Category: Digital Health

Bain & Company: Top Healthcare IT Priorities

Posted on by Jason Barry

Payors and providers are fighting different operational battles, but they’re using the same two-letter weapon to come out on top: AI, you guessed it. 

A joint report from Bain & Company and KLAS found that 80% of payors and 70% of providers now have an AI strategy in place, up from just 60% last year.

  • Providers are up against structural workforce shortages and rising patient volumes, while payors are contending with higher medical loss ratios and more regulatory scrutiny.
  • Bain and KLAS’ survey of 228 U.S. healthcare execs suggests that all signs point to one solution, and that’s deploying tech to improve margins.

Where are payors investing? Care coordination (57%) and utilization management (55%) were the top IT investment priorities for the second straight year.

  • Payors place total cost of ownership, functionality, and scalability ahead of suite convenience, so best‑of‑breed is still the default buying motion.
  • Plans are leveraging AI for everything from member engagement (35%) and enrollment (26%) to risk adjustment (26%) and prior auth automation (20%).

Where are providers investing? Revenue. Cycle. Management.

  • Half of providers ranked RCM among their top IT priorities, placing it above clinical workflows (34%) and EHRs (32%).
  • RCM = ROI. Accurate documentation and coding results in cleaner claims and fewer denials, which directly translates to higher revenue and lower expenses.
  • It’s also a match made in heaven for AI automation, and RCM currently represents the four most common AI use cases: ambient documentation (62%), clinical documentation improvement (43%), coding (30%), and prior authorization (27%).

Here’s the kicker. Providers cite EHR integration and interoperability as their biggest pain points, so most of them prioritize their EHR vendors for new solutions.

  • Only 20% of providers are primarily best-of-breed buyers, and two-thirds of Epic customers would choose an Epic option that’s “good enough” over a better competing product.

The Takeaway

It’s getting pretty hard to not be bullish on AI. There’s still plenty of uncertainty, but both payors and providers now seem to agree that inaction is the riskiest action.

Rock Health Q3 Overview: Signals Out of Sync

Posted on by Jason Barry

Rock Health’s always-excellent digital health market overview painted an interesting picture for Q3, with venture funding continuing to climb despite several “signals out of sync.”

We’re steady on the surface. Digital health startups raised $3.5B across 107 deals in the third quarter, outpacing last year by a decent margin and bringing the year-to-date total to $9.9B across 351 rounds [Chart: Q3 Funding].

  • Deal volume continued to slow, but fewer raises yielded larger checks. Q3 saw 107 funding rounds, down from 120 in Q2 and 124 in Q1.
  • The average raise in 2025 now stands at $28.1M (up from $20.4M in 2024), and we’ve already seen 19 mega-rounds above $100M – surpassing last year’s total with a quarter left to go.

The middle is missing. Rock Health rolled up its sleeves and calculated some great funding velocity numbers. Of companies that raised their Series B in 2025, the median time since their Series A was 27 months, up from 17 months in the 2023 cohort.

  • Series B deal flow has also thinned, with just 30 raises through Q3, compared to more than 60 annually over the past four years.
  • Pair that with the persistent prevalence of unlabeled raises, and the thinning Series B pipeline suggests that startups are traveling increasingly winding roads to reach scale.

Activity is concentrating around workflows. The biggest theme of the Q3 report was that Clinical Workflow and Non-Clinical Workflow are now 2025’s two most-funded value propositions, capturing a combined 42% of the total funding [Chart: Value Propositions].

  • A $1.3B lead separates these value propositions from the rest of the pack, and workflow tools now appear to be in a league of their own.

Startups are heading horizontal. The report also highlighted a growing group of startups pushing into adjacent workflows, such as Abridge’s partnership with Highmark Health (expanding into prior auths) and Judi Health acquiring Amino (moving into patient navigation).

  • M&A volume is up 37% from last year, with 166 acquisitions through Q3 (already topping 2024’s 121 total), in large part due to these horizontal moves. 

