evaluate the clinical effectiveness and health economics of mainstream virtual MSK solutions.

Based on the varying degrees of digital technology integration and therapist involvement, this report categorizes virtual MSK solutions into three types.

The first category consists of solutions that are entirely app-based. The entire rehabilitation plan is primarily designed and updated by AI, providing autonomous exercise therapy based on computer vision analysis or data from hardware sensors. Once the plan is established, physical therapists are largely no longer involved.

The second category comprises solutions guided by rehabilitation therapists, in which AI plays a role in patient assessment, treatment plan design, and follow-up management, while also delivering autonomous exercise therapy based on computer vision analysis or data from hardware sensors. In addition, rehabilitation therapists engage in relatively frequent online interactions with patients to provide guidance.

The third category comprises internet-based healthcare solutions that do not involve AI. In this model, rehabilitation therapists monitor patient progress through routine online communications, thereby supplementing offline rehabilitation services. However, such online consultations are subject to additional fees as required.

Based on the assessment results,The second approach is considered the most balanced. It can partially substitute for in-person rehabilitation, thereby improving service accessibility. Compared with in-person rehabilitation, this approach demonstrates superior clinical outcomes in terms of both pain relief and functional improvement, while also reducing healthcare expenditures.. It is estimated that if 25% of MSK patients receiving in-person rehabilitation switch to this type of program, annual savings would amount to approximately $4.4 million per 1 million commercially insured individuals, based on an annual cost of $995.

This is precisely why this model has been adopted by the largest number of enterprises. Among the eight companies covered in the report, five have adopted this model, including well-known industry players such as Hinge Health, Omada Health, RecoveryOne, Sword Health, and Vori Health.

The other two models also have their respective strengths and can both provide clinical benefits to patients, albeit to varying degrees. Furthermore, from a health economics perspective, the current performance of these two models is inferior to that of the “App + rehabilitation therapist” combined model.

As a practical explorer in this field, Lu Yiming believes that only the integration of multiple modalities can build an ideal musculoskeletal rehabilitation system: “Just as with tiered diagnosis and treatment, only by integrating online and offline services can a more comprehensive healthcare system be established.“The vast majority of standardized surgical cases, such as meniscal injuries, as well as mild musculoskeletal conditions, can be managed at home after the initial hospital consultation, with rehabilitation guided remotely by therapists and supported by digital therapeutics. In our practice, 70% of patients in orthopedics and sports medicine can undergo rehabilitation through this approach.”

“Patients with more severe conditions may require rehabilitation interventions involving medical devices, as purely online therapies are less effective; thus, a combined online-offline approach is necessary. Digital therapeutics, integrated with home-based rehabilitation under the guidance of rehabilitation therapists, serve as one component of this approach. For patients with even more severe conditions, such as those in the acute phase or suffering from major trauma, opting for offline care may be a better choice to ensure safety and stability,” he added.

The actions of leading MSK companies also prove this point.

In June, Upswing Health and Hinge Health, two leading companies in the musculoskeletal (MSK) sector, announced a partnership to combine Upswing Health’s strengths in internet-based healthcare platforms with Hinge Health’s expertise in digital therapeutics. Additionally, IncludeHealth has partnered with the OrthoForum Value Network, enabling its network of 2,500 clinics, 5,000 physicians, and 4,500 rehabilitation therapists to access IncludeHealth’s digital therapeutics platform.

Compared to Europe and the United States, China previously lagged significantly in its emphasis on musculoskeletal (MSK) health. However, this situation is rapidly improving, driven by an aging population and heightened health awareness.

On June 22, hosted by the People’s Government of Shandong Province and jointly supported by the Ministry of Education, the China Disabled Persons’ Federation, the National Health Commission, and other entities,Rehabilitation University Established in Qingdao: China’s First University Named “Rehabilitation”, headquartered in Qingdao, Shandong Province, it is a public regular undergraduate institution that will conduct fundamental and frontier scientific and technological research in the future, and cultivate composite, top-notch innovative talents capable of leading the development of the rehabilitation cause.

The establishment of this new research-oriented university also demonstrates, from one perspective, the state’s emphasis on the rehabilitation industry, including MSK rehabilitation.

On the other hand, with the development of socioeconomic levels, the sports industry has seen substantial growth in recent years. According to data released at the National Sports Industry Work Conference, the total scale of China’s sports industry reached RMB 3.3 trillion in 2022, with a value-added of RMB 1.3 trillion. Since 2012, the average annual growth rates for these two indicators have been as high as 13.2% and 15.4%, respectively, both exceeding the average annual GDP growth rate of China during the same period.

The “14th Five-Year Plan for Sports Development” sets forth development goals such as achieving a total sports industry scale of RMB 5 trillion by 2025, employing more than 8 million people, and raising the proportion of the national population regularly participating in physical exercise to 38.5%. By 2035, the sports industry is expected to become a pillar industry of the national economy.

