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June2024

THEAI-POWEREDHEALTHCAREEXPERIENCE

ReshapingthepatientJourney

Morethanjustthelatestbuzzword,artificialintelligence(AI)hascapturedtheworld’sattentionbydemonstratinglimitlesspossibilitiesandrapidly

becomingpartofeverydaylife.Thisfast-movingtechnologyhasgarnered

investmentacrossindustriesandfromthepublicsector.TheWhiteHouserecentlycommittedover$3Bthroughthe"Safe,SecureandTrustworthy

DevelopmentandUseofArtificialIntelligence"executiveorder.Fewsectorsstandtobenefitmorethanlifescienceandhealthcare.AdvancementsinAIareprovidingvalueinthisindustryfromimprovementsinadministrative

efficiencytopatientoutcomesanddrugdiscovery.Withaneyetowardthepatientjourney,weexplorethevariouswaysAIisreshapinghealthcare.

Overthelastfiveyears,AIdealactivityhasgrownfasterinhealthcarethan

intechoverall.Today,oneinfourdollarsinvestedinhealthcare

companiesisgoingtocompaniesthatareleveragingAI1.WhileAIin

drugdiscoveryandtherapeuticsaregarneringoutsizedattention,mostoftheinvestmentisgoingtowardotherapplications.Administrativeand

clinicalusecasesareseeing60%ofthetotalAIinvestment2in

healthcare.Therefore,thisreportfocusesontheseemergingAIapplicationsthatareimpactingpatientsfromdiagnosistorecovery.

TheimmensecostofdevelopinggenerativeAIisdrivingconsolidationinthe

RaysaBousleiman

VicePresident,

HealthcareVentureCapitalRelationshipManagement

rbousleiman@

svb》SBiaiinckonvaley

ADivisionofFirstcitizensBank

Notes:1)USdealsinQ12024.2)2021toQ12024.

Source:PitchBookData,Inc.,SVBproprietarydataandSVBanalysis.

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industrytowardtechgiantswhoare,inturn,investingmoreintohealthcare.Somestartupsarefindingsuccesspartneringwithbigtechbyusingtheir

computeresourcesandtheirabilitytodeployAIatscale.

ThesuccessofanyAIsolutionhingesonovercomingadoptionchallenges.Ontheproductside,itstartswithclean,quality,well-

structureddata.Ontheeconomicsside,itoftenbeginswithpayerswho

controlthepursestrings.WeareseeingincreasingadoptionamongpayerswhoareemployingAIacrosstheirhealthcarestackstocreateefficienciesandimprovepatientoutcomes.Accesstogreatdatawilllikelyplayamajorroleforthewinnersinthisspace.Companiesdevelopingpartnershipswithcliniciansandhospitalstoleveragepatientdatacannotonlyaccessquality

datatotraintheirAImodels,butwillalsofosterfuturecustomer

relationshipswiththeseclinicians.Nevertheless,theeducationandtrainingofhealthcareprofessionalsislaggingbehindtechnologicaladvancements,

creatinganotherhurdletoadoption.

ThecurrentandfutureimpactAIwillhaveonthepatientjourneyhasthe

potentialtonotonlylowercosts,butalsoimprovepatientoutcomes.WhilecompaniesmayfacechallengestoadapttoanAI-enabledfuture,wehaveneverbeenmoreoptimisticabouttheinnovationsweseeonthehorizon.

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AdministrativeAlisLOW-HangingFruit

Since2019,thegrowthinhealthcareAIdealsistwicethatoftechoverall.ThisinitialwaveofAIinhealthcareislargelyfocusedonstreamliningadministrativeburdensthataugment,asopposedto

change,physicianworkflow.This

includestaskslikemanagingrevenue

cycles,establishingdatainteroperabilityandschedulingpatients.AdministrativeAIaccountsfor27%ofAIhealthcare

investmentand42%ofdealvolumesofarin2024.ClinicalAIfacesmore

scrutinyduetoregulatoryhurdlesand

moredifficultadoption,oftenrequiringaworkflowchangetoimplement.For

providersandpayers,it’sstillearlydaysfortheirAIstrategies.ManyaretargetingadministrativeAIfirstsinceitcarrieslessriskandleadstoclearefficiencygains.

DoingtheDiligence

It’snotenoughforcompaniestobethe

“shinyAIobject.”Rather,near-term

financialvalidationandaccesstoqualityinputdataarecrucial.WhileAIdeal

activityisrelativelyresilientcomparedtothewiderecosystem,investorsand

buyersarecriticallyevaluatingnewAI

solutionsbydetermininghowreadilythey’llbeadoptedandhowmuch

businessvaluetheytrulyoffer.

