For those hoping 2024 would see a surge in the digitalization of healthcare, the year has been a disappointment. Investment in medtech startups remains prudent, the EU AI Act is causing uncertainty rather than optimism, and high-profile failures like Forward Health are dimming the hopes of even the staunchest digital health advocates.
A harsh geopolitical landscape
The steady rise in VC investments in digital health, which peaked in 2021 and saw telemedicine flourish during the pandemic, has all but stalled. The war in Ukraine and economic challenges in major economies like China, France, and Germany have prompted investors to seek safer havens.
Recent data from RockHealth suggests that VC funding for digital health startups in 2024 will match 2023 levels in both deal count and size. However, storm clouds are gathering: U.S. GDP growth slowed to 2.1% in 2024, down from 2.7% the previous year, with forecasts of further declines to 1.7% by 2026. Europe faces similar struggles, with Germany’s economy growing by just 0.1% (1% projected in 2025) and France’s by 1.1% in 2024.
In September, the much-anticipated Draghi Report boldly showed that Europe must invest in technologies; otherwise, European wealth is in danger. Yet, the report has sparked little action. The EU AI Act, introduced in 2024, though well-intentioned, has left European AI developers worrying about their competitiveness against the U.S. and China innovators having easier access to data and less paperwork to do. In healthcare, the Act exacerbates existing challenges posed by GDPR, with hospitals reluctant to share or process data and many avoiding AI altogether to sidestep compliance risks. Officials in Brussels argue that the laws themselves are not the problem but rather their interpretation, though this distinction offers little solace.
Beyond hype
France’s fast-track reimbursement pathway for digital health applications, launched in 2024, has ended up with only a handful of approvals. Germany’s DiGA (Digital Health Applications), after five years, includes 57 reimbursed digital applications, of which just 20 are permanent. In 2023, 235,000 prescriptions for DiGAs were issued—a tiny fraction of the roughly 500 million prescriptions issued annually in Germany.
Only 3 out of 27 European Union members (Germany, France, and Belgium) have implemented dedicated plans to reimburse digital health apps, with no similar strategies on the horizon for other EU nations. The new European Commission seems more focused on biotechnology and data security regulations than expanding digital health initiatives.
A potential bright spot is the European Health Data Space (EHDS), set to roll out in 2025. EHDS aims to provide EU-wide access to patient summaries by 2029, effectively creating a European health record. It also promises to drive investments in national e-health infrastructures, as member states must modernize their systems to comply with EHDS standards. Those lagging behind may receive EU funding to catch up.
This marks a return to fundamentals: building robust e-health infrastructure across Europe. Physicians need comprehensive access to patient data, and innovators require datasets to develop new solutions. Without these essentials, AI adoption in healthcare will remain a distant goal.
Backward health
When Forward Health launched in 2016, its vision of cutting-edge preventive care clinics and telemedicine pods seemed poised to revolutionize healthcare. By 2023, its first pods hit the market, with plans for 3,000 more. Blood tests, genetic screenings, and health monitoring were promised to be within easy reach. At its peak, the company was valued at $1 billion. Yet by November 2024, Forward Health had shut down.
The reasons are complex: clinic subscriptions fell short of expectations, and the pods failed to deliver a seamless user experience, frustrating rather than assisting patients. Investors lost $500 million, and the failure cast a long shadow over similar projects, discouraging further investment in automated healthcare and preventive care innovations.
Before the Forward Health concept faced a setback, Spotify's CEO launched the first full-body scanning clinic in London in 2024. Radiologists and doctors argue that screening healthy individuals or those outside high-risk groups lacks medical justification. Whether a prevention-based business model will succeed remains uncertain.
It’s now time for AI to revive faith in digital health
The promise that telemedicine and mobile health apps failed to deliver, artificial intelligence now aims to fulfill. By late 2024, the number of AI/ML solutions approved by the FDA surpassed 950, and investment in AI healthcare solutions continues to grow. Physicians hope generative AI will handle tedious data entry into electronic health records (EHRs). Pharma companies expect accelerated drug development, and health systems look to AI for personalized care and innovative delivery methods amid worsening workforce shortages.
The Nobel Prize for AlphaFold’s protein-folding breakthroughs has further boosted AI’s reputation in medicine. Hospitals are already testing large language models (LLMs) to summarize EMR data, while U.S. cloud service providers roll out speech-to-text tools to simplify documentation. Meanwhile, European medtech and pharmaceutical companies are expanding clinical AI platforms.
Still, the hopes in AI are high, while the reality of healthcare market – harsh. High implementation and maintenance costs, including data infrastructure and talent acquisition, are significant hurdles. Despite these obstacles, 2025 is shaping up to be a year of AI in healthcare. Early innovators in healthcare and medtech startups love technology; whenever it disappoints them, they quickly fall for the next one.
