Eleos Series C Brings AI to Behavioral Healthcare

There’s riches in niches, and “the most widely deployed behavioral health AI solution on the market” just landed another $60M with Eleos Health’s Series C fundraise.

Eleos’ clinical documentation solution looks a lot like other ambient AI tech on the surface:

  • It converts session audio directly into a clinical note in near real-time
  • It works with smartphones, telehealth, and 100+ languages 
  • Providers can review the note and push through any changes

The ambient AI arena is packed with companies catering to the broad needs of health systems, but Eleos side steps that competition by focusing exclusively on community behavioral health organizations.

  • These orgs usually face tight budget constraints, don’t use a major EHR vendor, and serve primarily Medicaid patients with state-by-state documentation needs.
  • By supporting a wide range of integrations and optimizing its solution so that it can document hour-long sessions without driving up costs, Eleos has become a crowd favorite in this corner of the market. It serves 120 orgs across 30 states.

The launch of Eleos Compliance added another differentiator to the funding announcement.

  • Eleos Compliance provides an instant review of every submitted note, proactively flagging potential documentation errors before they can trigger fines or clawbacks.

The Series C will go toward Eleos’ expansion to more settings that often get missed by the latest innovations, particularly substance use treatment centers and post-acute behavioral care.

  • These historically underserved segments not only allow Eleos to help the patients who need it most, but they also let it steer clear of larger players.
  • Rock Health’s recent market overview devoted an entire section to the David vs. Goliath story unfolding in this space, and Eleos is a great example of why taking the path less traveled is a good way to avoid getting stepped on. 

The Takeaway

The number of patients seeking behavioral healthcare far outstrips the providers available to deliver it, and Eleos is looking to help balance the equation with generative AI. The race to solve clinical documentation is as heated as they come, but Eleos’ momentum and specialization are also great tailwinds.

HIPAA Gets First Major Update in Over a Decade

It might have taken the biggest data breach in healthcare history to make it happen, but HHS finally announced the first major changes to HIPAA in over a decade.

Big changes need big titles, and the HIPAA Security Rule Notice of Proposed Rulemaking to Strengthen Cybersecurity for Electronic Protected Health Information packs 393 pages of them.

We admittedly only skimmed that for about two minutes before turning to our usual sources for a summary, so here’s an even shorter summary of those summaries.

The proposed HIPAA changes would require provider organizations to:

  • Enhance data security measures, including multi-factor authentication, network segmentation, and encrypting electronic protected health information (ePHI) 
  • Maintain a technology asset inventory and network map illustrating the movement of all ePHI within their information systems 
  • Maintain a detailed risk analysis of each component in the inventory and network map
  • Establish written procedures to restore EHR systems within 72 hours of a cyberattack
  • Conduct HIPAA compliance audits at least once per year

Another key change is the elimination of the distinction between “required” security rules that must be followed and “addressable” rules that providers can choose not to obey.

  • By eliminating that line, HIPAA would make all of the above changes mandatory for all organizations, whether they’re ready to implement them or not.

Even tech savvy providers are still in the business of care delivery, not cybersecurity, and many of them will have to partner with outside companies to ensure compliance.

  • Larger organizations with strong IT teams might already be preparing for these changes, but smaller hospitals with already-slim margins are probably in for a tough transition.

Health data needs to be protected, and our current safety measures obviously aren’t getting it done. On the other hand, there’s also a growing divide between “the best” and “the rest” of U.S. hospitals, so an unfunded mandate with heavy compliance costs runs the risk of making it wider.

The Takeaway

Healthcare has its fair share of acronyms, but HIPAA might just be the most common one in the alphabet soup. It’s important to get these changes right, and that means finding a balance between protecting patients and not overburdening providers. HHS is seeking comments on the rule until March 7.

Rock Health 2024 Overview: David vs Goliath

If last year’s digital health market felt like David vs. Goliath, Rock Health’s full-year funding recap has you covered with the reason why.

Here’s 2024 by the numbers:

  • U.S. digital health funding totaled $10.1B across 497 rounds 
  • Continued downtrend in investment (2023 was $10.8B total, 503 rounds)
  • Shift to early-stage companies drove the dropoff

There’s a tale of two trends unfolding between the early-stage startups and late-stage incumbents battling for market share, and neither side is helping out the funding total.

  • Investors began focusing on early-stage startups throughout 2024, and a whopping 86% of labeled rounds went to Seed, Series A, and Series B startups.
  • Larger companies also started to see smaller checks, with the median Series C and D raise clocking in at $50M and $55M, respectively (down ~10% from 2023). 

The shift to earlier-stage investments was driven by an appetite for startups that can show traction with small/medium sized organizations, especially among increasingly influential mega-VCs like General Catalyst and Andreessen Horowitz.

  • These smaller orgs want gen AI capabilities, aren’t a top target for massive IT players, and can be a goldmine for the startups that can fill that gap.  
  • The mega-VC influence in digital health follows a broader trend, with PitchBook data showing that 50% of all venture capital raised in the U.S. last year went to just nine firms… out of 391 total VCs. GC and a16z happened to rank #1 and #2.

