The Collapse of the Digital Health Pricing Model: Why PMPM Will Die in 2026 — and What Will Replace It

The biggest lie in digital health is that PMPM is a “standard” pricing model.

It isn’t. It never was. And new 2025–2026 evidence shows it won’t survive the next contracting cycle.

For a decade, digital health companies adopted PMPM by default — not because it worked, but because it was easy.

It let companies avoid the real work of:

• proving cost displacement

• tying value to utilization

• understanding benefit structures

• creating actuarial logic

• modeling attribution

• aligning with payer economics

  
  

But now, the market has shifted — decisively, and permanently.

Over the past 30 days alone, AJMC, Mercer, CMS MA 2026 updates, and employer benefits reports have converged on one clear message:

PMPM is economically indefensible in 2026.

And the companies who don’t replace it fast will lose payer, employer, and health system deals faster than they ever imagined.

Why PMPM Is Collapsing (The Unspoken Reasons)

Everyone feels PMPM is dying. Almost nobody understands why.

Here is the real mechanic behind the collapse:

1. PMPM is misaligned with utilization physics.

Digital health loves “engagement.”Payers care about site-of-care shifts.

Employers care about preventable utilization.

MA plans care about state-level cost trajectories.

PMPM ignores all of it.

If your pricing doesn’t reflect:

• avoided ED events

• avoided admissions

• avoided A1c escalations

• avoided radiology

• avoided step-therapy failures

• avoided behavioral health crises

…it’s immediately discounted as financially irrelevant.

2. PMPM collapses under attribution scrutiny.

A bombshell JAMA finding in October 2025:

62% of digital health interventions fail attribution when members see multiple vendors.

This alone destroys PMPM.

If you can’t isolate your contribution to cost displacement,you can’t justify a flat PMPM fee.

Attribution ≠ outcomes.Attribution = financial defensibility.

Payers now know this. Employers now know this. PE sponsors now know this.

Digital health’s PMPM optimism simply hasn’t caught up.

3. PMPM doesn’t survive employer budget compression.

Mercer’s 2025–2026 employer survey makes it explicit:

• discretionary benefit spend shrinking 8–14%

• CHRO-led decisions shifting to CFO-led

• vendor categories consolidating

• multi-condition stacking required

• ROI validation required for renewal

  
  

PMPM is the first thing to get cut.

Employers don’t want “more per member.”

They want:

• fewer vendors

• lower cost

• clearer value

• financially precise stack design

• predictable ROI across conditions

  
  

PMPM fails every one of those tests.

4. MA 2026 pushes plans toward utilization-anchored evidence.

MA plans entering 2026 must show:

• cost trajectory impact

• utilization impact

• benefit alignment

• documented continuity

• actuarial defensibility

• 
  

CMS is making plans prove value, not just outcomes.

PMPM pricing without utilization logic is now a compliance riskfor the plan itself.

That’s why MA executives are now openly rejecting PMPM from vendors — even high-outcome vendors.

5. PMPM doesn’t reflect real-world economics.

PMPM assumes:

• all members are equal

• all acuity is uniform

• all benefit structures behave the same

• all populations activate the same

• all conditions stack linearly

  
  

None of this is true.

In fact, it’s the opposite.

Real economics are driven by:

• cost-heavy cohorts

• condition clusters

• benefit-level friction

• activation mechanics

• social risk factors

• comorbidity load

• state-level cost drivers

• utilization patterns by geography

  
  

PMPM simplifies what payers now demand be amplified.

**The uncomfortable truth:

PMPM survived only because buyers weren’t paying attention. They are now.**

And the moment buyers start caring about:

• attribution

• actuarial logic

• cost displacement

• cohort-level variation

• predictable ROI

• benefit alignment

• utilization physics

  
  

PMPM becomes meaningless.

2026 is the year buyers care about all of it.

This is why PMPM is collapsing.

And it’s happening faster than anyone predicted.

**If PMPM dies — what replaces it?

Only one thing: Economic Clarity Pricing™.**

Created by Axis Growth Partners, Economic Clarity Pricing™ is the pricing architecture designed for the 2026 commercial environment.

It is built on seven principles:

1. Cohort-Based Cost Signatures™

Identify which conditions and acuity levels drive 80% of cost displacement.

Price those cohorts — not the whole population.

2. Attribution-Stable Value Rows™

Tie pricing to causal utilization shifts, not pre/post outcomes.

Plans are done with weak attribution models.

3. Utilization-Aligned Pricing

Align pricing with:

• avoided ED

• avoided admissions

• avoided radiology

• avoided specialty escalations

• avoided pharmacy escalations

• avoided behavioral health crises

  
  

This is what CFOs buy.

4. Episode-Compatible Pricing for IDNs

Pricing that maps to actual bundles, episodes, and care pathways —not theoretical clinical improvements.

5. Benefit-Structure Pricing for Employers

Your price must reflect the benefit structure, not the product.

• HRA vs HSA

• carved-in vs carved-out

• primary vs supplemental

• activation burden

• multi-condition stacking

This determines your value — not your outcomes slide.

6. State-Specific MA Pricing

Pricing aligned to:

• regional MLR

• state-level risk

• local contracting norms

• local care-cost differentials

  
  

MA buyers are done with national PMPM pricing.

7. Commercial Proof Rows™ (not pilots)

Replace pilots with contracting-ready economic evidencethat compresses cycles from 12 months to 6–8 weeks.

This is how winners will commercialize.

The winners of 2026 will be the companies who abandon PMPM first.

They will price:

• based on economics

• not engagement

• based on utilization

• not anecdotes

• based on cost displacement

• not outcomes decks

• based on actuarial logic

• not wishful thinking

• based on segment architecture

• not generic GTM playbooks

  
  

This is the future. This is the new standard. This is the path to commercial inevitability.

And Axis Growth Partners is already building this architecture for the next generation of category leadersin behavioral health, metabolic care, MSK/pain, employer health, and wearables.

If you are heading into 2026 with a PMPM model — you are already behind.

Axis Growth Partners architects:

• Economic Clarity Pricing™

• attribution + actuarial models

• MA 2026 contracting architecture

• employer benefit pricing

• utilization mapping

• multi-condition value stacks

• Structural Friction Audits

• Commercialization Architect function

• Commercial Cockpit execution

  
  

The market is resetting.PMPM is collapsing.Economic clarity is the new commercial currency.

Let’s build the pricing engine that will define your next decade.

Tom Riley, Founder & Commercialization Architect | Axis Growth Partners tomriley@axisgrowthpartners.co | axisgrowthpartners.co @axisgrowthpartners