AI startups' ROI reckoning

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AI Startups' ROI Reckoning

Reality check phase
Investors and customers are now expecting healthcare AI startups to prove clear financial and operational value. For health systems' in particular, tight finances mean that AI purchases increasingly require CFO approval — so there needs to be a solid case for financial returns, said Larry Cohen, CEO of Health2047, the American Medical Association's venture studio.

The long game
Many healthcare AI companies are still in the early innings when it comes to proving financial returns, particularly for tools that assist with clinical use cases, pointed out Uma Veerappan, vice president at Flare Capital Partners. In the near term, she believes demonstrating adoption could matter more than showing immediate ROI for some startups.

"With the early-stage nature of many of these companies, I don't necessarily believe that ROI needs to show within the first six or so months of deployment. Rather, I think the ability to show you have a sticky product is what's really important. After a longer period of time is probably when financial and clinical ROI become more table stakes," Veerappan remarked.

ROI depends on the tool
ROI looks different depending on the kind of AI tool, noted Rachel Feinman, managing director of Tampa General Hospital Ventures. Some tools, such as ambient clinical documentation scribes, deliver ROI indirectly rather than through immediate financial gains, she pointed out. For example, health systems may adopt these tools to stay competitive in recruiting physicians, even if they don't increase visit volume or short-term revenue.

At the same time, Feinman said AI that automates manual administrative work — especially for tasks like revenue cycle automation and data abstraction — typically offers clearer and more immediate financial returns.

ROI-driven business models
Vig Chandramouli, partner at Oak HC/FT, said that he is seeing more AI startups shifting away from traditional SaaS pricing toward models tied directly to outcomes, such as charging per completed task or transaction. This approach helps customers feel they are paying only for measurable results, he stated.

"Companies are getting forced into pricing at three to five times ROI. Value capture is front and center on almost every pitch," Chandramouli declared.

He warned, however, that transaction-based pricing can create hidden risks. If a company underestimates the true cost of delivering each successful transaction, the unit economics can quickly erode.

— By Katie Adams

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Reverse Merger Is Path Forward for an Autoimmune Disease Biotech

The deal
Privately held Candid Therapeutics is going public by combining with Nasdaq-listed Rallybio to continue clinical development of its T cell engagers, or TCEs, for autoimmune diseases. Along with the reverse merger, Candid announced $505 million in private financing. That capital, plus the cash from both companies, is expected to support the Candid pipeline through 2030.

The therapeutic approach
TCEs bind to targets on a T cell and a disease-driving cell, leading the immune cell to kill the pathogenic cell. This approach first reached patients as cancer treatments, but a growing number of companies are now developing TCEs for autoimmune disease. Candid's most advanced program, cizutamig, is on track to begin Phase 2 testing this summer in myasthenia gravis and interstitial lung disease.

Why it Matters
After disease-driving B cells are depleted with a TCE, the cells that replace them should not target healthy tissue, accomplishing a "reset" of the immune system. This approach could offer long lasting disease remission that makes a TCE a one-time treatment. But Candid is also exploring partial depletion of B cells, an "immune dimming" that wouldn't go as far as a full immune reset but could still be superior to currently available standard treatments.

Soundbite
"With immune dimming, we would expect intermittent TCE dosing that provides superior efficacy over standard of care with a strong safety profile," Candid CEO Ken Song said. "The immune reset and immune dimming approach we believe is unique to TCEs and both can be pursued in parallel as they are not mutually exclusive."

—By Frank Vinluan

5 Notable Health Tech Funding Announcements in February

The skinny
Health tech companies made several major funding announcements in February, including Talkiatry, Honest Health, Solace, Garner Health and Midi Health.

The details
Talkiatry, a telepsychiatry company, secured $210 million in Series D funding led by Perceptive Advisors. In total, Talkiatry has raised more than $400 million.

Honest Health, a value-based care enablement company, raised $140 million in funding led by NewSpring Healthcare. It will help the company expand into new markets and form new partnerships.

Solace, a care navigation company, raked in $130 million in Series C funding led by IVP. The financing will be used to expand its network of care advocates, as well as to invest in its platform and clinical research.

Garner Health, a platform that connects patients with high-performing doctors, secured $118 million in Series D funding led by Kleiner Perkins. In total, Garner Health has raised about $200 million.

Midi Health, a women's telehealth company, raised $100 million in Series D funding led by Goodwater Capital. The company is now valued at over $1 billion.

— By Marissa Plescia

Can AI Help Cure America's Healthcare Pricing Problem?

High cost of care
Not only is healthcare in the U.S. unaffordable for many patients, clinicians are also feeling the heat. Practices can hire additional staff at an annual cost of around $50,000 per employee, or gradually convert physicians into part-time administrators. Those administrative costs inevitably get baked into service pricing, pushing healthcare further out of reach for patients who were already learning to postpone care. At the same time, the growing administrative burden quietly erodes quality of care.

Thoughtful automation
This is precisely where thoughtful automation, if implemented correctly, can begin to change the equation. Instead of taking human jobs, AI automation in medicine is an opportunity to attack healthcare costs by reducing administrative burden. In recent years, AI has made meaningful advances across several healthcare domains. They already assist clinicians in imaging analysis, pathology screening, and early risk detection, improving accuracy and reducing time to diagnosis.

Perhaps the most immediate and underappreciated opportunity, however, lies in automating administrative and patient engagement workflows. Healthcare-specific AI platforms can now handle appointment booking and rescheduling, reminders, missed-call and after-hours follow-up, patient intake, frequently asked questions, inquiry triage, and recall campaigns.

An economic impact
AI-driven automation enables practices to scale patient volume without proportionally increasing headcount, improving margins while stabilizing or even lowering per-visit costs. Over time, widespread adoption of intelligent automation could help bend the healthcare cost curve by reducing administrative waste, improving appointment utilization, and minimizing revenue leakage from no-shows and unfilled schedules. More efficient operations also translate into better access: shorter wait times, faster responses, and more consistent follow-up improve patient adherence and outcomes, reducing downstream costs from delayed or missed care.

For patients, this means more accessible and affordable care. For providers, it means sustainable operations in an increasingly challenging environment.

— By MedCity Influencer Fedor Pak

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AI startups' ROI reckoning