Since it wouldn’t be a 2024 recap without the magic two letters: AI investment reached a fever pitch, and AI-first startups took home 37% of the overall funding.

  • Goliaths in this space include incumbents like Epic, the healthcare divisions of Big Tech players like Microsoft, and younger startups with the warchest to compete like Commure.
  • Rock Health sees a future where the AI Davids can continue thriving by addressing specialized use cases or smaller customer segments, as long as they keep an eye on the roadmaps of their bigger competition to avoid getting stepped on.

The Takeaway

If the healthcare industry wants to keep innovating, it needs companies of all shapes and sizes to make it happen. Rock Health’s 2024 recap is a good reminder that not every startup needs to be a Goliath, and that the Davids are still finding success by right-sizing their operation to the customers they serve.

Innovaccer Dives Into AI With Series F Raise

We’re barely halfway through the first month of 2025, and Innovaccer already raked in what could end up being the biggest raise of the year with its $275M Series F funding round.

Innovaccer got its start in 2014 with the goal of breaking down healthcare’s data siloes and using that connected fabric of information to improve care delivery. 

  • That infrastructure was made possible by Innovaccer’s Data Activation Platform, which unifies data across EHRs and care settings to deliver insights at the point of care. 
  • Innovaccer’s Health Cloud adds an entire suite of applications on top of that data layer to modernize patient experiences and alleviate administrative burdens for providers.

If Innovaccer’s last chapter was about building the infrastructure to make AI possible, the next part of its story will revolve around spearheading that new wave of solutions.

  • Innovaccer plans to introduce a bustling ecosystem of AI co-pilots and agents to its portfolio, tackling everything from prior authorization and clinical decision support to care management and contact centers. 

By throwing its hat into the ring of so many different segments, Innovaccer will be facing competition from just as many directions.

  • The health analytics arena is packed with players like Health Catalyst and Databricks. New AI scribing and revenue cycle management startups get funded every week. Customer relationship management has a 1000-pound gorilla named Salesforce.
  • The key to Innovaccer’s success will be its breadth of services, and it’s tough to name a single competitor that can match the same level of data infrastructure and co-pilot ecosystem needed to scale AI across large orgs without a mess of point solutions.

The Takeaway

Healthcare organizations have spent decades digitizing enormous amounts of data, but none of them actually want a mountain of data – they want the insights buried within it. Innovaccer helped lead the charge on creating the infrastructure, now it’s building the AI applications that can showcase the new experiences it made possible.

First Snapshot of AI Oversight at U.S. Hospitals

A beautiful paper in Health Affairs brought us the first snapshot of AI oversight at U.S. hospitals, as well as a glimpse of the blindspots that are already adding up.

Data from 2,425 hospitals that participated in the 2023 AHA Annual Survey shed light on the differences in AI adoption and evaluation capacity at hospitals on both sides of a growing divide.

Two-thirds of hospitals reported using AI predictive models, a figure that’s likely only gone up over the last year. These models were most commonly used to:

  • predict inpatient health trajectories (92%)
  • identify high-risk outpatients (79%)
  • facilitate scheduling (51%)
  • perform a long tail of various administrative tasks

Bias blindness ran rampant. Although 61% of the AI-user hospitals evaluated accuracy using data from their own system (local evaluation), only 44% performed similar evaluations for bias.

  • Those are some concerningly low percentages considering that models trained on external datasets might not be effective in different settings, and since AI bias is a surefire way to exacerbate health inequities
  • Hospitals that developed their own models, had high operating margins, and belonged to a health system were all more likely to conduct local evaluations. 

There’s a digital divide between hospitals with the resources to build models tailored to their own patients and those who are getting these solutions “off the shelf,” which increases the risk that they were trained on data from patients that might look very different from their own.

  • Only 54% of the AI hospitals designed their own models, while a larger share took the path of least resistance with algorithms supplied by their EHR developer (79%).
  • Combine that with the fact that most hospitals aren’t conducting local evaluations of bias, and there’s a major lack of systematic protection preventing these models from underrepresenting certain patients or adding unfair barriers to care.

The authors conclude that policymakers should “ensure the use of accurate and unbiased AI for patients regardless of where they receive care… including interventions designed to connect underresourced hospitals to evaluative capacity.”

The Takeaway

Without the local evaluation of AI models, there’s a glaring blindspot in the oversight of algorithmic bias, and this study gives compelling evidence that more needs to be done to fill that void.

Transcarent Builds Benefits Behemoth With Accolade Acquisition

It’s already shaping up to be a huge year for digital health M&A, and the headlining announcement from our action-packed first week was Transcarent’s acquisition of publicly traded benefits rival Accolade.

The $621M price tag is undeniably a big move for Transcarent, which launched in 2020 to make it easier for employees to access all of their care needs through a single convenient interface, their smartphone.

