Digital Mental Health Startups for Kids Are Raking in Cash, New Data Shows. It Won't Be Enough to Fix the Crisis

Virtual health care has exploded during the COVID-19 pandemic, and new data indicates digital tools targeting the behavioral health needs of children and teenagers are no exception.

The mental well-being of young people has long been a concern, given there are few pediatric mental health specialists in the United States, leaving long waiting lists for care and a growing number of kids sent to the emergency room in crisis. The pandemic has only exacerbated those challenges, prompting the surgeon general to call late last year for a “swift and coordinated response” to the youth mental health crisis. Now, digital health companies are stepping up.

Venture capital funding for digital behavioral health tools for children and teens, which also include those tackling issues like attention deficit hyperactivity disorder and autism, ballooned to $919 million in 2021, up from $54 million in 2017 and more than double the amount raised in 2020, according to exclusive data shared with Morning Consult from health tech investment and advisory firm Rock Health. That’s 16% of the funding for such tools targeting all ages last year, a small but growing share.

Yet while clinicians and health executives say these tools could offer some solutions for young people, they also come with challenges of their own.

“These companies have popped up and begun to operate in a handful of states, but it will take three key moves to create strong footprints: building a clinical workforce of 'A' players, negotiating national payer contracts and the ability to replicate validated models again and again,” said Tom Cassels, president of Rock Health’s advisory arm.

One such company is Charlie Health, which launched in 2020 as a virtual intensive outpatient program for teens and young adults dealing with severe mental health issues, with the goal of granting them agency in their care. Charlie Health offers individual and family therapy, and also puts together groups of six patients each with similar challenges and backgrounds for group sessions.

“To find six 12-year-old girls who are in an acute crisis right now, who all have had one suicide attempt, are smoking weed, have purple hair and like anime would be really hard” in any given community, said Carter Barnhart, Charlie Health’s co-founder and chief executive. “But virtual, we're able to do that.”

Other platforms are targeting a wider range of issues for younger patients. Little Otter, which serves kids 14 and under in five states and plans to expand to all 50 by next year, centers the entire family in its treatment of children with anxiety, aggression, attention issues and more. Patients pay out of pocket, but the company is looking to become an in-network benefit.

“We decided to show and prove that we can get high outcomes, that parents love us, that we can retain providers, and then go to insurance companies,” said Rebecca Egger, who co-founded Little Otter with her mother, Dr. Helen Egger, a child psychiatrist. “I think it's given us the ability to start from the ground up of what good care looks like.”

Payment models, privacy issues among the unresolved challenges

It’s fairly standard for digital health startups to launch as a cash pay tool and then look to partner with payers, though it can make them inaccessible to many potential patients at first. It could also slow their adoption as the space becomes more crowded, given existing mental health platforms with offerings for adults, like Ginger, are now looking to expand their services to include members’ children.

There are specific considerations for platforms serving young people. Cassels noted that while many startups offering on-demand care for adults are either centered on broad, low-acuity behavioral health issues or “laser-focused” on specific conditions, that approach may not translate well for younger people. Virtual care companies working with children and teens should instead allow for broad entry through three tiers: identifying whether there's an issue, followed by a detailed triage to offer treatment options and from there matching patients with the best fit.

Barnhart, meanwhile, emphasized continuity of mental health care for children: “The model for a lot of programs is like, Uber for therapy, where you have these rotating clinicians come in and out.”

It’s particularly important to establish long-term relationships for children’s mental health care because it can be difficult for them to be “fully present and engaged” in treatment through a screen, said Dr. Christine Crawford, a child psychiatrist in Boston and associate medical director for the National Alliance on Mental Illness. For particularly young children, “it may be really tough for the mental health provider to do a thorough assessment of the child if they're frequently getting up and running around.”

Guaranteeing children’s privacy and confidentiality when they’re not in the clinic is another challenge, one that could grow if low-quality tools flood the market. There may be up to 20,000 mental health apps available, but few are evidence-based, and new entrants in the pediatric field will need to show their value to gain widespread adoption — and insurance coverage.

Traditional providers moving into the digital space are another competitor. While there are relatively few virtual care companies targeting youth, about 1 in 3 behavioral health outpatient visits for those 18 and younger were done via telehealth as of August 2021.

All telehealth eyes on Capitol Hill for funding determinations

Both virtual care companies and brick-and-mortar providers offering mental health services via telemedicine are awaiting decisions from Congress and federal regulators on the future of digital care beyond the COVID-19 pandemic. A bipartisan group of lawmakers is working on comprehensive mental health legislation that they aim to pass later this year, with pediatric mental health and telehealth included as two of the plan’s five pillars.

Crawford, for one, stressed that the advent of virtual care for pediatric mental health should mean patients have more options, not that digital care fully replaces in-person treatment.

“For some people who may have more significant mental health-related concerns, it may be beneficial for them to meet with a therapist or meet with the psychiatrist in person,” Crawford said. And they shouldn't “feel as though it's any sort of failing or shortcoming on their part if they're not able to get all of their needs met in one of these virtual apps.”