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Investor’s eye-view of AI in healthcare | AI news watcher’s blog | Partner news

Tuesday, October 8, 2024
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3 things AI startups, investors must know to clear hurdles in healthcare technology markets

As 2024 winds down and the number of FDA-approved medical devices packing AI approaches 1,000—the agency had the tally at 950 as of August—the industry finds itself at a “critical inflection point.” 

Bessemer Venture Partners made the observation in a report they issued late last month, “Roadmap: Healthcare AI.” (AIin.Healthcare briefly noted the report’s release last week.) 

“Today,” the Bessemer authors write, “each new breakthrough in research has the potential to solve real-world problems—an opportunity that should galvanize [AI startup] founders and investors to engage more deeply with emerging developments in the field.”

After describing some of the particulars inherent to the opportunities, Bessemer turns its attention to some challenges. Here are excerpts from the latter section. 

1. Traditional market forces don’t apply in healthcare, but physics does. 

While the U.S. healthcare system may defy classical market economics, Bessemer points out, it adheres rigorously to Newton’s Third Law: For every action, there is an equal and opposite reaction. More: 

‘Healthcare AI founders need to be aware that their companies are not immune to these dynamics, and that, in the era of AI, resistance to change will likely emerge more quickly and with greater intensity.’ 

2. Regulation is both a barrier to entry and an enduring moat. 

Healthcare is a tightly regulated industry where the law tends to protect the status quo, the authors note. “The barrier to entry for startups to get to market can be sky-high,” they add, “and for companies operating in areas of healthcare where regulations are indeterminate or gray such as AI, this is even more true.” 

‘The dense regulatory landscape that creates obstacles for newcomers doubles as an enduring moat for the old guard—a small group of deeply entrenched healthcare incumbents that wield immense power and influence over the industry.’

3. Markets are smaller than they appear. 

Healthcare is one of the largest industries in the U.S., with expenditures accounting for 17% of the GDP and employing 1 in 10 American workers. It’s also “wildly inefficient,” the Bessemer analysts remark, “with $1 trillion spent annually on administration-related costs.” 

‘While healthcare is technically a $4.5 trillion market, the industry is far from a monolith. We’ve come to view the healthcare market as a container for around 4,500 distinct markets, each with a total available market closer $1 billion; or, approximately 1,000 unique markets, each with a total available market of $4.5 billion.’

For success in any market, the authors add, “unlocking sufficient total available [or addressable] market is essential, and it can be especially tricky in healthcare,” they write. “Still, we’ve already witnessed a new generation of healthcare AI companies that are forging ahead.” More:

‘We’re seeing teams adopt innovative modalities and business models to tap into bigger budgets and multiple buyers, allowing them not just to survive but to thrive, and even access total available markets that were unthinkable in the previous wave of what we used to call healthcare IT.’

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ai in healthcare industry watchers blog digest

Industry Watcher’s Digest

Buzzworthy developments of the past few days.

  • Federal workers: Don’t go out and just buy AI. The White House is urging officials at executive-branch departments and federal agencies to get involved early—and stay involved indefinitely—in AI acquisition processes. The instruction, voiced in a memo sent by Shalanda Young, director of the Office of Management and Budget, ties to OMB’s desire to make sure AI-adopting agencies “are able to identify and manage privacy risks and ensure compliance with law and policy.” That’s just a taste of one guideline in a document detailing many. “The adoption and scaling of innovative techniques and technologies enables the acquisition workforce to execute agency missions more efficiently with increased customer satisfaction, better performance and lower cost,” the memo states. Fact sheet here, full memo here
     
  • Public interest is piqued over AI-aided cancer detection. That’s the case in Kentucky, where the technology is in the news. The technology “really allows us to have an extra set of eyes on [mammography images], so that we’re not missing critical findings, Sohail Contractor, MD, chair of radiology at the University of Louisville, tells TV station WDRB. “I think over the next five to 10 years the technology will take off really well. It’s very promising.” 
     
  • No continent stands to benefit more from the rise of AI in healthcare than Africa. So states Jennifer Lotito, president and COO of (Red), the AIDS-busting organization co-founded by U2 singer Bono. “AI will play a key role in helping empower this population and strengthen healthcare systems,” Lotito writes in a piece published by Forbes. This “could be a game changer for the global AIDS fight.” 
     
  • Noise complaints. Pet control calls. Requests for trash pickup. All fine examples of non-emergency situations for which many Americans reflexively dial 911. Do that in Fairfax County, Va., and your call may be taken by an AI bot. “Handling all types of calls has an impact on the call takers’ mental health,” a local official tells WTOP Radio, which reaches Greater Washington, D.C. “They can transition from walking someone through administering CPR to taking a call about someone complaining about a neighbor’s grass. It does take a toll.” The hope is that the AI system will head off long wait times and help focus human attention on actual emergencies. 
     
  • Meanwhile police are using AI chatbots to draft incident reports. The cops love it. Why wouldn’t they? They didn’t choose their line of work because they enjoy doing documentation. However, some prosecutors, police watchdogs and legal scholars “have concerns about how AI could alter a fundamental document in the criminal justice system that plays a role in who gets prosecuted or imprisoned,” NBC News reports. And as warned by the CEO of the company that sells the product: You “never want to get an officer on the stand who says, ‘Well, I didn’t write that—the AI did.’”
     
  • Conduct a podcast without speaking a word. All you need is Google’s new AI podcasting tool, Audio Overview. Part of the company’s established research assistant NotebookLM, the podcast helper lets you upload all sorts of content and then type in some questions. The output is a weirdly human-sounding podcast called Deep Dive. The “humans” are the disembodied voices of a man and a woman. The two hosts interrupt one another, utter uncannily lifelike idioms and exclamations, and otherwise make your jaw drop. All while helpfully informing your podcast’s listeners. MIT Technology Review explains how it works and offers a sample here
     
  • Across the pond, a new effort to speed approvals of emerging technologies for healthcare. And other sectors. British science and technology minister Peter Kyle says the new Regulatory Innovation Office, aka “RIO,” will “curb the burden of red tape so businesses and our public services can innovate and grow, which means more jobs, a stronger economy.” More here
     
  • Recent research in the news: 
     
  • Funding news of note:
     
  • From AIin.Healthcare’s news partners:
     

 

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