  • The platform connects members to comprehensive experiences including Cancer Care, Weight Health, and Surgery Care (through provider partnerships), while also simplifying how employers manage and track that care.
  • Transcarent recently landed $126M in Series D funding at a $2.2B valuation, which it earmarked for AI innovations like its new WayFinding solution, and for taking advantage of juicy M&A opportunities in beaten-down competitors.

Accolade is a personalized health and benefits company with a long list of offerings that includes virtual-first primary care, navigation services, and expert medical opinions.

  • Despite raising $220M during its 2020 IPO, Accolade turned into an attractive acquisition target after struggling with revenue growth and booking a $100M loss during the latest fiscal year.
  • Accolate will add over 1,000 clinicians to Transcarent’s team, as well as deep data integrations with a wide partner ecosystem across diabetes, mental health, fertility, and MSK care.

Transcarent now plans to fold Accolade into its existing platform, bringing together the “best of provider, partner, and payor ecosystems.” 

  • By integrating its WayFinding and comprehensive care experiences with Accolade’s expert medical opinions and primary care, Transcarent expects to drive higher utilization and lower costs (+Accolade’s 16 years of health data for AI training was a nice kicker).

The Takeaway

At a time when point solution fatigue is crippling employers and public healthcare companies have lagged behind the broader market rally, Transcarent’s acquisition of Accolade seems like the right move at the right time. It could also mark the beginning of a much bigger M&A wave in digital health, especially if valuations continue looking too appetizing to pass up.

Crystal Ball Compilation: Digital Health in 2025

Welcome back to the first Digital Health Wire of 2025! The healthcare news cycle might never sleep, but we hope our readers are heading into the new year well rested and ready for big things to come.

The past few weeks have had plenty of fortune tellers predicting what those big things will be, so we’re kicking the year off with a compilation of the clearest crystal balls.

Let’s get right into it.

Second OpinionThere’s about to be a lot of AI capital incineration, Chrissy Farr

  • Favorite Forecast: AI startups will struggle if they don’t acknowledge that to sell into healthcare, you can’t ignore services. Until AI training is ubiquitous, startups will need their own teams to make it happen. Public healthcare “tech” companies have a service-heavy revenue mix for a reason.
  • Big Idea: “We are overdoing it on AI and missing out on opportunities to invest in solid, services businesses that are truly helping patients… These businesses have extremely low valuations and are struggling to raise, relative to their peers in AI that have made zero traction.”

The Surgeon’s Record2025 The Year of the Wood Snake, Dr. Ben Schwartz

  • Favorite Forecast: Care delivery innovation pivots from primary care to specialty care. Specialty care is extremely complex, with huge room for improvement from shifting sites of service, building new condition-specific treatment pathways, and aggregating high-quality networks.
  • Big Idea: “The specialty care innovation movement is well underway… Maven Clinic… Oshi Health… Thyme Care… Commons Clinic… The common thread here? Embracing a hybrid specialty care model.”

Out-of-PocketOut-Of-Pocket’s 2025 Predictions, Nikhil Krishnan

  • Favorite Forecast: Marketing becomes a mess. Meta is making some major healthcare advertising changes that make it difficult to actually target patients, and Google and LinkedIn could soon follow suit.
  • Big Idea: “AI generated slop is starting to mess up search engine optimization rankings. 50% of people are little content piggies that are fine with the slop though.”

Hospitalogy 8 Predictions for Healthcare 2025, Blake Madden

  • Favorite Forecast: LLM advancements made back-office AI the talk of 2024, but this year could bring a surge in funding for clinical AI solutions.
  • Big Idea: “The cost and complexity of processing unstructured clinical data, combined with low risk tolerance, have historically limited the adoption of clinical AI products. Fortunately, LLMs excel at more accurately interpreting unstructured / multi-modal data, and the cost of compute is decreasing. This sets the stage for AI to create more value in clinical workflows.”

ForbesAnti-Predictions For Healthcare In 2025, Seth Joseph

  • Favorite Forecast: Progress on data interoperability will continue, but painfully slowly. Everyone wants interoperability, but regulatory uncertainty and the rapid emergence of new data sources complicates the situation.
  • Big Idea: “The politics of access to healthcare data will continue as if it’s a 6th grade student council election.” – Zus Health CEO Jonathan Bush

NeuroFlow2025 Healthcare Forecast, Ellen Harvey

  • Favorite Forecast: Behavioral health will shift from access to impact. By collecting behavioral health data and merging it with physical health data, we’ll start to see which interventions truly reduce unnecessary utilization and improve outcomes. 
  • Big Idea: “The industry is finally shifting from asking ‘Do we have enough providers?’ to ‘Are our programs actually working?’ As healthcare costs continue to skyrocket, both public and private payers will demand proof that their behavioral health investments are paying off.” – NeuroFlow COO Robert Capobianco

The Takeaway

The healthcare industry has plenty of challenges, but it also has some strong tailwinds pushing it toward new solutions. Cheers to everyone making those solutions a reality in the new year.

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