Q&A: The state of medical XR in 2025

In November 2021, California-based virtual reality therapeutic company AppliedVR became the first medical extended reality (XR) company to be granted FDA De Novo clearance for a virtual reality healthcare product.
AppliedVR’s RelieVRx (formerly EaseVRx) is a fully immersive VR experience designed to help individuals manage chronic low back pain and provide a non-pharmacologic option for pain relief.
Josh Sackman, president and cofounder of AppliedVR, recently sat down with MobiHealthNews to discuss the current state of the medical XR industry and his expectations for the sector in the year ahead.
MobiHealthNews: What is the current state of medical XR?
Josh Sackman: I’ll give the AppliedVR-centric view and then radiate out because where we’re at often is a barometer of how things are shaped. We’ve been at this forefront position, and there are lots of perks to being the first, and you also bear the brunt of a lot of the challenges, too. And a lot of people put a lot of weight on the regulatory process and pathways and how you navigate.
But so many of those factors ended up being relatively new points because, as we know, the payer adoption, reimbursement and business models largely drive the success in this space. And there’s a lot of positive trends. You know, Highmark has not just covered AppliedVR and, you know, more traditional digital-centered products like Freespira and others, but seeing them cover Swing Therapeutics was great. And while they’re not VR, these are just signs of payers being a bit more progressive in terms of how they cover and what they cover, which was good.
And, you know, I’ll be really curious to see what reimbursement looks like for the new mental health codes, the ones that are nearing with RTM [remote therapeutic monitoring] because I know a lot of players that didn’t have DME [durable medical equipment] pathways that are now looking to see beyond RTM if those same type of coding paradigms will work with mental health indications. And so I think we’re going to see really creative coding this year to figure out what payers are willing to tolerate, and I’m very curious because RTM isn’t the most attractive business model for most medical devices, but it’s all you got in a lot of cases if you don’t fit into DMEs and other pathways.
I also think areas like the VA or some other alternative IDN [integrated delivery network] systems have really been good adopters of the technology. It’s in the more traditional commercial space when you’re dealing with really fragmented kind of payer mixes and health channels. It’s just really challenging, how you train and identify patients and communicate the benefits across all these disparate stakeholders. But what’s cool is when there’s a lot of aligned interests, like with the VA. There’s been a lot of traction and success, and it’s because the doctors, the patients, and the people paying for it are all kind of rolling in the same direction, which has been really cool for us to see.
MHN: MobiHealthNews has received mixed feedback about what is happening in the medical XR space. Some providers say they are having difficulty accessing some XR experiences because many companies are struggling or lack the resources to support providers. Is that something you have seen?
Sackman: I think what you bring up is a real risk that, you know, despite a lot of good trends, still the financial market for both early, middle and late-stage financing still is pretty uncertain.
And there are exceptions, like all the software AI products have been a bit insulated from it, but pretty much everything else if you don’t have a solid foundation of existing investors who are supporting your business. A lot of businesses have faced real runway issues, and even companies that have solid financial foundations, like Penumbra, decided to pull back from the space because their other lines of business were more attractive and easier to tap into, kind of the growth and potential, than XR.
And so you’re right. The biggest threat to medical extended reality is just the fundamental health of the businesses operating in it. If businesses pull out of the space because either they’re forced to or they choose to, it does cast kind of a halo effect on the category when you can have great products with great clinical value and great customer testimonials and really solid products, but it still casts doubt if the category is viable. And that’s certainly something, you know, we face, but we’ve been a little bit insulated just because we’ve been around close to 10 years. We’ve checked off a lot of the boxes. We have a lot of published data. We have really good contracts and momentum, but I certainly feel for companies that may be a step or two back from where we are, and I think there is a real risk there.
MHN: What do you see happening in the sector in 2025?
Sackman: Because of that, I do think there is going to be consolidation. There’s just been so much investment, and I don’t think it will get wasted. And so even if companies aren’t viable as standalone entities, I’d expect more consolidation, whether it’s medical extended reality companies or integration of those as products or features into broader digital health companies or even more traditional pharma and devices. I’m really curious about what Precision Health does and what momentum they have as kind of the last-standing big pharma player heavily investing in the space.
I’m really curious to see what Sword Health, Hinge Health and Omada do with their IPOs if they go public, and what that means for capital to then roll up companies that fit into MSK or metabolic care or other conditions that you know, medical XR can support, as well as just what the general PE [ private equity] and VC [venture capital] openness is to continue investing.
Whether it’s supporting consolidation or growth, I think there’s definitely a lot that’s going to change and, I think, positively from last year, where people are sitting by the sidelines to now, where I think people are still waiting through the inauguration, kind of seeing what happens in the market, but I think things are really going to pick up in the first couple quarters.