PE is trying to figure out where AI fits into the future of healthcare

The U.S. healthcare system is facing a conundrum, with no clear solution in sight.

The country’s population is growing. It’s also getting older. And the supply of healthcare workers is not keeping up with surging demand. This combination is one reason the cost of care continues to climb, reaching 18% of national GDP in the latest year with available data.

“Health systems have a major demographics and labor problem,” says Paul Deeringer, partner at Hooper, Lundy & Bookman, a law firm focused exclusively on the healthcare industry. “That’s creating this pressure cooker that you’re seeing within the healthcare system.”

Private equity might not be the most obvious place to turn in the search for a fix—after all, PE firms are typically more concerned with turning a profit than improving public welfare. In the U.S., many states are introducing new regulations to limit PE ownership of healthcare providers, generating substantial headwinds to investment in certain industry segments.

But providing tools to aid healthcare providers, rather than investing in providers themselves, may be one area where the missions of profit and welfare overlap. Thanks in no small part to the rise of AI, experts say the healthcare industry is experiencing a wave of technological disruption, as companies experiment with new offerings that could help improve efficiency and free up more resources to drive better patient outcomes and reduce costs.

Any transformative impact from AI on clinical care is likely far in the future. However, in areas like revenue cycle management, administrative services, and scribing, AI is already making its mark in healthcare.

In many cases, these advances would be happening with or without PE involvement. But PE firms are certainly taking note, both in terms of the new investments they target and the initiatives they pursue with existing portfolio companies.

“Using technology to support and augment the caregivers of today and tomorrow is an absolutely critical lever in the industry,” Deeringer says. “Companies and investors are trying to figure out, how can technology and private capital come together to support investment goals and also support continued delivery of quality care? It’s not for the faint of heart, and it really requires innovative solutions.”

The data behind the deals

As the 2020s have progressed, PE investment in the healthcare sector has increased. In 2025, total buyout deal value involving healthcare companies in the U.S. reached $100 billion, marking a 56% increase over the previous year. Compared to the start of the decade, in 2020, total buyout value in healthcare is up 89%.

Within that broader healthcare industry, investment in healthcare IT has also been climbing. In the first half of 2026, PE firms deployed more than $24 billion in the space, on pace for the highest annual total of the past five years. Provider operations and managed care are the two segments of healthcare IT where PE has put the most capital to work, with clinical information systems representing another significant subsector.

In addition to capital invested, the number of transactions being completed in healthcare IT is also trending up, with 2026 deal count currently on pace for a decade high.

While exit activity hasn’t exactly been surging in private equity as a whole, healthcare companies were able to generate some substantial liquidity last year. Globally, PE firms reached $156 billion in exit value in 2025, nearly tripling the figure from 2024. The most popular exit pathway was secondary buyouts, which accounted for about 71% of that value.

Where AI fits into PE’s healthcare approach

Healthcare IT has long been a busy sector for private equity investment. But as is the case for so many other areas of tech, interest in the space has been supercharged in recent years by the rapid development of AI and the new possibilities it presents.

Selling AI-infused software to healthcare companies, however, can be quite different from areas like fintech or B2B SaaS. Given that healthcare providers are literally dealing with life and death, the stakes can be much higher. Healthcare is also a heavily regulated, heavily segmented sector with its own rules and norms to navigate.

The size of the total addressable market (TAM) is huge. Compared to other common areas for PE investment, however, the healthcare industry is less prone to rapid disruption.

“Healthcare is a multitrillion-dollar TAM. But it’s heterogeneous,” Deeringer says. “Parts of it are really hard to access, and you’re inserting yourself into a high-trust environment with real-world consequences. Once you break that trust, it is very difficult to get it back. This is one reason that proactive approaches to AI governance and early diligence are increasingly important for health systems when evaluating these solutions.”

In part because of these limitations, when PE investors look at healthcare IT today, they’re typically not targeting companies aiming to completely transform how the industry functions. They’re more likely to set their sights on companies driving incremental improvements, particularly those using AI to improve and streamline existing healthcare workflows.

Rob Larson, managing director in the healthcare vertical at Grant Thornton Stax, sees this happening in his work in a couple of different ways.

“If you think of the way AI is going to interact with the sector, it’s going to do one of two things,” Larson says. “Companies can either use AI to replace existing software, or AI can get incorporated into that software to make it more usable in more use cases.”