Companiesthatcanleveragea

provider’sexistinginfrastructurein

theirnewproductmayfindpreferenceamongventurecapitalists(VCs).For

example,70%ofUSprovidersuseEPICforelectronichealthrecords(EHRs)2andAIcompaniesintheEHRspacemayfindthemselveswithalegupiftheyestablishinteroperabilitywiththeEPICsystem.

startups'FlexibilityDeliversvalue

OrganizationsoftenfavorestablishedplayerswhenpurchasingAIsolutions.Toovercomethishurdle,startups

mustclearlyarticulatewhythey’rethebetterchoicecomparedtolarger

competitorsthatorganizationsmayalreadyhaveaspartners.Startups’flexibilityistheirstrength.First,

massiveadoptionandmarginsare

notascrucialforstartupsasthey

areforestablishedbigtech.Also,thebottom-upnatureofstartupsmakes

themsuitableforworkingcloselywithphysicians.Inordertoaccessthe

necessarydata,AIstartupsoftenfinditbeneficialtoco-developfeatures

withtheircustomers.

patientDiagnosticsFacechallenges

EspeciallywithAI-drivendiagnostic

tests,companiesmayhaveadifficult

timeshowingthe“juiceisworththe

squeeze.”Challengesabound,from

navigatingregulatoryhoopstomanaginghighcostsandsecuringqualitydata.

Forstartups,beingnimbleisimportantforfindingalternativepaths,suchas

risksharing,monetizationand

profitability.Webelievetheshort-termpathforwardisforcompaniesto

understandwhoiswritingthecheckandwherepayersdefinevalue.

Demonstratingthecostsavingsfor

payersmayhelpcompaniesgetthe

revenuetojustifycostsuntilpayers

broadentheirperspectiveonpayingfordiagnostics.

Notes:1)Unlessotherwisestated,allchartsandmetricsarereferencingUShealthcarecompanies,andthedataisuptodatethroughQ12024.2)DefinitiveHealthcare.

THEAI-POWEREDHEALTHCAREEXPERIENCE3

Source:PitchBookData,Inc.,SVBproprietarydataandSVBanalysis.

TheAl-poweredHealthcareExperience:MappingthepatientJourney

Togetthefullreport,reachouttoyourSVBpointofcontact

What’sinside:

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4

ADivisionofFirstcitizensBank

THEAI-POWEREDHEALTHCAREEXPERIENCE5

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LeadAuthors

JackieSpencer

HeadofRelationship

ManagementforLifeScience&HealthcareBanking

jspencer@

RaysaBousleiman

VicePresident

HealthcareVentureCapitalRelationshipManagement

rbousleiman@

PeterSletteland

ManagingDirector

LifeScience&HealthcareCreditSolutions

psletteland@

NuziBarkatally

VicePresident

LifeScience&HealthcareStartupBanking

nbarkatally@

JackieSpencerleadstheUSRelationshipManagementteamforLifeScienceandHealthcareAcceleratorand

Growth.Jackieandherteamarefocusedonproviding

bankingandfinancingsolutionstoinnovativecompaniesinthesector.SincejoiningSVBin2007,Jackiehas

workedacrossboththetechnologyandhealthcare

practicesfromemergingmarkettolate-stagecorporatefinance.

JackiegraduatedfromSt.Mary’sCollegeofCaliforniawithhonors,receivingabachelor’sinfinance.

RaysaBousleimanmanagesrelationshipswith

traditionalVCfirmsfocusedonhealthcareandlifescienceinvestments.Sheisalsoresponsiblefor

conductingdata-drivenanalysesontheglobal

healthcareinnovationeconomythatSVBserves.PriortoSVB,Raysaworkedasahealthcareconsultant

focusingonhealthsystemsrevenuecyclemanagementandoperations.

RaysagraduatedfromtheUniversityofSouthern

Californiawithhonors,receivingabachelor’sinhumanbiology.

PeteSlettelandisaManagingDirectorintheHealthcareandLifeSciencepracticeatSVB.Peterunsthebiopharma,diagnosticsand

researchtoolsCreditSolutionsteamfortheBayAreaandPacificNorthwestandhasovernineyearsofexperienceadvisingcompaniesonfinancingandbankingsolutions.

Petereceivedhisbachelor’sinaccountingfrom

BucknellUniversityandamaster’sinhealthanalyticsfromDuke’sFuquaSchoolof

Business.

NuziBarkatallysupportsseed-stagehealthcareandlifesciencefoundersonSVB’sStartup

Bankingteam.PriortoSVB,Nuziworkedasanoperatoratvarioushealthcarestartups.

NuzigraduatedfromtheUniversityofHouston,receivingabacheloroffineartsandlater

fromtheRoyalCollegeofArtinconjunctionwithImperialCollege-SchoolofMedicine,

receivingamaster’sofresearchinhealthcare

anddesignwithafocusontheethicalimplicationsofAIinhealthcare.

MarketInsightsTeamAuthorReportAcknowledgements

TimotLamarre

Researcher

MarketInsights

tlamarre@

Thankyoutothefollowingforlendingtheirsubjectmatterexpertisetothisreport:

_section32

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