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The Real AI Bubble, Sword Acquisition, and Designer Babies
January 29, 2026
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Together with
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“Anyone can have a taller, smarter, and healthier baby with advanced genetics. But we don’t talk about it. This campaign bridges that gap.”
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Nucleus Genomics CEO Kian Sadeghi’s viral take on designer babies.
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Bessemer Venture Partners’ always-stellar State of Healthcare AI report did a great job explaining why we (probably) aren’t in a bubble even though the health AI rocket has hit escape velocity.
AI is more than hype. BVP points to signals from the private markets to make its case.
M&A activity is surging. Global health tech M&A reached 400 deals in 2025 (up from 350 in 2024), but the strategic rationale matters more than the volume. Healthcare orgs and investors recognize that AI simultaneously drives revenue growth and margin improvement.
- Prime example: the Smarter Technologies roll up was designed to leverage Thoughtful and SmarterDx’s growth engine and clinical AI platform to drive margin expansion across the Access Healthcare RCM services conglomerate.
VC funding is nearly back to pandemic levels. BVP counted 527 venture deals in 2025 (~$14B total), with the average round size climbing 42% to $29M.
- AI startups captured 55% of that, up from 37% in 2024. Even more importantly, for every $1 invested in AI companies overall, $0.22 was deployed to healthcare AI startups, outpacing the fair share of 18% of GDP that healthcare spending represents in the U.S.
The question now is, are we in a bubble? BVP has a nuanced answer for why health AI is in a better spot than the Dot Com Bubble.
- First, AI’s technological shift has spurred the invention of new business models, with the emergence of “AI-services-as-software” companies delivering service-level outcomes (human-quality work) with software-level margins (70%+ gross margins).
- Second, buyers are now pulling instead of being pushed. While EHRs took 15 years to scale, AI scribes have pulled it off in three. Demonstrable ROI and ease of implementation were key here.
Health AI has an X Factor. New health AI “supernova” startups are bending traditional growth curves entirely. BVP attributes these supernovas’ unprecedented growth to four X Factors.
- Continuous hyper-growth velocity (not just growth projections)
- Revenue durability through defensibility
- Productivity gains that translate to better margins and full-time employee metrics at scale
- Point solution to platform expansion
Maybe sane valuations, maybe VC mental gymnastics. BVP argues that a supernova with $30M ARR and $1B valuation isn’t overvalued, it has fundamentally different growth dynamics.
- When you’re growing 6x instead of 2x, you reach $100M ARR in 18 months instead of 36+ months. That compression in time-to-scale commands a premium, and BVP says a 7x revenue multiple for supernovas is justified versus 2-3x for a strong SaaS company.
The Takeaway
Health AI is going supernova, and the explosion might actually be big enough to let the leaders grow into their astronomical valuations.
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Making the Case for AI
Healthcare organizations have a lot to gain from implementing AI that can enhance coding accuracy and quality metrics, but securing buy-in from leadership is a crucial first step. Check out Navina’s new guide by Dr. Michael S. Barr to see exactly how to demonstrate clear financial benefits, ROI potential, and alignment with organizational priorities to help ensure AI projects are successful.
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Next Generation Ambient Tech and Agents
The ambient AI transformation is already sweeping across health systems, reducing administrative burdens and improving patient outcomes. So, what’s next? Tune into this on-demand session to learn how systems like Carle Health and Denver Health are leveraging Nabla to eliminate Pajama Time and build a future where agentic AI unlocks true workforce sustainability.
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- Sword Acquires Kaia: Sword scooped up its former virtual MSK rival Kaia Health for $285M, and the combined company now officially reaches over 100M patients. Kaia will expand Sword’s footprint in the U.S. and give it a strong beachhead in Germany, where the solution is already available through a digital health reimbursement pathway that covers more than 70M people. Existing Kaia customers will gain access to Sword’s shiny AI Care platform, which their AI Head of Strategy Rik Renard framed up beautifully in our recent interview on the DHW Show.
- Designer Babies Have Arrived: Nucleus Genomics recently wrapped up the largest genetic optimization marketing campaign in history after taking over New York City with ads for what many are calling “designer babies.” The polarizing posters were seen in a full station-blitz of Broadway Lafayette, 1k+ street ads across NYC, 1k+ subway car ads, and dozens of Urban panels throughout SoHo. The wait for genetically modified babies is over, even if the debate around them isn’t.
- Kontakt Patient Journey Analytics: Kontakt.io debuted Patient Journey Analytics to take hospital operations from retrospective reporting to “anticipatory decision-making.” Patient Journey Analytics accomplishes that by creating a hospital digital twin that integrates EHR data with operational signals like RTLS to create a continuously updated model of patient flow and resource utilization. The unified view allows hospitals to better align staff, space, and equipment with patient needs in real time.