The Takeaway

The numbers look steady, but the market is also steadily splitting in half. That means that the real story going forward won’t be whether digital health startups can attract investors (they can), but whether companies can demonstrate the impact needed to land on the right side of the divide. 

Penguin Ai Raises $30M to Arm the AI Agent War

Posted on by Jason Barry

Payors and providers are in an AI arms race, and Penguin Ai just raised $30M to supply both sides with agents to outcompete each other.

Penguin goes far beyond point solutions. The enterprise AI platform combines proprietary LLMs with AI tooling that both payors and providers can use to configure custom agents for their own back-office processes. 

  • The platform enables customers to prep their data for AI, use pre-built LLMs via APIs, or start with a ready-made agent for medical coding, prior auths, claims adjudication, appeals management, risk adjustment, medical chart summarization, or payment integrity.
  • The ultimate goal is streamline high-volume workflows and cut down on the billions of dollars of administrative waste that the healthcare industry generates every year.

The agent wars have begun. Payors and providers across the country are racing to enlist AI agents to fight for an advantage in a system that’s historically been plagued by inefficiencies and headbutting.

  • Providers vs. Payors: Doctors and hospitals are leveraging agents to fight back against billing denials – filing floods of appeals and automating responses faster than any human could manage alone.
  • Payors vs. Providers: Health plans are rolling out agents to instantly review claims, prior auths, and appeals requests – enabling mass, automatic care decisions that overwhelm providers.

Penguin CEO Fawad Butt has been in the buyer seat. He spent his career serving as the chief data officer at some of the biggest names in the industry: UnitedHealthcare, Kaiser Permanente, and Optum.

  • He founded Penguin to build the platform he saw was missing, and that adds a lot of credibility as Penguin takes on incumbent admin agent dealers like Innovaccer and Autonomize AI.

The Takeaway

The agent wars are in full swing, and Penguin is bringing a comprehensive platform to a battlefield full of point solutions. 

Particle vs Epic: The Lawsuit Moves Forward

Posted on by Jason Barry

For the first time in history, Epic will have to face antitrust claims in court after it failed to dismiss Particle Health’s allegations that the EHR giant has been wielding its monopoly power to stifle competition.

Here’s the overly-simplified version. Particle combines health data from 270M+ patients’ medical records by aggregating “thousands of sources”… sources like Carequality.

  • Carequality is effectively one of the largest health information networks, facilitating data exchange between network members (like Particle) who agree to only query patient data for “Permitted Purposes” such as Treatment, Health Operations, or Public Health Activities.
  • The problem at the heart of the lawsuit arises due to the fact that Treatment is the only purpose that organizations like Epic are actually required to respond to, causing all sorts of companies to warp their true purposes to Treatment-shaped requests.

Particle vs. Epic. Particle’s case alleges that Epic used its EHR monopoly to hamstring competition in the market for “payor platforms,” which allow payors to retrieve patient data to make decisions about care and coverage.

  • Last spring, Epic said that Particle was allowing its customers to inappropriately label their Carequality data requests as Treatment, then proceeded to stop responding to EHR requests from 34 Particle customers.
  • Particle’s lawsuit alleged that Epic trumped up the Carequality accusations in order to block it from serving its payor platform customers.

Epic filed to dismiss all nine of Particle’s claims. On Friday, the judge sided with Epic on five of the nine claims, dismissing the allegations that Epic maintained a conspiracy to uphold its market dominance, as well as claims of defamation and trade libel.

  • However, the court declined to throw out all three of Particle’s federal monopolization claims, as well as a state claim that Epic had interfered with a business contract.
  • Those claims will move forward into discovery, and Epic will now have to turn over documents that can shed light on whether its practices withstand legal scrutiny.

The Takeaway

Get the popcorn ready. Epic’s motion to dismiss was only partially successful, meaning it will now have to actually admit, deny, or qualify Particle’s remaining allegations. That deadline is quickly approaching on September 16th – then the real legal fireworks can get started.

