2024 outlook: Health IT investment, M&A and AI

Investments in healthcare IT will start to bubble up, generative AI could turn the hype into reality and mergers and acquisitions will become a path for many startups in 2024, according to Cheryl Cheng, CEO and founder of Vive Collective.

Vive Collective is a new investment platform to build, finance and scale the next generation digital health and health technology companies. The company is committed to a flexible partnership approach to support fast-growing, disruptive digital healthcare companies with a network of healthcare and technology experts and partners.

Healthcare IT news sat down with Cheng to get her expert opinion on the year ahead.

Q. You suggest that IT investments are an area that healthcare CIOs and other healthcare IT leaders should consider next year. What is?

A. Payers, healthcare systems, and key healthcare stakeholders will start purchasing software again. After a difficult period marked by layoffs and reorganizations, the dust will settle and companies will realize that they need to use software to fill the gaps resulting from workforce reductions.

Don’t expect a dramatic opening of the floodgates and investment dollars flowing throughout the industry, but the purse strings will loosen and the wallets will open. For large acquisition companies, this development will be an opportunity to rebuild and close some gaps in the IT stacks. For startups, this is a good sign for the future.

Q. Artificial intelligence has been hotter than fire this past year. You see a lot of activity ahead.

a. For generative artificial intelligence, 2024 could be the year when reality catches up to the hype. Certainly, there will be continued investment in generative AI and its applications, but much of the initial excitement around this category will diminish as regulators and end users increasingly focus on what’s in the ‘black box’, such as data sources, compliance considerations and guardrails for responsible application of AI tools.

There is increasing acceptance in healthcare that generative AI will deliver improvements in many processes, including billing, patient communications and administration. But how the industry will resolve questions surrounding patient privacy and patient data sharing still remains unclear.

Policymakers are doing their utmost to keep up with the latest developments in this rapidly changing field of technology, and this is likely to continue for the foreseeable future.

To make new generative AI applications and large healthcare systems with substantial resources will increasingly shift development in-house to take advantage of internal expertise. This will widen the gap between the ‘haves’ and the ‘have-nots’ of the clinical and operational capabilities of healthcare systems large and small.

Q. You say mergers and acquisitions will be a key focus. What do you see happening in 2024?

a. As venture capital funding for digital health continues to trend downward compared to recent years, mergers and acquisitions will become a natural path for many startups. We expect the deal market to be disrupted, with a few blockbusters at the high end, while most of the rest will fall at the low end.

For early or even mid-stage startups that cannot raise additional funding, smaller exits could be a reality in 2024. Now that the market has returned to valuing realized revenue over contracted revenue and multiples have shrunk, exit valuations will not be as high as in previous years.

However, there is still a need for strong technical and operational talent, especially from companies that know how to navigate the healthcare system.

For some mid-sized startups that have well-developed point solutions, we expect that consolidation into platforms or mergers of multiple point solutions will create more robust platforms. Buyers have long lamented the desire to purchase fewer point solutions and the reduction of resources on the customer side will accelerate this trend.

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