By Josh Schmidt, partner, BPM
After a tumultuous 2023 and 2024, health technology found its footing in 2025—not through a return to boom-time exuberance, but through a more sustainable recalibration driven by artificial intelligence, evolving trial methodologies, and maturing regulatory frameworks.
As we approach 2026, the lessons of the past year reveal which innovations are moving from hype to healthcare reality.
AI Emerged as the Dominant Investment Theme
The most striking development of 2025 was artificial intelligence’s commanding share of digital health investment.
By the second quarter, AI-focused startups captured 69 per cent of all digital health funding, up from 41 per cent in 2024.
Through the third quarter, healthtech companies raised $12.3 billion in venture capital—already surpassing 2024’s full-year total.
The capital flowed to practical applications addressing longstanding industry pain points.
Revenue cycle management emerged as one of the most investable subsectors, with AI-powered RCM companies raising over US$1.2 billion since 2021 as they promise to resolve costly administrative complexity.
Clinical documentation platforms also attracted substantial investment, with companies offering ambient clinical intelligence and automated note-taking securing multiple mega-rounds exceeding $100 million.
The enthusiasm wasn’t universal, however.
Average deal sizes hit record highs—$7.7 million in Q3—while overall deal volume declined, suggesting investors became increasingly selective.
Early-stage funding dropped from $11.7 million in Q1 to $7.7 million in Q2, indicating heightened scrutiny of business models and unit economics.
Decentralized Clinical Trials Confronted Reality
Decentralized clinical trials, accelerated into mainstream adoption during the COVID-19 pandemic, faced a moment of reckoning in 2025.
While the market remains on a strong growth trajectory—projected to expand from US$9.1 billion in 2025 to US$46 billion by 2035—adoption patterns revealed a more nuanced picture.
Research published in mid-2025 showed a sharp decline in DCT implementation since 2021.
Analysis revealed that 67.5 per cent of DCTs were initiated by academic institutions rather than pharmaceutical sponsors, and 78.3 per cent used only a single decentralized element rather than fully remote models.
Post-pandemic accessibility of traditional trials made DCT approaches less urgent for many sponsors.
Josh Schmidt
The most successful implementations focused on therapeutic areas requiring long-term monitoring—respiratory, neurological, psychiatric, and metabolic disorders—where digital health technologies were already integrated into clinical research.
Hybrid models combining traditional site visits with remote elements proved more practical than fully virtualised trials.
Platform providers reported that end-to-end digital trial platforms could reduce overall timelines by up to 50 per cent in certain cases, though these gains remained concentrated among sponsors with substantial digital infrastructure.
Regulatory Clarity Began Taking Shape
Perhaps the most consequential development for health tech’s long-term trajectory came in January 2025, when the FDA issued comprehensive draft guidance for AI-enabled medical devices.
With over 1,250 AI-enabled devices already authorised for marketing in the United States as of mid-2025—and roughly 100 new approvals occurring annually—the guidance addressed a critical gap in how adaptive, learning systems should be evaluated.
The draft guidance introduced Predetermined Change Control Plans, allowing manufacturers to specify future algorithm updates in their initial submissions.
If the FDA authorises the plan, companies can implement listed modifications without filing new applications, provided they follow prescribed testing protocols.
This framework acknowledges that AI medical devices evolve differently than traditional static technologies, potentially accelerating innovation cycles while maintaining safety oversight.
The regulatory focus extended beyond premarket approval to encompass the total product lifecycle, with heightened emphasis on bias mitigation, transparency, and post-market surveillance.
The Exit Environment Slowly Reopened
After years of IPO drought, 2025 witnessed the return of billion-dollar digital health public offerings.
Hinge Health and Omada Health went public at valuations of US$2.6 billion and US$1.1 billion respectively—the first above the US$1 billion mark in four quarters.
Both companies offer employer-driven chronic care programs, suggesting payers have validated these models as sustainable.
Exit activity accelerated through consolidation.
The third quarter recorded 42 venture-backed healthtech exits—an all-time high—with most comprising acquisitions of seed and Series A startups by strategic buyers seeking to build integrated platforms.
M&A volume increased 37 per cent compared to 2024.
Looking Toward 2026: From Experimentation to Integration
As we enter 2026, health technology appears poised to shift from experimentation to integration. Several trends warrant close attention:
• Platform consolidation will continue as providers reject point solutions that create integration headaches, driving M&A as platforms absorb specialised tools
• Accelerated AI commercialisation should follow clearer regulatory frameworks, particularly in radiology and cardiology where most authorisations have concentrated
• Outcomes-based validation will increasingly determine success as value-based contracting demands that digital health companies demonstrate real-world outcomes rather than simply process improvements
The healthcare innovation sector enters 2026 with more realistic expectations, clearer regulatory pathways, and capital concentrated around proven business models.
For an industry long characterised by enthusiasm outpacing evidence, this measured maturation may prove more durable than another boom cycle.
