ABIG Weekly Newsletter

AI in Medtech

Up Up and Away

Healthcare's AI boom is finally maturing beyond proof-of-concept, and the convergence of policy support, strategic capital, and institutional adoption suggests the sector is nearing an inflection point.

The strategic shift is almost complete. The latest industry data shows 70% of providers and 80% of payers now have an AI strategy in place or in development, up from 60% for both groups a year ago, according to research cited by Menlo Ventures. As one survey put it: "Healthcare organizations are moving from exploring AI products to focused implementation," per Yahoo Finance. Implementation of domain-specific AI tools currently sits at a 22% rate, a sevenfold increase over 2024, while fewer than one in 10 companies (9%) across the broader economy have implemented AI at all.

And what’s more, capital and deployment are converging across the ecosystem. Johnson & Johnson awarded its first AI Fund grants to Mayo Clinic and QAS.AI for surgical AI tools; three days later, Hippocratic AI closed a $126 million Series C that pushed its valuation to $3.5 billion. Meanwhile, HCA Healthcare, the country's largest for-profit chain with 191 hospitals,, is moving beyond pilots into production, deploying AI-driven nurse scheduling to nearly 100 facilities and partnering with Google on 400,000 weekly shift handoffs.

The big green light? All signs seem to indicate the present administration means to accelerate, not slow down, the adoption of AI in healthcare. FDA 2025 guidance establishes a practical framework for AI medical devices via Predetermined Change Control Plans: firms can iterate and improve on their product without again pushing through the approval gauntlet. Fast forward to November 7th at the Future of Health Summit: HHS Deputy Secretary Jim O'Neill, in his capacity as a keynote speaker, covered a range of issues centering on adoption of emerging technologies. A BIG quote from his remarks?

"So safety is important, but if I had to pick, I think faster is better. The faster we have really good AI, the more value we'll get out of it."

This is A BIG deal: As the market and regulatory environments are presently shaping up, the winners are truly poised to take it all. Healthcare costs are projected to rise 9.6% in 2026, but the more interesting story is what's happening underneath: AI efficiencies are delivering margin improvements, regulatory clarity is removing deployment friction, and early movers are building structural advantages.

What this means: There could soon be meaningful divergence between organizations capturing AI efficiencies and those that don't. If adoption jumps and the savings actually scale, 2026 could mark when healthcare AI stops being just a cost and starts becoming the solution. Click here for more insights.

Government Affairs

What Did I Miss?

States facing the Medicaid squeeze: a new KFF survey shows Medicaid enrollment declined 7.6% in fiscal 2025 and is expected to stay flat in 2026, yet total spending still rose 8.6% last year and is projected to increase another 7.9% in 2026. The disconnect? Fewer enrollees but much higher per-person costs. About two-thirds of states report at least a 50-50 chance of a budget shortfall in 2026, just as they prepare for $911 billion in federal Medicaid spending cuts and new work requirements under the One Big Beautiful Bill Act.
Shutdown, now over, creates backlog: The 42-day federal government shutdown that began Oct. 1 and ended on Nov. 12. furloughed 47% of CMS staff, pausing policy development, rulemaking, and external communications for six weeks. The agency now faces a substantial backlog. In the House spending bill to bring the government back into business, Congress also reinstated pandemic-era Medicare telehealth flexibilities through January 30th; telehealth advocates are still pushing for permanent coverage rather than continued short-term extensions.
Coverage win for renal denervation: CMS finalized a national coverage determination Oct. 28 for renal denervation to treat uncontrolled hypertension, extending Medicare coverage to Medtronic's Symplicity Spyral and Recor Medical's Paradise systems.
Trump's drug price deals may offer limited benefits to most insured Americans, with the administration's TrumpRx portal primarily helping the uninsured while the 92% of Americans with coverage likely have lower out-of-pocket costs through their existing plans. Five drugmakers have struck deals so far—including landmark agreements with Eli Lilly and Novo Nordisk to slash GLP-1 weight loss drug prices to $50/month for Medicare beneficiaries and expand coverage for obesity treatments for the first time. The exception: GLP-1s for weight loss, where many employers won't cover the drugs and reduced cash prices ($245-$350/month) could significantly expand access.

Market Movements

The Archetype:Concentrating Investment

Cornerstone Robotics raised $200 million to accelerate commercialization of its Sentire surgical robot, which has drawn comparisons to Intuitive Surgical's da Vinci platform. The Hong Kong-based company, founded in 2019, won Chinese approval in 2024 and is now pushing into European markets, with the latest round backed by global sovereign wealth funds and strategic investors.

Medtech VC investments slowed to $3 billion in Q3, down from $4.6 billion in Q2 and dampening expectations for 2025 to match post-pandemic highs, according to PitchBook. While the sector remains on track to exceed 2024's $14 billion total, deal volumes continue falling as investors concentrate capital on "top-tier assets with scalable models rather than incremental growth plays." PitchBook analysts warned there "has been a deterioration of funding possibilities for early-stage medtech companies and especially ones without AI tailwinds." Private equity showed similar patterns, with $7.4 billion invested across just 75 deals: far fewer than the 128+ deals annually from 2022-2024.