Justifying Healthcare AI Valuations

Posted on by Jason Barry

A stellar report from Flare Capital Partners suggests that there’s some surprisingly sound justifications for the sky-high valuations we’re seeing with healthcare AI companies.

Numbers talk. The report – based on an analysis of 4,500 digital health VC rounds and an exec survey – found that a record 58% of deals involved AI companies in H1 [Chart: AI Funding].

  • Over 10 healthcare AI startups joined the unicorn club in the last year, and the investor enthusiasm only kept surging after five exits over $1B: SmarterDx, Iodine Software, Machinify Health, Office Ally, and Tempus AI.
  • That’s resulted in AI-focused companies commanding valuations 50% higher than the healthcare industry average [Chart: Valuations]. 

What’s fueling the fire? Companies that handle administrative tasks like revenue cycle management and contact center operations are leading the pack, at least for now.

  • Administrative AI companies are shining by having LLMs help turn messy data into measurable ROI, but clinical support based on structured sources (ex. OpenEvidence) continues picking up steam [Chart: Category Adoption]. 
  • One of the best charts unpacks the DNA of market leaders, and it turns out quick deployments and immediate ROI work well regardless of category [Chart: Leaders]. 

It’s not just FOMO. Flare’s exec survey found that half are already carving out over 10% of their IT budget for AI, and 83% plan to dial that percentage up going forward.

  • There’s a meaningful level of product-led “pull” driving AI adoption, especially compared to the “push” that drove past cycles like EHRs.
  • There’s also a high amount of confidence that AI startups will push into new areas (ex. scribing to RCM), and investors are giving them a lot of credit for unrealized growth based on what customers are saying about future budgets and expansion plans.

The Takeaway

Healthcare AI has moved from experimentation to execution, with wider adoption, bigger budgets, and value concentrating around market leaders. Flare doesn’t necessarily believe that justifies billion-dollar valuations for companies that are years away from profitability, but it at least sheds light on why the top players are blasting into orbit.

Make Health Tech Great Again

Posted on by Jason Barry

CMS just wrapped its Make Health Tech Great Again event at the White House, and it unveiled an ambitious new strategy to modernize how healthcare data is exchanged.

This time is different. We’ve heard similar promises before, but the administration plans to “stop theoretical debates and start delivering real results” by taking a two-pronged approach.

  • The first priority is establishing a CMS Interoperability Framework to enable seamless information exchange between patients and providers. 
  • The second step is building a Health Tech Ecosystem to improve access to personalized tools so that patients have the resources they need to make better health decisions.  

The CMS Interoperability Framework includes voluntary criteria for data sharing across different network types – health information exchanges, EHRs, and tech platforms.

  • The blueprint covers everything from patient and provider access to transparency and security, complete with implementation guidelines co-developed with the early adopters. It’s completely aligned with TEFCA, which CMS is still participating in.
  • Over 20 networks pledged to meet the criteria to become CMS Aligned Networks, such as delivering data through FHIR APIs, updating the national provider directory, and providing metrics on network queries for patient records.

The Health Tech Ecosystem is a “standards-based digital health environment” that will integrate apps, EHRs, and care delivery organizations with the new CMS Aligned Networks. 

  • The ecosystem will leverage these integrations to develop new solutions for: (1) managing diabetes and obesity, (2) conversational AI to help check symptoms and navigate care, (3) “killing the clipboard” by replacing paper forms with digital solutions.
  • Over 30 companies and 11 major health systems signed on to “deliver results for the American people” by the first quarter of 2026, and the full roster includes some of the biggest names in healthcare.

The Takeaway

We apparently won’t have to wait long for the CMS Interoperability Framework and Health Tech Ecosystem to deliver results, although what those deliverables will look like remains to be seen.

Samsung Leans In On Healthcare With Xealth Acquisition

Posted on by Jason Barry

It was already shaping up to be a great year for digital health exits, and Samsung just kicked things up another notch by acquiring tech integration platform Xealth.

Xealth was the first spin out from Providence’s Digital Innovation Group back in 2017. The platform integrates 70+ partner solutions for everything from RPM to patient engagement into a single user interface that allows providers to manage them within their existing workflows.