- Suki Impact Report: KLAS and Suki put out a validation study that sprinkled some interesting new revenue data on top of the usual ambient AI metrics. Suki’s “improved documentation and coding” has been moving the needle at McLeod Health, driving a 5% increase in Level 5 encounters, a 7.3% increase in Level 4 encounters, and an 18.2% decrease in Level 3 encounters. It’s understandable that these gains rub some folks the wrong way given that they rhyme with the recent payor upcoding fiasco, but if it’s a Level 5 encounter it’s a Level 5 encounter, and if ambient AI can help docs accurately label it as such then we’re all for it.
- Ro and Our New Health Sherpas: A great op-ed in the Wall Street Journal explored how direct-to-consumer companies are shaking up healthcare through an interview with Ro CEO Zach Reitano. Opaque pricing and third-party payors have traditionally prevented competitive dynamics from playing out in healthcare, so Ro set out to “break the cycle of crazy” by vertically integrating a virtual doctor’s office, lab tests, and its own pharmacy. The model allows Ro to give patients more transparency, less middlemen, and paves the way for providers to “transition from gatekeepers to almost like Sherpas.”
- McKinsey Expects More Services: McKinsey’s latest industry report predicts that Healthcare Services & Technology will continue to be the industry’s fastest-growing segment. The consulting firm expects both payors and providers to increase outsourcing to tech and platform companies, and that nearly half of all healthcare profits will come from software, data, and analytics by 2029. The biggest losers in the analysis were traditional admin and consulting services, which have already begun slowing or contracting as AI takes over.
- Beauregard + Artera + DrFirst: Beauregard Health System is joining forces with Artera and DrFirst to give its patient and provider experiences an AI overhaul. Artera’s AI-powered patient communication infrastructure and DrFirst’s prescription engagement solution are now directly implemented in the rural system’s MEDITECH Expanse EHR. DrFirst has reportedly already prompted a 650% increase in pick-up reminders set by patients, while Artera’s Flows Agents have successfully closed 18% of gaps in mammography screenings and 13% in colorectal screenings in just two months.
- Epic Hospitals Go Big on Scribes: A study published in The American Journal of Managed Care shows that nearly two-thirds of hospitals on Epic had already adopted ambient AI as of June 2025. Researchers analyzed a national sample of 6,561 U.S. hospitals and identified 2,784 (42%) using Epic as their primary EHR. Of those, 1,744 (63%) had adopted at least one ambient AI tool, with DAX Copilot, Abridge, and ThinkAndor ranking as the most popular. The updated pie chart for next year might look a whole lot different after this year’s big UGM news.
- MedPAC Seeks 2027 Medicare Bump: The Medicare Payment Advisory Commission plans to advise Congress to raise 2027 Medicare payment rates by 0.5 percentage points above current law in its upcoming report. That’s the good news. The bad news is, such an increase would boost Medicare spending by $750M to $2B in one year, and because Medicare has a fixed budget, increases in one area have to be offset by cuts in another. Stay tuned.
- Top 10 Technology Hazards for 2026: Misuse of AI chatbots ranked as the biggest threat in ECRI’s Top 10 Technology Hazards for 2026. The safety group warned that widespread use in the absence of better regulation exposes patients to errors, bias, and hallucinations that should ideally require professional medical oversight. The risks of using chatbots for healthcare decisions could become an even greater concern as higher healthcare costs and hospital closures reduce access to care, leading more patients to rely on them as a substitute for professional medical advice.
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Enrollment Timelines, State by State
Provider enrollment delays are shaping access to care, revenue timelines, and even workforce strategy. Ever wonder how they’re impacting organizations near you? Check out Medallion’s 2025 Geography of Payor Enrollments to see state-by-state enrollment times, how delays are compounding workforce shortages, and why you should factor this into your 2026 planning.
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10 Bold Predictions for Healthcare AI in 2026
If 2024 was the year of proof-of-concept and 2025 was the year of early adoption and scale, 2026 is shaping up to be something different. This year, AI will become expected infrastructure and simply part of how healthcare gets done. Read these 10 predictions from clinical leaders, health system executives, and researchers shaping the next phase of the field on how the AI conversation will change in 2026.
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Scale RPM With BPM Pro 2
BPM Pro 2 is the next generation of cellular blood pressure monitors, empowering care teams to scale remote patient monitoring and streamline operations. Discover why leading providers are choosing BPM Pro 2 to collect highly precise measurements and enrich data with Patient Insights from their daily lives.
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