Overview
AI startups attracted most of the new digital health money in the first half of 2025, as investors focus on scaling proven technologies.
Mega rounds, IPOs and AI Tools Reflect Maturing Market with Fewer, Larger Deals
Digital health investors are plowing money into companies using artificial intelligence, more than any other kind of enterprise, according to a new report on funding for the first half of 2025.
For the first time, startups built on AI drew the majority of US digital health investment, hauling in $4 billion of the $6.4 billion raised so far this year, a new Rock Health analysis showed. The rapid rise of AI-powered tools has changed the digital health funding landscape, as AI-enabled companies now attract bigger rounds, more investor attention, and more hospital adoption than their peers.
In particular, companies that use AI to automate tasks, improve documentation or analyze health data are attracting the biggest investments. Top fundraisers include Abridge, a company that uses AI to record and transcribe conversations between patients and providers, which secured $550 million in two mega rounds this year. Truveta, a company aiming to build the world’s largest and most diverse database of genotypic and phenotypic information to accelerate drug discovery, launched in January with $320 million. Rounding off the top three is Innovaccer, an AI healthcare cloud company, which raised $275 million in January.
AI Startups Lead Deal Size Surge
In addition to the largest deals, including nine of the 11 “mega deals” (those greater than $100 million), AI-enabled digital health startups raised, on average, 83 percent more per deal than non-AI companies, with Series A rounds coming in at $24 million, or 56 percent higher and $55 million for Series B rounds, or 38 percent higher. Investors are betting that these products can not only make health systems more efficient, but are also gaining quick adoption by doctors and hospitals.
“Strong outcomes and clear impact for clinicians have driven the rapid adoption of medical ambient documentation tools—faster than any other technology in healthcare history,” Rock Health wrote in its report (see “Doctors Embrace AI Scribes as Solution for Burnout”). “Today, overall adoption rates hover between 30 percent and 40 percent across physician groups, with some leading hospitals reporting utilization as high as 90 percent.”
IPOs, Mergers and Signs of Maturity for AI-Powered Digital Health
After a quiet period for digital health IPOs, two companies made their public debuts. Hinge Health, which offers digital physical therapy, listed on the New York Stock Exchange in May, while Omada Health, a virtual chronic care provider, launched on Nasdaq in June. Both spent more than a decade building their tech platforms before going public, and both are now pushing to use AI to further automate care and support patients.
“Over the last decade, the foundation of Hinge Health has been built on two things: an exceptional, clinically validated member experience and strong client relationships and partners,” said Jim Pursley, President of Hinge Health, in the Rock Health report. “Those two things are necessary but not sufficient to succeed at scale—AI and computer vision were a critical third element that allowed us to simultaneously improve the member experience and improve our cost structure.”
Elsewhere, merger and acquisition activity nearly doubled, with 107 deals in the first half of 2025. Most buyers were other digital health companies, but private equity firms also moved in, rolling up AI startups with legacy healthcare players to create bigger businesses.
One example: New Mountain Capital’s formation of Smarter Technologies in May, which combined traditional financial management systems, clinical data organization and healthcare administrative services with new AI tools.
Uncertainty on the Policy Front
While investors found reasons for optimism, the policy environment was far from settled. The Trump administration began rolling out the “Make America Healthy Again” plan, focusing on childhood chronic illness and healthcare price transparency, and issued a wave of executive orders that could affect digital health business models (see “‘MAHA’ Reports U.S. Children’s Health Issues, Calls for Strategic Realignment.”)
At the same time, a new federal budget bill added Medicaid work requirements and changes to the Affordable Care Act marketplace, which could leave millions uninsured and reduce the potential customer base for digital health solutions. A modest, temporary increase in Medicare reimbursement rates offered little long-term certainty, Rock Health said.
“Players across the digital health landscape are living in an uncertain environment because they don’t know when, how, or if agencies will implement executive order directives,” said Rachel Stauffer, principal at McDermott+, in the report. “That being said, there are more opportunities than ever before for digital health companies to get involved and steer evolving regulations—from submitting responses to RFIs to connecting with agencies working on digital health, like CMMI and CMS.”
From Hype to Proof: Digital Health Delivers ROIs
The broader trends in digital health show that investors are focusing on fewer, but larger deals, and ones that demonstrate “proof points,” that technology can bring validated improvements to patient care, according to the report.
“Digital health is proving it is more than just steady and resilient; the sector is entering a new phase of traction and impact, with AI playing a linchpin role,” Rock Health wrote. “And although an IPO may not always be on the horizon, the proof is in the pudding—digital health can deliver on its core thesis: to improve care quality, accessibility, and affordability. By staying anchored to these north stars and championing them in key policy forums, digital health will help the healthcare industry weather shifting global, economic, and policy tides.”