  • That not only allows clinicians to avoid juggling separate apps, but it also gives health systems an orchestration layer for controlling the data and painting a complete picture of their patients.
  • Over 500 hospitals are already in Xealth’s network, and they’ll now be gaining access to Samsung’s connected care ecosystem when the acquisition gets finalized.

Samsung’s no newcomer to healthcare. It’s fresh off another acquisition with prenatal ultrasound startup Sonio, and has been loading up its wearables with FDA-cleared features like sleep apnea detection and irregular heart rhythm monitoring.

  • It’s also developing a new health hub to let users share Galaxy Watch and Galaxy Ring data with their providers between visits, which would be a solid step toward making the data clinically useful – assuming they can get docs to use it.
  • A standalone Samsung health hub sounded like a tough pitch without a way to plug into provider workflows, which happens to be exactly what Xealth brings to the table.

Samsung isn’t just acquiring an integration platform, it’s acquiring a bridge between its consumer ecosystem and actual healthcare delivery.

  • Xealth CEO Mike McSherry said the move will enable “health data from wearables to fill in context that is missing to hospitals and bring more data analysis possibilities that were not available just with clinical records.”
  • Decent enough reason for an acquisition, but then again so is hitting a growth ceiling and needing a Korean tech giant with deep pockets to help you keep scaling, which is the logic that McSherry gave to MedCityNews.

The Takeaway

Samsung and Xealth are keeping the M&A momentum rolling, and we’re already on pace to double 2024’s deal volume. So far this year we’ve seen an end to the IPO drought thanks to Hinge and Omada, Arcadia just got scooped up by a PE firm, and now Big Tech is coming in hot with platform plays. Who said there’s no exit in digital health? 

Catching the Right Wave in Digital Health

Posted on by Jason Barry

The ocean of digital health innovation seems to have a wave of new trends breaking every year, which is why Rock Health teamed up with LG NOVA to give enterprises a framework for “discerning promising currents from passing swells.”

Riding the wrong hype cycle can strain health systems’ limited resources with costly implementations or investment mistakes, so Rock Health divided the digital health landscape into 50 segments to see which show the most promise based on:

  • Value potential (VP) – share of total digital health venture funding, disease burden (degree of economic cost), and addressable population size.
  • Capturable opportunity (CO) – funding velocity, funding concentration (share of capital already held by large companies), and market maturity.

The “Goldilocks” waves include segments that are big enough to support a large market and ripe enough (but not too ripe) for new entrants to gain traction. [Chart: Strongest DH Segments]

  • High VP, High CO: Weight Management stood out with the highest scores in both VP and CO. The disease burden and funding levels don’t get much higher, and the balance of early- and late-stage companies signals a strong market with room for new entrants. 
  • Low VP, High CO: Patient Adherence was docked for its smaller share of overall digital health funding, but stood out for its favorable funding concentration and market maturity.
  • High VP, Low CO: Disease Monitoring had the opposite mix. The segment enjoys a large slice of the funding pie, but most of that is getting eaten by a few mega companies.
  • Low VP, Low CO: Dermatology received the low marks across the board, with poor scores for funding velocity, disease burden, and overall share of funding.

To complement its framework, Rock Health analyzed over 70 digital health unicorns to find other success signals from waves that the industry is already riding. Unicorns tended to:

  • separate from the herd with larger Series C rounds (ex. Abridge)
  • support care delivery or access and are often consumer-facing (ex. Wheel)
  • be therapeutic area agnostic w/ broad addressable markets (ex. Included Health)

The Takeaway

Timing the digital health market is no small feat, but Rock Health’s framework provides a helpful tool for those looking to catch the best wave with their investments and implementations.

SmarterDx, Thoughtful.ai, and Access Healthcare Form Smarter Technologies

Posted on by Jason Barry

New Mountain Capital just hit us with one of the biggest blockbuster mergers of the year, combining portfolio companies SmarterDx, Thoughtful.ai, and Access Healthcare into a new RCM powerhouse dubbed Smarter Technologies.

