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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Generative AI can help health systems improve margins, but only 6% of them have a strategy ready, according to a recent report from Bain & Co.

Why it matters: The hospital sector is seeing its most challenging year since 2020, with many systems buckling under wage inflation and staffing shortages, Aaron writes.

What's happening: Most health systems are eyeing near-term generative AI applications such as improving clinical documentation, structuring and analyzing patient data, and optimizing workflows.

For example, the University of Kansas Health System recently partnered with generative AI platform Abridge to reduce documentation burden.

What's next: Hospitals hope to start using generative AI for predictive analytics, clinical decisions and care recommendations.

What they're saying: "It's time to play offense — or be forced to play defense later," write Bain partners and lead authors Eric Berger and Margaret Dries.

"Choosing from the laundry list of generative AI applications is daunting," they add, noting companies risk "overinvesting in the wrong opportunities and underinvesting in the right ones."

Be smart: Amid a noisy generative AI market, focus and prioritization are persistent challenges for health systems, the report notes.

"In many boardrooms, executives are debating overwhelming lists of potential generative AI investments, only to deem them incomplete or outdated given the dizzying pace of innovation," Berger and Dries write.

Hospitals should start small, piloting low-risk generative AI applications with a narrow focus, such as billing or scheduling, the report suggests.

Health systems should also be weighing a buy-build-partner strategy when it comes to generative AI.

The bottom line: While "a wait-and-see approach is a tempting prospect," health systems shouldn't rest on their laurels when it comes to implementing new AI.

1 big thing: Health systems lag on AI strategy

Illustration of code in a health cross symbol

Elon Musk's brain-implant company Neuralink input $280 million in a round led by Peter Thiel-backed Founders Fund, Bloomberg reported.

Why it's the BFD: Neuralink recently bagged FDA approval for human clinical trials, despite being the subject of several current and potential federal probes regarding its treatment of animals, transport of pathogens and allegedly rushed project timelines, Erin writes.

The intrigue: Neuralink — which is developing a device that uses electrode-laced wires to connect the brain to a computer and requires drilling into the skull — has come under fire by federal agencies, employees and advocacy groups.

The U.S. Department of Transportation earlier this year began a probe into Neuralink following an animal advocacy organization's allegations about the company's handling of hazardous materials.

The company in December was under federal investigation for potential animal-welfare violations amid staff allegations of rushed animal testing, Reuters reported.

State of play: In light of the controversy, Neuralink is one of the highest-profile companies among a cadre of brain technology businesses, several of which have pivoted away from their initial vision or shuttered in recent years.

Neuralink previously raised $360 million from firms including Vy Capital, DFJ Growth, Craft Ventures and Valor Equity Partners.

Other startups continuing to develop brain computer interface (BCI) technology include Blackrock Neurotech, BrainGate and Synchron, which received FDA approval for human trials in 2021.

Others, such as Facebook Reality Labs' Brain-Computer Interface division, shut down after facing difficulties turning the futuristic devices into reality.

How it could work: Neuralink's goals, like those of the aforementioned companies, focus on helping people with quadriplegia to control mobile devices and computers with their thoughts.

Zoom out: Neurotech startups so far this year raised $143 million through June 26, per PitchBook data.

That figure could put the sector on track in 2023 to exceed last year's $278 million, but the total will likely fall far short of 2021's staggering $518.9 million.

Flashback: Musk has said previously that his ultimate vision for Neuralink is far more expansive. He has said it could help peel back the curtain on reality and even create a new race of AI-augmented humans.

In a July 202o tweet, Musk alleged that a Neuralink demonstration would show "the matrix in the matrix."

Reality check: So far as we know, that hasn't happened yet.

2. The BFD: Musk's Neuralink inputs $280M

Illustration of a piggy bank-like brain with a dollar going inside

• Daybreak Health, an SF-based provider of school telemental health services, raised $13m in Series B funding led by Union Square Ventures and joined by new backer Lux Capital and insiders Lightspeed Venture Partners, Maven Ventures and Y Combinator. https://www.daybreakhealth.com/

• Great Point Partners-backed Family Resource Home Care, a Liberty Lake, Washington-based independent provider of home care services, acquired Companion Care Inc., a family-owned and -operated non-medical in-home care agency based in Woodinville, Washington. https://www.gppfunds.com/

• Madison Dearborn Partners and Thoma Bravo sold Syntellis Performance Solutions, a Chicago-based enterprise performance management software, data and analytics solutions for healthcare, higher education, and financial institutions, to Roper Technologies in an all-cash transaction for an enterprise value of $1.4 billion. https://www.ropertech.com/

• Renovus Capital Partners-backed ToxStrategies, a Katy, Texas-based scientific consulting firm specializing in toxicology, epidemiology, exposure sciences, industrial hygiene and safety, and regulatory compliance, acquired Modality Solutions, a Houston-based package engineering and controlled-environment logistics company.  https://toxstrategies.com/

• VION Biosciences, an acquisition platform sponsored by Iron Path Capital, acquired Aldon Corp., an Avon, New York-based private-label manufacturer and distributor to the health care, life science and STEM education markets. www.aldon-chem.com

• Danam Health, a Lutz, Florida-based prescription fulfillment company, agreed to go public at an implied $200m enterprise value via Artemis Strategic Investment Corp. (Nasdaq: ARTE), which previously had a failed deal to buy Novibet. https://axios.link/443cxXo

3. Deals o' the day

• Josh Pappas left a role as sales director at Tendo to become senior sales director at Kintsugi.

• Omar Mousa left a role of VP of strategy at Adonis to become VP of product at Ventricle Health.

• Mark Kaye left a post as CFO at Moody's to take the same role at Elevance Health, replacing John Gallina who will retire from the role later this year.

• Heather Cianfrocco left a post as CEO of OptumRx at UnitedHealth to become president of Optum.

• Derek Johnson left a post as senior counsel at Myeloid Therapeutics to become general counsel at Portal Innovations.

Editor's note: This story has been corrected to note Mark Kaye was appointed CFO of Elevance Health, not John Gallina, who is the outgoing CFO of Elevance.

4. It's personnel

👩🏻‍⚕️ Doctors should pay more attention to non-physical side effects — STAT

🏥 One Brooklyn Health to slash more services — Politico

📉 Babylon's take-private deal with MindMaze collapses — Healthcare Dive

💲Clover Health avoids stock delisting — MobiHealth

5. Your daily dose

Illustration of a repeating pill bottle pattern with one rolled up newspaper.

🔪 Erin attended a '90s-themed murder mystery party dressed in character as an investigative journalist, but she failed to correctly identify the criminal.

🏆 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Jay Bennett. Please ask your colleagues, friends and family to sign up.

August 08, 2023

1 big thing: Health systems lag on AI strategy