Larson points to revenue cycle management as one of the main subsectors where AI is already making an impact on how the healthcare system functions. It’s an ideal early application, he says, because it doesn’t touch any aspect of the actual clinical process.

Patient intake, appointment scheduling, payer contracts, and internal provider workflows are some other areas where Larson and Deeringer say they’ve seen PE firms investing in AI-powered portfolio companies. Again, these tasks are largely separate from the clinical process. They’re also areas where AI has also begun to take hold in other industries outside of healthcare.

In other healthcare subsectors, AI adoption is much slower, if nonexistent. Among both healthcare providers and PE investors, much more hesitation exists around clinical AI, where the consequences of any mishaps or AI hallucinations are much higher.

“You’ve seen a lot of penetration on the revenue cycle and the back-end side for health AI,” Deeringer says. “The closer you get to the bedside, the higher that bar is going to go for trust and reliability.”

Incumbents vs. newcomers

Another way in which healthcare tech differs from the wider universe of tech is the sorts of companies that are leading the way in AI adoption.

In most of the tech world, it’s the younger upstarts building with AI as a foundation that seem to have a clear lead on legacy businesses implementing AI into their existing offerings. In healthcare, the dynamic looks a little different.

“You can have really great tech. But in healthcare, there are real moats around payer contracts, provider networks, EHR [electronic health records], native workflows,” Deeringer says. “When you have companies that are technology companies by their background and they decide to get into healthcare, there is a very real learning curve, with plenty of economic and regulatory traps for the uninitiated.”

This defensibility of market positioning informs where PE investors are looking. Larson says that most potential PE targets in healthcare tech today could be described as either a healthcare company doing AI, or an AI company doing healthcare. For now, the incumbents appear to have the edge.

“So far, the companies that seem to be winning are the existing companies bringing in AI,” Larson says. “I think the takeaway there is that domain knowledge is more important than AI expertise, at least for right now.”

The approach to adopting AI and other new technologies is different in healthcare in other ways, too. The wide moats that exist in healthcare can create higher switching costs, which can further protect incumbents from new threats. Larson says this is one reason why companies in healthcare tech were able to dodge some of the worst damage from this year’s so-called “SaaS-pocalypse.”

“Healthcare IT is different from other IT,” Larson says. “Generally speaking, it’s a bit safer of a space from an AI perspective, because the customers of that software are extraordinarily risk-averse. There’s zero chance they’re going to vibe-code their own version of their EHR.”

Dislocations, diligence, and demand

In other respects, recent developments in healthcare technology mirror those in other tech sectors. One example, Deeringer says, is that some private companies in the space are still clinging to valuations from a very different market environment and remain reluctant to pursue new transactions at lower prices.

This is particularly common among VC-backed companies that raised capital or PE-backed companies that were acquired during the early part of the decade, when a record-breaking bull market for tech companies was still in full effect. Faced with this hesitation to transact among some private companies, Deeringer has seen some PE firms shift their attention elsewhere.

“There’s still a lot of valuation dislocation from 2020 and 2021,” he says. “That’s resulting in some longer hold times and people looking at different options, including more creative structures: continuation vehicles to hold winners longer, carve-outs from strategics refocusing on core categories, and more structured capital deployment generally.”

For some of these companies, AI could act as a much-needed accelerant. Pursuing new AI offerings is another lever to pull for PE firms aiming to spur new growth at their portfolio companies.

In determining the price a PE firm is willing to pay—or whether it’s willing to do a deal at all—AI is an increasingly pervasive force in healthcare. This is another way in which the healthcare industry resembles every other tech-influenced sector in 2026, despite its many differences.

“Everyone wants to make sure they’re going to be the beneficiary of AI and not threatened by it,” Larson says. “That becomes a big part of the diligence, to help understand who’s likely going to be the winner in this space.”

Not everything is AI. PE firms are also investing in non-tech areas within healthcare that might help address the industry’s ongoing puzzle of supply and demand. This includes staffing companies and outsourced service providers to help address labor shortages. It also includes clinics and providers focused on behavioral health and aesthetic, two healthcare areas where consumer demand is on the rise.

But it’s in healthcare tech where the industry’s most transformative opportunities tend to lie.

“You cannot hire your way out of this problem in any capacity,” Deeringer says. “You have to figure out how to use technology more effectively to change the game of healthcare delivery.”

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