As health tech startups work to prove their value and scale, investors are tracking how pricing, adoption and workforce dynamics are reshaping the market.
During an interview Tuesday at LIVE conference in Los Angeles, Vig Chandramouli, associate at Oak HC/FTshared his views on what is currently driving innovation, investment and sales. Below are four of the trends he highlighted.
Work management for nurses and allied health professionals is a major underinvested opportunity.
For the most part, startups selling clinical AI solutions have focused heavily on doctors, but 70% of the health system’s work comes from nurses and allied health professionals, Chandramouli pointed out.
Burnout, staff flow, scheduling and unit coverage remain poorly addressed in this population, largely because these employees do not generate direct revenue, unlike physicians, who are reimbursed for the care they provide, he explained.
“But I think this year, with all the pressure on margins, it seems like a ripe area to focus on,” he said.
Margins are under scrutiny, but it’s people, not math, that are the real cost driver.
Many of the more “lively” AI startups are still seeing shrinking margins, but in general, investors are increasingly focused on margin sustainability, Chandramouli said.
“We’re certainly looking at it a little bit more to understand what’s driving this margin deterioration — and it’s actually not really a computational cost, as you might think,” he said.
He said the biggest cost issues often turn out to be related to customer success, workforce onboarding or forward-deployed engineers. For him, the key question is whether these costs are temporary or structural.
Underpricing and poor contract structure can present real scaling risks.
Some startups are moving from SaaS-based pricing to transaction- and success-based pricing, which can backfire if these companies don’t design their contracts carefully, Chandramouli pointed out.
“If they evaluate, for example, on a success basis, and they do 10 actions and one of them is successful, that’s where you end up in unit economics. On the basis of one successful action, you make money, but when you do 10, your margins are much worse, right? There are things like that where you just have to be very careful about how the contract is made,” he explained.
Poorly defined contracts around ROI, variable payments and volume assumptions can quickly destroy a startup’s economics, especially in larger, flashier contracts, Chandramouli said.
Epic occupies a large position and limits long-term commitments.
Epic is putting market pressure on “pretty much every product” in health tech, Chandramouli noted.
“The first question is: Will Epic release something in 12 months? And if not, then the customer is willing to try, but customers aren’t willing to sign long-term deals with anyone. They know the market moves quickly, so you’ll probably get a one- to two-year deal,” he said.
Photo: Amgun, Getty Images
