This past Tuesday, June 10th, Gilmartin’s Managing Director, Ryan Halsted, hosted a webinar with TD Cowen’s Charles Rhyee (Senior Research Analyst, Healthcare Technology) and Ryan Langston (Senior Research Analyst, Healthcare Services). The panel explored investor sentiment in the health technology & services sectors, and discussed views on recent IPO activity, market outlook, and technological innovation across the sector. Understanding investor sentiment in the health technology & services field is crucial for anticipating market trends. Below are key takeaways from this conversation.
Investor Sentiment Remains Risk-Off Amid Policy and Macro Uncertainty
Investor sentiment toward healthcare services and health tech remains risk-off, largely due to a lack of clarity around healthcare policy and continued macroeconomic uncertainty. Many expected a more business-friendly stance from the current administration, but regulatory ambiguity has persisted. Investor sentiment in the health technology & services domain is shaped significantly by these uncertainties. Health tech investors are particularly focused on the financial stability and spending capacity of their core customers—health systems and life sciences companies. This uncertainty has delayed spending across these end markets. As a result, investors are gravitating toward business models that offer predictable, measurable performance, regardless of regulatory outcomes. Key inflection points include clarity on policy—especially budget reconciliation—and broader macroeconomic stabilization.
Profitable Growth is the New Benchmark
The market continues to reward healthcare services and health tech companies that demonstrate profitable growth, while penalizing those pursuing “growth at all costs.” Investor sentiment in the health technology & services arena now strongly favors companies demonstrating financial sustainability. Threading that needle has become more complex in a post-COVID landscape. According to the panel, business models must adapt to a normalized operating environment and shifting customer dynamics. While early adoption from progressive employers once signaled massive TAMs, mainstream buyers—such as hospitals and smaller employers—pose different challenges, including long sales cycles, integration hurdles, and limited resources. As the sector matures, investors expect companies to adopt fundamentally different strategies—such as expanding across broader end markets rather than focusing on narrow sub-segments.
IPO Market Rewards Profitability and Clear Pathways to Scale
After a long drought, recent healthcare tech IPOs have shown promising signs—but only for companies that meet high expectations. The panel noted that successful entrants are either already profitable or have a clear, credible roadmap to profitability. This marks a significant shift, restoring confidence among public market investors previously skeptical of health tech’s ability to generate sustainable returns. To attract investor interest, companies must demonstrate a scalable model addressing a large TAM, along with financial discipline and proven unit economics.
AI as a Lever for Efficiency—But Execution and Regulatory Foresight Matter
Artificial intelligence stands out as a top opportunity for improving efficiency, particularly in administrative areas, which account for roughly 25% of total healthcare spend. The panel pointed to back-office functions as the clearest use case for delivering a demonstrable ROI. While adoption of AI is still early—EHR penetration only reached 90% in 2018–2019—recent advances in generative AI and large language models are enabling deeper insights from unstructured clinical data. Life sciences and digital health companies are expanding data science teams to deploy AI in patient engagement, clinical development, and operations. But while AI provides a competitive edge, regulatory sophistication is just as crucial to success.
Policy Uncertainty Demands Proactive Communication
In the face of a murky policy environment, companies must articulate a clear grasp of the intricacies of the regulatory landscape and the financial implications and mitigation strategy, if possible. Investor sentiment in the health technology & services industry can be positively influenced by proactive communication about policy impacts. Budget reconciliation remains top of mind for investors due to its potential to impact Medicare pricing, Medicaid enrollment, drug negotiations, and healthcare program funding. Meanwhile, shifting enforcement priorities at agencies like CMS, FTC, and DOJ have made acquirers more cautious. Deals increasingly require extensive regulatory due diligence and flexible structures to accommodate policy shifts.
Investors Prioritize Recurring Revenue and Measurable KPIs
When evaluating healthcare technology companies, investors favor subscription-based models due to their predictable, easy-to-model cash flows. KPIs like net revenue retention, gross revenue retention, and contribution margins on incremental business are front and center. For healthcare services companies, the focus shifts to operational consistency—utilization rates, multi-year managed care contracts, and cost-efficiency metrics such as cost per procedure or outcome-based benchmarks.
Conclusion
In an environment where clarity and stability command premium valuations, companies delivering predictable performance are in a position of strength. The sector’s transformation from prioritizing rapid growth to demanding sustainable profitability signals the maturation of an industry finally aligning technological innovation with proven business models. While this shift has created near-term headwinds for many healthcare technology companies, it presents a compelling opportunity for those demonstrating operational excellence and regulatory sophistication.
In times of market uncertainty, clear communication and value creation are critical. Gilmartin Group helps companies navigate complex challenges and align stakeholders for success. With deep expertise in Medtech, Biotech, LSTDx, and Digital Health, we partner with our clients to drive strategic outcomes. Reach out to our team to learn more about how we partner with our clients.
Authored by: Max Forgan (Associate), Gilmartin Group