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$1.4B was spent on healthcare AI in 2025.
A great report by Menlo Ventures, tl-dr:
Healthcare has quietly become the fastest adopter of AI: It’s now deploying AI 2.2x faster than the broader economy.
In just two years, healthcare went from 3% to 27% adoption: Hospitals and clinics are now America’s AI power users.
$1.4B was spent on healthcare AI in 2025, 3x last year: It’s the largest vertical AI market by dollars, ahead of legal and finance.
Startups are taking nearly all of it: 85% of healthcare AI spend flows to startups, not legacy vendors.
Ambient scribes are the breakout category: They’re a $600M market, led by Abridge and Ambience, with two new unicorns this year.
The real bottleneck isn’t data, it’s admin overload: AI is cutting physician documentation time by 50%+ and turning “pajama time” into rest time.
Providers are moving fast, payers are hesitating: Hospitals are buying in months, insurers still debating in quarters.
The biggest spend categories aren’t clinical, they’re operational: Documentation and revenue cycle automation already make up 60% of all healthcare IT spend.
AI is converting services into software: A $740B administrative labor pool is becoming the next SaaS frontier.
Prior authorization is healthcare’s next billion-dollar AI market: AI is cutting multi-day workflows down to minutes, and freeing nurses from paperwork.
Patient engagement is exploding: AI triage, scheduling, and follow-ups are now a $100M+ market, growing 20x YoY.
EHR incumbents like Epic and Oracle are fighting back: They’re embedding AI scribes natively to defend against startup encroachment.
Payers are getting nervous: AI-powered providers mean instant claims, faster billing, and rising reimbursement pressure.
Life sciences are building their own foundation models: 66% of pharma companies are training proprietary models for drug discovery.
Healthcare is moving from pilot to production: AI is starting to become the new operating system of care (and it is about time).
