Healthcare IT companies have shown a resurgence in venture capital funding, amassing $1 billion in the second quarter of 2023. Although slightly less than the $1.3 billion raised in the first quarter of the same year, it marks a significant increase from the low of $451.3 million documented for the final quarter of 2022, according to a report from Pitchbook.
As health systems navigate their way out of financial crisis mode, healthcare leaders are turning their focus towards boosting efficiency through advancements in technology, generating interest in one sector in particular, generative AI. More than a quarter of the second quarter’s venture capital in healthcare IT went towards companies offering generative AI solutions.
Generative AI has been at the forefront of significant funding rounds. For instance, Hippocratic AI, a startup proclaimed as the first large language model custom-tailored for healthcare, secured $50 million in a seed round in May, followed by an additional $15 million in July. Another impressive fundraising feat was achieved by Hyro, a conversational AI platform firm, with its $20 million Series B round.
While the healthcare industry is drawn to the potential benefits of generative AI, it remains wary about deploying this technology for clinical decision support or tasks requiring medical discretion, such as prior authorization review. Instead, establishments are focusing on how generative AI can improve efficiency, capacity, job satisfaction, and patient experiences.
Regulatory and reimbursement trends have also played a key role in guiding healthcare IT investments. The introduction of new codes for remote patient monitoring by CMS and easing of restrictions regarding the caregivers permitted to provide this care has subsequently directed capital towards startups specializing in this area.
Successful fundraising rounds by HealthSnap and Optimize Health underscore this trend. HealthSnap is a platform for chronic care virtual management and remote patient monitoring which completed a $9.1 million Series A round in May, while Optimize Health offers patient monitoring and care coordination platform secured $6 million in a Series B round in the second quarter.
Experts predict that commercial payers, and eventually CMS, will pare back reimbursement for remote patient monitoring programs that don’t demonstrate their ability to improve patient outcomes. In response startups in this sector are advised to prioritise generating actionable insights through seamless user experiences.