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MTI Viewpoints

Insights shared by industry relative to healthcare and the advancement of medical technology.

Allan Gobbs is a Venture Capitalist and Deeptech Entrepreneur. He is a Co-Founder and Managing Partner of New York-based Life Sciences venture firm ATEM Capital (www.atemcap.com).

Earlier this month, JPM Week in San Francisco served as a barometer for where U.S. health care is headed. This year, one issue consistently surfaced: mental health. Federal data show that one in five U.S. adults experience mental illness annually.

Mental health remains structurally underfunded, accounting for an estimated 10%-16%[1] of disability-adjusted life years but receiving only about 2% of health care investment[2], leaving an annual funding gap of roughly $200 billion to $350 billion[3].

That gap will not be closed by extending the system we already have. Medication-centric, clinic-bound care cannot scale. Workforce shortages, infrastructure limits, and modest pharmacological efficacy make further expansion fragile. JPM Week has become less about incremental spending and more about whether the system can deliver mental health care at scale.

But momentum does not equal impact. Innovation is no longer the bottleneck. Delivery is.

For families seeking mental health care, especially for children, this failure is not abstract. Waitlists stretch for months. Referrals fragment across schools, clinics, and specialists. Dr. Burns C. Blaxall, a recognized leader in precision medicine and father of a neurodivergent child, describes the pattern: “Every visit starts with good intentions,” he says. “And many visits end the same way: another trial-and-error prescription attempt.” Behavioral and skills-based therapies are discussed, but access is delayed or unavailable. Medication moves forward not because it is always the right answer, but because it is the only intervention the system can reliably deliver.

Non-pharmacological care demands sustained engagement beyond the clinic, continuity, coordination across providers, and follow-through at home. These capabilities don’t fit neatly into episodic visits, fee-for-service billing, or strained clinical workflows.

The delivery gap is not theoretical, it is encoded into health care infrastructure. Payment systems still privilege face-to-face encounters. Authorization frameworks often struggle to recognize software as treatment. Clinical systems rarely integrate data generated outside the clinic into care workflows. The result is predictable: even when non-pharmacological interventions demonstrate benefit and engagement, families cannot access them because clinicians cannot prescribe them cleanly, insurers will not reimburse them consistently, and care teams lack visibility into outcomes.

Extended reality offers a working model. Once treated as fringe, XR now functions as a practical delivery modality for mental health interventions requiring engagement, repetition, and skill acquisition.

What differentiates XR is mechanics. Immersive environments scale therapeutic interaction while maintaining structured control over a patient’s sensory, emotional, cognitive, and physical context. By minimizing distraction and using spatial intelligence, XR supports skill-building and emotional regulation in ways that are difficult to replicate through talk therapy, mobile apps, or clinic visits. This is particularly relevant in conditions where repetition, spatial cues, and emotional regulation matter, including anxiety disorders, PTSD, and early cognitive decline.

Systems that operate at population scale, including national health services, Medicaid plans, or integrated delivery networks, are uniquely positioned to deploy non-pharmacological care as infrastructure rather than an add-on.

The Veterans Health Administration offers a concrete proof point. As an integrated payer–provider system, the VA is structurally able to evaluate and scale new delivery models earlier than most fragmented health systems, reducing friction between clinical adoption and reimbursement. Over the past eight years, the VA has deployed immersive technologies across more than 170 medical centers in all 50 US states[4], expanding from a limited set of early use cases into more than 40 documented clinical indications, including pain management, PTSD, anxiety disorders, rehabilitation, and clinician training.

That breadth matters. The implication is not clinical novelty, but operational leverage. Unlike point solutions built around a single indication, a single XR platform can support multiple therapeutic pathways. That reduces fragmentation and enables non-pharmacological care to be delivered, measured, and reimbursed at scale, a prerequisite for adoption by large health systems and payers. As artificial intelligence is layered into these environments, personalization can occur within that same scalable framework, adapting content, pacing, and interventions to individual patients while preserving standardization at the system level. This is particularly important in mental health, where symptom expression and social determinants often matter as much as diagnosis.