Lu Yiming stated,Demand for MSK rehabilitation resulting from sports activities will increase significantly“The state is vigorously encouraging the development of the sports industry, and people are increasingly engaging in physical activities, particularly marathons, triathlons, and outdoor exploration. Consequently, the demand for sports rehabilitation has risen significantly. We have observed a marked increase in collaborations with sports organizations, including those focused on CrossFit, triathlons, tennis, and swimming. The promotion of musculoskeletal rehabilitation by the sports industry is evident, and there is substantial room for future growth.”

This kind ofThe formation of health awareness and habits will also inevitably drive the demand for MSK rehabilitation due to disease or aging in the future.。

“From our own perspective, business growth has been quite significant. There has been a marked increase in the number of surgical patients, as well as individuals engaged in sports and white-collar workers, compared to the past. A key driver behind this trend is the growing public awareness of rehabilitation. In China, whether in the realm of digital therapeutics or offline institutions for musculoskeletal rehabilitation, those of us who were among the first movers have played a pioneering role, incurring substantial costs in patient education.”

“There are more than 50,000 musculoskeletal rehabilitation clinics in the United States, as ubiquitous as pharmacies in China. One reason is that people consider musculoskeletal rehabilitation important and a commonplace matter. As awareness at the national level and among patients, along with overall demand, continues to rise, I believe the pace of development in musculoskeletal rehabilitation will accelerate significantly,” added Lv Yiming.

The rapid development of the MSK market is also reflected in the iteration of digital therapeutics products. Musculoskeletal rehabilitation requires an assessment of the patient's physical condition and the completion of corresponding rehabilitation exercises as prescribed. The core logic of digital health lies in how to conduct such assessments and ensure that patients can perform these exercises with high quality in a home setting. Currently, this technology has evolved into two approaches: hardware-based wearable sensors and software-based camera vision recognition.

Taking Fudong Musculoskeletal’s approved “Yue Xing Dong” musculoskeletal digital therapeutic as an example, its wearable kit includes three inertial motion sensors. These sensors collect key metrics of the patient’s current physical status, such as the types of movements the patient can perform and their range of motion. The data serves as a reference for assessing the patient’s current condition, thereby assisting physicians in evaluating the patient and adjusting the rehabilitation plan.

Upon receiving the rehabilitation plan, patients wear sensors to perform rehabilitation exercises as guided by the app. During training, the sensors collect key data such as joint angles and spatial posture. On one hand, this data is displayed in real time on the app, providing feedback to patients on whether their movements meet the required standards; on the other hand, the data is transmitted to physicians, serving as a reference for weekly assessments to enable appropriate adjustments based on the patient’s actual condition.

With the improvement of camera performance in smartphones and tablets, as well as advancements in AI algorithms, the combination of AI algorithms and smartphone cameras has become a new trend recently.

Lu Yiming told VCBeat that the technology behind MSK digital therapeutics has not yet reached perfection. “While visual recognition may be more convenient and relatively lower in cost, it can be significantly affected by background factors in home settings, with limitations in viewing angles and monitoring accuracy. Hardware sensors offer better precision and are free from background interference, but they may still be influenced by environmental factors and come at a higher cost.”

“However, technology is constantly iterating at a rapid pace. I believe the most important thing is that existing technology can serve the majority of patients,” he added.

Regarding the critical issue of payment, MSK has also made some progress in China.

Notably, Hainan, as a current hub for digital therapeutics, has also undertaken extensive explorations in reimbursement mechanisms. According to VCBeat, Hainan is formulating policy guidelines for the pricing of digital therapeutics, which will include specific billing codes for musculoskeletal (MSK) digital therapeutics. This development is expected to provide a strong impetus for the field.

In the realm of commercial health insurance, domestic musculoskeletal (MSK) companies are also exploring collaborations with insurers to develop customized insurance products that incorporate corresponding digital therapeutics. For instance, Fudong MSK’s digital therapeutic solution has been included in Wuxi’s Huimin Bao supplemental medical insurance plan.

VCBeat’s statistics show that,The number of digital health companies in China involved in musculoskeletal (MSK) care is also rapidly increasing. In the niche segment of digital therapeutics alone, more than 10 companies are actively operating in this space, with the number of approved products steadily rising.。

Furthermore, in 2023, a year widely recognized as an “investment winter,” Siyi Intelligence, a developer of MSK rehabilitation robots, secured RMB 100 million in financing, marking one of the few large-scale funding rounds last year. Jingcai Intelligence, which focuses on MSK digital solutions, raised tens of millions of yuan. These deals represent some of the rare bright spots in the primary market for digital health.

Whether MSK can become a catalyst for the resurgence of digital healthcare remains to be seen.

References:

Wang Hui, China Sports Daily: “Striving to Promote High-Quality Development of the Sports Industry”