Payors and providers are at war over every dollar, and Smarter is leveling the battlefield by arming health systems with a comprehensive revenue cycle management platform built on the unique strengths of its founding companies. That includes:

  • SmarterDx’s clinical AI for revenue integrity and care quality
  • Thoughtful.ai’s agentic AI for healthcare operations and revenue cycle automation
  • Access Healthcare’s established RCM and outsourcing expertise

As a combined force, Smarter’s “Automation and Insights Platform for Healthcare Efficiency” includes three core pillars, complete with a sleek intro video for the visual learners.

  • Nebula trains and deploys virtual AI agents that can automate the resolution of up to 70% of revenue cycle tasks while adjusting on the fly to unexpected payor responses.
  • Overwatch is the “lowest cost-to-serve global workforce platform,” enabling healthcare orgs to slash labor costs and lost collections with quality guarantees of 99%.
  • Spotlight delivers AI-driven clinical insights to surface pre-bill revenue and augment claims adjudication, but can be used at any stage of the rev cycle to optimize collections.

“Rip-and-replace” isn’t an approach that many health systems are eager to risk with their entire RCM systems, which is why Smarter CEO Jeremy Delinsky emphasized the platform’s modularity during his excellent Slice of Healthcare interview.

  • Smarter’s menu of EHR-agnostic solutions target specific areas like patient eligibility verification, prior auths, or AR followups – allowing its partners to adopt new AI capabilities without overhauling their existing tech stacks.
  • That leaves plenty of room to layer on more solutions down the road, and Smarter is already serving over 200 clients while managing 400M+ transactions annually. 

The Takeaway

It’s easy enough to announce a massive merger, but integrating three separate companies is a whole different story. Smarter Technologies has all the makings of a platform that can be more than the sum of its parts, but if it wants to ensure that more health systems have the margin to fulfill their mission, the real work is just getting started.

CB Insights State of Digital Health Q1 2025

Posted on by Jason Barry

CB Insights put out its State of Digital Health report for the first quarter, and it looks like it’ll take more than a stock market nosedive to stop the health tech rebound.

Although some of the themes might sound familiar to those that keep up with Rock Health’s analysis – primarily more funding directed toward fewer companies – CB Insights adds some interesting findings that it broke down into four main buckets.

Investors are concentrating their capital. Total VC funding jumped 47% QoQ to reach the highest level seen since 2022, even as the total number of rounds dropped 9%. (Obligatory Disclaimer: CB Insights’ definition of “digital health” includes more AI drug discovery and clinical trials than Rock Health).

  • One of the most striking changes was in investment size: median late-stage checks grew 96% QoQ, compared to 41% for mid-stage and 25% for early-stage rounds. [Chart 1]

Mega-rounds are back, and AI is claiming most of them. Funding from $100M+ mega-rounds surged to $2.5B across 11 deals in Q1, capturing 46% of total investment (highest since 2021).

  • AI startups secured 8 of these 11 mega-rounds, a strong signal of where investors are expecting outsized returns. AI startups pulled in 60% of Q1 funding [Chart 2]

Billion-dollar moves mark an M&A revival. M&A activity surged 27% to 51 transactions in Q1, with the U.S. demonstrating “renewed market confidence in high-value digital health platforms.”

  • Q1 featured two $1B+ acquisitions, with Roper Technologies acquiring autism care software provider CentralReach for $1.6B, and Paulus Holdings picking digital pharmacy platform Alto Pharmacy for $1.5B. [Chart 3]

Unicorn creation rebounds, driven by AI platforms. Digital health saw 6 new unicorns minted in Q1, more than all of 2024 and the highest quarterly total since Q2 2022.

  • With half focused on AI for provider workflows, the report suggests investor conviction is highest where AI directly supports care delivery. [Chart 4]

The Takeaway

CB Insights just delivered more evidence that the digital health market is impressively resilient, even if its definition of that market is a little wider than we’re used to.

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