Just as important, the VA’s experience challenges assumptions about resistance to new modalities. In early pilots, two-thirds of veterans had never used VR, yet over 90% found it easy and wanted continued access[5]. As Anne Lord Bailey, PharmD, BCPS, of the U.S. Department of Veterans Affairs has observed, “Let veterans feel the benefit, and adoption follows.” When immersive care is implemented as part of routine practice, rather than isolated as a pilot, patients participate, clinicians integrate it into workflows, and systems commit.

In pediatric mental health, engagement is often even more immediate, immersive tools feel like games, not therapy. The constraint is not interest; it is access. Roughly half of caregivers report difficulty obtaining mental health services for their children[6]. Medication is often initiated but frequently abandoned, with discontinuation driven by side effects, limited benefit, or logistical challenges.

For children, the barrier is rarely willingness to engage. It is the absence of delivery models that sustain engagement over time. Immersive approaches help close that gap by supporting attention training, emotional regulation, and core cognitive skills relevant to anxiety, ADHD, and specific learning disorders, without requiring repeated clinic visits or medication escalation. While full VR headsets may be appropriate for older children, augmented reality offers a complementary path for younger ones, layering interactive, skills-based content onto familiar objects such as books, delivered through smartphones or tablets. Without infrastructure to prescribe, deliver, and pay for these tools, however, even highly engaging interventions struggle to reach the families who need them most.

Digital health panels at JPM Week should not be mistaken for system change. Both investors and providers cite scalability, reimbursement, and workforce constraints. Both are grappling with what it takes to make non-pharmacological care operationally real inside existing systems. The VA’s experience suggests that when institutions treat immersive care as infrastructure rather than novelty, engagement shifts from being a barrier to becoming a measurable driver of outcomes.

If the MAHA Commission’s policy momentum is to matter, it must be matched by delivery infrastructure that makes non-pharmacological care executable in everyday clinical workflows. That means payment models that recognize software-enabled and experiential care as legitimate treatment pathways; prescribing and ordering workflows that allow clinicians to deploy validated digital and immersive interventions without workarounds; and data integration that makes engagement and outcomes visible and actionable.

Some pieces are moving. CMS has established a VR-specific HCPCS Level II code and classified certain clinical VR systems as durable medical equipment. Site-neutral care principles are gaining traction within CMS innovation efforts[7]. But one code does not make a system. Until the full delivery stack exists, medication will remain the default for health systems, not because it is always the best care, but because it is the easiest to prescribe, reimburse, and measure within current infrastructure. For payers, the opportunity is not novelty, but substitution: shifting cost from episodic, high-friction encounters toward scalable, engagement-driven care delivered earlier, at home, and with measurable outcomes.

JPM Week reflected a consensus that non-pharmacological mental health care is necessary, but not a system capable of delivering it.

Evidence exists. Engagement exists. Capital exists. What remains missing is delivery infrastructure. Until that gap is closed, much of the industry will continue to produce promising solutions that never reach most patients, remaining confined to a small number of leading, highly capable organizations rather than becoming standard care.

REFERENCES

[1] https://journals.plos.org/plosone/article?id=10.1371%2Fjournal.pone.0116820

[2] https://www.mckinsey.com/mhi/our-insights/investing-in-the-future-how-better-mental-health-benefits-everyone

[3] https://www.mckinsey.com/mhi/our-insights/investing-in-the-future-how-better-mental-health-benefits-everyone

[4] https://www.innovation.va.gov/hil/views/immersive/immersive.html

[5] https://ausn.org/immersive-technology-defining-a-new-reality-for-veteran-health-care

[6] https://www.kff.org/state-health-policy-data/state-indicator/percent-of-children-ages-3-17-who-faced-difficulties-obtaining-mental-health-care

[7] https://www.cms.gov/priorities/innovation/about/cms-innovation-center-strategy-make-america-healthy-again

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