Digital health funding is on the rise -- for example, MobiHealthNews tracked $689 million in deals this quarter, spread across 49 deals, compared to $392 million in Q3 of last year. But investors at a Health 2.0 panel this week said that dollar amounts don't tell the whole story.

"There are a lot of different sources of capital than there used to be before," Ankur Luther, an executive director at Morgan Stanley said. "Mutual funds, sovereign wealth funds, strategic investors, and a lot of that has driven up competition, driven up valuations for sure. I think we all know that valuations have been very frothy. [But] I think it’s more because people have been smart. You want to take advantage of the market while you can finance bigger because there will be a time when you can’t do that."

Abhas Gupta, a partner at Mohr Davidow Ventures, added that healthcare investments in particular can look inflated because everything in healthcare is so expensive.

"All the dollars in healthcare have multiple zeros behind them, that’s just how it works," he said. "The average revenue per user in Facebook is $4. For eBay it’s $89 dollars, for Amazon it’s $189 dollars. For Medicare it's $12,000. ... So you have to get wrapped around this idea that a company may only be doing tens of millions of dollars of revenue, but it’s worth a half a billion dollars, even though it’s literally in the first 16 months of its inception."

Correction: An earlier version of this post misstated the figures in Gupta's quote.

One panelist, Liz Rockett, a principal at Kaiser Permanente Ventures, does see the high valuations and investments as a validation of the space.

"Some of the reason this market is more flush with capital than it’s been in a long time is there’s a light at the end of the tunnel," she said. "There’s success stories to look at and it’s not from another market. That will stay with us through whatever happens next."

Consensus among the panel, which also included David Francis, managing director at RBC Capital Markets and was moderated by Venture Valkyrie Managing Partner Lisa Suennen, was that the digital health space may finally be approaching the point where larger general technology companies would start to be interested in acquiring digital health companies. Some of the regulatory turbulance that scared big buyers away until now is dying down, Francis said. And Gupta and Suennen also pointed to pharma as a potential big buyer that's close to putting real skin in the game.

The panel had different ideas about what made a successful healthcare company. While Rockett and Francis argued that service companies that used technology had more staying power, while Luther felt that the most successful exits had come from companies with technology at their core, addressing a healthcare issue.

Another important distinction the panel teased out was about consumerism in healthcare. One of the big trends is that, because of high deductible plans and health savings accounts, consumers are taking on more financial risks and decision-making when it comes to their care.

"Consumerism is the big play here," Francis said. "... We don’t have a Priceline, we don’t have a Yelp, we don’t have an OpenTable. We don’t have the tools we’re used to using outside of healthcare inside healthcare. It’s hard for us to be intelligent consumers when it comes to spending our own money on health."

But, as Francis's fellow panelists pointed out, we're still a long way from actually being able to build a business selling to consumers.

"Even in those companies [that are resonating with consumers], the acquisition may be consumer, but the actual way the dollars flow is not consumer," Gupta pushed back. "It’s B2B2C. There are certainly high deductibles driving pressure on the consumer, but ... purely consumer-focused companies are going to have a hard time."

A lot of the biggest pet peeves the investors expressed were about terminology and the use of vague terms like "population health" and "patient engagement" by startups that evoke those ideas so readily that they start to lose their meaning.

"That’s where we all get frustrated about what the buzzword is at the moment," Rockett said. "Being in the seat where you get to meet a lot of companies in a lot of spaces, [you want to ask] 'What are you actually doing? Help me understand what it is about you that’s different.' You don’t go into a consumer media conference and say “end user engagement” as a trend or a category. They get much more specific about it."

Even the term digital health is a fraught one -- Rockett said many investors don't take it seriously, and KP has wondered if it wouldn't be helpful to break it down into more specific buckets. And Suennen wondered how long it would be before digital was just implied in the term "health".

"After all, we don’t say digital banking," she said.